<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 MARCH 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 001-14245
AMB PROPERTY, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 94-3285362
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
505 MONTGOMERY ST., SAN FRANCISCO, 94111
CALIFORNIA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(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 [ ].
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<PAGE> 2
AMB PROPERTY, L.P.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1998 and
March 31, 1999 (unaudited).................................. 1
Consolidated Statements of Operations for the three months
ended March 31, 1998 and 1999 (unaudited)................... 2
Consolidated Statements of Cash Flows for the three months
ended March 31, 1998 and 1999 (unaudited)................... 3
Consolidated Statement of Partners' Capital for the three
months ended March 31, 1999 (unaudited)..................... 4
Notes to Consolidated Financial Statements (unaudited)...... 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 13
Item 3. Quantitative and Qualitative Disclosures About Market
Risks....................................................... 24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 24
Item 2. Changes in Securities....................................... 24
Item 3. Defaults Upon Senior Securities............................. 25
Item 4. Submission of Matters to a Vote of Security Holders......... 25
Item 5. Other Information........................................... 25
Item 6. Exhibits and Reports on Form 8-K............................ 28
</TABLE>
i
<PAGE> 3
PART I
ITEM 1. FINANCIAL STATEMENTS
AMB PROPERTY, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND MARCH 31, 1999
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------ ----------
<S> <C> <C>
Investments in real estate:
Land and improvements..................................... $ 740,680 $ 618,355
Buildings and improvements................................ 2,445,104 1,932,509
Construction in progress.................................. 183,276 181,800
---------- ----------
Total investments in properties................... 3,369,060 2,732,664
Accumulated depreciation and amortization................... (58,404) (54,760)
---------- ----------
Net investments in properties..................... 3,310,656 2,677,904
Investment in unconsolidated joint venture.................. 57,655 57,697
Properties held for divestiture, net........................ 115,050 871,665
---------- ----------
Net investments in real estate.................... 3,483,361 3,607,266
Cash and cash equivalents................................... 25,137 29,165
Other assets................................................ 54,387 60,187
---------- ----------
Total assets...................................... $3,562,885 $3,696,618
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Debt:
Secured debt.............................................. $ 734,196 $ 770,429
Unsecured senior debt securities.......................... 400,000 400,000
Unsecured credit facility................................. 234,000 316,000
---------- ----------
Total debt........................................ 1,368,196 1,486,429
Other liabilities........................................... 104,305 123,796
---------- ----------
Total liabilities................................. 1,472,501 1,610,225
Commitments and contingencies............................... -- --
Minority interests.......................................... 176,127 176,121
Partners' capital:
General Partner, 85,688,109 and 85,796,860 units
outstanding, respectively, and 4,000,000 Series A
preferred units with a $100,000 liquidation
preference............................................. 1,765,360 1,761,533
Limited Partners, 4,447,839 and 4,448,873 units
outstanding, respectively, and 1,300,000 Series B
preferred units with a $65,000 liquidation
preference............................................. 148,897 148,739
---------- ----------
Total partners' capital........................... 1,914,257 1,910,272
---------- ----------
Total liabilities and partners' capital........... $3,562,885 $3,696,618
========== ==========
</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 MONTHS ENDED MARCH 31, 1998 AND 1999
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
REVENUES
Rental revenues........................................... $ 74,602 $ 107,657
Equity in earnings of unconsolidated joint venture........ -- 1,151
Other income.............................................. 1,183 764
----------- -----------
Total revenues.................................... 75,785 109,572
OPERATING EXPENSES
Property operating expenses............................... 10,004 14,499
Real estate taxes......................................... 10,248 15,035
General and administrative................................ 2,718 4,072
Interest, including amortization.......................... 11,841 22,967
Depreciation and amortization............................. 11,786 18,424
----------- -----------
Total operating expenses.......................... 46,597 74,997
----------- -----------
Income from operations before minority
interests...................................... 29,188 34,575
Minority interests' share of net income................... (462) (3,821)
----------- -----------
Net income........................................ 28,726 30,754
Series A preferred unit distributions..................... -- (2,125)
Series B preferred unit distributions..................... -- (1,402)
----------- -----------
Net income available to common unitholders........ $ 28,726 $ 27,227
=========== ===========
Income available to common unitholders attributable to:
General Partner........................................... $ 27,906 $ 25,889
Limited Partners.......................................... 820 1,338
----------- -----------
$ 28,726 $ 27,227
=========== ===========
INCOME PER COMMON UNIT
Basic..................................................... $ 0.32 $ 0.30
=========== ===========
Diluted................................................... $ 0.32 $ 0.30
=========== ===========
WEIGHTED AVERAGE COMMON UNITS OUTSTANDING
Basic..................................................... 88,428,969 90,449,529
=========== ===========
Diluted................................................... 88,839,192 90,469,105
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 5
AMB PROPERTY, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 28,726 $ 30,754
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 11,786 18,424
Straight-line rents....................................... (2,825) (2,688)
Amortization of debt premiums and financing costs......... (669) (727)
Minority interests' share of net income................... 462 3,821
Equity in earnings of AMB Investment Management........... (126) (578)
Equity in earnings of unconsolidated joint venture........ -- (1,151)
Changes in assets and liabilities:
Other assets.............................................. (4,512) (2,834)
Other liabilities......................................... 1,978 19,491
--------- ---------
Net cash provided by operating activities......... 34,820 64,512
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for property acquisitions......................... (149,874) (70,100)
Additions to land, building, development costs, and
improvements.............................................. (11,575) (31,208)
Distribution received from unconsolidated joint venture..... -- 1,109
Reduction of payable to affiliates in connection with
Formation Transactions.................................... (38,071) --
--------- ---------
Net cash used in investing activities............. (199,520) (100,199)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock.................................... -- 391
Borrowings on unsecured credit facility..................... 162,000 82,000
Borrowings on secured debt.................................. 1,118 303
Payments on secured debt.................................... (9,429) (8,316)
Payments of financing fees.................................. -- (92)
Distributions to General Partner, Limited Partners and
preferred unitholders..................................... -- (33,277)
Distributions to minority interests......................... (373) (1,294)
--------- ---------
Net cash provided by financing activities......... 153,316 39,715
--------- ---------
Net increase (decrease) in cash and cash equivalents........ (11,384) 4,028
Cash and cash equivalents at beginning of period............ 39,968 25,137
--------- ---------
Cash and cash equivalents at end of period.................. $ 28,584 $ 29,165
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest...................................... $ 13,457 $ 15,312
========= =========
Non-cash transactions:
Acquisitions of properties................................ $ 296,143 $ 113,881
Assumption of debt........................................ (83,515) (43,756)
Minority interest's contribution, including units
issued................................................. (62,754) (25)
--------- ---------
Net cash paid..................................... $ 149,874 $ 70,100
========= =========
</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 THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GENERAL PARTNER LIMITED PARTNER
--------------------------------------------- -----------------------------------------
PREFERRED UNITS COMMON UNITS PREFERRED UNITS COMMON UNITS
------------------- ----------------------- ------------------- -------------------
UNITS AMOUNT UNITS AMOUNT UNITS AMOUNT UNITS AMOUNT TOTAL
--------- ------- ---------- ---------- --------- ------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1998........... 4,000,000 $96,100 85,688,109 $1,669,260 1,300,000 $62,190 4,447,839 $86,707 $1,914,257
Contributions........ -- -- 108,751 393 -- -- 1,034 25 418
Net Income........... -- 2,125 -- 25,889 -- 1,402 -- 1,338 30,754
Reallocation of
interests.......... -- -- -- -- -- -- -- -- --
Distributions........ -- (2,125) -- (30,109) -- (1,402) -- (1,521) (35,157)
--------- ------- ---------- ---------- --------- ------- --------- ------- ----------
Balance at March 31,
1999............... 4,000,000 $96,100 85,796,860 $1,665,433 1,300,000 $62,190 4,448,873 $86,549 $1,910,272
========= ======= ========== ========== ========= ======= ========= ======= ==========
</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
MARCH 31, 1999
(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 (the "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 LP
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, 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 Common Stock or LP Units in
connection with the Formation Transactions, to fund property acquisitions, and
for general corporate working capital requirements.
As of March 31, 1999, the Company owned an approximate 95.1% general
partner interest in the Operating Partnership, excluding preferred units. 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 current and former executive officers of the Company and an
officer of AMB Investment Management collectively purchased 100% of AMB
Investment Management's voting common stock (representing a 5% economic interest
therein). 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
5
<PAGE> 8
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND UNIT AMOUNTS)
therein). Certain executive officers of the Company and an officer 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 interests in entities that engage
in the management, leasing and development of properties and similar activities.
The Operating Partnership accounts for its investment in AMB Investment
Management and Headlands Realty Corporation using the equity method of
accounting.
As of March 31, 1999, the Company owned 615 industrial buildings (the
"Industrial Properties") and 38 retail centers (the "Retail Properties") located
in 30 markets throughout the United States. The Industrial Properties,
principally warehouse distribution buildings, encompass approximately 58.9
million rentable square feet and, as of March 31, 1999, were 95.4% leased to
over 1,900 tenants. The Retail Properties, principally grocer-anchored community
shopping centers, encompass approximately 7.1 million rentable square feet and,
as of the same date, were 95.0% 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 interim results of the three months ended March 31, 1999 and 1998 are
not necessarily indicative of the results expected for the entire year. These
financial statements should be read in conjunction with the financial statements
and the notes thereto included in the Operating Partnership's Annual Report on
Form 10-K for the year ended December 31, 1998.
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 AND DEVELOPMENT ACTIVITY
During the first quarter, the Operating Partnership invested $109,078 in
operating properties, consisting of 36 industrial buildings aggregating 1.7
million square feet. The Operating Partnership also initiated two new
development projects aggregating approximately 0.2 million square feet during
the quarter, with a total estimated cost of $14,600 upon completion. As of March
31, 1999, the Operating Partnership had 15 industrial projects aggregating
approximately 3.7 million square feet in its development pipeline with a total
estimated investment of $179,500 upon completion and three retail projects
aggregating approximately 0.6 million square feet in its development pipeline
representing an estimated investment of $84,700 upon completion. As of March 31,
1999, approximately $135,100 had been funded and approximately $129,100 is
estimated to be required to complete projects currently under construction or
for which we have committed to complete.
6
<PAGE> 9
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND UNIT AMOUNTS)
4. PROPERTY HELD FOR DIVESTITURE AND PROPERTY DIVESTITURE
On March 9, 1999, the Operating Partnership signed a series of definitive
agreements with BPP Retail, LLC ("BPP Retail"), a co-investment entity between
Burnham Pacific Properties ("BPP") and the California Public Employees'
Retirement System ("CalPERS"), pursuant to which, if fully consummated, BPP
Retail will acquire up to 28 of our retail shopping centers, totaling 5.1
million square feet, for an aggregate price of $663,400. BPP will acquire the
centers in separate transactions, which were originally expected to close on or
about April 30, 1999, July 31, 1999 and December 1, 1999. In addition, the
Operating Partnership has entered into a definitive agreement, subject to a
financing condition, with BPP, pursuant to which, if fully consummated, BPP will
acquire up to six additional retail centers, totaling 1.5 million square feet,
for $284,400. Assuming satisfaction or waiver of this condition, this
transaction is currently expected to close by December 31, 1999. Under the
agreements, the Operating Partnership has the right to extend the closing dates
for a period of up to either 20 or 50 days. The Operating Partnership has
exercised this right with respect to the first closing, which is now expected to
occur on or about June 15, 1999. In connection with these transactions, the
Company has granted to CalPERS an option to purchase up to 2,000,000 original
issue shares of the Company's Common Stock for an exercise price of $25 per
share that may be exercised on or before March 31, 2000. As of March 31, 1999,
the net carrying value of the properties held for divestiture was $823,452.
Certain of the properties included in these transactions are subject to
indebtedness which totaled $178,263 as of March 31, 1999. The Company intends to
use the proceeds of $947,800 from these transactions to pay expenses incurred in
connection with the divestitures, to repay the secured debt related to the
properties divested, to partially pay down the unsecured credit facility, for
potential acquisitions and for general corporate purposes.
Although none of the transactions has a discretionary due diligence period
(other than the transaction with BPP, which has a fully discretionary financing
contingency), all of the transactions are subject to certain customary closing
conditions, which are generally applied on a property-by-property basis. While
BPP Retail has posted certain initial deposits aggregating $25,000 on the
transactions, BPP Retail's liability in the event of its default under a
definitive agreement is limited to its deposit. Additionally, the sale of five
of the centers is subject to the consent of our joint venture partners.
Accordingly, the transactions might not close as scheduled or close at all, and
it is possible that the transactions may close with respect to just a portion of
the properties currently subject to the agreements.
In addition to the 34 retail centers, the Operating Partnership has decided
to divest itself of 17 industrial buildings which are not in its core markets
and which do not meet its strategic objectives. As of March 31, 1999, the
divestiture of the properties is subject to negotiation of acceptable terms and
conditions. As of March 31,1999, the net carrying value of the industrial
buildings held for divestiture was $48,213.
The following summarizes the condensed results of operations of the
properties held for divestiture for the quarter ended March 31, 1998 and 1999:
<TABLE>
<CAPTION>
PROPERTIES HELD FOR DIVESTITURE
-------------------------------------------------------
INDUSTRIAL RETAIL TOTAL
--------------- ----------------- -----------------
1998 1999 1998 1999 1998 1999
------ ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Income............................. $1,511 $1,409 $25,793 $27,900 $27,304 $29,309
Property Operating Expenses........ 333 322 6,928 7,572 7,261 7,894
------ ------ ------- ------- ------- -------
Net Operating Income............... $1,178 $1,087 $18,865 $20,328 $20,043 $21,415
====== ====== ======= ======= ======= =======
</TABLE>
On February 26, 1999, the Operating Partnership divested itself of one
retail center located in Miami, Florida, aggregating 83,108 square feet. The
center was sold at a gross sales price of $9,775 and the related secured debt of
$5,742 was paid down at the time of the closing of the transaction.
7
<PAGE> 10
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND UNIT AMOUNTS)
5. DEBT
As of December 31, 1998 and March 31, 1999, debt consisted of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 MARCH 31, 1999
----------------- --------------
<S> <C> <C>
Secured debt, varying interest rates from 4.00% to
10.38% due April 1999 to April 2014................... $ 718,979 $ 754,746
Unsecured senior debt securities, weighted average
interest rate of 7.18%, due June 2008, June 2015 and
June 2018............................................. 400,000 400,000
Unsecured credit facility, variable interest at LIBOR
plus 90 to 120 basis points (6.10% at March 31, 1999),
due November 2000..................................... 234,000 316,000
---------- ----------
Subtotal........................................... 1,352,979 1,470,746
Unamortized premiums............................... 15,217 15,683
---------- ----------
Total consolidated debt....................... $1,368,196 $1,486,429
========== ==========
</TABLE>
Secured debt generally requires monthly principal and interest payments.
The secured debt is secured by deeds of trust on certain Properties. As of March
31, 1999, the total gross investment value of those Properties secured by debt
was $1,432,595. All of the secured debt bears interest at fixed rates, except
for two loans with an aggregate principal amount of $9,466 which bear interest
at a variable rate. The secured debt has various financial and non-financial
covenants. Additionally, certain of the secured debt is cross-collateralized. In
the first quarter of 1999, as part of a property acquisition transaction, the
Operating Partnership assumed $43,800 of secured debt at a weighted average
interest rate of 7.91%, maturing between May, 2000 and March, 2010.
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.
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
an original 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. The Credit
Facility has various financial and non-financial covenants.
Capitalized interest related to construction projects for the three months
ended March 31, 1998 and 1999 was $1,253 and $2,583, respectively.
The scheduled maturities of the Operating Partnership's total debt,
excluding unamortized debt premiums, as of March 31, 1999 are as follows:
<TABLE>
<CAPTION>
UNSECURED
SENIOR UNSECURED
SECURED DEBT CREDIT
DEBT SECURITIES FACILITY TOTAL
-------- ---------- --------- ----------
<S> <C> <C> <C> <C>
1999 (nine months).................... $ 13,184 $ -- $ -- $ 13,184
2000.................................. 33,527 -- 316,000 349,527
2001.................................. 43,484 -- -- 43,484
2002.................................. 66,375 -- -- 66,375
2003.................................. 133,295 -- -- 133,295
Thereafter............................ 464,881 400,000 -- 864,881
-------- -------- -------- ----------
$754,746 $400,000 $316,000 $1,470,746
======== ======== ======== ==========
</TABLE>
8
<PAGE> 11
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND UNIT AMOUNTS)
6. MINORITY INTERESTS IN CONSOLIDATED JOINT VENTURES
Minority interests in the Operating Partnership represent the limited
partnership interests in the Operating Partnership and interests held by certain
third parties (some of which are Institutional Alliance Partners) in 21 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
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.
The following table distinguishes the minority interest ownership held by
certain Joint Venture Partners, Institutional Alliance Partners, and the Series
C Preferred Unitholders' interest in a subsidiary of the Operating Partnership,
as of and for the quarter ended March 31, 1999.
<TABLE>
<CAPTION>
MINORITY
MINORITY INTEREST INTEREST SHARE
LIABILITY OF NET INCOME
----------------- -----------------
<S> <C> <C>
Joint Venture Partners.................................. $ 17,974 $ 356
Institutional Alliance Partners......................... 52,279 1,059
Series C Preferred Units (liquidation preference of
$110,000)............................................. 105,868 2,406
-------- ------
$176,121 $3,821
======== ======
</TABLE>
On March 5, 1999, a subsidiary declared a quarterly cash distribution of
$1.0938 per unit on its Series C Preferred Units, for the three month period
ending April 14, 1999, payable on April 15, 1999, to unitholders of record as of
March 31, 1999.
7. INVESTMENT IN UNCONSOLIDATED JOINT VENTURE
The Operating Partnership has a 56.1% non-controlling limited partnership
interest in one unconsolidated equity investment joint venture which was
purchased in June 1998. The joint venture owns 36 industrial buildings totaling
approximately 4.0 million square feet in the Chicago market. For the three month
period ended March 31, 1999, the Operating Partnership's share of net operating
income was $1,151 and, as of March 31, 1999, the Operating Partnership's share
of the unconsolidated joint venture debt was $19,831, which had a weighted
average interest rate of 6.49%.
8. PARTNERS' CAPITAL
On March 5, 1999, the Operating Partnership declared a quarterly cash
distribution of $0.35 per operating partnership unit, for the quarter ending
March 31, 1999, payable on April 15, 1999, to unitholders of record as of March
31, 1999. On March 5, 1999, the Operating Partnership declared a cash
distribution of $0.53125 and $1.0781 per unit on its Series A Preferred Units
and Series B Preferred Units, respectively, for the three month period ending
April 14, 1999, payable on April 15, 1999, to unitholders of record as of March
31, 1999.
9. INCOME PER COMMON UNIT
The Operating Partnership's only dilutive securities outstanding for the
three months ended March 31, 1998 and 1999 was stock options issued under the
Company's stock incentive plan. The effect of the stock options was to increase
weighted average units outstanding by 410,223 and 19,576 units for the three
months ended March 31, 1998 and 1999, respectively. Such dilution was computed
using the treasury stock method.
9
<PAGE> 12
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND UNIT AMOUNTS)
10. SEGMENT INFORMATION
The Operating Partnership has two reportable segments: Industrial
Properties and Retail Properties. The Industrial Properties consist primarily of
warehouse distribution facilities suitable for single or multiple tenants and
are typically comprised of multiple buildings and are leased to tenants engaged
in various types of businesses. The Retail Properties are generally leased to
one or more anchor tenants, such as grocery and drug stores, and various retail
businesses. The accounting policies of the segments are the same as those
described in the summary of significant accounting policies. The Operating
Partnership evaluates performance based upon property net operating income and
contribution to funds from operations ("FFO)" from the combined properties in
each segment. The Operating Partnership's properties are managed separately
because each segment requires different operating, pricing and leasing
strategies. Significant information used by the Operating Partnership for the
reportable segments is as follows:
<TABLE>
<CAPTION>
INDUSTRIAL RETAIL TOTAL
PROPERTIES PROPERTIES PROPERTIES
---------- ---------- ----------
<S> <C> <C> <C>
RENTAL REVENUES:
For the three months ended:
March 31, 1998................................. $ 48,665 $ 25,937 $ 74,602
March 31, 1999................................. 79,686 27,971 107,657
PROPERTY NET OPERATING INCOME AND CONTRIBUTION TO
FFO(1):
For the three months ended:
March 31, 1998................................. 35,513 18,837 54,350
March 31, 1999................................. 58,050 20,073 78,123
INVESTMENT IN PROPERTIES:
As of:
December 31, 1998(2)........................... 2,574,940 794,120 3,369,060
March 31, 1999(3).............................. 2,690,481 42,183 2,732,664
</TABLE>
- ---------------
(1) Property net operating income (NOI) is defined as rental revenue, including
reimbursements and straight-line rents, less property level operating
expenses, including allocated asset management costs and excluding
depreciation, amortization and interest expense.
(2) Excludes net properties held for divestiture of $21,434, $93,616 and
$115,050 for Industrial, Retail and Total Properties, respectively.
(3) Excludes net properties held for divestiture of $48,213, $823,452 and
$871,665 for Industrial, Retail and Total Properties, respectively. See Note
4.
10
<PAGE> 13
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND UNIT AMOUNTS)
The Operating Partnership uses property net operating income and FFO as
operating performance measures. The following two tables are reconciliations
between total reportable segment revenue, property net operating income and FFO
contribution to consolidated revenues, net income and FFO.
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
MARCH 31,
--------------------
1998 1999
-------- --------
<S> <C> <C>
REVENUES
Total rental revenues for reportable segments............... $ 74,602 $107,657
Other income................................................ 1,183 1,915
-------- --------
Total consolidated revenues................................. $ 75,785 $109,572
======== ========
NET INCOME
Property net operating income for reportable segments....... $ 54,350 $ 78,123
Equity in earnings of unconsolidated joint venture.......... -- 1,151
Other income................................................ 1,183 764
Less:
General and administrative................................ (2,718) (4,072)
Interest expense.......................................... (11,841) (22,967)
Depreciation and amortization............................. (11,786) (18,424)
Minority interests........................................ (462) (3,821)
-------- --------
Net income.................................................. $ 28,726 $ 30,754
======== ========
FFO(1)
Net income.................................................. $ 28,726 $ 30,754
Minority interests' share of net income..................... 462 3,821
Real estate depreciation and amortization:
Total depreciation and amortization....................... 11,786 18,424
Furniture, fixtures, and equipment depreciation........... (104) (114)
FFO attributable to minority interests(2):
Institutional Alliance Partners........................... -- (1,474)
Other joint venture partners.............................. (575) (551)
Series C preferred unit distributions..................... -- (2,406)
Adjustments to derive FFO in unconsolidated joint
venture(3):
Operating Partnership's share of net income............... -- (1,151)
Operating Partnership's share of FFO...................... -- 1,645
Series A preferred unit distributions....................... -- (2,125)
Series B preferred unit distributions....................... -- (1,402)
-------- --------
FFO......................................................... $ 40,295 $ 45,421
======== ========
</TABLE>
- ---------------
(1) Funds from Operations ("FFO") is defined as income from operations before
minority interest, gains or losses from sale of real estate and
extraordinary losses plus real estate depreciation and adjustment to derive
the Operating Partnership's pro rata share of the FFO of unconsolidated
joint ventures, less minority interests' pro rata share of the FFO of
consolidated joint ventures and perpetual preferred stock dividends. In
accordance with NAREIT White Paper on FFO, the Operating Partnership
includes the effects of straight-line rents in FFO. Further, the Operating
Partnership does not adjust FFO to eliminate the effects of non-recurring
charges.
