EXHIBIT 3.5
VENTAS REALTY, LIMITED PARTNERSHIP
FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
AS OF
JANUARY 31, 2000
TABLE OF CONTENTS
I. Partnership......................................................................1
Section 1.1. Continuation of Partnership; Partnership Interests.....................1
Section 1.2. Name...................................................................2
II. Definitions.....................................................................2
III. Capital........................................................................9
Section 3.1. Capital Contributions of the Partners.................................10
Section 3.2. Issuance and Conversion of Units......................................10
Section 3.3. Additional Funds......................................................16
Section 3.4. Capital Accounts......................................................18
Section 3.5. Interest on and Return of Capital.....................................19
Section 3.6. Negative Capital Accounts.............................................20
Section 3.7. Limit on Contributions and Obligations of Partners....................21
Section 3.8. Redemption and Repurchase of Units....................................21
IV. Principal Office and Registered Office.........................................22
V. Purposes and Powers of Partnership..............................................22
VI. Term...........................................................................23
VII. Allocations...................................................................23
Section 7.1. Allocation of Profits.................................................23
Section 7.2. Losses................................................................23
Section 7.3. Special Allocations...................................................24
Section 7.4. Curative Allocations..................................................27
Section 7.5. Tax Allocations: Code Section 704(c)..................................27
VIII. Cash Available For Distribution..............................................28
Section 8.1. Operating Cash Flow...................................................28
Section 8.2. Capital Cash Flow.....................................................29
Section 8.3. Consent to Distributions..............................................31
Section 8.4. Right to Limit Distributions..........................................31
Section 8.5. Revisions to Reflect Issuance of Additional Partnership Interests.....31
IX. Management of Partnership......................................................31
Section 9.1. General Partner.......................................................31
Section 9.2. Limitations on Powers and Authorities of Partners.....................37
Section 9.3. Limited Partners......................................................37
Section 9.4. Liability of General Partner..........................................38
Section 9.5. Indemnity.............................................................38
Section 9.6. Other Activities of Partners and Agreements with Related Parties......39
Section 9.7. Other Matters Concerning the General Partner..........................40
Section 9.8. Partner Exculpation...................................................41
Section 9.9. General Partner Expenses and Liabilities..............................41
Section 9.10. Title To Partnership Assets..........................................42
Section 9.11. Reliance By Third Parties...........................................42
X. Banking.........................................................................43
XI. Accounting and Tax Matters.....................................................43
Section 11.1. Fiscal Year..........................................................43
Section 11.2. Books of Account.....................................................43
Section 11.3. Method of Accounting.................................................43
Section 11.4.. Preparation of Tax Returns..........................................43
Section 11.5. Tax Elections........................................................43
Section 11.6. Section 754 Election.................................................44
Section 11.7. Tax Matters Partner..................................................44
Section 11.8. Administrative Adjustments...........................................44
Section 11.9. Withholding..........................................................45
XII. Transfers of Partnership Interests............................................46
Section 12.1. General Partner......................................................46
Section 12.2. Limited Partner......................................................46
Section 12.3. Substituted Limited Partners.........................................48
Section 12.4. General Provisions...................................................49
Section 12.5 Existing Pledge.......................................................50
XIII. Admission of New Partners....................................................50
XIV. Termination, Liquidation and Dissolution of Partnership.......................51
Section 14.1. Termination Events...................................................51
Section 14.2. Method of Liquidation................................................51
Section 14.3. Date of Termination..................................................52
Section 14.4. Reconstitution Upon Bankruptcy.......................................52
Section 14.5. Death, Legal Incompetency, Etc. of a Limited Partner.................53
XV. Power of Attorney..............................................................53
XVI. Amendment of Agreement........................................................54
XVII. Miscellaneous................................................................55
Section 17.1. Notices..............................................................55
Section 17.2. Modifications........................................................56
Section 17.3. Successors and Assigns...............................................56
Section 17.4. Duplicate Originals..................................................56
Section 17.5. Construction.........................................................56
Section 17.6. Governing Law........................................................56
Section 17.7. Other Instruments....................................................56
Section 17.8. General Partner with Interest as Limited Partner.....................57
Section 17.9. Legal Construction...................................................57
Section 17.10. Gender..............................................................57
Section 17.11. Prior Agreements Superseded.........................................57
Section 17.12. No Third Party Beneficiary..........................................57
Section 17.13. Purchase for Investment.............................................57
Section 17.14. Waiver..............................................................58
Section 17.15. No Rights as Shareholder............................................58
Section 17.16. Time of Essence.....................................................58
Section 17.17. Counterparts........................................................58
FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
FOR
VENTAS REALTY, LIMITED PARTNERSHIP
THIS FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (this
"Agreement") has been executed and delivered as of the 31st day of January,
2000, by Ventas, Inc., a Delaware corporation (formerly known as "Vencor, Inc."
and the "General Partner" or the "Company"), Ventas LP Realty, L.L.C., a
Delaware limited liability company, pursuant to Section 16 hereof, ("LLC"); and
such other entities or persons as may in the future be identified on Schedule A
to this Agreement (the "Additional Partners") (the General Partner, LLC and the
Additional Partners (when admitted), being each a "Partner" and collectively,
the "Partners"). LLC and the Additional Partners are each a "Limited Partner"
and LLC is, as of the date of this Agreement, the "Limited Partner".
RECITALS
A. The Partners are parties to that certain Agreement of Limited
Partnership dated as of March 30, 1998 (the "Prior Partnership Agreement") and,
in accordance therewith, have been doing business as Ventas Realty, Limited
Partnership (the "Partnership").
B. Pursuant to the powers granted to the General Partner under Section 16
hereof, the General Partner deems it to be in the best interest of the
Partnership to amend and restate the Prior Partnership Agreement in its entirety
and is desirous of continuing the Partnership in accordance with the Delaware
Revised Uniform Limited Partnership Act and this Agreement.
THEREFORE, in consideration of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Partners agree as follows:
I. Partnership.
Section 1.1. Continuation of Partnership; Partnership Interests. The
General Partner and the Limited Partner do hereby continue the Partnership as a
Delaware limited partnership according to all of the terms and provisions of
this Agreement and otherwise in accordance with the Act. The General Partner is
the sole general partner and the Limited Partner is the sole limited partner of
the Partnership. All Partnership profits, losses, and distributive shares of tax
items accruing prior to the date of this Agreement shall be allocated in
accordance with,
and the respective rights and obligations of the Partners with respect to the
period prior to the date of this Agreement shall be governed by, the Prior
Partnership Agreement. No Partner has any interest in any Partnership property
but the interests of all Partners in the Partnership are, for all purposes,
personal property.
Section 1.2. Name. The Partnership name shall be "Ventas Realty, Limited
Partnership", but the General Partner may from time to time change the name of
the Partnership or may adopt such trade or fictitious names as it may determine.
II. Definitions.
As used in this Agreement, the following terms shall have the meanings set
forth respectively after each:
"Act" shall mean the Delaware Revised Uniform Limited Partnership Act, as
amended from time to time, and any successor statute.
"Adjusted Capital Account Deficit" shall mean, at any time, the then
balance in the Capital Account of a Partner, after giving effect to the
following adjustments:
(i) credit to such Capital Account any amounts that such Partner is
obligated to restore pursuant to this Agreement or otherwise or is deemed
to be obligated to restore as described in the penultimate sentences of
Regulations Section 1.704-2(g)(1) and Regulations Section 1.704-2(i)(5), or
any successor provisions; and
(ii) debit to such Capital Account the items described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
"Aggregate Restoration Amount" shall mean with respect to the Obligated
Partners, as a group, the aggregate balances of the Restoration Amounts, if any,
of the Obligated Partners, as determined on the date in question.
"Agreement" shall mean this First Amended and Restated Agreement of Limited
Partnership, as it may be amended from time to time.
"Assignee" shall mean a Person to whom one or more OP Units have been
transferred in a manner permitted under this Agreement, but who has not become a
substituted Limited Partner, and who has the rights set forth in Section
12(B)(ii).
"Bankruptcy" of a Partner shall mean (a) the filing by a Partner of a
voluntary petition seeking liquidation, reorganization, arrangement or
readjustment, in any form, of its
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debts under Title 11 of the United States Code (or corresponding provisions of
future laws) or any other Federal or state insolvency law, or a Partner's filing
an answer consenting to or acquiescing in any such petition, (b) the making by a
Partner of any assignment for the benefit of its creditors or the admission by a
Partner in writing of its inability to pay its debts as they mature, or (c) the
expiration of sixty (60) days after the filing of an involuntary petition under
Title 11 of the United States Code (or corresponding provisions of future laws),
seeking an application for the appointment of a receiver for the assets of a
Partner, or an involuntary petition seeking liquidation, reorganization,
arrangement or readjustment of its debts under any other Federal or state
insolvency law, provided that the same shall not have been vacated, set aside or
stayed within such 60-day period.
"Capital Account" shall mean the capital account maintained by the
Partnership for each Partner as described in Section 3.4 below.
"Capital Cash Flow" shall have the meaning provided in Section 8.2 below.
"Capital Contribution" shall mean, when used in respect of a Partner, the
initial capital contribution of such Partner as set forth in Schedule A below
and any other amounts of money or the fair market value of other property
contributed by such Partner to the capital of the Partnership pursuant to the
terms of this Agreement, including the Capital Contribution made by any
predecessor holder of the Partnership Interest of such Partner.
"Code" shall mean the Internal Revenue Code of 1986, as the same may be
amended from time to time, and any successor statute.
"Common Share" shall mean a common share of beneficial interest (or other
comparable common equity interest) of the Company.
"Company" means Ventas, Inc. and the General Partner of the Partnership,
and any successor thereto
"Contributing Partner" shall have the meaning provided in clause (vi) of
Section 3.2(B) below.
"Depreciation" shall mean for any fiscal year or portion thereof, an amount
equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such period for Federal income tax
purposes, except that if the Gross Asset Value of an asset differs from its
adjusted basis for Federal income tax purposes at the beginning of such period,
Depreciation shall be an amount that bears the same relationship to such
beginning Gross Asset Value as the depreciation, amortization or cost recovery
deduction in such period for Federal income tax purposes bears to the beginning
adjusted tax
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basis; provided, however, that if the adjusted basis for Federal
income tax purposes of an asset at the beginning of such period is zero,
Depreciation shall be determined with reference to such beginning Gross Asset
Value using any reasonable method selected by the General Partner.
"Determination Date" shall have the meaning provided in Section 3.2 below.
"FPAA" shall have the meaning provided in Section 11.6 below.
"General Partner" means Ventas, Inc. sometimes also referred to in this
Agreement as the "Company," and any successor thereto.
"Gross Asset Value" means, with respect to any Partnership asset, the
asset's adjusted basis for Federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset, as determined by the General Partner;
(ii) The Gross Asset Value of all Partnership assets shall be adjusted
to equal their respective gross fair market values, as determined by the
General Partner, as of the following times: (a) the acquisition of an
additional interest in the Partnership by any new or existing Partner in
exchange for more than a de minimis Capital Contribution; (b) the
distribution by the Partnership to a Partner of more than a de minimis
amount of Partnership property as consideration for an interest in the
Partnership; and (c) the liquidation of the Partnership within the meaning
of Regulations Section 1.704-1(b)(2)(ii)(g); provided, however, that
adjustments pursuant to clauses (a) and (b) above shall be made only if the
General Partner reasonably determines that such adjustments are necessary
or appropriate to reflect the relative economic interests of the Partners
in the Partnership;
(iii) The Gross Asset Value of any Partnership asset distributed to
any Partner shall be adjusted to equal the gross fair market value of such
asset on the date of distribution as determined by the General Partner; and
(iv) The Gross Asset Value of Partnership assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining
Capital Accounts pursuant
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to Regulations Section 1.704-1(b)(2)(iv)(m) and paragraph (vi) of the
definition of Profits and Losses and Section 7.3(G) below; provided,
however, that Gross Asset Value shall not be adjusted pursuant to this
paragraph (iv) to the extent the General Partner determines that an
adjustment pursuant to paragraph (ii) above is necessary or
appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this paragraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to paragraphs (i), (ii) or (iv) above, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset for purposes of computing Profits and Losses.
"IRS" shall have the meaning provided in Section 11.8 below.
"Limited Partner" shall mean any Person (i) whose name is set forth as a
Limited Partner on Schedule A attached hereto or who has become a Limited
Partner pursuant to the terms and conditions of this Agreement, and (ii) who
holds a Partnership Interest. "Limited Partners" means all such persons.
"Market Price" shall have the meaning set forth in Section 3.2(C) below.
"Nonrecourse Debt" shall mean a liability as defined in Regulations Section
1.704-2(b)(3).
"Nonrecourse Deductions" has the meaning set forth in Regulations Section
1.704-2(c).
"Obligated Partners" shall mean that or those Limited Partner(s) listed as
Obligated Partner(s) on Schedule A attached hereto and made a part hereof, as
such Schedule may be amended from time to time by the General Partner, whether
by express amendment to this Partnership Agreement or by execution of a written
instrument by and between any additional Obligated Partner(s) being directly
affected thereby and the General Partner, acting on behalf of the Partnership
and without the prior consent of the Limited Partners (whether or not Obligated
Partners other than the Obligated Partner(s) being directly affected thereby).
Any successor, Assignee, or transferee of the entire Partnership Interest of an
Obligated Partner shall be considered an Obligated Partner; provided, however,
that if an Obligated Partner makes a distribution of all or any portion of its
OP Units in accordance with Section 12(B)(i)(z) hereof, the General Partner
shall, upon receipt of written notice from such Obligated Partner and such
distributee(s) of OP Units, amend Schedule A_ to add any such distributee(s) as
an additional Obligated Partner in the manner set forth in such notice.
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"Operating Cash Flow" shall have the meaning provided in Section 8.1 below.
"OP Units" are units of Partnership Interest more particularly described in
Section 3.2 below.
"OP Unit Value" shall mean, as of any given time, the number of OP Units
into which a Preference Unit is convertible (whether or not the conversion can
then be effected), or the value of the Preference Unit expressed in OP Units if
the Preference Unit is not convertible into OP Units, as provided for in the
applicable Preference Unit Term Sheet or Other Securities Term Sheet.
"Other Securities" shall have the meaning set forth in clause (iv) of
Section 3.2(B) below.
"Other Securities Term Sheet" shall have the meaning provided in clause (f)
of Section 3.2(B) below.
"Partner Nonrecourse Debt" has the meaning set forth in Regulations Section
1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Regulations Section 1.704-2(i).
"Partner Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(i).
"Partners" shall mean, collectively, the General Partner and the Limited
Partners, or any additional or successor Partners of the Partnership admitted to
the Partnership in accordance with the terms of this agreement. Reference to a
Partner shall be to any one of the Partners.
"Partnership Interest" shall mean the ownership interest of a Partner in
the Partnership at any particular time, including the right of such Partner to
any and all benefits to which such Partner may be entitled as provided in this
Agreement, and to the extent not inconsistent with this Agreement, under the
Act, together with the obligations of such Partner to comply with all of the
terms and provisions of this Agreement and of the Act.
