EXHIBIT 3.6
AGREEMENT
OF LIMITED PARTNERSHIP
OF
NNN APARTMENT REIT HOLDINGS, L.P.
TABLE OF CONTENTS
PAGE
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ARTICLE I ............................................................... 1
ARTICLE II .............................................................. 9
SECTION 2.01 ORGANIZATION ........................................... 9
SECTION 2.02 NAME ................................................... 9
SECTION 2.03 REGISTERED OFFICE AND AGENT; PRINCIPAL OFFICE .......... 9
SECTION 2.04 PARTNERS ............................................... 9
SECTION 2.05 TERM AND DISSOLUTION ................................... 10
SECTION 2.06 FILING OF CERTIFICATE AND PERFECTION OF LIMITED
PARTNERSHIP ............................................ 10
SECTION 2.07 CERTIFICATES DESCRIBING PARTNERSHIP UNITS .............. 10
ARTICLE III ............................................................. 11
SECTION 3.01 PURPOSE AND NATURE ..................................... 11
SECTION 3.02 POWERS ................................................. 11
ARTICLE IV .............................................................. 11
SECTION 4.01 CAPITAL CONTRIBUTIONS .................................. 11
SECTION 4.02 ADDITIONAL CAPITAL CONTRIBUTIONS AND ISSUANCES OF
ADDITIONAL PARTNERSHIP INTERESTS ....................... 11
SECTION 4.03 ADDITIONAL FUNDING ..................................... 13
SECTION 4.04 CAPITAL ACCOUNTS ....................................... 13
SECTION 4.05 PERCENTAGE INTERESTS ................................... 13
SECTION 4.06 NO INTEREST ON CONTRIBUTIONS ........................... 14
SECTION 4.07 RETURN OF CAPITAL CONTRIBUTIONS ........................ 14
SECTION 4.08 NO THIRD-PARTY BENEFICIARY ............................. 14
ARTICLE V ............................................................... 14
SECTION 5.01 ALLOCATIONS ............................................ 14
SECTION 5.02 DISTRIBUTIONS .......................................... 18
SECTION 5.03 REIT DISTRIBUTION REQUIREMENTS ......................... 20
SECTION 5.04 NO RIGHT TO DISTRIBUTIONS IN KIND ...................... 20
SECTION 5.05 LIMITATIONS ON RETURN OF CAPITAL CONTRIBUTIONS ......... 20
SECTION 5.06 DISTRIBUTIONS UPON LIQUIDATION ......................... 20
SECTION 5.07 SUBSTANTIAL ECONOMIC EFFECT ............................ 21
ARTICLE VI .............................................................. 21
SECTION 6.01 MANAGEMENT OF THE PARTNERSHIP BY GENERAL PARTNER ....... 21
SECTION 6.02 DELEGATION OF AUTHORITY ................................ 23
SECTION 6.03. INDEMNIFICATION AND EXCULPATION OF INDEMNITEES ......... 23
SECTION 6.04 LIABILITY OF THE GENERAL PARTNER ....................... 24
SECTION 6.05 REIMBURSEMENT OBLIGATIONS OF PARTNERSHIP ............... 25
SECTION 6.06 OUTSIDE ACTIVITIES ..................................... 25
SECTION 6.07 EMPLOYMENT OR RETENTION OF AFFILIATES .................. 26
SECTION 6.08 TITLE OF PARTNERSHIP ASSETS ............................ 26
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SECTION 6.09 MISCELLANEOUS .......................................... 26
ARTICLE VII ............................................................. 27
SECTION 7.01 TRANSFER OF THE GENERAL PARTNER'S PARTNERSHIP
INTEREST ............................................... 27
SECTION 7.02 ADMISSION OF A SUBSTITUTE OR ADDITIONAL GENERAL
PARTNER................................................. 28
SECTION 7.03 EFFECT OF BANKRUPTCY, WITHDRAWAL, DEATH OR DISSOLUTION
OF A GENERAL PARTNER ................................... 29
SECTION 7.04 REMOVAL OF A GENERAL PARTNER ........................... 29
ARTICLE VIII ............................................................ 30
SECTION 8.01 NO MANAGEMENT OF THE PARTNERSHIP BY LIMITED PARTNERS ... 30
SECTION 8.02 POWER OF ATTORNEY ...................................... 30
SECTION 8.03 LIMITATION OF LIABILITY OF LIMITED PARTNERS ............ 30
SECTION 8.04 REDEMPTION OF INCENTIVE LIMITED PARTNERSHIP INTEREST ... 31
SECTION 8.05 REDEMPTION RIGHT ....................................... 31
SECTION 8.06 REGISTRATION ........................................... 33
ARTICLE IX .............................................................. 34
SECTION 9.01 PURCHASE FOR INVESTMENT ................................ 34
SECTION 9.02 RESTRICTIONS ON TRANSFER OF LIMITED PARTNERSHIP
INTERESTS .............................................. 35
SECTION 9.03 ADMISSION OF SUBSTITUTE LIMITED PARTNER ................ 36
SECTION 9.04 RIGHTS OF ASSIGNEES OF PARTNERSHIP INTERESTS ........... 37
SECTION 9.05 EFFECT OF BANKRUPTCY, DEATH, INCOMPETENCE, OR
TERMINATION OF A LIMITED PARTNER ....................... 37
SECTION 9.06 JOINT OWNERSHIP OF INTERESTS ........................... 37
ARTICLE X ............................................................... 38
SECTION 10.01 BOOKS AND RECORDS ...................................... 38
SECTION 10.02 CUSTODY OF PARTNERSHIP FUNDS; BANK ACCOUNTS ............ 38
SECTION 10.03 FISCAL AND TAXABLE YEAR ................................ 38
SECTION 10.04 ANNUAL TAX INFORMATION AND REPORT ...................... 38
SECTION 10.05 TAX MATTERS PARTNER; TAX ELECTIONS; SPECIAL BASIS
ADJUSTMENTS ............................................ 38
SECTION 10.06 REPORTS TO LIMITED PARTNERS ............................ 39
ARTICLE XI .............................................................. 39
SECTION 11.01 AMENDMENT OF THIS AGREEMENT ............................ 39
ARTICLE XII ............................................................. 40
SECTION 12.01 NOTICES ................................................ 40
SECTION 12.02 SURVIVAL OF RIGHTS ..................................... 40
SECTION 12.03 ADDITIONAL DOCUMENTS ................................... 40
SECTION 12.04 SEVERABILITY ........................................... 40
SECTION 12.05 ENTIRE AGREEMENT ....................................... 40
SECTION 12.06 PRONOUNS AND PLURALS ................................... 40
SECTION 12.07 HEADINGS ............................................... 40
SECTION 12.08 COUNTERPARTS ........................................... 40
SECTION 12.09 GOVERNING LAW .......................................... 40
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EXHIBITS
EXHIBIT A - Partners, Capital Contributions and Percentage Interests
EXHIBIT B - Notice of Exercise of Redemption Right
EXHIBIT C - Certification of Non-Foreign Status
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AGREEMENT
OF LIMITED PARTNERSHIP
OF
NNN APARTMENT REIT HOLDINGS, L.P.
This Agreement of Limited Partnership (the "Agreement") of NNN APARTMENT
REIT HOLDINGS, L.P. (the "Partnership"), dated as of December 27, 2005, is
entered into by and among NNN APARTMENT REIT, Inc., a Maryland corporation (the
"Company" or the "General Partner"), NNN APARTMENT REIT ADVISOR, LLC, a Virginia
limited liability company (the "Special Limited Partner"), NNN APARTMENT REIT
ADVISOR, LLC, as the initial limited partner (the "Initial Limited Partner") and
the other Limited Partners (as defined herein).
NOW, THEREFORE, in consideration of mutual covenants between the parties
hereto, and 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 meaning
specified below:
"ACT" means the Virginia Revised Uniform Limited Partnership Act, as it may
be amended from time to time.
"ADDITIONAL FUNDS" has the meaning set forth in Section 4.03 hereof.
"ADDITIONAL LIMITED PARTNER" means a Person admitted to this Partnership as
a Limited Partner pursuant to Section 4.02 hereof.
"ADDITIONAL SECURITIES" means any additional REIT Shares (other than REIT
Shares issued in connection with a redemption pursuant to Section 8.05 hereof)
or rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase REIT Shares, as set forth in
Section 4.02(a).
"ADJUSTED INVESTED CAPITAL" means Invested Capital, minus, upon the sale of
a Property, the lesser of (i) the Sale Proceeds from that Property that are
available for distribution or (ii) the sum of (A) the Allocable Invested Capital
for that Property and (B) any Cumulative Allocable Invested Capital Shortfall.
"ADMINISTRATIVE EXPENSES" means (i) all administrative and operating costs
and expenses incurred by the Partnership, (ii) those administrative costs and
expenses of the Company, including any salaries or other payments to directors,
officers or employees of the Company, and any accounting and legal expenses of
the Company, which expenses, the Partners have agreed, are expenses of the
Partnership and not the Company, and (iii) to the extent not included in clause
(ii) above, REIT Expenses; provided, however, that Administrative Expenses shall
not include any administrative costs and expenses incurred by the Company that
are attributable to Properties or Subsidiaries that are owned by the Company
directly, rather than through the Partnership.
"ADVISOR" means the Person, if any, appointed, employed or contracted with
by the Company pursuant to Section 8.1 of the Charter and responsible for
directing or performing the day-to-day business affairs of the Company,
including any Person to whom the Advisor subcontracts substantially all of such
functions.
"AFFILIATE" means, as to any individual, corporation, partnership, trust,
limited liability company or other legal entity, (i) any Person directly or
indirectly owning, controlling or holding, with the power to vote, ten percent
(10%) or more of the outstanding voting securities of such other Person; (ii)
any Person ten percent (10%) or more of whose outstanding voting securities are
directly or indirectly owned, controlled or held, with the power to vote, by
such other Person; (iii) any Person directly or indirectly controlling,
controlled by or under common control with such other Person; (iv) any executive
officer, director, trustee or general partner of such other Person; and (v) any
legal entity for which such Person acts as an executive officer, director,
manager, trustee or general partner.
"AGREED VALUE" means the fair market value of a Partner's non-cash Capital
Contribution as of the date of contribution as agreed to by the Partners. The
names and addresses of the Partners, number of Partnership Units issued to each
Partner and the Agreed Value of non-cash Capital Contributions as of the date of
contribution is set forth on Exhibit A.
"AGREEMENT" means this Agreement of Limited Partnership.
"ALLOCABLE INVESTED CAPITAL" means, for each Property, the product of (i)
the Invested Capital and (ii) a fraction equal to the Partnership's original
investment in that Property divided by the Partnership's total original
investment in all of its Properties.
"ALLOCABLE INVESTED CAPITAL SHORTFALL" means, for each Property that is
sold, the amount, if any, by which the Allocable Invested Capital exceeds the
Sale Proceeds available for distribution.
"CAPITAL ACCOUNT" has the meaning provided in Section 4.04 hereof.
"CAPITAL CONTRIBUTION" means the total amount of cash, cash equivalents and
the Agreed Value of any Property or other asset contributed or agreed to be
contributed, as the context requires, to the Partnership by each Partner
pursuant to the terms of the Agreement. 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), except for any Terminating Capital Transaction.
"CASH AMOUNT" means an amount of cash per Partnership Unit equal to the
value of the REIT Shares Amount on the date of receipt by the General Partner of
a Notice of Redemption. The value of the REIT Shares Amount shall be based on
the average of the daily market price of REIT Shares for the ten (10)
consecutive Trading Days immediately preceding the date of such valuation. The
market price for each such Trading Day shall be: (i) if the REIT 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 a closing bid and asked prices, regular way, on such day, (ii) if the
REIT 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 REIT
Shares are not listed or admitted to
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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 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 ten 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 REIT 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 REIT Shares
Amount includes rights that a holder of REIT Shares would be entitled to
receive, then the value of such rights shall be determined by the General
Partner acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate.
