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PARTNERSHIP AGREEMENT
OF
SM PORTFOLIO LIMITED PARTNERSHIP
BY AND BETWEEN
MACERICH EQ LIMITED PARTNERSHIP,
MACERICH EQ GP CORP.,
SDG EQ DEVELOPERS LIMITED PARTNERSHIP,
AND
SDG EQ ASSOCIATES, INC.
Dated as of
February 24, 1998
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TABLE OF CONTENTS
ARTICLE 1
FORMATION AND ORGANIZATION . . . . . . . . . . . . . 1
1.1 Formation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Character of the Business. . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Principal Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Title to Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Payments of Individual Obligations . . . . . . . . . . . . . . . . . . . 2
1.8 Other Business Interests . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2
CAPITAL CONTRIBUTIONS AND OTHER FINANCING MATTERS. . . . . . . . 3
2.1 Percentage Interests . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Initial Capital Contributions. . . . . . . . . . . . . . . . . . . . . . 4
2.3 Additional Capital Contributions . . . . . . . . . . . . . . . . . . . . 6
2.5 Other Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.6 No Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . 9
2.7 Third Party Financing. . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 3
DISTRIBUTIONS. . . . . . . . . . . . . . . . . 10
3.1 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2 Distributions after Dissolution. . . . . . . . . . . . . . . . . . . . . 10
3.3 Timing of Distributions Among Partners . . . . . . . . . . . . . . . . . 10
ARTICLE 4
ALLOCATIONS AND OTHER TAX AND ACCOUNTING MATTERS. . . . . . . . 10
4.1 Allocations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 Accounting, Books and Records. . . . . . . . . . . . . . . . . . . . . . 10
4.3 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.4 Tax Returns; Information . . . . . . . . . . . . . . . . . . . . . . . . 11
4.5 Special Basis Adjustment . . . . . . . . . . . . . . . . . . . . . . . . 12
4.6 Tax Matters Partner. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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ARTICLE 5
MANAGEMENT . . . . . . . . . . . . . . . . . 12
5.1 Executive Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 No Individual Authority. . . . . . . . . . . . . . . . . . . . . . . . . 15
5.3 Operating Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.4 Warranted Reliance by Executive Committee Members and Operating
Committee Members on Others. . . . . . . . . . . . . . . . . . . . . . . 18
5.5 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.6 REIT Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.7 Budgets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.8 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.9 Unanimous Consent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.10 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.11 Compensation and Reimbursement.. . . . . . . . . . . . . . . . . . . . . 22
5.12 No Employees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.13 Personal Services Contract.. . . . . . . . . . . . . . . . . . . . . . . 23
5.14 Defaults and Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 6
TRANSFERS OF INTERESTS . . . . . . . . . . . . . . 25
6.1 Restrictions on Transfers. . . . . . . . . . . . . . . . . . . . . . . . 25
6.2 Transferee Requirements. . . . . . . . . . . . . . . . . . . . . . . . . 26
6.3 Partnership Interest Loans . . . . . . . . . . . . . . . . . . . . . . . 26
6.4 Admission of Transferee as a Partner . . . . . . . . . . . . . . . . . . 31
6.5 Allocations and Distributions Upon Transfers . . . . . . . . . . . . . . 31
ARTICLE 7
Buy-Sell. . . . . . . . . . . . . . . . . . 32
7.1 Buy-Sell Offering Notice . . . . . . . . . . . . . . . . . . . . . . . . 32
7.2 Exercise of Buy-Sell . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.3 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 8
EXIT CALL; PORTFOLIO SALE. . . . . . . . . . . . . . 34
8.1 Call Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.2 Procedures upon Call Exercise. . . . . . . . . . . . . . . . . . . . . . 34
8.3 Closing Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.5 Fair Market Value Appraisal Process. . . . . . . . . . . . . . . . . . . 37
8.6 Portfolio Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.7 Effect of Existing Financing . . . . . . . . . . . . . . . . . . . . . . 39
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ARTICLE 9
WITHDRAWALS; ACTIONS FOR PARTITION . . . . . . . . . . . 39
9.1 Waiver of Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.2 Covenant Not to Withdraw or Dissolve . . . . . . . . . . . . . . . . . . 39
ARTICLE 10
DISSOLUTION, LIQUIDATION, WINDING-UP AND TERMINATION . . . . . . . 40
10.1 Causes of Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.2 Winding Up and Liquidation . . . . . . . . . . . . . . . . . . . . . . . 40
10.3 Timing Requirements; Deemed Distribution and Re-contribution . . . . . . 41
10.4 Sales Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.5 Documentation of Dissolution and Termination . . . . . . . . . . . . . . 42
ARTICLE 11
MISCELLANEOUS . . . . . . . . . . . . . . . . . 42
11.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.2 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.3 Construction of Agreement . . . . . . . . . . . . . . . . . . . . . . . . 43
11.4 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.5 Incorporation by Reference. . . . . . . . . . . . . . . . . . . . . . . . 43
11.6 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.8 Counterpart Execution . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.9 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.10 No Third Party Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.11 Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.12 Usury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.13 Business Day. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.14 Proposing and Adopting Amendments . . . . . . . . . . . . . . . . . . . . 44
11.15 Partners Not Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.16 Entire Understanding; Etc.. . . . . . . . . . . . . . . . . . . . . . . . 44
11.17 Action Without Dissolution. . . . . . . . . . . . . . . . . . . . . . . . 45
11.18 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.19 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.20 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.21 Press Releases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.22 Existing Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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Schedule 1 - Original Approved Pre-Closing Budget
Schedule 2 - Intentionally Omitted
Schedule 3 - Intentionally Omitted
Schedule 4 - List of Properties
Schedule 5 - Noncompetition Area
PARTNERSHIP AGREEMENT
OF
SM PORTFOLIO LIMITED PARTNERSHIP
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THIS PARTNERSHIP AGREEMENT (this "AGREEMENT") is made and entered
into as of February 24, 1998, by and between SDG EQ DEVELOPERS LIMITED
PARTNERSHIP a Delaware limited partnership ("SDG"), SDG EQ ASSOCIATES, INC.,
a Delaware corporation ("SSPE"), MACERICH EQ LIMITED PARTNERSHIP, a Delaware
limited partnership ("MACERICH"), and MACERICH EQ GP CORP., a Delaware
corporation ("MSPE"), on the terms and conditions set forth herein. Attached
to this Agreement immediately following the signature page is a glossary of
defined terms (the "GLOSSARY OF DEFINED TERMS"). Each capitalized term used
in this Agreement either is defined in the Glossary of Defined Terms, or the
location of its definition is cross-referenced in the Glossary of Defined
Terms.
ARTICLE 1
FORMATION AND ORGANIZATION
1.1 FORMATION. SDG, Macerich, SSPE and MSPE hereby form a limited
partnership (the "PARTNERSHIP") under the Act upon the terms and conditions
set forth in this Agreement. Each of SSPE and MSPE (and their permitted
successors-in-interest that are admitted as partners in the Partnership) is a
general partner in the Partnership and is referred to herein individually as
a "GENERAL PARTNER," and each of Macerich and SDG (and their permitted
successors-in-interest that are admitted as partners in the Partnership) is a
limited partner in the Partnership and is referred to herein individually as
a "LIMITED PARTNER." Each of the General Partners and the Limited Partners
are referred to herein individually as a "PARTNER" and, collectively, as the
"PARTNERS." SSPE and SDG, on the one hand, and MSPE and Macerich, on the
other hand, are jointly referred to herein as a "PARTY" and collectively as
"PARTIES". Any contributions by or distributions to a Party shall be deemed
to have been made to or by, as the case may be, the entities constituting
such Party in proportion to each such entity's Partnership Interest. The
General Partners shall promptly execute, publish or file all assumed or
fictitious name, or other similar, certificates required by law to be
published or filed, in connection with the formation and operation of the
Partnership in each state and locality where it is necessary or desirable to
publish or file such certificates in order to form and operate the
Partnership.
1.2 NAME. The name of the Partnership shall be "SM Portfolio
Limited Partnership," and all business of the Partnership shall be conducted
in such name or such other name as the Executive Committee, from time to
time, shall unanimously select.
1.3 CHARACTER OF THE BUSINESS. The purpose of the Partnership is
to (a) hold a ninety-nine percent (99%) limited partner interest in the
Underlying Partnership, (b) conduct
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all activities reasonably related to the ownership of such interests, (c)
acquire, own, develop, finance, refinance, mortgage, encumber, hypothecate,
lease, sell, maintain, improve, alter, remodel, expand, manage, exchange,
dispose, and otherwise operate and deal with real property, (d) to transact
any and all other businesses for which limited partnerships may be formed
under Delaware law, and (e) to accomplish any of the foregoing purposes for
its own account or as nominee, agent or trustee for others; PROVIDED,
HOWEVER, that such business shall be limited to and conducted in such a
manner as to permit any Persons owning any interests in any of the Partners
at all times to be classified as a "real estate investment trust" within the
meaning of Section 856 of the Code (a "REIT").
1.4 PRINCIPAL OFFICE. The principal office of the Partnership
shall be at 233 Wilshire Boulevard, Suite 700, Santa Monica, California
90401, or at such other place as the Executive Committee may, from time to
time, determine (the "PRINCIPAL OFFICE").
1.5 TERM. The Partnership shall commence on the date of this
Agreement and shall continue until the Partnership is dissolved and
terminated in accordance with the provisions of ARTICLE 10.
1.6 TITLE TO PROPERTY. All real and personal property owned by
the Partnership shall be owned by the Partnership as an entity and no Partner
shall have any ownership interest in such property in its individual name or
right, and each Partner's interest in the Partnership shall be personal
property for all purposes. Except as otherwise provided in this Agreement,
the Partnership shall hold all of its real and personal property in the name
of the Partnership and not in the name of any Partner.
1.7 PAYMENTS OF INDIVIDUAL OBLIGATIONS. The Partnership's credit
and assets shall be used solely for the benefit of the Partnership, and no
asset of the Partnership shall be transferred or encumbered for, or in
payment of, any individual obligation of a Partner.
1.8 OTHER BUSINESS INTERESTS.
(a) Each Partner shall be required to devote only such time
to the affairs of the Partnership as may be necessary for the proper
performance of such Partner's duties hereunder. Except to the extent
expressly provided to the contrary in this SECTION 1.8, nothing in this
Agreement shall: (i) limit the rights of each Partner and its Affiliates,
and such Partner's and Affiliate's respective officers, directors, employees
and stockholders ("RELATED PERSONS") to serve other Persons in any capacity,
to own interests in other businesses and undertakings, to pursue and engage
in other investments, opportunities and activities, and to derive and enjoy
profits, compensation and other consideration in respect thereof, whether or
not such services, interests, businesses, undertakings, investments,
opportunities and activities (collectively, "OTHER INTERESTS") are similar to
or competitive with the business or assets of the Partnership, (ii) afford
any Partner any right to share in the profits, compensation and other
consideration derived from the Other Interests of any other Partner or any
other Partner's Related Persons, or to participate in the Other Interests of
any other Partner or any other Partner's Related Persons, (iii) require any
Partner to disclose to any other Partner or the Partnership the existence or
nature of any such
2
Other Interest, or (iv) obligate any Partner to first offer any such Other
Interest to any other Partner or the Partnership, or allow any other Partner
or the Partnership to participate therein.
(b) Notwithstanding the foregoing, until an individual
Property has been sold or otherwise transferred by the Underlying Partnership
or Partnership, respectively, a Party (or any Affiliate of a Party) (each a
"PROPOSING PARTY") shall not obtain an equity interest (whether direct or
indirect) in any real estate venture ("REAL ESTATE ACTIVITY") within the area
described as the "Non-Competition Area" for each Property on SCHEDULE 5
attached hereto, as such SCHEDULE 5 may be amended from time to time,
("NON-COMPETITION AREA") unless it has first provided the other Party (the
"NONPROPOSING PARTY") with written notice describing in reasonable detail the
proposed transaction and offering the transaction as a Partnership
opportunity (the "PROPOSAL") and the Nonproposing Party has failed to notify
the Proposing Party within thirty (30) days of its receipt of such notice
that such Nonproposing Party desires that the Partnership, rather than the
Proposing Party individually, enter into and invest in such Real Estate
Activity. In the event that the Nonproposing Party delivers the notice
described in the immediately preceding sentence directing that the
Partnership invest in the Real Estate Activity, each Party shall make any
Additional Capital Contributions required by the Executive Committee to fund
the investment of the Partnership pursuant to the Proposal, the Real Estate
Activity will be an opportunity for the Partnership and the Real Estate
Activity shall be included as a business of the Partnership within SECTION
1.3. The Proposal described above shall include all information that the
Proposing Party has with respect to the Real Estate Activity, including
proformas, plans and specifications and economic projections relating to the
Real Estate Activity. If the Nonproposing Party consents to the Proposing
Party's investment in the Real Estate Activity individually or fails to
respond to the Proposal within thirty (30) days after its receipt thereof,
the Proposing Party or its Affiliate shall be permitted to invest in the Real
Estate Activity in its individual capacity.
1.9 TRANSACTIONS WITH AFFILIATES. To the extent permitted by
applicable law and except as otherwise provided in this Agreement (including
SECTION 5.11 hereof), the Operating Committee and any property manager, when
acting through the Partnership, are hereby authorized to purchase property
and services from, sell property and services to, or otherwise deal with any
Partner, acting on its own behalf, or any Affiliate of any Partner, provided
that any such purchase, sale, or other transaction (and any such Affiliates'
affiliation to a Partner) shall be fully disclosed to the Partners and shall
be made on market terms and conditions which are no less favorable to the
Partnership (including as to price, quality and payment terms) than if the
sale, purchase, or other transaction had been entered into with an
independent third party.
ARTICLE 2
CAPITAL CONTRIBUTIONS AND OTHER FINANCING MATTERS
2.1 PERCENTAGE INTERESTS. The names, addresses, and percentage
interests ("PERCENTAGE INTERESTS") of the Partners are as follows:
NAME AND ADDRESS PERCENTAGE INTEREST
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GENERAL PARTNERS
Macerich EQ GP Corp.
233 Wilshire Boulevard, Suite 700
Santa Monica, California 90401
Telecopier No.: (310) 395-2791 .1%
SDG EQ Associates, Inc.
c/o Simon DeBartolo Group
National City Center
115 West Washington Street
Indianapolis, Indiana 46204
Telecopier No.: (317) 685-7221 .1%
LIMITED PARTNERS
Macerich EQ Limited Partnership
233 Wilshire Boulevard, Suite 700
Santa Monica, California 90401
Telecopier No.: (310) 395-2791 49.9%
SDG EQ Developers Limited Partnership
c/o Simon DeBartolo Group
National City Center
115 West Washington Street
Indianapolis, Indiana 46204
Telecopier No.: (317) 685-7221 49.9%
2.2 INITIAL CAPITAL CONTRIBUTIONS. The initial Capital Contributions
("INITIAL CAPITAL CONTRIBUTIONS") of the Parties shall be made as follows:
(a) Concurrently with the execution of the Purchase Agreement by
the Underlying Partnership, each Party shall deliver to Equitable (the seller of
the Properties), as a contribution to the Partnership, and as a contribution by
the Partnership to the Underlying Partnership, a clean, irrevocable letter of
credit in the amount of $12,500,000 each naming Equitable as beneficiary (such
letters of credit to satisfy the "Deposit" requirement under the Purchase
Agreement). For this purpose, each of SDG and Macerich shall be deemed to have
contributed to each of SSPE and MSPE, respectively, a portion of each such
letter of credit representing each's proportionate interest in the Partnership,
which letters of credit shall be deemed contributed by to the Partnership by
SSPE and MSPE.
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(b) Each Party hereby agrees to contribute to the capital of
the Partnership, as a Capital Contribution, an amount equal to fifty percent
(50%) of the Closing Funding Requirement (as defined below), subject,
however, to the remaining provisions of this SECTION 2.2. As used herein,
the term "CLOSING FUNDING REQUIREMENT" shall mean the sum of (i) all amounts
required to be deposited by the Underlying Partnership with Escrow Agent
pursuant to the Purchase Agreement in order to close the transaction
thereunder, including amounts due to Equitable under the Purchase Agreement
as the purchase price consideration paid for the Underlying Properties and
the Underlying Partnership's share of all closing costs and expenses required
to be deposited with and paid through Escrow Agent pursuant to the Purchase
Agreement (the "ESCROW CLOSING REQUIREMENT"), (ii) all out-of-pocket costs
and expenses paid or payable to Persons other than the Underlying
Partnership, any Partner or any Affiliate thereof (other than those amounts
described in CLAUSE (i) above) that have been and/or will be incurred by the
Underlying Partnership, the Partnership, the Partners and the Partners'
respective Affiliates in connection with the formation of the Partnership and
the Underlying Partnership and investigating and acquiring the Properties
(including, without limitation, costs incurred in connection with the
negotiation of the Purchase Agreement and this Agreement and all
out-of-pocket due diligence costs and fees (collectively, "DUE DILIGENCE,
FORMATION AND ACQUISITION COSTS"), and (iii) the amount set forth in the
Original Approved Pre-Closing Budget (as defined below) for the funding of
the Underlying Partnership's initial capital improvement and operating
reserve (as such amount may be adjusted by the mutual consent of the Partners
in their sole and absolute discretion) (the "INITIAL RESERVE REQUIREMENTS").
(c) Attached hereto as SCHEDULE 1 is a budget (the "ORIGINAL
APPROVED PRE-CLOSING BUDGET") reflecting the Partners' best and good-faith
estimate of all Due Diligence, Formation and Acquisition Costs that will be
incurred in connection with the Partnership and Underlying Partnership's
formation and the acquisition of the Properties. In the event that any Party
incurs Due Diligence, Formation and Acquisition Costs in excess of that
budgeted in the Original Approved Pre-Closing Budget, the written approval of
the other Party shall be required before such additional amount may be
included in the Closing Funding Requirement. In the event that a Party
requests in writing that the other Party approve any such additional
expenditure or cost and the other Party fails to disapprove of the same in
writing (together with its specific written objections thereto) within five
(5) business days after its receipt of such request, such expenditure or cost
shall be deemed approved (but in each case only if such written request
specifically advises the Party that failure to respond within such five (5)
business day period will result in such deemed approval).
(d) Each of the Parties separately agrees to deposit its
portion of the Escrow Closing Requirement in escrow in good funds with Escrow
Agent at least one (1) business day prior to the Underlying Partnership's
acquisition of the Underlying Properties. Notwithstanding the foregoing,
each Party shall be permitted to deposit its portion of the Escrow Closing
Requirement into a separate escrow established with such Escrow Agent, which
escrow shall be solely for such Party's benefit until the closing of the
acquisition of the Underlying Properties, and shall be terminable solely by
such Party (provided that any such termination shall not relieve or release
such Party of its obligations hereunder, if any). Concurrently with such
Party's deposit of its portion of the Escrow Closing Requirement in escrow,
such Party shall enter
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into escrow instructions with Escrow Agent authorizing Escrow Agent to
transfer such amounts into the escrow established for the purchase and sale
of the Underlying Properties upon the satisfaction of all conditions
precedent for the closing of such purchase and sale. Such escrow
instructions shall also provide that if the closing of the purchase and sale
of the Underlying Properties does not occur on or before the date set forth
in SECTION 10.1(h), the escrow shall terminate and all sums held therein
(together with any interest actually earned thereon) shall be immediately
returned to such Party (whereupon such Party shall have no further liability
or duty hereunder with respect to the making of such portion of the Escrow
Closing Requirement), unless Escrow Agent receives written instructions from
such Party to extend such escrow. Any interest earned on amounts placed in
escrow prior to such closing shall accrue for the benefit of the Party
depositing same. Each Party shall deposit into the Partnership accounts
designated by the Operating Committee prior to the acquisition of the
Underlying Properties such Party's share of the Initial Reserve Requirement.