"Partnership Minimum Gain" has the meaning set forth in Regulations
Sections 1.704-2(b)(2) and 1.704-2(d).
"Percentage Interest" shall mean, as to each Partner, the quotient
(expressed as a percentage) arrived at by dividing (i) the sum of the OP Unit
Value of any Preference Units held by that Partner and the number of OP Units
held by that Partner, by (ii) the sum of the OP Unit Value of all Preference
Units issued and outstanding at the time and the total number of OP Units issued
and outstanding at the time. The respective Percentage Interests of the Partners
shall be as set forth in Schedule A attached to
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this Agreement, as such may be revised by the General Partner to add Partners
from time to time as provided in Section 3.1.
"Person" means any individual, partnership, corporation, trust or other
entity.
"Pledge" shall have the meaning provided in Section 12(B)(i) below.
"Preference Units" are units of Partnership Interest more particularly
described in Section 3.2 below.
"Preference Unit Term Sheet" shall have the meaning provided in clause (e)
Section 3.2(B) below.
"Prior Partnership Agreement" has the meaning set forth in Recital A above.
"Profits" and "Losses" shall mean for each fiscal year or portion thereof,
an amount equal to the Partnership's items of taxable income or loss for such
year or period, determined in accordance with Section 703(a) of the Code with
the following adjustments:
(i) any income which is exempt from Federal income tax and not
otherwise taken into account in computing Net Profits or Net Losses
shall be added to taxable income or loss;
(ii) any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Section 705(a)(2)(B) expenditures
under Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken
into account in computing Profits or Losses, will be subtracted from
taxable income or loss;
(iii) in the event that the Gross Asset Value of any Partnership
asset is adjusted pursuant to the definition of Gross Asset Value
contained in this Section 2, the amount of such adjustment shall be
taken into account as gain or loss from the disposition of such asset
for purposes of computing Profits and Losses;
(iv) gain or loss resulting from any disposition of Partnership
assets with respect to which gain or loss is recognized for Federal
income tax purposes shall be computed by reference to the Gross Asset
Value of the property disposed of, notwithstanding that the adjusted
tax basis of such property differs from its Gross Asset Value;
(v) in lieu of the depreciation, amortization and other cost
recovery deductions taken into account
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in computing such taxable income or loss, there shall be taken into
account Depreciation for such fiscal year or other period; (vi) to the
extent an adjustment to the adjusted tax basis of any Partnership
asset pursuant to Code Section 734(b) or Code Section 743(b) is
required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be
taken into account in determining Capital Accounts as a result of a
distribution other than in complete liquidation of a Partner's
Partnership Interest, the amount of such adjustment shall be treated
as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases the basis of the asset)
from the disposition of the asset and shall be taken into account for
purposes of computing Profits or Losses; and
(vi) any items specially allocated pursuant to Section 7.3 or
Section 7.4 below shall not be considered in determining Profits or
Losses.
"Recapitalization" shall have the meaning provided in Section 3.2(C) below.
"Record Date" shall have the meaning provided in Section 9.1A.(8) below.
"Recourse Debt" shall mean the amount of indebtedness owed by the
Partnership other than Nonrecourse Debt and Partner Nonrecourse Debt.
"Regulations" shall mean the Income Tax Regulations, including Temporary
Regulations, promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
"Restoration Amount" shall mean with respect to any Obligated Partner, the
amount set forth opposite the name of such Obligated Partner on Schedule A
attached hereto and made a part hereof, as such Schedule may be modified from
time to time by an amendment to the Partnership Agreement or by execution of a
written instrument by and between such Obligated Partner, and/or any additional
Obligated Partner(s) being directly affected thereby and the General Partner,
acting on behalf of the Partnership and without the prior written consent of the
Limited Partners (whether or not Obligated Partners other than the Obligated
Partner(s) being directly affected thereby). If an Obligated Partner makes a
distribution of all or any portion of its OP Units in accordance with Section
12(B)(i)(z) hereof, and the General Partner receives a written notice from such
Obligated Partner and any distributee of OP Units to amend Schedule A to add
such distributee as an additional Obligated Partner, the Restoration Amount of
such additional Obligated Partner shall be increased by an amount equal to that
amount set forth in such
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notice, and the Restoration Amount of the Obligated Partner making such
distribution shall be reduced by such amount.
"Subsidiary" or "Subsidiaries" shall mean any corporation, partnership,
limited liability or other entity in which the Partnership or the Company, as
applicable shall have a controlling interest whether by vote, value, number of
interests in such entity or by other agreement.
"TMP" shall have the meaning provided in Section 11.5 below.
"Units" has the meaning set forth in Section 3.2(A) below.
III. Capital.
Section 3.1. Capital Contributions of the Partners. At the time of the
execution of this Agreement, the Partners shall make or shall have made or be
deemed to have made the Capital Contributions as set forth in Schedule A. The
Partners shall own OP Units in the amounts set forth in Schedule A and shall
have a Percentage Interest in the Partnership as set forth in Schedule A, which
Percentage Interest shall be adjusted in Schedule A from time to time by the
General Partner to the extent necessary to reflect accurately redemptions,
Capital Contributions, the issuance of additional OP Units or similar events
having an effect on a Partner's Percentage Interest. To the extent the
Partnership is acquiring any property by the merger of any other Person into the
Partnership, Persons who receive Partnership Interests in exchange for their
interests in the Person merging into the Partnership shall become Partners and
shall be deemed to have made Capital Contributions as provided in the applicable
merger agreement and as set forth in Schedule A.
Section 3.2. Issuance and Conversion of Units.
A. The interest of a Partner in the Partnership is referred to as being
evidenced by one or more "Units". Units may be either "OP Units" or "Preference
Units":
(i) An "OP Unit" is a unit of Partnership Interest that, as
more particularly provided for below in Section 3.2(B), may be
converted into either cash or one (1) Common Share.
(ii) A "Preference Unit" is a unit of Partnership Interest
having such rights, preferences and other privileges, variations
and designations as may be determined by the General Partner in
its sole and absolute discretion (but not in violation of the
provisions of Section 3.2(B) or the terms of any other Preference
Unit(s)). There may be more than one series or class of
Preference Units having differing terms and conditions, but all
Preference Units within a given
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series or class shall have the same rights, preferences and other
privileges, variations and designations. A Preference Unit shall
be convertible into one or more OP Units or be capable of being
valued in OP Units. With respect to each series or class of
Preference Units, the General Partner may also, in its
discretion, determine and fix, among other terms and conditions,
any of the following: (a) the series to which such Preference
Units shall belong, (b) the distribution rate therefore, (c) the
price at and the terms and conditions on which such Preference
Units may be redeemed, (d) the amount payable in respect of such
Preference Units in the event of involuntary or voluntary
liquidation, (e) the terms and conditions on which such
Preference Units may be converted, if such Preference Units are
issued with the privilege of conversion, and (f) the number of
such Preference Units to be issued as a part of such series. Once
determined and fixed as herein provided, however, the terms and
conditions of a particular series or class of Preference Units
may not be changed without the written consent of the holders of
at least 67% of the Preference Units within the class or series
(or such greater percentage as may be provided for in the
applicable Preference Unit Term Sheet or Other Securities Term
Sheet, as the case may be).
The aggregate total of all Units outstanding as of the date of this
Agreement, including the making of the capital contributions referred to in
Section 3.1 above, is 67,988,676. As of the date of this Agreement, each Partner
is deemed to hold Units as shown on Schedule A.
B. From time to time hereafter, subject to and in accordance with the
provisions of this Section 3.2(B), the General Partner shall cause the
Partnership to issue additional Units as follows:
(i) OP Units to the Company upon the issuance by the Company
of additional Common Shares (other than in exchange for OP Units)
and the contribution of the net proceeds thereof as a Capital
Contribution to the Partnership as provided for in Section 3.3(B)
below it being understood, however, that the Company may issue
Common Shares in connection with share option plans, dividend
reinvestment plans, restricted share plans or other benefit or
compensation plans (for example, shares issued in lieu of fees or
compensation) without receiving any proceeds and that the
issuance of such Common Shares shall nonetheless entitle the
Company to additional OP Units pursuant to this clause (i);
(ii) OP Units to Partners (including itself) that hold
Preference Units that are convertible into OP
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Units, upon the exercise of such conversion in accordance with
the terms and conditions of the Preference Unit Term Sheet or
Other Securities Term Sheet each hereinafter defined) applicable
thereto;
(iii) OP Units to Partners holding OP Units (including
itself) if and to the extent of each such Partner's participation
in any reinvestment program contemplated by Section 3.3(C) below;
(iv) Preference Units to the Company upon the issuance by
the Company of securities other than Common Shares (whether debt
or equity securities; ("Other Securities") and the contribution
of the net proceeds thereof as a Capital Contribution to the
Partnership as provided for in Section 3.3(B) below; and
(v) in all other cases, OP Units and/or Preference Units, as
determined by the General Partner, in its discretion, to existing
or newly-admitted Partners (including itself), in exchange for
the contribution by a Partner (the "Contributing Partner") of
additional Capital Contributions to the Partnership.
Issuance of OP Units as aforesaid shall be in accordance with the following:
(a) the number of OP Units issued to the Company under clause (i) of this
Section 3.2(B) shall be equal to the number of Common Shares issued;
(b) the number of OP Units issued to a Partner under clause (ii) of this
Section 3.2(B) shall be as provided for in the Preference Unit Term Sheet or the
Other Securities Term Sheet (each hereinafter defined) pursuant to which the
Preference Units being converted exist;
(c) the number of OP Units issued to a Limited Partner under clause (iii)
of this Section 3.2(B) shall be as provided for in the applicable reinvestment
program; and
(d) the number of OP Units issued to a Contributing Partner under clause
(v) of this Section 3.2(B) shall be equal to the quotient (rounded to the
nearest whole number) arrived at by dividing (x) the initial Gross Asset Value
of the property contributed as additional Capital Contributions (net of any debt
to which such property is subject or assumed, and any cash paid to the
Contributing Partner, by the Partnership in connection with such contribution)
by (y) the contractual price per OP Unit agreed to by the General Partner and
the Contributing Partner.
(e) Preference Units issued pursuant to clause (v) of this Section 3.2(B)
shall have the terms and conditions specified in an agreement (a "Preference
Unit Term Sheet") executed by and
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between the Partnership (at the direction and in the discretion of the General
Partner) and the Contributing Partner and such Preference Unit Term Sheet shall
thereupon be a part of this Agreement. The number of Preference Units issued to
a Contributing Partner under clause (v) of this Section 3.2(B) shall be equal to
the quotient (rounded to the nearest whole number) arrived at by dividing (x)
the initial Gross Asset Value of the property contributed as additional capital
contributions (net of any debt to which such property is subject or assumed by
the Partnership in connection with such contribution) by (y) an amount provided
for in the Preference Unit Term Sheet; and
(f) Preference Units issued pursuant to clause (iv) of this Section 3.2(B)
shall have economic terms substantially identical to those of the applicable
Other Securities and such other terms and conditions, all of which are specified
in an agreement (an "Other Securities Term Sheet") executed between the
Partnership and the Company and such Other Securities Term Sheet shall thereupon
be a part of this Agreement.
Units may also be issued to some or all of the Partners holding Preference
Units if and to the extent of such Partner's participation in any reinvestment
program contemplated by Section 3.3(C) below. Upon the issuance of additional OP
Units and/or Preference Units in accordance with the provisions of this Section
3.2(B), each recipient of such Units shall either execute this Agreement or a
joinder to this Agreement (which joinder, as to Preference Units, may be a part
of the applicable Preference Unit Term Sheet or Other Securities Term Sheet) and
the Percentage Interests of all of the Partners shall thereupon be appropriately
adjusted by the General Partner. Notwithstanding anything to the contrary
contained herein, in no event shall any additional Preference Units or OP Units
be issued (pursuant to this Section 3.2(B) or otherwise) to the extent that the
effect of such issuance would be to reduce the General Partner's Percentage
Interest to fifty percent (50%) or less.
C. Subject to the further provisions of this Section 3.2(C), the Company
hereby grants to each Limited Partner holding OP Units the right to request the
Partnership to redeem any or all of its OP Units for cash, as follows:
(i) The cash to be paid per OP Unit shall be in an amount
equal to the product arrived at by multiplying (i) the number of
OP Units requested to be redeemed by such Limited Partner
multiplied by (ii) the Market Price, with such payment to be made
within ten (10) days after the Company's receipt of the Limited
Partner's exercise notice as aforesaid; provided, however, that
in calculating Market Price for this Section 3.2(C) only, the
"Determination Date" shall mean the trading date immediately
preceding the date on which the Company receives notice from the
holder of OP Units stating such holder's intention to exercise
its
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right to request an exchange of its OP Units for Common
Shares. As used in this Section 3.2(C), "Market Price" means
either (a) the last reported sale price per share of the Common
Shares at the close of trading on the Determination Date as
reported in the Wall Street Journal (Midwest Edition) or such
other reportable stock price reporting service as may be selected
by the General Partner, or (b) in the event that the Common
Shares were not traded on such Determination Date, then the last
reported sale price as aforesaid on the most recent day that the
Common Shares were traded.
(ii) After the date agreed upon by the General Partner and
each Limited Partner in a separate writing at the time a Limited
Partner is admitted to the Partnership, a Limited Partner may
exercise such right at any time and from time to time upon not
less than ten (10) days prior written notice by the Limited
Partner seeking to redeem OP Units to the Partnership and the
Company.
(iii) However, the Partnership shall not be obligated to
satisfy such request for redemption for cash if (A) the Company
elects, in its sole and absolute discretion and subject to the
limitations on Excess Shares in the Company's Certificate of
Incorporation, to purchase the OP Units subject to the redemption
notice by assuming the Partnership's obligations in this Section
3.2(C) and purchasing the OP Units tendered, by notifying within
five (5) business days after receipt of the Limited Partner's
notice the tendering Limited Partner of the Company's intention
to purchase the OP Units and to make payment therefor in Common
Shares, with one OP Unit being exchangeable for one Common Share,
and (B) the Company so purchases the tendered OP Units. If the
Company purchases such OP Units, the Company, the Partnership and
the tendering Limited Partner shall treat the transaction as a
taxable sale for federal income tax purposes by the Limited
Partner to the Company. Each such Limited Partner agrees to
execute such documents as the Company may reasonably require in
connection with such issuance of Common Shares. The Company shall
at all times reserve and keep available out of its authorized but
unissued Common Shares, solely for the purpose of effecting the
exchange of OP Units for Common Shares, such number of Common
Shares as shall from time to time be sufficient to effect the
conversion of all outstanding OP Units not owned by the Company,
and any Preference Units not owned by the Company that are
convertible into OP Units (whether or not the conversion can then
be effected).