"CASH AVAILABLE FOR DISTRIBUTION" means, for a taxable year of the
Partnership, a positive amount, if any, equal to the cash revenues and receipts
of the Partnership (other than those arising from a Capital Transaction or a
Terminating Capital Transaction) available for distribution to the partners
after payment of the Partnership's expenses and other expenditures and the
creation of any reasonably required reserves, as determined by the General
Partner.
"CERTIFICATE" means any instrument or document that is required under the
laws of the Commonwealth of Virginia, 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 8.02 hereof) and filed for recording in the
appropriate public offices within the Commonwealth of Virginia 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 Commonwealth of Virginia or such other
jurisdiction.
"CHARTER" means the charter of the Company.
"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
successor provision of the Code.
"COMMISSION" means the U.S. Securities and Exchange Commission.
"COMPANY" means NNN Apartment REIT, Inc., a Maryland corporation.
"CONVERSION FACTOR" means 1.0, provided that in the event that the Company
(i) declares or pays a dividend on its outstanding REIT Shares in REIT Shares or
makes a distribution to all holders of its outstanding REIT Shares in REIT
Shares, (ii) subdivides its outstanding REIT Shares or (iii) combines its
outstanding REIT Shares into a smaller number of REIT Shares, the Conversion
Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the
numerator of which shall be the number of REIT Shares issued and outstanding on
the record date 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 REIT Shares (determined without the above assumption)
issued and outstanding on such date and, provided further, that in the event
that an entity other than an Affiliate of the Company shall become General
Partner pursuant to any merger, consolidation or combination of the Company with
or into another entity (the "Successor Entity"), the Conversion Factor shall be
adjusted by multiplying the Conversion Factor by the number of shares of the
Successor Entity into which one REIT Share is converted pursuant to such merger,
consolidation or combination, determined as of the date of such merger,
consolidation or
3
combination. 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 a Redeeming Partner is
to receive the Cash Amount and the record date for such event falls during the
valuation period for determining the Cash Amount, the Conversion Factor shall be
appropriately adjusted by the General Partner to produce a fair and equitable
calculation of the Cash Amount.
"CUMULATIVE ALLOCABLE INVESTED CAPITAL SHORTFALL" means the cumulative
Allocable Invested Capital Shortfall from prior sales of Properties that has not
previously been distributed to the General Partner and the Limited Partners.
"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.
"GENERAL PARTNER" means the Company, 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 a Partnership Interest held by the
General Partner that is a general partnership interest.
"INCENTIVE LIMITED PARTNERSHIP INTEREST" means the ownership interest of
the Special Limited Partner in the Partnership at any particular time, including
the right of such Special Limited Partner to any and all benefits to which such
Special Limited Partner may be entitled as provided in this Agreement and in the
Act, together with the obligations of such Special Limited Partner to comply
with all the provisions of this Agreement and of such Act.
"INDEMNITEE" means (i) any Person made a party to a proceeding by reason of
its status as the General Partner or a director, officer or employee of the
Partnership, the Company or the General Partner and (ii) such other Persons
(including Affiliates of the Company, the General Partner or the Partnership) as
the General Partner may designate to from time to time, in its sole and absolute
discretion.
"INDEPENDENT DIRECTOR" means a director who is not, and within the last two
(2) years has not been, directly or indirectly, associated with the Sponsor or
the Advisor by virtue of (i) ownership of an interest in the Sponsor, the
Advisor or their Affiliates, (ii) employment by the Sponsor, the Advisor or
their Affiliates, (iii) service as an officer or director of the Sponsor, the
Advisor or their Affiliates, (iv) performance of services, other than as a
director, for the Company, (v) service as a director or trustee of more than
three (3) real estate investment trusts organized by the Sponsor or advised by
the Advisor or (vi) maintenance of a material business or professional
relationship with the Sponsor, the Advisor or their Affiliates. An indirect
relationship shall include circumstances in which a director's spouse, parents,
children, siblings, mothers- or fathers-in-law, sons- or daughters-in-law or
brothers- or sisters-in-law is or has been associated with the Sponsor, the
Advisor, any of the Affiliates or the Company. A business or professional
relationship is considered material if the gross revenue derived by the director
from the Sponsor, the Advisor or their Affiliates exceeds five percent (5%) of
either the director's annual gross
4
revenue derived from all sources during either of the last two (2) years or the
director's net worth, on a fair market value basis. Notwithstanding the
foregoing, serving as a director or owning an interest in a REIT or other real
estate program organized by the Sponsor or advised or managed by the Advisor or
its Affiliates shall not, by itself, cause a director to be deemed associated
with the Sponsor or the Advisor.
"INVESTED CAPITAL" means (i) the sum of (A) the number of REIT Shares
issued by the Company (including any REIT Shares actually issued through the
Company's dividend reinvestment program or the Company's incentive award plans)
and (B) the number of Partnership Units issued by the Partnership to Limited
Partners, multiplied by (ii) amount initially equal to $10.00, which amount
shall be adjusted appropriately to reflect (A) stock dividends, stock splits or
other changes in the capital structure of the Company or the Partnership and (B)
at the discretion of the General Partner, any changes in the average price per
share paid for REIT Shares and Partnership Units after the Offering.
"LIMITED PARTNER" means any Person (other than the Special Limited Partner)
named as a Limited Partner on Exhibit A attached hereto, as Exhibit A may be
amended from time to time, and any Person who becomes a Substitute or Additional
Limited Partner, in such Person's capacity as a Limited Partner in the
Partnership.
"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.
"LOSS" shall have the meaning set forth in Section 5.01(k) hereof.
"NOTICE OF REDEMPTION" means the Notice of Exercise of Redemption Right
substantially in the form attached as Exhibit B hereto.
"OFFER" has the meaning set forth in Section 7.01(c) hereof.
"OFFERING" means the initial offer and sale by the Company and the
participating broker-dealers pursuant to the Prospectus of REIT Shares for sale
to the public.
"OPERATING INCOME OR LOSS" means, for a taxable year of the Partnership,
the Profits and Losses of the Partnership (other than the Profits and Losses
arising from a Capital Transaction or a Terminating Capital Transaction), but
subject to the following adjustments:
(i) There shall be no reduction for depreciation or amortization
expenses; and
(ii) Operating Income or Loss shall not include any items of income,
loss, gain or expense that are specially allocated pursuant to Section 5.01(g),
(h) or (i).
"PARTNER" means any General Partner, Limited Partner or Special 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 held
by the General Partner, the Special Limited Partner or any Limited 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.
5
"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 5.02 hereof, which
record date shall be the same as the record date established by the Company for
a distribution to its stockholders of some or all of its portion of such
distribution.
"PARTNERSHIP UNIT" means a fractional, undivided share of the Partnership
Interests of all Partners (other than the Special Limited Partner) issued
hereunder. The allocation of Partnership Units among the Partners shall be as
set forth on Exhibit A, as may be amended from time to time.
"PERCENTAGE INTEREST" means the percentage ownership interest in the
Partnership of each Partner, as determined by dividing the Partnership Units
owned by a Partner by the total number of Partnership Units then outstanding.
The Percentage Interest of each Partner shall be as set forth on Exhibit A, as
may be amended from time to time.
"PERSON" means any individual, partnership, limited liability company,
corporation, joint venture, trust or other entity.
"PROFIT" shall have the meaning set forth in Section 5.01(k) hereof.
"PROPERTY" means any office or industrial property or other investment in
which the Partnership holds an ownership interest.
"PROSPECTUS" means the same as that term is defined in Section 2(10) of the
Securities Act of 1933, including a preliminary prospectus, an offering circular
as described in Rule 256 of the General Rules and Regulations under the
Securities Act of 1933 or, in the case of an intrastate offering, any document
by whatever name known, used for the purpose of offering and selling securities
to the public.
"REDEMPTION AMOUNT" means either the Cash Amount or the REIT Shares Amount,
as selected by the General Partner in its sole discretion pursuant to Section
8.05(b) hereof.
"REDEMPTION RIGHT" has the meaning provided in Section 8.05(a) hereof.
"REDEMPTION SHARES" has the meaning provided in Section 8.06(a) hereof.
"REDEEMING PARTNER" has the meaning provided in Section 8.05(a) hereof.
"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 successor provision of the Regulations.
"REIT" means a real estate investment trust under Sections 856 through 860
of the Code.
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"REIT EXPENSES" means (i) costs and expenses relating to the formation and
continuity of existence and operation of the Company and any Subsidiaries
thereof (which Subsidiaries shall, for purposes hereof, be included within the
definition of Company), including taxes, fees and assessments associated
therewith, any and all costs, expenses or fees payable to any director, officer
or employee of the Company, (ii) costs and expenses relating to any public
offering and registration of securities by the Company and all statements,
reports, fees and expenses incidental thereto, including, without limitation,
underwriting discounts and selling commissions applicable to any such offering
of securities and any costs and expenses associated with any claims made by any
holders of such securities or any underwriters or placement agents thereof,
(iii) costs and expenses associated with any repurchase of any securities by the
Company, (iv) costs and expenses associated with the preparation and filing of
any periodic or other reports and communications by the Company under federal,
state or local laws or regulations, including filings with the Commission, (v)
costs and expenses associated with compliance by the Company with laws, rules
and regulations promulgated by any regulatory body, including the Commission and
any securities exchange, (vi) costs and expenses associated with any 401(k)
plan, incentive plan, bonus plan or other plan providing for compensation for
the directors or employees of the Company or the Partnership, (vii) costs and
expenses incurred by the Company relating to any issuance or redemption of
Partnership Interests and (viii) all other operating or administrative costs of
the Company incurred in the ordinary course of its business on behalf of or in
connection with the Partnership.
"REIT SHARES" means the shares of common stock, $.01 par value per share,
of the Company (or Successor Entity, as the case may be).
"REIT SHARES AMOUNT" shall mean a number of REIT Shares equal to the
product of the number of Partnership Units offered for redemption by a Redeeming
Partner, multiplied by the Conversion Factor as adjusted to and including the
day immediately preceding the Specified Redemption Date; provided, that in the
event the Company issues to all holders of REIT Shares rights, options, warrants
or convertible or exchangeable securities entitling the stockholders to
subscribe for or purchase REIT Shares or any other securities or property
(collectively, the "rights") and the rights have not expired at the Specified
Redemption Date, then the REIT Shares Amount shall also include the rights
issuable to a holder of the REIT Shares Amount of REIT Shares on the record date
fixed for purposes of determining the holders of REIT Shares entitled to rights.
"RETURN" means an 8% per annum cumulative, non-compounded return on
Adjusted Invested Capital. If Adjusted Invested Capital is adjusted during a
period for which the Return is calculated, the Return will be computed based on
the weighted average Adjusted Invested Capital for the period. The Return shall
be prorated with respect to any Partner that is admitted as a Partner during a
period or that withdraws as a Partner during a period.
"SALE PROCEEDS" means the cash proceeds from a Capital Transaction after
payment of or adequate provision for, transaction expenses, debts of the
Partnership and any reasonably necessary reserves; provided, however, that Sale
Proceeds shall not include proceeds from any Terminating Capital Transaction.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SERVICE" means the Internal Revenue Service.
"SPECIAL LIMITED PARTNER" means NNN Apartment REIT Advisor, LLC a Virginia
limited liability company, or any Person who becomes an Advisor pursuant to the
authority of the Company under Section 8.1 of the Charter.
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"SPECIFIED REDEMPTION DATE" means the first business day that is at least
60 days after the receipt by the General Partner of the Notice of Redemption or
such earlier date as shall be designated in writing to the Redeeming Partner by
the General Partner.