The Parties shall meet and shall exchange invoices and other evidence of Due
Diligence, Formation and Acquisition Costs incurred by each of them or their
Affiliates in connection with the purchase and sale transaction. Once the
Parties have agreed upon all Due Diligence, Formation and Acquisition Costs,
the Party who incurred the lesser amount of Due Diligence, Formation and
Acquisition Costs shall promptly pay to the other Party an amount sufficient
to reimburse such other Party for the share of Due Diligence, Formation and
Acquisition Costs incurred by such other Party in excess of its combined 50%
share, it being the intention of the Parties that all Due Diligence,
Formation and Acquisition Costs be shared by the Parties equally.
(e) Notwithstanding anything else to the contrary contained
in this Agreement, if the Purchase Agreement is terminated or the purchase
and sale of the Underlying Properties fails to occur, each Party shall bear
fifty percent (50%) of the aggregate Due Diligence, Formation and Acquisition
Costs. If a Party has paid a disproportionate share of the aggregate Due
Diligence, Formation and Acquisition Costs, the other Party shall pay to such
Party the amount necessary such that each Party bears such costs in the
foregoing proportions, which payment shall be made within fifteen (15) days
after delivery of written notice, together with reasonably detailed
supporting documentation. Each Party agrees to provide to the other Party
such documentation as is reasonably necessary to substantiate such costs
incurred by such Party. Nothing contained in this SECTION 2.2(e) shall limit
or impair any right or remedy that a Party may have against any other Party
as a result of such other Party's breach of any obligation such other Party
may have under this Agreement to make its Initial Capital Contribution.
2.3 ADDITIONAL CAPITAL CONTRIBUTIONS.
(a) Additional capital contributions ("ADDITIONAL CAPITAL
CONTRIBUTIONS") may be called for in accordance with this SECTION 2.3. The
Executive Committee may call for Additional Capital Contributions for any
reason. Additional Capital Contributions may also be called for by either
Party if necessary in order to fund Cash Flow Shortfalls or Budgeted Capital
Items and for no other reason without the approval of the Executive
Committee. Except as otherwise provided in SUBSECTION (b) below, Additional
Capital Contributions shall be made upon written demand by the requesting
Party upon the other Party, or by the Executive Committee upon the Parties,
as the case may be, from time to time, shall be
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payable in proportion to the Percentage Interests of the Parties, and shall
be contributed by the Parties within ten (10) business days of the receipt of
the notice hereinbefore described, which notice shall state the amount of
such Additional Capital Contribution required from each Party.
(b) Each Party agrees to make all Additional Capital
Contributions required to be made in accordance with this Agreement within
the ten (10) business day period described in SUBSECTION (a) above; PROVIDED
THAT, any Party may, during such ten (10) business day period, request that
the Partnership seek third party financing (in lieu of the Parties making
Additional Capital Contributions) to satisfy the Partnership's cash need. In
the event that either Party makes such request, the period of time within
which the Additional Capital Contributions must be made will be extended as
hereinafter provided, and the Partnership shall use its commercially
reasonable efforts to secure third party financing at commercially reasonable
rates to satisfy the Partnership's cash needs. If the Partnership is unable
to secure any such financing on terms that are mutually acceptable to and
approved by the Parties within thirty (30) days after any Party's request to
fund the required amounts via third party financing, the Additional Capital
Contributions shall immediately become due and payable within five (5)
business days after the expiration of such thirty (30) day period. If any
Party fails to make its share of the Additional Capital Contributions within
the said five (5) business day period, then the terms and provisions of
SUBSECTION (c) below shall apply.
(c) If a Party fails to make its share of any required
Additional Capital Contributions after the Partnership has been unable to
secure third party financing approved by both Parties pursuant to SUBSECTION
(b) above, then such Party (the "NONCONTRIBUTING PARTY") shall be a
Defaulting Party hereunder, and the other Party (a "CONTRIBUTING PARTY") who
has made its share of such Additional Capital Contributions may elect to give
notice to the Noncontributing Party of its default hereunder. If such
Noncontributing Party cures such default within the cure period set forth in
SECTION 5.14(a) hereof, it shall thereupon become a Contributing Party. If
such Noncontributing Party fails to cure such default within the cure period
set forth in SECTION 5.14(a) hereof, then the Contributing Party may, in its
sole discretion and without limitation on its other rights and remedies under
this Agreement, elect to exercise its rights under the following SUBSECTIONS
(d) or (e) of this SECTION 2.3 (subject to the terms and conditions set forth
in said SUBSECTIONS (d) and (e)).
(d) The Contributing Party shall have the right to withdraw
all of its Additional Capital Contribution immediately after the expiration
of the Noncontributing Party's cure period. Any Contributing Party that
withdraws its Additional Capital Contribution in compliance with this
provision shall not be deemed a Defaulting Party by reason of such withdrawal.
(e) The Contributing Party shall have the right to make a
Default Loan to the Partnership pursuant to SECTION 2.4 equal to 100% of the
Noncontributing Party's share of the Additional Capital Contributions that it
failed to contribute.
7
2.4 DEFAULT LOANS.
(a) Without limitation on any other rights and remedies of
the Partners, if a Noncontributing Party shall have failed to timely pay its
portion of the Closing Funding Requirement as provided in SECTION 2.2 or to
make any Additional Capital Contributions as required pursuant to this
Agreement, and fails to cure such default after receiving notice thereof
within the applicable cure period provided under SECTION 5.14(a) hereof, the
Contributing Party may advance the amount of such delinquency to the
Partnership and direct the Partnership to pay the party or parties (which
party or parties may be a Partner (or Affiliate of a Partner) hereunder,
including the Contributing Party (or an Affiliate of the Contributing Party)
making such advance, if such amount is owed to such Person) to whom the same
is owed. Any such advance shall be treated as a loan (a "DEFAULT LOAN") by
such Contributing Party to the Partnership, payable on demand, and shall bear
interest at the Base Rate plus three percent (3%) per annum (compounded
monthly as of the last day of each calendar month) from the date of such loan
to the date of payment in full. In addition and without limitation on the
foregoing, the making of such Default Loan shall also create an obligation on
the part of the Noncontributing Party to contribute to the Partnership an
amount equal to the amount of the Default Loan (together with interest at the
aforesaid rate) made by the Contributing Party to the Partnership. As used
herein, the term "BASE RATE" shall mean the commercial loan rate of interest
announced publicly from time to time by Chase Manhattan Bank in New York, New
York as such bank's "prime rate", as from time to time in effect, such
interest rate to change monthly as of the first day of the calendar month
next succeeding the calendar month in which a change in Base Rate occurs;
PROVIDED THAT, if such rate is unavailable for any reason, then the parties
shall meet and agree upon a different bank's "prime rate" or "reference rate"
to serve as the Base Rate hereunder.
(b) The Contributing Party shall give written notice to the
Noncontributing Party of the making of any Default Loan, and the
Noncontributing Party may contribute the amount of such advance (plus all
accrued interest) to the Partnership at any time (and shall contribute such
amount at the time prescribed by SECTION 10.2 hereof). The Partnership shall
immediately pay such amounts received from the Noncontributing Party to the
Contributing Party. Such payments by the Noncontributing Party to the
Partnership and from the Partnership to the Contributing Party shall be
applied first against accrued interest and then against the principal of the
Default Loan until the repayment in full of principal and accrued interest on
the Default Loan. Notwithstanding any provision to the contrary herein, at
any time when a Default Loan shall be outstanding, all distributions of Net
Cash Flow by the Partnership from and after the making of such Default Loan
shall be made as follows: FIRST, all such distributions to which the
Contributing Party would normally (i.e., but for the effect and operation of
the provisions set forth in this SECTION 2.4) be entitled to receive under
SECTION 3.1 shall be calculated and made to such Contributing Party; SECOND,
the balance, if any, shall be paid by the Partnership directly to the
Contributing Party to be applied first against interest and then against
principal of the Default Loan; and THIRD, the balance, if any, shall be paid
to the Noncontributing Party in respect of the amounts to which it would
normally (i.e., but for the effect and operation of the provisions set forth
in this SECTION 2.4) be entitled to receive under SECTION 3.1 (and to the
extent such amounts, if any, paid to the Noncontributing Party are less than
the amounts which the Noncontributing Party would normally be entitled to
receive under SECTION 3.1, such deficiency
8
shall forever be forfeited by the Noncontributing Party and it shall have no
right to recoup or recover the same out of future distributions hereunder).
Only upon the payment in full of the principal of and all accrued interest on
a Default Loan shall the Noncontributing Party's Event of Default with
respect to which the Default Loan was made be deemed cured and after such
cure, provided no other Event of Default of the Noncontributing Party then
exists, the Noncontributing Party's rights under this Agreement shall be
immediately reinstated.
(c) Upon request by the Contributing Party at any time from
the date of the Contributing Party's advance pursuant to SUBSECTION (a) above
until any such Default Loan shall be repaid in full by cash payment, the
Noncontributing Party shall, on its own behalf and/or on behalf of the
Partnership, execute any and all documents reasonably requested by the
Contributing Party, including, without limitation, promissory notes or such
other documentation as may be necessary to reflect and perfect the
Contributing Party's rights under this SECTION 2.4 (and for such purpose the
Noncontributing Party hereby appoints the Contributing Party its true and
lawful attorney-in-fact with full power of substitution to execute and
deliver such documents on behalf of such Noncontributing Party, which power
of attorney shall be deemed to be a power coupled with an interest which
cannot be revoked by death, dissolution or otherwise).
2.5 OTHER MATTERS.
(a) Except as otherwise provided in this Agreement, no Party
shall demand or receive a return of its Capital Contributions or withdraw
from the Partnership without the consent of all Partners. Under circumstances
requiring a return of any Capital Contributions, no Partner shall have the
right to receive property other than cash except as may be specifically
provided herein.
(b) No Partner shall receive any interest, salary, or draw
with respect to its Capital Contributions or its Capital Account or for
services rendered on behalf of the Partnership or otherwise in its capacity
as Partner, except as otherwise provided in this Agreement. No Partner shall
be entitled to interest on its Capital Contributions or on such Partner's
Capital Account.
2.6 NO THIRD PARTY BENEFICIARY. No creditor or other third party
having dealings with the Partnership shall have the right to enforce the
right or obligation of any Partner to make Capital Contributions or loans or
to pursue any other right or remedy hereunder or at law or in equity, it
being understood and agreed that the provisions of this Agreement shall be
solely for the benefit of, and may be enforced solely by, the parties hereto
and their respective successors and assigns. None of the rights or
obligations of the Partners herein set forth to make Capital Contributions to
the Partnership shall be deemed asset of the Partnership for any purpose by
any creditor or other third party, nor may such rights or obligations be
sold, transferred or assigned by the Partnership or pledged or encumbered by
the Partnership to secure any debt or other obligation of the Partnership or
of any of the Partners. Without limiting the generality of the foregoing, a
deficit capital account of a Partner shall not be deemed to be a liability of
such Partner nor an asset or property of the Partnership.
9
2.7 THIRD PARTY FINANCING. Except as otherwise provided herein to
the contrary, the Partnership may obtain, on its own behalf, upon the
approval of the Executive Committee, all additional money and funds
necessary, at any time, to develop, construct, acquire and operate the
Partnership Assets. No Partner or Affiliate of a Partner shall be required to
guaranty or make any other financial commitment with respect to any debt or
other obligation of the Partnership. The Operating Committee shall use
commercially reasonable efforts to obtain, on behalf of the Partnership, all
additional money and funds necessary, at any time, to conduct the business of
the Partnership that cannot be funded through the resources of the
Partnership.
ARTICLE 3
DISTRIBUTIONS
3.1 DISTRIBUTIONS. As soon as practicable after the approval by
the Executive Committee of the quarterly statements of Net Cash Flow prepared
and delivered pursuant to SECTION 4.3, the Partnership shall distribute such
portion of the Net Cash Flow of the Partnership for the quarterly period
covered by each such statement as the Executive Committee or Operating
Committee may elect to distribute (which shall not, in any event, equal less
than ninety percent (90%) of the total Funds From Operations for such
quarterly period), to the Partners pro rata in accordance with their
respective Percentage Interests, subject to the alternative allocations set
forth in SECTION 2.4(b) in the event that a Default Loan is then outstanding.
Notwithstanding the foregoing, the Executive Committee shall approve for each
period a distribution sufficient to satisfy the requirements of SECTION
5.6(f) hereof.
3.2 DISTRIBUTIONS AFTER DISSOLUTION. Notwithstanding the
provisions of SECTION 3.1 to the contrary, all distributions of Net Cash Flow
to be made from and after the dissolution of the Partnership shall be made in
accordance with the provisions of ARTICLE 10.
3.3 TIMING OF DISTRIBUTIONS AMONG PARTNERS. Except as provided in
SECTION 6.3, all distributions of cash shall be distributed to the Persons
who are Partners on the day such distribution is made.
ARTICLE 4
ALLOCATIONS AND OTHER TAX AND ACCOUNTING MATTERS
4.1 ALLOCATIONS. The Net Income, Net Loss and/or other Tax Items
of the Partnership shall be allocated pursuant to the provisions of the
Allocations Exhibit.
4.2 ACCOUNTING, BOOKS AND RECORDS. The Partnership shall maintain
or cause to be maintained at its Principal Office (with full and complete
copies thereof to be delivered to and maintained at the offices of the Simon
DeBartolo Group at 115 West Washington Street, Indianapolis, Indiana 46204)
separate books of account for the Partnership which shall show a
10
true and accurate record of all costs and expenses incurred, all charges
made, all credits made and received, and all income derived in connection
with the operation of the Partnership business in accordance with generally
accepted accounting principles consistently applied and, to the extent
inconsistent therewith, in accordance with this Agreement. The Partnership
shall use the accrual method of accounting in preparation of its annual
reports and for tax purposes and shall keep its book accordingly. Each
Partner shall, at its sole expense, have the right, at any time, without
notice to any other Partner, to examine, copy, and audit the Partnership's
books and records during normal business hours.
4.3 REPORTS.
(a) IN GENERAL. The Operating Committee shall be responsible
for the preparation of financial reports of the Partnership and the
coordination of financial matters of the Partnership with the Accountants.
(b) REPORTS. Within sixty (60) days after the end of each
Fiscal Year and within thirty (30) days after the end of each of the first
three (3) fiscal quarters, and within thirty (30) days after the end of each
calendar month, the Operating Committee shall cause each Executive Committee
Member to be furnished with a copy of the balance sheet of the Partnership as
of the last day of the applicable period, and a statement of income or loss
for the Partnership for such period. In addition, concurrently with the
delivery of the quarterly and year-end financial statements referred to in
the preceding sentence, the Operating Committee shall cause each Executive
Committee Member to be furnished with a copy of a statement setting forth the
calculation of the Net Cash Flow (if any) for such prior quarterly period,
and setting forth the calculation of all amounts to be distributed to the
Partners pursuant to SECTION 3.1 or SECTION 10.2, as the case may be. Annual
statements shall also include a statement of the Partners' Capital Accounts
and changes therein for such Fiscal Year. Annual statements shall be audited
by the Accountants, and shall be in such form as shall enable the Partners to
comply with all reporting requirements applicable to either of them or their
Affiliates under the Securities Exchange Act of 1934, as amended. All
quarterly and annual statements shall be subject to the approval of the
Executive Committee, and no action shall be taken with respect thereto until
such approval has been given. The Operating Committee shall also cause to be
prepared such reports and/or information as are necessary for the Partners
(or any Persons who directly or indirectly own interests in the Partners) to
determine their qualification as a REIT and their compliance with all
requirements to qualify as a REIT or as may be required by any lender of the
Partnership.
4.4 TAX RETURNS; INFORMATION. The Operating Committee shall
arrange for the preparation and timely filing of all income and other tax
returns of the Partnership. Within ninety (90) days after the end of each
Fiscal Year, the Operating Committee shall cause the Accountants to prepare
the Partnership's tax returns for approval and execution by the Operating
Committee. The Operating Committee shall furnish to each Partner a copy of
each approved return, together with any schedules or other information which
each Partner may require in connection with such Partner's own tax affairs.
The Partnership shall be treated and shall file
11
its tax returns as a partnership for federal, state and municipal income tax
and other tax purposes. Upon request of any Partner, any elections made
pursuant to this Agreement under the provisions of the Code or similar
provisions hereafter enacted shall be evidenced by appropriate filings with
the Internal Revenue Service on behalf of the Partnership.
4.5 SPECIAL BASIS ADJUSTMENT. In connection with any Transfer of
a Partnership Interest permitted under ARTICLE 6, the Operating Committee
shall cause the Partnership, at the written request of the transferor or the
Transferee, but only upon the approval of the General Partners, on behalf of
the Partnership and at the time and in the manner provided in Regulations
Section 1.754-1(b), to make an election to adjust the basis of the
Partnership's property in the manner provided in Sections 734(b) and 743(b)
of the Code, and the Transferee shall pay all costs incurred by the
Partnership in connection therewith, including reasonable attorneys' and
accountants' fees.
4.6 TAX MATTERS PARTNER. MSPE is specially authorized and
appointed to act as the "Tax Matters Partner" under the Code and in any
similar capacity under state or local law; PROVIDED, HOWEVER, that it shall
exercise its authority in such capacity subject to all applicable terms and
limitations set forth in this Agreement. Notwithstanding the foregoing, the
Tax Matters Partner shall not, without the prior written approval of the
other General Partner, (i) make any tax election on behalf of the
Partnership, (ii) take any action with respect to any federal, state or local
contest of any partnership item (as defined in Section 6231(a)(7) of the Code
(or any successor thereto) (and comparable provisions of state and local
income tax laws) of the Partnership, or (iii) take any action with respect to
any audit of any federal, state or local income tax return or income tax
report filed by or on behalf of the Partnership.
ARTICLE 5
MANAGEMENT
5.1 EXECUTIVE COMMITTEE. The Partnership shall at all times have
an executive committee (the "EXECUTIVE COMMITTEE") composed of two
individuals (the "EXECUTIVE COMMITTEE MEMBERS") who shall vote on Major
Decisions and oversee the performance of the Operating Committee.
(a) MEMBERSHIP AND VOTING.
(i) MEMBERSHIP. The Executive Committee will consist of
two (2) Executive Committee Members, with one (1) Executive Committee
Member appointed by each General Partner. Concurrently with the execution
and delivery of this Agreement, the General Partners have notified one
another in writing of their respective initial appointed Executive
Committee Member. Each General Partner may, at any time, appoint an
alternate Executive Committee Member by prior written notice to the other
General Partner's appointed Executive Committee Member and such alternates
will have all the powers, authority and duties of a regular Executive
Committee Member in the absence
12
or inability of a regular Executive Committee Member to serve. In no
event, however, shall the other Executive Committee Member be under any
obligation to make inquiries as to, or verify or confirm, any such
absence or inability to serve of a regular Executive Committee Member,
it being understood and agreed that the Executive Committee Members
shall be entitled to rely upon and accept an alternate Executive
Committee Member's assertion of the absence or inability to serve of the
regular Executive Committee Member in question. Each General Partner
shall cause its appointed Executive Committee Member and alternate
Executive Committee Member to comply with the terms of this Agreement.
Each General Partner will have the power to remove its Executive
Committee Member or alternate Executive Committee Member appointed by it
by written notice to the other General Partner's Executive Committee
Member. Vacancies on the Executive Committee will be filled by
appointment by the General Partner that appointed the Executive
Committee Member previously holding the position that is then vacant.
The General Partners may mutually agree to increase or decrease the size
of the Executive Committee proportionately, from time to time. Notices
to an Executive Committee Member shall be delivered to such Person's
attention at the address set forth in SECTION 2.1 for the General
Partner that appointed such Executive Committee Member, and in the
manner prescribed in SECTION 11.1. No appointment or removal by a
General Partner of an Executive Committee Member or alternate Executive
Committee Member shall be effective until written notice of such action
is received or deemed received pursuant to SECTION 11.1 by the Executive
Committee Member of the other General Partner. Each General Partner,
its Limited Partner affiliate, and its respective Executive Committee
Member and alternate Executive Committee Member, when dealing with the
other General Partner's respective Executive Committee Member and
alternate Executive Committee Member, (i) shall be entitled to rely upon
and accept the written act, approval, consent or vote of each of such
other General Partner's then-appointed Executive Committee Member and
alternate Executive Committee Member, and (ii) shall be under no
obligation to make any inquiries in order to verify or confirm any of
such written acts, approvals, consents or votes.
