<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 333-49163
AMB PROPERTY, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-3281941
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
505 MONTGOMERY ST., SAN FRANCISCO, CALIFORNIA 94111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(415) 394-9000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
As of October 31, 1998, there were 90,092,941 common partnership units of
the Registrant outstanding.
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AMB PROPERTY, L.P.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1997 and September 30, 1998
(unaudited) 1
Consolidated Statements of Operations for the nine and three months ended
September 30, 1998 (unaudited) 2
Consolidated Statement of Cash Flows for the nine months ended September 30,
1998 (unaudited) 3
Consolidated Statement of Partners' Capital for the nine months ended
September 30, 1998 (unaudited) 4
Notes to Consolidated Financial Statements (unaudited) 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 16
</TABLE>
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<PAGE> 3
AMB PROPERTY, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND SEPTEMBER 30, 1998
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT UNIT AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, 1997 SEPTEMBER 30, 1998
----------- -----------
<S> <C> <C>
ASSETS
Investments in real estate:
Land and improvements ...................................................... $ 550,635 $ 718,855
Buildings and improvements ................................................. 1,822,516 2,376,390
Construction in progress ................................................... 69,848 128,685
----------- -----------
Total investments in properties ......................................... 2,442,999 3,223,930
Accumulated depreciation and amortization .................................. (4,153) (43,904)
----------- -----------
Net investments in properties ........................................... 2,438,846 3,180,026
Investment in unconsolidated joint venture ................................. -- 67,191
----------- -----------
Net investments in real estate .......................................... 2,438,846 3,247,217
Cash and cash equivalents ...................................................... 39,968 33,206
Other assets ................................................................ 27,441 46,850
----------- -----------
Total assets ............................................................ $ 2,506,255 $ 3,327,273
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Debt:
Unsecured credit facility .................................................. $ 150,000 $ 205,000
Senior debt securities ..................................................... -- 400,000
Secured debt ............................................................... 535,652 701,602
----------- -----------
Total debt .............................................................. 685,652 1,306,602
Other liabilities .............................................................. 49,350 109,606
Payable to affiliates .......................................................... 38,071 --
----------- -----------
Total liabilities ....................................................... 773,073 1,416,208
Commitments and contingencies .................................................. -- --
Minority interests ............................................................. 15,784 57,916
Partners' Capital:
General Partner, 85,645,102 and 85,645,102 units outstanding, respectively,
and 4,000,000 preferred units with a $100,000
liquidation preference as of September 30, 1998 ............................ 1,668,030 1,766,676
Limited Partners, 2,542,163 and 4,447,839 units outstanding,
respectively ............................................................... 49,368 86,473
----------- -----------
Total partners' capital ................................................. 1,717,398 1,853,149
----------- -----------
Total liabilities and partners' capital ................................. $ 2,506,255 $ 3,327,273
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
1
<PAGE> 4
AMB PROPERTY, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT UNIT AND PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1998 1998
------------ ------------
<S> <C> <C>
REVENUES
Rental revenues ............................ $ 92,841 $ 251,844
Investment management and other income ..... 1,220 3,016
------------ ------------
Total revenues .......................... 94,061 254,860
OPERATING EXPENSES
Property operating expenses ................ 12,720 33,951
Real estate taxes .......................... 12,413 33,686
General and administrative ................. 2,832 8,694
Interest, including amortization ........... 19,544 47,105
Depreciation and amortization .............. 14,750 40,052
------------ ------------
Total operating expenses ................ 62,259 163,488
------------ ------------
Income from operations before minority
interests ............................. 31,802 91,372
Minority interests' share of net income .... (1,427) (3,085)
------------ ------------
Net income .............................. 30,375 88,287
Preferred unit distributions ............... (1,514) (1,514)
------------ ------------
Net income available to general and
limited partners ........................ $ 28,861 $ 86,773
Income available to unitholders attributable to:
General Partner ........................... $ 27,358 $ 83,243
Limited Partners .......................... 1,503 3,530
------------ ------------
$ 28,861 $ 86,773
============ ============
INCOME PER COMMON UNIT
Basic ...................................... $ 0.32 $ 0.97
============ ============
Diluted .................................... $ 0.32 $ 0.97
============ ============
WEIGHTED AVERAGE COMMON UNITS OUTSTANDING
Basic ...................................... 89,675,763 89,214,581
============ ============
Diluted .................................... 90,053,107 89,188,352
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
2
<PAGE> 5
AMB PROPERTY, L.P.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998
------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...................................................................... $ 88,287
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ............................................... 40,052
Straight-line rents ......................................................... (8,083)
Amortization of debt premiums and financing costs ........................... (1,921)
Minority interests' share of net income ..................................... 3,085
Equity in loss of AMB Investment Management ................................. 394
Equity earnings of unconsolidated joint venture ............................. (833)
Changes in assets and liabilities:
Other assets ................................................................ (11,795)
Other liabilities ........................................................... 28,047
---------
Net cash provided by operating activities ................................ 137,233
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for property acquisitions ............................................. (397,388)
Additions to land and building improvements ..................................... (26,700)
Additions to tenant improvements and leasing costs .............................. (7,622)
Additions to construction in progress ........................................... (67,078)
Acquisition of interest in unconsolidated joint venture ......................... (67,149)
Distributions received from investment in unconsolidated joint venture .......... 1,011
Reduction of payable to affiliates in connection with Formation Transactions .... (38,071)
---------
Net cash used in investing activities .................................... (602,997)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on unsecured credit facilities ....................................... 546,000
Borrowings on secured debt ...................................................... 54,554
Payments on unsecured credit facilities ......................................... (491,000)
Payments on secured debt ........................................................ (62,916)
Proceeds from sale of senior debt securities (net of issuance costs) ............ 399,166
Contributions from General Partner in connection with sale of Preferred Stock ... 96,100
Distributions to General Partner, Limited Partners and preferred unitholders .... (62,251)
Distributions to minority interests ............................................. (20,651)
---------
Net cash provided by (used in) financing activities ...................... 459,002
---------
Net increase in cash and cash equivalents ....................................... (6,762)
Cash and cash equivalents at beginning of period ................................ 39,968
---------
Cash and cash equivalents at end of period ...................................... $ 33,206
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest .................................................................... $ 39,291
=========
Property acquisitions:
Purchase price .............................................................. $ 674,365
Assumption of secured debt .................................................. (171,988)
Minority interests' contribution ............................................ (104,989)
---------
Cash paid for property acquisitions .................................... $ 397,388
=========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE> 6
AMB PROPERTY, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GENERAL PARTNER
----------------------------------------------------
PREFERRED UNITS COMMON UNITS LIMITED PARTNERS TOTAL
--------------------- --------------------------- -------------------------- -----------
UNITS AMOUNT UNITS AMOUNT UNITS AMOUNT
--------- -------- ------------ ----------- ----------- -----------
<S> <S> <S> <C> <C> <C> <C> <C>
DECEMBER 31, 1997 -- $ -- 85,645,102 $ 1,668,030 2,542,163 $ 49,368 $ 1,717,398
Contributions . 4,000,000 96,100 -- -- 1,905,676 44,619 140,719
Net income .... -- 1,514 -- 81,729 -- 3,530 86,773
Reallocation .. -- -- -- 7,540 -- (7,540) --
Distributions . -- (1,514) -- (86,723) -- (3,504) (91,741)
--------- ------- ---------- ----------- ----------- ----------- -----------
SEPTEMBER 30, 1998 4,000,000 $96,100 85,645,102 $ 1,670,576 4,447,839 $ 86,473 $ 1,853,149
========= ======= ========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE> 7
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND UNIT AMOUNTS)
1. ORGANIZATION AND FORMATION
AMB Property Corporation, a Maryland corporation (the "Company"), commenced
operations as a fully integrated real estate company effective with the
completion of its initial public offering (the "IPO") on November 26, 1997. The
Company elected to be taxed as a real estate investment trust ("REIT") under
Sections 856 through 860 of the Internal Revenue Code of 1986 (the "Code"),
commencing with its taxable year ended December 31, 1997, and believes its
current organization and method of operation will enable it to maintain its
status as a REIT. The Company, through its controlling interest in its
subsidiary AMB Property, L.P., a Delaware limited partnership (the "Operating
Partnership"), is engaged in the acquisition, ownership, operation, management,
renovation, expansion and development of industrial buildings and community
shopping centers in target markets nationwide. Unless the context otherwise
requires, the "Company" means AMB Property Corporation, the Operating
Partnership and its other controlled subsidiaries.
The Company and the Operating Partnership were formed shortly before
consummation of the IPO. AMB Institutional Realty Advisors, Inc., a California
corporation and registered investment advisor (the "Predecessor") formed AMB
Property Corporation, a wholly owned subsidiary, and merged with and into the
Company (the "Merger") in exchange for 4,746,616 shares of the Company's Common
Stock. In addition, the Company and the Operating Partnership acquired, through
a series of mergers and other transactions, 31.8 million rentable square feet of
industrial property and 6.3 million rentable square feet of retail property in
exchange for 65,022,185 shares of the Company's Common Stock, 2,542,163 limited
partner interests ("LP Units") in the Operating Partnership, the assumption of
debt and, to a limited extent, cash. The net assets of the Predecessor and the
properties acquired with Common Stock were contributed to the Operating
Partnership in exchange for 69,768,801 units. The purchase method of accounting
was applied to the acquisition of the properties. Collectively, the Merger and
the other formation transactions described above are referred to as the
"Formation Transactions."
On November 26, 1997, the Company completed its IPO of 16,100,000 shares of
Common Stock, $0.01 par value per share (the "Common Stock") for $21.00 per
share, resulting in gross offering proceeds of approximately $338,100. The net
proceeds of approximately $300,032 were used to repay indebtedness, to purchase
interests from certain investors who elected not to receive shares or units in
connection with the Formation Transactions, to fund property acquisitions, and
for general corporate working capital requirements.
As of September 30, 1998, the Company owned an approximate 95.1% general
partner interest in the Operating Partnership. The remaining 4.9% limited
partner interest is owned by nonaffiliated investors. For local law purposes,
properties in certain states are owned through limited partnerships and limited
liability companies owned 99% by the Operating Partnership and 1% by a wholly
owned subsidiary of the Company. The ownership of such properties through such
entities does not materially affect the Company's overall ownership of the
interests in the properties. As the sole general partner of the Operating
Partnership, the Company has the full, exclusive and complete responsibility and
discretion in the day-to-day management and control of the Operating
Partnership.
In connection with the Formation Transactions, the Operating Partnership
formed AMB Investment Management, Inc., a Maryland corporation ("AMB Investment
Management"). The Operating Partnership purchased 100% of AMB Investment
Management's non-voting preferred stock (representing a 95% economic interest
therein). Certain executive officers of the Company and an officer of AMB
Investment Management collectively purchased 100% of the Investment Management
Subsidiary's voting common stock (representing a 5% economic interest therein).
The Operating Partnership accounts for its investment in AMB Investment
Management using the equity method of accounting. AMB Investment Management was
formed to succeed to the Predecessor's investment management business of
providing real estate investment management services on a fee basis to clients.
The Operating Partnership also owns 100% of the non-voting preferred stock of
Headlands Realty Corporation, a Maryland corporation (representing a 95%
economic interest therein). Certain executive officers of the company and a
director of Headlands Realty Corporation collectively own 100% of the voting
common stock of Headlands Realty Corporation (representing a 5% economic
interest therein). Headlands Realty Corporation invests in properties and may in
the future engage in or acquire interests in entities that engage in the
management, leasing and development of properties and similar activities.
As of September 30, 1998, the Company owned 547 industrial buildings (the
"Industrial Properties") and 37 retail centers (the "Retail Properties") located
in 29 markets throughout the United States. The Industrial Properties,
principally warehouse distribution buildings, encompass approximately 53.1
million rentable square feet and, as of September 30,
5
<PAGE> 8
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND UNIT AMOUNTS)
1998, were 95.9% leased to over 1,500 tenants. The Retail Properties,
principally grocer-anchored community shopping centers, encompass approximately
6.9 million rentable square feet and, as of the same date, were 94.8% leased to
over 900 tenants. The Industrial Properties and the Retail Properties
collectively are referred to as the "Properties."
2. INTERIM FINANCIAL STATEMENTS
The consolidated financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and note disclosures normally included in the
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The consolidated financial
statements for prior periods have been reclassified to conform to current
classifications with no effect on results of operations. In the opinion of
management, the accompanying unaudited consolidated financial statements contain
all adjustments, of a normal recurring nature, necessary for a fair presentation
of the Operating Partnership's consolidated financial position and results of
operations for the interim periods.
The Operating Partnership commenced operations on November 26, 1997. As
such, no operations for 1997 are presented.
The interim results of the nine and three months ended September 30, 1998
are not necessarily indicative of the results expected for the entire year.
These financial statements should be read in conjunction with AMB Property
Corporation's Annual Report on Form 10-K for the year ended December 31, 1997.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. REAL ESTATE ACQUISITION ACTIVITY
During the nine months ended September 30, 1998, the Operating Partnership
invested: (i) $642.5 million in 187 industrial buildings, aggregating 15.3
million rentable square feet, (ii) $31.8 million in 2 retail centers,
aggregating 0.4 million rentable square feet and (iii) $67.1 million in an
unconsolidated limited partnership interest in an existing real estate joint
venture that owns 36 industrial buildings aggregating 4.0 million square feet.
Of this activity, acquisitions totaling $258.9 million in 83 industrial
buildings aggregating 5.1 million rentable square feet were completed during the
three months ended September 30, 1998.
6
<PAGE> 9
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND UNIT AMOUNTS)
4. DEBT
In connection with the Formation Transactions, the Operating Partnership
assumed certain secured debt with an aggregate principal value of $517,031 and a
fair value of $535,613. The difference between the principal value and the fair
value was recorded as a debt premium. The debt premium is being amortized into
interest expense over the term of the related debt instruments using the
effective interest method. As of September 30, 1998, the unamortized debt
premium was $15,918. As of September 30, 1998, debt, excluding unamortized debt
premiums, consists of the following:
<TABLE>
<S> <C>
Unsecured credit facility, variable interest at LIBOR plus 90 basis points (6.53% at September 30,
1998), due November 2000 ......................................................................... $ 205,000
Unsecured senior debt securities, weighted average interest rate of 7.18%, due June 2008, June 2015 and
June 2018 ........................................................................................ 400,000
Secured debt, varying interest rates from 4.00% to 10.38% due November 1998 to January 2014 ........... 685,684
----------
Total Debt ................................................................................... $1,290,684
==========
</TABLE>
The Operating Partnership has a $500,000 unsecured revolving credit
agreement (the "Credit Facility") with Morgan Guaranty Trust Company of New
York, as agent, and a syndicate of twelve other banks. The Credit Facility has a
term of three years, and is subject to a fee that accrues on the daily average
undrawn funds, which varies between 15 and 25 basis points of the undrawn funds
based on the Operating Partnership's credit rating (15 basis points at September
30, 1998). The Credit Facility has various financial and non-financial
covenants.
Interest on the senior debt securities is payable semiannually in each June
and December commencing December 1998. The 2015 notes are putable and callable
in June 2005. The senior debt securities are subject to various financial and
non-financial covenants.
Secured debt generally requires monthly principal and interest payments.
The secured debt is secured by deeds of trust on certain Properties. All of the
secured debt bears interest at fixed rates, except for two loans with an
aggregate principal amount of $9,255 which bear interest at variable rates. The
secured debt has various financial and non-financial covenants. Additionally,
certain of the secured debt is cross-collateralized. The weighted-average fixed
interest rate on secured debt at September 30, 1998, was 7.9%.
Capitalized interest related to construction projects for the three and
nine months ended September 30, 1998, was $1,876 and $4,974, respectively.
The scheduled maturities of the Operating Partnership's total debt,
excluding unamortized debt premiums, as of September 30, 1998 are as follows:
<TABLE>
<CAPTION>
Senior
Credit Debt Secured
Facility Securities Debt Total
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1998 (three months) $ -- $ $ 15,343 $ 15,343
1999 .............. -- -- 12,689 12,689
2000 .............. 205,000 -- 18,151 223,151
2001 .............. -- -- 40,353 40,353
2002 .............. -- -- 66,466 66,466
Thereafter ........ -- 400,000 532,682 932,682
---------- ---------- ---------- ----------
$ 205,000 $ 400,000 $ 685,684 $1,290,684
========== ========== ========== ==========
</TABLE>
5. MINORITY INTERESTS
Minority interests represent interests held by certain third parties (some
of which are Institutional Alliance Partners(TM)) in 16 real estate joint
ventures that are consolidated for financial reporting purposes. Such
investments are consolidated because (i) the Operating Partnership owns a
majority interest, or (ii) the Operating Partnership holds significant control
7
<PAGE> 10
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND UNIT AMOUNTS)
over the entity through a 50% or greater ownership interest combined with the
ability to control major operating decisions such as approval of budgets,
selection of property managers and changes in financing.
6. PARTNERS' CAPITAL
On July 27, 1998 the Company sold 4,000,000 shares of 8 1/2% Series A
Cumulative Redeemable Preferred Stock for $100,000 in an underwritten public
offering. The net proceeds of $96,100 (after deducting underwriters' discounts
and commissions and offering costs) were contributed by the Company to the
Operating Partnership in exchange for 4,000,000 Series A preferred units with
terms identical to the Series A Preferred Stock. The Operating Partnership used
these proceeds to repay borrowings under the Credit Facility.
On September 3, 1998, the Operating Partnership declared a quarterly cash
distribution of $0.3425 per unit, payable on October 2, 1998, to unitholders of
record as of September 16, 1998. Additionally, on September 3, 1998, the
Operating Partnership declared a cash distribution of $0.4604 per unit on its
Series A Preferred Units, for the period commencing on July 27, 1998 and ending
on October 14, 1998, payable on October 15, 1998 to unitholders of record as of
September 16, 1998.
7. INCOME PER UNIT
The Operating Partnership's only dilutive securities outstanding for the
three and nine months ended September 30, 1998 were indirect interests in
consolidated subsidiaries which are in aggregate wholly-owned by the Company and
stock options issued under the Company's stock incentive plan. The effect of the
indirect interests and stock options was to increase weighted average units
outstanding by 607,821 and 606,755 units for the three and nine months ended
September 30, 1998, respectively. Such dilution was computed using the treasury
stock method.
8. PRO FORMA INFORMATION
The following summary unaudited pro forma financial information for the
three and nine months ended September 30, 1997 has been prepared as if the
Formation Transactions, the IPO (as described in Note 1) and property
acquisitions and dispositions during the year ended December 31, 1997 had
occurred on January 1, 1997. The pro forma financial information does not
purport to present the consolidated results that would have occurred if the
aforementioned transactions had been consummated on January 1, 1997, nor does it
purport to be indicative of the consolidated results of operations for future
periods.
<TABLE>
<CAPTION>
FOR THE THREE FOR THE NINE MONTHS
MONTHS ENDED ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
------------------ ------------------
<S> <C> <C>
Total revenues ................................. $ 70,816 $ 210,048
Income from operations before minority interests 25,730 75,539
Net income .................................... 25,463 72,572
Income Per Common Unit
Basic ....................................... $ 0.29 $ 0.82
=========== ===========
Diluted ..................................... $ 0.29 $ 0.82
=========== ===========
Weighted Average Common Units Outstanding
Basic ....................................... 88,416,676 88,416,676
=========== ===========
Diluted ..................................... 88,416,676 88,416,676
=========== ===========
</TABLE>
8
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
You should read the following discussion and analysis of the consolidated
financial condition and results of operations in conjunction with the Notes to
Consolidated Financial Statements. Statements contained in this discussion which
are not historical facts may be forward looking statements. You can identify
forward-looking statements by the use of forward-looking terminology such as
"believes," "expects," "may," "will," "should," "seeks," "approximately,"
"intends," "plans," "pro forma," "estimates," or "anticipates" or the negative
of these words and phrases or similar words or phrases. You can also identify
forward-looking statements by discussions of strategy, plans or intentions.
Forward-looking statements involve numerous risks and uncertainties and you
should not rely upon them as predictions of future events. There is no assurance
that the events or circumstances reflected in forward-looking statements will be
achieved or occur. Forward-looking statements are necessarily dependent on
assumptions, data or methods that may be incorrect or imprecise and we may not
be able to realize them. The following factors, among others, could cause actual
results and future events to differ materially from those set forth or
contemplated in the forward-looking statements: defaults or non-renewal of
leases by tenants, increased interest rates and operating costs, failure to
obtain necessary outside financing, difficulties in identifying properties to
acquire and in effecting acquisitions, our failure to successfully integrate
acquired properties and operations, risks and uncertainties affecting property
development and construction (including construction delays, cost overruns, our
inability to obtain necessary permits and public opposition to these
activities), AMB Property Corporation's failure to qualify and maintain its
status as a real estate investment trust under the Internal Revenue Code of
1986, as amended, environmental uncertainties, risks related to natural
disasters, financial market fluctuations, changes in real estate and zoning laws
and increases in real property tax rates. Our success also depends upon economic
trends generally, including interest rates, income tax laws, governmental
regulation, legislation, population changes and those risk factors discussed in
the section entitled "Business -- Business Risks" in AMB Property Corporation's
Annual Report on Form 10-K for fiscal year ended December 31, 1997. We caution
you not to place undue reliance on forward-looking statements, which reflect our
analysis only and speak only as of the date of this report or the dates
indicated in the statements.
.
THE OPERATING PARTNERSHIP
We are a fully integrated real estate company engaged in the ownership,
operation, management, acquisition, renovation, expansion and development of
industrial buildings and community shopping centers in target markets
nationwide.
At September 30, 1998, we owned and operated a total of 547 industrial
buildings and 37 retail centers totaling 60.0 million square feet in 29 markets
nationwide. In addition, as of the same date we had an interest in an
unconsolidated joint venture that owns 36 industrial buildings aggregating 4.0
million square feet and we operated properties aggregating 4.5 million square
feet of property on behalf of investment management clients.
INDUSTRIAL AND RETAIL PROPERTIES BY REGION
AS OF SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
INDUSTRIAL PROPERTIES RETAIL PROPERTIES TOTAL
------------------------- ---------------------------------------------- -----------------------------------
NUMBER RENTABLE NUMBER RENTABLE NUMBER RENTABLE
OF SQUARE % OF OF SQUARE % OF OF BUILDINGS SQUARE % OF
REGION BUILDINGS FEET TOTAL CENTERS FEET TOTAL AND CENTERS FEET TOTAL
---------- ---------- ----- ---------- ---------- ----- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Eastern 85 10,929,011 20.6% 4 1,272,968 18.6% 89 12,201,979 20.3%
Midwestern 106 11,986,978 22.6 4 710,833 10.4 110 12,697,811 21.2
Southern 184 16,171,842 30.4 12 1,972,366 28.6 196 18,144,208 30.2
Western 172 14,042,240 26.4 17 2,907,986 42.4 189 16,950,226 28.3
---------- ---------- ----- ---------- ---------- ----- ---------- ---------- -----
Total 547 53,130,071 100.0% 37 6,864,153 100.0% 584 59,994,224 100.0%
========== ========== ===== ========== ========== ===== ========== ========== =====
</TABLE>
9
<PAGE> 12
ACQUISITION AND DEVELOPMENT ACTIVITY
During the third quarter, we invested $258.9 million in operating
properties, consisting of 83 industrial buildings aggregating 5.1 million square
feet. We also initiated two new development projects aggregating approximately
0.5 million square feet during the quarter, with a total estimated cost of $23.3
million upon completion. As of September 30, 1998, we had 13 industrial projects
aggregating approximately 5.3 million square feet in our development pipeline
with a total estimated investment of $231.3 million upon completion and three
retail projects aggregating approximately 0.6 million square feet in our
development pipeline representing an estimated investment of $92.2 million upon
completion.
STRATEGIC ALLIANCE PROGRAMS (TM)
We believe that our strategy of forming strategic alliances with local and
regional real estate experts and institutional investors provides us with growth
opportunities, access to private capital and flexibility in the markets in which
we operate. We have been a leader in forming these alliances through our
Strategic Alliance Programs(TM).
Development Alliance Program (TM): Our strategy for our Development
Alliance Program (TM) is to enhance our development capability by forming
alliances with development firms with a strong local presence and
expertise. During the third quarter, we initiated two development projects
with Development Alliance Partners (TM): a $10.9 million expected
investment in a 0.2 million square foot industrial project in Dallas, Texas
and a $12.4 million expected investment in a 0.3 million square foot
industrial project in Houston, Texas.
UPREIT Alliance Program (TM): Through our UPREIT Alliance Program (TM), we
issue operating partnership units in exchange for properties, thus
providing additional growth for our portfolio. We expanded our UPREIT
Alliance Program (TM) in the third quarter through the acquisition of a 1.0
million square foot industrial portfolio aggregating 21 industrial
buildings in Menlo Park, California for $100.4 million. We believe that
UPREIT Alliance Partners (TM), who can benefit from a tax advantaged
transaction structure, have been, and will continue to be, an attractive
source of new acquisitions.
Institutional Alliance Program (TM): Our strategy for our Institutional
Alliance Program (TM) is to form joint ventures with institutional
investors through the co-investment program of AMB Investment Management.
This program provides access to private capital, including during those
times when the public markets are less attractive.
Management Alliance Program (TM): Our strategy for our Management Alliance
Program(TM) is to develop close relationships with, and outsource property
management to, local property managers that we believe are among the best
in their respective markets. These local property managers provide us with
local market information related to tenant activity and acquisition and
development opportunities. Two of our acquisitions during the third
quarter, aggregating $72.2 million and 1.9 million square feet, were
sourced through our Management Alliance Program(TM).
Customer Alliance Program (TM): Through our Customer Alliance Program(TM) ,
we seek to build long-term working relationships with major tenants with
the assistance of leading local and national leasing firms. During the
quarter we continued our comprehensive branding program intended to broaden
awareness of AMB among our constituents and to support the expansion of our
Strategic Alliance Programs(TM) and to establish consistency for all of
AMB's customers, brokers and Strategic Alliance Partners(TM).
RESULTS OF OPERATIONS
Because we commenced operations on November 26, 1997 upon consummation of
the Formation transactions and the IPO, a discussion of our results as compared
to 1997 is not applicable; however, a separate discussion of the historical
operations of the Properties for the comparative periods prior to the IPO is
presented below. The historical results of operations of the Properties for
periods prior to November 26, 1997 include Properties that were managed by the
Predecessor and exclude the results of four properties that were contributed to
us in the Formation Transactions that were not previously managed by the
Predecessor.
The historical property financial data presented in this report show
significant increases in revenues and expenses principally attributable to
substantial portfolio growth. As a result, we do not believe the year-to-year
financial data are comparable to prior periods. Therefore, the analysis below
shows changes resulting from Properties that the Predecessor owned as of January
1, 1997, excluding development projects, (the "Same Store Properties") and
changes attributable to acquisition and development activity during 1997 and
1998. For the comparison between the nine and three month periods ended
September 30, 1998 and 1997, the Same Store Properties consist of properties
aggregating 30.4 million square feet.
10
<PAGE> 13
Our future financial condition and results of operations, including rental
revenues, may be impacted by the acquisition of additional properties. Our
future revenues, expenses and income may vary materially from their historical
rates.
Properties - Nine and Three Months Ended September 30, 1998 and 1997
Rental revenues. Rental revenues, including straight-line rents, tenant
reimbursements and other property related income, increased by $82.5 and $34.8
million, or 49% and 60%, for the nine and three months ended September 30, 1998,
to $251.8 and $92.8 million, respectively, as compared with the same periods in
1997. Approximately $10.9 and $3.7 million, or 13% and 11% of this increase, was
attributable to Same Store Properties, with the remaining $71.6 and $31.1
million attributable to Properties acquired in 1997 and 1998, respectively. The
growth in rental revenues in Same Store Properties resulted primarily from the
incremental effect of cash rental rate increases, straight-line rents and
changes in occupancy and reimbursement of expenses. During the trailing 12
months ended September 30, 1998, the increase in average base rents (cash basis)
was 16.3% on 8.0 million square feet leased.
Property operating expenses and real estate taxes. Property operating
expenses, including asset management costs and real estate taxes, increased by
$15.5 and $7.3 million, or 30% and 42%, for the nine and three months ended
September 30, respectively, to $67.6 and $25.1 million as compared with the same
periods in 1997. Same Store Properties operating expenses decreased by
approximately $0.4 million for the nine months ended September 30, 1998, and
increased by approximately $0.2 million for the three months ended September 30,
1998, while operating expenses attributable to Properties acquired in 1998 and
1997 added $15.9 and $7.1 million, respectively. The change in Same Store
Properties operating expenses and real estate taxes relates to increases in Same
Store Properties real estate taxes and insurance expense of approximately $0.4
and $0.3 million for the nine and three months ended September 30, 1998,
respectively, offset by decreases in Same Store Properties other property
operating expenses (excluding real estate taxes and insurance) of approximately
$0.8 and $0.1 million for the nine and three months ended September 30, 1998,
respectively. The decrease in other property operating expenses is attributable
to lower asset management costs in 1998 as compared to 1997 resulting from the
change in ownership structure.
LIQUIDITY AND CAPITAL RESOURCES
We currently expect that our principal sources of working capital and
funding for acquisitions, development, expansion and renovation of Properties
will include borrowings under the Credit Facility, other forms of secured or
unsecured financing, proceeds from equity or debt offerings by the Company or
the Operating Partnership (including issuances of Units in the Operating
Partnership) and cash flows provided by operations. We presently believe that
our sources of working capital and our ability to access private and public debt
and equity capital are adequate for us to continue to meet liquidity
requirements for the foreseeable future.