"SPONSOR" means any Person directly or indirectly instrumental in
organizing, wholly or in part, the Company or any Person who will control,
manage or participate in the management of the Company and any Affiliate of such
Person. Not included is any Person whose only relationship with the Company is
that of an independent property manager of Company assets and whose only
compensation is as such. Sponsor does not include wholly independent third
parties such as attorneys, accountants and underwriters whose only compensation
is for professional services. A Person may also be deemed a Sponsor of the
Company by:
(i) taking the initiative, directly or indirectly, in founding or
organizing the business or enterprise of the Company, either alone or in
conjunction with one or more other Persons;
(ii) receiving a material participation in the Company in connection
with the founding or organizing of the business of the Company, in consideration
of services or property or both services and property;
(iii) having a substantial number of relationships and contacts with
the Company;
(iv) possessing significant rights to control the Company's
properties;
(v) receiving fees for providing services to the Company which are
paid on a basis that is not customary in the industry; or
(vi) providing goods or services to the Company on a basis which was
not negotiated at arms' length with the Company.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership 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.
"SUBSIDIARY PARTNERSHIP" means any partnership in which the General
Partner, a Subsidiary of the General Partner or the Partnership owns a
partnership interest.
"SUBSTITUTE LIMITED PARTNER" means any Person admitted to the Partnership
as a Limited Partner pursuant to Section 9.03 hereof.
"SUCCESSOR ENTITY" has the meaning provided in the definition of
"Conversion Factor" contained herein.
"SURVIVOR" has the meaning set forth in Section 7.01(d) hereof.
"TERMINATING CAPITAL TRANSACTION" means the sale, exchange or other
disposition of all or substantially all of the assets of the Partnership, after
which transaction the Partnership is dissolved and terminated.
8
"TRADING DAY" means a day on which the principal national securities
exchange on which a security is listed or admitted to trading is open for the
transaction of business or, if a security is not listed or admitted to trading
on any national securities exchange, shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"TRANSACTION" has the meaning set forth in Section 7.01(c) hereof.
"TRANSFER" has the meaning set forth in Section 9.02(a) hereof.
"TRANSFER RESTRICTION DATE" means that date on which the Offering is
declared effective by the Commission or such later date as shall be established
by agreement between the Partnership and any Limited Partner.
"WITHHELD AMOUNT" means an amount required to be withheld by the
Partnership under the Code or any other federal, state or local law, including,
without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of the Code.
ARTICLE II
PARTNERSHIP CONTINUATION AND IDENTIFICATION
Section 2.01 Organization. The Partnership is a limited partnership
organized pursuant to the provisions of the Act. Except as expressly provided
herein to the contrary, the rights and obligations of the Partners and the
administration and termination of the Partnership shall be governed by the Act.
The Partnership Interest of each Partner shall be personal property for all
purposes.
Section 2.02 Name. The name of the Partnership shall be NNN Apartment REIT
Holdings, L.P. The Partnership's business may be conducted under any other name
or names deemed advisable by the General Partner, including the name of the
General Partner or any Affiliate thereof. The words "Limited Partnership,"
"L.P.," "Ltd." or similar words or letters shall be included in the
Partnership's name where necessary for the purposes of complying with the laws
of any jurisdiction that so requires. The General Partner, in its sole and
absolute discretion, may change the name of the Partnership at any time and from
to time to time shall notify the Limited Partners of such change in the next
regular communication to the Limited Partners.
Section 2.03 Registered Office and Agent; Principal Office. The name and
address of the Partnership's registered agent in the Commonwealth of Virginia is
James L. Weinberg, Esq., 701 East Byrd Street, 15th Floor, Richmond, Virginia
23219. The principal office of the Partnership 1551 N. Tustin Avenue, Suite 200,
Santa Ana, California 92705 or such other place as the General Partner may from
time to time designate, in its sole and absolute discretion, by notice to the
Limited Partners. The Partnership may maintain offices at such other place or
places within or outside the Commonwealth of Virginia as the General Partner
deems advisable.
Section 2.04 Partners.
(a) The General Partner of the Partnership is the Company. Its principal
place of business be the same as that of the Partnership.
9
(b) The General Partner hereby consents to admit those persons identified
on Exhibit A as Limited Partners or Special Limited Partners as of the date
hereof. The Limited Partners shall be those Persons identified as Limited
Partners on Exhibit A hereto, as amended from time to time.
Section 2.05 Term and Dissolution.
(a) The term of the Partnership commenced on December 27, 2005, the date
the Certificate was filed with the State Corporation Commission of the
Commonwealth of Virginia in accordance with the Act and shall continue in full
force and effect until December 31, 2055, except that the Partnership shall be
dissolved upon the first to occur of any of the following events:
(i) The occurrence of an Event of Bankruptcy as to a General Partner
or the dissolution, death, removal or withdrawal of a General Partner
unless the business of the Partnership is continued pursuant to Section
7.03(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 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 disposition of all
or substantially all of 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 election by the General Partner that the Partnership should
be dissolved; or
(iv) As otherwise provided in the Act.
(b) Upon dissolution of the Partnership (unless the business of the
Partnership is continued pursuant to Section 7.03(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 5.06 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 of the
Partnership to the Partners in kind.
Section 2.06 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.
Section 2.07 Certificates Describing Partnership Units. At the request of a
Limited Partner, the General Partner, at its option, may issue a certificate
summarizing the terms of such Limited Partner's interest in the Partnership,
including the number of Partnership Units owned and the Percentage Interest
10
represented by such Partnership Units as of the date of such certificate. Any
such certificate (i) shall be in form and substance as approved by the General
Partner, (ii) shall not be negotiable and (iii) shall bear a legend to the
following effect:
This certificate is not negotiable. The Partnership Units represented
by this certificate are governed by and transferable only in
accordance with the provisions of the Agreement of Limited Partnership
of NNN Apartment REIT Holdings, L.P., as amended from time to time.
ARTICLE III
BUSINESS OF THE PARTNERSHIP
Section 3.01 Purpose and Nature. The purpose and nature of the business to
be conducted by the Partnership is (i) to conduct any business that may be
lawfully conducted by a limited partnership organized pursuant to the Act,
provided, however, that such business shall be limited to and conducted in such
manner as to permit the Company at all times to qualify as a REIT, unless the
Company otherwise ceases to qualify as a REIT, (ii) to enter into any
partnership, joint venture or other similar arrangement to engage in any of the
foregoing or the ownership of interests in any entity engaged in any of the
foregoing and (iii) to do anything necessary or incidental to the foregoing. In
connection with the foregoing and without limiting the Company's right in its
sole discretion to cease qualifying as a REIT, the Partners acknowledge that the
Company's current status as a REIT inures to the benefit of all the Partners and
not solely to the Company. 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 a "publicly traded partnership" that is treated as a
corporation under Section 7704 of the Code.
Section 3.02 Powers. The General Partner is empowered to do any and all
acts and things necessary, appropriate, proper, advisable, incidental to or
convenient for the furtherance and accomplishment of the purposes and business
described herein and for the protection and benefit of the Partnership, provided
that the General Partner shall not take or refrain from taking, any actions
which, in the judgment of the General Partner, in its sole and absolute
discretion, could: (i) adversely affect the ability of the General Partner to
initially qualify, or continue to qualify, as a REIT; (ii) subject the General
Partner to any taxes under Section 857 or Section 4981 of the Code (other than
any tax imposed under Code Section 857 on capital gains that the General Partner
elects to retain); or (iii) violate any law or regulation of any governmental
body or agency having jurisdiction over the General Partner or its securities,
unless such action (or inaction) shall have been specifically consented to in
writing by the General Partner.
ARTICLE IV
CAPITAL CONTRIBUTIONS AND ACCOUNTS
Section 4.01 Capital Contributions. The General Partner, the Special
Limited Partner and the Limited Partners have made capital contributions to the
Partnership in exchange for the Partnership Interests set forth opposite their
names on Exhibit A, as amended from time to time.
Section 4.02 Additional Capital Contributions and Issuances of Additional
Partnership Interests. Except as provided in this Section 4.02 or in Section
4.03, the Partners shall have no right or obligation to make any additional
Capital Contributions or loans to the Partnership. The General Partner may
contribute additional capital to the Partnership, from time to time and receive
additional Partnership Interests in respect thereof, in the manner contemplated
in this Section 4.02.
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(a) Issuances of Additional Partnership Interests. The General Partner is
hereby authorized to cause the Partnership to issue such additional Partnership
Interests in the form of Partnership Units for any Partnership purpose at any
time or from time to time, to the Partners (including the General Partner and
the Special Limited Partner) or to other Persons for such consideration and on
such terms and conditions as shall be established by the General Partner in its
sole and absolute discretion, all without the approval of the Special Limited
Partner or any Limited Partners. Any additional Partnership Interests issued
thereby may be issued in one or more classes, or one or more series of any of
such classes, with such designations, preferences and relative, participating,
optional or other special rights, powers and duties, including rights, powers
and duties senior to Limited Partnership Interests, all as shall be determined
by the General Partner in its sole and absolute discretion and without the
approval of the Special Limited Partner or any Limited Partner, subject to
Virginia law, including, without limitation, (i) the allocations of items of
Partnership income, gain, loss, deduction and credit to each such class or
series of Partnership Interests; (ii) the right of each such class or series of
Partnership Interests to share in Partnership distributions; and (iii) the
rights of each such class or series of Partnership Interests upon dissolution
and liquidation of the Partnership; provided, however, that no additional
Partnership Interests shall be issued to the Company or any wholly owned
Subsidiary of the Company unless either:
(i)(A) the additional Partnership Interests are issued in connection
with an issuance of REIT Shares of or other interests in the Company,
which shares or interests have designations, preferences and other
rights, all such that the economic interests are substantially similar
to the designations, preferences and other rights of the additional
Partnership Interests issued to the Company by the Partnership in
accordance with this Section 4.02 and (B) the Company shall make a
Capital Contribution (directly or through the General Partner) to the
Partnership in an amount equal to the proceeds raised in connection
with the issuance of such REIT Shares of or other interests in the
Company, or
(ii) the additional Partnership Interests are issued to all Partners
in proportion to their respective Percentage Interests.
Without limiting the foregoing, the General Partner is expressly authorized
to cause the Partnership to issue Partnership Units for less than fair market
value, so long as the General Partner concludes in good faith that such issuance
is in the best interests of the General Partner and the Partnership.
(b) Upon Issuance of Additional Securities. After the Offering, the Company
shall not issue any additional REIT Shares (other than REIT Shares issued in
connection with a redemption pursuant to Section 8.05 hereof) or rights,
options, warrants or convertible or exchangeable securities containing the right
to subscribe for or purchase REIT Shares (collectively, "Additional Securities")
other than to all holders of REIT Shares, unless (A) the General Partner shall
cause the Partnership to issue to the Company Partnership Interests or rights,
options, warrants or convertible or exchangeable securities of the Partnership
having designations, preferences and other rights, all such that the economic
interests are substantially similar to those of the Additional Securities and
(B) the Company contributes (directly or through the General Partner) the
proceeds from the issuance of such Additional Securities and from any exercise
of rights contained in such Additional Securities to the Partnership; provided,
however, that the Company is allowed to issue Additional Securities without
complying with the provisions of (A) and (B) above if such issuance of
Additional Securities has been approved and determined to be in the best
interests of the Company and the Partnership by a majority of the Independent
Directors. Without limiting the foregoing, the Company is expressly authorized
to issue Additional Securities for less than fair market value and the General
Partner is expressly authorized to cause the Partnership to issue to the Company
corresponding Partnership Interests, so long as (x) the General Partner
concludes in good faith that such
12
issuance is in the best interests of the Partnership and (y) the Company
contributes (directly or through the General Partner) all proceeds from such
issuance to the Partnership. In the event the Company issues REIT Shares for a
cash purchase price and contributes (directly or through the General Partner)
all of the proceeds of such issuance to the Partnership, the General Partner
shall be issued a number of additional Partnership Units equal to the product of
(A) the number of such REIT Shares issued by the Company, the proceeds of which
were so contributed, multiplied by (B) a fraction, the numerator of which is
100%, and the denominator of which is the Conversion Factor in effect on the
date of such contribution.
