AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
MISSION WEST PROPERTIES, L.P. [ ]
__________ __, 1998
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
MISSION WEST PROPERTIES, L.P. [ ]
This AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF MISSION WEST
PROPERTIES, L.P. [--] (this "Agreement"), dated as of __________ __, 1998, is
entered into by and among Mission West Properties, Inc., a California
corporation (the "Company" or the "General Partner")] and the parties whose
names are set forth on Appendix I attached hereto (as it may be amended from
time to time).
WHEREAS, the Partnership was organized initially as [INSERT DESCRIPTION]
and became a limited partnership pursuant to the Revised Uniform Limited
Partnership Act of the State of Delaware by filing an [AMENDMENT TO] certificate
of limited partnership with the Secretary of State of the State of Delaware on
_____ _____, 199__;
WHEREAS, since its organization as a Delaware limited partnership, the
Partnership has been operated and managed by [_________ ("_______")], as sole
general partner, pursuant to the terms of the Agreement of Limited Partnership
of [___________ __] (the "Prior Agreement");
WHEREAS, on ________ __, 1998, the Partnership filed an amendment of
certificate of limited partnership with the Secretary of State of the State of
Delaware changing the Partnership's name to Mission West Properties, L.P. [-];
WHEREAS, pursuant to the terms of a Acquisition Agreement dated as of
________ __, 1998 (the "Acquisition Agreement"), the Company has agreed to
acquire a ___% general partner interest in the Partnership and to become the
sole general partner in the Partnership upon the satisfaction of certain
conditions set forth in the Acquisition Agreement, which now have been satisfied
or waived by the parties thereto;
WHEREAS, [NAME OF EXISTING GENERAL PARTNER] and all of the limited
partners in the Partnership wish to admit the Company as a general partner, to
amend the certificate of limited partnership of the Partnership to reflect the
Company's admission as a general partner, and to amend and restate the Prior
Agreement as provided herein; and
WHEREAS, upon the filing of the certificate of amendment of the
certificate of limited partnership of the Partnership with the Secretary of
State of the State of Delaware, _______ intends to resign as a general partner
and become a limited partner in the Partnership pursuant to the terms of this
Agreement.
NOW THEREFORE, in consideration of the mutual covenants herein contained,
and other valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties do hereby agree as follows:
ARTICLE 1. DEFINED TERMS.
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the following terms used in this
Agreement.
1.1 "ACT" means the Delaware Revised Uniform Limited Partnership Act, as it
may be amended from time to time, and any successor to such statute.
1.2 "ACQUISITION AGREEMENT" means the agreement dated as of ________ __,
1998, among the Partnership, the other partnerships comprising the Operating
Partnership, all of the partners therein, and the Company concerning the
acquisition of the Berg Properties, the Acquired Properties and the Pending
Development Projects by the Operating Partnership, the Company's investment in
and admission to the Operating Partnership as sole general partner, and the
rights and options of the limited partners in the Operating Partnership to
tender L.P. Units or acquire shares of Common Stock under certain circumstances.
1.3 "ADDITIONAL LIMITED PARTNER" means a Person admitted to the Partnership
as a Limited Partner pursuant to Section 4.3 hereof and who is shown as such on
the books and records of the Partnership.
1.4 "ADJUSTED CAPITAL ACCOUNT DEFICIT" means with respect to any Partner,
the negative balance, if any, in such Partner's Capital Account as of the end of
any relevant fiscal year, determined after giving effect to the following
adjustments:
(a) credit to such Capital Account any portion of such negative
balance which such Partner (i) is treated as obligated to restore to the
Partnership pursuant to the provisions of Section 1.704-1(b)(2)(ii)(c) of
the Regulations, or (ii) is deemed to be obligated to restore to the
Partnership pursuant to the penultimate sentences of Sections 1.704-2(g)(1)
and 1.704-2(i)(5) of the Regulations; and
(b) debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
1.5 "ADJUSTED CONTRIBUTION" means the Capital Contributions of any Partner
reduced by the total distributions to such Partner from Capital Events occurring
subsequent to the Closing Date under the Acquisition Agreement. For purposes of
this Agreement, the initial Capital Contribution of the Company shall be equal
to [$35,200,000] and the initial Adjusted Contribution of each Limited Partner
shall be equal to the value of the Limited Partner's interest in the Operating
Partnership as set forth in Appendix I of the Acquisition Agreement.
1.6 "AFFILIATE" means, (a) with respect to any individual Person, any
member of the Immediate Family of such Person or a trust established for the
benefit of such member, or (b) with respect to any Entity, any Person which,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, any such Entity.
1.7 "AGREEMENT" means this Amended and Restated Agreement of Limited
Partnership, as originally executed and as amended, modified, supplemented or
restated from time to time, as the context requires.
1.8 "ARTICLES OF INCORPORATION" means the Articles of Incorporation of the
Company, as amended and restated from time to time, or the articles of
incorporation, certificate of incorporation, operating agreement of other
Charter instrument of any corporation or other entity which is a successor to
the Company by merger or consolidation.
1.9 "ASSIGNEE" means a Person to whom one or more L.P. Units have been
transferred in a manner permitted under this Agreement, but who has not become a
Substituted Limited Partner, and who has the rights set forth in Section 11.5.
1.10 "AVAILABLE CASH" means the Partnership's share of the Operating
Partnership's Available Cash (as defined in the Acquisition Agreement) with
respect to the applicable period of measurement (i.e., any period beginning on
the first day of the fiscal year, quarter or other period commencing immediately
after the last day of the fiscal year, quarter or other applicable period for
purposes of the prior calculation of Available Cash for or with respect to which
a distribution has been made, and ending on the last day of the fiscal year,
quarter or other applicable period immediately preceding the date of the
calculation). Notwithstanding the foregoing, Available Cash shall not include
any cash received or reductions in reserves, nor shall the calculation of
Available Cash take into account any disbursements made or reserves established,
after commencement of the dissolution and liquidation of the Partnership.
1.11 "BERG ACQUISITION" has the meaning set forth in the Acquisition
Agreement.
1.12 "BERG GROUP" means Carl E. Berg, Clyde J. Berg, the members of their
respective Immediate Families, and any Entity which is an Affiliate of either
Carl E. Berg or Clyde J. Berg, excluding the Partnership and the Company.
1.13 "BERG LAND HOLDINGS" means certain land held by members of the Berg
Group which the Operating Partnership may acquire under certain circumstances
pursuant to the terms of the Acquisition Agreement and the related Berg Land
Holdings Option Agreement dated as of ________ __, 1998.
1.14 "CAPITAL ACCOUNT" means with respect to any Partner, the Capital
Account maintained for such Partner in accordance with the following provisions:
(a) to each Partner's Capital Account there shall be credited (i) such
Partner's Initial Adjusted Contribution as of the effective date of this
Agreement (ii) such Partner's Capital Contributions subsequent to the
Effective Date of this Agreement, (iii) such Partner's distributive share
of Net Income and any items in the nature of income or gain which are
specially allocated to such Partner pursuant to Sections 1 and 2 of
Appendix II and (iv) the amount of any Partnership liabilities assumed by
such Partner or which are secured by any asset distributed to such Partner;
(b) to each Partner's Capital Account there shall be debited (i) the
amount of cash and the Gross Asset Value of any Property distributed to
such Partner pursuant to any provision of this Agreement, (ii) such
Partner's distributive share of Net Losses and any items in the nature of
expenses or losses which are specially allocated to such Partner pursuant
to Sections 1 and 2 of Appendix II, and (iii) the amount of any liabilities
of such Partner assumed by the Partnership or which are secured by any
asset contributed by such Partner to the Partnership to the extent not
assumed by the Partner; and
(c) in the event all or a portion of a Partnership Interest is
transferred in accordance with the terms of this Agreement, the transferee
shall succeed to the Capital Account of the transferor to the extent it
relates to the transferred Partnership Interest.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Sections
1.704-1(b) and 1.704-2 of the Regulations, and shall be interpreted and applied
in a manner consistent with such Regulations. In the event the General Partner
shall reasonably 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 assets or which are assumed by the Partnership, the
General Partner or any Limited Partner) are computed in order to comply with
such Regulations, the General Partner may make such modification; provided that
it does not have an adverse effect on the amounts distributable to any Partner
pursuant to Article 13 hereof upon the dissolution of the Partnership.
1.15 "CAPITAL CONTRIBUTION" means, with respect to any Partner, any cash,
cash equivalents or the Gross Asset Value of property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Article 4
hereof.
1.16 "CAPITAL EVENT" means any Partnership transaction not in the ordinary
course of its business, including, without limitation, distribution to the
Partners in excess of distributive shares of income, principal payments,
prepayments, prepayment penalties, sales, exchanges, foreclosures or other
dispositions of Property owned by the Partnership, recoveries of damage awards
and insurance proceeds not used to rebuild (other than the receipt of
contributions to the capital of the Partnership and business or rental
interruption insurance proceeds not used to rebuild).
1.17 "CERTIFICATE" means the Certificate of Limited Partnership relating to
the Partnership to be filed in the office of the Delaware Secretary of State, as
amended from time to time in accordance with the terms hereof and the Act.
1.18 "CHANGE OF CONTROL TRANSACTION" shall mean (A) any transaction or
series of transactions occurring after the Effective Date, in which all Limited
Partners in the Operating Partnership are legally entitled to participate and
pursuant to which L.P. Units representing more than 50% of the total outstanding
L.P. Units of the Operating Partnership are purchased by a Person not controlled
by, in control of or under common control with the Company, any Affiliate of the
Company or any Affiliate of a Limited Partner, (B) the merger or consolidation
of the Partnership with another entity (other than a merger or consolidation in
which the holders of L.P. Units of the Partnership immediately before the merger
or consolidation own immediately after the merger or consolidation, Voting
Securities of the surviving or acquiring Entity or a parent party of such
surviving or acquiring Entity, possessing more than 50% of the voting power of
the surviving or acquiring Entity or parent party) resulting in the exchange of
the outstanding L.P. Units of the Partnership for cash, securities or other
property, or (C) any merger, sale, lease, license, exchange or other disposition
(whether in one transaction or a series of related transactions) of more than
50% of the assets of the Partnership.
1.19 "CHARTER" has the meaning set forth in Rule 405 of Regulation C
promulgated by the SEC under the Securities Act ("Rule 405").
1.20 "CODE" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provision of future
law.
1.21 "COMMON STOCK" means a share of Common Stock of the Company or any
shares of Voting Securities into which the Common Stock may be reclassified or
converted or for which shares of Common Stock may be exchanged in any
transaction made applicable or available to all holders of Common Stock as a
class.
1.22 "COMMON STOCK PRICE" means with respect to a particular valuation
event identified under this Agreement, the last reported sales price regular way
on such date or, in case no such reported sale takes place on such date, the
average of the reported closing bid and asked prices regular way on such date,
in either case on the American Stock Exchange, the New York Stock Exchange, or
if the Common Stock is not then listed or admitted to trading on any such
exchange, the Nasdaq or any comparable system on which the Common Stock is then
listed or admitted to trading or, if not then listed or admitted to trading on
any national securities exchange, the Nasdaq or any comparable system for the
10-trading day period ending with the last day preceding the date of the
valuation event.
1.23 "COMPANY" means Mission West Properties, a California corporation, and
any successor to such corporation.
1.24 "CONSENT" means the consent or approval of a proposed action by a
Partner given in accordance with Section 14.2 hereof.
1.25 "DEPRECIATION" means, with respect to any asset of the Partnership for
any fiscal year or other period, the depreciation, depletion, amortization or
other cost recovery deduction, as the case may be, allowed or allowable for
federal income tax purposes in respect of such asset for such fiscal year or
other period; provided, however, that except as otherwise provided in Section
1.704-2 of the Regulations, if there is a difference between the Gross Asset
Value (including the Gross Asset Value, as increased pursuant to paragraph (d)
of the definition of Gross Asset Value) and the adjusted tax basis of such asset
at the beginning of such fiscal year or other period, Depreciation for such
asset shall be an amount that bears the same ratio to the beginning Gross Asset
Value of such asset as the federal income tax depreciation, depletion,
amortization or other cost recovery deduction for such fiscal year or other
period bears to the beginning adjusted tax basis of such asset; provided,
further, that if the federal income tax depreciation, depletion, amortization or
other cost recovery deduction for such asset for such fiscal year or other
period is zero, Depreciation of such asset shall be determined with reference to
the beginning Gross Asset Value of such asset using any reasonable method
selected by the General Partner.
1.26 "DIVIDEND REINVESTMENT PLAN" has the meaning set forth in Rule 405.
1.27 "EFFECTIVE DATE" means the date of closing of the Berg Acquisition.
1.28 "EMPLOYEE BENEFIT PLAN" has the meaning set forth in Rule 405.
1.29 "ENTITY" means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, real estate investment trust,
limited liability company, cooperative or association.
1.30 "EQUITY SECURITY" has the meaning set forth in Rule 405.
1.31 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time (or any corresponding provisions of succeeding laws).
1.32 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
1.33 "EXCHANGE FACTOR" has the meaning set forth in the Exchange Rights
Agreement, and is equal to the number of L.P. Units exchangeable for one share
of Common Stock, from time to time, under the Exchange Rights Agreement.
1.34 "EXCHANGE RIGHT" has the meaning set forth in the Exchange Rights
Agreement.
1.35 "EXCHANGE RIGHTS AGREEMENT" means Exchange Rights Agreement among the
Company, and each of the limited partners of the partnerships comprising the
Operating Partnership.
1.36 "GAAP" means United States generally accepted accounting principles,
as in effect from time to time.
1.37 "GENERAL PARTNER" means the general partner of the Partnership, if
there is more than one general partner, all such general partners.
1.38 "GENERAL PARTNER INTEREST" means a Partnership Interest held by the
General Partner, in its capacity as general partner. A General Partner Interest
may be expressed as a number of Units, each of which shall represent the same
Percentage Interest in the Partnership as one L.P. Unit.
1.39 "GROSS ASSET VALUE" means, with respect to any asset of the
Partnership, such asset's adjusted basis for federal income tax purposes, except
as follows:
(a) the initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset, without reduction for liabilities, as determined by the contributing
Partner and the Partnership on the date of contribution thereof;
(b) if the General Partner reasonably determines that an adjustment is
necessary or appropriate to reflect the relative economic interests of the
Partners, the Gross Asset Values of all Partnership assets shall be
adjusted in accordance with Sections 1.704-1(b)(2)(iv)(f) and (g) of the
Regulations to equal their respective gross fair market values, without
reduction for liabilities, as reasonably determined by the General Partner,
as of the following times:
(1) a Capital Contribution (other than a de minimis Capital
Contribution) to the Partnership by a new or existing Partner as
consideration for a Partnership Interest; or
(2) the distribution by the Partnership to a Partner of more than
a de minimis amount of Partnership assets as consideration for the
repurchase of a Partnership Interest; or
(3) the liquidation of the Partnership within the meaning of
Section 1.704-1(b)(2)(ii)(g) of the Regulations;
(c) the Gross Asset Values of Partnership assets distributed to any
Partner shall be the gross fair market values of such assets (taking
Section 7701(g) of the Code into account) without reduction for
liabilities, as reasonably determined by the General Partner as of the date
of distribution; and
(d) the Gross Asset Values of Partnership assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Sections 734(b) or 743(b) of the Code, but only to the
extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations (as
set forth in Appendix II); provided, however, that Gross Asset Values shall
not be adjusted pursuant to this paragraph (d) to the extent that the
General Partner reasonably determines that an adjustment pursuant to
paragraph (b) above is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to this
paragraph (d).
At all times, Gross Asset Values shall be adjusted by any Depreciation taken
into account with respect to the Partnership's assets for purposes of computing
Net Income and Net Loss.