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(iv) The redeeming Limited Partner shall have no right to
distributions with respect to the OP Units redeemed or sold to
the Company in respect of periods after the closing of redemption
or sale.
(v) No Limited Partner shall, by virtue of being the holder
of one or more OP Units and/or Preference Units, be deemed to be
a shareholder of or have any other interest in the Company.
(vi) In the event of any change in the outstanding Common
Shares by reason of any share dividend, split, recapitalization,
merger, consolidation, combination, exchange of shares or other
similar corporate change (a "Recapitalization"), the number of OP
Units held by each Partner (or into which Preference Units are or
may be convertible, if applicable) shall be proportionately
adjusted so that one OP Unit remains exchangeable for one Common
Share without dilution. If the Company adopts a shareholder
rights plan or such other plan or arrangement pursuant to which
the holders of Common Shares are entitled to receive rights or
other securities upon the occurrence of specified events, then
the General Partner shall in good faith make an equitable
adjustment to the exchange ratio of Common Shares for OP Units,
as the General Partner shall determine in its sole discretion, to
protect the value of the OP Units if any rights or other
securities issued under such plan or arrangement become
exercisable and expire prior to a Determination Date.
(vii) The Assignee of any Limited Partner may exercise the
rights of such Limited Partner pursuant to this Section 3.2(C),
and such Limited Partner shall be deemed to have assigned such
rights to such Assignee and shall be bound by the exercise of
such rights by such Limited Partner's Assignee. In connection
with any exercise of such rights by such Assignee on behalf of
such Limited Partner, if the Partnership makes a cash payment as
provided herein, the cash payment shall be paid by the
Partnership directly to such Assignee and not to such Limited
Partner, and if the Company elects to purchase the Units for
Common Shares, the Common Shares shall be exchanged for Units
held by such Assignee and not such Limited Partner.
(viii) In the event the Company issues any Common Shares in
exchange for OP Units pursuant to this Section 3.2(C), the
General Partner shall record the transfer on the books of the
Partnership so that the Company is thereupon the owner and holder
of such OP Units.
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(ix) Notwithstanding the foregoing provisions of this Section 3.2(C),
a Limited Partner shall not have the right to exchange OP Units for Common
Shares if (i) in the opinion of counsel for the Company, the Company would,
as a result thereof, no longer qualify (or it would be likely that the
Company no longer would qualify) as a real estate investment trust under
the Code; (ii) such exchange would, in the opinion of counsel for the
Company, constitute or be likely to constitute a violation of applicable
securities laws, or (iii) if the delivery of the Company Common Shares to
such Partner as provided in this paragraph C by the Company (regardless of
whether or not the Company would in fact exercise its rights to do so)
would be prohibited under the Certificate of Incorporation of the Company.
Section 3.3. Additional Funds.
A. No Partner shall be assessed or, except as otherwise provided in this
Agreement, required to contribute additional funds or other property to the
Partnership. Any additional funds or other property required by the Partnership,
as determined by the General Partner in its sole discretion, may, at the option
of the General Partner and without an obligation to do so (except as provided
for in Section 3.3(B) below), be contributed by the General Partner or any other
Partner (provided such other Partner is willing to do so and the General
consents thereto, each in its sole and absolute discretion) as additional
Capital Contributions. If and as the General Partner or any other Partner makes
additional Capital Contributions to the Partnership, each such Partner shall
receive additional OP Units and/or Preference Units as provided for in Section
3.2(B) above. The General Partner shall also have the right (but not the
obligation) to raise any additional funds required for the Partnership in
accordance with the provisions of Section 9.7(E) below and/or by causing the
Partnership to borrow the necessary funds from third parties on such terms and
conditions as the General Partner shall deem appropriate in its sole discretion.
If the General Partner elects to cause the Partnership to borrow the additional
funds, or if the Partnership issues a guaranty, indemnity or similar undertaking
in connection with indebtedness of the Company as aforesaid, in any such case
one or more of the Partnership's assets may be encumbered to secure the loan or
undertaking. Except as provided for in Section 3.3(C) below, no Limited Partner
shall have the right to make additional Capital Contributions to the Partnership
without the prior written consent of the General Partner.
B. Except for (i) the capitalization of any wholly owned entity of the
General Partner which is the general partner of a partnership having the
Partnership as a limited partner, (ii) the net proceeds generated by the
issuance of Other Securities that evidence debt (and are not equity securities)
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that are loaned by the Company to the Partnership, and (iii) where, in the good
faith opinion of the Company, the net proceeds generated by the issuance of
Other Securities (whether for debt or equity) are retained by the Company for a
valid business reason consistent with the purposes of the Partnership and such
retention does not materially adversely affect the Limited Partners, the net
proceeds of any and all funds raised by or through the Company through the
issuance of Common Shares or Other Securities shall be contributed to the
Partnership as additional Capital Contributions, and in such event the Company
shall be issued additional Units pursuant to Section 3.2(B) above.
C. If the General Partner creates and administers a reinvestment program in
substantial conformance with a dividend reinvestment program which may be
available from time to time to holders of the Common Shares, each Limited
Partner holding OP Units shall have the right to reinvest any or all cash
distributions payable to it from time to time pursuant to this Agreement by
having some or all (as the Limited Partner elects) of such distributions
contributed to the Partnership as additional Capital Contributions, and in such
event the Partnership shall issue to each such Limited Partner additional OP
Units pursuant to clause (iv) of Section 3.2(B) above, or the General Partner
may elect to cause distributions with respect to which a Limited Partner has
elected reinvestment to be contributed to the Company in exchange for the
issuance of Common Shares. At the option of the General Partner, such a program
may also be made available with respect to Preference Units.
D. From and after the date hereof, the Company shall not issue any
additional REIT Shares (other than REIT Shares issued pursuant to Section
3.2(C)), or rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase REIT Shares (collectively "New
Securities") other than to all holders of REIT Shares unless (i) 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 New
Securities; and (ii) the Company contributes to the Partnership the net proceeds
from the issuance of such New Securities and from the exercise of rights
contained in such New Securities. Without limiting the foregoing, the Company is
expressly authorized to issue New Securities for no tangible value or 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 issuance is in
the interests of the Company and the Partnership (for example, and not by way of
limitation, the issuance of REIT Shares and corresponding Units pursuant to an
employee stock purchase plan providing for employee grants or purchases of REIT
Shares or
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employee stock options that have an exercise price that is less than
the fair market value of the REIT Shares, either at the time of issuance or at
the time of exercise); and (y) the Company contributes all proceeds, if any,
from such issuance and exercise to the Partnership. All options to acquire
Common Shares issued by the Company prior to the date hereof to employees,
former employees, or employees of persons with whom the Company had or has
contractual relationships shall be treated for purposes of this Section 3.3 D.
in the same fashion as options issued after the date hereof to employees of the
Company and, as provided herein, the Partnership shall be treated as having
issued similar options to the Company in respect of all such options issued by
the Company that are currently outstanding.
E. In connection with any public or private offering of REIT Shares by the
Company and any other issuance of New Securities, the Company shall contribute
to the Partnership any proceeds (or a portion thereof) raised in connection with
such issuance; provided that if the proceeds actually received by the Company
are less than the gross proceeds of such issuance as a result of any
underwriter's discount or other expenses paid or incurred in connection with
such issuance, then the Company shall be deemed to have made a Capital
Contribution to the Partnership in the amount equal to the sum of the net
proceeds of such issuance plus the amount of such underwriter's discount and
other expenses paid by the Company (which discount and expense shall be treated
as an expense for the benefit of the Partnership for purposes of Section 9.9).
In the case of employee acquisitions of New Securities at a discount from fair
market value or for no value in connection with a grant of New Securities, the
amount of such discount representing compensation to the employee, as determined
by the General Partner, shall be treated as an expense of the issuance of such
New Securities.
Section 3.4. Capital Accounts. A separate capital account ("Capital
Account") shall be maintained for each Partner.
A. To each Partner's Capital Account there shall be credited such Partner's
Capital Contributions, such Partner's distributive share of Profits and any
items in the nature of income or gain which are specially allocated pursuant to
Section 7.3, Section 7.4 or Section 14.2(C) hereof, and the amount of any
Partnership liabilities assumed by such Partner or which are secured by any
Partnership property distributed to such Partner.
B. To each Partner's Capital Account there shall be debited the amount of
cash and the Gross Asset Value of any Partnership property distributed to such
Partner pursuant to any provision of this Agreement, such Partner's distributive
share of Losses and any items in the nature of expenses or losses which are
specially allocated pursuant to Section 7.3 or Section 7.4 hereof, and the
amount of any liabilities of such Partner assumed
-17-
by the Partnership or which are secured by any property contributed by such
Partner to the Partnership.
C. In the event all or a portion of a Partnership Interest is transferred
in accordance with the terms of this Agreement (including a transfer of OP Units
in exchange for Common Shares, pursuant to Section 3.2(C)), the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
transferred Partnership Interest.
D. In determining the amount of any liability for purposes of Sections
3.4(A) and 3.4(B) above, there shall be taken into account Code Section 752(c)
and any other applicable provisions of the Code and Regulations.
E. This Section 3.4 and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Regulations
Section 1.704-1(b), and shall be interpreted and applied in a manner consistent
with such Regulations. In the event the General Partner shall determine that it
is prudent to modify the manner in which the Capital Accounts, or any debits or
credits thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or which
are assumed by the Partnership, or the Partners) are computed in order to comply
with such Regulations, the General Partner may make such modification, provided
that it is not likely to have a material effect on the amounts distributed to
any Partner pursuant to Section 14 below upon the dissolution of the
Partnership. The General Partner also shall (i) make any adjustments that are
necessary or appropriate to maintain equality between the Capital Accounts of
the Partners and the amount of Partnership capital reflected on the
Partnership's balance sheet, as computed for book purposes, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(g), and (ii) make any appropriate
modifications in the event unanticipated events (for example, the acquisition by
the Partnership of oil or gas properties) might otherwise cause this Agreement
not to comply with Regulations Section 1.704-1(b).
Section 3.5. Interest on and Return of Capital.
A. No Partner shall be entitled to any interest on its Capital Account or
on its contributions to the capital of the Partnership.
B. Except as expressly provided for in this Agreement, no Partner shall
have the right to demand or to receive the return of all or any part of his
capital contributions to the Partnership and there shall be no priority of one
Partner over the other as to the return of capital contributions or withdrawals
or distributions of profits and losses. No Partner shall have the right to
demand or receive
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property other than cash in return for the contributions of such Partner to the
Partnership.
Section 3.6. Negative Capital Accounts.
A. Except as provided in the next sentence and Section 3.6(B), no Partner
shall be liable to the Partnership or to any other Partner for any deficit or
negative balance which may exist in such Partner's Capital Account. If any
Obligated Partner has a deficit balance in its Capital Account (after giving
effect to all contributions, distributions, allocations and adjustments to
Capital Accounts for all periods), each such Obligated Partner shall contribute
to the capital of the Partnership an amount equal to its respective deficit
balance; such obligation to be satisfied by the end of the fiscal year of
liquidation (or, if later, within ninety (90) days following the liquidation and
dissolution of the Partnership.) Such contributions shall be used to make
payments to creditors of the Partnership and such Obligated Partners (i) shall
not be subrogated to the rights of any such creditor against the General
Partner, the Partnership, another Partner or any person related thereto, and
(ii) hereby waive any right to reimbursement, contribution or similar right to
which such Obligated Partners might otherwise be entitled as a result of the
performance of its obligations under this Agreement.
B. Except as otherwise agreed in writing by the General Partner and an
Obligated Partner, prior to the time of admission of such Obligated Partner to
the Partnership, notwithstanding any other provision of this Agreement, an
Obligated Partner shall cease to be an Obligated Partner for purposes of this
Section 3.6 upon an exchange by such Obligated Partner of all remaining OP Units
for Common Shares (pursuant to Section 3.2(C) or otherwise) 12 months after the
date of such exchange by such Obligated Partner unless at the time of, or during
the 12 month period following, such exchange, there has been:
(i) An entry of a decree or order for relief in respect of the
Partnership by a court having jurisdiction over a substantial part of
the Partnership's assets, or the appointment of a receiver,
liquidator, Assignee, custodian, trustee, sequestrator (or other
similar official) of the Partnership or of any substantial part of its
property, or ordering the winding up or liquidation of the
Partnership's affairs, in an involuntary case under the federal
bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar
law; or
(ii) The commencement against the Partnership of an involuntary
case under the federal bankruptcy
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laws, as now or hereafter constituted, or any other applicable federal
or state bankruptcy, insolvency or other similar law; or
(iii) The commencement by the Partnership of a voluntary case
under the federal bankruptcy laws, as now or hereafter constituted, or
any other applicable federal or state bankruptcy, insolvency or other
similar law, or the consent by it to the entry of an order for relief
in an involuntary case under any such law or the consent by it to the
appointment of or taking possession by a receiver, liquidator,
Assignee, custodian, trustee, sequestrator (or other similar official)
of the Partnership or of any substantial part of its property, or the
making by it of a general assignment for the benefit of creditors, or
the failure of Partnership generally to pay its debts as such debts
become due or the taking of any action in furtherance of any of the
foregoing; provided that, after the passage of such 12 months, the
Obligated Partner shall cease to be an Obligated Partner, at the first
time, if any, that all of the conditions set forth in (i) through
(iii) above are no longer in existence.
This Section 3.6(B) shall not be amended without the consent of two-thirds
in number of the Obligated Partners, provided, however, that no such amendment
shall adversely affect an Obligated Partner without the written consent of such
Obligated Partner.
Section 3.7. Limit on Contributions and Obligations of Partners. Neither
the Limited Partner nor the General Partner shall be required to make any
additional advances or contributions to or on behalf of the Partnership or to
endorse any obligations of the Partnership.
Section 3.8. Redemption and Repurchase of Units. Notwithstanding any other
provision of this Agreement which may be contrary to this Section 3.8, in the
event of the proposed repurchase or redemption for cash by the Company of (i)
Common Shares or, (ii) Other Securities with respect to which the Company had
previously been issued Preference Units pursuant to Section 3.2(B)(iv) of this
Agreement, then, in such event, the Partnership shall provide cash to the
Company concurrently with such repurchase or redemption for such purpose equal
to the proposed repurchase or redemption price, and one OP Unit owned by the
General Partner (or, in the case of redemption or repurchase by the Company of
Other Securities contemplated by clause (ii) above, one Preference Unit owned by
the General Partner which had been issued with respect to such Other Securities)
shall be canceled with respect to each Common Share (or share of Other
Securities) so repurchased or redeemed.