Capital Resources
We have a $500 million unsecured revolving credit agreement with Morgan
Guaranty Trust Company of New York, as agent, and a syndicate of twelve other
banks. The Credit Facility has a term of three years and is subject to a fee
that accrues on the daily average undrawn funds, which varies between 15 and 25
basis points (currently 15 basis points) of the undrawn funds based on our
credit rating. We use the Credit Facility principally for acquisitions and for
general working capital requirements. Borrowings under the Credit Facility bear
interest at LIBOR plus 90 to 120 basis points (currently LIBOR plus 90 basis
points), depending our debt rating at the time of the borrowings. As of
September 30, 1998, the outstanding balance on the Credit Facility was $205.0
million and it bore interest at LIBOR plus 90 basis points (6.53% as of such
date). Monthly debt service payments on the Credit Facility are interest only.
The Credit Facility matures in November 2000. The total amount available under
the Credit Facility fluctuates based upon the borrowing base, as defined in the
agreement governing the Credit Facility. At September 30, 1998, the remaining
amount available under the Credit Facility was approximately $295.0 million.
In June 1998, we issued $400,000 aggregate principal amount of unsecured
notes ("Senior Debt Securities") in an underwritten public offering, the net
proceeds of which we used to repay amounts outstanding under the Credit
Facility. The Senior Debt Securities mature in June 2008, June 2015 and June
2018 and bear interest at a weighted average rate of 7.18%, which is payable in
June and December of each year, commencing in December 1998. The 2015 notes are
putable and callable in June 2005. We received credit ratings for our unsecured
debt of Baa1 from Moody's Investors Service, BBB from Standard & Poor's
Corporation and BBB+ from Duff & Phelps Credit Rating Co. As a result of the
receipt of the investment-grade credit ratings, the interest rate on the Credit
Facility was reduced by 20 basis points to the current rate of LIBOR plus 90
basis points.
11
<PAGE> 14
In July 1998, the Company sold 4,000,000 shares of 8 1/2% Series A
Cumulative Redeemable Preferred Stock at a price of $25.00 per share in an
underwritten public offering. The Company contributed the net proceeds to us in
exchange for 4,000,000 Series A preferred units and we used the funds to repay
borrowings under the Credit Facility incurred in connection with property
acquisitions and for general corporate purposes.
In connection with the Formation Transactions and property acquisitions
consummated after the Formation Transactions, we have assumed various mortgages
and other secured debt. As of September 30, 1998, the aggregate principal amount
of this secured debt was $685.7 million, excluding unamortized debt premiums of
$15.9 million. The secured debt bears interest at rates varying from 4.0% to
10.4% per annum (with a weighted average of 7.9%) and final maturity dates
ranging from November 1998 to January 2014.
As of September 30, 1998, our total outstanding debt was approximately $1.3
billion, including unamortized debt premiums of approximately $15.9 million. See
Notes to Consolidated Financial Statements. The total amount of debt that we
must repay during the remainder of 1998 is approximately $15.3 million,
including scheduled principal amortization of approximately $2.2 million.
In order to maintain financial flexibility and facilitate the rapid
deployment of capital through market cycles, we presently intend to operate with
a debt-to-total market capitalization ratio of approximately 45% or less.
Additionally, we presently intend to continue to structure our balance sheet in
order to maintain an investment grade rating on our senior unsecured debt. As of
September 30, 1998, our debt-to-total market capitalization ratio was
approximately 35.1%.
Liquidity
As of September 30, 1998, we had approximately $33.2 million in cash and
cash equivalents and $295.0 million of additional available borrowings under the
Credit Facility. We intend to use cash from operations and available borrowings
under the Credit Facility as well as net proceeds from any future debt or equity
offerings to fund property acquisitions, development activities, and capital
expenditures and to provide for general working capital requirements.
On September 3, 1998, the Company and the Operating Partnership declared a
quarterly cash distribution of $0.3425 per common share and operating
partnership unit, payable on October 2, 1998 to stockholders and unitholders of
record on September 16, 1998. On September 3, 1998, the Company declared a cash
dividend of $0.4604 per share on its Series A Preferred Stock, and the Operating
Partnership declared a cash distribution of $0.4604 per unit on its Series A
Preferred Units, for the period commencing on July 27, 1998 and ending on
October 14, 1998, payable on October 15, 1998 to stockholders and unitholders of
record as of September 16, 1998.
The anticipated size of our distributions, using only cash from operations,
will not allow us to retire all of our debt as it comes due. Therefore, we
intend to also repay maturing debt with net proceeds from future debt and/or
equity financings. However, we may not be able to obtain future financings on
favorable terms or at all.
Capital Commitments
In addition to recurring capital expenditures and costs to renew or
re-tenant space, our development pipeline currently includes 16 projects
representing a total estimated investment of $323.5 million upon completion. Of
this total, approximately $142.0 million had been funded as of September 30,
1998, approximately $89.0 million is estimated to be required to complete
projects currently under construction and the remainder represents estimated
investments in either projects where construction has not yet begun or future
phases of projects under construction We presently expect to fund these
expenditures with cash from operations, borrowings under the Credit Facility or
debt or equity issuances. Other than these capital items, we have no material
capital commitments.
During the period from January 1, 1998 to September 30, 1998, we invested:
- $642.5 million in 187 industrial buildings, aggregating 15.3
million rentable square feet,
- $31.8 million in 2 retail centers, aggregating 0.4 million
rentable square feet, and
- $67.1 million in an unconsolidated limited partnership
interest in an existing joint venture that owns 36 industrial
buildings aggregating 4.0 million square feet.
12
<PAGE> 15
We funded these acquisitions through borrowings under the Credit Facility,
cash, debt assumption, co-investments by Institutional Alliance Partners(TM) and
the issuance of LP Units. We presently believe that our funds from operations
and borrowings under the Credit Facility these will be sufficient to meet our
current capital commitments for the next 12 months.
Year 2000 Compliance
Many computer programs have been written using two digits rather than four
to define the applicable year. Computer programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This "year 2000 issue" could result in a system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices or engage in similar normal
business activities.
We are currently conducting a company-wide test of our financial and
non-financial systems to ensure that our systems will adequately handle the year
2000 issue. Our current financial system generally provides for a four-digit
year; however, the current system is not fully year 2000 compliant. We expect
that our financial system will be fully year 2000 compliant once we complete a
software upgrade in late 1998 or early 1999. We expect the upgrade to cost less
than $100,000.
We are currently surveying our property managers to determine if our
non-financial systems (HVAC, security, lighting and other building systems) at
our Properties are year 2000 compliant. We do not expect the cost to bring
property systems into compliance to be material. Although we can make no
assurance, we currently do not expect that the year 2000 issue will materially
affect our operations due to problems encountered by our suppliers, customers
and lenders.
Funds From Operations
We believe that Funds from Operations ("FFO"), as defined by NAREIT, is an
appropriate measure of performance for an equity REIT. While FFO is a relevant
and widely used measure of operating performance of REITs, it does not represent
cash flow from operations or net income as defined by GAAP, and it should not be
considered as an alternative to those indicators in evaluating liquidity or
operating performance. Further, FFO as disclosed by other REITs may not be
comparable.
The following table reflects the calculation of our FFO for the nine and
three months ended September 30, 1997 and 1998. The 1997 FFO was prepared on a
pro forma basis (giving effect to the completion of the Formation Transactions,
the IPO, and certain 1997 property acquisitions and dispositions) as if they had
occurred on January 1, 1997 (dollars in thousands).
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30, FOR THE NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------- -----------------------------------
1998 1997 (PRO FORMA) 1998 1997 (PRO FORMA)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income from operations before
minority interests $ 31,802 $ 25,730 $ 91,372 $ 75,539
Real estate related depreciation
and amortization:
Total depreciation and 14,750 12,060 40,052 35,298
amortization
Furniture, fixtures, and
equipment depreciation (104) (21) (319) (107)
FFO attributable to minority
interests(1)(2) (2,035) (375) (4,123) (1,326)
Adjustments to derive FFO in
unconsolidated joint
venture(3) :
Company's share of net income (833) -- (833) --
Company's share of FFO 1,327 -- 1,327 --
Series A Preferred Stock dividends (1,514) -- (1,514) --
------------ ------------ ------------ ------------
FFO(1) $ 43,393 $ 37,394 $ 125,962 $ 109,404
============ ============ ============ ============
Weighted average common units
outstanding (diluted) 90,053,107 88,416,676 89,537,512 88,416,676
============ ============ ============ ============
</TABLE>
(1) The White Paper on Funds from Operations approved by the Board of
Governors of the National Association of Real Estate Investment Trusts
("NAREIT") in March 1995 (the "White Paper") defines Funds from
Operations as net income (loss) (computed in accordance with GAAP),
excluding gains (or losses) from debt restructuring and sales of
properties, plus real estate related depreciation and amortization. We
consider FFO
13
<PAGE> 16
an appropriate measure of performance of an equity REIT because it is
predicated on cash flow analyses. We compute FFO in accordance with
standards established by the White Paper, which may differ from the
methodology for calculating FFO utilized by other REITs and,
accordingly, many not be comparable to other REITs. FFO should not be
considered as an alternative to net income (determined in accordance
with GAAP) as an indicator of financial performance or to cash flow
from operating activities (determined in accordance with GAAP) as a
measure of liquidity, nor is it indicative of funds available to fund
cash needs, including the ability to make distributions.
(2) Represents FFO attributable to minority interest in consolidated joint
ventures for the period presented, which has been computed as minority
interests' share of net income plus minority interests' share of real
estate-related depreciation and amortization of the consolidated joint
ventures for such period. These minority interests are not convertible
into shares of Common Stock.
(3) Represents our pro rata share of FFO in unconsolidated joint ventures
for the period presented, which has been computed as our share of net
income plus our share of real estate-related depreciation and
amortization of the unconsolidated joint venture for such period.
Tenant Retention Rates and Rent Increases
The following table sets forth information relating to tenant retention
rates and rent increases on renewal and re-tenanted space for the Industrial
Properties and the Retail Properties for the periods presented.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, FOR THE THREE FOR THE NINE
------------------------------- MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, WEIGHTED
1995 1996 1997 1998 1998 AVERAGE
---------- --------- ---------- ----------------- ------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES
Retention rate .................. 67.9% 79.2% 69.5% 58.0% 75.4% 73.2%
Rent increases .................. 4.8% 4.7% 13.0% 18.5% 18.8% 16.7%
RETAIL PROPERTIES
Retention rate .................. 63.5% 88.4% 87.8% 45.0% 73.9% 80.0%
Rent increases .................. 3.2% 5.4% 10.1% 3.5% 16.6% 14.6%
ALL PROPERTIES
Retention rate .................. 67.7% 79.8% 70.3% 57.3% 75.3% 73.6%
Rent increases .................. 4.3% 5.0% 11.0% 15.8% 18.4% 16.3%
</TABLE>
Recurring Tenant Improvements and Leasing Commissions per Square Foot Leased
The table below summarizes for the Industrial Properties and the Retail
Properties, separately, the recurring tenant improvements and leasing
commissions per square foot leased for the periods presented. The recurring
tenant improvements and leasing commissions represent costs incurred to lease
space after the initial lease term of the initial tenant, excluding costs
incurred to relocate tenants as part of a re-tenanting strategy. The tenant
improvements and leasing commissions set forth below are not necessarily
indicative of future tenant improvements and leasing commissions.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, FOR THE THREE FOR THE NINE
------------------------------- MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, WEIGHTED
1995 1996 1997 1998 1998 AVERAGE
---------- --------- ---------- ----------------- ------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES
Expenditures per renewed square
foot leased ................... $0.91 $0.93 $1.05 $1.06 $0.81 $0.91
Expenditures per re-tenanted
square foot leased ............ 1.75 1.97 1.62 1.60 2.05 1.81
Weighted average ............ 1.32 1.29 1.30 1.20 1.05 1.22
RETAIL PROPERTIES
Expenditures per renewed square
foot leased ................... $5.53 $4.72 $4.25 $3.31 $1.82 $3.51
Expenditures per re-tenanted
square foot leased ............ 5.37 6.53 7.92 8.31 6.40 7.14
Weighted average ............ 5.46 5.61 6.41 4.87 2.38 5.03
ALL PROPERTIES
Expenditures per renewed square
foot leased ................... $1.15 $1.07 $1.23 $1.13 $0.86 $1.04
Expenditures per re-tenanted
square foot leased ............ 1.89 2.27 2.23 1.88 2.19 2.15
Weighted average ............ 1.51 1.50 1.68 1.33 1.11 1.43
</TABLE>
Occupancy and Average Base Rent
14
<PAGE> 17
The table below sets forth weighted average occupancy rates and average
base rent per square foot, based on square feet leased, of the Industrial
Properties and the Retail Properties for the periods presented.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------- AS OF
1995 1996 1997 SEPTEMBER 30, 1998
---------- --------- ---------- ----------------------
<S> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES
Occupancy rate at period end ........ 97.3% 97.2% 95.7% 95.9%
Average base rent per square foot (1) $3.43 $3.81 $4.26 $4.48
RETAIL PROPERTIES
Occupancy rate at period end ........ 92.4% 92.4% 96.1% 94.8%
Average base rent per square foot (1) $10.46 $11.32 $11.98 $11.91
ALL PROPERTIES
Occupancy rate at period end ........ 97.0% 96.9% 95.8% 95.8%
Average base rent per square foot (1) N/A N/A N/A N/A
</TABLE>
(1) Average base rent per square foot represents the total
annualized contractual base rental revenue for the period
divided by the average occupied square feet during the period.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II
ITEM 1. LEGAL PROCEEDINGS
As of September 30, 1998, there were no pending legal proceedings to which
we are a party or of which any of our Properties is the subject, the adverse
determination of which we anticipate would have a material adverse effect upon
our financial condition and results of operations.
ITEM 2. CHANGES IN SECURITIES
(c) On September 24, 1998, we issued to five Lincoln Property Company Limited
Partnerships 699,837 LP Units with an aggregate value of approximately $16.5
million in consideration for the acquisition of certain properties. Holders of
the LP Units may redeem part or all of their LP Units for cash, or at the
election of the Company, exchange their LP Units for shares of Common Stock on a
one-for-one basis.
The issuance of LP Units in connection with the acquisitions discussed
above constituted private placements of securities which were exempt from the
registration requirement of the Securities Act of 1933, as amended, pursuant to
Section 4 (2) and Rule 506 of Regulation D.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
15
<PAGE> 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ ---------------------------------------------------
<S> <C>
4.1 Second Amended and Restated Agreement of Limited
Partnership of AMB Property, L.P.
10.1 Second Amendment to Second Amended and Restated
Revolving Credit Agreement made as of September 30,
1998 by and among AMB Property, L.P., the Banks and
Co-Agents Party Thereto, and Morgan Guaranty Trust
Company of New York, as Agent.
27.1 Financial Data Schedule - AMB Property, L.P.
</TABLE>
(b) Reports on Form 8-K:
None.
16
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMB PROPERTY, L.P.
Registrant
By: AMB Property Corporation,
Its general partner
Date: November 12, 1998 By: /s/ HAMID R. MOGHADAM
--------------------- ---------------------------------
Hamid R. Moghadam
President and Chief Executive Officer,
Director (Principal Executive Officer)
Date: November 12, 1998 And: /s/ S. DAVIS CARNIGLIA
--------------------- --------------------------------
S. Davis Carniglia
Chief Financial Officer,
Managing Director
(Principal Financial Officer)
Date: November 12, 1998 And: /s/ MICHAEL A. COKE
--------------------- --------------------------------
Michael A. Coke
Director of Financial Management
And Reporting, Chief Accounting
Officer (Principal Accounting Officer)
17
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------
<S> <C>
4.1 Second Amended and Restated Agreement of Limited Partnership of AMB
Property, L.P.
10.1 Second Amendment to Second Amended and Restated Revolving Credit
Agreement made as of September 30, 1998 by and among AMB Property,
L.P., the Banks and Co-Agents Party Thereto, and Morgan Guaranty Trust
Company of New York, as Agent.
27.1 Financial Data Schedule - AMB Property, L.P.
</TABLE>
<PAGE> 1
EXHIBIT 4.1
- --------------------------------------------------------------------------------
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
AMB PROPERTY, L.P.
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1. DEFINED TERMS AND RULES OF CONSTRUCTION................................................................2
Section 1.1. Definitions....................................................................2
Section 1.2. Rules of Construction.........................................................18
ARTICLE 2. ORGANIZATIONAL MATTERS................................................................................18
Section 2.1. Organization..................................................................18
Section 2.2. Name..........................................................................18
Section 2.3. Resident Agent; Principal Office..............................................18
Section 2.4. Power of Attorney.............................................................19
Section 2.5. Term..........................................................................20
Section 2.6. Number of Partners............................................................20
ARTICLE 3. PURPOSE...............................................................................................20
Section 3.1. Purpose and Business..........................................................20
Section 3.2. Powers........................................................................21
Section 3.3. Partnership Only for Purposes Specified.......................................21
Section 3.4. Representations and Warranties by the Parties.................................21
Section 3.5. Certain ERISA Matters.........................................................23
ARTICLE 4. CAPITAL CONTRIBUTIONS.................................................................................23
Section 4.1. Capital Contributions of the Partners.........................................23
Section 4.2. Loans by Third Parties........................................................24
Section 4.3. Additional Funding and Capital Contributions..................................24
Section 4.4. Stock Incentive Plan..........................................................26
Section 4.5. No Preemptive Rights..........................................................27
Section 4.6. Other Contribution Provisions.................................................27
ARTICLE 5. DISTRIBUTIONS.........................................................................................27
Section 5.1. Requirement and Characterization of Distributions.............................27
Section 5.2. Distributions in Kind.........................................................28
Section 5.3. Distributions Upon Liquidation................................................28
Section 5.4. Distributions to Reflect Issuance of Additional Partnership Interests.........28
Section 5.5 Character of PLP Distributions................................................28
ARTICLE 6. ALLOCATIONS...........................................................................................28
Section 6.1. Timing and Amount of Allocations of Net Income and Net Loss...................28
Section 6.2. General Allocations...........................................................29
Section 6.3. Additional Allocation Provisions..............................................31
Section 6.4. Tax Allocations...............................................................33
ARTICLE 7. MANAGEMENT AND OPERATIONS OF BUSINESS.................................................................34
Section 7.1. Management....................................................................34
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 7.2. Certificate of Limited Partnership............................................38
Section 7.3. Restrictions on General Partner's Authority...................................38
Section 7.4. Reimbursement of the General Partner..........................................41
Section 7.5. Outside Activities of the General Partner.....................................41
Section 7.6. Contracts with Affiliates.....................................................42
Section 7.7. Indemnification...............................................................43
Section 7.8. Liability of the General Partner..............................................45
Section 7.9. Other Matters Concerning the General Partner..................................45
Section 7.10. Title to Partnership Assets..................................................46
Section 7.11. Reliance by Third Parties....................................................47
ARTICLE 8. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS............................................................47
Section 8.1. Limitation of Liability.......................................................47
Section 8.2. Management of Business........................................................47
Section 8.3. Outside Activities of Limited Partners........................................47
Section 8.4. Return of Capital.............................................................48
Section 8.5. Rights of Limited Partners Relating to the Partnership........................48
Section 8.6. Limited Partner Redemption Rights.............................................49
ARTICLE 9. BOOKS, RECORDS, ACCOUNTING AND REPORTS................................................................51
Section 9.1. Records and Accounting........................................................51
Section 9.2. Fiscal Year...................................................................51
Section 9.3. Reports.......................................................................52
Section 9.4. Nondisclosure of Certain Information..........................................52
ARTICLE 10. TAX MATTERS..........................................................................................52
Section 10.1. Preparation of Tax Returns...................................................52
Section 10.2. Tax Elections................................................................52
Section 10.3. Tax Matters Partner..........................................................53
Section 10.4. Organizational Expenses......................................................54
Section 10.5. Withholding..................................................................54
ARTICLE 11. TRANSFERS AND WITHDRAWALS............................................................................55
Section 11.1. Transfer.....................................................................55
Section 11.2. Transfer of General Partner's Partnership Interest...........................55
Section 11.3. Limited Partners' Rights to Transfer.........................................57
Section 11.4. Substituted Limited Partners.................................................59
Section 11.5. Assignees....................................................................60
Section 11.6. General Provisions...........................................................60
ARTICLE 12. ADMISSION OF PARTNERS................................................................................62
Section 12.1. Admission of Successor General Partner.......................................62
Section 12.2. Admission of Additional Limited Partners.....................................62
Section 12.3. Amendment of Agreement and Certificate of Limited Partnership................63
ARTICLE 13. DISSOLUTION AND LIQUIDATION..........................................................................63
Section 13.1. Dissolution..................................................................63
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
Section 13.2. Winding Up...................................................................64
Section 13.3. Compliance with Timing Requirements of Regulations...........................65
Section 13.4. Deemed Distribution and Recontribution.......................................66
Section 13.5. Rights of Limited Partners...................................................66
Section 13.6. Notice of Dissolution........................................................66
Section 13.7. Cancellation of Certificate of Limited Partnership...........................66
Section 13.8. Reasonable Time for Winding-Up...............................................67
Section 13.9. Waiver of Partition..........................................................67
ARTICLE 14. AMENDMENT OF PARTNERSHIP AGREEMENT; CONSENTS.........................................................67
Section 14.1. Amendments...................................................................67
Section 14.2. Action by the Partners.......................................................67
ARTICLE 15. GENERAL PROVISIONS...................................................................................68
Section 15.1. Addresses and Notice.........................................................68
Section 15.2. Titles and Captions..........................................................68
Section 15.3. Pronouns and Plurals.........................................................68
Section 15.4. Further Action...............................................................69
Section 15.5. Binding Effect...............................................................69
Section 15.6. Creditors....................................................................69
Section 15.7. Waiver.......................................................................69
Section 15.8. Counterparts.................................................................69
Section 15.9. Applicable Law...............................................................69
Section 15.10. Invalidity of Provisions....................................................69
Section 15.11. Limitation to Preserve REIT Status..........................................69
Section 15.12. Entire Agreement............................................................70
Section 15.13. No Rights as Stockholders...................................................71
ARTICLE 16. SERIES A PREFERRED UNITS.............................................................................71
Section 16.1. Designation and Number.......................................................71
Section 16.2. Distributions................................................................71
Section 16.3. Liquidation Proceeds.........................................................72
Section 16.4. Redemption...................................................................73
Section 16.5. Voting Rights................................................................74
Section 16.6. Transfer Restrictions........................................................74
Section 16.7. No Conversion Rights.........................................................75
Section 16.8. No Sinking Fund..............................................................75
</TABLE>
iii
<PAGE> 5
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
AMB PROPERTY, L.P.
THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated
as of July 27, 1998, is entered into by and among AMB Property Corporation, a
Maryland corporation (the "Company"), as the General Partner, and the Persons
whose names are set forth on Exhibit A attached hereto, as the Limited Partners
(the "Existing Limited Partners"), together with any other Persons who become
Partners in the Partnership as provided herein.
WHEREAS, the General Partner and the Existing Limited Partners are
parties to that certain Amended and Restated Agreement of Limited Partnership,
dated November 21, 1997, as amended;
WHEREAS, in connection with the public offering and sale of Series A
Cumulative Redeemable Preferred Stock, par value $.01 per share (the "Series A
Preferred Shares") of the General Partner, the General Partner deems it to be in
the best interest of the Partnership to authorize for issuance Series A
Cumulative Redeemable Preferred Units of the Partnership (the "Series A
Preferred Units");
WHEREAS, pursuant to Section 4.3.C of the Partnership Agreement, the
General Partner may, in its sole and absolute discretion subject to Delaware
law, in connection with any Capital Contribution, issue additional Partnership
Interests in one or more classes, or one or more series of any such classes,
with such designations, preferences and relative, participating, optional or
other special rights, powers, and duties, including rights, powers, and duties
senior to then existing Limited Partnership Interests; and
WHEREAS, on the date hereof, the General Partner, in connection with the
public offering of its Series A Preferred Stock, has made a Capital Contribution
of cash to the Partnership in exchange for which the General Partner shall
receive Series A Preferred Units in the Partnership, in each case in the amounts
set forth in Exhibit A, with the rights, preferences, exchange and other rights,
voting powers and restrictions, limitations as to distributions, qualifications
and terms and conditions as set forth herein.
NOW, THEREFORE, for good and adequate consideration, the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
<PAGE> 6
ARTICLE 1.
DEFINED TERMS AND RULES OF CONSTRUCTION
Section 1.1. Definitions
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Act" means the Delaware Revised Uniform Limited Partnership Act, as it
may be amended from time to time, and any successor to such statute.
"Additional Funds" shall have the meaning set forth in Section 4.3.A.
"Additional Limited Partner" means a Person admitted to the Partnership
as a Limited Partner pursuant to Section 12.2 and who is shown as such on the
books and records of the Partnership.
"Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Capital Account as of the end of
the relevant fiscal year, after giving effect to the following adjustments:
(i) decrease such deficit by any amounts which such Partner is
obligated to restore pursuant to this Agreement or is deemed to
be obligated to restore pursuant to Regulations Section
1.704-1(b)(2)(ii)(c) or the penultimate sentence of each of
Regulations Sections 1.704-2(i)(5) and 1.704-2(g); and
(ii) increase such deficit by the items described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended
to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and
shall be interpreted consistently therewith.
"Adjustment Date" shall have the meaning set forth in Section 4.3.E.
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by or under common control with such Person.
"Agreed Value" means (i) in the case of any Contributed Property set
forth in Exhibit A and as of the time of its contribution to the Partnership,
the Agreed Value of such property as set forth in Exhibit A; (ii) in the case of
any Contributed Property not set forth in Exhibit A and as of the time of its
contribution to the Partnership, the fair market value of such property or other
consideration as determined by the General Partner, reduced by any liabilities
either assumed by the Partnership upon such contribution or to which such
property is subject when contributed; and (iii) in the case of any property
distributed to a Partner by the Partnership, the fair market value of such
property as determined by the General Partner at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner upon
2
<PAGE> 7
such distribution or to which such property is subject at the time of the
distribution as determined under Section 752 of the Code and the Regulations
thereunder.
"Agreement" means this Second Amended and Restated Agreement of Limited
Partnership, as it may be amended, modified, supplemented or restated from time
to time.
"Appraisal" means with respect to any assets, the opinion of an
independent third party experienced in the valuation of similar assets, selected
by the General Partner in good faith; such opinion may be in the form of an
opinion by such independent third party that the value for such asset as set by
the General Partner is fair, from a financial point of view, to the Partnership.
"Assignee" means a Person to whom one or more Partnership 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.
"Available Cash" means, with respect to any period for which such
calculation is being made, (i) the sum of:
(a) the Partnership's Net Income or Net Loss (as the case may
be) for such period,
(b) Depreciation and all other noncash charges deducted in
determining Net Income or Net Loss for such period,
(c) the amount of any reduction in reserves of the Partnership
referred to in clause (ii)(f) below (including, without limitation,
reductions resulting because the General Partner determines such amounts
are no longer necessary),
(d) the excess of the net proceeds from the sale, exchange,
disposition, or refinancing of Partnership property for such period over
the gain (or loss, as the case may be) recognized from any such sale,
exchange, disposition, or refinancing during such period (excluding
Terminating Capital Transactions), and
(e) all other cash received by the Partnership for such period
that was not included in determining Net Income or Net Loss for such
period;
(ii) less the sum of:
(a) all principal debt payments made during such period by the
Partnership,
(b) capital expenditures made by the Partnership during such
period,
(c) investments in any entity (including loans made thereto) to
the extent that such investments are not otherwise described in clauses
(ii)(a) or (b),
(d) all other expenditures and payments not deducted in
determining Net Income or Net Loss for such period,
3
<PAGE> 8
(e) any amount included in determining Net Income or Net Loss
for such period that was not received by the Partnership during such
period,
(f) the amount of any increase in reserves established during
such period which the General Partner determines are necessary or
appropriate in its sole and absolute discretion, and
(g) the amount of any working capital accounts and other cash or
similar balances which the General Partner determines to be necessary or
appropriate in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include any cash
received or reductions in reserves, or take into account any disbursements made
or reserves established, after commencement of the dissolution and liquidation
of the Partnership.
"Board of Directors" means the Board of Directors of the General
Partner.
"Business Day" means each day, other than a Saturday or a Sunday, which
is not a day on which banking institutions in Los Angeles, California or New
York, New York are authorized or required by law, regulation or executive order
to close.
"Capital Account" means, with respect to any Partner, the Capital
Account maintained for such Partner in accordance with the following provisions:
(i) To each Partner's Capital Account there shall be added such
Partner's Capital Contributions, such Partner's share of Net Income and any
items in the nature of income or gain which are specially allocated pursuant to
Section 6.3, and the amount of any Partnership liabilities assumed by such
Partner or which are secured by any property distributed to such Partner.
(ii) From each Partner's Capital Account there shall be subtracted the
amount of cash and the Gross Asset Value of any property distributed to such
Partner pursuant to any provision of this Agreement, such Partner's distributive
share of Net Losses and any items in the nature of expenses or losses which are
specially allocated pursuant to Section 6.3 hereof, and the amount of any
liabilities of such Partner assumed by the Partnership or which are secured by
any property contributed by such Partner to the Partnership.
(iii) In the event any interest in the Partnership 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
interest.
(iv) In determining the amount of any liability for purposes of
subsections (i) and (ii) hereof, there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and Regulations.
(v) The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations
4
<PAGE> 9
Sections 1.704-1(b) and 1.704-2, and shall be interpreted and applied in a
manner consistent with such Regulations. In the event the General Partner shall
determine that it is prudent to modify the manner in which the Capital Accounts,
or any debits or credits thereto (including, without limitation, debits or
credits relating to liabilities which are secured by contributed or distributed
property or which are assumed by the Partnership, the General Partner, or the
Limited Partners) are computed in order to comply with such Regulations, the
General Partner may make such modification; provided that, it is not likely to
have a material effect on the amounts distributable to any Person pursuant to
Article 13 of this Agreement upon the dissolution of the Partnership. The
General Partner also shall (a) make any adjustments that are necessary or
appropriate to maintain equality between the Capital Accounts of the Partners
and the amount of Partnership capital reflected on the Partnership's balance
sheet, as computed for book purposes, in accordance with Regulations Section
1.704-1(b)(2)(iv)(q) and (b) make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with
Regulations Section 1.704-1(b) or Section 1.704-2.
