As filed with the Securities and Exchange Commission on February __, 1999
Registration No. 333-52835-99
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1 TO FORM S-4 REGISTRATION STATEMENT
ON
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MISSION WEST PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
MARYLAND 952635431
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR IDENTIFICATION NO.)
ORGANIZATION)
CARL E. BERG
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
10050 BANDLEY DRIVE MISSION WEST PROPERTIES, INC.
CUPERTINO, CALIFORNIA 10050 BANDLEY DRIVE
95014-2188 CUPERTINO, CALIFORNIA 95014-2188
(408) 725-0700 (408) 725-0700
(Address including zip code, (Address including zip code, and
and telephone number, including telephone number, including
area code, of registrant's area code, of registrant's
principal executive offices) principal executive offices)
-------------------
COPIES TO:
ALAN B. KALIN
GRAHAM & JAMES LLP
600 HANSEN WAY
PALO ALTO, CALIFORNIA 94304-1043
-------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable following the effectiveness of this
Registration Statement.
-------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.
|_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. |X| If this Form is
filed to register additional securities for an offering pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act
registration statement number of earlier effective registration statement for
the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.|_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
*THIS REGISTRATION STATEMENT IS FILED AS POST-EFFECTIVE AMENDMENT NO. 1 TO
THE REGISTRANT'S FORM S-4 REGISTRATION STATEMENT NO. 333-52835-99 DECLARED
EFFECTIVE ON NOVEMBER 23, 1998. ALL FILING FEES WERE PAID WITH THE EARLIER
REGISTRATION STATEMENT.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
===============================================================================
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SECURITIES DESCRIBED IN THIS PROSPECTUS MAY NOT BE SOLD UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED FEBRUARY __, 1999
PROSPECTUS
MISSION WEST PROPERTIES, INC.
6,370,058 Shares of common stock
$.001 par value
The stockholders of Mission West Properties, Inc. listed below are offering
and selling 6,370,058 shares of common stock, under this prospectus. All of the
selling stockholders purchased their shares from us on or after December 29,
1998 under the terms of May 1998 stock purchase agreements. Some or all of the
selling stockholders expect to sell their shares.
The selling stockholders may offer their shares of common stock through
public or private transactions, on or off the United States exchanges, at
prevailing market prices, or at privately negotiated prices.
The common stock is listed on the American Stock Exchange and the Pacific
Exchange and trades on these stock exchanges with the symbol "MSW". On February
__, 1999 the closing price of one share of common stock, as quoted on the
American Stock Exchange was $____.
------------
THE SHARES OF COMMON STOCK INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 2.
------------
The date of this prospectus is ________ __, 1999.
<PAGE>
THE COMPANY
We are engaged in the management, leasing, marketing, development and
acquisition of R&D office properties, primarily located in the "Silicon Valley"
portion of the San Francisco Bay Area. We currently manage 71 properties
totaling 4.51 million square feet, which are owned by four separate operating
partnerships. We are the sole general partner of each of the operating
partnerships. In 1999, we will elect to be taxed as a real estate investment
trust ("REIT") for federal income tax purposes and will operate as a
self-managed, self-administered and fully integrated REIT.
Our principal executive offices are located at 10050 Bandley Drive,
Cupertino, California 95014, and our telephone number is (408) 725-0700.
RISK FACTORS
In addition to the other information contained in this prospectus,
investors should consider carefully the following risk factors before making an
investment decision concerning the common stock. This prospectus contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). In accordance with the Reform
Act, cautionary statements set forth below and additional cautionary statements
contained in the section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Company's Form 10-Q/A for
the quarter ended September 30, 1998 pertain to these forward-looking
statements. These cautionary statements identify certain important factors that
could cause actual results to differ materially from those in the
forward-looking statements and from historical trends.
DEPENDENCE ON CARL E. BERG
We are substantially dependent upon the leadership of Carl E. Berg, our
Chairman and Chief Executive Officer. He manages our day-to-day operations and
devotes a significant portion of his time to our affairs, but he has a number of
other business interests, as well. Some of these other interests involve
investment and director relationships with a number of technology companies,
including some of our tenants. We obtain valuable information about our markets
and business opportunities from Mr. Berg's other activities. Losing Mr. Berg's
knowledge and abilities could have a material adverse effect on our business and
the value of the common stock.
CONTROL OF MISSION WEST PROPERTIES AND THE OPERATING PARTNERSHIPS BY MR. BERG
AND HIS AFFILIATES
OWNERSHIP INTEREST. Mr. Berg, his brother Clyde J. Berg, members of their
family and certain trusts and other entities which they and their family members
control (the "Berg Group") own limited partnership interests ("L.P. Units")
representing approximately 81.8% ownership of the operating partnerships. The
L.P. Units may be converted into shares of common stock under certain
circumstances which upon conversion would represent voting control of Mission
West Properties. The Berg Group's ability to exchange their L.P. Units for
common stock permits them to exert substantial influence over the management and
direction of our corporation.
BOARD OF DIRECTORS REPRESENTATION. The Berg Group has the right to nominate
two of our current five directors for election to the board of directors as long
as they and their affiliates beneficially own at least 15% of the total number
of our outstanding securities, including all securities, such as L.P. Units,
exchangeable or redeemable for common stock or any other voting stock. If the
Berg Group's ownership percentage falls below 15% but is at least 10%, the Berg
Group has the right to nominate one person for election to our board of
directors. Their right to nominate directors may be considered to give the Berg
Group and Mr. Berg substantial control and influence over the management and
direction of our corporation.
SPECIAL BOARD VOTING PROVISIONS. Our governing corporate documents, which
are our Articles of Amendment and Restatement and our Bylaws also provide
substantial control rights for Mr. Berg and the Berg Group. These rights include
a requirement that Mr. Berg or someone he has designated to replace him as a
director approve certain fundamental corporate actions, including amendments to
our governing corporate documents and any merger, consolidation or sale of all
or substantially all of our assets or the assets of the operating partnerships.
In addition, our Bylaws provide that a quorum necessary to hold a valid meeting
of the board of directors must include Mr. Berg or someone he has designated to
replace him as a director. Also, directors representing more than 75% of the
entire board of directors must approve other significant transactions such as
incurring debt above certain amounts and conducting business other than through
the operating partnerships.
LIMITED PARTNER APPROVAL RIGHTS. Mr. Berg and other limited partners,
including other members of the Berg Group, also may restrict our operations and
activities through rights provided under the terms of the Amended and Restated
Agreement of Limited Partnership which governs each of the operating
partnerships and our legal relationship to each operating partnership as its
general partner.
POTENTIAL CONFLICTS OF INTEREST WITH THE BERG GROUP
Mr. Berg and other members of the Berg Group possess significant rights to
influence and control the Company and the operating partnerships and have a
variety of interests that may not be consistent with the interests of our other
stockholders. For example, our headquarters are leased from an entity owned by
Mr. Berg and other Berg Group members, and we pay them rent of approximately
$15,000 per month. Although Mr. Berg has agreed to provide us with the first
opportunity to pursue R&D office property development and acquisition activities
in Washington, Oregon and California, there are many other real estate
activities and other business activities that Mr. Berg and other members of the
Berg Group are free to pursue. If we decline an opportunity that has been
offered to us, Mr. Berg may pursue it. This would reduce the amount of time that
he could devote to our affairs and could result in the development by him or
other Berg Group members of properties that compete with our properties for
tenants. In general, we have agreed to limit the liability of Mr. Berg and other
members of the Berg Group to our corporation and stockholders arising from their
pursuit of these other opportunities. Mr. Berg and other Berg Group members have
agreed that all new transactions between us and any of them, or between us and
any entity in which they directly or indirectly own 5% or more of the equity
interests, including the operating partnerships for this purpose, must be
approved by the Independent Directors Committee of our board of directors. This
Committee currently consists of three directors who are independent of Mr. Berg
and the other members of the Berg Group.
EXCLUDED PROPERTIES. Mr. Berg and other members of the Berg Group have
retained certain R&D office properties in which we and the operating
partnerships have no ownership interests. Under certain circumstances, efforts
of Mr. Berg to lease these other properties may interfere with similar efforts
on our behalf.
PENDING DEVELOPMENT PROJECTS. Mr. Berg and other members of the Berg Group
currently own four pending development projects located in the Silicon Valley
that represent a potential total of 11 R&D office properties aggregating
approximately 950,000 rentable square feet. We and the operating partnerships
have agreed under the terms of a Pending Projects Acquisition Agreement to
acquire each of these properties from Mr. Berg and other members of the Berg
Group as it is completed and leased. The sellers may elect to receive cash or
L.P. Units at a value of $4.50 per unit. As the current market price of a share
of common stock is $____, this valuation represents a substantial discount from
the current market value of the common stock that may be issued in exchange for
these L.P. Units. The terms of the Pending Projects Acquisition Agreement were
agreed upon in May 1998 prior to the re-commencement of trading of our Common
Stock, however. Mr. Berg and other members of the Berg Group currently have the
right to obtain as many as 33,513,906 additional L.P. Units in exchange for the
pending development projects. They may elect to receive part of the
consideration in cash. In addition, prior to the sale of any of these properties
the sellers may place debt on the property that we and the operating
partnerships would be required to assume. The amount of any assumed debt would
reduce the value of the acquired property in determining the amount of other
consideration in the form of cash or L.P. Units payable to the sellers, however.
The rights of Mr. Berg and other Berg Group members under the Pending Projects
Acquisition Agreement permit them to acquire substantial additional interests in
the operating partnerships and, in the event of any exchange of their L.P. Units
for common stock, in our corporation, as well.
BERG LAND HOLDINGS. Mr. Berg and other members of the Berg Group also own
several parcels of unimproved land in the Silicon Valley that we and the
operating partnerships have the right to acquire under the terms of the Berg
Land Holdings Option Agreement. Mr. Berg and the other Berg Group members are
not obligated to exercise certain options they hold to acquire the properties
that are subject to the agreement. As a result, we may lose the ability to
expand our portfolio of properties and to increase our income through the
acquisition of those properties. In addition, we have agreed to pay a fixed
amount plus additional charges for any of the properties that we do acquire and
must pay the acquisition price in cash unless otherwise agreed by the sellers.
At the time of acquisition, these properties may be encumbered by debt that we
or the operating partnerships will be required to assume. An increase in our
indebtedness could materially adversely affect our financial condition, results
of operations or ability to make cash distributions to our stockholders. See
"--Real Estate Investment Considerations," "--Uncertainties Regarding
Distributions to Stockholders." The exercise of our options under the Berg Land
Holdings Option Agreement is subject to approval by the Independent Directors
Committee of our board of directors.
TAX CONSEQUENCES OF SALE OF PROPERTIES. Many of our properties have
unrealized taxable gain, which, if sold, could create adverse income tax
consequences for limited partners of the operating partnerships. Mr. Berg, Clyde
J. Berg, and one other limited partner have the right to prevent us and the
operating partnerships from selling or transferring properties which they
designate in any taxable transaction for a period of ten years. As a result, our
opportunities to sell those properties may be limited. If we need to sell any of
those properties to raise cash to service our debt, acquire new properties, pay
cash distributions to stockholders, or for other working capital purposes, we
may be unable to do so.
TERMS OF TRANSFERS; ENFORCEMENT OF AGREEMENT OF LIMITED PARTNERSHIP. The
terms of the Pending Projects Acquisition Agreement, the Berg Land Holdings
Option Agreement, the partnership agreement of each operating partnership, and
the terms of other material agreements in which we have acquired our interests
in the operating partnerships and the properties formerly controlled by Mr. Berg
and members of the Berg Group were not determined through arm's-length
negotiations. In addition, Mr. Berg and representatives of the Berg Group
sitting on our board of directors may be subject to conflicts of interest with
respect to their obligations as our directors to enforce the terms of the
partnership agreement of each operating partnership when it conflicts with their
personal interests. In addition, the terms of our Articles of Amendment and
Restatement and Bylaws were not determined through arm's-length negotiations.
Some of these terms are not as favorable as those that could have been obtained
through arms'-length negotiations.
RELATED PARTY DEBT. We are liable for a loan of approximately $18 million
payable to Berg & Berg Enterprises, Inc., which is a member of the Berg Group.
This loan is secured by three of our properties and matures in March 1999. We
believe that we will be able to repay that loan with proceeds of our existing
line of credit or other sources of working capital. Effective September 30,
1998, we assumed a $100 million line of credit with Wells Fargo Bank N.A.
previously provided to and guaranteed by the members of the Berg Group, which is
secured by 14 of our properties. We have the right to draw on the line of credit
and are liable for repayment of all amounts owing under the line of credit,
which totaled $27,200,992 as of December 31, 1998. The Berg Group members
continue to be liable as guarantors under the line of credit, which expires in
October 1999. If we are unable to repay our debts to Berg & Berg Enterprises,
Inc. or Wells Fargo Bank when due, however, Mr. Berg or other Berg Group
Members, in addition to the lenders, could take action to enforce our payment
obligations.
CHANGES IN POLICIES WITHOUT STOCKHOLDER APPROVAL
Our board of directors determines the investment and financing policies of
the operating partnerships and our policies with respect to certain other
activities, including growth, debt capitalization, distribution and operating
policies. Our board of directors may amend these policies at any time without a
vote of the stockholders. Changes in these policies could materially adversely
affect our financial condition, results of operations, and ability to make cash
distributions to our stockholders.
ANTI-TAKEOVER PROVISIONS
Provisions of our Articles of Amendment and Restatement and our Bylaws
could delay, defer or prevent a transaction or a change in control of our
corporation, or a similar transaction, that might involve a premium price for
holders of common stock or otherwise be in their best interests.
REAL ESTATE INVESTMENT CONSIDERATIONS
Real property investments are subject to varying degrees of risk.
Investment returns available from equity investments in real estate depend in
large part on the amount of income earned and capital appreciation generated by
our properties, as well as our related expenses incurred. If our properties do
not generate revenues sufficient to meet operating expenses, debt service and
capital expenditures, our income and ability to make distributions to our
stockholders will be affected adversely. Income from our properties may also be
adversely affected by general economic conditions, local economic conditions
such as over supply of commercial real estate, the attractiveness of our
properties to tenants and prospective tenants, competition from other available
rental property, our ability to provide adequate maintenance and insurance, the
cost of tenant improvements, leasing commissions and tenant inducements and the
potential of increased operating costs, including real estate taxes. Various
significant expenditures associated with an investment in real estate (such as
mortgage payments, real estate taxes and maintenance expenses) generally are not
reduced when circumstances cause a reduction in revenue from the investment.
Income from properties and real estate values also is affected by a variety of
other factors, such as governmental regulations and applicable laws (including
real estate, zoning and tax laws), interest rate levels and the availability of
financing.
Our properties and an investment in our common stock are also subject to a
number of specific risks, including the following:
o Real estate investments are relatively illiquid which limits our ability to
restructure our portfolio in response to changes in economic or other
conditions.
o All of our properties are located in the southern portion of the San
Francisco Bay Area commonly referred to as "Silicon Valley". The Silicon
Valley economy has been strong for the past five years but future increases
in values and rents for our properties depend to a significant extent on
the health of this region's economy. Recent trends suggest that the supply
of R&D office space available for rent has increased and that the demand
for such space in Silicon Valley has declined from near zero vacancy rates
in early 1998 and late 1997.
o We might lose key tenants. Most of our properties are occupied by single
tenants, many of whom are large, publicly-traded electronics companies.
Losing a key tenant could adversely affect our operating results and our
ability to make distributions to stockholders if we are unable to obtain
replacement tenants promptly.
o Key tenants could seek the protection of the bankruptcy laws which could
result in the rejection and termination of their leases thereby causing a
reduction in our income.
o We intend to engage in additional real estate acquisition and development.
These activities involve significant risks in addition to those relating to
the ownership and operation of existing, fully-leased properties. For
example, required approvals may not be obtained or may take more time and
resources to obtain them than expected, construction may not be completed
on schedule or on budget, and the properties may not achieve anticipated
rent or occupancy levels. These activities also depend upon the
availability of financing on terms that do not adversely impact our
operating results and our ability to make distributions to our
stockholders.
o Our properties are subject to substantial indebtedness. If we are unable to
make required mortgage payments, a loss could be sustained as a result of
foreclosure on our properties by the mortgagee. We have adopted a policy of
maintaining a consolidated ratio of debt to total market capitalization of
less than 50%, which may not be exceeded without the approval of more than
75% of our entire board of directors. Our board of directors may vote to
change this policy, however, and we could become more highly leveraged,
resulting in an increased risk of default on our obligations, and an
increase in debt service requirements that could adversely affect our
financial condition, our operating results and our ability to make
distributions to our stockholders.
o Our properties may expose us to liabilities under applicable environmental
and health and safety laws.
o We may sustain uninsured losses with respect to some of our properties.
o All of our properties are located in areas that are subject to earthquake
activity. Our insurance policies do not cover damage caused by seismic
activity, although they do cover losses from fires after an earthquake. We
generally do not consider such insurance coverage to be economical. If an
earthquake occurs and results in substantial damage to our properties, or
properties that we may acquire in the future, we could lose our investment
in those properties and our financial condition, operating results and
ability to make distributions to our stockholders could be materially
adversely affected.
FEDERAL INCOME TAX RISKS
FAILURE TO QUALIFY AS A REIT. We intend to elect to be taxed as a REIT
under the federal income tax laws for the year ending December 31, 1999. To
maintain that status we must meet certain tests for income, assets,
distributions to stockholders, ownership interests and other significant
conditions. If we fail to qualify as a REIT in any taxable year we will not be
allowed a deduction for distributions to our stockholders in computing our
taxable income and would be subject to federal income tax (including any
applicable alternative minimum tax) on our taxable income at regular corporate
rates. Moreover, unless we were entitled to relief under certain provisions of
the tax laws, we would be disqualified from treatment as a REIT for the four
taxable years following the year in which our qualification was lost. As a
result, funds available for distribution to our stockholders would be reduced
for each of the years involved and, in addition, we would no longer be required
to make distributions to our stockholders. Although we currently intend to
operate in a manner designed to enable us to qualify and maintain our REIT
status, it is possible that economic, market, legal, tax or other considerations
may cause us to fail to qualify as a REIT, or may cause our board of directors
either to refrain from making the REIT election or to revoke that election once
made.
REIT DISTRIBUTION REQUIREMENTS. To maintain REIT status we must distribute
as a dividend to our stockholders at least 95% of our otherwise taxable income
(after certain adjustments) with respect to each tax year. We may also be
subject to a 4% non-deductible excise tax in the event our distributions to
stockholders fail to meet certain other requirements. Failure to comply with
these requirements could result in our income being subject to tax at regular
corporate rates and could cause us to be liable for the excise tax.
OWNERSHIP LIMIT NECESSARY TO MAINTAIN REIT QUALIFICATION. As a REIT we are
subject to certain restrictions on the percentage of the total value of our
stock that may be owned by five or fewer individuals which may not exceed 50% as
determined under federal income tax laws. Our Articles of Amendment and
Restatement generally prohibit the direct or indirect ownership of more than 9%
of our common stock by any stockholder. This limit excludes the members of the
Berg Group, who have an aggregate ownership limit of 20%. In addition, as
permitted by our Articles of Amendment and Restatement, our board of directors
recently provided an exception to two other stockholders that permits them to
collectively own, directly or indirectly, up to 15% of our common stock on an
aggregate basis. In general, our Articles of Amendment and Restatement prohibit
the transfer of shares which result in a loss of our REIT qualification and
provide that any such transfer or any other transfer which causes a stockholder
to exceed the ownership limit will be subject to mandatory forfeiture
provisions.
UNCERTAINTIES REGARDING DISTRIBUTIONS TO STOCKHOLDERS
Our income will consist primarily of our share of the income of the
operating partnerships, and our cash flow will consist primarily of our share of
distributions from the operating partnerships. Differences in timing between the
receipt of income and the payment of expenses in arriving at our taxable income
or the taxable income of the operating partnerships and the effect of required
debt amortization payments could require us directly or through the operating
partnerships to borrow funds on a short-term basis to meet our intended
distribution policy.
The amount and timing of distributions by the operating partnerships and
of our distributions to our stockholders will be determined by our board of
directors. Our board of directors will consider many factors prior to making any
distributions, including the following:
o The amount of cash available for distribution;
o The operating partnerships' financial condition;
o Any decisions by the board of directors to reinvest funds rather than to
distribute such funds;
o The operating partnerships' capital expenditures;
o The annual distribution requirements under the REIT provisions of the
federal income tax laws; and
o Other factors as our board of directors deems relevant.
There is no assurance that we will be able to meet or maintain our intended cash
distribution policies.
OUR OBLIGATION TO PURCHASE TENDERED L.P. UNITS
Each of the limited partners of the operating partnerships (other than Carl
E. Berg and Clyde J. Berg) has the annual right to exercise put rights and cause
the operating partnerships to purchase a portion of the limited partner's L.P.
Units at a purchase price based on the average market value of the common stock
for the 10-trading day period immediately preceding the date of tender. Upon the
exercise of any such right by a limited partner, we will have the option to
purchase the tendered L.P. Units with available cash, borrowed funds or the
proceeds of an offering of newly issued shares of common stock. These put rights
become exercisable on December 29, 1999, and are available once a year for a
maximum of one-third of the eligible limited partners' total L.P. Units. If the
total purchase price of the L.P. Units tendered by all of the eligible limited
partners in one year exceeds $1 million, we or the operating partnerships will
be entitled to reduce proportionately the number of L.P. Units to be acquired
from each tendering limited partner so that the total purchase price does not
exceed $1 million dollars. The exercise of these put rights may reduce the
amount of cash that we have available to distribute to our stockholders.
SHARES ELIGIBLE FOR FUTURE SALE
There are nearly 8.2 million shares of common stock outstanding as of the
date of this prospectus. We cannot predict the effect, if any, that future sales
of shares of common stock, or the availability of shares for future sale, will
have on the market price of the common stock. Sales of substantial amounts of
common stock (including shares issued in connection with the exercise of the
exchange rights held by the limited partners of the operating partnerships), or
the perception that such sales could occur, could adversely affect prevailing
market prices for the common stock. Additional shares of common stock may be
issued to limited partners (subject to the applicable REIT qualification
ownership limit), if they exchange their L.P. Units for shares of common stock
pursuant to their exchange rights, or may be sold by the Company to raise funds
required to purchase such L.P. Units if the limited partners elect to tender
L.P. Units to us using their put rights. In addition, the pending offer of
common stock under this prospectus may adversely affect the market price of the
common stock. Subject to certain rights that we possess to halt offers and sales
of shares of common stock under this prospectus under certain circumstances, we
intend to maintain the effectiveness of the registration statement under which
these shares are offered for sale with the SEC until the end of December 1999.
See "THE SELLING STOCKHOLDERS."
USE OF PROCEEDS
All net proceeds from the sale of the shares of common stock will go to the
stockholders who offer and sell their shares. Accordingly, we will not receive
any of the proceeds from sales of their shares by the selling stockholders.
THE SELLING STOCKHOLDERS
The following table sets forth the name and the number of shares of common
stock beneficially owned by the stockholders listed below as of February 11,
1999, the number of shares of common stock that may be offered by selling
stockholders and the number and percentage of shares to be owned beneficially by
the selling stockholders assuming the sale of the shares offered by this
prospectus. As a condition to receiving our permission to offer and sell shares
of common stock under this prospectus, each selling stockholder has signed a
Registration Rights Agreement under which the stockholder has agreed not to
offer or sell any of such shares from the third business day after the date of
the Stop Trading Notice for a period of up to 30 days. We will send a Stop
Trading Notice to the selling stockholders if we determine, in our sole
discretion, that it would be detrimental to us or our stockholders for any
selling stockholder to offer or sell any such shares during the period set forth
in the notice. In this prospectus, the term "selling stockholders" includes
donees and pledgees selling shares received from a named stockholder after the
date of this prospectus.
Except as otherwise described below, none of the selling stockholders has
held any office with, been employed by, or otherwise had a material relationship
with us or our affiliates since February 11, 1996.
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares of Number of Outstanding
common stock Shares of Shares
Beneficially Common Stock of Stock
Owned Before Offered Stock After
Name of Selling Stockholder Offering (1) Hereby Offering (2)
- --------------------------- --------------- ------------ -------------
<S> <C> <C> <C>
Thelmer Aalgaard(3) 128,640 70,000 *
James H. and Edna J. 50,000 40,000 *
Anderson
Joseph F. Antizzo 20,000 20,000 *
Bancorp Equities LLC 20,000 20,000 *
Ron Bender 16,668 5,556 *
Carl and Mary Ann Berg 77,333 50,000 *
(4)
Howard Clowes 20,000 20,000 *
Clarion Offshore Fund 13,889 13,889 *
L.T.D.
c/o Morty Cohen,
Investment Manager
Clarion Partners, L.P. 41,667 41,667 *
c/o Morty Cohen,
Investment Manager
Mariana P. Cotton 55,000 55,000 *
Revocable Living Trust
John J. Dougherty 30,000 30,000 *
John B. Estill, 8,892 8,892 *
Co-Trustee of
The John and Teresa
Estill 1977 Trust
Harry L. Fox 10,000 10,000 *
Walter C.Frank 2,200 2,200 *
Richard S. Frary 85,000 85,000 *
Hugh C. Fraser 17,000 12,000 *
Ian H. Fraser 5,000 5,000 *
William S. Friedman 80,000 80,000 *
Tom Furlong 5,000 5,000 *
Thomas L. Gipson 200,000 200,000 *
James M. Greenleaf 11,000 11,000 *
Jennifer Greenleaf 11,000 11,000 *
Lewis S. Greenleaf III 142,500 142,500 *
Victoria Greenleaf 11,000 11,000 *
Richard V. and Catherine 10,000 10,000 *
P. Guerin JTWROS
Jeff Harris 45,000 45,000 *
Helzel Family Foundation 22,000 22,000 *
(5)
Leo B. and Florence 401,800 401,800 *
Helzel Living Trust (5)
Lawrence B. Helzel (5) (6) 182,083 80,000 *
Michael H. Weed and 20,000 20,000 *
Patricia A. Hurley
Ingalls & Snyder Value 1,125,067 1,125,067 *
Partners, L.P.
Investors Forum 50,000 50,000 *
Scott A. Katzmann 11,100 11,100 *
Helzel Kirshman L.P. (6) 100,000 100,000 *
Joseph Klein 15,000 15,000 *
Michael Knapp (7) 70,067 60,000 *
Joseph E. Kos and Amy 11,000 11,000 *
Davis JTWROS
Aaron Kozak Revocable 50,000 50,000 *
Trust
Lawton S. Lamb 11,000 11,000 *
Donald M. Liddell, Jr. 100,000 100,000 *
Joel Mael 25,000 25,000 *
Bradley T. and Wendy R. Marlin 39,609 39,609 *
Marquette National Bank 395,000 335,000 *
Trust
FBO John F. McCarthy
Charitable Lead Annuities
Trust (8)
Marquette National 405,000 400,000 *
Corporation (9)
Marquette National Bank 720,000 720,000 *
Trust
FBO Dan McCarthy (10)
David L. Mendel 11,000 11,000 *
John B. and Beverly J. 39,000 39,000 *
Miles JTWROS
John S. Moran 250,000 250,000 *
William M. Moran 5,000 5,000 *
William Moran Jr. 35,000 35,000 *
Martin and Anne Roher 50,000 50,000 *
JTWROS
Michael O'Rosky (11) 43,300 22,000 *
Poutiatine Living Trust 111,000 111,000
dtd 12/28/89
Ivan S. Poutiatine,
Trustee
Poutiatine Living Trust 11,000 11,000 *
dtd 12/28/89
Lochiel C.Poutiatine,
Trustee
Michael Poutiatine Trust 55,000 55,000 *
Prism Partners I, LP 418,500 418,500 *
Prism Partners Offshore Fund 31,500 31,500 *
Katherine A. Ray 100,000 100,000 *
Antonio Rigoni 18,445 18,445 *
Katharine Plourde Simmons 16,000 16,000 *
William Reed Simmons 39,000 39,000 *
Evelyn Slavin 11,000 11,000 *
Talkot Crossover Fund LP 333,333 333,333 *
Arnold Toren 10,000 10,000 *
Dean Witter, Cust. FBO 15,000 15,000 *
Lindell Van Dyke
IRA 112-122618-054
Lindell and Lynn Van Dyke 25,000 25,000 *
Carl E. Warden 109,000 109,000 *
Jeffrey Warmoth 11,000 11,000 *
David Wollersheim 4,000 4,000 *
Revocable Trust
Marlene A. Zielinski 25,000 25,000 *
Raymond Zielinski 33,000 33,000 *
</TABLE>
- --------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power
and/or investment power with respect to those securities that the person has the
right to acquire within 60 days of February 11, 1999. Unless otherwise
indicated, the persons or entities identified in the table have sole voting and
investment power with respect to all shares shown beneficially owned by them.
The numbers do not include shares of common stock which may be acquired by the
exchange of L.P. Units, which generally cannot occur within 60 days.
(2) Less than one percent of outstanding shares of Common Stock indicated by
"*".
(3) Mr. Aalgaard is a director and employee of Berg & Berg Enterprises, Inc., an
affiliate of Carl E. Berg. Includes (i) 33,400 shares held of record by Carl E.
Berg, Trustee, Berg & Berg Profit Sharing Plan FBO Thelmer G. Aalgaard Dated
1/1/84, (ii) 4,160 shares held of record by Carl E. Berg, Trustee, Berg & Berg
Profit Sharing Plan FBO Thelmer G. Aalgaard Dated 1/1/84, 1997 Contribution, and
(iii) 2,220 shares held of record by Thelmer G. Aalgaard, Custodian, Rachel
Michaels, Under the California Uniform Gifts to Minor Act.
(4) Mr. Berg is an officer and director of the Company and of Berg & Berg
Enterprises, Inc. Includes 27,333 shares of common stock held of record by Berg
& Berg Enterprises, Inc., of which Mr. Berg disclaims beneficial ownership
except as to his pecuniary interest therein. Mr. Berg is a principal shareholder
of the Company. Does not include 53,071 shares of common stock held of records
as trustee under various pension and profit sharing plans.
(5) Leo B. Helzel and Lawrence B. Helzel have only voting power with respect to
shares owned by the Helzel Family Foundation, of which they are directors. Leo
B. Helzel disclaims beneficial ownership of the shares held by the Living Trust
except to the extent of his pecuniary interest in the shares.
(6) Mr. Helzel became a director of Mission West Properties in December 1998.
Mr. Helzel has voting power with respect to the shares owned by Helzel Kirshman,
L.P. but disclaims any pecuniary interest in one-half of those shares.
(7) Mr. Knapp was formerly an officer and director of Mission West Properties.
Mr. Knapp is currently an officer of Berg & Berg Enterprises, Inc., an affiliate
of Carl E. Berg. Includes (i) 3,333 shares held of record by Carl E. Berg,
Trustee, Berg & Berg Enterprises, Inc. 401K FBO Michael L. Knapp Dated 1/1/84,
(ii) 2,000 shares held of record by Michael L. Knapp, Custodian, Ryan Michael
Knapp Under the California Uniform Gifts to Minor Act and (iii) 2,000 shares
held of record by Michael L. Knapp, Custodian, Kayla Marie Knapp Under the
California Uniform Gifts to Minor Act.
(8) Paul McCarthy may be deemed to be the beneficial owner of the shares of the
trust because he is the trustee of the trust, but he disclaims beneficial
ownership of these shares except to the extent of his pecuniary interest
therein.
(9) Paul McCarthy may be deemed to be the beneficial owner of these shares
because he is the Chairman and Chief Executive Officer of Marquette National
Corporation, but he disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest therein as a minority shareholder of the
corporation.
(10) Dan McCarthy may be deemed to be the beneficial owner of all of these
shares. Mr. McCarthy and an individaul retirement account for his sole benefit
are separate record holders of shares that are not included in this prospectus.
The total number of these shares is 150,000.
(11) Mr. O'Rosky is an employee of Berg & Berg Enterprises, Inc., an affiliate
of Carl E. Berg. Mr. O'Rosky is also the son-in-law of Clyde J. Berg, who is a
director of Berg & Berg Enterprises, Inc. and brother of Carl E. Berg. Includes
(i) 4,000 shares held of record by Michael J. O'Rosky, Custodian, Mason Michael
O'Rosky, Under the California Uniform Gifts to Minor Act; and (ii) 4,000 shares
held of record by Michael J. O'Rosky, Custodian, Hannah Rae O'Rosky, Under the
California Uniform Gifts to Minor Act.
PLAN OF DISTRIBUTION
The selling stockholders may offer their shares of common stock at various
times in one or more of the following transactions:
o on any of the United States securities exchanges where the common stock is
listed and traded, including the American Stock Exchange and the Pacific
Stock Exchange;
o in the over-the-counter market;
o in transactions other than on such exchanges or in the over-the-counter
market;
o in connection with short sales of the shares;
o by pledge to secure debts and other obligations;
o in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions and in settlement of other transactions in
standardized or over-the-counter options; or
o in a combination of any of the above transactions.
The selling stockholders may sell their shares of common stock at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, at negotiated prices, or at fixed prices.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus, filed as a part of a Post-Effective Amendment No. 1 to S-4
Registration Statement on Form S-3 Registration Statement, does not contain all
the information set forth in the registration statement or the exhibits and
schedules to the registration statement filed in accordance with the rules and
regulations of the SEC, and we are incorporating omitted information by this
reference. Statements made in this prospectus concerning the contents of any
contract, agreement or other document filed as an exhibit to the registration
statement are summaries of the terms of the contracts, agreements or documents
and are not necessarily complete. You should read each exhibit for a more
complete description of the matters involved. The registration statement and the
exhibits filed with the SEC may be inspected, without charge, and copies may be
obtained at prescribed rates, at the SEC's Public Reference facility maintained
by the Room, 450 Fifth Street, N.W., Washington, D.C. 20549. The public may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. The registration statement and other information filed by
the Company with the SEC also are available at the Web site maintained by the
SEC on the World Wide Web at http://www.sec.gov. Reports, proxy statements and
other information about us filed with the SEC may also be inspected at the
offices of the American Stock Exchange, 86 Trinity Place, New York, New York,
and the Pacific Exchange Incorporated, 301 Pine Street, San Francisco,
California.
Under SEC rules we are disclosing additional information to you by
referring to documents that we have filed previously with the SEC. Information
that we incorporate by reference into this prospectus is considered to be part
of this prospectus, and information that we file later with the SEC will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings we will make with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934:
1. The Form S-4 Registration Statement filed on May 15, 1998 and declared
effective on November 23, 1998 (Registration No. 333-52835-99) (the
"Registration Statement"), and the prospectus dated November 23, 1998 filed
pursuant to SEC Rule 424(b)(3).
2. Our Annual Report on Form 10-K for the one-month transition period and fiscal
year ended December 31, 1997.
3. All other reports filed since December 31, 1997 under Section 13(a) or 15(d)
of the Securities Exchange Act of 1934, including all reports filed after the
date of the Registration Statement and prior to the effective date of this
Post-Effective Amendment No. 1 to such Registration Statement, including our
report on Form 10-Q/A for the quarter ended September 30, 1998 and our report on
Form 8-K dated December 31, 1998.
4. The description of the common stock contained in the Registration Statement.
You may request a copy of these filings, at no cost upon written or oral
request by writing or telephoning us at the following address or telephone
number: Mission West Properties, Inc., 10050 Bandley Drive, Cupertino,
California 95014; telephone: (408) 725-0700.
RECENT DEVELOPMENTS
We recently acquired two newly constructed R&D office properties located on
Richard Avenue in Santa Clara, California and Hellyer Avenue in San Jose,
California consisting of a total of approximately 163,000 square feet of
rentable space. We acquired these properties from Carl E. Berg and other members
of the Berg Group under the Pending Projects Acquisition Agreement and the Berg
Land Holdings Option Agreement. We paid $4,197,600 for the Richard Avenue
property, which consists of approximately 52,800 rentable square feet, and
$9,494,000 for the Hellyer Avenue property, which consists of approximately
110,000 rentable square feet. Each property was acquired by a different
operating partnership, which assumed debt of $9,605,718 and issued 672,064 L.P.
Units to the sellers. Each of the L.P. Units may be exchanged for shares of
common stock in the same manner as other L.P. Units held by the same limited
partner. The terms of the acquisitions were approved by the Independent
Directors Committee of our board of directors. We have agreed with the sellers
of the properties to treat our acquisitions as effective as of September 1, 1998
with respect to the Richard Avenue property, and November 1, 1998 with respect
to the Hellyer Avenue property. This has allowed us to earn the rental income
from the properties from the applicable date.
LEGAL MATTERS
We have received opinions of counsel from Graham & James, LLP, Palo Alto,
California and Ballard Spahr Andrews & Ingersoll, LLP, Baltimore, Maryland
concerning the validity of the shares of common stock offered for sale by this
prospectus. A partner of Graham & James, LLP who is rendering services to us
beneficially owns 12,333 shares of common stock.
EXPERTS
The consolidated financial statements of Mission West Properties
incorporated by reference to the Annual Report on Form 10-K for the period ended
December 31, 1997 and the Combined Financial Statement for the Berg Properties
as of December 31, 1997 and 1996, and for the three years in the period ended
December 31, 1997, the Statement of Revenue and Certain Expenses of Fremont
Properties for the year ended December 31, 1997 and the Combined Statements of
Revenue and Certain Expenses for the Kontrabecki Properties for the years ended
December 31, 1997, 1996 and 1995 included in the Registration Statement and
prospectus have been audited by PricewaterhouseCoopers LLP, independent
accountants. Such financial statements have been included or incorporated by
reference in reliance upon the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The financial statements as of November 30, 1996 and for each of the two
years then ended incorporated in this prospectus by reference to the Annual
Report on Form 10-K for the year ended December 31, 1997, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
<PAGE>
<TABLE>
<CAPTION>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and distribution of the
securities being registered, other than underwriting discounts and commissions,
are estimated as follows:
Securities and Exchange Commission Registration Fee. Previously paid
<S> <C>
Legal fees and expenses*............................ $7,500
Accounting fees and expenses*....................... 5,000
Printing expenses/Transfer agent's fees*............ 500
--------
Total*........................................ $13,000
</TABLE>
- ----------------
* Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 2-418 of the Maryland General Corporation Law ("MGCL") permits a
Maryland corporation to include in its charter a provision limiting the
liability of its directors and officers to the corporation and its stockholders
for money damages except for liability resulting from (a) actual receipt of an
improper benefit or profit in money, property or services, or (b) active and
deliberate dishonesty established by a final judgment as being material to the
cause of action. Article IX of the Articles of Amendment and Restatement of
Mission West Properties, Inc. (the "Charter") contains such a provision which
eliminates such liability to the maximum extent permitted by the MGCL.
Section 2-418 of the MGCL requires a corporation (unless its charter
provides otherwise, which the Charter does not) to indemnify a director or
officer who has been successful, on the merits or otherwise, in the defense of
any proceeding to which he is made a party by reason of his service in that
capacity. The MGCL permits a corporation to indemnify its present and former
directors and officers, among others, against judgments, penalties, fines,
settlements, and reasonable expenses actually incurred by them in connection
with any proceeding to which they may be made a party by reason of their service
in those or other capacities unless it is established that (a) the act or
omission of the director or officer was material to the matter giving rise to
the proceeding and (i) was committed in bad faith or (ii) was the result of
active and deliberate dishonesty, (b) the director or officer actually received
an improper personal benefit in money, property or services or (c) in the case
of any criminal proceeding, the director or officer had reasonable cause to
believe that the act or omission was unlawful. However, under the MGCL, a
Maryland corporation may not indemnify for an adverse judgment in a suit by or
in the right of the corporation or for a judgment of liability on the basis that
personal benefit was improperly received, unless in either case a court orders
indemnification and then only for expenses. In addition, the MGCL permits a
corporation to advance reasonable expenses to a director or officer upon the
corporation's receipt of (a) a written affirmation by the director or officer of
his good faith belief that he has met the standard of conduct necessary for
indemnification by the corporation and (b) a written undertaking by him or on
his behalf to repay the amount paid or reimbursed by the corporation if it shall
ultimately be determined that the standard of conduct was not met.
The Charter also authorizes Mission West Properties, Inc. to the maximum
extent permitted by Maryland law, to obligate itself to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
any present or former director or officer, or any individual who, while a
director of Mission West Properties, Inc. and at the request of Mission West
Properties, Inc., serves or has served another corporation, real estate
investment trust, partnership, joint venture, trust, employee benefit plan or
any other enterprise as a director, officer, partner or trustee of such
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or other enterprise from and against any claim or
liability to which such person may become subject or which such person may incur
by reason of his status as a present or former director or officer of Mission
West Properties, Inc. Article XII of the Bylaws obligates Mission West
Properties, Inc., to the maximum extent permitted by Maryland law, to indemnify
and to pay or reimburse reasonable expenses in advance of final disposition of a
proceeding to (i) any present or former director or officer who is made a party
to the proceeding by reason of his service in that capacity or (ii) any
individual who, while a director of Mission West Properties, Inc. and at the
request of Mission West Properties, Inc. serves or has served another
corporation, real estate, investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner or
trustee of such corporation, real estate investment trust, partnership, joint
venture, trust, employee benefit plan or other enterprise and who is made a
party to the proceeding by reason of his service in that capacity. The Charter
and Bylaws also permit Mission West Properties, Inc. to indemnify and advance
expenses to any person who served a predecessor of Mission West Properties, Inc.
in any of the capacities described above and any employee or agent of Mission
West Properties, Inc. and or a predecessor of Mission West Properties, Inc.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------ ------------------------------------------------------------
<S> <C>
2.1 Merger Agreement and Plan of Merger between Mission West
Properties and Mission West Properties, Inc.
3.1** Articles of Amendment and Restatement of Mission West Properties,
Inc.
3.2** Restated Bylaws of Mission West Properties, Inc.
5.1** Opinion of Graham & James LLP regarding the validity of
the securities issued by the Company to be exchanged
in the Reincorporation Merger
5.2** Opinion of Ballard Spahr Andrews & Ingersoll LLP regarding
the validity of securities issued by Mission West-Maryland
in the Reincorporation Merge
10.1.1 Amended and Restated Agreement of Limited Partnership of
Mission West Properties, L.P.
10.1.2 Amended and Restated Agreement of Limited Partnership of
Mission West Properties, L.P. I
10.1.3 Amended and Restated Agreement of Limited Partnership of
Mission West Properties, L.P. II
10.1.4 Amended and Restated Agreement of Limited Partnership of
Mission West Properties, L.P. III
10.2 Exchange Rights Agreement between the Company and the Limited
Partners
10.4.1** Acquisition Agreement, dated as of May 14, 1998, among the
Company, Certain Partnerships and the Berg Group (as defined
therein)
10.4.2** Amendment to Acquisition Agreement, dated as of July 1, 1998
10.6 Pending Projects Acquisition Agreement among the Company,
the Operating Partnership and the members of the Berg Group
10.7 Berg Land Holdings Option Agreement between the Company and
certain members of the Berg Group
10.8 Form of Registration Rights Agreement
23.1** Consent of Graham & James LLP (included in the opinion filed
as Exhibit 5.1 to this Registration Statement)
23.2** Consent of Ballard Spahr Andrews & Ingersoll (included in
the opinion filed as Exhibit 5.2 to this Registration Statement)
23.3 Consent of PricewaterhouseCoopers LLP
23.4 Consent of PricewaterhouseCoopers LLP
24.1** Powers of Attorney (included in the signature page to
this Post-Effective Amendment No. 1 to S-4 Registration Statement)
</TABLE>
- ----------
** Previously Filed
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a) (1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii)To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) That for purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) To deliver or cause to be delivered with the prospectus, to each person
to whom the prospectus is sent or given, the latest annual report, to security
holders that is incorporated by reference in the prospectus and furnished
pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Securities Exchange Act and, where interim financial information required to be
presented by Article 3 of Regulation S-X is not set forth in the prospectus, to
deliver, or cause to be delivered to each person to whom the prospectus is sent
or given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial information.
(d) Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions described in Item 15 above, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission and indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. In the event that a claim of
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in a successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Post-Effective No.
1 Amendment to Form S-4 Registration Statement on Form S-3 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Cupertino,
State of California on February 11, 1999.
MISSION WEST PROPERTIES, INC.
By: /s/ Carl E. Berg
Carl E. Berg
Chairman of the Board, Chief Executive
Officer, President, and Chief Financial
Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Carl E. Berg and Michael J. Anderson, or
either of them, each with the power of substitution, his or her
attorney-in-fact, to sign any amendments to this Registration Statement and to
file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorney-in-fact, or his or her substitute, may
do or choose to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated, effective February 11, 1999.
SIGNATURE TITLE
/s/ Carl E. Berg
__________________________ Chairman of the Board, Chief Executive Officer,
Carl E. Berg President, Chief Financial Officer, and Director
/s/ Michael J. Anderson
__________________________ Vice President, Chief Operating Officer, and
Michael J. Anderson Director
/s/ Marianne K. Aguiar
__________________________ Vice President of Finance and Controller
Marianne K. Aguiar
/s/ John Bolger
__________________________ Director
John Bolger
/s/ William A. Hasler
__________________________ Director
William A. Hasler
/s/ Lawrence B. Helzel
__________________________ Director
Lawrence B. Helzel
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------ ------------------------------------------------------------
<S> <C>
2.1 Merger Agreement and Plan of Merger between Mission West
Properties and Mission West Properties, Inc.
3.1** Articles of Amendment and Restatement of Mission West Properties,
Inc.
3.2** Restated Bylaws of Mission West Properties, Inc.
5.1** Opinion of Graham & James LLP regarding the validity of
the securities issued by the Company to be exchanged
in the Reincorporation Merger
5.2** Opinion of Ballard Spahr Andrews & Ingersoll LLP regarding
the validity of securities issued by Mission West-Maryland
in the Reincorporation Merge
10.1.1 Amended and Restated Agreement of Limited Partnership of
Mission West Properties, L.P.
10.1.2 Amended and Restated Agreement of Limited Partnership of
Mission West Properties, L.P. I
10.1.3 Amended and Restated Agreement of Limited Partnership of
Mission West Properties, L.P. II
10.1.4 Amended and Restated Agreement of Limited Partnership of
Mission West Properties, L.P. III
10.2 Exchange Rights Agreement between the Company and the Limited
Partners
10.4.1** Acquisition Agreement, dated as of May 14, 1998, among the
Company, Certain Partnerships and the Berg Group (as defined
therein)
10.4.2** Amendment to Acquisition Agreement, dated as of July 1, 1998
10.6 Pending Projects Acquisition Agreement among the Company,
the Operating Partnership and the members of the Berg Group
10.7 Berg Land Holdings Option Agreement between the Company and
certain members of the Berg Group
10.8 Form of Registration Rights Agreement
23.1** Consent of Graham & James LLP (included in the opinion filed
as Exhibit 5.1 to this Registration Statement)
23.2** Consent of Ballard Spahr Andrews & Ingersoll (included in
the opinion filed as Exhibit 5.2 to this Registration Statement)
23.3 Consent of PricewaterhouseCoopers LLP
23.4 Consent of PricewaterhouseCoopers LLP
24.1** Powers of Attorney (included in the signature page to
this Post-Effective Amendment No. 1 to S-4 Registration Statement)
</TABLE>
- ----------
** Previously filed
MERGER AGREEMENT
AND
PLAN OF MERGER
This Merger Agreement and Plan of Merger ("Agreement") is made and entered
into as of November 18, 1998 by and between Mission West Properties, a
California corporation ("Mission West-California" or "Parent"), and Mission West
Properties, Inc., a Maryland corporation ("Mission West-Maryland" or "Surviving
Corporation"), (collectively, with Mission West-California, the "Constituent
Corporations").
ARTICLE I
THE MERGER
1.1 EFFECTIVE TIME OF THE MERGER. Mission West-California shall merge with
and into Mission West-Maryland (the "Merger") pursuant to Section 1110 of the
California General Corporation Law ("CGCL") and Sections 3-101 et seq. of the
Maryland General Corporation Law ("MGCL"). The Merger shall become effective
upon the filing of the certificate of ownership of Mission West-California,
which incorporates this Agreement, with the Secretary of State of the State of
California and acceptance for record of Articles of Merger by the State
Department of Assessments and Taxation of Maryland ("SDAT") (the "Effective Time
of Merger").
1.2 MERGER AT THE EFFECTIVE TIME. At the Effective Time of the Merger,
Mission West-California shall be merged into Mission West-Maryland, and the
separate corporate existence of Mission West-California shall cease. Mission
West-Maryland shall be the Surviving Corporation.
1.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
Section 1107 of the CGCL and Sections 3-114 of the MGCL. As the Surviving
Corporation in the Merger, Mission West-Maryland shall succeed, without other
transfer, to all the rights and property of Mission West-California and shall be
subject to all of the obligations and liabilities of Mission West-California in
the same manner as if Mission West-Maryland had incurred them itself.
ARTICLE II
APPROVAL OF THE MERGER
2.1 APPROVAL BY PARENT. The Merger shall be approved by the Board of
Directors of Mission West-California in accordance with the provisions of
Section 1110(a) of the CGCL. The Merger shall be approved by the shareholders of
Mission West-California as provided in Section 1110(c) of the CGCL.
2.2 APPROVAL BY SUBSIDIARY. The Merger shall be approved by the Board of
Directors of Mission West-Maryland as provided in Sections 3-105 and 3-106 of
the MGCL.
ARTICLE III
ARTICLES OF INCORPORATION, BYLAWS AND DIRECTORS AND
OFFICERS OF THE SURVIVING CORPORATION
3.1 ARTICLES OF INCORPORATION OF SURVIVING CORPORATION. The Articles of
Amendment and Restatement (the "Charter") of Mission West-Maryland, attached
hereto as Exhibit A, in effect immediately prior to the Effective Time of the
Merger, shall be the Charter of the Surviving Corporation unless and until the
Charter is amended as provided by applicable law or as provided in such Charter.
3.2 BYLAWS OF SURVIVING CORPORATION. The Bylaws of Mission West-Maryland,
attached hereto as Exhibit B, in effect immediately prior to the Effective Time
of the Merger, shall be the Bylaws of the Surviving Corporation unless and until
amended or repealed as provided by applicable law, the Charter or Bylaws of the
Surviving Corporation.
3.3 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION. The officers and
directors of Mission West-California in office immediately prior to the
Effective Time of the Merger shall be the officers and directors of the
Surviving Corporation unless and until replaced as provided by applicable law,
the Charter or the Bylaws of the Surviving Corporation.
ARTICLE IV
EFFECT ON OUTSTANDING STOCK; CAPITALIZATION
4.1 CAPITALIZATION. As of the date hereof, the authorized capital stock of
Mission West-California consists of 200,000,000 shares of Common Stock, no par
value, of which 100 shares are currently issued and outstanding, and 20,000,000
shares of Preferred Stock, no par value, none of which has been designated as
any series and none of which are issued and outstanding. As of the date hereof,
the authorized stock of Mission West-Maryland consists of 200,000,000 shares of
Common Stock, $0.001 par value per share, of which 100 shares are currently
issued and outstanding and 20,000,000 shares of Preferred Stock, $0.001 par
value per share, none of which has been designated as any series and none of
which are issued and outstanding. Mission West-California owns all of the issued
and outstanding shares of Common Stock of Mission West-Maryland.
4.2 EFFECT ON PARENT STOCK. At the Effective Time of the Merger, by virtue
of the Merger and without any action on the part of the Constituent
Corporations, each share of the issued and outstanding Common Stock of Mission
West-California shall be converted into one share of the Common Stock of Mission
West-Maryland.
4.3 EFFECT ON PARENT STOCK OPTIONS. At the Effective Time of the Merger,
by virtue of the Merger and without any action on the part of the Constituent
Corporations, the 5,500,000 shares of Common Stock reserved for issuance under
the Mission West-California 1997 Stock Option Plan shall become shares of Common
Stock of Mission West-Maryland reserved for issuance under such Plan, and
options to purchase 605,000 shares of Common Stock of Mission West-California
which have been granted and are outstanding under such Plan shall be
exchangeable for options to purchase the same number of shares of Mission
West-Maryland Common Stock at the same exercise price per share.
4.4 EFFECT ON STOCK OF SUBSIDIARY. At the Effective Time of the Merger, by
virtue of the Merger and without any action on the part of the Constituent
Corporations, all of the shares of Common Stock of Mission West-Maryland issued
and outstanding immediately before this Effective Time of the Merger shall be
canceled. No securities, cash, or other property shall be issued to Mission
West-California as the holder of all of the outstanding shares of Mission
West-Maryland Common Stock.
ARTICLE V
GENERAL PROVISIONS
5.1 GOVERNING LAW. This Agreement shall be governed by and effected in
accordance with the laws of the State of California.
5.2 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties with respect to the Merger and supersedes all prior or
contemporaneous agreements.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first written above.
MISSION WEST PROPERTIES,
a California corporation
/s/ Carl E. Berg
By:________________________________
Carl E. Berg, President
and Chief Executive Officer
/s/ Bradley A. Perkins
By:________________________________
Bradley A. Perkins, Secretary
MISSION WEST PROPERTIES, INC.
a Maryland corporation
/s/ Carl E. Berg
By:___________________________(SEAL)
Carl E. Berg, President
and Chief Executive Officer
/s/ Bradley A. Perkins
Attest:______________________________
Bradley A. Perkins, Secretary
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
MISSION WEST PROPERTIES, L.P.