-20-
IV. Principal Office and Registered Office.
The principal office of the Partnership shall be located at 4360
Brownsboro Road, Suite 115, Louisville, Kentucky 40207-1642 or at such other
place as the General Partner may designate after giving written notice of such
designation to the other Partners. The registered office of the Partnership
shall be c/o The Corporation Trust Company, 1209 Orange Street, City of
Wilmington, Count of New Castle, Delaware 19801
V. Purposes and Powers of Partnership.
A. The purposes of the Partnership shall be to engage in any lawful act or
activity for which limited partnerships may be formed under the Act and to
engage in any and all activities necessary or incidental to the foregoing,
including without limitation acquiring, owning, constructing, leasing,
operating, financing and disposing of direct and indirect interests in real
estate and other entities owning real estate interests, whether directly or
indirectly, alone or in association with others in partnership or otherwise,
making of investments or expenditures, borrowing and lending of money, and to
conduct any other business that may be lawfully conducted by a limited
partnership pursuant to the Act and the taking of any and all actions which are
incidental or related to any of the purposes recited above. It is agreed that
each of the foregoing is an ordinary part of the Partnership's business and
affairs. Property may be acquired subject to, and by assuming, the liens,
encumbrances, and other title exceptions which affect such property. The
partnership may also be a partner, general or limited, in partnerships, general
or limited, and joint ventures created to accomplish all or any of the foregoing
and may own any or all of the stock or membership interests in one or more
corporate subsidiaries or limited liability companies formed for one or more of
the foregoing purposes.
B. The Partnership purposes may be accomplished by taking any action which
is not prohibited under the Act and which is related to the acquisition,
ownership, development, improvement, operation, management, financing, leasing,
exchanging, selling or otherwise encumbering or disposing of all or any portion
of the assets of the Partnership, or any interest therein.
VI. Term.
The term of the Partnership shall continue until the Partnership is
terminated upon the occurrence of an event described in Section 14.1 below.
VII. Allocations.
Section 7.1. Allocation of Profits. After giving effect to the allocations
set forth in Sections 7.3 and 7.4, Profits for
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any fiscal year shall be allocated to the Partners in the following order of
priority:
A. First, to the General Partner to the extent that the cumulative Losses
allocated to the General Partner pursuant to Section 7.2(D) exceed the
cumulative Profits allocated to the General Partner pursuant to this Section
7.1(A);
B. Second, to each Partner to the extent of and in proportion to the amount
by which the cumulative Losses allocated to such Partner pursuant to Section
7.2(C) exceed the cumulative Profits allocated to such Partner pursuant to this
Section 7.1(B);
C. Third, to the General Partner to the extent that the cumulative Losses
allocated to the General Partner pursuant to Section 7.2(B) exceed the
cumulative Profits allocated to the General Partner pursuant to this Section
7.1(C);
D. Fourth, to each Partner to the extent of and in proportion to the amount
by which the cumulative Losses allocated to such Partner pursuant to Section
7.2(A) exceed the cumulative Profits allocated to such Partner pursuant to this
Section 7.1(D); and
E. Thereafter, to the Partners in accordance with their respective
Percentage Interests.
Section 7.2. Losses. After giving effect to the allocations set forth in
Sections 7.3 and 7.4, Losses for each fiscal year shall be allocated to the
Partners in the following order of priority:
A. First, to the Partners, in proportion to their respective Percentage
Interests; provided that Losses allocated pursuant to this Section 7.2(A) shall
not exceed the maximum amount of Losses that can be allocated without causing
any Partner to have an Adjusted Capital Account Deficit (excluding for this
purpose any increase to such Adjusted Capital Account Deficit for a Partner's
actual obligation to fund a deficit Capital Account balance, including the
obligation of an Obligated Partner to fund a deficit Capital Account balance
pursuant to Section 3.6 hereof);
B. Second, to the General Partner, until the General Partner's Adjusted
Capital Account Deficit (excluding for this purpose any increase to such
Adjusted Capital Account Deficit for the obligation of any General Partner to
actually fund a deficit Capital Account balance) equals the excess of (i) the
amount of Recourse Liabilities over (ii) the Aggregate Restoration Amount;
C. Third, to the Obligated Partners, in proportion to their respective
Restoration Amounts, until such time as the
-22-
Obligated Partners have been allocated in aggregate amount of Losses pursuant to
this Section 7.2(C) equal to the Aggregate Restoration Amount; and
D. Thereafter, to the General Partner.
This Section 7.2 together with Section 7.1 shall control notwithstanding
any reallocation or adjustment of taxable income, loss or other items by the IRS
or any other taxing authority; provided, however, that neither the Partnership
nor the General Partner (nor any of their respective affiliates) is required to
indemnify any Obligated Partner (or its affiliates) for the loss of any tax
benefit resulting from any reallocation or adjustment of taxable income, loss or
other items by the IRS or other taxing authority.
The provisions of Section 7.1 and this Section 7.2 shall not be amended
in a manner which adversely affects an Obligated Partner (without consent of
such Obligated Partner), provided that the General Partner may amend Schedule A
to add additional Obligated Partners. If the Partnership issues additional Units
to any Partner pursuant to this Agreement, the General Partner shall make such
revisions to this Article 7 and Schedule A as it deems necessary to reflect the
terms of the issuance of such Units, including making preferential allocations
to classes of Preference Units that are entitled thereto, which shall not be
deemed to affect adversely an Obligated Partner. Such revisions shall not
require the consent or approval of any other Partner.
Section 7.3. Special Allocations. The following special allocations shall
be made in the following order:
A. Minimum Gain Chargeback. Except as otherwise provided in Regulations
Section 1.704-2(f), notwithstanding any other provision of this Section 7, if
there is a net decrease in Partnership Minimum Gain during any fiscal year, each
Partner shall be specially allocated items of Partnership income and gain for
such fiscal year (and, if necessary, subsequent fiscal years) in an amount equal
to such Partner's share of the net decrease in Partnership Minimum Gain,
determined in accordance with Regulations Section 1.704-2(g). The items to be so
allocated shall be determined in accordance with Regulations Sections
1.704-2(f)(6) and 1.704-2(j)(2). This Section 7.3(A) is intended to comply with
the minimum gain chargeback requirement in Section 1.704-2(f) of the Regulations
and shall be interpreted consistently therewith.
B. Partner Minimum Gain Chargeback. Except as otherwise provided in
Regulations Section 1.704-2(i)(4), notwithstanding any other provision of this
Section 7, if there is a net decrease in Partner Nonrecourse Debt Minimum Gain
attributable to a Partner Nonrecourse Debt during any Partnership fiscal year,
each Partner who has a share of the Partner
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Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(5), shall be
specially allocated items of Partnership income and gain for such fiscal year
(and, if necessary, subsequent fiscal years) in an amount equal to such
Partner's share of the net decrease in Partner Nonrecourse Debt Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(4). The items to be so allocated shall be
determined in accordance with Regulations Sections 1.704-2(i)(4) and
1.704-2(i)(2). This Section 7.3(B) is intended to comply with the minimum gain
chargeback requirement in Regulations Section 1.704-2(i)(4) and shall be
interpreted consistently therewith.
C. Qualified Income Offset. In the event any Partner unexpectedly receives
any adjustments, allocations, or distributions described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5), or Section
1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specially
allocated to each such Partner in an amount and manner sufficient to eliminate,
to the extent required by the Regulations, the Adjusted Capital Account Deficit
of such Partner as quickly as possible, provided that an allocation pursuant to
this Section 7.3(C) shall be made only if and to the extent that such Partner
would have an Adjusted Capital Account Deficit after all other allocations
provided for this Section 7 have been tentatively made, as if this Section
7.3(C) were not in the Agreement.
D. Gross Income Allocation. In the event any Partner has a deficit Capital
Account at the end of any Partnership fiscal year which is in excess of the sum
of (i) the amount such Partner is obligated to restore pursuant to any provision
of this Agreement, and (ii) the amount such Partner is deemed to be obligated to
restore pursuant to the penultimate sentences of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5), each such Partner shall be specifically
allocated items of Partnership income and gain in the amount of such excess as
quickly as possible, provided that an allocation pursuant to this Section 7.3(D)
shall be made only if and to the extent that such Partner would have a deficit
Capital Account in excess of such sum after all other allocations provided for
in this Section 7 have been made as if Section 7.3(C) hereof and this Section
7.3(D) were not in the Agreement.
E. Preferential Gross Income Allocations. If and to the extent Partners
receive distributions from the Partnership (other than (i) distributions
pursuant to Section 14.2(C) in final liquidation of the Partnership), each such
Partner shall be allocated an equal amount of Partnership gross income prior to
any allocations of Profit and Loss pursuant to Sections 7.1 and 7.2 above. For
purposes of this Section 7.3(E), any payment with respect to a Preference Unit
that, under the applicable Preference Unit Term Sheet or Other Securities Term
Sheet, as the
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case may be, constitutes a payment in redemption of such Preference Unit shall
not be considered a distribution except to the extent such payment is
specifically attributable to accrued and unpaid preferred distributions with
respect to such Preference Unit provided for in such Term Sheet.
F. Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year shall
be allocated among the Partners in accordance with their respective Percentage
Interests.
G. Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions for
any fiscal year shall be specially allocated to the Partner who bears the
economic risk of loss with respect to the Partner Nonrecourse Debt to which such
Partner Nonrecourse Deductions are attributable, in accordance with Regulations
Section 1.704-2(i)(1).
H. Section 754 Adjustments. To the extent an adjustment to the adjusted tax
basis of any Partnership asset pursuant to Code Section 734(b) or Code Section
743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or
Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in
determining Capital Accounts as the result of a distribution to a Partner in
complete liquidation of his interest in the Partnership, the amount of such
adjustment to Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specifically allocated to
the Partners in accordance with their respective Percentage Interests in the
event that Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or the Partner
to whom such distribution was made in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
Section 7.4. Curative Allocations. The allocations set forth in Sections
7.3(A), 7.3(B), 7.3(C), 7.3(D), 7.3(F), 7.3(G) and 7.3(H) above (the "Regulatory
Allocations") are intended to comply with certain requirements of the
Regulations under Sections 704(b) and 514(c)(9)(E) of the Code. It is the intent
of the Partners that, to the extent possible, all Regulatory Allocations shall
be offset either with other Regulatory Allocations or with special allocations
of other items of Partnership income, gain, loss, or deduction pursuant to this
Section 7.4. Therefore, notwithstanding any other provision of this Section 7
(other than the Regulatory Allocations), the General Partner shall make such
offsetting special allocations of Partnership income, gain, loss, or deduction
in whatever manner it determines appropriate so that, after such offsetting
allocations are made, each Partner's Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Partner would have had if
the Regulatory Allocations were not part of the Agreement and all Partnership
items were allocated pursuant to Sections 7.1 and 7.2(A) (subject, however, to
Section
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7.3(E) above), and so that, to the greatest extent possible, such allocations
comply with the Regulations under Code Section 514(c)(9)(E). In exercising its
discretion under this Section 7.4, the General Partner shall take into account
future Regulatory Allocations under Sections 7.3(A) and 7.3(B) that, although
not yet made, are likely to offset other Regulatory Allocations previously made
under Sections 7.3(F) and 7.3(G).
Section 7.5. Tax Allocations: Code Section 704(c).
A. Income, gain, loss, and deduction with respect to any property
contributed to the capital of the Partnership shall, solely for tax purposes, be
allocated among the Partners so as to take account of any variation between the
adjusted basis of such property to the Partnership for Federal income tax
purposes and its initial Gross Asset Value in accordance with any permissible
manner or manners under Code Section 704(c) and the Regulations thereunder.
B. In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to the definition of "Gross Asset Value" contained in Section 2 above,
subsequent allocations of income, gain, loss, and deduction with respect to such
asset shall take account of any variation between the adjusted basis of such
asset for Federal income tax purposes and its Gross Asset Value in the same
manner or manners permitted under Code Section 704(c) and the Regulations
thereunder.
C. Any elections or other decisions relating to such allocations shall be
made by the General Partner in any permissible manner under the Code or the
Regulations that the General Partner may elect in its sole discretion.
Allocations pursuant to this Section 7.5 are solely for purposes of Federal,
state, and local taxes and shall not affect, or in any way be taken into account
in computing, any Partner's Capital Account or share of Profits, Losses, other
items, or distributions pursuant to any provision in this Agreement.
VIII. Cash Available For Distribution.
Section 8.1. Operating Cash Flow.
A. As used in this Agreement, "Operating Cash Flow" shall mean and be
defined as all cash receipts of the Partnership from whatever source (but
excluding Capital Cash Flow and excluding the proceeds of any additional Capital
Contributions to the Partnership pursuant to Section 3.3 above) during the
period in question in excess of all items of Partnership expense (other than
non-cash expenses such as depreciation) and other cash needs of the Partnership,
including, without limitation, amounts paid by the Partnership as principal on
debts and advances, during such period, capital expenditures and any reserves
(as determined by the General Partner) established or increased during such
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period. In the discretion of the General Partner, reserves may include cash held
for future acquisitions or any other business needs of the Partnership.
B. Operating Cash Flow shall, subject to the terms of the Partnership's
indebtedness, be distributed to or for the benefit of the Partners of record as
of the applicable Record Date not less frequently than annually, and shall be
distributed:
(i) first to those Partners holding Preference Units to the extent of
the respective priorities (if any) established by the applicable Preference
Unit Term Sheets and Other Securities Term Sheets; and then
(ii) the balance prorata among the Partners holding OP Units and the
Partners holding Preference Units which, based on the provisions of the
applicable Preference Unit Term Sheets and Other Securities Term Sheets,
entitle such Partners to participate in such distributions on a pari passu
basis with the holders of OP Units (the "Residual Operating Cash Flow
Preference Units"), to each Partner based on the quotient (expressed as a
percentage) arrived at by dividing (i) the sum of the OP Unit Value of any
Residual Operating Cash Flow Preference Units held by that Partner and the
number of OP Units held by that Partner by (ii) the sum of the OP Unit
Value of all Residual Operating Cash Flow Preference Units issued and
outstanding at the time and the total number of OP Units issued and
outstanding at the time;
provided, that in no event may a Partner receive a distribution of
Operating Cash Flow with respect to a Unit, as of such Record Date, if such
Partner is entitled to receive a distribution out of such Operating Cash
Flow with respect to a REIT Share as of such Record Date for which such
Unit has been exchanged and such distribution shall instead be made to the
Company.
C. Notwithstanding the foregoing, any incoming Limited Partners who were
admitted during the applicable quarter (but excluding any incoming Partners who
received Units from an existing Limited Partner) and who held Units as of an
applicable Record Date, but held such Units for less than the entire period with
respect to which an Operating Cash Flow distribution is to be paid, shall be
entitled to receive a pro-rated portion of such Operating Cash Flow distribution
otherwise payable to such Partner based on the number of days such Units were
outstanding during the applicable period, or any other method of pro-ration
deemed equitable by the General Partner, and in such event, if the General
Partner, in its sole discretion, deems it necessary, the amount of the
distribution payable to all other Partners shall be adjusted accordingly.