(2) Represents FFO attributable to minority interests in consolidated joint
ventures for the periods presented, which has been computed as minority
interests' share of net income before disposal of properties plus minority
interests' share of real estate-related depreciation and amortization of the
consolidated joint ventures for such periods. Such minority interests are
not exchangeable into shares of Common Stock of the Company.
(3) Represents the Operating Partnership's pro rata share of FFO in
unconsolidated joint ventures for the periods presented, which has been
computed as the Operating Partnership's share of net income plus the
Operating Partnership's share of real estate-related depreciation and
amortization of the unconsolidated joint venture for such periods.
11
<PAGE> 14
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND UNIT AMOUNTS)
11. COMMITMENTS AND CONTINGENCIES
Litigation
In the normal course of business, from time to time, the Operating
Partnership is involved in legal actions relating to the ownership and
operations of its Properties. In management's opinion, the liabilities, if any,
that may ultimately result from such legal actions are not expected to have a
materially adverse effect on the consolidated financial position, results of
operations, or cash flows of the Operating Partnership.
Environmental Matters
The Operating Partnership follows the policy of monitoring its properties
for the presence of hazardous or toxic substances. The Operating Partnership is
not aware of any environmental liability with respect to the Properties that
would have a material adverse effect on the Operating Partnership's business,
assets or results of operations. There can be no assurance that such a material
environmental liability does not exist. The existence of any such material
environmental liability would have an adverse effect on the Operating
Partnership's results of operations and cash flow.
General Uninsured Losses
The Operating Partnership carries comprehensive liability, fire, flood,
environmental, extended coverage and rental loss insurance with policy
specifications, limits and deductibles customarily carried for similar
properties. There are, however, certain types of extraordinary losses that may
be either uninsurable, or not economically insurable. Certain of the Properties
are located in areas that are subject to earthquake activity; the Operating
Partnership has therefore obtained limited earthquake insurance. Should an
uninsured loss occur, the Operating Partnership could lose its investment in,
and anticipated profits and cash flows, from a property.
12. SUBSEQUENT EVENTS
On April 30, 1999, the Operating Partnership issued an aggregate of 390,633
LP Units with an aggregate value of approximately $9,400 to two corporations and
twelve individuals in partial consideration for the acquisition of certain
industrial properties with a purchase price of $40,217. Holders of 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.
On May 5, 1999, a subsidiary issued and sold 1,595,337 7.75% Series D
Cumulative Redeemable Preferred Units at a price of $50.00 per unit in a private
placement. Distributions are cumulative from the date of original issuance and
are payable quarterly in arrears at a rate per unit equal to $3.875 per annum.
The Series D Preferred Units are redeemable by the subsidiary on or after May 5,
2004, subject to certain conditions, for cash at a redemption price equal to
$50.00 per unit, plus accumulated and unpaid distributions thereon, if any, to
the redemption date. The Series D Preferred Units are exchangeable, at specified
times and subject to certain conditions, on a one-for-one basis, for shares of
the Company's Series D Preferred Stock. The subsidiary used the proceeds to make
a loan to the Operating Partnership and to purchase an unconsolidated joint
venture interest from the Operating Partnership. The Operating Partnership used
the funds to repay borrowings under the Credit Facility and for general
corporate purposes.
12
<PAGE> 15
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, our failure to divest of properties we have
contracted to sell or to timely reinvest proceeds from any such divestitures,
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), 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
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Business Risks" in our Annual Report on Form 10-K for the fiscal
year ended December 31, 1998. 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.
Unless we indicate otherwise or unless the context requires otherwise, all
references in this report to "AMB" mean AMB Property Corporation and all
references to the "operating partnership" mean AMB Property, L.P. Unless we
indicate otherwise or unless the context requires otherwise, all references in
this prospectus to "we," "us," or "our" mean the operating partnership and its
subsidiaries.
THE OPERATING PARTNERSHIP
As of March 31, 1999, we owned and operated industrial buildings and retail
centers totaling 66.0 million square feet located in 30 markets nationwide. As
of March 31, 1999, we owned 615 industrial buildings, principally warehouse
distribution buildings, aggregating 58.9 million rentable square feet, which
were 95.4% leased, and 38 retail centers, principally grocer-anchored community
shopping centers, aggregating 7.1 million rentable square feet, which were 95.0%
leased. 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.
On March 9, 1999, we signed a series of definitive agreements with BPP
Retail, LLC, a co-investment entity between Burnham Pacific Properties and the
California Public Employees' Retirement System ("CalPERS"), pursuant to which,
if fully consummated, BPP Retail will acquire up to 28 of our retail shopping
centers, totaling 5.1 million square feet, for an aggregate price of $663.4
million. Burnham Pacific will acquire the centers in separate transactions,
which we originally expected to close on or about April 30, 1999, July 31, 1999
and December 1, 1999. In addition, we have entered into a definitive agreement,
subject to a financing condition, with Burnham Pacific, pursuant to which, if
fully consummated, Burnham Pacific will acquire up to six additional retail
centers, totaling 1.5 million square feet, for $284.4 million. Assuming
satisfaction or waiver of this condition, we currently expect this transaction
to close by December 31, 1999.
13
<PAGE> 16
Under the agreements, we have the right to extend the closing dates for a period
of up to either 20 or 50 days. We have exercised this right with respect to the
first closing, which is now expected to occur on or about June 15, 1999. In
connection with these transactions, AMB, our general partner, has granted to
CalPERS an option to purchase up to 2,000,000 shares of its common stock for an
exercise price of $25 per share that CalPERS may exercise on or before March 31,
2000. AMB has agreed to register the resale of the shares issuable upon exercise
of the option. We intend to use the proceeds of $947.8 million from these
transactions to pay expenses incurred in connection with the divestitures, to
repay the secured debt related to the properties divested, to partially pay down
the unsecured credit facility, for potential acquisitions and for general
corporate purposes.
Although none of the transactions has a discretionary due diligence period
(other than the transaction with Burnham Pacific, which has a fully
discretionary financing contingency), all of the transactions are subject to
certain customary closing conditions, which are generally applied on a
property-by-property basis. While BPP Retail has posted certain initial deposits
aggregating $25 million on the transactions, BPP Retail's liability in the event
of its default under a definitive agreement is limited to its deposit.
Additionally, the sale of five of the centers is subject to the consent of our
joint venture partners. Accordingly, the transactions might not close as
scheduled or close at all, and it is possible that the transactions may close
with respect to just a portion of the properties currently subject to the
agreements.
INDUSTRIAL AND RETAIL PROPERTIES BY REGION
AS OF MARCH 31, 1999
<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.............. 135 13,877,869 23.6% 4 1,282,140 18.1% 139 15,160,009 23.0%
Midwestern........... 108 12,137,590 20.6 5 803,283 11.4 113 12,940,873 19.6
Southern............. 194 17,846,453 30.3 12 1,975,312 27.9 206 19,821,765 30.0
Western.............. 178 15,028,232 25.5 17 3,013,060 42.6 195 18,041,292 27.4
--- ---------- ----- -- --------- ----- --- ---------- -----
Total............ 615 58,890,144 100.0% 38 7,073,795 100.0% 653 65,963,939 100.0%
=== ========== ===== == ========= ===== === ========== =====
</TABLE>
ACQUISITION AND DEVELOPMENT ACTIVITY
During the first quarter, we invested $109.1 million in operating
properties, consisting of 36 industrial buildings aggregating 1.7 million square
feet. We also initiated two new development projects aggregating approximately
0.2 million square feet during the quarter, with a total estimated cost of $14.6
million upon completion. As of March 31, 1999, we had 15 industrial projects
aggregating approximately 3.7 million square feet in our development pipeline
with a total estimated investment of $179.5 million upon completion and three
retail projects aggregating approximately 0.6 million square feet in our
development pipeline representing an estimated investment of $84.7 million upon
completion.
STRATEGIC ALLIANCE PROGRAMS
We believe that our strategy of forming strategic alliances with local and
regional real estate experts improves our operating efficiency and flexibility,
strengthens our customer satisfaction and retention and provides us with
attractive growth opportunities. Additionally, our strategic alliances with
institutional investors enhance our access to private capital and our ability to
finance transactions.
The following are trademarks of AMB: Strategic Alliance Programs,
Development Alliance Program, UPREIT Alliance Program, Institutional Alliance
Program, Management Alliance Program, Customer Alliance Program and Broker
Alliance Program.
14
<PAGE> 17
Our six Strategic Alliance Programs can be grouped into two categories:
- Operating Alliances, which allow us to form relationships with local or
regional real estate experts, thereby becoming their ally rather than
their competitor; and
- Investment Alliances, which allow us to establish relationships with a
variety of capital sources.
OPERATING ALLIANCES
MANAGEMENT ALLIANCE PROGRAM: Our strategy for the Management Alliance
Program is to develop close relationships with and outsource property management
to local property managers that we believe to be among the best in their
respective markets. Our alliances with local property managers increase our
flexibility, reduce our overhead expenses and improve our customer service. In
addition, these alliances provide us with local market information related to
tenant activity and acquisition opportunities.
CUSTOMER ALLIANCE PROGRAM: Through our Customer Alliance Program, we seek
to build long-term working relationships with major tenants. We are committed to
working with our tenants, particularly our larger tenants with multi-site
requirements, to make their property searches as efficient as possible. During
the first quarter of 1999, we acquired one industrial building aggregating
350,000 square feet sourced through our Customer Alliance Program.
BROKER ALLIANCE PROGRAM: Through our Broker Alliance Program, we work
closely with top local leasing companies in each of our markets, which brokers
provide us with access to high quality tenants and local market knowledge.
INVESTMENT ALLIANCES
DEVELOPMENT ALLIANCE PROGRAM: Our strategy for our Development Alliance
Program is to form alliances with development firms with a strong local presence
and expertise. Through our Development Alliance Program, during the first
quarter of 1999, we initiated one development project aggregating an estimated
78,000 square feet at completion. As of March 31, 1999, over 80% of our
development projects were managed by our Development Alliance Partners.
UPREIT ALLIANCE PROGRAM: Through our UPREIT Alliance Program, we issue
limited partnership units in the operating partnership to certain property
owners in exchange for properties, thus providing additional growth for our
portfolio. During the first quarter of 1999, we acquired a portion of the
Manekin Portfolio through our UPREIT Alliance Program, which consists of 35
buildings aggregating 1.3 million square feet, for a purchase price of $99.1
million. In addition, on April 30, 1999, we acquired an additional portion of
the Manekin Portfolio, through our UPREIT Alliance Program, which consists of
nine buildings aggregating 381,074 square feet, for a purchase price of $40.2
million.
INSTITUTIONAL ALLIANCE PROGRAM: Our strategy for our Institutional Alliance
Program is to form alliances with institutional investors. Our alliances with
institutional investors provide us with access to private capital, including
during those times when the public markets are less attractive, as well as
providing us with a source of incremental fee income and investment returns.
RESULTS OF OPERATIONS
The analysis below shows changes in our results of operations for the three
months ended March 31, 1999 and 1998 which includes changes attributable to
acquisitions and development activity, and the changes resulting from properties
that we owned during both the current and prior year reporting periods,
excluding development properties prior to being stabilized (95% leased) for both
the current and prior periods (the "same store properties"). For the comparison
between the three month periods ended March 31, 1999 and 1998, the same store
properties consist of properties aggregating 42.1 million square feet. Our
future financial condition and results of operations, including rental revenues,
may be impacted by the acquisition of additional properties. Our future revenues
and expenses may vary materially from their historical rates.
15
<PAGE> 18
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
Rental revenues. Rental revenues, including straight-line rents, tenant
reimbursements and other property related income, increased by $33.1 million, or
44.3%, for the three months ended March 31, 1999, to $107.7 million, as compared
with the same period in 1998. Approximately $4.6 million, or 13.9% of this
increase, was attributable to same store properties, with the remaining $28.5
million attributable to properties acquired between January 1, 1998 and March
31, 1999. The growth in rental revenues in same store properties resulted
primarily from the incremental effect of cash rental rate increases and changes
in occupancy and reimbursement of expenses, offset by a decrease in
straight-line rents. During the trailing 12 months ended March 31, 1999, the
same store properties increase in base rents (cash basis) was 10.7% on 6.2
million square feet leased.
Other revenues. Other revenues, including equity in earnings of
unconsolidated joint venture, investment management income, and interest income,
totaled $1.9 and $1.2 million for the three months ended March 31, 1999 and
1998, respectively. The $0.7 million, or 58.3%, increase in other revenues was
primarily attributable to the earnings from our equity investment in our
unconsolidated joint venture which was purchased in June 1998.
Property operating expenses and real estate taxes. Property operating
expenses, including asset management costs and real estate taxes, increased by
$9.2 million, or 45.3%, for the three months ended March 31, 1999, to $29.5
million as compared with the same period in 1998. Same store properties
operating expenses increased by approximately $0.8 million for the three months
ended March 31, 1999, while operating expenses attributable to properties
acquired between January 1, 1998 through March 31, 1999 added $8.5 million. The
change in same store properties operating expenses primarily relates to
increases in same store properties real estate taxes of approximately $0.8
million for the three months ended March 31, 1999.
General and administrative expenses. General and administrative expenses
were $4.1 and $2.7 million for the three months ended March 31, 1999 and 1998.
The $1.4 million, or 49.8%, increase in general and administrative expenses is
primarily attributable to additional staffing that resulted from the growth in
our portfolio. The remainder of the increase is due to the change in our
accounting policy for internal acquisition costs. During the first quarter of
1998, we capitalized $0.3 million of internal acquisition costs. Effective April
1998, we changed our policy to expense all internal costs.
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 cash flow from operations, borrowings under our unsecured credit
facility, other forms of secured or unsecured financing, proceeds from equity or
debt offerings by us or AMB (including issuances of limited partnership units by
us or a subsidiary or shares of stock by AMB) and net proceeds from divestitures
of properties. 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 our liquidity requirements for the foreseeable future.
CAPITAL RESOURCES
Property divestitures. On March 9, 1999, we signed a series of definitive
agreements with BPP Retail, a co-investment entity between Burnham Pacific and
CalPERS, pursuant to which, if fully consummated, BPP Retail will acquire up to
28 of our retail shopping centers, totaling 5.1 million square feet, for an
aggregate price of $663.4 million. If fully consummated, BPP Retail will acquire
the centers in separate transactions, which we originally expected to close on
or about April 30, 1999, July 31, 1999 and December 1, 1999. Under the
agreements, we have the right to extend the closing dates for a period of up to
either 20 or 50 days. We have exercised this right with respect to the first
closing, which we now expect to occur on or about June 15, 1999. In addition, we
have entered into a definitive agreement, subject to a financing condition, with
Burnham Pacific, pursuant to which, if fully consummated, Burnham Pacific will
acquire up to six additional retail centers, totaling 1.5 million square feet,
for $284.4 million. Assuming satisfaction or waiver of this condition,
16
<PAGE> 19
we currently expect this transaction to close by December 31, 1999. As of March
31, 1999, the net carrying value of the properties held for divestiture was
$823.5 million. Certain of the properties included in these transactions are
subject to indebtedness totaling $178.3 million as of March 31, 1999. We intend
to use the proceeds of $947.8 million from these transactions to pay expenses
incurred in connection with the divestitures, to repay the secured debt related
to the properties divested, to partially pay down the unsecured credit facility,
for potential acquisitions and for general corporate purposes.
On February 26, 1999, we divested one retail center located in Miami,
Florida, aggregating 83.1 million square feet. The center was sold at a gross
sales price of $9.8 million and the related secured debt of $5.7 million was
paid down at the time of the transaction. We used the net proceeds of $3.5
million to partially fund a property acquisition during the first quarter of
1999.
Credit facility. 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 March 31, 1999, the outstanding balance on the credit facility
was $316.0 million and it bore interest at 5.84%. 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 March 31, 1999, the remaining amount available under the credit
facility was approximately $184.0 million.
Debt and equity financing. In June 1998, the operating partnership issued
$400.0 million aggregate principal amount of senior, unsecured debt securities
in an underwritten public offering. The operating partnership used the net
proceeds 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 7.175%, 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.
In July 1998, AMB sold 4,000,000 shares of 8.5% Series A Cumulative
Redeemable Preferred Stock at a price of $25.00 per share in an underwritten
public offering. AMB contributed the net proceeds of $96.1 million 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 incurred in
connection with property acquisitions and for general corporate purposes.
In November 1998, the operating partnership issued and sold 1,300,000
8.625% Series B Cumulative Redeemable Preferred Units at a price of $50.00 per
unit in a private placement. Distributions are cumulative from the date of
original issuance and are payable quarterly in arrears at a rate per unit equal
to $4.3125 per annum. The Series B Preferred Units are redeemable by the
operating partnership on or after November 12, 2003, subject to certain
conditions, for cash at a redemption price equal to $50.00 per unit, plus
accumulated and unpaid distributions thereon, if any, to the redemption date.
The Series B Preferred Units are exchangeable, at specified times and subject to
certain conditions, on a one-for-one basis, for shares of AMB's Series B
Preferred Stock. The operating partnership used the net proceeds of
approximately $63.3 million to repay borrowings under the credit facility, for
property acquisitions and for general purposes.
In November 1998, AMB Property II, L.P., one of our subsidiaries, issued
and sold 2,200,000 8.75% Series C Cumulative Redeemable Preferred Limited
Partnership Units at a price of $50.00 per unit in a private placement.
Distributions are cumulative from the date of issuance and payable quarterly in
arrears at a rate per unit equal to $4.375 per annum. The Series C Preferred
Units are redeemable by AMB Property II, L.P. on or after November 24, 2003,
subject to certain conditions, for cash at a redemption price equal to
17
<PAGE> 20
$50.00 per unit, plus accumulated and unpaid distributions thereon, if any, to
the redemption date. The Series C Preferred Units are exchangeable, at specified
times and subject to certain conditions, on a one-for-one basis, for shares of
AMB's Series C Preferred Stock. AMB Property II, L.P. used the net proceeds of
approximately $107.2 million to make a loan to the operating partnership, which
used the funds to repay borrowings under the credit facility. The loan bears
interest at a rate of 7.0% per annum and is payable upon demand.
On May 5, 1999, AMB Property II, L.P. issued and sold 1,595,337 7.75%
Series D Cumulative Redeemable Preferred Limited Partnership Units at a price of
$50.00 per unit in a private placement. Distributions are cumulative from the
date of original issuance and are payable quarterly in arrears at a rate per
unit equal to $3.875 per annum. The Series D Preferred Units are redeemable by
AMB Property II, L.P. on or after May 5, 2004, subject to certain conditions,
for cash at a redemption price equal to $50.00 per unit, plus accumulated and
unpaid distributions thereon, if any, to the redemption date. The Series D
Preferred Units are exchangeable, at specified times and subject to certain
conditions, on a one-for-one basis, for shares of AMB's Series D Preferred
Stock. AMB Property II, L.P. used the net proceeds of approximately $77.8
million to make a loan to the operating partnership in the amount of
approximately $20.1 million and to purchase an unconsolidated joint venture
interest for a price of approximately $57.7 million from the operating
partnership. The loan bears interest at a rate of 7.0% per annum and is payable
upon demand. The operating partnership used the funds to repay borrowings under
the credit facility and for general corporate purposes.
Market capitalization. In connection with our formation transactions and
property acquisitions consummated after our formation transactions, we have
assumed various mortgages and other secured debt. As of March 31, 1999, the
aggregate principal amount of this secured debt was $754.7 million, excluding
unamortized debt premiums of $15.7 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 April 1999 to April 2014. We believe the
carrying value of the debt approximates its fair value on March 31, 1999.
As of March 31, 1999, our total outstanding debt was approximately $1.5
billion, including unamortized debt premiums of approximately $15.7 million. See
Note 5 to our Consolidated Financial Statements. The total amount of debt that
we must repay during the remainder of 1999 is approximately $13.2 million,
including scheduled principal amortization of approximately $9.6 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.
18
<PAGE> 21
The tables below summarize our debt maturities and capitalization as of
March 31, 1999 (in thousands, except share amounts and percentages).
DEBT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNSECURED
INDUSTRIAL RETAIL SENIOR UNSECURED
SECURED SECURED DEBT CREDIT
DEBT DEBT SECURITIES FACILITY TOTAL
---------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
1999 (nine months)................. $ 9,947 $ 3,237 $ -- $ -- $ 13,184
2000............................... 25,576 7,951 -- 316,000 349,527
2001............................... 12,563 30,921 -- -- 43,484
2002............................... 27,512 38,863 -- -- 66,375
2003............................... 57,001 76,294 -- -- 133,295
2004............................... 91,283 722 -- -- 92,005
2005............................... 68,810 779 100,000 -- 169,589
2006............................... 116,396 11,581 -- -- 127,977
2007............................... 38,053 458 -- -- 38,511
2008............................... 120,277 7,465 175,000 -- 302,742
Thereafter......................... 9,057 -- 125,000 -- 134,057
-------- -------- -------- -------- ----------
Subtotal......................... 576,475 178,271 400,000 316,000 1,470,746
Unamortized premiums............. 10,620 5,063 -- -- 15,683
-------- -------- -------- -------- ----------
Total consolidated
debt................... 587,095 183,334 400,000 316,000 1,486,429
Our share of unconsolidated JV
debt............................. 19,831 -- -- -- 19,831
-------- -------- -------- -------- ----------
Total debt............... $606,926 $183,334 $400,000 $316,000 $1,506,260
======== ======== ======== ======== ==========
JV partners' share of consolidated
JV debt.......................... (39,818)
----------
Our share of total
debt................... $1,466,442
==========
</TABLE>
MARKET EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY OUTSTANDING MARKET PRICE MARKET VALUE
-------- ----------- ------------ ------------
<S> <C> <C> <C>
Common stock...................................... 86,026,271 $20.75 $1,785,045
Limited partnership units......................... 4,448,873 20.75 92,314
---------- ----------
Total................................... 90,475,144 $1,877,359
========== ==========
</TABLE>
PREFERRED STOCK AND UNITS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIQUIDATION REDEMPTION
SECURITY DIVIDEND RATE PREFERENCE PROVISIONS
-------- ------------- ----------- -------------
<S> <C> <C> <C>
Series A preferred stock...................... 8.50% $100,000 July 2003
Series B preferred units...................... 8.63% 65,000 November 2003
Series C preferred units...................... 8.75% 110,000 November 2003
---- --------
Weighted Average/Total.............. 8.66% $275,000
==== ========
</TABLE>
CAPITALIZATION RATIOS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Total debt-to-total market capitalization................... 41.2%
Our share of total debt-to-total market capitalization...... 40.1%
Total debt plus preferred-to-total market capitalization.... 48.7%
Our share of total debt plus preferred-to-total market
capitalization............................................ 48.1%
</TABLE>
19
<PAGE> 22
LIQUIDITY
As of March 31, 1999, we had approximately $29.2 million in cash and cash
equivalents and $184.0 million of additional available borrowings under the
credit facility. We intend to use cash from operations, borrowings under the
credit facility, other forms of secured and unsecured financing, proceeds from
any future debt or equity offerings by us or AMB (including issuances of limited
partnership units by us or a subsidiary or shares of stock by AMB), and proceeds
from divestitures of properties to fund acquisitions, development activities and
capital expenditures and to provide for general working capital requirements.