JULY 1, 1998
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE 1. Defined Terms..........................................2
1.1 "Act".......................................................2
1.2 "Acquisition Agreement".....................................2
1.3 "Additional Limited Partner"................................2
1.4 "Adjusted Capital Account Deficit"..........................2
1.5 "Adjusted Contribution".....................................2
1.6 "Affiliate".................................................3
1.7 "Agreement".................................................3
1.8 "Articles of Incorporation".................................3
1.9 "Assignee"..................................................3
1.10 "Available Cash"...........................................3
1.11 "Berg Acquisition".........................................3
1.12 "Berg Group"...............................................3
1.13 "Berg Land Holdings".......................................4
1.14 "Capital Account"..........................................4
1.15 "Capital Contribution".....................................5
1.16 "Capital Event"............................................5
1.17 "Certificate"..............................................5
1.18 "Change of Control Transaction"............................5
1.19 "Charter"..................................................5
1.20 "Code".....................................................5
1.21 "Common Stock".............................................5
1.22 "Common Stock Price".......................................6
1.23 "Company"..................................................6
1.24 "Consent"..................................................6
1.25 "Depreciation".............................................6
1.26 "Dividend Reinvestment Plan"...............................6
1.27 "Effective Date"...........................................6
1.28 "Employee Benefit Plan"....................................6
1.29 "Entity"...................................................7
1.30 "Equity Security"..........................................7
1.31 "ERISA"....................................................7
1.32 "Exchange Act".............................................7
1.33 "Exchange Factor"..........................................7
1.34 "Exchange Right"...........................................7
1.35 "Exchange Rights Agreement"................................7
1.36 "GAAP".....................................................7
1.37 "General Partner"..........................................7
1.38 "General Partner Interest".................................7
1.39 "Gross Asset Value"........................................7
1.40 "Immediate Family".........................................8
1.41 "Incapacity" or "Incapacitated"............................8
1.42 "Indemnitee"...............................................9
1.43 "Initial Contributed Property".............................9
<PAGE>
1.44 "Lien".....................................................9
1.45 "Limited Partner".........................................10
1.46 "Limited Partner Interest"................................10
1.47 "Liquidating Event".......................................10
1.48 "Liquidator"..............................................10
1.49 "L.P. Unit"...............................................10
1.50 "L.P. Unit Majority"......................................10
1.51 "Net Income" or "Net Loss"................................10
1.52 "New Equity Financing Right"..............................11
1.53 "Nonrecourse Deductions"..................................11
1.54 "Nonrecourse Liabilities".................................11
1.55 "Operating Partnership"...................................11
1.56 "Partner".................................................11
1.57 "Partner Minimum Gain"....................................11
1.58 "Partner Nonrecourse Debt"................................11
1.59 "Partner Nonrecourse Deductions"..........................11
1.60 "Partnership".............................................12
1.61 "Partnership Interest"....................................12
1.62 "Partnership Minimum Gain"................................12
1.63 "Partnership Record Date".................................12
1.64 "Partnership Year"........................................12
1.65 "Pending Development Projects"............................12
1.66 "Partnership Interest"....................................12
1.67 "Permitted Partners"......................................12
1.68 "Permitted Transferee"....................................12
1.69 "Person"..................................................12
1.70 "Precontribution Gain"....................................12
1.71 "Put Rights"..............................................12
1.72 "Protective Provisions Expiration Date"...................13
1.73 "Quarter".................................................13
1.74 "Regulations".............................................13
1.75 "REIT"....................................................13
1.76 "REIT Requirements".......................................13
1.77 "Restricted Partner"......................................13
1.78 "SEC".....................................................13
1.79 "Securities Act"..........................................13
1.80 "Stock Option Plan".......................................13
1.81 "Subsidiary"..............................................13
1.82 "Substituted Limited Partner".............................13
1.83 "Tax Items"...............................................13
1.84 "Terminating Capital Transaction".........................14
1.85 "Total Market Capitalization".............................14
1.86 "Transfer"................................................14
1.87 "Unit"....................................................14
<PAGE>
1.88 "United States Person"....................................14
1.89 "Voting Securities".......................................14
ARTICLE 2. Organizational Matters................................14
2.1 Continuation...............................................14
2.2 Name.......................................................14
2.3 Registered Office and Agent; Principal Office..............15
2.4 Power of Attorney..........................................15
2.5 Term.......................................................16
ARTICLE 3. Purpose...............................................16
3.1 Purpose and Business.......................................16
3.2 Powers.....................................................17
ARTICLE 4. Capital Contributions.................................17
4.1 Capital Contributions of the Partners......................17
4.2 Additional Funds; Restrictions on Company..................17
4.3 Issuance of Additional Partnership Interests; Admission of
Additional Limited Partners................................19
4.4 Repurchase of Company Equity Securities....................19
4.5 No Third Party Beneficiary.................................20
4.6 No Interest; No Return.....................................20
ARTICLE 5. Distributions.........................................20
5.1 Regular Distributions......................................20
5.2 Qualification as a REIT....................................20
5.3 Withholding................................................21
5.4 Additional Partnership Interests...........................21
5.5 Distributions Upon Liquidation.............................21
ARTICLE 6. Allocations...........................................21
ARTICLE 7. Management and Operation of Business..................21
7.1 Management.................................................21
7.2 Certificate of Limited Partnership.........................22
7.3 Reimbursement of the General Partner and the Company.......23
7.4 Outside Activities of the General Partner..................23
7.5 Contracts with Affiliates..................................23
7.6 Indemnification............................................24
<PAGE>
7.7 Liability of the General Partner...........................26
7.8 Limited Partners' Right to Bring Derivative Lawsuits.......27
7.9 Other Matters Concerning the General Partner...............27
7.10 Title to Partnership Assets...............................27
7.11 Reliance by Third Parties.................................28
ARTICLE 8. Rights and Obligations of Limited Partners............28
8.1 Limitation of Liability....................................28
8.2 Management of Business.....................................28
8.3 Outside Activities of Limited Partners.....................29
8.4 Return of Capital..........................................29
8.5 Rights of Limited Partners Relating to the Partnership.....29
8.6 Exchange Rights............................................30
8.7 Put Rights.................................................30
8.8 New Equity Financing Rights................................32
8.9 Matters Requiring L.P. Unit Majority Approval..............32
8.10 Approval of Certain Taxable Sales.........................33
ARTICLE 9. Books, Records, Accounting and Reports................33
9.1 Records and Accounting.....................................33
9.2 Fiscal Year................................................34
ARTICLE 10. Tax Matters..........................................34
10.1 Preparation of Tax Returns................................34
10.2 Tax Elections.............................................34
10.3 Tax Matters Partner.......................................34
10.4 Organizational Expenses...................................36
10.5 Withholding...............................................36
ARTICLE 11. Transfers and Withdrawals............................37
11.1 Transfer..................................................37
11.2 Transfer of the Company's Partnership Interests...........37
11.3 Limited Partners' Rights to Transfer......................37
11.4 Substituted Limited Partners..............................40
11.5 Assignees.................................................40
11.6 Effect of Prohibited Transfer.............................41
11.7 General Provisions........................................41
ARTICLE 12. Admission of Partners................................41
<PAGE>
12.1 Admission of Successor General Partner....................41
12.2 Admission of Additional and Substituted Limited Partners..42
12.3 Amendment of Agreement and Certificate of Limited.........43
Partnership.
ARTICLE 13. Dissolution, Liquidation and Termination.............43
13.1 Dissolution...............................................43
13.2 Winding Up................................................44
13.3 Obligation to Contribute Deficit..........................45
13.4 Rights of Limited Partner.................................45
13.5 Notice of Dissolution.....................................46
13.6 Termination of Partnership and Cancellation of Certif-....46
icate of Limited Partnership
13.7 Reasonable Time for Winding-Up............................46
13.8 Waiver of Partition.......................................46
13.9 Deemed Distribution and Recontribution....................46
ARTICLE 14. Amendment of Partnership Agreement; Meetings.........47
14.1 Amendments................................................47
14.2 Meetings of the Partners..................................48
Article 15. General Provisions...................................49
15.1 Addresses and Notices.....................................49
15.2 Titles and Captions.......................................49
15.3 Pronouns and Plurals......................................49
15.4 Further Action............................................49
15.5 Binding Effect............................................50
15.6 Creditors.................................................50
15.7 Waiver....................................................50
15.8 Counterparts..............................................50
15.9 Applicable Law............................................50
15.10 Invalidity of Provisions.................................50
15.11 Entire Agreement.........................................50
15.12 Guaranty by the Company..................................50
</TABLE>
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
MISSION WEST PROPERTIES, L.P.
This AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF MISSION WEST
PROPERTIES, L.P. (this "Agreement"), dated as of July 1, 1998, is entered into
by and among Mission West Properties, a California corporation (the "Company" or
the "General Partner") and the parties whose names are set forth on Appendix I
attached hereto (as it may be amended from time to time).
WHEREAS, the Partnership was organized initially as Berg Properties, L.P.
and became a limited partnership pursuant to the Revised Uniform Limited
Partnership Act of the State of Delaware by filing a certificate of limited
partnership with the Secretary of State of the State of Delaware on July 11,
1995;
WHEREAS, since its organization as a Delaware limited partnership, the
Partnership has been operated and managed by Berg & Berg Enterprises, Inc., a
California corporation ("BBE"), as sole general partner, pursuant to the terms
of the Agreement of Limited Partnership of Berg Properties, L.P. (the "Prior
Agreement");
WHEREAS, on December 22, 1997, the Partnership filed an amendment of
certificate of limited partnership with the Secretary of State of the State of
Delaware changing the Partnership's name to Mission West Properties, L.P.;
WHEREAS, pursuant to the terms of a Acquisition Agreement dated as of May
14, 1998, as amended as of July 1, 1998 (the "Acquisition Agreement"), the
Company has agreed to acquire a 10.91% general partner interest in the
Partnership and to become the sole general partner in the Partnership upon the
satisfaction of certain conditions set forth in the Acquisition Agreement, which
now have been satisfied or waived by the parties thereto;
WHEREAS, BBE and all of the limited partners in the Partnership wish to
admit the Company as a general partner, to amend the certificate of limited
partnership of the Partnership to reflect the Company's admission as a general
partner, and to amend and restate the Prior Agreement as provided herein; and
WHEREAS, upon the filing of the certificate of amendment of the
certificate of limited partnership of the Partnership with the Secretary of
State of the State of
<PAGE>
Delaware, BBE intends to resign as a general partner and become a limited
partner in the Partnership pursuant to the terms of this Agreement.
NOW THEREFORE, in consideration of the mutual covenants herein contained,
and other valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties do hereby agree as follows:
ARTICLE 1. DEFINED TERMS.
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the following terms used in this
Agreement.
1.1 "ACT" the Delaware Revised Uniform Limited Partnership Act, as it may
be amended from time to time, and any successor to such statute.
1.2 "ACQUISITION AGREEMENT" means the agreement dated as of May 14, 1998,
as amended as of July 1, 1998, among the Partnership, the other partnerships
comprising the Operating Partnership, all of the partners therein, and the
Company concerning the acquisition of the Berg Properties, the Acquired
Properties and the Pending Development Projects by the Operating Partnership,
the Company's investment in and admission to the Operating Partnership as sole
general partner, and the rights and options of the limited partners in the
Operating Partnership to tender L.P. Units or acquire shares of Common Stock
under certain circumstances.
1.3 "ADDITIONAL LIMITED PARTNER" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 4.3 hereof and who is shown
as such on the books and records of the Partnership.
1.4 "ADJUSTED CAPITAL ACCOUNT DEFICIT" means with respect to any Partner,
the negative balance, if any, in such Partner's Capital Account as of the end of
any relevant fiscal year, determined after giving effect to the following
adjustments:
(a) credit to such Capital Account any portion of such negative
balance which such Partner (i) is treated as obligated to restore to the
Partnership pursuant to the provisions of Section 1.704-1(b)(2)(ii)(c) of
the Regulations, or (ii) is deemed to be obligated to restore to the
Partnership pursuant to the penultimate sentences of Sections
1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
(b) debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
1.5 "ADJUSTED CONTRIBUTION" means the Capital Contributions of any Partner
reduced by the total distributions to such Partner from Capital Events occurring
subsequent to the Closing Date under the Acquisition Agreement. For purposes of
this Agreement, the initial Capital Contribution of the Company shall be equal
to [$35,200,000] and the initial Adjusted Contribution of each Limited Partner
shall be
-2-
<PAGE>
equal to the value of the Limited Partner's interest in the Operating
Partnership as set forth in Appendix I of the Acquisition Agreement.
1.6 "AFFILIATE" means, (a) with respect to any individual Person, any
member of the Immediate Family of such Person or a trust established for the
benefit of such member, or (b) with respect to any Entity, any Person which,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, any such Entity.
1.7 "AGREEMENT" means this Amended and Restated Agreement of Limited
Partnership, as originally executed and as amended, modified, supplemented or
restated from time to time, as the context requires.
1.8 "ARTICLES OF INCORPORATION" means the Articles of Incorporation of the
Company, as amended and restated from time to time, or the articles of
incorporation, certificate of incorporation, operating agreement of other
Charter instrument of any corporation or other entity which is a successor to
the Company by merger or consolidation.
1.9 "ASSIGNEE" means a Person to whom one or more L.P. Units have been
transferred in a manner permitted under this Agreement, but who has not become a
Substituted Limited Partner, and who has the rights set forth in Section 11.5.
1.10 "AVAILABLE CASH" means the Partnership's share of the Operating
Partnership's Available Cash (as defined in the Acquisition Agreement) with
respect to the applicable period of measurement (i.e., any period beginning on
the first day of the fiscal year, quarter or other period commencing immediately
after the last day of the fiscal year, quarter or other applicable period for
purposes of the prior calculation of Available Cash for or with respect to which
a distribution has been made, and ending on the last day of the fiscal year,
quarter or other applicable period immediately preceding the date of the
calculation). Notwithstanding the foregoing, Available Cash shall not include
any cash received or reductions in reserves, nor shall the calculation of
Available Cash take into account any disbursements made or reserves established,
after commencement of the dissolution and liquidation of the Partnership.
1.11 "BERG ACQUISITION" has the meaning set forth in the Acquisition
Agreement.
1.12 "BERG GROUP" means Carl E. Berg, Clyde J. Berg, the members of their
respective Immediate Families, and any Entity which is an Affiliate of either
Carl E. Berg or Clyde J. Berg, excluding the Partnership and the Company.
1.13 "BERG LAND HOLDINGS" means certain land held by members of the Berg
Group which the Operating Partnership may acquire under certain circumstances
pursuant to the terms of the Acquisition Agreement and the related Berg Land
Holdings
-3-
<PAGE>
Option Agreement to be entered into by the parties thereto upon approval of
certain transactions by the Company's shareholders.
1.14 "CAPITAL ACCOUNT" means with respect to any Partner, the Capital
Account maintained for such Partner in accordance with the following provisions:
(a) to each Partner's Capital Account there shall be credited (i)
such Partner's Initial Adjusted Contribution as of the effective date of
this Agreement (ii) such Partner's Capital Contributions subsequent to the
Effective Date of this Agreement, (iii) such Partner's distributive share
of Net Income and any items in the nature of income or gain which are
specially allocated to such Partner pursuant to Sections 1 and 2 of
Appendix II and (iv) the amount of any Partnership liabilities assumed by
such Partner or which are secured by any asset distributed to such
Partner;
(b) to each Partner's Capital Account there shall be debited (i) the
amount of cash and the Gross Asset Value of any Property distributed to
such Partner pursuant to any provision of this Agreement, (ii) such
Partner's distributive share of Net Losses and any items in the nature of
expenses or losses which are specially allocated to such Partner pursuant
to Sections 1 and 2 of Appendix II, and (iii) the amount of any
liabilities of such Partner assumed by the Partnership or which are
secured by any asset contributed by such Partner to the Partnership to the
extent not assumed by the Partner; and
(c) in the event all or a portion of a Partnership Interest is
transferred in accordance with the terms of this Agreement, the transferee
shall succeed to the Capital Account of the transferor to the extent it
relates to the transferred Partnership Interest.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Sections
1.704-1(b) and 1.704-2 of the Regulations, and shall be interpreted and applied
in a manner consistent with such Regulations. In the event the General Partner
shall reasonably determine that it is prudent to modify the manner in which the
Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed assets or which are assumed by the Partnership, the
General Partner or any Limited Partner) are computed in order to comply with
such Regulations, the General Partner may make such modification; provided that
it does not have an adverse effect on the amounts distributable to any Partner
pursuant to Article 13 hereof upon the dissolution of the Partnership.
1.15 "CAPITAL CONTRIBUTION" means, with respect to any Partner, any cash,
cash equivalents or the Gross Asset Value of property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Article 4
hereof.
1.16 "CAPITAL EVENT" means any Partnership transaction not in the ordinary
course of its business, including, without limitation, distribution to the
Partners in excess
-4-
<PAGE>
of distributive shares of income, principal payments, prepayments, prepayment
penalties, sales, exchanges, foreclosures or other dispositions of Property
owned by the Partnership, recoveries of damage awards and insurance proceeds not
used to rebuild (other than the receipt of contributions to the capital of the
Partnership and business or rental interruption insurance proceeds not used to
rebuild).
1.17 "CERTIFICATE" means the Certificate of Limited Partnership relating
to the Partnership to be filed in the office of the Delaware Secretary of State,
as amended from time to time in accordance with the terms hereof and the Act.
1.18 "CHANGE OF CONTROL TRANSACTION" shall mean (A) any transaction or
series of transactions occurring after the Effective Date, in which all Limited
Partners in the Operating Partnership are legally entitled to participate and
pursuant to which L.P. Units representing more than 50% of the total outstanding
L.P. Units of the Operating Partnership are purchased by a Person not controlled
by, in control of or under common control with the Company, any Affiliate of the
Company or any Affiliate of a Limited Partner, (B) the merger or consolidation
of the Partnership with another entity (other than a merger or consolidation in
which the holders of L.P. Units of the Partnership immediately before the merger
or consolidation own immediately after the merger or consolidation, Voting
Securities of the surviving or acquiring Entity or a parent party of such
surviving or acquiring Entity, possessing more than 50% of the voting power of
the surviving or acquiring Entity or parent party) resulting in the exchange of
the outstanding L.P. Units of the Partnership for cash, securities or other
property, or (C) any merger, sale, lease, license, exchange or other disposition
(whether in one transaction or a series of related transactions) of more than
50% of the assets of the Partnership.
1.19 "CHARTER" has the meaning set forth in Rule 405 of Regulation C
promulgated by the SEC under the Securities Act ("Rule 405").
1.20 "CODE" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provision of future
law.
1.21 "COMMON STOCK" means a share of Common Stock of the Company or any
shares of Voting Securities into which the Common Stock may be reclassified or
converted or for which shares of Common Stock may be exchanged in any
transaction made applicable or available to all holders of Common Stock as a
class.
1.22 "COMMON STOCK PRICE" means with respect to a particular valuation
event identified under this Agreement, the last reported sales price regular way
on such date or, in case no such reported sale takes place on such date, the
average of the reported closing bid and asked prices regular way on such date,
in either case on the American Stock Exchange, the New York Stock Exchange, or
if the Common Stock is not then listed or admitted to trading on any such
exchange, the Nasdaq or any comparable system on which the Common Stock is then
listed or admitted to trading or,
-5-
<PAGE>
if not then listed or admitted to trading on any national securities exchange,
the Nasdaq or any comparable system for the 10-trading day period ending with
the last day preceding the date of the valuation event.
1.23 "COMPANY" means Mission West Properties, a California corporation,
and any successor to such corporation.
1.24 "CONSENT" means the consent or approval of a proposed action by a
Partner given in accordance with Section 14.2 hereof.
1.25 "DEPRECIATION" means, with respect to any asset of the Partnership
for any fiscal year or other period, the depreciation, depletion, amortization
or other cost recovery deduction, as the case may be, allowed or allowable for
federal income tax purposes in respect of such asset for such fiscal year or
other period; provided, however, that except as otherwise provided in Section
1.704-2 of the Regulations, if there is a difference between the Gross Asset
Value (including the Gross Asset Value, as increased pursuant to paragraph (d)
of the definition of Gross Asset Value) and the adjusted tax basis of such asset
at the beginning of such fiscal year or other period, Depreciation for such
asset shall be an amount that bears the same ratio to the beginning Gross Asset
Value of such asset as the federal income tax depreciation, depletion,
amortization or other cost recovery deduction for such fiscal year or other
period bears to the beginning adjusted tax basis of such asset; provided,
further, that if the federal income tax depreciation, depletion, amortization or
other cost recovery deduction for such asset for such fiscal year or other
period is zero, Depreciation of such asset shall be determined with reference to
the beginning Gross Asset Value of such asset using any reasonable method
selected by the General Partner.
1.26 "DIVIDEND REINVESTMENT PLAN" has the meaning set forth in Rule 405.
1.27 "EFFECTIVE DATE" means the date of closing of the Berg Acquisition.
1.28 "EMPLOYEE BENEFIT PLAN" has the meaning set forth in Rule 405.
1.29 "ENTITY" means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, real estate investment trust,
limited liability company, cooperative or association.
1.30 "EQUITY SECURITY" has the meaning set forth in Rule 405.
1.31 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time (or any corresponding provisions of succeeding laws).
1.32 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
-6-
<PAGE>
1.33 "EXCHANGE FACTOR" has the meaning set forth in the Exchange Rights
Agreement, and is equal to the number of L.P. Units exchangeable for one share
of Common Stock, from time to time, under the Exchange Rights Agreement.
1.34 "EXCHANGE RIGHT" has the meaning set forth in the Exchange Rights
Agreement.
1.35 "EXCHANGE RIGHTS AGREEMENT" means Exchange Rights Agreement among the
Company, and each of the limited partners of the partnerships comprising the
Operating Partnership.
1.36 "GAAP" means United States generally accepted accounting principles,
as in effect from time to time.
1.37 "GENERAL PARTNER" means the general partner of the Partnership, if
there is more than one general partner, all such general partners.
1.38 "GENERAL PARTNER INTEREST" means a Partnership Interest held by the
General Partner, in its capacity as general partner. A General Partner Interest
may be expressed as a number of Units, each of which shall represent the same
Percentage Interest in the Partnership as one L.P. Unit.
1.39 "GROSS ASSET VALUE" means, with respect to any asset of the
Partnership, such asset's adjusted basis for federal income tax purposes, except
as follows:
(a) the initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset, without reduction for liabilities, as determined by the
contributing Partner and the Partnership on the date of contribution
thereof;
(b) if the General Partner reasonably determines that an adjustment
is necessary or appropriate to reflect the relative economic interests of
the Partners, the Gross Asset Values of all Partnership assets shall be
adjusted in accordance with Sections 1.704-1(b)(2)(iv)(f) and (g) of the
Regulations to equal their respective gross fair market values, without
reduction for liabilities, as reasonably determined by the General
Partner, as of the following times:
(1) a Capital Contribution (other than a de minimis Capital
Contribution) to the Partnership by a new or existing Partner as
consideration for a Partnership Interest; or
(2) the distribution by the Partnership to a Partner of more
than a de minimis amount of Partnership assets as consideration for
the repurchase of a Partnership Interest; or
-7-
<PAGE>
(3) the liquidation of the Partnership within the meaning of
Section 1.704-1(b)(2)(ii)(g) of the Regulations;
(c) the Gross Asset Values of Partnership assets distributed to any
Partner shall be the gross fair market values of such assets (taking
Section 7701(g) of the Code into account) without reduction for
liabilities, as reasonably determined by the General Partner as of the
date of distribution; and
(d) the Gross Asset Values of Partnership assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Sections 734(b) or 743(b) of the Code, but only to the
extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations (as
set forth in Appendix II); provided, however, that Gross Asset Values
shall not be adjusted pursuant to this paragraph (d) to the extent that
the General Partner reasonably determines that an adjustment pursuant to
paragraph (b) above is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to this
paragraph (d).
At all times, Gross Asset Values shall be adjusted by any Depreciation
taken into account with respect to the Partnership's assets for purposes of
computing Net Income and Net Loss.
1.40 "IMMEDIATE FAMILY" means, with respect to any Person, such Person's
spouse, parents, parents-in-law, children, nephews, nieces, brothers, sisters,
brothers-in-law, sisters-in-law, stepchildren, sons-in-law and daughters-in-law
or any trust solely for the benefit of any of the foregoing family members whose
sole beneficiaries include the foregoing family members.
1.41 "INCAPACITY" OR "INCAPACITATED" means, (i) as to any individual
Partner, death, total physical disability or entry by a court of competent
jurisdiction adjudicating him incompetent to manage his person or his estate;
(ii) as to any corporation which is a Partner, the filing of a certificate of
dissolution, or its equivalent, for the corporation or the revocation of its
charter; (iii) as to any partnership which is a Partner, the dissolution and
commencement of winding up of the partnership; (iv) as to any estate which is a
Partner, the distribution by the fiduciary of the estate's entire interest in
the Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this definition,
bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner
commences a voluntary proceeding seeking liquidation, reorganization or other
relief under any bankruptcy, insolvency or other similar law now or hereafter in
effect; (b) the Partner is adjudged as bankrupt or insolvent, or a final and
nonappealable order for relief under any bankruptcy, insolvency or similar law
now or hereafter in effect has been entered against the Partner; (c) the Partner
executes and delivers a general assignment for the benefit of the Partner's
creditors; (d) the Partner files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in
-8-
<PAGE>
clause (b) above; (e) the Partner seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator for the Partner or for all or
any substantial part of the Partner's properties; (f) any proceeding seeking
liquidation, reorganization or other relief of or against such Partner under any
bankruptcy, insolvency or other similar law now or hereafter in effect has not
been dismissed within 120 days after the commencement thereof; (g) the
appointment without the Partner's consent or acquiescence of a trustee, receiver
or liquidator has not been vacated or stayed within 90 days of such appointment;
or (h) an appointment referred to in clause (g) which has been stayed is not
vacated within 90 days after the expiration of any such stay.
1.42 "INDEMNITEE" means (i) any Person made a party to a proceeding by
reason of (A) such Person's status as (1) the General Partner, (2) a director,
trustee or officer of the Partnership or the General Partner, or (3) a director,
trustee or officer of any other Entity, each Person serving in such capacity at
the request of the Partnership or the General Partner, or (B) his or its
liabilities, pursuant to a loan guarantee or otherwise, for any indebtedness of
the Partnership or any Subsidiary of the Partnership (including, without
limitation, any indebtedness which the Partnership or any Subsidiary of the
Partnership has assumed or taken assets subject to); and (ii) such other Persons
(including Affiliates of the General Partner or the Partnership) as the General
Partner may designate from time to time (whether before or after the event
giving rise to potential liability), in its sole and absolute discretion.
1.43 "INITIAL CONTRIBUTED PROPERTY" means the Properties as defined in the
Acquisition Agreement.
1.44 "LIEN" means, with respect to any asset of the Partnership, (i) any
mortgage, deed of trust, lien, pledge, encumbrance, charge, restriction or
security interest in or on such asset, (ii) the interest of a vendor or a lessor
under any conditional sale agreement, capital lease or title retention agreement
relating to such asset and (iii) in the case of securities, any purchase option,
call or similar right of a third party with respect to such securities.
1.45 "LIMITED PARTNER" means any Person named as a Limited Partner in
Appendix I, as such Appendix may be amended from time to time, or any
Substituted Limited Partner or Additional Limited Partner, in such Person's
capacity as a Limited Partner of the Partnership.
1.46 "LIMITED PARTNER INTEREST" means a Partnership Interest of a Limited
Partner in the Partnership representing a fractional part of the Partnership
Interests of all Partners and includes any and all benefits to which the holder
of such a Partnership Interest may be entitled, as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement. A Limited Partner Interest may be expressed as a
number of L.P. Units.
1.47 "LIQUIDATING EVENT" has the meaning set forth in Section 13.1 hereof.
-9-
<PAGE>
1.48 "LIQUIDATOR" has the meaning set forth in Section 13.2 hereof.
1.49 "L.P. UNIT" means a fractional, undivided share of the Partnership
Interests of all Partners issued pursuant to Sections 4.1, 4.2 and 4.3. The
number of L.P. Units outstanding and the Percentage Interests in the Partnership
represented by such L.P. Units are set forth in Appendix I, as such Appendix may
be amended from time to time. The ownership of L.P. Units shall be evidenced by
such form of certificate for units as the General Partner adopts from time to
time unless the General Partner determines that the L.P. Units shall be
uncertificated securities.
1.50 "L.P. UNIT MAJORITY" means the Limited Partners holding the right
to vote, in the aggregate, a majority of the total number of L.P. Units
outstanding in the Operating Partnership.
1.51 "NET INCOME" OR "NET LOSS" means, for each fiscal year or other
applicable period, an amount equal to the Partnership's taxable income or loss
for such year or period as determined for federal income tax purposes by the
General Partner, determined in accordance with Section 703(a) of the Code (for
this purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Section 703(a) of the Code shall be included in taxable
income or loss), adjusted as follows: (a) by including as an item of gross
income any tax-exempt income received by the Partnership and not otherwise taken
into account in computing Net Income or Net Loss; (b) by treating as a
deductible expense any expenditure of the Partnership described in Section
705(a)(2)(B) of the Code (or which is treated as a Section 705(a)(2)(B)
expenditure pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations) and not
otherwise taken into account in computing Net Income or Net Loss, including
amounts paid or incurred to organize the Partnership (unless an election is made
pursuant to Section 709(b) of the Code) or to promote the sale of interests in
the Partnership and by treating deductions for any losses incurred in connection
with the sale or exchange of Partnership property disallowed pursuant to Section
267(a)(1) or 707(b) of the Code as expenditures described in Section
705(a)(2)(B) of the Code; (c) by taking into account Depreciation in lieu of
depreciation, depletion, amortization and other cost recovery deductions taken
into account in computing taxable income or loss; (d) by computing gain or loss
resulting from any disposition of Partnership property with respect to which
gain or loss is recognized for federal income tax purposes by reference to the
Gross Asset Value of such property rather than its adjusted tax basis; (e) in
the event of an adjustment of the Gross Asset Value of any Partnership asset
which requires that the Capital Accounts of the Partnership be adjusted pursuant
to Sections 1.704-1(b)(2)(iv)(e), (f) and (g) of the Regulations, by taking into
account the amount of such adjustment as if such adjustment represented
additional Net Income or Net Loss pursuant to Appendix II; and (f) by not taking
into account in computing Net Income or Net Loss items separately allocated to
the Partners pursuant to Sections 1 and 2 of Appendix II.
1.52 "NEW EQUITY FINANCING RIGHT" has the meaning set forth in Section
8.8.
-10-
<PAGE>
1.53 "NONRECOURSE DEDUCTIONS" has the meaning set forth in Regulations
Sections 1.704-2(b)(1) and 1.704-2(c).
1.54 "NONRECOURSE LIABILITIES" has the meaning set forth in Regulations
Section 1.704-2(b)(3).
1.55 "OPERATING PARTNERSHIP" means, collectively, Mission West
Properties, L.P., Mission West Properties, L.P. I, Mission West Properties,
L.P. II and Mission West Properties, L.P. III.
1.56 "PARTNER" means the General Partner or a Limited Partner, and
"Partners" means the General Partner and the Limited Partners collectively.
1.57 "PARTNER MINIMUM GAIN" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
1.58 "PARTNER NONRECOURSE DEBT" has the meaning set forth in Regulations
Section 1.704-2(b)(4).
1.59 "PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership taxable
year shall be determined in accordance with the rules of Regulations Section
1.704-2(i)(2).
1.60 "PARTNERSHIP" means the limited partnership governed by this
Agreement, and any successor thereto.
1.61 "PARTNERSHIP INTEREST" means an ownership interest in the Partnership
representing an Adjusted Contribution by either a Limited Partner or the General
Partner and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement. A Partnership Interest may be expressed as a number of L.P.
Units.
1.62 "PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Regulations
Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as
any net increase or decrease in a Partnership Minimum Gain, for a Partnership
taxable year shall be determined in accordance with the rules of Regulations
Section 1.704-2(d).
1.63 "PARTNERSHIP RECORD DATE" means the record date established by the
General Partner for the distribution of Available Cash pursuant to Section 5.1,
which shall be the same as the record date established by the Company for a
distribution to its shareholders of some or all of its portion of such
distribution.
-11-
<PAGE>
1.64 "PARTNERSHIP YEAR" means the fiscal year of the Partnership, which is
the calendar year, as set forth in Section 9.2.
1.65 "PENDING DEVELOPMENT PROJECTS" means three Berg Group-owned R&D
Property development projects which the Operating Partnership has agreed to
acquire upon their completion pursuant to the terms of the Acquisition Agreement
and the related Pending Projects Option Agreement to be entered into by the
parties thereto upon the approval of certain transactions by the Company's
shareholders.
1.66 "PARTNERSHIP INTEREST" means, as to a Partner, the fractional part of
the Partnership Interests owned by such Partner and expressed as a percentage as
specified in Appendix I, as such Appendix may be amended from time to time.
1.67 "PERMITTED PARTNERS" has the meaning set forth in Section 1(b) of
Appendix II.
1.68 "PERMITTED TRANSFEREE" means any person to whom L.P. Units are
Transferred in accordance with Section 11.3 of this Agreement.
1.69 "PERSON" means an individual or Entity.
1.70 "PRECONTRIBUTION GAIN" has the meaning set forth in Section 3(c) of
Appendix II.
1.71 "PUT RIGHTS" shall have the meaning provided in Section 8.7.
1.72 "PROTECTIVE PROVISIONS EXPIRATION DATE" means the date on which the
members of the Berg Group own less than 15% of the Common Stock, treating all
Equity Securities of the Company and all L.P. Units owned by such members as
Common Stock outstanding for this purpose.
1.73 "PROPERTIES" has the meaning given such term in the Acquisition
Agreement.
1.74 "QUARTER" means each of the three month periods ending on March 31,
June 30, September 30 and December 31.
1.75 "REGULATIONS" means the final, temporary or proposed Income Tax
Regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
1.76 "REIT" means a real estate investment trust as defined in Section 856
of the Code.
1.77 "REIT REQUIREMENTS" means all of the requirements imposed under the
Code on any entity seeking to qualify and remain qualified as a REIT.
-12-
<PAGE>
1.78 "RESTRICTED PARTNER" has the meaning set forth in Section 1(b) of
Appendix II.
1.79 "SEC" means the U.S. Securities and Exchange Commission.
1.80 "SECURITIES ACT" means the Securities Act of 1933, as amended.
1.81 "STOCK OPTION PLAN" means the Company's 1997 Stock Option Plan and
any other plan adopted from time to time by the Company pursuant to which shares
of Common Stock are issued, or options to acquire shares of Common Stock are
granted, to consultant, employees or directors of the Company, the Operating
Partnership or their respective Affiliates in consideration for services or
future services.
1.82 "SUBSIDIARY" means, with respect to any Person, any corporation,
partnership or other entity of which a majority of (i) the voting power of the
Voting Securities; or (ii) the outstanding equity interests, is owned, directly
or indirectly, by such Person.
1.83 "SUBSTITUTED LIMITED PARTNER" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.4 hereof.
1.84 "TAX ITEMS" has the meaning set forth in Appendix II.
1.85 "TERMINATING CAPITAL TRANSACTION" means any Change of Control
Transaction.
1.86 "TOTAL MARKET CAPITALIZATION" means the market value of the
outstanding Common Stock determined as if all L.P. Units in the Operating
Partnership had been converted into Common Stock at the Exchange Factor plus the
total debt of the Company and the Operating Partnership.
1.87 "TRANSFER" as a noun, means any sale, assignment, conveyance, pledge,
hypothecation, gift, encumbrance or other transfer, and as a verb, means to
sell, assign, convey, pledge, hypothecate, give, encumber or otherwise transfer.
1.88 "UNIT" means an equal undivided interest in all of the outstanding
Partnership Interests.
1.89 "UNITED STATES PERSON" means a holder of L.P. Units who is an
individual who is a citizen or resident of the United States; a corporation,
partnership or other entity created or organized in, or under the laws of, the
United States or any State; an estate the income of which from sources without
the United States is includable in gross income for United States federal income
tax purposes; a trust the primary supervision of which is exercisable by a court
within the United States and having one or more United States fiduciaries with
authority to control all substantial decisions of such trust; and any
-14-
<PAGE>
Person whose income or gain in respect of the L.P. Units is effectively
connected with the conduct of a United States trade or business.
1.90 "VOTING SECURITIES" means any Equity Security which entitles the
holder thereof to vote on all matters submitted for a vote of equity holders by
the issuer of such Equity Security, including the right to vote for directors in
the case of a corporation.
Certain additional terms and phrases have the meanings set forth in
Appendix II.
ARTICLE 2. ORGANIZATIONAL MATTERS.
2.1 CONTINUATION. The Partners hereby agree to continue the Partnership
under and pursuant to the Act. Except as expressly provided herein to the
contrary, the rights and obligations of the Partners and the administration and
termination of the Partnership shall be governed by the Act. The Partnership
Interest of each Partner shall be personal property for all purposes.
2.2 NAME. The name of the Partnership shall be Mission West Properties,
L.P. [ ]. The Partnership's business may be conducted under any other name or
names deemed advisable by the General Partner, including the name of the General
Partner or any Affiliate thereof. The words "Limited Partnership," "L.P.,"
"Ltd." or similar words or letters shall be included in the Partnership's name
where necessary to comply with the laws of any jurisdiction. The General Partner
in its sole and absolute discretion may, upon 5 days' prior written notice to
the Limited Partners, change the name of the Partnership.
2.3 REGISTERED OFFICE AND AGENT; PRINCIPAL OFFICE. The address of the
registered office of the Partnership in the State of Delaware and the name and
address of the registered agent for service of process on the Partnership in the
State of Delaware is The Corporation Trust Company, 1029 Orange Street,
Wilmington, Delaware 19801. The principal office of the Partnership shall be
10050 Bandley Drive, Cupertino, California 95014, or such other place as the
General Partner may from time to time designate by notice to the Limited
Partners. The Partnership may maintain offices at such other place or places
within or outside the State of Delaware as the General Partner deems advisable.
2.4 POWER OF ATTORNEY.
A. Each Limited Partner and each Assignee hereby constitutes and appoints
the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case with
full power of substitution, as its true and lawful agent and attorney-in-fact,
with full power and authority in its name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (a) all certificates, documents and other
instruments (including, without limitation, this Agreement and the
Certificate and all amendments or restatements thereof) that the General
Partner or the Liquidator deems appropriate or necessary to form, qualify
or continue the existence or qualification of the Partnership as a limited
partnership (or a partnership in which the Limited Partners have limited
liability) in the State of Delaware and in all other jurisdictions in
which the Partnership may or plans to conduct business or own property,
including, without limitation, any documents necessary or advisable to
convey any Contributed Property to the Partnership; (b) all instruments
that the General Partner deems appropriate or necessary to reflect any
amendment, change, modification or restatement of this Agreement in
accordance with its terms; (c) all conveyances and other instruments or
documents that the General Partner or the Liquidator deems appropriate or
necessary to reflect the dissolution and liquidation of the Partnership
pursuant to the terms of this Agreement, including, without limitation, a
certificate of cancellation; (d) all instruments relating to the
admission, withdrawal, removal or substitution of any Partner pursuant to,
or other events described in, Article 11, 12 or 13, or the Capital
Contribution of any Partner; and (e) all certificates, documents and other
instruments relating to the determination of the rights, preferences and
privileges of Partnership Interest; and
(2) execute, swear to, seal, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other instruments
appropriate or necessary, in the sole and absolute discretion of the
General Partner or any Liquidator, to make, evidence, give, confirm or
ratify any vote, consent, approval, agreement or other action which is
made or given by the Partners hereunder or is consistent with the terms of
this agreement or appropriate or necessary, in the sole discretion of the
General Partner or any Liquidator, to effectuate the terms or intent of
this Agreement.
Nothing contained herein shall be construed as authorizing the General
Partner or any Liquidator to amend this Agreement except in accordance with
Article 14, or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, in recognition of the fact that each of
the Partners will be relying upon the power of the General Partner and any
Liquidator to act as contemplated by this Agreement in any filing or other
action by it on behalf of the Partnership, and it shall survive and not be
affected by the subsequent Incapacity of any Limited Partner or Assignee and the
Transfer of all or any portion of such Limited Partner's or Assignee's L.P.
Units and shall extend to such Limited Partner's or Assignee's heirs,
successors, assigns and personal representatives. Each such Limited Partner or
Assignee hereby agrees to be bound by any representation made by the General
Partner or any Liquidator, acting in good faith pursuant to such power of
attorney, and each such Limited Partner or Assignee hereby waives any and all
defenses which may be available to contest, negate or disaffirm the action of
the General Partner or any Liquidator, taken in good faith under such power of
attorney. Each Limited Partner or Assignee shall execute and deliver to the
General Partner or the
-15-
<PAGE>
Liquidator, within 15 days after receipt of the General Partner' s or
Liquidator's request therefor, such further designation, powers of attorney and
other instruments as the General Partner or the Liquidator, as the case may be,
deems necessary to effectuate this Agreement and the purposes of the
Partnership.
2.5 TERM. The term of the Partnership shall commence on the date hereof
and shall continue until December 31, 2048, unless the Partnership is dissolved
sooner pursuant to the provisions of Article 13 or as otherwise provided by law.
ARTICLE 3. PURPOSE.
3.1 PURPOSE AND BUSINESS. The purpose and nature of the business to be
conducted by the Partnership is to conduct any business that may be lawfully
conducted by a limited partnership organized pursuant to the Act including,
without limitation, to engage in the following activities: to acquire, hold,
own, develop, construct, improve, maintain, operate, sell, lease, transfer,
encumber, convey, exchange, and otherwise dispose of or deal with the
Properties, and the Pending Development Projects; to acquire, hold, own,
develop, construct, improve, maintain, operate, sell, lease, transfer, encumber,
convey, exchange, and otherwise dispose of or deal with real and personal
property of all kinds; to undertake such other activities as may be necessary,
advisable, desirable or convenient to the business of the Partnership; and to
engage in such other ancillary activities as shall be necessary or desirable to
effectuate the foregoing purposes.
3.2 POWERS. The Partnership is empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business for which it has
been formed and for the protection and benefit of the Partnership; provided,
that the Partnership shall not take, and shall refrain from taking, any action
which, in the judgment of the General Partner, in its sole and absolute
discretion, (i) could adversely affect the ability of the Company to continue to
qualify as a REIT; (ii) could subject the Company to any additional taxes under
Section 857 or Section 4981 of the Code; or (iii) could violate any law or
regulation of any governmental body or agency having jurisdiction over the
Company or its securities, unless such action (or inaction) shall have been
specifically consented to by the Company, if not the General Partner, and the
L.P. Unit Majority.
ARTICLE 4. CAPITAL CONTRIBUTIONS.
4.1 CAPITAL CONTRIBUTIONS OF THE PARTNERS.
A. At the time of the execution of this Agreement, the Partners have made
the Adjusted Contributions, or shall make the Capital Contributions contemplated
by the Acquisition Agreement, as set forth in Appendix I to this Agreement. Each
Limited Partner shall own L.P. Units in the amount set forth for such Partner in
Appendix I and shall have a Percentage Interest in the Partnership as set forth
in Appendix I, which shall be adjusted in Appendix I from time to time by the
General Partner to the extent
-16-
<PAGE>
necessary to reflect accurately exchanges, additional Capital Contributions, the
issuance of additional Partnership Interests, the exercise of Put Rights with
respect to L.P. Units or similar events having an effect on any Partner's
Percentage Interest.
B. The number of Units held by the General Partner, in its capacity as
general partner, shall be deemed to be the General Partner Interest. Except as
provided in Sections 4.2, 10.5 and 13.3, the Partners shall have no obligation
to make any additional Capital Contributions.
4.2 ADDITIONAL FUNDS; RESTRICTIONS ON COMPANY.
A. The sums of money required to finance the business and affairs of the
Partnership shall be derived from the initial Capital Contributions made to the
Partnership by the Company as set forth in the Acquisition Agreement and from
funds generated from the operation and business of the Partnership including,
without limitation, distributions directly or indirectly received by the
Partnership from Available Cash provided by the Operating Partnership. In the
event additional financing is needed from sources other than as set forth in the
preceding sentence for any reason, subject to the provisions of Sections 8.8 and
8.9, the General Partner may, in its discretion, in such amounts and at such
times as it solely shall determine to be necessary or appropriate, obtain
additional funds for the Operating Partnership which shall be allocated to each
of the partnerships included therein, including the Partnership, pro rata in
proportion to the ratio of the number of Units then outstanding in each such
Partnership to the total number of L.P. Units then outstanding in the Operating
Partnership taken as a whole ("Pro Rata Share"). Accordingly, to the extent of
such Pro Rata Share of the Partnership and subject to Section 8.9 and any other
limitations contained in this Agreement or the Acquisition Agreement, the
General Partner may, (i) cause the Partnership to issue additional Partnership
Interests and admit additional Limited Partners to the Partnership in accordance
with Section 4.3; (ii) make additional Capital Contributions to the Partnership
(subject to the provisions of Section 4.2B); (iii) cause the Partnership to
borrow money, enter into loan arrangements, issue debt securities, obtain
letters of credit or otherwise borrow money on a secured or unsecured basis; or
(iv) make loans to the Partnership (subject to Section 4.2B). In no event shall
the Limited Partners be required to make any additional Capital Contributions or
any loan to, or otherwise provide any financial accommodation for the benefit
of, the Partnership pursuant to any such permitted action by the General
Partner, except insofar as a Limited Partner has exercised its New Equity
Financing Right pursuant to Section 8.8.
B. Except as agreed otherwise at the time by vote or written consent of
the L.P. Unit Majority: (i) the Company shall lend to the Partnership its Pro
Rata Share of the proceeds of or consideration received by the Company from all
loans and advances to the Company pursuant to any financial borrowing
arrangement on the same financial terms and conditions, including interest rate
and repayment schedule, as shall be applicable with respect to or incurred in
connection with the issuance of such loans and advances to the Company (which
the Partnership may, in turn, lend to any other
-17-
<PAGE>
partnership constituting part of the Operating Partnership); (ii) in the case of
Equity Securities senior or junior to the Common Stock as to dividends and
distributions on liquidation, which are not convertible into Common Stock as of
the issuance date, the Company shall contribute to the Partnership the proceeds
of or consideration (including any property or other non-cash assets) received
for such Securities and the proceeds of, or consideration received from, any
subsequent exercise, exchange or conversion thereof (if applicable), and shall
receive from the Partnership, new Partnership Interests in the Partnership in
consideration therefor with the same financial terms and conditions, including
dividend, dividend priority, liquidation preference, conversion and redemption
rights, as are applicable to such Equity Securities; (iii) in the case of Common
Stock, or other Equity Securities convertible into Common Stock as of the
issuance date, including, without limitation, shares of Common Stock or other
Equity Securities issued upon exercise of options issued under the Stock Option
Plan or any other Employee Benefit Plan of the Company, the Company shall
contribute to the Partnership the proceeds of or consideration (including any
property or other non-cash assets) received for such Securities and the proceeds
of, or consideration received from, any subsequent exercise, exchange or
conversion thereof (if applicable), and shall receive from the Partnership a
number of additional Units of General Partner Interest in consideration therefor
equal to the product of (x) the number of shares of Common Stock or other Equity
Securities issued by the Company, multiplied by (y) the Exchange Factor in
effect on the date of such contribution; and (iv) in the case of Common Stock or
other Equity Securities issued upon the exercise or surrender of rights under a
stock option, warrant, or any other right for which the Company does not receive
proceeds, and issues less than the number of shares of Common Stock or other
Equity Securities subject to such option, warrant or other right to the holder
thereof retaining the excess of such shares as payment of the purchase price (a
"net exercise"), or where the Company uses the proceeds received pursuant to a
Dividend Reinvestment Plan to acquire shares of Common Stock or other Equity
Securities to be issued to the shareholder exercising such right, the Company
shall receive from the Partnership a number of additional Units of General
Partner Interest equal to the actual number of shares of Common Stock or other
Equity Securities so issued to the shareholder multiplied by the Exchange
Factor.
4.3 ISSUANCE OF ADDITIONAL PARTNERSHIP INTERESTS; ADMISSION OF ADDITIONAL
LIMITED PARTNERS. In addition to any Partnership Interests issuable by the
Partnership pursuant to Section 4.2, and subject to the provisions of Sections
8.8 and 8.9, the General Partner is authorized to cause the Partnership to issue
additional Partnership Interests (or options therefor) in the form of L.P. Units
or other Partnership Interests senior or junior to the L.P. Units to any Persons
at any time or from time to time, for consideration per Unit of Partnership
Interest not less than the Common Stock Price determined at the initial issuance
date divided by the Exchange Factor, and on such other terms and conditions, as
the General Partner shall establish provided, however, that (i) each partnership
included in the Operating Partnership shall effect its Pro Rata Share of such
issuance, (ii) such issuance does not cause the Partnership to become, with
respect to any Employee Benefit Plan subject to Title I of ERISA or Section 4975
of the Code, a "party in interest" (as defined in Section 3(14) of ERISA) or
-18-
<PAGE>
a "disqualified person" (as defined in Section 4975(e) of the Code); and (iii)
such issuance does not cause any portion of the assets of the Partnership to
constitute assets of any Employee Benefit Plan subject to Section 2510.3-101 of
the regulations of the United States Department of Labor. Subject to the
limitations set forth in the preceding sentence, the General Partner may take
such steps as it, in its reasonable discretion, deems necessary or appropriate
to admit any Person as a Limited Partner of the Partnership, including, without
limitation, amending the Certificate, Appendix I or any other provision of this
Agreement.
4.4 REPURCHASE OF COMPANY EQUITY SECURITIES. In the event the Company
shall elect to purchase from its shareholders shares of Common Stock for the
purpose of delivering such shares to satisfy an obligation under any Dividend
Reinvestment Plan or Employee Benefit Plan adopted by the Company, or shall
repurchase any other Equity Securities of the Company pursuant to any other
share repurchase obligation or arrangement undertaken by the Company with any
Company shareholder, including preferred stock redemptions, the purchase price
paid by the Company for such shares and any other expenses incurred by the
Company in connection with such purchase shall be considered expenses of the
Partnership and shall be reimbursed to the Company, subject to the condition
that: (i) if such shares subsequently are to be sold by the Company, the Company
shall pay to the Partnership any proceeds received by the Company for such
shares of Common Stock or other Equity Securities (provided that an exchange of
shares of Common Stock for L.P. Units pursuant to the Exchange Rights Agreement
would not be considered a sale for such purposes); and (ii) if such shares are
not re-transferred by the Company within 30 days after the purchase thereof, the
General Partner shall cause the Partnership to cancel the number of Units of
General Partner Interest held by the Company determined by multiplying (x) the
quotient obtained by dividing the total amount deemed paid by the Partnership by
the Common Stock Price determined as of the repurchase date, by (y) the Exchange
Factor in effect on the date of such repurchase.
4.5 NO THIRD PARTY BENEFICIARY. No creditor or other third party having
dealings with the Partnership shall have the right to enforce the right or
obligation of any Partner to make Capital Contributions or loans or to pursue
any other right or remedy hereunder or at law or in equity, it being understood
and agreed that the provisions of this Agreement shall be solely for the benefit
of, and may be enforced solely by, the parties hereto and their respective
successors and assigns.
4.6 NO INTEREST; NO RETURN. No Partner shall be entitled to interest on
its Capital Contribution or on such Partner's Capital Account. Except as
provided in Section 8.7 or Article 13 of this Agreement, or by law, no Partner
shall have any right to demand or receive the return of its Capital Contribution
from the Partnership.
ARTICLE 5. DISTRIBUTIONS.
5.1 REGULAR DISTRIBUTIONS. Except for distributions pursuant to Section
13.2 in connection with the dissolution and liquidation of the Partnership, and
subject to the provisions of Sections 5.3, 5.4 and 5.5, the General Partner
shall cause the Partnership
-19-
<PAGE>
to distribute, from time to time as determined by the General Partner, but in
any event not less frequently than once each Quarter, the Partnership's Pro Rata
Share of all Available Cash, to the Partners, in accordance with each Partner's
respective Percentage Interest; provided, however, that in no event may a
Limited Partner receive a distribution of Available Cash with respect to a L.P.
Unit, if such Limited Partner is entitled to receive a distribution out of such
Available Cash with respect to a share of Common Stock for which such L.P. Unit
has been exchanged.
5.2 QUALIFICATION AS A REIT. The General Partner shall be entitled to
cause the Partnership to distribute to the General Partner the Partnership's Pro
Rata Share of Available Cash distributed by the Operating Partnership to enable
the General Partner to pay shareholder dividends that will (i) satisfy the REIT
Requirements for distributions to shareholders, and (ii) avoid any federal
income or excise tax liability of the General Partner; provided, however, the
General Partner is not bound to comply with this covenant to the extent such
distributions would violate applicable Delaware law.