"Capital Contribution" means, with respect to any Partner, the amount of
money and the initial Gross Asset Value of any property (other than money)
contributed to the Partnership by such Partner.
"Cash Amount" means, with respect to any Partnership Units subject to a
Redemption, an amount of cash equal to the Deemed Partnership Interest Value
attributable to such Partnership Units.
"Certificate" means the Certificate of Limited Partnership relating to
the Partnership filed in the office of the Secretary of State of Delaware, as
amended from time to time in accordance with the terms hereof and the Act.
"Charter" means the Company's Articles of Incorporation as of November
24, 1997, as amended by the Articles Supplementary filed with the Maryland
Department of Assessments and Taxation on July 23, 1998, and as further amended
or restated from time to time.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time or any successor statute thereto, 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.
"Common Unit" means each Partnership Unit that is not entitled to any
preference with respect to any other Partnership Unit as to distribution or
voluntary or involuntary liquidation, dissolution or winding up of the
Partnership.
"Consent" means the consent to, approval of, or vote on a proposed
action by a Partner given in accordance with Article 14 hereof.
"Consent of the Limited Partners" means the Consent of a Majority in
Interest of the Limited Partners which Consent shall be obtained prior to the
taking of any action for which it is required by this Agreement and may be given
or withheld by a Majority in Interest of the
5
<PAGE> 10
Limited Partners, unless otherwise expressly provided herein, in their sole and
absolute discretion.
"Consent of the Partners" means the Consent of Partners holding
Percentage Interests that in the aggregate are equal to or greater than a
majority of the aggregate Percentage Interests of all Partners which Consent
shall be obtained prior to the taking of any action for which it is required by
this Agreement and may be given or withheld by such Partners, in their sole and
absolute discretion.
"Constructively Own" means ownership under the constructive ownership
rules described in Exhibit C.
"Contributed Property" means each property or other asset, in such form
as may be permitted by the Act, but excluding cash, contributed or deemed
contributed to the Partnership (or, to the extent provided in applicable
regulations, deemed contributed by the Partnership on termination and
reconstitution thereof pursuant to Section 708 of the Code).
"Debt" means, as to any Person, as of any date of determination: (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services; (ii) all amounts owed by such Person to banks or
other Persons in respect of reimbursement obligations under letters of credit,
surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person; (iii) all indebtedness for borrowed
money or for the deferred purchase price of property or services secured by any
lien on any property owned by such Person, to the extent attributable to such
Person's interest in such property, even though such Person has not assumed or
become liable for the payment thereof; and (iv) lease obligations of such Person
which, in accordance with generally accepted accounting principles, should be
capitalized.
"Deemed Partnership Interest Value" means, as of any date with respect
to any class of Partnership Interests, the Deemed Value of the Partnership
Interests of such class multiplied by the applicable Partner's Percentage
Interest of such class.
"Deemed Value of the Partnership Interests" means, as of any date with
respect to any class or series of Partnership Interests, (i) the total number of
Partnership Units of the General Partner in such class or series of Partnership
Interests (as provided for in Sections 4.1 and 4.3.C) issued and outstanding as
of the close of business on such date multiplied by the Fair Market Value
determined as of such date of a share of capital stock of the General Partner
which corresponds to such class or series of Partnership Interests; (ii) divided
by the Percentage Interest of the General Partner in such class or series of
Partnership Interests on such date; provided, that if no outstanding shares of
capital stock of the General Partner correspond to a class of series of
Partnership Interests, the Deemed Value of the Partnership Interests with
respect to such class or series shall be equal to an amount reasonably
determined by the General Partner.
"Depreciation" means, for each fiscal year or other period, an amount
equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such year or other period, except that if
the Gross Asset Value of an asset differs from its adjusted basis for Federal
income tax purposes at the beginning of such year or other period,
6
<PAGE> 11
Depreciation shall be an amount which bears the same ratio to such beginning
Gross Asset Value as the Federal income tax depreciation, amortization or other
cost recovery deduction for such year or other period bears to such beginning
adjusted tax basis; provided, however, that if the Federal income tax
depreciation, amortization or other cost recovery deduction for such year is
zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the General Partner.
"Effective Date" means the date of closing of the initial public
offering of REIT Shares upon which date contributions set forth on Exhibit A
shall become effective.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agreements" means one or more of the agreements between the
Company, the Partnership and one or more of the Performance Investors, dated as
of the closing of the date of the initial public offering of the common stock of
the General Partner, pursuant to which the Performance Investors have deposited
their Performance Shares in escrow for possible transfer to the General Partner
or the Partnership (as applicable).
"Excess Performance Capital" means, with respect to a Performance
Partner, an amount equal to the number of Partnership Units held by such
Performance Partner, multiplied by the excess of (i) the Capital Account per
Partnership Unit for such Performance Partner; over (ii) the Capital Account per
Partnership Unit for a Limited Partner which is not a PLP or a Performance
Partner. For purposes of (ii) above, it shall be assumed that the Limited
Partner has no special arrangements with the Partnership, other than as set
forth in this Agreement, which would cause its Capital Account per Partnership
Unit to be different from the Capital Account per Partnership Unit of other
Limited Partners who are not Performance Partners or PLPs. If the Partner
described in (ii) above does not exist, the amount used for purposes of (ii)
shall be the projected Capital Account balance per Partnership Unit for such
Partner, determined in the reasonable discretion of the General Partner.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
"Fair Market Value" means, with respect to any share of capital stock of
the General Partner, the average of the daily market price for the ten (10)
consecutive trading days immediately preceding the date with respect to which
"Fair Market Value" must be determined hereunder or, if such date is not a
Business Day, the immediately preceding Business Day. The market price for each
such trading day shall be (i) if such shares are listed or admitted to trading
on any securities exchange or the Nasdaq National Market, the closing price,
regular way, on such day, or if no such sale takes place on such day, the
average of the closing bid and asked prices on such day, (ii) if such shares are
not listed or admitted to trading on any securities exchange or the Nasdaq
National Market, the last reported sale price on such day or, if no sale takes
place on such day, the average of the closing bid and asked prices on such day,
as reported by a reliable quotation source designated by the General Partner or
(iii) if such shares are not listed or admitted to trading on any securities
exchange or the Nasdaq National Market and no such last reported sale price or
closing bid and asked prices are available, the average of the
7
<PAGE> 12
reported high bid and low asked prices on such day, as reported by a reliable
quotation source designated by the General Partner, or if there shall be no bid
and asked prices on such day, the average of the high bid and low asked prices,
as so reported, on the most recent day (not more than ten (10) days prior to the
date in question) for which prices have been so reported; provided, that if
there are no bid and asked prices reported during the ten (10) days prior to the
date in question, the Fair Market Value of such shares shall be determined by
the General Partner acting in good faith on the basis of such quotations and
other information as it considers, in its reasonable judgment, appropriate. In
the event the REIT Shares Amount for such shares includes rights that a holder
of such shares would be entitled to receive, then the Fair Market Value of such
rights shall be determined by the General Partner acting in good faith on the
basis of such quotations and other information as it considers, in its
reasonable judgment, appropriate; provided, that in connection with determining
the Deemed Value of the Partnership Interests for purposes of determining the
number of additional Partnership Units issuable upon a Capital Contribution
funded by an underwritten public offering of shares of capital stock of the
General Partner, the Fair Market Value of such shares shall be the public
offering price per share of such class of capital stock sold. Notwithstanding
the foregoing, the General Partner in its reasonable discretion may use a
different "Fair Market Value" for purposes of making the determinations under
subparagraph (ii) of the definition of "Gross Asset Value" and Section 4.3.E. in
connection with the contribution of Property to the Partnership by a
third-party, provided such value shall be based upon the value per REIT Share
(or per Partnership Unit) agreed upon by the General Partner and such
third-party for purposes of such contribution.
"Funding Debt" means the incurrence of any Debt by or on behalf of the
General Partner for the purpose of providing funds to the Partnership.
"General Partner" means the Company or its successors as general partner
of the Partnership.
"General Partner Interest" means a Partnership Interest held by the
General Partner. A General Partner Interest may be expressed as a number of
Partnership Units.
"General Partner Loan" shall have the meaning set forth in Section
4.3.B.
"General Partner Payment" shall have the meaning set forth in Section
15.11.
"Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for Federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a Partner
to the Partnership shall be the gross fair market value of such asset, as
determined by the contributing Partner and the General Partner (as set forth on
Exhibit A attached hereto, as such Exhibit may be amended from time to time);
provided, that if the contributing Partner is the General Partner then, except
with respect to the General Partner's initial Capital Contribution which shall
be determined as set forth on Exhibit A, or capital contributions of cash, REIT
Shares or other shares of capital stock of the General Partner, the
determination of the fair market value of the contributed asset shall be
determined by (a) the price paid by the General Partner if the asset is
8
<PAGE> 13
acquired by the General Partner contemporaneously with its contribution to the
Partnership or (b) by Appraisal if otherwise acquired by the General Partner.
(ii) Immediately prior to the times listed below, the Gross Asset Values
of all Partnership assets shall be adjusted to equal their respective gross fair
market values, as determined by the General Partner using such reasonable method
of valuation as it may adopt; provided, however, that for such purpose, the net
value of all of the Partnership assets, in the aggregate, shall be equal to the
Deemed Value of the Partnership Interests of all classes of Partnership
Interests then outstanding, regardless of the method of valuation adopted by the
General Partner:
(a) the acquisition of an additional interest in the Partnership by
a new or existing Partner in exchange for more than a de minimis
Capital Contribution, if the General Partner reasonably
determines that such adjustment is necessary or appropriate to
reflect the relative economic interests of the Partners in the
Partnership;
(b) the distribution by the Partnership to a Partner of more than a
de minimis amount of Partnership property as consideration for
an interest in the Partnership if the General Partner reasonably
determines that such adjustment is necessary or appropriate to
reflect the relative economic interests of the Partners in the
Partnership; the Partners agree that such an adjustment is
appropriate when the Partnership effects a Redemption;
(c) the liquidation of the Partnership within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g);
(d) the issuance of Performance Units; and
(e) at such other times as the General Partner shall reasonably
determine necessary or advisable in order to comply with
Regulations Sections 1.704-1(b) and 1.704-2.
(iii) The Gross Asset Value of any Partnership asset distributed to a
Partner shall be the gross fair market value of such asset on the date of
distribution as determined by the distributee and the General Partner; provided,
that if the distributee is the General Partner, or if the distributee and the
General Partner cannot agree on such a determination, by Appraisal.
(iv) 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 Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); provided, however, that
Gross Asset Values shall not be adjusted pursuant to this subparagraph (iv) to
the extent that the General Partner reasonably determines that an adjustment
pursuant to subparagraph (ii) is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to this
subparagraph (iv).
9
<PAGE> 14
(v) If the Gross Asset Value of a Partnership asset has been determined
or adjusted pursuant to subparagraph (i), (ii) or (iv), such Gross Asset Value
shall thereafter be adjusted by the Depreciation taken into account with respect
to such asset for purposes of computing Net Income and Net Losses.
"Holder" means either the Partner or Assignee owning a Partnership Unit.
"Immediate Family" means, with respect to any natural Person, such
natural Person's estate or heirs or current spouse or former spouse, parents,
parents-in-law, children, siblings and grandchildren and any trust or estate,
all of the beneficiaries of which consist of such Person or such Person's
spouse, former spouse, parents, parents-in-law, children, siblings or
grandchildren.
"IMS" means AMB Investment Management, Inc., a Maryland corporation, and
any of its direct or indirect subsidiaries.
"Incapacity" or "Incapacitated" means: (i) as to any individual Partner,
death, total physical disability or entry by a court of competent jurisdiction
adjudicating him or her incompetent to manage his or her Person or his or her
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 under any
bankruptcy, insolvency or other similar law now or hereafter in effect has not
been dismissed within one hundred and twenty (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 ninety
(90) days of such appointment or (h) an appointment referred to in clause (g) is
not vacated within ninety (90) days after the expiration of any such stay.
"Indemnitee" means (i) any Person subject to a claim or demand or made
or threatened to be made a party to, or involved or threatened to be involved
in, an action, suit or proceeding by reason of his or her status as (a) the
General Partner or (b) a director, officer, employee or agent of the Partnership
or the General Partner and (ii) such other Persons
10
<PAGE> 15
(including Affiliates of the General Partner or the Partnership) as the General
Partner may designate from time to time, in its sole and absolute discretion.
"IRS" means the Internal Revenue Service, which administers the internal
revenue laws of the United States.
"Junior Units" shall have the meaning set forth in Section 16.2.D
hereof.
"Limited Partner" means any Person (including any PLP) named as a
Limited Partner in Exhibit A attached hereto, as such Exhibit may be amended
from time to time, any Substituted Limited Partner or Additional Limited
Partner, in such Person's capacity as a Limited Partner in the Partnership.
"Limited Partnership Interest" means a Partnership Interest of a Limited
Partner representing a fractional part of the Partnership Interests of all
Limited 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 Partnership Interest may be expressed as a number of
Partnership Units.
"Liquidating Events" shall have the meaning set forth in Section 13.1.
"Liquidator" shall have the meaning set forth in Section 13.2.A.
"Majority in Interest of the Limited Partners" means Limited Partners
(other than the General Partner and any Limited Partner 50% or more of whose
equity is owned, directly or indirectly, by the General Partner) holding
Percentage Interests that in the aggregate are greater than fifty percent (50%)
of the aggregate Percentage Interests of all Limited Partners (other than the
General Partner and any Limited Partner 50% or more of whose equity is owned,
directly or indirectly, by the General Partner).
"Majority in Interest of Partners" means Partners holding Percentage
Interests that are greater than fifty percent (50%) of the aggregate Percentage
Interests of all Partners.
"Net Income" or "Net Loss" means for each fiscal year of the
Partnership, an amount equal to the Partnership's taxable income or loss for
such fiscal year, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(i) Any income of the Partnership that is exempt from Federal income tax
and not otherwise taken into account in computing Net Income or Net Loss
pursuant to this definition of Net Income or Net Loss shall be added to such
taxable income or loss;
(ii) Any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
in computing Net Income or
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Net Loss pursuant to this definition of Net Income or Net Loss shall be
subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to subparagraph (iii) of the definition of Gross Asset Value,
the amount of such adjustment shall be taken into account as gain or loss from
the disposition of such asset for purposes of computing Net Income or Net Loss;
in the event the Gross Asset Value of any Partnership asset is adjusted pursuant
to subparagraph (ii) of the definition of Gross Asset Value, the amount of such
adjustment shall be taken into account as gain or loss from the disposition of
all Partnership assets in a Terminating Capital Transaction for purposes of
computing Net Income or Net Loss as set forth in Article 6;
(iv) Gain or loss resulting from any disposition of property with
respect to which gain or loss is recognized for Federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such fiscal year;
(vi) To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken
into account in determining Capital Accounts as a result of a distribution other
than in liquidation of a Partner's interest in the Partnership, the amount of
such adjustment shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases the basis of the
asset) from the disposition of the asset and shall be taken into account for
purposes of computing Net Income or Net Loss; and
(vii) Notwithstanding any other provision of this definition of Net
Income or Net Loss, any items which are specially allocated pursuant to Section
6.3 shall not be taken into account in computing Net Income or Net Loss. The
amounts of the items of Partnership income, gain, loss, or deduction available
to be specially allocated pursuant to Section 6.3 shall be determined by
applying rules analogous to those set forth in this definition of Net Income or
Net Loss.
"New Securities" means (i) any rights, options, warrants or convertible
or exchangeable securities having the right to subscribe for or purchase REIT
Shares or other shares of capital stock of the General Partner, excluding grants
under any Stock Incentive Plan or (ii) any Debt issued by the General Partner
that provides any of the rights described in clause (i).
"Nonrecourse Deductions" shall have the meaning set forth in Regulations
Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a
Partnership Year shall be determined in accordance with the rules of Regulations
Section 1.704-2(c).
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"Nonrecourse Liability" shall have the meaning set forth in Regulations
Section 1.752-1(a)(2).
"Notice of Redemption" means the Notice of Redemption substantially in
the form of Exhibit B to this Agreement.
"Offering Costs" means the aggregate amounts expended by the General
Partner which related to the organization of the Partnership and the General
Partner, or to the initial public offering or subsequent offerings of REIT
Shares or other shares of capital stock of the General Partner, the net proceeds
of which were used to make a contribution to the Partnership, in each case to
the extent such expenses of the General Partner were not reimbursed by the
Partnership.
"Parity Preferred Unit" means any class or series of Partnership
Interests of the Partnership now or hereafter authorized, issued or outstanding
expressly designated by the Partnership to rank on a parity with the Series A
Preferred Units with respect to distributions or rights upon voluntary or
involuntary liquidation, winding up or dissolution of the Partnership, or both,
as the context may require.
"Partner" means a General Partner or a Limited Partner, and "Partners"
means the General Partner and the Limited Partners.
"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).
"Partner Nonrecourse Debt" shall have the meaning set forth in
Regulations Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" shall have 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 Year
shall be determined in accordance with the rules of Regulations Section
1.704-2(i)(2).
"Partnership" means the limited partnership formed under the Act and
pursuant to this Agreement, and any successor thereto.
"Partnership Interest" means, an ownership interest in the Partnership
of 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. There may be one or more
classes of Partnership Interests as provided in Section 4.3. A Partnership
Interest may be expressed as a number of Partnership Units. Unless otherwise
expressly provided for by the General Partner at the time of the original
issuance of any Partnership Interests, all Partnership Interests (whether of a
Limited Partner or a General Partner) shall be of the same class. The
Partnership Interest represented by the Common Units (including
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Performance Units) and the Series A Preferred Units are the only Partnership
Interests and are separate classes of Partnership Interest for all purposes of
this Agreement.
"Partnership Minimum Gain" shall have 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 Partnership Minimum Gain, for a
Partnership Year shall be determined in accordance with the rules of Regulations
Section 1.704-2(d).
"Partnership Record Date" means the record date established by the
General Partner for the distribution of Available Cash with respect to Common
Units pursuant to Section 5.1 which record date shall be the same as the record
date established by the General Partner for a distribution to its stockholders
of some or all of its portion of such distribution.
"Partnership Unit" means, with respect to any class of Partnership
Interest, a fractional, undivided share of such class of Partnership Interest
issued pursuant to Sections 4.1 and 4.3 (including Performance Units). The
ownership of Partnership Units may be evidenced by a certificate for units
substantially in the form of Exhibit D-1 or D-2 hereto or as the General Partner
may determine with respect to any class of Partnership Units issued from time to
time under Sections 4.1 and 4.3.
"Partnership Year" means the fiscal year of the Partnership, which shall
be the calendar year.
"Percentage Interest" means, as to a Partner holding a class of
Partnership Interests, its interest in the Partnership as determined by dividing
the Partnership Units of such class owned by such Partner by the total number of
Partnership Units of such class then outstanding as specified in Exhibit A
attached hereto, as such Exhibit may be amended from time to time. If the
Partnership issues more than one class of Partnership Interest, the interest in
the Partnership among the classes of Partnership Interests shall be determined
as set forth in the amendment to the Partnership Agreement setting forth the
rights and privileges of such additional classes of Partnership Interest, if
any, as contemplated by Section 4.3.C.
"Performance Amount" means, with respect to a PLP on a specified date,
(i) in the case of a Redemption, a number of Performance Units equal to (a) the
amount of such PLP's Capital Account balance immediately following the
revaluation of the Partnership's assets as of such date pursuant to the
definitions of "Gross Asset Value" (paragraph (ii) therein) and "Net Income"
(paragraph (iii) therein), divided by (b) the Fair Market Value of a REIT Share;
and (ii) in the case of an exchange of Performance Units for the REIT Shares
Amount, the same number of Performance Units as determined pursuant to
subparagraph (i) above.
"Performance Investors" means shareholders of the General Partner and
Limited Partners who are parties to one or more of the Escrow Agreements.
"Performance Partners" means Partners which had the number of their
Partnership Units reduced pursuant to Section 4.3.F.
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"Performance Shares" means a portion of the REIT Shares or Partnership
Units issued to the Performance Investors which were escrowed pursuant to the
Escrow Agreements for possible transfer to the General Partner or the
Partnership (as applicable), the applicable number of which for each Performance
Investor is described in the applicable Escrow Agreement.
"Performance Units" means those Partnership Units issued pursuant to
Section 4.3.F.
"Permitted Reason" means a termination of employment by reason of death,
disability, termination by the employer without "cause," or termination by a
Person of their employment for "good reason." For purposes of this definition,
"cause" shall mean (i) gross negligence or willful misconduct, (ii) breach by
the Person of the covenant not to compete provided in their employment agreement
during the one year period following the closing of the initial public offering
of common stock of the General Partner, (iii) fraud or other conduct against the
material best interests of the General Partner, the Partnership or their
subsidiaries, or (iv) conviction of a felony if such conviction has a material
adverse effect on the General Partner, the Partnership or their subsidiaries.
For purposes of this definition, "good reason" means (a) a substantial adverse
change in the nature or scope of a Person's responsibilities or authority under
the Person's employment agreement, or (b) an uncured breach by the employer of
any of its material obligations under such employment agreement.
"Person" means an individual or a corporation, partnership, limited
liability company, trust, unincorporated organization, association or other
entity.
"Plan Asset Regulation" means the regulations promulgated by the United
States Department of Labor in Title 29, Code of Federal Regulations, Part 2510,
Section 101-3, and any successor regulations thereto.
"Pledge" shall have the meaning set forth in Section 11.3.A.
"PLP" means at any time, any Person who then owns one or more
Performance Units, including Performance Units which have not vested.
"Preferred Capital" means a Capital Account balance equal to the product
of (i) the number of Series A Preferred Units then held by the General Partner
multiplied by (ii) the sum of $25 and any Preferred Distribution Shortfall per
Series A Preferred Unit.
"Preferred Distribution Shortfall" shall have the meaning given to such
term in Section 5.1 hereof.
"Preferred Partner" means a Partner holding any series of Preferred
Units.
"Preferred Share" means a share of the General Partner's preferred
stock, par value $.01 per share, with such rights, priorities and preferences as
shall be designated by the Board of Directors in accordance with the Charter.
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"Preferred Unit" means a Partnership Unit representing a Partnership
Interest, with such rights, priorities and preferences as shall be designated by
the General Partner pursuant to Section 4.3.C hereof.
"Priority Return" shall mean, an amount equal to 8 1/2% per annum on an
amount equal to $25 per Series A Preferred Unit then outstanding (equivalent to
$2.125 per annum). Such amount shall be determined on a daily basis computed on
the basis of a 360-day year of twelve 30-day months (or actual days for any
month which is shorter than a full monthly period), cumulative from July 27,
1998 to the extent not distributed for any given distribution period pursuant to
Sections 5.1 and 16.2 hereof. Notwithstanding the foregoing, distributions on
the Series A Preferred Units will accrue whether or not the terms and provisions
of any agreement of the Partnership at any time prohibit the current payment of
distributions, whether or not the Partnership has earnings, whether or not there
are funds legally available for the payment of such distributions and whether or
not such distributions are authorized. Accrued but unpaid distributions on the
Series A Preferred Units will accumulate as of the Preferred Unit Distribution
Payment Date on which they first become payable.
"Properties" means such interests in real property and personal property
including without limitation, fee interests, interests in ground leases,
interests in joint ventures, interests in mortgages, and Debt instruments as the
Partnership may hold from time to time.
"Qualified REIT Subsidiary" means any Subsidiary of the General Partner
that is a "qualified REIT subsidiary" within the meaning of Section 856(i) of
the Code.
"Qualified Transferee" means an "Accredited Investor" as defined in Rule
501 promulgated under the Securities Act.
"Redemption" shall have the meaning set forth in Section 8.6.A.
"Regulations" means the Income Tax Regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Regulatory Allocations" shall have the meaning set forth in Section
6.3.A(viii).
"REIT" means a real estate investment trust under Sections 856 through
860 of the Code.
"REIT Requirements" shall have the meaning set forth in Section 5.1.
"REIT Share" means a share of common stock, par value $.01 per share, of
the General Partner.
"REIT Shares Amount" means, as of any date, an aggregate number of REIT
Shares equal to the number of Tendered Units, or in the case of Section 11.2.B,
all Units, as adjusted pursuant to Section 7.5 (in the event the General Partner
acquires material assets, other than on behalf of the Partnership) and for stock
dividends and distributions, stock splits and
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subdivisions, reverse stock splits and combinations, distributions of rights,
warrants or options, and distributions of evidences of indebtedness or assets
relating to assets not received by the General Partner pursuant to a pro rata
distribution by the Partnership.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder.
"Series A Articles Supplementary" means the Articles Supplementary of
the General Partner in connection with its Series A Preferred Shares, as filed
with the Maryland Department of Revenue and Taxation on July 23, 1998.
"Series A Preferred Share" means a share of 8 1/2% Series A Cumulative
Redeemable Preferred Stock, par value $.01 per share, liquidation preference $25
per share, of the General Partner.
"Series A Preferred Units" means the Partnership's 8 1/2% Series A
Cumulative Redeemable Partnership Units.
"Series A Preferred Unit Distribution Payment Date" shall have the
meaning set forth in Section 16.2.A hereof.
"Specified Redemption Date" means the day of receipt by the General
Partner of a Notice of Redemption.
"Stock Incentive Plan" means any stock incentive plan of the General
Partner.
"Subsidiary" shall mean, with respect to any person, any corporation,
partnership, limited liability company, joint venture or other entity of which a
majority of (i) the voting power of the voting equity securities or (ii) the
outstanding equity interests, is owned, directly or indirectly, by such person.
"Subsidiary Partnership" means any partnership or limited liability
company that is a Subsidiary of the Partnership.
"Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.4.
"Surviving Partnership" shall have the meaning set forth in Section
11.2.C.
"Tax Items" shall have the meaning set forth in Section 6.4.A.
"Tenant" means any tenant from which the General Partner derives rent
either directly or indirectly through partnerships, including the Partnership.
"Tendered Units" shall have the meaning set forth in Section 8.6.A.
"Tendering Partner" shall have the meaning set forth in Section 8.6.A.
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"Terminating Capital Transaction" means any sale or other disposition of
all or substantially all of the assets of the Partnership or a related series of
transactions that, taken together, result in the sale or other disposition of
all or substantially all of the assets of the Partnership.
"Termination Transaction" shall have the meaning set forth in Section
11.2.B.
Section 1.2. Rules of Construction
Unless otherwise indicated, all references herein to "REIT," "REIT
Requirements," "REIT Shares" and "REIT Shares Amount" with respect to the
General Partner shall apply only with reference to the Company.
ARTICLE 2.
ORGANIZATIONAL MATTERS
Section 2.1. Organization
The Partnership is a limited partnership formed pursuant to the
provisions of the Act and upon the terms and conditions set forth in this
Agreement. Except as expressly provided herein, the rights and obligations of
the Partners and the administration and termination of the Partnership shall be
governed by the Act. The Partnership Interest of each Partner shall be personal
property for all purposes.
Section 2.2. Name
The name of the Partnership is AMB Property, L.P. The Partnership's
business may be conducted under any other name or names deemed advisable by the
General Partner, including the name of the General Partner or any Affiliate
thereof. The words "Limited Partnership," "L.P.," "Ltd." or similar words or
letters shall be included in the Partnership's name where necessary for the
purposes of complying with the laws of any jurisdiction that so requires. The
General Partner in its sole and absolute discretion may change the name of the
Partnership at any time and from time to time and shall notify the Limited
Partners of such change in the next regular communication to the Limited
Partners.
Section 2.3. Resident Agent; Principal Office
The name and address of the resident agent of the Partnership in the
State of Delaware is The Corporation Trust Company, 1209 Orange Street,
Wilmington, Delaware 19801. The address of the principal office of the
Partnership in the State of Delaware is The Corporation Trust Company, 1209
Orange Street, Wilmington, Delaware 19801 at such address. The principal office
of the Partnership is located at 505 Montgomery Street, San Francisco,
California 94111, 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.
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Section 2.4. Power of Attorney
A. Each Limited Partner and each Assignee 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:
(i) 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 conduct business or
own property; (b) all instruments that the General Partner or
any Liquidator 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 any
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, Articles 11, 12 and
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 Interests; and
(ii) execute, swear to, 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
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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
Partnership 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 any Liquidator, within fifteen (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.
Section 2.5. Term
The term of the Partnership commenced on October 15, 1997 and shall
continue until December 31, 2096 unless it is dissolved sooner pursuant to the
provisions of Article 13 or as otherwise provided by law.
Section 2.6. Number of Partners
Without the consent of the General Partner which may be given or
withheld in its sole discretion, the Partnership shall not at any time have more
than one hundred (100) partners (including as partners those persons indirectly
owning an interest in the Partnership through a partnership, limited liability
company, S corporation or grantor trust (such entity, a "flow through entity"),
but only if substantially all of the value of such person's interest in the flow
through entity is attributable to the flow through entity's interest (direct or
indirect) in the Partnership).
ARTICLE 3.
PURPOSE
Section 3.1. Purpose and Business
The purpose and nature of the business to be conducted by the
Partnership is (i) to conduct any business that may be lawfully conducted by a
limited partnership organized pursuant to the Act; provided, however, that such
business shall be limited to and conducted in such a manner as to permit the
General Partner at all times to be classified as a REIT for Federal income tax
purposes, unless the General Partner ceases to qualify as a REIT for reasons
other than the conduct of the business of the Partnership, (ii) to enter into
any partnership, joint venture or other similar arrangement to engage in any of
the foregoing or to own interests in any entity engaged, directly or indirectly,
in any of the foregoing and (iii) to do anything necessary or incidental to the
foregoing. In connection with the foregoing, and without limiting the General
Partner's right in its sole discretion to cease qualifying as a REIT, the
Partners acknowledge that the General Partner's current status as a REIT inures
to the benefit of all the Partners and not solely the General Partner.