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D. The General Partner shall take such reasonable efforts, as determined by
it in its sole and absolute discretion and consistent with the Company's
qualification as a REIT, to distribute Operating Cash Flow (a) to the Limited
Partners so as to preclude any such distribution or portion thereof from being
treated as part of a sale of property to the Partnership by a Limited Partner
under Section 707 of the Code or the Regulations thereunder; provided that the
General Partner and the Partnership shall not have liability to a Limited
Partner under any circumstances as a result of any distribution to a Limited
Partner being so treated and (b) to satisfy the requirements for qualifying as a
REIT under the Code. Unless otherwise expressly provided for herein or in an
agreement at the time a new class of Units is created hereunder, no Unit shall
be entitled to a distribution in preference to any other Unit.
E. All amounts withheld pursuant to the Code or any provisions of any state
or local tax law and Section 11.9 hereof with respect to any allocation, payment
or distribution to the Partners or Assignees shall be treated as amounts
distributed to the Partners or Assignees pursuant to Section 8.1 for all
purposes under this Agreement.
Section 8.2. Capital Cash Flow.
A. As used in this Agreement, "Capital Cash Flow" shall mean and be defined
as collectively (a) gross proceeds realized in connection with the sale of any
assets of the Partnership, (b) gross financing or refinancing proceeds, (c)
gross condemnation proceeds (excluding condemnation proceeds applied to
restoration of remaining property) and (d) gross insurance proceeds (excluding
rental insurance proceeds or insurance proceeds applied to restoration of
property), less (a) closing costs, (b) the cost to discharge any Partnership
financing encumbering or otherwise associated with the asset(s) in question, (c)
the establishment of reserves (as determined by the General Partner, and which
may include cash held for future acquisitions or any other business needs of the
Partnership), and (d) other expenses of the Partnership then due and owing.
B. Subject to Section 14.2 below, if applicable, Capital Cash Flow shall,
subject to the terms of the Partnership's indebtedness, be distributed to or for
the benefit of the Partners of record as of the applicable Record Date not less
frequently than annually and shall be distributed:
(i) first to the Partners holding Preference Units to the extent of
the respective priorities (if any) established by the applicable Preference
Unit Term Sheets and Other Securities Term Sheets; and then
(ii) the balance prorata among those Partners holding OP Units and
those Partners holding Preference
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Units which, based on the provisions of the applicable Preference Unit Term
Sheets and Other Securities Term Sheets, entitle such Partners to
participate in such distributions on a pari passu basis with the holders of
OP Units (the "Capital Cash Flow Preference Units"), to each Partner based
on the quotient (expressed as a percentage) arrived at by dividing (i) the
sum of the OP Unit Value of any Capital Cash Flow Preference Units held by
that Partner and the number of OP Units held by that Partner by (ii) the
sum of the OP Unit Value of all Capital Cash Flow Preference Units issued
and outstanding at the time and the total number of OP Units issued and
outstanding at the time;
provided, that in no event may a Partner receive a distribution of Capital
Cash Flow with respect to a Unit as of such Record Date if such Partner is
entitled to receive a distribution out of such Capital Cash Flow with
respect to a REIT Share as of such Record Date for which such Unit has been
exchanged and such distribution shall instead be made to the Company.
C. Notwithstanding the foregoing, the General Partner reserves the right to
pro-rate distributions of Capital Cash Flow to incoming Limited Partners who
were admitted during the applicable quarter (but excluding any incoming Partners
who received Units from an existing Limited Partner) and who held Units as of
the applicable Record Date but held such Units for less than the entire period
with respect to which the Capital Cash Flow distribution is to be paid, based on
the number of days such Units were outstanding during the applicable period, or
any other method of pro-ration deemed equitable by the General Partner and, in
such event, the amount of the distribution payable to all other Partners shall
be adjusted accordingly.
D. Proceeds from a terminating capital transaction and any other cash
received or reductions in reserves made after commencement of the liquidation of
the Partnership shall be distributed to the Partners in accordance with Section
14.2.
Section 8.3. Consent to Distributions. Each of the Partners hereby consents
to the distributions provided for in this Agreement.
Section 8.4. Right to Limit Distributions. The right of any Partner to
receive distributions of any nature pursuant to the terms of this Agreement
shall be subject to the terms of any agreement between such Partner and the
Partnership limiting, restricting or providing rights of set-off with respect to
such distributions.
Section 8.5. Revisions to Reflect Issuance of Additional Partnership
Interests. In the event that the Partnership issues additional Partnership
Interests to the General Partner or any
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Additional Limited Partner pursuant to Section 3 hereof, the General Partner
shall make such revisions to this Section 8 and Schedule A as it deems necessary
to reflect the issuance of such additional Partnership Interests and any special
rights, duties or powers with respect thereto. Such revisions shall not require
the consent or approval of any other Partner.
IX. Management of Partnership.
Section 9.1. General Partner.
A. Powers. Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs of the Partnership are and shall
be exclusively vested in the General Partner, and no Limited Partner shall have
any right to participate in or exercise control or management power over the
business and affairs of the Partnership. The General Partner may not be removed
by the Limited Partners with or without cause. In addition to the powers now or
hereafter granted a general partner of a limited partnership under applicable
law or which are granted to the General Partner under any other provision of
this Agreement, the General Partner, subject to Section 9.10, shall have full
power and authority to do all things deemed necessary or desirable by it to
conduct the business of the Partnership, to exercise all powers set forth in
Section 5.B. and to effectuate the purposes set forth in Section 5.A.,
including, without limitation:
(1) the making of any expenditures, the lending or borrowing
of money (including, without limitation, making prepayments on loans
and borrowing money to permit the Partnership to make distributions to
its Partners in such amounts as are required or will permit the General
Partner (so long as the General Partner qualifies as REIT) to avoid the
payment of any federal income tax (including, for this purpose, any
excise tax pursuant to Section 4981 of the Code) and to make
distributions to its shareholders sufficient to permit the General
Partner to maintain REIT status), the assumption or guarantee of, or
other contracting for, indebtedness and other liabilities, the issuance
of evidences of indebtedness (including the securing of same by
mortgage, deed of trust or other lien or encumbrance on the
Partnership's assets) and the incurring of any obligations the General
Partner deems necessary for the conduct of the activities of the
Partnership;
(2) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental or other
agencies having jurisdiction over the business or assets of the
Partnership;
(3) the acquisition, disposition, mortgage, pledge,
encumbrance, hypothecation or exchange of any or all of the
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assets of Partnership (including the exercise or grant of any
conversion, option, privilege or subscription right or other right
available in connection with any assets at any time held by the
Partnership) or the merger or other combination of the Partnership
with or into another entity on such terms as the General Partner deems
proper;
(4) the use of the assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent with the terms of
this Agreement and on any terms it sees fit, including, without
limitation, the financing of the conduct of the operations of the
General Partner, the Partnership or any of the Partnership's
Subsidiaries, the lending of funds to other Persons (including,
without limitation, the General Partner, its Subsidiaries and the
Partnership's Subsidiaries) and the repayment of obligations of the
Partnership and its Subsidiaries and any other Person in which the
Partnership has an equity investment and the making of capital
contributions to its Subsidiaries;
(5) the management, operation, leasing, landscaping, repair,
alteration, zoning or rezoning, demolition or improvement of any real
property or improvements owned by the Partnership or any Subsidiary of
the Partnership or any Person in which the Partnership has made a
direct or indirect equity investment;
(6) the negotiation, execution, delivery and performance of any
contracts, conveyances or other instruments that the General Partner
considers useful or necessary to the conduct of the Partnership's
operations or the implementation of the General Partner's powers under
this Agreement, including contracting with contractors, developers,
consultants, accountants, legal counsel, other professional advisors
and other agents and the payment of their expenses and compensation
out of the Partnership's assets;
(7) the mortgage, pledge, encumbrance or hypothecation of any
assets of the Partnership, and the use of the assets of the
Partnership (including, without limitation, cash on hand) for any
purpose consistent with the terms of this Agreement and on any terms
it sees fit, including, without limitation, the financing of the
conduct or the operations of the General Partner or the Partnership,
the lending of funds to other Persons (including, without limitation,
any Subsidiaries of the Partnership) and the repayment of obligations
of the Partnership, any of its Subsidiaries and any other Person in
which it has an equity investment;
(8) establishment of a date or dates (the "Record Date"), which
shall to the extent practicable coincide with
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the record date for dividends to be paid by the Company, for the
purpose of making any proper determination with respect to which
Partners are entitled to receive distributions, consent to any matter
for which the consent of Partners is permitted or required under any
provision hereof, or otherwise be allocated rights hereunder;
(9) the distribution of Partnership cash or other Partnership
assets in accordance with this Agreement;
(10) the holding, managing, investing and reinvesting of cash and
other assets of the Partnership;
(11) the collection and receipt of revenues and income of the
Partnership;
(12) the selection, designation of powers, authority and duties
and the dismal of employees of the Partnership (including, without
limitation, employees having titles such as "president," "vice
president," "secretary" and "treasurer") and agents, outside
attorneys, accountants, consultants and contractors of the Partnership
and the determination of their compensation and other terms of
employment or hiring;
(13) the maintenance of such insurance for the benefit of the
Partnership and the Partners as it deems necessary or appropriate;
(14) the formation of, or acquisition of an interest (including
non-voting interests in entities controlled by Affiliates of the
Partnership or third parties) in, and the contribution of property to,
any further limited or general partnerships, joint ventures, limited
liability companies or other relationships that it deems desirable
(including, without limitation, the acquisition of interests in, and
the contributions of funds or property to, or making of loans to the
General partner, the General Partner of the Partnership's Subsidiaries
and any other Person in which it has an equity investment from time to
time, or the incurrence of indebtedness on behalf of such Persons or
the guarantee of the obligations of such Persons); provided that, as
long as the General Partner has determined to elect or continue to
qualify as a REIT, the Partnership may not engage in any such
formation, acquisition or contribution that would cause the General
Partner to fail to qualify as a REIT;
(15) the control of any matters affecting the rights and
obligations of the Partnership, including the settlement, compromise,
submission to arbitration or any other form of dispute resolution or
abandonment of any claim, cause of action, liability, debt or damages
due or owing to or from the Partnership, the commencement or
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defense of suits, legal proceedings, administrative proceedings,
arbitrations or other forms of dispute resolution, the representation
of the Partnership in all suits or legal proceedings, administrative
proceedings, arbitrations or other forms of dispute resolution, the
incurring of legal expense and the indemnification of any Person
against liabilities and contingencies to the extent permitted by law;
(16) the determination of the fair market value of any
Partnership property distributed in kind, using such reasonable method
of valuation as the General Partner may adopt;
(17) the exercise, directly or indirectly, through any
attorney-in-fact acting under a general or limited power of attorney,
of any right, including the right to vote, appurtenant to any assets
or investment held by the Partnership;
(18) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of or in connection with any
Subsidiary of the Partnership or any other Person in which the
Partnership has a direct or indirect interest, individually or jointly
with any such Subsidiary or other Person;
(19) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of or in connection with any
Subsidiary of the Partnership or any other Person in which the
Partnership has a direct or indirect interest, individually or jointly
with any such Subsidiary or other Person;
(20) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of any Person in which the
Partnership does not have any interest pursuant to contractual or
other arrangements with such Person;
(21) the making, executing and delivering of any and all deeds,
leases, notes, deeds to secure debt, mortgages, deeds of trust,
security agreements, conveyances, contracts, guarantees, warranties,
indemnities, waivers, releases or other legal instruments or
agreements in writing necessary or appropriate in the judgment of the
General Partner for the accomplishment of any of the powers of the
General Partner enumerated in this Agreement; and
(22) the distribution of cash to acquire Units held by a Limited
Partner in connection with a Limited Partner's exercise of its rights
under Section 3.2 C.; and
(23) the amendment and restatement of Schedule A to reflect
accurately at all times the Capital Contributions
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and Percentage Interests of the Partners as the same are adjusted from
time to time to the extent necessary to reflect redemptions, Capital
Contributions, the issuance of Units, the admission of any Additional
Limited Partner or any Substituted Limited Partner or otherwise, which
amendment and restatement, notwithstanding anything in this Agreement
to the contrary, shall not be deemed an amendment of this Agreement,
as long as the matter or event being reflected in Schedule A otherwise
is authorized by this Agreement.
B. No Approval by Limited Partners. Except as provided in Section 16, each
of the Limited Partners agree that the General Partner is authorized to execute,
deliver and perform the above-mentioned agreements and transactions on behalf of
the Partnership without any further act, approval or vote of the Partners,
notwithstanding any other provision of this Agreement, the Act or any applicable
law, rule or regulation, to the full extent permitted under the Act or other
applicable law. The execution, delivery or performance by the General Partner or
the Partnership of any agreement authorized or permitted under this Agreement
shall not constitute a breach by the General Partner of any duty that the
General Partner may owe the Partnership or the Limited Partners or any other
Persons under this Agreement or of any duty stated or implied by law or equity.
C. Insurance. At all times from and after the date hereof, the General
Partner may cause the Partnership to obtain and maintain (i) casualty, liability
and other insurance on the properties of the Partnership and (ii) liability
insurance for the Indemnitees hereunder and (iii) such other insurance as the
General Partner, in its sole and absolute discretion, determines to be
necessary.
D. Working Capital and Other Reserves. At all times from and after the date
hereof, the General Partner may cause the Partnership to establish and maintain
working capital reserves in such amounts as the General Partner, in its sole and
absolute discretion, deems appropriate and reasonable from time to time,
including upon liquidation of the Partnership under Section 13.
E. No Obligations to Consider Tax Consequences of Limited Partners. In
exercising their authority under this Agreement, the General Partner may, but
shall be under no obligation to, take into account the tax consequences to any
Partner (including the General Partner) of any action taken (or not taken) by
any of them. The General Partner may cause the Partnership to agree with any one
or more (but not necessarily all) Limited Partners as to tax matters (including,
without limitation, the allocation of nonrecourse debt to certain Limited
Partners for income tax purposes and guarantees of Partnership indebtedness by
one or more (but not necessarily all) Limited Partners), the conduct of the
Partnership's business and activities, the operation, financing, holding or
disposition of
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any Partnership assets, and the tax reporting as to any of the foregoing, in
each case whether affecting one, some or less than all Limited Partners. The
General Partner shall not be obligated to consider the tax consequences in
respect of any other Limited Partners in connection with any such agreements or
other undertakings with some but not all Limited Partners. The General Partner
and the Partnership shall have no liability to any Limited Partner for monetary
damages or otherwise for losses sustained, liabilities incurred or benefits not
derived by such Limited Partner in connection with such decisions, provided that
the General Partner shall have acted pursuant to its authority under this
Agreement.
F. Limited Partner Guarantees of Partnership Debt. The General Partner
agrees, upon the prior written request of a Limited Partner in connection with
the admission of such Partner to the Partnership, to cause the Partnership to
use its reasonable commercial efforts to cause its lenders to permit such
Partners to elect to guarantee any indebtedness of the Partnership (including
additional indebtedness or substitute indebtedness incurred thereafter) and to
thereby become the guarantor or guarantors of last resort with respect to such
additional or substitute indebtedness.
Section 9.2. Limitations on Powers and Authorities of Partners.