(ii) VOTING. Each Executive Committee Member shall have one
vote on any decision of the Executive Committee. An Executive Committee
Member may give a written proxy to another Executive Committee Member to
vote on such Executive Committee Member's behalf in such Executive
Committee Member's absence. Except as expressly provided to the contrary
in this Agreement, all actions, decisions, capital calls,
determinations, waivers, approvals and consents to be taken or given by
the Executive Committee must be unanimously approved by the Executive
Committee Members (whether or not present at the meeting at which such
vote occurs).
(b) MEETINGS OF THE EXECUTIVE COMMITTEE; TIME AND PLACE.
Unless otherwise agreed by the Executive Committee, regular meetings of the
Executive Committee shall be held no less often than quarterly at such time
and at such place as the Executive Committee shall determine. At such regular
meetings, the Operating Committee shall report on the financial performance
and condition of the Partnership on a year-to-date basis (including cash
flows, reserves, outstanding loans, and compliance efforts), progress on
capital projects, material
13
contracts entered into, material litigation, marketing and leasing efforts,
deviations from any Budget and such other matters relevant to the management
and operation of the Partnership and the Properties. Special meetings of the
Executive Committee shall be held on the call of any Executive Committee
Member; provided that at least three (3) business days' notice is given to
all Executive Committee Members (unless written waiver of this requirement by
all Executive Committee Members is obtained). A quorum for any Executive
Committee meeting shall consist of not less than two (2) Executive Committee
Members (one appointed by each General Partner) present either in person or
by proxy. The Executive Committee may make use of telephones and other
electronic devices to hold meetings; provided that the Executive Committee
Members participating in such meeting can hear one another. The Executive
Committee may act without a meeting if the action taken is reduced to writing
and approved by the Executive Committee in accordance with the other voting
provisions of this Agreement. Written minutes shall be taken at each meeting
of the Executive Committee. However, any action taken or matter agreed upon
by the Executive Committee shall be deemed final, whether or not written
minutes are ever prepared or finalized.
(c) MAJOR DECISIONS. No action shall be taken, no sum shall
be expended and no obligation shall be incurred by the Operating Committee or
any property manager with respect to any matter affecting the Partnership
which is within the scope of a Major Decision unless such Major Decision
shall have been approved by the Executive Committee in advance in writing. A
"MAJOR DECISION" shall mean any decision:
(i) to sell, assign, transfer, exchange, grant easements
over, or otherwise convey or dispose of, any of the Partnership Properties,
or any portion thereof or any material interest therein, or to lease or
license the Partnership's entire interest in any of the Partnership
Properties;
(ii) to acquire any Partnership Property or any option or
interest therein, and to appoint a property manager with respect to each
such Partnership Property;
(iii) to approve or make any change to any Budget or
marketing plan for the Partnership or any of the Partnership Properties;
(iv) to amend this Agreement;
(v) to borrow money or to apply for, execute, grant or
modify any mortgage, pledge, deed of trust, financing statement,
encumbrance or other hypothecation or security agreement affecting the
Partnership Assets or any portion thereof or any interest therein, except
as otherwise may be provided in an approved Budget;
(vi) to approve proposals submitted to, or agreements
entered into, or to authorize or give any consent with respect to any
matter relating to zoning, rezoning variances, compliance with
environmental laws, subdivision, modification of
14
development rights or other land use matters which affect the
Partnership or any of the Partnership Properties;
(vii) to select and retain the Accountants;
(viii) to approve the Partnership's tax returns, or to
make proposals to or to conduct any actions, litigation or other activities
with federal or state taxing authorities;
(ix) to change or permit to be changed in any substantial
way the accounting process and procedures employed in keeping the books of
account or preparing financial statements with respect to the operation or
management of the Partnership pursuant to this Agreement;
(x) to compromise or settle any claim for insurance
proceeds, or any claim for payment of awards or damages arising out of the
exercise of eminent domain by any public or governmental authority;
(xi) to make, execute or deliver on behalf of the
Partnership any assignment for the benefit of creditors;
(xii) to dissolve, terminate or liquidate the
Partnership, or to petition a court for the dissolution, termination or
liquidation of the Partnership, except in accordance with this Agreement;
(xiii) to cause the Partnership, or any of the
Partnership Properties to be subject to the authority of any trustee,
custodian or receiver or to be subject to any proceeding for bankruptcy,
insolvency, reorganization, arrangement, readjustment of debt, relief of
debtors, or similar proceedings;
(xiv) to obligate the Partnership as a surety,
guarantor, indemnitor or accommodation party to any obligation;
(xv) to enter into, terminate, accept the surrender of,
modify, amend, supplement, or give any material approval, consent or waiver
on behalf of the Partnership under the Purchase Agreement or any of the
loan documents relating to the Existing Financing; or
(xvi) to take any other action or decision that this
Agreement provides may only be taken or made by the Executive Committee.
5.2 NO INDIVIDUAL AUTHORITY. Except as otherwise expressly
provided in this Agreement, no Partner, acting alone, shall have any
authority to act for, or undertake or assume any obligation or responsibility
on behalf of, any other Partner or the Partnership.
15
5.3 OPERATING COMMITTEE. Unless otherwise agreed to by the
General Partners, the management of the Partnership, subject to the
restrictions on its authority set forth in SECTION 5.1, shall be vested in
the operating committee (the "OPERATING COMMITTEE"). The Operating Committee
shall be composed of two individuals (the "OPERATING COMMITTEE MEMBERS") who
shall vote on all management issues relating to the business and operations
of the Partnership.
(a) MEMBERSHIP AND VOTING.
(i) MEMBERSHIP. The Operating Committee will consist of
two (2) Operating Committee Members, with one (1) Operating Committee
Member appointed by each General Partner. Concurrently with the execution
and delivery of this Agreement, the General Partners have notified one
another in writing of their respective initial appointed Operating
Committee Member. Each General Partner may, at any time, appoint one of
its employees as an alternate Operating Committee Member by prior written
notice to the other General Partner's appointed Operating Committee Member
and such alternates will have all the powers, authority and duties of a
regular Operating Committee Member in the absence or inability of a regular
Operating Committee Member to serve. In no event, however, shall the other
Operating Committee Member be under any obligation to make inquiries as to,
or verify or confirm, any such absence or inability to serve of a regular
Operating Committee Member, it being understood and agreed that the
Operating Committee Members shall be entitled to rely upon and accept an
alternate Operating Committee Member's assertion of the absence or
inability to serve of the regular Operating Committee Member in question.
Each General Partner shall cause its appointed Operating Committee Member
and alternate Operating Committee Member to comply with the terms of this
Agreement. Each General Partner will have the power to remove its
Operating Committee Member or alternate Operating Committee Member
appointed by it by written notice to the other General Partner's Operating
Committee Member. Vacancies on the Operating Committee will be filled by
appointment by the General Partner that appointed the Operating Committee
Member previously holding the position that is then vacant. The General
Partners may mutually agree to increase or decrease the size of the
Operating Committee proportionately, from time to time. Notices to an
Operating Committee Member shall be delivered to such Person's attention at
the address set forth in SECTION 2.1 for the General Partner that appointed
such Operating Committee Member, and in the manner prescribed in SECTION
11.1. No appointment or removal by a General Partner of an Operating
Committee Member or alternate Operating Committee Member shall be effective
until written notice of such action is received or deemed received pursuant
to SECTION 11.1 by the Operating Committee Member of the other General
Partner. Each General Partner, its Limited Partner affiliate, and its
respective Operating Committee Member and alternate Operating Committee
Member, when dealing with the other General Partner's respective Operating
Committee Member and alternate Operating Committee Member, (i) shall be
entitled to rely upon and accept the written act, approval, consent or vote
of each of such other General Partner's then-appointed Operating Committee
Member and alternate Operating Committee Member, and (ii) shall
16
be under no obligation to make any inquiries in order to verify or confirm
any of such written acts, approvals, consents or votes.
(ii) VOTING. Each Operating Committee Member shall have
one vote on any decision of the Operating Committee. An Operating
Committee Member may give a written proxy to another Operating Committee
Member or any Partner's employee to vote on such Operating Committee
Member's behalf in such Operating Committee Member's absence. Except as
expressly provided to the contrary in this Agreement, all actions,
decisions, capital calls, determinations, waivers, approvals and consents
to be taken or given by the Operating Committee must be unanimously
approved by the Operating Committee Members (whether or not present at the
meeting at which such vote occurs).
(b) REPORTS AND MEETINGS OF THE OPERATING COMMITTEE; TIME AND
PLACE. The Operating Committee shall report to the Executive Committee on
activities undertaken by the Operating Committee, as required by the Executive
Committee and this Agreement. Unless otherwise agreed by the Operating
Committee, regular meetings of the Operating Committee shall be held monthly at
such time and at such place as the Operating Committee shall determine.
Special meetings of the Operating Committee shall be held on the call of any
Operating Committee Member; provided that at least three (3) business days'
notice is given to all Operating Committee Members (unless written waiver of
this requirement by all Operating Committee Members is obtained). A quorum for
any Operating Committee meeting shall consist of not less than two (2)
Operating Committee Members (one appointed by each General Partner) present
either in person or by proxy. The Operating Committee may make use of
telephones and other electronic devices to hold meetings; provided that the
Operating Committee Members participating in such meeting can hear one another.
The Operating Committee may act without a meeting if the action taken is
reduced to writing and approved by the Operating Committee in accordance with
the other voting provisions of this Agreement. Written minutes shall be taken
at each meeting of the Operating Committee. However, any action taken or
matter agreed upon by the Operating Committee shall be deemed final, whether or
not written minutes are ever prepared or finalized. Operating Committee
meetings may be attended by persons other than the Operating Committee Members
(including other employees of the Partners and their Affiliates).
(c) DUTIES OF THE OPERATING COMMITTEE. The Operating Committee
shall be generally responsible for overseeing and managing the day-to-day
business, operations and affairs of the Partnership and carrying out the duties
delegated to it by the Executive Committee, and shall have fiduciary
responsibility for the safekeeping and use of all funds and assets of the
Partnership, whether or not in its immediate possession or control. The
Operating Committee may, in carrying out its duties, defend against lawsuits or
other judicial or administrative proceedings brought against the Partnership,
provided that it promptly notifies the Executive Committee of such action. The
funds of the Partnership shall not be commingled with the funds of any other
Person, and the Operating Committee shall not employ, or permit any other
Person to employ, such funds in any manner except for the benefit of the
Partnership. The bank accounts of the Partnership shall be maintained in such
banking institutions as are approved
17
by the Operating Committee and withdrawals shall be made only in the regular
course of Partnership business and as otherwise authorized in this Agreement on
such signature or signatures as the Operating Committee may determine. The
Operating Committee shall also have the duties imposed upon it elsewhere in
this Agreement. The Operating Committee shall devote sufficient time, effort
and managerial resources to the business of the Partnership as is reasonably
required to fulfill its obligations hereunder.
5.4 WARRANTED RELIANCE BY EXECUTIVE COMMITTEE MEMBERS AND OPERATING
COMMITTEE MEMBERS ON OTHERS. In exercising their authority and performing
their duties under this Agreement, the Executive Committee Members and the
Operating Committee Members shall be entitled to rely on information, opinions,
reports, or statements of the following persons or groups unless they have
actual knowledge concerning the matter in question that would cause such
reliance to be unwarranted:
(a) one or more agents of the Partnership whom the Executive
Committee Member or Operating Committee Member, as the case may be, reasonably
believes to be reliable and competent in the matters presented; and
(b) any attorney, public accountant, or other person as to
matters which the Executive Committee Member or Operating Committee Member, as
the case may be, reasonably believes to be within such person's professional or
expert competence.
5.5 INTENTIONALLY OMITTED.
5.6 REIT STATUS. The Partners hereby acknowledge that Macerich and
SDG (and/or certain Persons directly or indirectly owning interests in Macerich
or SDG) are and intend to qualify at all times as a REIT, and that each such
Partner's or other Person's ability to qualify as such will depend principally
upon the nature of the Partnership's operations. Accordingly, the
Partnership's operations shall be conducted at all times in a manner that will
enable each of Macerich, SDG and each Person owning, directly or indirectly,
interests in either Macerich or SDG to satisfy all requirements for REIT status
under Sections 856 through 860 of the Code and the regulations promulgated
thereunder to the extent possible. In furtherance of the foregoing (and not in
limitation thereof), notwithstanding any other provision herein to the
contrary, the Partnership shall conduct its operations in accordance with the
following provisions at all times:
(a) The Partnership shall not render any services to any lessee
or sublessee or any customer thereof, either directly or through an
"independent contractor" within the meaning of Section 856(d)(3) of the Code,
if the rendering of such services shall cause all or any part of the rents
received by the Partnership to fail to qualify as "rents from real property"
within the meaning of Section 856(d) of the Code;
(b) The Partnership shall not own, directly or indirectly
(taking into account the attribution rules referred to in Section 856(d)(5) of
the Code), in the aggregate 10% or more of the total number of shares of all
classes of stock, 10% or more of the voting power
18
of all classes of voting stock or 10% or more of the assets or net profits of
any lessee or sublessee of all or any part of any of the Properties or any
Partnership Property;
(c) No lease or sublease of any space at the Properties shall
provide for any rent based in whole or in part on the "income or profits"
within the meaning of Section 856(d)(2)(A) of the Code derived by any lessee or
sublessee;
(d) The Partnership shall not own more than 10% of the
outstanding voting securities of any one issuer (as determined for purposes of
Section 856(c)(5)(B) of the Code);
(e) Neither the Partnership nor any Partner shall take any action
(or fail to take any action permitted under this Agreement) that would
otherwise cause the Partnership's and Underlying Partnership's gross income to
consist of more than one percent (1%) of income not described in Section
856(c)(2) of the Code or more than ten percent (10%) of income not described in
Section 856(c)(3) of the Code, or cause any significant part of the Partnership
Assets to consist of assets other than "real estate assets" within the meaning
of Section 856(c)(6)(B) of the Code;
(f) The Partnership shall distribute to the Partners during each
Fiscal Year an amount of cash such that the portion so distributed will equal
or exceed 100% of the amount of Partnership taxable income, if any, to be
allocated to the Partners with respect to such Fiscal Year distributed at the
times required to prevent the imposition of an excise tax under Section 4981 of
the Code; PROVIDED, HOWEVER, that if each such Partner's distributable share of
any Net Cash Flow of the Partnership and its distributable share of any funds
maintained in the Partnership reserves are insufficient to meet the aforesaid
distribution requirement with respect to such Partner, then the Partnership
shall have satisfied the foregoing distribution requirement with respect to
such Partner upon distributing to it such distributable share of Net Cash Flow
and funds maintained in the Partnership reserves. In no event shall the
Partnership be required to borrow funds, or any Partner be required to
contribute funds to the Partnership, in order to permit the Partnership to
satisfy the foregoing distribution requirement. In no event shall the
foregoing provisions of this SUBSECTION (f) adversely affect the allocation of,
and Percentage Interest in, Net Cash Flow of any other Partner.
(g) The Partnership shall not engage in any "prohibited
transactions" within the meaning of Section 857(b)(6)(B)(iii) of the Code.
The Partners hereby acknowledge that the foregoing are the current guidelines
applicable to the qualification of REITs. If and to the extent that any of the
requirements to qualify for REIT status shall be changed, altered, modified or
added to, then such changes, alterations, modifications or additions, as
applicable, shall be deemed incorporated herein, and this SECTION 5.6 shall be
deemed to be amended and modified as necessary to incorporate such changed,
altered, modified or added REIT requirements.
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5.7 BUDGETS.
(a) PREPARATION AND APPROVAL. As soon as reasonably possible
hereafter, the Operating Committee shall prepare (or cause to be prepared) and
submit to the Executive Committee for approval an interim operating budget
(each an "INTERIM OPERATING BUDGET") for the management, leasing and operation
of each Partnership Property through the end of Fiscal Year 1998. At least
forty-five (45) days prior to the beginning of each Fiscal Year, the Operating
Committee shall prepare and submit to the Executive Committee for approval a
proposed budget (each an "ANNUAL BUDGET") for the management, leasing and
operation of each Partnership Property for the next Fiscal Year. The Interim
Operating Budgets and Annual Operating Budgets shall sometimes hereinafter be
collectively referred to individually as a "BUDGET" and collectively as the
"BUDGETS". The Executive Committee may approve or disapprove the entire Budget
or certain cost items or categories of each Budget. If the Executive Committee
disapproves any Budget or any cost item or category thereof, the Operating
Committee shall meet within five (5) business days after the Executive
Committee's disapproval and seek in good faith to agree upon an acceptable
revision to such disapproved Budget(s) or cost item or category, as the case
may be. Once revised, each such disapproved Budget shall be resubmitted to the
Executive Committee for approval and such process shall continue until the
Executive Committee has approved a Budget for each Partnership Property for the
Fiscal Year in question. Such Budgets will be prepared by the Operating
Committee and approved by the Executive Committee in good faith based upon
estimates taking into account the most recent information then available to the
Operating Committee. The Operating Committee shall update each Budget no less
frequently than quarterly, and shall promptly submit any proposed revisions to
such Budgets resulting from such updates to the Executive Committee for
approval in the manner provided above for approval of the original Budgets.
(b) OPERATIONS. The approved Budget for each Partnership
Property shall be submitted to the property manager for such Partnership
Property for implementation. The Operating Committee and property managers
shall manage and operate each Property and each Partnership Property consistent
with the approved Budget therefor (as may be updated from time to time in
accordance with SUBSECTION (a) above). If the Executive Committee has not
approved a Budget or any cost item or category of any Budget prior to the
beginning of the next Fiscal Year, the Operating Committee shall substitute the
Budget or the actual cost of such disapproved item or category incurred by the
Partnership during the preceding Fiscal Year, if any; PROVIDED THAT, if any
such item or category of expense is in the nature of utility expenses, personal
or real property taxes, insurance expenses to be incurred in accordance with
SECTION 5.8 hereof, debt service due and payable under any loan of the
Partnership, or any payments that the Partnership is required to make by law,
then the Operating Committee shall substitute the reasonably anticipated costs
of such items or categories of expense (based on the previous year's bills
therefor, if available).
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5.8 INSURANCE.
(a) COVERAGE. The Operating Committee shall procure and
maintain, or cause to be procured and maintained, insurance sufficient to enable
the Partnership to comply with applicable laws, regulations, and contractual
requirements (including the requirements of Persons providing financing to the
Partnership), including as a minimum, the following:
(i) Comprehensive general liability insurance covering
each Partnership Property in the amounts and upon terms customary for
businesses and assets comparable to such Partnership Property, and
otherwise satisfactory to the Executive Committee;
(ii) With respect to completed improvements, fire and
extended coverage insurance, and, whenever construction of any improvement
is taking place, builders' risk insurance, in each case, on a replacement
cost basis of not less than one hundred percent (100%) of the full
replacement cost of such improvements;
(iii) Worker's compensation insurance as required by law
including employer's liability;
(iv) Fidelity insurance in an amount to protect against
losses due to employee dishonesty, theft by any other Partnership
contractor, and mysterious disappearances; and
(v) Such additional insurance against other risks of loss
to the Partnership Properties as, from time to time, may be required by any
lender making a loan to the Partnership or which may be required by law.
The Operating Committee shall furnish the Executive Committee, no
less frequently than annually, a schedule of such insurance and copies of
certificates evidencing the same. The Executive Committee must consent to the
establishment or modification of any self insurance or deductibles which
exposes the Partnership to uninsured liability. Each Partner shall be named as
an additional insured to the Partnership's comprehensive general liability
insurance policies.
5.9 UNANIMOUS CONSENT. Notwithstanding anything to the contrary in
this Agreement, the Partnership may take any action contemplated under this
Agreement if approved by the unanimous consent of the General Partners.