On March 5, 1999, the operating partnership declared a quarterly cash
distribution of $0.35 per operating partnership unit and AMB declared a
quarterly cash distribution of $0.35 per share of common stock, for the quarter
ending March 31, 1999, payable on April 15, 1999, to unitholders and
stockholders of record as of March 31, 1999. On March 5, 1999, the operating
partnership declared a cash distribution of $0.53125 per unit on our Series A
Preferred Units and AMB declared a cash dividend of $0.53125 per share on its
Series A Preferred Stock , for the three month period ending April 14, 1999,
payable on April 15, 1999, to unitholders and stockholders of record as of March
31, 1999. On March 5, 1999, the Operating Partnership and a subsidiary declared
a cash distribution of $1.0781 and $1.0938 per unit on the Series B Preferred
Units and Series C Preferred Units, for the three month period ending April 14,
1999, payable on April 15, 1999, to unitholders of record as of March 31, 1999.
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, as of March 31, 1999, our development pipeline included 18
projects representing a total estimated investment of $264.2 million upon
completion. Of this total, approximately $135.1 million had been funded as of
March 31, 1999 and approximately $129.1 million is estimated to be required to
complete projects currently under construction or for which we have committed to
complete. We presently expect to fund these expenditures with cash from
operations, borrowings under the credit facility, debt or equity issuances and
net proceeds from property divestitures. Other than these capital items, we have
no material capital commitments.
During the period from January 1, 1999 to March 31, 1999, we invested:
- $109.1 million in 36 industrial buildings, aggregating 1.7 million
rentable square feet, and
- $14.6 million in two new development projects aggregating approximately
0.2 million square feet.
We funded these acquisitions and initiated development projects through
borrowings under the credit facility, cash, debt assumption, and the issuance of
our limited partnership units.
YEAR 2000 COMPLIANCE
Our state of readiness. We utilize a number of computer software programs
and operating systems across our entire organization, including applications
used in financial business systems and various administrative functions. To the
extent that our software applications contain source code that is unable to
appropriately interpret the upcoming calendar year "2000" and beyond, some level
of modification or replacement of such applications will be necessary.
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 1999. We are also 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 and to determine the
state of readiness of our tenants regarding their year 2000 compliance. In
addition, we are currently surveying our other third party
20
<PAGE> 23
vendors to determine if their systems are year 2000 compliant and to determine
the state of readiness regarding their year 2000 compliance.
Costs of addressing our year 2000 issues. Given the information known at
this time about our systems, coupled with our ongoing, normal course-of-business
efforts to upgrade or replace critical systems, as necessary, we do not expect
year 2000 compliance costs to have any material adverse impact on our liquidity
or ongoing results of operations. The costs of such assessment will be included
in our general and administrative expenses. 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.
Risks of our year 2000 issues. In light of our assessment and remediation
efforts to date, we believe that any residual year 2000 risk is limited to
non-critical business applications and support hardware. No assurance can be
given, however, that all of our systems will be year 2000 compliant or that
compliance will not have a material adverse effect on our future liquidity,
results of operations or ability to service debt.
Our contingency plans. We are currently developing our contingency plan for
all operations to address the most reasonably likely worst case scenarios
regarding year 2000 compliance. We expect such contingency plans to be completed
before the end of the year.
21
<PAGE> 24
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 three months
ended March 31, 1998 and 1999 (dollars in thousands).
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
Income from operations before minority interests............ $ 29,188 $ 34,575
Real estate related depreciation and amortization:
Total depreciation and amortization....................... 11,786 18,424
Furniture, fixtures, and equipment depreciation........... (104) (114)
FFO attributable to minority interests(1)(2):
Institutional Alliance Partners........................... -- (1,474)
Other joint venture partners.............................. (575) (551)
Series C preferred unit distributions..................... -- (2,406)
Adjustments to derive FFO in unconsolidated joint
venture(3):
Our share of net income................................... -- (1,151)
Our share of FFO.......................................... -- 1,645
Series A preferred unit distributions....................... -- (2,125)
Series B preferred unit distributions....................... -- (1,402)
---------- ----------
FFO(1)...................................................... $ 40,295 $ 45,421
---------- ----------
FFO per common unit:
Basic..................................................... $ 0.46 $ 0.50
========== ==========
Diluted................................................... $ 0.45 $ 0.50
========== ==========
Weighted average common units outstanding:
Basic..................................................... 88,428,969 90,449,529
========== ==========
Diluted(4)................................................ 88,839,192 90,469,105
========== ==========
</TABLE>
- ---------------
(1) Funds from Operations ("FFO") is defined as income from operations before
minority interest, gains or losses from sale of real estate and
extraordinary losses plus real estate depreciation and adjustment to derive
our pro rata share of the FFO of unconsolidated joint ventures, less
minority interests' pro rata share of the FFO of consolidated joint ventures
and perpetual preferred stock dividends. In accordance with NAREIT White
Paper on FFO, we include the effects of straight-line rents in FFO. Further,
we do not adjust FFO to eliminate the effects of non-recurring changes.
(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.
(4) Includes the dilutive effect of stock options.
22
<PAGE> 25
OPERATING AND LEASING STATISTICS SUMMARY
The following summarizes key operating and leasing statistics for the all
of our industrial properties and retail properties as of and for the period
ended March 31, 1999.
<TABLE>
<CAPTION>
INDUSTRIAL RETAIL TOTAL
----------- ---------- -----------
<S> <C> <C> <C>
Square feet owned(1)......................... 58,890,144 7,073,795 65,963,939
Occupancy percentage......................... 95.4% 95.0% 95.4%
Lease expirations as percentage of total
square feet (next 12 months)............... 14.6% 7.0% 13.8%
Weighted average lease term.................. 7 years 16 years 8 years
Tenant retention:
Quarter.................................... 73.5% 75.9% 73.6%
Trailing average (1/01/96 to 3/31/99)...... 74.0% 85.4% 74.6%
Rent increases on renewals and rollovers:
Quarter.................................... 12.6% 8.3% 12.1%
Trailing 12 months......................... 11.8% 9.1% 11.5%
Same store cash basis NOI growth(2):
Quarter.................................... 6.7% 2.8% 5.4%
Second generation tenant improvements and
leasing commissions per sq. ft.:
Quarter:
Renewals................................ $ 1.58 $ 1.46 $ 1.57
Re-tenanted............................. 1.80 5.59 2.15
----------- ---------- -----------
Weighted average................... $ 1.58 $ 1.62 $ 1.59
=========== ========== ===========
Trailing average (1/01/96 to 3/31/99)...... $ 1.27 $ 4.16 $ 1.43
=========== ========== ===========
</TABLE>
- ---------------
(1) In addition to owned square feet as of March 31, 1999, we managed, through
our subsidiary, AMB Investment Management, 4.0 million, 0.4 million, and 0.1
million additional square feet of industrial, retail, and other properties,
respectively. We also have an investment in 4.0 million square feet of
industrial properties through our investment in an unconsolidated joint
venture.
(2) Consists of industrial buildings and retail centers aggregating 36.3 million
and 5.8 million square feet, respectively, that have been owned by us prior
to January 1, 1998, and excludes development properties prior to
stabilization.
23
<PAGE> 26
The following summarizes key same store properties' operating statistics
for our industrial properties and retail properties as of and for the period
ending March 31, 1999.
<TABLE>
<CAPTION>
INDUSTRIAL RETAIL TOTAL
----------- ---------- -----------
<S> <C> <C> <C>
Square feet in same store pool(1)............ 36,282,521 5,832,434 42,114,955
Occupancy percentage......................... 96.3% 96.8% 96.4%
Tenant retention:
Quarter.................................... 71.0% 78.6% 71.3%
Trailing 12 months......................... 73.1% 81.2% 73.5%
Rent increases on renewals and rollovers:
Quarter.................................... 14.5% 8.4% 13.5%
Trailing 12 months......................... 11.0% 9.2% 10.7%
Cash basis NOI growth % increase:
Quarter:
Revenues................................ 6.1% 3.3% 5.2%
Expenses................................ 4.5% 4.6% 4.6%
NOI..................................... 6.7% 2.8% 5.4%
</TABLE>
- ---------------
(1) Same store properties include all properties that were owned during both the
current and prior year reporting periods and excludes development properties
prior to being stabilized for both the current and prior reporting period.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Our exposure to market risk includes the rising interest rates in
connection with our unsecured credit facility and other variable rate
borrowings, and our ability to incur more debt without unitholder or noteholder
approval, thereby increasing our debt service obligations, which could adversely
affect our cash flows. See "Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources -- Capital Resources -- Market Capitalization."
PART II
ITEM 1. LEGAL PROCEEDINGS
As of March 31, 1999, 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
On February 9, 1999, the operating partnership issued an aggregate of 1,034
limited partnership units with an aggregate value of approximately $24,800 to
two corporations and twelve individuals in partial consideration for the
acquisition of properties. In addition, on April 30, 1999, the operating
partnership issued an aggregate of 390,633 limited partnership units with an
aggregate value of approximately $9.4 million to two corporations and twelve
individuals in partial consideration for the acquisition of properties. Holders
of the limited partnership units may redeem part or all of their limited
partnership units for cash, or at the election of AMB, our general partner,
exchange their limited partnership units for shares of AMB's common stock on a
one-for-one basis.
The issuance of limited partnership 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
pursuant to Section 4(2) of the Securities Act and Rule 506 of Regulation D.
24
<PAGE> 27
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
On May 5, 1999, AMB Property II, L.P. issued and sold 1,595,337 7.75%
Series D Cumulative Redeemable Preferred Limited Partnership Units at a price of
$50.00 per unit in a private placement. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
Series D Preferred Units
General. Each Series D Preferred Unit will be entitled to receive
cumulative preferential distributions from May 5, 1999 payable on or before the
25th of March, June, September and December of each year, commencing June 25,
1999, at a rate of 7.75% per annum in preference to any payment made on any
other class or series of partnership interest of AMB Property II, L.P., other
than any class or series of partnership interest expressly designated as ranking
on parity with or senior to the Series D Preferred Units.
Ranking. The Series D Preferred Units will rank on parity with all classes
or series of preferred partnership units designated as ranking on a parity with
the Series D Preferred Units with respect to distributions and rights upon
liquidation, dissolution and winding-up, senior to all classes or series of
preferred partnership units designated as ranking junior to the Series D
Preferred Units and junior to all other classes or series of preferred
partnership units designated as ranking senior to the Series D Preferred Units.
Limited Consent Rights. For so long as any Series D Preferred Units remain
outstanding, AMB Property II, L.P. shall not, without the affirmative vote of
the holders of at least two-thirds of the Series D Preferred Units:
- authorize, create or increase the authorized or issued amount of any
class or series of partnership interests ranking prior to the Series D
Preferred Units with respect to payment of distributions or rights upon
liquidation, dissolution or winding-up or reclassify any partnership
interests of AMB Property II, L.P. into any such partnership interest, or
create, authorize or issue any obligations or security convertible into
or evidencing the right to purchase any such partnership interests,
- authorize or create, or increase the authorized or issued amount of any
preferred units ranking on a parity with the Series D Preferred Units or
reclassify any partnership interest of AMB Property II, L.P. into any
such partnership interest or create, authorize or issue any obligations
or security convertible into or evidencing the right to purchase any such
partnership interests but only to the extent such Parity Preferred Units
are issued to an affiliate of AMB Property II, L.P., other than its
general partner or the operating partnership to the extent the issuance
of such interests was to allow its general partner or the operating
partnership to issue corresponding preferred stock or preferred interests
to persons who are not affiliates of AMB Property II, L.P., or
- either (1) consolidate, merge into or with, or convey, transfer or lease
its assets substantially as an entirety to, any corporation or other
entity or (2) amend, alter or repeal the provisions of AMB Property II,
L.P.'s partnership agreement, whether by merger, consolidation or
otherwise, in each case in a manner that would materially and adversely
affect the powers, special rights, preferences, privileges or voting
power of the Series D Preferred Units or the holders of Series D
Preferred Units.
With respect to the occurrence of any of the events set forth in the third
bullet point above, so long as AMB Property II, L.P. is either the surviving
entity and the Series D Preferred Units remain outstanding with the terms
materially unchanged or the resulting, surviving or transferee entity is a
partnership, limited liability company or like entity organized under the laws
of any state and substitutes for the Series D Preferred Units
25
<PAGE> 28
other partnership interests having substantially the same terms and rights as
the Series D Preferred Units, the occurrence of any such event will not be
considered to materially and adversely affect rights, preferences, privileges or
voting powers of holders of Series D Preferred Units. Any increase in the amount
of partnership interests or the creation or issuance of any other class or
series of partnership interests, in each case ranking on a parity with or junior
to the Series D Preferred Units will not be considered to materially and
adversely affect such rights, preferences, privileges or voting powers.
Limited Management Rights. If distributions on any Series D Preferred Units
remain unpaid for six or more quarterly periods (whether or not consecutive),
subject to the rights of any holders of future preferred units ranking on a
parity with the Series D Preferred Units, the holders of Series D Preferred
Units may assume certain rights to manage AMB Property II, L.P. for the sole
purpose of enforcing AMB Property II, L.P.'s rights and remedies against
obligees of AMB Property II, L.P. or others from whom AMB Property II, L.P. may
be entitled to receive cash or other assets, until all distributions accumulated
on Series D Preferred Units for all past quarterly period and distributions for
then-current quarterly period have been fully paid or declared and a sum
sufficient for the payment of such dividends irrevocably set aside in trust for
payment in full.
Redemption and Exchange. Beginning May 5, 2004, the Series D Preferred
Units may be redeemed by AMB Property II, L.P. out of proceeds from issuances of
AMB's capital stock at a redemption price equal to $50.00 per unit, plus accrued
and unpaid distributions to the date of redemption. Beginning May 5, 2009, the
Series D Preferred Units may be exchanged, in whole but not in part, into shares
of AMB's 7.75% Series D Cumulative Redeemable Preferred Stock at the option of
51% of the holders. In addition, the Series D Preferred Units may be exchanged,
in whole but not in part, into shares of Series D Preferred Stock at any time at
the option of 51% of the holders if:
- distributions on the Series D Preferred Units have not been made for six
prior quarterly distribution periods, whether or not consecutive or
- AMB Property Holding Corporation, the general partner of AMB Property II,
L.P., or one of its subsidiaries, takes the position, and a holder or
holders of Series D Preferred Units receive an opinion of independent
counsel that AMB Property II, L.P. is, or upon the happening of a certain
event likely will be, a "publicly traded partnership" within the meaning
of the Internal Revenue Code.
In addition, the Series D Preferred Units may be exchanged, in whole but
not in part, on or after May 5, 2002 and prior to May 5, 2009 if the Series D
Preferred Units would not be considered "stock and securities" for federal
income tax purposes. AMB may, in lieu of exchanging the Series D Preferred Units
for shares of Series D Preferred Stock, elect to redeem all or a portion of the
Series D Preferred Units for cash in an amount equal to $50 per unit plus
accrued and unpaid distributions. The right of the holders of Series D Preferred
Units to exchange the Series D Preferred Units for shares of Series D Preferred
Stock shall in each case be subject to the ownership limitations set forth in
AMB's charter in order for AMB to maintain its qualification as a REIT for
federal income tax purposes.
Series D Preferred Stock
General. Each share of Series D Preferred Stock into which the Series D
Preferred Units may be exchanged will be entitled to receive cumulative
preferential cash dividends from the date of issue (including any accrued but
unpaid distributions in respect of Series D Preferred Units at the time that
such units are exchanged for shares of Series D Preferred Stock) payable on or
before the 15th of January, April, July and October of each year, in cash, at
the rate of 7.75% per annum in preference to any payment made on any other
classes or series of capital stock or other equity securities of AMB, other than
any class or series of equity securities of AMB expressly designated as ranking
on a parity with or senior to the Series D Preferred Stock.
Ranking. The Series D Preferred Stock will rank on parity with AMB's 8.50%
Series A Cumulative Redeemable Preferred Stock, its 8.625% Series B Cumulative
Redeemable Preferred Stock and its 8.75% Series C Cumulative Redeemable
Preferred Stock, if and when issued, and all other classes or series of
preferred stock designated as ranking on a parity with the Series D Preferred
Stock with respect to
26
<PAGE> 29
distributions and rights upon liquidation, dissolution, or winding-up, senior to
all classes or series of preferred stock designated as ranking junior to the
Series D Preferred Stock and junior to all other classes or series of preferred
partnership units designated as ranking senior to Series D Preferred Stock.
Redemption. The Series D Preferred Stock may be redeemed, at AMB's option,
on and after May 5, 2004, in whole or in part from time to time, at a redemption
price payable in cash equal to $50.00 per share, plus any accrued but unpaid
dividends to the date of redemption. AMB may redeem the Series D Preferred Stock
prior to May 5, 2004 to the extent necessary to maintain its qualification as a
REIT. The redemption price of the Series D Preferred Stock (other than the
portion of the redemption price consisting of accumulated but unpaid dividends)
will be payable solely out of proceeds from issuances of AMB's capital stock.
Limited Voting Rights. If dividends on any of the shares of Series D
Preferred Stock remain unpaid for six or more quarterly periods (whether or not
consecutive), the holders of such shares of Series D Preferred Stock (voting as
a single class with all other shares of preferred stock ranking on a parity with
the Series D Preferred Stock upon which like voting rights have been conferred
and are exercisable) will be entitled to vote for the election of two additional
directors of AMB who will be elected by a plurality of the votes cast in such
election for a one-year term and until their successors are duly elected and
shall qualify (or until such director's right to hold such office terminates,
whichever occurs earlier, subject to such director's earlier death,
disqualification, resignation or removal), at a special meeting called by the
holders of at least 20% of the outstanding shares of Series D Preferred Stock or
the holders of shares of any other class or series of preferred stock ranking on
a parity with the Series D Preferred Stock with respect to which dividends are
also accrued and unpaid (unless such request is received less than 90 days
before the date fixed for the next annual or special meeting of stockholders)
or, if the request for a special meeting is received by AMB less than 90 days
before the date fixed for the next annual or special meeting of stockholders, at
the next annual or special meeting of stockholders, and at each subsequent
annual meeting until all dividends accumulated on the shares of Series D
Preferred Stock for all past dividend periods and the dividend for the then
current dividend period have been fully paid or declared and a sum sufficient
for the payment of such dividends irrevocably set aside in trust for payment in
full. Upon the payment in full of all such dividends, the holders of Series D
Preferred Stock will be divested of their voting rights and the term of any
member of the board of directors elected by the holders of Series D Preferred
Stock and holders of any other shares of preferred stock ranking on a parity
with the Series D Preferred Stock will terminate.
In addition, for so long as any shares of Series D Preferred Stock are
outstanding, without the consent of two-thirds of the holders of the Series D
Preferred Stock then outstanding, AMB shall not:
- authorize or create or increase the authorized or issued amount of any
shares ranking senior to the Series D Preferred Stock or reclassify any
authorized shares of AMB into any such shares,
- designate or create, or increase the authorized or issued amount of, or
reclassify any authorized shares of AMB into any preferred stock ranking
on a parity with the Series D Preferred Stock, or create, authorize or
issue any obligations or security convertible into or evidencing the
right to purchase any such shares, but only to the extent such preferred
stock ranking on a parity with the Series D Preferred Stock is issued to
an affiliate of AMB, or
- either (1) consolidate, merge into or with, or convey, transfer or lease
its assets substantially as an entirety, to any corporation or other
entity, or (2) amend, alter or repeal the provisions of AMB's Articles of
Incorporation, whether by merger, consolidation or otherwise, in each
case that would materially and adversely affect the powers, special
rights, preferences, privileges or voting power of the Series D Preferred
Stock or the holders of Series D Preferred Stock. The Series D Preferred
Stock will have no voting rights other than as discussed above and as
otherwise provided by applicable law.
With respect to the occurrence of any of the events set forth in the third
bullet point above, so long as AMB is either the surviving entity and shares of
Series D Preferred Stock remain outstanding with the terms materially unchanged
or the resulting, surviving or transferee entity is a corporation, business
trust or like entity organized under the laws of any state and substitutes for
the Series D Preferred Stock other preferred
27
<PAGE> 30
stock or preferred shares having substantially the same terms and rights as the
Series D Preferred Stock, the occurrence of any such event will not be
considered to materially and adversely affect rights, preferences, privileges or
voting powers of holders of Series D Preferred Stock. Any increase in the amount
of authorized preferred stock, the creation or issuance of any other class or
series of preferred stock or any increase in an amount of authorized shares of
each class or series, in each case ranking on a parity with or junior to the
Series D Preferred Stock will not be considered to materially and adversely
affect such rights, preferences, privileges or voting powers.
Liquidation Preference. Each share of Series D Preferred Stock is entitled
to a liquidation preference of $50.00 per share, plus any accrued but unpaid
dividends, in preference to any other class or series of capital stock of AMB,
other than any class or series of equity securities of AMB expressly designated
as ranking on a parity with or senior to the Series D Preferred Stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.1 Fourth Amended and Restated Agreement of Limited Partnership
of AMB Property II, L.P., dated as of May 5, 1999.
27.1 Financial Data Schedule -- AMB Property Corporation
</TABLE>
(b) Reports on Form 8-K:
- Current Report on Form 8-K was filed on January 7, 1999, in connection
with reporting the issuance of 2,200,000 8.75% Series C Cumulative
Redeemable Preferred Limited Partnership Units.
- Current Report on Form 8-K was filed on April 15, 1999, in connection
with reporting the acquisition by BPP Retail, LLC of 28 retail shopping
centers of the operating partnership, totaling 5.1 million square feet,
for an aggregate price of $663.4 million and filing financial statements
in connection therewith.
28
<PAGE> 31
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.
By: AMB PROPERTY CORPORATION,
its General Partner
Date: May 14, 1999 By: /s/ MICHAEL A. COKE
-------------------------------------
Michael A. Coke
Chief Financial Officer and
Senior Vice President
(Duly Authorized Officer and
Principal Financial and Accounting
Officer)
29
<PAGE> 32
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
10.1 Fourth Amdended and Restated Agreement of Limited
Partnership of AMB Property II, L.P. dated May 5, 1999.