Notwithstanding the powers of the General Partner set forth in Section 9.1
above, no Partner shall have the right or power to do any of the following:
(a) do any act in contravention of this Agreement, or any amendment hereto;
(b) do any act which would make it impossible to carry on the ordinary
business of the Partnership, except to the extent that such act is specifically
permitted by the terms hereof (it being understood and agreed that, except as
hereafter provided in this Section 9.2, a sale of any or all of the assets of
the Partnership, for example, would be an ordinary part of the Partnership's
business and affairs and is specifically permitted hereby); or
(c) confess a judgment against the Partnership.
Section 9.3. Limited Partners.
A. The Limited Partners shall have no right or authority to act for or to
bind the Partnership and no Limited Partner shall participate in the conduct or
control of the Partnership's affairs or business.
B. Each Limited Partner shall have the right, for a purpose reasonably
related to such Limited Partner's interest as a limited partner in the
Partnership, upon written demand with a statement of the purpose of such demand
and at such Limited
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Partner's own expense (including such copying and administrative charges as the
General Partner may establish from time to time):
(1) to obtain a copy of the most recent annual and quarterly reports
filed with the Securities and Exchange Commission by the Company pursuant
to the Securities Exchange Act of 1934; and
(2) to obtain a copy of this Agreement and the Certificate of Limited
Partnership and all amendments thereto, together with executed copies of
all powers of attorney pursuant to which this Agreement, the Certificate of
Limited Partnership and all amendments thereto have been executed.
C. The Partnership shall notify each Limited Partner, upon request, of the
then current Conversion Factor and the REIT Shares Amount per Common Unit and,
with reasonable detail, how the same was determined.
D. Notwithstanding any other provision of this Agreement, the General
Partner may keep confidential from the Limited Partners, for such period of time
as the General Partner determines in its sole and absolute discretion to be
reasonable, any information that (i) the General Partner reasonably believes to
be in the nature of trade secrets or other information, the disclosure of which
the General Partner in good faith believes is not in the best interests of the
Partnership or could damage the Partnership or its business; or (ii) the
Partnership is required by law or by agreements with an unaffiliated third party
to keep confidential.
Section 9.4. Liability of General Partner. The General Partner shall not be
liable or accountable, in damages or otherwise, to the Partnership or to any
other Partner for any error of judgment or for any mistakes of fact or law or
for anything which it may do or refrain from doing hereafter in connection with
the business and affairs of the Partnership except (i) in the case of fraud,
willful misconduct (such as an intentional breach of fiduciary duty or an
intentional breach of this Agreement) or gross negligence, and (ii) for other
breaches of this Agreement, but the liability of the General Partner under this
clause (ii) shall be limited to its interest in the Partnership as more
particularly provided for in Section 9.8 below. The General Partner shall not
have any personal liability for the return of any Limited Partner's capital.
Section 9.5. Indemnity. The Partnership shall indemnify and shall hold the
officers, employees, agents and representatives of the Partnership, the General
Partner, and each of the trustees, officers, employees, agents, and
representatives of the General Partner harmless from any loss or damage,
including without limitation reasonable legal fees and court costs, incurred by
it or any of them by reason of anything it or
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any of them may do or refrain from doing hereafter for and on behalf of the
Partnership or in connection with its business or affairs; provided, however,
that (i) the Partnership shall not be required to indemnify any officers,
employees, agents and representatives of the Partnership, the General Partner or
any of the trustees, officers, employees, agents, and representatives of the
General Partner for any loss or damage which it might incur as a result fraud,
willful misconduct or gross negligence committed by any such person in the
performance of their duties hereunder, it being agreed that the Partnership's
indemnification obligations hereunder shall continue and be unaffected in
respect of any other person which or who shall not have committed such fraud,
willful misconduct or gross negligence, and (ii) this indemnification shall not
relieve the General Partner of its proportionate part of the obligations of the
Partnership as a Partner. In addition, the General Partner shall be entitled to
reimbursement from the Partnership for any amounts paid by it in satisfaction of
indemnification obligations owed by the General Partner to present or former
trustees, officers, employees, agents or representatives of the General Partner
or its predecessors, or other Persons indemnified by the General Partner, as
provided for in or pursuant to the Declaration of Trust and By-Laws of the
General Partner or otherwise. The right of indemnification set forth in this
Section 9.5 shall be in addition to any rights to which the person or entity
seeking indemnification may otherwise be entitled and shall inure to the benefit
of the successors and assigns of any such person or entity. No Partner shall be
personally liable with respect to any claim for indemnification pursuant to this
Section 9.5, but such claim shall be satisfied solely out of assets of the
Partnership.
Section 9.6. Other Activities of Partners and Agreements with Related
Parties. The General Partner shall devote its full-time efforts in furtherance
of the Partnership business, it being expressly understood that, except for (i)
the Company's ownership interest in a partnership or a limited liability company
of which the Partnership is a partner or a member, respectively; (ii) the
Company's ownership of any qualified REIT subsidiary (within the meaning of the
Code) or any other entity which is a partner of a partnership or a member of a
limited liability company having the Partnership as a partner or member,
respectively; (iii) the Company's ownership of any other entity that owns no
more than a thirty-five percent (35%) interest in any partnership, limited
liability company or other entity; (iv) borrowing (including the issuance of
debt securities) where the net proceeds thereof are loaned or contributed to the
Partnership; (v) any activity or undertaking, including without limitation
guaranteeing of Partnership obligations whether unsecured or secured by a pledge
of the Company's interests in the Partnership, which the Board of Trustees of
the General Partner, in its sole discretion, has determined will have a material
benefit to the General Partner and will not have a material adverse effect on
the Partnership;
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and (vi) activities incidental to the Company's status and existence as a real
estate investment trusts, the General Partner shall conduct all of its
activities with respect to the healthcare real estate business exclusively
through the Partnership and shall not conduct or engage in any way in any other
business.
Section 9.7. Other Matters Concerning the General Partner.
A. The General Partner shall be protected in relying, acting or refraining
from acting on any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, bond, debenture, or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties.
B. The General Partner may exercise any of the powers granted or perform
any of the duties imposed by this Agreement either directly or through agents.
The General Partner may consult with counsel, accountants, appraisers,
management consultants, investment bankers and other consultants selected by it,
each of whom may serve as consultants for the Partnership. An opinion by any
consultant on a matter which the General Partner believes to be within its
professional or expert competence shall be full and complete protection as to
any action taken or omitted by the General Partner based on the opinion and
taken or omitted in good faith. The General Partner shall not be responsible for
the misconduct, negligence, acts or omissions of any consultant or contractor of
the Partnership or of the General Partner, and shall assume no obligations other
than to use due care in the selection of all consultants and contractors.
C. No mortgagee, grantee, creditor or any other person dealing with the
Partnership shall be required to investigate the authority of the General
Partner or secure the approval of or confirmation by any Limited Partner of any
act of the General Partner in connection with the conduct of the Partnership
business.
D. The General Partner may retain such persons or entities as it shall
determine (including the General Partner or any entity in which the General
Partner shall have an interest or with which it is affiliated) to provide
services to or on behalf of the Partnership. The General Partner shall be
entitled to reimbursement from the Partnership for its out-of-pocket expenses
(including, without limitation, amounts paid or payable to the General Partner
or any entity in which the General Partner shall have an interest or with which
it is affiliated) incurred in connection with Partnership business. Such
expenses shall be deemed to include those expenses required in connection with
the administration of the Partnership such as the maintenance of Partnership
books and records, management of the Partnership property and assets and
preparation of information respecting the
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Partnership needed by the Partners in the preparation of their individual tax
returns.
E. The General Partner may loan to the Partnership the net proceeds of
loans obtained or debt securities issued by the Company so long as the terms of
such loan to the Partnership are substantially equivalent to the corresponding
loan obtained or debt securities issued by the Company. The General Partner from
time to time may borrow from the Partnership such amounts on such terms as it
deems to be arm's length.
Section 9.8. Partner Exculpation. Except for fraud, willful misconduct and
gross negligence, no Partner shall have any personal liability whatever, whether
to the Partnership or to the other Partner, for the debts or liabilities of the
Partnership or its obligations hereunder, and the full recourse of the other
Partner shall be limited to the interest of that Partner in the Partnership. To
the fullest extent permitted by law, no officer, trustee or shareholder of the
General Partner shall be liable to the Partnership for money damages except for
(i) active and deliberate dishonesty established by a final judgment or (ii)
actual receipt of an improper benefit or profit in money, property or services.
Without limitation of the foregoing, and except for fraud, willful misconduct
and gross negligence, no property or assets of any Partner, other than its
interest in the Partnership, shall be subject to levy, execution or other
enforcement procedures for the satisfaction of any judgment (or other judicial
process) in favor of any other Partner(s) and arising out of, or in connection
with, this Agreement. This Agreement is executed by the officers or General
Partner of each Partner solely as officers or partners of the same and not in
their own individual capacities. No advisor, trustee, officer, partner,
employee, beneficiary, shareholder, participant or agent of any Partner (or of
any partner of a Partner) shall be personally liable in any matter or to any
extent under or in connection with this Agreement, and the Partnership, each
Partner and their respective successors and assigns shall look solely to the
interest of the other Partner in the Partnership for the payment of any claim or
for any performance hereunder.
Section 9.9. General Partner Expenses and Liabilities. All costs and
expenses incurred by the Company in connection with its activities as the
General Partner hereunder, all costs and expenses incurred by the Company in
connection with its continued corporate existence and its status as a public
company, tax reporting and compliance, qualification as a real estate investment
trust under the Code and otherwise, and all other liabilities incurred or
suffered by the General Partner in connection with the pursuit of its business
and affairs as contemplated hereunder and in connection herewith, shall be paid
(or reimbursed to the Company, if paid by the Company) by the Partnership
including all such costs that were paid by the
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Company in connection with the issuance of additional shares of beneficial
interest of the Company as contemplated by Section 3.3(B) above.
Section 9.10. Title To Partnership Assets. Title to Partnership assets,
whether real, personal or mixed and whether tangible or intangible, shall be
deemed to be owned by the Partnership as an entity, and no Partners,
individually or collectively, shall have any ownership interest in such
Partnership assets or any portion thereof. Title to any or all of the
Partnership assets may be held in the name of the Partnership, the General
Partner or one or more nominees, as the General Partner may determine, including
Affiliates of the General Partner. The General Partner hereby declares and
warrants that any Partnership assets for which legal title is held in the name
of the General Partner or any nominee or Affiliate of the General Partner shall
be held by that General Partner for the use and benefit of the Partnership in
accordance with the provisions of this Agreement. 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 9.11. Reliance By Third Parties. Notwithstanding anything to the
contrary in this Agreement, any Person dealing with the Partnership shall be
entitled to assume that the General Partner has full power and authority,
without consent or approval of any other Partner or Person, to encumber, sell or
otherwise use in any manner any and all assets of the Partnership, to enter into
any contracts on behalf of the Partnership and to take any and all actions on
behalf of the Partnership, and such Person shall be entitled to deal with the
General Partner as if the General Partner were the Partnership's sole party in
interest, both legally and beneficially. Each Limited Partner hereby waives any
and all defenses or other remedies which may be available against such Person to
contest, negate or disaffirm any action of the General Partner in connection
with any such dealing. In no event shall any Person dealing with the General
Partner or its representatives be obligated to ascertain that the terms of this
Agreement have been complied with or to inquire into the necessity or expedience
of any act or action of the General Partner or its representatives. Each and
every certificate, document or other instrument executed on behalf of the
Partnership by the General Partner or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (i) at the time of the execution and delivery of such certificate, document
or instrument, this Agreement was in full force and effect, (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership, and
(iii) such certificate, document or instrument was duly executed and delivered
in accordance with
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the terms and provisions of this Agreement and is binding upon the Partnership
X. Banking.
The funds of the Partnership shall be kept in accounts designated by the
General Partner and all withdrawals therefrom shall be made on such signature or
signatures as shall be designated by the General Partner.
XI. Accounting and Tax Matters.
Section 11.1. Fiscal Year. The fiscal year and taxable year of the
Partnership (the "fiscal year") shall end on the last day of December of each
year, unless another fiscal year end is selected by the General Partner.
Section 11.2. Books of Account. The Partnership books of account shall be
maintained at the principal office designated in Section 4 above or at such
other locations and by such person or persons as may be designated by the
General Partner. The Partnership shall pay the expense of maintaining its books
of account. Each Partner shall have, during reasonable business hours and upon
reasonable prior notice, access to the books of the Partnership and in addition,
at its expense, shall have the right to copy such books. The General Partner, at
the expense of the Partnership, shall cause to be prepared and distributed to
the Partners annual financial data sufficient to reflect the status and
operations of the Partnership and its assets and to enable each Partner to file
its federal income tax return.
Section 11.3. Method of Accounting. The Partnership books of account shall
be maintained and kept, and its income, gains, losses and deductions shall be
accounted for, in accordance with sound principles of accounting consistently
applied, or such other method of accounting as may be adopted hereafter by the
General Partner. All elections and options available to the Partnership for
Federal or state income tax purposes shall be taken or rejected by the
Partnership in the sole discretion of the General Partner.
Section 11.4. Preparation of Tax Returns. The General Partner shall arrange
for the preparation and timely filing of all returns of Partnership income,
gains, deductions, losses and other items required of the Partnership for
federal and state income tax purposes and shall use all reasonable efforts to
furnish, within ninety (90) days of the close of each taxable year, the tax
information reasonably required by Limited Partners for federal and state income
tax reporting purposes.
Section 11.5. Tax Elections. The General Partner shall, in its sole and
absolute discretion, determine whether to make any available election pursuant
to the Code. In making any such tax
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election the General Partner shall have no obligation to take into account the
tax consequences to the Limited Partners resulting from any such election. The
General Partner shall have the right to seek to revoke any tax election it makes
(including, without limitation, the election under Section 754 of the Code) upon
the General Partner's determination, in its sole and absolute discretion, that
such revocation is in the best interests of the Partners. The General Partner
shall have the authority in its sole and absolute discretion to decide all
tax-related matters affecting or relating to the Partnership or its assets and
to enter into agreements with any taxing authority, third party or Partner in
respect of the Partnership, its assets or the conduct of the Partnership's
affairs and business in order to give effect to the General Partner's decisions
relating to any such tax or tax-related matters. All Partners shall be bound by
such elections and decisions, and the Limited Partners shall have no consent or
other approval rights of any kind in respect of any tax or tax-related matter.
Section 11.6. Section 754 Election. In case of a distribution of property
made in the manner provided in Section 734 of the Code (or any similar provision
enacted in lieu thereof), or in the case of a transfer of any interest in the
Partnership permitted by this Agreement made in the manner provided in Section
743 of the Code (or any similar provision enacted in lieu thereof), the General
Partner, on behalf of the Partnership, shall file an election under Section 754
of the Code (or any similar provision enacted in lieu thereof) in accordance
with the procedures set forth in the applicable Regulations.