5.10 INDEMNIFICATION.
(a) The Partnership shall, to the fullest extent permitted by
law, indemnify any and all Indemnitees from and against any and all losses,
claims, damages, liabilities, costs and expenses (including attorneys' fees and
costs), judgments, fines, settlements, and other amounts arising from any and
all claims, demands, actions, suits or proceedings, civil,
21
criminal, administrative or investigative, that relate to the operations of the
Partnership as set forth in this Agreement in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, unless it
is established that: (i) the act or omission of the Indemnitee was material to
the matter giving rise to the claim, demand, action, suit or proceeding and
either was committed in bad faith or was the result of active and deliberate
dishonesty; (ii) the Indemnitee actually received an improper personal benefit
in money, property or services; or (iii) in the case of any criminal
proceeding, the Indemnitee had reasonable cause to believe that the act or
omission was unlawful. Any indemnification pursuant to this SECTION 5.10 shall
be made only out of Partnership Assets, and no Partner shall be required to
contribute or advance funds to the Partnership to enable the Partnership to
satisfy its obligations under this SECTION 5.10.
(b) Reasonable expenses incurred by an Indemnitee who is a party
to a proceeding shall be paid or reimbursed by the Partnership in advance of
the final disposition of the proceeding upon receipt by the Partnership of (i)
a written affirmation by the Indemnitee of the Indemnitee's good faith belief
that it is entitled to indemnification by the Partnership pursuant to this
SECTION 5.10(b) with respect to such expenses and proceeding, and (ii) a
written undertaking by or on behalf of the Indemnitee, to and in favor of the
Partnership, wherein the Indemnitee agrees to repay the amount if it shall
ultimately be adjudged not to have been entitled to indemnification under this
SECTION 5.10.
(c) The indemnification provided by this SECTION 5.10 shall be
in addition to any other rights to which an Indemnitee or any other Person may
be entitled under any agreement, as a matter of law or otherwise.
(d) The Partnership may purchase and maintain insurance, on
behalf of the Indemnitees and such other Persons as the Partners shall mutually
determine, against any liability that may be asserted against or expenses that
may be incurred by such Person in connection with the Partnership's activities,
regardless of whether the Partnership would have the obligation to indemnify
such Person against such liability under the provisions of this Agreement.
(e) The provisions of this SECTION 5.10 are for the benefit of
the Indemnitees, their heirs, successors, assigns and administrators and shall
not be deemed to create any rights for the benefit of any other Persons.
5.11 COMPENSATION AND REIMBURSEMENT. The Partnership shall not pay a
Partner or an Affiliate of a Partner any fees or other compensation except as
set forth in this Agreement or except as otherwise agreed by the Executive
Committee. The Partnership will reimburse a Partner and its Affiliates for all
reasonable actual out-of-pocket third party expenses incurred in connection
with the carrying out of the duties set forth in this Agreement imposed upon
such Partner or its Affiliates, provided such expenses are approved by the
Executive Committee or are reflected in a Budget that has been approved by the
Executive Committee, in each case upon the presentation of reasonable
supporting documentation of the amount and purpose of such expenses.
22
5.12 NO EMPLOYEES. The Partnership shall not have employees. Each
Partner shall be solely responsible for all wages, benefits, insurance and
payroll taxes with respect to any of its respective Executive Committee
Members, Operating Committee Members or other employees.
5.13 PERSONAL SERVICES CONTRACT. The Partners acknowledge and agree
that except for their respective economic interests in the Partnership, each
Partner's respective rights, powers and privileges as a Partner hereunder shall
be deemed to be in respect of a personal services contract, and not an
executory contract, under the United States Bankruptcy Code and any state
insolvency or bankruptcy laws. Without limitation on the foregoing, each
Partner confirms and agrees that one of the major factors that caused the
Partners to form this Partnership and to enter into this Agreement was the
personal trust and confidence each Partner reposed in the personal services,
management skills and business experience of the other Partner. The Partners
do not desire to, and agree that they shall not be required to, accept the
exercise of management or control rights (including rights to give approvals or
consents under this Agreement) by any party other than a Partner. Accordingly,
in the event of a Bankruptcy of a General Partner or the withdrawal of a
General Partner, such General Partner's Operating Committee Members and
Executive Committee Members shall immediately be terminated and deemed removed
from the Operating Committee and Executive Committee, respectively, and such
General Partner shall have no right whatsoever to participate in the management
or control of the Partnership; PROVIDED, HOWEVER, that such General Partner
shall be entitled to all of the rights and benefits of an assignee of a
partnership interest under the Act.
5.14 Defaults and Remedies.
(a) EVENTS OF DEFAULT. The occurrence of any of the following
events by or with respect to a Partner of one Party or such Party (the
"DEFAULTING PARTY"; and the other Party shall be referred to herein as a
"NON-DEFAULTING PARTY," provided that neither a Partner of the other Party nor
the other Party itself is already a Defaulting Party) shall be a default
hereunder and if not cured within the applicable notice and cure period
provided below, if any, such default shall constitute an "EVENT OF DEFAULT"
hereunder:
(i) The failure of a Partner or Party to make any payment
as required by this Agreement that is not cured within five (5) business
days of written notice to such Partner or Party;
(ii) The failure of a Partner or Party to perform any of
its other obligations under this Agreement or the breach by a Partner or
Party of any of the terms of this Agreement, and a continuation of such
failure or breach for more than thirty (30) days after notice by a
Non-defaulting Party to the Defaulting Partner that such Defaulting Party
has failed to perform any of its obligations under, or has breached, this
Agreement; provided that if such failure or breach is of the nature that it
can be cured but cannot reasonably be cured within such thirty (30) day
period, such period shall be extended for up to an additional sixty (60)
days so long as the Defaulting Party in good faith commences all reasonable
curative efforts within ten (10) days of its receipt of such notice
23
from the Non-defaulting Party and diligently and expeditiously continues
its curative efforts to completion; or
(iii) The occurrence of a Bankruptcy with respect to a
Partner or the withdrawal by a Partner.
(b) REMEDIES. Upon the occurrence of any Event of Default, the
Non-defaulting Party may elect to do one or more of the following:
(i) Exercise its rights under SECTION 5.14(c);
(ii) Dissolve the Partnership and commence to liquidate
its assets as provided in ARTICLE 10;
(iii) Enforce any covenant by the Defaulting Party to
advance money or to take or forbear from any other action hereunder; or
(iv) Pursue any other remedy permitted by this Agreement
or at law or in equity.
(c) CHANGE OF GOVERNANCE OF PARTNERSHIP. In addition to any
other rights or remedies which a Non-defaulting Party may have under this
Agreement or under applicable laws with respect to an Event of Default, a
Non-defaulting Party shall have the option to exercise the rights set forth
below in this SECTION 5.14(c) in the event of the occurrence of any Event of
Default. Upon the occurrence of an Event of Default, the General Partner of the
Non-defaulting Party may elect, by giving written notice to the Defaulting
Party, to assume the role of the "CONTROLLING PARTY" of the Partnership, and
shall remain as such unless and until (i) the Partners otherwise agree,
(ii) such Controlling Party is removed as such pursuant to the foregoing
provisions of this SECTION 5.14(c) by reason of its having become a Defaulting
Party, or (iii) such Event of Default is cured. During the period of time that
an Event of Default has occurred and is continuing, the General Partner of the
Controlling Party shall have the authority to take exclusive charge and control
of the Partnership free and clear of any and all restrictions (including any and
all restrictions set forth in this ARTICLE 5 and any and all consent, voting or
approval rights granted the Executive Committee, Operating Committee or any
Partner, other than that of the Controlling Party) imposed by this Agreement,
and the Defaulting Party's right to, acting alone, make certain decisions and
take certain actions with respect to matters concerning the Partnership's
management agreements with the Non-defaulting Party (or its Affiliates) as
provided in SECTION 5.5 shall be suspended and the General Partner of the
Controlling Party shall make all such decisions and take all such actions
thereunder. The General Partner of the Controlling Party shall have the right
to amend any fictitious business name statement, certificate of partnership, or
any similar document to reflect such election and to provide that it is the sole
Partner authorized to bind the Partnership, and to file or record any such
amended documents and change the Partnership's Principal Office, and each
Partner hereby grants to the General Partner of the Controlling Party its
irrevocable power of attorney to do the same, which power of attorney shall be
deemed to be a power coupled with an interest which may not be revoked until
24
the termination and winding up of the Partnership. The provisions of this
SECTION 5.14(c) shall take precedence over any provision to the contrary set
forth in this Agreement.
(d) REMEDIES NOT eXCLUSIVE. No remedy conferred upon the
Partnership or any Partner in this Agreement is intended to be exclusive of any
other remedy herein or by law provided or permitted, but rather each shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law, in equity or by statute.
ARTICLE 6
Transfers of Interests
6.1 RESTRICTIONS ON TRANSFERS.
(a) Except as permitted in SECTION 6.1(b) or otherwise expressly
permitted or required by this Agreement, no Partner shall Transfer all or any
portion of its Partnership Interest, and no partner or other controlling entity
or Person of a Partner shall directly or indirectly Transfer its ownership
interest in such Partner or take any action which would have such an effect,
without the unanimous prior written consent of the Partners, which consent may
be withheld by a Partner in its sole and absolute discretion. Any Transfer or
attempted Transfer by any Partner in violation of the preceding sentence shall
be null and void and of no force or effect whatsoever. Each Partner hereby
acknowledges the reasonableness of the restrictions on Transfer imposed by this
Agreement in view of the Partnership purposes and the relationship of the
Partners and the Partnership. Accordingly, the restrictions on Transfer
contained herein shall be specifically enforceable. Each Partner hereby
further agrees to hold the Partnership and each Partner wholly and completely
harmless from any cost, liability, or damage (including liabilities for income
taxes and costs of enforcing this indemnity) incurred by any of such
indemnified Persons as a result of a Transfer or an attempted Transfer in
violation of this Agreement.
(b) Notwithstanding anything to the contrary contained herein,
the following Transfers shall be permitted under this Agreement without any
consent being required from any Partner ("PERMITTED TRANSFERS"):
(i) Any Transfer of the entire Partnership Interest to an
Affiliate of the respective Operating Partnership of the Partner, provided
that the applicable Operating Partnership has a direct or indirect legal or
beneficial ownership interest entitled to receive at least 25% of the
dividends, distributions or other cash proceeds of such Affiliate;
(ii) Any transaction involving (1) the Transfer, issuance
or redemption of stock or other equity securities of any direct or indirect
corporate partner of a Partner, whether or not such Transfer, issuance or
redemption occurs on any public stock exchange, (2) the Transfer, issuance
or redemption of any partnership units in the
25
respective Operating Partnership of the Partner, or (3) the direct or
indirect Transfer, issuance or redemption of limited partnership interests
in any Partner; PROVIDED THAT following any such transaction referred to in
(1) - (3) of this SUBSECTION (ii), the entire Partnership Interest is owned
by an Affiliate of the applicable Operating Partnership and the applicable
Operating Partnership continues to have a direct or indirect legal or
beneficial ownership interest entitled to receive at least 25% of the
dividends, distributions or other cash proceeds of such Affiliate.
6.2 TRANSFEREE REQUIREMENTS. In no event may any Partner Transfer
its Partnership Interest pursuant to the provisions of this ARTICLE 6 or
otherwise (i) to any person who lacks the legal right, power or capacity to own
a Partnership Interest; (ii) in violation of any provision of any mortgage or
deed of trust (or note or bond secured thereby) constituting a lien against any
Partnership Property or any part thereof, or of any other instrument, document
or agreement to which the Partnership is a party or otherwise bound; (iii) in
violation of applicable law; (iv) in the event such Transfer or issuance would
cause any Partner who is a REIT (or any Person who, directly or indirectly,
owns an interest in any Partner who is a REIT) to cease to comply with the
requirements necessary to achieve REIT status; (v) if such Transfer would cause
a termination of the Partnership for federal income tax purposes or would cause
a constructive distribution to any Partner or to any partner of the Underlying
Partnership under Section 752 of the Code; (vi) if such Transfer would, in the
opinion of counsel to the Partnership, cause the Partnership to cease to be
classified as a partnership for federal income tax purposes; (vii) if such
Transfer would cause the Partnership to become, with respect to any employee
benefit plan subject to Title 1 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); or (xiii) if such Transfer would, in the opinion of
counsel to the Partnership, cause any portion of the Partnership Properties to
constitute assets of any employee benefit plan pursuant to the Department of
Labor Regulations Section 2510.2-101. As used in this Agreement, the term
"TRANSFEREE" shall mean any approved Transferee pursuant to ARTICLE 6 hereof.
6.3 PARTNERSHIP INTEREST LOANS.
(a) GENERAL LOAN PROVISIONS. Each Partner shall have the right
to pledge its entire Partnership Interest, and the proceeds thereof as security
for a loan or loans (or a guaranty of a loan or loans to its partner or other
controlling Entity or Person) under a credit facility and all other obligations
under the related loan documents (collectively, a "PARTNERSHIP INTEREST LOAN
OBLIGATIONS") and to obtain such loan or loans secured by its Partnership
Interest and the proceeds thereof (all loans under a single credit facility
being, collectively, a "PARTNERSHIP INTEREST LOAN") at any time during the term
of this Agreement upon the following terms and conditions:
(i) there shall never be more than one Partnership Interest
Loan with respect to each Partner's Partnership Interest outstanding at any
time;
26
(ii) the Partnership Interest Loan Obligations may be
secured by the Partner's Partnership Interest and the proceeds thereof but
shall not be secured by or in any way collateralized by any of the
Properties;
(iii) the Partnership Interest Loan shall be prepayable
in full at any time, subject to customary notice and prepayment penalties;
(iv) the Partner obtaining or guaranteeing any such
Partnership Interest Loan shall pay each other Partner's reasonable
attorneys' fees incurred in connection with the review of the loan
documents for each such Partnership Interest Loan with respect to the
compliance of such loan documents with the conditions set forth in this
SECTION 6.3;
(v) At the time such Partnership Interest Loan is incurred,
no default or Event of Default by or with respect to the Partner obtaining
the Partnership Interest Loan shall have occurred and be continuing under
this Agreement;
(vi) The lender or lenders under each such Partnership
Interest Loan shall be a bank, or other institutional lender, provided that
in the case of a Partnership Interest Loan made by more than one lender (or
in which there are one or more participants), the Partners and the
Partnership shall be entitled to deal only with an agent or other
representative for all such lenders (and their participants, if any, or, in
the case of a Partnership Interest Loan held by a single lender in which
there are one or more participants, shall be entitled to deal only with
such lender) in connection with such Partnership Interest Loan and any
notice given to such representative (or lender) shall be deemed notice to
all lenders and participants, and any consent or approval by such
representative (or lender) shall be deemed given by all lenders and
participants);
(vii) The other Partners shall be reasonably satisfied
that any loan by a Partner will not result in any adverse tax consequences
to such Partners or the Partnership;
(viii) Any loan must be an arm's length "bridge" or other
financing on terms customary for financings of that type or otherwise
reasonably acceptable to the other Partners;
(ix) (a) The loan documents for each such Partnership
Interest Loan shall not include terms or conditions which unreasonably
(taking into account what is then customary in loan documents for similar
loans with similar lenders) and adversely impact the Partnership's, the
Underlying Partnership's, the Partners' or any property manager's ability
to operate, manage or lease any Property or any Partnership Property; and
(b) the loan documents for each such loan shall not include terms or
conditions that grant the lender approval or consent rights with respect to
the operation, management or leasing of any Property or any Partnership
Property except, in the case of CLAUSES (a) and
27
(b) immediately above, as approved by the other Partners, which
approval shall not be unreasonably withheld;
(x) The loan shall not include any participation,
contingent interest or equity conversion features (provided that the
foregoing limitations shall not preclude the calculation or payment of any
prepayment penalty based upon a yield maintenance or similar formula);
interest on the loan shall be payable on a basis no less frequently than
monthly (or, in the case of LIBOR loans, at the end of the interest period
applicable thereto, but not less frequently than every three months);
(xi) A Partnership Interest Loan shall not cause a default
under any agreement to which the Partnership or the Partner incurring or
guaranteeing such Partnership Interest Loan (the "PLEDGING PARTNER") is a
party or bound and the Pledging Partner shall have obtained all third party
consents to such loan required to be obtained by it;
(xii) The loan documents shall provide that the lender
or lenders (or such representative) will not exercise remedies thereunder
except after giving written notice to the other Partners and the
Partnership of any default under the loan documents concurrently with the
giving of such notice to the defaulting Partner; the Pledging Partner shall
agree that the loan documents shall not be amended, modified or
supplemented without the other Partners' prior written consent; and the
lender or representative shall, at any other Partner's request, enter into
a separate agreement in form reasonably satisfactory to such other Partner,
wherein the lender reasonably agrees to provide such other Partner and the
Partnership with such notice; and
(xiii) Neither the Person making the Partnership Interest
Loan, nor any Person participating in a Partnership Interest Loan, shall
have made a loan to the Partnership or to the Underlying Partnership or
secured by any Partnership Assets or any Underlying Partnership Assets.
(b) Within a reasonable time after receipt of a request by the
Partner obtaining a Partnership Interest Loan accompanied by a copy of the
related loan documents, the other Partners shall certify whether the Partnership
Interest Loan and the loan documents relating to such Partnership Interest Loan
comply with the conditions set forth in CLAUSES (iii), (iv), (v), (vi), (vii),
(viii), (ix), (x), (xi) as to the Partnership only, (xii) and (xiii) of this
SECTION 6.3(a), which certification shall not be unreasonably withheld, and any
such lender or representative may conclusively rely on such certification.
(c) The Partnership shall notify the lender or representative of
any failure by the Pledging Partner to make any payment to the Partnership or to
any other Partner required under this Agreement. Notwithstanding anything
herein to the contrary, the lender or lenders under the Partnership Interest
Loan (or such representative) shall have the right (but not the obligation) to
cure such default within 30 days after receipt of such notice by making such
payment (which shall have the same effect as if such payment had been made by
such Partner),
28
and until the expiration of such 30 day period, the other Partners shall not
exercise any of their rights and remedies hereunder or under the Act with
respect to such default and, if and when such secured party makes the
payment, such default shall be considered cured and shall cease to exist for
all purposes of this Agreement and the Act.
(d) Notwithstanding anything herein to the contrary, at any time
after the date on which the Partnership receives written notice (a "PARTNERSHIP
INTEREST LOAN DEFAULT NOTICE") from a lender or representative that an "event of
default" of the Pledging Partner has occurred and exists under a Partnership
Interest Loan and instructing the Partnership to make all future distributions
or other payments then required to be made to the Pledging Partner under the
Partnership Agreement or any Default Loan to such lender or representative until
further notice from such lender or representative, such payments shall be made
to such lender or representative notwithstanding receipt by the Partnership or
any other Partner of any notice by the Pledging Partner (or any trustee or other
person acting on its behalf) to the contrary. In addition, at any time after
the date on which the Partnership receives a Partnership Interest Loan Default
Notice and until such notice is rescinded by the lender or representative after
all "events of default" of the Pledging Partner have ceased to exist, the
Partnership shall provide to the lender or representative under the Partnership
Interest Loan copies of all notices and reports being provided hereunder or
under the Act to the Pledging Partner and such other information regarding the
Properties or the Partnership Property and the operations, assets, liabilities
and business of the Partnership as the lender or representative may reasonably
request.
(e) Upon any foreclosure of the security interest securing any
Partnership Interest Loan Obligations, or any transfer in lieu thereof, (i) the
secured party, purchaser, transferee or a designee thereof shall have the rights
of an "assignee" of such Partnership Interest under the Act, including, without
limitation, all rights of the Pledging Partner to (A) share in profits and
losses of the Partnership, (B) receive distributions from the Partnership under
ARTICLE 3 or 10 or SECTION 7.3(b), 8.4 or 8.6(b) hereof or the other provisions
of this Agreement or the Act and (C) all other economic rights of such Pledging
Partner with respect to the Partnership Interest (including the right to receive
any and all sale proceeds of the Partnership Interest if and when the
Partnership Interest is sold in accordance with the provisions of this
Agreement), and (ii) in all other respects the Pledging Partner shall continue
as a Partner under this Agreement with all other rights hereunder (including,
without limitation, the right to exercise any voting, management or other
consensual rights), unless and until the secured party, purchaser, transferee or
designee is admitted as a substitute Partner pursuant to SECTION 6.4 at such
Person's request. Upon satisfaction by such secured party, purchaser,
transferee or designee of the conditions set forth in Section 6.4, (i) such
Person shall be admitted as a Partner and (ii) the Pledging Partner shall cease
to be a Partner, in each case without the consent of any other Partner or other
Person being required. Unless and until such secured party, purchaser,
transferee or designee becomes a Partner under this Agreement, such secured
party, purchaser, transferee or designee shall not be liable for any of the
liabilities and obligations of the Partnership or such Pledging Partner, whether
under this Agreement, the Act or otherwise, except as otherwise provided by law.