1.40 "IMMEDIATE FAMILY" means, with respect to any Person, such Person's
spouse, parents, parents-in-law, children, nephews, nieces, brothers, sisters,
brothers-in-law, sisters-in-law, stepchildren, sons-in-law and daughters-in-law
or any trust solely for the benefit of any of the foregoing family members whose
sole beneficiaries include the foregoing family members.
1.41 "INCAPACITY" OR "INCAPACITATED" means, (i) as to any individual
Partner, death, total physical disability or entry by a court of competent
jurisdiction adjudicating him incompetent to manage his person or his estate;
(ii) as to any corporation which is a Partner, the filing of a certificate of
dissolution, or its equivalent, for the corporation or the revocation of its
charter; (iii) as to any partnership which is a Partner, the dissolution and
commencement of winding up of the partnership; (iv) as to any estate which is a
Partner, the distribution by the fiduciary of the estate's entire interest in
the Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this definition,
bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner
commences a voluntary proceeding seeking liquidation, reorganization or other
relief under any bankruptcy, insolvency or other similar law now or hereafter in
effect; (b) the Partner is adjudged as bankrupt or insolvent, or a final and
nonappealable order for relief under any bankruptcy, insolvency or similar law
now or hereafter in effect has been entered against the Partner; (c) the Partner
executes and delivers a general assignment for the benefit of the Partner's
creditors; (d) the Partner files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in clause (b) above; (e) the
Partner seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for the Partner or for all or any substantial part of the
Partner's properties; (f) any proceeding seeking liquidation, reorganization or
other relief of or against such Partner under any bankruptcy, insolvency or
other similar law now or hereafter in effect has not been dismissed within 120
days after the commencement thereof; (g) the appointment without the Partner's
consent or acquiescence of a trustee, receiver or liquidator has not been
vacated or stayed within 90 days of such appointment; or (h) an appointment
referred to in clause (g) which has been stayed is not vacated within 90 days
after the expiration of any such stay.
1.42 "INDEMNITEE" means (i) any Person made a party to a proceeding by
reason of (A) such Person's status as (1) the General Partner, (2) a director,
trustee or officer of the Partnership or the General Partner, or (3) a director,
trustee or officer of any other Entity, each Person serving in such capacity at
the request of the Partnership or the General Partner, or (B) his or its
liabilities, pursuant to a loan guarantee or otherwise, for any indebtedness of
the Partnership or any Subsidiary of the Partnership (including, without
limitation, any indebtedness which the Partnership or any Subsidiary of the
Partnership has assumed or taken assets subject to); and (ii) such other Persons
(including Affiliates of the General Partner or the Partnership) as the General
Partner may designate from time to time (whether before or after the event
giving rise to potential liability), in its sole and absolute discretion.
1.43 "INITIAL CONTRIBUTED PROPERTY" means the Properties as defined in the
Acquisition Agreement.
1.44 "LIEN" means, with respect to any asset of the Partnership, (i) any
mortgage, deed of trust, lien, pledge, encumbrance, charge, restriction or
security interest in or on such asset, (ii) the interest of a vendor or a lessor
under any conditional sale agreement, capital lease or title retention agreement
relating to such asset and (iii) in the case of securities, any purchase option,
call or similar right of a third party with respect to such securities.
1.45 "LIMITED PARTNER" means any Person named as a Limited Partner in
Appendix I, as such Appendix may be amended from time to time, or any
Substituted Limited Partner or Additional Limited Partner, in such Person's
capacity as a Limited Partner of the Partnership.
1.46 "LIMITED PARTNER INTEREST" means a Partnership Interest of a Limited
Partner in the Partnership representing a fractional part of the Partnership
Interests of all Partners and includes any and all benefits to which the holder
of such a Partnership Interest may be entitled, as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement. A Limited Partner Interest may be expressed as a
number of L.P. Units.
1.47 "LIQUIDATING EVENT" has the meaning set forth in Section 13.1 hereof.
1.48 "LIQUIDATOR" has the meaning set forth in Section 13.2 hereof.
1.49 "L.P. UNIT" means a fractional, undivided share of the Partnership
Interests of all Partners issued pursuant to Sections 4.1, 4.2 and 4.3. The
number of L.P. Units outstanding and the Percentage Interests in the Partnership
represented by such L.P. Units are set forth in Appendix I, as such Appendix may
be amended from time to time. The ownership of L.P. Units shall be evidenced by
such form of certificate for units as the General Partner adopts from time to
time unless the General Partner determines that the L.P. Units shall be
uncertificated securities.
1.50 "L.P. UNIT MAJORITY" means the Limited Partners holding the right to
vote, in the aggregate, a majority of the total number of L.P. Units outstanding
in the Operating Partnership.
1.51 "NET INCOME" OR "NET LOSS" means, for each fiscal year or other
applicable period, an amount equal to the Partnership's taxable income or loss
for such year or period as determined for federal income tax purposes by the
General Partner, 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), adjusted as follows: (a) by including as an item of gross
income any tax-exempt income received by the Partnership and not otherwise taken
into account in computing Net Income or Net Loss; (b) by treating as a
deductible expense any expenditure of the Partnership described in Section
705(a)(2)(B) of the Code (or which is treated as a Section 705(a)(2)(B)
expenditure pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations) and not
otherwise taken into account in computing Net Income or Net Loss, including
amounts paid or incurred to organize the Partnership (unless an election is made
pursuant to Section 709(b) of the Code) or to promote the sale of interests in
the Partnership and by treating deductions for any losses incurred in connection
with the sale or exchange of Partnership property disallowed pursuant to Section
267(a)(1) or 707(b) of the Code as expenditures described in Section
705(a)(2)(B) of the Code; (c) by taking into account Depreciation in lieu of
depreciation, depletion, amortization and other cost recovery deductions taken
into account in computing taxable income or loss; (d) by computing gain or loss
resulting from any disposition of Partnership property with respect to which
gain or loss is recognized for federal income tax purposes by reference to the
Gross Asset Value of such property rather than its adjusted tax basis; (e) in
the event of an adjustment of the Gross Asset Value of any Partnership asset
which requires that the Capital Accounts of the Partnership be adjusted pursuant
to Sections 1.704-1(b)(2)(iv)(e), (f) and (g) of the Regulations, by taking into
account the amount of such adjustment as if such adjustment represented
additional Net Income or Net Loss pursuant to Appendix II; and (f) by not taking
into account in computing Net Income or Net Loss items separately allocated to
the Partners pursuant to Sections 1 and 2 of Appendix II.
1.52 "NEW EQUITY FINANCING RIGHT" has the meaning set forth in Section 8.8.
1.53 "NONRECOURSE DEDUCTIONS" has the meaning set forth in Regulations
Sections 1.704-2(b)(1) and 1.704-2(c).
1.54 "NONRECOURSE LIABILITIES" has the meaning set forth in Regulations
Section 1.704-2(b)(3).
1.55 "OPERATING PARTNERSHIP" means, collectively, Mission West Properties,
L.P., Mission West Properties, L.P. I, Mission West Properties, L.P. II and
Mission West Properties, L.P. III.
1.56 "PARTNER" means the General Partner or a Limited Partner, and
"Partners" means the General Partner and the Limited Partners collectively.
1.57 "PARTNER MINIMUM GAIN" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
1.58 "PARTNER NONRECOURSE DEBT" has the meaning set forth in Regulations
Section 1.704-2(b)(4).
1.59 "PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership taxable
year shall be determined in accordance with the rules of Regulations Section
1.704-2(i)(2).
1.60 "PARTNERSHIP" means the limited partnership governed by this
Agreement, and any successor thereto.
1.61 "PARTNERSHIP INTEREST" means an ownership interest in the Partnership
representing an Adjusted Contribution by either a Limited Partner or the General
Partner and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement. A Partnership Interest may be expressed as a number of L.P.
Units.
1.62 "PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Regulations
Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as
any net increase or decrease in a Partnership Minimum Gain, for a Partnership
taxable year shall be determined in accordance with the rules of Regulations
Section 1.704-2(d).
1.63 "PARTNERSHIP RECORD DATE" means the record date established by the
General Partner for the distribution of Available Cash pursuant to Section 5.1,
which shall be the same as the record date established by the Company for a
distribution to its shareholders of some or all of its portion of such
distribution.
1.64 "PARTNERSHIP YEAR" means the fiscal year of the Partnership, which is
the calendar year, as set forth in Section 9.2.
1.65 "PENDING DEVELOPMENT PROJECTS" means three Berg Group-owned R&D
Property development projects which the Operating Partnership has agreed to
acquire upon their completion pursuant to the terms of the Acquisition Agreement
and the related Pending Projects Option Agreement dated as of ________ __, 1998.
1.66 "PARTNERSHIP INTEREST" means, as to a Partner, the fractional part of
the Partnership Interests owned by such Partner and expressed as a percentage as
specified in Appendix I, as such Appendix may be amended from time to time.
1.67 "PERMITTED PARTNERS" has the meaning set forth in Section 1(b) of
Appendix II.
1.68 "PERMITTED TRANSFEREE" means any person to whom L.P. Units are
Transferred in accordance with Section 11.3 of this Agreement.
1.69 "PERSON" means an individual or Entity.
1.70 "PRECONTRIBUTION GAIN" has the meaning set forth in Section 3(c) of
Appendix II.
1.71 "PUT RIGHTS" shall have the meaning provided in Section 8.7.
1.72 "PROTECTIVE PROVISIONS EXPIRATION DATE" means the date on which the
members of the Berg Group own less than 15% of the Common Stock, treating all
Equity Securities of the Company and all L.P. Units owned by such members as
Common Stock outstanding for this purpose.
1.73 "PROPERTIES" has the meaning given such term in the Acquisition
Agreement.
1.74 "QUARTER" means each of the three month periods ending on March 31,
June 30, September 30 and December 31.
1.75 "REGULATIONS" means 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).
1.76 "REIT" means a real estate investment trust as defined in Section 856
of the Code.
1.77 "REIT REQUIREMENTS" means all of the requirements imposed under the
Code on any entity seeking to qualify and remain qualified as a REIT.
1.78 "RESTRICTED PARTNER" has the meaning set forth in Section 1(b) of
Appendix II.
1.79 "SEC" means the U.S. Securities and Exchange Commission.
1.80 "SECURITIES ACT" means the Securities Act of 1933, as amended.
1.81 "STOCK OPTION PLAN" means the Company's 1997 Stock Option Plan and any
other plan adopted from time to time by the Company pursuant to which shares of
Common Stock are issued, or options to acquire shares of Common Stock are
granted, to consultant, employees or directors of the Company, the Operating
Partnership or their respective Affiliates in consideration for services or
future services.
1.82 "SUBSIDIARY" means, with respect to any Person, any corporation,
partnership or other entity of which a majority of (i) the voting power of the
Voting Securities; or (ii) the outstanding equity interests, is owned, directly
or indirectly, by such Person.
1.83 "SUBSTITUTED LIMITED PARTNER" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.4 hereof.
1.84 "TAX ITEMS" has the meaning set forth in Appendix II.
1.85 "TERMINATING CAPITAL TRANSACTION" means any Change of Control
Transaction.
1.86 "TOTAL MARKET CAPITALIZATION" means the market value of the
outstanding Common Stock determined as if all L.P. Units in the Operating
Partnership had been converted into Common Stock at the Exchange Factor plus the
total debt of the Company and the Operating Partnership.
1.87 "TRANSFER" as a noun, means any sale, assignment, conveyance, pledge,
hypothecation, gift, encumbrance or other transfer, and as a verb, means to
sell, assign, convey, pledge, hypothecate, give, encumber or otherwise transfer.
1.88 "UNIT" means an equal undivided interest in all of the outstanding
Partnership Interests.
1.89 "UNITED STATES PERSON" means a holder of L.P. Units who is an
individual who is a citizen or resident of the United States; a corporation,
partnership or other entity created or organized in, or under the laws of, the
United States or any State; an estate the income of which from sources without
the United States is includable in gross income for United States federal income
tax purposes; a trust the primary supervision of which is exercisable by a court
within the United States and having one or more United States fiduciaries with
authority to control all substantial decisions of such trust; and any Person
whose income or gain in respect of the L.P. Units is effectively connected with
the conduct of a United States trade or business.
1.90 "VOTING SECURITIES" means any Equity Security which entitles the
holder thereof to vote on all matters submitted for a vote of equity holders by
the issuer of such Equity Security, including the right to vote for directors in
the case of a corporation.
Certain additional terms and phrases have the meanings set forth in
Appendix II.
ARTICLE 2. ORGANIZATIONAL MATTERS.
2.1 CONTINUATION. The Partners hereby agree to continue the Partnership
under and pursuant to the Act. Except as expressly provided herein to the
contrary, the rights and obligations of the Partners and the administration and
termination of the Partnership shall be governed by the Act. The Partnership
Interest of each Partner shall be personal property for all purposes.
2.2 NAME. The name of the Partnership shall be Mission West Properties,
L.P. [ ]. The Partnership's business may be conducted under any other name or
names deemed advisable by the General Partner, including the name of the General
Partner or any Affiliate thereof. The words "Limited Partnership," "L.P.,"
"Ltd." or similar words or letters shall be included in the Partnership's name
where necessary to comply with the laws of any jurisdiction. The General Partner
in its sole and absolute discretion may, upon 5 days' prior written notice to
the Limited Partners, change the name of the Partnership.
2.3 REGISTERED OFFICE AND AGENT; PRINCIPAL OFFICE. The address of the
registered office of the Partnership in the State of Delaware and the name and
address of the registered agent for service of process on the Partnership in the
State of Delaware is The Corporation Trust Company, 1029 Orange Street,
Wilmington, Delaware 19801. The principal office of the Partnership shall be
10050 Bandley Drive, Cupertino, California 95014, or such other place as the
General Partner may from time to time designate by notice to the Limited
Partners. The Partnership may maintain offices at such other place or places
within or outside the State of Delaware as the General Partner deems advisable.
2.4 POWER OF ATTORNEY.
A. Each Limited Partner and each Assignee hereby constitutes and appoints
the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case with
full power of substitution, as its true and lawful agent and attorney-in-fact,
with full power and authority in its name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (a) all certificates, documents and other
instruments (including, without limitation, this Agreement and the
Certificate and all amendments or restatements thereof) that the General
Partner or the Liquidator deems appropriate or necessary to form, qualify
or continue the existence or qualification of the Partnership as a limited
partnership (or a partnership in which the Limited Partners have limited
liability) in the State of Delaware and in all other jurisdictions in which
the Partnership may or plans to conduct business or own property,
including, without limitation, any documents necessary or advisable to
convey any Contributed Property to the Partnership; (b) all instruments
that the General Partner deems appropriate or necessary to reflect any
amendment, change, modification or restatement of this Agreement in
accordance with its terms; (c) all conveyances and other instruments or
documents that the General Partner or the Liquidator deems appropriate or
necessary to reflect the dissolution and liquidation of the Partnership
pursuant to the terms of this Agreement, including, without limitation, a
certificate of cancellation; (d) all instruments relating to the admission,
withdrawal, removal or substitution of any Partner pursuant to, or other
events described in, Article 11, 12 or 13, or the Capital Contribution of
any Partner; and (e) all certificates, documents and other instruments
relating to the determination of the rights, preferences and privileges of
Partnership Interest; and
(2) execute, swear to, seal, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other instruments
appropriate or necessary, in the sole and absolute discretion of the
General Partner or any Liquidator, to make, evidence, give, confirm or
ratify any vote, consent, approval, agreement or other action which is made
or given by the Partners hereunder or is consistent with the terms of this
agreement or appropriate or necessary, in the sole discretion of the
General Partner or any Liquidator, to effectuate the terms or intent of
this Agreement.
Nothing contained herein shall be construed as authorizing the General
Partner or any Liquidator to amend this Agreement except in accordance with
Article 14, or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be irrevocable and
a power coupled with an interest, in recognition of the fact that each of the
Partners will be relying upon the power of the General Partner and any
Liquidator to act as contemplated by this Agreement in any filing or other
action by it on behalf of the Partnership, and it shall survive and not be
affected by the subsequent Incapacity of any Limited Partner or Assignee and the
Transfer of all or any portion of such Limited Partner's or Assignee's L.P.