Section 11.7. Tax Matters Partner. The General Partner is hereby designated
the Tax Matters Partner (hereinafter referred to as the "TMP") of the
Partnership and shall have all the rights and obligations of the TMP under the
Code.
Section 11.8. Administrative Adjustments. If the TMP receives notice of a
Final Partnership Administrative Adjustment (the "FPAA") or if a request for an
administrative adjustment made by the TMP is not allowed by the United States
Internal Revenue Service (the "IRS") and the IRS does not notify the TMP of the
beginning of an administrative proceeding with respect to the Partnership's
taxable year to which such request relates (or if the IRS so notifies the TMP
but fails to mail a timely notice of an FPAA), the TMP may, but shall not be
obligated to, petition a Court for readjustment of partnership items. In the
case of notice of an FPAA, if the TMP determines that the United States District
Court or Claims Court is the most appropriate forum for such a petition, the TMP
shall notify each person who was a Partner at any time during the Partnership's
taxable year to which the IRS notice relates of the approximate amount by which
its tax liability would be increased (based on such assumptions as the TMP may
in good faith make) if the treatment of partnership items on his return was made
consistent with the
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treatment of partnership items on the Partnership's return, as adjusted by the
FPAA. Unless each such person deposits with the TMP, for deposit with IRS, the
approximate amount of his increased tax liability, together with a written
agreement to make additional deposits if required to satisfy the jurisdictional
requirements of the Court, within thirty days after the TMP's notice to such
person, the TMP shall not file a petition in such Court. Instead, the TMP may,
but shall not be obligated to, file a petition in the United States Tax Court.
Section 11.9. Withholding. Each Limited Partner hereby authorizes the
Partnership to withhold from, or pay on behalf of or with respect to, such
Limited Partner any amount of federal, state, local, or foreign taxes that the
General Partner determines that the Partnership is required to withhold or pay
with respect to any amount distributable or allocable to such Limited Partner
pursuant to this Agreement, including, without limitation, any taxes required to
be withheld or paid by the Partnership pursuant to Sections 1441, 1442, 1445, or
1446 of the Code. Any amount paid on behalf of or with respect to a Limited
Partner shall constitute a loan by the Partnership to such Limited Partner,
which loan shall be repaid by such Limited Partner within fifteen (15) days
after notice from the General Partner that such payment must be made unless (i)
the Partnership withholds such payment from a distribution which would otherwise
be made to the Limited Partner; or (ii) the General Partner determines, in its
sole and absolute discretion, that such payment may be satisfied out of the
available funds of the Partnership which would, but for such payment, be
distributed to the Limited Partner. Any amounts withheld pursuant to the
foregoing clauses (i) or (ii) shall be treated as having been distributed to
such Limited Partner. Each Limited Partner hereby unconditionally and
irrevocably grants to the Partnership a security interest in such Limited
Partner's Partnership Interest to secure such Limited Partner's obligation to
pay to the Partnership any amounts required to be paid pursuant to this Section
11.9. In the event that a Limited Partner fails to pay any amounts owed to the
Partnership pursuant to this Section 11.9 when due, the General Partner may, in
its sole and absolute discretion, elect to make the payment to the Partnership
on behalf of such defaulting Limited Partner, and in such event shall be deemed
to have loaned such amount to such defaulting Limited Partner and shall succeed
to all rights and remedies of the Partnership as against such defaulting Limited
Partner. Without limitation, in such event the General Partner shall have the
right to receive distributions that would otherwise be distributable to such
defaulting Limited Partner until such time as such loan, together with all
interest thereon, has been paid in full, and any such distributions so received
by the General Partner shall be treated as having been distributed to the
defaulting Limited Partner and immediately paid by the defaulting Limited
Partner to the General Partner in repayment of such loan. Any amounts payable by
a Limited Partner hereunder shall bear
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interest at the lesser of (A) 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, plus four (4) percentage points, or (B) the maximum lawful rate
of interest on such obligation, such interest to accrue from the date such
amount is due (i.e., fifteen (15) days after demand) until such amount is paid
in full. Each Limited Partner shall take such actions as the Partnership or the
General Partner shall request in order to perfect or enforce the security
interest created hereunder.
XII. Transfers of Partnership Interests.
Section 12.1. General Partner. In no event may the General Partner at any
time assign, sell, transfer, pledge, hypothecate or otherwise dispose of all or
any portion of its Partnership Interest, except by operation of law; provided,
however, the General Partner may pledge or hypothecate its interests in the
Partnership in connection with a guarantee or other undertaking by it in respect
of any Partnership obligation and any exercise of the pledgee's right in respect
of such pledge or hypothecation, including a transfer of such interests to the
pledgee or any assignee of such pledgee is permitted by this Agreement,
notwithstanding any other provision of this Agreement.
Section 12.2. Limited Partner. Subject to the provisions of Sections
12.2.A, 12.2.B, 12.2.C, 12.2.D, and 12.2E, a Limited Partner (other than the
Company) may transfer, with or without the consent of the General Partner, all
or any portion of its Partnership Interest, or any of such Limited Partner's
economic rights as a Limited Partner.
A. If a Limited Partner is subject to incapacity, the executor,
administrator, trustee, committee, guardian, conservator or receiver of such
Limited Partner's estate shall have all of the rights of a Limited Partner, but
not more rights than those enjoyed by other Limited Partners, for the purpose of
settling or managing the estate and such power as the incapacitated Limited
Partner possessed to transfer all or any part of his or its interest in the
Partnership. The incapacity of a Limited Partner, in and of itself, shall not
dissolve or terminate the Partnership.
B. The General Partner may prohibit any transfer by a Limited Partner of
its Units if, in the opinion of legal counsel to the Partnership, such transfer
would require filing of a registration statement under the Securities Act of
1933 or would otherwise violate any federal or state securities laws or
regulations applicable to the Partnership or the Units.
C. No transfer by a Limited Partner of its Units may be made to any Person
if (i) in the opinion of legal counsel for the Partnership, it would result in
the Partnership being treated
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as an association taxable as a corporation (except as a result of the redemption
or exchange for Shares of all Units held by all Limited Partners or pursuant to
a transaction expressly permitted under this Agreement); (ii) it is made within
the period agreed upon by a Limited Partner and the General Partner in
connection with such Limited Partner's admission to the Partnership; (iii) such
transfer is effectuated through an "established securities market" or a
"secondary market (or the substantial equivalent thereof)" with the meaning of
Section 7704 of the Code or such transfer causes the Partnership to become a
"publicly traded partnership," as such term is defined in Section 469(k)(2) or
Section 7704(b) of the Code (provided that this clause (iii) shall not be the
basis for limiting or restricting in any manner the exercise of the redemption
under Section 3.2.C unless, and only to the extent that, outside tax counsel
provides to the General Partner an opinion to the effect that, in the absence of
such limitation or restriction, there is a significant risk that the Partnership
will be treated as a "publicly traded partnership" and, by reason thereof,
taxable as a corporation; (iv) such transfer would cause the Partnership to
become, with respect to any employee benefit plan subject to Title I of ERISA, a
"party-in-interest" (as defined in Section 3(14) of ERISA) or a "disqualified
person" (as defined in Section 4975(c) of the Code); (v) such transfer would, in
the opinion of legal counsel for the Partnership, cause any portion of the
assets of the Partnership to constitute assets of any employee benefit plan
pursuant to Department of Labor Regulations Section 2510.2-101; (vi) such
transfer would subject the Partnership to be regulated under the Investment
Company Act of 1940, the Investment Advisors Act of 1940 or the Employee
Retirement Income Security Act of 1974, each as amended; (vii) without the
express consent of the General Partner, in its sole and absolute discretion, (a)
to any person or entity who lacks the legal right, power or capacity to own a
Partnership Interest; (b) in violation of applicable law; (c) of any component
portion of a Partnership Interest, such as the Capital Account, or rights to
distributions, separate and apart from all other components of a Partnership
Interest; (viii) such transfer could adversely affect the ability of the General
Partner to become or remain qualified as a REIT; or (ix) if in the opinion of
legal counsel for the transferring Partner (which opinion and counsel shall be
reasonably satisfactory to the Partnership) or legal counsel for the
Partnership, such transfer would adversely affect the ability of the General
Partner to become or continue to qualify as a REIT or subject the General
Partner to any additional taxes under Section 857 or Section 4981 of the Code.
D. No transfer of any Units may be made to a lender to the
Partnership or any Person who is related (within the meaning of Section 1.752-
4(b) of the Regulations) to any lender to the Partnership whose loan constitutes
a Nonrecourse Liability, without the consent of the General Partner, in its sole
and absolute discretion; provided that as a condition to such consent the lender
will be required to enter into an
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arrangement with the Partnership and the General Partner to redeem for the
applicable cash amount any Units in which a security interest is held
simultaneously with the time at which such lender would be deemed to be a
partner in the Partnership for purposes of allocating liabilities to such lender
under Section 752 of the Code.
E. The General Partner shall monitor the transfers of interests in the
Partnership to determine (i) if such interests are being traded on an
"established securities market" or a "secondary market (or the substantial
equivalent thereof)" within the meaning of Section 7704 of the Code and (ii)
whether additional transfers of interests would result in the Partnership being
unable to qualify for at least one of the "safe harbors" set forth in
Regulations Section 1.7704-1 (or such other guidance subsequently published by
the IRS setting forth safe harbors under which interests will not be treated as
"readily tradable on a secondary market (or the substantial equivalent thereof)"
within the meaning of Section 7704 of the Code) (the "Safe Harbors"). The
General Partner shall take all steps reasonably necessary or appropriate to
prevent any trading of interests or any recognition by the Partnership of
transfers made on such markets and, except as otherwise provided herein, to
insure that at least one of the Safe Harbors is met; provided, however, that the
foregoing shall not authorize the General Partner to limit or restrict in any
manner the right of any holder of a Unit to exercise the redemption right in
accordance with the terms of Section 3.2.C unless, and only to the extent that,
outside tax counsel provides to the General Partner an opinion to the effect
that, in the absence of such limitation or restriction, there is a significant
risk that the Partnership will be treated as a "publicly traded partnership"
and, by reason thereof, taxable as a corporation.
Section 12.3. Substituted Limited Partners.
A. No Limited Partner shall have the right to substitute a transferee as a
Limited Partner in his place. The General Partner shall, however, have the right
to consent to the admission of a transferee of the interest of a Limited Partner
pursuant to this Section 11.4 as a Substituted Limited Partner, which consent
may be given or withheld by the General Partner in its sole and absolute
discretion. The General Partner's failure or refusal to permit a transferee of
any such interests to become a Substituted Limited Partner shall not give rise
to any cause of action against the Partnership or any Partner.
B. A transferee who has been admitted as a Substituted Limited Partner in
accordance with this Article 11 shall have all the rights and powers and be
subject to all the restrictions and liabilities of a Limited Partner under this
Agreement.
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C. Upon the admission of a Substituted Limited Partner, the General Partner
shall amend Exhibit A to reflect the name, address, number of Units, and
Percentage Interest of such Substituted Limited Partner and to eliminate or
adjust, if necessary, the name, address and interest of the predecessor of such
Substituted Limited Partner.
Section 12.4. General Provisions.
A. Withdrawal of Limited Partner. No Limited Partner may withdraw from the
Partnership other than as a result of a permitted transfer of all of such
Limited Partner's Units in accordance with this Article XII or pursuant to
redemption of all of its Units under Section 3.2.
B. Termination of Status as Limited Partner. Any Limited Partner who shall
transfer all of its Units in a transfer permitted pursuant to this Article XII
or pursuant to redemption of all of its Units under Section 3.2 shall cease to
be a Limited Partner.
C. Timing of Transfers. Transfers pursuant to this Article XII may only be
made upon three business days prior notice, unless the General Partner otherwise
agrees.
D. Allocations. If any Partnership Interest is transferred during any
quarterly segment of the Partnership's fiscal year in compliance with the
provisions of this Article XII or redeemed or transferred pursuant to Section
3.2, Net Income, Net Losses, each item thereof and all other items attributable
to such interest for such fiscal year shall be divided and allocated between the
transferor Partner and the transferee Partner by taking into account their
varying interests during the fiscal year in accordance with Section 706(d) of
the Code, using the interim closing of the books method (unless the General
Partner, in its sole and absolute discretion, elects to adopt a daily, weekly,
or a monthly proration period, in which event Net Income, Net Losses, each item
thereof and all other items attributable to such interest for such fiscal year
shall be prorated based upon the applicable method selected by the General
Partner). Solely for purposes of making such allocations, each of such items for
the calendar month in which the transfer or redemption occurs shall be allocated
to the Person who is a Partner as of midnight on the last day of said month. All
distributions of Available Cash attributable to any Unit with respect to which
the Partnership Record Date is before the date of such transfer, assignment or
redemption shall be made to the transferor Partner or the Redeeming Partner, as
the case may be, and, in the case of a transfer or assignment other than a
redemption, all distributions of Available Cash thereafter attributable to such
Unit shall be made to the transferee Partner.
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E. Admission Adjustments. The General Partner shall, when necessary, cause
this Agreement to be amended from time to time to reflect the addition or
withdrawal of Partners, and the issuance, conversion and redemption of any
Preference Units and/or OP Units (including the corresponding adjustments to
Percentage Interests).
F. Limitation. Notwithstanding any other provision of this Agreement to the
contrary, no sale, exchange, assignment, or other transfer or issuance of a
Partnership Interest by or to any Partner shall be effective, if the effect of
such transaction would be to cause the General Partner's Percentage Interest to
decrease to a level of fifty percent (50%) or less.
Section 12.5 Existing Pledge.
Notwithstanding anything to the contrary contained in this Agreement,
Ventas, Inc. and Ventas Realty LP, L.L.C. may each pledge, mortgage, assign,
hypothecate or otherwise transfer all or any portion of its Partnership Interest
in the Partnership pursuant to the Pledge and Security Agreement, dated as of
April 29, 1998, in favor of Morgan Guaranty Trust Company of New York, as
documentation Agent and pursuant to the Amended and Restated Credit, Security,
Guaranty and Pledge Agreement, dated as of April 29, 1998, as amended and
restated as of January 31, 2000 by and among the Partnership, Ventas, Inc.,
Ventas Realty LP, L.L.C., Bank of America, N.A., as administrative agent and
issuing Bank, Morgan Guaranty Trust Company of New York, as documentation agent,
and the Lenders referred to therein; provided, however, that no such assignment,
pledge, hypothecation or transfer of any partnership interest will be effective
to the extent it will cause the Partnership to be considered a "publicly traded
partnership" under Section 7704 of the Internal Revenue Code of 1986, as
amended.
XIII. Admission of New Partners.
The General Partner shall admit to the Partnership as Limited Partners
those persons and entities who are not already Partners and who receive OP Units
and/or Preference Units in accordance with the provisions of this Agreement.
Such admission may be by an amendment of this Agreement, an amendment of only
Schedule A or by a separate joinder having the terms the General Partner
believes appropriate and such joinder shall constitute a part of this Agreement.