29
(f) Any partner or other controlling Person of a Partner shall
be entitled to grant a security interest to a lender or lenders (or
representative) referred to in CLAUSE (vi) of SECTION 6.3(a) under a Partnership
Interest Loan in the direct or indirect ownership interests that such partner or
other Person holds from time to time in such Partner or the Partnership,
provided that such security interest shall not be foreclosed (and no transfer in
lieu thereof shall occur) at any time prior to foreclosure of the security
interest in the Partnership Interest (or transfer in lieu thereof).
(g) Notwithstanding anything herein to the contrary, the
provisions of this SECTION 6 shall accrue to the benefit of all lenders and
representatives under Partnership Interest Loans.
(h) RIGHT OF PURCHASE. If any lender of a Partnership Interest
Loan or any third party (each a "LOAN DEFAULT TRANSFEREE") should become an
assignee of any Partner's Partnership Interest as a result of a default under
any such Partnership Interest Loan, whether by or through foreclosure of its
security interest in and to such Partnership Interest, assignment-in-lieu
thereof, or otherwise, then a Partner of the other Party shall have a one-time
right to purchase from the Loan Default Transferee such assignee's interest in
the Partnership Interest on the terms and conditions of this SECTION 6.3(h). No
later than five (5) business days after its acquisition of such assignee's
interest in the Partnership Interest, the Loan Default Transferee shall deliver
written notice (the "LOAN DEFAULT TRANSFER NOTICE") to the other Partners
notifying such other Partners of the transfer, setting forth such Loan Default
Transferee's address for notices and stating the credit bid, purchase price or
other amount paid for the assignee's interest in the Partnership Interest (which
amount may include the discharge of indebtedness in exchange therefor). The
other Partners may then exercise its rights under this SUBSECTION (h) by
delivering to the Loan Default Transferee, within 30 days after such other
Partner's receipt of the Loan Default Transfer Notice, written notice stating
its intention to purchase such assignee's interest in the Partnership Interest.
The purchase price for the assignee's interest in the Partnership Interest shall
equal the credit bid, purchase price or other amount paid by such Loan Default
Transferee for such assignee's interest in the Partnership Interest as stated in
the Loan Default Transfer Notice, plus interest thereon from the date that the
Loan Default Transferee acquires title to the assignee's interest in the
Partnership Interest until the date that the sale of the assignee's interest in
the Partnership Interest to the other Partner is consummated at the default rate
stated in the loan documents. If any other Partner exercises its option to
purchase such assignee's interest in the Partnership Interest hereunder to such
other Partner or its designee, the transfer of the assignee's interest in the
Partnership Interest to the other Partner shall be consummated no later than the
sixtieth (60th) day after the date of such Loan Default Transferee's receipt of
the other Partner's written notice exercising such purchase option. The other
Partner may designate an Affiliate of such Partner as the purchaser of such
assignee's interest in the Partnership Interest. Upon the consummation of any
transfer hereunder to such Partner or its designee, the Loan Default Transferee
shall be released from any and all obligations and liability hereunder except
for obligations, liabilities, duties and rights arising before such transfer
which have not been determined or ascertained as of the date of transfer.
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Upon request by a Partner who is obtaining a Partnership Interest Loan
in accordance with the provisions of this Section 6.3, the Partnership and the
other Partners shall each execute and deliver to the lender or representative
under such Partnership Interest Loan, in addition to the certifications
contemplated by Section 6.3(b), such agreements and other documents as may be
reasonably requested by such lender or representative in connection therewith,
provided such agreements and other documents are consistent with the provisions
of this Article 6.
6.4 ADMISSION OF TRANSFEREE AS A PARTNER. No Transferee pursuant to
the provisions of this ARTICLE 6 above shall become a substituted Partner until
all of the following conditions have been satisfied, as applicable:
(a) A certified copy of the instrument of transfer shall have
been filed with the Partnership. The Transferee shall agree in writing for the
benefit of the Partnership to be bound by all of the terms of this Agreement and
to assume and perform all obligations and duties of the transferring Partner,
and an executed, duplicate original of said assumption shall be delivered to the
Partnership.
(b) The proposed Partner shall have executed and acknowledged
for recordation an amendment to this Agreement and the Statement of Partnership
and such other instruments as the other Partners may reasonably deem necessary
or desirable to effect such admission or substitution.
(c) A transfer fee sufficient to cover all expenses in
connection with such assignment and substitution (including reasonable legal and
accounting fees) shall have been paid to the Partnership either by the
Transferee or the transferring Partner.
(d) The admission of a Transferee as a substituted Partner and
any release of the transferring Partner shall not be a cause for dissolution of
the Partnership under the Delaware Uniform Partnership Act. Each Partner hereby
agrees in writing that the Partnership shall continue after such admission.
6.5 ALLOCATIONS AND DISTRIBUTIONS UPON TRANSFERS. Upon the
occurrence of a Transfer during any Fiscal Year, Profits, Losses, each item
thereof, and all other items attributable to the Partnership Interest so
transferred for such Fiscal Year shall be divided and allocated between the
transferring Partner and the Transferee by taking into account their varying
interests during the Fiscal Year in accordance with Code Section 706(d), using
any conventions permitted by law and selected by the Operating Committee. All
distributions and allocations on or before the date of a Transfer shall be made
to the transferring Partner, and all distributions and allocations thereafter
shall be made to the Transferee. The Operating Committee and the Partnership
shall incur no liability for making allocations and distributions in accordance
with the provisions of this SECTION 6.5, whether or not the Operating Committee
or the Partnership has knowledge of any Transfer of ownership of any interest in
the Partnership.
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ARTICLE 7
BUY-SELL
7.1 BUY-SELL OFFERING NOTICE. Either Party may exercise its rights
under this ARTICLE 7 at any time after a deadlock over a Buy-Sell Major Decision
relating to one (1) of the Underlying Properties or Partnership Properties (the
"SUBJECT PROPERTY") is not resolved within thirty (30) days after the Executive
Committee meeting at which the same is voted upon; PROVIDED, HOWEVER, that in
the case of an Underlying Property (i) such rights may only be exercised in
connection with an in-kind distribution of such Underlying Property to the
Partnership under Section 5.3 of the Underlying Partnership Agreement, and (ii)
in the event of any such in-kind distribution, the Party whose Affiliate elected
to cause such in-kind distribution shall be required to become the Initiating
Party with respect to such Property hereunder. At any such time, either Party
(the "INITIATING PARTY") may give written notice (the "OFFERING NOTICE") to the
other Party (the "RESPONDING PARTY") of its intent to purchase all, but not less
than all, of the Subject Property. The Offering Notice must be given within
fifteen (15) days after the expiration of the thirty (30) day period described
immediately above. In such event, the provisions set forth in this ARTICLE 7
shall apply. The Initiating Party shall specify in its Offering Notice the all
cash purchase price ("PURCHASE PRICE") at which the Initiating Party would be
willing to purchase a fifty percent (50%) undivided interest in the Subject
Property free and clear of all debt secured by mortgages, deeds of trust and
other security instruments thereon as of the date the Offering Notice is given
("DATE OF VALUE"). Once given, an Offering Notice may not be revoked or
withdrawn by an Initiating Party without the written consent of the Responding
Party, which consent may be withheld in its sole and absolute discretion. In no
event shall either Party be permitted to give an Offering Notice initiating its
buy-sell rights under this ARTICLE 7 more often than once in any twelve (12)
successive month period.
7.2 EXERCISE OF BUY-SELL. Upon receipt of the Offering Notice, the
Responding Party shall then be obligated either:
(a) To consent to the sale of a fifty percent (50%) undivided
interest in the Subject Property to the Initiating Party for the Purchase Price;
or
(b) To purchase a fifty percent (50%) undivided interest in the
Subject Property for the Purchase Price.
The Responding Party shall notify the Initiating Party of its election within
thirty (30) days after the Date of Value. Failure to give notice within the
required time period shall be deemed consent to the sale of the Subject Property
to the Initiating Party. For purposes of this ARTICLE 7, the terms "PURCHASING
PARTY" and "SELLING PARTY" shall mean, respectively, the Party who is obligated
to purchase and the Party who is obligated to sell a fifty percent (50%)
undivided interest in the Subject Property pursuant to either SECTION 7.2(a) or
7.2(b) (regardless of which Party is the Initiating Party and which Party is the
Responding Party).
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7.3 CLOSING.
(a) The Parties shall meet and exchange documents and pay
amounts due, and otherwise do all things necessary to conclude the transaction
set forth herein at the closing of such purchase (the "BUY-SELL CLOSING"). The
Buy-Sell Closing shall occur at the office of the Purchasing Party's legal
counsel at 9:00 a.m. on the first Wednesday after the ninetieth (90th) day after
the Date of Value unless the day is a Saturday, Sunday, or national or state
holiday and, in that event, on the next business day. At the Buy-Sell Closing,
the Partnership shall distribute to each of the Initiating Party and the
Responding Party a fifty percent (50%) undivided fee simple interest in the
Subject Property. Immediately thereafter, the Purchasing Party shall purchase
the interest of the Selling Party in the Subject Property for cash in an amount
equal to the Purchase Price. At the Buy-Sell Closing, there shall be delivered
to the Purchasing Party a duly executed and acknowledged deed in such form as
may be appropriate and required to legally transfer such fee simple title in and
to the Subject Property to the Purchasing Party, and shall also, upon the
request of the Purchasing Party, concurrently therewith (or at any time and from
time to time thereafter) be executed, acknowledged and delivered such other
documents and records as the Purchasing Party determines are reasonably
necessary or desirable to conclude the Buy-Sell Closing and to otherwise vest
title in and to the Subject Property in the Purchasing Party and allow the
Purchasing Party to develop, use, sell, rent, manage or operate the Subject
Property (including, without limitation, assignments of leases, reciprocal
easement and operating agreements, contracts, personal property and other rights
or property of the Partnership necessary or useful in the management and
operation of the Subject Property). Additionally, the Selling Party shall
execute, acknowledge and deliver such other documents and records as the
Purchasing Party determines are reasonably necessary or desirable to provide the
Purchasing Party with the same rights and interests in the Subject Property as
were granted to the Selling Party by the Partnership. The management agreement
for the Subject Property shall be immediately terminated effective as of the day
of the Buy-Sell Closing. Further, from and after the date of the Buy-Sell
Closing, both the Partnership and the Selling Party shall be released from all
obligations and liabilities accruing in connection with the Subject Property,
and the Purchasing Party shall indemnify and hold the Partnership and the
Selling Party harmless from and against any and all such obligations and
liabilities accruing from and after the Buy-Sell Closing.
(b) At the Buy-Sell Closing, each of the Purchasing Party and
the Selling Party shall be responsible for the satisfaction of fifty percent
(50%) of any debt secured by mortgages or deeds of trust against the Subject
Property as of the Value Date and, if applicable, the "release price" necessary
to release any mortgage or deed of trust securing the Existing Financing as of
the Value Date. It is expressly understood and agreed that (i) the transfer of
a Subject Property shall be reflected on the books and records of the
Partnership and the Underlying Partnership as a partial transfer to the general
partners of the Underlying Partnership, in accordance with their respective
Percentage Interests therein, followed by a sale of such partial interest by the
general partner that is an Affiliate of the Selling Party to the Purchasing
Party (or its Assignee), and (ii) such satisfaction may occur through the
assumption of such debt by the Purchasing Party, or the refinancing of such debt
with new indebtedness secured by the Purchasing Party (in each case, with an
appropriate reduction of amounts
33
otherwise owed by the Purchasing Party to the Selling Party), or through
other tax-efficient means agreed upon by the Partners. It is also expressly
understood and agreed that the Buy-Sell Closing may be effected through the
transfer of a duly executed and acknowledged deed directly from the
Partnership or the Underlying Partnership, as the case may be, to the
Purchasing Party (or its designee). The Purchasing Party shall be
responsible for and pay all costs and expenses incurred in connection with
the sale of the Subject Property; PROVIDED THAT, each Party shall bear its
own attorneys' fees and further the Initiating Party shall pay any yield
maintenance or other interest premium on the pay-off of such debt.
(c) The Partners acknowledge and agree that each Subject
Property is extraordinary and unique, and the provisions of this ARTICLE 7 shall
be specifically enforceable.
ARTICLE 8
EXIT CALL; PORTFOLIO SALE
8.1 CALL RIGHTS. At any time from and after the date which is
eighteen (18) months after the acquisition of the Underlying Properties by
the Underlying Partnership, either Party may, without cause and in its sole
and absolute discretion, elect to call for the Partnership to dissolve and
the distribution of all Partnership Properties to the Partners in kind;
PROVIDED, HOWEVER, that such election may only be made in connection with an
election, pursuant to Section 10.01(e) of the Underlying Partnership
Agreement, to liquidate the Underlying Partnership, in which case the Party
whose Affiliate elected such liquidation shall be the "Exercising Party"
hereunder. Such distribution by the Underlying Partnership shall be treated
as occurring as follows: (i) first, as a distribution to the partners in the
Underlying Partnership in accordance with their interests therein; and (ii)
as a distribution by the Partnership of its assets (including its
proportionate share of the Underlying Partnership Assets) to the Partners in
accordance with their Partnership Interests. Any Party may exercise its
right to call for the dissolution of the Partnership by delivering to the
other Party written notice stating that it is exercising its call right under
this ARTICLE 8 (a "CALL NOTICE"). The Party exercising its rights hereunder
shall be referred to herein as the "EXERCISING PARTY" and the other Party
shall be referred as the "NON-EXERCISING PARTY". Once a Call Notice is
delivered, it cannot be rescinded or withdrawn except with the prior written
consent of the Non-Exercising Party.
8.2 PROCEDURES UPON CALL EXERCISE. Within fifteen (15) business days
after the delivery of a Call Notice requiring the dissolution of the Partnership
by the Exercising Party, the Partners shall meet (a "CALL DISSOLUTION MEETING")
in order to determine and agree upon the fair market value of each Property (for
purposes of this ARTICLE 8, any such property being referred to, individually,
as a "CALL PROPERTY," and collectively, as the "CALL PROPERTIES"). It is
expressly acknowledged and agreed that the Call Dissolution Meeting may occur
over the course of a number of days and may be adjourned from time to time and
reconvened upon the agreement of the Parties. If the Parties are unable to
agree upon the fair market value of any Call Property within thirty (30) days
after the first day of such Call Dissolution Meeting, the fair market value of
such Call Property shall be determined in accordance with the appraisal process
34
set forth in SECTION 8.5 below. Upon the determination of the fair market value
of each Call Property, whether by agreement of the Parties or appraisal, the
Call Properties will be distributed to the Parties as follows:
(a) first, the Non-Exercising Party shall select a Call Property for
acquisition;
(b) second, the Exercising Party shall select a Call Property for
acquisition; and
(c) thereafter, the Non-Exercising Party shall select a Call Property
for acquisition and the Parties shall alternate choices in such manner until all
of the Call Properties have been allocated between the Partners.
If the total number of Call Properties is an odd number, then the
Non-Exercising Party shall be permitted to elect, in its sole and absolute
discretion, whether to acquire the final Call Property or to mandate that the
Exercising Party acquire such final Call Property. The Call Properties to be
acquired by the Exercising Party pursuant to this SECTION 8.2 shall be herein
referred to each as an "EXERCISING PARTY'S PROPERTY" and collectively as the
"EXERCISING PARTY'S PROPERTIES", and the Call Properties to be acquired by
the Non-Exercising Party pursuant to this SECTION 8.2 shall be herein
referred to each as a "NON-EXERCISING PARTY'S PROPERTY" and collectively as
the "NON-EXERCISING PARTY'S PROPERTIES"
8.3 CLOSING PROCEDURE. The Partners shall meet and exchange
documents and pay amounts due, and otherwise do all things necessary to conclude
the transactions set forth in this ARTICLE 8 at the closing (the "CALL
CLOSING"). The Call Closing shall occur at the office of the Exercising Party's
legal counsel at 9:00 a.m. on the first Wednesday after the thirtieth (30th) day
following the day that the selection procedure described in SECTION 8.2 above
shall have been completed (unless such day is a Saturday, Sunday, or national or
state holiday and, in that event, on the next business day). At the Call
Closing each of the Exercising Party and the Non-Exercising Party shall be
responsible for the satisfaction of any debt secured by mortgages or deeds of
trust against the Exercising Party's Properties and the Non-Exercising Party's
Properties, respectively, as of such date and, if applicable, the "release
price" necessary to release any mortgage or deed of trust securing the Existing
Financing as of such date. It is expressly understood and agreed that such
satisfaction may occur through the assumption of such debt, or the refinancing
of such debt with new indebtedness, or through other tax-efficient means agreed
upon by the Partners. Immediately thereafter, the Partnership shall (i) deliver
to the Exercising Party a duly executed and acknowledged deed in such form as
may be appropriate and required to legally transfer fee simple title in and to
each Exercising Party's Property to the Exercising Party, and shall also, upon
the request of the Exercising Party, concurrently therewith (or at any time and
from time to time thereafter) execute, acknowledge and deliver such other
documents and records as the Exercising Party determines are reasonably
necessary or desirable to conclude the Call Closing and to otherwise vest title
in and to the Exercising Party's Properties in the Exercising Party and allow
the Exercising Party to develop, use, sell, rent, manage or operate the
Exercising Party's Properties (including, without limitation, assignments of
leases, reciprocal easement and operating agreements, contracts, personal
property and other rights or property of the Partnership necessary or useful in
the management and operation of the Exercising Partner's
35
Properties), and (ii) deliver to the Non-Exercising Party a duly executed and
acknowledged deed in such form as may be appropriate and required to legally
transfer fee simple title in and to each Non-Exercising Party's Property to
the Non-Exercising Party, and shall also, upon the request of the
Non-Exercising Party, concurrently therewith (or at any time and from time to
time thereafter) execute, acknowledge and deliver such other documents and
records as the Non-Exercising Party determines are reasonably necessary or
desirable to conclude the Call Closing and to otherwise vest title in and to
the Non-Exercising Party's Properties in the Non-Exercising Party and allow
the Non-Exercising Party to develop, use, sell, rent, manage or operate the
Non-Exercising Party's Properties (including, without limitation, assignments
of leases, reciprocal easement and operating agreements, contracts, personal
property and other rights or property of the Partnership or the Underlying
Partnership necessary or useful in the management and operation of the
Non-Exercising Party's Properties). The Partnership shall distribute to the
Exercising Party all of the Exercising Party's Properties, and distribute to
the Non-Exercising Party all of the Non-Exercising Party's Properties. In
the event that the aggregate fair market value of the Exercising Party's
Properties (less any debt assumed by the Exercising Party) and the aggregate
fair market value of the Non-Exercising Party's Properties (less any debt
assumed by the Non-Exercising Party), as determined pursuant to SECTION 8.6
below, are unequal, the Partnership shall designate one Call Property (the
"DESIGNATED PROPERTY"), which Designated Property shall be deemed to have
been distributed to the Exercising and Non-Exercising Parties in that
proportion necessary to equate, as closely as possible, the fair market
values of the Call Properties distributed to the Exercising and
Non-Exercising Parties (less any debt assumed by the Parties). If the
Designated Property is an Exercising Party Property, then the Exercising
Party shall pay to the Non-Exercising Party cash, in an amount equal to the
fair market value of such Designated Property multiplied by the percentage of
the Designated Property distributed to the Non-Exercising Party. If the
Designated Property is a Non-Exercising Party Property, then the
Non-Exercising Party shall pay to the Exercising Party cash in an amount
equal to the fair market value of such Designated Property multiplied by the
percentage of the Designated Property distributed to the Exercising Party.