Units and shall extend to such Limited Partner's or Assignee's heirs,
successors, assigns and personal representatives. Each such Limited Partner or
Assignee hereby agrees to be bound by any representation made by the General
Partner or any Liquidator, acting in good faith pursuant to such power of
attorney, and each such Limited Partner or Assignee hereby waives any and all
defenses which may be available to contest, negate or disaffirm the action of
the General Partner or any Liquidator, taken in good faith under such power of
attorney. Each Limited Partner or Assignee shall execute and deliver to the
General Partner or the Liquidator, within 15 days after receipt of the General
Partner's or Liquidator's request therefor, such further designation, powers of
attorney and other instruments as the General Partner or the Liquidator, as the
case may be, deems necessary to effectuate this Agreement and the purposes of
the Partnership.
2.5 TERM. The term of the Partnership shall commence on the date hereof and
shall continue until December 31, 2048, unless the Partnership is dissolved
sooner pursuant to the provisions of Article 13 or as otherwise provided by law.
ARTICLE 3. PURPOSE.
3.1 PURPOSE AND BUSINESS. The purpose and nature of the business to be
conducted by the Partnership is to conduct any business that may be lawfully
conducted by a limited partnership organized pursuant to the Act including,
without limitation, to engage in the following activities: to acquire, hold,
own, develop, construct, improve, maintain, operate, sell, lease, transfer,
encumber, convey, exchange, and otherwise dispose of or deal with the
Properties, and the Pending Development Projects; to acquire, hold, own,
develop, construct, improve, maintain, operate, sell, lease, transfer, encumber,
convey, exchange, and otherwise dispose of or deal with real and personal
property of all kinds; to undertake such other activities as may be necessary,
advisable, desirable or convenient to the business of the Partnership; and to
engage in such other ancillary activities as shall be necessary or desirable to
effectuate the foregoing purposes.
3.2 POWERS. The Partnership is empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business for which it has
been formed and for the protection and benefit of the Partnership; provided,
that the Partnership shall not take, and shall refrain from taking, any action
which, in the judgment of the General Partner, in its sole and absolute
discretion, (i) could adversely affect the ability of the Company to continue to
qualify as a REIT; (ii) could subject the Company to any additional taxes under
Section 857 or Section 4981 of the Code; or (iii) could violate any law or
regulation of any governmental body or agency having jurisdiction over the
Company or its securities, unless such action (or inaction) shall have been
specifically consented to by the Company, if not the General Partner, and the
L.P. Unit Majority.
ARTICLE 4. CAPITAL CONTRIBUTIONS.
4.1 CAPITAL CONTRIBUTIONS OF THE PARTNERS.
A. At the time of the execution of this Agreement, the Partners have made
the Adjusted Contributions, or shall make the Capital Contributions contemplated
by the Acquisition Agreement, as set forth in Appendix I to this Agreement. Each
Limited Partner shall own L.P. Units in the amount set forth for such Partner in
Appendix I and shall have a Percentage Interest in the Partnership as set forth
in Appendix I, which shall be adjusted in Appendix I from time to time by the
General Partner to the extent necessary to reflect accurately exchanges,
additional Capital Contributions, the issuance of additional Partnership
Interests, the exercise of Put Rights with respect to L.P. Units or similar
events having an effect on any Partner's Percentage Interest.
B. The number of Units held by the General Partner, in its capacity as
general partner, shall be deemed to be the General Partner Interest. Except as
provided in Sections 4.2, 10.5 and 13.3, the Partners shall have no obligation
to make any additional Capital Contributions.
4.2 ADDITIONAL FUNDS; RESTRICTIONS ON COMPANY.
A. The sums of money required to finance the business and affairs of the
Partnership shall be derived from the initial Capital Contributions made to the
Partnership by the Company as set forth in the Acquisition Agreement and from
funds generated from the operation and business of the Partnership including,
without limitation, distributions directly or indirectly received by the
Partnership from Available Cash provided by the Operating Partnership. In the
event additional financing is needed from sources other than as set forth in the
preceding sentence for any reason, subject to the provisions of Sections 8.8 and
8.9, the General Partner may, in its discretion, in such amounts and at such
times as it solely shall determine to be necessary or appropriate, obtain
additional funds for the Operating Partnership which shall be allocated to each
of the partnerships included therein, including the Partnership, pro rata in
proportion to the ratio of the number of Units then outstanding in each such
Partnership to the total number of L.P. Units then outstanding in the Operating
Partnership taken as a whole ("Pro Rata Share"). Accordingly, to the extent of
such Pro Rata Share of the Partnership and subject to Section 8.9 and any other
limitations contained in this Agreement or the Acquisition Agreement, the
General Partner may, (i) cause the Partnership to issue additional Partnership
Interests and admit additional Limited Partners to the Partnership in accordance
with Section 4.3; (ii) make additional Capital Contributions to the Partnership
(subject to the provisions of Section 4.2B); (iii) cause the Partnership to
borrow money, enter into loan arrangements, issue debt securities, obtain
letters of credit or otherwise borrow money on a secured or unsecured basis; or
(iv) make loans to the Partnership (subject to Section 4.2B). In no event shall
the Limited Partners be required to make any additional Capital Contributions or
any loan to, or otherwise provide any financial accommodation for the benefit
of, the Partnership pursuant to any such permitted action by the General
Partner, except insofar as a Limited Partner has exercised its New Equity
Financing Right pursuant to Section 8.8.
B. Except as agreed otherwise at the time by vote or written consent of the
L.P. Unit Majority: (i) the Company shall lend to the Partnership its Pro Rata
Share of the proceeds of or consideration received by the Company from all loans
and advances to the Company pursuant to any financial borrowing arrangement on
the same financial terms and conditions, including interest rate and repayment
schedule, as shall be applicable with respect to or incurred in connection with
the issuance of such loans and advances to the Company (which the Partnership
may, in turn, lend to any other partnership constituting part of the Operating
Partnership); (ii) in the case of Equity Securities senior or junior to the
Common Stock as to dividends and distributions on liquidation, which are not
convertible into Common Stock as of the issuance date, the Company shall
contribute to the Partnership the proceeds of or consideration (including any
property or other non-cash assets) received for such Securities and the proceeds
of, or consideration received from, any subsequent exercise, exchange or
conversion thereof (if applicable), and shall receive from the Partnership, new
Partnership Interests in the Partnership in consideration therefor with the same
financial terms and conditions, including dividend, dividend priority,
liquidation preference, conversion and redemption rights, as are applicable to
such Equity Securities; (iii) in the case of Common Stock, or other Equity
Securities convertible into Common Stock as of the issuance date, including,
without limitation, shares of Common Stock or other Equity Securities issued
upon exercise of options issued under the Stock Option Plan or any other
Employee Benefit Plan of the Company, the Company shall contribute to the
Partnership the proceeds of or consideration (including any property or other
non-cash assets) received for such Securities and the proceeds of, or
consideration received from, any subsequent exercise, exchange or conversion
thereof (if applicable), and shall receive from the Partnership a number of
additional Units of General Partner Interest in consideration therefor equal to
the product of (x) the number of shares of Common Stock or other Equity
Securities issued by the Company, multiplied by (y) the Exchange Factor in
effect on the date of such contribution; and (iv) in the case of Common Stock or
other Equity Securities issued upon the exercise or surrender of rights under a
stock option, warrant, or any other right for which the Company does not receive
proceeds, and issues less than the number of shares of Common Stock or other
Equity Securities subject to such option, warrant or other right to the holder
thereof retaining the excess of such shares as payment of the purchase price (a
"net exercise"), or where the Company uses the proceeds received pursuant to a
Dividend Reinvestment Plan to acquire shares of Common Stock or other Equity
Securities to be issued to the shareholder exercising such right, the Company
shall receive from the Partnership a number of additional Units of General
Partner Interest equal to the actual number of shares of Common Stock or other
Equity Securities so issued to the shareholder multiplied by the Exchange
Factor.
4.3 ISSUANCE OF ADDITIONAL PARTNERSHIP INTERESTS; ADMISSION OF ADDITIONAL
LIMITED PARTNERS. In addition to any Partnership Interests issuable by the
Partnership pursuant to Section 4.2, and subject to the provisions of Sections
8.8 and 8.9, the General Partner is authorized to cause the Partnership to issue
additional Partnership Interests (or options therefor) in the form of L.P. Units
or other Partnership Interests senior or junior to the L.P. Units to any Persons
at any time or from time to time, for consideration per Unit of Partnership
Interest not less than the Common Stock Price determined at the initial issuance
date divided by the Exchange Factor, and on such other terms and conditions, as
the General Partner shall establish provided, however, that (i) each partnership
included in the Operating Partnership shall effect its Pro Rata Share of such
issuance, (ii) such issuance does not cause the Partnership to become, with
respect to any Employee Benefit Plan subject to Title I of ERISA or Section 4975
of the Code, a "party in interest" (as defined in Section 3(14) of ERISA) or a
"disqualified person" (as defined in Section 4975(e) of the Code); and (iii)
such issuance does not cause any portion of the assets of the Partnership to
constitute assets of any Employee Benefit Plan subject to Section 2510.3-101 of
the regulations of the United States Department of Labor. Subject to the
limitations set forth in the preceding sentence, the General Partner may take
such steps as it, in its reasonable discretion, deems necessary or appropriate
to admit any Person as a Limited Partner of the Partnership, including, without
limitation, amending the Certificate, Appendix I or any other provision of this
Agreement.
4.4 REPURCHASE OF COMPANY EQUITY SECURITIES. In the event the Company shall
elect to purchase from its shareholders shares of Common Stock for the purpose
of delivering such shares to satisfy an obligation under any Dividend
Reinvestment Plan or Employee Benefit Plan adopted by the Company, or shall
repurchase any other Equity Securities of the Company pursuant to any other
share repurchase obligation or arrangement undertaken by the Company with any
Company shareholder, including preferred stock redemptions, the purchase price
paid by the Company for such shares and any other expenses incurred by the
Company in connection with such purchase shall be considered expenses of the
Partnership and shall be reimbursed to the Company, subject to the condition
that: (i) if such shares subsequently are to be sold by the Company, the Company
shall pay to the Partnership any proceeds received by the Company for such
shares of Common Stock or other Equity Securities (provided that an exchange of
shares of Common Stock for L.P. Units pursuant to the Exchange Rights Agreement
would not be considered a sale for such purposes); and (ii) if such shares are
not re-transferred by the Company within 30 days after the purchase thereof, the
General Partner shall cause the Partnership to cancel the number of Units of
General Partner Interest held by the Company determined by multiplying (x) the
quotient obtained by dividing the total amount deemed paid by the Partnership by
the Common Stock Price determined as of the repurchase date, by (y) the Exchange
Factor in effect on the date of such repurchase.
4.5 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.
4.6 NO INTEREST; NO RETURN. No Partner shall be entitled to interest on its
Capital Contribution or on such Partner's Capital Account. Except as provided in
Section 8.7 or Article 13 of this Agreement, or by law, no Partner shall have
any right to demand or receive the return of its Capital Contribution from the
Partnership.
ARTICLE 5. DISTRIBUTIONS.
5.1 REGULAR DISTRIBUTIONS. Except for distributions pursuant to Section
13.2 in connection with the dissolution and liquidation of the Partnership, and
subject to the provisions of Sections 5.3, 5.4 and 5.5, the General Partner
shall cause the Partnership to distribute, from time to time as determined by
the General Partner, but in any event not less frequently than once each
Quarter, the Partnership's Pro Rata Share of all Available Cash, to the
Partners, in accordance with each Partner's respective Percentage Interest;
provided, however, that in no event may a Limited Partner receive a distribution
of Available Cash with respect to a L.P. Unit, if such Limited Partner is
entitled to receive a distribution out of such Available Cash with respect to a
share of Common Stock for which such L.P. Unit has been exchanged.
5.2 QUALIFICATION AS A REIT. The General Partner shall be entitled to cause
the Partnership to distribute to the General Partner the Partnership's Pro Rata
Share of Available Cash distributed by the Operating Partnership to enable the
General Partner to pay shareholder dividends that will (i) satisfy the REIT
Requirements for distributions to shareholders, and (ii) avoid any federal
income or excise tax liability of the General Partner; provided, however, the
General Partner is not bound to comply with this covenant to the extent such
distributions would violate applicable Delaware law.
5.3 WITHHOLDING. With respect to any withholding tax or other similar tax
liability or obligation to which the Partnership may be subject as a result of
any act or status of any Partner or to which the Partnership becomes subject
with respect to any Unit, the Partnership shall have the right to withhold
amounts of Available Cash distributable to such Partner or with respect to such
Units, to the extent of the amount of such withholding tax or other similar tax
liability or obligation pursuant to the provisions contained in Section 10.5.
5.4 ADDITIONAL PARTNERSHIP INTERESTS. If the Partnership issues Partnership
Interests in accordance with Section 4.2 or 4.3 which are entitled to certain
distribution priorities, Section 5.1 shall be amended, as necessary, to reflect
the distribution priority of such Partnership Interests and corresponding
amendments shall be made to the provisions of Appendix II.
5.5 DISTRIBUTIONS UPON LIQUIDATION. Proceeds from a Terminating Capital
Transaction and any other cash received or reductions in reserves made after
commencement of the liquidation of the Partnership shall be distributed to the
Partners in accordance with Section 13.2.
ARTICLE 6. ALLOCATIONS.
The Net Income, Net Loss, and other Partnership items of income, gain,
loss, deduction or credit as provided under the Code, shall be allocated
pursuant to the provisions of Appendix II, as amended from time to time.
ARTICLE 7. MANAGEMENT AND OPERATION OF BUSINESS.
7.1 MANAGEMENT.
A. Except as otherwise expressly provided in this Agreement, and subject to
the provisions of Section 8.9, all management powers over the business and
affairs the Partnership are and shall be exclusively vested in the General
Partner, and no Limited Partner shall have any right to participate in or
exercise control or management power over the business and affairs of the
Partnership. The General Partner may not be removed by the Limited Partners,
with or without cause. In addition to the powers now or hereafter granted a
general partner of a limited partnership under the Act or which are granted to
the General Partner under any other provision of this Agreement, the General
Partner shall have full power and authority to make contracts, sign documents,
conduct litigation, acquire and convey property, hire employees, consultants and
professionals, raise capital, borrow funds, incur liabilities, invest funds,
comply with all applicable laws, and do all other things deemed necessary or
desirable by the General Partner to conduct the business of the Partnership on
behalf of the Partnership; to exercise all powers set forth in Section 3.2, and
to effectuate the purposes set forth in Section 3.1, provided that any exercise
of the foregoing rights and powers must be consistent with the REIT
Requirements.
B. Except as provided in Section 8.9, each of the Limited Partners agrees
that the General Partner is authorized to execute, deliver and perform the
agreements and transactions on behalf of the Partnership without any further
act, approval or vote of the Partners, notwithstanding any other provision of
this Agreement to the fullest extent permitted under the Act or other applicable
law, rule or regulation. The execution, delivery or performance by the General
Partner or the Partnership of any agreement authorized or permitted under this
Agreement shall not constitute a breach by the General Partner of any duty that
the General Partner may owe the Partnership or the Limited Partners or any other
Persons under this Agreement or of any duty stated or implied by law or equity.
C. At all times from and after the date hereof, in accordance with the
provisions of the Acquisition Agreement, the General Partner may cause the
Partnership to establish and maintain at any and all times working capital
accounts and other cash or similar balances in such amount as the General
Partner, in its sole and absolute discretion, deems appropriate and reasonable
from time to time. Such accounts may include funds of the General Partner and
the other partnerships in the Operating Partnership, which the General Partner
shall be free to commingle.