(c) Certain Deemed Contributions of Proceeds of Offering of REIT Shares. In
connection with any and all offerings of REIT Shares, the Company shall make
(directly or through the General Partner) Capital Contributions to the
Partnership of the net proceeds therefrom, provided that if the proceeds
actually received and contributed are less than the gross proceeds of such
offering as a result of any underwriter's discount or other expenses paid or
incurred in connection with such issuance, then the Company shall make (directly
or through a General Partner if other than the Company) a Capital Contribution
of such net proceeds to the Partnership but the General Partner shall receive
additional Partnership Units with a value equal to the aggregate amount of the
gross proceeds of such issuance pursuant to Section 4.02(a) hereof. Upon any
such Capital Contribution by the Company or the General Partner, its Capital
Account shall be increased by the actual amount of its Capital Contribution
pursuant to Section 4.01 hereof.
Section 4.03 Additional Funding. If the General Partner determines that it
is in the best interests of the Partnership to provide for additional
Partnership funds ("Additional Funds") for any Partnership purpose, the General
Partner may (i) cause the Partnership to obtain such funds from outside
borrowings, or (ii) elect to have the General Partner provide such Additional
Funds to the Partnership through loans or otherwise.
Section 4.04 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, in its sole discretion, and taking into account Section 7701(g)
of the Code) in accordance with Regulations Section 1.704-1(b)(2)(iv)(f). When
the Partnership's property is revalued by the General Partner, the Capital
Accounts of the Partners shall be adjusted in accordance with 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
Account previously) would be allocated among the Partners pursuant to Section
5.01 if there were a taxable disposition of such property for its fair market
value (as determined by the General Partner, in its sole discretion, and taking
into account Section 7701(g) of the Code) on the date of the revaluation.
Section 4.05 Percentage Interests. If the number of outstanding Partnership
Units increases or decreases during a taxable year, each Partner's Percentage
Interest shall be adjusted by the General Partner effective as of the effective
date of each such increase or decrease to a percentage equal to the number of
Partnership Units held by such Partner divided by the aggregate number of
Partnership Units outstanding after giving effect to such increase or decrease.
If the Partners' Percentage Interests are adjusted pursuant to this Section
4.05, Operating Income for the taxable year in which the adjustment occurs shall
be allocated between the part of the year ending on the day preceding the
effective date of such adjustment and the part of the year beginning on the
effective date of such adjustment either (i) as if the taxable year had ended on
the date of the adjustment or (ii) based on the number of days in each part.
13
The General Partner, in its sole discretion, shall determine which method shall
be used to allocate Operating Income for the taxable year in which the
adjustment occurs. The allocation of Operating Income for the earlier part of
the year shall be based on the Percentage Interests before adjustment, and the
allocation of Operating Income for the later part shall be based on the adjusted
Percentage Interests.
Section 4.06 No Interest on Contributions. No Partner shall be entitled to
interest on its Capital Contribution.
Section 4.07 Return of Capital Contributions. 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 specifically provided
in this Agreement. 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.
Section 4.08 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. However, if any court of competent
jurisdiction holds that, not withstanding the provisions of this Agreement, any
Limited Partner is obligated to return such money or property, such obligation
shall be the obligation of such Limited Partner and not of the General Partner.
Without limiting the generality of the foregoing, a deficit Capital Account of a
Partner shall not be deemed to be a liability of such Partner nor an asset or
property of the Partnership.
ARTICLE V
ALLOCATIONS; DISTRIBUTIONS
Section 5.01 Allocations.
(a) Operating Income. Operating Income of the Partnership for each taxable
year of the Partnership shall be allocated among the Partners as follows:
(i) First, 100% to the General Partner and the Limited Partners in
accordance with their respective Percentage Interests until the cumulative
amount of Operating Income and gain allocated pursuant to this Section
5.01(a)(i) and Section 5.01(c)(i)(A) for the current and all prior years
equals the cumulative amount of Operating Losses and losses allocated
pursuant to Section 5.01(b)(iii) and Section 5.01(c)(ii)(B) for the current
and all prior years;
(ii) Second, 85% to the General Partner and the Limited Partners in
accordance with their respective Percentage Interests and 15% to the
Special Limited Partner until the cumulative amount of Operating Income and
gain allocated pursuant to this Section 5.01(a)(ii) and Section
5.01(c)(i)(B) for the current and all prior years equals the cumulative
amount of Operating Losses and losses allocated pursuant to Section
5.01(b)(ii) and Section 5.01(c)(ii)(A) for the current and all prior years;
14
(iii) Third, 100% to the General Partner and the Limited Partners in
accordance with their respective Percentage Interests until the cumulative
amount of Operating Income and gain allocated to the General Partner and
each of the Limited Partners under this Section 5.01(a)(iii) and Section
5.01(c)(i)(C)(4) for the current and all prior years and under Section
5.01(a)(v) for all prior years (less the cumulative amount of Operating
Losses allocated under Section 5.01(b)(i) for the current and all prior
years) equals the cumulative amount distributed to the General Partner and
each of the Limited Partners pursuant to Section 5.02(a) and Section
5.02(b)(i)(C) for the current and all prior years;
(iv) Fourth, 85% to the General Partner and the Limited Partners in
accordance with their respective Percentage Interests and 15% to the
Special Limited Partner until the cumulative amount of Operating Income and
gain allocated to the Special Limited Partner under this Section
5.01(a)(iv) and Section 5.01(c)(i)(D) for the current and all prior years
equals the cumulative amount distributed to the Special Limited Partner
pursuant to Section 5.02(b)(ii) for the current and all prior years; and
(v) Thereafter, 100% to the General Partner and the Limited Partners
in accordance with their respective Percentage Interests.
(b) Operating Losses. Operating Losses of the Partnership for each taxable
year of the Partnership shall be allocated among the Partners as follows:
(i) First, 100% to the General Partner and the Limited Partners in
accordance with their respective Percentage Interests until the cumulative
amount of Operating Losses allocated pursuant to this Section 5.01(b)(i)
for the current and all prior years equals the cumulative amount of
Operating Income allocated pursuant to Section 5.01(a)(v) for the current
and all prior years;
(ii) Second, 85% to the General Partner and the Limited Partners in
accordance with their respective Percentage Interests and 15% to the
Special Limited Partner until the cumulative amount of Operating Losses and
losses allocated pursuant to this Section 5.01(b)(ii) and Section
5.01(c)(ii)(A) for the current and all prior years (less the cumulative
amount of Operating Income and gain allocated pursuant to Section
5.01(a)(ii) and Section 5.01(c)(i)(B) for the current and all prior years)
equals the cumulative amount of Operating Income and gain allocated
pursuant to Section 5.01(a)(iv) and Section 5.01(c)(i)(D) for the current
and all prior years; and
(iii) Thereafter, 100% to the General Partner and the Limited Partners
in accordance with their respective Percentage Interests.
(c) Gains and Losses from Capital Transactions. (i) Gains from Capital
Transactions shall be allocated among the Partners as follows:
(A) First, 100% to the General Partner and the Limited Partners
in accordance with their respective Percentage Interests until the
cumulative amount of Operating Income and gain allocated pursuant to
Section 5.01(a)(i) and this Section 5.01(c)(i)(A) for the current and
all prior years equals the cumulative amount of Operating Losses and
losses allocated pursuant to Section 5.01(b)(iii) and Section
5.01(c)(ii)(B) for the current and all prior years;
(B) Second, 85% to the General Partner and the Limited Partners
in accordance with their respective Percentage Interests and 15% to
the Special Limited Partner until the cumulative amount of Operating
Income and gain allocated pursuant to
15
Section 5.01(a)(ii) and this Section 5.01(c)(i)(B) for the current and
all prior years equals the cumulative amount of Operating Losses and
losses allocated pursuant to Section 5.01(b)(ii) and Section
5.01(c)(ii)(A) for the current and all prior years;
(C) Third, 100% to the General Partner and the Limited Partners
in accordance with their respective Percentage Interests until the
General Partner and the Limited Partners have been allocated an
aggregate amount equal to the sum of (1) any depreciation or
amortization recapture associated with the Partnership's investment in
the Property, (2) the amount by which the Allocable Invested Capital
exceeds the Partnership's investment in the Property, (3) any amounts
distributed to the General Partner and the Limited Partners pursuant
to Section 5.02(b)(i)(B) (except to the extent that the related
Cumulative Allocable Invested Capital Shortfall was attributable to a
loss previously allocated pursuant to Section 5.01(c)(ii)(B) that has
been previously recaptured pursuant to Section 5.01(a)(i) or Section
5.01(c)(i)(A)) and (4) any amounts distributed to the General Partner
and the Limited Partners pursuant to Section 5.02(b)(i)(C); and
(D) Thereafter, 85% to the General Partner and the Limited
Partners in accordance with their respective Percentage Interests, and
15% to the Special Limited Partner.
(ii) Losses from Capital Transactions shall be allocated among the
Partners follows:
(A) First, 85% to the General Partner and the Limited Partners in
accordance with their respective Percentage Interests and 15% to the
Special Limited Partner until the cumulative amount of Operating
Losses and losses allocated pursuant to Section 5.01(b)(ii) and this
Section 5.01(c)(ii)(A) for the current and all prior years (less the
cumulative amount of Operating Income and gain allocated pursuant to
Section 5.01(a)(ii) and Section 5.01(c)(i)(B) for the current and all
prior years) equals the cumulative amount of Operating Income and gain
allocated pursuant to Section 5.01(a)(iv) and Section 5.01(c)(i)(D)
for the current and all prior years; and
(B) Thereafter, 100% to the General Partner and the Limited
Partners in accordance with their respective Percentage Interests.
(d) Gains and Losses from Terminating Capital Transactions. (i) Gains from
a Terminating Capital Transaction shall be allocated among the Partners as
follows:
(A) First, 100% to the General Partner and the Limited Partners
in accordance with their respective Percentage Interests until the
aggregate Capital Account balance of the General Partner and the
Limited Partners equals the sum of (1) the Adjusted Invested Capital
(after reduction by any amounts previously distributed pursuant to
Section 5.02(b)(i)(A) and (B)) and (2) the cumulative Return for the
current year and all prior years that has not previously been
distributed pursuant to Section 5.02(b)(i)(C); and
(B) Thereafter, 85% to the General Partner and the Limited
Partners in accordance with their respective Percentage Interests, and
15% to the Special Limited Partner.
16
(ii) Losses from a Terminating Capital Transaction shall be allocated
among the Partners as follows:
(A) First, 85% to the General Partner and the Limited Partners in
accordance with their respective Percentage Interests and 15% to the
Special Limited Partner until the cumulative amount of Operating
Losses and losses allocated pursuant to Section 5.01(b)(ii), Section
5.01(c)(ii)(A) and this Section 5.01(d)(ii)(A) for the current and all
prior years (less the cumulative amount of Operating Income and gain
allocated pursuant to Section 5.01(a)(ii) and Section 5.01(c)(i)(B)
for the current and all prior years) equals the cumulative amount of
Operating Income and gain allocated pursuant to Section 5.01(a)(ii),
Section 5.01(a)(iv) and Section 5.01(c)(i)(D) for the current and all
prior years; and
(B) Thereafter, 100% to the General Partner and the Limited
Partners in accordance with their respective Percentage Interests.
(e) Clawback. Notwithstanding Sections 5.01(a), (b), (c) and (d) hereof, to
the extent that the Special Limited Partner is required to repay distributions
to the Partnership pursuant to Section 5.02(c) hereof, the allocations under
Sections 5.01(a), (b), (c) and (d) hereof shall be adjusted to reflect such
repayment.
(f) Depreciation and Amortization Deductions. Depreciation and amortization
deductions for each taxable year of the Partnership shall be allocated to the
General Partner and the Limited Partners in accordance with their respective
Percentage Interests.