XIV. Termination, Liquidation and Dissolution of Partnership.
Section 14.1. Termination Events. The Partnership shall be dissolved and
its affairs wound up in the manner hereinafter provided upon the earliest to
occur of the following events:
(a) January 1, 2099; or
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(b) the agreement of those Partners holding at least ninety percent (90%)
of the Percentage Interests of all of the Partners, determining that the
Partnership should be dissolved; or
(c) subject to Section 14.4 below, the entry of a final judgment, order or
decree of a court of competent jurisdiction adjudicating as bankrupt either the
Partnership or the General Partner, and the expiration without appeal of the
period, if any, allowed by applicable law to appeal therefrom.
Section 14.2. Method of Liquidation. Upon the happening of any of the
events specified in Section 14.1 above, the General Partner (or if there be no
General Partner, a liquidating trustee selected by those Limited Partners
holding in the aggregate more than fifty percent 50% of the Percentage Interests
held by all Limited Partners) shall immediately commence to wind up the
Partnership's affairs and shall liquidate the assets of the Partnership as
promptly as possible, unless the General Partner, or the liquidating trustee,
shall determine that an immediate sale of Partnership assets would cause undue
loss to the Partnership, in which event the liquidation may be deferred for a
reasonable time. The Partners shall continue to share Operating Cash Flow,
Capital Cash Flow, Profits and Losses during the period of liquidation in the
same proportions as before dissolution (subject to Section 14.2(C) below). The
proceeds from liquidation of the Partnership, including repayment of any debts
of Partners to the Partnership, shall be applied in the order of priority as
follows:
A. Debts of the Partnership, including repayment of principal and interest
on loans and advances made by the General Partner pursuant to Sections 3.3
and/or 9.7 above; then
B. To the establishment of any reserves deemed necessary or appropriate by
the General Partner, or by the person(s) winding up the affairs of the
Partnership in the event there is no remaining General Partner of the
Partnership, for any contingent or unforeseen liabilities or obligations of the
Partnership. Such reserves established hereunder shall be held for the purpose
of paying any such contingent or unforeseen liabilities or obligations and, at
the expiration of such period as the General Partner, or such person(s) deems
advisable, the balance of such reserves shall be distributed in the manner
provided hereinafter in this Section 14.2 as though such reserves had been
distributed contemporaneously with the other funds distributed hereunder; then
C. To the Partners in accordance with their respective Capital Account
balances, after giving effect to all contributions, distributions and
allocations for all periods. In connection therewith, the Company, as the holder
of Preference Units, shall be allocated gross income to the extent necessary to
cause its Capital Account balance to equal the amount established in the
applicable Other Securities Term Sheet upon any voluntary
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or involuntary dissolution, liquidation or winding up of the Partnership;
provided, that no such gross income allocation shall be made to the Company to
the extent that such allocation would result in any additional Loss (or item
thereof) being allocated to any Obligated Partner.
Section 14.3. Date of Termination. The Partnership shall be terminated when
all notes received in connection with such disposition have been paid and all of
the cash or property available for application and distribution under Section
14.2 above (including reserves) shall have been applied and distributed in
accordance therewith.
Section 14.4. Reconstitution Upon Bankruptcy.
A. Notwithstanding any dissolution of the Partnership under clause (c) of
Section 14.1 above, if the Partnership is reconstituted as set forth in this
Section 14.4, then the business of the Partnership shall be continued with the
Partnership's property and the Partnership's assets shall not be liquidated.
B. If the Partnership is dissolved by reason of the bankruptcy of the
General Partner, a successor general partner may be admitted within 90 days
after the dissolution, effective as of the date of dissolution, as the General
Partner hereunder, with the written consent of those Limited Partners holding
more than 50% of the aggregate Percentage Interests of all Limited Partners.
Upon the admission of such successor general partner, without any further
consent or approval of any other Partner, the Partnership shall be reconstituted
as a successor limited partnership.
C. If the Partnership is dissolved by reason of the bankruptcy of the
Partnership in a proceeding for the reorganization (and not the liquidation) of
the Partnership, then, with the consent of the Company and those Limited
Partners holding at least fifty percent (50%) of the Percentage Interests held
by all Limited Partners, the Partnership may be reconstituted within 90 days
after dissolution, effective as of the date of dissolution, whereupon the
Partnership shall be reconstituted as a successor limited partnership.
D. The successor limited partnership reconstituted in accordance with the
foregoing provisions of this Section 14.4 shall continue the business of the
Partnership with the Partnership's property. The Percentage Interests of the
Partners in the successor limited partnership shall be in proportion to their
respective Percentage Interests in the dissolved Partnership. Such successor
limited partnership shall be governed by the terms and provisions of this
Agreement and references in this Agreement to the Partnership or to the Partners
or their rights and obligations shall be understood to
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comprehend such successor limited partnership and the Partners thereof and their
rights and obligations.
Section 14.5. Death, Legal Incompetency, Etc. of a Limited Partner. The
death, legal incompetency, insolvency, dissolution or bankruptcy of a Limited
Partner shall not dissolve or terminate the Partnership. Upon the death or
incapacity of an individual Limited Partner, such individual Limited Partner's
interest in the Partnership shall be transferred either by will, the laws of
intestacy or otherwise to the legal representative or successor of such
individual Limited Partner.
XV. Power of Attorney.
Each Limited Partner hereby irrevocably constitutes and appoints the
Chairman of the Board of the General Partner (or the Co-Chairmen acting together
if there be more than one), with full power of substitution, its true and lawful
attorney, for him and in his name, place and stead and for his use and benefit,
to sign, swear to, acknowledge, file and record:
(i) this Agreement, and subject to Section 16 below, amendments
to this Agreement; (ii) any certificates, instruments and documents
(including assumed and fictitious name certificates) as may be
required by, or may be appropriate under, the laws of the State of
Delaware or any other State or jurisdiction in which the Partnership
is doing or intends to do business, in order to discharge the purposes
of the Partnership or otherwise in connection with the use of the name
or names used by the Partnership;
(ii) any other instrument which may be required to be filed or
recorded by the Partnership on behalf of the Partners under the laws
of any State or by any governmental agency in order for the
Partnership to conduct its business;
(iii) any documents which may be required to effect the
continuation of the Partnership, the admission of a substitute or
additional Partner, or the dissolution and termination of the
Partnership, provided such continuation, admission or dissolution and
termination is not in violation of any provision of this Agreement;
and
(iv) any documents which may be required or desirable to have the
General Partner appointed, and act as, the "Tax Matters Partner" as
described in the Code.
The foregoing grant of authority is a special power of attorney coupled
with an interest, is irrevocable and shall
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survive the death or incapacity of any individual Limited Partner, and shall
survive the delivery of any assignment by a Limited Partner of the whole or any
portion of his interest in the Partnership.
XVI. Amendment of Agreement.
A. Each Limited Partner, by his execution of or joinder in this Agreement,
hereby irrevocably appoints the Chairman of the Board of the General Partner (or
the Co-Chairmen acting together if there be more than one) with power of
substitution, as his true and lawful attorney coupled with an interest, in his
name, place and stead to amend this Agreement in any respect other than:
(i) to enlarge the obligation of any Partner to make contributions to
the capital of the Partnership, as provided for in Section 3 above; or
(ii) except as otherwise provided for in this Agreement or as required
by law, to modify the allocation of Profits or Losses or distributions
among the Partners as provided for in Section 7 and 8 above, respectively;
or
(iii) to amend Sections 1, 3.2, 9.2, or 12; or
(iv) to amend this Section 16.
B. With respect to amendments regarding Sections 16(A)(ii) or 16(A)(iii),
this Agreement may be amended with the written consent of the Company.
Notwithstanding the foregoing, the terms and conditions of a particular
series of Preference Units may not be changed without the written consent of the
holders of at least 67% of the Preference Units within the class or series (or
such greater percentage as may be provided for in the applicable Preference Unit
Term Sheet or Other Securities Term Sheet, as the case may be).
C. With respect to amendments regarding Sections 16(A)(i) or (iv), this
Agreement may be amended only with the written consent of all Partners.
In the event this Agreement shall be amended pursuant to this Section 16,
the General Partner shall cause this Agreement to be amended to reflect the
amendment.
XVII. Miscellaneous.
Section 17.1. Notices. Any notice, election or other communication provided
for or required by this Agreement shall be in writing and shall be deemed to
have been given when delivered
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by hand or by telecopy or other facsimile transmission, the first business day
after sent by overnight courier (such as Federal Express), or on the second
business day after deposit in the United States Mail, certified or registered,
return receipt requested, postage prepaid, properly addressed to the Partner to
whom such notice is intended to be given at the address for the Partner set
forth on the signature pages of this Agreement, or at such other address as such
person may have previously furnished in writing to the Partnership and each
Partner with copies to:
General Counsel
Ventas, Inc.
4360 Brownsboro Road
Suite 115
Louisville, Kentucky 40207-1642
Facsimile No.: 502-357-9001,
with a courtesy copy to:
Bruce M. Montgomerie, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
Facsimile No.: 212-728-8111
Section 17.2. Modifications. Except as otherwise provided in this
Agreement, no change or modification of this Agreement, nor any waiver of any
term or condition in the future, shall be valid or binding upon the Partners
unless such change or modification shall be in writing and signed by all of the
Partners or, in the case of a waiver of any term or condition, such waiver shall
be in writing and signed by all Partners who were intended, as determined in the
reasonable judgment of the General Partner, to be the primary beneficiaries of
the waived term or condition.
Section 17.3. Successors and Assigns. Any person acquiring or claiming an
interest in the Partnership, in any manner whatsoever, shall be subject to and
bound by all of the terms, conditions and obligations of this Agreement to which
his predecessor-in-interest was subject or bound, without regard to whether such
a person has executed a counterpart hereof or any other document contemplated
hereby. No person, including the legal representative, heir or legatee of a
deceased Partner, shall have any rights or obligations greater than those set
forth in this Agreement, and no person shall acquire an interest in the
Partnership or become a Partner thereof except as expressly permitted by and
pursuant to the terms of this Agreement. Subject to the foregoing, and the
provisions of Section 12 above, this Agreement shall be binding upon and inure
to the benefit of
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the Partners and their respective successors, assigns, heirs, legal
representatives, executors and administrators.
Section 17.4. Duplicate Originals. For the convenience of the Partners, any
number of counterparts hereof may be executed, and each such counterpart shall
be deemed to be an original instrument, and all of which taken together shall
constitute one agreement.
Section 17.5. Construction. The titles of the Sections and subsections
herein have been inserted as a matter of convenience of reference only and shall
not control or affect the meaning or construction of any of the terms or
provisions herein.
Section 17.6. Governing Law. This Agreement shall be governed by the laws
of the State of Delaware. Except to the extent the Act is inconsistent with the
provisions of this Agreement, the provisions of such Act shall apply to the
Partnership.
Section 17.7. Other Instruments. The parties hereto covenant and agree that
they will execute such other and further instruments and documents as, in the
opinion of the General Partner, are or may become necessary or desirable to
effectuate and carry out the Partnership as provided for by this Agreement.
Section 17.8. General Partner with Interest as Limited Partner. If the
General Partner ever has an interest as a Limited Partner in the Partnership,
the General Partner shall, with respect to such interest, enjoy all of the
rights and be subject to all of the obligations and duties of a Limited Partner.
Section 17.9. Legal Construction. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
Section 17.10. Gender. Whenever the context shall so require, all words
herein in any gender shall be deemed to include the masculine, feminine or
neuter gender, all singular words shall include the plural, and all plural words
shall include the singular.
Section 17.11. Prior Agreements Superseded. Except for joinders, term
sheets and/or addendums that have been made or will be made and are deemed to be
incorporated by reference herein and made a part hereof, this Agreement
supersedes any prior understandings or written or oral agreements amongst the
Partners, or any of them, respecting the within subject matter
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and contains the entire understanding amongst the Partners with respect thereto.
Section 17.12. No Third Party Beneficiary. The terms and provisions of this
Agreement are for the exclusive use and benefit of General Partner and the
Limited Partners and shall not inure to the benefit of any other person or
entity.
Section 17.13. Purchase for Investment. Each Partner represents, warrants
and agrees that it has acquired and continues to hold its interest in the
Partnership for its own account for investment only and not for the purpose of,
or with a view toward, the resale or distribution of all or any part thereof,
nor with a view toward selling or otherwise distributing such interest or any
part thereof at any particular time or under any predetermined circumstances.
Each Partner further represents and warrants that it is a sophisticated
investor, able and accustomed to handling sophisticated financial matters for
itself, particularly real estate investments, and that it has a sufficiently
high net worth that it does not anticipate a need for the funds it has invested
in the Partnership in what it understands to be a highly speculative and
illiquid investment.
Section 17.14. Waiver. No consent or waiver, express or implied, by any
Partner to or of any breach or default by any other Partner in the performance
by such other Partner of its obligations hereunder shall be deemed or construed
to be a consent to or waiver of any other breach or default in the performance
by such other Partner of the same or any other obligations of such Partner
hereunder. Failure on the part of any Partner to complain of any act or failure
to act on the part of any other Partner or to declare any other Partner in
default, irrespective of how long such failure continues, shall not constitute a
waiver by such Partner of its rights hereunder.
Section 17.15. No Rights as Shareholder. Nothing contained in this
Agreement shall be construed as conferring upon the holders of the Units any
rights whatsoever as partners or shareholders of any of the General Partner,
including, without limitation, any right to receive dividends or other
distributions made to shareholders of the General Partner or to vote or to
consent or receive notice as (i) shareholders in respect to any meeting of
shareholders for the election of trustees of General Partner or any other matter
or (ii) or any other matter.
Section 17.16. Time of Essence. Time is hereby expressly made of the
essence with respect to the performance by the parties of their respective
obligations under this Agreement.
Section 17.17. Counterparts. This Agreement may be executed in one or more
counterparts, which when taken together, shall constitute but one original.
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IN WITNESS WHEREOF, the General Partner (on behalf of itself and as
attorney-in-fact for the Limited Partners pursuant to Section 16 hereof) has
executed this Amendment as of the date first written above.
GENERAL PARTNER:
Ventas, Inc.
By: /s/ Debra A. Cafaro
-------------------
Name: Debra A. Cafaro
Title: President
LIMITED PARTNER:
Ventas LP Realty, L.L.C.
By: Ventas, Inc. Member
By: /s/ Debra A. Cafaro
-------------------
Name Debra A. Cafaro
Title: President
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SCHEDULE A TO VENTAS REALTY LIMITED PARTNERSHIP AGREEMENT
PARTNERS/ADDRESSES INITIAL NUMBER OF OP PERCENTAGE
CONTRIBUTIONS UNITS INTEREST
Ventas, Inc. 99.00
4360 Brownsboro Road
Suite 115
Louisville, Kentucky
40207-1642
1.00
Ventas Realty, L.L.C.
4360 Brownsboro Road
Suite 115
Louisville, Kentucky
40207-1642
---------------
Total: 100.00%
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