D. In exercising its authority under this Agreement, the General Partner
shall take into account the tax consequences to any Partner of any action taken
by it and shall select the alternative which appears at the time to present the
least adverse tax consequences to the Limited Partners. By way of example, but
not of limitation: If the General Partner decides to refinance (directly or
indirectly) any outstanding indebtedness of the Partnership, the General Partner
shall use reasonable efforts to structure such refinancing in a manner that
minimizes any adverse tax consequences resulting therefrom to the Limited
Partners. The General Partner and the Partnership shall not have liability to a
Limited Partner under any circumstances as a result of an income tax liability
incurred by such Limited Partner as a result of a necessary action (or inaction)
by the General Partner taken pursuant to its authority under and in accordance
with this Agreement where avoiding the resulting adverse tax consequences to a
Limited Partner was not reasonably practicable under the circumstances.
7.2 CERTIFICATE OF LIMITED PARTNERSHIP. The General Partner shall file the
[AMENDED CERTIFICATE] [CERTIFICATE] with the Secretary of State of Delaware as
required by the Act. The General Partner shall use all reasonable efforts to
cause to be filed such other certificates or documents as may be reasonable and
necessary or appropriate for the formation, continuation, qualification and
operation of a limited partnership (or a partnership in which the limited
partners have limited liability) in the State of Delaware and any other state,
or the District of Columbia, in which the Partnership may elect to do business
or own property. To the extent that such action is determined by the General
Partner to be reasonable and necessary or appropriate, the General Partner shall
file amendments to and restatements of the Certificate and do all of the things
to maintain the Partnership as a limited partnership (or a partnership in which
the limited partners have limited liability) under the laws of the State of
Delaware and each other state, or the District of Columbia, in which the
Partnership may elect to do business or own property. Subject to the terms of
Section 8.5A(iv) hereof, the General Partner shall not be required, before or
after filing, to deliver or mail a copy of the Certificate or any amendment
thereto to any Limited Partner.
7.3 REIMBURSEMENT OF THE GENERAL PARTNER AND THE COMPANY.
A. Except as provided in this Section 7.3 and elsewhere in this Agreement
(including the provisions of Articles 5 and 6 regarding distributions, payments,
and allocations to which it may be entitled), the General Partner shall not be
compensated for its services as general partner of the Partnership.
B. The General Partner, shall be reimbursed on a monthly basis, or such
other basis as it may determine in its sole and absolute discretion, for all
expenses that it incurs relating to the ownership and operation of, or for the
benefit of, the Partnership; provided, that the amount of any such reimbursement
shall be reduced by any interest earned by the General Partner with respect to
bank accounts or other instruments or accounts held by it in its name. Such
reimbursement shall be in addition to any reimbursement made as a result of
indemnification pursuant to Section 7.6.
7.4 OUTSIDE ACTIVITIES OF THE GENERAL PARTNER. The General Partner shall
not directly or indirectly enter into or conduct any business other than in
connection with the ownership, acquisition, development and disposition of
Partnership Interests and the management of the business of the Partnership, and
such activities as are incidental thereto. The General Partner and any
Affiliates of the General Partner may acquire Limited Partner Interests and
shall be entitled to exercise all rights of a Limited Partner relating to such
Limited Partner Interests.
7.5 CONTRACTS WITH AFFILIATES.
A. The Partnership may lend or contribute funds or other assets to its
Subsidiaries or other Persons in which it has an equity investment and such
Persons may borrow funds from the Partnership, on terms and conditions
established in the sole and absolute discretion of the General Partner. The
foregoing authority shall not create any right or benefit in favor of any
Subsidiary or any other Person.
B. Except as provided in Section 7.4, the Partnership may Transfer assets
to joint ventures, other partnerships, corporations or other business entities
in which it is or thereby becomes a participant upon such terms and subject to
such conditions consistent with this Agreement and applicable law as the General
Partner, in its sole and absolute discretion, believes are advisable.
C. Except as expressly permitted by this Agreement or otherwise
contemplated by the Acquisition Agreement, neither the General Partner nor any
of its Affiliates shall sell, Transfer or convey any property to, or purchase
any property from, the Partnership, directly or indirectly, except pursuant to
transactions that are determined by the General Partner in good faith to be fair
and reasonable.
D. Except as provided otherwise in Section 8.9, the General Partner, in its
sole and absolute discretion and without the approval of the Limited Partners,
may propose and adopt, on behalf of the Partnership, Employee Benefit Plans
funded by the Partnership for the benefit of employees of the General Partner,
the Partnership, Subsidiaries of the Partnership or any Affiliate of any of them
in respect of services performed, directly or indirectly, for the benefit of the
Partnership, the General Partner, or any Subsidiaries of the Partnership.
E. The General Partner is expressly authorized to enter into, in the name
and on behalf of the Partnership, a "right of first opportunity" or "right of
first offer" arrangement, non-competition agreements and other conflict
avoidance agreements with various Affiliates of the Partnership and the General
Partner, on such terms as the General Partner, in its sole and absolute
discretion, believes are advisable.
7.6 INDEMNIFICATION.
A. To the fullest extent permitted by Delaware law, the Partnership shall
indemnify each Indemnitee from and against any and all losses, claims, damages,
liabilities, joint or several, expenses (including, without limitation,
reasonable attorneys' fees and other legal fees and expenses), judgments, fines,
settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative,
that relate to the operations of the Partnership or the Company as set forth in
this Agreement, in which such Indemnitee may be involved, or is threatened to be
involved, as a party or otherwise, except to the extent it is finally determined
by a court of competent jurisdiction, from which no further appeal may be taken,
that such Indemnitee's action constituted intentional acts or omissions
constituting willful misconduct or fraud. Without limitation, the foregoing
indemnity shall extend to any liability of any Indemnitee, pursuant to a loan
guaranty or otherwise for any indebtedness of the Partnership or any Subsidiary
of the Partnership (including, without limitation, any indebtedness which the
Partnership or any Subsidiary of the Partnership has assumed or taken subject
to), except with respect to Partnership debt that has been assumed or guaranteed
by an Indemnitee in its capacity as a Limited Partner. The General Partner is
hereby authorized and empowered, on behalf of the Partnership, to enter into one
or more indemnity agreements consistent with the provisions of this Section 7.6
in favor of any Indemnitee having or potentially having liability for any such
indebtedness. Any indemnification pursuant to this Section 7.6 shall be made
only out of the assets of the Partnership, and neither the General Partner nor
any Limited Partner shall have any obligation to contribute to the capital of
the Partnership, or otherwise provide funds, to enable the Partnership to fund
its obligations under this Section 7.6.
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.
C. The indemnification provided by this Section 7.6 shall be in addition to
any other rights to which an Indemnitee or any other Person may be entitled
under any agreement, pursuant to any vote of the Partners, under the Company's
Articles of Incorporation, as a matter of law, or otherwise, and shall continue
as to an Indemnitee who has ceased to serve in such capacity unless otherwise
provided in a written agreement pursuant to which such Indemnities are
indemnified.
D. The Partnership may, but shall not be obligated to, purchase and
maintain insurance, on behalf of the Indemnities and such other Persons as the
General Partner shall determine, against any liability that may be asserted
against or expenses that may be incurred by such Person in connection with the
Partnership's activities, regardless of whether the Partnership would have the
power to indemnify such Person against such liability under the provisions of
this Agreement.
E. For purposes of this Section 7.6, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an Employee Benefit Plan
whenever the performance by such Indemnitee of its duties to the Partnership
also imposes duties on, or otherwise involves services by, such Indemnitee to
the plan or participants or beneficiaries of the plan; excise taxes assessed on
an Indemnitee with respect to an Employee Benefit Pan pursuant to applicable law
shall constitute fines within the meaning of this Section 7.6; and actions taken
or omitted by the Indemnitee with respect to an Employee Benefit Plan in the
performance of its duties for a purpose reasonably believed by it to be in the
interest of the participant and beneficiaries of the plan shall be deemed to be
for a purpose which is not opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject any of the Limited Partners to
personal liability by reason of the indemnification provisions set forth in this
Agreement.
G. An Indemnitee shall not be denied indemnification in whole or in part
under this Section 7.6 because the Indemnitee had an interest in the transaction
with respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.6 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. Any
amendment, modification or repeal of this Section 7.6 or any provision hereof
shall be prospective only and shall not in any way affect the Partnership's
liability to any Indemnitee under this Section 7.6, as in effect immediately
prior to such amendment, modification, or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.
I. The provisions of this Section 7.6 shall be inapplicable to any
investigation, claim, suit, or proceeding, or the portion thereof, which
concerns claims for breach of contract between the Partnership and a Person
contracting other than in such Person's capacity as a Partner, or as an officer
or director of the General Partner.
J. No provision of this Section 7.6 shall be construed as permitting any
contract or transaction which is prohibited by the provisions of Section
9.2(b) of the Acquisition Agreement.
7.7 LIABILITY OF THE GENERAL PARTNER.
A. Notwithstanding anything to the contrary set forth in this Agreement,
the General Partner and its officers and directors shall not be liable for
monetary damages to the Partnership, any Partners or any Assignees for losses
sustained or liabilities incurred as a result of errors in judgment or of any
act or omission, if the General Partner acted in good faith; provided, however,
the foregoing shall not be deemed to exculpate the Company from any liability
the Company may have under the Acquisition Agreement.
B. Subject to its obligations and duties as General Partner set forth in
Section 7.1A hereof, the General Partner may exercise any of the powers granted
to it by this Agreement and perform any of the duties imposed upon it hereunder
either directly or by or through its agent. The General Partner shall not be
liable for any acts or omissions on the part of any such agent, except in
circumstances for which the General Partner may be liable under Section 7.7A or
would not be subject to indemnification under Section 7.6.
C. Any amendment, modification or repeal of this Section 7.7 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the General Partner's and its officers' and directors' liability
to the Partnership and the Limited Partners under this Section 7.7 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
7.8 LIMITED PARTNERS' RIGHT TO BRING DERIVATIVE LAWSUITS. Any Limited
Partner may bring an action on behalf of the Partnership, as permitted under the
Act and the laws of the State of Delaware, to recover a judgment in favor of the
Partnership if the General Partner has refused to bring the action or if an
effort to cause the General Partner to bring the action is not likely to
succeed.
7.9 OTHER MATTERS CONCERNING THE GENERAL PARTNER.
A. The General Partner may rely and shall be protected in acting, or
refraining from acting, upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture, or other
paper or document believed by it in good faith to be genuine and to have been
signed or presented by the proper party or parties.
B. The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, architects, engineers,
environmental consultants and other consultants and advisers selected by it, and
any act taken or omitted to be taken in reliance upon the opinion of such
Persons as to matters which such General Partner reasonably believes to be
within such Person's professional or expert competence shall be conclusively
presumed to have been done or omitted in good faith and in accordance with such
opinion.
C. The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers and duly appointed attorneys-in-fact. Each such attorney shall, to the
extent provided by the General Partner in the power of attorney, have full power
and authority to do and perform all and every act and duty which is permitted or
required to be done by the General Partner hereunder.
D. Notwithstanding any other provisions of this Agreement or the Act, any
action of the General Partner on behalf of the Partnership or any decision of
the General Partner to refrain from acting on behalf of the Partnership,
undertaken in the good faith belief that such action or omission is necessary or
advisable in order (i) to protect the ability of the Company to continue to
qualify as a REIT; or (ii) to avoid the Company incurring any taxes under
Section 857 or Section 4981 of the Code, is expressly authorized under this
Agreement and is deemed approved by all of the Limited Partners.
7.10 TITLE TO PARTNERSHIP ASSETS. Title to Partnership assets, whether
real, personal or mixed and whether tangible or intangible, shall be deemed to
be owned by the Partnership as an entity, and no Partner, individually or
collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner or one or more nominees, as
the General Partner may determine, including Affiliates of the General Partner.
The General Partner hereby declares and warrants that any Partnership asset for
which legal title is held in the name of the General Partner or any nominee or
Affiliate of the General Partner shall be held by the General Partner for the
use and benefit of the Partnership in accordance with the provisions of this
Agreement; provided, that the General Partner shall use its best efforts to
cause beneficial and record title to such assets to be vested in the Partnership
as soon as reasonably practicable. All Partnership assets shall be recorded as
the property of the Partnership in its books and records, irrespective of the
name in which legal title to such Partnership assets is held.
7.11 RELIANCE BY THIRD PARTIES. Notwithstanding anything to the contrary in
this Agreement, any Person dealing with the Partnership shall be entitled to
assume that the General Partner has full power and authority, without consent or
approval of any other Partner or Person, to encumber, sell or otherwise use in
any manner any and all assets of the Partnership and to enter into any contracts
on behalf of the Partnership, and take any and all actions on behalf of the
Partnership, and such Person shall be entitled to deal with the General Partner
as if the General Partner were the Partnership's sole party in interest, both
legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies which may be available against such Person to
contest, negate or disaffirm any action of the General Partner in connection
with any such dealing. In no event shall any Person dealing with the General
Partner or its representatives be obligated to ascertain that the terms of this
Agreement have been complied with or to inquire into the necessity or expedience
of any act or action of the General Partner or its representatives. Each and
every certificate, document or other instrument executed on behalf of the
Partnership by the General Partner or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that: (i) at the time of the execution and delivery of such certificate,
document or instrument, this Agreement was in full force and effect; (ii) the
Person executing and delivering such certificate, document or instrument was
duly authorized and empowered to do so for and on behalf of the Partnership; and
(iii) such certificate, document or instrument was duly executed and delivered
in accordance with the terms and provisions of this Agreement and is binding
upon the Partnership.
ARTICLE 8. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.
8.1 LIMITATION OF LIABILITY. The Limited Partners shall have no liability
under this Agreement except as expressly provided in this Agreement, including
Sections 10.5 and 13.3 hereof, or under the Act. Notwithstanding the preceding
sentence, each Limited Partner shall have the right, but not the obligation, to
guarantee a portion of the indebtedness of the Partnership in accordance with
the terms of the Acquisition Agreement.
8.2 MANAGEMENT OF BUSINESS. No Limited Partner or Assignee (other than the
General Partner, any of its Affiliates or any officer, director, employee, agent
or trustee of the General Partner, the Partnership or any of their Affiliates,
in their capacity as such) shall take part in the operation, management or
control (within the meaning of the Act) of the Partnership's business, transact
any business in the Partnership's name or have the power to sign documents for
or otherwise bind the Partnership. The transaction of any such business by the
General Partner, any of its Affiliates or any officer, director, employee,
partner, agent or trustee of the General Partner, the Partnership or any of
their Affiliates, in their capacity as such, shall not affect, impair or
eliminate the limitations on the liability of the Limited Partners or Assignees
under this Agreement.
8.3 OUTSIDE ACTIVITIES OF LIMITED PARTNERS. Subject to any agreements
entered into pursuant to Section 7.5 hereof and any other agreements entered
into by a Limited Partner or its Affiliates with the Partnership or any of its
Subsidiaries including the Acquisition Agreement, any Limited Partner (other
than the Company) and any officer, director, employee, agent, trustee, Affiliate
or shareholder of any Limited Partner (other than the Company) shall be entitled
to and may have business interests and engage in business activities in addition
to those relating to the Partnership, including business interests and
activities that are in direct competition with the Partnership or that are
enhanced by the activities of the Partnership. Neither the Partnership nor any
Partners shall have any rights by virtue of this Agreement in any business
ventures of any Limited Partner or Assignee which are permitted within the scope
of this Section 8.3. None of the Limited Partners (other than the Company) nor
any other Person shall have any rights by virtue of this Agreement or the
Partnership relationship established hereby in any business ventures of any
other Person and such Person shall have no obligation pursuant to this Agreement
to offer any interest in any such business ventures to the Partnership, any
Limited Partner or any such other Person, even if such opportunity is of a
character which, if presented to the Partnership, any Limited Partner or such
other Person, could be taken by such Person.