5.3 WITHHOLDING. With respect to any withholding tax or other similar tax
liability or obligation to which the Partnership may be subject as a result of
any act or status of any Partner or to which the Partnership becomes subject
with respect to any Unit, the Partnership shall have the right to withhold
amounts of Available Cash distributable to such Partner or with respect to such
Units, to the extent of the amount of such withholding tax or other similar tax
liability or obligation pursuant to the provisions contained in Section 10.5.
5.4 ADDITIONAL PARTNERSHIP INTERESTS. If the Partnership issues
Partnership Interests in accordance with Section 4.2 or 4.3 which are entitled
to certain distribution priorities, Section 5.1 shall be amended, as necessary,
to reflect the distribution priority of such Partnership Interests and
corresponding amendments shall be made to the provisions of Appendix II.
5.5 DISTRIBUTIONS UPON LIQUIDATION. Proceeds from a Terminating Capital
Transaction and any other cash received or reductions in reserves made after
commencement of the liquidation of the Partnership shall be distributed to the
Partners in accordance with Section 13.2.
ARTICLE 6. ALLOCATIONS.
The Net Income, Net Loss, and other Partnership items of income, gain,
loss, deduction or credit as provided under the Code, shall be allocated
pursuant to the provisions of Appendix II, as amended from time to time.
ARTICLE 7. MANAGEMENT AND OPERATION OF BUSINESS.
7.1 MANAGEMENT.
A. Except as otherwise expressly provided in this Agreement, and subject
to the provisions of Section 8.9, all management powers over the business and
affairs the
-20-
<PAGE>
Partnership are and shall be exclusively vested in the General Partner, and no
Limited Partner shall have any right to participate in or exercise control or
management power over the business and affairs of the Partnership. The General
Partner may not be removed by the Limited Partners, with or without cause. In
addition to the powers now or hereafter granted a general partner of a limited
partnership under the Act or which are granted to the General Partner under any
other provision of this Agreement, the General Partner shall have full power and
authority to make contracts, sign documents, conduct litigation, acquire and
convey property, hire employees, consultants and professionals, raise capital,
borrow funds, incur liabilities, invest funds, comply with all applicable laws,
and do all other things deemed necessary or desirable by the General Partner to
conduct the business of the Partnership on behalf of the Partnership; to
exercise all powers set forth in Section 3.2, and to effectuate the purposes set
forth in Section 3.1, provided that any exercise of the foregoing rights and
powers must be consistent with the REIT Requirements.
B. Except as provided in Section 8.9, each of the Limited Partners agrees
that the General Partner is authorized to execute, deliver and perform the
agreements and transactions on behalf of the Partnership without any further
act, approval or vote of the Partners, notwithstanding any other provision of
this Agreement to the fullest extent permitted under the Act or other applicable
law, rule or regulation. The execution, delivery or performance by the General
Partner or the Partnership of any agreement authorized or permitted under this
Agreement shall not constitute a breach by the General Partner of any duty that
the General Partner may owe the Partnership or the Limited Partners or any other
Persons under this Agreement or of any duty stated or implied by law or equity.
C. At all times from and after the date hereof, in accordance with the
provisions of the Acquisition Agreement, the General Partner may cause the
Partnership to establish and maintain at any and all times working capital
accounts and other cash or similar balances in such amount as the General
Partner, in its sole and absolute discretion, deems appropriate and reasonable
from time to time. Such accounts may include funds of the General Partner and
the other partnerships in the Operating Partnership, which the General Partner
shall be free to commingle.
D. In exercising its authority under this Agreement, the General Partner
shall take into account the tax consequences to any Partner of any action taken
by it and shall select the alternative which appears at the time to present the
least adverse tax consequences to the Limited Partners. By way of example, but
not of limitation: If the General Partner decides to refinance (directly or
indirectly) any outstanding indebtedness of the Partnership, the General Partner
shall use reasonable efforts to structure such refinancing in a manner that
minimizes any adverse tax consequences resulting therefrom to the Limited
Partners. The General Partner and the Partnership shall not have liability to a
Limited Partner under any circumstances as a result of an income tax liability
incurred by such Limited Partner as a result of a necessary action (or inaction)
by the General Partner taken pursuant to its authority under and in accordance
with this Agreement where avoiding the resulting adverse tax
-21-
<PAGE>
consequences to a Limited Partner was not reasonably practicable under the
circumstances.
7.2 CERTIFICATE OF LIMITED PARTNERSHIP. The General Partner shall file the
amended Certificate with the Secretary of State of Delaware as required by the
Act. The General Partner shall use all reasonable efforts to cause to be filed
such other certificates or documents as may be reasonable and necessary or
appropriate for the formation, continuation, qualification and operation of a
limited partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware and any other state, or the District of
Columbia, in which the Partnership may elect to do business or own property. To
the extent that such action is determined by the General Partner to be
reasonable and necessary or appropriate, the General Partner shall file
amendments to and restatements of the Certificate and do all of the things to
maintain the Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) under the laws of the State of Delaware
and each other state, or the District of Columbia, in which the Partnership may
elect to do business or own property. Subject to the terms of Section 8.5A(iv)
hereof, the General Partner shall not be required, before or after filing, to
deliver or mail a copy of the Certificate or any amendment thereto to any
Limited Partner.
7.3 REIMBURSEMENT OF THE GENERAL PARTNER AND THE COMPANY.
A. Except as provided in this Section 7.3 and elsewhere in this Agreement
(including the provisions of Articles 5 and 6 regarding distributions, payments,
and allocations to which it may be entitled), the General Partner shall not be
compensated for its services as general partner of the Partnership.
B. The General Partner, shall be reimbursed on a monthly basis, or such
other basis as it may determine in its sole and absolute discretion, for all
expenses that it incurs relating to the ownership and operation of, or for the
benefit of, the Partnership; provided, that the amount of any such reimbursement
shall be reduced by any interest earned by the General Partner with respect to
bank accounts or other instruments or accounts held by it in its name. Such
reimbursement shall be in addition to any reimbursement made as a result of
indemnification pursuant to Section 7.6.
7.4 OUTSIDE ACTIVITIES OF THE GENERAL PARTNER. The General Partner shall
not directly or indirectly enter into or conduct any business other than in
connection with the ownership, acquisition, development and disposition of
Partnership Interests and the management of the business of the Partnership, and
such activities as are incidental thereto. The General Partner and any
Affiliates of the General Partner may acquire Limited Partner Interests and
shall be entitled to exercise all rights of a Limited Partner relating to such
Limited Partner Interests.
7.5 CONTRACTS WITH AFFILIATES.
A. The Partnership may lend or contribute funds or other assets to its
Subsidiaries or other Persons in which it has an equity investment and such
Persons
-22-
<PAGE>
may borrow funds from the Partnership, on terms and conditions established in
the sole and absolute discretion of the General Partner. The foregoing authority
shall not create any right or benefit in favor of any Subsidiary or any other
Person.
B. Except as provided in Section 7.4, the Partnership may Transfer assets
to joint ventures, other partnerships, corporations or other business entities
in which it is or thereby becomes a participant upon such terms and subject to
such conditions consistent with this Agreement and applicable law as the General
Partner, in its sole and absolute discretion, believes are advisable.
C. Except as expressly permitted by this Agreement or otherwise
contemplated by the Acquisition Agreement, neither the General Partner nor any
of its Affiliates shall sell, Transfer or convey any property to, or purchase
any property from, the Partnership, directly or indirectly, except pursuant to
transactions that are determined by the General Partner in good faith to be fair
and reasonable.
D. Except as provided otherwise in Section 8.9, the General Partner, in
its sole and absolute discretion and without the approval of the Limited
Partners, may propose and adopt, on behalf of the Partnership, Employee Benefit
Plans funded by the Partnership for the benefit of employees of the General
Partner, the Partnership, Subsidiaries of the Partnership or any Affiliate of
any of them in respect of services performed, directly or indirectly, for the
benefit of the Partnership, the General Partner, or any Subsidiaries of the
Partnership.
E. The General Partner is expressly authorized to enter into, in the name
and on behalf of the Partnership, a "right of first opportunity" or "right of
first offer" arrangement, non-competition agreements and other conflict
avoidance agreements with various Affiliates of the Partnership and the General
Partner, on such terms as the General Partner, in its sole and absolute
discretion, believes are advisable.
7.6 INDEMNIFICATION.
A. To the fullest extent permitted by Delaware law, the Partnership shall
indemnify each Indemnitee from and against any and all losses, claims, damages,
liabilities, joint or several, expenses (including, without limitation,
reasonable attorneys' fees and other legal fees and expenses), judgments, fines,
settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative,
that relate to the operations of the Partnership or the Company as set forth in
this Agreement, in which such Indemnitee may be involved, or is threatened to be
involved, as a party or otherwise, except to the extent it is finally determined
by a court of competent jurisdiction, from which no further appeal may be taken,
that such Indemnitee's action constituted intentional acts or omissions
constituting willful misconduct or fraud. Without limitation, the foregoing
indemnity shall extend to any liability of any Indemnitee, pursuant to a loan
guaranty or otherwise for any indebtedness of the Partnership or any Subsidiary
of the Partnership (including, without limitation, any indebtedness which the
Partnership or any Subsidiary of the Partnership has assumed or taken subject
to), except with respect to Partnership debt
-23-
<PAGE>
that has been assumed or guaranteed by an Indemnitee in its capacity as a
Limited Partner. The General Partner is hereby authorized and empowered, on
behalf of the Partnership, to enter into one or more indemnity agreements
consistent with the provisions of this Section 7.6 in favor of any Indemnitee
having or potentially having liability for any such indebtedness. Any
indemnification pursuant to this Section 7.6 shall be made only out of the
assets of the Partnership, and neither the General Partner nor any Limited
Partner shall have any obligation to contribute to the capital of the
Partnership, or otherwise provide funds, to enable the Partnership to fund its
obligations under this Section 7.6.
B. Reasonable expenses incurred by an Indemnitee who is a party to a
proceeding shall be paid or reimbursed by the Partnership in advance of the
final disposition of the proceeding.
C. The indemnification provided by this Section 7.6 shall be in addition
to any other rights to which an Indemnitee or any other Person may be entitled
under any agreement, pursuant to any vote of the Partners, under the Company's
Articles of Incorporation, as a matter of law, or otherwise, and shall continue
as to an Indemnitee who has ceased to serve in such capacity unless otherwise
provided in a written agreement pursuant to which such Indemnities are
indemnified.
D. The Partnership may, but shall not be obligated to, purchase and
maintain insurance, on behalf of the Indemnities and such other Persons as the
General Partner shall determine, against any liability that may be asserted
against or expenses that may be incurred by such Person in connection with the
Partnership's activities, regardless of whether the Partnership would have the
power to indemnify such Person against such liability under the provisions of
this Agreement.
E. For purposes of this Section 7.6, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an Employee Benefit Plan
whenever the performance by such Indemnitee of its duties to the Partnership
also imposes duties on, or otherwise involves services by, such Indemnitee to
the plan or participants or beneficiaries of the plan; excise taxes assessed on
an Indemnitee with respect to an Employee Benefit Pan pursuant to applicable law
shall constitute fines within the meaning of this Section 7.6; and actions taken
or omitted by the Indemnitee with respect to an Employee Benefit Plan in the
performance of its duties for a purpose reasonably believed by it to be in the
interest of the participant and beneficiaries of the plan shall be deemed to be
for a purpose which is not opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject any of the Limited Partners to
personal liability by reason of the indemnification provisions set forth in this
Agreement.
G. An Indemnitee shall not be denied indemnification in whole or in part
under this Section 7.6 because the Indemnitee had an interest in the transaction
with
-24-
<PAGE>
respect to which the indemnification applies if the transaction was otherwise
permitted by the terms of this Agreement.
H. The provisions of this Section 7.6 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons. Any
amendment, modification or repeal of this Section 7.6 or any provision hereof
shall be prospective only and shall not in any way affect the Partnership's
liability to any Indemnitee under this Section 7.6, as in effect immediately
prior to such amendment, modification, or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.
I. The provisions of this Section 7.6 shall be inapplicable to any
investigation, claim, suit, or proceeding, or the portion thereof, which
concerns claims for breach of contract between the Partnership and a Person
contracting other than in such Person's capacity as a Partner, or as an officer
or director of the General Partner.
J. No provision of this Section 7.6 shall be construed as permitting any
contract or transaction which is prohibited by the provisions of Section 9.2(b)
of the Acquisition Agreement.
7.7 LIABILITY OF THE GENERAL PARTNER.
A. Notwithstanding anything to the contrary set forth in this Agreement,
the General Partner and its officers and directors shall not be liable for
monetary damages to the Partnership, any Partners or any Assignees for losses
sustained or liabilities incurred as a result of errors in judgment or of any
act or omission, if the General Partner acted in good faith; provided, however,
the foregoing shall not be deemed to exculpate the Company from any liability
the Company may have under the Acquisition Agreement.
B. Subject to its obligations and duties as General Partner set forth in
Section 7.1A hereof, the General Partner may exercise any of the powers granted
to it by this Agreement and perform any of the duties imposed upon it hereunder
either directly or by or through its agent. The General Partner shall not be
liable for any acts or omissions on the part of any such agent, except in
circumstances for which the General Partner may be liable under Section 7.7A or
would not be subject to indemnification under Section 7.6.
C. Any amendment, modification or repeal of this Section 7.7 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the General Partner's and its officers' and directors' liability
to the Partnership and the Limited Partners under this Section 7.7 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to
-25-
<PAGE>
matters occurring, in whole or in part, prior to such amendment, modification or
repeal, regardless of when such claims may arise or be asserted.
-26-
<PAGE>
7.8 LIMITED PARTNERS' RIGHT TO BRING DERIVATIVE LAWSUITS. Any Limited
Partner may bring an action on behalf of the Partnership, as permitted under the
Act and the laws of the State of Delaware, to recover a judgment in favor of the
Partnership if the General Partner has refused to bring the action or if an
effort to cause the General Partner to bring the action is not likely to
succeed.
7.9 OTHER MATTERS CONCERNING THE GENERAL PARTNER.
A. The General Partner may rely and shall be protected in acting, or
refraining from acting, upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture, or other
paper or document believed by it in good faith to be genuine and to have been
signed or presented by the proper party or parties.
B. The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, architects, engineers,
environmental consultants and other consultants and advisers selected by it, and
any act taken or omitted to be taken in reliance upon the opinion of such
Persons as to matters which such General Partner reasonably believes to be
within such Person's professional or expert competence shall be conclusively
presumed to have been done or omitted in good faith and in accordance with such
opinion.
C. The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers and duly appointed attorneys-in-fact. Each such attorney shall, to the
extent provided by the General Partner in the power of attorney, have full power
and authority to do and perform all and every act and duty which is permitted or
required to be done by the General Partner hereunder.
D. Notwithstanding any other provisions of this Agreement or the Act, any
action of the General Partner on behalf of the Partnership or any decision of
the General Partner to refrain from acting on behalf of the Partnership,
undertaken in the good faith belief that such action or omission is necessary or
advisable in order (i) to protect the ability of the Company to continue to
qualify as a REIT; or (ii) to avoid the Company incurring any taxes under
Section 857 or Section 4981 of the Code, is expressly authorized under this
Agreement and is deemed approved by all of the Limited Partners.
7.10 TITLE TO PARTNERSHIP ASSETS. Title to Partnership assets, whether
real, personal or mixed and whether tangible or intangible, shall be deemed to
be owned by the Partnership as an entity, and no Partner, individually or
collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner or one or more nominees, as
the General Partner may determine, including Affiliates of the General Partner.
The General Partner hereby declares and warrants that any Partnership asset for
which legal title is held in the name of the General Partner or any nominee or
Affiliate of the General Partner shall be held by the General Partner
-27-
<PAGE>
for the use and benefit of the Partnership in accordance with the provisions of
this Agreement; provided, that the General Partner shall use its best efforts to
cause beneficial and record title to such assets to be vested in the Partnership
as soon as reasonably practicable. All Partnership assets shall be recorded as
the property of the Partnership in its books and records, irrespective of the
name in which legal title to such Partnership assets is held.
7.11 RELIANCE BY THIRD PARTIES. Notwithstanding anything to the contrary
in this Agreement, any Person dealing with the Partnership shall be entitled to
assume that the General Partner has full power and authority, without consent or
approval of any other Partner or Person, to encumber, sell or otherwise use in
any manner any and all assets of the Partnership and to enter into any contracts
on behalf of the Partnership, and take any and all actions on behalf of the
Partnership, and such Person shall be entitled to deal with the General Partner
as if the General Partner were the Partnership's sole party in interest, both
legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies which may be available against such Person to
contest, negate or disaffirm any action of the General Partner in connection
with any such dealing. In no event shall any Person dealing with the General
Partner or its representatives be obligated to ascertain that the terms of this
Agreement have been complied with or to inquire into the necessity or expedience
of any act or action of the General Partner or its representatives. Each and
every certificate, document or other instrument executed on behalf of the
Partnership by the General Partner or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that: (i) at the time of the execution and delivery of such certificate,
document or instrument, this Agreement was in full force and effect; (ii) the
Person executing and delivering such certificate, document or instrument was
duly authorized and empowered to do so for and on behalf of the Partnership; and
(iii) such certificate, document or instrument was duly executed and delivered
in accordance with the terms and provisions of this Agreement and is binding
upon the Partnership.
ARTICLE 8. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.
8.1 LIMITATION OF LIABILITY. The Limited Partners shall have no liability
under this Agreement except as expressly provided in this Agreement, including
Sections 10.5 and 13.3 hereof, or under the Act. Notwithstanding the preceding
sentence, each Limited Partner shall have the right, but not the obligation, to
guarantee a portion of the indebtedness of the Partnership in accordance with
the terms of the Acquisition Agreement.
8.2 MANAGEMENT OF BUSINESS. No Limited Partner or Assignee (other than the
General Partner, any of its Affiliates or any officer, director, employee, agent
or trustee of the General Partner, the Partnership or any of their Affiliates,
in their capacity as such) shall take part in the operation, management or
control (within the meaning of the Act) of the Partnership's business, transact
any business in the Partnership's name or have the power to sign documents for
or otherwise bind the Partnership.
-28-
<PAGE>
The transaction of any such business by the General Partner, any of its
Affiliates or any officer, director, employee, partner, agent or trustee of the
General Partner, the Partnership or any of their Affiliates, in their capacity
as such, shall not affect, impair or eliminate the limitations on the liability
of the Limited Partners or Assignees under this Agreement.
8.3 OUTSIDE ACTIVITIES OF LIMITED PARTNERS. Subject to any agreements
entered into pursuant to Section 7.5 hereof and any other agreements entered
into by a Limited Partner or its Affiliates with the Partnership or any of its
Subsidiaries including the Acquisition Agreement, any Limited Partner (other
than the Company) and any officer, director, employee, agent, trustee, Affiliate
or shareholder of any Limited Partner (other than the Company) shall be entitled
to and may have business interests and engage in business activities in addition
to those relating to the Partnership, including business interests and
activities that are in direct competition with the Partnership or that are
enhanced by the activities of the Partnership. Neither the Partnership nor any
Partners shall have any rights by virtue of this Agreement in any business
ventures of any Limited Partner or Assignee which are permitted within the scope
of this Section 8.3. None of the Limited Partners (other than the Company) nor
any other Person shall have any rights by virtue of this Agreement or the
Partnership relationship established hereby in any business ventures of any
other Person and such Person shall have no obligation pursuant to this Agreement
to offer any interest in any such business ventures to the Partnership, any
Limited Partner or any such other Person, even if such opportunity is of a
character which, if presented to the Partnership, any Limited Partner or such
other Person, could be taken by such Person.
8.4 RETURN OF CAPITAL. Except in connection with the exercise of Exchange
Rights or Put Rights, no Limited Partner shall be entitled to the withdrawal or
return of its Capital Contribution, except to the extent of distributions made
pursuant to this Agreement or upon termination of the Partnership as provided
herein. Except to the extent provided by Appendix II, or as otherwise expressly
provided in this Agreement, no Limited Partner or Assignee shall have priority
over any other Limited Partner or Assignee, either as to the return of Capital
Contributions or as to profits, losses or distributions.
8.5 RIGHTS OF LIMITED PARTNERS RELATING TO THE PARTNERSHIP.
A. In addition to the other rights provided by this Agreement or by the
Act, and except as limited by Section 8.5B hereof, each Limited Partner shall
have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon written demand with a
statement of the purpose of such demand and at such Limited Partner' s own
expense (including such reasonable copying and administrative charges as the
General Partner may establish from time to time): (i) to obtain a copy of the
most recent annual and quarterly reports filed by the Company with the SEC
pursuant to the Exchange Act; (ii) to obtain a copy of the Partnership's
federal, state and local income tax returns for each Partnership Year; (iii) to
obtain a current list of the name and last known business, residence or mailing
-29-
<PAGE>
address of each Partner; (iv) to obtain a copy of this Agreement and the
Certificate and all amendments and/or restatements thereto, together with
executed copies of all powers of attorney pursuant to which this Agreement, the
Certificate and all amendments and/or restatements thereto have been executed;
and (v) to obtain true and full information regarding the amount of cash and a
description and statement of any other property or services contributed by each
Partner and which each Partner has agreed to contribute in the future, and the
date on which each became a Partner.
B. Notwithstanding any other provision of this Section 8.5, the General
Partner may keep confidential from the Limited Partners, for such period of time
as the General Partner determines in its sole and absolute discretion to be
reasonable, any information that (i) the General Partner reasonably believes to
be in the nature of trade secrets or other confidential information, the
disclosure of which the General Partner in good faith believes is not in the
best interests of the Partnership or the Company or could damage the Partnership
or its business; or (ii) the Partnership is required by law or by agreements
with an unaffiliated third party to keep confidential.
8.6 EXCHANGE RIGHTS. The Limited Partners may exchange all or a portion of
their L.P. Units for shares of Common Stock on the terms and subject to the
conditions and restrictions contained in the Exchange Rights Agreement.
8.7 PUT RIGHTS.
A. Upon the terms and subject to the conditions of this Agreement, each
Limited Partner (other than Carl E. Berg and Clyde J. Berg with respect to all
L.P. Units owned by them beneficially as of the Effective Date) shall have the
right to tender to the Partnership outstanding L.P. Units no more than once
during any 12-month period commencing after December 29, 1999. The Partnership
shall purchase properly tendered L.P. Units for cash at a price (the "Tender
Price") equal to the average market value of the Common Stock price as of the
date the Limited Partner delivers to the General Partner, at the address
provided in Appendix II, a completed and duly executed Letter of Transmittal in
the form attached as Exhibit A to the Exchange Rights Agreement, and any other
documents required by the Letter of Transmittal. Only a tender in this manner
will constitute a valid tender of L.P. Units pursuant to this Section 8.7A. The
General Partner shall make all determinations as to the validity and form of any
tender of L.P. Units in accordance with the provisions of this Agreement, and
upon rejection of a tender, shall give the tendering holder written notice of
such rejection, which shall include the reasons therefor. Unless otherwise
agreed by the General Partner or as provided in Section 8.7C, tenders of L.P.
Units pursuant to this Section 8.7A shall be irrevocable and shall not be
subject to withdrawal or modification.
B. Within 15 days after the valid tender of L.P. Units pursuant to Section
8.7A, the Company may make an election to purchase such L.P. Units itself with
cash of the Company (the "Cash Election"). If with respect to any tender of L.P.
Units pursuant to this Section 8.7, the Company makes the Cash Election, then
within 90 days after such tender the Company shall pay to the tendering Limited
Partner an aggregate amount of cash equal to the purchase price of the tendered
L.P. Units with available cash,
-30-
<PAGE>
borrowed funds or the proceeds of an offering of new shares of Common Stock.
Upon acquiring the L.P. Units, the Company may cause the Partnership to retire
the L.P. Units and convert them to the same number of Units of General Partner
Interest, and the General Partner shall amend Appendix I accordingly.
C. Notwithstanding the foregoing, if the purchase price for the L.P. Units
tendered by a Limited Partners in one year exceeds $1,000,000, the Partnership
or the Company shall be entitled to reduce proportionally the number of L.P.
Units to be acquired from each Tendering Partner so that the total purchase
price does not exceed $1,000,000 if the Company so elects. In addition, if the
Company does not timely make the Cash Election, the Partnership shall deliver
the purchase price for the tendered L.P. Units to the Limited Partner within 45
days after the Letter of Transmittal was delivered to the General Partner. The
General Partner may defer payment of the purchase price until such time not to
exceed 120 days after the valid tender of L.P. Units pursuant to Section 8.7A as
the Partnership has adequate Available Cash after payment of the purchase price,
in the reasonable judgment of the General Partner, to fund current distributions
necessary for the Company to satisfy the REIT Requirements following the waiver
by the Company of its right to make the Cash Election. In such event, the
General Partner shall give the tendering Limited Partner written notice of its
decision to defer the payment with a calculation supporting the General
Partner's determination within 20 days after the Letter of Transmittal was
delivered to the General Partner. Upon receiving such notice, the Limited
Partner may withdraw the tender. In addition, the Limited Partner may instead
exercise its rights under the Exchange Rights Agreement. If a Limited Partner
tenders L.P. Units pursuant to this Section 8.7, the Limited Partner shall pay
the amount of any additional documentary, stamp or similar issue or transfer tax
which is due, and shall be responsible for all income or other taxes as a result
of such exchange.
D. Each tender of L.P. Units shall constitute a representation and
warranty by the tendering Limited Partner of each of the representations and
warranties set forth in the form of Letter of Transmittal.
E. Until the holder of L.P. Units tendered pursuant to Section 8.7 has
received cash in exchange therefor, such Limited Partner shall continue to hold
and own such L.P. Units for all purposes of this Agreement.
-31-
<PAGE>
8.8 NEW EQUITY FINANCING RIGHTS.
A. If the General Partner determines that it is in the best interests of
the Partnership to obtain additional funds through the issuance of additional
Partnership Interests, the General Partner shall first offer to the Limited
Partners in each of the partnerships comprising the Operating Partnership,
including the Partnership, the right of first refusal to purchase that portion
of such additional Partnership Interests which their respective numbers of L.P.
Units bear to the total number of outstanding L.P. Units in the Operating
Partnership. The General Partner shall make this offer pursuant to a written
notice describing the offering price, class or series of Partnership Interest,
and all other material terms of the offer. Such notice shall be sent to each
Limited Partner at the address reflected in Appendix I, as amended. The Limited
Partners shall have 10 days from the date of such notice to elect to purchase
any such additional Partnership Interests. Such election shall be made pursuant
to a written subscription form specifying the number of Units of additional
Limited Partnership Interests the Limited Partner intends to acquire and the
total purchase price therefor, and shall be signed by the Limited Partner and
delivered to the General Partner at the address set forth on Appendix I. After
such 10-day period, the General Partner shall be free to offer any additional
Limited Partnership Interests on substantially similar terms to non-Partners and
Partners alike.
B. The foregoing right of the Limited Partners to acquire additional
equity interests offered by the Partnership ("New Equity Financing Right") shall
not apply to any offering (i) which is part of a transaction in which the
Limited Partners had the ability to exercise their New Equity Financing Rights
under the Acquisition Agreement with respect to an offering of Equity Securities
by the Company, (ii) in connection with a merger or other business combination
subject to approval by the L.P. Unit Majority pursuant to Section 8.9, (iii) to
a Person in connection with the acquisition of property or services by the
Partnership from such Person, or (iv) of any Partnership Interest upon
conversion of an outstanding Equity Security of the Partnership, any Partnership
Subsidiary, or the Company.
8.9 MATTERS REQUIRING L.P. UNIT MAJORITY APPROVAL.
The consent of the L.P. Unit Majority will be required with respect to the
following actions involving the Partnership: (i) the material amendment,
modification or termination of the Agreement; (ii) a general assignment for the
benefit of creditors or the appointment of a custodian, receiver or trustee for
any of the assets of the Partnership; (iii) the institution of any proceeding
for bankruptcy of the Partnership; (iv) the Transfer of any General Partnership
Interests, including transfers attendant to any merger, consolidation or
liquidation of the Company except as otherwise provided in 11.2C; (v) the
admission of any additional or substitute General Partner in the Partnership;
and (vi) a Change of Control Transaction. In addition, until the Protective
Provisions Expiration Date, the consent of the L.P. Unit Majority will also be
required with respect to: (i) any Terminating Capital Transaction; (ii) the
dissolution and liquidation of the Partnership; and (iii) the Partnership's
issuance of Limited Partner
-32-
<PAGE>
Interests having seniority over the L.P. Units with respect to distributing
assets, and voting rights.
8.10 APPROVAL OF CERTAIN TAXABLE SALES. Until the earlier of the tenth
anniversary of the closing of the Berg Acquisition and the Protective Provisions
Expiration Date, the General Partner must obtain the prior written consent of
Carl E. Berg, and upon Carl Berg's death if prior to the expiration of this
provision, Clyde J. Berg, before effecting any sale or other transfer of any of
the Properties identified on Schedules 1, 2, 3 or 5 to the Acquisition Agreement
on behalf of the Partnership which results in the recognition of taxable income
by any member of the Berg Group under the Code. Until the earlier of the tenth
anniversary of the Berg Acquisition and the date on which John T. Kontrabecki
ceases to beneficially own at least 750,000 L.P. Units, the General Partner
shall obtain his prior written consent prior to effecting any sale or other
transfer of any of the Properties (identified in Schedules 4 or 5 to the
Acquisition Agreement) as owned by Kontrabecki, Triangle Partners, or Berg
Ventures II, which will result in the recognition of taxable income by
Kontrabecki under the Code.
ARTICLE 9. BOOKS, RECORDS, ACCOUNTING AND REPORTS.
9.1 RECORDS AND ACCOUNTING.
The General Partner shall keep or cause to be kept at the principal office of
the Partnership those records and documents required to be maintained by the Act
and other books and records deemed by the General Partner to be appropriate with
respect to the Partnership's business, including, without limitation, all books
and records necessary to comply with applicable REIT Requirements and to provide
to the Limited Partners any information, lists and copies of documents required
to be provided pursuant to Sections 8.5A and 9.3 hereof. Any records maintained
by or on behalf of the Partnership in the regular course of its business may be
kept on, or be in the form of, punch cards, magnetic tape, photographs,
micrographics or any other information storage device, provided that the records
so maintained are convertible into clearly legible written form within a
reasonable period of time. The books of the Partnership shall be maintained, for
financial and tax reporting purposes, on an accrual basis in
-33-
<PAGE>
accordance with GAAP, or such other basis as the General Partner determines to
be necessary or appropriate.
9.2 FISCAL YEAR. The fiscal year of the Partnership shall be the
calendar year.
ARTICLE 10. TAX MATTERS.
10.1 PREPARATION OF TAX RETURNS. The General Partner shall arrange for the
preparation and timely filing of all Partnership returns for federal and state
income tax purposes and shall use all reasonable efforts to furnish, within
sixty (60) days of the close of each taxable year, the tax information
reasonably required by Limited Partners for their federal and state income tax
reporting purposes.
10.2 TAX ELECTIONS. The General Partner shall elect for the Partnership to
be considered a limited partnership on all applicable federal and state income
tax returns to be filed by the Partnership. Except as otherwise provided herein,
the General Partner shall, in its sole and absolute discretion, determine
whether to make any other available election pursuant to the Code.
Notwithstanding the above, in making any such tax election the General Partner
shall take into account the tax consequences to the Limited Partners resulting
from any such election. The General Partner shall make such tax elections on
behalf of the Partnership as the L.P. Unit Majority request, provided that the
General Partner believes that such election is not adverse to the interests of
the General Partner, including its interest in preserving its qualification as a
REIT under the Code. In addition, the General Partner shall elect the
"traditional method" of making Section 704(c) allocations pursuant to
Regulations Section 1.704-3 with respect to each Property under the Acquisition
Agreement. The General Partner shall have the right to seek to revoke any tax
election it makes (other than the election to use the traditional method of
making the Section 704(c) allocations described in this Section 10.2),
including, without limitation, the election under Section 754 of the Code, upon
the General Partner' s determination, in its sole and absolute discretion, that
such revocation is in the best interests of the Limited Partners taken as a
whole and with the approval of the L.P. Unit Majority until the Protective
Provisions Expiration Date. All such elections and determinations may be made on
a Property-by-Property basis, and the General Partner shall be required to
analyze the impact of all such elections and determinations on that basis.
10.3 TAX MATTERS PARTNER.
A. The General Partner shall be the "tax matters partner" of the
Partnership for federal income tax purposes. Pursuant to Section 6230(e) of the
Code, upon receipt of notice from the Internal Revenue Service of the beginning
of an administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the Internal Revenue Service with the name, address,
taxpayer identification number, and Percentage Interest of each of the Limited
Partners and the Assignees; provided, that such information is provided to the
Partnership by the Limited Partners and the Assignees.
-34-
<PAGE>
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the Internal Revenue Service
with respect to any administrative or judicial proceedings for the
adjustment of Partnership items required to be taken into account by a
Partner for income tax purposes (such administrative proceedings being
referred to as a "tax audit" and such judicial proceedings being referred
to as "judicial review"), and in the settlement agreement the tax matters
partner may expressly state that such agreement shall bind all Partners,
except that such settlement agreement shall not bind any Partner (i) who
(within the time prescribed pursuant to the Code and Regulations) files a
statement with the Internal Revenue Service providing that the tax matters
partner shall not have the authority to enter into a settlement agreement
on behalf of such Partner; or (ii) who is a "notice partner" (as defined
in Section 6231(a)(8) of the Code) or a member of a "notice group" (as
defined in Section 6223(b)(2) of the Code);
(2) in the event that a notice of a final administrative adjustment
at the Partnership level of any item required to be taken into account by
a Partner for tax purposes (a "final adjustment") is mailed to the tax
matters partner, to seek judicial review of such final adjustment,
including the filing of a petition for readjustment with the Tax Court or
the filing of a complaint for refund with the United States Claims Court
or the District Court of the United States for the district in which the
Partnership's principal place of business is located;
(3) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the
Internal Revenue Service and, if any part of such request is not allowed
by the Internal Revenue Service, to file an appropriate pleading (petition
or complaint) for judicial review with respect to such request;
(5) to enter into an agreement with the Internal Revenue Service to
extend the period for assessing any tax which is attributable to any item
required to be taken account of by a Partner for tax purposes, or an item
affected by such item; and
(6) to take any other action on behalf of the Partners or the
Partnership in connection with any tax audit or judicial review proceeding
to the extent permitted by applicable law or regulations.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the
extent required by law, is a matter in the sole and absolute discretion of
the tax matters partner and the provisions relating to indemnification of
the General Partner set forth in
-35-
<PAGE>
Section 7.6 of this Agreement shall be fully applicable to the tax matters
partner in its capacity as such.
C. The tax matters partner shall receive no compensation for its services.
All third party costs and expenses incurred by the tax matters partner in
performing its duties as such (including legal and accounting fees and expenses)
shall be borne by the Partnership. Nothing herein shall be construed to restrict
the Partnership from engaging an accounting firm to assist the tax matters
partner in discharging its duties hereunder, so long as the compensation paid by
the Partnership for such services is reasonable.
10.4 ORGANIZATIONAL EXPENSES. The Partnership shall elect to deduct
expenses, if any, incurred by it in organizing the Partnership ratably over a
60-month period as provided in Section 709 of the Code.
10.5 WITHHOLDING. Each Limited Partner hereby authorizes the Partnership
to withhold from, or pay on behalf of or with respect to, such Limited Partner
any amount of federal, state, local, or foreign taxes that the General Partner
determines that the Partnership is required to withhold or pay with respect to
any amount distributable or allocable to such Limited Partner pursuant to this
Agreement, including, without limitation, any taxes required to be withheld or
paid by the Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of the
Code. Any amount paid on behalf of or with respect to a Limited Partner shall
constitute a loan by the Partnership to such Limited Partner, which loan shall
be repaid by such Limited Partner within 15 days after notice from the General
Partner that such payment must be made unless (i) the Partnership withholds such
payment from a distribution which would otherwise be made to the Limited
Partner; or (ii) the General Partner determines, in its sole and absolute
discretion, that such payment may be satisfied out of the amount of Available
Cash which would, but for such payment, be distributed to the Limited Partner.
Any amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be
treated as having been distributed to such Limited Partner. Each Limited Partner
hereby unconditionally and irrevocably grants to the Partnership a security
interest in such Limited Partner' s Partnership Interest to secure such Limited
Partner's obligation to pay to the Partnership any amounts required to be paid
pursuant to this Section 10.5. In the event that a Limited Partner fails to pay
when due any amounts owed to the Partnership pursuant to this Section 10.5, the
General Partner may, in its sole and absolute discretion, elect to make the
payment to the Partnership on behalf of such defaulting Limited Partner, and in
such event shall be deemed to have loaned such amount to such defaulting Limited
Partner and shall succeed to all rights and remedies of the Partnership as
against such defaulting Limited Partner. Without limitation, in such event, the
General Partner shall have the right to receive distributions that would
otherwise be distributable to such defaulting Limited Partner until such time as
such loan, together with all interest thereon, has been paid in full, and any
such distributions so received by the General Partner shall be treated as having
been distributed to the defaulting Limited Partner and immediately paid by the
defaulting Limited Partner to the General Partner in repayment of such loan. Any
amount payable by a Limited Partner
-36-
<PAGE>
hereunder shall bear interest at the highest base or prime rate of interest
published from time to time by any of Wells Fargo Bank, N.A., plus 4 percentage
points, but in no event higher than the maximum lawful rate of interest on such
obligation, such interest to accrue from the date such amount is due (i.e., 15
days after demand) until such amount is paid in full. Each Limited Partner shall
take such actions as the Partnership or the General Partner shall request in
order to perfect or enforce the security interest created hereunder.
ARTICLE 11. TRANSFERS AND WITHDRAWALS.
11.1 TRANSFER.
A. The term "Transfer," when used in this Article 11 with respect to a
Unit, shall be deemed to refer to a transaction by which the General Partner
purports to assign all or any part of its General Partner Interest to another
Person or by which a Limited Partner purports to assign all or any part of its
Limited Partner Interest to another Person. The term "Transfer" when used in
this Article 11 does not include any exchange of L.P. Units for shares of Common
Stock pursuant to the Exchange Rights Agreement.
B. No Partnership Interest shall be Transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article 11.
Any Transfer or purported Transfer of a Partnership Interest not made in
accordance with this Article 11 shall be null and void.
11.2 TRANSFER OF THE COMPANY'S PARTNERSHIP INTERESTS.
A. The General Partner may not withdraw as General Partner or transfer its
General Partner Interest or Limited Partner Interest unless (i) the L.P. Unit
Majority (excluding L.P. Units held by the Company) consents to such Transfer or
withdrawal, or (ii) such Transfer is to an entity which is wholly-owned by the
Company and is a Qualified REIT Subsidiary under Section 856(i) of the Code.
B. In the event the General Partner withdraws as General Partner in
accordance with Section 11.2A, the General Partner's General Partner Interest
shall immediately be converted into a Limited Partner Interest.
11.3 LIMITED PARTNERS' RIGHTS TO TRANSFER.
A. Subject to the provisions of this Section 11.3, a Limited Partner
(other than the Company) may, without the consent of the General Partner:
(a) if such Limited Partner is a partnership or a limited liability
company, Transfer such Limited Partner's L.P. Units to any partner of such
Limited Partner or any member of such limited liability company;
-37-
<PAGE>
(b) Transfer such Limited Partner's L.P. Units to any other Limited
Partner; and
(c) pledge such Limited Partner's L.P. Units to any financial
institution as collateral for any loan with respect to which such Limited
Partner is personally liable.
B. Subject to the provisions of this Section 11.3, a Limited Partner may
Transfer any of such Limited Partner's L.P. Units, other than in accordance with
Section 11.3A, only with the prior written consent of the General Partner which
may be withheld in its sole discretion.
C. If a Limited Partner is subject to Incapacity, the executor,
administrator, trustee, committee, guardian, conservator or receiver of such
Limited Partner's estate shall have all of the rights of a Limited Partner, but
not more rights than those enjoyed by other Limited Partners, for the purpose of
settling or managing the estate and such power as the Incapacitated Limited
Partner possessed to Transfer all or any part of his or its interest in the
Partnership. The Incapacity of a Limited Partner, in and of itself, shall not
dissolve or terminate the Partnership.
D. No Transfer by a Limited Partner of its L.P. Units may be made to any
Person if (i) in the opinion of legal counsel for the Partnership, it would
result in the Partnership being treated as an association taxable as a
corporation; (ii) such Transfer would cause the Partnership to become, with
respect to any Employee Benefit Plan subject to Title I of ERISA, a
"party-in-interest" (as defined in Section 3(14) of ERISA) or a "disqualified
person" (as defined in Section 4975(c) of the Code); (iii) such Transfer would,
in the opinion of legal counsel for the Partnership, cause any portion of the
assets of the Partnership to constitute assets of any Employee Benefit Plan
pursuant to Department of Labor Regulations Section 2510.2-101; (iv) such
Transfer would subject the Partnership to regulation under the Investment
Company Act of 1940, the Investment Advisors Act of 1940 or ERISA; or (v) such
Transfer is a sale or exchange, and such sale or exchange would, when aggregated
with all other sales and exchanges during the 12-month period ending on the date
of the proposed Transfer, result in a Change of Control Transaction.
E. Subject to the foregoing provisions of Section 11.3 and the terms of
Section 12.2, a Limited Partner may transfer L.P. Units to an Affiliate and have
such Affiliate become a Limited Partner.
In addition to the conditions set forth in Sections 11.3D, 11.4, and 12.2
any Transfer pursuant to this Article 11 is subject to the following conditions:
(1) unless such Transfer is being made pursuant to an effective
registration statement under the Securities Act, or pursuant to Rule 144 or Rule
144A thereunder, the transferring Limited Partner shall deliver to the Company a
notice with respect to the proposed transfer, together with an opinion of
counsel in form and substance satisfactory to the General Partner prepared by
counsel reasonably
-38-
<PAGE>
satisfactory to the General Partner (which shall include, without limitation,
counsel to each of the Limited Partners as of the date hereof), to the effect
that an exemption from registration and qualification under such Securities Act
is available;
(2) the transferring Limited Partner and its transferee shall
each provide a certificate to the General Partner, in form and substance
satisfactory to the General Partner, to the effect that (i) the proposed
transfer will not be effected on or through (a) a United States national,
regional or local securities exchange, (b) a foreign securities exchange or (c)
an interdealer quotation system that regularly disseminates firm buy or sell
quotations by identified brokers or dealers (including, without limitation, the
Nasdaq) by electronic means or otherwise, and (ii) it is not, and the proposed
transfer will not be made by, through or on behalf of, (a) a Person who
regularly quotes equity interests in the Partnership, such as a broker or dealer
making a market in equity interests in the Partnership or (b) a Person who
regularly makes available to the public (including customers or subscribers) bid
or offer quotes with respect to equity interests in the Partnership and stands
ready to effect buy or sell transactions at the quoted prices for itself or on
behalf of others; PROVIDED, HOWEVER, that such certificate shall not be required
for any transfer in connection with a registered public offering;
(3) the transferee must be a United States Person for federal
income tax purposes; and
(4) such transfer must not cause the Partnership to terminate or
lose its status as a partnership for tax purposes.
F. If it shall become unlawful for any Limited Partner to continue to hold
some or all of the L.P. Units held by such Limited Partner, or by reason of
legal or regulatory restrictions the cost to such Limited Partner to continue to
hold such L.P. Units (in relation to the value of such L.P. Units to such
Limited Partner) has, in the reasonable judgment of such Limited Partner,
significantly increased, such Limited Partner may, at any time following the
date three business days after the delivery by such Limited Partner to the
General Partner a notice of the existence of any such restriction, Transfer all
or any portion of the L.P. Units held by such Limited Partner free of any
restrictions imposed under this Agreement (other than those restrictions
required by federal or state laws, including securities, and tax, laws, and
subject to the prospective transferee meeting the requirements of Section 12.2,
and provided that the transferee Limited Partner shall hold its L.P. Units
subject to all of the terms of this Agreement); but only if such Limited Partner
cannot then exercise its Exchange Rights or Put Rights for cash, and the Company
has notified the Limited Partner that the Company will not register for offer
and sale all shares of Common Stock issued upon the exercise of the Exchange
Rights within 90 days. In connection therewith, the Company shall assist such
Limited Partner in disposing of the L.P. Units held by it in a prompt and
orderly manner, and (at the request of such Limited Partner) make available (and
authorize such Limited Partner to make available through the Company) financial
and other information concerning the Company and its Subsidiaries (including,
without limitation, the information described in Rule 144A(d)(4)) to any
prospective purchaser of
-39-
<PAGE>
such L.P. Units (it being agreed that such prospective purchaser shall be either
an "accredited investor" within the meaning of Rule 501 (a) under the Securities
Act or a "qualified institutional buyer" within the meaning of Rule 144A(d)(1)
under such Act to the extent that such L.P. Units are "restricted securities" as
such term is defined in Rule 144). The Company may require that each such
prospective purchaser keep confidential, pursuant to customary confidentiality
requirements, any information received by it pursuant to this provision.
11.4 SUBSTITUTED LIMITED PARTNERS. The General Partner shall have the
right to consent to the admission of a transferee who receives L.P. Units
pursuant to Section 11.3A, C, or E, which consent may be given or withheld by
the General Partner in its sole and absolute discretion. The General Partner's
failure or refusal to permit such transferee to become a Substituted Limited
Partner shall not give rise to any cause of action against the Partnership or
any Partner.
11.5 ASSIGNEES. If the General Partner, in its sole and absolute
discretion, does not consent to the admission of any transferee as a Substituted
Limited Partner, as described in Section 11.4, such transferee shall be
considered an Assignee for purposes of this Agreement. An Assignee shall be
deemed to have had assigned to it, and shall be entitled to receive
distributions from the Partnership and the share of Net Income, Net Losses and
any other Tax Items with respect to the L.P. Units assigned to such transferee,
but shall not be deemed to be a holder of L.P. Units for any other purpose under
this Agreement, and shall not be entitled to vote such L.P. Units in any matter
presented to the Limited Partners for a vote (such L.P. Units being deemed to
have been voted on such matter in the same proportion as all other L.P. Units
held by Limited Partners are voted). In the event the Assignee desires to make a
further assignment of any such L.P. Units, such Assignee shall be subject to all
of the provisions of this Article 11 to the same extent and in the same manner
as any Limited Partner desiring to make an assignment of L.P. Units.
11.6 EFFECT OF PROHIBITED TRANSFER. Any transfer made in violation of
Article 11 shall be null and void and of no force and effect.
11.7 GENERAL PROVISIONS.
A. No Limited Partner may withdraw from the Partnership other than as a
result of a permitted Transfer of all of such Limited Partner' s L.P. Units in
accordance with this Article 11, or pursuant to the tender or exchange of all of
its L.P. Units pursuant to the exercise of Put Rights or Exchange Rights.
B. Any Limited Partner who shall Transfer all of its L.P. Units in a
Transfer permitted pursuant to this Article 11 shall cease to be a Limited
Partner upon the admission of all Assignees of such L.P. Units as Substituted
Limited Partners. Similarly, any Limited Partner who shall Transfer all of its
L.P. Units pursuant to a tender or exchange of all of its L.P. Units pursuant to
the exercise of Put Rights or Exchange Rights shall cease to be a Limited
Partner.
-40-
<PAGE>
C. Without the consent of the General Partner, permitted Transfers
pursuant to this Article 11 may be made effective only as of the first day of a
Quarter.
D. If any Partnership Interest is transferred or assigned during the year
in compliance with the provisions of this Article 11, or redeemed pursuant to
Section 8.7, or exchanged pursuant to the Exchange Rights Agreement on any day
other than the first day of a Partnership Year, the Net Income, Net Losses, each
item thereof, and all other Tax Items attributable to such interest for such
Partnership Year shall be divided and allocated between the transferor Partner
and the transferee Partner by taking into account their varying interests during
the Partnership Year in accordance with Section 706(d) of the Code, using the
interim closing of the books method. Solely for purposes of making such
allocations, each of such items for the calendar month in which the Transfer or
assignment occurs shall be allocated to the transferee Partner, and none of such
items for the calendar month in which an exchange occurs shall be allocated to
the exchanging Partner, provided, however, that the General Partner may adopt
such other conventions relating to allocations in connection with transfers,
assignments, or exchanges as it determines are necessary or appropriate. All
distributions of Available Cash attributable to such L.P. Units with respect to
which the Partnership Record Date is before the date of such transfer,
assignment, or exchange shall be made to the transferor Partner or the
exchanging Partner, as the case may be, and in the case of a Transfer or
assignment other than an exchange, all distributions of Available Cash
thereafter attributable to such L.P. Units shall be made to the transferee
Partner.
ARTICLE 12. ADMISSION OF PARTNERS.
12.1 ADMISSION OF SUCCESSOR GENERAL PARTNER. A successor to all of the
General Partner Interest pursuant to Article 11 hereof who is proposed to be
admitted as a successor General Partner shall be admitted to the Partnership as
the General Partner, effective upon the Transfer. Any such transferee shall
carry on the business of the Partnership without dissolution. In each case, the
admission shall be subject to the successor General Partner executing and
delivering to the Partnership an acceptance of all of the terms and conditions
of this Agreement, the Acquisition Agreement, and such other documents or
instruments as may be required to effect the admission. In the case of such
admission on any day other than the first day of a Partnership Year, all items
attributable to the General Partner Interest for such Partnership Year shall be
allocated between the transferring General Partner and such successor as
provided in Section 11.6D.
12.2 ADMISSION OF ADDITIONAL AND SUBSTITUTED LIMITED PARTNERS.
A. A Person who makes a Capital Contribution to the Partnership in
accordance with this Agreement after the Effective Date and a Permitted
Transferee pursuant to Article 11 shall be admitted to the Partnership as an
Additional Limited Partner or a Substituted Limited Partner only upon furnishing
to the General Partner (i) evidence of acceptance in form satisfactory to the
General Partner of all of the terms and conditions of this Agreement and the
Acquisition Agreement, including, without limitation, the power of attorney
granted in Section 2.4 hereof and (ii) such other
-41-
<PAGE>
documents or instruments as may be required in the discretion of the General
Partner in order to effect such Person's admission as an Additional Limited
Partner.
B. Notwithstanding anything to the contrary in this Section 12.2, no
Person shall be admitted as an Additional Limited Partner or a Substituted
Limited Partner without the consent of the General Partner, which consent may be
given or withheld in the General Partner's sole and absolute discretion. The
admission of any Person as an Additional Limited Partner or a Substituted
Limited Partner shall become effective on the date upon which the name of such
Person is recorded on the books and records of the Partnership, following the
consent of the General Partner to such admission.
C. If any Additional Limited Partner is admitted to the Partnership on any
day other than the first day of a Partnership Year, then Net Income, Net Losses,
each other Tax Item and all other items allocable among Partners and Assignees
for such Partnership Year shall be allocated among such Additional Limited
Partner and all other Partners and Assignees by taking into account their
varying interests during the Partnership Year in accordance with Section 706(d)
of the Code, using the interim closing of the books method. Solely for purposes
of making such allocations, each of such items for the calendar month in which
an admission of any Additional Limited Partner occurs shall be allocated among
all of the Partners and Assignees, including such Additional Limited Partner.
All distributions of Available Cash with respect to which the Partnership Record
Date is before the date of such admission shall be made solely to Partners and
Assignees, other than the Additional Limited Partner, and all distributions of
Available Cash thereafter shall be made to all of the Partners and Assignees,
including such Additional Limited Partner.
D. A transferee who has been admitted as a Substituted Limited Partner or
an Additional Limited Partner shall have all the rights and powers and be
subject to all the restrictions and liabilities of a Limited Partner under this
Agreement.
12.3 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP. For
the admission to the Partnership of any Partner, the General Partner shall take
all steps necessary and appropriate under the Act to amend the records of the
Partnership and, if necessary, to prepare as soon as practical an amendment of
this Agreement (including an amendment of Appendix I) and, if required by law,
shall prepare and file an amendment to the Certificate and may for this purpose
exercise the power of attorney granted pursuant to Section 2.4 hereof.
ARTICLE 13. DISSOLUTION, LIQUIDATION AND TERMINATION.
13.1 DISSOLUTION. The Partnership shall not be dissolved by the admission
of Substituted Limited Partners or Additional Limited Partners or by the
admission of a successor General Partner in accordance with the terms of this
Agreement. In the event of the withdrawal of the General Partner, any successor
General Partner shall continue the business of the Partnership. The Partnership
shall dissolve, and its affairs
-42-
<PAGE>
shall be wound up, only upon the first to occur of any of the following
("Liquidating Events"):
(i) the expiration of its term as provided in Section 2.5 hereof;
(ii) an event of withdrawal of the General Partner, as defined in the Act
(other than an event of bankruptcy), unless, within 90 days after such event of
withdrawal a majority in interest of the remaining Partners agree in writing to
continue the business of the Partnership and to the appointment, effective as of
the date of withdrawal, of a successor General Partner;
(iii)from and after the date of this Agreement through December 31, 2048,
an election to dissolve the Partnership made by the General Partner, with the
Consent of Limited Partners holding 66-2/3% or more of the L.P.