27.1 Financial Data Schedule -- AMB Property Corporation
<PAGE> 1
EXHIBIT 10.1
- --------------------------------------------------------------------------------
FOURTH AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
AMB PROPERTY II, 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
ARTICLE 2. ORGANIZATIONAL MATTERS........................................................... 17
Section 2.1. Organization................................................................ 17
Section 2.2. Name........................................................................ 17
Section 2.3. Resident Agent; Principal Office............................................ 17
Section 2.4. Power of Attorney........................................................... 17
Section 2.5. Term........................................................................ 19
Section 2.6. Number of Partners.......................................................... 19
ARTICLE 3. PURPOSE.......................................................................... 19
Section 3.1. Purpose and Business........................................................ 19
Section 3.2. Powers...................................................................... 19
Section 3.3. Partnership Only for Purposes Specified..................................... 20
Section 3.4. Representations and Warranties by the Parties............................... 20
Section 3.5. Certain ERISA Matters....................................................... 22
ARTICLE 4. CAPITAL CONTRIBUTIONS............................................................ 22
Section 4.1. Capital Contributions of the Partners....................................... 22
Section 4.2. Loans....................................................................... 22
Section 4.3. Additional Funding and Capital Contributions................................ 23
Section 4.4. No Preemptive Rights........................................................ 23
Section 4.5. Other Contribution Provisions............................................... 24
ARTICLE 5. DISTRIBUTIONS.................................................................... 24
Section 5.1. Requirement and Characterization of Distributions........................... 24
Section 5.2. Distributions in Kind....................................................... 25
Section 5.3. Distributions Upon Liquidation.............................................. 25
Section 5.4. Distributions to Reflect Issuance of Additional Partnership Interests....... 25
ARTICLE 6. ALLOCATIONS...................................................................... 25
Section 6.1. Timing and Amount of Allocations of Net Income and Net Loss................. 25
Section 6.2. General Allocations......................................................... 25
Section 6.3. Additional Allocation Provisions............................................ 27
Section 6.4. Tax Allocations............................................................. 29
ARTICLE 7. MANAGEMENT AND OPERATIONS OF BUSINESS............................................ 30
Section 7.1. Management.................................................................. 30
Section 7.2. Certificate of Limited Partnership.......................................... 34
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 7.3. Restrictions on General Partner's Authority................................ 34
Section 7.4. Reimbursement of the General Partner....................................... 36
Section 7.5. Outside Activities of the General Partner.................................. 37
Section 7.6. Employee Benefit Plans..................................................... 37
Section 7.7. Indemnification............................................................ 37
Section 7.8. Liability of the General Partner........................................... 39
Section 7.9. Other Matters Concerning the General Partner............................... 40
Section 7.10. Title to Partnership Assets................................................ 41
Section 7.11. Reliance by Third Parties.................................................. 41
ARTICLE 8. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS....................................... 42
Section 8.1. Limitation of Liability.................................................... 42
Section 8.2. Management of Business..................................................... 42
Section 8.3. Outside Activities of Limited Partners..................................... 42
Section 8.4. Return of Capital.......................................................... 43
Section 8.5. Rights of Limited Partners Relating to the Partnership..................... 43
ARTICLE 9. BOOKS, RECORDS, ACCOUNTING AND REPORTS........................................... 44
Section 9.1. Records and Accounting..................................................... 44
Section 9.2. Fiscal Year................................................................ 44
Section 9.3. Reports.................................................................... 44
Section 9.4. Nondisclosure of Certain Information....................................... 44
ARTICLE 10. TAX MATTERS..................................................................... 45
Section 10.1. Preparation of Tax Returns................................................. 45
Section 10.2. Tax Elections.............................................................. 45
Section 10.3. Tax Matters Partner........................................................ 45
Section 10.4. Organizational Expenses.................................................... 46
Section 10.5. Withholding................................................................ 47
ARTICLE 11. TRANSFERS AND WITHDRAWALS....................................................... 47
Section 11.1. Transfer................................................................... 47
Section 11.2. Transfer of General Partner's and Common Limited Partner's Partnership
Interest................................................................................. 48
Section 11.3. Preferred Limited Partners' Rights to Transfer............................. 48
Section 11.4. Substituted Limited Partners............................................... 50
Section 11.5. Assignees.................................................................. 50
Section 11.6. General Provisions......................................................... 51
ARTICLE 12. ADMISSION OF PARTNERS........................................................... 53
Section 12.1. Admission of Successor General Partner..................................... 53
Section 12.2. Admission of Additional Limited Partners................................... 53
Section 12.3. Amendment of Agreement and Certificate of Limited Partnership.............. 54
ARTICLE 13. DISSOLUTION AND LIQUIDATION..................................................... 54
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
Section 13.1. Dissolution................................................................ 54
Section 13.2. Winding Up................................................................. 55
Section 13.3. Compliance with Timing Requirements of Regulations......................... 56
Section 13.4. Deemed Distribution and Recontribution..................................... 57
Section 13.5. Rights of Limited Partners................................................. 57
Section 13.6. Notice of Dissolution...................................................... 57
Section 13.7. Cancellation of Certificate of Limited Partnership......................... 57
Section 13.8. Reasonable Time for Winding-Up............................................. 58
Section 13.9. Waiver of Partition........................................................ 58
ARTICLE 14. AMENDMENT OF PARTNERSHIP AGREEMENT; CONSENTS..................................... 58
Section 14.1. Amendments................................................................. 58
Section 14.2. Action by the Partners..................................................... 58
ARTICLE 15. GENERAL PROVISIONS............................................................... 59
Section 15.1. Addresses and Notice....................................................... 59
Section 15.2. Titles and Captions........................................................ 59
Section 15.3. Pronouns and Plurals....................................................... 59
Section 15.4. Further Action............................................................. 60
Section 15.5. Binding Effect............................................................. 60
Section 15.6. Creditors.................................................................. 60
Section 15.7. Waiver..................................................................... 60
Section 15.8. Counterparts............................................................... 60
Section 15.9. Applicable Law............................................................. 60
Section 15.10. Invalidity of Provisions................................................... 60
Section 15.11. Entire Agreement........................................................... 60
Section 15.12. No Rights as Stockholders.................................................. 61
ARTICLE 16. SERIES C PREFERRED UNITS......................................................... 61
Section 16.1. Designation and Number..................................................... 61
Section 16.2. Ranking.................................................................... 61
Section 16.3. Distributions.............................................................. 61
Section 16.4. Liquidation Proceeds....................................................... 63
Section 16.5. Redemption................................................................. 63
Section 16.6. Voting Rights.............................................................. 65
Section 16.7. Transfer Restrictions...................................................... 66
Section 16.8. Exchange Rights............................................................ 66
Section 16.9. No Conversion Rights....................................................... 71
Section 16.10. No Sinking Fund............................................................ 71
ARTICLE 17. SERIES D PREFERRED UNITS......................................................... 71
Section 17.1. Designation and Number..................................................... 71
Section 17.2. Ranking.................................................................... 71
Section 17.3. Distributions.............................................................. 72
Section 17.4. Liquidation Proceeds....................................................... 74
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
Section 17.5. Series D Redemption........................................................ 74
Section 17.6. Voting and Certain Management Rights....................................... 76
Section 17.7. Transfer Restrictions...................................................... 78
Section 17.8. Exchange Rights............................................................ 78
Section 17.9. No Conversion Rights....................................................... 82
Section 17.10. No Sinking Fund............................................................ 82
</TABLE>
iv
<PAGE> 6
FOURTH AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
AMB PROPERTY II, L.P.
THIS FOURTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated
as of May 5, 1999, is entered into by and among AMB Property Holding
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 Third Amended and Restated Agreement of Limited
Partnership, dated November 24, 1998, as amended;
WHEREAS, on November 24, 1998, Belcrest Realty Corporation, a Delaware
corporation and Belair Real Estate Corporation, a Delaware corporation (each a
"Contributor" and, together the "Contributors") made an aggregate Capital
Contribution of $110,000,000, in cash, to the Partnership in exchange for which
Contributors received 2,200,000 Series C Preferred Units in the Partnership;
WHEREAS, pursuant to Section 4.3.B 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;
WHEREAS, on the date hereof, J.P. Morgan Mosaic Fund, LLC, a Delaware
limited liability company (the "Series D Contributor") has made a Capital
Contribution of $79,766,850, in cash, to the Partnership in exchange for which
the Series D Contributor is entitled to receive an aggregate of 1,595,337 the
Series D Preferred Units in the Partnership with rights, preferences, exchange
and other rights, voting powers and restrictions, limitations as to
distributions, qualifications and terms and conditions as set forth herein;
WHEREAS, pursuant to the authority granted to the General Partner under
the Partnership Agreement, the General Partner desires to amend and restate the
Partnership Agreement to reflect (i) the issuance of the Series D Preferred
Units, (ii) the admission of the Series D Contributor as an Additional Limited
Partner and a holder of a certain number of Series D Preferred Units and (iii)
certain other matters described herein;
WHEREAS, the Series D Contributor desires to become a party to the
Partnership Agreement as a Limited Partner and to be bound by all terms,
conditions and other provisions of the Partnership Agreement; and
<PAGE> 7
WHEREAS, by virtue of the execution of this Agreement by the Company in
its capacity as General Partner of the Partnership, the General Partner hereby
consents to the amendment and restatement of the Third Amended and Restated
Agreement of Limited Partnership.
NOW, THEREFORE, for good and adequate consideration, the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
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.D.
"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
2
<PAGE> 8
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 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 Fourth Amended and Restated Agreement of Limited
Partnership, as it may be amended, modified, supplemented or restated from time
to time.
"AMB" means AMB Property Corporation, a Maryland corporation, in its
capacity as the owner of 100% of the common stock of the General Partner and as
the sole general partner of the Operating Partnership.
"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, 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:
3
<PAGE> 9
(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,
(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 AMB.
"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.
4
<PAGE> 10
(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 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.
"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 filed with
the Maryland Department of Assessments and Taxation on November 24, 1997.
"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.
"Common Limited Partner" means any Person holding Common Units, and
named as a Common Limited Partner in Exhibit A attached hereto, as such Exhibit
may be
5
<PAGE> 11
amended from time to time, or any Substituted Limited Partner or Additional
Limited Partner, in such Person's capacity as a Common Limited Partner in 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, other than the Preferred 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 Limited Partners, unless otherwise expressly provided herein, in
their sole and absolute discretion.
"Consent of the Partners" means the Consent of Partners, other than the
Preferred Limited Partners, holding Percentage Interests that in the aggregate
are equal to or greater than a majority of the aggregate Percentage Interests of
all Partners, other than the Preferred 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 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).
"Contributor" shall have the meaning given to such term in the recitals
hereto.
"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.
"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, 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
6
<PAGE> 12
zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the General Partner.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
"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.
"Future Parity Preferred Capital" means, with respect to any series of
Parity Preferred Units issued to Future Parity Preferred Unitholders following
the date hereof, the product of (i) the number of Parity Preferred Units within
such series then held by Preferred Limited Partners (other than the General
Partner and the Operating Partnership) and (ii) the sum of amount contributed to
the Partnership per such Parity Preferred Unit by Preferred Limited Partners and
the Preferred Distribution Shortfall with respect to each such Parity Preferred
Unit, if any.
"Future Parity Preferred Unitholders" shall have the meaning set forth
in Section 17.6.D.
"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.
"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, 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 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:
(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
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<PAGE> 13
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;
(c) the liquidation of the Partnership within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g); and
(d) 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).
(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.
"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
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<PAGE> 14
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 (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 Stock" means shares of capital stock of AMB representing any
class or series of equity interest ranking, as to distributions and voluntary or
involuntary liquidation, dissolution or winding up of AMB, junior to the Series
C Preferred Shares and the Series D Preferred Shares.
"Junior Units" means Partnership Units representing any class or series
of Partnership Interest ranking, as to distributions and voluntary or
involuntary liquidation, dissolution or winding up of the Partnership, junior to
the Series C Preferred Units and the Series D Preferred Units.
"Limited Partner" means any Person 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.
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<PAGE> 15
"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 any Preferred Limited 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 any Preferred Limited Partner).
"Majority in Interest of Partners" means Partners (other than Preferred
Limited Partners) holding Percentage Interests that are greater than fifty
percent (50%) of the aggregate Percentage Interests of all Partners (other than
Preferred Limited 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 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 (ii) or (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;
(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;
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<PAGE> 16
(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.
Solely for purposes of allocating Net Income or Net Loss in any Fiscal
Year to the Holders of the Series C Preferred Units and the Series D Preferred
Units pursuant to Sections 6.2.B.1(c) and (e), and Section 6.2.B.2(b), items of
Net Income and Net Loss, as the case may be, shall not include Depreciation with
respect to properties that are "ceiling limited" in respect of Preferred Limited
Partners. For purposes of the preceding sentence, Partnership property shall be
considered ceiling limited in respect of a Preferred Limited Partner if
Depreciation attributable to such Partnership property which would otherwise be
allocable to such Partner, without regard to this paragraph, exceeded
depreciation determined for federal income tax purposes attributable to such
Partnership property which would otherwise be allocable to such Partner by more
than 5%.
"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).
"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.
"Operating Partnership" means AMB Property, L.P., a Delaware limited
partnership.
"Parity Preferred Capital" means the sum of (i) the aggregate Series D
Preferred Capital for all Holders of Series D Preferred Units (other than the
General Partner and the Operating Partnership) and (ii) the aggregate Future
Parity Preferred Capital for each series of Preferred Units issued following the
date hereof.
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"Parity Preferred Stock" means any class or series of equity interest of
AMB now or hereafter authorized, issued or outstanding expressly designated by
AMB to rank on a parity with the Series C Preferred Shares and the Series D
Preferred Shares with respect to distributions and rights upon voluntary or
involuntary liquidation, winding up or dissolution of AMB.
"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 C
Preferred Units and the Series D Preferred Units with respect to distributions
and rights upon voluntary or involuntary liquidation, winding up or dissolution
of the Partnership.
"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 Interests represented by the Common Units, the Series C Preferred
Units, and the Series D Preferred Units are the only Partnership Interests and
each such type of unit is a separate class 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).
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"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 AMB 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. The ownership of Partnership Units may
be evidenced by a certificate for units substantially in the form of Exhibit D-1
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.B.
"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.
"Preferred Distribution Shortfall" shall have the meaning given to such
term in Section 5.1 hereof.
"Preferred Limited Partner" means any Person holding a Preferred Unit,
and named as a Preferred Limited Partner in Exhibit A attached hereto, as such
Exhibit may be amended from time to time, or any Substitute Limited Partner or
Additional Limited Partner, in such Person's capacity as a Preferred Limited
Partner in the Partnership.
"Preferred Share" means a share of AMB 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 REIT Charter.
"Preferred Unit" means a Partnership Unit representing a Limited
Partnership Interest, with such preferential rights and priorities as shall be
designated by the General Partner pursuant to Section 4.3.C hereof including,
without limitation, the Series C Preferred Units and the Series D Preferred
Units.
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"Priority Return" means with respect to (i) the Series C Preferred
Units, the Series C Priority Return and (ii) the Series D Preferred Units, the
Series D Priority Return.
"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.
"PTP" shall have the meaning set forth in Section 16.7.
"Qualified REIT Subsidiary" means any Subsidiary of AMB 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.
"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 Charter" means the Articles of Incorporation of AMB as of November
24, 1997, as amended by the Articles Supplementary filed with the Maryland
Department of Assessments and Taxation on July 23, 1998 designating the 8 1/2%
Series A Cumulative Redeemable Preferred Stock, the Articles Supplementary filed
with the Maryland Department of Assessments and Taxation on November 12, 1998
designating the 8 1/8% Series B Cumulative Redeemable Preferred Stock, the
Articles Supplementary filed with the Maryland Department of Assessments and
Taxation on November 24, 1998 designating the 8 3/4% Series C Cumulative
Redeemable Preferred Stock, and the Articles Supplementary filed with the
Maryland Department of Assessments and Taxation on May 5, 1999 designating the
7.75% Series D Cumulative Redeemable Preferred Stock, and as further amended or
restated from time to time.
"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
AMB.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder.
"Series B Preferred Units" shall have the meaning set forth in Section
16.8.C.
"Series C Articles Supplementary" means the Articles Supplementary of
AMB in connection with its Series C Preferred Shares, as filed with the Maryland
Department of Revenue and Taxation on November 24, 1998.
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"Series C Limited Partner" means any Person holding Series C Preferred
Units and named as a Series C Limited Partner in Exhibit A attached hereto, as
such Exhibit may be amended from time to time, or any Substitute Limited
Partner, in such Person's capacity as a Limited Partner in the Partnership.
"Series C Preferred Capital" means a Capital Account balance equal to
the product of (i) the number of Series C Preferred Units then held by the
Series C Limited Partner (including the General Partner and the Operating
Partnership to the extent either of them holds Series C Preferred Units)
multiplied by (ii) the sum of $50 and any Preferred Distribution Shortfall per
Series C Preferred Unit.
"Series C Preferred Share" means a share of 8 3/4% Series C Cumulative
Redeemable Preferred Stock, par value $.01 per share, liquidation preference $50
per share, of AMB.
"Series C Preferred Units" means the Partnership's 8 3/4% Series C
Cumulative Redeemable Partnership Units.
"Series C Preferred Unit Distribution Payment Date" shall have the
meaning set forth in Section 16.3.A hereof.
"Series C Priority Return" shall mean an amount equal to 8 3/4% per
annum on an amount equal to $50 per Series C Preferred Unit then outstanding
(equivalent to $4.375 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
November 24, 1998 to the extent not distributed for any given distribution
period pursuant to Sections 5.1 and 16.3 hereof. Notwithstanding the foregoing,
distributions on the Series C 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 C Preferred Units will accumulate as of
the Series C Preferred Unit Distribution Payment Date on which they first become
payable.
"Series C Redemption" shall have the meaning set forth in Section
16.5.A.
"Series D Articles Supplementary" means the Articles Supplementary of
AMB in connection with its Series D Preferred Shares, as filed with the Maryland
Department of Revenue and Taxation on May 5, 1999.
"Series D Limited Partner" means any Person holding Series D Preferred
Units and named as a Series D Limited Partner in Exhibit A attached hereto, as
such Exhibit may be amended from time to time, or any Substitute Limited
Partner, in such Person's capacity as a Limited Partner in the Partnership.
"Series D Preferred Capital" means a Capital Account balance equal to
the product of (i) the number of Series D Preferred Units then held by the
Series D Limited Partner (including the General Partner and the Operating
Partnership to the extent either of them holds
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<PAGE> 21
Series C Preferred Units) multiplied by (ii) the sum of $50 and any
Preferred Distribution Shortfall per Series D Preferred Unit.
"Series D Preferred Share" means a share of 7.75% Series D Cumulative
Redeemable Preferred Stock, par value $.01 per share, liquidation preference $50
per share, of AMB.
"Series D Preferred Units" means the Partnership's 7.75% Series D
Cumulative Redeemable Membership Units.
"Series D Preferred Unit Distribution Payment Date" shall have the
meaning set forth in Section 17.3.A hereof.
"Series D Priority Return" shall mean an amount equal to 7.75% per annum
on an amount equal to $50 per Series D Preferred Unit then outstanding
(equivalent to $3.875 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
May 5, 1999 to the extent not distributed for any given distribution period
pursuant to Sections 5.1 and 17.3 hereof. Notwithstanding the foregoing,
distributions on the Series D 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 D Preferred Units will accumulate as of
the Series D Preferred Unit Distribution Payment Date on which they first become
payable.
"Series D Redemption" shall have the meaning set forth in Section
17.5.A.
"Specified Redemption Date" means the day of receipt by the General
Partner of a Notice of Redemption.
"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 or the Operating Partnership.
"Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.4.
"Tax Items" shall have the meaning set forth in Section 6.4.A.
"Tenant" means any tenant from which AMB derives rent either directly or
indirectly through partnerships, including the Partnership.
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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 II, 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.
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
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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 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.
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Section 2.5. Term
The term of the Partnership commenced on October 15, 1997 and shall
continue until October 15, 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 AMB, in
its capacity as the owner of 100% of the Common Stock of the General Partner and
as the sole General Partner of the Operating Partnership, at all times to be
classified as a REIT for Federal income tax purposes, unless AMB 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 AMB's right in its sole discretion to cease
qualifying as a REIT, the Partners acknowledge that AMB's current status as a
REIT inures to the benefit of all the Partners and not solely the General
Partner.
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 AMB, in its sole and absolute discretion, (i) could adversely affect
the ability of AMB, in its capacity as the owner of 100% of the Common Stock of
the General Partner and as the sole general partner of the Operating
Partnership, to continue to qualify as a REIT, (ii) absent
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the consent of the General Partner, which may be given or withheld in its sole
and absolute discretion, and except with respect to the distribution of
Available Cash to the Series C Limited Partners and the Series D Limited
Partners in accordance with Sections 16.3 and 17.3, respectively, could subject
AMB 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 AMB or its securities, unless any such action (or inaction)
under the foregoing clauses (i), (ii) or (iii) shall have been specifically
consented to by AMB 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.
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
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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 AMB, other than any
shares of capital stock of AMB that such Partner may acquire pursuant to
Sections 16.8 or 17.8, subject to the ownership limitations set forth in
the REIT Charter.
(iii) Upon request of the General Partner, it will disclose to
the General Partner the amount of shares of capital stock of AMB 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 AMB
violates the limitations set forth in the REIT Charter, then (x) some or
all of the Redemption rights or rights to exchange Partnership Interests
for Series C Preferred Shares or some or all of the Series D Redemption
rights or rights to exchange Partnership Interests for Series D
Preferred Shares of the Limited Partners may become non-exercisable, and
(y) some or all of such shares owned by the Partners and/or some or all
of the Partnership Interests owned by the Limited Partners may be
automatically transferred to a trust for the benefit of a charitable
beneficiary, as provided in the REIT Charter and Exhibit I of this
Agreement, respectively.
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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 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 and 10.5, no Partner shall be required
or permitted to make any additional Capital Contributions or loans to the
Partnership.
Section 4.2. Loans
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, including the General Partner, the
Operating Partnership and their affiliates, 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.
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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.
B. 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), and subject to
Sections 16.6 and 17.6 hereof, 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
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. In the event that
the Partnership issues additional Partnership Interests pursuant to this Section
4.3.B, the General Partner shall make such revisions to this Agreement
(including but not limited to the revisions described in Sections 5.4 and 6.2.C)
as it determines are necessary to reflect the issuance of such additional
Partnership Interests.
C. Percentage Interest Adjustments in the Case of Capital Contributions
for Partnership Units. Upon the acceptance of additional Capital Contributions
in exchange for Partnership Units, the Percentage Interest related thereto, and
the Percentage Interest of each other Partner, shall be equal to the amounts
agreed to by the Partnership and the contributors.
D. AMB agrees to comply with Section 4.3.D of the Third Amended and
Restated Agreement of Limited Partnership of the Operating Partnership, as
amended or waived from time to time.
Section 4.4. 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) making additional Capital Contributions or
loans to the Partnership or (ii) issuance or sale of any Partnership Units or
other Partnership Interests.
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Section 4.5. 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). Except as expressly provided for in Article 16 with
respect to the Series C Preferred Units, in Article 17 with respect to the
Series D Preferred Units, and in an agreement, if any, entered into in
connection with the creation of a new class of Partnership Interests 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 AMB's qualification as a REIT, to cause
the Partnership to distribute sufficient amounts to enable AMB, in its capacity
of general partner of the Operating Partnership, and the sole stockholder of the
General Partner, to pay stockholder dividends that will, so long as AMB has
determined to qualify as a REIT (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 AMB, except to the extent that a distribution
pursuant to clause (b) would prevent the Partnership from making a distribution
to the holders of Series C
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Preferred Units or Series D Preferred Units in accordance with Sections 16.3 and
17.3, respectively.
Section 5.2. Distributions in Kind
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; provided, however, that, in such case, the General Partners shall
distribute only cash to the Series C Limited Partners and the Series D Limited
Partners.
Section 5.3. Distributions Upon Liquidation
Proceeds from a Liquidating Event 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 to the General Partner or any Additional Limited Partner pursuant to
Section 4.3.B 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.