8.4 RETURN OF CAPITAL. Except in connection with the exercise of Exchange
Rights or Put Rights, no Limited Partner shall be entitled to the withdrawal or
return of its Capital Contribution, except to the extent of distributions made
pursuant to this Agreement or upon termination of the Partnership as provided
herein. Except to the extent provided by Appendix II, or as otherwise expressly
provided in this Agreement, no Limited Partner or Assignee shall have priority
over any other Limited Partner or Assignee, either as to the return of Capital
Contributions or as to profits, losses or distributions.
8.5 RIGHTS OF LIMITED PARTNERS RELATING TO THE PARTNERSHIP.
A. In addition to the other rights provided by this Agreement or by the
Act, and except as limited by Section 8.5B hereof, each Limited Partner shall
have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon written demand with a
statement of the purpose of such demand and at such Limited Partner's own
expense (including such reasonable copying and administrative charges as the
General Partner may establish from time to time): (i) to obtain a copy of the
most recent annual and quarterly reports filed by the Company with the SEC
pursuant to the Exchange Act; (ii) to obtain a copy of the Partnership's
federal, state and local income tax returns for each Partnership Year; (iii) to
obtain a current list of the name and last known business, residence or mailing
address of each Partner; (iv) to obtain a copy of this Agreement and the
Certificate and all amendments and/or restatements thereto, together with
executed copies of all powers of attorney pursuant to which this Agreement, the
Certificate and all amendments and/or restatements thereto have been executed;
and (v) to obtain true and full information regarding the amount of cash and a
description and statement of any other property or services contributed by each
Partner and which each Partner has agreed to contribute in the future, and the
date on which each became a Partner.
B. Notwithstanding any other provision of this Section 8.5, the General
Partner may keep confidential from the Limited Partners, for such period of time
as the General Partner determines in its sole and absolute discretion to be
reasonable, any information that (i) the General Partner reasonably believes to
be in the nature of trade secrets or other confidential information, the
disclosure of which the General Partner in good faith believes is not in the
best interests of the Partnership or the Company or could damage the Partnership
or its business; or (ii) the Partnership is required by law or by agreements
with an unaffiliated third party to keep confidential.
8.6 EXCHANGE RIGHTS. The Limited Partners may exchange all or a portion of
their L.P. Units for shares of Common Stock on the terms and subject to the
conditions and restrictions contained in the Exchange Rights Agreement.
8.7 PUT RIGHTS.
A. Upon the terms and subject to the conditions of this Agreement, each
Limited Partner (other than Carl E. Berg and Clyde J. Berg with respect to all
L.P. Units owned by them beneficially as of the Effective Date) shall have the
right to tender to the Partnership outstanding L.P. Units no more than once
during any 12-month period commencing after ___________, ___ 1999. The
Partnership shall purchase properly tendered L.P. Units for cash at a price (the
"Tender Price") equal to the average market value of the Common Stock price as
of the date the Limited Partner delivers to the General Partner, at the address
provided in Appendix II, a completed and duly executed Letter of Transmittal in
the form attached as Exhibit A to the Exchange Rights Agreement, and any other
documents required by the Letter of Transmittal. Only a tender in this manner
will constitute a valid tender of L.P. Units pursuant to this Section 8.7A. The
General Partner shall make all determinations as to the validity and form of any
tender of L.P. Units in accordance with the provisions of this Agreement, and
upon rejection of a tender, shall give the tendering holder written notice of
such rejection, which shall include the reasons therefor. Unless otherwise
agreed by the General Partner or as provided in Section 8.7C, tenders of L.P.
Units pursuant to this Section 8.7A shall be irrevocable and shall not be
subject to withdrawal or modification.
B. Within 15 days after the valid tender of L.P. Units pursuant to Section
8.7A, the Company may make an election to purchase such L.P. Units itself with
cash of the Company (the "Cash Election"). If with respect to any tender of L.P.
Units pursuant to this Section 8.7, the Company makes the Cash Election, then
within 90 days after such tender the Company shall pay to the tendering Limited
Partner an aggregate amount of cash equal to the purchase price of the tendered
L.P. Units with available cash, borrowed funds or the proceeds of an offering of
new shares of Common Stock. Upon acquiring the L.P. Units, the Company may cause
the Partnership to retire the L.P. Units and convert them to the same number of
Units of General Partner Interest, and the General Partner shall amend Appendix
I accordingly.
C. Notwithstanding the foregoing, if the purchase price for the L.P. Units
tendered by a Limited Partners in one year exceeds $1,000,000, the Partnership
or the Company shall be entitled to reduce proportionally the number of L.P.
Units to be acquired from each Tendering Partner so that the total purchase
price does not exceed $1,000,000 if the Company so elects. In addition, if the
Company does not timely make the Cash Election, the Partnership shall deliver
the purchase price for the tendered L.P. Units to the Limited Partner within 45
days after the Letter of Transmittal was delivered to the General Partner. The
General Partner may defer payment of the purchase price until such time not to
exceed 120 days after the valid tender of L.P. Units pursuant to Section 8.7A as
the Partnership has adequate Available Cash after payment of the purchase price,
in the reasonable judgment of the General Partner, to fund current distributions
necessary for the Company to satisfy the REIT Requirements following the waiver
by the Company of its right to make the Cash Election. In such event, the
General Partner shall give the tendering Limited Partner written notice of its
decision to defer the payment with a calculation supporting the General
Partner's determination within 20 days after the Letter of Transmittal was
delivered to the General Partner. Upon receiving such notice, the Limited
Partner may withdraw the tender. In addition, the Limited Partner may instead
exercise its rights under the Exchange Rights Agreement. If a Limited Partner
tenders L.P. Units pursuant to this Section 8.7, the Limited Partner shall pay
the amount of any additional documentary, stamp or similar issue or transfer tax
which is due, and shall be responsible for all income or other taxes as a result
of such exchange.
D. Each tender of L.P. Units shall constitute a representation and warranty
by the tendering Limited Partner of each of the representations and warranties
set forth in the form of Letter of Transmittal.
E. Until the holder of L.P. Units tendered pursuant to Section 8.7 has
received cash in exchange therefor, such Limited Partner shall continue to hold
and own such L.P. Units for all purposes of this Agreement.
8.8 NEW EQUITY FINANCING RIGHTS.
A. If the General Partner determines that it is in the best interests of
the Partnership to obtain additional funds through the issuance of additional
Partnership Interests, the General Partner shall first offer to the Limited
Partners in each of the partnerships comprising the Operating Partnership,
including the Partnership, the right of first refusal to purchase that portion
of such additional Partnership Interests which their respective numbers of L.P.
Units bear to the total number of outstanding L.P. Units in the Operating
Partnership. The General Partner shall make this offer pursuant to a written
notice describing the offering price, class or series of Partnership Interest,
and all other material terms of the offer. Such notice shall be sent to each
Limited Partner at the address reflected in Appendix I, as amended. The Limited
Partners shall have 10 days from the date of such notice to elect to purchase
any such additional Partnership Interests. Such election shall be made pursuant
to a written subscription form specifying the number of Units of additional
Limited Partnership Interests the Limited Partner intends to acquire and the
total purchase price therefor, and shall be signed by the Limited Partner and
delivered to the General Partner at the address set forth on Appendix I. After
such 10-day period, the General Partner shall be free to offer any additional
Limited Partnership Interests on substantially similar terms to non-Partners and
Partners alike.
B. The foregoing right of the Limited Partners to acquire additional equity
interests offered by the Partnership ("New Equity Financing Right") shall not
apply to any offering (i) which is part of a transaction in which the Limited
Partners had the ability to exercise their New Equity Financing Rights under the
Acquisition Agreement with respect to an offering of Equity Securities by the
Company, (ii) in connection with a merger or other business combination subject
to approval by the L.P. Unit Majority pursuant to Section 8.9, (iii) to a Person
in connection with the acquisition of property or services by the Partnership
from such Person, or (iv) of any Partnership Interest upon conversion of an
outstanding Equity Security of the Partnership, any Partnership Subsidiary, or
the Company.
8.9 MATTERS REQUIRING L.P. UNIT MAJORITY APPROVAL. The consent of the L.P.
Unit Majority will be required with respect to the following actions involving
the Partnership: (i) the material amendment, modification or termination of the
Agreement; (ii) a general assignment for the benefit of creditors or the
appointment of a custodian, receiver or trustee for any of the assets of the
Partnership; (iii) the institution of any proceeding for bankruptcy of the
Partnership; (iv) the Transfer of any General Partnership Interests, including
transfers attendant to any merger, consolidation or liquidation of the Company
except as otherwise provided in 11.2C; (v) the admission of any additional or
substitute General Partner in the Partnership; and (vi) a Change of Control
Transaction. In addition, until the Protective Provisions Expiration Date, the
consent of the L.P. Unit Majority will also be required with respect to: (i) any
Terminating Capital Transaction; (ii) the dissolution and liquidation of the
Partnership; and (iii) the Partnership's issuance of Limited Partner Interests
having seniority over the L.P. Units with respect to distributing assets, and
voting rights.
8.10 APPROVAL OF CERTAIN TAXABLE SALES. Until the earlier of the tenth
anniversary of the closing of the Berg Acquisition and the Protective Provisions
Expiration Date, the General Partner must obtain the prior written consent of
Carl E. Berg, and upon Carl Berg's death if prior to the expiration of this
provision, Clyde J. Berg, before effecting any sale or other transfer of any of
the Properties identified on Schedules 1, 2, 3 or 5 to the Acquisition Agreement
on behalf of the Partnership which results in the recognition of taxable income
by any member of the Berg Group under the Code. Until the earlier of the tenth
anniversary of the Berg Acquisition and the date on which John T. Kontrabecki
ceases to beneficially own at least 750,000 L.P. Units, the General Partner
shall obtain his prior written consent prior to effecting any sale or other
transfer of any of the Properties (identified in Schedules 4 or 5 to the
Acquisition Agreement) as owned by Kontrabecki, Triangle Partners, or Berg
Ventures II, which will result in the recognition of taxable income by
Kontrabecki under the Code.
ARTICLE 9. BOOKS, RECORDS, ACCOUNTING AND REPORTS.
9.1 RECORDS AND ACCOUNTING. The General Partner shall keep or cause to be
kept at the principal office of the Partnership those records and documents
required to be maintained by the Act and other books and records deemed by the
General Partner to be appropriate with respect to the Partnership's business,
including, without limitation, all books and records necessary to comply with
applicable REIT Requirements and to provide to the Limited Partners any
information, lists and copies of documents required to be provided pursuant to
Sections 8.5A and 9.3 hereof. Any records maintained by or on behalf of the
Partnership in the regular course of its business may be kept on, or be in the
form of, punch cards, magnetic tape, photographs, micrographics or any other
information storage device, provided that the records so maintained are
convertible into clearly legible written form within a reasonable period of
time. The books of the Partnership shall be maintained, for financial and tax
reporting purposes, on an accrual basis in accordance with GAAP, or such other
basis as the General Partner determines to be necessary or appropriate.
9.2 FISCAL YEAR. The fiscal year of the Partnership shall be the calendar
year.
ARTICLE 10. TAX MATTERS.
10.1 PREPARATION OF TAX RETURNS. The General Partner shall arrange for the
preparation and timely filing of all Partnership returns for federal and state
income tax purposes and shall use all reasonable efforts to furnish, within
sixty (60) days of the close of each taxable year, the tax information
reasonably required by Limited Partners for their federal and state income tax
reporting purposes.
10.2 TAX ELECTIONS. The General Partner shall elect for the Partnership to
be considered a limited partnership on all applicable federal and state income
tax returns to be filed by the Partnership. Except as otherwise provided herein,
the General Partner shall, in its sole and absolute discretion, determine
whether to make any other available election pursuant to the Code.
Notwithstanding the above, in making any such tax election the General Partner
shall take into account the tax consequences to the Limited Partners resulting
from any such election. The General Partner shall make such tax elections on
behalf of the Partnership as the L.P. Unit Majority request, provided that the
General Partner believes that such election is not adverse to the interests of
the General Partner, including its interest in preserving its qualification as a
REIT under the Code. In addition, the General Partner shall elect the
"traditional method" of making Section 704(c) allocations pursuant to
Regulations Section 1.704-3 with respect to each Property under the Acquisition
Agreement. The General Partner shall have the right to seek to revoke any tax
election it makes (other than the election to use the traditional method of
making the Section 704(c) allocations described in this Section 10.2),
including, without limitation, the election under Section 754 of the Code, upon
the General Partner' s determination, in its sole and absolute discretion, that
such revocation is in the best interests of the Limited Partners taken as a
whole and with the approval of the L.P. Unit Majority until the Protective
Provisions Expiration Date. All such elections and determinations may be made on
a Property-by-Property basis, and the General Partner shall be required to
analyze the impact of all such elections and determinations on that basis.
10.3 TAX MATTERS PARTNER.
A. The General Partner shall be the "tax matters partner" of the
Partnership for federal income tax purposes. Pursuant to Section 6230(e) of the
Code, upon receipt of notice from the Internal Revenue Service of the beginning
of an administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the Internal Revenue Service with the name, address,
taxpayer identification number, and Percentage Interest of each of the Limited
Partners and the Assignees; provided, that such information is provided to the
Partnership by the Limited Partners and the Assignees.
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the Internal Revenue Service
with respect to any administrative or judicial proceedings for the
adjustment of Partnership items required to be taken into account by a
Partner for income tax purposes (such administrative proceedings being
referred to as a "tax audit" and such judicial proceedings being referred
to as "judicial review"), and in the settlement agreement the tax matters
partner may expressly state that such agreement shall bind all Partners,
except that such settlement agreement shall not bind any Partner (i) who
(within the time prescribed pursuant to the Code and Regulations) files a
statement with the Internal Revenue Service providing that the tax matters
partner shall not have the authority to enter into a settlement agreement
on behalf of such Partner; or (ii) who is a "notice partner" (as defined in
Section 6231(a)(8) of the Code) or a member of a "notice group" (as defined
in Section 6223(b)(2) of the Code);
(2) in the event that a notice of a final administrative adjustment at
the Partnership level of any item required to be taken into account by a
Partner for tax purposes (a "final adjustment") is mailed to the tax
matters partner, to seek judicial review of such final adjustment,
including the filing of a petition for readjustment with the Tax Court or
the filing of a complaint for refund with the United States Claims Court or
the District Court of the United States for the district in which the
Partnership's principal place of business is located;
(3) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the
Internal Revenue Service and, if any part of such request is not allowed by
the Internal Revenue Service, to file an appropriate pleading (petition or
complaint) for judicial review with respect to such request;
(5) to enter into an agreement with the Internal Revenue Service to
extend the period for assessing any tax which is attributable to any item
required to be taken account of by a Partner for tax purposes, or an item
affected by such item; and
(6) to take any other action on behalf of the Partners or the
Partnership in connection with any tax audit or judicial review proceeding
to the extent permitted by applicable law or regulations.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the
extent required by law, is a matter in the sole and absolute discretion of
the tax matters partner and the provisions relating to indemnification of
the General Partner set forth in Section 7.6 of this Agreement shall be
fully applicable to the tax matters partner in its capacity as such.
C. The tax matters partner shall receive no compensation for its services.
All third party costs and expenses incurred by the tax matters partner in
performing its duties as such (including legal and accounting fees and expenses)
shall be borne by the Partnership. Nothing herein shall be construed to restrict
the Partnership from engaging an accounting firm to assist the tax matters
partner in discharging its duties hereunder, so long as the compensation paid by
the Partnership for such services is reasonable.
10.4 ORGANIZATIONAL EXPENSES. The Partnership shall elect to deduct
expenses, if any, incurred by it in organizing the Partnership ratably over a
60-month period as provided in Section 709 of the Code.