Units (including L.P. Units held by the Company);
(iv) on or after January 1, 2049, an election to dissolve the Partnership
made by the General Partner, in its sole and absolute discretion;
(v) entry of a decree of judicial dissolution of the Partnership pursuant
to the provisions of the Act;
(vi) the sale of all or substantially all of the assets and properties of
the Partnership;
(vii)a final and non-appealable judgment is entered by a court of
competent jurisdiction ruling that the General Partner is bankrupt or insolvent,
or a final and non-appealable order for relief is entered by a court with
appropriate jurisdiction against the General Partner, in each case under any
federal or state bankruptcy or insolvency laws as now or hereafter in effect,
unless prior to the entry of such order or judgment all of the remaining
Partners agree in writing to continue the business of the Partnership and to the
appointment, effective as of a date prior to the date of such order or judgment,
of a substitute General Partner.
13.2 WINDING UP.
A. Upon the occurrence of a Liquidating Event, the Partnership shall
continue solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors and Partners.
No Partner shall take any action that is inconsistent with, or not necessary to
or appropriate for, the winding up of the Partnership's business and affairs.
The General Partner, or, in the event there is no remaining General Partner, any
Person elected by Limited Partners holding at least a majority of the Limited
Partnership Interests (the General Partner or such other Person being referred
to herein as the "Liquidator"), shall be responsible for overseeing the winding
up and dissolution of the Partnership and shall take full account of the
Partnership's liabilities and property and the Partnership property shall be
liquidated as promptly as is consistent with obtaining the fair value thereof,
and the
-43-
<PAGE>
proceeds therefrom (which may, to the extent determined by the General Partner,
include shares of beneficial interest or other securities of the Company) shall
be applied and distributed in the following order:
(i) First, to the payment and discharge of all of the Partnership's
debts and liabilities to creditors other than the Partners;
(ii) Second, to the payment and discharge of all of the Partnership's
debts and liabilities to the General Partner;
(iii)Third, to the payment and discharge of all of the
Partnership's debts and liabilities to the other Partners;
(iv) Fourth, to the General Partner and Limited Partners to the
extent of and in accordance with the positive balances in their Capital
Accounts, after giving effect to all contributions, distributions, and
allocations for all periods; and
(v) The balance, if any, to the Partners according to their
Percentage Interests.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2A hereof which require
liquidation of the assets of the Partnership, but subject to the order of
priorities set forth therein, if prior to or upon dissolution of the Partnership
the Liquidator determines that an immediate sale of part or all of the
Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any asset except those necessary to satisfy
liabilities of the Partnership (including to those Partners as creditors) and/or
distribute to the Partners, in lieu of cash, as tenants in common and in
accordance with the provisions of Section 13.2A hereof, undivided interests in
such Partnership assets as the Liquidator deems not suitable for liquidation.
Any such distributions in kind shall be made only if, in the good faith judgment
of the Liquidator, such distributions in kind are in the best interests of the
Partners, and shall be subject to such conditions relating to the disposition
and management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such properties at
such time. The Liquidator shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may adopt.
C. In the discretion of the Liquidator, a pro rata portion of the
distributions that would otherwise be made to the General Partner and Limited
Partners pursuant to this Article 13 may be:
(1) distributed to a trust established for the benefit of the General
Partner and Limited Partners for the purposes of liquidating Partnership
assets,
-44-
<PAGE>
collecting amounts owed to the Partnership, and paying any contingent or
unforeseen liabilities or obligations of the Partnership or the General
Partner arising out of or in connection with the Partnership. The assets of
any such trust shall be distributed to the General Partner and Limited
Partners from time to time, in the reasonable discretion of the Liquidator,
in the same proportions as the amount distributed to such trust by the
Partnership would otherwise have been distributed to the General Partner
and Limited Partners pursuant to this Agreement; or
(2) withheld or escrowed to provide a reasonable reserve for
Partnership liabilities (contingent or otherwise) and to reflect the
unrealized portion of any installment obligations owed to the Partnership,
provided that such withheld or escrowed amounts shall be distributed to
the General Partner and Limited Partners in the manner and order of
priority set forth in Section 13.2A as soon as practicable.
13.3 OBLIGATION TO CONTRIBUTE DEFICIT. In the event the Partnership is
"liquidated" within the meaning Section 1.704-1(b)(2)(ii)(G) of the Regulations,
if any Partner's Adjusted Contributions are less than zero (after giving effect
to all contributions, distributions, and allocations for all Fiscal Years,
including the Fiscal Year during which such liquidation occurs), such Partner
shall contribute to the capital of the Partnership the amount necessary to
restore such Partner's Capital Account to zero in compliance with Regulations
Section 1.704-1(b)(2(ii)(B)(3).
13.4 RIGHTS OF LIMITED PARTNERS. Except as otherwise provided in this
Agreement, each Limited Partner shall look solely to the assets of the
Partnership for the return of its Adjusted Capital Contributions and shall have
no right or power to demand or receive property other than cash from the
Partnership. Except as otherwise provided in this Agreement, no Limited Partner
shall have priority over any other Partner as to the return of its Adjusted
Capital Contributions, distributions, or allocations.
13.5 NOTICE OF DISSOLUTION. In the event a Liquidating Event occurs or an
event occurs that would, but for the provisions of an election or objection by
one or more Partners pursuant to Section 13.1, result in a dissolution of the
Partnership, the General Partner shall, within 30 days thereafter, provide
written notice thereof to each of the Partners.
13.6 TERMINATION OF PARTNERSHIP AND CANCELLATION OF CERTIFICATE OF LIMITED
PARTNERSHIP. Upon the completion of the liquidation of the Partnership' s
assets, as provided in Section 13.2 hereof, the Partnership shall be terminated,
a certificate of cancellation shall be filed, and all qualifications of the
Partnership as a foreign limited partnership in jurisdictions other than the
state of Delaware shall be canceled and such other actions as may be necessary
to terminate the Partnership shall be taken.
13.7 REASONABLE TIME FOR WINDING-UP. A reasonable time shall be allowed
for the orderly winding-up of the business and affairs of the Partnership and
the
-45-
<PAGE>
liquidation of its assets pursuant to Section 13.2 hereof in order to minimize
any losses otherwise attendant upon such winding-up, and the provisions of this
Agreement shall remain in effect among the Partners during the period of
liquidation.
13.8 WAIVER OF PARTITION. Each Partner hereby waives any right to
partition of the Partnership property.
13.9 DEEMED DISTRIBUTION AND RECONTRIBUTION. Notwithstanding any other
provisions of this Article 13, in the event the Partnership is liquidated within
the meaning of Regulations Section 1.704-1(b)(2)(ii)(G) but no Liquidating Event
has occurred, the Property shall not be liquidated, the Partnership's
liabilities shall not be paid or discharged, and the Partnership's affairs shall
not be wound up. Instead, the Partnership shall be deemed to have distributed
the Property in kind to the Partners, who shall be deemed to have assumed and
taken subject to all Partnership liabilities, all in accordance with their
respective Capital Accounts, and if any Partner has an Adjusted Capital Account
Deficit (after giving effect to all contributions, distributions, and
allocations for all Fiscal Years, including the Fiscal Year during which such
liquidation occurs) such Partner shall contribute to the capital of the
Partnership the amount necessary to restore such deficit balance to zero in
compliance with Regulations Section 1.704-1(b)(2(ii)(B)(3). Immediately
thereafter, the Partners shall be deemed to have recontributed the property in
kind to the Partnership, which shall be deemed to have assumed and taken subject
to all such liabilities.
ARTICLE 14. AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS.
14.1 AMENDMENTS.
A. Amendments to this Agreement may be proposed by the General Partner or
by any Limited Partners (other than the Company) holding in the aggregate 25% or
more of the Partnership Interests. Following such proposal, the General Partner
shall submit any proposed amendment to the Limited Partners. The General Partner
shall seek the written vote of the Partners on the proposed amendment or shall
call a meeting to vote thereon and to transact any other business that it may
deem appropriate. For purposes of obtaining a written vote, the General Partner
may require a response within a reasonable specified time, but not less than 15
days, and failure to respond in such time period shall constitute a vote which
is consistent with the General Partner's recommendation with respect to the
proposal. Except as provided in Section 8.9, 13.1C, 14.1B, 14.1C or 14.1D, a
proposed amendment shall be adopted and be effective as an amendment hereto if
it is approved by the General Partner and it receives the Consent of Limited
Partners holding 50% or more of the Percentage Interests of the Limited Partners
(including Limited Partner Interests held by the Company).
B. Notwithstanding any provisions of Sections 8.9 and 14.1A to the
contrary, the General Partner shall have the power, without the consent of the
Limited Partners,
-46-
<PAGE>
to amend this Agreement as may be required to facilitate or implement any of the
following purposes:
(1) to add to the obligations of the General Partner or surrender any
right or power granted to the General Partner or any Affiliate of the
General Partner for the benefit of the Limited Partners;
(2) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement;
(3) to set forth the designations, rights, powers, duties, and
preferences of the holders of any additional Partnership Interests issued
pursuant to Section 4.3 hereof;
(4) to reflect a change that is of an inconsequential nature and does
not adversely affect the Limited Partners in any material respect, or to
cure any ambiguity, correct or supplement any provision in this Agreement
not inconsistent with law or with other provisions, or make other changes
with respect to matters arising under this Agreement that will not be
inconsistent with law or with the provisions of this Agreement; and
(5) to satisfy any requirements, conditions, or guidelines contained
in any order, directive, opinion, ruling or regulation of a federal or
state agency or contained in federal or state law.
The General Partner shall provide notice to the Limited Partners when any action
under this Section 14.1B is taken.
C. Notwithstanding provision of Section 14.1A and 14.1B to the contrary,
this Agreement shall not be amended without the Consent of each Partner
adversely affected if such amendment would (i) convert a Limited Partner's
interest in the Partnership into a General Partner Interest; (ii) modify the
limited liability of a Limited Partner in a manner adverse to such Limited
Partner; (iii) alter rights of the Partner to receive distributions pursuant to
Article 5 or Article 13, or the allocations specified in Article 6 (except as
permitted pursuant to Article IV and Section 14.1B(3) hereof); (iv) cause the
termination of the Partnership prior to the time set forth in Section 2.5 or
13.1; or (v) amend this Section 14.1C. Further, no amendment may alter the
restrictions on the General Partner' s authority set forth in Section 13.1C
without the Consent specified in that section.
14.2 MEETINGS OF THE PARTNERS.
A. Meetings of the Partners may be called by the General Partner and shall
be called upon the receipt by the General Partner of a written request by
Limited Partners (other than the Company) holding 25% or more of the Partnership
Interests. The request shall state the nature of the business to be transacted.
Notice of any such meeting shall be given to all Partners not less than 7 days
nor more than 30 days prior
-47-
<PAGE>
to the date of such meeting. Partners may vote in person or by proxy at such
meeting. Whenever the vote or Consent of the Limited Partners is permitted or
required under this Agreement, such vote or Consent may be given at a meeting of
the Partners or may be given in accordance with the procedure prescribed in
Section 14.1A hereof. Except as otherwise expressly provided in this Agreement,
the consent of holders of a majority of the Percentage Interests held by
Partners (including Limited Partnership Interests held by the Company) shall
control.
B. Any action required or permitted to be taken at a meeting of the
Partners may be taken without a meeting if a written consent setting forth the
action so taken is signed by a majority of the Percentage Interests of the
Partners (or such other percentage as is expressly required by this Agreement).
Such consent may be in one instrument or in several instruments, and shall have
the same force and effect as a vote of a majority of the Percentage Interests of
the Partners (or such other percentage as is expressly required by this
Agreement). Such consent shall be filed with the General Partner. An action so
taken shall be deemed to have been taken at a meeting held on the effective date
so certified.
C. Each Limited Partner may authorize any Person or Persons to act for him
by proxy on all matters in which a Limited Partner is entitled to participate,
including waiving notice of any meeting, or voting or participating at a
meeting. Every proxy must be signed by the Limited Partner or his
attorney-in-fact. No proxy shall be valid after the expiration of 11 months from
the date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the Limited Partner executing it, such revocation
to be effective upon the Partnership's receipt of written notice of such
revocation from the Limited Partner executing such proxy.
D. Each meeting of the Partners shall be conducted by the General Partner
or such other Person as the General Partner may appoint pursuant to such rules
for the conduct of the meeting as the General Partner or such other Person deems
appropriate. Meetings of Partners may be conducted in the same manner as
meetings of the shareholders of the Company and may be held at the same time,
and as part of, meetings of the shareholders of the Company.
ARTICLE 15. GENERAL PROVISIONS.
15.1 ADDRESSES AND NOTICE. Any notice, demand, request or report required
or permitted to be given or made to a Partner or Assignee under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other means of written
communication to the Partner or Assignee (including electronic mail and
electronic facsimile transmission if delivery in that manner has been confirmed)
at the address set forth in Appendix I or such other address of which the
Partner shall notify the General Partner in writing.
15.2 TITLES AND CAPTIONS. All article or section titles or captions in
this Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions
-48-
<PAGE>
hereof. Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
15.3 PRONOUNS AND PLURALS. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
15.4 FURTHER ACTION. The parties shall execute and deliver all documents,
provide all information and take or refrain from taking action as may be
necessary or appropriate to achieve the purposes of this Agreement.
15.5 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assigns.
15.6 CREDITORS. Other than as expressly set forth herein with respect to
the Indemnitees, none of the provisions of this Agreement shall be for the
benefit of, or shall be enforceable by, any creditor of the Partnership.
15.7 WAIVER. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or condition.
15.8 COUNTERPARTS. This Agreement may be executed in counterparts, all of
which together shall constitute one agreement binding on all of the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
15.9 APPLICABLE LAW. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of laws thereof.
15.10 INVALIDITY OF PROVISIONS. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
15.11 ENTIRE AGREEMENT. This Agreement contains the entire understanding
and agreement among the Partners with respect to the subject matter hereof and
supersedes any other prior written or oral understandings or agreements among
them with respect thereto.
15.12 GUARANTY BY THE COMPANY. The Company unconditionally and irrevocably
guarantees to the Limited Partners the performance by the General Partner
-49-
<PAGE>
of the General Partner' s obligations under this Agreement. This guarantee is
exclusively for the benefit of the Limited Partners and shall not extend to the
benefit any creditor of the Partnership.
-50-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
MISSION WEST PROPERTIES, A CALIFORNIA CORPORATION
By: /s/ Michael J. Anderson
------------------------
Michael J. Anderson
Its: Vice President and Chief Operating Officer
LIMITED PARTNERS:
BERG & BERG ENTERPRISES, INC., A CALIFORNIA CORPORATION
By: /s/ Carl E. Berg
----------------------------
Carl E. Berg
Its: President
/s/ Thelmer Aalgaard
- --------------------------------
THELMER AALGAARD
/s/ Clyde J. Berg, Trustee
- -------------------------------
CLYDE J. BERG, TRUSTEE, 1981
KARA ANN BERG TRUST
/s/ Michael L. Knapp
- -------------------------------
MICHAEL L. KNAPP
/s/ Thelmer Aalgaard, Trustee
- -------------------------------
THELMER AALGAARD, TRUSTEE OF
THE SONYA L. BERG TRUST
/s/ Thelmer Aalgaard, Trustee
- --------------------------------
THELMER AALGAARD, TRUSTEE OF
THE SHERRI L. BERG TRUST
KONTRABECKI ASSOCIATES I, A CALIFORNIA LIMITED PARTNERSHIP
By: /s/ John T. Kontrabecki
------------------------------
John T. Kontrabecki
Its: General Partner
TRIANGLE DEVELOPMENT COMPANY, A CALIFORNIA GENERAL PARTNERSHIP
By: Berg Venture I
Its: General Partner
By: /s/ John T. Kontrabecki
------------------------
John T. Kontrabecki
Its: General Partner
BERG VENTURE II, A CALIFORNIA LIMITED PARTNERSHIP
By: /s/ John T. Kontrabecki
-------------------------
John T. Kontrabecki
Its: General Partner
BACCARAT FREMONT DEVELOPERS, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY
By: /s/ Michael L. Knapp
-------------------------
Michael L. Knapp
Its: Managing Member
BACCARAT CAMBRIAN, A CALIFORNIA GENERAL PARTNERSHIP
By: /s/ Carl E. Berg
-------------------------
Carl E. Berg
Its: General Partner
DE ANZA OFFICE PARTNERS, A CALIFORNIA GENERAL PARTNERSHIP
By: /s/ Carl E. Berg
-------------------------
Carl E. Berg
Its: General Partner
<PAGE>
<TABLE>
<CAPTION>
APPENDIX I
PARTNERS' [ADJUSTED] CONTRIBUTIONS AND PARTNERSHIP INTERESTS
=========================================================================================
Name and Cash Agreed Total LP Percentage
Address Contributions Value of Contribution Units Interest
of Partner Contributed
Property
=========================================================================================
GENERAL PARTNER
<S> <C> <C>
Mission West Properties 10.91%
10050 Bandley Drive
Cupertino, CA 95014
=========================================================================================
LIMITED PARTNERS
Berg & Berg Enterprises, 4,542,121 30.7329%
Inc.,
10050 Bandley Drive
Cupertino, CA
Thelmer G. Aalgaard 302,567 2.0472%
10050 Bandley Drive
Cupertino, CA 95014
Clyde J. Berg, Trustee 998,472 6.7559%
1981 Karen Ann Berg Trust
10050 Bandley Drive
Cupertino, CA 95014
Michael L. Knapp 100,856 0.6824%
10050 Bandley Drive
Cupertino, CA 95014
Thelmer Aalgaard, Trustee 297,524 2.0136%
of the Sonya L. Berg Trust
10050 Bandley Drive
Cupertino, CA 95014
Thelmer, Aalgaard, Trustee 297,524 2.0136%
of the Sherri L. Berg Trust
10050 Bandley Drive
Cupertino, CA 95014
Triangle Development 482,911 3.2674%
2255 Campus Drive, #100
San Mateo, CA 94403
Berg Venture II 1,243,653 8.4147%
10050 Bandley Drive
Cupertino, CA 95014
Baccarat Fremont 1,216,290 8.2296%
Developers, LLC
10050 Bandley Drive
Cupertino, CA 95014
Baccarat Cambrian 2,878,152 19.4740%
10050 Bandley Drive
Cupertino, CA 95014
DeAnza Office 806,846 5.4593%
10050 Bandley Drive
Cupertino, CA 95014
</TABLE>
==========
* The Company's Cash Contribution shall be increased by all transaction costs
paid by the Company out of the Company Cash pursuant to the Acquisition
Agreement.
** To be completed upon final adjustment of accounts at July 1, 1998 and
preparation of 1998 federal income tax return.
*** Upon contribution of additional properties by Carl E. Berg, he will
become an additional limited partner with 3,061,427 L.P. Units.
<PAGE>
APPENDIX II
ALLOCATIONS OF PARTNERSHIP INTERESTS
1. ALLOCATION OF NET INCOME AND NET LOSS.
(a) NET INCOME. Except as otherwise provided in this Appendix II, Net
Income (or items thereof) (other than Net Income, or items thereof, arising in
connection with a Terminating Capital Transaction) for any fiscal year or other
applicable period shall be allocated to the Partners in accordance with their
respective Percentage Interests.
(b) NET LOSS. Except as otherwise provided in this Appendix II, Net Loss
(or items thereof) of the Partnership for each fiscal year or other applicable
period shall be allocated to the Partners in accordance with the Partners'
respective Percentage Interests. Notwithstanding the preceding sentence, to the
extent any Net Loss (or items thereof) allocated to a Partner under this
subparagraph (b) would cause such Partner (hereinafter, a "Restricted Partner")
to have an Adjusted Capital Account Deficit, or increase the amount of an
existing Adjusted Capital Account Deficit, as of the end of the fiscal year or
other applicable period to which such Net Loss relates, such Net Loss shall not
be allocated to such Restricted Partner and instead shall be allocated to the
other Partner(s) (hereinafter, the "Permitted Partners") pro rata in accordance
with each Permitted Partner's Percentage Interest.
(c) TERMINATING CAPITAL TRANSACTION; LIQUIDATION. Allocations of Net
Income or Net Loss (or items thereof) in connection with a Terminating Capital
Transaction or Liquidation of the Partnership shall first be made so that, to
the extent possible, each Partner's Capital Account balance is equal to such
Partner's Adjusted Contribution, and the remainder of such Net Income or Net
Loss (or items thereof) shall be allocated to the Partners in accordance with
their Percentage Interests. Notwithstanding the preceding sentence, to the
extent any Net Loss (or items thereof) would be allocated to a Restricted
Partner under this subparagraph (c), such Net Loss shall not be allocated to
such Restricted Partner and instead shall be allocated to the Permitted Partners
pro rata in accordance with each Permitted Partner's Percentage Interest.
(d) RULES OF CONSTRUCTION.
(1) CAPITAL ACCOUNT INCREASES. For purposes of making allocations
pursuant to subparagraph 1(c) of this Appendix II, a Partner's Capital Account
balance shall be deemed to be increased by such Partner's share of any
Partnership Minimum Gain and Partner Minimum Gain remaining at the close of the
fiscal period in respect of which such allocations are being made.
(2) CHANGE IN PERCENTAGE INTERESTS. In the event any Partner's
Percentage Interest changes during a fiscal year for any reason, including
without limitation, the Transfer of any interest in the Partnership, the tax
allocations contained in this Appendix II shall be applied as necessary to
reflect the varying interests of the Partners during such year.
2. SPECIAL ALLOCATIONS.
Notwithstanding any provisions of paragraph 1 of this Appendix II, the
following special allocations shall be made.
(a) MINIMUM GAIN CHARGEBACK (NONRECOURSE LIABILITIES). Except as otherwise
provided in Section 1.704-2(f) of the Regulations, if there is a net decrease in
Partnership Minimum Gain for any Partnership fiscal year, each Partner shall be
specially allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount equal to such Partner's share of the
net decrease in Partnership Minimum Gain to the extent required by Regulations
Section 1.704-2(f). The items to be so allocated shall be determined in
accordance with Sections 1.704-2(f) and (j)(2) of the Regulations. This
subparagraph 2(a) is intended to comply with the minimum gain chargeback
requirement in said section of the Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this subparagraph 2(a) shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant hereto.
(b) PARTNER MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Section 1.704-2(i)(4) of the Regulations, if there is a net decrease in Partner
Minimum Gain attributable to a Partner Nonrecourse Debt during any fiscal year,
each Partner who has a share of the Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Section 1.704- 2(i)(5)
of the Regulations, shall be specially allocated items of Partnership income and
gain for such year (and, if necessary, subsequent years) in an amount equal to
that Partner's share of the net decrease in the Partner Minimum Gain
attributable to such Partner Nonrecourse Debt to the extent and in the manner
required by Section 1.704-2(i) of the Regulations. The items to be so allocated
shall be determined in accordance with Sections 1.704-2(i)(4) and (j)(2) of the
Regulations. This subparagraph 2(b) is intended to comply with the minimum gain
chargeback requirement with respect to Partner Nonrecourse Debt contained in
said Section 1.704-2(i)(4) of the Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this subparagraph 2(b) shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant hereto.
(c) QUALIFIED INCOME OFFSET. In the event a Partner unexpectedly receives
any adjustments, allocations or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, and such Partner has an
Adjusted Capital Account Deficit, items of Partnership income (including gross
income) and gain shall be specially allocated to such Partner in an amount and
manner sufficient to eliminate the Adjusted Capital Account Deficit as quickly
as possible as required by the Regulations. This subparagraph 2(c) is intended
to constitute a "qualified income offset" under Section 1.704-1(b)(2)(ii)(d) of
the Regulations and shall be interpreted consistently therewith.
(d) OTHER CHARGEBACK OF IMPERMISSIBLE NEGATIVE CAPITAL ACCOUNT. To the
extent any Partner has an Adjusted Capital Account Deficit at the end of any
Partnership Year, each such Partner shall be specially allocated items of
Partnership income (including gross income) and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
paragraph 2(d) shall be made if and only to the extent that such Partner would
have an Adjusted Capital Account Deficit after all other allocations provided
for in this Appendix II have been tentatively made as if this paragraph 2(d)
were not in the Agreement.
(e) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any fiscal year or
other applicable period shall be allocated to the Partners in accordance with
their respective Percentage Interests.
(f) PARTNER NONRECOURSE DEDUCTIONS. Partner Nonrecourse Deductions for any
fiscal year or other applicable period with respect to a Partner Nonrecourse
Debt shall be specially allocated to the Partner that bears the economic risk of
loss for such Partner Nonrecourse Debt (as determined under Sections
1.704-2(b)(4) and 1.704-2(i)(1) of the Regulations).
(g) INTENT OF ALLOCATIONS. The parties intend that the allocation
provisions of this Appendix II shall result in final Capital Account balances of
the Partners that initially are equal to each Partner's Adjusted Contribution
and are then in proportion to the Partners' respective Percentage Interests, so
that when liquidating distributions are made in accordance with such final
Capital Account balances under Section 13.2A(4) hereof, such distributions will
be able to return to each Partner its Adjusted Contribution and then will be
made in proportion to the Partners' respective Percentage Interests. To the
extent that such final Capital Account balances do not so reflect the provisions
of this Appendix II, income and loss of the Partnership for the current year and
future years, as computed for book purposes, shall be allocated among the
Partners so as to result in final Capital Account balances reflecting the
provisions of this Appendix II, and to the extent such allocations of items of
income (including gross income) and deduction do not result in such final
Capital Account balances, then, income and loss of the Partnership for prior
open years, as computed for book purposes (or items of gross income and
deduction of the Partnership for such years, as computed for book purposes)
shall be reallocated among the Partners consistent with the foregoing. This
subparagraph shall control notwithstanding any reallocation of income, loss, or
items thereof, as computed for book purposes, by the Internal Revenue Service or
any other taxing authority.
(h) SECTION 754 ADJUSTMENT. To the extent an adjustment to the adjusted
tax basis of any asset of the Partnership pursuant to Section 734(b) of the Code
or Section 743(b) of the Code is required pursuant to Regulations Section
1.704-1(b)(2)(iv)(m) to be taken into account in determining Capital Accounts,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such gain or loss shall be specially
allocated among the Partners in a manner consistent with the manner in which
each of their respective Capital Accounts are required to be adjusted pursuant
to such section of the Regulations.
(i) GROSS INCOME ALLOCATION. There shall be specially allocated to the
General Partner an amount of Partnership income and gain during each Partnership
Year or portion thereof, before any other allocations are made hereunder, which
is equal to the excess, if any, of the cumulative distributions of cash made to
the General Partner under Section 7.3B hereof over the cumulative allocations of
Partnership income and gain to the General Partner pursuant to this Section (i)
of this Appendix II.
3. TAX ALLOCATIONS.
(a) ITEMS OF INCOME OR LOSS. Except as is otherwise provided in this
Appendix II, an allocation of Partnership Net Income or Net Loss to a Partner
shall be treated as an allocation to such Partner of the same share of each item
of income, gain, loss, deduction and item of tax-exempt income or Section
705(a)(2)(B) expenditure (or item treated as such expenditure pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i)) ("Tax Items") that is taken into
account in computing Net Income or Net Loss.
(b) SECTION 1245/1250 RECAPTURE. If any portion of gain from the sale of
Partnership assets is treated as gain which is ordinary income by virtue of the
application of Code Sections 1245 or 1250 ("Affected Gain"), then such Affected
Gain shall be allocated among the Partners in the same proportion that the
depreciation and amortization deductions giving rise to the Affected Gain were
allocated. This subparagraph 3(b) shall not alter the amount of Net Income (or
items thereof) allocated among the Partners, but merely the character of such
Net Income (or items thereof). For purposes hereof, in order to determine the
proportionate allocations of depreciation and amortization deductions for each
fiscal year or other applicable period, such deductions shall be deemed
allocated on the same basis as Net Income and Net Loss for such respective
period.
(c) PRECONTRIBUTION GAIN. The Partnership may elect the traditional method
of allocation contained in Section 1.704- 3(b) of the Regulations to take into
account any variation between the adjusted basis and the fair market value of
the Initial Contributed Property at the time of the contribution
("Precontribution Gain") on a Property-by-Property basis. By executing this
Agreement, each Partner hereby agrees to report income, gain, loss and deduction
on such Partner's federal income tax return in a manner that is consistent with
the use of the traditional method of allocation with respect to the Initial
Contributed Property. With respect to any Contributed Property, the Partnership
shall use any permissible method contained in the Regulations promulgated under
Section 704(c) of the Code selected by the General Partner, in its sole
discretion, to take into account any variation between the adjusted basis of
such asset and the fair market value of such asset as of the time of the
contribution. Each Partner hereby agrees to report income, gain, loss and
deduction on such Partner's federal income tax return in a manner consistent
with the method used by the Partnership.
(d) ALLOCATIONS RESPECTING SECTION 704(C) AND REVALUATIONS. If any asset
has a Gross Asset Value which is different from the Partnership's adjusted basis
for such asset for federal income tax purposes because the Partnership has
revalued such asset pursuant to Regulations Section 1.704-1(b)(2)(iv)(f), the
allocations of Tax Items shall be made in accordance with the principles of
Section 704(c) of the Code and the Regulations and the methods of allocation
promulgated thereunder, provided, however, that the General Partner shall elect
with respect to each Initial Contributed Property, to allocate the income, gain,
loss and deduction with respect to such Property using the "traditional method"
described in Regulations Section 1.704-3(b) unless the majority of the Limited
Partners affected thereby otherwise instruct the General Partner. The intent of
this Section 3(d) and Section 3(c) above is that each Partner who contributed to
the capital of the Partnership a Contributed Property will bear, through reduced
allocations of depreciation, increased allocations of gain or other items, the
tax detriments associated with any Precontribution Gain. This Section 3(d) and
Section 3(c) are to be interpreted consistently with such intent.
(e) EXCESS NONRECOURSE LIABILITY SAFE HARBOR. Pursuant to Regulations
Section 1.752-3(a)(3), solely for purposes of determining each Partner's
proportionate share of the "excess nonrecourse liabilities" of the Partnership
(as defined in Regulations Section 1.752-3(a)(3)), the Partners' respective
interests in Partnership profits shall be determined in accordance with each
Partner's Percentage Interest; provided, however, that each Partner who has
contributed an asset to the Partnership shall be allocated, to the extent
possible, a share of "excess nonrecourse liabilities" of the Partnership which
results in such Partner being allocated nonrecourse liabilities in an amount
which is at least equal to the amount of income pursuant to Section 704(c) of
the Code and the Regulations promulgated thereunder (the "Liability Shortfall").
In the event there is an insufficient amount of nonrecourse liabilities to
allocate to each Partner an amount of nonrecourse liabilities equal to the
Liability Shortfall, then an amount of nonrecourse liabilities in proportion to,
and to the extent of, the Liability Shortfall shall be allocated to each
Partner.
(f) REFERENCES TO REGULATIONS. Any reference in this Appendix II or the
Agreement to a provision of proposed and/or temporary Regulations shall, in the
event such provision is modified or renumbered, be deemed to refer to the
successor provision as so modified or renumbered, but only to the extent such
successor provision applies to the Partnership under the effective date rules
applicable to such successor provision.
(g) SUCCESSOR PARTNERS. For purposes of this Appendix II, a transferee of
a Partnership Interest shall be deemed to have been allocated the Net Income,
Net Loss and other items of Partnership income, gain, loss, deduction and credit
allocable to the transferred Partnership Interest that previously have been
allocated to the transferor Partner pursuant to this Agreement.
(h) LIMITATION TO PRESERVE REIT STATUS. Notwithstanding anything else in
this Agreement, to the extent that the amount paid, credited, distributed or
reimbursed by the Partnership or any Partners to, for or with respect any
Partner that is a REIT ("REIT Partner") or its officers, directors, employees or
agents, whether as a reimbursement, fee, expense or indemnity (a "REIT
Payment"), would constitute gross income to the REIT Partner for purposes of
Section 856 (c)(2) or Section 856(c)(3) of the Code, then, notwithstanding any
other provision of this Agreement, the amount of such REIT Payments, as selected
by the General Partner in its discretion from among items of potential
distribution, reimbursement, fees, expenses and indemnities, shall be reduced
for any Fiscal Year so that the REIT Payments, as so reduced, to, for or with
respect to such REIT Partner shall not exceed the lesser of:
(i) an amount equal to the excess, if any, of (x) four and
nine-tenths percent (4.9%) of the REIT Partner total gross income (but excluding
the amount of any REIT Payments) for the Fiscal Year that is described in
subsections (A) through (H) of Section 856(c)(2) over (y) the amount of gross
income (within the meaning of Section 856(c)(2)) derived by the REIT Partner
from sources other than those described in subsections (A) through (H) of
Section 856(c)(2) (but not including the amount of any REIT Payments); or
(ii) an amount equal to the excess, if any, of (x) 24% of the REIT
Partner's total gross income (but excluding the amount of any REIT Payments) for
the Fiscal Year that is described in subsections (A) through (I) of Section
856(c)(3) over (y) the amount of gross income (within the meaning of Section
856(c)(3)) derived by the REIT Partner from sources other than those described
in subsections (A) through (I) of Section 856(c)(3) (but not including the
amount of any REIT Payments);
PROVIDED, HOWEVER, that REIT payments in excess of the amounts set forth in
clauses (i) and (ii) above may be made if the General Partner, as a condition
precedent, obtains an opinion of tax counsel that the receipt of such excess
amounts shall not adversely affect the REIT Partner's ability to qualify as a
REIT. To the extent that REIT Payments may not be made in a Fiscal Year as a
consequence of the limitations set forth in this Section 3(h), such REIT
Payments shall carry over and shall be treated as arising in the following
Fiscal Year. Nothing in this Section 3(h) shall permit the General Partner to
allocate income of the Partnership to any Partner in excess of the income that
would otherwise be allocated to it under Article 6 without regard to this
Section 3(h). The purpose of the limitations contained in this Section 3(h) is
to prevent any REIT Partner from failing to qualify as a REIT under the Code by
reason of such REIT Partner's share of items, including distributions,
reimbursements, fees, expenses or indemnities, receivable directly or indirectly
from the Partnership or the Partners, and this Section 3(h) shall be interpreted
and applied to effectuate such purpose.
<PAGE>
_____________________________________________________________________
Amended and Restated
Agreement of Limited Partnership
of
Mission West Properties, L.P. I
July 1, 1998
_____________________________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1. Defined Terms..........................................2
1.1 "Act".......................................................2
1.2 "Acquisition Agreement".....................................2
1.3 "Additional Limited Partner"................................2
1.4 "Adjusted Capital Account Deficit"..........................2
1.5 "Adjusted Contribution".....................................2
1.6 "Affiliate".................................................3
1.7 "Agreement".................................................3
1.8 "Articles of Incorporation".................................3
1.9 "Assignee"..................................................3
1.10 "Available Cash"...........................................3
1.11 "Berg Acquisition".........................................3
1.12 "Berg Group"...............................................3
1.13 "Berg Land Holdings".......................................4
1.14 "Capital Account"..........................................4
1.15 "Capital Contribution".....................................5
1.16 "Capital Event"............................................5
1.17 "Certificate"..............................................5
1.18 "Change of Control Transaction"............................5
1.19 "Charter"..................................................5
1.20 "Code".....................................................5
1.21 "Common Stock".............................................5
1.22 "Common Stock Price".......................................6
1.23 "Company"..................................................6
1.24 "Consent"..................................................6
1.25 "Depreciation".............................................6
1.26 "Dividend Reinvestment Plan"...............................6
1.27 "Effective Date"...........................................6
1.28 "Employee Benefit Plan"....................................6
1.29 "Entity"...................................................7
1.30 "Equity Security"..........................................7
1.31 "ERISA"....................................................7
1.32 "Exchange Act".............................................7
1.33 "Exchange Factor"..........................................7
1.34 "Exchange Right"...........................................7
1.35 "Exchange Rights Agreement"................................7
1.36 "GAAP".....................................................7
1.37 "General Partner"..........................................7
1.38 "General Partner Interest".................................7
1.39 "Gross Asset Value"........................................7
1.40 "Immediate Family".........................................8
1.41 "Incapacity" or "Incapacitated"............................8
1.42 "Indemnitee"...............................................9
1.43 "Initial Contributed Property".............................9
1.44 "Lien".....................................................9
1.45 "Limited Partner".........................................10
1.46 "Limited Partner Interest"................................10
1.47 "Liquidating Event".......................................10
1.48 "Liquidator"..............................................10
1.49 "L.P. Unit"...............................................10
1.50 "L.P. Unit Majority"......................................10
1.51 "Net Income" or "Net Loss"................................10
1.52 "New Equity Financing Right"..............................11
1.53 "Nonrecourse Deductions"..................................11
1.54 "Nonrecourse Liabilities".................................11
1.55 "Operating Partnership"...................................11
1.56 "Partner".................................................11
1.57 "Partner Minimum Gain"....................................11
1.58 "Partner Nonrecourse Debt"................................11
1.59 "Partner Nonrecourse Deductions"..........................11
1.60 "Partnership".............................................12
1.61 "Partnership Interest"....................................12
1.62 "Partnership Minimum Gain"................................12
1.63 "Partnership Record Date".................................12
1.64 "Partnership Year"........................................12
1.65 "Pending Development Projects"............................12
1.66 "Partnership Interest"....................................12
1.67 "Permitted Partners"......................................12
1.68 "Permitted Transferee"....................................12
1.69 "Person"..................................................12
1.70 "Precontribution Gain"....................................12
1.71 "Put Rights"..............................................12
1.72 "Protective Provisions Expiration Date"...................13
1.73 "Quarter".................................................13
1.74 "Regulations".............................................13
1.75 "REIT"....................................................13
1.76 "REIT Requirements".......................................13
1.77 "Restricted Partner"......................................13
1.78 "SEC".....................................................13
1.79 "Securities Act"..........................................13
1.80 "Stock Option Plan".......................................13
1.81 "Subsidiary"..............................................13
1.82 "Substituted Limited Partner".............................13
1.83 "Tax Items"...............................................13
1.84 "Terminating Capital Transaction".........................14
1.85 "Total Market Capitalization".............................14
1.86 "Transfer"................................................14
1.87 "Unit"....................................................14
1.88 "United States Person"....................................14
1.89 "Voting Securities".......................................14
ARTICLE 2. Organizational Matters................................14
2.1 Continuation...............................................14
2.2 Name.......................................................14
2.3 Registered Office and Agent; Principal Office..............15
2.4 Power of Attorney..........................................15
2.5 Term.......................................................16
ARTICLE 3. Purpose...............................................16
3.1 Purpose and Business.......................................16
3.2 Powers.....................................................17
ARTICLE 4. Capital Contributions.................................17
4.1 Capital Contributions of the Partners......................17
4.2 Additional Funds; Restrictions on Company..................17
4.3 Issuance of Additional Partnership Interests; Admission
of Additional Limited Partners.............................19
4.4 Repurchase of Company Equity Securities....................19
4.5 No Third Party Beneficiary.................................20
4.6 No Interest; No Return.....................................20
ARTICLE 5. Distributions.........................................20
5.1 Regular Distributions......................................20
5.2 Qualification as a REIT....................................20
5.3 Withholding................................................21
5.4 Additional Partnership Interests...........................21
5.5 Distributions Upon Liquidation.............................21
ARTICLE 6. Allocations...........................................21
ARTICLE 7. Management and Operation of Business..................21
7.1 Management.................................................21
7.2 Certificate of Limited Partnership.........................22
7.3 Reimbursement of the General Partner and the Company.......23
7.4 Outside Activities of the General Partner..................23
7.5 Contracts with Affiliates..................................23
7.6 Indemnification............................................24
7.7 Liability of the General Partner...........................26
7.8 Limited Partners' Right to Bring Derivative Lawsuits.......27
7.9 Other Matters Concerning the General Partner...............27
7.10 Title to Partnership Assets...............................27
7.11 Reliance by Third Parties.................................28
ARTICLE 8. Rights and Obligations of Limited Partners............28
8.1 Limitation of Liability....................................28
8.2 Management of Business.....................................28
8.3 Outside Activities of Limited Partners.....................29
8.4 Return of Capital..........................................29
8.5 Rights of Limited Partners Relating to the Partnership.....29
8.6 Exchange Rights............................................30
8.7 Put Rights.................................................30
8.8 New Equity Financing Rights................................32
8.9 Matters Requiring L.P. Unit Majority Approval..............32
8.10 Approval of Certain Taxable Sales.........................33
ARTICLE 9. Books, Records, Accounting and Reports................33
9.1 Records and Accounting.....................................33
9.2 Fiscal Year................................................34
ARTICLE 10. Tax Matters..........................................34
10.1 Preparation of Tax Returns................................34
10.2 Tax Elections.............................................34
10.3 Tax Matters Partner.......................................34
10.4 Organizational Expenses...................................36
10.5 Withholding...............................................36
ARTICLE 11. Transfers and Withdrawals............................37
11.1 Transfer..................................................37
11.2 Transfer of the Company's Partnership Interests...........37
11.3 Limited Partners' Rights to Transfer......................37
11.4 Substituted Limited Partners..............................40
11.5 Assignees.................................................40
11.6 Effect of Prohibited Transfer.............................41
11.7 General Provisions........................................41
ARTICLE 12. Admission of Partners................................41
12.1 Admission of Successor General Partner....................41
12.2 Admission of Additional and Substituted Limited Partners..42
12.3 Amendment of Agreement and Certificate of Limited
Partnership...............................................43
ARTICLE 13. Dissolution, Liquidation and Termination.............43
13.1 Dissolution...............................................43
13.2 Winding Up................................................44
13.3 Obligation to Contribute Deficit..........................45
13.4 Rights of Limited Partners................................46
13.5 Notice of Dissolution.....................................46
13.6 Termination of Partnership and Cancellation of
Certificate of Limited Partnership........................46
13.7 Reasonable Time for Winding-Up............................46
13.8 Waiver of Partition.......................................46
13.9 Deemed Distribution and Recontribution....................46
ARTICLE 14. Amendment of Partnership Agreement; Meetings.........47
14.1 Amendments................................................47
14.2 Meetings of the Partners..................................48
ARTICLE 15. General Provisions...................................49
15.1 Addresses and Notice......................................49
15.2 Titles and Captions.......................................49
15.3 Pronouns and Plurals......................................49
15.4 Further Action............................................49
15.5 Binding Effect............................................50
15.6 Creditors.................................................50
15.7 Waiver....................................................50
15.8 Counterparts..............................................50
15.9 Applicable Law............................................50
15.10 Invalidity of Provisions.................................50
15.11 Entire Agreement.........................................50
15.12 Guaranty by the Company..................................50
</TABLE>
- 1 -
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
MISSION WEST PROPERTIES, L.P. I
This Amended and Restated Agreement of Limited Partnership of Mission West
Properties, L.P. I (this "Agreement"), dated as of July 1, 1998, is entered into
by and among Mission West Properties, Inc., a California corporation (the
"Company" or the "General Partner") and the parties whose names are set forth on
Appendix I attached hereto (as it may be amended from time to time).
WHEREAS, the Partnership was organized initially as Berg Family Partners,
L.P. and became a limited partnership pursuant to the Revised Uniform Limited
Partnership Act of the State of Delaware by filing a certificate of limited
partnership with the Secretary of State of the State of Delaware on December 22,
1997;
WHEREAS, since its organization as a Delaware limited partnership, the
Partnership has been operated and managed by Berg Family Partners LLC, as sole
general partner, pursuant to the terms of the Agreement of Limited Partnership
of Berg Family Partners, L.P. (the "Prior Agreement");
WHEREAS, on July 1, 1998, the Partnership filed an amendment of certificate
of limited partnership with the Secretary of State of the State of Delaware
changing the Partnerships name to Mission West Properties, L.P. I;
Whereas, pursuant to the terms of a Acquisition Agreement dated as of May
14, 1998, as amended as of July 1, 1998 (the "Acquisition Agreement"), the
Company has agreed to acquire a 10.91% general partner interest in the
Partnership and to become the sole general partner in the Partnership upon the
satisfaction of certain conditions set forth in the Acquisition Agreement, which
now have been satisfied or waived by the parties thereto;
WHEREAS, Berg Family Partners LLC and all of the limited partners in the
Partnership wish to admit the Company as a general partner, to amend the
certificate of limited partnership of the Partnership to reflect the Company's
admission as a general partner, and to amend and restate the Prior Agreement as
provided herein; and
WHEREAS, upon the filing of the certificate of amendment of the certificate
of limited partnership of the Partnership with the Secretary of State of the
State of Delaware, Berg Family Partners LLC intends to resign as a general
partner and become a limited partner in the Partnership pursuant to the terms of
this Agreement.
Now Therefore, in consideration of the mutual covenants herein contained,
and other valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties do hereby agree as follows:
ARTICLE 1. Defined Terms.
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the following terms used in this
Agreement.
1.1 "Act" the Delaware Revised Uniform Limited Partnership Act, as it may
be amended from time to time, and any successor to such statute.
1.2 "Acquisition Agreement" means the agreement dated as of May 14, 1998,
as amended as of July 1, 1998, among the Partnership, the other partnerships
comprising the Operating Partnership, all of the partners therein, and the
Company concerning the acquisition of the Berg Properties, the Acquired
Properties and the Pending Development Projects by the Operating Partnership,
the Company's investment in and admission to the Operating Partnership as sole
general partner, and the rights and options of the limited partners in the
Operating Partnership to tender L.P. Units or acquire shares of Common Stock
under certain circumstances.
1.3 "Additional Limited Partner" means a Person admitted to the Partnership
as a Limited Partner pursuant to Section 4.3 hereof and who is shown as such on
the books and records of the Partnership.
1.4 "Adjusted Capital Account Deficit" means with respect to any Partner,
the negative balance, if any, in such Partner's Capital Account as of the end of
any relevant fiscal year, determined after giving effect to the following
adjustments:
(a) credit to such Capital Account any portion of such negative balance
which such Partner (i) is treated as obligated to restore to the
Partnership pursuant to the provisions of Section 1.704-1(b)(2)(ii)(c)
of the Regulations, or (ii) is deemed to be obligated to restore to
the Partnership pursuant to the penultimate sentences of Sections
1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
(b) debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
1.5 "Adjusted Contribution" means the Capital Contributions of any Partner
reduced by the total distributions to such Partner from Capital Events occurring
subsequent to the Closing Date under the Acquisition Agreement. For purposes of
this Agreement, the initial Capital Contribution of the Company shall be equal
to [$35,200,000] and the initial Adjusted Contribution of each Limited Partner
shall be
- 2 -
<PAGE>
equal to the value of the Limited Partner's interest in the Operating
Partnership as set forth in Appendix I of the Acquisition Agreement.
1.6 "Affiliate" means, (a) with respect to any individual Person, any
member of the Immediate Family of such Person or a trust established for the
benefit of such member, or (b) with respect to any Entity, any Person which,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, any such Entity.
1.7 "Agreement" means this Amended and Restated Agreement of Limited
Partnership, as originally executed and as amended, modified, supplemented or
restated from time to time, as the context requires.
1.8 "Articles of Incorporation" means the Articles of Incorporation of the
Company, as amended and restated from time to time, or the articles of
incorporation, certificate of incorporation, operating agreement of other
Charter instrument of any corporation or other entity which is a successor to
the Company by merger or consolidation.
1.9 "Assignee" means a Person to whom one or more L.P. Units have been
transferred in a manner permitted under this Agreement, but who has not become a
Substituted Limited Partner, and who has the rights set forth in Section 11.5.
1.10 "Available Cash" means the Partnership's share of the Operating
Partnership's Available Cash (as defined in the Acquisition Agreement) with
respect to the applicable period of measurement (i.e., any period beginning on
the first day of the fiscal year, quarter or other period commencing immediately
after the last day of the fiscal year, quarter or other applicable period for
purposes of the prior calculation of Available Cash for or with respect to which
a distribution has been made, and ending on the last day of the fiscal year,
quarter or other applicable period immediately preceding the date of the
calculation). Notwithstanding the foregoing, Available Cash shall not include
any cash received or reductions in reserves, nor shall the calculation of
Available Cash take into account any disbursements made or reserves established,
after commencement of the dissolution and liquidation of the Partnership.
1.11 "Berg Acquisition" has the meaning set forth in the Acquisition
Agreement.
1.12 "Berg Group" means Carl E. Berg, Clyde J. Berg, the members of their
respective Immediate Families, and any Entity which is an Affiliate of either
Carl E. Berg or Clyde J. Berg, excluding the Partnership and the Company.
1.13 "Berg Land Holdings" means certain land held by members of the Berg
Group which the Operating Partnership may acquire under certain circumstances
pursuant to the terms of the Acquisition Agreement and the related Berg Land
Holdings
- 3 -
<PAGE>
Option Agreement to be entered into by the parties thereto upon approval of
certain transactions by the Company's shareholders..
1.14 "Capital Account" means with respect to any Partner, the Capital
Account maintained for such Partner in accordance with the following provisions:
(a) to each Partner's Capital Account there shall be credited (i) such
Partner's Initial Adjusted Contribution as of the effective date of
this Agreement (ii) such Partner's Capital Contributions subsequent to
the Effective Date of this Agreement, (iii) such Partner's
distributive share of Net Income and any items in the nature of income
or gain which are specially allocated to such Partner pursuant to
Sections 1 and 2 of Appendix II and (iv) the amount of any Partnership
liabilities assumed by such Partner or which are secured by any asset
distributed to such Partner;
(b) to each Partner's Capital Account there shall be debited (i) the
amount of cash and the Gross Asset Value of any Property distributed
to such Partner pursuant to any provision of this Agreement, (ii) such
Partner's distributive share of Net Losses and any items in the nature
of expenses or losses which are specially allocated to such Partner
pursuant to Sections 1 and 2 of Appendix II, and (iii) the amount of
any liabilities of such Partner assumed by the Partnership or which
are secured by any asset contributed by such Partner to the
Partnership to the extent not assumed by the Partner; and
(c) in the event all or a portion of a Partnership Interest is transferred
in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it
relates to the transferred Partnership Interest.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Sections
1.704-1(b) and 1.704-2 of the Regulations, and shall be interpreted and applied
in a manner consistent with such Regulations. In the event the General Partner
shall reasonably determine that it is prudent to modify the manner in which the
Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed assets or which are assumed by the Partnership, the
General Partner or any Limited Partner) are computed in order to comply with
such Regulations, the General Partner may make such modification; provided that
it does not have an adverse effect on the amounts distributable to any Partner
pursuant to Article 13 hereof upon the dissolution of the Partnership.
1.15 "Capital Contribution" means, with respect to any Partner, any cash,
cash equivalents or the Gross Asset Value of property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Article 4
hereof.
1.16 "Capital Event" means any Partnership transaction not in the ordinary
course of its business, including, without limitation, distribution to the
Partners in excess
- 4 -
<PAGE>
of distributive shares of income, principal payments,
prepayments, prepayment penalties, sales, exchanges, foreclosures or other
dispositions of Property owned by the Partnership, recoveries of damage awards
and insurance proceeds not used to rebuild (other than the receipt of
contributions to the capital of the Partnership and business or rental
interruption insurance proceeds not used to rebuild).
1.17 "Certificate" means the Certificate of Limited Partnership relating to
the Partnership to be filed in the office of the Delaware Secretary of State, as
amended from time to time in accordance with the terms hereof and the Act.
1.18 "Change of Control Transaction" shall mean (A) any transaction or
series of transactions occurring after the Effective Date, in which all Limited
Partners in the Operating Partnership are legally entitled to participate and
pursuant to which L.P. Units representing more than 50% of the total outstanding
L.P. Units of the Operating Partnership are purchased by a Person not controlled
by, in control of or under common control with the Company, any Affiliate of the
Company or any Affiliate of a Limited Partner, (B) the merger or consolidation
of the Partnership with another entity (other than a merger or consolidation in
which the holders of L.P. Units of the Partnership immediately before the merger
or consolidation own immediately after the merger or consolidation, Voting
Securities of the surviving or acquiring Entity or a parent party of such
surviving or acquiring Entity, possessing more than 50% of the voting power of
the surviving or acquiring Entity or parent party) resulting in the exchange of
the outstanding L.P. Units of the Partnership for cash, securities or other
property, or (C) any merger, sale, lease, license, exchange or other disposition
(whether in one transaction or a series of related transactions) of more than
50% of the assets of the Partnership.
1.19 "Charter" has the meaning set forth in Rule 405 of Regulation C
promulgated by the SEC under the Securities Act ("Rule 405").
1.20 "Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provision of future
law.
1.21 "Common Stock" means a share of Common Stock of the Company or any
shares of Voting Securities into which the Common Stock may be reclassified or
converted or for which shares of Common Stock may be exchanged in any
transaction made applicable or available to all holders of Common Stock as a
class.
1.22 "Common Stock Price" means with respect to a particular valuation
event identified under this Agreement, the last reported sales price regular way
on such date or, in case no such reported sale takes place on such date, the
average of the reported closing bid and asked prices regular way on such date,
in either case on the American Stock Exchange, the New York Stock Exchange, or
if the Common Stock is not then listed or admitted to trading on any such
exchange, the Nasdaq or any comparable system on which the Common Stock is then
listed or admitted to trading or,
- 5 -
<PAGE>
if not then listed or admitted to trading on any national securities exchange,
the Nasdaq or any comparable system for the 10-trading day period ending with
the last day preceding the date of the valuation event.