The Partnership shall be responsible for and shall pay all costs and expenses
incurred in connection with the pay-off and satisfaction of all financing
secured by the Partnership Properties, or any of them (including, without
limitation, the Existing Financing) and the release of all liens created
thereby (including, without limitation, all prepayment penalties or fees,
recording charges and other such costs and expenses). Except as otherwise
provided in the immediately preceding sentence and in this sentence below,
the Exercising Party shall be responsible for and pay all costs and expenses
incurred in connection with the distribution of the Exercising Party's
Properties, and the Non-Exercising Party shall be responsible for and pay all
costs and expenses incurred in connection with the distribution of the
Non-Exercising Party's Properties; PROVIDED THAT, each Party, the Partnership
and the Underlying Partnership shall bear its own attorneys' fees in
connection with such transactions. Each Party shall also, upon the request
of the other Party, concurrently with the Call Closing (or at any time and
from time to time thereafter) execute, acknowledge and deliver such other
documents and records as such other Party determines are reasonably necessary
or desirable to conclude the Call Closing. The management agreements for all
Call Properties shall be terminated effective as of the day of the Call
Closing. Further, from and after the date of the Call Closing, the
Partnership shall be released from all obligations and liabilities accruing
to them in connection with the Call Properties, and each Party shall
indemnify and hold the Underlying Partnership, the Partnership
36
and the other Party harmless from and against any and all such obligations
and liabilities with respect to or relating to the Call Properties
distributed to such Party accruing from and after the Call Closing. It is
also expressly understood and agreed that (i) the transfer of Partnership
Properties shall be reflected on the books and records of the Partnership and
the Underlying Partnership so as to take into account, as appropriate, the
ownership interests of the general partners of the Underlying Partnership,
and (ii) the Call Closing may be effected through the transfer of a duly
executed and acknowledged deed directly from the Partnership or the
Underlying Partnership, as the case may be, to the appropriate Parties (or
their designees).
8.4 WINDING UP; DISTRIBUTION OF PROCEEDS. Immediately following
the Call Closing, the Partnership and the Underlying Partnership shall be
wound up, and all remaining Partnership Properties shall be distributed to
the Partners, in accordance with the terms and provisions of ARTICLE 10
hereof.
8.5 FAIR MARKET VALUE APPRAISAL PROCESS. If the Parties are
unable to agree upon the fair market value of any Call Property in accordance
with and within the time period set forth in SECTION 8.2 above, then the fair
market value of such Call Property shall be determined in accordance with the
terms and provisions of this SECTION 8.5. Within twenty (20) days after the
conclusion of the Call Dissolution Meeting or the expiration of the thirty
(30) day period described in SECTION 8.2, whichever occurs first, each Party
shall appoint an appraiser and, within ten (10) days after their appointment,
the appraisers so appointed shall appoint a third appraiser. The appraisers
so appointed shall proceed to determine the fair market value of the Call
Property (determined assuming the Call Property was not encumbered by any
debt). The fair market value of the Call Property shall be the average of
the two (2) most proximate appraisals. If the highest and the lowest of the
three (3) appraisals are exactly equidistant from the middle appraisal,
however, the fair market value of the Call Property shall be an amount equal
to the middle appraisal. Each appraiser appointed pursuant to this
SECTION 8.5 shall be a real estate appraiser with at least ten (10) years'
professional experience and with knowledge of the regional shopping center
market (or knowledge of any other relevant market with respect to any
particular Call Property) within the area where the Call Property is located.
If either Party fails to appoint an appraiser within such twenty (20) day
period, the determination of the fair market value of the Call Property shall
be made by the appraiser chosen by the other Party and such determination
shall be binding upon the Parties. If the first two (2) appraisers are
unable to agree upon the third appraiser within the ten (10) day period
following their appointment, then they shall notify the then chairman of the
chapter of the American Institute of Real Estate Appraisers that is the
closest to the Call Property geographically and request such person to select
a third appraiser. Each Party shall pay the expense of the appraiser that it
appoints and the Parties shall share the expense of the third appraiser.
8.6 PORTFOLIO SALE.
(a) Any time after the date which is eighteen (18) months after
the date of the acquisition of the Properties by the Underlying Partnership, a
Party (for purposes of this SECTION 8.6, the "PORTFOLIO SELLING PARTY") shall
have the right to cause (i) the Partnership to sell all (but not less than all)
of the Partnership Properties to any unaffiliated third-party Person,
37
subject to compliance with this SECTION 8.6; PROVIDED, HOWEVER, that such
right may only be exercised in connection with an election, pursuant to
Section 10.01(e) of the Underlying Partnership Agreement, to liquidate the
Underlying Partnership, in which case the Party whose Affiliate elected such
liquidation shall be the "Portfolio Selling Party" hereunder. If the
Portfolio Selling Party desires to sell the Partnership Properties, the
Portfolio Selling Party shall give the other Party (for purposes of this
SECTION 8.6, the "REMAINING PARTY") written notice of its desire to do so
(the "PORTFOLIO OFFER NOTICE"), which Portfolio Offer Notice shall state the
aggregate price, measured in dollars and payable solely in cash or
immediately available funds (but which may include a credit for any existing
mortgage debt to be assumed), at which the Properties as a portfolio, will be
offered for sale (the "PORTFOLIO OFFER PRICE"). The Remaining Party shall,
within ninety (90) days after its receipt of the Portfolio Offer Notice,
notify the Portfolio Selling Party in writing whether or not the Remaining
Party will purchase the entire Partnership Interest of the Portfolio Selling
Party in the Partnership for a purchase price equal to the amount that the
Portfolio Selling Party (and the Affiliate of such Portfolio Selling Party
that is a general portion of the Underlying Partnership) would receive if all
of the Properties were sold for cash (including a credit for any mortgage
debt to be assumed if included in the Portfolio Offer Notice) at the
Portfolio Offer Price, and the Partnership were liquidated, on a closing date
set forth in such notice which shall not be less than ten (10) nor more than
thirty (30) days after the date of delivery of the Remaining Party's response
notice. If the Remaining Party does not respond within the said ninety (90)
day period, the Remaining Party shall be deemed conclusively to have declined
to purchase the entire Partnership Interest of the Portfolio Selling Party in
the Partnership as provided hereinabove and to have consented to the sale of
the Properties to an unaffiliated third-party Person on the terms hereinafter
provided. If the Remaining Party elects to purchase the entire Partnership
Interest of the Portfolio Selling Party in the Partnership, the Portfolio
Offer Notice and the Remaining Party's response notice shall constitute a
binding agreement of purchase and sale between the Portfolio Selling Party
and the Remaining Party and the Partnership Interest sale transaction shall
close on the date stated in the Remaining Party's response notice. At the
closing, the Parties will each execute and deliver to one another such
documents as may be necessary and appropriate to consummate the transfer of
the Selling Party's Partnership Interest (including, without limitation, an
Assignment of Partnership Interest containing customary indemnity
provisions), and the Remaining Party shall pay to the Selling Party, in cash,
the purchase price for such Partnership Interest. If applicable, all
management agreements for the Properties and Partnership Property managed by
any property manager affiliated with the Portfolio Selling Party shall be
automatically terminated upon the consummation of the sale of such
Partnership Interest.
(b) If the Remaining Party does not elect to purchase the entire
Partnership Interest of the Portfolio Selling Party in the Partnership, the
Portfolio Selling Party shall have the right, subject to this SUBSECTION (b), to
cause the Partnership to sell the Partnership Properties for a cash (with a
credit for mortgage debt to be assumed) purchase price equal to or greater than
ninety-eight percent (98%) of the Portfolio Offer Price; PROVIDED THAT, the
Partnership Properties must be listed with an investment banking firm
experienced in the sales of portfolio properties similar to the Partnership
Properties for the highest and best price recommended by such investment banking
firm, but not in any event less than the Project Offer Price. The closing of
such portfolio sale shall occur not later than nine (9) months after the earlier
of (x) the expiration
38
of the Remaining Party's one hundred twenty (120) day response period
provided in SUBSECTION (a) above, and (y) the date that the Remaining Party
delivers written notice to the Selling Party stating that it consents to the
sale of the Partnership Properties on the terms and conditions of this
SECTION 8.6. If the Portfolio Selling Party does not close such sale within
such nine (9) month period in accordance with the terms hereof, then the
Partnership Properties may not thereafter be sold as a portfolio under this
SECTION 8.6 without again giving notice to the Remaining Party pursuant to
SUBSECTION (a) above. The Remaining Party shall cooperate with the Portfolio
Selling Party in order to sell the Partnership Properties on the terms
provided in this SECTION 8.6.
8.7 EFFECT OF EXISTING FINANCING. Notwithstanding anything in
this Agreement to the contrary, the foregoing provisions of this Article 8
shall not be effective unless, prior to or contemporaneously with any
transaction described herein, the Existing Financing has been satisfied in
full.
ARTICLE 9
WITHDRAWALS; ACTIONS FOR PARTITION
9.1 WAIVER OF PARTITION. No Partner shall, either directly or
indirectly, take any action to require partition of any Partnership
Properties, and notwithstanding any provisions of applicable law to the
contrary, each Partner hereby irrevocably waives any and all rights it may
have to maintain any action for partition or to compel any sale with respect
to its Partnership Interest or with respect to the Partnership's interest in
the Underlying Partnership, or with respect to any Partnership Properties,
except as expressly provided in this Agreement.
9.2 COVENANT NOT TO WITHDRAW OR DISSOLVE. Each Partner hereby
covenants and agrees that the Partners have entered into this Agreement based
on their mutual expectation that all Partners will continue as Partners and
carry out the duties and obligations undertaken by them hereunder and that,
except as otherwise expressly required or permitted hereby, each Partner
hereby covenants and agrees not to (a) take any action to file a certificate
of dissolution or its equivalent with respect to itself, (b) take any action
that would cause a Bankruptcy of such Partner, (c) withdraw or attempt to
withdraw from the Partnership, (d) exercise any power under the Act to
dissolve the Partnership, (e) Transfer all or any portion of its Partnership
Interest (other than pursuant to the terms and provisions of ARTICLE 6
hereof), (f) petition for judicial dissolution of the Partnership or permit
or cause the Partnership to cause a dissolution of the Underlying
Partnership, or (g) demand a return of such Partner's contributions or
profits (or a bond or other security for the return of such contributions or
profits) without the unanimous consent of the Partners, or except as
otherwise specifically allowed under this Agreement.
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ARTICLE 10
DISSOLUTION, LIQUIDATION, WINDING-UP AND TERMINATION
10.1 CAUSES OF DISSOLUTION. The Partnership shall be dissolved
upon the first to occur of the following:
(a) January 1, 2095;
(b) The written agreement of the Partners or by any Party
upon the exercise of its call right pursuant to ARTICLE 8 of this Agreement;
(c) The dissolution, termination, retirement, withdrawal or
Bankruptcy of a Partner, unless the business of the Partnership is continued
at the election of other Partners having at least a fifty percent (50%)
Partnership Interest, made by delivery of written notice to the Partners and
the Executive Committee given within ninety (90) days of the discovery by
such other Partners of such dissolution, termination, retirement, withdrawal
or Bankruptcy;
(d) The election of a Non-defaulting Party made at any time
during the continuation of an Event of Default with respect to the other
Party;
(e) The occurrence of any event that makes it unlawful for
the business of the Partnership to be carried on;
(f) The sale or other disposition of all of the Partnership
Properties;
(g) The decree of the dissolution of the Partnership by a
court of competent jurisdiction; and
(h) The failure of the Underlying Partnership to acquire the
Properties on or before April 1, 1998, unless such date is extended in
writing by all Partners.
To the fullest extent permitted by law, the Partners agree
that no act, thing, occurrence, event or circumstance shall cause or result
in the dissolution or termination of the Partnership except as provided in
this SECTION 10.1.
10.2 WINDING UP AND LIQUIDATION. Upon the dissolution of the
Partnership, the Partnership shall immediately commence to wind up its
affairs, and the Partners or the Liquidator, as the case may be, shall
proceed with reasonable promptness to liquidate the Partnership Assets.
Except as provided below, during the period of the winding up of the affairs
of the Partnership, the rights and obligations of the Partners set forth in
ARTICLE 5 with respect to the management and operation of the Partnership and
its business shall continue. Notwithstanding anything contained in this
Agreement to the contrary, if any event described in SECTION 10.1(c) shall be
continuing with respect to a Partner of one Party at the time the Partnership
is dissolved, a Partner of the other Party (provided no such event is then
continuing
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with respect to it), shall be entitled to act as the liquidating Partner
hereunder or to appoint a liquidating trustee (in either event, such Partner
or trustee being referred to herein as the "LIQUIDATOR") and (i) such
Liquidator shall be fully empowered to act on behalf of the Partnership and
to wind up the Partnership's affairs and liquidate the Partnership
Properties, and (ii) the Liquidator shall be empowered to make, perform and
implement all Major Decisions hereunder without obtaining the consent,
approval or waiver of any Partner or Person. The Liquidator shall be
entitled to receive reasonable compensation for its services, and shall be
fully indemnified, defended and held harmless by the Partnership from and
against all claims, costs and expenses (including reasonable attorneys' fees
and costs) arising in the course of it performing its duties hereunder,
except for any such claims, costs or expenses resulting from the gross
negligence or wilful misconduct of the Liquidator. From and after the
dissolution of the Partnership, the Partnership Assets shall be liquidated
and reduced to cash or cash equivalents as soon as practicable and the
resulting Net Cash Flow, and all other Net Cash Flow, shall be applied and
distributed in the following rank and order:
(a) To the payment of creditors of the Partnership (other
than in respect of Default Loans) in the order of priority as provided by law;
(b) To the establishment and maintenance of a reserve of cash
or other assets of the Partnership to pay contingent liabilities of the
Partnership (other than any Default Loans) in such amounts as may be
reasonably and in good faith determined by the Partners or the Liquidator, as
the case may be;
(c) To repay the principal amount of, and to pay any interest
owing with respect to, any Default Loan; and
(d) To the Partners in accordance with their respective
Percentage Interests.
If, immediately prior to the liquidation of the Partnership in
accordance with the preceding provisions, there shall continue to be
outstanding any principal or accrued interest on any Default Loan (a "DEFAULT
LOAN DEFICIENCY"), the Noncontributing Party with respect to such Default
Loan shall contribute to the Partnership the amount of such Default Loan
Deficiency, which amount shall immediately thereafter be distributed to the
Contributing Party in satisfaction of the Default Loan.
10.3 TIMING REQUIREMENTS; DEEMED DISTRIBUTION AND RE-CONTRIBUTION.
In the event that the Partnership is "liquidated" within the meaning of
Section 1.704-1(b)(2)(ii)(g) of the Regulations, any and all distributions to
the Partners pursuant to SECTION 10.2(c) hereof shall be made no later than
the later to occur of (i) the last day of the taxable year of the Partnership
in which such liquidation occurs or (ii) ninety (90) days after the date of
such liquidation. Subject to the foregoing, a reasonable time shall be
allowed for the orderly winding up of the business and affairs of the
Partnership and the liquidation of its assets in order to minimize any losses
otherwise attendant upon such winding up. Notwithstanding any other
provisions of this ARTICLE 10 to the contrary, if the Partnership is
liquidated within the meaning
41
of Regulations Section 1.704-1(b)(2)(ii)(g)(3), but no dissolution event
described in SUBSECTIONS (a) through (h) of SECTION 10.1 has occurred, the
Partnership Properties shall not be liquidated, the Partnership's liabilities
shall not be paid or discharged, and the Partnership's affairs shall not be
wound up.
10.4 SALES RECEIVABLES. The winding up of the Partnership shall
not be deemed finally completed until the Partnership shall have received
cash payments in full with respect to obligations such as notes, installment
sale contracts and other similar receivables received by the Partnership in
connection with the sale of Partnership Properties. The Partners or the
Liquidator, as the case may be, shall continue to act to enforce all of the
rights of the Partnership pursuant to any such obligations until paid in full.
10.5 DOCUMENTATION OF DISSOLUTION AND TERMINATION. Upon the
dissolution of the Partnership and the appointment of a Liquidator in
accordance with SECTION 10.2, the Liquidator shall execute, file and record
such certificates, instruments and documents as it shall deem necessary or
appropriate in each state in which the Partnership or its affiliates do
business. Upon the completion of the winding-up of the Partnership
(including the application or distribution of all cash or other assets placed
in reserve in accordance with SECTION 10.2(b)), the Partnership shall be
terminated and the Partners or the Liquidator, as the case may be, shall
execute, file and record such certificates, instruments and documents as it
shall deem necessary or appropriate in each state in which the Partnership or
its affiliates do business in order to reflect or effect the termination of
the Partnership.
ARTICLE 11
MISCELLANEOUS
11.1 NOTICES. Notices may be delivered either by private messenger
service, by mail, or facsimile transmission. Any notice or document required
or permitted hereunder to a Partner shall be in writing and shall be deemed
to be given on the date received by the Partner; PROVIDED, HOWEVER, that all
notices and documents mailed to a Partner in the United States Mail, postage
prepaid, certified mail, return receipt requested, addressed to the Partner
at its respective address as shown in the records of the Partnership, shall
be deemed to have been received five (5) days after mailing and provided
further, that the sender of any such notice or document by facsimile
transmission shall bear the burden of proof as to proper transmission and
date of transmission of such facsimile. The address and the telecopier
number of each of the Partners shall for all purposes be as set forth at
SECTION 2.1 unless otherwise changed by the applicable Partner by notice to
the other as provided herein.
11.2 BINDING EFFECT. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Partners and their respective
permitted successors, transferees, and assigns.
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11.3 CONSTRUCTION OF AGREEMENT. As used herein, the singular shall
be deemed to include the plural, and the plural shall be deemed to include
the singular, and all pronouns shall include the masculine, feminine and
neuter, whenever the context and facts require such construction. The
headings, captions, titles and subtitles herein are inserted for convenience
of reference only and are to be ignored in any construction of the provisions
hereof. Except as otherwise indicated, all section and exhibit references in
this Agreement shall be deemed to refer to the sections and exhibits of and
to this Agreement, and the terms "herein", "hereof", "hereto", "hereunder"
and similar terms refer to this Agreement generally rather than to the
particular provision in which such term is used. Whenever the words
"including", "include" or "includes" are used in this Agreement, they shall
be interpreted in a non-exclusive manner as though the words "but [is] not
limited to" immediately followed the same. Time is of the essence of this
Agreement. The language in all parts of this Agreement shall in all cases be
construed simply according to the fair meaning thereof and not strictly
against the party which drafted such language. Except as otherwise provided
herein, references in this Agreement to any agreement, articles, by-laws,
instrument or other document are to such agreement, articles, by-laws,
instrument or other document as amended, modified or supplemented from time
to time.
11.4 SEVERABILITY. Every provision of this Agreement is intended
to be severable. If any term or provision hereof is illegal or invalid for
any reason whatsoever, such illegality or invalidity shall not affect the
validity or legality of the remainder of this Agreement.
11.5 INCORPORATION BY REFERENCE. The Glossary of Defined Terms and
every exhibit, schedule, and other appendix attached to this Agreement and
referred to herein is incorporated in this Agreement by reference.
11.6 FURTHER ASSURANCES. Each of the Partners shall hereafter
execute and deliver such further instruments and do such further acts and
things as may be required or useful to carry out the intent and purpose of
this Agreement and as are not inconsistent with the terms hereof.
11.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
regard to any conflict of laws rules thereof.
11.8 COUNTERPART EXECUTION. This Agreement may be executed in any
number of counterparts with the same effect as if all of the Partners had
signed the same document. All counterparts shall be construed together and
shall constitute one agreement.
11.9 LOANS. Any Partner may, with the approval of the Executive
Committee or as otherwise provided by this Agreement, lend or advance money
to the Partnership. If any Partner shall make any loan or loans to the
Partnership, the amount of any such loan or advance shall not be treated as a
contribution to the capital of the Partnership but shall be a debt due from
the Partnership. Except as otherwise provided herein, no Partner shall be
obligated to make any loan or advance to the Partnership.