10.5 WITHHOLDING. Each Limited Partner hereby authorizes the Partnership to
withhold from, or pay on behalf of or with respect to, such Limited Partner any
amount of federal, state, local, or foreign taxes that the General Partner
determines that the Partnership is required to withhold or pay with respect to
any amount distributable or allocable to such Limited Partner pursuant to this
Agreement, including, without limitation, any taxes required to be withheld or
paid by the Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of the
Code. Any amount paid on behalf of or with respect to a Limited Partner shall
constitute a loan by the Partnership to such Limited Partner, which loan shall
be repaid by such Limited Partner within 15 days after notice from the General
Partner that such payment must be made unless (i) the Partnership withholds such
payment from a distribution which would otherwise be made to the Limited
Partner; or (ii) the General Partner determines, in its sole and absolute
discretion, that such payment may be satisfied out of the amount of Available
Cash which would, but for such payment, be distributed to the Limited Partner.
Any amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be
treated as having been distributed to such Limited Partner. Each Limited Partner
hereby unconditionally and irrevocably grants to the Partnership a security
interest in such Limited Partner's Partnership Interest to secure such Limited
Partner's obligation to pay to the Partnership any amounts required to be paid
pursuant to this Section 10.5. In the event that a Limited Partner fails to pay
when due any amounts owed to the Partnership pursuant to this Section 10.5, the
General Partner may, in its sole and absolute discretion, elect to make the
payment to the Partnership on behalf of such defaulting Limited Partner, and in
such event shall be deemed to have loaned such amount to such defaulting Limited
Partner and shall succeed to all rights and remedies of the Partnership as
against such defaulting Limited Partner. Without limitation, in such event, the
General Partner shall have the right to receive distributions that would
otherwise be distributable to such defaulting Limited Partner until such time as
such loan, together with all interest thereon, has been paid in full, and any
such distributions so received by the General Partner shall be treated as having
been distributed to the defaulting Limited Partner and immediately paid by the
defaulting Limited Partner to the General Partner in repayment of such loan. Any
amount payable by a Limited Partner hereunder shall bear interest at the highest
base or prime rate of interest published from time to time by any of Wells Fargo
Bank, N.A., plus 4 percentage points, but in no event higher than the maximum
lawful rate of interest on such obligation, such interest to accrue from the
date such amount is due (i.e., 15 days after demand) until such amount is paid
in full. Each Limited Partner shall take such actions as the Partnership or the
General Partner shall request in order to perfect or enforce the security
interest created hereunder.
ARTICLE 11. TRANSFERS AND WITHDRAWALS.
11.1 TRANSFER.
A. The term "Transfer," when used in this Article 11 with respect to a
Unit, shall be deemed to refer to a transaction by which the General Partner
purports to assign all or any part of its General Partner Interest to another
Person or by which a Limited Partner purports to assign all or any part of its
Limited Partner Interest to another Person. The term "Transfer" when used in
this Article 11 does not include any exchange of L.P. Units for shares of Common
Stock pursuant to the Exchange Rights Agreement.
B. No Partnership Interest shall be Transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article 11.
Any Transfer or purported Transfer of a Partnership Interest not made in
accordance with this Article 11 shall be null and void.
11.2 TRANSFER OF THE COMPANY'S PARTNERSHIP INTERESTS.
A. The General Partner may not withdraw as General Partner or transfer its
General Partner Interest or Limited Partner Interest unless (i) the L.P. Unit
Majority (excluding L.P. Units held by the Company) consents to such Transfer or
withdrawal, or (ii) such Transfer is to an entity which is wholly-owned by the
Company and is a Qualified REIT Subsidiary under Section 856(i) of the Code.
B. In the event the General Partner withdraws as General Partner in
accordance with Section 11.2A, the General Partner's General Partner Interest
shall immediately be converted into a Limited Partner Interest.
11.3 LIMITED PARTNERS' RIGHTS TO TRANSFER.
A. Subject to the provisions of this Section 11.3, a Limited Partner (other
than the Company) may, without the consent of the General Partner:
(a) if such Limited Partner is a partnership or a limited liability
company, Transfer such Limited Partner's L.P. Units to any partner of such
Limited Partner or any member of such limited liability company;
(b) Transfer such Limited Partner's L.P. Units to any other Limited
Partner; and
(c) pledge such Limited Partner's L.P. Units to any financial
institution as collateral for any loan with respect to which such Limited
Partner is personally liable.
B. Subject to the provisions of this Section 11.3, a Limited Partner may
Transfer any of such Limited Partner's L.P. Units, other than in accordance with
Section 11.3A, only with the prior written consent of the General Partner which
may be withheld in its sole discretion.
C. If a Limited Partner is subject to Incapacity, the executor,
administrator, trustee, committee, guardian, conservator or receiver of such
Limited Partner's estate shall have all of the rights of a Limited Partner, but
not more rights than those enjoyed by other Limited Partners, for the purpose of
settling or managing the estate and such power as the Incapacitated Limited
Partner possessed to Transfer all or any part of his or its interest in the
Partnership. The Incapacity of a Limited Partner, in and of itself, shall not
dissolve or terminate the Partnership.
D. No Transfer by a Limited Partner of its L.P. Units may be made to any
Person if (i) in the opinion of legal counsel for the Partnership, it would
result in the Partnership being treated as an association taxable as a
corporation; (ii) such Transfer would cause the Partnership to become, with
respect to any Employee Benefit Plan subject to Title I of ERISA, a
"party-in-interest" (as defined in Section 3(14) of ERISA) or a "disqualified
person" (as defined in Section 4975(c) of the Code); (iii) such Transfer would,
in the opinion of legal counsel for the Partnership, cause any portion of the
assets of the Partnership to constitute assets of any Employee Benefit Plan
pursuant to Department of Labor Regulations Section 2510.2-101; (iv) such
Transfer would subject the Partnership to regulation under the Investment
Company Act of 1940, the Investment Advisors Act of 1940 or ERISA; or (v) such
Transfer is a sale or exchange, and such sale or exchange would, when aggregated
with all other sales and exchanges during the 12-month period ending on the date
of the proposed Transfer, result in a Change of Control Transaction.
E. Subject to the foregoing provisions of Section 11.3 and the terms of
Section 12.2, a Limited Partner may transfer L.P. Units to an Affiliate and have
such Affiliate become a Limited Partner.
In addition to the conditions set forth in Sections 11.3D, 11.4, and 12.2
any Transfer pursuant to this Article 11 is subject to the following conditions:
(1) unless such Transfer is being made pursuant to an effective
registration statement under the Securities Act, or pursuant to Rule
144 or Rule 144A thereunder, the transferring Limited Partner shall
deliver to the Company a notice with respect to the proposed transfer,
together with an opinion of counsel in form and substance satisfactory
to the General Partner prepared by counsel reasonably satisfactory to
the General Partner (which shall include, without limitation, counsel
to each of the Limited Partners as of the date hereof), to the effect
that an exemption from registration and qualification under such
Securities Act is available;
(2) the transferring Limited Partner and its transferee shall
each provide a certificate to the General Partner, in form and
substance satisfactory to the General Partner, to the effect that (i)
the proposed transfer will not be effected on or through (a) a United
States national, regional or local securities exchange, (b) a foreign
securities exchange or (c) an interdealer quotation system that
regularly disseminates firm buy or sell quotations by identified
brokers or dealers (including, without limitation, the Nasdaq) by
electronic means or otherwise, and (ii) it is not, and the proposed
transfer will not be made by, through or on behalf of, (a) a Person
who regularly quotes equity interests in the Partnership, such as a
broker or dealer making a market in equity interests in the
Partnership or (b) a Person who regularly makes available to the
public (including customers or subscribers) bid or offer quotes with
respect to equity interests in the Partnership and stands ready to
effect buy or sell transactions at the quoted prices for itself or on
behalf of others; PROVIDED, HOWEVER, that such certificate shall not
be required for any transfer in connection with a registered public
offering;
(3) the transferee must be a United States Person for federal
income tax purposes; and
(4) such transfer must not cause the Partnership to terminate or
lose its status as a partnership for tax purposes.
F. If it shall become unlawful for any Limited Partner to continue to hold
some or all of the L.P. Units held by such Limited Partner, or by reason of
legal or regulatory restrictions the cost to such Limited Partner to continue to
hold such L.P. Units (in relation to the value of such L.P. Units to such
Limited Partner) has, in the reasonable judgment of such Limited Partner,
significantly increased, such Limited Partner may, at any time following the
date three business days after the delivery by such Limited Partner to the
General Partner a notice of the existence of any such restriction, Transfer all
or any portion of the L.P. Units held by such Limited Partner free of any
restrictions imposed under this Agreement (other than those restrictions
required by federal or state laws, including securities, and tax, laws, and
subject to the prospective transferee meeting the requirements of Section 12.2,
and provided that the transferee Limited Partner shall hold its L.P. Units
subject to all of the terms of this Agreement); but only if such Limited Partner
cannot then exercise its Exchange Rights or Put Rights for cash, and the Company
has notified the Limited Partner that the Company will not register for offer
and sale all shares of Common Stock issued upon the exercise of the Exchange
Rights within 90 days. In connection therewith, the Company shall assist such
Limited Partner in disposing of the L.P. Units held by it in a prompt and
orderly manner, and (at the request of such Limited Partner) make available (and
authorize such Limited Partner to make available through the Company) financial
and other information concerning the Company and its Subsidiaries (including,
without limitation, the information described in Rule 144A(d)(4)) to any
prospective purchaser of such L.P. Units (it being agreed that such prospective
purchaser shall be either an "accredited investor" within the meaning of Rule
501 (a) under the Securities Act or a "qualified institutional buyer" within the
meaning of Rule 144A(d)(1) under such Act to the extent that such L.P. Units are
"restricted securities" as such term is defined in Rule 144). The Company may
require that each such prospective purchaser keep confidential, pursuant to
customary confidentiality requirements, any information received by it pursuant
to this provision.
11.4 SUBSTITUTED LIMITED PARTNERS. The General Partner shall have the right
to consent to the admission of a transferee who receives L.P. Units pursuant to
Section 11.3A, C, or E, which consent may be given or withheld by the General
Partner in its sole and absolute discretion. The General Partner's failure or
refusal to permit such transferee to become a Substituted Limited Partner shall
not give rise to any cause of action against the Partnership or any Partner.
11.5 ASSIGNEES. If the General Partner, in its sole and absolute
discretion, does not consent to the admission of any transferee as a Substituted
Limited Partner, as described in Section 11.4, such transferee shall be
considered an Assignee for purposes of this Agreement. An Assignee shall be
deemed to have had assigned to it, and shall be entitled to receive
distributions from the Partnership and the share of Net Income, Net Losses and
any other Tax Items with respect to the L.P. Units assigned to such transferee,
but shall not be deemed to be a holder of L.P. Units for any other purpose under
this Agreement, and shall not be entitled to vote such L.P. Units in any matter
presented to the Limited Partners for a vote (such L.P. Units being deemed to
have been voted on such matter in the same proportion as all other L.P. Units
held by Limited Partners are voted). In the event the Assignee desires to make a
further assignment of any such L.P. Units, such Assignee shall be subject to all
of the provisions of this Article 11 to the same extent and in the same manner
as any Limited Partner desiring to make an assignment of L.P. Units.
11.6 EFFECT OF PROHIBITED TRANSFER. Any transfer made in violation of
Article 11 shall be null and void and of no force and effect.
11.7 GENERAL PROVISIONS.
A. No Limited Partner may withdraw from the Partnership other than as a
result of a permitted Transfer of all of such Limited Partner's L.P. Units in
accordance with this Article 11, or pursuant to the tender or exchange of all of
its L.P. Units pursuant to the exercise of Put Rights or Exchange Rights.
B. Any Limited Partner who shall Transfer all of its L.P. Units in a
Transfer permitted pursuant to this Article 11 shall cease to be a Limited
Partner upon the admission of all Assignees of such L.P. Units as Substituted
Limited Partners. Similarly, any Limited Partner who shall Transfer all of its
L.P. Units pursuant to a tender or exchange of all of its L.P. Units pursuant to
the exercise of Put Rights or Exchange Rights shall cease to be a Limited
Partner.
C. Without the consent of the General Partner, permitted Transfers pursuant
to this Article 11 may be made effective only as of the first day of a Quarter.
D. If any Partnership Interest is transferred or assigned during the year
in compliance with the provisions of this Article 11, or redeemed pursuant to
Section 8.7, or exchanged pursuant to the Exchange Rights Agreement on any day
other than the first day of a Partnership Year, the Net Income, Net Losses, each
item thereof, and all other Tax Items attributable to such interest for such
Partnership Year shall be divided and allocated between the transferor Partner
and the transferee Partner by taking into account their varying interests during
the Partnership Year in accordance with Section 706(d) of the Code, using the
interim closing of the books method. Solely for purposes of making such
allocations, each of such items for the calendar month in which the Transfer or
assignment occurs shall be allocated to the transferee Partner, and none of such
items for the calendar month in which an exchange occurs shall be allocated to
the exchanging Partner, provided, however, that the General Partner may adopt
such other conventions relating to allocations in connection with transfers,
assignments, or exchanges as it determines are necessary or appropriate. All
distributions of Available Cash attributable to such L.P. Units with respect to
which the Partnership Record Date is before the date of such transfer,
assignment, or exchange shall be made to the transferor Partner or the
exchanging Partner, as the case may be, and in the case of a Transfer or
assignment other than an exchange, all distributions of Available Cash
thereafter attributable to such L.P. Units shall be made to the transferee
Partner.
ARTICLE 12. ADMISSION OF PARTNERS.
12.1 ADMISSION OF SUCCESSOR GENERAL PARTNER. A successor to all of the
General Partner Interest pursuant to Article 11 hereof who is proposed to be
admitted as a successor General Partner shall be admitted to the Partnership as
the General Partner, effective upon the Transfer. Any such transferee shall
carry on the business of the Partnership without dissolution. In each case, the
admission shall be subject to the successor General Partner executing and
delivering to the Partnership an acceptance of all of the terms and conditions
of this Agreement, the Acquisition Agreement, and such other documents or
instruments as may be required to effect the admission. In the case of such
admission on any day other than the first day of a Partnership Year, all items
attributable to the General Partner Interest for such Partnership Year shall be
allocated between the transferring General Partner and such successor as
provided in Section 11.6D.
12.2 ADMISSION OF ADDITIONAL AND SUBSTITUTED LIMITED PARTNERS.
A. A Person who makes a Capital Contribution to the Partnership in
accordance with this Agreement after the Effective Date and a Permitted
Transferee pursuant to Article 11 shall be admitted to the Partnership as an
Additional Limited Partner or a Substituted Limited Partner only upon furnishing
to the General Partner (i) evidence of acceptance in form satisfactory to the
General Partner of all of the terms and conditions of this Agreement and the
Acquisition Agreement, including, without limitation, the power of attorney
granted in Section 2.4 hereof and (ii) such other documents or instruments as
may be required in the discretion of the General Partner in order to effect such
Person's admission as an Additional Limited Partner.
B. Notwithstanding anything to the contrary in this Section 12.2, no Person
shall be admitted as an Additional Limited Partner or a Substituted Limited
Partner without the consent of the General Partner, which consent may be given
or withheld in the General Partner's sole and absolute discretion. The admission
of any Person as an Additional Limited Partner or a Substituted Limited Partner
shall become effective on the date upon which the name of such Person is
recorded on the books and records of the Partnership, following the consent of
the General Partner to such admission.
C. If any Additional Limited Partner is admitted to the Partnership on any
day other than the first day of a Partnership Year, then Net Income, Net Losses,
each other Tax Item and all other items allocable among Partners and Assignees
for such Partnership Year shall be allocated among such Additional Limited
Partner and all other Partners and Assignees by taking into account their
varying interests during the Partnership Year in accordance with Section 706(d)
of the Code, using the interim closing of the books method. Solely for purposes
of making such allocations, each of such items for the calendar month in which
an admission of any Additional Limited Partner occurs shall be allocated among
all of the Partners and Assignees, including such Additional Limited Partner.