1.23 "Company" means Mission West Properties, a California corporation, and
any successor to such corporation.
1.24 "Consent" means the consent or approval of a proposed action by a
Partner given in accordance with Section 14.2 hereof.
1.25 "Depreciation" means, with respect to any asset of the Partnership for
any fiscal year or other period, the depreciation, depletion, amortization or
other cost recovery deduction, as the case may be, allowed or allowable for
federal income tax purposes in respect of such asset for such fiscal year or
other period; provided, however, that except as otherwise provided in Section
1.704-2 of the Regulations, if there is a difference between the Gross Asset
Value (including the Gross Asset Value, as increased pursuant to paragraph (d)
of the definition of Gross Asset Value) and the adjusted tax basis of such asset
at the beginning of such fiscal year or other period, Depreciation for such
asset shall be an amount that bears the same ratio to the beginning Gross Asset
Value of such asset as the federal income tax depreciation, depletion,
amortization or other cost recovery deduction for such fiscal year or other
period bears to the beginning adjusted tax basis of such asset; provided,
further, that if the federal income tax depreciation, depletion, amortization or
other cost recovery deduction for such asset for such fiscal year or other
period is zero, Depreciation of such asset shall be determined with reference to
the beginning Gross Asset Value of such asset using any reasonable method
selected by the General Partner.
1.26 "Dividend Reinvestment Plan" has the meaning set forth in Rule 405.
1.27 "Effective Date" means the date of closing of the Berg Acquisition.
1.28 "Employee Benefit Plan" has the meaning set forth in Rule 405.
1.29 "Entity" means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, real estate investment trust,
limited liability company, cooperative or association.
1.30 "Equity Security" has the meaning set forth in Rule 405.
1.31 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time (or any corresponding provisions of succeeding laws).
1.32 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
- 6 -
<PAGE>
1.33 "Exchange Factor" has the meaning set forth in the Exchange Rights
Agreement, and is equal to the number of L.P. Units exchangeable for one share
of Common Stock, from time to time, under the Exchange Rights Agreement.
1.34 "Exchange Right" has the meaning set forth in the Exchange Rights
Agreement.
1.35 "Exchange Rights Agreement" means Exchange Rights Agreement among the
Company, and each of the limited partners of the partnerships comprising the
Operating Partnership.
1.36 "GAAP" means United States generally accepted accounting principles,
as in effect from time to time.
1.37 "General Partner" means the general partner of the Partnership, if
there is more than one general partner, all such general partners.
1.38 "General Partner Interest" means a Partnership Interest held by the
General Partner, in its capacity as general partner. A General Partner Interest
may be expressed as a number of Units, each of which shall represent the same
Percentage Interest in the Partnership as one L.P. Unit.
1.39 "Gross Asset Value" means, with respect to any asset of the
Partnership, such asset's adjusted basis for federal income tax purposes, except
as follows:
(a) the initial Gross Asset Value of any asset contributed by a Partner to
the Partnership shall be the gross fair market value of such asset,
without reduction for liabilities, as determined by the contributing
Partner and the Partnership on the date of contribution thereof;
(b) if the General Partner reasonably determines that an adjustment is
necessary or appropriate to reflect the relative economic interests of
the Partners, the Gross Asset Values of all Partnership assets shall
be adjusted in accordance with Sections 1.704-1(b)(2)(iv)(f) and (g)
of the Regulations to equal their respective gross fair market values,
without reduction for liabilities, as reasonably determined by the
General Partner, as of the following times:
(1) a Capital Contribution (other than a de minimis Capital
Contribution) to the Partnership by a new or existing Partner as
consideration for a Partnership Interest; or
(2) the distribution by the Partnership to a Partner of more than a
de minimis amount of Partnership assets as consideration for the
repurchase of a Partnership Interest; or
- 7 -
<PAGE>
(3) the liquidation of the Partnership within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations;
(c) the Gross Asset Values of Partnership assets distributed to any
Partner shall be the gross fair market values of such assets (taking
Section 7701(g) of the Code into account) without reduction for
liabilities, as reasonably determined by the General Partner as of the
date of distribution; and
(d) the Gross Asset Values of Partnership assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Sections 734(b) or 743(b) of the Code, but only to
the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the
Regulations (as set forth in Appendix II); provided, however, that
Gross Asset Values shall not be adjusted pursuant to this paragraph
(d) to the extent that the General Partner reasonably determines that
an adjustment pursuant to paragraph (b) above is necessary or
appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this paragraph (d).
At all times, Gross Asset Values shall be adjusted by any Depreciation
taken into account with respect to the Partnership's assets for purposes of
computing Net Income and Net Loss.
1.40 "Immediate Family" means, with respect to any Person, such Person's
spouse, parents, parents-in-law, children, nephews, nieces, brothers, sisters,
brothers-in-law, sisters-in-law, stepchildren, sons-in-law and daughters-in-law
or any trust solely for the benefit of any of the foregoing family members whose
sole beneficiaries include the foregoing family members.
1.41 "Incapacity" or "Incapacitated" means, (i) as to any individual
Partner, death, total physical disability or entry by a court of competent
jurisdiction adjudicating him incompetent to manage his person or his estate;
(ii) as to any corporation which is a Partner, the filing of a certificate of
dissolution, or its equivalent, for the corporation or the revocation of its
charter; (iii) as to any partnership which is a Partner, the dissolution and
commencement of winding up of the partnership; (iv) as to any estate which is a
Partner, the distribution by the fiduciary of the estate's entire interest in
the Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this definition,
bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner
commences a voluntary proceeding seeking liquidation, reorganization or other
relief under any bankruptcy, insolvency or other similar law now or hereafter in
effect; (b) the Partner is adjudged as bankrupt or insolvent, or a final and
nonappealable order for relief under any bankruptcy, insolvency or similar law
now or hereafter in effect has been entered against the Partner; (c) the Partner
executes and delivers a general assignment for the benefit of the Partner's
creditors; (d) the Partner files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in
- 8 -
<PAGE>
clause (b) above; (e) the Partner seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator for the Partner or for all or
any substantial part of the Partner's properties; (f) any proceeding seeking
liquidation, reorganization or other relief of or against such Partner under any
bankruptcy, insolvency or other similar law now or hereafter in effect has not
been dismissed within 120 days after the commencement thereof; (g) the
appointment without the Partner's consent or acquiescence of a trustee, receiver
or liquidator has not been vacated or stayed within 90 days of such appointment;
or (h) an appointment referred to in clause (g) which has been stayed is not
vacated within 90 days after the expiration of any such stay.
1.42 "Indemnitee" means (i) any Person made a party to a proceeding by
reason of (A) such Person's status as (1) the General Partner, (2) a director,
trustee or officer of the Partnership or the General Partner, or (3) a director,
trustee or officer of any other Entity, each Person serving in such capacity at
the request of the Partnership or the General Partner, or (B) his or its
liabilities, pursuant to a loan guarantee or otherwise, for any indebtedness of
the Partnership or any Subsidiary of the Partnership (including, without
limitation, any indebtedness which the Partnership or any Subsidiary of the
Partnership has assumed or taken assets subject to); and (ii) such other Persons
(including Affiliates of the General Partner or the Partnership) as the General
Partner may designate from time to time (whether before or after the event
giving rise to potential liability), in its sole and absolute discretion.
1.43 "Initial Contributed Property" means the Properties as defined in the
Acquisition Agreement.
1.44 "Lien" means, with respect to any asset of the Partnership, (i) any
mortgage, deed of trust, lien, pledge, encumbrance, charge, restriction or
security interest in or on such asset, (ii) the interest of a vendor or a lessor
under any conditional sale agreement, capital lease or title retention agreement
relating to such asset and (iii) in the case of securities, any purchase option,
call or similar right of a third party with respect to such securities.
1.45 "Limited Partner" means any Person named as a Limited Partner in
Appendix I, as such Appendix may be amended from time to time, or any
Substituted Limited Partner or Additional Limited Partner, in such Person's
capacity as a Limited Partner of the Partnership.
1.46 "Limited Partner Interest" means a Partnership Interest of a Limited
Partner in the Partnership representing a fractional part of the Partnership
Interests of all Partners and includes any and all benefits to which the holder
of such a Partnership Interest may be entitled, as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement. A Limited Partner Interest may be expressed as a
number of L.P. Units.
1.47 "Liquidating Event" has the meaning set forth in Section 13.1 hereof.
- - 9 -
<PAGE>
1.48 "Liquidator" has the meaning set forth in Section 13.2 hereof.
1.49 "L.P. Unit" means a fractional, undivided share of the Partnership
Interests of all Partners issued pursuant to Sections 4.1, 4.2 and 4.3. The
number of L.P. Units outstanding and the Percentage Interests in the Partnership
represented by such L.P. Units are set forth in Appendix I, as such Appendix may
be amended from time to time. The ownership of L.P. Units shall be evidenced by
such form of certificate for units as the General Partner adopts from time to
time unless the General Partner determines that the L.P. Units shall be
uncertificated securities.
1.50 "L.P. Unit Majority" means the Limited Partners holding the right to
vote, in the aggregate, a majority of the total number of L.P. Units outstanding
in the Operating Partnership.
1.51 "Net Income" or "Net Loss" means, for each fiscal year or other
applicable period, an amount equal to the Partnership's taxable income or loss
for such year or period as determined for federal income tax purposes by the
General Partner, determined in accordance with Section 703(a) of the Code (for
this purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Section 703(a) of the Code shall be included in taxable
income or loss), adjusted as follows: (a) by including as an item of gross
income any tax-exempt income received by the Partnership and not otherwise taken
into account in computing Net Income or Net Loss; (b) by treating as a
deductible expense any expenditure of the Partnership described in Section
705(a)(2)(B) of the Code (or which is treated as a Section 705(a)(2)(B)
expenditure pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations) and not
otherwise taken into account in computing Net Income or Net Loss, including
amounts paid or incurred to organize the Partnership (unless an election is made
pursuant to Section 709(b) of the Code) or to promote the sale of interests in
the Partnership and by treating deductions for any losses incurred in connection
with the sale or exchange of Partnership property disallowed pursuant to Section
267(a)(1) or 707(b) of the Code as expenditures described in Section
705(a)(2)(B) of the Code; (c) by taking into account Depreciation in lieu of
depreciation, depletion, amortization and other cost recovery deductions taken
into account in computing taxable income or loss; (d) by computing gain or loss
resulting from any disposition of Partnership property with respect to which
gain or loss is recognized for federal income tax purposes by reference to the
Gross Asset Value of such property rather than its adjusted tax basis; (e) in
the event of an adjustment of the Gross Asset Value of any Partnership asset
which requires that the Capital Accounts of the Partnership be adjusted pursuant
to Sections 1.704-1(b)(2)(iv)(e), (f) and (g) of the Regulations, by taking into
account the amount of such adjustment as if such adjustment represented
additional Net Income or Net Loss pursuant to Appendix II; and (f) by not taking
into account in computing Net Income or Net Loss items separately allocated to
the Partners pursuant to Sections 1 and 2 of Appendix II.
1.52 "New Equity Financing Right" has the meaning set forth in Section 8.8.
- 10 -
<PAGE>
1.53 "Nonrecourse Deductions" has the meaning set forth in Regulations
Sections 1.704-2(b)(1) and 1.704-2(c).
1.54 "Nonrecourse Liabilities" has the meaning set forth in Regulations
Section 1.704-2(b)(3).
1.55 "Operating Partnership" means, collectively, Mission West Properties,
L.P., Mission West Properties, L.P. I, Mission West Properties, L.P. II and
Mission West Properties, L.P. III.
1.56 "Partner" means the General Partner or a Limited Partner, and
"Partners" means the General Partner and the Limited Partners collectively.
1.57 "Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
1.58 "Partner Nonrecourse Debt" has the meaning set forth in Regulations
Section 1.704-2(b)(4).
1.59 "Partner Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership taxable
year shall be determined in accordance with the rules of Regulations Section
1.704-2(i)(2).
1.60 "Partnership" means the limited partnership governed by this
Agreement, and any successor thereto.
1.61 "Partnership Interest" means an ownership interest in the Partnership
representing an Adjusted Contribution by either a Limited Partner or the General
Partner and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement. A Partnership Interest may be expressed as a number of L.P.
Units.
1.62 "Partnership Minimum Gain" has the meaning set forth in Regulations
Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as
any net increase or decrease in a Partnership Minimum Gain, for a Partnership
taxable year shall be determined in accordance with the rules of Regulations
Section 1.704-2(d).
1.63 "Partnership Record Date" means the record date established by the
General Partner for the distribution of Available Cash pursuant to Section 5.1,
which shall be the same as the record date established by the Company for a
distribution to its shareholders of some or all of its portion of such
distribution.
- 11 -
<PAGE>
1.64 "Partnership Year" means the fiscal year of the Partnership, which is
the calendar year, as set forth in Section 9.2.
1.65 "Pending Development Projects" means three Berg Group-owned R&D
Property development projects which the Operating Partnership has agreed to
acquire upon their completion pursuant to the terms of the Acquisition Agreement
and the related Pending Projects Option Agreement into by the parties thereto
upon approval of certain transactions by the Company's shareholders.
1.66 "Partnership Interest" means, as to a Partner, the fractional part of
the Partnership Interests owned by such Partner and expressed as a percentage as
specified in Appendix I, as such Appendix may be amended from time to time.
1.67 "Permitted Partners" has the meaning set forth in Section 1(b) of
Appendix II.
1.68 "Permitted Transferee" means any person to whom L.P. Units are
Transferred in accordance with Section 11.3 of this Agreement.
1.69 "Person" means an individual or Entity.
1.70 "Precontribution Gain" has the meaning set forth in Section 3(c) of
Appendix II.
1.71 "Put Rights" shall have the meaning provided in Section 8.7.
1.72 "Protective Provisions Expiration Date" means the date on which the
members of the Berg Group own less than 15% of the Common Stock, treating all
Equity Securities of the Company and all L.P. Units owned by such members as
Common Stock outstanding for this purpose.
1.73 "Properties" has the meaning given such term in the Acquisition
Agreement.
1.74 "Quarter" means each of the three month periods ending on March 31,
June 30, September 30 and December 31.
1.75 "Regulations" means the final, temporary or proposed Income Tax
Regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
1.76 "REIT" means a real estate investment trust as defined in Section 856
of the Code.
1.77 "REIT Requirements" means all of the requirements imposed under the
Code on any entity seeking to qualify and remain qualified as a REIT.
- 12 -
<PAGE>
1.78 "Restricted Partner" has the meaning set forth in Section 1(b) of
Appendix II.
1.79 "SEC" means the U.S. Securities and Exchange Commission.
1.80 "Securities Act" means the Securities Act of 1933, as amended.
1.81 "Stock Option Plan" means the Company's 1997 Stock Option Plan and any
other plan adopted from time to time by the Company pursuant to which shares of
Common Stock are issued, or options to acquire shares of Common Stock are
granted, to consultant, employees or directors of the Company, the Operating
Partnership or their respective Affiliates in consideration for services or
future services.
1.82 "Subsidiary" means, with respect to any Person, any corporation,
partnership or other entity of which a majority of (i) the voting power of the
Voting Securities; or (ii) the outstanding equity interests, is owned, directly
or indirectly, by such Person.
1.83 "Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.4 hereof.
1.84 "Tax Items" has the meaning set forth in Appendix II.
1.85 "Terminating Capital Transaction" means any Change of Control
Transaction.
1.86 "Total Market Capitalization" means the market value of the
outstanding Common Stock determined as if all L.P. Units in the Operating
Partnership had been converted into Common Stock at the Exchange Factor plus the
total debt of the Company and the Operating Partnership.
1.87 "Transfer" as a noun, means any sale, assignment, conveyance, pledge,
hypothecation, gift, encumbrance or other transfer, and as a verb, means to
sell, assign, convey, pledge, hypothecate, give, encumber or otherwise transfer.
1.88 "Unit" means an equal undivided interest in all of the outstanding
Partnership Interests.
1.89 "United States Person" means a holder of L.P. Units who is an
individual who is a citizen or resident of the United States; a corporation,
partnership or other entity created or organized in, or under the laws of, the
United States or any State; an estate the income of which from sources without
the United States is includable in gross income for United States federal income
tax purposes; a trust the primary supervision of which is exercisable by a court
within the United States and having one or more United States fiduciaries with
authority to control all substantial decisions of such trust; and any
- 13 -
<PAGE>
Person whose income or gain in respect of the L.P. Units is effectively
connected with the conduct of a United States trade or business.
1.90 "Voting Securities" means any Equity Security which entitles the
holder thereof to vote on all matters submitted for a vote of equity holders by
the issuer of such Equity Security, including the right to vote for directors in
the case of a corporation.
Certain additional terms and phrases have the meanings set forth in
Appendix II.
ARTICLE 2. Organizational Matters.
2.1 Continuation. The Partners hereby agree to continue the Partnership
under and pursuant to the Act. Except as expressly provided herein to the
contrary, the rights and obligations of the Partners and the administration and
termination of the Partnership shall be governed by the Act. The Partnership
Interest of each Partner shall be personal property for all purposes.
2.2 Name. The name of the Partnership shall be Mission West Properties,
L.P. [ ]. The Partnership's business may be conducted under any other name or
names deemed advisable by the General Partner, including the name of the General
Partner or any Affiliate thereof. The words "Limited Partnership," "L.P.,"
"Ltd." or similar words or letters shall be included in the Partnership's name
where necessary to comply with the laws of any jurisdiction. The General Partner
in its sole and absolute discretion may, upon 5 days' prior written notice to
the Limited Partners, change the name of the Partnership.
2.3 Registered Office and Agent; Principal Office. The address of the
registered office of the Partnership in the State of Delaware and the name and
address of the registered agent for service of process on the Partnership in the
State of Delaware is The Corporation Trust Company, 1029 Orange Street,
Wilmington, Delaware 19801. The principal office of the Partnership shall be
10050 Bandley Drive, Cupertino, California 95014, or such other place as the
General Partner may from time to time designate by notice to the Limited
Partners. The Partnership may maintain offices at such other place or places
within or outside the State of Delaware as the General Partner deems advisable.
2.4 Power of Attorney.
A. Each Limited Partner and each Assignee hereby constitutes and appoints
the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each
case with full power of substitution, as its true and lawful agent and
attorney-in-fact, with full power and authority in its name, place and
stead to:
(1) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (a) all certificates, documents and
other instruments (including, without limitation, this Agreement
and the Certificate and all
- 14 -
<PAGE>
amendments or restatements thereof) that the General Partner or
the Liquidator deems appropriate or necessary to form, qualify or
continue the existence or qualification of the Partnership as a
limited partnership (or a partnership in which the Limited
Partners have limited liability) in the State of Delaware and in
all other jurisdictions in which the Partnership may or plans to
conduct business or own property, including, without limitation,
any documents necessary or advisable to convey any Contributed
Property to the Partnership; (b) all instruments that the General
Partner deems appropriate or necessary to reflect any amendment,
change, modification or restatement of this Agreement in
accordance with its terms; (c) all conveyances and other
instruments or documents that the General Partner or the
Liquidator deems appropriate or necessary to reflect the
dissolution and liquidation of the Partnership pursuant to the
terms of this Agreement, including, without limitation, a
certificate of cancellation; (d) all instruments relating to the
admission, withdrawal, removal or substitution of any Partner
pursuant to, or other events described in, Article 11, 12 or 13,
or the Capital Contribution of any Partner; and (e) all
certificates, documents and other instruments relating to the
determination of the rights, preferences and privileges of
Partnership Interest; and
(2) execute, swear to, seal, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other instruments
appropriate or necessary, in the sole and absolute discretion of
the General Partner or any Liquidator, to make, evidence, give,
confirm or ratify any vote, consent, approval, agreement or other
action which is made or given by the Partners hereunder or is
consistent with the terms of this agreement or appropriate or
necessary, in the sole discretion of the General Partner or any
Liquidator, to effectuate the terms or intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General
Partner or any Liquidator to amend this Agreement except in accordance with
Article 14, or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, in recognition of the fact that
each of the Partners will be relying upon the power of the General
Partner and any Liquidator to act as contemplated by this Agreement in
any filing or other action by it on behalf of the Partnership, and it
shall survive and not be affected by the subsequent Incapacity of any
Limited Partner or Assignee and the Transfer of all or any portion of
such Limited Partner's or Assignee's L.P. Units and shall extend to
such Limited Partner's or Assignee's heirs, successors, assigns and
personal representatives. Each such Limited Partner or Assignee hereby
agrees to be bound by any representation made by the General Partner
or any Liquidator, acting in good faith pursuant to such power of
attorney, and each such Limited Partner or Assignee hereby waives any
and all defenses which may be available to contest, negate or
disaffirm the action of the General Partner or any Liquidator, taken
in good faith under such power of attorney. Each Limited Partner or
Assignee shall execute and deliver to the General Partner or
- 15 -
<PAGE>
the Liquidator, within 15 days after receipt of the General Partner's
or Liquidator's request therefor, such further designation, powers of
attorney and other instruments as the General Partner or the
Liquidator, as the case may be, deems necessary to effectuate this
Agreement and the purposes of the Partnership.
2.5 Term. The term of the Partnership shall commence on the date hereof and
shall continue until December 31, 2048, unless the Partnership is dissolved
sooner pursuant to the provisions of Article 13 or as otherwise provided by law.
ARTICLE 3. Purpose.
3.1 Purpose and Business. The purpose and nature of the business to be
conducted by the Partnership is to conduct any business that may be lawfully
conducted by a limited partnership organized pursuant to the Act including,
without limitation, to engage in the following activities: to acquire, hold,
own, develop, construct, improve, maintain, operate, sell, lease, transfer,
encumber, convey, exchange, and otherwise dispose of or deal with the
Properties, and the Pending Development Projects; to acquire, hold, own,
develop, construct, improve, maintain, operate, sell, lease, transfer, encumber,
convey, exchange, and otherwise dispose of or deal with real and personal
property of all kinds; to undertake such other activities as may be necessary,
advisable, desirable or convenient to the business of the Partnership; and to
engage in such other ancillary activities as shall be necessary or desirable to
effectuate the foregoing purposes.
3.2 Powers. The Partnership is empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business for which it has
been formed and for the protection and benefit of the Partnership; provided,
that the Partnership shall not take, and shall refrain from taking, any action
which, in the judgment of the General Partner, in its sole and absolute
discretion, (i) could adversely affect the ability of the Company to continue to
qualify as a REIT; (ii) could subject the Company to any additional taxes under
Section 857 or Section 4981 of the Code; or (iii) could violate any law or
regulation of any governmental body or agency having jurisdiction over the
Company or its securities, unless such action (or inaction) shall have been
specifically consented to by the Company, if not the General Partner, and the
L.P. Unit Majority.
ARTICLE 4. Capital Contributions.
4.1 Capital Contributions of the Partners.
A. At the time of the execution of this Agreement, the Partners have made
the Adjusted Contributions, or shall make the Capital Contributions
contemplated by the Acquisition Agreement, as set forth in Appendix I
to this Agreement. Each Limited Partner shall own L.P. Units in the
amount set forth for such Partner in Appendix I and shall have a
Percentage Interest in the Partnership as set forth in Appendix I,
which shall be adjusted in Appendix I from time to time by the General
Partner to the extent
- 16 -
<PAGE>
necessary to reflect accurately exchanges, additional Capital
Contributions, the issuance of additional Partnership Interests, the
exercise of Put Rights with respect to L.P. Units or similar events
having an effect on any Partner's Percentage Interest.
B. The number of Units held by the General Partner, in its capacity as
general partner, shall be deemed to be the General Partner Interest.
Except as provided in Sections 4.2, 10.5 and 13.3, the Partners shall
have no obligation to make any additional Capital Contributions.
4.2 Additional Funds; Restrictions on Company.
A. The sums of money required to finance the business and affairs of the
Partnership shall be derived from the initial Capital Contributions
made to the Partnership by the Company as set forth in the Acquisition
Agreement and from funds generated from the operation and business of
the Partnership including, without limitation, distributions directly
or indirectly received by the Partnership from Available Cash provided
by the Operating Partnership. In the event additional financing is
needed from sources other than as set forth in the preceding sentence
for any reason, subject to the provisions of Sections 8.8 and 8.9, the
General Partner may, in its discretion, in such amounts and at such
times as it solely shall determine to be necessary or appropriate,
obtain additional funds for the Operating Partnership which shall be
allocated to each of the partnerships included therein, including the
Partnership, pro rata in proportion to the ratio of the number of
Units then outstanding in each such Partnership to the total number of
L.P. Units then outstanding in the Operating Partnership taken as a
whole ("Pro Rata Share"). Accordingly, to the extent of such Pro Rata
Share of the Partnership and subject to Section 8.9 and any other
limitations contained in this Agreement or the Acquisition Agreement,
the General Partner may, (i) cause the Partnership to issue additional
Partnership Interests and admit additional Limited Partners to the
Partnership in accordance with Section 4.3; (ii) make additional
Capital Contributions to the Partnership (subject to the provisions of
Section 4.2B); (iii) cause the Partnership to borrow money, enter into
loan arrangements, issue debt securities, obtain letters of credit or
otherwise borrow money on a secured or unsecured basis; or (iv) make
loans to the Partnership (subject to Section 4.2B). In no event shall
the Limited Partners be required to make any additional Capital
Contributions or any loan to, or otherwise provide any financial
accommodation for the benefit of, the Partnership pursuant to any such
permitted action by the General Partner, except insofar as a Limited
Partner has exercised its New Equity Financing Right pursuant to
Section 8.8.
B. Except as agreed otherwise at the time by vote or written consent of
the L.P. Unit Majority: (i) the Company shall lend to the Partnership
its Pro Rata Share of the proceeds of or consideration received by the
Company from all loans and advances to the Company pursuant to any
financial borrowing arrangement on the same financial terms and
conditions, including interest rate and repayment schedule, as shall
be applicable with respect to or incurred in connection with the
issuance of such loans and advances to the Company (which the
Partnership may, in turn, lend to any other
- 17 -
<PAGE>
partnership constituting part of the Operating Partnership); (ii) in
the case ofEquity Securities senior or junior to the Common Stock as
to dividends and distributions on liquidation, which are not
convertible into Common Stock as of the issuance date, the Company
shall contribute to the Partnership the proceeds of or consideration
(including any property or other non-cash assets) received for such
Securities and the proceeds of, or consideration received from, any
subsequent exercise, exchange or conversion thereof (if applicable),
and shall receive from the Partnership, new Partnership Interests in
the Partnership in consideration therefor with the same financial
terms and conditions, including dividend, dividend priority,
liquidation preference, conversion and redemption rights, as are
applicable to such Equity Securities; (iii) in the case of Common
Stock, or other Equity Securities convertible into Common Stock as of
the issuance date, including, without limitation, shares of Common
Stock or other Equity Securities issued upon exercise of options
issued under the Stock Option Plan or any other Employee Benefit Plan
of the Company, the Company shall contribute to the Partnership the
proceeds of or consideration (including any property or other non-cash
assets) received for such Securities and the proceeds of, or
consideration received from, any subsequent exercise, exchange or
conversion thereof (if applicable), and shall receive from the
Partnership a number of additional Units o General Partner Interest in
consideration therefor equal to the product of (x) the number of
shares of Common Stock or other Equity Securities issued by the
Company, multiplied by (y) the Exchange Factor in effect on the date
of such contribution; and (iv) in the case of Common Stock or other
Equity Securities issued upon the exercise or surrender of rights
under a stock option, warrant, or any other right for which the
Company does not receive proceeds, and issues less than the number of
shares of Common Stock or other Equity Securities subject to such
option, warrant or other right to the holder thereof retaining the
excess of such shares as payment of the purchase price (a "net
exercise"), or where the Company uses the proceeds received pursuant
to a Dividend Reinvestment Plan to acquire shares of Common Stock or
other Equity Securities to be issued to the shareholder exercising
such right, the Company shall receive from the Partnership a number of
additional Units of General Partner Interest equal to the actual
number of shares of Common Stock or other Equity Securities so issued
to the shareholder multiplied by the Exchange Factor.
4.3 Issuance of Additional Partnership Interests; Admission of Additional
Limited Partners. In addition to any Partnership Interests issuable by the
Partnership pursuant to Section 4.2, and subject to the provisions of Sections
8.8 and 8.9, the General Partner is authorized to cause the Partnership to issue
additional Partnership Interests (or options therefor) in the form of L.P. Units
or other Partnership Interests senior or junior to the L.P. Units to any Persons
at any time or from time to time, for consideration per Unit of Partnership
Interest not less than the Common Stock Price determined at the initial issuance
date divided by the Exchange Factor, and on such other terms and conditions, as
the General Partner shall establish provided, however, that (i) each partnership
included in the Operating Partnership shall effect its Pro Rata Share of such
issuance, (ii) such issuance does not cause the Partnership to become, with
respect to any Employee Benefit Plan subject to Title I of ERISA or Section 4975
of the Code, a "party in interest" (as defined in Section 3(14) of ERISA) or
- 18 -
<PAGE>
a "disqualified person" (as defined in Section 4975(e) of the Code); and (iii)
such issuance does not cause any portion of the assets of the Partnership to
constitute assets of any Employee Benefit Plan subject to Section 2510.3-101 of
the regulations of the United States Department of Labor. Subject to the
limitations set forth in the preceding sentence, the General Partner may take
such steps as it, in its reasonable discretion, deems necessary or appropriate
to admit any Person as a Limited Partner of the Partnership, including, without
limitation, amending the Certificate, Appendix I or any other provision of this
Agreement.
4.4 Repurchase of Company Equity Securities. In the event the Company shall
elect to purchase from its shareholders shares of Common Stock for the purpose
of delivering such shares to satisfy an obligation under any Dividend
Reinvestment Plan or Employee Benefit Plan adopted by the Company, or shall
repurchase any other Equity Securities of the Company pursuant to any other
share repurchase obligation or arrangement undertaken by the Company with any
Company shareholder, including preferred stock redemptions, the purchase price
paid by the Company for such shares and any other expenses incurred by the
Company in connection with such purchase shall be considered expenses of the
Partnership and shall be reimbursed to the Company, subject to the condition
that: (i) if such shares subsequently are to be sold by the Company, the Company
shall pay to the Partnership any proceeds received by the Company for such
shares of Common Stock or other Equity Securities (provided that an exchange of
shares of Common Stock for L.P. Units pursuant to the Exchange Rights Agreement
would not be considered a sale for such purposes); and (ii) if such shares are
not re-transferred by the Company within 30 days after the purchase thereof, the
General Partner shall cause the Partnership to cancel the number of Units of
General Partner Interest held by the Company determined by multiplying (x) the
quotient obtained by dividing the total amount deemed paid by the Partnership by
the Common Stock Price determined as of the repurchase date, by (y) the Exchange
Factor in effect on the date of such repurchase.
4.5 No Third Party Beneficiary. No creditor or other third party having
dealings with the Partnership shall have the right to enforce the right or
obligation of any Partner to make Capital Contributions or loans or to pursue
any other right or remedy hereunder or at law or in equity, it being understood
and agreed that the provisions of this Agreement shall be solely for the benefit
of, and may be enforced solely by, the parties hereto and their respective
successors and assigns.
4.6 No Interest; No Return. No Partner shall be entitled to interest on its
Capital Contribution or on such Partner's Capital Account. Except as provided in
Section 8.7 or Article 13 of this Agreement, or by law, no Partner shall have
any right to demand or receive the return of its Capital Contribution from the
Partnership.
ARTICLE 5. Distributions.
5.1 Regular Distributions. Except for distributions pursuant to Section
13.2 in connection with the dissolution and liquidation of the Partnership, and
subject to the provisions of Sections 5.3, 5.4 and 5.5, the General Partner
shall cause the Partnership
- 19 -
<PAGE>
to distribute, from time to time as determined by the General Partner, but in
any event not less frequently than once each Quarter, the Partnership's Pro Rata
Share of all Available Cash, to the Partners, in accordance with each Partner's
respective Percentage Interest; provided, however, that in no event may a
Limited Partner receive a distribution of Available Cash with respect to a L.P.
Unit, if such Limited Partner is entitled to receive a distribution out of such
Available Cash with respect to a share of Common Stock for which such L.P. Unit
has been exchanged.
5.2 Qualification as a REIT. The General Partner shall be entitled to cause
the Partnership to distribute to the General Partner the Partnership's Pro Rata
Share of Available Cash distributed by the Operating Partnership to enable the
General Partner to pay shareholder dividends that will (i) satisfy the REIT
Requirements for distributions to shareholders, and (ii) avoid any federal
income or excise tax liability of the General Partner; provided, however, the
General Partner is not bound to comply with this covenant to the extent such
distributions would violate applicable Delaware law.
5.3 Withholding. With respect to any withholding tax or other similar tax
liability or obligation to which the Partnership may be subject as a result of
any act or status of any Partner or to which the Partnership becomes subject
with respect to any Unit, the Partnership shall have the right to withhold
amounts of Available Cash distributable to such Partner or with respect to such
Units, to the extent of the amount of such withholding tax or other similar tax
liability or obligation pursuant to the provisions contained in Section 10.5.
5.4 Additional Partnership Interests. If the Partnership issues Partnership
Interests in accordance with Section 4.2 or 4.3 which are entitled to certain
distribution priorities, Section 5.1 shall be amended, as necessary, to reflect
the distribution priority of such Partnership Interests and corresponding
amendments shall be made to the provisions of Appendix II.
5.5 Distributions Upon Liquidation. Proceeds from a Terminating Capital
Transaction and any other cash received or reductions in reserves made after
commencement of the liquidation of the Partnership shall be distributed to the
Partners in accordance with Section 13.2.
ARTICLE 6. Allocations.
The Net Income, Net Loss, and other Partnership items of income, gain,
loss, deduction or credit as provided under the Code, shall be allocated
pursuant to the provisions of Appendix II, as amended from time to time.
ARTICLE 7. Management and Operation of Business.
7.1 Management.
A. Except as otherwise expressly provided in this Agreement, and subject
to the provisions of Section 8.9, all management powers over the
business and affairs the
- 20 -
<PAGE>
Partnership are and shall be exclusively vested in the General
Partner, and no Limited Partner shall have any right to participate in
or exercise control or management power over the business and affairs
of the Partnership. The General Partner may not be removed by the
Limited Partners, with or without cause. In addition to the powers now
or hereafter granted a general partner of a limited partnership under
the Act or which are granted to the General Partner under any other
provision of this Agreement, the General Partner shall have full power
and authority to make contracts, sign documents, conduct litigation,
acquire and convey property, hire employees, consultants and
professionals, raise capital, borrow funds, incur liabilities, invest
funds, comply with all applicable laws, and do all other things deemed
necessary or desirable by the General Partner to conduct the business
of the Partnership on behalf of the Partnership; to exercise all
powers set forth in Section 3.2, and to effectuate the purposes set
forth in Section 3.1, provided that any exercise of the foregoing
rights and powers must be consistent with the REIT Requirements.
B. Except as provided in Section 8.9, each of the Limited Partners agrees
that the General Partner is authorized to execute, deliver and perform
the agreements and transactions on behalf of the Partnership without
any further act, approval or vote of the Partners, notwithstanding any
other provision of this Agreement to the fullest extent permitted
under the Act or other applicable law, rule or regulation. The
execution, delivery or performance by the General Partner or the
Partnership of any agreement authorized or permitted under this
Agreement shall not constitute a breach by the General Partner of any
duty that the General Partner may owe the Partnership or the Limited
Partners or any other Persons under this Agreement or of any duty
stated or implied by law or equity.
C. At all times from and after the date hereof, in accordance with the
provisions of the Acquisition Agreement, the General Partner may cause
the Partnership to establish and maintain at any and all times working
capital accounts and other cash or similar balances in such amount as
the General Partner, in its sole and absolute discretion, deems
appropriate and reasonable from time to time. Such accounts may
include funds of the General Partner and the other partnerships in the
Operating Partnership, which the General Partner shall be free to
commingle.
D. In exercising its authority under this Agreement, the General Partner
shall take into account the tax consequences to any Partner of any
action taken by it and shall select the alternative which appears at
the time to present the least adverse tax consequences to the Limited
Partners. By way of example, but not of limitation: If the General
Partner decides to refinance (directly or indirectly) any outstanding
indebtedness of the Partnership, the General Partner shall use
reasonable efforts to structure such refinancing in a manner that
minimizes any adverse tax consequences resulting therefrom to the
Limited Partners. The General Partner and the Partnership shall not
have liability to a Limited Partner under any circumstances as a
result of an income tax liability incurred by such Limited Partner as
a result of a necessary action (or inaction) by the General Partner
taken pursuant to its authority under and in accordance with this
Agreement where avoiding the resulting adverse tax
- 21 -
<PAGE>
consequences to a Limited Partner was not reasonably practicable
under the circumstances.
7.2 Certificate of Limited Partnership. The General Partner shall file the
amended Certificate with the Secretary of State of Delaware as required by the
Act. The General Partner shall use all reasonable efforts to cause to be filed
such other certificates or documents as may be reasonable and necessary or
appropriate for the formation, continuation, qualification and operation of a
limited partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware and any other state, or the District of
Columbia, in which the Partnership may elect to do business or own property. To
the extent that such action is determined by the General Partner to be
reasonable and necessary or appropriate, the General Partner shall file
amendments to and restatements of the Certificate and do all of the things to
maintain the Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) under the laws of the State of Delaware
and each other state, or the District of Columbia, in which the Partnership may
elect to do business or own property. Subject to the terms of Section 8.5A(iv)
hereof, the General Partner shall not be required, before or after filing, to
deliver or mail a copy of the Certificate or any amendment thereto to any
Limited Partner.
7.3 Reimbursement of the General Partner and the Company.
A. Except as provided in this Section 7.3 and elsewhere in this Agreement
(including the provisions of Articles 5 and 6 regarding distributions,
payments, and allocations to which it may be entitled), the General
Partner shall not be compensated for its services as general partner
of the Partnership.
B. The General Partner, shall be reimbursed on a monthly basis, or such
other basis as it may determine in its sole and absolute discretion,
for all expenses that it incurs relating to the ownership and
operation of, or for the benefit of, the Partnership; provided, that
the amount of any such reimbursement shall be reduced by any interest
earned by the General Partner with respect to bank accounts or other
instruments or accounts held by it in its name. Such reimbursement
shall be in addition to any reimbursement made as a result of
indemnification pursuant to Section 7.6.
7.4 Outside Activities of the General Partner. The General Partner shall
not directly or indirectly enter into or conduct any business other than in
connection with the ownership, acquisition, development and disposition of
Partnership Interests and the management of the business of the Partnership, and
such activities as are incidental thereto. The General Partner and any
Affiliates of the General Partner may acquire Limited Partner Interests and
shall be entitled to exercise all rights of a Limited Partner relating to such
Limited Partner Interests.
7.5 Contracts with Affiliates.
A. The Partnership may lend or contribute funds or other assets to its
Subsidiaries or other Persons
- 22 -
<PAGE>
in which it has an equity investment and such Persons may borrow funds
from the Partnership, on terms and conditions established in the sole
and absolute discretion of the General Partner. The foregoing
authority shall not create any right of benefit in favor of any
Subsidiary or any other Person.
B. Except as provided in Section 7.4, the Partnership may Transfer assets
to joint ventures, other partnerships, corporations or other business
entities in which it is or thereby becomes a participant upon such
terms and subject to such conditions consistent with this Agreement
and applicable law as the General Partner, in its sole and absolute
discretion, believes are advisable.
C. Except as expressly permitted by this Agreement or otherwise
contemplated by the Acquisition Agreement, neither the General Partner
nor any of its Affiliates shall sell, Transfer or convey any property
to, or purchase any property from, the Partnership, directly or
indirectly, except pursuant to transactions that are determined by the
General Partner in good faith to be fair and reasonable.
D. Except as provided otherwise in Section 8.9, the General Partner, in
its sole and absolute discretion and without the approval of the
Limited Partners, may propose and adopt, on behalf of the Partnership,
Employee Benefit Plans funded by the Partnership for the benefit of
employees of the General Partner, the Partnership, Subsidiaries of the
Partnership or any Affiliate of any of them in respect of services
performed, directly or indirectly, for the benefit of the Partnership,
the General Partner, or any Subsidiaries of the Partnership.
E. The General Partner is expressly authorized to enter into, in the name
and on behalf of the Partnership, a "right of first opportunity" or
"right of first offer" arrangement, non-competition agreements and
other conflict avoidance agreements with various Affiliates of the
Partnership and the General Partner, on such terms as the General
Partner, in its sole and absolute discretion, believes are advisable.
7.6 Indemnification.
A. To the fullest extent permitted by Delaware law, the Partnership shall
indemnify each Indemnitee from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including, without
limitation, reasonable attorneys' fees and other legal fees and
expenses), judgments, fines, settlements, and other amounts arising
from any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative, that relate to the
operations of the Partnership or the Company as set forth in this
Agreement, in which such Indemnitee may be involved, or is threatened
to be involved, as a party or otherwise, except to the extent it is
finally determined by a court of competent jurisdiction, from which no
further appeal may be taken, that such Indemnitee's action constituted
intentional acts or omissions constituting willful misconduct or
fraud. Without limitation, the foregoing indemnity shall extend to any
liability of any Indemnitee, pursuant to a loan guaranty or otherwise
for any indebtedness of the Partnership or any Subsidiary of the
Partnership (including, without limitation, any indebtedness which the
Partnership or any Subsidiary of the Partnership has assumed or taken
subject to), except with respect to Partnership debt
- 23 -
<PAGE>
that has been assumed or guaranteed by an Indemnitee in its capacity
as a Limited Partner. The General Partner is hereby authorized and
empowered, on behalf of the Partnership, to enter into one or more
indemnity agreements consistent with the provisions of this Section
7.6 in favor of any Indemnitee having or potentially having liability
for any such indebtedness. Any indemnification pursuant to this
Section 7.6 shall be made only out of the assets of the Partnership,
and neither the General Partner nor any Limited Partner shall have any
obligation to contribute to the capital of the Partnership, or
otherwise provide funds, to enable the Partnership to fund its
obligations under this Section 7.6.
B. Reasonable expenses incurred by an Indemnitee who is a party to a
proceeding shall be paid or reimbursed by the Partnership in advance
of the final disposition of the proceeding.
C. The indemnification provided by this Section 7.6 shall be in addition
to any other rights to which an Indemnitee or any other Person may be
entitled under any agreement, pursuant to any vote of the Partners,
under the Company's Articles of Incorporation, as a matter of law, or
otherwise, and shall continue as to an Indemnitee who has ceased to
serve in such capacity unless otherwise provided in a written
agreement pursuant to which such Indemnities are indemnified.
D. The Partnership may, but shall not be obligated to, purchase and
maintain insurance, on behalf of the Indemnities and such other
Persons as the General Partner shall determine, against any liability
that may be asserted against or expenses that may be incurred by such
Person in connection with the Partnership's activities, regardless of
whether the Partnership would have the power to indemnify such Person
against such liability under the provisions of this Agreement.
E. For purposes of this Section 7.6, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an Employee
Benefit Plan whenever the performance by such Indemnitee of its duties
to the Partnership also imposes duties on, or otherwise involves
services by, such Indemnitee to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with
respect to an Employee Benefit Pan pursuant to applicable law shall
constitute fines within the meaning of this Section 7.6; and actions
taken or omitted by the Indemnitee with respect to an Employee Benefit
Plan in the performance of its duties for a purpose reasonably
believed by it to be in the interest of the participant and
beneficiaries of the plan shall be deemed to be for a purpose which is
not opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject any of the Limited Partners to
personal liability by reason of the indemnification provisions set
forth in this Agreement.
G. An Indemnitee shall not be denied indemnification in whole or in part
under this Section 7.6 because the Indemnitee had an interest in the
transaction with
- 24 -
<PAGE>
respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.6 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and
shall not be deemed to create any rights for the benefit of any other
Persons. Any amendment, modification or repeal of this Section 7.6 or
any provision hereof shall be prospective only and shall not in any
way affect the Partnership's liability to any Indemnitee under this
Section 7.6, as in effect immediately prior to such amendment,
modification, or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
I. The provisions of this Section 7.6 shall be inapplicable to any
investigation, claim, suit, or proceeding, or the portion thereof,
which concerns claims for breach of contract between the Partnership
and a Person contracting other than in such Person's capacity as a
Partner, or as an officer or director of the General Partner.
J. No provision of this Section 7.6 shall be construed as permitting any
contract or transaction which is prohibited by the provisions of
Section 9.2(b) of the Acquisition Agreement.
7.7 Liability of the General Partner.
A. Notwithstanding anything to the contrary set forth in this Agreement,
the General Partner and its officers and directors shall not be liable
for monetary damages to the Partnership, any Partners or any Assignees
for losses sustained or liabilities incurred as a result of errors in
judgment or of any act or omission, if the General Partner acted in
good faith; provided, however, the foregoing shall not be deemed to
exculpate the Company from any liability the Company may have under
the Acquisition Agreement.
B. Subject to its obligations and duties as General Partner set forth in
Section 7.1A hereof, the General Partner may exercise any of the
powers granted to it by this Agreement and perform any of the duties
imposed upon it hereunder either directly or by or through its agent.
The General Partner shall not be liable for any acts or omissions on
the part of any such agent, except in circumstances for which the
General Partner may be liable under Section 7.7A or would not be
subject to indemnification under Section 7.6.
C. Any amendment, modification or repeal of this Section 7.7 or any
provision hereof shall be prospective only and shall not in any way
affect the limitations on the General Partner's and its officers' and
directors' liability to the Partnership and the Limited Partners under
this Section 7.7 as in effect immediately prior to such amendment,
modification or repeal with respect to claims arising from or relating
to
- 25 -
<PAGE>
matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be
asserted.
- 26 -
<PAGE>
7.8 Limited Partners' Right to Bring Derivative Lawsuits. Any Limited
Partner may bring an action on behalf of the Partnership, as permitted under the
Act and the laws of the State of Delaware, to recover a judgment in favor of the
Partnership if the General Partner has refused to bring the action or if an
effort to cause the General Partner to bring the action is not likely to
succeed.
7.9 Other Matters Concerning the General Partner.
A. The General Partner may rely and shall be protected in acting, or
refraining from acting, upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond,
debenture, or other paper or document believed by it in good faith to
be genuine and to have been signed or presented by the proper party or
parties.
B. The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, architects,
engineers, environmental consultants and other consultants and
advisers selected by it, and any act taken or omitted to be taken in
reliance upon the opinion of such Persons as to matters which such
General Partner reasonably believes to be within such Person's
professional or expert competence shall be conclusively presumed to
have been done or omitted in good faith and in accordance with such
opinion.
C. The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly
authorized officers and duly appointed attorneys-in-fact. Each such
attorney shall, to the extent provided by the General Partner in the
power of attorney, have full power and authority to do and perform all
and every act and duty which is permitted or required to be done by
the General Partner hereunder.
D. Notwithstanding any other provisions of this Agreement or the Act, any
action of the General Partner on behalf of the Partnership or any
decision of the General Partner to refrain from acting on behalf of
the Partnership, undertaken in the good faith belief that such action
or omission is necessary or advisable in order (i) to protect the
ability of the Company to continue to qualify as a REIT; or (ii) to
avoid the Company incurring any taxes under Section 857 or Section
4981 of the Code, is expressly authorized under this Agreement and is
deemed approved by all of the Limited Partners.
7.10 Title to Partnership Assets. Title to Partnership assets, whether
real, personal or mixed and whether tangible or intangible, shall be deemed to
be owned by the Partnership as an entity, and no Partner, individually or
collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner or one or more nominees, as
the General Partner may determine, including Affiliates of the General Partner.
The General Partner hereby declares and warrants that any Partnership asset for
which legal title is held in the name of the General Partner or any nominee or
Affiliate of the General Partner shall be held by the General
- 27 -
<PAGE>
Partner for the use and benefit of the Partnership in accordance with the
provisions of this Agreement; provided, that the General Partner shall use its
best efforts to cause beneficial and record title to such assets to be vested in
the Partnership as soon as reasonably practicable. All Partnership assets shall
be recorded as the property of the Partnership in its books and records,
irrespective of the name in which legal title to such Partnership assets is
held.
7.11 Reliance by Third Parties. Notwithstanding anything to the contrary in
this Agreement, any Person dealing with the Partnership shall be entitled to
assume that the General Partner has full power and authority, without consent or
approval of any other Partner or Person, to encumber, sell or otherwise use in
any manner any and all assets of the Partnership and to enter into any contracts
on behalf of the Partnership, and take any and all actions on behalf of the
Partnership, and such Person shall be entitled to deal with the General Partner
as if the General Partner were the Partnership's sole party in interest, both
legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies which may be available against such Person to
contest, negate or disaffirm any action of the General Partner in connection
with any such dealing. In no event shall any Person dealing with the General
Partner or its representatives be obligated to ascertain that the terms of this
Agreement have been complied with or to inquire into the necessity or expedience
of any act or action of the General Partner or its representatives. Each and
every certificate, document or other instrument executed on behalf of the
Partnership by the General Partner or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that: (i) at the time of the execution and delivery of such certificate,
document or instrument, this Agreement was in full force and effect; (ii) the
Person executing and delivering such certificate, document or instrument was
duly authorized and empowered to do so for and on behalf of the Partnership; and
(iii) such certificate, document or instrument was duly executed and delivered
in accordance with the terms and provisions of this Agreement and is binding
upon the Partnership.
ARTICLE 8. Rights and Obligations of Limited Partners.
8.1 Limitation of Liability. The Limited Partners shall have no liability
under this Agreement except as expressly provided in this Agreement, including
Sections 10.5 and 13.3 hereof, or under the Act. Notwithstanding the preceding
sentence, each Limited Partner shall have the right, but not the obligation, to
guarantee a portion of the indebtedness of the Partnership in accordance with
the terms of the Acquisition Agreement.
8.2 Management of Business. No Limited Partner or Assignee (other than the
General Partner, any of its Affiliates or any officer, director, employee, agent
or trustee of the General Partner, the Partnership or any of their Affiliates,
in their capacity as such) shall take part in the operation, management or
control (within the meaning of the Act) of the Partnership's business, transact
any business in the Partnership's name or have the power to sign documents for
or otherwise bind the Partnership. The
- 28 -
<PAGE>
transaction of any such business by the General Partner, any of its Affiliates
or any officer, director, employee, partner, agent or trustee of the General
Partner, the Partnership or any of their Affiliates, in their capacity as such,
shall not affect, impair or eliminate the limitations on the liability of the
Limited Partners or Assignees under this Agreement.
8.3 Outside Activities of Limited Partners. Subject to any agreements
entered into pursuant to Section 7.5 hereof and any other agreements entered
into by a Limited Partner or its Affiliates with the Partnership or any of its
Subsidiaries including the Acquisition Agreement, any Limited Partner (other
than the Company) and any officer, director, employee, agent, trustee, Affiliate
or shareholder of any Limited Partner (other than the Company) shall be entitled
to and may have business interests and engage in business activities in addition
to those relating to the Partnership, including business interests and
activities that are in direct competition with the Partnership or that are
enhanced by the activities of the Partnership. Neither the Partnership nor any
Partners shall have any rights by virtue of this Agreement in any business
ventures of any Limited Partner or Assignee which are permitted within the scope
of this Section 8.3. None of the Limited Partners (other than the Company) nor
any other Person shall have any rights by virtue of this Agreement or the
Partnership relationship established hereby in any business ventures of any
other Person and such Person shall have no obligation pursuant to this Agreement
to offer any interest in any such business ventures to the Partnership, any
Limited Partner or any such other Person, even if such opportunity is of a
character which, if presented to the Partnership, any Limited Partner or such
other Person, could be taken by such Person.
8.4 Return of Capital. Except in connection with the exercise of Exchange
Rights or Put Rights, no Limited Partner shall be entitled to the withdrawal or
return of its Capital Contribution, except to the extent of distributions made
pursuant to this Agreement or upon termination of the Partnership as provided
herein. Except to the extent provided by Appendix II, or as otherwise expressly
provided in this Agreement, no Limited Partner or Assignee shall have priority
over any other Limited Partner or Assignee, either as to the return of Capital
Contributions or as to profits, losses or distributions.
8.5 Rights of Limited Partners Relating to the Partnership.
A. In addition to the other rights provided by this Agreement or by the
Act, and except as limited by Section 8.5B hereof, each Limited
Partner shall have the right, for a purpose reasonably related to such
Limited Partner's interest as a limited partner in the Partnership,
upon written demand with a statement of the purpose of such demand and
at such Limited Partner' s own expense (including such reasonable
copying and administrative charges as the General Partner may
establish from time to time): (i) to obtain a copy of the most recent
annual and quarterly reports filed by the Company with the SEC
pursuant to the Exchange Act; (ii) to obtain a copy of the
Partnership's federal, state and local income tax returns for each
Partnership Year; (iii) to obtain a current list of the name and last
known business, residence or mailing
- 29 -
<PAGE>
address of each Partner; (iv) to obtain a copy of this Agreement and
the Certificate and all amendments and/or restatements thereto,
together with executed copies of all powers of attorney pursuant to
which this Agreement, the Certificate and all amendments and/or
restatements thereto have been executed; and (v) to obtain true and
full information regarding the amount of cash and a description and
statement of any other property or services contributed by each
Partner and which each Partner has agreed to contribute in the future,
and the date on which each became a Partner.