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Section 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 described herein and
for the protection and benefit of the Partnership, including, without
limitation, full power and authority, directly or through its ownership interest
in other entities, to enter into, perform and carry out contracts of any kind,
borrow money and issue evidences of indebtedness, whether or not secured by
mortgage, deed of trust, pledge or other lien, acquire and develop real
property, and manage, lease, sell, transfer and dispose of real property;
provided, however, not withstanding anything to the contrary in this Agreement,
the Partnership shall not take, or 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 General Partner to continue to qualify as a
REIT, (ii) could subject the General Partner to any 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 General Partner or its
securities, unless any such action (or inaction) under the foregoing clauses
(i), (ii) or (iii) shall have been specifically consented to by the General
Partner in writing.
Section 3.3. Partnership Only for Purposes Specified
The Partnership shall be a partnership only for the purposes specified
in Section 3.1, and this Agreement shall not be deemed to create a partnership
among the Partners with respect to any activities whatsoever other than the
activities within the purposes of the Partnership as specified in Section 3.1.
Except as otherwise provided in this Agreement, no Partner shall have any
authority to act for, bind, commit or assume any obligation or responsibility on
behalf of the Partnership, its properties or any other Partner. No Partner, in
its capacity as a Partner under this Agreement, shall be responsible or liable
for any indebtedness or obligation of another Partner, nor shall the Partnership
be responsible or liable for any indebtedness or obligation of any Partner,
incurred either before or after the execution and delivery of this Agreement by
such Partner, except as to those responsibilities, liabilities, indebtedness or
obligations incurred pursuant to and as limited by the terms of this Agreement
and the Act.
Section 3.4. Representations and Warranties by the Parties
A. Each Partner that is an individual represents and warrants to each
other Partner that (i) such Partner has in the case of any Person other than an
individual, the power and authority, and in the case of an individual, the legal
capacity, to enter into this Agreement and perform such Partner's obligations
hereunder, (ii) the consummation of the transactions contemplated by this
Agreement to be performed by such Partner will not result in a breach or
violation of, or a default under, any agreement by which such Partner or any of
such Partner's property is or are bound, or any statute, regulation, order or
other law to which such Partner is subject, (iii) such Partner is neither a
"foreign person" within the meaning of Section 1445(f) of the Code nor a
"foreign partner" within the meaning of Section 1446(e) of the Code and (iv)
this Agreement has been duly executed and delivered by such Partner and is
binding upon, and enforceable against, such Partner in accordance with its
terms.
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B. Each Partner that is not an individual represents and warrants to
each other Partner that (i) its execution and delivery of this Agreement and all
transactions contemplated by this Agreement to be performed by it have been duly
authorized by all necessary action, including without limitation, that of its
general partner(s), committee(s), trustee(s), beneficiaries, directors and/or
stockholder(s), as the case may be, as required, (ii) the consummation of such
transactions shall not result in a breach or violation of, or a default under,
its certificate of limited partnership, partnership agreement, trust agreement,
limited liability company operating agreement, charter or by-laws, as the case
may be, any agreement by which such Partner or any of such Partner's properties
or any of its partners, beneficiaries, trustees or stockholders, as the case may
be, is or are bound, or any statute, regulation, order or other law to which
such Partner or any of its partners, trustees, beneficiaries or stockholders, as
the case may be, is or are subject, (iii) such Partner is neither a "foreign
person" within the meaning of Section 1445(f) of the Code nor a "foreign
partner" within the meaning of Section 1446(e) of the Code and (iv) this
Agreement has been duly executed and delivered by such Partner and is binding
upon, and enforceable against, such Partner in accordance with its terms.
C. Each Partner represents, warrants and agrees that it has acquired and
continues to hold its interest in the Partnership for its own account for
investment only and not for the purpose of, or with a view toward, the resale or
distribution of all or any part thereof, nor with a view toward selling or
otherwise distributing such interest or any part thereof at any particular time
or under any predetermined circumstances. Each Partner further represents and
warrants that it is a sophisticated investor, able and accustomed to handling
sophisticated financial matters for itself, particularly real estate
investments, and that it has a sufficiently high net worth that it does not
anticipate a need for the funds it has invested in the Partnership in what it
understands to be a highly speculative and illiquid investment.
D. Each Partner further represents, warrants and agrees as follows:
(i) Except as provided in Exhibit E, at any time such Partner
actually or constructively owns a 25% or greater capital interest or
profits interest in the Partnership, it does not and will not, without
the prior written consent of the General Partner, actually own or
Constructively Own (a) with respect to any Tenant that is a corporation,
any stock of such Tenant and (b) with respect to any Tenant that is not
a corporation, any interests in either the assets or net profits of such
Tenant.
(ii) Except as provided in Exhibit F, at any time such Partner
actually or constructively owns a 25% or greater capital interest or
profits interest in the Partnership, it does not, and agrees that it
will not without the prior written consent of the General Partner,
actually own or Constructively Own, any stock in the General Partner,
other than any REIT Shares or other shares of capital stock of the
General Partner such Partner may acquire (a) as a result of an exchange
of Tendered Units pursuant to Section 8.6 or (b) upon the exercise of
options granted or delivery of REIT Shares pursuant to any Stock
Incentive Plan, in each case subject to the ownership limitations set
forth in the General Partner's Charter.
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(iii) Upon request of the General Partner, it will disclose to
the General Partner the amount of REIT Shares or other shares of capital
stock of the General Partner that it actually owns or Constructively
Owns.
(iv) It understands that if, for any reason, (a) the
representations, warranties or agreements set forth in Section 3.4.D(i)
or (ii) are violated or (b) the Partnership's actual or Constructive
Ownership of the REIT Shares or other shares of capital stock of the
General Partner violates the limitations set forth in the Charter, then
(x) some or all of the Redemption rights of the Partners may become
non-exercisable, and (y) some or all of the REIT Shares owned by the
Partners may be automatically transferred to a trust for the benefit of
a charitable beneficiary, as provided in the Charter.
E. The representations and warranties contained in Sections 3.4.A,
3.4.B, 3.4.C and 3.4.D shall survive the execution and delivery of this
Agreement by each Partner and the dissolution and winding up of the Partnership.
F. Each Partner hereby acknowledges that no representations as to
potential profit, cash flows, funds from operations or yield, if any, in respect
of the Partnership or the General Partner have been made by any Partner or any
employee or representative or Affiliate of any Partner, and that projections and
any other information, including, without limitation, financial and descriptive
information and documentation, which may have been in any manner submitted to
such Partner shall not constitute any representation or warranty of any kind or
nature, express or implied.
Section 3.5. Certain ERISA Matters
Each Partner acknowledges that the Partnership is intended to qualify as
a "real estate operating company" (as such term is defined in the Plan Asset
Regulation). The General Partner will use its reasonable best efforts to
structure the investments in, relationships with and conduct with respect to
Properties and any other assets of the Partnership so that the Partnership will
be a "real estate operating company" (as such term is defined in the Plan Asset
Regulation).
ARTICLE 4.
CAPITAL CONTRIBUTIONS
Section 4.1. Capital Contributions of the Partners
At the time of their respective execution of this Agreement, the
Partners shall make or shall have made Capital Contributions as set forth in
Exhibit A to this Agreement. The Partners shall own Partnership Units of the
class and in the amounts set forth in Exhibit A and shall have a Percentage
Interest in the Partnership as set forth in Exhibit A, which Percentage Interest
shall be adjusted in Exhibit A from time to time by the General Partner to the
extent necessary to accurately reflect exchanges, redemptions, Capital
Contributions, the issuance of additional Partnership Units (including the
issuance of Performance Units pursuant to Section 4.3.F) or similar events
having an effect on a Partner's Percentage Interest. Except as required by law
or as otherwise provided in Sections 4.3, 4.4 and 10.5, no Partner shall be
required or permitted to make any additional Capital Contributions or loans to
the Partnership. Unless
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otherwise specified by the General Partner at the time of the creation of any
class of Partnership Interests, the corresponding class of capital stock for any
Partnership Units issued shall be REIT Shares.
Section 4.2. Loans by Third Parties
Subject to Section 4.3, the Partnership may incur Debt, or enter into
other similar credit, guarantee, financing or refinancing arrangements for any
purpose (including, without limitation, in connection with any further
acquisition of Properties) with any Person that is not the General Partner upon
such terms as the General Partner determines appropriate; provided, that the
Partnership shall not incur any Debt that is recourse to the General Partner,
except to the extent otherwise agreed to by the General Partner in its sole
discretion.
Section 4.3. Additional Funding and Capital Contributions
A. General. The General Partner may, at any time and from time to time,
determine that the Partnership requires additional funds ("Additional Funds")
for the acquisition of additional Properties or for such other Partnership
purposes as the General Partner may determine. Additional Funds may be raised by
the Partnership, at the election of the General Partner, in any manner provided
in, and in accordance with, the terms of this Section 4.3. No Person shall have
any preemptive, preferential or similar right or rights to subscribe for or
acquire any Partnership Interest, except as set forth in this Section 4.3.
B. General Partner Loans. The General Partner may enter into a Funding
Debt, including, without limitation, Funding Debt that is convertible into REIT
Shares, and lend the Additional Funds to the Partnership (a "General Partner
Loan"); provided, however, that the General Partner shall not be obligated to
lend the net proceeds of any Funding Debt to the Partnership in a manner that
would be inconsistent with the General Partner's ability to remain qualified as
a REIT. If the General Partner enters into such a Funding Debt, the General
Partner Loan will consist of the net proceeds from such Funding Debt and will be
on comparable terms and conditions, including interest rate, repayment schedule
and costs and expenses, as shall be applicable with respect to or incurred in
connection with such Funding Debt.
C. Issuance of Additional Partnership Interests. The General Partner may
raise all or any portion of the Additional Funds by accepting additional Capital
Contributions of cash. The General Partner may also accept additional Capital
Contributions of real property or other non-cash assets. In connection with any
such additional Capital Contributions (of cash or property), the General Partner
is hereby authorized to cause the Partnership from time to time to issue to
Partners (including the General Partner) or other Persons (including, without
limitation, in connection with the contribution of property to the Partnership)
additional Partnership Units or other Partnership Interests in one or more
classes, or one or more series of any of such classes, with such designations,
preferences and relative, participating, optional or other special rights,
powers, and duties, including rights, powers, and duties senior to then existing
Limited Partnership Interests, all as shall be determined by the General Partner
in its sole and absolute discretion subject to Delaware law, and as set forth by
amendment to this Agreement, including without limitation: (i) the allocations
of items of Partnership income, gain, loss, deduction, and credit to such class
or series of Partnership Interests; (ii) the right of each such class or series
of
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Partnership Interests to share in Partnership distributions; (iii) the rights of
each such class or series of Partnership Interests upon dissolution and
liquidation of the Partnership; and (iv) the right to vote, including, without
limitation, the limited partner approval rights set forth in Section 11.2.A;
provided, that no such additional Partnership Units or other Partnership
Interests shall be issued to the General Partner unless either (a) the
additional Partnership Interests are issued in connection with the grant, award,
or issuance of shares of the General Partner pursuant to Section 4.3.D below,
which shares have designations, preferences, and other rights (except voting
rights) such that the economic interests attributable to such shares are
substantially similar to the designations, preferences and other rights of the
additional Partnership Interests issued to the General Partner in accordance
with this Section 4.3.C or (b) the additional Partnership Interests are issued
to all Partners holding Partnership Interests in the same class in proportion to
their respective Percentage Interests in such class. In the event that the
Partnership issues additional Partnership Interests pursuant to this Section
4.3.C, the General Partner shall make such revisions to this Agreement
(including but not limited to the revisions described in Sections 5.4, 6.2.C,
and 8.6) as it determines are necessary to reflect the issuance of such
additional Partnership Interests.
D. Issuance of REIT Shares or Other Securities by the General Partner.
The General Partner shall not issue any additional REIT Shares (other than REIT
Shares issued pursuant to Section 8.6 or pursuant to a dividend or distribution
(including any stock split) of REIT Shares to all of its stockholders or all of
its stockholders who hold a class of stock of the General Partner), other shares
of capital stock of the General Partner or New Securities unless the General
Partner shall make a Capital Contribution of the net proceeds (including,
without limitation, cash and Properties) from the issuance of such additional
REIT Shares, other shares of capital stock or New Securities, as the case may
be, and from the exercise of the rights contained in such additional New
Securities, as the case may be. The General Partner's Capital Account shall be
increased by the amount of cash or the value of Properties so contributed.
E. Percentage Interest Adjustments in the Case of Capital Contributions
for Partnership Units. Upon the acceptance of additional Capital Contributions
in exchange for any class or series of Partnership Units, the Percentage
Interest related thereto shall be equal to a fraction, the numerator of which is
equal to the amount of cash and the Agreed Value of the Properties contributed
as of the Business Day immediately preceding the date on which the additional
Capital Contributions are made (an "Adjustment Date") and the denominator of
which is equal to the sum of (i) the Deemed Value of the Partnership Interests
of such class or series (computed as of the Business Day immediately preceding
the Adjustment Date) plus (ii) the aggregate amount of cash and the Agreed Value
of the Property contributed to the Partnership on such Adjustment Date in
respect of such class or series of Partnership Interests. The Percentage
Interest of each other Partner holding Partnership Interests of such class or
series not making a full pro rata Capital Contribution shall be adjusted to
equal a fraction, the numerator of which is equal to the sum of (i) the Deemed
Partnership Interest Value of such Limited Partner in respect of such class or
series (computed as of the Business Day immediately preceding the Adjustment
Date) plus (ii) the amount of cash and the Agreed Value of the Property
contributed by such Partner to the Partnership in respect of such class or
series as of such Adjustment Date, and the denominator of which is equal to the
sum of (a) the Deemed Value of the Partnership Interests of such class (computed
as of the Business Day immediately preceding the Adjustment Date), plus
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(b) the aggregate amount of cash and the Agreed Value of the Property
contributed to the Partnership on such Adjustment Date in respect of such class
or series. Notwithstanding the foregoing, solely for purposes of calculating a
Partner's Percentage Interest pursuant to this Section 4.3.E, (i) in the case of
cash Capital Contributions by the General Partner, such Capital Contributions
will be deemed to equal the cash contributed by the General Partner plus, in the
case of cash contributions funded by an offering of REIT Shares or other shares
of capital stock of the General Partner, the offering costs attributable to the
cash contributed to the Partnership, and (ii) in the case of the contribution of
Properties (or any portion thereof) by the General Partner which were acquired
by the General Partner in exchange for REIT Shares immediately prior to such
contribution, the General Partner shall be issued a number of Partnership Units
equal to the number of REIT Shares issued by the General Partner in exchange for
such Properties, the Partnership Units held by the other Partners shall not be
adjusted, and the Partners' Percentage Interests shall be adjusted accordingly.
The General Partner shall promptly give each Partner written notice of its
Percentage Interest, as adjusted.
F. Issuance of Performance Units to the PLPs. Performance Investors may
be required pursuant to the terms of the Escrow Agreements to transfer all or a
portion of their Performance Shares to the General Partner or the Partnership
(as applicable). To the extent Performance Shares (i.e., REIT Shares) are
transferred by Performance Investors to the General Partner pursuant to the
Escrow Agreements, the number of Partnership Units held by the General Partner
shall be automatically reduced by such amount on such date. To the extent
Performance Shares (i.e., Partnership Units) are transferred by Performance
Investors to the Partnership pursuant the Escrow Agreements, the number of
Partnership Units held by each such Performance Investor shall be automatically
reduced by such amount on such date. To the extent the Partnership Units held by
the General Partner or Performance Investors are reduced as set forth in the
preceding two sentences, the Partnership shall immediately issue an equal number
of Performance Units to the Persons listed on Schedule G-1 and Schedule G-2 to
Exhibit G in accordance with the allocations set forth on Exhibit G. The
adjustments in the number of Partnership Units held by the Performance Partners
and the PLPs set forth above shall have no effect on each such Partners' Capital
Account in the Partnership (except with respect to subsequent allocations of
items of Partnership income, gain, loss, deduction, and credit made to such
Partners and possibly with respect to the reissuance of a Performance Unit
subsequent to its forfeiture by a PLP) and no PLP shall have an obligation to
make a contribution to the capital of the Partnership in connection with the
issuance of Performance Units.
Section 4.4. Stock Incentive Plan
If at any time or from time to time the General Partner sells or issues
REIT Shares pursuant to any Stock Incentive Plan, the General Partner shall
contribute any proceeds therefrom to the Partnership as an additional Capital
Contribution and shall receive an amount of additional Partnership Units equal
to the number of REIT Shares so sold or issued. The General Partner's Capital
Account shall be increased by the amount of cash so contributed.
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Section 4.5. No Preemptive Rights
Except to the extent expressly granted by the Partnership pursuant to
another agreement, no Person shall have any preemptive, preferential or other
similar right with respect to (i) additional Capital Contributions or loans to
the Partnership or (ii) issuance or sale of any Partnership Units or other
Partnership Interests.
Section 4.6. Other Contribution Provisions
In the event that any Partner is admitted to the Partnership and is
given (or is treated as having received) a Capital Account in exchange for
services rendered to the Partnership, such transaction shall be treated by the
Partnership and the affected Partner as if the Partnership had compensated such
Partner in cash, and the Partner had contributed such cash to the capital of the
Partnership. In addition, with the consent of the General Partner, in its sole
discretion, one or more Limited Partners may enter into contribution agreements
with the Partnership which have the effect of providing a guarantee of certain
obligations of the Partnership.
ARTICLE 5.
DISTRIBUTIONS
Section 5.1. Requirement and Characterization of Distributions
The General Partner shall cause the Partnership to distribute all, or
such portion as the General Partner may in its discretion determine, Available
Cash generated by the Partnership (i) first, to the extent that the amount of
cash distributed with respect to any Partnership Interests that are entitled to
any preference in distribution for any prior distribution period was less than
the required distribution for such outstanding Partnership Interests for such
prior distribution period, and to the extent such deficiency has not been
subsequently distributed pursuant to this Section 5.1 (a "Preferred Distribution
Shortfall"), in accordance with the rights of such class of Partnership
Interests (and within such class, pro rata in proportion to the respective
Percentage Interests on the applicable record date) and to the Partners who are
Partners on the applicable record date with respect to such distribution, (ii)
second, with respect to any Partnership Interests that are entitled to any
preference in distribution, in accordance with the rights of such class of
Partnership Interests (and within such class, pro rata in proportion to the
respective Percentage Interests on the applicable record date) and (iii) third,
with respect to Partnership Interests that are not entitled to any preference in
distribution, pro rata to each such class on a quarterly basis and in accordance
with the terms of such class to Partners who are Partners of such class on the
Partnership Record Date with respect to such distribution (and within each such
class, pro rata in proportion with the respective Percentage Interests on such
Partnership Record Date). Unless otherwise expressly provided for in Article 16
with respect to the Series A Preferred Units and in an agreement, if any, at the
time a new class of Partnership Interests is created in accordance with Article
4, no Partnership Interest shall be entitled to a distribution in preference to
any other Partnership Interest. The General Partner shall take such reasonable
efforts, as determined by it in its sole and absolute discretion and consistent
with its qualification as a REIT, to cause the Partnership to distribute
sufficient amounts to enable the General Partner, for so long as the General
Partner has determined to qualify as a REIT, to pay stockholder dividends that
will
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(a) satisfy the requirements for qualifying as a REIT under the Code and
Regulations ("REIT Requirements") and (b) except to the extent otherwise
determined by the General Partner, avoid any Federal income or excise tax
liability of the General Partner.
Section 5.2. Distributions in Kind
Except as expressly provided herein, no right is given to any Partner to
demand and receive property other than cash. The General Partner may determine,
in its sole and absolute discretion, to make a distribution in kind to the
Partners of Partnership assets, and such assets shall be distributed in such a
fashion as to ensure that the fair market value is distributed and allocated in
accordance with Articles 5, 6 and 10.
Section 5.3. Distributions Upon Liquidation
Proceeds from a Terminating Transaction shall be distributed to the
Partners in accordance with Section 13.2.
Section 5.4. Distributions to Reflect Issuance of Additional Partnership
Interests
In the event that the Partnership issues additional Partnership
Interests (other than Performance Units, which shall receive distributions as
set forth in Section 5.1) to the General Partner or any Additional Limited
Partner pursuant to Section 4.3.C or 4.4, the General Partner shall make such
revisions to this Article 5 as it determines are necessary to reflect the
issuance of such additional Partnership Interests. In the absence of any
agreement to the contrary, an Additional Limited Partner shall be entitled to
the distributions set forth in Section 5.1 (without regard to this Section 5.4)
with respect to the quarter during which the closing of its contribution to the
Partnership occurs, multiplied by a fraction the numerator of which is the
number of days from and after the date of such closing through the end of the
applicable quarter, and the denominator of which is the total number of days in
such quarter.
Section 5.5 Character of PLP Distributions
Distributions to each PLP pursuant to this Agreement shall be advances
or drawings of money or property against such Partner's distributive share of
Net Income (or items thereof) as described in Treasury Regulation Section
1.731-1(a)(1)(ii).
ARTICLE 6.
ALLOCATIONS
Section 6.1. Timing and Amount of Allocations of Net Income and Net Loss
Net Income and Net Loss of the Partnership shall be determined and
allocated with respect to each fiscal year of the Partnership as of the end of
each such year. Subject to the other provisions of this Article 6, an allocation
to a Partner of a share of Net Income or Net Loss
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shall be treated as an allocation of the same share of each item of income,
gain, loss or deduction that is taken into account in computing Net Income or
Net Loss.
Section 6.2. General Allocations
A. In General. Except as otherwise provided in this Article 6, Net
Income and Net Loss allocable with respect to a class of Partnership Interests,
shall be allocated to each of the Partners holding such class of Partnership
Interests in accordance with their respective Percentage Interest of such class.
B.1. Net Income. Except as provided in Section 6.2.B.3, Net Income for
any Partnership Year shall be allocated in the following manner and order of
priority:
(a) First, 100% to the General Partner in an amount equal to the
remainder, if any, of the cumulative Net Losses allocated to the
General Partner pursuant to Section 6.2.B.2(d) for all prior
Partnership Years minus the cumulative Net Income allocated to
the General Partner pursuant to this Section 6.2.B.1(a) for all
prior Partnership Years;
(b) Second, 100% to each Limited Partner in an amount equal to the
remainder, if any, of the cumulative Net Losses allocated to
each such Limited Partner pursuant to Section 6.2.B.2(c) for all
prior Partnership Years minus the cumulative Net Income
allocated to such Limited Partner pursuant to this Section
6.2.B.1(b) for all prior Partnership Years, and to the extent
such allocations of Net Income are not sufficient to entirely
offset such Net Losses, such allocations shall be made in
proportion to the total amount that would have been allocated
pursuant to this Section 6.2.B.1(b) without regard to such
shortfall;
(c) Third, 100% to the General Partner in respect of the Series A
Preferred Units in an amount equal to the remainder, if any, of
the cumulative Net Losses allocated to the Series A Preferred
Units pursuant to Section 6.2.B.2(b) for all prior Partnership
Years minus the cumulative Net Income allocated to the Series A
Preferred Units pursuant to this Section 6.2.B.1(c) for all
prior Partnership Years;
(d) Fourth, 100% to the General Partner and the Limited Partners in
an amount equal to the remainder, if any, of the cumulative Net
Losses allocated to each such Partner pursuant to Section
6.2.B.2(a) for all prior Partnership Years minus the cumulative
Net Income allocated to each Partner pursuant to this Section
6.2.B.1(d) for all prior Partnership Years;
(e) Fifth, 100% to the General Partner in respect of the Series A
Preferred Units until the General Partner has been allocated an
amount equal to the remainder, if any, of (i) the cumulative
Priority Return to the last day of the current Partnership Year
or to the date of redemption, to the extent Series A Preferred
Units are redeemed during such year, minus (ii) the
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cumulative Net Income allocated to the General Partner pursuant
to this Section 6.2.B.1(e) for all prior Partnership Years;
(f) Sixth, 100% to the General Partner and the Limited Partners in
accordance with their respective Percentage Interests in the
Common Units.
B.2. Net Losses. Except as provided in Section 6.2.B.3, Net Losses for
any Partnership Year shall be allocated in the following manner and order of
priority:
(a) First, 100% to the General Partner and the Limited Partners
in accordance with their respective Percentage Interests in the Common
Units (to the extent consistent with this Section 6.2.B.2(a)) until the
Adjusted Capital Account (ignoring for this purpose any amounts a
Partner is obligated to contribute to the capital of the Partnership or
is deemed obligated to contribute pursuant to Regulations Section
1.704-1(b)(2)(ii)(c)(2) and ignoring the General Partner's Preferred
Capital) of each such Partner is zero;
(b) Second, 100% to the General Partner until the Adjusted Capital
Account (ignoring for this purpose any amounts the General
Partner is obligated to contribute to the capital of the
Partnership or is deemed obligated to contribute pursuant to
Regulations Section 1.704-1(b)(2)(ii)(c)(2)) of the General
Partner is zero;
(c) Third, 100% to the Limited Partners to the extent of, and in
proportion to, the positive balance (if any) in their Adjusted
Capital Accounts; and
(d) Fourth, 100% to the General Partner.
B.3. Terminating Capital Transactions.
(a) If no Performance Units are outstanding at the time of a
Terminating Capital Transaction, any Net Income attributable to
such Terminating Capital Transaction shall first be allocated to
the General Partner in an amount equal to the Offering Costs, to
the extent the General Partner's Capital Account has not
previously been adjusted to account for such amounts.
(b) If Performance Units are outstanding at the time of a
Terminating Capital Transaction --
(1) any Net Income attributable to such Terminating Capital
Transaction shall be allocated as follows: such Net
Income shall first be tentatively allocated solely as an
interim step in calculating final allocations pursuant
to this Section 6.2.B.3(b)(1), among the Partners in
accordance with Section 6.2.B.3(a), Section 6.2.A and
Section 6.2.B.1. Then the amount so tentatively
allocated to each
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Performance Partner, to the extent of each such
Performance Partner's Excess Performance Capital, shall
instead be allocated to the PLPs, pro rata to the number
of Performance Units held by each PLP.
(2) any Net Loss attributable to such Terminating Capital
Transaction shall be allocated as follows: such Net Loss
shall first be tentatively allocated, solely as an
interim step in calculating final allocations pursuant
to this Section 6.2.B.3(b)(2), among the Partners in
accordance with Section 6.2.A and Section 6.2.B.2. Then
the amount so tentatively allocated to the PLPs shall
instead be allocated to the Performance Partners to the
extent of the aggregate Excess Performance Capital of
the Performance Partners. Any amounts so allocated away
from the PLPs shall be done on a basis which is
proportionate to each PLP's Performance Units. Any
amounts so allocated to the Performance Partners shall
be done on a basis which is proportionate to each
Performance Partner's Excess Performance Capital.
C. Allocations to Reflect Issuance of Additional Partnership Interests.
In the event that the Partnership issues additional Partnership Interests to the
General Partner or any Additional Limited Partner pursuant to Section 4.3 or
4.4, the General Partner shall make such revisions to this Section 6.2 or to
Section 12.2.B as it determines are necessary to reflect the terms of the
issuance of such additional Partnership Interests, including making preferential
allocations to certain classes of Partnership Interests, subject to the terms of
the Series A Preferred Units. In addition, for any quarter in which Performance
Units were issued, Net Income and Net Loss relating to such units shall be
allocated among (i) the PLPs who received such units and (ii) the Performance
Partners who returned the corresponding Partnership Units to the Partnership, in
accordance with any method selected by the General Partner which is permitted
under Section 706 of the Code.
Section 6.3. Additional Allocation Provisions
Notwithstanding the foregoing provisions of this Article 6:
A. Regulatory Allocations.
(i) Minimum Gain Chargeback. Except as otherwise provided in
Regulations Section 1.704-2(f), notwithstanding the provisions of
Section 6.2, or any other provision of this Article 6, if there is a net
decrease in Partnership Minimum Gain during any fiscal year, each
Partner shall be specially allocated items of Partnership income and
gain for such year (and, if necessary, subsequent years) in an amount
equal to such Partner's share of the net decrease in Partnership Minimum
Gain, as determined under Regulations Section 1.704-2(g). Allocations
pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant
thereto. The items to be allocated shall be determined in accordance
with Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section
6.3.A(i) is
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intended to qualify as a "minimum gain chargeback" within the meaning of
Regulation Section 1.704-2(f) which shall be controlling in the event of
a conflict between such Regulation and this Section 6.3.A(i).
(ii) Partner Minimum Gain Chargeback. Except as otherwise
provided in Regulations Section 1.704-2(i)(4), and notwithstanding the
provisions of Section 6.2, or any other provision of this Article 6
(except Section 6.3.A(i)), 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 Regulations
Section 1.704-2(i)(5), shall be specially allocated items of Partnership
income and gain for such year (and, if necessary, subsequent years) in
an amount equal to such Partner's share of the net decrease in Partner
Minimum Gain attributable to such Partner Nonrecourse Debt, determined
in accordance with Regulations Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each General Partner and
Limited Partner pursuant thereto. The items to be so allocated shall be
determined in accordance with Regulations Sections 1.704-2(i)(4) and
1.704-2(j)(2). This Section 6.3.A(ii) is intended to qualify as a
"chargeback of partner nonrecourse debt minimum gain" within the meaning
of Regulation Section 1.704-2(i) which shall be controlling in the event
of a conflict between such Regulation and this Section 6.3.A(ii).
(iii) Nonrecourse Deductions and Partner Nonrecourse Deductions.
Any Nonrecourse Deductions for any fiscal year shall be specially
allocated to the Partners in accordance with their respective Percentage
Interest in Common Units. Any Partner Nonrecourse Deductions for any
fiscal year shall be specially allocated to the Partner(s) who bears the
economic risk of loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable, in
accordance with Regulations Sections 1.704-2(b)(4) and 1.704-2(i).