All distributions of Available Cash with respect to which the Partnership Record
Date is before the date of such admission shall be made solely to Partners and
Assignees, other than the Additional Limited Partner, and all distributions of
Available Cash thereafter shall be made to all of the Partners and Assignees,
including such Additional Limited Partner.
D. A transferee who has been admitted as a Substituted Limited Partner or
an Additional Limited Partner shall have all the rights and powers and be
subject to all the restrictions and liabilities of a Limited Partner under this
Agreement.
12.3 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP. For the
admission to the Partnership of any Partner, the General Partner shall take all
steps necessary and appropriate under the Act to amend the records of the
Partnership and, if necessary, to prepare as soon as practical an amendment of
this Agreement (including an amendment of Appendix I) and, if required by law,
shall prepare and file an amendment to the Certificate and may for this purpose
exercise the power of attorney granted pursuant to Section 2.4 hereof.
ARTICLE 13. DISSOLUTION, LIQUIDATION AND TERMINATION.
13.1 DISSOLUTION. The Partnership shall not be dissolved by the admission
of Substituted Limited Partners or Additional Limited Partners or by the
admission of a successor General Partner in accordance with the terms of this
Agreement. In the event of the withdrawal of the General Partner, any successor
General Partner shall continue the business of the Partnership. The Partnership
shall dissolve, and its affairs shall be wound up, only upon the first to occur
of any of the following ("Liquidating Events"):
(i) the expiration of its term as provided in Section 2.5 hereof;
(ii) an event of withdrawal of the General Partner, as defined in the
Act (other than an event of bankruptcy), unless, within 90 days after such
event of withdrawal a majority in interest of the remaining Partners agree
in writing to continue the business of the Partnership and to the
appointment, effective as of the date of withdrawal, of a successor General
Partner;
(iii) from and after the date of this Agreement through December 31,
2048, an election to dissolve the Partnership made by the General Partner,
with the Consent of Limited Partners holding 66-2/3% or more of the L.P.
Units (including L.P. Units held by the Company);
(iv) on or after January 1, 2049, an election to dissolve the
Partnership made by the General Partner, in its sole and absolute
discretion;
(v) entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Act;
(vi) the sale of all or substantially all of the assets and properties
of the Partnership;
(vii) a final and non-appealable judgment is entered by a court of
competent jurisdiction ruling that the General Partner is bankrupt or
insolvent, or a final and non-appealable order for relief is entered by a
court with appropriate jurisdiction against the General Partner, in each
case under any federal or state bankruptcy or insolvency laws as now or
hereafter in effect, unless prior to the entry of such order or judgment
all of the remaining Partners agree in writing to continue the business of
the Partnership and to the appointment, effective as of a date prior to the
date of such order or judgment, of a substitute General Partner.
13.2 WINDING UP.
A. Upon the occurrence of a Liquidating Event, the Partnership shall
continue solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors and Partners.
No Partner shall take any action that is inconsistent with, or not necessary to
or appropriate for, the winding up of the Partnership's business and affairs.
The General Partner, or, in the event there is no remaining General Partner, any
Person elected by Limited Partners holding at least a majority of the Limited
Partnership Interests (the General Partner or such other Person being referred
to herein as the "Liquidator"), shall be responsible for overseeing the winding
up and dissolution of the Partnership and shall take full account of the
Partnership's liabilities and property and the Partnership property shall be
liquidated as promptly as is consistent with obtaining the fair value thereof,
and the proceeds therefrom (which may, to the extent determined by the General
Partner, include shares of beneficial interest or other securities of the
Company) shall be applied and distributed in the following order:
(i) First, to the payment and discharge of all of the Partnership's
debts and liabilities to creditors other than the Partners;
(ii) Second, to the payment and discharge of all of the Partnership's
debts and liabilities to the General Partner;
(iii) Third, to the payment and discharge of all of the Partnership's
debts and liabilities to the other Partners;
(iv) Fourth, to the General Partner and Limited Partners to the extent
of and in accordance with the positive balances in their Capital Accounts,
after giving effect to all contributions, distributions, and allocations
for all periods; and
(v) The balance, if any, to the Partners according to their Percentage
Interests.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2A hereof which require
liquidation of the assets of the Partnership, but subject to the order of
priorities set forth therein, if prior to or upon dissolution of the Partnership
the Liquidator determines that an immediate sale of part or all of the
Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any asset except those necessary to satisfy
liabilities of the Partnership (including to those Partners as creditors) and/or
distribute to the Partners, in lieu of cash, as tenants in common and in
accordance with the provisions of Section 13.2A hereof, undivided interests in
such Partnership assets as the Liquidator deems not suitable for liquidation.
Any such distributions in kind shall be made only if, in the good faith judgment
of the Liquidator, such distributions in kind are in the best interests of the
Partners, and shall be subject to such conditions relating to the disposition
and management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such properties at
such time. The Liquidator shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may adopt.
C. In the discretion of the Liquidator, a pro rata portion of the
distributions that would otherwise be made to the General Partner and Limited
Partners pursuant to this Article 13 may be:
(1) distributed to a trust established for the benefit of the General
Partner and Limited Partners for the purposes of liquidating Partnership
assets, collecting amounts owed to the Partnership, and paying any
contingent or unforeseen liabilities or obligations of the Partnership or
the General Partner arising out of or in connection with the Partnership.
The assets of any such trust shall be distributed to the General Partner
and Limited Partners from time to time, in the reasonable discretion of the
Liquidator, in the same proportions as the amount distributed to such trust
by the Partnership would otherwise have been distributed to the General
Partner and Limited Partners pursuant to this Agreement; or
(2) withheld or escrowed to provide a reasonable reserve for
Partnership liabilities (contingent or otherwise) and to reflect the
unrealized portion of any installment obligations owed to the Partnership,
provided that such withheld or escrowed amounts shall be distributed to the
General Partner and Limited Partners in the manner and order of priority
set forth in Section 13.2A as soon as practicable.
13.3 OBLIGATION TO CONTRIBUTE DEFICIT. In the event the Partnership is
"liquidated" within the meaning Section 1.704-1(b)(2)(ii)(G) of the Regulations,
if any Partner's Adjusted Contributions are less than zero (after giving effect
to all contributions, distributions, and allocations for all Fiscal Years,
including the Fiscal Year during which such liquidation occurs), such Partner
shall contribute to the capital of the Partnership the amount necessary to
restore such Partner's Capital Account to zero in compliance with Regulations
Section 1.704-1(b)(2(ii)(B)(3).
13.4 RIGHTS OF LIMITED PARTNERS. Except as otherwise provided in this
Agreement, each Limited Partner shall look solely to the assets of the
Partnership for the return of its Adjusted Capital Contributions and shall have
no right or power to demand or receive property other than cash from the
Partnership. Except as otherwise provided in this Agreement, no Limited Partner
shall have priority over any other Partner as to the return of its Adjusted
Capital Contributions, distributions, or allocations.
13.5 NOTICE OF DISSOLUTION. In the event a Liquidating Event occurs or an
event occurs that would, but for the provisions of an election or objection by
one or more Partners pursuant to Section 13.1, result in a dissolution of the
Partnership, the General Partner shall, within 30 days thereafter, provide
written notice thereof to each of the Partners.
13.6 TERMINATION OF PARTNERSHIP AND CANCELLATION OF CERTIFICATE OF LIMITED
PARTNERSHIP. Upon the completion of the liquidation of the Partnership' s
assets, as provided in Section 13.2 hereof, the Partnership shall be terminated,
a certificate of cancellation shall be filed, and all qualifications of the
Partnership as a foreign limited partnership in jurisdictions other than the
state of Delaware shall be canceled and such other actions as may be necessary
to terminate the Partnership shall be taken.
13.7 REASONABLE TIME FOR WINDING-UP. 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 pursuant to Section 13.2 hereof in order to minimize
any losses otherwise attendant upon such winding-up, and the provisions of this
Agreement shall remain in effect among the Partners during the period of
liquidation.
13.8 WAIVER OF PARTITION. Each Partner hereby waives any right to partition
of the Partnership property.
13.9 DEEMED DISTRIBUTION AND RECONTRIBUTION. Notwithstanding any other
provisions of this Article 13, in the event the Partnership is liquidated within
the meaning of Regulations Section 1.704-1(b)(2)(ii)(G) but no Liquidating Event
has occurred, the Property shall not be liquidated, the Partnership's
liabilities shall not be paid or discharged, and the Partnership's affairs shall
not be wound up. Instead, the Partnership shall be deemed to have distributed
the Property in kind to the Partners, who shall be deemed to have assumed and
taken subject to all Partnership liabilities, all in accordance with their
respective Capital Accounts, and if any Partner has an Adjusted Capital Account
Deficit (after giving effect to all contributions, distributions, and
allocations for all Fiscal Years, including the Fiscal Year during which such
liquidation occurs) such Partner shall contribute to the capital of the
Partnership the amount necessary to restore such deficit balance to zero in
compliance with Regulations Section 1.704-1(b)(2(ii)(b)(3). Immediately
thereafter, the Partners shall be deemed to have recontributed the property in
kind to the Partnership, which shall be deemed to have assumed and taken subject
to all such liabilities.
ARTICLE 14. AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS.
14.1 AMENDMENTS.
A. Amendments to this Agreement may be proposed by the General Partner or
by any Limited Partners (other than the Company) holding in the aggregate 25% or
more of the Partnership Interests. Following such proposal, the General Partner
shall submit any proposed amendment to the Limited Partners. The General Partner
shall seek the written vote of the Partners on the proposed amendment or shall
call a meeting to vote thereon and to transact any other business that it may
deem appropriate. For purposes of obtaining a written vote, the General Partner
may require a response within a reasonable specified time, but not less than 15
days, and failure to respond in such time period shall constitute a vote which
is consistent with the General Partner's recommendation with respect to the
proposal. Except as provided in Section 8.9, 13.1C, 14.1B, 14.1C or 14.1D, a
proposed amendment shall be adopted and be effective as an amendment hereto if
it is approved by the General Partner and it receives the Consent of Limited
Partners holding 50% or more of the Percentage Interests of the Limited Partners
(including Limited Partner Interests held by the Company).
B. Notwithstanding any provisions of Sections 8.9 and 14.1A to the
contrary, the General Partner shall have the power, without the consent of the
Limited Partners, to amend this Agreement as may be required to facilitate or
implement any of the following purposes:
(1) to add to the obligations of the General Partner or surrender any
right or power granted to the General Partner or any Affiliate of the
General Partner for the benefit of the Limited Partners;
(2) to reflect the admission, substitution, termination, or withdrawal
of Partners in accordance with this Agreement;
(3) to set forth the designations, rights, powers, duties, and
preferences of the holders of any additional Partnership Interests issued
pursuant to Section 4.3 hereof;
(4) to reflect a change that is of an inconsequential nature and does
not adversely affect the Limited Partners in any material respect, or to
cure any ambiguity, correct or supplement any provision in this Agreement
not inconsistent with law or with other provisions, or make other changes
with respect to matters arising under this Agreement that will not be
inconsistent with law or with the provisions of this Agreement; and
(5) to satisfy any requirements, conditions, or guidelines contained
in any order, directive, opinion, ruling or regulation of a federal or
state agency or contained in federal or state law.
The General Partner shall provide notice to the Limited Partners when any action
under this Section 14.1B is taken.
C. Notwithstanding provision of Section 14.1A and 14.1B to the contrary,
this Agreement shall not be amended without the Consent of each Partner
adversely affected if such amendment would (i) convert a Limited Partner's
interest in the Partnership into a General Partner Interest; (ii) modify the
limited liability of a Limited Partner in a manner adverse to such Limited
Partner; (iii) alter rights of the Partner to receive distributions pursuant to
Article 5 or Article 13, or the allocations specified in Article 6 (except as
permitted pursuant to Article IV and Section 14.1B(3) hereof); (iv) cause the
termination of the Partnership prior to the time set forth in Section 2.5 or
13.1; or (v) amend this Section 14.1C. Further, no amendment may alter the
restrictions on the General Partner's authority set forth in Section 13.1C
without the Consent specified in that section.
14.2 MEETINGS OF THE PARTNERS.
A. Meetings of the Partners may be called by the General Partner and shall
be called upon the receipt by the General Partner of a written request by
Limited Partners (other than the Company) holding 25% or more of the Partnership
Interests. The request shall state the nature of the business to be transacted.
Notice of any such meeting shall be given to all Partners not less than 7 days
nor more than 30 days prior to the date of such meeting. Partners may vote in
person or by proxy at such meeting. Whenever the vote or Consent of the Limited
Partners is permitted or required under this Agreement, such vote or Consent may
be given at a meeting of the Partners or may be given in accordance with the
procedure prescribed in Section 14.1A hereof. Except as otherwise expressly
provided in this Agreement, the consent of holders of a majority of the
Percentage Interests held by Partners (including Limited Partnership Interests
held by the Company) shall control.
B. Any action required or permitted to be taken at a meeting of the
Partners may be taken without a meeting if a written consent setting forth the
action so taken is signed by a majority of the Percentage Interests of the
Partners (or such other percentage as is expressly required by this Agreement).
Such consent may be in one instrument or in several instruments, and shall have
the same force and effect as a vote of a majority of the Percentage Interests of
the Partners (or such other percentage as is expressly required by this
Agreement). Such consent shall be filed with the General Partner. An action so
taken shall be deemed to have been taken at a meeting held on the effective date
so certified.
C. Each Limited Partner may authorize any Person or Persons to act for him
by proxy on all matters in which a Limited Partner is entitled to participate,
including waiving notice of any meeting, or voting or participating at a
meeting. Every proxy must be signed by the Limited Partner or his
attorney-in-fact. No proxy shall be valid after the expiration of 11 months from
the date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the Limited Partner executing it, such revocation
to be effective upon the Partnership's receipt of written notice of such
revocation from the Limited Partner executing such proxy.
D. Each meeting of the Partners shall be conducted by the General Partner
or such other Person as the General Partner may appoint pursuant to such rules
for the conduct of the meeting as the General Partner or such other Person deems
appropriate. Meetings of Partners may be conducted in the same manner as
meetings of the shareholders of the Company and may be held at the same time,
and as part of, meetings of the shareholders of the Company.
ARTICLE 15. GENERAL PROVISIONS.
15.1 ADDRESSES AND NOTICE. Any notice, demand, request or report required
or permitted to be given or made to a Partner or Assignee under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other means of written
communication to the Partner or Assignee (including electronic mail and
electronic facsimile transmission if delivery in that manner has been confirmed)
at the address set forth in Appendix I or such other address of which the
Partner shall notify the General Partner in writing.
15.2 TITLES AND CAPTIONS. All article or section titles or captions in this
Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof. Except as specifically provided otherwise, references to
"Articles" and "Sections" are to Articles and Sections of this Agreement.
15.3 PRONOUNS AND PLURALS. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
15.4 FURTHER ACTION. The parties shall execute and deliver all documents,
provide all information and take or refrain from taking action as may be
necessary or appropriate to achieve the purposes of this Agreement.
15.5 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assigns.
15.6 CREDITORS. Other than as expressly set forth herein with respect to
the Indemnitees, none of the provisions of this Agreement shall be for the
benefit of, or shall be enforceable by, any creditor of the Partnership.
15.7 WAIVER. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or condition.
15.8 COUNTERPARTS. This Agreement may be executed in counterparts, all of
which together shall constitute one agreement binding on all of the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
15.9 APPLICABLE LAW. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of laws thereof.
15.10 INVALIDITY OF PROVISIONS. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
15.11 ENTIRE AGREEMENT. This Agreement contains the entire understanding
and agreement among the Partners with respect to the subject matter hereof and
supersedes any other prior written or oral understandings or agreements among
them with respect thereto.