B. Notwithstanding any other provision of this Section 8.5, the General
Partner may keep confidential from the Limited Partners, for such
period of time as the General Partner determines in its sole and
absolute discretion to be reasonable, any information that (i) the
General Partner reasonably believes to be in the nature of trade
secrets or other confidential information, the disclosure of which the
General Partner in good faith believes is not in the best interests of
the Partnership or the Company or could damage the Partnership or its
business; or (ii) the Partnership is required by law or by agreements
with an unaffiliated third party to keep confidential.
8.6 Exchange Rights. The Limited Partners may exchange all or a portion of
their L.P. Units for shares of Common Stock on the terms and subject to the
conditions and restrictions contained in the Exchange Rights Agreement.
8.7 Put Rights.
A. Upon the terms and subject to the conditions of this Agreement, each
Limited Partner (other than Carl E. Berg and Clyde J. Berg with
respect to all L.P. Units owned by them beneficially as of the
Effective Date) shall have the right to tender to the Partnership
outstanding L.P. Units no more than once during any 12-month period
commencing after December 29, 1999. The Partnership shall purchase
properly tendered L.P. Units for cash at a price (the "Tender Price")
equal to the average market value of the Common Stock price as of the
date the Limited Partner delivers to the General Partner, at the
address provided in Appendix II, a completed and duly executed Letter
of Transmittal in the form attached as Exhibit A to the Exchange
Rights Agreement, and any other documents required by the Letter of
Transmittal. Only a tender in this manner will constitute a valid
tender of L.P. Units pursuant to this Section 8.7A. The General
Partner shall make all determinations as to the validity and form of
any tender of L.P. Units in accordance with the provisions of this
Agreement, and upon rejection of a tender, shall give the tendering
holder written notice of such rejection, which shall include the
reasons therefor. Unless otherwise agreed by the General Partner or as
provided in Section 8.7C, tenders of L.P. Units pursuant to this
Section 8.7A shall be irrevocable and shall not be subject to
withdrawal or modification.
B. Within 15 days after the valid tender of L.P. Units pursuant to
Section 8.7A, the Company may make an election to purchase such L.P.
Units itself with cash of the Company (the "Cash Election"). If with
respect to any tender of L.P. Units pursuant to this Section 8.7, the
Company makes the Cash Election, then within 90 days after such tender
the Company shall pay to the tendering Limited Partner an aggregate
amount of cash equal to the purchase price of the tendered L.P. Units
with available cash,
- 30 -
<PAGE>
borrowed funds or the proceeds of an offering of new shares of Common
Stock. Upon acquiring the L.P Units, the Company may cause the
Partnership to retire the L.P. Units and convert them to the same
number of Units of General Partner Interest, and the General Partner
shall amend Appendix I accordingly.
C. Notwithstanding the foregoing, if the purchase price for the L.P.
Units tendered by a Limited Partners in one year exceeds $1,000,000,
the Partnership or the Company shall be entitled to reduce
proportionally the number of L.P. Units to be acquired from each
Tendering Partner so that the total purchase price does not exceed
$1,000,000 if the Company so elects. In addition, if the Company does
not timely make the Cash Election, the Partnership shall deliver the
purchase price for the tendered L.P. Units to the Limited Partner
within 45 days after the Letter of Transmittal was delivered to the
General Partner. The General Partner may defer payment of the purchase
price until such time not to exceed 120 days after the valid tender of
L.P. Units pursuant to Section 8.7A as the Partnership has adequate
Available Cash after payment of the purchase price, in the reasonable
judgment of the General Partner, to fund current distributions
necessary for the Company to satisfy the REIT Requirements following
the waiver by the Company of its right to make the Cash Election. In
such event, the General Partner shall give the tendering Limited
Partner written notice of its decision to defer the payment with a
calculation supporting the General Partner's determination within 20
days after the Letter of Transmittal was delivered to the General
Partner. Upon receiving such notice, the Limited Partner may withdraw
the tender. In addition, the Limited Partner may instead exercise its
rights under the Exchange Rights Agreement. If a Limited Partner
tenders L.P. Units pursuant to this Section 8.7, the Limited Partner
shall pay the amount of any additional documentary, stamp or similar
issue or transfer tax which is due, and shall be responsible for all
income or other taxes as a result of such exchange.
D. Each tender of L.P. Units shall constitute a representation and
warranty by the tendering Limited Partner of each of the
representations and warranties set forth in the form of Letter of
Transmittal.
E. Until the holder of L.P. Units tendered pursuant to Section 8.7 has
received cash in exchange therefor, such Limited Partner shall
continue to hold and own such L.P. Units for all purposes of this
Agreement.
- 31 -
<PAGE>
8.8 New Equity Financing Rights.
A. If the General Partner determines that it is in the best interests of
the Partnership to obtain additional funds through the issuance of
additional Partnership Interests, the General Partner shall first
offer to the Limited Partners in each of the partnerships comprising
the Operating Partnership, including the Partnership, the right of
first refusal to purchase that portion of such additional Partnership
Interests which their respective numbers of L.P. Units bear to the
total number of outstanding L.P. Units in the Operating Partnership.
The General Partner shall make this offer pursuant to a written notice
describing the offering price, class or series of Partnership
Interest, and all other material terms of the offer. Such notice shall
be sent to each Limited Partner at the address reflected in Appendix
I, as amended. The Limited Partners shall have 10 days from the date
of such notice to elect to purchase any such additional Partnership
Interests. Such election shall be made pursuant to a written
subscription form specifying the number of Units of additional Limited
Partnership Interests the Limited Partner intends to acquire and the
total purchase price therefor, and shall be signed by the Limited
Partner and delivered to the General Partner at the address set forth
on Appendix I. After such 10-day period, the General Partner shall be
free to offer any additional Limited Partnership Interests on
substantially similar terms to non-Partners and Partners alike.
B. The foregoing right of the Limited Partners to acquire additional
equity interests offered by the Partnership ("New Equity Financing
Right") shall not apply to any offering (i) which is part of a
transaction in which the Limited Partners had the ability to exercise
their New Equity Financing Rights under the Acquisition Agreement with
respect to an offering of Equity Securities by the Company, (ii) in
connection with a merger or other business combination subject to
approval by the L.P. Unit Majority pursuant to Section 8.9, (iii) to a
Person in connection with the acquisition of property or services by
the Partnership from such Person, or (iv) of any Partnership Interest
upon conversion of an outstanding Equity Security of the Partnership,
any Partnership Subsidiary, or the Company.
8.9 Matters Requiring L.P. Unit Majority Approval.
The consent of the L.P. Unit Majority will be required with respect to the
following actions involving the Partnership: (i) the material amendment,
modification or termination of the Agreement; (ii) a general assignment for the
benefit of creditors or the appointment of a custodian, receiver or trustee for
any of the assets of the Partnership; (iii) the institution of any proceeding
for bankruptcy of the Partnership; (iv) the Transfer of any General Partnership
Interests, including transfers attendant to any merger, consolidation or
liquidation of the Company except as otherwise provided in 11.2C; (v) the
admission of any additional or substitute General Partner in the Partnership;
and (vi) a Change of Control Transaction. In addition, until the Protective
Provisions Expiration Date, the consent of the L.P. Unit Majority will also be
required with respect to: (i) any Terminating Capital Transaction; (ii) the
dissolution and liquidation of the Partnership; and (iii) the Partnership's
issuance of Limited Partner
- 32 -
<PAGE>
Interests having seniority over the L.P. Units with respect to distributing
assets, and voting rights.
8.10 Approval of Certain Taxable Sales. Until the earlier of the tenth
anniversary of the closing of the Berg Acquisition and the Protective Provisions
Expiration Date, the General Partner must obtain the prior written consent of
Carl E. Berg, and upon Carl Berg's death if prior to the expiration of this
provision, Clyde J. Berg, before effecting any sale or other transfer of any of
the Properties identified on Schedules 1, 2, 3 or 5 to the Acquisition Agreement
on behalf of the Partnership which results in the recognition of taxable income
by any member of the Berg Group under the Code. Until the earlier of the tenth
anniversary of the Berg Acquisition and the date on which John T. Kontrabecki
ceases to beneficially own at least 750,000 L.P. Units, the General Partner
shall obtain his prior written consent prior to effecting any sale or other
transfer of any of the Properties (identified in Schedules 4 or 5 to the
Acquisition Agreement) as owned by Kontrabecki, Triangle Partners, or Berg
Ventures II, which will result in the recognition of taxable income by
Kontrabecki under the Code.
ARTICLE 9. Books, Records, Accounting and Reports.
9.1 Records and Accounting.
The General Partner shall keep or cause to be kept at the principal office
of the Partnership those records and documents required to be maintained by the
Act and other books and records deemed by the General Partner to be appropriate
with respect to the Partnership's business, including, without limitation, all
books and records necessary to comply with applicable REIT Requirements and to
provide to the Limited Partners any information, lists and copies of documents
required to be provided pursuant to Sections 8.5A and 9.3 hereof. Any records
maintained by or on behalf of the Partnership in the regular course of its
business may be kept on, or be in the form of, punch cards, magnetic tape,
photographs, micrographics or any other information storage device, provided
that the records so maintained are convertible into clearly legible written form
within a reasonable period of time. The books of the Partnership shall be
maintained, for financial and tax reporting purposes, on an accrual basis in
- 33 -
<PAGE>
accordance with GAAP, or such other basis as the General Partner determines to
be necessary or appropriate.
9.2 Fiscal Year. The fiscal year of the Partnership shall be the calendar
year.
ARTICLE 10. Tax Matters.
10.1 Preparation of Tax Returns. The General Partner shall arrange for the
preparation and timely filing of all Partnership returns for federal and state
income tax purposes and shall use all reasonable efforts to furnish, within
sixty (60) days of the close of each taxable year, the tax information
reasonably required by Limited Partners for their federal and state income tax
reporting purposes.
10.2 Tax Elections. The General Partner shall elect for the Partnership to
be considered a limited partnership on all applicable federal and state income
tax returns to be filed by the Partnership. Except as otherwise provided herein,
the General Partner shall, in its sole and absolute discretion, determine
whether to make any other available election pursuant to the Code.
Notwithstanding the above, in making any such tax election the General Partner
shall take into account the tax consequences to the Limited Partners resulting
from any such election. The General Partner shall make such tax elections on
behalf of the Partnership as the L.P. Unit Majority request, provided that the
General Partner believes that such election is not adverse to the interests of
the General Partner, including its interest in preserving its qualification as a
REIT under the Code. In addition, the General Partner shall elect the
"traditional method" of making Section 704(c) allocations pursuant to
Regulations Section 1.704-3 with respect to each Property under the Acquisition
Agreement. The General Partner shall have the right to seek to revoke any tax
election it makes (other than the election to use the traditional method of
making the Section 704(c) allocations described in this Section 10.2),
including, without limitation, the election under Section 754 of the Code, upon
the General Partner' s determination, in its sole and absolute discretion, that
such revocation is in the best interests of the Limited Partners taken as a
whole and with the approval of the L.P. Unit Majority until the Protective
Provisions Expiration Date. All such elections and determinations may be made on
a Property-by-Property basis, and the General Partner shall be required to
analyze the impact of all such elections and determinations on that basis.
10.3 Tax Matters Partner.
A. The General Partner shall be the "tax matters partner" of the
Partnership for federal income tax purposes. Pursuant to Section
6230(e) of the Code, upon receipt of notice from the Internal Revenue
Service of the beginning of an administrative proceeding with respect
to the Partnership, the tax matters partner shall furnish the Internal
Revenue Service with the name, address, taxpayer identification
number, and Percentage Interest of each of the Limited Partners and
the Assignees; provided, that such information is provided to the
Partnership by the Limited Partners and the Assignees.
- 34 -
<PAGE>
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the Internal Revenue Service
with respect to any administrative or judicial proceedings for
the adjustment of Partnership items required to be taken into
account by a Partner for income tax purposes (such administrative
proceedings being referred to as a "tax audit" and such judicial
proceedings being referred to as "judicial review"), and in the
settlement agreement the tax matters partner may expressly state
that such agreement shall bind all Partners, except that such
settlement agreement shall not bind any Partner (i) who (within
the time prescribed pursuant to the Code and Regulations) files a
statement with the Internal Revenue Service providing that the
tax matters partner shall not have the authority to enter into a
settlement agreement on behalf of such Partner; or (ii) who is a
"notice partner" (as defined in Section 6231(a)(8) of the Code)
or a member of a "notice group" (as defined in Section 6223(b)(2)
of the Code);
(2) in the event that a notice of a final administrative adjustment
at the Partnership level of any item required to be taken into
account by a Partner for tax purposes (a "final adjustment") is
mailed to the tax matters partner, to seek judicial review of
such final adjustment, including the filing of a petition for
readjustment with the Tax Court or the filing of a complaint for
refund with the United States Claims Court or the District Court
of the United States for the district in which the Partnership's
principal place of business is located;
(3) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the
Internal Revenue Service and, if any part of such request is not
allowed by the Internal Revenue Service, to file an appropriate
pleading (petition or complaint) for judicial review with respect
to such request;
(5) to enter into an agreement with the Internal Revenue Service to
extend the period for assessing any tax which is attributable to
any item required to be taken account of by a Partner for tax
purposes, or an item affected by such item; and
(6) to take any other action on behalf of the Partners or the
Partnership in connection with any tax audit or judicial review
proceeding to the extent permitted by applicable law or
regulations.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the
extent required by law, is a matter in the sole and absolute
discretion of the tax matters partner and the provisions relating to
indemnification of the General Partner set forth in
- 35 -
<PAGE>
Sectio 7.6 of this Agreement shall be fully applicable to the tax
matters partner in its capacity as such.
C. The tax matters partner shall receive no compensation for its
services. All third party costs and expenses incurred by the tax
matters partner in performing its duties as such (including legal and
accounting fees and expenses) shall be borne by the Partnership.
Nothing herein shall be construed to restrict the Partnership from
engaging an accounting firm to assist the tax matters partner in
discharging its duties hereunder, so long as the compensation paid by
the Partnership for such services is reasonable.
10.4 Organizational Expenses. The Partnership shall elect to deduct
expenses, if any, incurred by it in organizing the Partnership ratably over a
60-month period as provided in Section 709 of the Code.
10.5 Withholding. Each Limited Partner hereby authorizes the Partnership to
withhold from, or pay on behalf of or with respect to, such Limited Partner any
amount of federal, state, local, or foreign taxes that the General Partner
determines that the Partnership is required to withhold or pay with respect to
any amount distributable or allocable to such Limited Partner pursuant to this
Agreement, including, without limitation, any taxes required to be withheld or
paid by the Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of the
Code. Any amount paid on behalf of or with respect to a Limited Partner shall
constitute a loan by the Partnership to such Limited Partner, which loan shall
be repaid by such Limited Partner within 15 days after notice from the General
Partner that such payment must be made unless (i) the Partnership withholds such
payment from a distribution which would otherwise be made to the Limited
Partner; or (ii) the General Partner determines, in its sole and absolute
discretion, that such payment may be satisfied out of the amount of Available
Cash which would, but for such payment, be distributed to the Limited Partner.
Any amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be
treated as having been distributed to such Limited Partner. Each Limited Partner
hereby unconditionally and irrevocably grants to the Partnership a security
interest in such Limited Partner' s Partnership Interest to secure such Limited
Partner's obligation to pay to the Partnership any amounts required to be paid
pursuant to this Section 10.5. In the event that a Limited Partner fails to pay
when due any amounts owed to the Partnership pursuant to this Section 10.5, the
General Partner may, in its sole and absolute discretion, elect to make the
payment to the Partnership on behalf of such defaulting Limited Partner, and in
such event shall be deemed to have loaned such amount to such defaulting Limited
Partner and shall succeed to all rights and remedies of the Partnership as
against such defaulting Limited Partner. Without limitation, in such event, the
General Partner shall have the right to receive distributions that would
otherwise be distributable to such defaulting Limited Partner until such time as
such loan, together with all interest thereon, has been paid in full, and any
such distributions so received by the General Partner shall be treated as having
been distributed to the defaulting Limited Partner and immediately paid by the
defaulting Limited Partner to the General Partner in repayment of such loan. Any
amount payable by a Limited Partner
- 36 -
<PAGE>
hereunder shall bear interest at the highest base or prime rate of interest
published from time to time by any of Wells Fargo Bank, N.A., plus 4 percentage
points, but in no event higher than the maximum lawful rate of interest on such
obligation, such interest to accrue from the date such amount is due (i.e., 15
days after demand) until such amount is paid in full. Each Limited Partner shall
take such actions as the Partnership or the General Partner shall request in
order to perfect or enforce the security interest created hereunder.
ARTICLE 11. Transfers and Withdrawals.
11.1 Transfer.
A. The term "Transfer" when used in this Article 11 with respect to a
Unit, shall be deemed to refer to a transaction by which the General
Partner purports to assign all or any part of its General Partner
Interest to another Person or by which a Limited Partner purports to
assign all or any part of its Limited Partner Interest to another
Person. The term "Transfer" when used in this Article 11 does not
include any exchange of L.P. Units for shares of Common Stock pursuant
to the Exchange Rights Agreement.
B. No Partnership Interest shall be Transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this
Article 11. Any Transfer or purported Transfer of a Partnership
Interest not made in accordance with this Article 11 shall be null and
void.
11.2 Transfer of the Company's Partnership Interests.
A. The General Partner may not withdraw as General Partner or transfer
its General Partner Interest or Limited Partner Interest unless (i)
the L.P. Unit Majority (excluding L.P. Units held by the Company)
consents to such Transfer or withdrawal, or (ii) such Transfer is to
an entity which is wholly-owned by the Company and is a Qualified REIT
Subsidiary under Section 856(i) of the Code.
B. In the event the General Partner withdraws as General Partner in
accordance with Section 11.2A, the General Partner's General Partner
Interest shall immediately be converted into a Limited Partner
Interest.
11.3 Limited Partners' Rights to Transfer.
A. Subject to the provisions of this Section 11.3, a Limited Partner
(other than the Company) may, without the consent of the General
Partner:
(a) if such Limited Partner is a partnership or a limited liability
company, Transfer such Limited Partner's L.P. Units to any
partner of such Limited Partner or any member of such limited
liability company;
- 37 -
<PAGE>
(b) Transfer such Limited Partner's L.P. Units to any other Limited
Partner; and
(c) pledge such Limited Partner's L.P. Units to any financial
institution as collateral for any loan with respect to which such
Limited Partner is personally liable.
B. Subject to the provisions of this Section 11.3, a Limited Partner may
Transfer any of such Limited Partner's L.P. Units, other than in
accordance with Section 11.3A, only with the prior written consent of
the General Partner which may be withheld in its sole discretion.
C. If a Limited Partner is subject to Incapacity, the executor,
administrator, trustee, committee, guardian, conservator or receiver
of such Limited Partner's estate shall have all of the rights of a
Limited Partner, but not more rights than those enjoyed by other
Limited Partners, for the purpose of settling or managing the estate
and such power as the Incapacitated Limited Partner possessed to
Transfer all or any part of his or its interest in the Partnership.
The Incapacity of a Limited Partner, in and of itself, shall not
dissolve or terminate the Partnership.
D. No Transfer by a Limited Partner of its L.P. Units may be made to any
Person if (i) in the opinion of legal counsel for the Partnership, it
would result in the Partnership being treated as an association
taxable as a corporation; (ii) such Transfer would cause the
Partnership to become, with respect to any Employee Benefit Plan
subject to Title I of ERISA, a "party-in-interest" (as defined in
Section 3(14) of ERISA) or a "disqualified person" (as defined in
Section 4975(c) of the Code); (iii) such Transfer would, in the
opinion of legal counsel for the Partnership, cause any portion of the
assets of the Partnership to constitute assets of any Employee Benefit
Plan pursuant to Department of Labor Regulations Section 2510.2-101;
(iv) such Transfer would subject the Partnership to regulation under
the Investment Company Act of 1940, the Investment Advisors Act of
1940 or ERISA; or (v) such Transfer is a sale or exchange, and such
sale or exchange would, when aggregated with all other sales and
exchanges during the 12-month period ending on the date of the
proposed Transfer, result in a Change of Control Transaction.
E. Subject to the foregoing provisions of Section 11.3 and the terms of
Section 12.2, a Limited Partner may transfer L.P. Units to an
Affiliate and have such Affiliate become a Limited Partner.
In addition to the conditions set forth in Sections 11.3D, 11.4, and 12.2
any Transfer pursuant to this Article 11 is subject to the following conditions:
(1) unless such Transfer is being made pursuant to an effective
registration statement under the Securities Act, or pursuant to Rule 144 or
Rule 144A thereunder, the transferring Limited Partner shall deliver to the
Company a notice with respect to the proposed transfer, together with an
opinion of counsel in form and substance satisfactory to the General
Partner prepared by counsel reasonably
- 38 -
<PAGE>
satisfactory to the General Partner (which shall include, without
limitation, counsel to each of the Limited Partners as of the date hereof),
to the effect that an exemption from registration and qualification under
such Securities Act is available;
(2) the transferring Limited Partner and its transferee shall each
provide a certificate to the General Partner, in form and substance
satisfactory to the General Partner, to the effect that (i) the proposed
transfer will not be effected on or through (a) a United States national,
regional or local securities exchange, (b) a foreign securities exchange or
(c) an interdealer quotation system that regularly disseminates firm buy or
sell quotations by identified brokers or dealers (including, without
limitation, the Nasdaq) by electronic means or otherwise, and (ii) it is
not, and the proposed transfer will not be made by, through or on behalf
of, (a) a Person who regularly quotes equity interests in the Partnership,
such as a broker or dealer making a market in equity interests in the
Partnership or (b) a Person who regularly makes available to the public
(including customers or subscribers) bid or offer quotes with respect to
equity interests in the Partnership and stands ready to effect buy or sell
transactions at the quoted prices for itself or on behalf of others;
provided, however, that such certificate shall not be required for any
transfer in connection with a registered public offering;
(3) the transferee must be a United States Person for federal income
tax purposes; and
(4) such transfer must not cause the Partnership to terminate or lose
its status as a partnership for tax purposes.
F. If it shall become unlawful for any Limited Partner to continue to
hold some or all of the L.P. Units held by such Limited Partner, or by
reason of legal or regulatory restrictions the cost to such Limited
Partner to continue to hold such L.P. Units (in relation to the value
of such L.P. Units to such Limited Partner) has, in the reasonable
judgment of such Limited Partner, significantly increased, such
Limited Partner may, at any time following the date three business
days after the delivery by such Limited Partner to the General Partner
a notice of the existence of any such restriction, Transfer all or any
portion of the L.P. Units held by such Limited Partner free of any
restrictions imposed under this Agreement (other than those
restrictions required by federal or state laws, including securities,
and tax, laws, and subject to the prospective transferee meeting the
requirements of Section 12.2, and provided that the transferee Limited
Partner shall hold its L.P. Units subject to all of the terms of this
Agreement); but only if such Limited Partner cannot then exercise its
Exchange Rights or Put Rights for cash, and the Company has notified
the Limited Partner that the Company will not register for offer and
sale all shares of Common Stock issued upon the exercise of the
Exchange Rights within 90 days. In connection therewith, the Company
shall assist such Limited Partner in disposing of the L.P. Units held
by it in a prompt and orderly manner, and (at the request of such
Limited Partner) make available (and authorize such Limited Partner to
make available through the Company) financial and other information
concerning the Company and its Subsidiaries (including, without
limitation, the information described in Rule 144A(d)(4)) to any
prospective purchaser of
- 39 -
<PAGE>
such L.P. Units (it being agreed that such prospective purchaser shall
be either an "accredited investor" within the meaning of Rule 501 (a)
under the Securities Act or a "qualified institutional buyer" within
the meaning of Rule 144A(d)(1) under such Act to the extent that such
L.P. Units are "restricted securities" as such term is defined in Rule
144). The Company may require that each such prospective purchaser
keep confidential, pursuant to customary confidentiality requirements,
any information received by it pursuant to this provision.
11.4 Substituted Limited Partners. The General Partner shall have the right
to consent to the admission of a transferee who receives L.P. Units pursuant to
Section 11.3A, C, or E, which consent may be given or withheld by the General
Partner in its sole and absolute discretion. The General Partner's failure or
refusal to permit such transferee to become a Substituted Limited Partner shall
not give rise to any cause of action against the Partnership or any Partner.
11.5 Assignees. If the General Partner, in its sole and absolute
discretion, does not consent to the admission of any transferee as a Substituted
Limited Partner, as described in Section 11.4, such transferee shall be
considered an Assignee for purposes of this Agreement. An Assignee shall be
deemed to have had assigned to it, and shall be entitled to receive
distributions from the Partnership and the share of Net Income, Net Losses and
any other Tax Items with respect to the L.P. Units assigned to such transferee,
but shall not be deemed to be a holder of L.P. Units for any other purpose under
this Agreement, and shall not be entitled to vote such L.P. Units in any matter
presented to the Limited Partners for a vote (such L.P. Units being deemed to
have been voted on such matter in the same proportion as all other L.P. Units
held by Limited Partners are voted). In the event the Assignee desires to make a
further assignment of any such L.P. Units, such Assignee shall be subject to all
of the provisions of this Article 11 to the same extent and in the same manner
as any Limited Partner desiring to make an assignment of L.P. Units.
11.6 Effect of Prohibited Transfer. Any transfer made in violation of
Article 11 shall be null and void and of no force and effect.
11.7 General Provisions.
A. No Limited Partner may withdraw from the Partnership other than as a
result of a permitted Transfer of all of such Limited Partner' s L.P.
Units in accordance with this Article 11, or pursuant to the tender or
exchange of all of its L.P. Units pursuant to the exercise of Put
Rights or Exchange Rights.
B. Any Limited Partner who shall Transfer all of its L.P. Units in a
Transfer permitted pursuant to this Article 11 shall cease to be a
Limited Partner upon the admission of all Assignees of such L.P. Units
as Substituted Limited Partners. Similarly, any Limited Partner who
shall Transfer all of its L.P. Units pursuant to a tender or exchange
of all of its L.P. Units pursuant to the exercise of Put Rights or
Exchange Rights shall cease to be a Limited Partner.
- 40 -
<PAGE>
C. Without the consent of the General Partner, permitted Transfers
pursuant to this Article 11 may be made effective only as of the first
day of a Quarter.
D. If any Partnership Interest is transferred or assigned during the year
in compliance with the provisions of this Article 11, or redeemed
pursuant to Section 8.7, or exchanged pursuant to the Exchange Rights
Agreement on any day other than the first day of a Partnership Year,
the Net Income, Net Losses, each item thereof, and all other Tax Items
attributable to such interest for such Partnership Year shall be
divided and allocated between the transferor Partner and the
transferee Partner by taking into account their varying interests
during the Partnership Year in accordance with Section 706(d) of the
Code, using the interim closing of the books method. Solely for
purposes of making such allocations, each of such items for the
calendar month in which the Transfer or assignment occurs shall be
allocated to the transferee Partner, and none of such items for the
calendar month in which an exchange occurs shall be allocated to the
exchanging Partner, provided, however, that the General Partner may
adopt such other conventions relating to allocations in connection
with transfers, assignments, or exchanges as it determines are
necessary or appropriate. All distributions of Available Cash
attributable to such L.P. Units with respect to which the Partnership
Record Date is before the date of such transfer, assignment, or
exchange shall be made to the transferor Partner or the exchanging
Partner, as the case may be, and in the case of a Transfer or
assignment other than an exchange, all distributions of Available Cash
thereafter attributable to such L.P. Units shall be made to the
transferee Partner.
ARTICLE 12. Admission of Partners.
12.1 Admission of Successor General Partner. A successor to all of the
General Partner Interest pursuant to Article 11 hereof who is proposed to be
admitted as a successor General Partner shall be admitted to the Partnership as
the General Partner, effective upon the Transfer. Any such transferee shall
carry on the business of the Partnership without dissolution. In each case, the
admission shall be subject to the successor General Partner executing and
delivering to the Partnership an acceptance of all of the terms and conditions
of this Agreement, the Acquisition Agreement, and such other documents or
instruments as may be required to effect the admission. In the case of such
admission on any day other than the first day of a Partnership Year, all items
attributable to the General Partner Interest for such Partnership Year shall be
allocated between the transferring General Partner and such successor as
provided in Section 11.6D.
12.2 Admission of Additional and Substituted Limited Partners.
A. A Person who makes a Capital Contribution to the Partnership in
accordance with this Agreement after the Effective Date and a
Permitted Transferee pursuant to Article 11 shall be admitted to the
Partnership as an Additional Limited Partner or a Substituted Limited
Partner only upon furnishing to the General Partner (i) evidence of
acceptance in form satisfactory to the General Partner of all of the
terms and conditions of this Agreement and the Acquisition Agreement,
including, without limitation, the power of attorney granted in
Section 2.4 hereof and (ii) such other
- 41 -
<PAGE>
documents or instruments as may be required in the discretion of the
General Partner in order to effect such Person's admission as an
Additional Limited Partner.
B. Notwithstanding anything to the contrary in this Section 12.2, no
Person shall be admitted as an Additional Limited Partner or a
Substituted Limited Partner without the consent of the General
Partner, which consent may be given or withheld in the General
Partner's sole and absolute discretion. The admission of any Person as
an Additional Limited Partner or a Substituted Limited Partner shall
become effective on the date upon which the name of such Person is
recorded on the books and records of the Partnership, following the
consent of the General Partner to such admission.
C. If any Additional Limited Partner is admitted to the Partnership on
any day other than the first day of a Partnership Year, then Net
Income, Net Losses, each other Tax Item and all other items allocable
among Partners and Assignees for such Partnership Year shall be
allocated among such Additional Limited Partner and all other Partners
and Assignees by taking into account their varying interests during
the Partnership Year in accordance with Section 706(d) of the Code,
using the interim closing of the books method. Solely for purposes of
making such allocations, each of such items for the calendar month in
which an admission of any Additional Limited Partner occurs shall be
allocated among all of the Partners and Assignees, including such
Additional Limited Partner. All distributions of Available Cash with
respect to which the Partnership Record Date is before the date of
such admission shall be made solely to Partners and Assignees, other
than the Additional Limited Partner, and all distributions of
Available Cash thereafter shall be made to all of the Partners and
Assignees, including such Additional Limited Partner.
D. A transferee who has been admitted as a Substituted Limited Partner or
an Additional Limited Partner shall have all the rights and powers and
be subject to all the restrictions and liabilities of a Limited
Partner under this Agreement.
12.3 Amendment of Agreement and Certificate of Limited Partnership. For the
admission to the Partnership of any Partner, the General Partner shall take all
steps necessary and appropriate under the Act to amend the records of the
Partnership and, if necessary, to prepare as soon as practical an amendment of
this Agreement (including an amendment of Appendix I) and, if required by law,
shall prepare and file an amendment to the Certificate and may for this purpose
exercise the power of attorney granted pursuant to Section 2.4 hereof.
ARTICLE 13. Dissolution, Liquidation and Termination.
13.1 Dissolution. The Partnership shall not be dissolved by the admission
of Substituted Limited Partners or Additional Limited Partners or by the
admission of a successor General Partner in accordance with the terms of this
Agreement. In the event of the withdrawal of the General Partner, any successor
General Partner shall continue the business of the Partnership. The Partnership
shall dissolve, and its affairs
- 42 -
<PAGE>
shall be wound up, only upon the first to occur of any of the following
("Liquidating Events"):
(i) the expiration of its term as provided in Section 2.5 hereof;
(ii) an event of withdrawal of the General Partner, as defined in the Act
(other than an event of bankruptcy), unless, within 90 days after such
event of withdrawal a majority in interest of the remaining Partners
agree in writing to continue the business of the Partnership and to
the appointment, effective as of the date of withdrawal, of a
successor General Partner;
(iii)from and after the date of this Agreement through December 31, 2048,
an election to dissolve the Partnership made by the General Partner,
with the Consent of Limited Partners holding 66-2/3% or more of the
L.P. Units (including L.P. Units held by the Company);
(iv) on or after January 1, 2049, an election to dissolve the Partnership
made by the General Partner, in its sole and absolute discretion;
(v) entry of a decree of judicial dissolution of the Partnership pursuant
to the provisions of the Act;
(vi) the sale of all or substantially all of the assets and properties of
the Partnership;
(vii)a final and non-appealable judgment is entered by a court of competent
jurisdiction ruling that the General Partner is bankrupt or insolvent,
or a final and non-appealable order for relief is entered by a court
with appropriate jurisdiction against the General Partner, in each
case under any federal or state bankruptcy or insolvency laws as now
or hereafter in effect, unless prior to the entry of such order or
judgment all of the remaining Partners agree in writing to continue
the business of the Partnership and to the appointment, effective as
of a date prior to the date of such order or judgment, of a substitute
General Partner.
13.2 Winding Up.
A. Upon the occurrence of a Liquidating Event, the Partnership shall
continue solely for the purposes of winding up its affairs in an
orderly manner, liquidating its assets, and satisfying the claims of
its creditors and Partners. No Partner shall take any action that is
inconsistent with, or not necessary to or appropriate for, the winding
up of the Partnership's business and affairs. The General Partner, or,
in the event there is no remaining General Partner, any Person elected
by Limited Partners holding at least a majority of the Limited
Partnership Interests (the General Partner or such other Person being
referred to herein as the "Liquidator"), shall be responsible for
overseeing the winding up and dissolution of the Partnership and shall
take full account of the Partnership's liabilities and property and
the Partnership property shall be liquidated as promptly as is
consistent with obtaining the fair value thereof, and the
- 43 -
<PAGE>
proceeds therefrom (which may, to the extent determined by the General
Partner, include shares of beneficial interest or other securities of
the Company) shall be applied and distributed in the following order:
(i) First, to the payment and discharge of all of the Partnership's
debts and liabilities to creditors other than the Partners;
(ii) Second, to the payment and discharge of all of the Partnership's
debts and liabilities to the General Partner;
(iii)Third, to the payment and discharge of all of the Partnership's
debts and liabilities to the other Partners;
(iv) Fourth, to the General Partner and Limited Partners to the extent
of and in accordance with the positive balances in their Capital
Accounts, after giving effect to all contributions,
distributions, and allocations for all periods; and
(v) The balance, if any, to the Partners according to their
Percentage Interests.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2A hereof which require
liquidation of the assets of the Partnership, but subject to the order
of priorities set forth therein, if prior to or upon dissolution of
the Partnership the Liquidator determines that an immediate sale of
part or all of the Partnership's assets would be impractical or would
cause undue loss to the Partners, the Liquidator may, in its sole and
absolute discretion, defer for a reasonable time the liquidation of
any asset except those necessary to satisfy liabilities of the
Partnership (including to those Partners as creditors) and/or
distribute to the Partners, in lieu of cash, as tenants in common and
in accordance with the provisions of Section 13.2A hereof, undivided
interests in such Partnership assets as the Liquidator deems not
suitable for liquidation. Any such distributions in kind shall be made
only if, in the good faith judgment of the Liquidator, such
distributions in kind are in the best interests of the Partners, and
shall be subject to such conditions relating to the disposition and
management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such
properties at such time. The Liquidator shall determine the fair
market value of any property distributed in kind using such reasonable
method of valuation as it may adopt.
C. In the discretion of the Liquidator, a pro rata portion of the
distributions that would otherwise be made to the General Partner and
Limited Partners pursuant to this Article 13 may be:
(1) distributed to a trust established for the benefit of the General
Partner and Limited Partners for the purposes of liquidating
Partnership assets,
- 44 -
<PAGE>
collecting amounts owed to the Partnership, and paying any
contingent or unforeseen liabilities or obligations of the
Partnership or the General Partner arising out of or in
connection with the Partnership. The assets of any such trust
shall be distributed to the General Partner and Limited Partners
from time to time, in the reasonable discretion of the
Liquidator, in the same proportions as the amount distributed to
such trust by the Partnership would otherwise have been
distributed to the General Partner and Limited Partners pursuant
to this Agreement; or
(2) withheld or escrowed to provide a reasonable reserve for
Partnership liabilities (contingent or otherwise) and to reflect
the unrealized portion of any installment obligations owed to the
Partnership, provided that such withheld or escrowed amounts
shall be distributed to the General Partner and Limited Partners
in the manner and order of priority set forth in Section 13.2A as
soon as practicable.
13.3 Obligation to Contribute Deficit. In the event the Partnership is
"liquidated" within the meaning Section 1.704-1(b)(2)(ii)(g) of the Regulations,
if any Partner's Adjusted Contributions are less than zero (after giving effect
to all contributions, distributions, and allocations for all Fiscal Years,
including the Fiscal Year during which such liquidation occurs), such Partner
shall contribute to the capital of the Partnership the amount necessary to
restore such Partner's Capital Account to zero in compliance with Regulations
Section 1.704-1(b)(2(ii)(b)(3).
13.4 Rights of Limited Partners. Except as otherwise provided in this
Agreement, each Limited Partner shall look solely to the assets of the
Partnership for the return of its Adjusted Capital Contributions and shall have
no right or power to demand or receive property other than cash from the
Partnership. Except as otherwise provided in this Agreement, no Limited Partner
shall have priority over any other Partner as to the return of its Adjusted
Capital Contributions, distributions, or allocations.
13.5 Notice of Dissolution. In the event a Liquidating Event occurs or an
event occurs that would, but for the provisions of an election or objection by
one or more Partners pursuant to Section 13.1, result in a dissolution of the
Partnership, the General Partner shall, within 30 days thereafter, provide
written notice thereof to each of the Partners.
13.6 Termination of Partnership and Cancellation of Certificate of Limited
Partnership. Upon the completion of the liquidation of the Partnership' s
assets, as provided in Section 13.2 hereof, the Partnership shall be terminated,
a certificate of cancellation shall be filed, and all qualifications of the
Partnership as a foreign limited partnership in jurisdictions other than the
state of Delaware shall be canceled and such other actions as may be necessary
to terminate the Partnership shall be taken.
13.7 Reasonable Time for Winding-Up. A reasonable time shall be allowed for
the orderly winding-up of the business and affairs of the Partnership and the
- 45 -
<PAGE>
liquidation of its assets pursuant to Section 13.2 hereof in order to minimize
any losses otherwise attendant upon such winding-up, and the provisions of this
Agreement shall remain in effect among the Partners during the period of
liquidation.
13.8 Waiver of Partition. Each Partner hereby waives any right to partition
of the Partnership property.
13.9 Deemed Distribution and Recontribution. Notwithstanding any other
provisions of this Article 13, in the event the Partnership is liquidated within
the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Liquidating Event
has occurred, the Property shall not be liquidated, the Partnership's
liabilities shall not be paid or discharged, and the Partnership's affairs shall
not be wound up. Instead, the Partnership shall be deemed to have distributed
the Property in kind to the Partners, who shall be deemed to have assumed and
taken subject to all Partnership liabilities, all in accordance with their
respective Capital Accounts, and if any Partner has an Adjusted Capital Account
Deficit (after giving effect to all contributions, distributions, and
allocations for all Fiscal Years, including the Fiscal Year during which such
liquidation occurs) such Partner shall contribute to the capital of the
Partnership the amount necessary to restore such deficit balance to zero in
compliance with Regulations Section 1.704-1(b)(2(ii)(b)(3). Immediately
thereafter, the Partners shall be deemed to have recontributed the property in
kind to the Partnership, which shall be deemed to have assumed and taken subject
to all such liabilities.
ARTICLE 14. Amendment of Partnership Agreement; Meetings.
14.1 Amendments.
A. Amendments to this Agreement may be proposed by the General Partner or
by any Limited Partners (other than the Company) holding in the
aggregate 25% or more of the Partnership Interests. Following such
proposal, the General Partner shall submit any proposed amendment to
the Limited Partners. The General Partner shall seek the written vote
of the Partners on the proposed amendment or shall call a meeting to
vote thereon and to transact any other business that it may deem
appropriate. For purposes of obtaining a written vote, the General
Partner may require a response within a reasonable specified time, but
not less than 15 days, and failure to respond in such time period
shall constitute a vote which is consistent with the General Partner's
recommendation with respect to the proposal. Except as provided in
Section 8.9, 13.1C, 14.1B, 14.1C or 14.1D, a proposed amendment shall
be adopted and be effective as an amendment hereto if it is approved
by the General Partner and it receives the Consent of Limited Partners
holding 50% or more of the Percentage Interests of the Limited
Partners (including Limited Partner Interests held by the Company).
B. Notwithstanding any provisions of Sections 8.9 and 14.1A to the
contrary, the General Partner shall have the power, without the
consent of the Limited Partners,
- 46 -
<PAGE>
to amend this Agreement as may be required to facilitate or implement
any of the following purposes:
(1) to add to the obligations of the General Partner or surrender any
right or power granted to the General Partner or any Affiliate of
the General Partner for the benefit of the Limited Partners;
(2) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement;
(3) to set forth the designations, rights, powers, duties, and
preferences of the holders of any additional Partnership
Interests issued pursuant to Section 4.3 hereof;
(4) to reflect a change that is of an inconsequential nature and does
not adversely affect the Limited Partners in any material
respect, or to cure any ambiguity, correct or supplement any
provision in this Agreement not inconsistent with law or with
other provisions, or make other changes with respect to matters
arising under this Agreement that will not be inconsistent with
law or with the provisions of this Agreement; and
(5) to satisfy any requirements, conditions, or guidelines contained
in any order, directive, opinion, ruling or regulation of a
federal or state agency or contained in federal or state law.
The General Partner shall provide notice to the Limited Partners when any action
under this Section 14.1B is taken.
C. Notwithstanding provision of Section 14.1A and 14.1B to the contrary,
this Agreement shall not be amended without the Consent of each
Partner adversely affected if such amendment would (i) convert a
Limited Partner's interest in the Partnership into a General Partner
Interest; (ii) modify the limited liability of a Limited Partner in a
manner adverse to such Limited Partner; (iii) alter rights of the
Partner to receive distributions pursuant to Article 5 or Article 13,
or the allocations specified in Article 6 (except as permitted
pursuant to Article IV and Section 14.1B(3) hereof); (iv) cause the
termination of the Partnership prior to the time set forth in Section
2.5 or 13.1; or (v) amend this Section 14.1C. Further, no amendment
may alter the restrictions on the General Partner' s authority set
forth in Section 13.1C without the Consent specified in that section.
14.2 Meetings of the Partners.
A. Meetings of the Partners may be called by the General Partner and
shall be called upon the receipt by the General Partner of a written
request by Limited Partners (other than the Company) holding 25% or
more of the Partnership Interests. The request shall state the nature
of the business to be transacted. Notice of any such meeting shall be
given to all Partners not less than 7 days nor more than 30 days prior
- 47 -
<PAGE>
to the date of such meeting. Partners may vote in person or by proxy
at such meeting. Whenever the vote or Consent of the Limited Partners
is permitted or required under this Agreement, such vote or Consent
may be given at a meeting of the Partners or may be given in
accordance with the procedure prescribed in Section 14.1A hereof.
Except as otherwise expressly provided in this Agreement, the consent
of holders of a majority of the Percentage Interests held by Partners
(including Limited Partnership Interests held by the Company) shall
control.
B. Any action required or permitted to be taken at a meeting of the
Partners may be taken without a meeting if a written consent setting
forth the action so taken is signed by a majority of the Percentage
Interests of the Partners (or such other percentage as is expressly
required by this Agreement). Such consent may be in one instrument or
in several instruments, and shall have the same force and effect as a
vote of a majority of the Percentage Interests of the Partners (or
such other percentage as is expressly required by this Agreement).
Such consent shall be filed with the General Partner. An action so
taken shall be deemed to have been taken at a meeting held on the
effective date so certified.
C. Each Limited Partner may authorize any Person or Persons to act for
him by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the Limited
Partner or his attorney-in-fact. No proxy shall be valid after the
expiration of 11 months from the date thereof unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure
of the Limited Partner executing it, such revocation to be effective
upon the Partnership's receipt of written notice of such revocation
from the Limited Partner executing such proxy.
D. Each meeting of the Partners shall be conducted by the General Partner
or such other Person as the General Partner may appoint pursuant to
such rules for the conduct of the meeting as the General Partner or
such other Person deems appropriate. Meetings of Partners may be
conducted in the same manner as meetings of the shareholders of the
Company and may be held at the same time, and as part of, meetings of
the shareholders of the Company.
ARTICLE 15. General Provisions.
15.1 Addresses and Notice. Any notice, demand, request or report required
or permitted to be given or made to a Partner or Assignee under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other means of written
communication to the Partner or Assignee (including electronic mail and
electronic facsimile transmission if delivery in that manner has been confirmed)
at the address set forth in Appendix I or such other address of which the
Partner shall notify the General Partner in writing.
15.2 Titles and Captions. All article or section titles or captions in this
Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions
- 48 -
<PAGE>
hereof. Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
15.3 Pronouns and Plurals. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
15.4 Further Action. The parties shall execute and deliver all documents,
provide all information and take or refrain from taking action as may be
necessary or appropriate to achieve the purposes of this Agreement.
15.5 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assigns.
15.6 Creditors. Other than as expressly set forth herein with respect to
the Indemnitees, none of the provisions of this Agreement shall be for the
benefit of, or shall be enforceable by, any creditor of the Partnership.
15.7 Waiver. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or condition.
15.8 Counterparts. This Agreement may be executed in counterparts, all of
which together shall constitute one agreement binding on all of the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
15.9 Applicable Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of laws thereof.
15.10 Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
15.11 Entire Agreement. This Agreement contains the entire understanding
and agreement among the Partners with respect to the subject matter hereof and
supersedes any other prior written or oral understandings or agreements among
them with respect thereto.
15.12 Guaranty by the Company. The Company unconditionally and irrevocably
guarantees to the Limited Partners the performance by the General Partner
- 49 -
<PAGE>
of the General Partner' s obligations under this Agreement. This guarantee is
exclusively for the benefit of the Limited Partners and shall not extend to the
benefit any creditor of the Partnership.
- 50 -
<PAGE>
In Witness Whereof, the parties hereto have executed this Agreement as of
the date first written above.
General Partner:
Mission West Properties, a California corporation
By:/s/ Michael J. Anderson
- ---------------------------------
Michael J. Anderson
Its: Vice President and Chief Operating Officer
Limited Partners:
Carl E. Berg, Trustee, Berg Living Trust UTA dated May 1, 1981
/s/ Carl E. Berg
- ----------------------------------
Clyde J. Berg, Trustee, 1995 Clyde J. Berg
Revocable Trust, dated April 4, 1995
/s/ Clyde J. Berg
- ----------------------------------
Clyde J. Berg, Trustee, Carl Berg Child's Trust
UTA dated June 2, 1978
/s/ Clyde J. Berg
- ---------------------------------
- 51 -
<PAGE>
Appendix I
Partners' [Adjusted] Contributions and Partnership Interests
<TABLE>
<CAPTION>
Name and Address Cash Agreed Total L.P. Percentage
of Partner Contributions* Value of Contribution** Units Interest
Contributed
Property**
- ------------------ -------------- ----------- -------------- ------- ----------
<S> <C> <C>
General Partner
Mission West Properties ___ 10.91%
10050 Bandley Drive
Cupertino, CA 95014
Limited Partners
Berg Living Trust UTA 10,306,802 72.172%
dated May 1, 1981
10050 Bandley Drive
Cupertino, CA 95014
Clyde J. Berg, Trustee, 1,505,116 10.539%
1995 Clyde J. Berg
Revocable Trust date
April 4, 1995
10050 Bandley Drive
Cupertino, CA 95014
Clyde J. Berg, Trustee, 910,958 6.379%
Carl Berg Child's
Trust UTA dated
June 2, 1978
10050 Bandley Drive
Cupertino, CA 95014
</TABLE>
* The Company's Cash Contribution shall be increased by all transaction costs
paid by the Company out of the Company Cash pursuant to the Acquisition
Agreement.
** To be completed upon final adjustment of accounts at July 1, 1998 and
preparation of 1998 federal income tax return.
- 52 -
<PAGE>
Appendix II
Allocations of Partnership Interests
1. Allocation of Net Income and Net Loss.
(a) Net Income. Except as otherwise provided in this Appendix II, Net
Income (or items thereof) (other than Net Income, or items thereof, arising in
connection with a Terminating Capital Transaction) for any fiscal year or other
applicable period shall be allocated to the Partners in accordance with their
respective Percentage Interests.
(b) Net Loss. Except as otherwise provided in this Appendix II, Net Loss
(or items thereof) of the Partnership for each fiscal year or other applicable
period shall be allocated to the Partners in accordance with the Partners'
respective Percentage Interests. Notwithstanding the preceding sentence, to the
extent any Net Loss (or items thereof) allocated to a Partner under this
subparagraph (b) would cause such Partner (hereinafter, a "Restricted Partner")
to have an Adjusted Capital Account Deficit, or increase the amount of an
existing Adjusted Capital Account Deficit, as of the end of the fiscal year or
other applicable period to which such Net Loss relates, such Net Loss shall not
be allocated to such Restricted Partner and instead shall be allocated to the
other Partner(s) (hereinafter, the "Permitted Partners") pro rata in accordance
with each Permitted Partner's Percentage Interest.
(c) Terminating Capital Transaction; Liquidation. Allocations of Net Income
or Net Loss (or items thereof) in connection with a Terminating Capital
Transaction or Liquidation of the Partnership shall first be made so that, to
the extent possible, each Partner's Capital Account balance is equal to such
Partner's Adjusted Contribution, and the remainder of such Net Income or Net
Loss (or items thereof) shall be allocated to the Partners in accordance with
their Percentage Interests. Notwithstanding the preceding sentence, to the
extent any Net Loss (or items thereof) would be allocated to a Restricted
Partner under this subparagraph (c), such Net Loss shall not be allocated to
such Restricted Partner and instead shall be allocated to the Permitted Partners
pro rata in accordance with each Permitted Partner's Percentage Interest.
(d) Rules of Construction.
(1) Capital Account Increases. For purposes of making allocations pursuant
to subparagraph 1(c) of this Appendix II, a Partner's Capital Account
balance shall be deemed to be increased by such Partner's share of any
Partnership Minimum Gain and Partner Minimum Gain remaining at the
close of the fiscal period in respect of which such allocations are
being made.
- 53 -
<PAGE>
(2) Change in Percentage Interests. In the event any Partner's Percentage
Interest changes during a fiscal year for any reason, including
without limitation, the Transfer of any interest in the Partnership,
the tax allocations contained in this Appendix II shall be applied as
necessary to reflect the varying interests of the Partners during such
year.
2. Special Allocations.
Notwithstanding any provisions of paragraph 1 of this Appendix II, the
following special allocations shall be made.
(a) Minimum Gain Chargeback (Nonrecourse Liabilities). Except as otherwise
provided in Section 1.704-2(f) of the Regulations, if there is a net decrease in
Partnership Minimum Gain for any Partnership fiscal year, each Partner shall be
specially allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount equal to such Partner's share of the
net decrease in Partnership Minimum Gain to the extent required by Regulations
Section 1.704-2(f). The items to be so allocated shall be determined in
accordance with Sections 1.704-2(f) and (j)(2) of the Regulations. This
subparagraph 2(a) is intended to comply with the minimum gain chargeback
requirement in said section of the Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this subparagraph 2(a) shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant hereto.
(b) Partner Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(i)(4) of the Regulations, if there is a net decrease in Partner
Minimum Gain attributable to a Partner Nonrecourse Debt during any fiscal year,
each Partner who has a share of the Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Section 1.704- 2(i)(5)
of the Regulations, shall be specially allocated items of Partnership income and
gain for such year (and, if necessary, subsequent years) in an amount equal to
that Partner's share of the net decrease in the Partner Minimum Gain
attributable to such Partner Nonrecourse Debt to the extent and in the manner
required by Section 1.704-2(i) of the Regulations. The items to be so allocated
shall be determined in accordance with Sections 1.704-2(i)(4) and (j)(2) of the
Regulations. This subparagraph 2(b) is intended to comply with the minimum gain
chargeback requirement with respect to Partner Nonrecourse Debt contained in
said Section 1.704-2(i)(4) of the Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this subparagraph 2(b) shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant hereto.
(c) Qualified Income Offset. In the event a Partner unexpectedly receives
any adjustments, allocations or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, and such Partner has an
Adjusted Capital Account Deficit, items of Partnership income (including gross
income) and gain shall be specially allocated to such Partner in an amount and
manner sufficient to eliminate the Adjusted Capital Account Deficit as quickly
as possible as required by the
- 54 -
<PAGE>
Regulations. This subparagraph 2(c) is intended to constitute a "qualified
income offset" under Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall
be interpreted consistently therewith.
(d) Other Chargeback of Impermissible Negative Capital Account. To the
extent any Partner has an Adjusted Capital Account Deficit at the end of any
Partnership Year, each such Partner shall be specially allocated items of
Partnership income (including gross income) and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
paragraph 2(d) shall be made if and only to the extent that such Partner would
have an Adjusted Capital Account Deficit after all other allocations provided
for in this Appendix II have been tentatively made as if this paragraph 2(d)
were not in the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year or
other applicable period shall be allocated to the Partners in accordance with
their respective Percentage Interests.