(iv) Qualified Income Offset. If any Partner unexpectedly
receives an adjustment, allocation or distribution described in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of
Partnership income and gain shall be allocated, in accordance with
Regulations Section 1.704-1(b)(2)(ii)(d), to the Partner in an amount
and manner sufficient to eliminate, to the extent required by such
Regulations, the Adjusted Capital Account Deficit of the Partner as
quickly as possible provided that an allocation pursuant to this Section
6.3.A(iv) shall be made if and only to the extent that such Partner
would have an Adjusted Capital Account Deficit after all other
allocations provided in this Article 6 have been tentatively made as if
this Section 6.3.A(iv) were not in the Agreement. It is intended that
this Section 6.3.A(iv) qualify and be construed as a "qualified income
offset" within the meaning of Regulations 1.704-1(b)(2)(ii)(d), which
shall be controlling in the event of a conflict between such Regulations
and this Section 6.3.A(iv).
(v) Gross Income Allocation. In the event any Partner has a
deficit Capital Account at the end of any fiscal year which is in excess
of the sum of (a) the
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amount (if any) such Partner is obligated to restore to the Partnership
and (b) the amount such Partner is deemed to be obligated to restore
pursuant to Regulations Section 1.704-1(b)(2)(ii)(c) or the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each
such Partner shall be specially allocated items of Partnership income
and gain in the amount of such excess as quickly as possible; provided,
that an allocation pursuant to this Section 6.3.A(v) shall be made if
and only to the extent that such Partner would have a deficit Capital
Account in excess of such sum after all other allocations provided in
this Article 6 have been tentatively made as if this Section 6.3.A(v)
and Section 6.3.A(iv) were not in the Agreement.
(vi) Limitation on Allocation of Net Loss. To the extent any
allocation of Net Loss would cause or increase an Adjusted Capital
Account Deficit as to any Partner, such allocation of Net Loss shall be
reallocated among the other Partners in accordance with their respective
Percentage Interests in Common Units, subject to the limitations of this
Section 6.3.A(vi).
(vii) Section 754 Adjustment. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Code Section
734(b) or Code Section 743(b) is required, pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m)(2) or Regulations Section
1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as the result of a distribution to a Partner in complete
liquidation of his interest in the Partnership, the amount of such
adjustment to 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 to the Partners in accordance with their interests
in the Partnership in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(2) applies, or to the Partners to whom such
distribution was made in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(viii) Curative Allocation. The allocations set forth in
Sections 6.3.A(i), (ii), (iii), (iv), (v), (vi), and (vii) (the
"Regulatory Allocations") are intended to comply with certain regulatory
requirements, including the requirements of Regulations Sections
1.704-1(b) and 1.704-2. Notwithstanding the provisions of Sections 6.1
and 6.2, the Regulatory Allocations shall be taken into account in
allocating other items of income, gain, loss and deduction among the
Partners so that, to the extent possible, the net amount of such
allocations of other items and the Regulatory Allocations to each
Partner shall be equal to the net amount that would have been allocated
to each such Partner if the Regulatory Allocations had not occurred.
B. For purposes of determining a Partner's proportional share of the
"excess nonrecourse liabilities" of the Partnership within the meaning of
Regulations Section 1.752-3(a)(3), each Partner's interest in Partnership
profits shall be such Partner's Percentage Interest in Common Units.
Section 6.4. Tax Allocations
A. In General. Except as otherwise provided in this Section 6.4, for
income tax purposes each item of income, gain, loss and deduction (collectively,
"Tax Items") shall be
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allocated among the Partners in the same manner as its correlative item of
"book" income, gain, loss or deduction is allocated pursuant to Sections 6.2 and
6.3.
B. Allocations Respecting Section 704(c) Revaluations. Notwithstanding
Section 6.4.A, Tax Items with respect to Partnership property that is
contributed to the Partnership by a Partner shall be shared among the Partners
for income tax purposes pursuant to Regulations promulgated under Section 704(c)
of the Code, so as to take into account the variation, if any, between the basis
of the property to the Partnership and its initial Gross Asset Value. With
respect to Partnership property that is initially contributed to the Partnership
upon its formation pursuant to Section 4.1, such variation between basis and
initial Gross Asset Value shall be taken into account under the "traditional
method" as described in Regulations Section 1.704-3(b). With respect to
properties subsequently contributed to the Partnership, the Partnership shall
account for such variation under any method approved under Section 704(c) of the
Code and the applicable regulations as chosen by the General Partner. In the
event the Gross Asset Value of any Partnership asset is adjusted pursuant to
subparagraph (ii) of the definition of Gross Asset Value (provided in Article
1), subsequent allocations of Tax Items with respect to such asset shall take
account of the variation, if any, between the adjusted basis of such asset and
its Gross Asset Value in the same manner as under Section 704(c) of the Code and
the applicable regulations consistent with the requirements of Regulations
Section 1.704-1(b)(2)(iv)(g) using any method approved under 704(c) of the Code
and the applicable regulations as chosen by the General Partner.
ARTICLE 7.
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1. Management
A. Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs of the Partnership are
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, except with the consent of the
General Partner. In addition to the powers now or hereafter granted a general
partner of a limited partnership under the Act and other applicable law or which
are granted to the General Partner under any other provision of this Agreement,
the General Partner, subject to the other provisions hereof including Section
7.3, shall have full power and authority to do all things deemed necessary or
desirable by it to conduct the business of the Partnership, to exercise all
powers set forth in Section 3.2 and to effectuate the purposes set forth in
Section 3.1, including, without limitation:
(i) the making of any expenditures, the lending or borrowing of
money (including, without limitation, making prepayments on
loans and borrowing money to permit the Partnership to make
distributions to its Partners in such amounts as will permit the
General Partner (for so long as the General Partner has
determined to qualify as a REIT) to avoid the payment of any
Federal income tax (including, for this purpose, any excise
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tax pursuant to Section 4981 of the Code) and to make
distributions to its stockholders sufficient to permit the
General Partner to maintain REIT status), the assumption or
guarantee of, or other contracting for, indebtedness and other
liabilities, the issuance of evidences of indebtedness
(including the securing of same by mortgage, deed of trust or
other lien or encumbrance on all or any of the Partnership's
assets) and the incurring of any obligations it deems necessary
for the conduct of the activities of the Partnership;
(ii) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental
or other agencies having jurisdiction over the business
or assets of the Partnership;
(iii) subject to the provisions of Section 7.3.D, the
acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any assets of the
Partnership or the merger or other combination of the
Partnership with or into another entity;
(iv) the mortgage, pledge, encumbrance or hypothecation of
all or any assets of the Partnership, and the use of the
assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent
with the terms of this Agreement and on any terms it
sees fit, including, without limitation, the financing
of the conduct or the operations of the General Partner
or the Partnership, the lending of funds to other
Persons (including, without limitation, the General
Partner (if necessary to permit the financing or
capitalization of a subsidiary of the General Partner or
the Partnership) and any Subsidiaries of the
Partnership) and the repayment of obligations of the
Partnership, any of its Subsidiaries and any other
Person in which it has an equity investment;
(v) the negotiation, execution, and performance of any
contracts, leases, conveyances or other instruments that
the General Partner considers useful or necessary to the
conduct of the Partnership's operations or the
implementation of the General Partner's powers under
this Agreement;
(vi) the distribution of Partnership cash or other
Partnership assets in accordance with this Agreement;
(vii) the selection and dismissal of employees of the
Partnership (including, without limitation, employees
having titles such as "president," "vice president,"
"secretary" and "treasurer"), and agents, outside
attorneys, accountants, consultants and contractors of
the Partnership, the determination of their compensation
and other terms of employment or hiring, including
waivers of conflicts of interest and the payment of
their expenses and compensation out of the Partnership's
assets;
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(viii) the maintenance of such insurance for the benefit of the
Partnership and the Partners as it deems necessary or
appropriate;
(ix) the formation of, or acquisition of an interest in, and
the contribution of property to, any further limited or
general partnerships, joint ventures or other
relationships that it deems desirable (including,
without limitation, the acquisition of interests in, and
the contributions of property to any Subsidiary and any
other Person in which it has an equity investment from
time to time); provided that, as long as the General
Partner has determined to continue to qualify as a REIT,
the Partnership may not engage in any such formation,
acquisition or contribution that would cause the General
Partner to fail to qualify as a REIT;
(x) the control of any matters affecting the rights and
obligations of the Partnership, including the conduct of
litigation and the incurring of legal expense and the
settlement of claims and litigation, and the
indemnification of any Person against liabilities and
contingencies to the extent permitted by law;
(xi) the undertaking of any action in connection with the
Partnership's direct or indirect investment in any
Person (including, without limitation, contributing or
loaning Partnership funds to, incurring indebtedness on
behalf of, or guarantying the obligations of any such
Persons);
(xii) subject to the other provisions in this Agreement, the
determination of the fair market value of any
Partnership property distributed in kind using such
reasonable method of valuation as it may adopt; provided
that, such methods are otherwise consistent with
requirements of this Agreement;
(xiii) the management, operation, leasing, landscaping, repair,
alteration, demolition or improvement of any real
property or improvements owned by the Partnership or any
Subsidiary of the Partnership or any Person in which the
Partnership has made a direct or indirect equity
investment;
(xiv) holding, managing, investing and reinvesting cash and
other assets of the Partnership;
(xv) the collection and receipt of revenues and income of the
Partnership;
(xvi) the exercise, directly or indirectly through any
attorney-in-fact acting under a general or limited power
of attorney, of any right, including the right to vote,
appurtenant to any asset or investment held by the
Partnership;
(xvii) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of or in
connection with any Subsidiary of the
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Partnership or any other Person in which the Partnership
has a direct or indirect interest, or jointly with any
such Subsidiary or other Person;
(xviii) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of any Person in
which the Partnership does not have an interest,
pursuant to contractual or other arrangements with such
Person; and
(xix) the making, execution and delivery of any and all deeds,
leases, notes, deeds to secure debt, mortgages, deeds of
trust, security agreements, conveyances, contracts,
guarantees, warranties, indemnities, waivers, releases
or legal instruments or other agreements in writing
necessary or appropriate in the judgment of the General
Partner for the accomplishment of any of the powers of
the General Partner enumerated in this Agreement.
B. Each of the Limited Partners agrees that the General Partner is
authorized to execute, deliver and perform the above-mentioned agreements and
transactions on behalf of the Partnership without any further act, approval or
vote of the partners, notwithstanding any other provisions of this Agreement
(except as provided in Section 7.3), the Act or any 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, the General Partner may
cause the Partnership to obtain and maintain (i) casualty, liability and other
insurance (including, without limitation, earthquake insurance) on the
properties of the Partnership and (ii) liability insurance for the Indemnities
hereunder.
D. At all times from and after the date hereof, the General Partner may
cause the Partnership to establish and maintain working capital and other
reserves in such amounts as the General Partner, in its sole and absolute
discretion, deems appropriate and reasonable from time to time.
E. In exercising its authority under this Agreement, the General Partner
may, but other than as set forth in the following sentence and as expressly set
forth in the agreements listed on Exhibit I hereto, shall be under no obligation
to, take into account the tax consequences to any Partner (including the General
Partner) of any action taken by the General Partner. The General Partner, on
behalf of the Partnership, shall use commercially reasonable efforts to
cooperate with the Limited Partners to minimize any taxes payable in connection
with any sale, exchange or any other disposition of assets of the Partnership.
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 an action (or inaction) by the General
Partner pursuant to its authority under this Agreement.
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F. Except as otherwise provided herein, to the extent the duties of the
General Partner require expenditures of funds to be paid to third parties, the
General Partner shall not have any obligations hereunder except to the extent
that Partnership funds are reasonably available to it for the performance of
such duties, and nothing herein contained shall be deemed to authorize or
require the General Partner, in its capacity as such, to expend its individual
funds for payment to third parties or to undertake any individual liability or
obligation on behalf of the Partnership.
Section 7.2. Certificate of Limited Partnership
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 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 to maintain the Partnership's qualification to do business as a foreign
limited partnership in each other state, the District of Columbia or other
jurisdiction, in which the Partnership may elect to do business or own property.
Subject to the terms of Section 8.5.A(iv), 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. 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 or other
jurisdiction, in which the Partnership may elect to do business or own property.
Section 7.3. Restrictions on General Partner's Authority
A. The General Partner may not take any action in contravention of this
Agreement, including, without limitation:
(i) take any action that would make it impossible to carry on the
ordinary business of the Partnership, except as otherwise
provided in this Agreement;
(ii) possess Partnership property, or assign any rights in specific
Partnership property, for other than a Partnership purpose
except as otherwise provided in this Agreement;
(iii) admit a Person as a Partner, except as otherwise provided in
this Agreement (including with respect to the PLPs, who shall
become Partners upon their receipt of Performance Units);
(iv) perform any act that would subject a Limited Partner to
liability as a general partner in any jurisdiction or any other
liability except as provided herein or under the Act; or
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(v) enter into any contract, mortgage, loan or other agreement that
prohibits or restricts, or has the effect of prohibiting or
restricting, the ability of a Limited Partner to exercise its
rights to a Redemption in full, except with the written consent
of such Limited Partner.
B. The General Partner shall not, without the prior Consent of the
Partners (in addition to any Consent of the Limited Partners required by any
other provision hereof), undertake, on behalf of the Partnership, any of the
following actions or enter into any transaction which would have the effect of
such transactions:
(i) except as provided in Section 7.3.D below, amend, modify or
terminate this Agreement other than to reflect the admission,
substitution, termination or withdrawal of partners pursuant to
Article 12;
(ii) make a general assignment for the benefit of creditors or
appoint or acquiesce in the appointment of a custodian, receiver
or trustee for all or any part of the assets of the Partnership;
(iii) institute any proceeding for bankruptcy on behalf of the
Partnership;
(iv) confess a judgment against the Partnership; or
(v) enter into a merger (including a triangular merger),
consolidation or other combination of the Partnership with or
into another entity.
C. Except in the case of a Liquidating Event pursuant to Section 13.1
(other than Section 13.1.F), the General Partner shall not, without the prior
Consent of the Limited Partners, undertake, on behalf of the Partnership, any
actions or enter into any transaction which would have the effect of a
dissolution of the Partnership, including a sale, exchange, transfer or other
disposition of all or substantially all of the Partnership's assets in a single
transaction or a series of related transactions.
D. Notwithstanding Sections 7.3.B and 7.3.C, but subject to Section
7.3.E, the General Partner shall have the power, without the Consent of the
Partners, to amend this Agreement as may be required to facilitate or implement
any of the following purposes:
(i) 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;
(ii) to reflect the issuance of additional Partnership Interests
pursuant to Sections 4.3.C, 4.3.F and 4.4, or the admission,
substitution, termination, reduction in Partnership Units or
withdrawal of Partners in accordance with this Agreement (which
may be effected through the replacement of Exhibit A with an
amended Exhibit A);
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(iii) to set forth or amend the designations, rights, powers, duties,
and preferences of the holders of any additional Partnership
Interests issued pursuant to Article 4;
(iv) 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 in, correct or supplement any
provision, 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;
(v) to satisfy any requirements, conditions, or guidelines contained
in any order, directive, opinion, ruling or regulation of a
Federal, state of local agency or contained in Federal, state or
local law.
(vi) to reflect such changes as are reasonably necessary for the
General Partner to maintain its status as a REIT, including
changes which may be necessitated due to a change in applicable
law (or an authoritative interpretation thereof) or a ruling of
the IRS; and
(vii) to modify, as set forth in the definition of "Capital Account,"
the manner in which Capital Accounts are computed.
The General Partner will provide notice to the Limited Partners when any action
under this Section 7.3.D is taken.
E. Notwithstanding Sections 7.3.B, 7.3.C and 7.3.D, this Agreement shall
not be amended, and no action may be taken by the General Partner, including in
either case through merger or sale of assets of the Partnership or otherwise,
without the Consent of each Partner adversely affected if such amendment or
action would (i) convert a Limited Partner's interest in the Partnership into a
general partner's interest (except as the result of the General Partner
acquiring such interest), (ii) modify the limited liability of a Limited
Partner, (iii) alter rights of the Partner to receive distributions pursuant to
Article 5, Section 13.2.A(4) or Article 16 or the allocations specified in
Article 6 (except as permitted pursuant to Section 4.3 and Section 7.3.D), (iv)
alter or modify the rights to a Redemption or the REIT Shares Amount as set
forth in Section 8.6, and related definitions hereof, or (v) amend this Section
7.3.E. Further, no amendment may alter the restrictions on the General Partner's
authority set forth elsewhere in this Section 7.3 without the Consent specified
in such section. In addition, (a) Section 11.2 of this Agreement shall not be
amended, and no action in contravention of Section 11.2 shall be taken,
including in either case through merger or sale of assets of the Partnership or
otherwise, without the Consent of the Limited Partners and (b) this Agreement
shall not be amended, and no action shall be taken, including in either case
through merger or sale of assets of the Partnership or otherwise, which would
adversely affect the rights of the Persons set forth in Exhibit G to receive
Performance Units as described herein.
F. Other than incident to a transaction pursuant to Sections 11.2.B or
11.2.C, the General Partner shall not undertake to dispose of any Partnership
Property specified in the agreements listed in Exhibit H in a taxable sale or
taxable exchange prior to the dates specified in
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such agreements without the prior consent of each Limited Partner which
contributed all or any portion of an interest in such Property to the
Partnership, as set forth in such agreements.
Section 7.4. Reimbursement of the General Partner
A. Except as provided in this Section 7.4 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. Subject to Section 15.11, the General Partner shall be reimbursed on
a monthly basis, or such other basis as the General Partner may determine in its
sole and absolute discretion, for all expenses it incurs relating to the
ownership of interests in and operation of, or for the benefit of, the
Partnership. The Limited Partners acknowledge that the General Partner's sole
business is the ownership of interests in and operation of the Partnership and
that such expenses are incurred for the benefit of the Partnership; provided
that, the General Partner shall not be reimbursed for expenses it incurs
relating to the organization of the Partnership and the General Partner, or the
initial public offering or subsequent offerings of REIT Shares, other shares of
capital stock or Funding Debt by the General Partner, but shall be reimbursed
for expenses it incurs with respect to any other issuance of additional
Partnership Interests pursuant to the provisions hereof. Such reimbursements
shall be in addition to any reimbursement to the General Partner as a result of
indemnification pursuant to Section 7.7.
C. If and to the extent any reimbursements to the General Partner
pursuant to this Section 7.4 constitute gross income of the General Partner (as
opposed to the repayment of advances made by the General Partner on behalf of
the Partnership), such amounts shall constitute guaranteed payments within the
meaning of Section 707(c) of the Code, shall be treated consistently therewith
by the Partnership and all Partners, and shall not be treated as distributions
for purposes of computing the Partners' Capital Accounts.
Section 7.5. Outside Activities of the General Partner
A. Except in connection with a transaction authorized in Section 11.2,
without the Consent of the Limited Partners, the General Partner shall not,
directly or indirectly, enter into or conduct any business, other than in
connection with the ownership, acquisition and disposition of Partnership
Interests as a General Partner and the management of the business of the
Partnership, its operation as a public reporting company with a class (or
classes) of securities registered under the Exchange Act, its operation as a
REIT and such activities as are incidental to the same. Without the Consent of
the Limited Partners, the General Partner shall not, directly or indirectly,
participate in or otherwise acquire any interest in any real or personal
property, except its General Partner Interest, its interest in any Subsidiary
Partnership(s) (held directly or indirectly through a Qualified REIT Subsidiary)
that the General Partner holds in order to maintain such Subsidiary
Partnership's status as a partnership, and such bank accounts, similar
instruments or other short-term investments as it deems necessary to carry out
its responsibilities contemplated under this Agreement and the Charter. In the
event the General Partner desires to contribute cash to any Subsidiary
Partnership to acquire or maintain an interest of 1% or less in the capital of
such partnership, the General Partner may acquire such cash from the [Operating]
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Partnership in exchange for a reduction in the General Partner's OP Units, in an
amount equal to the amount of such cash divided by the Fair Market Value of a
REIT Share on the day such cash is received by the General Partner.
Notwithstanding the foregoing, the General Partner may acquire Properties in
exchange for REIT Shares, to the extent such Properties are immediately
contributed by the General Partner to the Partnership, pursuant to the terms
described in Section 4.3.E. Any Limited Partner Interests acquired by the
General Partner, whether pursuant to exercise by a Limited Partner of its right
of Redemption, or otherwise, shall be automatically converted into a General
Partner Interest comprised of an identical number of Partnership Units with the
same rights, priorities and preferences as the class or series so acquired. If,
at any time, the General Partner acquires material assets (other than on behalf
of the Partnership) the definition of "REIT Shares Amount" shall be adjusted, as
reasonably agreed to by the General Partner and the other Limited Partners, to
reflect the relative Fair Market Value of a share of capital stock of the
General Partner relative to the Deemed Partnership Interest Value of the related
Partnership Unit. The General Partner's General Partner Interest in the
Partnership, its minority interest in any Subsidiary Partnership(s) (held
directly or indirectly through a Qualified REIT Subsidiary) that the General
Partner holds in order to maintain such Subsidiary Partnership's status as a
partnership, and interests in such short-term liquid investments, bank accounts
or similar instruments as the General Partner deems necessary to carry out its
responsibilities contemplated under this Agreement and the Charter are interests
which the General Partner is permitted to acquire and hold for purposes of this
Section 7.5.A.
B. In the event the General Partner exercises its rights under the
Charter to purchase REIT Shares or Preferred Shares, then the General Partner
shall cause the Partnership to redeem from it a number of Partnership Units of
the appropriate class as determined based on, in the case of REIT Shares, the
REIT Shares Amount equal to the number of REIT Shares so purchased, or in the
case of Preferred Shares an equal number of Preferred Units which correspond in
ranking to the Preferred Shares so purchased, in each case on the same terms
that the General Partner purchased such REIT Shares or Preferred Shares (as
applicable).
Section 7.6. Contracts with Affiliates
A. Except as expressly permitted by this Agreement, the Partnership
shall not, directly or indirectly, sell, transfer or convey any property to, or
purchase any property from, or borrow funds from, or lend funds to, any Partner
or any Affiliate of the Partnership that is not also a Subsidiary of the
Partnership, except pursuant to transactions that are on terms that are fair and
reasonable and no less favorable to the Partnership than would be obtained from
an unaffiliated third party.
B. 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 of the Partnership's Subsidiaries. The General Partner also is expressly
authorized to cause the Partnership to issue to it Partnership Units
corresponding to REIT Shares issued by the General Partner pursuant to its Stock
Incentive Plan or any similar or successor plan and to repurchase
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such Partnership Units from the General Partner to the extent necessary to
permit the General Partner to repurchase such REIT Shares in accordance with
such plan.
Section 7.7. Indemnification
A. The Partnership shall indemnify an Indemnitee from and against any
and all losses, claims, damages, liabilities, joint or several, expenses
(including legal fees and expenses), judgments, fines, settlements, and other
amounts arising from any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative, that relate to the operations
of the Partnership as set forth in this Agreement in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, unless it is
established that: (i) the act or omission of the Indemnitee was material to the
matter giving rise to the proceeding and either was committed in bad faith or
was the result of active and deliberate dishonesty; (ii) the Indemnitee actually
received an improper personal benefit in money, property or services; or (iii)
in the case of any criminal proceeding, the Indemnitee had reasonable cause to
believe that the act or omission was unlawful. 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), and 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 7.7 in favor of any Indemnitee having or
potentially having liability for any such indebtedness. The termination of any
proceeding by judgment, order or settlement does not create a presumption that
the Indemnitee did not meet the requisite standard of conduct set forth in this
Section 7.7.A. The termination of any proceeding by conviction or upon a plea of
nolo contendere or its equivalent, or any entry of an order of probation prior
to judgment, creates a rebuttable presumption that the Indemnitee acted in a
manner contrary to that specified in this Section 7.7.A. Any indemnification
pursuant to this Section 7.7 shall be made only out of the assets of the
Partnership, and any insurance proceeds from the liability policy covering the
General Partner and any Indemnitee, 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 7.7.
B. Reasonable expenses incurred by an Indemnitee who is a party to a
proceeding may be paid or reimbursed by the Partnership in advance of the final
disposition of the proceeding upon receipt by the Partnership of (i) a written
affirmation by the Indemnitee of the Indemnitee's good faith belief that the
standard of conduct necessary for indemnification by the Partnership as
authorized in Section 7.7.A has been met and (ii) a written undertaking by or on
behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
C. The indemnification provided by this Section 7.7 shall be in addition
to any other rights to which an Indemnitee or any other Person may be entitled
under any agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, and shall continue as to an Indemnitee who has ceased to serve in
such capacity.
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D. The Partnership may purchase and maintain insurance, on behalf of the
Indemnitees and such other Persons as the General Partner shall determine,
against any liability that may be asserted against or expenses that may be
incurred by any 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 7.7, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership also imposes
duties on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute fines
within the meaning of Section 7.7; and actions taken or omitted by the
Indemnitee with respect to an employee benefit plan in the performance of its
duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject the Limited Partners to
personal liability by reason of the indemnification provisions set forth in this
Agreement.
G. An Indemnitee shall not be denied indemnification in whole or in part
under this Section 7.7 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 7.7 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 7.7 or any provision hereof
shall be prospective only and shall not in any way affect the limitations on the
Partnership's liability to any Indemnitee 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.
I. If and to the extent any reimbursements to the General Partner
pursuant to this Section 7.7 constitute gross income of the General Partner (as
opposed to the repayment of advances made by the General Partner on behalf of
the Partnership) such amounts shall constitute guaranteed payments within the
meaning of Section 707(c) of the Code, shall be treated consistently therewith
by the Partnership and all Partners, and shall not be treated as distributions
for purposes of computing the Partners' Capital Accounts.
J. Any indemnification hereunder is subject to, and limited by, the
provisions of Section 17-108 of the Act.
K. In the event the Partnership is made a party to any litigation or
otherwise incurs any loss or expense as a result of or in connection with any
Partner's personal obligations or liabilities unrelated to Partnership business,
such Partner shall indemnify and reimburse the Partnership for all such loss and
expense incurred, including legal fees, and the Partnership
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Interest of such Partner may be charged therefor. The liability of a Partner
under this Section 7.7.K shall not be limited to such Partner's Partnership
Interest, but shall be enforceable against such Partner personally.
Section 7.8. Liability of the General Partner
A. Notwithstanding anything to the contrary set forth in this Agreement,
none of the General Partner and any of its officers, directors, agents and
employees shall be liable or accountable in damages or otherwise to the
Partnership, any Partners or any Assignees, or their successors or assigns, for
losses sustained, liabilities incurred or benefits not derived as a result of
errors in judgment or mistakes of fact or law or any act or omission if the
General Partner acted in good faith.
B. The Limited Partners expressly acknowledge that the General Partner
is acting for the benefit of the Partnership, the Limited Partners and the
General Partner's stockholders collectively, that the General Partner is under
no obligation to give priority to the separate interests of the Limited Partners
or the General Partner's stockholders (including, without limitation, the tax
consequences to Limited Partners or Assignees or to stockholders) in deciding
whether to cause the Partnership to take (or decline to take) any actions and
that the General Partner shall not be liable to the Partnership or to any
Limited Partner for monetary damages for losses sustained, liabilities incurred,
or benefits not derived by Limited Partners in connection with such decisions;
provided, that the General Partner has acted in good faith.
C. Subject to its obligations and duties as General Partner set forth in
Section 7.1.A, 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 agents. The General Partner shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by it in good faith. In no event shall the liability of the General
Partner and its officers, directors, agents and employees, to the Partnership
and the Limited Partners under this Section 7.8 be greater than the Partnership
Interest of the General Partner.
D. Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the liability of the General Partner and any of its officers,
directors, agents and employees to the Partnership and the Limited Partners
under this Section 7.8 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.
Section 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 to be genuine and to have been signed or
presented by the proper party or parties.
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B. The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers 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 a duly appointed attorney or 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 any
non-mandatory provision of 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 to protect the ability of
the General Partner, for so long as the General Partner has determined to
qualify as a REIT, to (i) continue to qualify as a REIT or (ii) avoid the
General Partner 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.
E. So long as the Company holds any interest in the Partnership (as
either a General Partner or Limited Partner), the Company shall have "management
rights" (as such term is defined in the Plan Asset Regulation) with respect to
the Partnership and its Properties to the extent necessary to qualify the
Company as a "venture capital operating company" (as such term is defined in the
Plan Asset Regulation).
Section 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 Partners, individually or collectively, shall have any ownership
interest in such Partnership assets or any portion thereof. Title to any or all
of the Partnership assets may be held in the name of the Partnership, the
General Partner or one or more nominees, as the General Partner may determine,
including Affiliates of the General Partner. The General Partner hereby declares
and warrants that any Partnership assets for which legal title is held in the
name of the General Partner or any nominee or Affiliate of the General Partner
shall be deemed held by the General Partner or such nominee or Affiliate for the
use and benefit of the Partnership in accordance with the provisions of this
Agreement; provided, however, that the General Partner shall use its best
efforts to cause beneficial and record title to such assets to be vested in the
Partnership as soon as reasonably practicable. All Partnership assets shall be
recorded as the property of the Partnership in its books and records,
irrespective of the name in which legal title to such Partnership assets is
held.
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Section 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 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 such Person shall be entitled to deal with the
General Partner as if it 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
Section 8.1. Limitation of Liability
The Limited Partners shall have no liability under this Agreement except
as expressly provided in this Agreement or under the Act.
Section 8.2. Management of Business
No Limited Partner or Assignee (other than the General Partner, any of
its Affiliates or any officer, director, employee, general partner, agent or
trustee of the General Partner, the Partnership or any of their Affiliates, in
their capacity as such) shall take part in the operations, 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,
general 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.
Section 8.3. Outside Activities of Limited Partners
Subject to any agreements entered into by a Limited Partner or its
Affiliates with the General Partner, Partnership or a Subsidiary, any Limited
Partner and any officer, director, employee, agent, trustee, Affiliate or
stockholder of any Limited Partner shall be entitled to and
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may have business interests and engage in business activities in addition to
those relating to the Partnership, including business interests and activities
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. Subject to such agreements, none of the Limited
Partners nor any other Person shall have any rights by virtue of this Agreement
or the partnership relationship established hereby in any business ventures of
any other Person, other than the Limited Partners benefiting from the business
conducted by the General Partner, and such other 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 other Person.