(g) 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) shall be allocated in accordance
with the Partners' respective 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 Partner that bears
the "economic risk of loss" of such deduction 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, then subject to the exceptions set forth in Regulations Section
1.704-2(f)(2), (3), (4) and (5), 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, then,
subject to the exceptions set forth in Regulations Section 1.704(2)(g), 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). A Partner's "interest in partnership profits"
for purposes of determining its share of the nonrecourse liabilities of the
Partnership within the meaning of Regulations Section 1.752-3(a)(3) shall be
such Partner's Percentage Interest.
(h) Qualified Income Offset. If a Partner receives in any taxable year an
adjustment, allocation, or distribution described in subparagraph (4), (5), or
(6) of Regulations Section 1.704-1(b)(2)(ii)(d) that causes or increases a
deficit 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 taxable year
(and, if necessary, later taxable years) items of income and gain in an amount
and manner sufficient to eliminate such deficit Capital Account balance as
quickly as possible as provided in Regulations Section 1.704-1(b)(2)(ii)(d).
After the occurrence of an
17
allocation of income or gain to a Partner in accordance with this Section
5.01(h), 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 5.01(h).
(i) Capital Account Deficits. Loss shall not be allocated to a 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. Any loss
in excess of that limitation shall be allocated to other Partners who have
positive Capital Account balances in accordance with their respective Percentage
Interests. After the occurrence of an allocation of loss to a Partner in
accordance with this Section 5.01(i), to the extent permitted by Regulations
Section 1.704-1(b), profit, income, or gain shall be allocated to such Partner
in an amount necessary to offset a loss previously allocated to such Partner
under this Section 5.01(i).
(j) Allocations Between Transferor and Transferee. If a Partner transfers
any part or all of its Partnership Interest, the distributive shares of the
various items of income, gain, loss and expense allocable among the Partners
during such fiscal year of the Partnership shall be allocated between the
transferor and the transferee 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 income, gain, loss and expense
between the transferor and the transferee Partner.
(k) 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). All allocations of income, Profit, gain,
Loss and expense (and all items contained therein) for federal income tax
purposes shall be identical to all allocations of such items set forth in this
Section 5.01, 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, expense and loss as required by Section 704(c) of the Code and
such election shall be binding on all Partners.
Section 5.02 Distributions.
(a) Cash Available for Distribution. The Partnership shall distribute Cash
Available for Distribution on a quarterly (or, at the election of the General
Partner, more frequent) basis, in an amount determined by the General Partner in
its sole discretion, to the Partners who are Partners on the Partnership Record
Date with respect to such quarter (or other distribution period) 100% to the
General Partner and the Limited Partners in accordance with their respective
Percentage Interests.
Notwithstanding the foregoing, however, if a new or existing Partner acquires an
additional Partnership Interest in exchange for a Capital Contribution on any
date other than a Partnership Record Date, the cash distribution attributable to
such additional Partnership Interest relating to the Partnership Record Date
next following the issuance of such additional Partnership Interest shall be
reduced in the proportion to (i) the number of days that such additional
Partnership Interest is held by such Partner bears to (ii) the number of days
between such Partnership Record Date and the immediately preceding Partnership
Record Date.
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(b) Sale Proceeds. The Partnership shall distribute Sale Proceeds on a
quarterly (or, at the election of the General Partner, more frequent) basis, in
an amount determined by the General Partner in its sole discretion, to the
Partners who are Partners on the Partnership Record Date with respect to such
quarter (or other distribution period) as follows:
(i) First, 100% to the General Partner and the Limited Partners in
accordance with their respective Percentage Interests until the General
Partner and the Limited Partners have received an amount equal to the sum
of (A) the Allocable Invested Capital with respect to the Properties sold
during such quarter (or other distribution period), (B) any Cumulative
Allocable Invested Capital Shortfall that has not been distributed
previously pursuant to Section 5.02(a) and (C) any cumulative shortfall in
the General Partner's and the Limited Partners' receipt of the Return
pursuant to Section 5.02(a) hereof and this Section 5.02(b)(i)(C); and
(ii) Thereafter, 85% to the General Partner and the Limited Partners
in accordance with their respective Percentage Interests, and 15% to the
Special Limited Partner.
(c) Clawback. Notwithstanding Section 5.02(b) hereof, if there is a
shortfall in the distribution of the Return to the General Partner and the
Limited Partners at the end of any calendar year and the Special Limited Partner
previously has received distributions pursuant to Section 5.02(b)(ii) (other
than distributions that have previously been repaid pursuant to this Section
5.02(c)), the Special Limited Partner will be required to repay to the
Partnership whatever portion of those prior distributions is necessary to cause
the Return to be met. The Partnership will distribute any repaid amounts to the
General Partner and the Limited Partners in accordance with their respective
Percentage Interests. For purposes of this Section 5.02(c), in determining
whether there is a shortfall in the Return, only amounts distributed pursuant to
Section 5.02(b)(ii) or Section 5.02(c) generally will be taken into account.
However, to the extent that the Special Limited Partner has returned a
distribution under this Section 5.02(c), the returned distribution plus the
original accompanying 85% distribution to the General Partner and the Limited
Partners will be treated as having been distributed 100% to the General Partner
and the Limited Partners pursuant to Section 5.02(b)(ii) or Section 5.02(c). In
no event will the cumulative amount repaid by the Special Limited Partner to the
Partnership pursuant to this Section 5.02(c) exceed the cumulative amount of
distributions that the Special Limited Partner previously has received pursuant
to Section 5.02(b)(ii).
(d) Withholding. 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, 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 the Partner or assignee (including by reason of
Section 1446 of the Code), either (i) if the actual amount to be distributed to
the Partner (the "Distributable Amount") equals or exceeds the amount required
to be withheld by the Partnership (the "Withheld Amount"), the entire
Distributable Amount shall be treated as a distribution of cash to such Partner,
or (ii) if the Amount is less than the Withheld Amount, the excess of the
Withheld Amount over the Distributable Amount 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 a 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 (a "Defaulting Limited Partner") fails to pay any amount
owed to the Partnership with respect to the Partnership Loan within 15 days
after demand for payment thereof is made by the Partnership on the 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
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loan (a "General Partner Loan") to the Defaulting Limited Partner in the amount
of the payment made by the General Partner and shall succeed to all rights and
remedies of the Partnership against the Defaulting Limited Partner as to that
amount. Without limitation, the General Partner shall have the right to receive
any distributions that otherwise would have been made by the Partnership to the
Defaulting Limited Partner until such time the General Partner Loan has been
paid in full and any such distributions so received the General Partner shall be
treated as having been received by the Defaulting Limited Partner and
immediately paid to the General Partner.
Any amounts treated as a Partnership Loan or a General Partner Loan
pursuant to this Section 5.02(d) 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.
(e) Redeemed Partnership Units. In no event may a Partner receive a
distribution of cash with respect to a Partnership Unit if such Partner is
entitled to receive an equivalent cash dividend as the holder of record of a
REIT Share for which all or part of such Partnership Unit has been or will be
redeemed.
Section 5.03 REIT Distribution Requirements. The General Partner shall use
its reasonable efforts to cause the Partnership to distribute amounts sufficient
to enable the Company to pay stockholder dividends that will allow a Company to
(i) meet its distribution requirement for qualification as a REIT as set forth
in Section 857 of the Code and (ii) avoid any federal income or excise tax
liability imposed by the Code (other than federal income tax liability
associated with capital gains that the Company elects to retain).
Section 5.04 No Right to Distributions in Kind. No Partner shall be
entitled to demand property other than cash in connection with any distributions
by the Partnership.
Section 5.05 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 that includes a return of all or part of a Partner's Capital
Contributions, unless after giving effect to the return of a Capital
Contribution, the sum of all Partnership liabilities, 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.
Section 5.06 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 this Section 5.06(a), the
Capital Account of each Partner shall be determined after all adjustments made
in accordance with Sections 5.01 and 5.02 resulting from Partnership operations
and from all sales and dispositions of all or any part of the Partnership's
assets. 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) If less than all of the Adjusted Invested Capital has been returned to
the General Partner and the Limited Partners or there is a shortfall in the
distribution of the Return to the General Partner and the Limited Partners when
the Partnership's last Property has been sold and the Special Limited Partner
20
previously has received distributions pursuant to Section 5.02(b)(ii) (other
than distributions that have previously been repaid pursuant to Section
5.02(c)), the Special Limited Partner will be required to repay to the
Partnership whatever portion of those prior distributions is necessary to cause
a full return of Adjusted Invested Capital and a full distribution of the Return
to the General Partner and the Limited Partners. The Partnership will distribute
any repaid amounts to the General Partner and the Limited Partners in accordance
with their respective Percentage Interests. For purposes of this Section
5.06(b), in determining whether Adjusted Invested Capital has been returned and
a full distribution of the Return has been made to the General Partner and the
Limited Partners, generally only amounts distributed pursuant to Section
5.02(b)(i) and Section 5.06(a) will be taken into account. However, to the
extent that the Special Limited Partner returns a distribution under Section
5.02(c) or this Section 5.06(b), the returned distribution plus the original
accompanying 85% distributions to the General Partner and the Limited Partners
will be treated as having been distributed 100% to the General Partner and the
Limited Partners in accordance with their respective Percentage Interests
pursuant to Section 5.02(b)(i). In no event will the cumulative amount repaid by
the Special Limited Partner to the Partnership pursuant to Section 5.02(c) and
this Section 5.06(b) exceed a cumulative amount of distributions that the
Special Limited Partner previously has received pursuant to Section 5.02(b)(ii).
Section 5.07 Substantial Economic Effect. It is the intent of the Partners
that the allocations of Operating Income, Operating Loss, income, gain, loss and
expense 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 or expenses attributable to nonrecourse debt) within the meaning of
Section 704(b) of the Code interpreted by the Regulations promulgated pursuant
thereto. Article V and other relevant provisions of this Agreement shall be
interpreted in a manner consistent with such intent. Furthermore, the General
Partner shall have the right, without the consent of the Limited Partners or the
Special Limited Partner, to modify the provisions of Section 5.01 to the extent
necessary to comply with Section 704(b) of the Code or otherwise to achieve the
intended distribution of Cash Available for Distribution, Sale Proceeds, or
liquidation proceeds among the Partners.
ARTICLE VI
RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER
Section 6.01 Management of the Partnership by General Partner.
(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, operate, lease and dispose of any real
property and any other property or assets including, but not limited to,
notes and mortgages, that the General Partner determines are necessary or
appropriate or in the best interests of the business of the Partnership;
(ii) to construct buildings and make other improvements on the
properties owned or leased by the Partnership;
(iii) to authorize, issue, sell, redeem or otherwise purchase any
Partnership Interests or any securities (including secured and unsecured
debt obligations of the Partnership, debt obligations of the Partnership
convertible into any class or series of Partnership Interests, or options,
rights, warrants or appreciation rights relating to any Partnership
Interests) of the Partnership;
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(iv) to borrow or lend money for the Partnership, issue or receive
evidences of indebtedness in connection therewith, refinance, increase the
amount of, modify, amend or change the terms of, or extend the time for the
payment of, any such indebtedness and secure such indebtedness by mortgage,
deed of trust, pledge or other lien on the Partnership's assets;
(v) to guarantee or become a co-maker of indebtedness of the Company,
the General Partner or any Subsidiary thereof, refinance, increase the
amount of, modify, amend or change the terms of, or extend the time for the
payment of, any such guarantee or indebtedness and secure such guarantee or
indebtedness by mortgage, deed of trust, pledge or other lien on the
Partnership's assets;
(vi) to use assets of the Partnership (including, without limitation,
cash on hand) for any purpose consistent with this Agreement, including,
without limitation, payment, either directly or by reimbursement, of all
operating costs and general administrative expenses of the General Partner,
the Partnership or any Subsidiary of either, to third parties or to the
General Partner as set forth in this Agreement;
(vii) 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;
(viii) 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;
(ix) 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;
(x) to make or revoke any election permitted or required of the
Partnership by any taxing authority;
(xi) 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;
(xii) to determine whether or not to apply any insurance proceeds for
any property to the restoration of such property or to distribute the same;
(xiii) to establish one or more divisions of the Partnership, to hire
and dismiss employees of the Partnership or any division of the Partnership
and 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 Partnership business and to pay therefor
such reasonable remuneration as the General Partner may deem reasonable and
proper;
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(xiv) 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;
(xv) 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;
(xvi) to maintain accurate accounting records and to file promptly all
federal, state and local income tax returns on behalf of the Partnership;
(xvii) to distribute Partnership cash or other Partnership assets in
accordance with this Agreement;
(xviii) 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);
(xix) to establish Partnership reserves for working capital, capital
expenditures, contingent liabilities or any other valid Partnership
purpose; and
(xx) to take such other action, execute, acknowledge, swear to or
deliver such other documents and instruments and perform any and all other
acts that 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.