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11.10 NO THIRD PARTY RIGHTS. This Agreement is intended to create
enforceable rights between the parties hereto only, and creates no rights in,
or obligations to, any other Persons whatsoever. Without limiting the
generality of the foregoing, as to any third party, a deficit capital account
of a Partner shall not be deemed to be a liability of such Partner nor an
asset or property of the Partnership.
11.11 ESTOPPEL CERTIFICATES. Upon the written request of a Partner,
the other Partner shall, within fifteen (15) days of its receipt of such
request, execute and deliver a written statement certifying: (a) that this
Agreement is unmodified and in full force and effect (or, if modified, that
this Agreement is in full force and effect as modified and, stating any and
all modifications), (b) no Event of Default has occurred with respect to such
Partner that has not been cured and, to its actual knowledge, no Event of
Default has occurred with respect to the requesting Partner that has not been
cured, in each case except as specified in such statement and, (c) that to
its actual knowledge, no event has occurred which with the passage of time or
the giving of notice, or both, would ripen into an Event of Default
hereunder, except as specified in such statement.
11.12 USURY. If any return, interest payment, or other charge
payable under this Agreement shall at any time exceed the maximum amount
chargeable by applicable law, then the applicable rate of return or interest
shall be the maximum rate permitted by applicable law.
11.13 BUSINESS DAY. "BUSINESS DAY" or "BUSINESS DAY" means any
calendar day except Saturday, Sunday, or a federal or State of Delaware legal
holiday.
11.14 PROPOSING AND ADOPTING AMENDMENTS. Amendments to this
Agreement may be proposed by any Executive Committee Member by his submitting
to the Executive Committee a verbatim statement of the proposed amendment,
and such Executive Committee Member shall include in any such submission a
recommendation as to the proposed amendment. A proposed amendment shall be
adopted and be effective as an amendment hereto upon the approval of the
Executive Committee and its mutual execution and delivery by the Partners.
This Agreement may be amended only upon the written agreement of both
Partners, and no provision benefiting a Partner may be waived, except by a
written instrument signed by the Partner. The giving of consent by any
Partner to any action by another Partner in any one instance shall not limit
or waive the necessity to obtain such Partner's consent in any future
instance.
11.15 PARTNERS NOT AGENTS. Nothing contained herein shall be
construed to constitute any Partner the agent of another Partner, except as
otherwise expressly provided herein, or in any manner to limit the Partners
in the carrying on of their own respective businesses or activities.
11.16 ENTIRE UNDERSTANDING; ETC. This Agreement constitutes the
entire agreement and understanding among the Partners, and supersedes any
prior or contemporaneous understandings and/or written or oral agreements
among them, respecting the subject matter of this Agreement.
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11.17 ACTION WITHOUT DISSOLUTION. To the fullest extent permitted
by law, each Partner shall be entitled to maintain, on its own behalf or on
behalf of the Partnership, any action or proceeding against any other Partner
or the Partnership (including an action for damages, specific performance, or
injunctive or declaratory relief) for or by reason of the tortious conduct of
such party or the breach by such party of this Agreement or any other
agreement entered into with such party in connection with the transactions
contemplated hereunder, and the bringing of such action or proceeding shall
not cause or require the dissolution of the Partnership or an accounting of
the Partnership's assets or affairs.
11.18 ATTORNEYS' FEES. In the event of any litigation between
Partners by reason of a breach hereunder, or to enforce or interpret any
provision, right or obligation hereunder, the unsuccessful party or parties
to such litigation covenants and agree to pay the successful party or parties
all costs and expenses reasonably incurred, including reasonable attorneys'
fees. For the purpose of this Agreement, the term "attorneys' fees" and
"attorneys' fees and costs" shall mean the fees and expenses of counsel to
the parties hereto, which may include printing, photostating, duplicating and
other expenses, air freight charges and fees billed for law clerks,
paralegals, librarians and others not admitted to the bar but performing
services under the supervision of any attorney. Such term shall also include
all such fees and expenses incurred with respect to appeals and bankruptcy
proceedings, and whether or not any action or proceeding is brought with
respect to the matter for which said fees and expenses were incurred.
11.19 WAIVER OF JURY TRIAL. To the fullest extent permitted by law,
each Partner hereby waives trial by jury in any action, proceeding or
counterclaim brought by a Partner or the Partnership with respect to any
matter whatsoever arising out of or in any way connected with this Agreement,
the relationship of the Partners, any claim of injury or damage relating to
any of the foregoing, or the enforcement of any remedy under any statute with
respect thereto.
11.20 CONFIDENTIALITY. The terms of this Agreement, any non-public
details of the transactions contemplated hereby, any financial, marketing or
other information delivered or produced pursuant to the terms of this
Agreement not generally disclosed to the public, the trade, or creditors, and
any non-public information regarding any other Partner or any of its
Affiliates learned as a result of the partnership relationship created by
this Agreement, shall not be disclosed by any Partner (or any of its
Affiliates) to any Person other than its Affiliates, directors, officers,
trustees, employees, partners, attorneys and agents of such Partner and their
affiliates, except as may be required by any regulatory authority having
jurisdiction or by any applicable law, regulation, ordinance or order, and
except as otherwise required to carry out the intent of this Agreement.
11.21 PRESS RELEASES. Each Partner agrees to refrain from
generating or participating in any publicity statement, press release, or
other public notice regarding the formation of this Partnership or the
identification of its Partners, the acquisition, disposition or financing of
the Properties by the Partnership or any other business or affairs of the
Partnership. All publicity statements, press releases or other public
notices relating to the formation of this Partnership or the identification
of its Partners, the acquisition, disposition or financing of the Properties
by the Partnership or any other business or affairs of the Partnership must
be approved
45
by the Executive Committee. Upon the full execution of the Purchase
Agreement, the Partners shall issue a joint press release in a form
acceptable to both Partners.
11.22 EXISTING FINANCING. The Partners hereby acknowledge and agree
that the Underlying Properties shall be acquired by the Underlying
Partnership subject to, and the Underlying Partnership shall assume, the
Existing Financing and that the acquisition of the Properties subject to such
Existing Financing is subject to the approval of the Rating Agencies (Moody's
Investors Service, Inc. and Fitch Investors Service, L.P.). Each of the
Partners hereby agrees to execute any commercially reasonable amendment to
this Agreement reasonably required by such Rating Agencies in connection with
such approval.
11.23 CONSENTS; APPROVALS. Unless otherwise herein provided, in any
instance in which any Partner, any Executive Committee Member or any
Operating Committee Member shall be requested to consent to or approve of any
matter with respect to which such Person's consent or approval is required by
any of the provisions of this Agreement, such consent (or refusal to consent)
or approval (or disapproval) shall be given in writing, and such consent or
approval shall not be unreasonably withheld or delayed unless this Agreement
with respect to a particular consent or approval shall expressly provide that
the same may be given or refused in the sole judgment or discretion of such
Partner, Executive Committee Member or Operating Committee Member, as
applicable.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date and year first above written.
GENERAL PARTNERS
MACERICH EQ GP CORP.,
a Delaware corporation
By:
---------------------------------------
Its:
--------------------------------------
SDG EQ ASSOCIATES, INC.,
a Delaware corporation
By:
---------------------------------------
Its:
--------------------------------------
LIMITED PARTNERS
MACERICH EQ LIMITED PARTNERSHIP,
a California limited partnership
By: MACERICH EQ GP CORP.,
a Delaware corporation,
its General Partner
By:
---------------------------------------
Its:
--------------------------------------
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SDG EQ DEVELOPERS LIMITED PARTNERSHIP,
a Delaware limited partnership
By: SDG EQ ASSOCIATES, INC.,
a Delaware corporation,
its General Partner
By:
---------------------------------------
Its: Chief Executive Officer
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GLOSSARY OF DEFINED TERMS
"ACCOUNTANTS" shall mean the firm or firms of independent certified
public accountants selected by the Partners on behalf of the Partnership to
audit the books and records of the Partnership and to prepare statements and
reports in connection therewith.
"ACT" shall mean the Delaware Uniform Partnership Act, as the same may
hereafter be amended or supplemented from time to time and any successor
thereto.
"ADDITIONAL CAPITAL CONTRIBUTIONS" is defined in SECTION 2.3.
"AFFECTED GAIN" is defined in the Allocations Exhibit.
"AFFILIATE" shall mean any Entity which directly or indirectly through
one or more intermediaries, Controls, is Controlled by, or is under common
Control with, any Person and shall include in the case of Macerich and MSPE,
Macerich Property Management Company, a California corporation and Macerich
Management Company, a California corporation, and in the case of SDG and SSPE
shall include M.S. Management Associates, Inc., a Delaware corporation, and
its subsidiaries.
"AGREEMENT" shall mean this Partnership Agreement.
"ALLOCATIONS EXHIBIT" shall mean EXHIBIT A.
"ANNUAL BUDGET" is defined in SECTION 5.7(a).
"AUDITED FINANCIAL STATEMENTS" shall mean financial statements (balance
sheets, statement of income, statement of partners' equity and statement of
cash flows) prepared in accordance with generally accepted accounting
principles and accompanied by an independent auditor's report.
"BANKRUPTCY" shall mean, with respect to any Partner, (i) the
commencement by such Partner of any proceeding seeking relief under any
provision or chapter of the federal Bankruptcy Code or any other federal or
state law relating to insolvency, bankruptcy or reorganization; (ii) an
adjudication that such Partner is insolvent or bankrupt; (iii) the entry of
an order for relief under the federal Bankruptcy Code with respect to such
Partner; (iv) the filing of any such petition or the commencement of any such
case or proceeding against such Partner, unless such petition and the case or
proceeding initiated thereby are dismissed within ninety (90) days from the
date of such filing; (v) the filing of an answer by such Partner admitting
the material allegations of any such petition; (vi) the appointment of a
trustee, receiver or custodian for all or substantially all of the assets of
such Partner unless such appointment is vacated or dismissed within ninety
(90) days from the date of such appointment but not less than five (5) days
before the proposed sale of any assets of such Partner; (vii) the insolvency
of such Partner or the execution by such Partner of a general assignment for
the benefit of creditors; (viii) the convening by such Partner
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of a meeting of its creditors, or any class thereof, for purposes of
effecting a moratorium upon or extension or composition of its debts; (ix)
the failure of such Partner to pay its debts as they mature; (x) the levy,
attachment, execution or other seizure of substantially all of the assets of
such Partner where such seizure is not discharged within thirty (30) days
thereafter; or (xi) the admission by such Partner in writing of its inability
to pay its debts as they mature or that it is generally not paying its debts
as they become due.
"BASE RATE" is defined in SECTION 2.4(a).
"BUDGET" and "BUDGETS" is defined in SECTION 5.7(a).
"BUDGETED CAPITAL ITEMS" shall mean capital expenditures set forth in a
Budget for any of the Properties.
"BUSINESS DAY" is defined in SECTION 11.13.
"BUY-SELL CLOSING" is defined in SECTION 7.3(a).
"BUY-SELL MAJOR DECISION" shall mean a decision to sell, finance,
refinance, expand or renovate a Property involving an expenditure or
commitment by the Partnership in the case of an expansion or renovation of
not less than $10,000,000.
"CALL CLOSING" is defined in SECTION 8.3.
"CALL DISSOLUTION MEETING" is defined in SECTION 8.2.
"CALL NOTICE" is defined in SECTION 8.1.
"CALL PROPERTY" is defined in SECTION 8.2.
"CAPITAL ACCOUNT" is defined in the Allocations Exhibit.
"CAPITAL CONTRIBUTION" shall mean, with respect to any Partner, the
amount of money and initial Gross Asset Value of any property other than
money contributed to the Partnership with respect to the Partnership Interest
held by such Partner (net of liabilities to which such property is subject).
"CASH FLOW SHORTFALLS" shall mean the EXCESS, if any, of (a) the sum
(without duplication) of all operating or other cash expenditures paid by the
Partnership (other than capital expenditures of any nature), plus all
payments of principal, interest, fees and related costs made by the
Partnership with respect to Partnership indebtedness (including all such
payments, fees and costs paid in connection with the Existing Financing),
plus all additions to Partnership reserves established in accordance with
this Agreement], OVER (b) all cash revenues and funds received by the
Partnership from any and all sources, including reductions of Partnership
reserves established in accordance with this Agreement, but excluding
security deposit and other refundable deposits
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unless and until earned or applied. Non-cash allowances such as
depreciation, amortization, cost recovery deductions, or similar items shall
not be considered when calculating Cash Flow Shortfalls.
"CLOSING FUNDING REQUIREMENT" is defined in SECTION 2.2(b).
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"CONTRIBUTING PARTY" is defined in SECTION 2.3(c).
"CONTROL" shall mean the ability, whether by the direct or indirect
ownership of shares or other equity interests, by contract or otherwise, to
elect a majority of the directors of a corporation, to select the managing
partner of a partnership, or otherwise to select, or have the power to remove
and then select, a majority of those persons exercising governing authority
over an Entity. In the case of a limited partnership, the sole general
partner, all of the general partners to the extent each has equal management
control and authority, or the managing general partner or managing general
partners thereof shall be deemed to have control of such partnership and, in
the case of a trust, any trustee thereof or any Person having the right to
select any such trustee shall be deemed to have control of such trust. The
terms "Controls" and "Controlled" shall have correlative meanings.
"CONTROLLING PARTY" is defined in SECTION 5.14(c).
"DATE OF VALUE" is defined in SECTION 7.1.
"DEFAULT LOAN" is defined in SECTION 2.4(a).
"DEFAULT LOAN DEFICIENCY" is defined in SECTION 10.2.
"DEFAULTING PARTY" is defined in SECTION 5.14(a).
"DEPRECIATION" is defined in the Allocations Exhibit.
"DESIGNATED PROPERTY" is defined in SECTION 8.3.
"DUE DILIGENCE FORMATION AND ACQUISITION COSTS" is defined in SECTION
2.2(b).
"ENTITY" shall mean any general partnership, limited partnership,
corporation, limited liability company, joint venture, trust, business trust,
cooperative or association.
"ESCROW AGENT" shall mean the "Escrow Agent" under and defined in the
Purchase Agreement.
"ESCROW CLOSING REQUIREMENT" is defined in SECTION 2.2(b).
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"EQUITABLE" shall mean The Equitable Life Assurance Society of the
United States, a New York corporation, the "seller" of the Properties under
the Purchase Agreement.
"EVENT OF DEFAULT" is defined in SECTION 5.14(a).
"EXECUTIVE COMMITTEE" is defined in SECTION 5.1.
"EXECUTIVE COMMITTEE MEMBERS" is defined in SECTION 5.1.
"EXERCISING PARTY" is defined in SECTION 8.1.
"EXERCISING PARTY'S PROPERTY" and "EXERCISING PARTY'S PROPERTIES" are
defined in SECTION 8.2.
"EXISTING FINANCING" shall mean that certain financing with respect to
all of the Properties evidenced by those certain collateralized fixed and
floating rate notes in the aggregate principal sum of $485,000,000 issued by
Equitable, which notes are secured by, INTER ALIA, those documents and
instruments more particularly described on Exhibit B to the Purchase
Agreement.
"FISCAL YEAR" is defined in the Allocations Exhibit.
"FUNDS FROM OPERATIONS" shall mean net income (loss) (computed in
accordance with generally accepted accounting principles), excluding gains
(or losses) from debt restructuring and sales of property, plus depreciation
and amortization (excluding depreciation on personal property and
amortization of loan and financial instrument costs), and after adjustments
for unconsolidated entities. Adjustments for unconsolidated entities are
calculated at the same basis.
"GLOSSARY OF DEFINED TERMS" is defined in the preamble paragraph to this
Agreement.
"GROSS ASSET VALUE" is defined in the Allocations Exhibit.
"IMMEDIATE FAMILY" shall mean, with respect to any individual, such
individual's spouse, parents, parents-in-law, descendants, nephews, nieces,
brothers, sisters, brothers-in-law, sisters-in-law and children-in-law.
"INDEMNITEE" means (i) any Person that is (A) a Partner, (B) an
Executive Committee Member, (C) an Operating Committee Member or (D) a
director, officer, employee, trustee, agent or representative of a Partner,
and (ii) such other Persons (including Affiliates of a Partner or the
Partnership) as the Partners may mutually designate from time to time.
"INITIAL CAPITAL CONTRIBUTIONS" is defined in SECTION 2.2.
"INITIAL RESERVE REQUIREMENT" is defined in SECTION 2.2(b).
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"INITIATING PARTY" is defined in SECTION 7.1.
"INTERIM OPERATING BUDGET" is defined in SECTION 5.7(a).
"LIEN" shall mean any liens, security interests, mortgages, deeds of
trust, charges, claims, encumbrances, pledges, options, rights of first offer
or first refusal and any other rights or interests of others of any kind or
nature, actual or contingent, or other similar encumbrances of any nature
whatsoever.
"LIQUIDATOR" is defined in SECTION 10.2.
"LOAN DEFAULT TRANSFEREE" is defined in SECTION 6.3(c).
"LOAN DEFAULT TRANSFER NOTICE" is defined in SECTION 6.3(c).
"MACERICH" is defined in the Introduction to this Agreement.
"MAJOR DECISION" is defined in SECTION 5.1(c).
"MINIMUM GAIN ATTRIBUTABLE TO PARTNER NONRECOURSE DEBT" is defined in
the Allocations Exhibit.
"NET CASH FLOW" means with respect to any period, the EXCESS, if any, of
(a) all cash revenues and funds received by the Partnership from any and all
sources during such period, including reductions of Partnership reserves
established in accordance with this Agreement, but excluding security deposit
and other refundable deposits unless and until earned or applied, OVER (b)
the sum (without duplication) of all capital, operating or other cash
expenditures of the Partnership paid during such period, plus all payments of
principal, interest, fees and related costs with respect to Partnership
indebtedness made during such period (including all such payments, fees and
costs paid in connection with the Existing Financing), plus all additions to
Partnership reserves established in accordance with this Agreement. Net Cash
Flow shall not be reduced by depreciation, amortization, cost recovery
deductions, or similar non-cash allowances.
"NET INCOME OR NET LOSS" is defined in the Allocations Exhibit.
"NON-COMPETITION AREA" is defined in SECTION 1.8(b).
"NONCONTRIBUTING PARTY" is defined in SECTION 2.3(c).
"NON-DEFAULTING PARTY" is defined in SECTION 5.14(a).
"NON-EXERCISING PARTY" is defined in SECTION 8.1.
"NON-EXERCISING PARTY'S PROPERTY" and "NON-EXERCISING PARTY'S
PROPERTIES" are defined in SECTION 8.2.
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"NONPROPOSING PARTY"is defined in SECTION 1.8(b).
"NONRECOURSE DEDUCTIONS" is defined in the Allocations Exhibit.
"NONRECOURSE LIABILITIES" is defined in the Allocations Exhibit.
"OFFERING NOTICE" is defined in SECTION 7.1.
"OPERATING COMMITTEE" is defined in SECTION 5.3.
"OPERATING COMMITTEE MEMBERS" is defined in SECTION 5.3.
"OPERATING PARTNERSHIP" shall mean, in the case of SDG or SSPE, Simon
DeBartolo Group, L.P., a Delaware limited partnership, and in the case of
Macerich or MSPE, The Macerich Partnership, L.P., a Delaware limited
partnership, as well as their successors by consolidation or other
combination with or into another Person.
"ORIGINAL APPROVED PRE-CLOSING BUDGET" is defined in SECTION 2.2(c).
"OTHER INTERESTS" is defined in SECTION 1.8(a).
"PARTNER NONRECOURSE DEDUCTIONS" is defined in the Allocations Exhibit.
"PARTNER NONRECOURSE DEBT" is defined in the Allocations Exhibit.
"PARTNER" shall mean Macerich, MSPE, SDG and SSPE, and their permitted
successors and assigns that are admitted as Partners, individually.
"PARTNERS" shall mean Macerich MSPE, SDG and SSPE, and their permitted
successors and assigns that are admitted as Partners.