(f) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for any
fiscal year or other applicable period with respect to a Partner Nonrecourse
Debt shall be specially allocated to the Partner that bears the economic risk of
loss for such Partner Nonrecourse Debt (as determined under Sections
1.704-2(b)(4) and 1.704-2(i)(1) of the Regulations).
(g) Intent of Allocations. The parties intend that the allocation
provisions of this Appendix II shall result in final Capital Account balances of
the Partners that initially are equal to each Partner's Adjusted Contribution
and are then in proportion to the Partners' respective Percentage Interests, so
that when liquidating distributions are made in accordance with such final
Capital Account balances under Section 13.2A(4) hereof, such distributions will
be able to return to each Partner its Adjusted Contribution and then will be
made in proportion to the Partners' respective Percentage Interests. To the
extent that such final Capital Account balances do not so reflect the provisions
of this Appendix II, income and loss of the Partnership for the current year and
future years, as computed for book purposes, shall be allocated among the
Partners so as to result in final Capital Account balances reflecting the
provisions of this Appendix II, and to the extent such allocations of items of
income (including gross income) and deduction do not result in such final
Capital Account balances, then, income and loss of the Partnership for prior
open years, as computed for book purposes (or items of gross income and
deduction of the Partnership for such years, as computed for book purposes)
shall be reallocated among the Partners consistent with the foregoing. This
subparagraph shall control notwithstanding any reallocation of income, loss, or
items thereof, as computed for book purposes, by the Internal Revenue Service or
any other taxing authority.
(h) Section 754 Adjustment. To the extent an adjustment to the adjusted tax
basis of any asset of the Partnership pursuant to Section 734(b) of the Code or
Section 743(b) of the Code is required pursuant to Regulations Section
1.704-1(b)(2)(iv)(m) to be taken into account in determining Capital Accounts,
the amount of such adjustment
- 55 -
to the Capital Accounts shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases such
basis) and such gain or loss shall be specially allocated among the Partners in
a manner consistent with the manner in which each of their respective Capital
Accounts are required to be adjusted pursuant to such section of the
Regulations.
(i) Gross Income Allocation. There shall be specially allocated to the
General Partner an amount of Partnership income and gain during each Partnership
Year or portion thereof, before any other allocations are made hereunder, which
is equal to the excess, if any, of the cumulative distributions of cash made to
the General Partner under Section 7.3B hereof over the cumulative allocations of
Partnership income and gain to the General Partner pursuant to this Section (i)
of this Appendix II.
3. Tax Allocations.
(a) Items of Income or Loss. Except as is otherwise provided in this
Appendix II, an allocation of Partnership Net Income or Net Loss to a Partner
shall be treated as an allocation to such Partner of the same share of each item
of income, gain, loss, deduction and item of tax-exempt income or Section
705(a)(2)(B) expenditure (or item treated as such expenditure pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i)) ("Tax Items") that is taken into
account in computing Net Income or Net Loss.
(b) Section 1245/1250 Recapture. If any portion of gain from the sale of
Partnership assets is treated as gain which is ordinary income by virtue of the
application of Code Sections 1245 or 1250 ("Affected Gain"), then such Affected
Gain shall be allocated among the Partners in the same proportion that the
depreciation and amortization deductions giving rise to the Affected Gain were
allocated. This subparagraph 3(b) shall not alter the amount of Net Income (or
items thereof) allocated among the Partners, but merely the character of such
Net Income (or items thereof). For purposes hereof, in order to determine the
proportionate allocations of depreciation and amortization deductions for each
fiscal year or other applicable period, such deductions shall be deemed
allocated on the same basis as Net Income and Net Loss for such respective
period.
(c) Precontribution Gain. The Partnership may elect the traditional method
of allocation contained in Section 1.704- 3(b) of the Regulations to take into
account any variation between the adjusted basis and the fair market value of
the Initial Contributed Property at the time of the contribution
("Precontribution Gain") on a Property-by-Property basis. By executing this
Agreement, each Partner hereby agrees to report income, gain, loss and deduction
on such Partner's federal income tax return in a manner that is consistent with
the use of the traditional method of allocation with respect to the Initial
Contributed Property. With respect to any Contributed Property, the Partnership
shall use any permissible method contained in the Regulations promulgated under
Section 704(c) of the Code selected by the General Partner, in its sole
discretion, to take into account any variation between the adjusted basis of
such asset and the fair market value of such asset as of the time of the
contribution. Each Partner hereby agrees to report income, gain, loss and
deduction on such Partner's
- 56 -
<PAGE>
federal income tax return in a manner consistent with the method used by the
Partnership.
(d) Allocations Respecting Section 704(c) and Revaluations. If any asset
has a Gross Asset Value which is different from the Partnership's adjusted basis
for such asset for federal income tax purposes because the Partnership has
revalued such asset pursuant to Regulations Section 1.704-1(b)(2)(iv)(f), the
allocations of Tax Items shall be made in accordance with the principles of
Section 704(c) of the Code and the Regulations and the methods of allocation
promulgated thereunder, provided, however, that the General Partner shall elect
with respect to each Initial Contributed Property, to allocate the income, gain,
loss and deduction with respect to such Property using the "traditional method"
described in Regulations Section 1.704-3(b) unless the majority of the Limited
Partners affected thereby otherwise instruct the General Partner. The intent of
this Section 3(d) and Section 3(c) above is that each Partner who contributed to
the capital of the Partnership a Contributed Property will bear, through reduced
allocations of depreciation, increased allocations of gain or other items, the
tax detriments associated with any Precontribution Gain. This Section 3(d) and
Section 3(c) are to be interpreted consistently with such intent.
(e) Excess Nonrecourse Liability Safe Harbor. Pursuant to Regulations
Section 1.752-3(a)(3), solely for purposes of determining each Partner's
proportionate share of the "excess nonrecourse liabilities" of the Partnership
(as defined in Regulations Section 1.752-3(a)(3)), the Partners' respective
interests in Partnership profits shall be determined in accordance with each
Partner's Percentage Interest; provided, however, that each Partner who has
contributed an asset to the Partnership shall be allocated, to the extent
possible, a share of "excess nonrecourse liabilities" of the Partnership which
results in such Partner being allocated nonrecourse liabilities in an amount
which is at least equal to the amount of income pursuant to Section 704(c) of
the Code and the Regulations promulgated thereunder (the "Liability Shortfall").
In the event there is an insufficient amount of nonrecourse liabilities to
allocate to each Partner an amount of nonrecourse liabilities equal to the
Liability Shortfall, then an amount of nonrecourse liabilities in proportion to,
and to the extent of, the Liability Shortfall shall be allocated to each
Partner.
(f) References to Regulations. Any reference in this Appendix II or the
Agreement to a provision of proposed and/or temporary Regulations shall, in the
event such provision is modified or renumbered, be deemed to refer to the
successor provision as so modified or renumbered, but only to the extent such
successor provision applies to the Partnership under the effective date rules
applicable to such successor provision.
(g) Successor Partners. For purposes of this Appendix II, a transferee of a
Partnership Interest shall be deemed to have been allocated the Net Income, Net
Loss and other items of Partnership income, gain, loss, deduction and credit
allocable to the transferred Partnership Interest that previously have been
allocated to the transferor Partner pursuant to this Agreement.
- 57 -
<PAGE>
(h) Limitation to Preserve REIT Status. Notwithstanding anything else in
this Agreement, to the extent that the amount paid, credited, distributed or
reimbursed by the Partnership or any Partners to, for or with respect any
Partner that is a REIT ("REIT Partner") or its officers, directors, employees or
agents, whether as a reimbursement, fee, expense or indemnity (a "REIT
Payment"), would constitute gross income to the REIT Partner for purposes of
Section 856 (c)(2) or Section 856(c)(3) of the Code, then, notwithstanding any
other provision of this Agreement, the amount of such REIT Payments, as selected
by the General Partner in its discretion from among items of potential
distribution, reimbursement, fees, expenses and indemnities, shall be reduced
for any Fiscal Year so that the REIT Payments, as so reduced, to, for or with
respect to such REIT Partner shall not exceed the lesser of:
(i) an amount equal to the excess, if any, of (x) four and nine-tenths
percent (4.9%) of the REIT Partner total gross income (but excluding
the amount of any REIT Payments) for the Fiscal Year that is described
in subsections (A) through (H) of Section 856(c)(2) over (y) the
amount of gross income (within the meaning of Section 856(c)(2))
derived by the REIT Partner from sources other than those described in
subsections (A) through (H) of Section 856(c)(2) (but not including
the amount of any REIT Payments); or
(ii) an amount equal to the excess, if any, of (x) 24% of the REIT
Partner's total gross income (but excluding the amount of any REIT
Payments) for the Fiscal Year that is described in subsections (A)
through (I) of Section 856(c)(3) over (y) the amount of gross income
(within the meaning of Section 856(c)(3)) derived by the REIT Partner
from sources other than those described in subsections (A) through (I)
of Section 856(c)(3) (but not including the amount of any REIT
Payments);
provided, however, that REIT payments in excess of the amounts set
forth in clauses (i) and (ii) above may be made if the General
Partner, as a condition precedent, obtains an opinion of tax counsel
that the receipt of such excess amounts shall not adversely affect the
REIT Partner's ability to qualify as a REIT. To the extent that REIT
Payments may not be made in a Fiscal Year as a consequence of the
limitations set forth in this Section 3(h), such REIT Payments shall
carry over and shall be treated as arising in the following Fiscal
Year. Nothing in this Section 3(h) shall permit the General Partner
to allocate income of the Partnership to any Partner in excess of the
income that would otherwise be allocated to it under Article 6 without
regard to this Section 3(h). The purpose of the limitations contained
in this Section 3(h) is to prevent any REIT Partner from failing to
qualify as a REIT under the Code by reason of such REIT Partner's
share of items, including distributions, reimbursements, fees,
expenses or indemnities, receivable directly or indirectly from the
Partnership or the Partners, and this Section 3(h)shall be interpreted
and applied to effectuate such purpose.
- 58 -
---------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
MISSION WEST PROPERTIES, L.P. II
JULY 1, 1998
---------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1. Defined Terms..........................................2
1.1 "Act".......................................................2
1.2 "Acquisition Agreement".....................................2
1.3 "Additional Limited Partner"................................2
1.4 "Adjusted Capital Account Deficit"..........................2
1.5 "Adjusted Contribution".....................................2
1.6 "Affiliate".................................................3
1.7 "Agreement".................................................3
1.8 "Articles of Incorporation".................................3
1.9 "Assignee"..................................................3
1.10 "Available Cash"...........................................3
1.11 "Berg Acquisition".........................................3
1.12 "Berg Group"...............................................3
1.13 "Berg Land Holdings".......................................4
1.14 "Capital Account"..........................................4
1.15 "Capital Contribution".....................................5
1.16 "Capital Event"............................................5
1.17 "Certificate"..............................................5
1.18 "Change of Control Transaction"............................5
1.19 "Charter"..................................................5
1.20 "Code".....................................................5
1.21 "Common Stock".............................................5
1.22 "Common Stock Price".......................................6
1.23 "Company"..................................................6
1.24 "Consent"..................................................6
1.25 "Depreciation".............................................6
1.26 "Dividend Reinvestment Plan"...............................6
1.27 "Effective Date"...........................................6
1.28 "Employee Benefit Plan"....................................6
1.29 "Entity"...................................................7
1.30 "Equity Security"..........................................7
1.31 "ERISA"....................................................7
1.32 "Exchange Act".............................................7
1.33 "Exchange Factor"..........................................7
1.34 "Exchange Right"...........................................7
1.35 "Exchange Rights Agreement"................................7
1.36 "GAAP".....................................................7
1.37 "General Partner"..........................................7
1.38 "General Partner Interest".................................7
1.39 "Gross Asset Value"........................................7
1.40 "Immediate Family".........................................8
1.41 "Incapacity" or "Incapacitated"............................8
1.42 "Indemnitee"...............................................9
1.43 "Initial Contributed Property".............................9
<PAGE>
1.44 "Lien".....................................................9
1.45 "Limited Partner".........................................10
1.46 "Limited Partner Interest"................................10
1.47 "Liquidating Event".......................................10
1.48 "Liquidator"..............................................10
1.49 "L.P. Unit"...............................................10
1.50 "L.P. Unit Majority"......................................10
1.51 "Net Income" or "Net Loss"................................10
1.52 "New Equity Financing Right"..............................11
1.53 "Nonrecourse Deductions"..................................11
1.54 "Nonrecourse Liabilities".................................11
1.55 "Operating Partnership"...................................11
1.56 "Partner".................................................11
1.57 "Partner Minimum Gain"....................................11
1.58 "Partner Nonrecourse Debt"................................11
1.59 "Partner Nonrecourse Deductions"..........................11
1.60 "Partnership".............................................12
1.61 "Partnership Interest"....................................12
1.62 "Partnership Minimum Gain"................................12
1.63 "Partnership Record Date".................................12
1.64 "Partnership Year"........................................12
1.65 "Pending Development Projects"............................12
1.66 "Partnership Interest"....................................12
1.67 "Permitted Partners"......................................12
1.68 "Permitted Transferee"....................................12
1.69 "Person"..................................................12
1.70 "Precontribution Gain"....................................12
1.71 "Put Rights"..............................................12
1.72 "Protective Provisions Expiration Date"...................13
1.73 "Quarter".................................................13
1.74 "Regulations".............................................13
1.75 "REIT"....................................................13
1.76 "REIT Requirements".......................................13
1.77 "Restricted Partner"......................................13
1.78 "SEC".....................................................13
1.79 "Securities Act"..........................................13
1.80 "Stock Option Plan".......................................13
1.81 "Subsidiary"..............................................13
1.82 "Substituted Limited Partner".............................13
1.83 "Tax Items"...............................................13
1.84 "Terminating Capital Transaction".........................14
1.85 "Total Market Capitalization".............................14
1.86 "Transfer"................................................14
1.87 "Unit"....................................................14
<PAGE>
1.88 "United States Person"....................................14
1.89 "Voting Securities".......................................14
ARTICLE 2. Organizational Matters................................14
2.1 Continuation...............................................14
2.2 Name.......................................................14
2.3 Registered Office and Agent; Principal Office..............15
2.4 Power of Attorney..........................................15
2.5 Term.......................................................16
ARTICLE 3. Purpose...............................................16
3.1 Purpose and Business.......................................16
3.2 Powers.....................................................17
ARTICLE 4. Capital Contributions.................................17
4.1 Capital Contributions of the Partners......................17
4.2 Additional Funds; Restrictions on Company..................17
4.3 Issuance of Additional Partnership Interests; Admission
of Additional Limited Partners.............................19
4.4 Repurchase of Company Equity Securities....................19
4.5 No Third Party Beneficiary.................................20
4.6 No Interest; No Return.....................................20
ARTICLE 5. Distributions.........................................20
5.1 Regular Distributions......................................20
5.2 Qualification as a REIT....................................20
5.3 Withholding................................................21
5.4 Additional Partnership Interests...........................21
5.5 Distributions Upon Liquidation.............................21
ARTICLE 6. Allocations...........................................21
ARTICLE 7. Management and Operation of Business..................21
7.1 Management.................................................21
7.2 Certificate of Limited Partnership.........................22
7.3 Reimbursement of the General Partner and the Company.......23
7.4 Outside Activities of the General Partner..................23
7.5 Contracts with Affiliates..................................23
7.6 Indemnification............................................24
<PAGE>
7.7 Liability of the General Partner...........................26
7.8 Limited Partners' Right to Bring Derivative Lawsuits.......27
7.9 Other Matters Concerning the General Partner...............27
7.10 Title to Partnership Assets...............................27
7.11 Reliance by Third Parties.................................28
ARTICLE 8. Rights and Obligations of Limited Partners............28
8.1 Limitation of Liability....................................28
8.2 Management of Business.....................................28
8.3 Outside Activities of Limited Partners.....................29
8.4 Return of Capital..........................................29
8.5 Rights of Limited Partners Relating to the Partnership.....29
8.6 Exchange Rights............................................30
8.7 Put Rights.................................................30
8.8 New Equity Financing Rights................................32
8.9 Matters Requiring L.P. Unit Majority Approval..............32
8.10 Approval of Certain Taxable Sales.........................33
ARTICLE 9. Books, Records, Accounting and Reports................33
9.1 Records and Accounting.....................................33
9.2 Fiscal Year................................................34
ARTICLE 10. Tax Matters..........................................34
10.1 Preparation of Tax Returns................................34
10.2 Tax Elections.............................................34
10.3 Tax Matters Partner.......................................34
10.4 Organizational Expenses...................................36
10.5 Withholding...............................................36
ARTICLE 11. Transfers and Withdrawals............................37
11.1 Transfer..................................................37
11.2 Transfer of the Company's Partnership Interests...........37
11.3 Limited Partners' Rights to Transfer......................37
11.4 Substituted Limited Partners..............................40
11.5 Assignees.................................................40
11.6 Effect of Prohibited Transfer.............................41
11.7 General Provisions........................................41
ARTICLE 12. Admission of Partners................................41
<PAGE>
12.1 Admission of Successor General Partner....................41
12.2 Admission of Additional and Substituted Limited Partners..42
12.3 Amendment of Agreement and Certificate of Limited
Partnership...............................................43
ARTICLE 13. Dissolution, Liquidation and Termination.............43
13.1 Dissolution...............................................43
13.2 Winding Up................................................44
13.3 Obligation to Contribute Deficit..........................45
13.4 Rights of Limited Partners................................46
13.5 Notice of Dissolution.....................................46
13.6 Termination of Partnership and Cancellation of
Certificate of Limited Partnership........................46
13.7 Reasonable Time for Winding-Up............................46
13.8 Waiver of Partition.......................................46
13.9 Deemed Distribution and Recontribution....................46
ARTICLE 14. Amendment of Partnership Agreement; Meetings.........47
14.1 Amendments................................................47
14.2 Meetings of the Partners..................................48
ARTICLE 15. General Provisions...................................49
15.1 Addresses and Notice......................................49
15.2 Titles and Captions.......................................49
15.3 Pronouns and Plurals......................................49
15.4 Further Action............................................49
15.5 Binding Effect............................................50
15.6 Creditors.................................................50
15.7 Waiver....................................................50
15.8 Counterparts..............................................50
15.9 Applicable Law............................................50
15.10 Invalidity of Provisions.................................50
15.11 Entire Agreement.........................................50
15.12 Guaranty by the Company..................................50
</TABLE>
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
MISSION WEST PROPERTIES, L.P. II
This AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF MISSION WEST
PROPERTIES, L.P. II (this "Agreement"), dated as of July 1, 1998, is entered
into by and among Mission West Properties, a California corporation (the
"Company" or the "General Partner") and the parties whose names are set forth on
Appendix I attached hereto (as it may be amended from time to time).
WHEREAS, the Partnership converted from a California general partnership
and became a limited partnership pursuant to the Revised Uniform Limited
Partnership Act of the State of Delaware by filing a certificate of limited
partnership with the Secretary of State of the State of Delaware on December 22,
1997;
WHEREAS, since its organization as a Delaware limited partnership, the
Partnership has been operated and managed by Berg & Berg Developers LLC, as sole
general partner, pursuant to the terms of the Agreement of Limited Partnership
of Berg & Berg Developers, L.P. (the "Prior Agreement");
WHEREAS, on July 1, 1998, the Partnership filed an amendment of
certificate of limited partnership with the Secretary of State of the State of
Delaware changing the Partnership's name to Mission West Properties, L.P.
II;
WHEREAS, pursuant to the terms of a Acquisition Agreement dated as of May
14, 1998, as amended as of July 1, 1998 (the "Acquisition Agreement"), the
Company has agreed to acquire a 10.91% general partner interest in the
Partnership and to become the sole general partner in the Partnership upon the
satisfaction of certain conditions set forth in the Acquisition Agreement, which
now have been satisfied or waived by the parties thereto;
WHEREAS, Berg & Berg Developers LLC and all of the limited partners in the
Partnership wish to admit the Company as a general partner, to amend the
certificate of limited partnership of the Partnership to reflect the Company's
admission as a general partner, and to amend and restate the Prior Agreement as
provided herein; and
WHEREAS, upon the filing of the certificate of amendment of the
certificate of limited partnership of the Partnership with the Secretary of
State of the State of
<PAGE>
Delaware, Berg & Berg Developers LLC intends to resign as
a general partner and become a limited partner in the Partnership pursuant to
the terms of this Agreement.
NOW THEREFORE, in consideration of the mutual covenants herein contained,
and other valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties do hereby agree as follows:
ARTICLE 1. DEFINED TERMS.
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the following terms used in this
Agreement.
1.1 "ACT" the Delaware Revised Uniform Limited Partnership Act, as it may
be amended from time to time, and any successor to such statute.
1.2 "ACQUISITION AGREEMENT" means the agreement dated as of May 14, 1998,
as amended as of July 1, 1998, among the Partnership, the other partnerships
comprising the Operating Partnership, all of the partners therein, and the
Company concerning the acquisition of the Berg Properties, the Acquired
Properties and the Pending Development Projects by the Operating Partnership,
the Company's investment in and admission to the Operating Partnership as sole
general partner, and the rights and options of the limited partners in the
Operating Partnership to tender L.P. Units or acquire shares of Common Stock
under certain circumstances.
1.3 "ADDITIONAL LIMITED PARTNER" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 4.3 hereof and who is shown
as such on the books and records of the Partnership.
1.4 "ADJUSTED CAPITAL ACCOUNT DEFICIT" means with respect to any Partner,
the negative balance, if any, in such Partner's Capital Account as of the end of
any relevant fiscal year, determined after giving effect to the following
adjustments:
(a) credit to such Capital Account any portion of such negative balance
which such Partner (i) is treated as obligated to restore to the
Partnership pursuant to the provisions of Section 1.704-1(b)(2)(ii)(c)
of the Regulations, or (ii) is deemed to be obligated to restore to
the Partnership pursuant to the penultimate sentences of Sections
1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
(b) debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
1.5 "ADJUSTED CONTRIBUTION" means the Capital Contributions of any Partner
reduced by the total distributions to such Partner from Capital Events occurring
subsequent to the Closing Date under the Acquisition Agreement. For purposes of
this Agreement, the initial Capital Contribution of the Company shall be equal
to [$35,200,000] and the initial Adjusted Contribution of each Limited Partner
shall be
-2-
<PAGE>
equal to the value of the Limited Partner's interest in the Operating
Partnership as set forth in Appendix I of the Acquisition Agreement.
1.6 "AFFILIATE" means, (a) with respect to any individual Person, any
member of the Immediate Family of such Person or a trust established for the
benefit of such member, or (b) with respect to any Entity, any Person which,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, any such Entity.
1.7 "AGREEMENT" means this Amended and Restated Agreement of Limited
Partnership, as originally executed and as amended, modified, supplemented or
restated from time to time, as the context requires.
1.8 "ARTICLES OF INCORPORATION" means the Articles of Incorporation of the
Company, as amended and restated from time to time, or the articles of
incorporation, certificate of incorporation, operating agreement of other
Charter instrument of any corporation or other entity which is a successor to
the Company by merger or consolidation.
1.9 "ASSIGNEE" means a Person to whom one or more L.P. Units have been
transferred in a manner permitted under this Agreement, but who has not become a
Substituted Limited Partner, and who has the rights set forth in Section 11.5.
1.10 "AVAILABLE CASH" means the Partnership's share of the Operating
Partnership's Available Cash (as defined in the Acquisition Agreement) with
respect to the applicable period of measurement (i.e., any period beginning on
the first day of the fiscal year, quarter or other period commencing immediately
after the last day of the fiscal year, quarter or other applicable period for
purposes of the prior calculation of Available Cash for or with respect to which
a distribution has been made, and ending on the last day of the fiscal year,
quarter or other applicable period immediately preceding the date of the
calculation). Notwithstanding the foregoing, Available Cash shall not include
any cash received or reductions in reserves, nor shall the calculation of
Available Cash take into account any disbursements made or reserves established,
after commencement of the dissolution and liquidation of the Partnership.
1.11 "BERG ACQUISITION" has the meaning set forth in the Acquisition
Agreement.
1.12 "BERG GROUP" means Carl E. Berg, Clyde J. Berg, the members of their
respective Immediate Families, and any Entity which is an Affiliate of either
Carl E. Berg or Clyde J. Berg, excluding the Partnership and the Company.
1.13 "BERG LAND HOLDINGS" means certain land held by members of the Berg
Group which the Operating Partnership may acquire under certain circumstances
pursuant to the terms of the Acquisition Agreement and the related Berg Land
Holdings
-3-
<PAGE>
Option Agreement to be entered into by the parties thereto upon approval of
certain transactions by the Company's shareholders.
1.14 "CAPITAL ACCOUNT" means with respect to any Partner, the Capital
Account maintained for such Partner in accordance with the following provisions:
(a) to each Partner's Capital Account there shall be credited (i) such
Partner's Initial Adjusted Contribution as of the effective date of
this Agreement (ii) such Partner's Capital Contributions subsequent to
the Effective Date of this Agreement, (iii) such Partner's
distributive share of Net Income and any items in the nature of income
or gain which are specially allocated to such Partner pursuant to
Sections 1 and 2 of Appendix II and (iv) the amount of any Partnership
liabilities assumed by such Partner or which are secured by any asset
distributed to such Partner;
(b) to each Partner's Capital Account there shall be debited (i) the
amount of cash and the Gross Asset Value of any Property distributed
to such Partner pursuant to any provision of this Agreement, (ii) such
Partner's distributive share of Net Losses and any items in the nature
of expenses or losses which are specially allocated to such Partner
pursuant to Sections 1 and 2 of Appendix II, and (iii) the amount of
any liabilities of such Partner assumed by the Partnership or which
are secured by any asset contributed by such Partner to the
Partnership to the extent not assumed by the Partner; and
(c) in the event all or a portion of a Partnership Interest is transferred
in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it
relates to the transferred Partnership Interest.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Sections
1.704-1(b) and 1.704-2 of the Regulations, and shall be interpreted and applied
in a manner consistent with such Regulations. In the event the General Partner
shall reasonably determine that it is prudent to modify the manner in which the
Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed assets or which are assumed by the Partnership, the
General Partner or any Limited Partner) are computed in order to comply with
such Regulations, the General Partner may make such modification; provided that
it does not have an adverse effect on the amounts distributable to any Partner
pursuant to Article 13 hereof upon the dissolution of the Partnership.
1.15 "CAPITAL CONTRIBUTION" means, with respect to any Partner, any cash,
cash equivalents or the Gross Asset Value of property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Article 4
hereof.
1.16 "CAPITAL EVENT" means any Partnership transaction not in the ordinary
course of its business, including, without limitation, distribution to the
Partners in excess
-4-
<PAGE>
of distributive shares of income, principal payments, prepayments, prepayment
penalties, sales, exchanges, foreclosures or other dispositions of Property
owned by the Partnership, recoveries of damage awards and insurance proceeds not
used to rebuild (other than the receipt of contributions to the capital of the
Partnership and business or rental interruption insurance proceeds not used to
rebuild).
1.17 "CERTIFICATE" means the Certificate of Limited Partnership relating
to the Partnership to be filed in the office of the Delaware Secretary of State,
as amended from time to time in accordance with the terms hereof and the Act.
1.18 "CHANGE OF CONTROL TRANSACTION" shall mean (A) any transaction or
series of transactions occurring after the Effective Date, in which all Limited
Partners in the Operating Partnership are legally entitled to participate and
pursuant to which L.P. Units representing more than 50% of the total outstanding
L.P. Units of the Operating Partnership are purchased by a Person not controlled
by, in control of or under common control with the Company, any Affiliate of the
Company or any Affiliate of a Limited Partner, (B) the merger or consolidation
of the Partnership with another entity (other than a merger or consolidation in
which the holders of L.P. Units of the Partnership immediately before the merger
or consolidation own immediately after the merger or consolidation, Voting
Securities of the surviving or acquiring Entity or a parent party of such
surviving or acquiring Entity, possessing more than 50% of the voting power of
the surviving or acquiring Entity or parent party) resulting in the exchange of
the outstanding L.P. Units of the Partnership for cash, securities or other
property, or (C) any merger, sale, lease, license, exchange or other disposition
(whether in one transaction or a series of related transactions) of more than
50% of the assets of the Partnership.
1.19 "CHARTER" has the meaning set forth in Rule 405 of Regulation C
promulgated by the SEC under the Securities Act ("Rule 405").
1.20 "CODE" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provision of future
law.
1.21 "COMMON STOCK" means a share of Common Stock of the Company or any
shares of Voting Securities into which the Common Stock may be reclassified or
converted or for which shares of Common Stock may be exchanged in any
transaction made applicable or available to all holders of Common Stock as a
class.
1.22 "COMMON STOCK PRICE" means with respect to a particular valuation
event identified under this Agreement, the last reported sales price regular way
on such date or, in case no such reported sale takes place on such date, the
average of the reported closing bid and asked prices regular way on such date,
in either case on the American Stock Exchange, the New York Stock Exchange, or
if the Common Stock is not then listed or admitted to trading on any such
exchange, the Nasdaq or any comparable system on which the Common Stock is then
listed or admitted to trading or,
-5-
<PAGE>
if not then listed or admitted to trading on any national securities exchange,
the Nasdaq or any comparable system for the 10-trading day period ending with
the last day preceding the date of the valuation event.
1.23 "COMPANY" means Mission West Properties, a California corporation,
and any successor to such corporation.
1.24 "CONSENT" means the consent or approval of a proposed action by a
Partner given in accordance with Section 14.2 hereof.
1.25 "DEPRECIATION" means, with respect to any asset of the Partnership
for any fiscal year or other period, the depreciation, depletion, amortization
or other cost recovery deduction, as the case may be, allowed or allowable for
federal income tax purposes in respect of such asset for such fiscal year or
other period; provided, however, that except as otherwise provided in Section
1.704-2 of the Regulations, if there is a difference between the Gross Asset
Value (including the Gross Asset Value, as increased pursuant to paragraph (d)
of the definition of Gross Asset Value) and the adjusted tax basis of such asset
at the beginning of such fiscal year or other period, Depreciation for such
asset shall be an amount that bears the same ratio to the beginning Gross Asset
Value of such asset as the federal income tax depreciation, depletion,
amortization or other cost recovery deduction for such fiscal year or other
period bears to the beginning adjusted tax basis of such asset; provided,
further, that if the federal income tax depreciation, depletion, amortization or
other cost recovery deduction for such asset for such fiscal year or other
period is zero, Depreciation of such asset shall be determined with reference to
the beginning Gross Asset Value of such asset using any reasonable method
selected by the General Partner.
1.26 "DIVIDEND REINVESTMENT PLAN" has the meaning set forth in Rule 405.
1.27 "EFFECTIVE DATE" means the date of closing of the Berg Acquisition.
1.28 "EMPLOYEE BENEFIT PLAN" has the meaning set forth in Rule 405.
1.29 "ENTITY" means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, real estate investment trust,
limited liability company, cooperative or association.
1.30 "EQUITY SECURITY" has the meaning set forth in Rule 405.
1.31 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time (or any corresponding provisions of succeeding laws).
1.32 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
-6-
<PAGE>
1.33 "EXCHANGE FACTOR" has the meaning set forth in the Exchange Rights
Agreement, and is equal to the number of L.P. Units exchangeable for one share
of Common Stock, from time to time, under the Exchange Rights Agreement.
1.34 "EXCHANGE RIGHT" has the meaning set forth in the Exchange Rights
Agreement.
1.35 "EXCHANGE RIGHTS AGREEMENT" means Exchange Rights Agreement among the
Company, and each of the limited partners of the partnerships comprising the
Operating Partnership.
1.36 "GAAP" means United States generally accepted accounting principles,
as in effect from time to time.
1.37 "GENERAL PARTNER" means the general partner of the Partnership, if
there is more than one general partner, all such general partners.
1.38 "GENERAL PARTNER INTEREST" means a Partnership Interest held by the
General Partner, in its capacity as general partner. A General Partner Interest
may be expressed as a number of Units, each of which shall represent the same
Percentage Interest in the Partnership as one L.P. Unit.
1.39 "GROSS ASSET VALUE" means, with respect to any asset of the
Partnership, such asset's adjusted basis for federal income tax purposes, except
as follows:
(a) the initial Gross Asset Value of any asset contributed by a Partner to
the Partnership shall be the gross fair market value of such asset,
without reduction for liabilities, as determined by the contributing
Partner and the Partnership on the date of contribution thereof;
(b) if the General Partner reasonably determines that an adjustment is
necessary or appropriate to reflect the relative economic interests of
the Partners, the Gross Asset Values of all Partnership assets shall
be adjusted in accordance with Sections 1.704-1(b)(2)(iv)(f) and (g)
of the Regulations to equal their respective gross fair market values,
without reduction for liabilities, as reasonably determined by the
General Partner, as of the following times:
(1) a Capital Contribution (other than a de minimis Capital
Contribution) to the Partnership by a new or existing Partner as
consideration for a Partnership Interest; or
(2) the distribution by the Partnership to a Partner of more than a
de minimis amount of Partnership assets as consideration for the
repurchase of a Partnership Interest; or
-7-
<PAGE>
(3) the liquidation of the Partnership within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations;
(c) the Gross Asset Values of Partnership assets distributed to any
Partner shall be the gross fair market values of such assets (taking
Section 7701(g) of the Code into account) without reduction for
liabilities, as reasonably determined by the General Partner as of the
date of distribution; and
(d) the Gross Asset Values of Partnership assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Sections 734(b) or 743(b) of the Code, but only to
the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the
Regulations (as set forth in Appendix II); provided, however, that
Gross Asset Values shall not be adjusted pursuant to this paragraph
(d) to the extent that the General Partner reasonably determines that
an adjustment pursuant to paragraph (b) above is necessary or
appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this paragraph (d).
At all times, Gross Asset Values shall be adjusted by any Depreciation
taken into account with respect to the Partnership's assets for purposes of
computing Net Income and Net Loss.
1.40 "IMMEDIATE FAMILY" means, with respect to any Person, such Person's
spouse, parents, parents-in-law, children, nephews, nieces, brothers, sisters,
brothers-in-law, sisters-in-law, stepchildren, sons-in-law and daughters-in-law
or any trust solely for the benefit of any of the foregoing family members whose
sole beneficiaries include the foregoing family members.
1.41 "INCAPACITY" OR "INCAPACITATED" means, (i) as to any individual
Partner, death, total physical disability or entry by a court of competent
jurisdiction adjudicating him incompetent to manage his person or his estate;
(ii) as to any corporation which is a Partner, the filing of a certificate of
dissolution, or its equivalent, for the corporation or the revocation of its
charter; (iii) as to any partnership which is a Partner, the dissolution and
commencement of winding up of the partnership; (iv) as to any estate which is a
Partner, the distribution by the fiduciary of the estate's entire interest in
the Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this definition,
bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner
commences a voluntary proceeding seeking liquidation, reorganization or other
relief under any bankruptcy, insolvency or other similar law now or hereafter in
effect; (b) the Partner is adjudged as bankrupt or insolvent, or a final and
nonappealable order for relief under any bankruptcy, insolvency or similar law
now or hereafter in effect has been entered against the Partner; (c) the Partner
executes and delivers a general assignment for the benefit of the Partner's
creditors; (d) the Partner files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in
-8-
<PAGE>
clause (b) above; (e) the Partner seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator for the Partner or for all or
any substantial part of the Partner's properties; (f) any proceeding seeking
liquidation, reorganization or other relief of or against such Partner under any
bankruptcy, insolvency or other similar law now or hereafter in effect has not
been dismissed within 120 days after the commencement thereof; (g) the
appointment without the Partner's consent or acquiescence of a trustee, receiver
or liquidator has not been vacated or stayed within 90 days of such appointment;
or (h) an appointment referred to in clause (g) which has been stayed is not
vacated within 90 days after the expiration of any such stay.
1.42 "INDEMNITEE" means (i) any Person made a party to a proceeding by
reason of (A) such Person's status as (1) the General Partner, (2) a director,
trustee or officer of the Partnership or the General Partner, or (3) a director,
trustee or officer of any other Entity, each Person serving in such capacity at
the request of the Partnership or the General Partner, or (B) his or its
liabilities, pursuant to a loan guarantee or otherwise, for any indebtedness of
the Partnership or any Subsidiary of the Partnership (including, without
limitation, any indebtedness which the Partnership or any Subsidiary of the
Partnership has assumed or taken assets subject to); and (ii) such other Persons
(including Affiliates of the General Partner or the Partnership) as the General
Partner may designate from time to time (whether before or after the event
giving rise to potential liability), in its sole and absolute discretion.
1.43 "INITIAL CONTRIBUTED PROPERTY" means the Properties as defined in the
Acquisition Agreement.
1.44 "LIEN" means, with respect to any asset of the Partnership, (i) any
mortgage, deed of trust, lien, pledge, encumbrance, charge, restriction or
security interest in or on such asset, (ii) the interest of a vendor or a lessor
under any conditional sale agreement, capital lease or title retention agreement
relating to such asset and (iii) in the case of securities, any purchase option,
call or similar right of a third party with respect to such securities.
1.45 "LIMITED PARTNER" means any Person named as a Limited Partner in
Appendix I, as such Appendix may be amended from time to time, or any
Substituted Limited Partner or Additional Limited Partner, in such Person's
capacity as a Limited Partner of the Partnership.
1.46 "LIMITED PARTNER INTEREST" means a Partnership Interest of a Limited
Partner in the Partnership representing a fractional part of the Partnership
Interests of all Partners and includes any and all benefits to which the holder
of such a Partnership Interest may be entitled, as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement. A Limited Partner Interest may be expressed as a
number of L.P. Units.
1.47 "LIQUIDATING EVENT" has the meaning set forth in Section 13.1 hereof.
-9-
<PAGE>
1.48 "LIQUIDATOR" has the meaning set forth in Section 13.2 hereof.
1.49 "L.P. UNIT" means a fractional, undivided share of the Partnership
Interests of all Partners issued pursuant to Sections 4.1, 4.2 and 4.3. The
number of L.P. Units outstanding and the Percentage Interests in the Partnership
represented by such L.P. Units are set forth in Appendix I, as such Appendix may
be amended from time to time. The ownership of L.P. Units shall be evidenced by
such form of certificate for units as the General Partner adopts from time to
time unless the General Partner determines that the L.P. Units shall be
uncertificated securities.
1.50 "L.P. UNIT MAJORITY" means the Limited Partners holding the right
to vote, in the aggregate, a majority of the total number of L.P. Units
outstanding in the Operating Partnership.
1.51 "NET INCOME" OR "NET LOSS" means, for each fiscal year or other
applicable period, an amount equal to the Partnership's taxable income or loss
for such year or period as determined for federal income tax purposes by the
General Partner, determined in accordance with Section 703(a) of the Code (for
this purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Section 703(a) of the Code shall be included in taxable
income or loss), adjusted as follows: (a) by including as an item of gross
income any tax-exempt income received by the Partnership and not otherwise taken
into account in computing Net Income or Net Loss; (b) by treating as a
deductible expense any expenditure of the Partnership described in Section
705(a)(2)(B) of the Code (or which is treated as a Section 705(a)(2)(B)
expenditure pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations) and not
otherwise taken into account in computing Net Income or Net Loss, including
amounts paid or incurred to organize the Partnership (unless an election is made
pursuant to Section 709(b) of the Code) or to promote the sale of interests in
the Partnership and by treating deductions for any losses incurred in connection
with the sale or exchange of Partnership property disallowed pursuant to Section
267(a)(1) or 707(b) of the Code as expenditures described in Section
705(a)(2)(B) of the Code; (c) by taking into account Depreciation in lieu of
depreciation, depletion, amortization and other cost recovery deductions taken
into account in computing taxable income or loss; (d) by computing gain or loss
resulting from any disposition of Partnership property with respect to which
gain or loss is recognized for federal income tax purposes by reference to the
Gross Asset Value of such property rather than its adjusted tax basis; (e) in
the event of an adjustment of the Gross Asset Value of any Partnership asset
which requires that the Capital Accounts of the Partnership be adjusted pursuant
to Sections 1.704-1(b)(2)(iv)(e), (f) and (g) of the Regulations, by taking into
account the amount of such adjustment as if such adjustment represented
additional Net Income or Net Loss pursuant to Appendix II; and (f) by not taking
into account in computing Net Income or Net Loss items separately allocated to
the Partners pursuant to Sections 1 and 2 of Appendix II.
1.52 "NEW EQUITY FINANCING RIGHT" has the meaning set forth in Section
8.8.
-10-
<PAGE>
1.53 "NONRECOURSE DEDUCTIONS" has the meaning set forth in Regulations
Sections 1.704-2(b)(1) and 1.704-2(c).
1.54 "NONRECOURSE LIABILITIES" has the meaning set forth in Regulations
Section 1.704-2(b)(3).
1.55 "OPERATING PARTNERSHIP" means, collectively, Mission West
Properties, L.P., Mission West Properties, L.P. I, Mission West Properties,
L.P. II and Mission West Properties, L.P. III.
1.56 "PARTNER" means the General Partner or a Limited Partner, and
"Partners" means the General Partner and the Limited Partners collectively.
1.57 "PARTNER MINIMUM GAIN" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
1.58 "PARTNER NONRECOURSE DEBT" has the meaning set forth in Regulations
Section 1.704-2(b)(4).
1.59 "PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership taxable
year shall be determined in accordance with the rules of Regulations Section
1.704-2(i)(2).
1.60 "PARTNERSHIP" means the limited partnership governed by this
Agreement, and any successor thereto.
1.61 "PARTNERSHIP INTEREST" means an ownership interest in the Partnership
representing an Adjusted Contribution by either a Limited Partner or the General
Partner and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement. A Partnership Interest may be expressed as a number of L.P.
Units.
1.62 "PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Regulations
Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as
any net increase or decrease in a Partnership Minimum Gain, for a Partnership
taxable year shall be determined in accordance with the rules of Regulations
Section 1.704-2(d).
1.63 "PARTNERSHIP RECORD DATE" means the record date established by the
General Partner for the distribution of Available Cash pursuant to Section 5.1,
which shall be the same as the record date established by the Company for a
distribution to its shareholders of some or all of its portion of such
distribution.
-11-
<PAGE>
1.64 "PARTNERSHIP YEAR" means the fiscal year of the Partnership, which is
the calendar year, as set forth in Section 9.2.
1.65 "PENDING DEVELOPMENT PROJECTS" means three Berg Group-owned R&D
Property development projects which the Operating Partnership has agreed to
acquire upon their completion pursuant to the terms of the Acquisition Agreement
and the related Pending Projects Option Agreement to be entered into by the
parties thereto upon approval of certain transactions by the Company's
shareholders.
1.66 "PARTNERSHIP INTEREST" means, as to a Partner, the fractional part of
the Partnership Interests owned by such Partner and expressed as a percentage as
specified in Appendix I, as such Appendix may be amended from time to time.
1.67 "PERMITTED PARTNERS" has the meaning set forth in Section 1(b) of
Appendix II.
1.68 "PERMITTED TRANSFEREE" means any person to whom L.P. Units are
Transferred in accordance with Section 11.3 of this Agreement.
1.69 "PERSON" means an individual or Entity.
1.70 "PRECONTRIBUTION GAIN" has the meaning set forth in Section 3(c) of
Appendix II.
1.71 "PUT RIGHTS" shall have the meaning provided in Section 8.7.
1.72 "PROTECTIVE PROVISIONS EXPIRATION DATE" means the date on which the
members of the Berg Group own less than 15% of the Common Stock, treating all
Equity Securities of the Company and all L.P. Units owned by such members as
Common Stock outstanding for this purpose.
1.73 "PROPERTIES" has the meaning given such term in the Acquisition
Agreement.
1.74 "QUARTER" means each of the three month periods ending on March 31,
June 30, September 30 and December 31.
1.75 "REGULATIONS" means the final, temporary or proposed Income Tax
Regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
1.76 "REIT" means a real estate investment trust as defined in Section 856
of the Code.
1.77 "REIT REQUIREMENTS" means all of the requirements imposed under the
Code on any entity seeking to qualify and remain qualified as a REIT.
-12-
<PAGE>
1.78 "RESTRICTED PARTNER" has the meaning set forth in Section 1(b) of
Appendix II.
1.79 "SEC" means the U.S. Securities and Exchange Commission.
1.80 "SECURITIES ACT" means the Securities Act of 1933, as amended.
1.81 "STOCK OPTION PLAN" means the Company's 1997 Stock Option Plan and
any other plan adopted from time to time by the Company pursuant to which shares
of Common Stock are issued, or options to acquire shares of Common Stock are
granted, to consultant, employees or directors of the Company, the Operating
Partnership or their respective Affiliates in consideration for services or
future services.
1.82 "SUBSIDIARY" means, with respect to any Person, any corporation,
partnership or other entity of which a majority of (i) the voting power of the
Voting Securities; or (ii) the outstanding equity interests, is owned, directly
or indirectly, by such Person.
1.83 "SUBSTITUTED LIMITED PARTNER" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.4 hereof.
1.84 "TAX ITEMS" has the meaning set forth in Appendix II.
1.85 "TERMINATING CAPITAL TRANSACTION" means any Change of Control
Transaction.
1.86 "TOTAL MARKET CAPITALIZATION" means the market value of the
outstanding Common Stock determined as if all L.P. Units in the Operating
Partnership had been converted into Common Stock at the Exchange Factor plus the
total debt of the Company and the Operating Partnership.
1.87 "TRANSFER" as a noun, means any sale, assignment, conveyance, pledge,
hypothecation, gift, encumbrance or other transfer, and as a verb, means to
sell, assign, convey, pledge, hypothecate, give, encumber or otherwise transfer.
1.88 "UNIT" means an equal undivided interest in all of the outstanding
Partnership Interests.
1.89 "UNITED STATES PERSON" means a holder of L.P. Units who is an
individual who is a citizen or resident of the United States; a corporation,
partnership or other entity created or organized in, or under the laws of, the
United States or any State; an estate the income of which from sources without
the United States is includable in gross income for United States federal income
tax purposes; a trust the primary supervision of which is exercisable by a court
within the United States and having one or more United States fiduciaries with
authority to control all substantial decisions of such trust; and any
-13-
<PAGE>
Person whose income or gain in respect of the L.P. Units is effectively
connected with the conduct of a United States trade or business.
1.90 "VOTING SECURITIES" means any Equity Security which entitles the
holder thereof to vote on all matters submitted for a vote of equity holders by
the issuer of such Equity Security, including the right to vote for directors in
the case of a corporation.
Certain additional terms and phrases have the meanings set forth in
Appendix II.
ARTICLE 2. ORGANIZATIONAL MATTERS.
2.1 CONTINUATION. The Partners hereby agree to continue the Partnership
under and pursuant to the Act. Except as expressly provided herein to the
contrary, the rights and obligations of the Partners and the administration and
termination of the Partnership shall be governed by the Act. The Partnership
Interest of each Partner shall be personal property for all purposes.
2.2 NAME. The name of the Partnership shall be Mission West Properties,
L.P. [ ]. The Partnership's business may be conducted under any other name or
names deemed advisable by the General Partner, including the name of the General
Partner or any Affiliate thereof. The words "Limited Partnership," "L.P.,"
"Ltd." or similar words or letters shall be included in the Partnership's name
where necessary to comply with the laws of any jurisdiction. The General Partner
in its sole and absolute discretion may, upon 5 days' prior written notice to
the Limited Partners, change the name of the Partnership.
2.3 REGISTERED OFFICE AND AGENT; PRINCIPAL OFFICE. The address of the
registered office of the Partnership in the State of Delaware and the name and
address of the registered agent for service of process on the Partnership in the
State of Delaware is The Corporation Trust Company, 1029 Orange Street,
Wilmington, Delaware 19801. The principal office of the Partnership shall be
10050 Bandley Drive, Cupertino, California 95014, or such other place as the
General Partner may from time to time designate by notice to the Limited
Partners. The Partnership may maintain offices at such other place or places
within or outside the State of Delaware as the General Partner deems advisable.
2.4 POWER OF ATTORNEY.
A. Each Limited Partner and each Assignee hereby constitutes and appoints
the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each
case with full power of substitution, as its true and lawful agent and
attorney-in-fact, with full power and authority in its name, place and
stead to:
(1) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (a) all certificates, documents and
other instruments (including, without limitation, this Agreement
and the Certificate and all
-14-
<PAGE>
amendments or restatements thereof) that the General Partner or
the Liquidator deems appropriate or necessary to form, qualify or
continue the existence or qualification of the Partnership as a
limited partnership (or a partnership in which the Limited
Partners have limited liability) in the State of Delaware and in
all other jurisdictions in which the Partnership may or plans to
conduct business or own property, including, without limitation,
any documents necessary or advisable to convey any Contributed
Property to the Partnership; (b) all instruments that the General
Partner deems appropriate or necessary to reflect any amendment,
change, modification or restatement of this Agreement in
accordance with its terms; (c) all conveyances and other
instruments or documents that the General Partner or the
Liquidator deems appropriate or necessary to reflect the
dissolution and liquidation of the Partnership pursuant to the
terms of this Agreement, including, without limitation, a
certificate of cancellation; (d) all instruments relating to the
admission, withdrawal, removal or substitution of any Partner
pursuant to, or other events described in, Article 11, 12 or 13,
or the Capital Contribution of any Partner; and (e) all
certificates, documents and other instruments relating to the
determination of the rights, preferences and privileges of
Partnership Interest; and
(2) execute, swear to, seal, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other instruments
appropriate or necessary, in the sole and absolute discretion of
the General Partner or any Liquidator, to make, evidence, give,
confirm or ratify any vote, consent, approval, agreement or other
action which is made or given by the Partners hereunder or is
consistent with the terms of this agreement or appropriate or
necessary, in the sole discretion of the General Partner or any
Liquidator, to effectuate the terms or intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General
Partner or any Liquidator to amend this Agreement except in accordance with
Article 14, or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, in recognition of the fact that
each of the Partners will be relying upon the power of the General
Partner and any Liquidator to act as contemplated by this Agreement in
any filing or other action by it on behalf of the Partnership, and it
shall survive and not be affected by the subsequent Incapacity of any
Limited Partner or Assignee and the Transfer of all or any portion of
such Limited Partner's or Assignee's L.P. Units and shall extend to
such Limited Partner's or Assignee's heirs, successors, assigns and
personal representatives. Each such Limited Partner or Assignee hereby
agrees to be bound by any representation made by the General Partner
or any Liquidator, acting in good faith pursuant to such power of
attorney, and each such Limited Partner or Assignee hereby waives any
and all defenses which may be available to contest, negate or
disaffirm the action of the General Partner or any Liquidator, taken
in good faith under such power of attorney. Each Limited Partner or
Assignee shall execute and deliver to the General Partner or
-15-
<PAGE>
the Liquidator, within 15 days after receipt of the General Partner' s
or Liquidator's request therefor, such further designation, powers of
attorney and other instruments as the General Partner or the
Liquidator, as the case may be, deems necessary to effectuate this
Agreement and the purposes of the Partnership.
2.5 TERM. The term of the Partnership shall commence on the date hereof
and shall continue until December 31, 2048, unless the Partnership is dissolved
sooner pursuant to the provisions of Article 13 or as otherwise provided by law.
ARTICLE 3. PURPOSE.
3.1 PURPOSE AND BUSINESS. The purpose and nature of the business to be
conducted by the Partnership is to conduct any business that may be lawfully
conducted by a limited partnership organized pursuant to the Act including,
without limitation, to engage in the following activities: to acquire, hold,
own, develop, construct, improve, maintain, operate, sell, lease, transfer,
encumber, convey, exchange, and otherwise dispose of or deal with the
Properties, and the Pending Development Projects; to acquire, hold, own,
develop, construct, improve, maintain, operate, sell, lease, transfer, encumber,
convey, exchange, and otherwise dispose of or deal with real and personal
property of all kinds; to undertake such other activities as may be necessary,
advisable, desirable or convenient to the business of the Partnership; and to
engage in such other ancillary activities as shall be necessary or desirable to
effectuate the foregoing purposes.
3.2 POWERS. The Partnership is empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business for which it has
been formed and for the protection and benefit of the Partnership; provided,
that the Partnership shall not take, and shall refrain from taking, any action
which, in the judgment of the General Partner, in its sole and absolute
discretion, (i) could adversely affect the ability of the Company to continue to
qualify as a REIT; (ii) could subject the Company to any additional taxes under
Section 857 or Section 4981 of the Code; or (iii) could violate any law or
regulation of any governmental body or agency having jurisdiction over the
Company or its securities, unless such action (or inaction) shall have been
specifically consented to by the Company, if not the General Partner, and the
L.P. Unit Majority.
ARTICLE 4. CAPITAL CONTRIBUTIONS.
4.1 CAPITAL CONTRIBUTIONS OF THE PARTNERS.
A. At the time of the execution of this Agreement, the Partners have made
the Adjusted Contributions, or shall make the Capital Contributions
contemplated by the Acquisition Agreement, as set forth in Appendix I
to this Agreement. Each Limited Partner shall own L.P. Units in the
amount set forth for such Partner in Appendix I and shall have a
Percentage Interest in the Partnership as set forth in Appendix I,
which shall be adjusted in Appendix I from time to time by the General
Partner to the extent
-16-
<PAGE>
necessary to reflect accurately exchanges, additional Capital
Contributions, the issuance of additional Partnership Interests, the
exercise of Put Rights with respect to L.P. Units or similar events
having an effect on any Partner's Percentage Interest.