(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 shat 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.
Section 6.02 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.
Section 6.03. Indemnification and Exculpation of Indemnitees.
(a) The Partnership shall indemnify an Indemnitee from and against any and
all losses, claims, damages, liabilities, joint or several, expenses (including
reasonable 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 any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, unless it is
established that: (i) the act or omission of the Indemnitee was material to the
matter giving rise to the proceeding and either was committed in bad faith or
was the result of active and deliberate dishonesty; (ii) the Indemnitee actually
received an improper personal
23
benefit in money, property or services; or (iii) in the case of any criminal
proceeding, the Indemnitee had reasonable cause to believe that the act or
omission was unlawful. 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 6.03(a). The termination
of any proceeding by conviction or upon a plea of nolo contendere or its
equivalent, or an entry of an order of probation prior to judgment, creates a
rebuttable presumption that the Indemnitee acted in a manner contrary to that
specified in this Section 6.03(a). Any indemnification pursuant to this Section
6.03 shall be made only out of the assets of the Partnership.
(b) The Partnership shall reimburse an Indemnitee for reasonable expenses
incurred by an Indemnitee who is a party to a proceeding 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 6.03 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 6.03 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 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 6.03, 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 service 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 6.03; 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.
(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 6.03 because the Indemnitee had an interest in the
transaction with respect to which indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 6.03 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.
Section 6.04 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
24
liabilities incurred as a result of errors in judgment or of any act or omission
if the General Partner acted in good faith. 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 stockholders
collectively, that the General Partner is under no obligation to consider the
separate interests of the Limited Partners (including, without limitation, the
tax consequences to Limited Partners or the tax consequences of some, but not
all, of the Limited Partners) 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 stockholders 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 Company's
stockholders or the Limited Partners; provided, however, that for so long as the
Company owns a controlling interest in the Partnership, any such conflict that
cannot resolved in a manner not adverse to either the Company's stockholders or
the Limited Partners shall be resolved in favor of the stockholders. The General
Partner shall not be liable for monetary damages for losses sustained,
liabilities incurred or benefits of 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 6.01 hereof, a 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
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 6.04 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 6.04 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.
Section 6.05 Reimbursement Obligations of Partnership. 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 and REIT 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 and REIT Expenses) incurred by it on behalf of the
Partnership which shall be made other than out of the funds of the Partnership.
Section 6.06 Outside Activities. Subject to Section 6.08 hereof, the
Charter and any agreements entered into by the Company, the General Partner or
its Affiliates with the Partnership or a
25
Subsidiary, any officer, director, employee, agent, trustee, Affiliate or
stockholder of the Company or the General Partner, 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, interest 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.
Section 6.07 Employment or Retention of Affiliates.
(a) Any Affiliate of the Company or the General Partner may be employed or
retained by the Partnership and may otherwise deal with the Partnership (whether
as a buyer, lessor, lessee, 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 lend or contribute to its Subsidiaries or other
Persons in which it has an equity investment and such Persons may borrow funds
from the Partnership, on terms and conditions established in the sole and
absolute discretion of the General Partner. The foregoing authority shall not
create any right or benefit in favor of any Subsidiary or any other Person.
(c) 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.
(d) 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.
Section 6.08 Title of 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 Person, 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 a 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.
Section 6.09 Miscellaneous. In the event the Company redeems any REIT
Shares, then the General Partner shall cause the Partnership to purchase from
the General Partner a number of Partnership Units as determined based on the
application of the Conversion Factor on the same terms that the
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Company redeemed such REIT Shares. Moreover, if the Company makes a cash tender
offer or other offer to acquire REIT Shares, then the General Partner shall
cause the Partnership to make a corresponding offer to the General Partner to
acquire an equal number of Partnership Units held by the General Partner. In the
event any REIT Shares are acquired by the Company pursuant to such offer, the
Partnership shall redeem an equivalent number of the General Partner's
Partnership Units for an equivalent purchase price based on the application of
the Conversion Factor.
ARTICLE VII
CHANGES IN GENERAL PARTNER
Section 7.01 Transfer of the General Partner's Partnership Interest.
(a) The General Partner shall not transfer all or any portion of its
General Partnership Interest or withdraw as General Partner except as provided
in Section 7.01(c) or in connection with a transaction described in Section
7.01(d) or (e).
(b) The General Partner agrees that its Percentage Interest will at all
times be in the aggregate at least 1%.
(c) Except as otherwise provided herein in Section 7.01(d) or (e) hereof,
the Company shall not engage in any merger, consolidation or other combination
with or into another Person or sale of all or substantially all of its assets,
or any reclassification, or any recapitalization or change of outstanding REIT
Shares (other than a change in par value, or from par value to no par value, or
as a result of a subdivision or combination of REIT Shares), in each case which
results in a change of control of the Company (a "Transaction"), unless:
(i) as a result of such Transaction all Limited Partners will receive
for each Partnership Unit an amount of cash, securities or other property
equal to the product of the Conversion Factor and the greatest amount of
cash, securities or other property paid in the Transaction to a holder of
one REIT Share in consideration of one REIT Share, provided that if, in
connection with the Transaction, a purchase, tender or exchange offer
("Offer") shall have been made to, and accepted by, the holders of more
than 50% of the outstanding REIT Shares, each holder of Partnership Units
shall be given the option to exchange its Partnership Units for the
greatest amount of cash, securities or other property which a Limited
Partner would have received had it (A) exercised its Redemption Right and
(B) sold, tendered or exchanged pursuant to the Offer the REIT Shares
received upon exercise of the Redemption Right immediately prior to the
expiration of the Offer; or
(ii) the Company is the surviving entity in the Transaction and either
the holders of REIT Shares do not receive cash, securities or other
property in the Transaction or (B) all Limited Partners (other than the
General Partner or an Affiliate of the General Partner) receive an amount
of cash, securities or other property (expressed as an amount per REIT
Share) that is no less than the product of Conversion Factor and the
greatest amount of cash, securities or other property (expressed as an
amount per REIT Share) received in the Transaction by any holder of REIT
Shares.
(d) Notwithstanding Section 7.01(c), the Company may merge with or into or
consolidate with another entity if immediately after such merger or
consolidation (i) substantially all of the assets of the successor or surviving
entity, including any wholly owned Subsidiary of such entity (collectively, the
"Survivor"), other than Partnership Units or the stock of any wholly owned
Subsidiary, are contributed, directly or indirectly, to the Partnership as a
Capital Contribution in exchange for Partnership Units with a
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fair market value equal to the value of the assets so contributed as determined
by the Survivor in good faith and (ii) the Survivor expressly agrees to assume
all obligations of the Company, as appropriate, hereunder. Upon such
contribution and assumption, the Survivor shall have the right and duty to amend
this Agreement as set forth in this Section 7.01(d). The Survivor shall in good
faith arrive at a new method for the calculation of the Cash Amount, the REIT
Shares Amount and Conversion Factor for a Partnership Unit after any such merger
or consolidation so as to approximate the existing method for such calculation
as closely as reasonably possible. Such calculation shall take into account,
among other things, the kind and amount of securities, cash and other property
that was receivable upon such merger or consolidation by a holder of REIT Shares
or options, warrants or other rights relating thereto and to which a holder of
Partnership Units could have acquired had such Partnership Units been redeemed
immediately prior to such merger or consolidation. Such amendment to this
Agreement shall provide for adjustment to such method of calculation, which
shall be as nearly equivalent as may be practicable to the adjustments provided
for with respect to the Conversion Factor. The Survivor also shall in good faith
modify the definition of REIT Shares and make such amendments to Section 8.05
hereof so as to approximate the existing rights and obligations set forth in
Section 8.05 as closely as reasonably possible. The above provisions of this
Section 7.01(d) shall similarly apply to successive mergers or consolidations
permitted hereunder.
(e) Notwithstanding Section 7.01(c),
(i) a General Partner (including the Company) may transfer all or any
portion of its General Partnership Interest to (A) a wholly owned
Subsidiary of such General Partner or (B) the owner of all of the ownership
interests of such General Partner and following a transfer of all of its
General Partnership Interest, withdraw as General Partner; and
(ii) the Company may engage in any transaction not required by law or
by the rules of any national securities exchange on which the REIT Shares
are listed to be submitted to the vote of the holders of the REIT Shares.
Section 7.02 Admission of a Substitute or Additional General Partner. A
Person shall be admitted as a substitute or additional General Partner of the
Partnership only if the following terms and conditions are satisfied:
(a) Except where the admission of a substitute or additional General
Partner is expressly authorized in Section 7.01, a majority in interest of the
Limited Partners (other than the General Partner) must consent in writing to the
admission of the substitute or additional General Partner, which consent may be
withheld in the sole discretion of such Limited Partners;
(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 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 2.05 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
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(d) Counsel for the Partnership shall have rendered an opinion (relying on
such opinion 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.
Section 7.03 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 7.04(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 or 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 7.03(b) hereof.
(b) Following the occurrence of an Event of Bankruptcy as to a General
Partner (and its removal pursuant to Section 7.04(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 or Event of Bankruptcy 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 2.05 hereof by selecting, subject
to Section 7.02 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.
Section 7.04 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; provided, however, that if a General Partner is on the date of
such occurrence a partnership, the withdrawal, death, dissolution or 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. The Limited Partners
may not otherwise remove the General Partner, with or without cause.
(b) If a General Partner has been removed pursuant to this Section 7.04 and
the Partnership is continued pursuant to Section 7.03(b) 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 7.03(b) hereof and
otherwise admitted to the Partnership in accordance with Section 7.02 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 by such 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 ten (10) days following the
removal of the General Partner. In a 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
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an appraiser. Each such appraiser shall complete an appraisal of the fair market
value of the removed General Partner's General Partnership Interest within
thirty (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 forty (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 sixty (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 7.04(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 a transfer is effective pursuant to Section
7.04(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; REDEMPTION RIGHTS
Section 8.01 No Management of the Partnership by Limited Partners. The
Limited Partners shall not participate in the management or control of
Partnership business nor shall they transact any business for the 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.
Section 8.02 Power of Attorney. Each Limited Partner hereby irrevocably
appoints the General Partner its true and lawful attorney-in-fact, who may act
for each Limited Partner and in its name, place and stead and for its 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 its Partnership Interest.
Section 8.03 Limitation of Liability of Limited Partners. No Limited
Partner shall be liable for any debts, liabilities, contracts or obligations of
the Partnership. A Limited Partner shall be liable to the Partnership only to
make payments of its Capital Contribution, if any, as and when due hereunder.
After its Capital Contribution is fully paid, no Limited Partner shall, except
as otherwise required by the Act, be required to make any further Capital
Contributions or other payments or lend any funds to the Partnership.
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Section 8.04 Redemption of Incentive Limited Partnership Interest.
(a) Upon a termination of the advisory agreement between the Advisor and
the General Partner in connection with the listing of the REIT Shares on a stock
exchange, the General Partner will redeem the Incentive Limited Partnership
Interest of the Special Limited Partner. The redemption price for the Incentive
Limited Partnership Interest shall equal 15.0% of the amount, if any, by which
(1) the market value of the outstanding REIT Shares at listing, measured by
taking the average closing price or the average of the bid and asked price, as
the case may be, over a period of 30 days during which the REIT Shares are
traded, with such period beginning 180 days after listing, plus the total
distributions paid by the Company to its stockholders prior to listing exceeds
(2) the sum of the Invested Capital plus the Return. Such redemption price shall
be payable in cash or in REIT Shares or Limited Partnership Interests, if agreed
to by the Special Limited Partner and the General Partner, except that the
Special Limited Partner shall not be permitted to elect to receive REIT Shares
to the extent that doing so would cause the Company to fail to qualify as a
REIT.