Section 8.4. Return of Capital
Except pursuant to the rights of Redemption set forth in Section 8.6, no
Limited Partner shall be entitled to the withdrawal or return of his or her
Capital Contribution, except to the extent of distributions made pursuant to
this Agreement or upon termination of the Partnership as provided herein. Except
as expressly set forth herein with respect to the rights, priorities and
preferences of the Preferred Partners holding any series of Preferred Units, no
Partner or Assignee shall have priority over any other Partner or Assignee
either as to the return of Capital Contributions, or as otherwise expressly
provided in this Agreement, as to profits, losses, distributions or credits.
Section 8.5. Rights of Limited Partners Relating to the Partnership
A. In addition to other rights provided by this Agreement or by the Act,
and except as limited by Section 8.5.C, 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 the Partnership's expense:
(i) to obtain a copy of the most recent annual and quarterly reports
filed with the Securities and Exchange Commission by the General
Partner pursuant to the Exchange Act, and each communication
sent to the stockholders of the General Partner;
(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 thereto, together with executed copies of all powers
of attorney pursuant to which this Agreement, the Certificate
and all amendments thereto have been executed; and
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(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. The Partnership shall notify each Limited Partner in writing of any
adjustment made in the calculation of the REIT Shares Amount within ten (10)
Business Days of the date such change becomes effective.
C. 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 believes to be in the
nature of trade secrets or other information the disclosure of which the General
Partner in good faith believes is not in the best interests of the Partnership
or (ii) the Partnership or the General Partner is required by law or by
agreements with unaffiliated third parties to keep confidential.
Section 8.6. Limited Partner Redemption Rights
A. On or after the date one year after the Effective Date, or on or
after such later date as expressly provided in an agreement entered into between
the Partnership and any Limited Partner, each Limited Partner shall have the
right (subject to the terms and conditions set forth herein and in any other
such agreement, as applicable) to require the Partnership to redeem all or a
portion of the Partnership Units held by such Limited Partner (such Partnership
Units being hereafter referred to as "Tendered Units") in exchange for the Cash
Amount (a "Redemption"); provided, that the terms of such Partnership Units do
not provide that such Partnership Units are not entitled to a right of
Redemption. Unless otherwise expressly provided in this Agreement or a separate
agreement entered into between the Partnership and the holders of such
Partnership Units, all Partnership Units shall be entitled to a right of
Redemption hereunder. Notwithstanding the foregoing, a PLP shall not have the
right to require the Partnership to redeem, and the Partnership may not redeem,
(i) a number of Performance Units held by such PLP in excess of the Performance
Amount; or (ii) any Performance Units prior to the second anniversary of their
issuance. Any Redemption shall be exercised pursuant to a Notice of Redemption
delivered to the General Partner by the Limited Partner who is exercising the
right (the "Tendering Partner"). The Cash Amount shall be delivered as a
certified check payable to the Tendering Partner within ten (10) days of the
Specified Redemption Date in accordance with the instructions set forth in the
Notice of Redemption.
B. Notwithstanding Section 8.6.A above, if a Limited Partner has
delivered to the General Partner a Notice of Redemption then the General Partner
may, in its sole and absolute discretion, (subject to the limitations on
ownership and transfer of REIT Shares set forth in Article IV.E of the Charter)
elect to acquire some or all of the Tendered Units from the Tendering Partner in
exchange for the REIT Shares Amount (as of the Specified Redemption Date) and,
if the General Partner so elects, the Tendering Partner shall sell the Tendered
Units to the General Partner in exchange for the REIT Shares Amount. In such
event, the Tendering Partner shall have no right to cause the Partnership to
redeem such Tendered Units. The General
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Partner shall promptly give such Tendering Partner written notice of its
election, and the Tendering Partner may elect to withdraw its redemption request
at any time prior to the acceptance of the Cash Amount or REIT Shares Amount by
such Tendering Partner.
C. The REIT Shares Amount, if applicable, shall be delivered as duly
authorized, validly issued, fully paid and nonassessable REIT Shares and, if
applicable, free of any pledge, lien, encumbrance or restriction, other than
those provided in the Charter, the Bylaws of the General Partner, the Securities
Act, relevant state securities or blue sky laws and any applicable registration
rights agreement with respect to such REIT Shares entered into by the Tendering
Partner. The REIT Shares Amount shall be registered in the name and otherwise
delivered as set forth in the Notice of Redemption. Notwithstanding any delay in
such delivery (but subject to Section 8.6.E below), the Tendering Partner shall
be deemed the owner of such REIT Shares for all purposes, including without
limitation, rights to vote or consent, and receive dividends, as of the
Specified Redemption Date.
D. Each Limited Partner covenants and agrees with the General Partner
that all Tendered Units shall be delivered to the General Partner free and clear
of all liens, claims and encumbrances whatsoever and should any such liens,
claims and/or encumbrances exist or arise with respect to such Tendered Units,
the General Partner shall be under no obligation to acquire the same. Each
Limited Partner further agrees that, in the event any state or local property
transfer tax is payable as a result of the transfer of its Tendered Units to the
General Partner (or its designee), such Limited Partner shall assume and pay
such transfer tax.
E. Notwithstanding the provisions of Sections 8.6.A, 8.6.B, 8.6.C or any
other provision of this Agreement, a Limited Partner (i) shall not be entitled
to effect a Redemption for cash or an exchange for REIT Shares to the extent the
ownership or right to acquire REIT Shares pursuant to such exchange by such
Partner on the Specified Redemption Date would cause such Partner or any other
Person, or, in the opinion of counsel selected by the General Partner, may cause
such Partner or any other Person, to violate the restrictions on ownership and
transfer of REIT Shares set forth in Article IV.E of the Charter and (ii) shall
have no rights under this Agreement to acquire REIT Shares which would otherwise
be prohibited under the Charter. To the extent any attempted Redemption or
exchange for REIT Shares would be in violation of this Section 8.6.E, it shall
be null and void ab initio and such Limited Partner shall not acquire any rights
or economic interest in the cash otherwise payable upon such redemption or the
REIT Shares otherwise issuable upon such exchange.
F. Notwithstanding anything herein to the contrary (but subject to
Section 8.6.E above), with respect to any Redemption or exchange for REIT Shares
pursuant to this Section 8.6:
(i) All Partnership Units acquired by the General Partner pursuant
thereto shall automatically, and without further action
required, be converted into and deemed to be General Partner
Interests comprised of the same number and class of Partnership
Units.
(ii) Without the consent of the General Partner, each Limited Partner
may not effect a Redemption for less than 10,000 Partnership
Units or, if the
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Limited Partner holds less than 10,000 Partnership Units, all of
the Partnership Units held by such Limited Partner.
(iii) Without the consent of the General Partner, each Limited Partner
may not effect a Redemption during the period after the
Partnership Record Date with respect to a distribution and
before the record date established by the General Partner for a
distribution to its common stockholders of some or all of its
portion of such distribution.
(iv) The consummation of any Redemption or exchange for REIT Shares
shall be subject to the expiration or termination of the
applicable waiting period, if any, under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
(v) Each Tendering Partner shall continue to own all Partnership
Units subject to any Redemption or exchange for REIT Shares, and
be treated as a Limited Partner with respect to such Partnership
Units for all purposes of this Agreement, until such Partnership
Units are transferred to the General Partner and paid for or
exchanged as of the Specified Redemption Date. Until a Specified
Redemption Date, the Tendering Partner shall have no rights as a
stockholder of the General Partner with respect to such
Tendering Partner's Partnership Units.
G. In the event that the Partnership issues additional Partnership
Interests to any Additional Limited Partner pursuant to Section 4.3.C, the
General Partner shall make such revisions to this Section 8.6 as it determines
are necessary to reflect the issuance of such additional Partnership Interests.
ARTICLE 9.
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1. Records and Accounting
The General Partner shall keep or cause to be kept at the principal
office of the Partnership appropriate books and records with respect to the
Partnership's business, including without limitation, all books and records
necessary to provide to the Limited Partners any information, lists and copies
of documents required to be provided pursuant to Section 9.3. 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 generally accepted accounting principles.
Section 9.2. Fiscal Year
The fiscal year of the Partnership shall be the calendar year.
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Section 9.3. Reports
A. As soon as practicable, but in no event later than one hundred and
five (105) days after the close of each Partnership Year, or such earlier date
as they are filed with the Securities and Exchange Commission, the General
Partner shall cause to be mailed to each Limited Partner as of the close of the
Partnership Year, an annual report containing financial statements of the
Partnership, or of the General Partner if such statements are prepared solely on
a consolidated basis with the General Partner, for such Partnership Year,
presented in accordance with generally accepted accounting principles, such
statements to be audited by a nationally recognized firm of independent public
accountants selected by the General Partner.
B. As soon as practicable, but in no event later than forty-five (45)
days after the close of each calendar quarter (except the last calendar quarter
of each year), or such earlier date as they are filed with the Securities and
Exchange Commission, the General Partner shall cause to be mailed to each
Limited Partner as of the last day of the calendar quarter, a report containing
unaudited financial statements of the Partnership, or of the General Partner, if
such statements are prepared solely on a consolidated basis with the General
Partner, presented in accordance with the applicable law or regulation, or as
the General Partner determines to be appropriate.
Section 9.4. Nondisclosure of Certain Information
Notwithstanding the provisions of Sections 9.1 and 9.3, the General
Partner may keep confidential from the Limited Partners any information that the
General Partner believes to be in the nature of trade secrets or other
information the disclosure of which the General Partner in good faith believes
is not in the best interests of the Partnership or which the Partnership is
required by law or by agreements with unaffiliated third parties to keep
confidential.
ARTICLE 10.
TAX MATTERS
Section 10.1. Preparation of Tax Returns
The General Partner shall arrange for the preparation and timely filing
of all returns of Partnership income, gains, deductions, losses and other items
required of the Partnership for Federal and state income tax purposes and shall
use all reasonable efforts to furnish, within ninety (90) days of the close of
each taxable year, the tax information reasonably required by Limited Partners
for Federal and state income tax reporting purposes. Each Limited Partner shall
promptly provide the General Partner with such information relating to any
Contributed Property contributed by such Limited Partner to the Partnership on
or after July 27, 1998,
Section 10.2. Tax Elections
Except as otherwise provided herein, the General Partner shall, in its
sole and absolute discretion, determine whether to make any available election
pursuant to the Code, including the election under Section 754 of the Code. The
General Partner shall have the right to
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seek to revoke any such election (including without limitation, any election
under Section 754 of the Code) upon the General Partner's determination in its
sole and absolute discretion that such revocation is the best interests of the
Partners.
Section 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 6223(c) of the
Code, upon receipt of notice from the IRS of the beginning of an administrative
proceeding with respect to the Partnership, the tax matters partner shall
furnish the IRS with the name, address and profit interest of each of the
Limited Partners and Assignees; provided, however, that such information is
provided to the Partnership by the Limited Partners and Assignees.
B. The tax matters partner is authorized, but not required:
(i) to enter into any settlement with the IRS 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 (a) who (within the time
prescribed pursuant to the Code and Regulations) files a
statement with the IRS providing that the tax matters partner
shall not have the authority to enter into a settlement
agreement on behalf of such Partner or (b) who is a "notice
partner" (as defined in Section 6231 of the Code) or a member of
a "notice group" (as defined in Section 6223(b)(2) of the Code);
(ii) 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 United States Claims
Court, or the filing of a complaint for refund with the District
Court of the United States for the district in which the
Partnership's principal place of business is located;
(iii) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(iv) to file a request for an administrative adjustment with the IRS
at any time and, if any part of such request is not allowed by
the IRS, to file an appropriate pleading (petition or complaint)
for judicial review with respect to such request;
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(v) to enter into an agreement with the IRS to extend the period for
assessing any tax which is attributable to any item required to
be taken into account by a Partner for tax purposes, or an item
affected by such item; and
(vi) to take any other action on behalf of the Partners of 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 7.7 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) 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.
Section 10.4. Organizational Expenses
The Partnership shall elect to deduct expenses, if any, incurred by it
in organizing the Partnership ratably over a sixty (60) month period as provided
in Section 709 of the Code.
Section 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 fifteen (15) days after notice from the General
Partner that such payment must be made unless (i) the Partnership withholds such
payment from a distribution which would otherwise be made to the Limited Partner
or (ii) the General Partner determines, in its sole and absolute discretion,
that such payment may be satisfied out of the available funds of the Partnership
which would, but for such payment, be distributed to the Limited Partner. Any
amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be treated
as having been distributed to such Limited Partner. Each Limited Partner hereby
unconditionally and irrevocably grants to the Partnership a security interest in
such Limited Partner's Partnership Interest to secure such Limited Partner's
obligation to pay to the Partnership any amounts required to be paid pursuant to
this Section 10.5. In the event that a Limited Partner fails to pay any amounts
owed to the Partnership pursuant to this Section 10.5 when due, the General
Partner may, in its sole and absolute discretion, elect to make
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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 (including, without limitation, the
right to receive distributions and the holding of a security interest in such
Limited Partner's Partnership Interest). Any amounts payable by a Limited
Partner hereunder shall bear interest at the base rate on corporate loans at
large United States money center commercial banks, as published from time to
time in the Wall Street Journal, plus two percentage points (but not higher than
the maximum lawful rate) 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
Section 11.1. Transfer
A. The term "transfer," when used in this Article 11 with respect to a
Partnership Interest, shall be deemed to refer to a transaction by which the
General Partner purports to assign its General Partner Interest to another
Person or by which a Limited Partner purports to assign its Limited Partnership
Interest to another Person, and includes a sale, assignment, gift (outright or
in trust), pledge, encumbrance, hypothecation, mortgage, exchange or any other
disposition by law or otherwise. Except to the extent otherwise specified, the
term "transfer" when used in this Article 11 does not include any Redemption or
exchange for REIT Shares pursuant to Section 8.6. No part of the interest of a
Limited Partner shall be subject to the claims of any creditor, any spouse for
alimony or support, or to legal process, and may not be voluntarily or
involuntarily alienated or encumbered, except as may be specifically provided
for in this 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 ab initio unless
otherwise consented by the General Partner in its sole and absolute discretion.
Section 11.2. Transfer of General Partner's Partnership Interest
A. The General Partner shall not withdraw from the Partnership and shall
not transfer all or any portion of its interest in the Partnership (whether by
sale, statutory merger, consolidation, liquidation or otherwise) without the
Consent of the Limited Partners which may be given or withheld by each such
Limited Partner in its sole and absolute discretion, and only upon the admission
of a successor General Partner pursuant to Section 12.1; provided, however,
that, subject to Sections 11.2.B, 11.2.C, 11.2.D and 11.2.E, the General Partner
may withdraw from the Partnership and transfer all of its interest upon the
merger, consolidation or sale of substantially all of the assets of the General
Partner without the consent of any Limited Partners. Upon any transfer of a
Partnership Interest in accordance with the provisions of this Section 11.2, the
transferee shall become a substitute General Partner for all purposes herein,
and shall be
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vested with the powers and rights of the transferor General Partner, and shall
be liable for all obligations and responsible for all duties of the General
Partner, once such transferee has executed such instruments as may be necessary
to effectuate such admission and to confirm the agreement of such transferee to
be bound by all the terms and provisions of this Agreement with respect to the
Partnership Interest so acquired. It is a condition to any transfer otherwise
permitted hereunder that the transferee assumes, by operation of law or express
agreement, all of the obligations of the transferor General Partner under this
Agreement with respect to such transferred Partnership Interest, and no such
transfer (other than pursuant to a statutory merger or consolidation wherein all
obligations and liabilities of the transferor General Partner are assumed by a
successor corporation by operation of law) shall relieve the transferor General
Partner of its obligations under this Agreement without the Consent of the
Partners, in their reasonable discretion. In the event the General Partner
withdraws from the Partnership, or otherwise dissolves or terminates, or upon
the Incapacity of the General Partner, all of the remaining Partners may elect
to continue the Partnership business by selecting a substitute General Partner
in accordance with the Act.
B. Neither the General Partner nor the Partnership may engage in any
merger, consolidation or other combination with or into another person, or
effect any reclassification, recapitalization or change of its outstanding
equity interests, and the General Partner may not sell all or substantially all
of its assets (each a "Termination Transaction") unless in connection with the
Termination Transaction all holders of Partnership Units either will receive, or
will have the right to elect to receive, for each Partnership Unit an amount of
cash, securities or other property equal to the product of the REIT Share Amount
and the greatest amount of cash, securities or other property paid to the holder
of one REIT Share in consideration of one REIT Share pursuant to the Termination
Transaction. If, in connection with the Termination Transaction, a purchase,
tender or exchange offer shall have been made to and accepted by the holders of
the outstanding REIT Shares, each holder of Partnership Units will receive, or
will have the right to elect to receive, the greatest amount of cash, securities
or other property which such holder would have received had it exercised its
rights to Redemption (as set forth in Section 8.6) and received REIT Shares in
exchange for its Partnership Units immediately prior to the expiration of such
purchase, tender or exchange offer and had thereupon accepted such purchase,
tender or exchange offer. The PLPs shall have the benefit of the foregoing
provisions with respect to all of their Performance Units, notwithstanding the
limitation set forth in Section 8.6.A on a PLPs ability to exercise its rights
to a Redemption.
C. A Termination Transaction may also occur if the following conditions
are met: (i) substantially all of the assets directly or indirectly owned by the
surviving entity are held directly or indirectly by the Partnership or another
limited partnership or limited liability company which is the survivor of a
merger, consolidation or combination of assets with the Partnership (in each
case, the "Surviving Partnership"); (ii) the holders of Partnership Units,
including the holders of Performance Units issued or to be issued, own a
percentage interest of the Surviving Partnership based on the relative fair
market value of the net assets of the Partnership and the other net assets of
the Surviving Partnership immediately prior to the consummation of such
transaction; (iii) the rights, preferences and privileges of such holders in the
Surviving Partnership, including the holders of Performance Units issued or to
be issued, are at least as favorable as those in effect immediately prior to the
consummation of such transaction
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and as those applicable to any other limited partners or non-managing members of
the Surviving Partnership (except, as to Performance Units, for such differences
with Partnership Units regarding liquidation, Redemption and exchange as are set
forth herein); and (iv) such rights of the Limited Partners, including the
holders of Performance Units issued or to be issued, include at least one of the
following: (a) the right to redeem their interests in the Surviving Partnership
for the consideration available to such persons pursuant to Section 11.2.B; or
(b) the right to redeem their Partnership Units for cash on terms equivalent to
those in effect with respect to their Partnership Units immediately prior to the
consummation of such transaction, or, if the ultimate controlling person of the
Surviving Partnership has publicly traded common equity securities, such common
equity securities, with an exchange ratio based on the determination of relative
fair market value of such securities and the REIT Shares.
D. In connection with any transaction permitted by Section 11.2.B or
11.2.C the determination of relative fair market values and rights, preferences
and privileges of the Limited Partners shall be reasonably determined by the
General Partner's Board of Directors as of the time of the Termination
Transaction and, to the extent applicable, the values shall be no less favorable
to the holders of Partnership Units than the relative values reflected in the
terms of the Termination Transaction.
E. In the event of a Termination Transaction, the arrangements with
respect to Performance Units and Performance Shares will be equitably adjusted
to reflect the terms of the transaction, including, to the extent that the REIT
Shares are exchanged for consideration other than publicly traded common equity,
the transfer or release of remaining Performance Shares pursuant to the Escrow
Agreements, and resulting issuance of any Performance Units as set forth in
Section 4.3.F.
Section 11.3. Limited Partners' Rights to Transfer
A. Any Limited Partner may, at any time without the consent of the
General Partner, (i) transfer all or any portion of its Partnership Interest to
the General Partner, (ii) transfer all or any portion of its Partnership
Interest to an Affiliate controlled thereby or to an Immediate Family member,
subject to the provisions of Section 11.6, (iii) transfer all or any portion of
its Partnership Interest to a trust for the benefit of a charitable beneficiary
or to a charitable foundation, subject to the provisions of Section 11.6 and
(iv) subject to the provisions of Section 11.6, (a) pledge (a "Pledge") all or
any portion of its Partnership Interest to a lending institution, which is not
an Affiliate of such Limited Partner, as collateral or security for a bona fide
loan or other extension of credit, or (b) transfer such pledged Partnership
Interest to such lending institution in connection with the exercise of remedies
under such loan or extension of credit. In addition, each Limited Partner or
Assignee (resulting from a transfer made pursuant to clauses (i)-(iv) of the
preceding sentence) shall have the right to transfer all or any portion of its
Partnership Interest, subject to the provisions of Section 11.6 and the
satisfaction of each of the following conditions:
(a) General Partner Right of First Refusal. The transferring Partner
shall give written notice of the proposed transfer to the
General Partner, which notice shall state (x) the identity of
the proposed transferee and (y) the amount
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and type of consideration proposed to be received for the
transferred Partnership Units. The General Partner shall have
ten (10) days upon which to give the transferring Partner notice
of its election to acquire the Partnership Units on the proposed
terms. If it so elects, it shall purchase the Partnership Units
on such terms within ten (10) days after giving notice of such
election. If it does not so elect, the transferring Partner may
transfer such Partnership Units to a third party, on economic
terms no more favorable to the transferee than the proposed
terms, subject to the other conditions of this Section 11.3.
(b) Qualified Transferee. Any transfer of a Partnership Interest
shall be made only to Qualified Transferees.
It is a condition to any transfer otherwise permitted hereunder that the
transferee assumes by operation of law or express agreement all of the
obligations of the transferor Limited Partner under this Agreement with respect
to such transferred Partnership Interest and no such transfer (other than
pursuant to a statutory merger or consolidation wherein all obligations and
liabilities of the transferor Partner are assumed by a successor corporation by
operation of law) shall relieve the transferor Partner of its obligations under
this Agreement without the approval of the General Partner, in its reasonable
discretion. Notwithstanding the foregoing, any transferee of any transferred
Partnership Interest shall be subject to any and all ownership limitations
contained in the Charter and to the representations set forth in Section 3.4.D.
Any transferee, whether or not admitted as a Substituted Limited Partner, shall
take subject to the obligations of the transferor hereunder. Unless admitted as
a Substituted Limited Partner, no transferee, whether by a voluntary transfer,
by operation of law or otherwise, shall have any rights hereunder, other than
the rights of an Assignee as provided in Section 11.5.
B. 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 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.
C. The General Partner may prohibit any transfer otherwise permitted
under this Section 11.3 by a Limited Partner of his or her Partnership Units if,
in the opinion of legal counsel to the Partnership, such transfer would require
the filing of a registration statement under the Securities Act by the
Partnership or would otherwise violate any Federal or state securities laws or
regulations applicable to the Partnership or the Partnership Unit.
D. No transfer by a Limited Partner of his or her Partnership Units
(including any Redemption or exchange for REIT Shares pursuant to Section 8.6,
or any other acquisition of Partnership Units by the General Partner or the
Partnership) may be made to any person if (i) in the opinion of legal counsel
for the Partnership, it could result in the Partnership being treated as an
association taxable as a corporation or (ii) such transfer could be treated as
effectuated
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through an "established securities market" or a "secondary market (or the
substantial equivalent thereof)" within the meaning of Section 7704 of the Code.
E. No transfer of any Partnership Units may be made to a lender to the
Partnership or any Person who is related (within the meaning of Section
1.752-4(b) of the Regulations) to any lender to the Partnership whose loan
constitutes a Nonrecourse Liability, without the consent of the General Partner,
in its sole and absolute discretion; provided, that as a condition to such
consent, the lender will be required to enter into an arrangement with the
Partnership and the General Partner to redeem or exchange for the REIT Shares
Amount any Partnership Units in which a security interest is held simultaneously
with the time at which such lender would be deemed to be a partner in the
Partnership for purposes of allocating liabilities to such lender under Section
752 of the Code.
F. No Limited Partner may withdraw from the Partnership except as a
result of transfer, redemption or exchange of Partnership Units pursuant hereto.
G. No PLP (or any transferee described below) shall be entitled to
transfer any Performance Units prior to the second anniversary of their
issuance, without the consent of the General Partner, which may be given or
withheld in its sole discretion; provided, however, no such consent shall be
required under this Section 11.3.G (but subject to the other limitations of this
Article 11) for a transfer of all or a portion of such Performance Units to an
Affiliate, to Immediate Family Members, to a trust described in Section
11.3.A(iii), pursuant to a Pledge, or a transfer of such pledged units to such
lending institution in connection with the exercise of remedies under such loan
or extension of credit.
Section 11.4. Substituted Limited Partners
A. No Limited Partner shall have the right to substitute a transferee as
a Limited Partner in his or her place (including any transferee permitted by
Section 11.3 above). The General Partner shall, however, have the right to
consent to the admission of a permitted transferee of the interest of a Limited
Partner, as a Substituted Limited Partner, pursuant to this Section 11.4, which
consent may be given or withheld by the General Partner in its sole and absolute
discretion. The General Partner's failure or refusal to permit a transferee of
any such interests to become a Substituted Limited Partner shall not give rise
to any cause of action against the Partnership or any Partner.
B. A transferee who has been admitted as a Substituted Limited Partner
in accordance with this Article 11 shall have all the rights and powers and be
subject to all the restrictions and liabilities of a Limited Partner under this
Agreement. The admission of any transferee as a Substituted Limited Partner
shall be subject to the transferee executing and delivering to the Partnership
an acceptance of all of the terms and conditions of this Agreement (including,
without limitation, the provisions of Section 2.4 and such other documents or
instruments as may be required to effect the admission, each in form and
substance satisfactory to the General Partner) and the acknowledgment by such
transferee that each of the representations and warranties set forth in Section
3.4 are true and correct with respect to such transferee as of the date of the
transfer of the Partnership Interest to such transferee.
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C. Upon the admission of a Substituted Limited Partner, the General
Partner shall amend Exhibit A to reflect the name, address, number of
Partnership Units, and Percentage Interest of such Substituted Limited Partner
and to eliminate or adjust, if necessary, the name, address and interest of the
predecessor of such Substituted Limited Partner.
Section 11.5. Assignees
If the General Partner, in its sole and absolute discretion, does not
consent to the admission of any permitted transferee under Section 11.3 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
entitled to all the rights of an assignee of a limited partnership interest
under the Act, including the right to receive distributions from the Partnership
and the share of Net Income, Net Losses, gain and loss attributable to the
Partnership Units assigned to such transferee, the rights to transfer the
Partnership Units provided in this Article 11, the right of Redemption provided
in Section 8.6, but shall not be deemed to be a holder of Partnership Units for
any other purpose under this Agreement, and shall not be entitled to effect a
Consent with respect to such Partnership Units on any matter presented to the
Limited Partners for approval (such Consent remaining with the transferor
Limited Partner). In the event any such transferee desires to make a further
assignment of any such Partnership Units, such transferee shall be subject to
all 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 Partnership Units.
Notwithstanding anything contained in this Agreement to the contrary, as a
condition to becoming an Assignee, any prospective Assignee must first execute
and deliver to the Partnership an acknowledgment that each of the
representations and warranties set forth in Section 3.4 hereof are true and
correct with respect to such prospective Assignee as of the date of the
prospective assignment of the Partnership Interest to such prospective Assignee
and will continue to be true to the extent required by such representations or
warranties.
Section 11.6. General Provisions
A. No Limited Partner may withdraw from the Partnership other than as a
result of (i) a permitted transfer of all of such Limited Partner's Partnership
Units in accordance with this Article 11 and the transferee(s) of such Units
being admitted to the Partnership as a Substituted Limited Partner(s) or (ii)
pursuant to the exercise of its right of Redemption of all of such Limited
Partner's Partnership Units under Section 8.6.
B. Any Limited Partner who shall transfer all of such Limited Partner's
Partnership Units in a transfer permitted pursuant to this Article 11 where such
transferee was admitted as a Substituted Limited Partner or pursuant to the
exercise of its rights of Redemption of all of such Limited Partner's
Partnership Units under Section 8.6 shall cease to be a Limited Partner.
C. Transfers pursuant to this Article 11 may only be made effective on
the last day of the month set forth on the written instrument of transfer,
unless the General Partner otherwise agrees.
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D. If any Partnership Interest is transferred, assigned or redeemed
during any quarterly segment of the Partnership's fiscal year in compliance with
the provisions of this Article 11 or transferred or redeemed pursuant to
Sections 8.6 or 16.4, on any day other than the first day of a Partnership Year,
then Net Income, Net Losses, each item thereof and all other items attributable
to such Partnership Interest for such fiscal year shall be divided and allocated
between the transferor Partner and the transferee Partner by taking into account
their varying interests during the fiscal year in accordance with Section 706(d)
of the Code, using the interim closing of the books method. Except as otherwise
required by Section 706(d) of the Code or as otherwise specified in this
Agreement or as otherwise determined by the General Partner (to the extent
consistent with Section 706(d) of the Code), solely for purposes of making such
allocations, each of such items for the calendar month in which the transfer,
assignment or redemption occurs shall be allocated among all the Partners and
Assignees in a manner determined by the General Partner in its sole discretion.