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
Holder of a share of Net Income or Net Loss 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 Holders holding such class of Partnership
Interests in accordance with their respective Percentage Interest of such class.
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B.1. Net Income. Except as provided in Section 6.3, 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 Holder of Partnership Interests in an
amount equal to the remainder, if any, of the cumulative Net
Losses allocated to each such Holder pursuant to Section
6.2.B.2(c) for all prior Partnership Years minus the cumulative
Net Income allocated to such Holder pursuant to this Section
6.2.B.1(b) for all prior Partnership Years;
(c) Third, 100% to the Holders of Preferred Units in an amount equal
to the remainder, if any, of the cumulative Net Losses allocated
to such Holders pursuant to Section 6.2.B.2(b) for all prior
Partnership Years minus the cumulative Net Income allocated to
such Holders pursuant to this Section 6.2.B.1(c) for all prior
Partnership Years;
(d) Fourth, 100% to the Holders of Common Units in an amount equal
to the remainder, if any, of the cumulative Net Losses allocated
to each such Holder pursuant to Section 6.2.B.2(a) for all prior
Partnership Years minus the cumulative Net Income allocated to
each Holder pursuant to this Section 6.2.B.1(d) for all prior
Partnership Years;
(e) Fifth, 100% to the Holders of Preferred Units, with respect to
each series of Preferred Units, in an amount equal to the excess
of (i) the cumulative Priority Return to the last day of the
current Partnership Year or to the date of redemption of such
Preferred Units, to the extent such Preferred Units are redeemed
during such year, over (ii) the cumulative Net Income allocated
to the Holders of such Preferred Units, pursuant to this Section
6.2.B.1(e) for all prior Partnership Years; and
(f) Sixth, 100% to the Holders of Common Units in accordance with
their respective Percentage Interests in the Common Units.
To the extent the allocations of Net Income set forth above in any
paragraph of this Section 6.2.B.1 are not sufficient to entirely satisfy the
allocation set forth in such paragraph, such allocation shall be made in
proration to the total amount that would have been allocated pursuant to such
paragraph without regard to such shortfall.
B.2. Net Losses. Except as provided in Section 6.3, Net Losses for any
Partnership Year shall be allocated in the following manner and order of
priority:
(a) First, 100% to the Holders of Common Units in accordance with
their respective Percentage Interests in the Common Units (to
the extent
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consistent with this Section 6.2.B.2(a)) until the Adjusted
Capital Account (ignoring for this purpose any amounts a Holder
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 Holder's Series
C Preferred Capital and Series D Preferred Capital) of each such
Holder is zero;
(b) Second, 100% to the Holders of Preferred Units, pro rata to each
such Holder's Adjusted Capital Account (ignoring for this
purpose any amounts a Holder 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)), until
the Adjusted Capital Account (as so modified) of each such
Holder is zero;
(c) Third, 100% to the Holders of Partnership Interests 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.
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 C Preferred Units and the Series D Preferred Units.
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 Holder
shall be specially allocated items of Partnership income and gain for
such year (and, if necessary, subsequent years) in an amount equal to
such Holder'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 Holder 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
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).
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(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 Holder 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 Holder'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 Holder 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 Holders in accordance with their respective Percentage
Interest in Common Units. Any Partner Nonrecourse Deductions for any
fiscal year shall be specially allocated to the Holder(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 Holder 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 Holder in an amount and
manner sufficient to eliminate, to the extent required by such
Regulations, the Adjusted Capital Account Deficit of the Holder 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 Holder 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 Holder has a
deficit Capital Account at the end of any fiscal year which is in excess
of the sum of (a) the amount (if any) such Holder is obligated to
restore to the Partnership and (b) the amount such Holder 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 Holder 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 Holder
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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 Holder, such allocation of Net Loss shall be
reallocated among the other Holders 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 Holder 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 Holders 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 Holders 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
Holders so that, to the extent possible, the net amount of such
allocations of other items and the Regulatory Allocations to each Holder
shall be equal to the net amount that would have been allocated to each
such Holder if the Regulatory Allocations had not occurred.
B. For purposes of determining a Holder's proportional share of the
"excess nonrecourse liabilities" of the Partnership within the meaning of
Regulations Section 1.752-3(a)(3), each Holder's interest in Partnership profits
shall be such Holder'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 allocated among the Holders 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 Holders
for income tax purposes pursuant to
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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; provided, however, that the General
Partner may be removed by the Majority in Interest of the Limited Partners, with
or without cause, such removal effective upon the delivery of written notice
thereof by the Limited Partners to 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
AMB, in its capacity as the sole general partner of the
Operating Partnership and as sole stockholder of the General
Partner (for so long as AMB has determined to qualify as a
REIT), to avoid the payment of any Federal income tax
(including, for this purpose, any excise tax pursuant to Section
4981 of the Code) and to make distributions to its stockholders
sufficient to permit AMB 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
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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;
(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
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Subsidiary and any other Person in which it has an equity
investment from time to time); provided that as long as AMB, in
its capacity as the sole stockholder of the General Partner and
as the sole general partner of the Operating Partnership, has
determined to continue to qualify as a REIT, the Partnership may
not engage in any such formation, acquisition or contribution
that would cause AMB 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 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;
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(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; and
(xx) the making of loans by the Partnership to its Partners, for any
purpose, provided that such loans be upon arm's-length terms.
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 H 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 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.
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.
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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;
(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
(v) perform any act that would subject the Partnership to regulation
as an "investment company" as such term is defined under the
Investment Company Act of 1940, as amended.
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:
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(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 Section 4.3.B, 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);
(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;
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(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 AMB, in
its capacity as the sole stockholder of the General Partner and
as the sole general partner of the Operating Partnership, 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 Common Limited Partner or Preferred Limited 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 or Section 13.2.A(4) or Articles 16
or 17 or the allocations specified in Article 6 (except as permitted pursuant to
Sections 4.3 and 7.3.D), (iv) alter the Series C Redemption or exchange rights
as set forth in Sections 16.5 and 16.8, respectively, or the Series D Redemption
or exchange rights as set forth in Sections 17.5 and 17.8, respectively, 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.
F. The General Partner shall not undertake to dispose of any Partnership
Property specified in the agreements listed in Exhibit G in a taxable sale or
taxable exchange prior to the dates specified in 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. 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
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Partnership. 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
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 and such activities as are incidental to the same and activities
incidental to the ownership of interests permitted by the next succeeding
sentence. 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 REIT
Charter. The General Partner's General Partner Interest in the 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.
Section 7.6. Employee Benefit Plans
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.
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
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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.
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
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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 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.
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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.
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.
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,
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undertaken in the good faith belief that such action or omission is necessary or
advisable in order to protect the ability of AMB, in its capacity as the sole
stockholder of the General Partner and as the sole general partner of the
Operating Partnership, for so long as AMB has determined to qualify as a REIT,
to (i) continue to qualify as a REIT or (ii) except with respect to the
distribution of Available Cash to the Series C Limited Partners and the Series D
Limited Partners in accordance with Sections 16.3 and 17.3, respectively, avoid
AMB 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 General Partner holds any interest in the Partnership
(as either a General Partner or Limited Partner), the General Partner 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
AMB 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.
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
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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. Notwithstanding the foregoing, the General
Partner may be removed by the Limited Partners, pursuant to and in accordance
with Section 7.1. Upon the removal of the General Partner, the Common Limited
Partners shall select a successor General Partner, who shall upon the acceptance
of such selection be admitted as a successor General Partner pursuant to Section
12.1 hereof. 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 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.
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Section 8.4. Return of Capital
Except pursuant to the Redemption and exchange rights set forth in
Sections 16.5 and 16.8 and the Series D Redemption and exchange rights set forth
in Sections 17.5 and 17.8, 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 Limited
Partners holding any series of Preferred Units, no Limited Partner or Assignee
shall have priority over any other Limited Partner or Assignee either as to the
return of Capital Contributions, or as 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.B, each Limited Partner shall have the
right, for a purpose reasonably related to such Limited Partner's interest as a
limited partner in the Partnership, upon written demand with a statement of the
purpose of such demand and at 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 AMB
pursuant to the Exchange Act, and each communication sent to the
stockholders of AMB;
(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
(v) to obtain true and full information regarding the amount of cash
and a description and statement of any other property or
services contributed by each Partner and which each Partner has
agreed to contribute in the future, and the date on which each
became a Partner.
B. Notwithstanding any other provision of this Section 8.5, the General
Partner may keep confidential from the Limited Partners, for such period of time
as the General Partner determines in its sole and absolute discretion to be
reasonable, any information that (i) the General Partner 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.
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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; provide,
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.
Section 9.3. Reports
A. (1) As soon as practicable, but in no event later than the earlier to
occur of (a) 105 days after the close of each Partnership Year and (b) five (5)
business days following the date on which Company files its annual report in
respect of a fiscal year on Form 10-K, or such other applicable form ("Form
10-K"), with the Securities and Exchange Commission (the "Commission"), a
complete copy of AMB's audited financial statements for such fiscal year
including a balance sheet, income statement and cash flow statement for such
fiscal year prepared and audited by an independent nationally recognized firm of
certified public accountants in accordance with GAAP and (2) not later than
fifteen (15) days after the date documents are delivered in clause (A)(1) above,
the consolidating balance sheet, cash flow statement and income statement of the
Operating Partnership for such fiscal year, prepared by AMB; and
B. (1) As soon as practicable, but in no event later than five (5)
business days following the date on which AMB files its quarterly report in
respect of a fiscal quarter on Form 10-Q, or such other applicable form ("Form
10-Q"), with the Commission, a complete copy of AMB's unaudited quarterly
financial statements for such fiscal quarter including a balance sheet, income
statement and cash flow statement for such fiscal quarter prepared in accordance
with GAAP and (2) not later than fifteen (15) days after the date documents are
delivered in clause (B)(1) above, the consolidating balance sheet, cash flow
statement and income statement of the Operating Partnership for such fiscal
quarter, prepared and certified by AMB.
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
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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.
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 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
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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;
(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.
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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 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 exchange for
Series C Preferred Shares pursuant to Section 16.8 or any exchange for Series D
Preferred Shares pursuant to Section 17.8. No part of the interest of a Limited
Partner shall be subject to the claims of any
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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 and Common Limited 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). Any attempted
transfer of the General Partner Interest shall be void ab initio. To the extent
the prior sentence does not have the effect of preventing any such proposed
transfer, the transfer shall cause the dissolution of the Partnership.
B. Except as otherwise provided in this Section 11.2.B, no Common
Limited Partner shall withdraw from or transfer all or any portion of its
interest in the Partnership (whether by sale, statutory merger, consolidation,
liquidation or otherwise). Any attempted transfer of a Common Limited Partner
Interest contrary to this Section 11.2.B shall be void ab initio. To the extent
the prior sentence does not have the effect of preventing any such proposed
transfer, the transfer shall cause the dissolution of the Partnership.
C. Notwithstanding Section 11.2.B, any Common Limited Partner other than
the Operating Partnership shall be permitted to transfer, with the consent of
the General Partner (which consent may be given or withheld in the General
Partner's sole and absolute discretion), all or any portion of its Partnership
Interest to the Operating Partnership.
Section 11.3. Preferred Limited Partners' Rights to Transfer
A. Any Preferred 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 Preferred 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 Preferred
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,
provided that any transfer of a Partnership Interest shall be made only to
Qualified Transferees.
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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 Preferred 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 REIT Charter, which may limit or restrict such
transferee's ability to exercise its Series C Redemption rights or the exchange
rights set forth in Sections 16.5 or 16.8, respectively, or its Series D
Redemption rights or the exchange rights set forth in Sections 17.5 or 17.8,
respectively, 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 Preferred 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 Preferred
Limited Partner, but not more rights than those enjoyed by other Preferred
Limited Partners, for the purpose of settling or managing the estate, and such
power as the Incapacitated Preferred 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 Preferred 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 Preferred Limited Partner of his or her Partnership
Units (including any Series C Redemption or exchange rights set forth in
Sections 16.5 and 16.8, respectively, any Series D Redemption or exchange rights
set forth in Sections 17.5 and 17.8, respectively, or any other acquisition of
Common Units, Series C Preferred Units or Series D Preferred Units by the
General Partner, AMB 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) absent the
consent of the General Partner, which may be given or withheld in its sole and
absolute discretion, such transfer could be treated as effectuated 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 Preferred 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
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Partnership and the General Partner to redeem or exchange for the
specified amount of Series C Preferred Shares and/or Series D Preferred Units
(as the case may be) 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 Preferred Limited Partner may withdraw from the Partnership except
as a result of transfer, Series C Redemption, Series D Redemption, or exchange
of all of its Partnership Units pursuant hereto.
Section 11.4. Substituted Limited Partners
A. Any Preferred Limited Partner shall have the right to substitute a
transferee permitted by this Agreement as a Limited Partner in his or her place.
The General Partner shall have the right to consent to the admission of a
permitted transferee of the interest of any other 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 and will continue to be
true to the extent required by such representations and warranties.
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, with respect to a transferee requiring the
General Partner's consent, does not consent, in its sole and absolute
discretion, 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
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transfer the Partnership Units provided in this Article 11, the right of
exchange for Series C Preferred Shares set forth in Section 16.8, and the right
of exchange for Series D Preferred Shares set forth in Section 17.8, 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 transfer of all of such Limited Partner's Partnership Units as
permitted in accordance with this Article 11 and the transferee(s) of such Units
being admitted to the Partnership as a Substituted Limited Partner(s), (ii)
pursuant to the Series C Redemption or exchange of all of such Limited Partner's
Series C Preferred Units pursuant to Section 16.8, or (iii) pursuant to the
Series D Redemption or exchange of all of such Limited Partner's Series D
Preferred Units pursuant to Section 17.8.
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 Series C Redemption or exchange of all of such Limited
Partner's Series C Preferred Units pursuant to Section 16.8 or pursuant to the
exercise of its rights of Series D Redemption or exchange of all of such Limited
Partner's Series D Preferred Units pursuant to Section 17.8, 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.
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 16.5 or 17.5, 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
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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 Series C Redemption or exchange for Series C
Preferred Shares, a Series D Redemption or exchange for Series D Preferred
Shares, or any other acquisition of Common Units, Series C Preferred Units, or
Series D Preferred Units by the Partnership, AMB or the General Partner) 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) except with
the consent of the General Partner, which may be given or withheld in its sole
and absolute discretion, 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) except with the consent of
the General Partner, which may be given or withheld in its sole and absolute
discretion, 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 Series C Redemption or exchange for
Preferred Shares or cash pursuant to Sections 16.5 and 16.8, respectively, and
the Series D Redemption or exchange for Preferred Shares or cash pursuant to
Sections 17.5 and 17.8, respectively, of all Partnership Units held by all
Limited Partners); (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 a Series C
Redemption or exchange for Preferred Shares pursuant to Sections 16.5 and 16.8,
respectively, and a Series D Redemption or exchange for Preferred Shares
pursuant to Sections 17.5 and 17.8, respectively, 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 or requires the
registration of the exchange of such Partnership Interests for any capital stock
pursuant to any applicable Federal or state securities laws; (ix) except with
the consent of the General Partner, which may be given or withheld in its sole
and absolute discretion, 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
AMB, in its capacity as the sole stockholder of General Partner and the sole
general partner of the Operating Partnership, to remain qualified as a REIT; or
(xii) if, except with the consent of the General Partner, which may be given or
withheld in its sole and absolute
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discretion, such transfer would subject AMB to any additional taxes under
Section 857 or Section 4981 of the Code.
F. The General Partner shall monitor the transfers of interests in the
Partnership (including any acquisition of Series C Preferred Units or Series D
Preferred Units by the Partnership, AMB 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 (but
shall not be required to) 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.
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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 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
Common Limited 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 October 15, 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;
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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;
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;
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 Limited Partners remaining 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)).
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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.
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
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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
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. Except as expressly set forth herein with respect to the
rights, priorities and preferences of the Preferred Limited Partners holding any
series of Preferred Units, 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 Sections 7.3, 16.6 and
17.6, 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 entitled to consent or approve such matter. 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 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 that are entitled to vote on the matters
proposed to be voted on at such meeting. 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. Except as otherwise expressly provided, 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 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. Entire Agreement
This Agreement (together with the agreements listed on Exhibit H 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
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Partners with respect to the subject matter hereof and supersedes any other
prior written or oral understandings or agreements among them with respect
thereto.
Section 15.12. 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 C PREFERRED UNITS
Section 16.1. Designation and Number
A series of Partnership Units in the Partnership designated as the 8
3/4% Series C Cumulative Redeemable Preferred Units (the "Series C Preferred
Units") is hereby established. The number of Series C Preferred Units shall be
2,200,000.
Section 16.2. Ranking
The Series C Preferred Units shall, with respect to distribution rights
and rights upon voluntary or involuntary liquidation, winding up or dissolution
of the Partnership, rank (i) senior to the Common Units and to all Partnership
Units the terms of which provide that such Partnership Units shall rank junior
to the Series C Preferred Units; (ii) on a parity with all other Parity
Preferred Units; and (iii) junior to all Partnership Units which rank senior to
the Series C Preferred Units.
Section 16.3. 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, holders of Series C 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 Series C Priority Return. Such distributions will be payable (A) quarterly
(such quarterly periods for purposes of payment and accrual will be the
quarterly periods ending on the dates specified in this sentence and not
calendar year quarters) in arrears, on the 15th day of January, April, July and
October of each year and (B) in the event of (i) an exchange of Series C
Preferred Units into Series C Preferred Shares, or (ii) a redemption of Series C
Preferred Units, on the exchange date or redemption date, as applicable (each a
"Series C 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 C 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
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Business Day, in each case with the same force and effect as if made on such
date. Distributions on the Series C Preferred Units will be made to the holders
of record of the Series C Preferred Units on the relevant record dates, which
will be fifteen (15) days prior to the relevant Preferred Unit Distribution
Payment Date (the "Series C Preferred Unit Partnership Record Date").
B. Distributions Cumulative. Notwithstanding the foregoing,
distributions on the Series C 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 of such distributions and whether or not such distributions are authorized.
Accrued but unpaid distributions on the Series C Preferred Units will accumulate
as of the Preferred Unit Distribution Payment Date on which they first become
payable.
C. Priority as to Distributions. (i) So long as any Series C 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 represented by 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, as the case may be) 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 C Preferred Units and all classes and
series of outstanding Parity Preferred Units for all distribution periods. 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 C
Preferred Units as to distributions and upon voluntary and involuntary
liquidation, dissolution or winding up of the Partnership, or (c) distributions
necessary to enable the Operating Partnership to redeem partnership interests
corresponding to Series C Preferred Shares, Parity Preferred Stock with respect
to distributions or Junior Stock to be purchased by AMB pursuant to the REIT
Charter to preserve AMB's status as a REIT, provided that such redemption shall
be upon the same terms as the corresponding stock purchase pursuant to the REIT
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 C
Preferred Units and any other Parity Preferred Units, all distributions
authorized and declared on the Series C 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
C 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 C 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 C Preferred Units which may be in
arrears.
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(iii) Notwithstanding anything to the contrary set forth herein,
distributions on Partnership Interests held by either (a) the General Partner or
(b) any other holder of Partnership Interests in the Partnership, in each case
ranking junior to or on parity with the Series C Preferred Units may be made,
without preserving the priority of distributions described in Sections 16.3.C(i)
and (ii), but only to the extent such distributions are required to preserve the
REIT status of AMB, in its capacity as sole general partner of the Operating
Partnership and as sole stockholder of the General Partner, and in the case of
any holder other than the General Partner only to the extent required by the
Partnership Agreement; provided, that the Partnership shall not be
disproportionately burdened by this provision relative to the cash flow
generated by other assets owned directly or indirectly by AMB.
D. No Further Rights. Holders of Series C 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.
Section 16.4. Liquidation Proceeds
A. Distributions. Upon voluntary or involuntary liquidation, dissolution
or winding-up of the Partnership, distributions on the Series C 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.
C. No Further Rights. After payment of the full amount of the
liquidating distributions to which they are entitled, Holders of Series C
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 16.5. Redemption
A. Redemption. The Series C Preferred Units may not be redeemed prior to
November 24, 2003. On or after such date, the Partnership shall have the right
to redeem the Series C Preferred Units, in whole or in part, at any time or from
time to time, upon not less than 30 nor more than 60 days' written notice, at a
redemption price, payable in cash (a "Series C Redemption"), equal to the
Capital Account balance of the holder of Series C Preferred Units (the "Series C
Redemption Price"); provided, however, that no redemption pursuant to this
Section 16.5 will be permitted if the Series C Redemption Price does not equal
or exceed the original Capital Contribution of such holder plus the cumulative
Series C Priority Return to the redemption date to the extent not previously
distributed. If fewer than all of the outstanding
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Series C Preferred Units are to be redeemed, the Series C Preferred Units to be
redeemed shall be selected pro rata (as nearly as practicable without creating
fractional units).
B. Limitation on Redemption. (i) The Series C Redemption Price of the
Series C 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 AMB which will be contributed by AMB to the Operating
Partnership and the General Partner, and which in turn will be contributed by
the Operating Partnership and the General Partner to the Partnership as an
additional capital contribution, or out of the sale of limited partner interests
in the Partnership or the Operating 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
REIT 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.
(ii) The Partnership may not redeem fewer than all of the outstanding
Series C Preferred Units unless all accumulated and unpaid distributions have
been paid on all Series C Preferred Units for all quarterly distribution periods
terminating on or prior to the date of redemption.
C. Procedures for Redemption. (i) Notice of redemption will be (i)
faxed, and (ii) mailed by the Partnership, by certified mail, postage prepaid,
not less than 30 nor more than 60 days prior to the redemption date, addressed
to the respective holders of record of the Series C Preferred Units at their
respective addresses as they appear on the records of the Partnership. No
failure to give or defect in such notice shall affect the validity of the
proceedings for the redemption of any Series C Preferred Units except as to the
holder to whom such notice was defective or not given. In addition to any
information required by law, each such notice shall state: (a) the redemption
date, (b) the Series C Redemption Price, (c) the aggregate number of Series C
Preferred Units to be redeemed and if fewer than all of the outstanding Series C
Preferred Units are to be redeemed, the number of Series C Preferred Units to be
redeemed held by such holder, which number shall equal such holder's pro rata
share (based on the percentage of the aggregate number of outstanding Series C
Preferred Units that the total number of Series C Preferred Units held by such
holder represents) of the aggregate number of Series C Preferred Units to be
redeemed, (d) the place or places where such Series C Preferred Units are to be
surrendered for payment of the Series C Redemption Price, (e) that distributions
on the Series C Preferred Units to be redeemed will cease to accumulate on such
redemption date and (f) that payment of the Series C Redemption Price will be
made upon presentation and surrender of such Series C Preferred Units.