"PARTNERSHIP" shall mean the partnership hereby constituted, as such
partnership may from time to time be constituted.
"PARTNERSHIP INTEREST" shall mean an ownership interest of a Partner in
the Partnership from time to time, including such Partner's Percentage
Interest and such Partner's Capital Account, and any and all other benefits
to which the holder of such Partnership Interest may be entitled as provided
in this Agreement, together with all obligations of such Person to comply
with the terms of this Agreement.
"PARTNERSHIP INTEREST LOAN" is defined in SECTION 6.3(a).
"PARTNERSHIP INTEREST LOAN DEFAULT NOTICE" is defined in SECTION 6.3(d).
"PARTNERSHIP INTEREST LOAN OBLIGATIONS" is defined in SECTION 6.3(a).
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"PARTNERSHIP MINIMUM GAIN" is defined in the Allocations Exhibit.
"PARTNERSHIP PROPERTIES" shall mean any tangible or intangible property
hereafter acquired by the Partnership.
"PARTY" and "PARTIES" are defined in SECTION 1.1.
"PERCENTAGE INTEREST" is defined in SECTION 2.1.
"PERMITTED TRANSFERS" is defined in SECTION 6.1(b).
"PERSON" shall mean any individual or Entity.
"PLEDGING PARTNER" is defined in SECTION 6.3(a)(xi).
"PORTFOLIO OFFER NOTICE" is defined in SECTION 8.6(a).
"PORTFOLIO OFFER PRICE" is defined in SECTION 8.6(a).
"PORTFOLIO SELLING PARTY" is defined in SECTION 8.6(a).
"PRINCIPAL OFFICE" is defined in SECTION 1.4.
"PROPERTY" shall mean any of the Properties individually.
"PROPERTIES" shall mean, collectively, the Partnership Properties and
the Underlying Properties.
"PROPOSAL" is defined in SECTION 1.8(b).
"PROPOSING PARTY" is defined in SECTION 1.8(b).
"PURCHASE AGREEMENT" shall mean that certain Purchase and Sale Agreement
by and between Equitable and SM Portfolio Partners, which provides for the
sale of the Properties by Equitable to SM Portfolio Partners, subject to the
Existing Financing.
"PURCHASE PRICE" is defined in SECTION 7.1.
"PURCHASING PARTY" is defined in SECTION 7.2.
"REIT" is defined in SECTION 1.3.
"REAL ESTATE ACTIVITY" is defined in SECTION 1.8(b).
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"REGULATIONS" shall mean the final, temporary or proposed Income Tax
Regulations promulgated under the Code, as such regulations may be amended
from time to time (including corresponding provisions of succeeding
regulations).
"REGULATORY ALLOCATIONS" is defined in the Allocations Exhibit.
"RELATED PERSONS" is defined in SECTION 1.8.
"REMAINING PARTY" is defined in SECTION 8.6(a).
"RESPONDING PARTY" is defined in SECTION 7.1.
"SDG" is defined in the Introduction to this Agreement.
"SUBJECT PROPERTY" is defined in SECTION 7.1.
"TAX ITEM" is defined in the Allocations Exhibit.
"TERM" is defined in SECTION 1.5.
"TRANSFER" means, as a noun, any voluntary or involuntary transfer,
sale, other disposition, hypothecation or encumbrance, and, as a verb,
voluntarily or involuntarily to transfer, sell, otherwise dispose of,
hypothecate or encumber.
"TRANSFEREE" is defined in SECTION 6.2.
"UNDERLYING PARTNERSHIP" shall mean SDG Macerich Properties, L.P., a
Delaware limited partnership, which owns the Properties.
"UNDERLYING PROPERTIES" shall mean the real properties to be acquired by
the Underlying Partnership pursuant to the Purchase Agreement, each of which
real properties is more specifically identified and defined on Schedule 4
attached hereto, together with all other tangible and intangible property to
be acquired by the Underlying Partnership pursuant to the Purchase Agreement.
"UNREALIZED GAIN" is defined in the Allocations Exhibit.
"UNREALIZED LOSS" is defined in the Allocations Exhibit.
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EXHIBIT A
ALLOCATIONS EXHIBIT
Each Capitalized term used in this Allocations Exhibit either is defined
in the Glossary of Defined Terms to the Agreement or in Section 5 of this
Allocations Exhibit.
1. CAPITAL ACCOUNTS.
1.1 ESTABLISHMENT AND MAINTENANCE OF CAPITAL ACCOUNTS. The Partnership
shall establish and maintain for each Partner a separate account ("CAPITAL
ACCOUNT") in accordance with the rules of Regulations Section
1.704-1(b)(2)(iv) and this Allocations Exhibit. The Capital Account of each
Partner shall be increased by (i) the amount of all Capital Contributions and
any other contributions made by such Partner to the Partnership pursuant to
the Agreement, (ii) the amount of Net Income allocated to such Partner
pursuant to Section 2.1 of this Allocations Exhibit, and (iii) the amount of
any other items of income or gain specially allocated to such Partner
pursuant to Section 3 of this Allocations Exhibit. The Capital Account of
each Partner shall be decreased by (i) the amount of cash or Gross Asset
Value (net of any liabilities to which the Partnership Assets distributed are
subject) of any distributions of cash or property made to such Partner
pursuant to the Agreement, (ii) the amount of Net Loss allocated to such
Partner pursuant to Section 2.2 of this Allocations Exhibit, and (iii) the
amount of any other items of deduction or loss specially allocated to such
Partner pursuant to Section 3 of this Allocations Exhibit. The initial
balance of each Partner's Capital Account shall equal the amount of such
Partner's Capital Contribution to the Partnership on the date hereof as
described in ARTICLE 2 of the Agreement. The Capital Accounts of each
Partner shall be increased or decreased to reflect the revaluation of
Partnership Assets under Section 1.3 of this Allocations Exhibit.
1.2 TRANSFEREES. Generally, a transferee (including any assignee) of a
Partnership Interest shall succeed to a pro rata portion of the Capital
Account of the transferor; PROVIDED, HOWEVER, that, if the transfer causes a
termination of the Partnership under Section 708(b)(1)(B) of the Code, the
Partnership's properties and liabilities shall be deemed, solely for federal
income tax purposes, to have been contributed to a new Partnership in
exchange for an interest in the new Partnership, and the terminated
Partnership distributes interests in the new Partnership to the purchasing
Partner and the other remaining Partners in proportion to their respective
Percentage Interests in liquidation of the terminated Partnership. In such
event, the Gross Asset Values of the Partnership properties shall be adjusted
immediately prior to such deemed contribution pursuant to Section 1.3(b) of
this Allocations Exhibit. The Capital Accounts of such reconstituted
Partnership shall be maintained in accordance with the principles of this
Allocations Exhibit.
1.3 REVALUATIONS OF PARTNERSHIP ASSETS.
(a) Consistent with the provisions of Regulations Section
1.704-1(b)(2)(iv)(f), and as provided in this Section 1.3, the Gross
Asset Values of all Partnership Assets shall
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be adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership Assets, as of the times
of the adjustments provided in Section 1.3(b) of this Allocations
Exhibit, as if such Unrealized Gain or Unrealized Loss had been
recognized on an actual sale of each such property and allocated
pursuant to this Allocations Exhibit.
(b) Such adjustments shall be made as of the following times: (i)
immediately prior to the acquisition of an additional interest in the
Partnership, after the date hereof, by any new or existing Partner in
exchange for more than a de minimis Capital Contribution; (ii)
immediately prior to the distribution by the Partnership to a Partner of
more than a de minimis amount of property as consideration for an
interest in the Partnership; and (iii) immediately prior to 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 (i) and (ii) above shall be made only if the Partners determine
that such adjustments are necessary or appropriate to reflect the
relative economic interests of the Partners in the Partnership.
(c) In accordance with Regulations Section 1.704-1(b)(2)(iv)(e)
the Gross Asset Value of Partnership Assets distributed in kind shall be
adjusted upward or downward to reflect any Unrealized Gain or Unrealized
Loss attributable to such Partnership property, as of the time any such
asset is distributed.
(d) In determining Unrealized Gain or Unrealized Loss for purposes
of this Allocations Exhibit, the aggregate cash amount and fair market
value of all Partnership Assets (including cash or cash equivalents)
shall be determined by the Partners using such reasonable methods of
valuation as they may adopt, or in the case of a liquidating
distribution pursuant to ARTICLE 10 of the Agreement, be determined and
allocated by the Liquidator using such reasonable methods of valuation
as it may adopt. The Partners, or the Liquidator, as the case may be,
shall allocate such aggregate value among the assets of the Partnership
(in such manner as it determines in its sole and absolute discretion
necessary to arrive at a fair market value for individual properties).
1.4 COMPLIANCE WITH REGULATIONS. The provisions of this Allocations
Exhibit 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
Partners 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 any of the Partners), are computed in order to comply with such
Regulations, the Partners may make such modification, provided that it is not
likely to have a material effect on the amounts distributable to any Person
pursuant to ARTICLE 10 of the Agreement upon the dissolution of the
Partnership. The Partners 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)(q), and (ii) make any appropriate
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modifications in the event unanticipated events might otherwise cause the
Agreement and this Allocations Exhibit not to comply with Regulations Section
1.704-(b).
2. ALLOCATION OF NET INCOME AND NET LOSS. After giving effect to the
special allocations set forth in Section 3 of this Allocations Exhibit, Net
Income and Net Loss for any Fiscal Year or other applicable period shall be
allocated to the Partners in accordance with their respective Percentage
Interests.
3. SPECIAL ALLOCATIONS.
Notwithstanding any other provision of the Agreement or this Allocations
Exhibit, the following special allocations shall be made in the following
order:
3.1 MINIMUM GAIN CHARGEBACK. Notwithstanding any other provisions of
this Allocations Exhibit, 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 year (and, if necessary, subsequent
years) in an amount equal to such Partner's share of the net decrease in
Partnership Minimum Gain, as determined under Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in proportion to
the respective amounts required to be allocated to each Partner pursuant
thereto. The items to be so allocated shall be determined in accordance with
Regulations Section 1.704-2(f)(6). This Section 3.1 is intended to comply
with the minimum gain chargeback requirements of Regulations Section
1.704-2(f) and shall be interpreted consistently therewith.
3.2 PARTNER MINIMUM GAIN CHARGEBACK. Notwithstanding any other
provision of this Allocations Exhibit (except Section 3.1), if there is a net
decrease in Minimum Gain Attributable to a Partner Nonrecourse Debt during
any Fiscal Year, each Partner who has a share of the Partnership 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 year (and, if necessary, subsequent
years) in an amount equal to such Partner's share of the net decrease in
Partnership Minimum Gain Attributable to such Partner Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(5). Allocations
pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with
Regulations Section 1.704-2(i)(4). This Section 3.2 is intended to comply
with the minimum gain chargeback requirements of Regulations Section
1.704-2(i)(4) and shall be interpreted consistently therewith.
3.3 INTEREST ON DEFAULT LOANS. Interest Deductions with respect to any
Default Loan shall be allocated to the Noncontributing Partner with respect
to such Default Loan.
3.4 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, under Regulations Section 1.704-2(i)(1), with respect
to the Partner Nonrecourse Debt to which such
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Partner Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i)(2).
3.5 CODE SECTION 754 ADJUSTMENTS. To the extent an adjustment to the
adjusted tax basis of any Partnership Asset pursuant to Section 732, 734 or
743 of the Code is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the 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 item of
gain or loss shall be specially allocated to the Partners in a manner
consistent with the manner in which their Capital Accounts are required to be
adjusted pursuant to such Section of the Regulations.
3.6 CURATIVE ALLOCATIONS. The allocations set forth in Sections 3.1,
3.2, 3.3 and 3.5 (the "REGULATORY ALLOCATIONS") are intended to comply with
certain requirements of Regulations Sections 1.704-1(b) and 1.704-2.
Notwithstanding any provisions of Sections 2 and 3 to the contrary (other
than the Regulatory Allocations), the Regulatory Allocations shall be taken
into account in allocating other items of income, gain, loss and deduction
among the Partners so that, to the extent possible, the cumulative net amount
for the allocations of Partnership items under Sections 2 and 3 hereof shall
be equal to the net amount that would have been allocated had the Regulatory
Allocations not occurred. This Section 3.8 is intended to minimize to the
extent possible and to the extent necessary any economic distortions which
may result from application of the Regulatory Allocations and shall be
interpreted in a manner consistent therewith.
4. ALLOCATIONS FOR TAX PURPOSES.
4.1 GENERALLY. Except as otherwise provided in this Section 4, for
federal income tax purposes, each item of income, gain, loss and deduction (a
"TAX ITEM") shall be allocated among the Partners in the same manner as its
correlative item of "book" income, gain, loss or deduction is allocated among
the Partners pursuant to Sections 2 and 3 of this Allocations Exhibit.
4.2 SECTIONS 1245/1250 RECAPTURE. If any portion of gain from the sale
of property is treated as gain which is ordinary income by virtue of the
application of Code Sections 1245 or 1250 ("AFFECTED GAIN"), then (i) such
Affected Gain shall be allocated among the Partners in the same proportion
that the depreciation and amortization deductions giving rise to the Affected
Gain were allocated and (ii) other Tax Items of gain of the same character
that would have been recognized, but for the application of Code Sections
1245 and/or 1250, shall be allocated away from those Partners who are
allocated Affected Gain pursuant to Clause (i) so that, to the extent
possible, the other Partners are allocated the same amount and type, of
capital gain that would have been allocated to them had Code Sections 1245
and/or 1250 not applied. For purposes hereof, in order to determine the
proportionate allocations of depreciation and amortization deductions for
each Fiscal Year or other applicable period, such deductions shall be deemed
allocated on the same basis as Net Income and Net Loss for such period.
4.3 TAX ALLOCATIONS: CODE SECTION 704(c). In accordance with Code
Section 704(c) and the Regulations promulgated thereunder, income, gain, loss
and deduction with respect to any
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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 the event
the Gross Asset Value of any Partnership asset is adjusted pursuant to
Section 1.3 of this Allocations Exhibit, 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 to the Partnership for
federal income tax purposes and its Gross Asset Value in the same manner as
under Code Section 704(c) and the Regulations promulgated thereunder.
Without limiting the foregoing, the Partners shall allocate income, gain,
loss and deduction with respect to any property acquired as of the date
hereof, the adjusted basis of which differs from its Gross Asset Value, among
the Partners on a property by property basis, subject to the application of
the "ceiling limitation," in accordance with Regulations Section 1.704-3(b).
The Partners shall allocate income, gain, loss and deduction with respect to
any property acquired after the date hereof, the adjusted basis of which
differs from its Gross Asset Value, among the Partners under any method the
they may elect, so long as such method is set forth in the Regulations
promulgated under Section 704(c) of the Code on the date such property is
acquired.
5. DEFINITIONS.
"AFFECTED GAIN" is defined in SECTION 4.2.
"DEPRECIATION" means, for each Fiscal Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, 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 Fiscal Year, Depreciation shall be an
amount which bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization or other cost recovery
deduction for such Fiscal Year bears to such beginning adjusted tax basis;
PROVIDED, HOWEVER, that if the adjusted basis for federal income tax purposes
of an asset at the beginning of such Fiscal Year is zero, Depreciation shall
be determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the Partners.
"FISCAL YEAR" means each calendar year, or partial calendar year,
occurring during the term of the Partnership, or such other Fiscal Year as
may be adopted by the Executive Committee from time to time.
"GROSS ASSET VALUE" means, with respect to any 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 a Partnership shall be the gross fair market value
of such asset on the date of contribution to the Partnership,
as determined by the Partners;
(ii) the Gross Asset Values of all Partnership Assets shall be
adjusted in accordance with Section 1.3 of this Allocations
Exhibit; and
(iii) the Gross Asset Value of an asset shall be adjusted each
Fiscal Year by the Depreciation with respect to such asset
taken into account for purposes of computing Net Income and
Net Loss for such year.
"MINIMUM GAIN ATTRIBUTABLE TO PARTNER NONRECOURSE DEBT" shall mean
"partner nonrecourse debt minimum gain" as determined in accordance with
Regulation Section 1.704-2(i)(2).
"NET INCOME OR NET LOSS" shall mean, for each Fiscal Year or other
applicable period, an amount equal to the Partnership's taxable income or
loss for such year or period, determined in accordance with Section 703(a) of
the Code (for this purpose, all items of income, gain, loss or deduction
required to be stated separately pursuant to Section 703(a) of the Code shall
be included in taxable income or loss), with the following adjustments:
(i) The computation of all items of income, gain, loss and
deduction shall be made without regard to the fact that items
described in Sections 705(a)(1)(B) or 705(a)(2)(B) of the Code
are not includable in gross income or are neither currently
deductible nor capitalized for federal income tax purposes;
(ii) Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be determined as
if the adjusted basis of such property as of such date of
disposition were equal in amount to the Partnership's Gross
Asset Value with respect to such property as of such date;
(iii) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such
taxable income or loss, there shall be taken into account
Depreciation for such Fiscal Year;
(iv) In the event the Gross Asset Value of any Partnership property
is adjusted to reflect any Unrealized Gain or Unrealized Loss
with respect to such property pursuant to Section 1.3 hereof,
the amount of any such Unrealized Gain or Unrealized Loss
shall be taken into account as gain or loss from the
disposition of such property; and
(v) Any items specially allocated under Article 3 of this
Allocations Exhibit shall not be taken into account.
"NONRECOURSE DEDUCTIONS" shall have the meaning set forth in Sections
1.704-2(b)(1) and (c) of the Regulations.
"NONRECOURSE LIABILITIES" shall have the meaning set forth in Section
1.752-1(a)(2) of the Regulations.
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"PARTNER NONRECOURSE DEDUCTIONS" shall have the meaning set forth in
Section 1.704-2(i)(1) of the Regulations.
"PARTNER NONRECOURSE DEBT" shall have the meaning set forth in
Section 1.704-2(b)(4) of the Regulations.
"PARTNERSHIP MINIMUM GAIN" shall have the meaning set forth in
Sections 1.704-2(b)(2) and (d)(1) of the Regulations.
"TAX ITEM" is defined in SECTION 4.1 of this Allocations Exhibit.
"UNREALIZED GAIN" means, with respect to any Partnership property
as of any particular date, the excess of (i) the gross fair market value of
such property on such date as determined in accordance with Section 1.3 of
this Allocations Exhibit, over (ii) the Gross Asset Value of such property to
the Partnership on such date.
"UNREALIZED LOSS" means, with respect to any Partnership property
as of any particular date, the excess of (i) the Gross Asset Value of such
property to the Partnership on such date, over (ii) the gross fair market
value of such property on such date, as determined in accordance with Section
1.3 of this Allocations Exhibit as of such date.
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SCHEDULE 1
ORIGINAL APPROVED PRE-CLOSING BUDGET
To be mutually approved by SDG and Macerich and incorporated into this
Agreement by an amendment signed by SDG and Macerich.
SCHEDULE 1
SCHEDULE 2
[Intentionally Omitted]
SCHEDULE 2
SCHEDULE 3
[Intentionally Omitted]
SCHEDULE 3
SCHEDULE 4
LIST OF PROPERTIES
1. Eastland Mall
Evansville, Indiana
2. Empire East
Sioux Falls, South Dakota
3. Empire Mall
Sioux Falls, South Dakota
4. Granite Run Mall
Media, Pennsylvania
5. Lake Square Mall
Leesburg, Florida
6. Lindale Mall
Cedar Rapids, Iowa
7. Mesa Mall
Grand Junction, Colorado
8. NorthPark Mall
Davenport, Iowa
9. Rushmore Mall
Rapid City, South Dakota
10. Southern Hills Mall
Sioux City, Iowa
11. SouthPark Mall
Moline, Illinois
12. Southridge Mall
Des Moines, Iowa
13. Valley Mall
Harrisonburg, Virginia
SCHEDULE 4
SCHEDULE 5
NONCOMPETITION AREA
To be mutually approved by SDG and Macerich and incorporated into this
Agreement by an amendment signed by SDG and Macerich.
SCHEDULE 5