E. In addition to any other restrictions on transfer herein contained,
including without limitation the provisions of this Article 11 and Section 2.6,
in no event may any transfer or assignment of a Partnership Interest by any
Partner (including by way of a Redemption) be made (i) to any person or entity
who lacks the legal right, power or capacity to own a Partnership Interest; (ii)
in violation of applicable law; (iii) of any component portion of a Partnership
Interest, such as the Capital Account, or rights to distributions, separate and
apart from all other components of a Partnership Interest; (iv) if in the
opinion of legal counsel to the Partnership such transfer would cause a
termination of the Partnership for Federal or state income tax purposes (except
as a result of the Redemption or exchange for REIT Shares of all Partnership
Units held by all Limited Partners or pursuant to a Termination Transaction
expressly permitted under Section 11.2); (v) if in the opinion of counsel to the
Partnership such transfer would cause the Partnership to cease to be classified
as a partnership for Federal or state income tax purposes (except as a result of
the Redemption or exchange for REIT Shares of all Partnership Units held by all
Limited Partners); (vi) if 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); (vii) if such transfer
would, in the opinion of counsel to 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; (viii) if such
transfer requires the registration of such Partnership Interest pursuant to any
applicable Federal or state securities laws; (ix) if such transfer is
effectuated through an "established securities market" or a "secondary market"
(or the substantial equivalent thereof) within the meaning of Section 7704 of
the Code or such transfer causes the Partnership to become a "Publicly Traded
Partnership," as such term is defined in Sections 469(k)(2) or 7704(b) of the
Code; (x) if such transfer subjects the Partnership to be regulated under the
Investment Company Act of 1940, the Investment Advisors Act of 1940 or the
Employee Retirement Income Security Act of 1974, each as amended; (xi) if the
transferee or assignee of such Partnership Interest is unable to make the
representations set forth in Section 3.4.D or such transfer could otherwise
adversely affect the ability of the General Partner to remain qualified as a
REIT; or (xii) if in the opinion of legal counsel for the Partnership such
transfer would adversely affect the ability of the General Partner to continue
to qualify as a REIT or subject the General Partner to any additional taxes
under Section 857 or Section 4981 of the Code.
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F. The General Partner shall monitor the transfers of interests in the
Partnership (including any acquisition of Partnership Units by the Partnership
or the General Partner) to determine (i) if such interests are being traded on
an "established securities market" or a "secondary market (or the substantial
equivalent thereof)" within the meaning of Section 7704 of the Code and (ii)
whether such transfers of interests would result in the Partnership being unable
to qualify for at least one of the "safe harbors" set forth in Regulations
Section 1.7704-1 (or such other applicable guidance subsequently published by
the IRS setting forth safe harbors under which interests will not be treated as
"readily tradable on a secondary market (or the substantial equivalent thereof)"
within the meaning of Section 7704 of the Code) (the "Safe Harbors"). The
General Partner shall have authority to take any steps it determines are
necessary or appropriate in its sole and absolute discretion to prevent any
trading of interests which could cause the Partnership to become a "publicly
traded partnership," or any recognition by the Partnership of such transfers, or
to insure that at least one of the Safe Harbors is met.
ARTICLE 12.
ADMISSION OF PARTNERS
Section 12.1. Admission of Successor General Partner
A successor to all of the General Partner's General Partner Interest
pursuant to Section 11.2 who is proposed to be admitted as a successor General
Partner shall be admitted to the Partnership as the General Partner, effective
upon such 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 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 Article 11.
Section 12.2. Admission of Additional Limited Partners
A. A Person who makes a Capital Contribution to the Partnership in
accordance with this Agreement shall be admitted to the Partnership as an
Additional 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, including, without limitation, the power
of attorney granted in Section 2.4 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 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 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 receipt of the Capital Contribution in respect of such Limited
Partner, the documents set forth in this Section 12.2.A and the consent of the
General Partner to such
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admission. 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 item thereof and all other items allocable among Partners and
Assignees for such Partnership Year shall be allocated among such 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 an Additional Limited Partner occurs shall be allocated among
all the Partners and Assignees, including such Additional Limited Partner, in a
manner determined by the General Partner in its sole discretion.
Section 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 Exhibit A) 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.
ARTICLE 13.
DISSOLUTION AND LIQUIDATION
Section 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. Upon
the withdrawal of the General Partner, any successor General Partner (selected
as described in Section 13.1.B below) shall continue the business of the
Partnership. The Partnership shall dissolve, and its affairs shall be wound up,
upon the first to occur of any of the following ("Liquidating Events"):
A. the expiration of its term as provided in Section 2.5;
B. an event of withdrawal of the General Partner, as defined in the Act,
unless, within ninety (90) days after the withdrawal, all of the remaining
Partners agree in writing, in their sole and absolute discretion, to continue
the business of the Partnership and to the appointment, effective as of the date
of withdrawal, of a substitute General Partner;
C. prior to December 31, 2096, an election to dissolve the Partnership
made by the General Partner with the consent of Limited Partners who hold ninety
percent (90%) of the outstanding Units held by Limited Partners;
D. subject to the provisions of Section 7.3.C, an election to dissolve
the Partnership made by the General Partner in its sole and absolute discretion;
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E. entry of a decree of judicial dissolution of the Partnership pursuant
to the provisions of the Act;
F. the sale or disposition of all or substantially all of the assets and
properties of the Partnership; or
G. 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 or at the time of the entry of such order or judgment a Majority
in Interest of the remaining Limited Partners Consent 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.
Section 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 a Majority in Interest of the Limited Partners (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 assets 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 stock of the General Partner) 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; and
(iv) The balance, if any, to the Partners in accordance with
their Capital Account balances determined after giving
effect to all contributions and distributions for all
periods, and after taking into account all Capital
Account adjustments for the Partnership taxable year
during which the liquidation occurs (other than those
made as a result of the liquidating distribution set
forth in this Section 13.2.A(iv)).
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13 other than reimbursement of its
expenses as provided in Section 7.4.
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B. Notwithstanding the provisions of Section 13.2.A 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 assets 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 13.2.A, 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 interest 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. The Partnership shall be terminated when any notes received
in connection with any such sale or disposition referenced in Section 13.1.E
above, or in connection with the liquidation of the Partnership have been paid
and all of the cash or property available for application and distribution under
this Agreement have been applied and distributed in accordance with this
Agreement.
Section 13.3. Compliance with Timing Requirements of Regulations
In the event the Partnership is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant
to this Article 13 to the General Partner and Limited Partners who have positive
Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2).
If any Partner has a deficit balance in his or her Capital Account (after giving
effect to all contributions, distributions and allocations for the taxable
years, including the year during which such liquidation occurs), such Partner
shall have no obligation to make any contribution to the capital of the
Partnership with respect to such deficit, and such deficit shall not be
considered a debt owed to the Partnership or to any other Person for any purpose
whatsoever, except to the extent otherwise agreed to by such Partner and the
General Partner. In the discretion of the Liquidator or the General Partner, 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:
A. 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 of 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 or the General
Partner, in the same proportions and 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
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<PAGE> 70
B. withheld to establish any reserves deemed necessary or appropriate
for any contingent or unforeseen liabilities or obligations of the Partnership;
and to reflect the unrealized portion of any installment obligations owed to the
Partnership; provided that, such withheld amounts shall be distributed to the
General Partner and Limited Partners as soon as practicable.
Section 13.4. Deemed Distribution and Recontribution
Notwithstanding any other provision 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 Partnership's
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 Partnership
property in kind to the General Partner and Limited Partners, who shall be
deemed to have assumed and taken such property subject to all Partnership
liabilities, all in accordance with their respective Capital Accounts.
Immediately thereafter, the General Partner and Limited Partners shall be deemed
to have recontributed the Partnership property in kind to the Partnership, which
shall be deemed to have assumed and taken such property subject to all such
liabilities.
Section 13.5. 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 his Capital
Contribution and shall have no right or power to demand or receive property from
the General Partner. No Limited Partner shall have priority over any other
Limited Partner as to the return of his Capital Contributions, distributions or
allocations.
Section 13.6. Notice of Dissolution
In the event a Liquidating Event occurs or an event occurs that would,
but for provisions of Section 13.1, result in a dissolution of the Partnership,
the General Partner shall, within thirty (30) days thereafter, provide written
notice thereof to each of the Partners and to all other parties with whom the
Partnership regularly conducts business (as determined in the discretion of the
General Partner) and shall publish notice thereof in a newspaper of general
circulation in each place in which the Partnership regularly conducts business
(as determined in the discretion of the General Partner).
Section 13.7. Cancellation of Certificate of Limited Partnership
Upon the completion of the liquidation of the Partnership cash and
property as provided in Section 13.2, the Partnership shall be terminated and
the Certificate 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.
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Section 13.8. 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, in order to minimize any losses otherwise attendant
upon such winding-up, and the provisions of this Agreement shall remain in
effect between the Partners during the period of liquidation.
Section 13.9. Waiver of Partition
Each Partner hereby waives any right to partition of the Partnership
property.
ARTICLE 14.
AMENDMENT OF PARTNERSHIP AGREEMENT; CONSENTS
Section 14.1. Amendments
A. The actions requiring consent or approval of the Partners or of the
Limited Partners pursuant to this Agreement, including Section 7.3, or otherwise
pursuant to applicable law, are subject to the procedures in this Article 14.
B. Amendments to this Agreement requiring the consent or approval of
Limited Partners may be proposed by the General Partner or by Limited Partners
holding twenty-five percent (25%) or more of the Partnership Interests held by
Limited Partners. Following such proposal, the General Partner shall submit any
proposed amendment to the Partners or of the Limited Partners, as applicable.
The General Partner shall seek the written consent or approval of the Partners
or of the Limited 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 consent, the General Partner may require a
response within a reasonable specified time, but not less than fifteen (15)
days, and failure to respond in such time period shall constitute a consent
which is consistent with the General Partner's recommendation (if so
recommended); provided that, an action shall become effective at such time as
requisite consents are received even if prior to such specified time.
Section 14.2. Action by 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 holding twenty-five percent (25%) or more of the Partnership
Interests held by the Limited Partners. The call shall state the nature of the
business to be transacted. Notice of any such meeting shall be given to all
Partners not less than seven days nor more than thirty (30) days prior to the
date of such meeting. Partners may vote in person or by proxy at such meeting.
Whenever the vote of the Percentage Interests of the Partners, or the Consent of
the Partners or Consent of the Limited Partners is permitted or required under
this Agreement, such vote or Consent may be given at a meeting of Partners or
may be given in accordance with the procedure prescribed in Section 14.1.
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
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the Percentage Interests as is expressly required by this Agreement for the
action in question. Such consent may be in one instrument or in several
instruments, and shall have the same force and effect as a vote of the
Percentage Interests of the Partners (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 eleven (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.
D. Each meeting of 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.
E. On matters on which Limited Partners are entitled to vote, each
Limited Partner shall have a vote equal to the number of Partnership Units held.
ARTICLE 15.
GENERAL PROVISIONS
Section 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 certified
first class United States mail, nationally recognized overnight delivery service
or facsimile transmission to the Partner or Assignee at the address set forth in
Exhibit A or such other address as the Partners shall notify the General Partner
in writing.
Section 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.
Section 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.
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Section 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.
Section 15.5. Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
parties hereto including the Persons set forth in Exhibit G, and their heirs,
executors, administrators, successors, legal representatives and permitted
assigns.
Section 15.6. Creditors
Other than as expressly set forth herein with respect to Indemnitees,
none of the provisions of this Agreement shall be for the benefit of, or shall
be enforceable by, any creditor of the Partnership.
Section 15.7. Waiver
No failure or delay 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 any breach thereof shall constitute waiver
of any such breach or any other covenant, duty, agreement or condition.
Section 15.8. Counterparts
This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all 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.
Section 15.9. Applicable Law
This Agreement shall be construed in accordance with and governed by the
laws of the State of Delaware, without regard to the principles of conflicts of
law.
Section 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.
Section 15.11. Limitation to Preserve REIT Status
To the extent that any amount paid or credited to the General Partner or
its officers, directors, employees or agents pursuant to Section 7.4 or 7.7
would constitute gross income to the General Partner for purposes of Sections
856(c)(2) or 856(c)(3) of the Code (a
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<PAGE> 74
"General Partner Payment") then, notwithstanding any other provision of this
Agreement, the amount of such General Partner Payments for any fiscal year shall
not exceed the lesser of:
(i) an amount equal to the excess, if any, of (a) 4.17% of the
General Partner's total gross income (but not including the amount of
any General Partner Payments) for the fiscal year which is described in
subsections (A) through (H) of Section 856(c)(2) of the Code over (b)
the amount of gross income (within the meaning of Section 856(c)(2) of
the Code) derived by the General Partner from sources other than those
described in subsections (A) through (H) of Section 856(c)(2) of the
Code (but not including the amount of any General Partner Payments); or
(ii) an amount equal to the excess, if any, of (a) 25% of the
General Partner's total gross income (but not including the amount of
any General Partner Payments) for the fiscal year which is described in
subsections (A) through (I) of Section 856(c)(3) of the Code over (b)
the amount of gross income (within the meaning of Section 856(c)(3) of
the Code) derived by the General Partner from sources other than those
described in subsections (A) through (I) of Section 856(c)(3) of the
Code (but not including the amount of any General Partner Payments);
provided, however, that General Partner Payments in excess of the amounts set
forth in subparagraphs (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 would not adversely affect the General Partner's ability to
qualify as a REIT. To the extent General Partner Payments may not be made in a
year due to the foregoing limitations, such General Partner Payments shall carry
over and be treated as arising in the following year; provided, however, that
such amounts shall not carry over for more than five years, and if not paid
within such five year period, shall expire; provided, further, that (a) as
General Partner Payments are made, such payments shall be applied first to carry
over amounts outstanding, if any and (b) with respect to carry over amounts for
more than one Partnership Year, such payments shall be applied to the earliest
Partnership Year first.
Section 15.12. Entire Agreement
This Agreement (together with the agreements listed on Exhibit I hereto
as to rights and obligations in respect of the Units held by the Limited
Partners who are parties thereto, or their permitted transferees) 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.
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Section 15.13. No Rights as Stockholders
Nothing contained in this Agreement shall be construed as conferring
upon the holders of Partnership Units any rights whatsoever as stockholders of
the General Partner, including without limitation any right to receive dividends
or other distributions made to stockholders of the General Partner or to vote or
to consent or to receive notice as stockholders in respect of any meeting of
stockholders for the election of directors of the General Partner or any other
matter.
ARTICLE 16.
SERIES A PREFERRED UNITS
Section 16.1. Designation and Number
A series of Partnership Units in the Partnership designated as the 8
1/2% Series A Cumulative Redeemable Preferred Units (the "Series A Preferred
Units") is hereby established. The number of Series A Preferred Units shall be
4,600,000.
Section 16.2. Distributions
A. Payment of Distributions. Subject to the rights of holders of Parity
Preferred Units as to the payment of distributions, pursuant to Section 5.1
hereof, the General Partner, as holder of the Series A Preferred Units, will be
entitled to receive, when, as and if declared by the Partnership acting through
the General Partner, out of Available Cash, cumulative preferential cash
distributions in an amount equal to the Priority Return. Such distributions will
be payable (A) quarterly in arrears, on the 15th day of January, April, July and
October of each year and (B) in the event of a redemption of Series A Preferred
Units, on the redemption date (each a "Preferred Unit Distribution Payment
Date"), commencing on the first of such payment dates to occur following their
original date of issuance. If any date on which distributions are to be made on
the Series A Preferred Units is not a Business Day, then payment of the
distribution to be made on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay) except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date.
B. No Distributions in Contravention of Agreements. No distribution on
the Series A Preferred Units shall be authorized by the General Partner or made
or set apart for payment by the Partnership at such time as the terms and
provisions of any agreement of the Partnership or the General Partner, including
any agreement relating to indebtedness, prohibits such declaration, payment or
setting apart for payment or provides that such declaration, payment or setting
apart for payment would constitute a breach thereof, or a default thereunder, or
if such declaration or payment shall be restricted or prohibited by law.
C. Priority as to Distributions. (i) Except to the extent set forth in
Section 16.2.C(ii), so long as any Series A Preferred Units are outstanding, no
distribution of cash or other property shall be authorized, declared, paid or
set apart for payment on or with respect to any class or series of Partnership
Interest of the Partnership ranking, as to distributions or
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voluntary or involuntary liquidation, dissolution or winding up of the
Partnership, junior to the Series A Preferred Units (collectively, "Junior
Units"), nor shall any Junior Units or Parity Preferred Units be redeemed,
purchased or otherwise acquired for any consideration (or any monies be paid to
or made available for a sinking fund for the redemption of any such Junior Units
or Parity Preferred Units) by the Partnership (except by conversion into or
exchange for other Junior Units or Parity Preferred Units) unless, in each case,
full cumulative distributions have been or contemporaneously are authorized and
paid or authorized and a sum sufficient for the payment thereof set apart for
such payment on the Series A Preferred Units for all past distribution periods
and the current distribution period. The foregoing sentence will not prohibit
(a) distributions payable solely in Junior Units, (b) the exchange of Junior
Units or Parity Preferred Units into Partnership Interests of the Partnership
ranking junior to the Series A Preferred Units as to distributions, or (c) the
redemption of Partnership Interests corresponding to REIT Series A Preferred
Shares, Parity Preferred Stock with respect to distributions or Junior Stock to
be purchased by the General Partner pursuant to the Charter to preserve the
General Partner's status as a real estate investment trust, provided that such
redemption shall be upon the same terms as the corresponding stock purchase
pursuant to the Charter.
(ii) So long as distributions have not been paid in full (or a sum
sufficient for such full payment is not so set apart) upon the Series A
Preferred Units and any other Parity Preferred Units, all distributions
authorized and declared on the Series A Preferred Units and all classes or
series of outstanding Parity Preferred Units shall be authorized and declared
pro rata so that the amount of distributions authorized and declared per Series
A Preferred Unit and such other classes or series of Parity Preferred Units
shall in all cases bear to each other the same ratio that accrued distributions
per Series A Preferred Unit and such other classes or series of Parity Preferred
Units (which shall not include any accumulation in respect of unpaid
distributions for prior distribution periods if such class or series of Parity
Preferred Units do not have cumulative distribution rights) bear to each other.
No interest, or sum of money in lieu of interest, shall be payable in respect of
any distributions or payments on Series A Preferred Shares which may be in
arrears.
D. No Further Rights. The General Partner, as holder of the Series A
Preferred Units, shall not be entitled to any distributions, whether payable in
cash, other property or otherwise, in excess of the full cumulative
distributions described herein. Any distribution payment made on the Series A
Preferred Units shall first be credited against the earliest accrued but unpaid
distribution due with respect to such Series A Preferred Units which remain
payable.
Section 16.3. Liquidation Proceeds
A. Upon voluntary or involuntary liquidation, dissolution or winding-up
of the Partnership, distributions on the Series A Preferred Units shall be made
in accordance with Article 13 of this Agreement.
B. Notice. Written notice of any such voluntary or involuntary
liquidation, dissolution or winding-up of the Partnership, stating the payment
date or dates when, and the place or places where, the amounts distributable in
such circumstances shall be payable, shall be given by the General Partner
pursuant to Section 13.6 hereof.
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C. No Further Rights. After payment of the full amount of the
liquidating distributions to which they are entitled, the General Partner, as
holder of the Series A Preferred Units, will have no right or claim to any of
the remaining assets of the Partnership.
D. Consolidation, Merger or Certain Other Transactions. None of a
consolidation or merger of the Partnership with or into another entity, a merger
of another entity with or into the Partnership, or a sale, lease, transfer or
conveyance of all or substantially all of the Partnership' s property or
business shall be considered a liquidation, dissolution or winding up of the
Partnership.
Section 16.4. Redemption
A. Redemption. The Series A Preferred Units may not be redeemed prior to
June 27, 2003. If, on or after such date, the General Partner elects to redeem
any of the Series A Preferred Shares, the Partnership shall, on the date set for
redemption of such Series A Preferred Shares, redeem the number of Series A
Preferred Units equal to the number of Series A Preferred Shares for which the
General Partner has given notice of redemption pursuant to Section 5 of Article
First of the Series A Articles Supplementary, at a redemption price, payable in
cash, equal to the product of (i) the number of Series A Preferred Units being
redeemed, and (ii) the sum of $25 and the Preferred Distribution Shortfall per
Series A Preferred Unit, if any.
B. Limitation on Redemption. The Redemption Price of the Series A
Preferred Units (other than the portion thereof consisting of accumulated but
unpaid distributions) is payable solely out of the sale proceeds of capital
stock of the General Partner, which will be contributed by the General Partner
to the Partnership as an additional capital contribution, or out of the sale of
limited partner interests in the Partnership and from no other source. For
purposes of the preceding sentence, "capital stock" means any equity securities
(including Common Stock and Preferred Stock (as such terms are defined in the
Charter)), depository shares, interests, participation or other ownership
interests (however designated) and any rights (other than debt securities
convertible into or exchangeable for equity securities) or options to purchase
any of the foregoing.
C. Payment of Accumulated Distributions. Immediately prior to any
redemption of Series A Preferred Units, the Partnership shall pay, in cash, any
accumulated and unpaid distributions on the Series A Preferred Units to be
redeemed through the redemption date. Except as provided above, the Partnership
will make no payment or allowance for unpaid distributions, whether or not in
arrears, on Series A Preferred Units for which a notice of redemption has been
given.
D. Procedures for Redemption. The following provisions set forth the
procedures for Redemption:
(i) Notice of redemption will be given by the General Partner to the
Partnership concurrently with the notice of the General Partner sent to the
holders of its Series A Preferred Shares in connection with such redemption.
Such notice shall state: (A) the redemption date; (B) the redemption price; (C)
the number of Series A Preferred Units to be redeemed; (D) the place or places
where the Series A Preferred Units are to be surrendered for
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payment of the redemption price; and (E) that distributions on the Series A
Preferred Units to be redeemed will cease to accumulate on such redemption date.
If less than all of the Series A Preferred Units are to be redeemed, the notice
shall also specify the number of Series A Preferred Units to be redeemed.
(ii) On or after the redemption date, the General Partner shall present
and surrender the certificates, if any, representing the Series A Preferred
Units to the Partnership at the place designated in the notice of redemption and
thereupon the redemption price of such Units (including all accumulated and
unpaid distributions up to the redemption date) shall be paid to the General
Partner and each surrendered Unit certificate, if any, shall be canceled. If
fewer than all the Units represented by any such certificate representing Series
A Preferred Units are to be redeemed, a new certificate shall be issued
representing the unredeemed shares.
(iii) From and after the redemption date (unless the Partnership
defaults in payment of the redemption price), all distributions on the Series A
Preferred Units designated for redemption in such notice shall cease to
accumulate and all rights of the General Partner, except the right to receive
the redemption price thereof (including all accumulated and unpaid distributions
up to the redemption date), shall cease and terminate, and such Units shall not
be deemed to be outstanding for any purpose whatsoever. At its election, the
Partnership, prior to a redemption date, may irrevocably deposit the redemption
price (including accumulated and unpaid distributions to the redemption date) of
the Series A Preferred Units so called for redemption in trust for the General
Partner with a bank or trust company, in which case the redemption notice to
General Partner shall (A) state the date of such deposit, (B) specify the office
of such bank or trust company as the place of payment of the redemption price
and (C) require the General Partner to surrender the certificates, if any,
representing such Series A Preferred Units at such place on or about the date
fixed in such redemption notice (which may not be later than the redemption
date) against payment of the redemption price (including all accumulated and
unpaid distributions to the redemption date). Any monies so deposited which
remain unclaimed by the General Partner at the end of two years after the
redemption date shall be returned by such bank or trust company to the
Partnership.
E. No Further Rights. Any Series A Preferred Units that shall at any
time have been redeemed shall, after such redemption, have the status of
authorized but unissued Preferred Units, without designation as to series until
such shares are once more designated as part of a particular series by the
General Partner.
Section 16.5. Voting Rights
The General Partner shall not have any voting or consent rights in
respect of its partnership interest represented by the Series A Preferred Units.
Section 16.6. Transfer Restrictions
The Series A Preferred Units shall not be transferable.
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Section 16.7. No Conversion Rights
The Series A Preferred Units shall not be convertible into any other
class or series of interest in the Partnership.
Section 16.8. No Sinking Fund
No sinking fund shall be established for the retirement or redemption of
Series A Preferred Units.
(Signature Pages Follows)
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
GENERAL PARTNER:
AMB PROPERTY CORPORATION,
a Maryland corporation
By: /s/ David S. Fries
------------------------------------
David S. Fries
Managing Director, General Counsel
and Secretary
LIMITED PARTNERS:
AMB PROPERTY CORPORATION,
as attorney-in-fact for each of the
Limited Partners
By: /s/ David S. Fries
------------------------------------
David S. Fries
Managing Director, General Counsel
and Secretary
S-1
<PAGE> 81
EXHIBIT A
PARTNERS, CONTRIBUTIONS, AND PARTNERSHIP INTERESTS
I. COMMON UNITS
<TABLE>
<CAPTION>
Agreed Value of
Contribution Cash Contributed Total Partnership Percentage
Name of Partner Date Contributions Property Contributions Units Interest
- ------------------------------- ------------ ------------- --------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
GENERAL PARTNER:
AMB Property Corporation (a) 11/26/97 $73,798,710 $1,693,339,826 $1,767,138,536 85,645,102 95.80728%
LIMITED PARTNERS:
David Brown 11/26/97 $0 $1,150,359 $1,150,359 54,779 0.06128%
Daniel Sarhad 11/26/97 $0 $6,174 $6,174 294 0.00033%
Craig Duncan 11/26/97 $0 $216,447 $216,447 10,307 0.01153%
GP Met Phase One 95, Ltd. 11/26/97 $0 $1,774,164 $1,774,164 84,484 0.09451%
GP Met 4/12, Ltd. 11/26/97 $0 $1,486,212 $1,486,212 70,772 0.07917%
Holbrook W. Goodale 54 Trust 11/26/97 $0 $1,118,754 $1,118,754 53,274 0.05960%
Charles R. Wichman 54 Trust 11/26/97 $0 $1,118,754 $1,118,754 53,274 0.05960%
Frederick B. Wichman 54 Trust 11/26/97 $0 $1,118,754 $1,118,754 53,274 0.05960%
Holbrook W. Goodale 57 Trust 11/26/97 $0 $3,919,734 $3,919,734 186,654 0.20880%
Charles R. Wichman 57 Trust 11/26/97 $0 $3,919,734 $3,919,734 186,654 0.20880%
Frederick B. Wichman 57 Trust 11/26/97 $0 $3,919,734 $3,919,734 186,654 0.20880%
Holbrook W. Goodale 58 Trust 11/26/97 $0 $3,919,734 $3,919,734 186,654 0.20880%
Charles R. Wichman 58 Trust 11/26/97 $0 $3,919,734 $3,919,734 186,654 0.20880%
Frederick B. Wichman 58 Trust 11/26/97 $0 $3,919,734 $3,919,734 186,654 0.20880%
Allmerica Financial Life 11/26/97 $0 $11,752,188 $11,752,188 559,628 0.62603%
Insurance and Annuity
Company
The Gamble Family Investment 11/26/97 $0 $10,125,213 $10,125,213 482,153 0.53936%
Limited Partnership
Campanelli Investment 03/30/98 $0 $12,435,871 $12,435,871 517,547 0.57896%
Properties (b)
Campanelli Enterprises (c) 03/30/98 $0 $10,334,678 $10,334,678 438,110 0.49009%
Steve Liefschultz 03/31/98 $0 $1,990,798 $1,990,798 81,174 0.09081%
Stephen M. Vincent 03/31/98 $0 $634,825 $634,825 25,884 0.02896%
Alan Wilensky 03/31/98 $0 $266,073 $266,073 10,849 0.01214%
Craig Gagnon 03/31/98 $0 $806,404 $806,404 32,880 0.03678%
Seefried Properties, Inc. 06/04/98 $0 $61,250 $61,250 2,590 0.00290%
Monique Brouillet Seefried 06/04/98 $0 $660,275 $660,275 27,916 0.03123%
Robert S. Rakusin 06/04/98 $0 $319,725 $319,725 13,518 0.01512%
Gerald L. Daws 06/04/98 $0 $147,000 $147,000 6,215 0.00695%
Thomas Ellis 06/04/98 $0 $36,750 $36,750 1,554 0.00174%
James E. Hayes as trustee of
the James E. Hayes Living
Trust under Agreement dated 06/30/98 $0 $580,747 $580,747 23,801 0.02663%
August 22, 1995
Lawrence J. Hayes 06/30/98 $0 $580,747 $580,747 23,801 0.02663%
============= =============== ================ =============== =============
TOTAL COMMON UNITS $73,798,710 $1,775,580,392 $1,849,379,102 89,393,104 100.00000%
============= =============== ================ =============== =============
</TABLE>
(a) Excludes 229,411 of Sub OP and Long Gate LLC shares/units.
(b) Includes 3,402 units reserved.
(c) Includes 10,836 units reserved.
A-1
<PAGE> 82
EXHIBIT A
PARTNERS, CONTRIBUTIONS, AND PARTNERSHIP INTERESTS
II. SERIES A PREFERRED UNITS
<TABLE>
<CAPTION>
Agreed Value of
Contribution Cash Contributed Total Partnership Percentage
Name of Partner Date Contributions Property Contributions Units Interest
- ------------------------------- ------------ ------------- --------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
GENERAL PARTNER:
AMB Property Corporation 7/27/98 $96,100,000 $0 $96,100,000 4,000,000 100.00000%
=========== ============== ================ ============= ==========
TOTAL SERIES A PREFERRED UNITS $96,100,000 $0 $96,100,000 4,000,000 100.00000%
=========== ============== ================ ============= ==========
</TABLE>
A-2
<PAGE> 83
EXHIBIT B
NOTICE OF REDEMPTION
The undersigned hereby [irrevocably] (i) exchanges
____________ Limited Partnership Units in AMB Property, L.P. in accordance with
the terms of the Limited Partnership Agreement of AMB Property, L.P. dated as of
_________________, as amended, and the rights of Redemption referred to therein,
(ii) surrenders such Limited Partnership Units and all right, title and interest
therein and (iii) directs that the cash (or, if applicable, REIT Shares)
deliverable upon Redemption or exchange be delivered to the address specified
below, and if applicable, that such REIT Shares be registered or placed in the
name(s) and at the address(es) specified below.