(ii) If the Partnership gives a notice of redemption in respect of
Series C Preferred Units (which notice will be irrevocable) then, by 12:00 noon,
New York City time, on the redemption date, the Partnership will deposit
irrevocably in trust for the benefit of the Series C Preferred Units being
redeemed funds sufficient to pay the applicable Series C Redemption Price and
will give irrevocable instructions and authority to pay such Series C Redemption
Price to the holders of the Series C Preferred Units upon surrender of the
Series C Preferred Units by such holders at the place designated in the notice
of redemption. On and after the date of redemption, distributions will cease to
accumulate on the Series C Preferred Units or portions
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thereof called for redemption, unless the Partnership defaults in the payment
thereof. If any date fixed for redemption of Series C Preferred Units is not a
Business Day, then payment of the Series C Redemption Price payable 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 falls in the next calendar year, such payment will be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date fixed for redemption. If payment of the Series C
Redemption Price is improperly withheld or refused and not paid by the
Partnership, distributions on such Series C Preferred Units will continue to
accumulate from the original redemption date to the date of payment, in which
case the actual payment date will be considered the date fixed for redemption
for purposes of calculating the applicable Series C Redemption Price.
Section 16.6. Voting Rights
A. General. Holders of the Series C Preferred Units will not have any
voting rights or right to consent to any matter requiring the consent or
approval of the Limited Partners, except as set forth below and in Section
7.3.E.
B. Certain Voting Rights. So long as any Series C Preferred Units
remains outstanding, the Partnership shall not, without the affirmative vote of
the holders of at least two-thirds of the Series C Preferred Units outstanding
at the time (i) authorize or create, or increase the authorized or issued amount
of, any class or series of Partnership Interests ranking prior to the Series C
Preferred Units with respect to payment of distributions or rights upon
liquidation, dissolution or winding-up or reclassify any Partnership Interests
of the Partnership into any such Partnership Interest, or create, authorize or
issue any obligations or security convertible into or evidencing the right to
purchase any such Partnership Interests, (ii) authorize or create, or increase
the authorized or issued amount of any Parity Preferred Units or reclassify any
Partnership Interest of the Partnership into any such Partnership Interest or
create, authorize or issue any obligations or security convertible into or
evidencing the right to purchase any such Partnership Interests but only to the
extent such Parity Preferred Units are issued to an affiliate of the
Partnership, other than AMB or the Operating Partnership to the extent the
issuance of such interests was to allow AMB or the Operating Partnership to
issue corresponding preferred stock or preferred interests to persons who are
not affiliates of the Partnership (other than AMB to the extent AMB issues
corresponding preferred stock to persons who are not affiliates of the
Partnership or the Operating Partnership) or (iii) either consolidate, merge
into or with, or convey, transfer or lease its assets substantially as an
entirety to, any corporation or other entity or amend, alter or repeal the
provisions of the Partnership Agreement (including, without limitation, this
Article 16 and Section 11.2), whether by merger, consolidation or otherwise, in
each case in a manner that would materially and adversely affect the powers,
special rights, preferences, privileges or voting power of the Series C
Preferred Units or the holders thereof; provided, however, that with respect to
the occurrence of any event set forth in (iii) above, so long as (a) the
Partnership is the surviving entity and the Series C Preferred Units remain
outstanding with the terms thereof unchanged, or (b) the resulting, surviving or
transferee entity is a partnership, limited liability company or other
pass-through entity organized under the laws of any state and substitutes the
Series C Preferred Units for other interests in such entity having substantially
the same terms and rights as the Series C Preferred Units, including with
respect to distributions, voting rights and rights upon liquidation, dissolution
or winding-up, then the
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occurrence of any such event shall not be deemed to materially and adversely
affect such rights, privileges or voting powers of the holders of the Series C
Preferred Units; and provided further, that any increase in the amount of
Partnership Interests or the creation or issuance of any other class or series
of Partnership Interests represented by Junior Units or Parity Preferred Units
that are not issued to an affiliate of the Partnership, other than the General
Partner or the Operating Partnership to the extent the issuance of such
interests was to allow the General Partner or the Operating Partnership to issue
corresponding preferred stock or preferred interests to persons who are not
affiliates of the Partnership (other than AMB to the extent AMB issues
corresponding preferred stock or preferred interests to persons who are not
affiliates of the Partnership or the Operating Partnership), shall not be deemed
to materially and adversely affect such rights, preferences, privileges or
voting powers.
C. So long as any Series C Preferred Units remain outstanding, the
Operating Partnership shall not, without the affirmative vote of the holders of
at least two-thirds of the Series C Preferred Units outstanding at the time,
take any action which would result in the termination of the right of the
holders of such units to effect an exchange pursuant to Section 16.8; provided
however, no such vote shall be required so long as the Series C Preferred Units
(or any interests substituted therefore pursuant to Section 16.6.B) remain
outstanding and are exchangeable for Series C Preferred Shares or stock in
another entity having substantially the same terms and rights as the Series C
Preferred Shares.
Section 16.7. Transfer Restrictions
The Series C Preferred Units shall be subject to the provisions of
Article 11 hereof. No transfer of Series C Preferred Units, or other action by
the holder or holders of such Units, is permitted, without the consent of the
General Partner which consent may be given or withheld in its sole and absolute
discretion, if such transfer or other action would result in more than four
partners holding all outstanding Series C Preferred Units within the meaning of
Treasury Regulation Section 1.7704-1(h)(3)(i); provided, however, that the
General Partner's consent may not be unreasonably withheld if (a) such transfer
or other action would not result in more than ten partners holding all
outstanding Series C Preferred Units within the meaning of Treasury Regulation
Section 1.7704-1(h)(3)(i) and (b) the General Partner is relying on a provision
other than Treasury Regulation Section 1.7704-1(h) to avoid classification of
Operating Partnership as a "publicly traded partnership" within the meaning of
Code Section 7704 (a "PTP"). In addition, no transfer may be made to any person
if such transfer would cause the exchange of the Series C Preferred Units for
Series C Preferred Shares, as provided herein, to be required to be registered
under the Securities Act of 1933, as amended, or any state securities laws.
Section 16.8. Exchange Rights
A. Right to Exchange.
(i) Series C Preferred Units will be exchangeable in whole but not in
part unless expressly otherwise provided herein at anytime on or after November
24, 2008, at the option of 51% of the holders of all outstanding Series C
Preferred Units, for authorized but previously unissued Series C Preferred
Shares at an exchange rate of one Series C Preferred Share from
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AMB for one Series C Preferred Unit, subject to adjustment as described below
(the "Series C Exchange Price"), provided that the Series C Preferred Units will
become exchangeable at any time, in whole but not in part unless expressly
otherwise provided herein, at the option of 51% of the holders of all
outstanding Series C Preferred Units for Series C Preferred Shares if (y) at any
time full distributions shall not have been timely made on any Series C
Preferred Unit with respect to six (6) prior quarterly distribution periods,
whether or not consecutive, provided, however, that a distribution in respect of
Series C Preferred Units shall be considered timely made if made within two (2)
Business Days after the applicable Preferred Unit Distribution Payment Date if
at the time of such late payment there shall not be any prior quarterly
distribution periods in respect of which full distributions were not timely made
or (z) upon receipt by a holder or holders of Series C Preferred Units of (A)
notice from the General Partner that the General Partner or a Subsidiary of the
General Partner has taken the position that the Partnership is, or upon the
consummation of an identified event in the immediate future will be, a PTP and
(B) an opinion rendered by independent counsel familiar with such matters
addressed to a holder or holders of Series C Preferred Units, that the
Partnership is or likely is, or upon the occurrence of a defined event in the
immediate future will be or likely will be, a PTP. In addition, the Series C
Preferred Units may be exchanged for Series C Preferred Shares, in whole but not
in part unless expressly otherwise provided herein, at the option of 51% of the
holders of all outstanding Series C Preferred Units after November 24, 2001 and
prior to November 24, 2008 if such holders of a Series C Preferred Units shall
deliver to the General Partner either (i) a private letter ruling addressed to
such holder of Series C Preferred Units or (ii) an opinion of independent
counsel reasonably acceptable to the General Partner based on the enactment of
temporary or final Treasury Regulations or the publication of a Revenue Ruling,
in either case to the effect that an exchange of the Series C Preferred Units at
such earlier time would not cause the Series C Preferred Units to be considered
"stock and securities" within the meaning of section 351(e) of the Code for
purposes of determining whether the holder of such Series C Preferred Units is
an "investment company" under section 721(b) of the Code if an exchange is
permitted at such earlier date. Furthermore, the Series C Preferred Units, if
Contributors holding 51% of all outstanding Series C Preferred Units determine,
may be exchanged in whole but not in part (regardless of whether held by
Contributors) for Series C Preferred Shares (but only if the exchange in whole
may be accomplished consistently with the ownership limitations set forth under
the Series C Articles Supplementary (as defined herein), taking into account
exceptions thereto) if at any time, excluding the effect of the "Loan" (as
defined below) for purposes of the 5% test of Section 856(c)(4)(B) of the Code,
(i) the Partnership reasonably determines that the assets and income of the
Partnership for a taxable year after 1998 would not satisfy the income and
assets tests of Section 856 of the Code for such taxable year if the Partnership
were a real estate investment trust within the meaning of the Code or (ii) any
holder of Series C Preferred Units shall deliver to the Partnership and the
Company an opinion of independent counsel reasonably acceptable to the Company
to the effect that, based on the assets and income of the Partnership for a
taxable year after 1998, the Partnership would not satisfy the income and assets
tests of Section 856 of the Code for such taxable year if the Partnership were a
real estate investment trust within the meaning of the Code and that such
failure would create a meaningful risk that a holder of the Series C Preferred
Units would fail to maintain qualification as a real estate investment trust.
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(ii) Notwithstanding anything to the contrary set forth in Section
16.8.A(i), if an Series C Exchange Notice (as defined herein) has been delivered
to AMB and the General Partner, then the General Partner may, at its option,
within ten (10) Business Days after receipt of the Series C Exchange Notice,
elect to cause the Partnership to redeem all or a portion of the outstanding
Series C Preferred Units for cash in an amount equal to the original Capital
Contribution per Series C Preferred Unit and all accrued and unpaid
distributions thereon to the date of redemption. If the General Partner elects
to redeem fewer than all of the outstanding Series C Preferred Units, the number
of Series C Preferred Units held by each holder to be redeemed shall equal such
holder's pro rata share (based on the percentage of the aggregate number of
outstanding Series C Preferred Units that the total number of Series C Preferred
Units held by such holder represents) of the aggregate number of Series C
Preferred Units being redeemed.
(iii) In the event an exchange of all Series C Preferred Units pursuant
to Section 16.8.A would violate the provisions on ownership limitation of AMB
set forth in Section 7 of Article Third of the Articles Supplementary to the
REIT Charter with respect to Series C Preferred Shares (the "Series C Articles
Supplementary"), each holder of Series C Preferred Units shall be entitled to
exchange, pursuant to the provisions of Section 16.8.B, a number of Series C
Preferred Units which would comply with the provisions on the ownership
limitation of AMB set forth in such Section 7 of Article Third of the Series C
Articles Supplementary, with respect to such holder, and any Series C Preferred
Units not so exchanged (the "Series C Excess Units") shall be redeemed by the
Partnership for cash in an amount equal to the original Capital Contribution per
Excess Unit, plus any accrued and unpaid distributions thereon to the date of
redemption subject to any restriction thereon contained in any debt instrument
or agreement of the Partnership. In the event an exchange would result in Excess
Units, as a condition to such exchange, each holder of such units agrees to
provide representations and covenants reasonably requested by AMB relating to
(i) the widely held nature of the interests in such holder, sufficient to assure
AMB that the Holder's ownership of stock of AMB (without regard to the limits
described above) will not cause any individual to own in excess of 9.0% of the
stock of AMB; and (ii) to the extent such Holder can so represent and covenant
without obtaining information from its owners (other than one or more direct or
indirect parent corporations, limited liability companies or partnerships and
not the holders of any interests in any such parent), the Holder's ownership of
tenants of the Partnership and its affiliates. For purposes of determining the
number of Excess Units under this Section 16.8.A(iii), the "Ownership Limit" set
forth in the Series C Articles Supplementary shall be deemed to be 9.0%. To the
extent the Partnership would not be able to pay the cash set forth above in
exchange for the Excess Units, and to the extent consistent with the REIT
Charter, AMB agrees that it will grant to the holders of the Series C Preferred
Units exceptions to the Ownership Limit set forth in the Series C Articles
Supplementary sufficient to allow such Holders to exchange all of their Series C
Preferred Units for Series C Preferred Shares, provided such holders furnish to
AMB representations acceptable to AMB in its sole and absolute discretion which
assure AMB that such exceptions will not jeopardize AMB's tax status as a REIT
for purposes of federal and applicable state law. Notwithstanding any provision
of this Agreement to the contrary, no Series C Limited Partner shall be entitled
to effect an exchange of Series C Preferred Units for Series C Preferred Shares
to the extent that ownership or right to acquire such shares would cause the
Partner or any other Person or, in the opinion of counsel selected by AMB, may
cause the Partner or any other Person,
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to violate the restrictions on ownership and transfer of Series C Preferred
Shares set forth in the REIT Charter. To the extent any such attempted exchange
for Series C Preferred Shares would be in violation of the previous sentence, it
shall be void ab initio and such Series C Limited Partner shall not acquire any
rights or economic interest in the Series C Preferred Shares otherwise issuable
upon such exchange.
(iv) The redemption of Series C Preferred Units described in Section
16.8.A(ii) and (iii) shall be subject to the provisions of Section 16.5.B(i) and
Section 16.5.C(ii); provided, however, that the term "Redemption Price" in such
Sections 16.5.B(i) and 16.5.C(ii) shall be read to mean the original Capital
Contribution per Series C Preferred Unit being redeemed as set forth on Exhibit
A plus all accrued and unpaid distributions to the redemption date.
B. Procedure for Exchange and/or Redemption of Series C Preferred Units.
(i) Any exchange shall be exercised pursuant to a notice of exchange
(the "Series C Exchange Notice") delivered to AMB and the General Partner by the
Partners representing at least 51% of the outstanding Series C Preferred Units
(or by Contributors in the case of an exchange pursuant to the last sentence of
Section 16.8.A.(i) hereof) by (a) fax and (b) by certified mail postage prepaid.
AMB may effect any exchange of Series C Preferred Units, or the General Partner
may exercise its option to cause the Partnership to redeem any portion of the
Series C Preferred Units for cash pursuant to Section 16.8.A(ii) or redeem
Excess Units pursuant to Section 16.8.A(iii), by delivering to each holder of
record of Series C Preferred Units, within ten (10) Business Days following
receipt of the Series C Exchange Notice, (a) if the General Partner elects to
cause the Partnership to acquire any of the Series C Preferred Units then
outstanding, (1) certificates representing the Series C Preferred Shares being
issued in exchange for the Series C Preferred Units of such holder being
exchanged and (2) a written notice (a "Series C Redemption Notice") stating (A)
the redemption date, which may be the date of such Series C Redemption Notice or
any other date which is not later than sixty (60) days following the receipt of
the Series C Exchange Notice, (B) the redemption price, (C) the place or places
where the Series C Preferred Units are to be surrendered and (D) that
distributions on the Series C Preferred Units will cease to accrue on such
redemption date, or (b) if the General Partner elects to cause the Partnership
to redeem all of the Series C Preferred Units then outstanding in exchange for
cash, a Series C Redemption Notice. Series C Preferred Units shall be deemed
canceled (and any corresponding Partnership Interest represented thereby deemed
terminated) simultaneously with the delivery of shares of Series C Preferred
Shares (with respect to Series C Preferred Units exchanged) or simultaneously
with the redemption date (with respect to Series C Preferred Units redeemed).
Holders of Series C Preferred Units shall deliver any canceled certificates
representing Series C Preferred Units which have been exchanged or redeemed to
the office of General Partner (which currently is located at 505 Montgomery
Street, San Francisco, California 94111) within ten (10) Business Days of the
exchange or redemption with respect thereto. Notwithstanding anything to the
contrary contained herein, any and all Series C Preferred Units to be exchanged
for Series C Preferred Stock pursuant to this Section 16.8 shall be so exchanged
in a single transaction at one time. As a condition to exchange, AMB may require
the holders of Series C Preferred Units to make such representations as may be
reasonably necessary for the General Partner to establish that the issuance of
Series C Preferred Shares pursuant to the exchange shall not be required to be
registered under the Securities Act or any state securities laws. Any Series C
Preferred Shares issued pursuant to this Section 16.8 shall be delivered as
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shares which are duly authorized, validly issued, fully paid and nonassessable,
free of any pledge, lien, encumbrance or restriction other than those provided
in the REIT Charter, the Bylaws of AMB, the Securities Act and relevant state
securities or blue sky laws.
The certificates representing the Series C Preferred Shares issued upon
exchange of the Series C Preferred Units shall contain the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT (A)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), AND STATE SECURITIES LAWS OR (B) IF THE
CORPORATION HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL
FOR THE HOLDER OF THE SHARES REPRESENTED HEREBY, OR OTHER EVIDENCE
SATISFACTORY TO THE CORPORATION, THAT SUCH TRANSFER, SALE, ASSIGNMENT,
PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS
OF SECTION 5 OF THE ACT AND STATE SECURITIES LAWS AND THE RULES AND
REGULATIONS THEREUNDER.
(ii) In the event of an exchange of Series C Preferred Units for Series
C Preferred Shares, an amount equal to the accrued and unpaid distributions to
the date of exchange on any Series C Preferred Units tendered for exchange shall
(i) accrue on the Series C Preferred Shares into which such Series C Preferred
Units are exchanged, and (ii) continue to accrue on such Series C Preferred
Units, which shall remain outstanding following such exchange, with the General
Partner as the holder of such REIT Series C Preferred Units. Notwithstanding
anything to the contrary set forth herein, in no event shall a Holder of a
Series C Preferred Unit that was validly exchanged for Series C Preferred Shares
pursuant to this Section (other than the General Partner holding such Series C
Preferred Unit following any such exchange), receive a distribution out of
Available Cash of the Partnership, if such Holder, after exchange, is entitled
to receive a distribution with respect to the Series C Preferred Shares for
which such Series C Preferred Unit was exchanged or redeemed. Further for
purposes of the foregoing, in the event of an exchange of Series C Preferred
Units for Series C Preferred Shares, if the accrued and unpaid distributions per
Series C Preferred Unit is not the same for each Series C Preferred Unit, the
accrued and unpaid distributions per Series C Preferred Unit for each such
Series C Preferred Unit shall be equal to the greatest amount of such accrued
and unpaid distributions per Series C Preferred Unit on any such unit.
(iii) Fractional Series C Preferred Shares are not to be issued upon
exchange but, in lieu thereof, the General Partner will pay a cash adjustment
based upon the fair market value of the Series C Preferred Shares on the day
prior to the exchange date as determined in good faith by the Board of
Directors.
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C. Adjustment of Exchange Price. In case AMB shall be a party to any
transaction (including, without limitation, a merger, consolidation, statutory
share exchange, tender offer for all or substantially all of AMB's capital stock
or sale of all or substantially all of AMB's assets), in each case as a result
of which the Series C Preferred Shares will be converted into the right to
receive shares of capital stock, other securities or other property (including
cash or any combination thereof), each Series C Preferred Unit will thereafter
be exchangeable into the kind and amount of shares of capital stock and other
securities and property receivable (including cash or any combination thereof)
upon the consummation of such transaction by a holder of that number of Series C
Preferred Shares or fraction thereof into which one Series C Preferred Unit was
exchangeable immediately prior to such transaction. AMB may not become a party
to any such transaction unless the terms thereof are consistent with the
foregoing. AMB and the Operating Partnership further agree that, notwithstanding
any transaction to which either may be a party (including, without limitation,
any merger, consolidation, statutory share exchange, tender offer for all or
substantially all of such entity's capital stock or partnership interests or
sale of all or substantially all of such entity's assets), immediately following
any such transaction, the issuer or issuers of any shares of capital stock and
other securities into which the Series C Preferred Units shall be exchangeable
pursuant to this Section 16.8 shall be the same issuer or issuers of shares of
capital stock and other securities into which the 8 1/8% Series B Cumulative
Redeemable Partnership Units of the Operating Partnership (the "Series B
Preferred Units") are then exchangeable (or, if the Series B Preferred Units
have previously been redeemed in full, would have been then exchangeable if then
still outstanding).
Section 16.9. No Conversion Rights
The Series C Preferred Units shall not be convertible into any other
class or series of interest in the Partnership.
Section 16.10. No Sinking Fund
No sinking fund shall be established for the retirement or redemption of
Series C Preferred Units.
ARTICLE 17.
SERIES D PREFERRED UNITS
Section 17.1. Designation and Number
A series of Partnership Units in the Partnership designated as the 7.75%
Series D Cumulative Redeemable Preferred Units (the "Series D Preferred Units")
is hereby established. The number of Series D Preferred Units shall be
1,595,337.
Section 17.2. Ranking
The Series D Preferred Units shall, with respect to distribution rights
and rights upon voluntary or involuntary liquidation, winding up or dissolution
of the Partnership, rank (i) senior to the Common Units and to all Partnership
Units the terms of which provide that such
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Partnership Units shall rank junior to the Series D Preferred Units; (ii) on a
parity with the Series C Preferred Units and all other Parity Preferred Units;
and (iii) junior to all Partnership Units which rank senior to the Series D
Preferred Units.
Section 17.3. Distributions
A. Payment of Distributions. Subject to the rights of holders of Parity
Preferred Units (including the Series C Preferred Units) as to the payment of
distributions, pursuant to Sections 5.1 and 16.3.A hereof, holders of Series D
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 Series D
Priority Return. Such distributions will be payable (A) quarterly (such
quarterly periods for purposes of payment and accrual will be the quarterly
periods ending on the dates specified in this sentence and not calendar year
quarters) in arrears, on the 25th day of March, June, September and December of
each year and (B) in the event of (i) an exchange of Series D Preferred Units
into Series D Preferred Shares, or (ii) a redemption of Series D Preferred
Units, on the exchange date or redemption date, as applicable (each a "Series D
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 D 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. Distributions on the Series D Preferred Units will be
made to the holders of record of the Series D Preferred Units on the relevant
record dates, which will be fifteen (15) days prior to the relevant Preferred
Unit Distribution Payment Date (the "Series D Preferred Unit Partnership Record
Date"). For purposes of clarifying the relative distribution priority rights of
the Series D Preferred Units to the Series C Preferred Units, the payment of
distributions with respect to the Series D Preferred Units prior to the payment
of distributions with respect to the Series C Preferred Units, solely as a
result of the Series D Preferred Unit Distribution Payment Date occurring prior
to the Series C Preferred Unit Distribution Payment Date, shall not be deemed to
create a priority in favor of Series D Preferred Units over Series C Preferred
Units.
B. Distributions Cumulative. Notwithstanding the foregoing,
distributions on the Series D 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 of such distributions and whether or not such distributions are authorized.
Accrued but unpaid distributions on the Series D Preferred Units will accumulate
as of the Preferred Unit Distribution Payment Date on which they first become
payable.
C. Priority as to Distributions. (i) So long as any Series D 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 represented by Junior Units, nor shall
any Junior Units or Parity Preferred Units (including the Series C Preferred
Units) be redeemed, purchased or otherwise acquired for any consideration (or
any
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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, as
the case may be) 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 D Preferred
Units and all classes and series of outstanding Parity Preferred Units for all
distribution periods. The foregoing sentence will not prohibit (a) distributions
payable solely in Junior Units, (b) the exchange of Junior Units or Parity
Preferred Units (including the Series C Preferred Units) into Partnership
Interests of the Partnership ranking junior to the Series D Preferred Units as
to distributions and upon voluntary and involuntary liquidation, dissolution or
winding up of the Partnership, or (c) distributions necessary to enable the
Operating Partnership to redeem partnership interests corresponding to Series D
Preferred Shares, Parity Preferred Stock (including Series C Preferred Shares)
with respect to distributions or Junior Stock to be purchased by AMB pursuant to
the REIT Charter to preserve AMB's status as a REIT; provided that such
redemption shall be upon the same terms as the corresponding stock purchase
pursuant to the REIT 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 D
Preferred Units and any other Parity Preferred Units (including the Series C
Preferred Units), all distributions authorized and declared on the Series D
Preferred Units and all classes or series of outstanding Parity Preferred Units
(including the Series C Preferred Units) shall be authorized and declared pro
rata so that the amount of distributions authorized and declared per Series D
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 D 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 D Preferred Units which may be in
arrears.