15.12 GUARANTY BY THE COMPANY. The Company unconditionally and irrevocably
guarantees to the Limited Partners the performance by the General Partner of the
General Partner' s obligations under this Agreement. This guarantee is
exclusively for the benefit of the Limited Partners and shall not extend to the
benefit any creditor of the Partnership.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
[GENERAL PARTNER]
By:
-----------------------------------
Title:
LIMITED PARTNERS:
[TO COME]
APPENDIX I
PARTNERS' [ADJUSTED] CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Name Cash Agreed Total L.P. Percentage
and Contribution* Value of Contribution Units Interest
Address Contributed
of Property
Partner
GENERAL
PARTNER
[General
Partner]
LIMITED
PARTNERS
[General
Partner]
[Other
Limited
Partners
To Come]
*The Company's Cash Contribution shall be increased by all transaction costs
paid by the Company out of the Company Cash pursuant to the Acquisition
Agreement.
APPENDIX II
ALLOCATIONS OF PARTNERSHIP INTERESTS
1. ALLOCATION OF NET INCOME AND NET LOSS.
(a) NET INCOME. Except as otherwise provided in this Appendix II, Net
Income (or items thereof) (other than Net Income, or items thereof, arising in
connection with a Terminating Capital Transaction) for any fiscal year or other
applicable period shall be allocated to the Partners in accordance with their
respective Percentage Interests.
(b) NET LOSS. Except as otherwise provided in this Appendix II, Net Loss
(or items thereof) of the Partnership for each fiscal year or other applicable
period shall be allocated to the Partners in accordance with the Partners'
respective Percentage Interests. Notwithstanding the preceding sentence, to the
extent any Net Loss (or items thereof) allocated to a Partner under this
subparagraph (b) would cause such Partner (hereinafter, a "Restricted Partner")
to have an Adjusted Capital Account Deficit, or increase the amount of an
existing Adjusted Capital Account Deficit, as of the end of the fiscal year or
other applicable period to which such Net Loss relates, such Net Loss shall not
be allocated to such Restricted Partner and instead shall be allocated to the
other Partner(s) (hereinafter, the "Permitted Partners") pro rata in accordance
with each Permitted Partner's Percentage Interest.
(c) TERMINATING CAPITAL TRANSACTION; LIQUIDATION. Allocations of Net
Income or Net Loss (or items thereof) in connection with a Terminating Capital
Transaction or Liquidation of the Partnership shall first be made so that, to
the extent possible, each Partner's Capital Account balance is equal to such
Partner's Adjusted Contribution, and the remainder of such Net Income or Net
Loss (or items thereof) shall be allocated to the Partners in accordance with
their Percentage Interests. Notwithstanding the preceding sentence, to the
extent any Net Loss (or items thereof) would be allocated to a Restricted
Partner under this subparagraph (c), such Net Loss shall not be allocated to
such Restricted Partner and instead shall be allocated to the Permitted Partners
pro rata in accordance with each Permitted Partner's Percentage Interest.
(d) RULES OF CONSTRUCTION.
(1) CAPITAL ACCOUNT INCREASES. For purposes of making allocations
pursuant to subparagraph 1(c) of this Appendix II, a Partner's Capital Account
balance shall be deemed to be increased by such Partner's share of any
Partnership Minimum Gain and Partner Minimum Gain remaining at the close of the
fiscal period in respect of which such allocations are being made.
(2) CHANGE IN PERCENTAGE INTERESTS. In the event any Partner's
Percentage Interest changes during a fiscal year for any reason, including
without limitation, the Transfer of any interest in the Partnership, the tax
allocations contained in this Appendix II shall be applied as necessary to
reflect the varying interests of the Partners during such year.
2. SPECIAL ALLOCATIONS.
Notwithstanding any provisions of paragraph 1 of this Appendix II, the
following special allocations shall be made.
(a) MINIMUM GAIN CHARGEBACK (NONRECOURSE LIABILITIES). Except as otherwise
provided in Section 1.704-2(f) of the Regulations, if there is a net decrease in
Partnership Minimum Gain for any Partnership 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 to the extent required by Regulations
Section 1.704-2(f). The items to be so allocated shall be determined in
accordance with Sections 1.704-2(f) and (j)(2) of the Regulations. This
subparagraph 2(a) is intended to comply with the minimum gain chargeback
requirement in said Section of the Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this subparagraph 2(a) shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant hereto.
(b) PARTNER MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Section 1.704-2(i)(4) of the Regulations, if there is a net decrease in Partner
Minimum Gain attributable to a Partner Nonrecourse Debt during any fiscal year,
each Partner who has a share of the Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Section 1.704- 2(i)(5)
of the Regulations, shall be specially allocated items of Partnership income and
gain for such year (and, if necessary, subsequent years) in an amount equal to
that Partner's share of the net decrease in the Partner Minimum Gain
attributable to such Partner Nonrecourse Debt to the extent and in the manner
required by Section 1.704-2(i) of the Regulations. The items to be so
allocated shall be determined in accordance with Sections 1.704-2(i)(4) and
(j)(2) of the Regulations. This subparagraph 2(b) is intended to comply with
the minimum gain chargeback requirement with respect to Partner Nonrecourse
Debt contained in said Section 1.704-2(i)(4) of the Regulations and shall be
interpreted consistently therewith. Allocations pursuant to this subparagraph
2(b) shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant hereto.
(c) QUALIFIED INCOME OFFSET. In the event a Partner unexpectedly
receives any adjustments, allocations or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, and such Partner has
an Adjusted Capital Account Deficit, items of Partnership income (including
gross income) and gain shall be specially allocated to such Partner in an
amount and manner sufficient to eliminate the Adjusted Capital Account
Deficit as quickly as possible as required by the Regulations. This
subparagraph 2(c) is intended to constitute a "qualified income offset" under
Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted
consistently therewith.
(d) OTHER CHARGEBACK OF IMPERMISSIBLE NEGATIVE CAPITAL ACCOUNT. To the
extent any Partner has an Adjusted Capital Account Deficit at the end of any
Partnership Year, each such Partner shall be specially allocated items of
Partnership income (including gross income) and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
paragraph 2(d) shall be made if and only to the extent that such Partner would
have an Adjusted Capital Account Deficit after all other allocations provided
for in this Appendix II have been tentatively made as if this paragraph 2(d)
were not in the Agreement.
(e) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any fiscal year or
other applicable period shall be allocated to the Partners in accordance with
their respective Percentage Interests.
(f) PARTNER NONRECOURSE DEDUCTIONS. Partner Nonrecourse Deductions for any
fiscal year or other applicable period with respect to a Partner Nonrecourse
Debt shall be specially allocated to the Partner that bears the economic risk of
loss for such Partner Nonrecourse Debt (as determined under Sections
1.704-2(b)(4) and 1.704-2(i)(1) of the Regulations).
(g) INTENT OF ALLOCATIONS. The parties intend that the allocation
provisions of this Appendix II shall result in final Capital Account balances of
the Partners that initially are equal to each Partner's Adjusted Contribution
and are then in proportion to the Partners' respective Percentage Interests, so
that when liquidating distributions are made in accordance with such final
Capital Account balances under Section 13.2A(4) hereof, such distributions will
be able to return to each Partner its Adjusted Contribution and then will be
made in proportion to the Partners' respective Percentage Interests. To the
extent that such final Capital Account balances do not so reflect the provisions
of this Appendix II, income and loss of the Partnership for the current year and
future years, as computed for book purposes, shall be allocated among the
Partners so as to result in final Capital Account balances reflecting the
provisions of this Appendix II, and to the extent such allocations of items of
income (including gross income) and deduction do not result in such final
Capital Account balances, then, income and loss of the Partnership for prior
open years, as computed for book purposes (or items of gross income and
deduction of the Partnership for such years, as computed for book purposes)
shall be reallocated among the Partners consistent with the foregoing. This
subparagraph shall control notwithstanding any reallocation of income, loss, or
items thereof, as computed for book purposes, by the Internal Revenue Service or
any other taxing authority.
(h) SECTION 754 ADJUSTMENT. To the extent an adjustment to the adjusted
tax basis of any asset of the Partnership pursuant to Section 734(b) of the Code
or Section 743(b) 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 gain or loss shall be specially
allocated among the Partners in a manner consistent with the manner in which
each of their respective Capital Accounts are required to be adjusted pursuant
to such section of the Regulations.
(i) GROSS INCOME ALLOCATION. There shall be specially allocated to the
General Partner an amount of Partnership income and gain during each Partnership
Year or portion thereof, before any other allocations are made hereunder, which
is equal to the excess, if any, of the cumulative distributions of cash made to
the General Partner under Section 7.3B hereof over the cumulative allocations of
Partnership income and gain to the General Partner pursuant to this Section (i)
of this Appendix II.
3. TAX ALLOCATIONS.
(a) ITEMS OF INCOME OR LOSS. Except as is otherwise provided in this
Appendix II, an allocation of Partnership Net Income or Net Loss to a Partner
shall be treated as an allocation to such Partner of the same share of each item
of income, gain, loss, deduction and item of tax-exempt income or Section
705(a)(2)(B) expenditure (or item treated as such expenditure pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i)) ("Tax Items") that is taken into
account in computing Net Income or Net Loss.
(b) SECTION 1245/1250 RECAPTURE. If any portion of gain from the sale of
Partnership assets is treated as gain which is ordinary income by virtue of the
application of Code Sections 1245 or 1250 ("Affected Gain"), then 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. This subparagraph 3(b) shall not alter the amount of Net Income (or
items thereof) allocated among the Partners, but merely the character of such
Net Income (or items thereof). 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 respective
period.
(c) PRECONTRIBUTION GAIN. The Partnership may elect the traditional method
of allocation contained in Section 1.704- 3(b) of the Regulations to take into
account any variation between the adjusted basis and the fair market value of
the Initial Contributed Property at the time of the contribution
("Precontribution Gain") on a Property-by-Property basis. By executing this
Agreement, each Partner hereby agrees to report income, gain, loss and deduction
on such Partner's federal income tax return in a manner that is consistent with
the use of the traditional method of allocation with respect to the Initial
Contributed Property. With respect to any Contributed Property, the Partnership
shall use any permissible method contained in the Regulations promulgated under
Section 704(c) of the Code selected by the General Partner, in its sole
discretion, to take into account any variation between the adjusted basis of
such asset and the fair market value of such asset as of the time of the
contribution. Each Partner hereby agrees to report income, gain, loss and
deduction on such Partner's federal income tax return in a manner consistent
with the method used by the Partnership.
(d) ALLOCATIONS RESPECTING SECTION 704(C) AND Revaluations. If any asset
has a Gross Asset Value which is different from the Partnership's adjusted basis
for such asset for federal income tax purposes because the Partnership has
revalued such asset pursuant to Regulations Section 1.704-1(b)(2)(iv)(f), the
allocations of Tax Items shall be made in accordance with the principles of
Section 704(c) of the Code and the Regulations and the methods of allocation
promulgated thereunder, provided, however, that the General Partner shall elect
with respect to each Initial Contributed Property, to allocate the income, gain,
loss and deduction with respect to such Property using the "traditional method"
described in Regulations Section 1.704-3(b) unless the majority of the Limited
Partners affected thereby otherwise instruct the General Partner. The intent of
this Section 3(d) and Section 3(c) above is that each Partner who contributed to
the capital of the Partnership a Contributed Property will bear, through reduced
allocations of depreciation, increased allocations of gain or other items, the
tax detriments associated with any Precontribution Gain. This Section 3(d) and
Section 3(c) are to be interpreted consistently with such intent.
(e) EXCESS NONRECOURSE LIABILITY SAFE HARBOR. Pursuant to Regulations
Section 1.752-3(a)(3), solely for purposes of determining each Partner's
proportionate share of the "excess nonrecourse liabilities" of the Partnership
(as defined in Regulations Section 1.752-3(a)(3)), the Partners' respective
interests in Partnership profits shall be determined in accordance with each
Partner's Percentage Interest; provided, however, that each Partner who has
contributed an asset to the Partnership shall be allocated, to the extent
possible, a share of "excess nonrecourse liabilities" of the Partnership which
results in such Partner being allocated nonrecourse liabilities in an amount
which is at least equal to the amount of income pursuant to Section 704(c) of
the Code and the Regulations promulgated thereunder (the "Liability Shortfall").
In the event there is an insufficient amount of nonrecourse liabilities to
allocate to each Partner an amount of nonrecourse liabilities equal to the
Liability Shortfall, then an amount of nonrecourse liabilities in proportion to,
and to the extent of, the Liability Shortfall shall be allocated to each
Partner.
(f) REFERENCES TO REGULATIONS. Any reference in this Appendix II or the
Agreement to a provision of proposed and/or temporary Regulations shall, in the
event such provision is modified or renumbered, be deemed to refer to the
successor provision as so modified or renumbered, but only to the extent such
successor provision applies to the Partnership under the effective date rules
applicable to such successor provision.
(g) SUCCESSOR PARTNERS. For purposes of this Appendix II, a transferee of
a Partnership Interest shall be deemed to have been allocated the Net Income,
Net Loss and other items of Partnership income, gain, loss, deduction and credit
allocable to the transferred Partnership Interest that previously have been
allocated to the transferor Partner pursuant to this Agreement.
(h) LIMITATION TO PRESERVE REIT STATUS. Notwithstanding anything else in
this Agreement, to the extent that the amount paid, credited, distributed or
reimbursed by the Partnership or any Partners to, for or with respect any
Partner that is a REIT ("REIT Partner") or its officers, directors, employees or
agents, whether as a reimbursement, fee, expense or indemnity (a "REIT
Payment"), would constitute gross income to the REIT Partner for purposes of
Section 856 (c)(2) or Section 856(c)(3) of the Code, then, notwithstanding any
other provision of this Agreement, the amount of such REIT Payments, as selected
by the General Partner in its discretion from among items of potential
distribution, reimbursement, fees, expenses and indemnities, shall be reduced
for any Fiscal Year so that the REIT Payments, as so reduced, to, for or with
respect to such REIT Partner shall not exceed the lesser of:
(i) an amount equal to the excess, if any, of (x) four and
nine-tenths percent (4.9%) of the REIT Partner total gross income (but excluding
the amount of any REIT Payments) for the Fiscal Year that is described in
subSections (A) through (H) of Section 856(c)(2) over (y) the amount of gross
income (within the meaning of Section 856(c)(2)) derived by the REIT Partner
from sources other than those described in subSections (A) through (H) of
Section 856(c)(2) (but not including the amount of any REIT Payments); or
(ii) an amount equal to the excess, if any, of (x) 24% of the REIT
Partner's total gross income (but excluding the amount of any REIT Payments) for
the Fiscal Year that is described in subSections (A) through (I) of Section
856(c)(3) over (y) the amount of gross income (within the meaning of Section
856(c)(3)) derived by the REIT Partner from sources other than those described
in subSections (A) through (I) of Section 856(c)(3) (but not including the
amount of any REIT Payments);
PROVIDED, HOWEVER, that REIT payments in excess of the amounts set forth in
clauses (i) and (ii) above may be made if the General Partner, as a condition
precedent, obtains an opinion of tax counsel that the receipt of such excess
amounts shall not adversely affect the REIT Partner's ability to qualify as a
REIT. To the extent that REIT Payments may not be made in a Fiscal Year as a
consequence of the limitations set forth in this Section 3(h), such REIT
Payments shall carry over and shall be treated as arising in the following
Fiscal Year. Nothing in this Section 3(h) shall permit the General Partner to
allocate income of the Partnership to any Partner in excess of the income that
would otherwise be allocated to it under Article 6 without regard to this
Section 3(h). The purpose of the limitations contained in this Section 3(h) is
to prevent any REIT Partner from failing to qualify as a REIT under the Code by
reason of such REIT Partner's share of items, including distributions,
reimbursements, fees, expenses or indemnities, receivable directly or indirectly
from the Partnership or the Partners, and this Section 3(h) shall be interpreted
and applied to effectuate such purpose.