Dated: ________________________
Name of Limited Partner:
---------------------------------
(Signature of Limited Partner)
---------------------------------
(Street Address)
---------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
---------------------------------
Issue REIT Shares in the name of:
Please insert social security or identifying number:
Address (if different than above):
B-1
<PAGE> 84
EXHIBIT C
CONSTRUCTIVE OWNERSHIP DEFINITION
The term "Constructively Owns" means ownership determined through the
application of the constructive ownership rules of Section 318 of the Code, as
modified by Section 856(d)(5) of the Code. Generally, these rules provide the
following:
a. an individual is considered as owning the Ownership Interest that is
owned, actually or constructively, by or for his spouse, his children, his
grandchildren, and his parents;
b. an Ownership Interest that is owned, actually or constructively, by
or for a partnership, limited liability company or estate is considered as owned
proportionately by its partners, members or beneficiaries;
c. an Ownership Interest that is owned, actually or constructively, by
or for a trust is considered as owned by its beneficiaries in proportion to the
actuarial interest of such beneficiaries (provided, however, that in the case of
a "grantor trust" the Ownership Interest will be considered as owned by the
grantors);
d. if ten percent (10%) or more in value of the stock in a corporation
is owned, actually or constructively, by or for any person, such person shall be
considered as owning the Ownership Interest that is owned, actually or
constructively, by or for such corporation in that proportion which the value of
the stock which such person so owns bears to the value of all the stock in such
corporation;
e. an Ownership Interest that is owned, actually or constructively, by
or for a partner or member which actually or constructively owns a 25% or
greater capital interest or profits interest in a partnership or limited
liability company, or by or for a beneficiary of an estate or trust, shall be
considered as owned by the partnership, limited liability company, estate, or
trust (or, in the case of a grantor trust, the grantors);
f. if ten percent (10%) or more in value of the stock in a corporation
is owned, actually or constructively, by or for any person, such corporation
shall be considered as owning the Ownership Interest that is owned, actually or
constructively, by or for such person;
g. if any person has an option to acquire an Ownership Interest
(including an option to acquire an option or any one of a series of such
options), such Ownership Interest shall be considered as owned by such person;
h. an Ownership Interest that is constructively owned by a person by
reason of the application of the rules described in paragraphs (a) through (g)
above shall, for purposes of applying paragraphs (a) through (g), be considered
as actually owned by such person provided, however, that (i) an Ownership
Interest constructively owned by an individual by reason of paragraph (a) shall
not be considered as owned by him for purposes of again applying paragraph (a)
in order to make another the constructive owner of such Ownership Interest, (ii)
an Ownership Interest constructively owned by a partnership, estate, trust, or
corporation by reason of the application of paragraphs (e) or (f) shall not be
considered as owned by it for purposes of applying paragraphs (b), (c), or (d)
in order to make another the constructive owner of such Ownership Interest,
(iii) if an Ownership Interest may be considered as owned by an individual under
paragraphs (a) or (g), it shall be considered as owned by him under paragraph
(g) and (iv) for purposes of the above described rules, an S corporation shall
be treated as a partnership and any stockholder of the S corporation shall be
treated as a partner of such partnership except that this rule shall not apply
for purposes of determining whether stock in the S corporation is constructively
owned by any person.
i. For purposes of the above summary of the constructive ownership
rules, the term "Ownership Interest" means the ownership of stock with respect
to a corporation and, with respect to any other type of entity, the ownership of
an interest in either its assets or net profits.
C-1
<PAGE> 85
EXHIBIT D-1
FORM OF PARTNERSHIP UNIT CERTIFICATE
CERTIFICATE FOR PARTNERSHIP UNITS OF
AMB PROPERTY, L.P.
No. _______________ ____________ UNITS
AMB Property Corporation as the General Partner of AMB Property, L.P., a
Delaware limited partnership (the "Operating Partnership"), hereby certifies
that _____________ is a Limited Partner of the Operating Partnership whose
Partnership Interests therein, as set forth in the Agreement of Limited
Partnership of AMB Property, L.P., dated as of ______________, 199_ (as it may
be amended, modified or supplemented from time to time in accordance with its
terms, (the "Partnership Agreement"), under which the Operating Partnership is
existing and as filed in the office of the Delaware [State Department of
Assessments and Taxation] (copies of which are on file at the Operating
Partnership's principal office at ___________________________________________,
represent _____________ units of limited partnership interest in the Operating
Partnership (the "Partnership Units").
THE PARTNERSHIP UNITS REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY
NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION COMPLIES WITH THE PROVISIONS OF THE PARTNERSHIP AGREEMENT (A COPY OF
WHICH IS ON FILE WITH THE OPERATING PARTNERSHIP). EXCEPT AS OTHERWISE PROVIDED
IN THE PARTNERSHIP AGREEMENT, NO TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION OF THE PARTNERSHIP UNITS REPRESENTED BY THIS
CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR (B) IF
THE OPERATING PARTNERSHIP HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OF
COUNSEL FOR THE HOLDER OF THE PARTNERSHIP UNITS REPRESENTED BY THIS CERTIFICATE
THAT SUCH TRANSFER, SALE ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION
IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE ACT AND THE RULES AND
REGULATIONS IN EFFECT THEREUNDER.
DATED:_____________________, 199_.
AMB PROPERTY CORPORATION
General Partner of AMB
Property, L.P.
ATTEST:
By:_______________________________ By:_________________________________
D-1
<PAGE> 86
EXHIBIT D-2
FORM OF PARTNERSHIP UNIT CERTIFICATE
CERTIFICATE FOR PERFORMANCE UNITS OF
AMB PROPERTY, L.P.
No. _______________ ____________ UNITS
AMB Property Corporation as the General Partner of AMB Property, L.P., a
Delaware limited partnership (the "Operating Partnership"), hereby certifies
that _____________ is a Limited Partner of the Operating Partnership whose
Partnership Interests therein, as set forth in the Agreement of Limited
Partnership of AMB Property, L.P., dated as of ______________, 199_ (as it may
be amended, modified or supplemented from time to time in accordance with its
terms, (the "Partnership Agreement"), under which the Operating Partnership is
existing and as filed in the office of the Delaware [State Department of
Assessments and Taxation] (copies of which are on file at the Operating
Partnership's principal office at ____________________________________________,
represent _____________ performance units (as defined in the Partnership
Agreement) of limited partnership interest in the Operating Partnership
(the "Performance Units").
THE PERFORMANCE UNITS REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY
NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION COMPLIES WITH THE PROVISIONS OF THE PARTNERSHIP AGREEMENT (A COPY OF
WHICH IS ON FILE WITH THE OPERATING PARTNERSHIP). EXCEPT AS OTHERWISE PROVIDED
IN THE PARTNERSHIP AGREEMENT, NO TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION OF THE PERFORMANCE UNITS REPRESENTED BY THIS
CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR (B) IF
THE OPERATING PARTNERSHIP HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OF
COUNSEL FOR THE HOLDER OF THE PERFORMANCE UNITS REPRESENTED BY THIS CERTIFICATE
THAT SUCH TRANSFER, SALE ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION
IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE ACT AND THE RULES AND
REGULATIONS IN EFFECT THEREUNDER.
DATED:_____________________, 199_.
AMB PROPERTY CORPORATION
General Partner of AMB
Property, L.P.
ATTEST:
By:_______________________________ By:_________________________________
D-2
<PAGE> 87
EXHIBIT E
SCHEDULE OF PARTNERS' OWNERSHIP
WITH RESPECT TO TENANTS
None
E-1
<PAGE> 88
EXHIBIT F
SCHEDULE OF REIT SHARES
ACTUALLY OR CONSTRUCTIVELY OWNED BY 25% LIMITED PARTNERS
OTHER THAN THOSE ACQUIRED PURSUANT TO AN EXCHANGE
None
F-1
<PAGE> 89
EXHIBIT G
PERFORMANCE UNITS
Any Performance Units to be issued by the Partnership pursuant to
Section 4.3.F. shall be issued to the following Persons in the following
amounts:
1. The first 3,000,000 Performance Units to be issued shall be issued
90% to the "Old PLPs" (as defined below) and 10% to the "New PLPs" (as defined
below).
2. Any Performance Units to be issued in excess of those set forth in
paragraph 1. above shall be issued 80% to the Old PLPs and 20% to the New PLPs.
3. The Performance Units allocable to each group of PLPs pursuant to
paragraphs 1. and 2. above shall be allocated among the PLPs within such group
in accordance with each PLP's percentage interest as set forth in the
definitions below.
4. The receipt of Performance Units by a PLP is subject to the following
vesting requirements:
A. Any Person who is listed in the definition of Old PLP or New
PLP and who does not remain employed, by one or more of the Partnership, the IMS
or their affiliates, for at least one (1) year from the closing of the initial
public offering of the common stock of the General Partner, other than Persons
who cease to be so employed as a result of a Permitted Reason, shall have their
name removed from such definition and such Person's percentage as set forth in
such definition shall be transferred to the other Persons listed in such
definition in proportion to their immediately preceding percentages.
B. Performance Units issued to a New PLP shall be subject to a
vesting requirement pursuant to which a New PLP will have their ownership of
Performance Units vest in 25% increments on each anniversary of such issuance,
beginning on the first such anniversary and ending on the fourth such
anniversary. In order for such portion of the Performance Units to vest on an
anniversary, the New PLP must continue to be employed by one or more of the
Partnership, the IMS or their affiliates on such anniversary (the "Employment
Requirement"). In the event a New PLP ceases to meet the Employment Requirement,
he or she shall immediately forfeit any Performance Units which have not
previously vested. Notwithstanding the foregoing, (i) all Performance Units held
by New PLPs meeting the Employment Requirement at the effective time of a
Termination Transaction shall vest at such time; and (ii) the General Partner
may, in its sole and absolute discretion, cause the immediate vesting of some or
all of the Performance Units issued to one or more of the New PLPs
C. Any Performance Units forfeited pursuant to paragraph B.
above shall be reissued by the Partnership to each of the Old PLPs and New PLPs
in proportion to the number of Performance Units originally issued to each such
PLP (including Performance Units then held by a New PLP which have not yet
vested). Any Performance Units which are reissued to a New PLP pursuant to this
paragraph 4.C. with respect to such New PLP's Performance Units which have not
yet vested (based on the percentage of such New PLP's Performance Units that
G-1
<PAGE> 90
have not yet vested), shall be unvested Performance Units and shall vest or be
forfeited in accordance with or at the same time as the Performance Units with
respect to which such reissued Performance Units were acquired. Any other
Performance Units which are reissued to a PLP pursuant to this paragraph 4.C.
shall be fully vested upon such reissuance.
D. Units which have not vested may not be exchanged or redeemed
(including pursuant to Section 8.6), sold or otherwise disposed of by a PLP.
E. If by January 31, 1999, 100% of the percentage interests
allocable to the New PLPs have not been allocated (i.e., a portion of such
percentage interests continues to be allocable to "TBD"), any such unallocated
percentage interests shall be reallocated on such date to the other Persons
listed in such definition in proportion to their immediately preceding
percentages.
Definitions
"Old PLPs" means the Persons set forth on Schedule G-1 attached hereto, with the
percentage interest so indicated, as adjusted pursuant to paragraph 4.A. above.
"New PLPs" means the Persons set forth on Schedule G-2 attached hereto, with the
percentage interest so indicated, as adjusted pursuant to paragraph 4.A. above.
G-2
<PAGE> 91
SCHEDULE G-1
OLD PLPS
<TABLE>
<CAPTION>
Name of Old PLP Percentage
- --------------- ----------
<S> <C>
Douglas D. Abbey 23.6537%
Luis A. Belmonte 2.8055%
T. Robert Burke 17.8504%
S. Davis Carniglia 4.7271%
John H. Diserens 5.9870%
Bruce H. Freedman 1.9607%
Jean Collier Hurley 2.4411%
Barbara J. Linn 4.2467%
Hamid R. Moghadam 29.4184%
Craig A. Severance 6.9094%
</TABLE>
G-1
<PAGE> 92
SCHEDULE G-2
NEW PLPS
<TABLE>
<CAPTION>
Name of New PLP Percentage
- --------------- ----------
<S> <C>
Lindsey Adams 2%
Mohammad Barzegar 4%
Steven Callaway 3%
Steven Campbell 2%
Michael Coke 4%
Martin Coyne 2%
Dave Doyno 2%
David Fries 8%
Kent Greenawalt 3%
Jane Harris 4%
Carlie Headapohl 2%
Tyler Higgins 4%
Steven Kimball 2%
John Meyer 3%
John R. Roberts 4%
John T. Roberts 4%
John Rossi 2%
Cynthia Sarver 2%
Michael Scandalios 2%
Christine Schadlich 3%
Gary Scheier 2%
Andrew Singer 3%
Gayle Starr 3%
William Steinberg 4%
K.C. Swartzel 4%
Celia Tanaka 2%
Janice Thacher 1.2%
TBD 18.8%
</TABLE>
G-1
<PAGE> 93
EXHIBIT H
SCHEDULE OF CERTAIN AGREEMENTS RELATING TO
PROPERTIES WITH RESTRICTIONS ON DISPOSITION
PURSUANT TO SECTION 7.3.F
1. Joint Venture Interest Exchange/Contribution Agreement, dated November
26, 1997, by and among AMB Property, L.P., David Brown, Daniel Sarhad
and Craig Duncan.
2. Joint Venture Interest Exchange/Contribution Agreement, dated November
26, 1997, by and among AMB Property, L.P., GP Met Phase One 95, Ltd. and
GP Met 4/12, Ltd.
3. Agreement for Transfer of Realty and Assets, dated November 26, 1997, by
and among AMB Property, L.P. and Holbrook W. Goodale, Charles R. Wichman
and Frederick B. Wichman as Trustees for the Wichman Family Trusts.
4. Contribution Agreement, dated November 26, 1997, between AMB Property,
L.P. and Linder Skokie Real Estate Corporation. (Allmerica Portfolio)
5. Agreement for Transfer of Realty and Assets, dated November 26, 1997, by
and among AMB Property, L.P., Launce E. Gamble and George F. Gamble.
6. Contribution Agreements, dated March 30, 1998, by and among AMB
Property, L.P. and the other parties named therein. (Campanelli
Portfolio)
7. Contribution Agreement, dated March 31, 1998, by and among AMB Property,
L.P., Steve Liefschultz, Stephen M. Vincent, Alan Wilensky and Craig
Gagnon.
8. Contribution Agreement, dated June 4, 1998 by and among AMB Property,
L.P. and the other parties named therein. (Southfield Portfolio)
H-1
<PAGE> 94
EXHIBIT I
SCHEDULE OF CERTAIN AGREEMENTS CONTAINING
LIMITATIONS ON GENERAL PARTNERS GENERAL AUTHORITY
1. Contribution Agreements, dated March 30, 1998, by and among AMB
Property, L.P. and the other parties named therein. (Campanelli
Portfolio)
2. AMB Property, L.P., First Amendment to Amended and Restated Agreement of
Limited Partnership, dated as of March 30, 1998.
3. Contribution Agreement, dated March 31, 1998, by and among AMB Property,
L.P. and Steve Liefschultz, Stephen M. Vincent, Alan Wilensky and Craig
Gagnon.
4. AMB Property, L.P., Second Amendment to Amended and Restated Agreement
of Limited Partnership, dated as of March 31, 1998.
5. Contribution Agreement, dated June 4, 1998 by and among AMB Property,
L.P. and the other parties named therein. (Southfield Portfolio)
6. AMB Property, L.P. Third Amendments to Amended and Restated Agreement of
Limited Partnership, dated as of June 4, 1998.
7. Contribution Agreement, dated May 21, 1998, by and among AMB Property,
L.P. and the other parties named therein. (Alsip Industrial Portfolio)
8. AMB Property, L.P. Fourth Amendment to Amended and Restated Agreement of
Limited Partnership, dated as of June 30, 1998.
I-1
<PAGE> 1
EXHIBIT 10.1
SECOND AMENDMENT TO SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING
CREDIT AGREEMENT (this "Amendment") is made as of September 30, 1998, by and
among AMB PROPERTY, L.P., a Delaware limited partnership (the "Borrower"), the
BANKS and CO-AGENTS party hereto, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Agent.
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent, the Co-Agents and the Banks
have entered into the Second Amended and Restated Revolving Credit Agreement,
dated as of November 26, 1997, as amended by that certain Amendment to Second
Amended and Restated Revolving Credit Agreement dated as of May 29, 1998 (as so
amended, the "Credit Agreement"); and
WHEREAS, the parties desire to modify the Credit Agreement upon
the terms and conditions set forth herein.
NOW THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties do hereby agree as
follows:
1. Definitions. All capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Credit Agreement.
2. Modifications to Definitions.
(a) The definition of "Adjusted EBITDA" contained in Article I
is hereby deleted in its entirety and replaced with the following:
"Adjusted EBITDA" means EBITDA minus (i) an adjustment to
exclude the effects of straight-lining of rents, and minus (ii) an
amount equal to appropriate reserves for replacements of not less than
$0.25 per square foot per annum for each Real Property Asset that is
primarily a retail use property and not less than $0.10 per square foot
per annum for each Real Property Asset that is primarily an industrial
use property.
<PAGE> 2
(b) The following definition of "Borrower Debt Service" is
hereby added to Article I:
"Borrower Debt Service" means as of any date of determination,
an amount equal to Debt Service on the Unsecured Senior Debt for the
previous four quarters including the quarter then ended.
(c) The definition of "Borrowing Base Net Operating Cash Flow"
contained in Article I is hereby deleted in its entirety and replaced with the
following:
"Borrowing Base Net Operating Cash Flow" means as of any date of
determination with respect to the Borrowing Base Properties, Property
Income for the previous four consecutive quarters including the quarter
then ended, but less (x) Property Expenses with respect to the Borrowing
Base Properties for the previous four consecutive quarters including the
quarter then ended, and (y) appropriate reserves for replacements of not
less than $0.25 per square foot per annum for each Borrowing Base
Property that is primarily a retail use property and not less than $0.10
per square foot per annum for each Borrowing Base Property that is
primarily an industrial use property. For purposes of Section 5.1(m)
hereof, the calculation of Borrowing Base Net Operating Cash Flow shall
be made separately as to each Borrowing Base Property.
(d) The definition of "Gross Asset Value" contained in Article I
is hereby deleted in its entirety and replaced with the following:
"Gross Asset Value" shall mean (i) with respect to a Real
Property Asset that was acquired, directly or indirectly, within the
twelve (12) months prior to the date of determination, (A) prior to the
first full quarter following such acquisition, the Acquisition Price of
such Real Property Asset plus any Capital Expenditures actually incurred
by the Borrower or its Subsidiary in connection with such Real Property
Asset (which, for the purpose of this definition shall include any
expenditures that would have been considered Capital Expenditures except
that they were made with respect to the acquisition by the Borrower or
its Consolidated Subsidiaries of any interest in a Real Property Asset
within twelve months after the date such interest in asset was acquired)
and (B) from and after the first full quarter following such
acquisition, the lesser of (x) the amount in clause (i)(A) above and (y)
the Net Operating Cash Flow applicable to such Real Property Asset
(provided that such Net Operating Cash Flow shall be calculated on an
annualized basis based upon the actual amount of Net Operating Cash Flow
for the period of Borrower's ownership of such Real Property Asset), in
each case capitalized at an annual interest rate of 9.25% if such Real
Property Asset is primarily a retail use property and 9.00% if such Real
Property Asset is primarily an industrial use property; and (ii) with
respect to a Real Property Asset that was acquired, directly or
indirectly by the Borrower more than twelve (12) months prior to the
date of determination, the Net
2
<PAGE> 3
Operating Cash Flow applicable to such Real Property Asset capitalized
at an annual interest rate of 9.25% if such Real Property Asset is
primarily a retail use property and 9.00% if such Real Property Asset is
primarily an industrial use property.
(e) The definition of "Net Operating Cash Flow" contained in
Article I is hereby deleted in its entirety and replaced with the following:
"Net Operating Cash Flow" means, as of any date of
determination, with respect to all Real Property Assets, Minority
Holdings and Joint Ventures of Borrower, the General Partner, and their
Consolidated Subsidiaries (with respect to Minority Holdings and Joint
Ventures, the Borrower's, the General Partner's or the applicable
Consolidated Subsidiary's allocable share only), Property Income for
the previous four consecutive quarters including the quarter then
ended, but less (x) Property Expenses with respect to all such Real
Property Assets, Minority Holdings and Joint Ventures (with respect to
Minority Holdings and Joint Ventures, the Borrower's, the General
Partner's or the applicable Consolidated Subsidiary's allocable share
only) for the previous four consecutive quarters including the quarter
then ended and (y) appropriate reserves for replacements of not less
than $0.25 per square foot per annum for each Real Property Asset that
is primarily a retail use property and not less than $0.10 per square
foot per annum for each Real Property Asset that is primarily an
industrial use property.
(f) The definition of "Pro-Forma Debt Service" contained in
Article I is hereby deleted in its entirety.
(g) The following definition of "Total Liabilities to Gross
Asset Value Ratio" is hereby added to Article I:
"Total Liabilities to Gross Asset Value Ratio" means the ratio,
expressed as a percentage, of (i) Total Liabilities to (ii) the sum of (a)
Combined Gross Asset Value, and (b) Cash and Cash Equivalents held by the
Borrower, the General Partner or any Consolidated Subsidiary and (c) accounts
receivable of the Borrower, the General Partner or any Consolidated Subsidiary,
less (d) Intangible Assets (as defined in the definition of Consolidated
Tangible Net Worth) and deferred rents.
(h) The definition of "Unimproved Land Value" contained in
Article I of the Credit Agreement is hereby deleted in its entirety and replaced
with the following:
"Unimproved Land Value" means the aggregate Acquisition Price of
Unimproved Assets.
3
<PAGE> 4
3. Year 2000 Representation. The Credit Agreement is hereby
amended by the addition of the following new Section 4.27:
SECTION 4.27 Year 2000 Compliance. Each of the Borrower and the
General Partner has conducted a comprehensive review and assessment of
its computer applications and has made such inquiry as it determined to
be advisable of its key suppliers, vendors and customers or prospects
with respect to the "year 2000 problem" (i.e., the risk that computer
applications may not be able to properly perform date-sensitive
functions after December 31, 1999) and, based on that review and
inquiry, neither the Borrower nor the General Partner believes that the
year 2000 problem will result in a Material Adverse Effect.
4. Total Liabilities to Gross Asset Value Ratio. Section 5.9(a)
is hereby deleted in its entirety and replaced with the following:
(a) Total Liabilities to Gross Asset Value Ratio.
(i) As of the last day of each calendar quarter commencing as of
July 1, 1998 through and including September 30, 1999, for the prior
four calendar quarters including the quarter then ended, the Total
Liabilities to Gross Asset Value Ratio shall not exceed fifty-five
percent (55%).
(ii) From and after October 1, 1999 through and including the
Maturity Date, the Total Liabilities to Gross Asset Value Ratio as of
the last day of each calendar quarter for the prior four calendar
quarters including the quarter then ended, shall not exceed fifty
percent (50%).
5. Development Activities. Section 5.9(i) is hereby deleted in
its entirety and replaced with the following:
(i) Limitation on Construction Asset Costs. Construction Asset
Costs of the Borrower, the General Partner and their Subsidiaries shall
at no time exceed twelve and one-half percent (12.5%) of Combined Gross
Asset Value.
6. Debt Service. Section 5.9(l) is hereby deleted in its
entirety and replaced with the following:
(l) Borrowing Base Properties Minimum Debt Service Coverage. As
of the last day of each calendar quarter, the ratio of Borrowing Base
Net Operating Cash Flow to Borrower Debt Service shall be equal to or
greater than 2.00:1.00.
4
<PAGE> 5
7. Borrowing Base Properties Value to Unsecured Debt Ratio.
Section 5.9(m) is hereby deleted in its entirety and replaced with the
following:
(m) Borrowing Base Properties Value Unsecured Debt Ratio. The
ratio of Borrowing Base Properties Value to Senior Unsecured Debt shall
not, through and including September 30, 1999, be less than 1.75:1.00
and shall not, from October 1, 1999 through and including the Maturity
Date, be less than 2.00:1.00.
8. Effective Date. This Amendment shall become effective as of
the date hereof upon receipt by the Agent of counterparts hereof signed by the
Borrower and the Required Banks (the date of such receipt being deemed the
"Effective Date").
9. Entire Agreement. This Amendment constitutes the entire and
final agreement among the parties hereto with respect to the subject matter
hereof and there are no other agreements, understandings, undertakings,
representations or warranties among the parties hereto with respect to the
subject matter hereof except as set forth herein.
10. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the law of the State of New York.
11. Counterparts. This Amendment may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
agreement, and any of the parties hereto may execute this Amendment by signing
any such counterpart.
12. Headings, Etc. Section or other headings contained in this
Amendment are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Amendment.
13. No Further Modifications. Except as modified herein, all of
the terms and conditions of the Credit Agreement, as modified hereby shall
remain in full force and effect and, as modified hereby, the Borrower confirms
and ratifies all of the terms, covenants and conditions of the Credit Agreement
in all respects.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective authorized officers as of the
day and year first above written.
Borrower: AMB PROPERTY, L.P., a Delaware limited
partnership
By: AMB Property Corporation,
a Maryland corporation and its
sole general partner
By: /s/ John T. Roberts, Jr.
--------------------------------
Name: John T. Roberts, Jr.
Title: Treasurer, V.P.
FOR PURPOSES OF CONFIRMING AND RATIFYING THE CONTINUED EFFECTIVENESS OF THE
UNCONDITIONAL GUARANTY AGREEMENT, DATED AS OF NOVEMBER 26, 1997, BY AMB PROPERTY
CORPORATION:
Confirmed and Ratified:
AMB PROPERTY CORPORATION
By: /s/ John T. Roberts, Jr.
------------------------------
Name: John T. Roberts, Jr.
Title: Treasurer, V.P.
<PAGE> 7
Signature Page to ABM Property, L.P. Second Amendment to Second
Amended and Restated Revolving Credit Agreement
Agent and Bank: MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as a Bank and as Agent
By: /s/ Timothy V. O'Donovan
------------------------------------
Name: Timothy V. O'Donovan
Title: Vice President
<PAGE> 8
Signature Page to ABM Property, L.P. Second Amendment to Second
Amended and Restated Revolving Credit Agreement
Co-Agent and Bank: COMMERZBANK AKTIENGESELLSCHAFT,
LOS ANGELES BRANCH
By: /s/ James J. Henry
------------------------------------
Name: James J. Henry
Title: Senior Vice President
By: /s/ Christine H. Finkel
------------------------------------
Name: Christine H. Finkel
Title: Assistant Vice President
<PAGE> 9
Signature Page to ABM Property, L.P. Second Amendment to Second
Amended and Restated Revolving Credit Agreement
Co-Agent and Bank: FLEET NATIONAL BANK
By:_____________________________________
Name:
Title:
<PAGE> 10
Signature Page to ABM Property, L.P. Second Amendment to Second
Amended and Restated Revolving Credit Agreement
Co-Agent and Bank: NATIONSBANK, N.A.(f/k/a/ NationsBank
of Texas, N.A.) Co-Agent and Bank:
By: /s/ Donald H. Moses
------------------------------------
Name: Donald H. Moses
Title: Senior Vice President
<PAGE> 11
Signature Page to ABM Property, L.P. Second Amendment to Second
Amended and Restated Revolving Credit Agreement
Co-Agent and Bank: PNC BANK, NATIONAL ASSOCIATION
By: /s/ David Martens
------------------------------------
Name: David Martens
Title: Vice President
<PAGE> 12
Signature Page to ABM Property, L.P. Second Amendment to Second
Amended and Restated Revolving Credit Agreement
Bank: BANK OF AMERICA, NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Mark McCue
------------------------------------
Name: Mark McCue
Title: Vice President
<PAGE> 13
Signature Page to ABM Property, L.P. Second Amendment to Second
Amended and Restated Revolving Credit Agreement
Bank: SOCIETE GENERALE, SOUTHWEST AGENCY
By:_____________________________________
Name:
Title:
<PAGE> 14
Signature Page to ABM Property, L.P. Second Amendment to Second
Amended and Restated Revolving Credit Agreement
Bank: DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
By:_____________________________________
Name:
Title:
<PAGE> 15
Signature Page to ABM Property, L.P. Second Amendment to Second
Amended and Restated Revolving Credit Agreement
Bank: BANKERS TRUST COMPANY
By: /s/ Alexander B.V. Johnson
------------------------------------
Name: Alexander B.V. Johnson
Title: Managing Director
<PAGE> 16
Signature Page to ABM Property, L.P. Second Amendment to Second
Amended and Restated Revolving Credit Agreement
Bank: FIRST UNION BANK, N.A. (successor to
CORESTATES BANK, N.A.)
By: /s/ Cynthia A. Bean
------------------------------------
Name: Cynthia A. Bean
Title: Vice President
<PAGE> 17
Signature Page to ABM Property, L.P. Second Amendment to Second
Amended and Restated Revolving Credit Agreement
Bank: THE BANK OF NOVA SCOTIA, ACTING
THROUGH ITS SAN FRANCISCO
AGENCY
By:_____________________________________
Name:
Title:
<PAGE> 18
Signature Page to ABM Property, L.P. Second Amendment to Second
Amended and Restated Revolving Credit Agreement
Bank: THE INDUSTRIAL BANK OF JAPAN,
LIMITED, LOS ANGELES AGENCY
By: /s/ Takeshi Kubo
------------------------------------
Name: Takeshi Kubo
Title: Vice President
<PAGE> 19
Signature Page to ABM Property, L.P. Second Amendment to Second
Amended and Restated Revolving Credit Agreement
Bank: UNION BANK OF CALIFORNIA, N.A.
By: /s/ Diana Giacomini
------------------------------------
Name: Diana Giacomini
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 33,206
<SECURITIES> 0
<RECEIVABLES> 46,850
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 80,056
<PP&E> 3,223,930
<DEPRECIATION> 43,904
<TOTAL-ASSETS> 3,327,273
<CURRENT-LIABILITIES> 109,606
<BONDS> 1,306,602
0
0
<COMMON> 0
<OTHER-SE> 1,853,149
<TOTAL-LIABILITY-AND-EQUITY> 3,327,273
<SALES> 0
<TOTAL-REVENUES> 254,860
<CGS> 0
<TOTAL-COSTS> 163,488
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,105
<INCOME-PRETAX> 91,372
<INCOME-TAX> 0
<INCOME-CONTINUING> 91,372
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 86,773
<EPS-PRIMARY> 0.97
<EPS-DILUTED> 0.97
</TABLE>