(iii) Notwithstanding anything to the contrary set forth herein,
distributions on Partnership Interests held by either (a) the General Partner or
(b) any other holder of Partnership Interests in the Partnership, in each case
ranking junior to or on parity with the Series D Preferred Units may be made,
without preserving the priority of distributions described in Sections 17.3.C(i)
and (ii), but only to the extent such distributions are required to preserve the
REIT status of AMB, in its capacity as sole general partner of the Operating
Partnership and as sole stockholder of the General Partner, and in the case of
any holder other than the General Partner only to the extent required by the
Partnership Agreement; provided, that the Partnership shall not be
disproportionately burdened by this provision relative to the cash flow
generated by other assets owned directly or indirectly by AMB.
D. No Further Rights. Holders of Series D 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.
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Section 17.4. Liquidation Proceeds
A. Distributions. Upon voluntary or involuntary liquidation, dissolution
or winding-up of the Partnership, distributions on the Series D 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.
C. No Further Rights. After payment of the full amount of the
liquidating distributions to which they are entitled, Holders of Series D
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 17.5. Series D Redemption
A. Series D Redemption. The Series D Preferred Units may not be redeemed
prior to May 5, 2004. On or after such date, the Partnership shall have the
right to redeem the Series D Preferred Units, in whole or in part, at any time
or from time to time, upon not less than 30 nor more than 60 days' written
notice, at a redemption price, payable in cash (a "Series D Redemption"), equal
to the Capital Account balance of the holder of Series D Preferred Units (the
"Series D Redemption Price"); provided, however, that no redemption pursuant to
this Section 17.5 will be permitted if the Series D Redemption Price does not
equal or exceed the original Capital Contribution of such holder plus the
cumulative Series D Priority Return to the redemption date to the extent not
previously distributed. If fewer than all of the outstanding Series D Preferred
Units are to be redeemed, the Series D Preferred Units to be redeemed shall be
selected pro rata (as nearly as practicable without creating fractional units).
B. Limitation on Series D Redemption. (i) The Series D Redemption Price
of the Series D 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 AMB, which will be contributed by AMB to the General Partner
or the Operating Partnership and which in turn will be contributed by the
General Partner or the Operating Partnership to the Partnership as an additional
capital contribution, or out of the sale of limited partner interests in the
Partnership or the Operating 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
REIT 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.
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(ii) The Partnership may not redeem fewer than all of the outstanding
Series D Preferred Units unless all accumulated and unpaid distributions have
been paid on all Series D Preferred Units for all quarterly distribution periods
terminating on or prior to the date of redemption.
C. Procedures for Series D Redemption. (i) Notice of redemption will be
(i) faxed, and (ii) mailed by the Partnership, by certified mail, postage
prepaid, not less than 30 nor more than 60 days prior to the redemption date,
addressed to the respective holders of record of the Series D Preferred Units at
their respective addresses as they appear on the records of the Partnership. No
failure to give or defect in such notice shall affect the validity of the
proceedings for the redemption of any Series D Preferred Units except as to the
holder to whom such notice was defective or not given. In addition to any
information required by law, each such notice shall state: (a) the redemption
date, (b) the Series D Redemption Price, (c) the aggregate number of Series D
Preferred Units to be redeemed and if fewer than all of the outstanding Series D
Preferred Units are to be redeemed, the number of Series D Preferred Units to be
redeemed held by such holder, which number shall equal such holder's pro rata
share (based on the percentage of the aggregate number of outstanding Series D
Preferred Units that the total number of Series D Preferred Units held by such
holder represents) of the aggregate number of Series D Preferred Units to be
redeemed, (d) the place or places where such Series D Preferred Units are to be
surrendered for payment of the Series D Redemption Price, (e) that distributions
on the Series D Preferred Units to be redeemed will cease to accumulate on such
redemption date and (f) that payment of the Series D Redemption Price will be
made upon presentation and surrender of such Series D Preferred Units.
(ii) If the Partnership gives a notice of redemption in respect of
Series D Preferred Units (which notice will be irrevocable) then, by 12:00 noon,
New York City time, on the redemption date, the Partnership will deposit
irrevocably in trust for the benefit of the Series D Preferred Units being
redeemed funds sufficient to pay the applicable Series D Redemption Price and
will give irrevocable instructions and authority to pay such Series D Redemption
Price to the holders of the Series D Preferred Units upon surrender of the
Series D Preferred Units by such holders at the place designated in the notice
of redemption. On and after the date of redemption, distributions will cease to
accumulate on the Series D Preferred Units or portions thereof called for
redemption, unless the Partnership defaults in the payment thereof. If any date
fixed for redemption of Series D Preferred Units is not a Business Day, then
payment of the Series D Redemption Price payable 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
falls in the next calendar year, such payment will be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date fixed for redemption. If payment of the Series D Redemption Price
is improperly withheld or refused and not paid by the Partnership, distributions
on such Series D Preferred Units will continue to accumulate from the original
redemption date to the date of payment, in which case the actual payment date
will be considered the date fixed for redemption for purposes of calculating the
applicable Series D Redemption Price.
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Section 17.6. Voting and Certain Management Rights
A. General. Holders of the Series D Preferred Units will not have any
voting rights or right to consent to any matter requiring the consent or
approval of the Limited Partners, except as set forth below and in Section
7.3.E.
B. Certain Voting Rights. So long as any Series D Preferred Units
remains outstanding, the Partnership shall not, without the affirmative vote of
the holders of at least two-thirds of the Series D Preferred Units outstanding
at the time (i) authorize or create, or increase the authorized or issued amount
of, any class or series of Partnership Interests ranking prior to the Series D
Preferred Units with respect to payment of distributions or rights upon
liquidation, dissolution or winding-up or reclassify any Partnership Interests
of the Partnership into any such Partnership Interest, or create, authorize or
issue any obligations or security convertible into or evidencing the right to
purchase any such Partnership Interests, (ii) authorize or create, or increase
the authorized or issued amount of any Parity Preferred Units or reclassify any
Partnership Interest of the Partnership into any such Partnership Interest or
create, authorize or issue any obligations or security convertible into or
evidencing the right to purchase any such Partnership Interests but only to the
extent such Parity Preferred Units are issued to an affiliate of the
Partnership, other than AMB or the Operating Partnership to the extent the
issuance of such interests was to allow AMB or the Operating Partnership to
issue corresponding preferred stock or preferred interests to persons who are
not affiliates of the Partnership (other than AMB to the extent AMB issues
corresponding preferred stock to persons who are not affiliates of the
Partnership or the Operating Partnership) or (iii) either consolidate, merge
into or with, or convey, transfer or lease its assets substantially as an
entirety to, any corporation or other entity or amend, alter or repeal the
provisions of the Partnership Agreement (including, without limitation, this
Article 17 and Section 11.2), whether by merger, consolidation or otherwise, in
each case in a manner that would materially and adversely affect the powers,
special rights, preferences, privileges or voting power of the Series D
Preferred Units or the holders thereof; provided, however, that with respect to
the occurrence of any event set forth in (iii) above, so long as (a) the
Partnership is the surviving entity and the Series D Preferred Units remain
outstanding with the terms thereof unchanged, or (b) the resulting, surviving or
transferee entity is a partnership, limited liability company or other
pass-through entity organized under the laws of any state and substitutes the
Series D Preferred Units for other interests in such entity having substantially
the same terms and rights as the Series D Preferred Units, including with
respect to distributions, voting rights and rights upon liquidation, dissolution
or winding-up, then the occurrence of any such event shall not be deemed to
materially and adversely affect such rights, privileges or voting powers of the
holders of the Series D Preferred Units; and provided further, that any increase
in the amount of Partnership Interests or the creation or issuance of any other
class or series of Partnership Interests represented by Junior Units or Parity
Preferred Units that are not issued to an affiliate of the Partnership, other
than the General Partner or the Operating Partnership to the extent the issuance
of such interests was to allow the General Partner or the Operating Partnership
to issue corresponding preferred stock or preferred interests to persons who are
not affiliates of the Partnership (other than AMB to the extent AMB issues
corresponding preferred stock or preferred interests to persons who are not
affiliates of the Partnership or the Operating Partnership), shall not be deemed
to materially and adversely affect such rights, preferences, privileges or
voting powers.
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C. So long as any Series D Preferred Units remain outstanding, the
General Partner shall not, without the affirmative vote of the holders of at
least two-thirds of the Series D Preferred Units outstanding at the time, take
any action which would result in the termination of the right of the holders of
such units to effect an exchange pursuant to Section 17.8; provided however, no
such vote shall be required so long as the Series D Preferred Units (or any
interests substituted therefore pursuant to Section 17.6.B) remain outstanding
and are exchangeable for Series D Preferred Shares or stock in another entity
having substantially the same terms and rights as the Series D Preferred Shares.
D. Notwithstanding anything to the contrary contained in this Agreement,
including, without limitation, the provisions of Article 7 regarding the
management rights and responsibilities of the General Partner, whenever
distributions on any Series D Preferred Units shall remain unpaid for six or
more quarterly periods (i.e., the quarterly periods ending on the 15th day of
each January, April, July, and October, or, if not a business day, the next
succeeding business day, beginning with the quarterly period ending July 15,
1999) (whether or not consecutive) (a "Preferred Distribution Default"), the
holders of 51% of either (i) such Series D Preferred Units, in the event that no
Future Parity Preferred Unitholders (as defined below) are entitled to exercise
management rights similar to those to which the holders of Series D Preferred
Units are entitled to exercise pursuant to this Section 17.6.D, or (ii) the
Parity Preferred Capital, in the event that Future Parity Preferred Unitholders
are entitled to exercise management rights similar to those to which the holders
of Series D Preferred Units are entitled to exercise pursuant to this Section
17.6.D, shall be entitled to assume rights to manage the Partnership and perform
actions related thereto for the sole purpose of enforcing the Partnership's
rights and remedies as against obligees of the Partnership or other Persons from
whom the Partnership may be entitled to receive cash or other assets, until all
distributions accumulated on the Series D Preferred Units for all past quarterly
periods and the distribution for the then-current quarterly period shall have
been fully-paid or declared and a sum sufficient for the payment thereof
irrevocably set aside in trust for payment in full; provided, however, that no
such holder or holders of Series D Preferred Units may at any time take any
action (or fail to take any action) if the consequence of such action (or
inaction) would be (i) to cause AMB to fail to qualify as a REIT for federal or
applicable state income tax purposes or (ii) to cause the Operating Partnership
to fail to qualify as a partnership for federal or applicable state income tax
purposes, or (iii) to cause the Partnership, the Operating Partnership, the
General Partner, or AMB to be considered an "investment company" as defined in,
or otherwise be subject to regulation under, the Investment Company Act of 1940,
as amended; and provided, further, that solely for purposes of exercising the
management rights set forth in this Section 17.6.D, each holder of Series D
Preferred Units shall be deemed an Indemnitee, and shall be entitled to the
benefits of the indemnification provisions of Section 7.7 with respect to any
and all action(s) taken (or failure(s) to act) by a holder of Series D Preferred
Units in the exercise of (or failure(s) to exercise) the management rights
described in this Section 17.6.D, including, without limitation, alleged
breaches of the General Partner's fiduciary duty to the Partners; and provided
further, that the holders of the Series D Preferred Units acknowledge and agree
that the General Partner and the Partnership shall be entitled to provide
similar management rights to holders of Parity Preferred Units that are issued
by the Partnership following the date hereof ("Future Parity Preferred
Unitholders").
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Section 17.7. Transfer Restrictions
The Series D Preferred Units shall be subject to the provisions of
Article 11 hereof. Notwithstanding any provision to the contrary herein, no
transfer of Series D Preferred Units, or other action by the holder or holders
of such Units, is permitted, without the consent of the General Partner which
consent may be given or withheld in its sole and absolute discretion, if such
transfer or other action would result in more than four partners holding all
outstanding Series D Preferred Units within the meaning of Treasury Regulation
Section 1.7704-1(h)(1)(ii) (without regard to Treasury Regulation Section
1.7704-1(h)(3)(ii)); provided, however, that the General Partner's consent may
not be unreasonably withheld if (a) such transfer or other action would not
result in more than ten partners holding all outstanding Series D Preferred
Units within the meaning of Treasury Regulation Section 1.7704-1(h)(1)(ii)
(without regard to Treasury Regulation Section 1.7704-1(h)(3)(ii)) and (b) the
General Partner cannot rely on Treasury Regulation Section 1.7704-1(h). In
addition, no transfer may be made to any person if such transfer would cause the
exchange of the Series D Preferred Units for Series D Preferred Shares, as
provided herein, to be required to be registered under the Securities Act of
1933, as amended, or any state securities laws.
Section 17.8. Exchange Rights
A. Right to Exchange. (i) Series D Preferred Units will be exchangeable
in whole but not in part unless expressly otherwise provided herein at anytime
on or after May 5, 2009, at the option of 51% of the holders of all outstanding
Series D Preferred Units, for authorized but previously unissued Series D
Preferred Shares at an exchange rate of one Series D Preferred Share from AMB
for one Series D Preferred Unit, subject to adjustment as described below (the
"Series D Exchange Price"); provided that the Series D Preferred Units will
become exchangeable at any time, in whole but not in part unless expressly
otherwise provided herein, at the option of 51% of the holders of all
outstanding Series D Preferred Units for Series D Preferred Shares if (y) at any
time full distributions shall not have been timely made on any Series D
Preferred Unit with respect to six (6) prior quarterly distribution periods,
whether or not consecutive; provided, however, that a distribution in respect of
Series D Preferred Units shall be considered timely made if made within two (2)
Business Days after the applicable Series D Preferred Unit Distribution Payment
Date if at the time of such late payment there shall not be any prior quarterly
distribution periods in respect of which full distributions were not timely made
or (z) upon receipt by a holder or holders of Series D Preferred Units of (A)
notice from the General Partner that the General Partner or a Subsidiary of the
General Partner has taken the position that the Partnership is, or upon the
consummation of an identified event in the immediate future will be, a PTP and
(B) an opinion rendered by independent counsel familiar with such matters
addressed to a holder or holders of Series D Preferred Units, that the
Partnership is or likely is, or upon the occurrence of a defined event in the
immediate future will be or likely will be, a PTP. In addition, the Series D
Preferred Units may be exchanged for Series D Preferred Shares, in whole but not
in part unless expressly otherwise provided herein, at the option of 51% of the
holders of all outstanding Series D Preferred Units after May 5, 2002 and prior
to May 5, 2009 if such holders of a Series D Preferred Units shall deliver to
the General Partner either (i) a private letter ruling addressed to such holder
of Series D Preferred Units or (ii) an opinion of independent counsel reasonably
acceptable to the General Partner based on a change in statute, the enactment of
temporary or final Treasury Regulations or the publication of
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a Revenue Ruling or any other IRS release, in either case to the effect that an
exchange of the Series D Preferred Units at such earlier time would not cause
the Series D Preferred Units to be considered "stock and securities" within the
meaning of section 351(e) of the Code for purposes of determining whether the
holder of such Series D Preferred Units is an "investment company" under section
721(b) of the Code if an exchange is permitted at such earlier date.
(ii) Notwithstanding anything to the contrary set forth in Section
17.8.A(i), if an Series D Exchange Notice (as defined herein) has been delivered
to AMB and the General Partner may, at its option, within ten (10) Business Days
after receipt of the Series D Exchange Notice, elect to cause the Partnership to
redeem all or a portion of the outstanding Series D Preferred Units for cash in
an amount equal to the original Capital Contribution per Series D Preferred Unit
and all accrued and unpaid distributions thereon to the date of redemption. If
the General Partner elects to redeem fewer than all of the outstanding Series D
Preferred Units, the number of Series D Preferred Units held by each holder to
be redeemed shall equal such holder's pro rata share (based on the percentage of
the aggregate number of outstanding Series D Preferred Units that the total
number of Series D Preferred Units held by such holder represents) of the
aggregate number of Series D Preferred Units being redeemed.
(iii) In the event an exchange of all Series D Preferred Units pursuant
to Section 17.8.A would violate the provisions on ownership limitation of AMB
set forth in Section 7 of Article Third of the Series D Articles Supplementary,
each holder of Series D Preferred Units shall be entitled to exchange, pursuant
to the provisions of Section 17.8.B, a number of Series D Preferred Units which
would comply with the provisions on the ownership limitation of AMB set forth in
such Section 7 of Article Third of the Series D Articles Supplementary, with
respect to such holder, and any Series D Preferred Units not so exchanged (the
"Series D Excess Units") shall be redeemed by the Partnership for cash in an
amount equal to the original Capital Contribution per Series D Excess Unit, plus
any accrued and unpaid distributions thereon to the date of redemption subject
to any restriction thereon contained in any debt instrument or agreement of the
Partnership. In the event an exchange would result in Series D Excess Units, as
a condition to such exchange, each holder of such units agrees to provide
representations and covenants reasonably requested by AMB relating to (i) the
widely held nature of the interests in such holder, sufficient to assure AMB
that the holder's ownership of stock of AMB (without regard to the limits
described above) will not cause any individual to own in excess of 9.0% of the
stock of AMB; and (ii) to the extent such Holder can so represent and covenant
without obtaining information from its owners (other than one or more direct or
indirect parent corporations, limited liability companies or partnerships and
not the holders of any interests in any such parent), the Holder's ownership of
tenants of the Partnership and its affiliates. For purposes of determining the
number of Series D Excess Units under this Section 17.8.A(iii), the "Ownership
Limit" set forth in the Series D Articles Supplementary shall be deemed to be
9.0%. To the extent the General Partner would not be able to pay the cash set
forth above in exchange for the Series D Excess Units, and to the extent
consistent with the REIT Charter, AMB agrees that it will grant to the holders
of the Series D Preferred Units exceptions to the Ownership Limit set forth in
the Series D Articles Supplementary sufficient to allow such Holders to exchange
all of their Series D Preferred Units for Series D Preferred Shares; provided
such holders furnish to AMB representations acceptable to AMB in its sole and
absolute discretion which assure AMB that such exceptions will not jeopardize
AMB's tax status as a REIT for purposes of federal and applicable state law.
Notwithstanding any provision of this Agreement to the contrary, no Series
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D Limited Partner shall be entitled to effect an exchange of Series D Preferred
Units for Series D Preferred Shares to the extent that ownership or right to
acquire such shares would cause the Partner or any other Person or, in the
opinion of counsel selected by AMB, may cause the Partner or any other Person,
to violate the restrictions on ownership and transfer of Series D Preferred
Shares set forth in the REIT Charter. To the extent any such attempted exchange
for Series D Preferred Shares would be in violation of the previous sentence, it
shall be void ab initio and such Series D Limited Partner shall not acquire any
rights or economic interest in the Series D Preferred Shares otherwise issuable
upon such exchange.
(iv) The redemption of Series D Preferred Units described in Section
17.8.A(ii) and (iii) shall be subject to the provisions of Section 17.5.B(i) and
Section 17.5.C(ii); provided, however, that the term "Series D Redemption Price"
in such Sections 17.5.B(i) and 17.5.C(ii) shall be read to mean the original
Capital Contribution per Series D Preferred Unit being redeemed as set forth on
Exhibit A plus all accrued and unpaid distributions to the redemption date.
B. Procedure for Exchange of Series D Preferred Units and/or Series D
Redemption.
(i) Any exchange shall be exercised pursuant to a notice of exchange
(the "Series D Exchange Notice") delivered to AMB and the General Partner by the
Partners representing at least 51% of the outstanding Series D Preferred Units
(or by the Series D Contributor in the case of an exchange pursuant to the last
sentence of Section 17.8.A.(i) hereof) by (a) fax and (b) by certified mail
postage prepaid. The General Partner may effect any exchange of Series D
Preferred Units, or exercise its option to cause the Partnership to redeem any
portion of the Series D Preferred Units for cash pursuant to Section 17.8.A(ii)
or redeem Series D Excess Units pursuant to Section 17.8.A(iii), by delivering
to each holder of record of Series D Preferred Units, within ten (10) Business
Days following receipt of the Series D Exchange Notice, (a) if the General
Partner elects to cause the Partnership to acquire any of the Series D Preferred
Units then outstanding, (1) certificates representing the Series D Preferred
Shares being issued in exchange for the Series D Preferred Units of such holder
being exchanged and (2) a written notice (a "Series D Redemption Notice")
stating (A) the redemption date, which may be the date of such Series D
Redemption Notice or any other date which is not later than sixty (60) days
following the receipt of the Series D Exchange Notice, (B) the redemption price,
(C) the place or places where the Series D Preferred Units are to be surrendered
and (D) that distributions on the Series D Preferred Units will cease to accrue
on such redemption date, or (b) if the General Partner elects to cause the
Partnership to redeem all of the Series D Preferred Units then outstanding in
exchange for cash, a Series D Redemption Notice. Series D Preferred Units shall
be deemed canceled (and any corresponding Partnership Interest represented
thereby deemed terminated) simultaneously with the delivery of shares of Series
D Preferred Shares (with respect to Series D Preferred Units exchanged) or
simultaneously with the redemption date (with respect to Series D Preferred
Units redeemed). Holders of Series D Preferred Units shall deliver any canceled
certificates representing Series D Preferred Units which have been exchanged or
redeemed to the office of General Partner (which currently is located at 505
Montgomery Street, San Francisco, California 94111) within ten (10) Business
Days of the exchange or redemption with respect thereto. Notwithstanding
anything to the contrary contained herein, any and all Series D Preferred Units
to be exchanged for Series D Preferred Shares pursuant to this Section 17.8
shall
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be so exchanged in a single transaction at one time. As a condition to exchange,
AMB may require the holders of Series D Preferred Units to make such
representations as may be reasonably necessary for the General Partner to
establish that the issuance of Series D Preferred Shares pursuant to the
exchange shall not be required to be registered under the Securities Act or any
state securities laws. Any Series D Preferred Shares issued pursuant to this
Section 17.8 shall be delivered as shares which are duly authorized, validly
issued, fully paid and nonassessable, free of any pledge, lien, encumbrance or
restriction other than those provided in the REIT Charter, the Bylaws of AMB,
the Securities Act and relevant state securities or blue sky laws.
The certificates representing the Series D Preferred Shares issued upon
exchange of the Series D Preferred Units shall contain the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT (A)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), AND STATE SECURITIES LAWS OR (B) IF THE
CORPORATION HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL
FOR THE HOLDER OF THE SHARES REPRESENTED HEREBY, OR OTHER EVIDENCE
SATISFACTORY TO THE CORPORATION, THAT SUCH TRANSFER, SALE, ASSIGNMENT,
PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS
OF SECTION 5 OF THE ACT AND STATE SECURITIES LAWS AND THE RULES AND
REGULATIONS THEREUNDER.