(b) Upon a termination of the advisory agreement between the Advisor and
the Company in connection with an internalization of the Advisor into the
Company pursuant to the Company's conversion to a self-administered REIT and a
distribution or payment to the Advisor in connection therewith of such
consideration as is determined by negotiation between a special committee
comprised of all of the Independent Directors and the Advisor, the Incentive
Limited Partnership Interest of the Special Limited Partner will be redeemed by
the General Partner in consideration for such distribution or payment.
(c) Upon a termination of the advisory agreement between the Advisor and
the Company in connection with any other event except the listing described in
Section 8.04(a) and the internalization of the Advisor described in Section
8.04(b), the Incentive Limited Partnership Interest of the Special Limited
Partner may be redeemed by the General Partner for a redemption price equal to
the amount of the distribution that the Special Limited Partner would receive
pursuant to Section 5.02(b)(ii) hereof if the Partnership were immediately to
sell all of its Properties for their fair market value. Such redemption price
shall be payable in cash or in REIT Shares or Limited Partnership Interests, if
agreed to by the Special Limited Partner and the General Partner, except that
the Special Limited Partner shall not be permitted to elect to receive REIT
Shares to the extent that doing so would cause the Company to fail to qualify as
a REIT.
Section 8.05 Redemption Right.
(a) Subject to the provisions of this Section 8.05 and the terms of any
agreements between the Partnership and one or more Limited Partners, each
Limited Partner shall have the right (the "Redemption Right") to require the
Partnership to redeem on the Specified Redemption Date all or a portion of the
Partnership Units held by such Limited Partner at a redemption price equal to
and in the form of the Cash Amount to be paid by the Partnership. The Redemption
Right shall be exercised pursuant to a Notice of Redemption delivered to the
Partnership (with a copy to the General Partner) by the Limited Partner who is
exercising the Redemption Right (the "Redeeming Partner"); provided, however,
that the Partnership shall not be obligated to satisfy such Redemption Right if
the General Partner elects to purchase the Partnership Units subject to the
Notice of Redemption pursuant to Section 8.05(b); and provided, further, that no
Limited Partner may deliver more than two Notices of Redemption during each
calendar year. A Limited Partner may not exercise the Redemption Right for less
than 1,000 Partnership Units or, if such Limited Partner holds less than 1,000
Partnership Units, all of the Partnership Units held by such Partner. The
Redeeming Partner shall have no right, with respect to any Partnership Units so
redeemed, to receive any distribution paid with respect to Partnership Units if
the Partnership Record Date for such distribution is on or after the Specified
Redemption Date.
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(b) Notwithstanding the provisions of Section 8.05(a), a Limited Partner
that exercises the Redemption Right shall be deemed to have offered to sell the
Partnership Units described in the Notice of Redemption to the General Partner
and the General Partner may, in its sole and absolute discretion, elect to
purchase directly and acquire such Partnership Units by paying to the Redeeming
Partner either the Cash Amount or the REIT Shares Amount, as elected by the
General Partner (in its sole and absolute discretion), on the Specified
Redemption Date, whereupon the General Partner shall acquire the Partnership
Units offered for redemption by the redeeming Partner and shall be treated for
all purposes of this Agreement as the owner of such Partnership Units. If the
General Partner shall elect to exercise its right to purchase Partnership Units
under this Section 8.05(b) with respect to a Notice of Redemption, it shall so
notify the Redeeming Partner within ten (10) Business Days after the receipt by
the General Partner of such Notice of Redemption. Unless the General Partner (in
its sole and absolute discretion) shall exercise its right to purchase
Partnership Units from the Redeeming Partner pursuant to this Section 8.05(b),
the General Partner shall have no obligation to the Redeeming Partner or the
Partnership with respect to the Redeeming Partner's exercise of the Redemption
Right. In the event the General Partner shall exercise its right to purchase
Partnership Units with respect to the exercise of a Redemption Right in the
manner described in the first sentence of this Section 8.05(b), the Partnership
shall have no obligation to pay any amount to the Redeeming Partner with respect
to such Redeeming Partner's exercise of such Redemption Right and each of the
Redeeming Partner, the Partnership and the General Partner, as the case may be,
shall treat the transaction between the General Partner and the Redeeming
Partner for federal income tax purposes as a sale of the Redeeming Partner's
Partnership Units to the General Partner. Each Redeeming Partner agrees to
execute such documents as the General Partner may reasonably require in
connection with the issuance of REIT Shares upon exercise of the Redemption
Right. If the Redeeming Partner receives REIT Shares, the Redeeming Partner
shall have the right to receive any dividend or other distribution paid with
respect to REIT Shares if the record date for such dividend or distribution is
on or after the Specified Redemption Date.
(c) Notwithstanding the provisions of Section 8.05(a) and 8.05(b), a
Limited Partner shall not be entitled to exercise the Redemption Right if the
delivery of REIT Shares to such Partner on the Specified Redemption Date by the
General Partner pursuant to Section 8.05(b) (regardless of whether the General
Partner would in fact exercise its rights under Section 8.05(b)) would (i)
result in such Partner or any other person owning, directly or indirectly, REIT
Shares in excess of the Aggregate Stock Ownership Limit or Common Stock
Ownership Limit (each as defined in the Charter) and calculated in accordance
therewith, except as provided in the Charter, (ii) result in REIT Shares being
owned by fewer than 100 persons (determined without reference to an rules of
attribution), (iii) result in the General Partner being "closely held" within
the meaning of Section 856(h) of the Code, (iv) otherwise jeopardize the General
Partner's status as a REIT or (v) cause the acquisition of REIT Shares by such
Partner to be "integrated" with any other distribution of REIT Shares for
purposes of complying with the registration provisions of the Securities Act.
The General Partner, in its sole discretion, may waive the restriction on
redemption set forth in this Section 8.05(c); provided, however, that in the
event such restriction is waived, the Redeeming Partner shall be paid the Cash
Amount.
(d) Any Cash Amount to be paid to a Redeeming Partner pursuant to this
Section 8.05 shall be paid on the Specified Redemption Date; provided, however,
the General Partner may elect to cause the Specified Redemption Date to be
delayed for up to an additional 180 days to the extent required for the General
Partner to cause additional REIT Shares to be issued to provide financing to be
used to make such payment of the Cash Amount. Notwithstanding the foregoing, the
General Partner agrees to use its best efforts to cause the closing of the
acquisition of redeemed Partnership Units hereunder to occur as quickly as
reasonably possible.
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(e) 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 that apply
upon a Redeeming Partner's exercise of the Redemption Right. If a Redeeming
Partner believes that it is exempt from such withholding upon a exercise of the
Redemption Right, such Partner must furnish the General Partner with a FIRPTA
Certificate in the form attached hereto as Exhibit C. If the Partnership or the
General Partner is required to withhold and pay over to any taxing authority any
amount upon a Redeeming Partner's exercise of the Redemption Right and if the
Redemption Amount equals or exceeds the Withheld Amount, the Withheld Amount
shall be treated as an amount received by such Partner in redemption of its
Partnership Units. If, however, the Redemption Amount is less than the Withheld
Amount, the Redeeming Partner shall not receive any portion of the Redemption
Amount, the Redemption Amount shall be treated as an amount received by such
Partner in redemption of its Partnership Units and the Partner shall contribute
the excess of the Withheld Amount over the Redemption Amount to the Partnership
before the Partnership is required to pay over such excess to a taxing
authority.
(f) Notwithstanding any other provision of this Agreement, the General
Partner shall place appropriate restrictions on the ability of the Limited
Partners to exercise their Redemption Rights as and if deemed necessary to
ensure that the Partnership does not constitute a "publicly traded partnership"
that is taxed as a corporation under Section 7704 of the Code. If and when the
General Partner determines that imposing such restrictions is necessary, the
General Partner shall give prompt written notice thereof (a "Restriction
Notice") to each of the Limited Partners, which notice shall be accompanied by a
copy of an opinion of counsel to the Partnership which states that, in the
opinion of such counsel, restrictions are necessary in order to avoid the
Partnership being treated as a "publicly traded partnership" that is taxed as a
corporation under Section 7704 of the Code.
Section 8.06 Registration. Subject to the terms of any agreement between
the General Partner and one or more Limited Partners with respect to Partnership
Units held by them:
(a) Shelf Registration of the Common Stock. Within two weeks prior or
subsequent to the first date upon which the Partnership Units owned by any
Limited Partner may be redeemed (or such later date as may be permitted under
applicable provisions of the Securities Act), the General Partner agrees to file
with the Commission a shelf registration statement on Form S-3 (if the General
Partner is eligible to use such form) under Rule 415 of the Securities Act (a
"Registration Statement") or any similar rule that may be adopted by the
Commission, with respect to all of the REIT Shares that may be issued upon
redemption of such Partnership Units pursuant to Section 8.05 hereof
("Redemption Shares"). The General Partner will use its best efforts to have the
Registration Statement declared effective under the Securities Act. The General
Partner need not file a separate Registration Statement, but may file one
Registration Statement covering Redemption Shares issuable to more than one
Limited Partner. The General Partner further agrees to supplement or make
amendments to each Registration Statement, if required by the rules, regulations
or instructions applicable to the registration form utilized by the General
Partner or by the Securities Act or rules and regulations thereunder for such
Registration Statement.
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(b) If a Registration Statement under subsection (a) above is not available
under the securities laws or the rules of the Commission, or if required to
permit the resale of Redemption Shares by "Affiliates" (as defined in the
Securities Act), upon the written request of any Limited Partner holding at
least 20,000 Partnership Units, the General Partner agrees to file with the
Commission a Registration Statement covering the resale of Redemption Shares by
Affiliates or others whose Redemption Shares are not covered by a Registration
Statement filed pursuant to subsection (a) above, provided that the General
Partner is furnished all information with respect to holders of Redemption
Shares required to complete such Registration Statement and have it declared
effective by the Commission. The General Partner will use its best efforts to
have the Registration Statement declared effective under the Securities Act. The
General Partner need not file a separate Registration Statement, but may file
one Registration Statement covering Redemption Shares issuable to more than one
Limited Partner. The General Partner further agrees to supplement or make
amendments to each Registration Statement, if required by the rules, regulations
or instructions applicable to the registration form utilized by the General
Partner or by the Securities Act or rules and regulations thereunder for such
Registration Statement.
(c) Listing on Securities Exchange. If the General Partner shall list or
maintain the listing of REIT 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 Redemption Shares hereunder, list thereon, maintain
and, when necessary, increase such listing to include such Redemption Shares.
(d) Registration Not Required. Notwithstanding the foregoing, the General
Partner shall not be required to file or maintain the effectiveness of a
registration statement relating to Redemption Shares after the first date upon
which, in the opinion of counsel to the General Partner, all of the Redemption
Shares covered thereby could be sold by the holders thereof in any period of
three months pursuant to Rule 144 under the Securities Act, or any successor
rule thereto.
ARTICLE IX
TRANSFERS OF LIMITED PARTNERSHIP INTERESTS
Section 9.01 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 Interests
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 9.01(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.
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Section 9.02 Restrictions on Transfer of Limited Partnership Interests.
(a) Subject to the provisions of this Article IX, no Limited Partner may
offer, sell, assign, hypothecate, pledge or otherwise transfer all or any
portion of his Limited Partnership Interest, or any of such Limited Partner's
economic rights as a Limited Partner, whether voluntarily or by operation of law
or at judicial sale or otherwise (collectively, a "Transfer") without the
consent of the General Partner, which consent may be granted or withheld in its
sole an absolute discretion. Any such purported transfer undertaken without such
consent shall considered to be null and void ab initio and shall not be given
effect. Each Limited Partner acknowledges that the General Partner has agreed
not to grant any such consent prior to the Transfer Restriction Date. The
General Partner may require, as a condition of any Transfer to which it
consents, that the transferor assume all costs incurred by the Partnership in
connection therewith.