(ii) In the event of an exchange of Series D Preferred Units for Series
D Preferred Shares, an amount equal to the accrued and unpaid distributions to
the date of exchange on any Series D Preferred Units tendered for exchange shall
(i) accrue on the Series D Preferred Shares into which such Series D Preferred
Units are exchanged, and (ii) continue to accrue on such Series D Preferred
Units, which shall remain outstanding following such exchange, with the General
Partner as the holder of such Series D Preferred Units. Notwithstanding anything
to the contrary set forth herein, in no event shall a Holder of a Series D
Preferred Unit that was validly exchanged for Series D Preferred Shares pursuant
to this Section (other than the General Partner holding such Series D Preferred
Unit following any such exchange), receive a distribution out of Available Cash
of the Partnership, if such Holder, after exchange, is entitled to receive a
distribution with respect to the Series D Preferred Shares for which such Series
D Preferred Unit was exchanged or redeemed. Further for purposes of the
foregoing, in the event of an exchange of Series D Preferred Units for Series D
Preferred Shares, if the accrued and unpaid distributions per Series D Preferred
Unit is not the same for each Series D Preferred Unit, the accrued and unpaid
distributions per Series D Preferred Unit for each such Series D Preferred Unit
shall be equal to the greatest amount of such accrued and unpaid distributions
per Series D Preferred Unit on any such unit.
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<PAGE> 87
(iii) Fractional Series D Preferred Shares are not to be issued upon
exchange but, in lieu thereof, the General Partner will pay a cash adjustment
based upon the fair market value of the Series D Preferred Shares on the day
prior to the exchange date as determined in good faith by the board of directors
of the General Partner.
C. Adjustment of Series D Exchange Price. In case AMB shall be a party
to any transaction (including, without limitation, a merger, consolidation,
statutory share exchange, tender offer for all or substantially all of AMB's
capital stock or sale of all or substantially all of AMB's assets), in each case
as a result of which the Series D Preferred Shares will be converted into the
right to receive shares of capital stock, other securities or other property
(including cash or any combination thereof), each Series D Preferred Unit will
thereafter be exchangeable into the kind and amount of shares of capital stock
and other securities and property receivable (including cash or any combination
thereof) upon the consummation of such transaction by a holder of that number of
Series D Preferred Shares or fraction thereof into which one Series D Preferred
Unit was exchangeable immediately prior to such transaction. AMB may not become
a party to any such transaction unless the terms thereof are consistent with the
foregoing. AMB and the Operating Partnership further agree that, notwithstanding
any transaction to which either may be a party (including, without limitation,
any merger, consolidation, statutory share exchange, tender offer for all or
substantially all of such entity's capital stock or partnership interests or
sale of all or substantially all of such entity's assets), immediately following
any such transaction, the issuer or issuers of any shares of capital stock and
other securities into which the Series D Preferred Units shall be exchangeable
pursuant to this Section 17.8 shall be the same issuer or issuers of shares of
capital stock and other securities into which both (i) the Series B Preferred
Units are then exchangeable (or, if the Series B Preferred Units have previously
been redeemed in full, would have been then exchangeable if then still
outstanding) and (ii) the Series C Preferred Units are then exchangeable (or, if
the Series C Preferred Units have previously been redeemed in full, would have
been then exchangeable if then still outstanding).
Section 17.9. No Conversion Rights
The Series D Preferred Units shall not be convertible into any other
class or series of interest in the Partnership.
Section 17.10. No Sinking Fund
No sinking fund shall be established for the retirement or redemption of
Series D Preferred Units.
(Signature Pages Follow)
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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 HOLDING CORPORATION,
a Maryland corporation
By:
---------------------------------
John T. Roberts, Jr.
Senior Vice President
and Director of Capital Markets
COMMON LIMITED PARTNER:
AMB PROPERTY, L.P., a Delaware
limited partnership
By: AMB Property Corporation,
its general partner
By:
---------------------------------
John T. Roberts, Jr.
Senior Vice President and
Director of Capital Markets
GENERAL PARTNER OF COMMON LIMITED
PARTNER:
AMB PROPERTY CORPORATION,
a Maryland corporation
By:
---------------------------------
John T. Roberts, Jr.
Senior Vice President and
Director of Capital Markets
S-1
<PAGE> 89
SERIES D LIMITED PARTNER:
J.P. MORGAN MOSAIC FUND, LLC,
a Delaware limited liability company
By: J.P. MORGAN PRIVATE INVESTMENTS
INC., as manager of J.P. Morgan
Mosaic Fund, LLC
By:
---------------------------------
Name:
Title:
S-2
<PAGE> 90
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 Contribution Property Contributions Units Interest
- --------------- ---- ------------ -------- ------------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
GENERAL PARTNER:
AMB Property Holding 11/26/97 -- 3,626,023 3,626,023 172,668 .99725%
Corporation
LIMITED PARTNERS:
AMB Property, L.P. 11/26/97 -- 358,976,301 358,976,301 17,094,110 98.72782%
ASDF 06/30/98 -- 1,161,489 1,161,489 47,602 .27493%
----------- ----------- ----------- ----------- ---------
TOTAL COMMON UNITS -- 363,763,813 363,763,813 17,314,380 100.00000%
=========== =========== =========== =========== =========
</TABLE>
A-1
<PAGE> 91
EXHIBIT A
PARTNERS, CONTRIBUTIONS, AND PARTNERSHIP INTERESTS
II. SERIES C PREFERRED UNITS
<TABLE>
<CAPTION>
Agreed
Value of Series C
Contribution Cash Contributed Total Partnership Percentage
Name of Partner Date Contributions Property Contributions Units Interest
- --------------- ---- ------------- -------- ------------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
LIMITED PARTNER:
Belcrest Realty 11/24/98 $ 24,000,000 -- $ 24,000,000 480,000 21.8182%
Corporation
Belair Real Estate Corporation 11/24/98 $ 86,000,000 -- $ 86,000,000 1,720,000 78.1818%
------------ -------- ------------ ------------ --------
TOTAL SERIES C PREFERRED UNITS $110,000,000 -- $110,000,000 2,200,000 100.0000%
============ ======== ============ ============ ========
</TABLE>
III. SERIES D PREFERRED UNITS
<TABLE>
<CAPTION>
Agreed
Value of Series D
Contribution Cash Contributed Total Partnership Percentage
Name of Partner Date Contributions Property Contributions Units Interest
- --------------- ---- ------------- -------- ------------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
LIMITED PARTNER:
J.P. Morgan Mosaic Fund, LLC 5/5/99 $79,766,850 -- $79,766,850 1,595,337 100.0000%
----------- -------- ----------- ----------- --------
TOTAL SERIES D PREFERRED UNITS $79,766,850 -- $79,766,850 1,595,337 100.0000%
=========== ======== =========== =========== ========
</TABLE>
A-2
<PAGE> 92
EXHIBIT B
NOTICE OF REDEMPTION
The undersigned hereby [irrevocably] (i) exchanges ____________ Limited
Partnership Units in AMB Property II, L.P. in accordance with the terms of the
Limited Partnership Agreement of AMB Property II, L.P. dated as of
_________________, as amended, and the rights of [Series D] 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,
Preferred Stock) deliverable upon [Series D] Redemption or exchange be delivered
to the address specified below, and if applicable, that such Preferred Stock 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 Shares in the name of:
Please insert social security or identifying number:
Address (if different than above):
B-1
<PAGE> 93
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.
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EXHIBIT D-1
FORM OF PARTNERSHIP UNIT CERTIFICATE
CERTIFICATE FOR PARTNERSHIP UNITS OF
AMB PROPERTY II, L.P.
No. _______________ ____________ UNITS
AMB Property Holding Corporation as the General Partner of AMB Property
II, 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 II, 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 HOLDING CORPORATION
General Partner of AMB Property II,
L.P.
ATTEST:
By:_______________________________ By:_________________________________
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<PAGE> 95
EXHIBIT E
SCHEDULE OF PARTNERS' OWNERSHIP
WITH RESPECT TO TENANTS
E-1
<PAGE> 96
EXHIBIT F
SCHEDULE OF REIT SHARES
ACTUALLY OR CONSTRUCTIVELY OWNED BY 25% LIMITED PARTNERS
OTHER THAN THOSE ACQUIRED PURSUANT TO AN EXCHANGE
F-1
<PAGE> 97
EXHIBIT G
SCHEDULE OF CERTAIN AGREEMENTS RELATING TO
PROPERTIES WITH RESTRICTIONS ON DISPOSITION
PURSUANT TO SECTION 7.3.F
1. APLP II Contribution Agreement dated as of May 21, 1998, by and between
Hayes Realty Company, an Illinois general partnership and AMB Property
II, L.P., a Delaware limited partnership.
G-1
<PAGE> 98
EXHIBIT H
SCHEDULE OF CERTAIN AGREEMENTS CONTAINING
LIMITATIONS ON GENERAL PARTNERS GENERAL AUTHORITY
1. APLP II Contribution Agreement dated as of May 21, 1998, by and between
Hayes Realty Company, an Illinois general partnership and AMB Property
II, L.P., a Delaware limited partnership.
H-1
<PAGE> 99
EXHIBIT I
RESTRICTIONS ON OWNERSHIP AND TRANSFER TO PRESERVE TAX BENEFIT
(a) Definitions. for the purposes of this Exhibit I, the following terms
shall have the following meanings:
"Charitable Beneficiary" shall mean one or more beneficiaries of
a Trust, as determined pursuant to subsection (c)(vi), each of which
shall be an organization described in Sections 170(b)(1)(A), 170(c)(2)
and 501(c)(3) of the Code.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Constructive Ownership" shall mean ownership of Partnership
Units by a Person who is or would be treated as an owner of such
Partnership Units either actually or constructively through the
application of Section 318 of the Code, as modified by Section 856(d)(5)
of the Code. The terms "Constructive Owner," "Constructively Owns" and
"Constructively Owned" shall have the correlative meanings.
"Exempted Person" shall mean any Person exempted from time to
time by the General Partner in its sole and absolute discretion. The
Operating Partnership shall be considered an Exempted Person.
"Market Price" shall mean the market price of the Partnership
Units on the relevant date as determined in good faith by the General
Partner; provided, however, if AMB has outstanding shares of capital
stock which correspond to such Partnership Units (i.e., the Series C
Preferred Shares), the Market Price of each such Partnership Unit shall
be equal to the Value of a share of such capital stock, subject to
adjustment if the right to exchange such Partnership Units for such
stock is other than one to one.
"Ownership Limit" shall mean 24.9% of the capital or profits
interests of the Partnership.
"Person" shall mean an individual, corporation, partnership,
limited liability company, estate, trust (including a trust qualified
under Section 401(a) or 501(c)(17) of the Code), a portion of a trust
permanently set aside for or to be used exclusively for the purposes
described in Section 642(c) of the Code, association, private foundation
within the meaning of Section 509(a) of the Code, joint stock company or
other entity.
"Purported Beneficial Transferee" shall mean, with respect to
any purported Transfer (or other event) which results in a transfer to a
Trust, as provided in subsection (b)(ii), the Purported Record
Transferee, unless the Purported Record Transferee would have acquired
or owned Partnership Units for another Person who
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<PAGE> 100
is the beneficial transferee or owner of such Partnership Units, in
which case the Purported Beneficial Transferee shall be such Person.
"Purported Record Transferee" shall mean, with respect to any
purported Transfer (or other event) which results in a transfer to a
Trust, as provided in subsection (b)(ii), the holder of the Partnership
Units as set forth or to be set forth in Exhibit A to the Partnership
Agreement, and any Assignee of such Partnership Units, if such Transfer
or ownership had been valid under subsection (b)(i).
"Restriction Termination Date" shall mean the first day after
the date hereof on which the General Partner determines, in its sole and
absolute discretion, that compliance with subsection (b)(i) is no longer
necessary or advisable.
"Transfer" shall mean any sale, transfer, gift, assignment,
devise or other disposition of Partnership Units, (including (i) the
granting of any option or entering into any agreement for the sale,
transfer or other disposition of Partnership Units or (ii) the sale,
transfer, assignment or other disposition of any securities (or rights
convertible into or exchangeable for Partnership Units)), whether
voluntary or involuntary, whether such transfer has occurred of record
or beneficially or Constructively (including but not limited to
transfers of interests in other entities which results in changes in
Constructive Ownership of Partnership Units), and whether such transfer
has occurred by operation of law or otherwise.
"Trust" shall mean each of the trusts provided for in subsection
(c).
"Trustee" shall mean any Person unaffiliated with the
Partnership, or a Purported Beneficial Transferee, or a Purported Record
Transferee, that is appointed by the Partnership to serve as trustee of
a Trust.
Capitalized terms used and not defined herein shall have the meanings ascribed
to them in the Third Amended and Restated Agreement of Limited Partnership of
AMB Property II, L.P. (the "Partnership Agreement"), as such agreement may be
amended from time to time. All references to "Section" refer to the Partnership
Agreement.
(b) Restriction on Ownership and Transfers.
(i) Prior to the Restriction Termination Date, no Person, other
than an Exempted Person, shall at any time Constructively Own Partnership Units
in excess of the Ownership Limit if the representations contained in Section
3.4.D are not at such time true and correct.
(ii) If, prior to the Restriction Termination Date, any Transfer
or other event occurs that, if effective, would result in any Person
Constructively Owning Partnership Units in violation of subsection (b)(i), (1)
then that number of Partnership Units that otherwise would cause such Person to
violate subsection (b)(i) (rounded up to the nearest whole Partnership Unit)
shall be automatically transferred (provided such Transfer is not in violation
of the restrictions on transfer
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<PAGE> 101
set forth in the Partnership Agreement, except to the extent the General Partner
waives such restrictions) to a Trust for the benefit of a Charitable
Beneficiary, as described in subsection (c), effective as of the close of
business on the business day prior to the date of such Transfer or other event,
and such Purported Beneficial Transferee shall thereafter have no rights in such
Partnership Units or (2) if, for any reason, the transfer to the Trust described
in clause (1) of this sentence is not automatically effective as provided
therein to prevent any Person from Constructively Owning Partnership Units in
violation of subsection (b)(i), then the Transfer of that number of Partnership
Units that otherwise would cause any Person to violate subsection (b)(i) shall
be void ab initio, and the Purported Beneficial Transferee shall have no rights
in such Partnership Units.
(c) Transfers of Partnership Units in Trust.
(i) Upon any purported Transfer or other event described in
subsection (b)(ii), such Partnership Units shall be deemed to have been
transferred to the Trustee in his capacity as trustee of a Trust for the
exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the
Trustee shall be deemed to be effective as of the close of business on the
business day prior to the purported Transfer or other event that results in a
transfer to the Trust pursuant to subsection (b)(ii). The Trustee shall be
appointed by the Partnership and shall be a Person unaffiliated with the
Partnership, any Purported Beneficial Transferee, or any Purported Record
Transferee. Each Charitable Beneficiary shall be designated by the Partnership
as provided in subsection (c)(vi).
(ii) Partnership Units held by the Trustee shall be issued and
outstanding Partnership Units of the Partnership. The Purported Beneficial
Transferee or Purported Record Transferee shall have no rights in the
Partnership Units held by the Trustee. The Purported Beneficial Transferee or
Purported Record Transferee shall not benefit economically from ownership of any
Partnership Units held in trust by the Trustee, shall have no rights to
distributions or allocations with respect to Partnership Units held in the Trust
and shall not possess any rights to vote or other rights attributable to the
Partnership Units held in the Trust.
(iii) The Trustee shall have all voting rights and rights to
distributions and allocations with respect to Partnership Units held in the
Trust, which rights shall be exercised for the exclusive benefit of the
Charitable Beneficiary. Any distribution paid prior to the discovery by the
Partnership that Partnership Units have been transferred to the Trustee shall be
paid to the Trustee upon demand, and any distribution with respect to such
Partnership Units shall be paid when due to the Trustee. Any distributions so
paid over to the Trustee shall be held in trust for the Charitable Beneficiary.
The Purported Record Transferee and Purported Beneficial
Transferee shall have no voting rights with respect to the Partnership Units
held in the Trust and, subject to Delaware law, effective as of the date the
Partnership Units has been transferred to the Trustee, the Trustee shall have
the authority (at the Trustee's sole discretion) (i) to rescind as void any vote
cast by a Purported Record Transferee with respect to such Partnership Units
prior to the discovery by the Partnership that the Partnership Units has been
transferred to the Trustee and (ii) to recast such vote in accordance with the
desires of the Trustee acting for the benefit of the Charitable Beneficiary;
provided, however, that if the Partnership has already taken irreversible
action, then the Trustee shall not have the authority to rescind and recast such
vote. Notwithstanding any other provision of
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this Exhibit I to the contrary, until the Partnership has received notification
that the Partnership Units have been transferred into a Trust, the Partnership
shall be entitled to rely on its Partnership Unit transfer and other unitholder
records for purposes of preparing Exhibit A to the Partnership Agreement, lists
of unitholders entitled to vote at meetings, and otherwise conducting votes of
Partners.
(iv) Within 20 days of receiving notice from the Partnership
that Partnership Units have been transferred to the Trust, the Trustee of the
Trust shall, in accordance with the terms of (and subject to the limitations
contained in) the Partnership Agreement, sell the Partnership Units held in the
Trust to a Person, designated by the Trustee, whose ownership of the Partnership
Units will not violate the ownership limitations set forth in subsection (b)(i).
Upon such sale, the interest of the Charitable Beneficiary in the Partnership
Units sold shall terminate and the Trustee shall distribute the net proceeds of
the sale to the Purported Record Transferee and to the Charitable Beneficiary as
provided in this subsection (c)(iv). The Purported Record Transferee shall
receive the lesser of (1) the price paid by the Purported Record Transferee for
the Partnership Units in the transaction that resulted in such transfer to the
Trust (or, if the event which resulted in the transfer to the Trust did not
involve a purchase of such Partnership Units at Market Price, the Market Price
of such Partnership Units on the day of the event which resulted in the transfer
of such Partnership Units to the Trust) and (2) the price per Partnership Unit
received by the Trustee (net of any commissions and other expenses of sale) from
the sale or other disposition of the Partnership Units held in the Trust. Any
net sales proceeds in excess of the amount payable to the Purported Record
Transferee shall be immediately paid to the Charitable Beneficiary together with
any distributions thereon. If, prior to the discovery by the Partnership that
Partnership Units have been transferred to the Trustee, such Partnership Units
are sold by a Purported Record Transferee then (i) such Partnership Units shall
be deemed to have been sold on behalf of the Trust and (ii) to the extent that
the Purported Record Transferee received an amount for such Partnership Units
that exceeds the amount that such Purported Record Transferee was entitled to
receive pursuant to this subsection (c)(iv), such excess shall be paid to the
Trustee upon demand. The expenses described in item (2) above shall include any
expenses of administering the Trust, any transfer of Partnership Units thereto
or disposition of Partnership Units thereby, which shall be allocated equitably
among the Partnership Units which are transferred to the Trust.
(v) Partnership Units transferred to the Trustee shall be deemed
to have been offered for sale to the Partnership, or its designee, at a price
per Partnership Unit equal to the lesser of (i) the price paid by the Purported
Record Transferee for the Partnership Units in the transaction that resulted in
such transfer to the Trust (or, if the event which resulted in the transfer to
the Trust did not involve a purchase of such Partnership Units at Market Price,
the Market Price of such Partnership Units on the day of the event which
resulted in the transfer of such Partnership Units to the Trust) and (ii) the
Market Price on the date the Partnership, or its designee, accepts such offer.
The Partnership shall have the right to accept such offer until the Trustee has
sold the Partnership Units held in the Trust pursuant to subsection (c)(iv).
Upon such a sale to the Partnership, the interest of the Charitable Beneficiary
in the Partnership Units sold shall terminate and the Trustee shall distribute
the net proceeds of the sale to the Purported Record Transferee and any
distributions held by the Trustee with respect to such Partnership Units shall
thereupon be paid to the Charitable Beneficiary.
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(vi) By written notice to the Trustee, the Partnership shall
designate one or more nonprofit organizations to be the Charitable Beneficiary
of the interest in the Trust such that the Partnership Units held in the Trust
would not violate the restrictions set forth in subsection (b)(i) in the hands
of such Charitable Beneficiary.
(d) Remedies For Breach. If the General Partner shall at any time
determine in good faith that a Transfer or other event has taken place in
violation of subsection (b) or that a Person intends to acquire, has attempted
to acquire or may acquire beneficial ownership (determined without reference to
any rules of attribution) or Constructive Ownership of any Partnership Units of
the Partnership in violation of subsection (b), the General Partner shall take
such action as it deems advisable to refuse to give effect or to prevent such
Transfer, including, but not limited to, causing the Partnership to redeem
Partnership Units, refusing to give effect to such Transfer on the books of the
Partnership or instituting proceedings to enjoin such Transfer; provided,
however, that any Transfers (or, in the case of events other than a Transfer,
ownership or Constructive Ownership) in violation of subsection (b)(i), shall
automatically result in the transfer to a Trust as described in subsection
(b)(ii).
(e) Notice of Restricted Transfer. Any Person who acquires or attempts
to acquire or own Partnership Units in violation of subsection (b), or any
Person who is a Purported Beneficial Transferee such that an automatic transfer
to a Trust results under subsection (b)(ii), shall immediately give written
notice to the Partnership of such event and shall provide to the Partnership
such other information as the Partnership may request in order to determine the
effect, if any, of such Transfer or attempted Transfer on such Person's
compliance with subsection (b)(i).
(f) Owners Required To Provide Information. Prior to the Restriction
Termination Date each Person who is a beneficial owner or Constructive Owner of
Partnership Units and each Person who is holding Partnership Units for a
beneficial owner or Constructive Owner shall provide to the Partnership such
information that the Partnership may request, in good faith, in order to
determine the Partnership's status as a partnership (as opposed to a
corporation) or AMB's status as a REIT for federal income tax purposes.
(g) Remedies Not Limited. Nothing contained in this Exhibit I shall
limit the authority of the General Partner to take such other action as it deems
necessary or advisable to protect the Partnership and the interests of its
Partners by preservation of the Partnership's status as a partnership (as
opposed to a corporation) or AMB's status as a REIT for federal income tax
purposes.
(h) Ambiguity. In the case of an ambiguity in the application of any of
the provisions of this Exhibit I, including any definition contained in
subsection (a), the General Partner shall have the power to determine the
application of the provisions of this Exhibit I with respect to any situation
based on the facts known to it. In the event that a provision of this Exhibit I
requires an action by the General Partner and Exhibit I fails to provide
specific guidance with respect to such action, the General Partner shall have
the power to determine the action to be taken so long as such action is not
contrary to the provisions of Exhibit I. Absent a decision to the contrary by
the General Partner (which the General Partner may make in its sole and absolute
discretion), if a Person would have (but for the remedies set forth in
subsection (b)) acquired Constructive
I-5
<PAGE> 104
Ownership of Partnership Units in violation of subsection (b)(i), such remedies
(as applicable) shall apply first to the Partnership Units which, but for such
remedies, would have been actually owned by such Person, and second to
Partnership Units which, but for such remedies, would have been Constructively
Owned (but not actually owned) by such Person, pro rata among the Persons who
actually own such Partnership Units based upon the relative number of the
Partnership Units held by each such Person.
I-6
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<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
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0
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