(b) No Limited Partner may withdraw from the Partnership other than as a
result of a permitted Transfer (i.e., a Transfer consented to as contemplated by
clause (a) above or clause (c) below or a Transfer pursuant to Section 9.05
below) of all of his Partnership Units pursuant to this Article IX or pursuant
to a redemption of all of his Partnership Units pursuant to Section 8.05. Upon
the permitted Transfer or redemption of all of a Limited Partner's Partnership
Units, such Limited Partner shall cease to be a Limited Partner.
(c) Subject to the provisions of this Article IX, a Limited Partner may
Transfer, with the consent of the General Partner, all or a portion of his
Partnership Units to (i) a parent or parent's spouse, natural or adopted
descendant or descendants, spouse of such descendant, or brother or sister, or a
trust created by such Limited Partner for the benefit of such Limited Partner
and/or any such person(s), of which trust such Limited Partner or any such
person(s) is a trustee, (ii) a corporation controlled by a Person or Persons
named in clause (i) above, or (iii) if the Limited Partner is an entity, its
beneficial owners or one or more of its Affiliates.
(d) No Limited Partner may effect a Transfer of its 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).
(e) No Transfer by a Limited Partner of its Partnership Units, in whole or
in part, may be made to any Person if (i) in the opinion of legal counsel for
the Partnership, the transfer would result in the Partnership being treated as
an association taxable as corporation (other than a qualified REIT subsidiary
within the meaning of Section 856(i) of the Code), (ii) in the opinion of legal
counsel for the Partnership, it would adversely affect the ability of the
Company to continue to qualify as a REIT or subject the Company to any taxes
under Section 857 or Section 4981 of the Code, or (iii) such transfer is
effectuated through an "established securities market" or a "secondary market
(or the substantial equivalent thereof)" within a meaning of Section 7704 of the
Code.
(f) No transfer of any Partnership Units may be made to a lender to the
Partnership or any Person who is related (within the meaning of Regulations
Section 1.752-4(b)) to any lender the Partnership whose loan constitutes a
nonrecourse 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 may be required to enter into an arrangement with the Partnership and
the General Partner to exchange or redeem for the Cash Amount any Partnership
Units which a security interest is held simultaneously with the time at which
such lender would deemed to be a partner in the Partnership for purposes of
allocating liabilities to such lender under Section 752 of the Code.
35
(g) 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.
(h) Prior to the consummation of any Transfer under this Article IX, the
transferor and/or a transferee shall deliver to the General Partner such
opinions, certificates and other documents as the General Partner shall request
in connection with such Transfer.
Section 9.03 Admission of Substitute Limited Partner.
(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 with the consent of the General Partner and 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 9.01(a) hereof and the agreement set
forth in Section 9.01(b) hereof.
(iv) If the assignee is a corporation, partnership, limited liability
company 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 8.02 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 its 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 the General Partner's
sole and absolute discretion.
(b) For the purpose of allocating Operating Income 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 9.03(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.
36
(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.
Section 9.04 Rights of Assignees of Partnership Interests.
(a) Subject to the provisions of Sections 9.01 and 9.02 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 its
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 its Limited Partnership Interest.
Section 9.05 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.
Section 9.06 Joint Ownership of Interests. A Partnership Interest may be
acquired by two individuals as joint tenants with the 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. Upon notice to the General Partner from either
owner, the General Partner shall cause the Partnership Interest to be divided
into two equal Partnership Interests, which shall thereafter be owned separately
by each of the former owners.
37
ARTICLE X
BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS
Section 10.01 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 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 its 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.
Section 10.02 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 10.02(b).
Section 10.03 Fiscal and Taxable Year. The fiscal and taxable year of the
Partnership shall be the calendar year.
Section 10.04 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 a properly
completed Schedule K-1.
Section 10.05 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.
(b) All elections required or permitted to be made by the Partnership under
the Code or any applicable state or local tax law shall be made by the General
Partner in its sole discretion.
38
(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.
Section 10.06 Reports to Limited Partners.
(a) As soon as practicable after the close of each fiscal quarter (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 General Partner if such statements are
prepared solely on a consolidated basis with the General Partner, 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, or of the General
Partner if such statements are prepared solely on a consolidated basis with the
General Partner, for such fiscal year, presented 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 THIS AGREEMENT
Section 11.01 Amendment of this Agreement The General Partner's consent
shall be required for any amendment to this 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 more than 50% of the Percentage Interests of
the Limited Partners:
(a) any amendment affecting the operation of the Conversion Factor or the
Redemption Right (except as provided in Section 7.01 or 8.05 hereof) in a manner
adverse to the Limited Partners;
(b) any amendment that would adversely affect the rights of the Limited
Partners to receive the distributions payable to them hereunder, other than
pursuant to the issuance of additional Partnership Units pursuant to Section
4.02 hereof;
(c) any amendment that would alter the Partnership's allocations of income,
gain, loss and expense to the Limited Partners, other than pursuant to the
issuance of additional Partnership Units pursuant to Section 4.02 hereof or an
amendment effected pursuant to Section 5.07 hereof; or
(d) any amendment that would impose on the Limited Partners any obligation
to make additional Capital Contributions to the Partnership.
39
ARTICLE XII
GENERAL PROVISIONS
Section 12.01 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 and 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.
Section 12.02 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.
Section 12.03 Additional Documents. Each Partner agrees to perform all
further acts and execute, swear to, acknowledge and deliver all further
documents which may be reasonable, necessary, appropriate, or desirable to carry
out the provisions of this Agreement or the Act.
Section 12.04 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 no affect the remainder hereof.
Section 12.05 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.
Section 12.06 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.
Section 12.07 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.
Section 12.08 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.
Section 12.09 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Virginia.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
40
IN WITNESS WHEREOF, the parties hereto have hereunder affixed their
signatures to this Agreement of Limited Partnership, all as of ______________
__, 2006.
GENERAL PARTNER:
NNN APARTMENT REIT, INC., a Maryland
corporation
By:
------------------------------------
Stanley J. Olander, Jr., Chief
Executive Officer
SPECIAL LIMITED PARTNER:
NNN APARTMENT REIT ADVISOR, LLC, a
Virginia limited liability company
By:
------------------------------------
Louis J. Rogers, President
INITIAL LIMITED PARTNER:
NNN APARTMENT REIT ADVISOR, LLC a
Virginia limited liability company
By:
------------------------------------
Louis J. Rogers, President
41
EXHIBIT A
Agreed Value
Cash of Capital Partnership Percentage
Partner Contribution Contribution Units Interest
- ------- ------------ ------------ ----------- ----------
GENERAL PARTNER:
NNN Apartment REIT, Inc. $200,007 $200,007 22,223 99.99%
LIMITED PARTNER:
NNN Apartment REIT Advisor, LLC $ 1,000 $ 1,000 100 0.01%
SPECIAL LIMITED PARTNER:
NNN Apartment REIT Advisor, LLC 0 0 0 0%*
* The Special Limited Partner will be entitled to the distributions provided
for in Article V and Section 8.04 of this Agreement.
A-1
EXHIBIT B
NOTICE OF EXERCISE OF REDEMPTION RIGHT
In accordance with Section 8.05 of the Agreement of Limited Partnership
(the "Agreement") of NNN Apartment REIT, L.P., a Virginia limited partnership,
the undersigned hereby irrevocably (i) presents for redemption Partnership Units
in NNN Apartment REIT, L.P. in accordance with the terms of the Agreement and
the Redemption Right referred to in Section 8.05 thereof, (ii) surrenders such
Partnership Units and all right, title and interest therein and (iii) directs
that the Cash Amount or REIT Shares Amount as defined in the Agreement) as
determined by the General Partner deliverable upon exercise of the Redemption
Right be delivered to the address specified below and if REIT Shares (as defined
in the Agreement) are to be delivered, such REIT 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 REIT Shares are to be issued, issue to:
-------------------------------------
Please insert social security or identifying number:
---------------------------
Name:
-------------------------------
B-1
EXHIBIT C
For Redeeming Partners that are entities:
CERTIFICATION OF NON-FOREIGN STATUS
Under Section 1445(e) of the Internal Revenue Code of 1986, as amended (the
"Code"), in the event of a disposition by a non-U. S. person of a partnership
interest in a partnership in which (i) 50% or more of the value of the gross
assets consists of United States real property interests ("USRPIs"), as defined
in section 897(c) of the Code and (ii) 90% or more of the value of the gross
assets consists of USRPIs, cash and cash equivalents, the transferee will be
required to withhold 10% of the amount realized by the non-U. S. person upon the
disposition. To inform NNN Apartment REIT, Inc., a Maryland corporation (the
"General Partner"), and NNN Apartment REIT, L.P., a Virginia limited partnership
(the "Partnership"), that no withholding is required with respect to the
redemption by ________________________ ("Limited Partner") of its units of
limited partnership interest in the Partnership, the undersigned hereby
certifies the following on behalf of Limited Partner:
1. Limited Partner is not a foreign corporation, foreign partnership, foreign
trust, or foreign estate as those terms are defined in the Code and the
Treasury regulations thereunder.
2. Limited Partner is not a disregarded entity as defined in Section
1.445-2(b)(2)(iii) of the Treasury regulations under the Code.
3. The U. S. employer identification number of Limited Partner is
____________.
4. The principal business address of Limited Partner is ______________________
____________________________________, and Limited Partner's place of
incorporation is _____________________________________.
5. Limited Partner agrees to inform the General Partner if it becomes a
foreign person at any time during the three-year period immediately
following the date of this notice.
6. Limited Partner understands that this certification may be disclosed to the
Internal Revenue Service by the General Partner and that any false
statement contained herein could be punished by fine, imprisonment, or
both.
LIMITED PARTNER
By:
------------------------------------
Name:
----------------------------------
Its:
-----------------------------------
Under penalties of perjury, I declare that I have examined this certification
and, to the best of my knowledge and belief, it is true, correct and complete
and I further declare that I have authority to sign this document on behalf of
Limited Partner.
Date: [NAME]
-----------------
----------------------------------------
Title
----------------------------------
C-1
For Redeeming Partners that are individuals:
CERTIFICATION OF NON-FOREIGN STATUS
Under section 1445(e) of the Internal Revenue Code of 1986, as amended (the
"Code"), in the event of a disposition by a non-U. S. person of a partnership
interest in a partnership in which (i) 50% or more of the value of the gross
assets consists of United States real property interests ("USRPIs"), as defined
in section 897(c) of the Code and (ii) 90% or more of the value of the gross
assets consists of USRPIs, cash and cash equivalents, the transferee will be
required to withhold 10% of the amount realized by the non-U. S. person upon the
disposition. To inform NNN Apartment REIT, Inc., a Maryland corporation (the
"General Partner"), and NNN Apartment REIT, L.P., a Virginia limited partnership
(the "Partnership"), that no withholding is required with respect to my
redemption of my units of limited partnership interest in the Partnership, I,
_________________, hereby certify the following:
1. I am not a nonresident alien for purposes of U. S. income taxation.
2. My U. S. taxpayer identification number (social security number) is
_____________.
3. My home address is: ____________________________________________.
4. I agree to inform the General Partner promptly if I become a nonresident
alien at any time during the three-year period immediately following the
date of this notice.
5. I understand that this certification may be disclosed to the Internal
Revenue Service by the General Partner and that any false statement
contained herein could be punished by fine, imprisonment, or both.
----------------------------------------
Name:
----------------------------------
Under penalties of perjury, I declare that I have examined this certification
and, to the best of my knowledge and belief, it is true, correct and complete.
Date:
----------------- ----------------------------------------
Name:
----------------------------------
C-1