B. The number of Units held by the General Partner, in its capacity as
general partner, shall be deemed to be the General Partner Interest.
Except as provided in Sections 4.2, 10.5 and 13.3, the Partners shall
have no obligation to make any additional Capital Contributions.
4.2 ADDITIONAL FUNDS; RESTRICTIONS ON COMPANY.
A. The sums of money required to finance the business and affairs of the
Partnership shall be derived from the initial Capital Contributions
made to the Partnership by the Company as set forth in the Acquisition
Agreement and from funds generated from the operation and business of
the Partnership including, without limitation, distributions directly
or indirectly received by the Partnership from Available Cash provided
by the Operating Partnership. In the event additional financing is
needed from sources other than as set forth in the preceding sentence
for any reason, subject to the provisions of Sections 8.8 and 8.9, the
General Partner may, in its discretion, in such amounts and at such
times as it solely shall determine to be necessary or appropriate,
obtain additional funds for the Operating Partnership which shall be
allocated to each of the partnerships included therein, including the
Partnership, pro rata in proportion to the ratio of the number of
Units then outstanding in each such Partnership to the total number of
L.P. Units then outstanding in the Operating Partnership taken as a
whole ("Pro Rata Share"). Accordingly, to the extent of such Pro Rata
Share of the Partnership and subject to Section 8.9 and any other
limitations contained in this Agreement or the Acquisition Agreement,
the General Partner may, (i) cause the Partnership to issue additional
Partnership Interests and admit additional Limited Partners to the
Partnership in accordance with Section 4.3; (ii) make additional
Capital Contributions to the Partnership (subject to the provisions of
Section 4.2B); (iii) cause the Partnership to borrow money, enter into
loan arrangements, issue debt securities, obtain letters of credit or
otherwise borrow money on a secured or unsecured basis; or (iv) make
loans to the Partnership (subject to Section 4.2B). In no event shall
the Limited Partners be required to make any additional Capital
Contributions or any loan to, or otherwise provide any financial
accommodation for the benefit of, the Partnership pursuant to any such
permitted action by the General Partner, except insofar as a Limited
Partner has exercised its New Equity Financing Right pursuant to
Section 8.8.
B. Except as agreed otherwise at the time by vote or written consent of
the L.P. Unit Majority: (i) the Company shall lend to the Partnership
its Pro Rata Share of the proceeds of or consideration received by the
Company from all loans and advances to the Company pursuant to any
financial borrowing arrangement on the same financial terms and
conditions, including interest rate and repayment schedule, as shall
be applicable with respect to or incurred in connection with the
issuance of such loans and advances to the Company (which the
Partnership may, in turn, lend to any other
-17-
<PAGE>
partnership constituting part of the Operating Partnership); (ii) in
the case of Equity Securities senior or junior to the Common Stock as
to dividends and distributions on liquidation, which are not
convertible into Common Stock as of the issuance date, the Company
shall contribute to the Partnership the proceeds of or consideration
(including any property or other non-cash assets) received for such
Securities and the proceeds of, or consideration received from, any
subsequent exercise, exchange or conversion thereof (if applicable),
and shall receive from the Partnership, new Partnership Interests in
the Partnership in consideration therefor with the same financial
terms and conditions, including dividend, dividend priority,
liquidation preference, conversion and redemption rights, as are
applicable to such Equity Securities; (iii) in the case of Common
Stock, or other Equity Securities convertible into Common Stock as of
the issuance date, including, without limitation, shares of Common
Stock or other Equity Securities issued upon exercise of options
issued under the Stock Option Plan or any other Employee Benefit Plan
of the Company, the Company shall contribute to the Partnership the
proceeds of or consideration (including any property or other non-cash
assets) received for such Securities and the proceeds of, or
consideration received from, any subsequent exercise, exchange or
conversion thereof (if applicable), and shall receive from the
Partnership a number of additional Units of General Partner Interest
in consideration therefor equal to the product of (x) the number of
shares of Common Stock or other Equity Securities issued by the
Company, multiplied by (y) the Exchange Factor in effect on the date
of such contribution; and (iv) in the case of Common Stock or other
Equity Securities issued upon the exercise or surrender of rights
under a stock option, warrant, or any other right for which the
Company does not receive proceeds, and issues less than the number of
shares of Common Stock or other Equity Securities subject to such
option, warrant or other right to the holder thereof retaining the
excess of such shares as payment of the purchase price (a "net
exercise"), or where the Company uses the proceeds received pursuant
to a Dividend Reinvestment Plan to acquire shares of Common Stock or
other Equity Securities to be issued to the shareholder exercising
such right, the Company shall receive from the Partnership a number of
additional Units of General Partner Interest equal to the actual
number of shares of Common Stock or other Equity Securities so issued
to the shareholder multiplied by the Exchange Factor.
4.3 ISSUANCE OF ADDITIONAL PARTNERSHIP INTERESTS; ADMISSION OF ADDITIONAL
LIMITED PARTNERS. In addition to any Partnership Interests issuable by the
Partnership pursuant to Section 4.2, and subject to the provisions of Sections
8.8 and 8.9, the General Partner is authorized to cause the Partnership to issue
additional Partnership Interests (or options therefor) in the form of L.P. Units
or other Partnership Interests senior or junior to the L.P. Units to any Persons
at any time or from time to time, for consideration per Unit of Partnership
Interest not less than the Common Stock Price determined at the initial issuance
date divided by the Exchange Factor, and on such other terms and conditions, as
the General Partner shall establish provided, however, that (i) each partnership
included in the Operating Partnership shall effect its Pro Rata Share of such
issuance, (ii) such issuance does not cause the Partnership to become, with
respect to any Employee Benefit Plan subject to Title I of ERISA or Section 4975
of the Code, a "party in interest" (as defined in Section 3(14) of ERISA) or
-18-
<PAGE>
a "disqualified person" (as defined in Section 4975(e) of the Code); and (iii)
such issuance does not cause any portion of the assets of the Partnership to
constitute assets of any Employee Benefit Plan subject to Section 2510.3-101 of
the regulations of the United States Department of Labor. Subject to the
limitations set forth in the preceding sentence, the General Partner may take
such steps as it, in its reasonable discretion, deems necessary or appropriate
to admit any Person as a Limited Partner of the Partnership, including, without
limitation, amending the Certificate, Appendix I or any other provision of this
Agreement.
4.4 REPURCHASE OF COMPANY EQUITY SECURITIES. In the event the Company
shall elect to purchase from its shareholders shares of Common Stock for the
purpose of delivering such shares to satisfy an obligation under any Dividend
Reinvestment Plan or Employee Benefit Plan adopted by the Company, or shall
repurchase any other Equity Securities of the Company pursuant to any other
share repurchase obligation or arrangement undertaken by the Company with any
Company shareholder, including preferred stock redemptions, the purchase price
paid by the Company for such shares and any other expenses incurred by the
Company in connection with such purchase shall be considered expenses of the
Partnership and shall be reimbursed to the Company, subject to the condition
that: (i) if such shares subsequently are to be sold by the Company, the Company
shall pay to the Partnership any proceeds received by the Company for such
shares of Common Stock or other Equity Securities (provided that an exchange of
shares of Common Stock for L.P. Units pursuant to the Exchange Rights Agreement
would not be considered a sale for such purposes); and (ii) if such shares are
not re-transferred by the Company within 30 days after the purchase thereof, the
General Partner shall cause the Partnership to cancel the number of Units of
General Partner Interest held by the Company determined by multiplying (x) the
quotient obtained by dividing the total amount deemed paid by the Partnership by
the Common Stock Price determined as of the repurchase date, by (y) the Exchange
Factor in effect on the date of such repurchase.
4.5 NO THIRD PARTY BENEFICIARY. No creditor or other third party having
dealings with the Partnership shall have the right to enforce the right or
obligation of any Partner to make Capital Contributions or loans or to pursue
any other right or remedy hereunder or at law or in equity, it being understood
and agreed that the provisions of this Agreement shall be solely for the benefit
of, and may be enforced solely by, the parties hereto and their respective
successors and assigns.
4.6 NO INTEREST; NO RETURN. No Partner shall be entitled to interest on
its Capital Contribution or on such Partner's Capital Account. Except as
provided in Section 8.7 or Article 13 of this Agreement, or by law, no Partner
shall have any right to demand or receive the return of its Capital Contribution
from the Partnership.
ARTICLE 5. DISTRIBUTIONS.
5.1 REGULAR DISTRIBUTIONS. Except for distributions pursuant to Section
13.2 in connection with the dissolution and liquidation of the Partnership, and
subject to the provisions of Sections 5.3, 5.4 and 5.5, the General Partner
shall cause the Partnership
-19-
<PAGE>
to distribute, from time to time as determined by the General Partner, but in
any event not less frequently than once each Quarter, the Partnership's Pro Rata
Share of all Available Cash, to the Partners, in accordance with each Partner's
respective Percentage Interest; provided, however, that in no event may a
Limited Partner receive a distribution of Available Cash with respect to a L.P.
Unit, if such Limited Partner is entitled to receive a distribution out of such
Available Cash with respect to a share of Common Stock for which such L.P. Unit
has been exchanged.
5.2 QUALIFICATION AS A REIT. The General Partner shall be entitled to
cause the Partnership to distribute to the General Partner the Partnership's Pro
Rata Share of Available Cash distributed by the Operating Partnership to enable
the General Partner to pay shareholder dividends that will (i) satisfy the REIT
Requirements for distributions to shareholders, and (ii) avoid any federal
income or excise tax liability of the General Partner; provided, however, the
General Partner is not bound to comply with this covenant to the extent such
distributions would violate applicable Delaware law.
5.3 WITHHOLDING. With respect to any withholding tax or other similar tax
liability or obligation to which the Partnership may be subject as a result of
any act or status of any Partner or to which the Partnership becomes subject
with respect to any Unit, the Partnership shall have the right to withhold
amounts of Available Cash distributable to such Partner or with respect to such
Units, to the extent of the amount of such withholding tax or other similar tax
liability or obligation pursuant to the provisions contained in Section 10.5.
5.4 ADDITIONAL PARTNERSHIP INTERESTS. If the Partnership issues
Partnership Interests in accordance with Section 4.2 or 4.3 which are entitled
to certain distribution priorities, Section 5.1 shall be amended, as necessary,
to reflect the distribution priority of such Partnership Interests and
corresponding amendments shall be made to the provisions of Appendix II.
5.5 DISTRIBUTIONS UPON LIQUIDATION. Proceeds from a Terminating Capital
Transaction and any other cash received or reductions in reserves made after
commencement of the liquidation of the Partnership shall be distributed to the
Partners in accordance with Section 13.2.
ARTICLE 6. ALLOCATIONS.
The Net Income, Net Loss, and other Partnership items of income, gain,
loss, deduction or credit as provided under the Code, shall be allocated
pursuant to the provisions of Appendix II, as amended from time to time.
ARTICLE 7. MANAGEMENT AND OPERATION OF BUSINESS.
7.1 MANAGEMENT.
A. Except as otherwise expressly provided in this Agreement, and subject
to the provisions of Section 8.9, all management powers over the
business and affairs the
-20-
<PAGE>
Partnership are and shall be exclusively vested in the General
Partner, and no Limited Partner shall have any right to participate in
or exercise control or management power over the business and affairs
of the Partnership. The General Partner may not be removed by the
Limited Partners, with or without cause. In addition to the powers now
or hereafter granted a general partner of a limited partnership under
the Act or which are granted to the General Partner under any other
provision of this Agreement, the General Partner shall have full power
and authority to make contracts, sign documents, conduct litigation,
acquire and convey property, hire employees, consultants and
professionals, raise capital, borrow funds, incur liabilities, invest
funds, comply with all applicable laws, and do all other things deemed
necessary or desirable by the General Partner to conduct the business
of the Partnership on behalf of the Partnership; to exercise all
powers set forth in Section 3.2, and to effectuate the purposes set
forth in Section 3.1, provided that any exercise of the foregoing
rights and powers must be consistent with the REIT Requirements.
B. Except as provided in Section 8.9, each of the Limited Partners agrees
that the General Partner is authorized to execute, deliver and perform
the agreements and transactions on behalf of the Partnership without
any further act, approval or vote of the Partners, notwithstanding any
other provision of this Agreement to the fullest extent permitted
under the Act or other applicable law, rule or regulation. The
execution, delivery or performance by the General Partner or the
Partnership of any agreement authorized or permitted under this
Agreement shall not constitute a breach by the General Partner of any
duty that the General Partner may owe the Partnership or the Limited
Partners or any other Persons under this Agreement or of any duty
stated or implied by law or equity.
C. At all times from and after the date hereof, in accordance with the
provisions of the Acquisition Agreement, the General Partner may cause
the Partnership to establish and maintain at any and all times working
capital accounts and other cash or similar balances in such amount as
the General Partner, in its sole and absolute discretion, deems
appropriate and reasonable from time to time. Such accounts may
include funds of the General Partner and the other partnerships in the
Operating Partnership, which the General Partner shall be free to
commingle.
D. In exercising its authority under this Agreement, the General Partner
shall take into account the tax consequences to any Partner of any
action taken by it and shall select the alternative which appears at
the time to present the least adverse tax consequences to the Limited
Partners. By way of example, but not of limitation: If the General
Partner decides to refinance (directly or indirectly) any outstanding
indebtedness of the Partnership, the General Partner shall use
reasonable efforts to structure such refinancing in a manner that
minimizes any adverse tax consequences resulting therefrom to the
Limited Partners. The General Partner and the Partnership shall not
have liability to a Limited Partner under any circumstances as a
result of an income tax liability incurred by such Limited Partner as
a result of a necessary action (or inaction) by the General Partner
taken pursuant to its authority under and in accordance with this
Agreement where avoiding the resulting adverse tax
-21-
<PAGE>
consequences to a Limited Partner was not reasonably practicable under
the circumstances.
7.2 CERTIFICATE OF LIMITED PARTNERSHIP. The General Partner shall file the
amended Certificate with the Secretary of State of Delaware as required by the
Act. The General Partner shall use all reasonable efforts to cause to be filed
such other certificates or documents as may be reasonable and necessary or
appropriate for the formation, continuation, qualification and operation of a
limited partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware and any other state, or the District of
Columbia, in which the Partnership may elect to do business or own property. To
the extent that such action is determined by the General Partner to be
reasonable and necessary or appropriate, the General Partner shall file
amendments to and restatements of the Certificate and do all of the things to
maintain the Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) under the laws of the State of Delaware
and each other state, or the District of Columbia, in which the Partnership may
elect to do business or own property. Subject to the terms of Section 8.5A(iv)
hereof, the General Partner shall not be required, before or after filing, to
deliver or mail a copy of the Certificate or any amendment thereto to any
Limited Partner.
7.3 REIMBURSEMENT OF THE GENERAL PARTNER AND THE COMPANY.
A. Except as provided in this Section 7.3 and elsewhere in this Agreement
(including the provisions of Articles 5 and 6 regarding distributions,
payments, and allocations to which it may be entitled), the General
Partner shall not be compensated for its services as general partner
of the Partnership.
B. The General Partner, shall be reimbursed on a monthly basis, or such
other basis as it may determine in its sole and absolute discretion,
for all expenses that it incurs relating to the ownership and
operation of, or for the benefit of, the Partnership; provided, that
the amount of any such reimbursement shall be reduced by any interest
earned by the General Partner with respect to bank accounts or other
instruments or accounts held by it in its name. Such reimbursement
shall be in addition to any reimbursement made as a result of
indemnification pursuant to Section 7.6.
7.4 OUTSIDE ACTIVITIES OF THE GENERAL PARTNER. The General Partner shall
not directly or indirectly enter into or conduct any business other than in
connection with the ownership, acquisition, development and disposition of
Partnership Interests and the management of the business of the Partnership, and
such activities as are incidental thereto. The General Partner and any
Affiliates of the General Partner may acquire Limited Partner Interests and
shall be entitled to exercise all rights of a Limited Partner relating to such
Limited Partner Interests.
7.5 CONTRACTS WITH AFFILIATES.
A. The Partnership may lend or contribute funds or other assets to its
Subsidiaries or other Persons in which it has an equity investment and
such Persons
-22-
<PAGE>
may borrow funds from the Partnership, on terms and conditions
established in the sole and absolute discretion of the General
Partner. The foregoing authority shall not create any right or benefit
in favor of any Subsidiary or any other Person.
B. Except as provided in Section 7.4, the Partnership may Transfer assets
to joint ventures, other partnerships, corporations or other business
entities in which it is or thereby becomes a participant upon such
terms and subject to such conditions consistent with this Agreement
and applicable law as the General Partner, in its sole and absolute
discretion, believes are advisable.
C. Except as expressly permitted by this Agreement or otherwise
contemplated by the Acquisition Agreement, neither the General Partner
nor any of its Affiliates shall sell, Transfer or convey any property
to, or purchase any property from, the Partnership, directly or
indirectly, except pursuant to transactions that are determined by the
General Partner in good faith to be fair and reasonable.
D. Except as provided otherwise in Section 8.9, the General Partner, in
its sole and absolute discretion and without the approval of the
Limited Partners, may propose and adopt, on behalf of the Partnership,
Employee Benefit Plans funded by the Partnership for the benefit of
employees of the General Partner, the Partnership, Subsidiaries of the
Partnership or any Affiliate of any of them in respect of services
performed, directly or indirectly, for the benefit of the Partnership,
the General Partner, or any Subsidiaries of the Partnership.
E. The General Partner is expressly authorized to enter into, in the name
and on behalf of the Partnership, a "right of first opportunity" or
"right of first offer" arrangement, non-competition agreements and
other conflict avoidance agreements with various Affiliates of the
Partnership and the General Partner, on such terms as the General
Partner, in its sole and absolute discretion, believes are advisable.
7.6 INDEMNIFICATION.
A. To the fullest extent permitted by Delaware law, the Partnership shall
indemnify each Indemnitee from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including, without
limitation, reasonable attorneys' fees and other legal fees and
expenses), judgments, fines, settlements, and other amounts arising
from any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative, that relate to the
operations of the Partnership or the Company as set forth in this
Agreement, in which such Indemnitee may be involved, or is threatened
to be involved, as a party or otherwise, except to the extent it is
finally determined by a court of competent jurisdiction, from which no
further appeal may be taken, that such Indemnitee's action constituted
intentional acts or omissions constituting willful misconduct or
fraud. Without limitation, the foregoing indemnity shall extend to any
liability of any Indemnitee, pursuant to a loan guaranty or otherwise
for any indebtedness of the Partnership or any Subsidiary of the
Partnership (including, without limitation, any indebtedness which the
Partnership or any Subsidiary of the Partnership has assumed or taken
subject to), except with respect to Partnership debt
-23-
<PAGE>
that has been assumed or guaranteed by an Indemnitee in its capacity
as a Limited Partner. The General Partner is hereby authorized and
empowered, on behalf of the Partnership, to enter into one or more
indemnity agreements consistent with the provisions of this Section
7.6 in favor of any Indemnitee having or potentially having liability
for any such indebtedness. Any indemnification pursuant to this
Section 7.6 shall be made only out of the assets of the Partnership,
and neither the General Partner nor any Limited Partner shall have any
obligation to contribute to the capital of the Partnership, or
otherwise provide funds, to enable the Partnership to fund its
obligations under this Section 7.6.
B. Reasonable expenses incurred by an Indemnitee who is a party to a
proceeding shall be paid or reimbursed by the Partnership in advance
of the final disposition of the proceeding.
C. The indemnification provided by this Section 7.6 shall be in addition
to any other rights to which an Indemnitee or any other Person may be
entitled under any agreement, pursuant to any vote of the Partners,
under the Company's Articles of Incorporation, as a matter of law, or
otherwise, and shall continue as to an Indemnitee who has ceased to
serve in such capacity unless otherwise provided in a written
agreement pursuant to which such Indemnities are indemnified.
D. The Partnership may, but shall not be obligated to, purchase and
maintain insurance, on behalf of the Indemnities and such other
Persons as the General Partner shall determine, against any liability
that may be asserted against or expenses that may be incurred by such
Person in connection with the Partnership's activities, regardless of
whether the Partnership would have the power to indemnify such Person
against such liability under the provisions of this Agreement.
E. For purposes of this Section 7.6, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an Employee
Benefit Plan whenever the performance by such Indemnitee of its duties
to the Partnership also imposes duties on, or otherwise involves
services by, such Indemnitee to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with
respect to an Employee Benefit Pan pursuant to applicable law shall
constitute fines within the meaning of this Section 7.6; and actions
taken or omitted by the Indemnitee with respect to an Employee Benefit
Plan in the performance of its duties for a purpose reasonably
believed by it to be in the interest of the participant and
beneficiaries of the plan shall be deemed to be for a purpose which is
not opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject any of the Limited Partners to
personal liability by reason of the indemnification provisions set
forth in this Agreement.
G. An Indemnitee shall not be denied indemnification in whole or in part
under this Section 7.6 because the Indemnitee had an interest in the
transaction with
-24-
<PAGE>
respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.6 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and
shall not be deemed to create any rights for the benefit of any other
Persons. Any amendment, modification or repeal of this Section 7.6 or
any provision hereof shall be prospective only and shall not in any
way affect the Partnership's liability to any Indemnitee under this
Section 7.6, as in effect immediately prior to such amendment,
modification, or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
I. The provisions of this Section 7.6 shall be inapplicable to any
investigation, claim, suit, or proceeding, or the portion thereof,
which concerns claims for breach of contract between the Partnership
and a Person contracting other than in such Person's capacity as a
Partner, or as an officer or director of the General Partner.
J. No provision of this Section 7.6 shall be construed as permitting any
contract or transaction which is prohibited by the provisions of
Section 9.2(b) of the Acquisition Agreement.
7.7 LIABILITY OF THE GENERAL PARTNER.
A. Notwithstanding anything to the contrary set forth in this Agreement,
the General Partner and its officers and directors shall not be liable
for monetary damages to the Partnership, any Partners or any Assignees
for losses sustained or liabilities incurred as a result of errors in
judgment or of any act or omission, if the General Partner acted in
good faith; provided, however, the foregoing shall not be deemed to
exculpate the Company from any liability the Company may have under
the Acquisition Agreement.
B. Subject to its obligations and duties as General Partner set forth in
Section 7.1A hereof, the General Partner may exercise any of the
powers granted to it by this Agreement and perform any of the duties
imposed upon it hereunder either directly or by or through its agent.
The General Partner shall not be liable for any acts or omissions on
the part of any such agent, except in circumstances for which the
General Partner may be liable under Section 7.7A or would not be
subject to indemnification under Section 7.6.
C. Any amendment, modification or repeal of this Section 7.7 or any
provision hereof shall be prospective only and shall not in any way
affect the limitations on the General Partner's and its officers' and
directors' liability to the Partnership and the Limited Partners under
this Section 7.7 as in effect immediately prior to such amendment,
modification or repeal with respect to claims arising from or relating
to
-25-
<PAGE>
matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be
asserted.
-26-
<PAGE>
7.8 LIMITED PARTNERS' RIGHT TO BRING DERIVATIVE LAWSUITS. Any Limited
Partner may bring an action on behalf of the Partnership, as permitted under the
Act and the laws of the State of Delaware, to recover a judgment in favor of the
Partnership if the General Partner has refused to bring the action or if an
effort to cause the General Partner to bring the action is not likely to
succeed.
7.9 OTHER MATTERS CONCERNING THE GENERAL PARTNER.
A. The General Partner may rely and shall be protected in acting, or
refraining from acting, upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond,
debenture, or other paper or document believed by it in good faith to
be genuine and to have been signed or presented by the proper party or
parties.
B. The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, architects,
engineers, environmental consultants and other consultants and
advisers selected by it, and any act taken or omitted to be taken in
reliance upon the opinion of such Persons as to matters which such
General Partner reasonably believes to be within such Person's
professional or expert competence shall be conclusively presumed to
have been done or omitted in good faith and in accordance with such
opinion.
C. The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly
authorized officers and duly appointed attorneys-in-fact. Each such
attorney shall, to the extent provided by the General Partner in the
power of attorney, have full power and authority to do and perform all
and every act and duty which is permitted or required to be done by
the General Partner hereunder.
D. Notwithstanding any other provisions of this Agreement or the Act, any
action of the General Partner on behalf of the Partnership or any
decision of the General Partner to refrain from acting on behalf of
the Partnership, undertaken in the good faith belief that such action
or omission is necessary or advisable in order (i) to protect the
ability of the Company to continue to qualify as a REIT; or (ii) to
avoid the Company incurring any taxes under Section 857 or Section
4981 of the Code, is expressly authorized under this Agreement and is
deemed approved by all of the Limited Partners.
7.10 TITLE TO PARTNERSHIP ASSETS. Title to Partnership assets, whether
real, personal or mixed and whether tangible or intangible, shall be deemed to
be owned by the Partnership as an entity, and no Partner, individually or
collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner or one or more nominees, as
the General Partner may determine, including Affiliates of the General Partner.
The General Partner hereby declares and warrants that any Partnership asset for
which legal title is held in the name of the General Partner or any nominee or
Affiliate of the General Partner shall be held by the General
-27-
<PAGE>
Partner for theuse and benefit of the Partnership in accordance with the
provisions of this Agreement; provided, that the General Partner shall use its
best efforts to cause beneficial and record title to such assets to be vested in
the Partnership as soon as reasonably practicable. All Partnership assets shall
be recorded as the property of the Partnership in its books and records,
irrespective of the name in which legal title to such Partnership assets is
held.
7.11 RELIANCE BY THIRD PARTIES. Notwithstanding anything to the contrary
in this Agreement, any Person dealing with the Partnership shall be entitled to
assume that the General Partner has full power and authority, without consent or
approval of any other Partner or Person, to encumber, sell or otherwise use in
any manner any and all assets of the Partnership and to enter into any contracts
on behalf of the Partnership, and take any and all actions on behalf of the
Partnership, and such Person shall be entitled to deal with the General Partner
as if the General Partner were the Partnership's sole party in interest, both
legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies which may be available against such Person to
contest, negate or disaffirm any action of the General Partner in connection
with any such dealing. In no event shall any Person dealing with the General
Partner or its representatives be obligated to ascertain that the terms of this
Agreement have been complied with or to inquire into the necessity or expedience
of any act or action of the General Partner or its representatives. Each and
every certificate, document or other instrument executed on behalf of the
Partnership by the General Partner or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that: (i) at the time of the execution and delivery of such certificate,
document or instrument, this Agreement was in full force and effect; (ii) the
Person executing and delivering such certificate, document or instrument was
duly authorized and empowered to do so for and on behalf of the Partnership; and
(iii) such certificate, document or instrument was duly executed and delivered
in accordance with the terms and provisions of this Agreement and is binding
upon the Partnership.
ARTICLE 8. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.
8.1 LIMITATION OF LIABILITY. The Limited Partners shall have no liability
under this Agreement except as expressly provided in this Agreement, including
Sections 10.5 and 13.3 hereof, or under the Act. Notwithstanding the preceding
sentence, each Limited Partner shall have the right, but not the obligation, to
guarantee a portion of the indebtedness of the Partnership in accordance with
the terms of the Acquisition Agreement.
8.2 MANAGEMENT OF BUSINESS. No Limited Partner or Assignee (other than the
General Partner, any of its Affiliates or any officer, director, employee, agent
or trustee of the General Partner, the Partnership or any of their Affiliates,
in their capacity as such) shall take part in the operation, management or
control (within the meaning of the Act) of the Partnership's business, transact
any business in the Partnership's name or have the power to sign documents for
or otherwise bind the Partnership. The
-28-
<PAGE>
transaction of any such business by the General Partner, any of its Affiliates
or any officer, director, employee, partner, agent or trustee of the General
Partner, the Partnership or any of their Affiliates, in their capacity as such,
shall not affect, impair or eliminate the limitations on the liability of the
Limited Partners or Assignees under this Agreement.
8.3 OUTSIDE ACTIVITIES OF LIMITED PARTNERS. Subject to any agreements
entered into pursuant to Section 7.5 hereof and any other agreements entered
into by a Limited Partner or its Affiliates with the Partnership or any of its
Subsidiaries including the Acquisition Agreement, any Limited Partner (other
than the Company) and any officer, director, employee, agent, trustee, Affiliate
or shareholder of any Limited Partner (other than the Company) shall be entitled
to and may have business interests and engage in business activities in addition
to those relating to the Partnership, including business interests and
activities that are in direct competition with the Partnership or that are
enhanced by the activities of the Partnership. Neither the Partnership nor any
Partners shall have any rights by virtue of this Agreement in any business
ventures of any Limited Partner or Assignee which are permitted within the scope
of this Section 8.3. None of the Limited Partners (other than the Company) nor
any other Person shall have any rights by virtue of this Agreement or the
Partnership relationship established hereby in any business ventures of any
other Person and such Person shall have no obligation pursuant to this Agreement
to offer any interest in any such business ventures to the Partnership, any
Limited Partner or any such other Person, even if such opportunity is of a
character which, if presented to the Partnership, any Limited Partner or such
other Person, could be taken by such Person.
8.4 RETURN OF CAPITAL. Except in connection with the exercise of Exchange
Rights or Put Rights, no Limited Partner shall be entitled to the withdrawal or
return of its Capital Contribution, except to the extent of distributions made
pursuant to this Agreement or upon termination of the Partnership as provided
herein. Except to the extent provided by Appendix II, or as otherwise expressly
provided in this Agreement, no Limited Partner or Assignee shall have priority
over any other Limited Partner or Assignee, either as to the return of Capital
Contributions or as to profits, losses or distributions.
8.5 RIGHTS OF LIMITED PARTNERS RELATING TO THE PARTNERSHIP.
A. In addition to the other rights provided by this Agreement or by the
Act, and except as limited by Section 8.5B hereof, each Limited
Partner shall have the right, for a purpose reasonably related to such
Limited Partner's interest as a limited partner in the Partnership,
upon written demand with a statement of the purpose of such demand and
at such Limited Partner' s own expense (including such reasonable
copying and administrative charges as the General Partner may
establish from time to time): (i) to obtain a copy of the most recent
annual and quarterly reports filed by the Company with the SEC
pursuant to the Exchange Act; (ii) to obtain a copy of the
Partnership's federal, state and local income tax returns for each
Partnership Year; (iii) to obtain a current list of the name and last
known business, residence or mailing
-29-
<PAGE>
address of each Partner; (iv) to obtain a copy of this Agreement and
the Certificate and all amendments and/or restatements thereto,
together with executed copies of all powers of attorney pursuant to
which this Agreement, the Certificate and all amendments and/or
restatements thereto have been executed; and (v) to obtain true and
full information regarding the amount of cash and a description and
statement of any other property or services contributed by each
Partner and which each Partner has agreed to contribute in the future,
and the date on which each became a Partner.
B. Notwithstanding any other provision of this Section 8.5, the General
Partner may keep confidential from the Limited Partners, for such
period of time as the General Partner determines in its sole and
absolute discretion to be reasonable, any information that (i) the
General Partner reasonably believes to be in the nature of trade
secrets or other confidential information, the disclosure of which the
General Partner in good faith believes is not in the best interests of
the Partnership or the Company or could damage the Partnership or its
business; or (ii) the Partnership is required by law or by agreements
with an unaffiliated third party to keep confidential.
8.6 EXCHANGE RIGHTS. The Limited Partners may exchange all or a portion of
their L.P. Units for shares of Common Stock on the terms and subject to the
conditions and restrictions contained in the Exchange Rights Agreement.
8.7 PUT RIGHTS.
A. Upon the terms and subject to the conditions of this Agreement, each
Limited Partner (other than Carl E. Berg and Clyde J. Berg with
respect to all L.P. Units owned by them beneficially as of the
Effective Date) shall have the right to tender to the Partnership
outstanding L.P. Units no more than once during any 12-month period
commencing after December 29, 1999. The Partnership shall purchase
properly tendered L.P. Units for cash at a price (the "Tender Price")
equal to the average market value of the Common Stock price as of the
date the Limited Partner delivers to the General Partner, at the
address provided in Appendix II, a completed and duly executed Letter
of Transmittal in the form attached as Exhibit A to the Exchange
Rights Agreement, and any other documents required by the Letter of
Transmittal. Only a tender in this manner will constitute a valid
tender of L.P. Units pursuant to this Section 8.7A. The General
Partner shall make all determinations as to the validity and form of
any tender of L.P. Units in accordance with the provisions of this
Agreement, and upon rejection of a tender, shall give the tendering
holder written notice of such rejection, which shall include the
reasons therefor. Unless otherwise agreed by the General Partner or as
provided in Section 8.7C, tenders of L.P. Units pursuant to this
Section 8.7A shall be irrevocable and shall not be subject to
withdrawal or modification.
B. Within 15 days after the valid tender of L.P. Units pursuant to
Section 8.7A, the Company may make an election to purchase such L.P.
Units itself with cash of the Company (the "Cash Election"). If with
respect to any tender of L.P. Units pursuant to this Section 8.7, the
Company makes the Cash Election, then within 90 days after such tender
the Company shall pay to the tendering Limited Partner an aggregate
amount of cash equal to the purchase price of the tendered L.P. Units
with available cash,
-30-
<PAGE>
borrowed funds or the proceeds of an offering of new shares of Common
Stock. Upon acquiring the L.P. Units, the Company may cause the
Partnership to retire the L.P. Units and convert them to the same
number of Units of General Partner Interest, and the General Partner
shall amend Appendix I accordingly.
C. Notwithstanding the foregoing, if the purchase price for the L.P.
Units tendered by a Limited Partners in one year exceeds $1,000,000,
the Partnership or the Company shall be entitled to reduce
proportionally the number of L.P. Units to be acquired from each
Tendering Partner so that the total purchase price does not exceed
$1,000,000 if the Company so elects. In addition, if the Company does
not timely make the Cash Election, the Partnership shall deliver the
purchase price for the tendered L.P. Units to the Limited Partner
within 45 days after the Letter of Transmittal was delivered to the
General Partner. The General Partner may defer payment of the purchase
price until such time not to exceed 120 days after the valid tender of
L.P. Units pursuant to Section 8.7A as the Partnership has adequate
Available Cash after payment of the purchase price, in the reasonable
judgment of the General Partner, to fund current distributions
necessary for the Company to satisfy the REIT Requirements following
the waiver by the Company of its right to make the Cash Election. In
such event, the General Partner shall give the tendering Limited
Partner written notice of its decision to defer the payment with a
calculation supporting the General Partner's determination within 20
days after the Letter of Transmittal was delivered to the General
Partner. Upon receiving such notice, the Limited Partner may withdraw
the tender. In addition, the Limited Partner may instead exercise its
rights under the Exchange Rights Agreement. If a Limited Partner
tenders L.P. Units pursuant to this Section 8.7, the Limited Partner
shall pay the amount of any additional documentary, stamp or similar
issue or transfer tax which is due, and shall be responsible for all
income or other taxes as a result of such exchange.
D. Each tender of L.P. Units shall constitute a representation and
warranty by the tendering Limited Partner of each of the
representations and warranties set forth in the form of Letter of
Transmittal.
E. Until the holder of L.P. Units tendered pursuant to Section 8.7 has
received cash in exchange therefor, such Limited Partner shall
continue to hold and own such L.P. Units for all purposes of this
Agreement.
-31-
<PAGE>
8.8 NEW EQUITY FINANCING RIGHTS.
A. If the General Partner determines that it is in the best interests of
the Partnership to obtain additional funds through the issuance of
additional Partnership Interests, the General Partner shall first
offer to the Limited Partners in each of the partnerships comprising
the Operating Partnership, including the Partnership, the right of
first refusal to purchase that portion of such additional Partnership
Interests which their respective numbers of L.P. Units bear to the
total number of outstanding L.P. Units in the Operating Partnership.
The General Partner shall make this offer pursuant to a written notice
describing the offering price, class or series of Partnership
Interest, and all other material terms of the offer. Such notice shall
be sent to each Limited Partner at the address reflected in Appendix
I, as amended. The Limited Partners shall have 10 days from the date
of such notice to elect to purchase any such additional Partnership
Interests. Such election shall be made pursuant to a written
subscription form specifying the number of Units of additional Limited
Partnership Interests the Limited Partner intends to acquire and the
total purchase price therefor, and shall be signed by the Limited
Partner and delivered to the General Partner at the address set forth
on Appendix I. After such 10-day period, the General Partner shall be
free to offer any additional Limited Partnership Interests on
substantially similar terms to non-Partners and Partners alike.
B. The foregoing right of the Limited Partners to acquire additional
equity interests offered by the Partnership ("New Equity Financing
Right") shall not apply to any offering (i) which is part of a
transaction in which the Limited Partners had the ability to exercise
their New Equity Financing Rights under the Acquisition Agreement with
respect to an offering of Equity Securities by the Company, (ii) in
connection with a merger or other business combination subject to
approval by the L.P. Unit Majority pursuant to Section 8.9, (iii) to a
Person in connection with the acquisition of property or services by
the Partnership from such Person, or (iv) of any Partnership Interest
upon conversion of an outstanding Equity Security of the Partnership,
any Partnership Subsidiary, or the Company.
8.9 MATTERS REQUIRING L.P. UNIT MAJORITY APPROVAL.
The consent of the L.P. Unit Majority will be required with respect to the
following actions involving the Partnership: (i) the material amendment,
modification or termination of the Agreement; (ii) a general assignment for the
benefit of creditors or the appointment of a custodian, receiver or trustee for
any of the assets of the Partnership; (iii) the institution of any proceeding
for bankruptcy of the Partnership; (iv) the Transfer of any General Partnership
Interests, including transfers attendant to any merger, consolidation or
liquidation of the Company except as otherwise provided in 11.2C; (v) the
admission of any additional or substitute General Partner in the Partnership;
and (vi) a Change of Control Transaction. In addition, until the Protective
Provisions Expiration Date, the consent of the L.P. Unit Majority will also be
required with respect to: (i) any Terminating Capital Transaction; (ii) the
dissolution and liquidation of the Partnership; and (iii) the Partnership's
issuance of Limited Partner
-32-
<PAGE>
Interests having seniority over the L.P. Units with respect to distributing
assets, and voting rights.
8.10 APPROVAL OF CERTAIN TAXABLE SALES. Until the earlier of the tenth
anniversary of the closing of the Berg Acquisition and the Protective Provisions
Expiration Date, the General Partner must obtain the prior written consent of
Carl E. Berg, and upon Carl Berg's death if prior to the expiration of this
provision, Clyde J. Berg, before effecting any sale or other transfer of any of
the Properties identified on Schedules 1, 2, 3 or 5 to the Acquisition Agreement
on behalf of the Partnership which results in the recognition of taxable income
by any member of the Berg Group under the Code. Until the earlier of the tenth
anniversary of the Berg Acquisition and the date on which John T. Kontrabecki
ceases to beneficially own at least 750,000 L.P. Units, the General Partner
shall obtain his prior written consent prior to effecting any sale or other
transfer of any of the Properties (identified in Schedules 4 or 5 to the
Acquisition Agreement) as owned by Kontrabecki, Triangle Partners, or Berg
Ventures II, which will result in the recognition of taxable income by
Kontrabecki under the Code.
ARTICLE 9. BOOKS, RECORDS, ACCOUNTING AND REPORTS.
9.1 RECORDS AND ACCOUNTING.
The General Partner shall keep or cause to be kept at the principal office
of the Partnership those records and documents required to be maintained by the
Act and other books and records deemed by the General Partner to be appropriate
with respect to the Partnership's business, including, without limitation, all
books and records necessary to comply with applicable REIT Requirements and to
provide to the Limited Partners any information, lists and copies of documents
required to be provided pursuant to Sections 8.5A and 9.3 hereof. Any records
maintained by or on behalf of the Partnership in the regular course of its
business may be kept on, or be in the form of, punch cards, magnetic tape,
photographs, micrographics or any other information storage device, provided
that the records so maintained are convertible into clearly legible written form
within a reasonable period of time. The books of the Partnership shall be
maintained, for financial and tax reporting purposes, on an accrual basis in
-33-
<PAGE>
accordance with GAAP, or such other basis as the General Partner
determines to be necessary or appropriate.
9.2 FISCAL YEAR. The fiscal year of the Partnership shall be the
calendar year.
ARTICLE 10. TAX MATTERS.
10.1 PREPARATION OF TAX RETURNS. The General Partner shall arrange for the
preparation and timely filing of all Partnership returns for federal and state
income tax purposes and shall use all reasonable efforts to furnish, within
sixty (60) days of the close of each taxable year, the tax information
reasonably required by Limited Partners for their federal and state income tax
reporting purposes.
10.2 TAX ELECTIONS. The General Partner shall elect for the Partnership to
be considered a limited partnership on all applicable federal and state income
tax returns to be filed by the Partnership. Except as otherwise provided herein,
the General Partner shall, in its sole and absolute discretion, determine
whether to make any other available election pursuant to the Code.
Notwithstanding the above, in making any such tax election the General Partner
shall take into account the tax consequences to the Limited Partners resulting
from any such election. The General Partner shall make such tax elections on
behalf of the Partnership as the L.P. Unit Majority request, provided that the
General Partner believes that such election is not adverse to the interests of
the General Partner, including its interest in preserving its qualification as a
REIT under the Code. In addition, the General Partner shall elect the
"traditional method" of making Section 704(c) allocations pursuant to
Regulations Section 1.704-3 with respect to each Property under the Acquisition
Agreement. The General Partner shall have the right to seek to revoke any tax
election it makes (other than the election to use the traditional method of
making the Section 704(c) allocations described in this Section 10.2),
including, without limitation, the election under Section 754 of the Code, upon
the General Partner' s determination, in its sole and absolute discretion, that
such revocation is in the best interests of the Limited Partners taken as a
whole and with the approval of the L.P. Unit Majority until the Protective
Provisions Expiration Date. All such elections and determinations may be made on
a Property-by-Property basis, and the General Partner shall be required to
analyze the impact of all such elections and determinations on that basis.
10.3 TAX MATTERS PARTNER.
A. The General Partner shall be the "tax matters partner" of the
Partnership for federal income tax purposes. Pursuant to Section 6230(e) of the
Code, upon receipt of notice from the Internal Revenue Service of the beginning
of an administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the Internal Revenue Service with the name, address,
taxpayer identification number, and Percentage Interest of each of the Limited
Partners and the Assignees; provided, that such information is provided to the
Partnership by the Limited Partners and the Assignees.
-34-
<PAGE>
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the Internal Revenue Service
with respect to any administrative or judicial proceedings for
the adjustment of Partnership items required to be taken into
account by a Partner for income tax purposes (such administrative
proceedings being referred to as a "tax audit" and such judicial
proceedings being referred to as "judicial review"), and in the
settlement agreement the tax matters partner may expressly state
that such agreement shall bind all Partners, except that such
settlement agreement shall not bind any Partner (i) who (within
the time prescribed pursuant to the Code and Regulations) files a
statement with the Internal Revenue Service providing that the
tax matters partner shall not have the authority to enter into a
settlement agreement on behalf of such Partner; or (ii) who is a
"notice partner" (as defined in Section 6231(a)(8) of the Code)
or a member of a "notice group" (as defined in Section 6223(b)(2)
of the Code);
(2) in the event that a notice of a final administrative adjustment
at the Partnership level of any item required to be taken into
account by a Partner for tax purposes (a "final adjustment") is
mailed to the tax matters partner, to seek judicial review of
such final adjustment, including the filing of a petition for
readjustment with the Tax Court or the filing of a complaint for
refund with the United States Claims Court or the District Court
of the United States for the district in which the Partnership's
principal place of business is located;
(3) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the
Internal Revenue Service and, if any part of such request is not
allowed by the Internal Revenue Service, to file an appropriate
pleading (petition or complaint) for judicial review with respect
to such request;
(5) to enter into an agreement with the Internal Revenue Service to
extend the period for assessing any tax which is attributable to
any item required to be taken account of by a Partner for tax
purposes, or an item affected by such item; and
(6) to take any other action on behalf of the Partners or the
Partnership in connection with any tax audit or judicial review
proceeding to the extent permitted by applicable law or
regulations.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the
extent required by law, is a matter in the sole and absolute
discretion of the tax matters partner and the provisions relating to
indemnification of the General Partner set forth in
-35-
<PAGE>
Section 7.6 of this Agreement shall be fully applicable to the tax
matters partner in its capacity as such.
C. The tax matters partner shall receive no compensation for its
services. All third party costs and expenses incurred by the tax
matters partner in performing its duties as such (including legal and
accounting fees and expenses) shall be borne by the Partnership.
Nothing herein shall be construed to restrict the Partnership from
engaging an accounting firm to assist the tax matters partner in
discharging its duties hereunder, so long as the compensation paid by
the Partnership for such services is reasonable.
10.4 ORGANIZATIONAL EXPENSES. The Partnership shall elect to deduct
expenses, if any, incurred by it in organizing the Partnership ratably over a
60-month period as provided in Section 709 of the Code.
10.5 WITHHOLDING. Each Limited Partner hereby authorizes the Partnership
to withhold from, or pay on behalf of or with respect to, such Limited Partner
any amount of federal, state, local, or foreign taxes that the General Partner
determines that the Partnership is required to withhold or pay with respect to
any amount distributable or allocable to such Limited Partner pursuant to this
Agreement, including, without limitation, any taxes required to be withheld or
paid by the Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of the
Code. Any amount paid on behalf of or with respect to a Limited Partner shall
constitute a loan by the Partnership to such Limited Partner, which loan shall
be repaid by such Limited Partner within 15 days after notice from the General
Partner that such payment must be made unless (i) the Partnership withholds such
payment from a distribution which would otherwise be made to the Limited
Partner; or (ii) the General Partner determines, in its sole and absolute
discretion, that such payment may be satisfied out of the amount of Available
Cash which would, but for such payment, be distributed to the Limited Partner.
Any amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be
treated as having been distributed to such Limited Partner. Each Limited Partner
hereby unconditionally and irrevocably grants to the Partnership a security
interest in such Limited Partner' s Partnership Interest to secure such Limited
Partner's obligation to pay to the Partnership any amounts required to be paid
pursuant to this Section 10.5. In the event that a Limited Partner fails to pay
when due any amounts owed to the Partnership pursuant to this Section 10.5, the
General Partner may, in its sole and absolute discretion, elect to make the
payment to the Partnership on behalf of such defaulting Limited Partner, and in
such event shall be deemed to have loaned such amount to such defaulting Limited
Partner and shall succeed to all rights and remedies of the Partnership as
against such defaulting Limited Partner. Without limitation, in such event, the
General Partner shall have the right to receive distributions that would
otherwise be distributable to such defaulting Limited Partner until such time as
such loan, together with all interest thereon, has been paid in full, and any
such distributions so received by the General Partner shall be treated as having
been distributed to the defaulting Limited Partner and immediately paid by the
defaulting Limited Partner to the General Partner in repayment of such loan. Any
amount payable by a Limited Partner
-36-
<PAGE>
hereunder shall bear interest at the highest base or prime rate of interest
published from time to time by any of Wells Fargo Bank, N.A., plus 4 percentage
points, but in no event higher than the maximum lawful rate of interest on such
obligation, such interest to accrue from the date such amount is due (i.e., 15
days after demand) until such amount is paid in full. Each Limited Partner shall
take such actions as the Partnership or the General Partner shall request in
order to perfect or enforce the security interest created hereunder.
ARTICLE 11. TRANSFERS AND WITHDRAWALS.
11.1 TRANSFER.
A. The term "Transfer," when used in this Article 11 with respect to a
Unit, shall be deemed to refer to a transaction by which the General
Partner purports to assign all or any part of its General Partner
Interest to another Person or by which a Limited Partner purports to
assign all or any part of its Limited Partner Interest to another
Person. The term "Transfer" when used in this Article 11 does not
include any exchange of L.P. Units for shares of Common Stock pursuant
to the Exchange Rights Agreement.
B. No Partnership Interest shall be Transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this
Article 11. Any Transfer or purported Transfer of a Partnership
Interest not made in accordance with this Article 11 shall be null and
void.
11.2 TRANSFER OF THE COMPANY'S PARTNERSHIP INTERESTS.
A. The General Partner may not withdraw as General Partner or transfer
its General Partner Interest or Limited Partner Interest unless (i)
the L.P. Unit Majority (excluding L.P. Units held by the Company)
consents to such Transfer or withdrawal, or (ii) such Transfer is to
an entity which is wholly-owned by the Company and is a Qualified REIT
Subsidiary under Section 856(i) of the Code.
B. In the event the General Partner withdraws as General Partner in
accordance with Section 11.2A, the General Partner's General Partner
Interest shall immediately be converted into a Limited Partner
Interest.
11.3 LIMITED PARTNERS' RIGHTS TO TRANSFER.
A. Subject to the provisions of this Section 11.3, a Limited Partner
(other than the Company) may, without the consent of the General
Partner:
(a) if such Limited Partner is a partnership or a limited liability
company, Transfer such Limited Partner's L.P. Units to any
partner of such Limited Partner or any member of such limited
liability company;
-37-
<PAGE>
(b) Transfer such Limited Partner's L.P. Units to any other Limited
Partner; and
(c) pledge such Limited Partner's L.P. Units to any financial
institution as collateral for any loan with respect to which such
Limited Partner is personally liable.
B. Subject to the provisions of this Section 11.3, a Limited Partner may
Transfer any of such Limited Partner's L.P. Units, other than in
accordance with Section 11.3A, only with the prior written consent of
the General Partner which may be withheld in its sole discretion.
C. If a Limited Partner is subject to Incapacity, the executor,
administrator, trustee, committee, guardian, conservator or receiver
of such Limited Partner's estate shall have all of the rights of a
Limited Partner, but not more rights than those enjoyed by other
Limited Partners, for the purpose of settling or managing the estate
and such power as the Incapacitated Limited Partner possessed to
Transfer all or any part of his or its interest in the Partnership.
The Incapacity of a Limited Partner, in and of itself, shall not
dissolve or terminate the Partnership.
D. No Transfer by a Limited Partner of its L.P. Units may be made to any
Person if (i) in the opinion of legal counsel for the Partnership, it
would result in the Partnership being treated as an association
taxable as a corporation; (ii) such Transfer would cause the
Partnership to become, with respect to any Employee Benefit Plan
subject to Title I of ERISA, a "party-in-interest" (as defined in
Section 3(14) of ERISA) or a "disqualified person" (as defined in
Section 4975(c) of the Code); (iii) such Transfer would, in the
opinion of legal counsel for the Partnership, cause any portion of the
assets of the Partnership to constitute assets of any Employee Benefit
Plan pursuant to Department of Labor Regulations Section 2510.2-101;
(iv) such Transfer would subject the Partnership to regulation under
the Investment Company Act of 1940, the Investment Advisors Act of
1940 or ERISA; or (v) such Transfer is a sale or exchange, and such
sale or exchange would, when aggregated with all other sales and
exchanges during the 12-month period ending on the date of the
proposed Transfer, result in a Change of Control Transaction.
E. Subject to the foregoing provisions of Section 11.3 and the terms of
Section 12.2, a Limited Partner may transfer L.P. Units to an
Affiliate and have such Affiliate become a Limited Partner.
In addition to the conditions set forth in Sections 11.3D, 11.4, and 12.2
any Transfer pursuant to this Article 11 is subject to the following conditions:
(1) unless such Transfer is being made pursuant to an effective
registration statement under the Securities Act, or pursuant to Rule 144 or
Rule 144A thereunder, the transferring Limited Partner shall deliver to the
Company a notice with respect to the proposed transfer, together with an
opinion of counsel in form and substance satisfactory to the General
Partner prepared by counsel reasonably
-38-
<PAGE>
satisfactory to the General Partner (which shall include, without
limitation, counsel to each of the Limited Partners as of the date hereof),
to the effect that an exemption from registration and qualification under
such Securities Act is available;
(2) the transferring Limited Partner and its transferee shall each
provide a certificate to the General Partner, in form and substance
satisfactory to the General Partner, to the effect that (i) the proposed
transfer will not be effected on or through (a) a United States national,
regional or local securities exchange, (b) a foreign securities exchange or
(c) an interdealer quotation system that regularly disseminates firm buy or
sell quotations by identified brokers or dealers (including, without
limitation, the Nasdaq) by electronic means or otherwise, and (ii) it is
not, and the proposed transfer will not be made by, through or on behalf
of, (a) a Person who regularly quotes equity interests in the Partnership,
such as a broker or dealer making a market in equity interests in the
Partnership or (b) a Person who regularly makes available to the public
(including customers or subscribers) bid or offer quotes with respect to
equity interests in the Partnership and stands ready to effect buy or sell
transactions at the quoted prices for itself or on behalf of others;
PROVIDED, HOWEVER, that such certificate shall not be required for any
transfer in connection with a registered public offering;
(3) the transferee must be a United States Person for federal income
tax purposes; and
(4) such transfer must not cause the Partnership to terminate or lose
its status as a partnership for tax purposes.
F. If it shall become unlawful for any Limited Partner to continue to
hold some or all of the L.P. Units held by such Limited Partner, or by
reason of legal or regulatory restrictions the cost to such Limited
Partner to continue to hold such L.P. Units (in relation to the value
of such L.P. Units to such Limited Partner) has, in the reasonable
judgment of such Limited Partner, significantly increased, such
Limited Partner may, at any time following the date three business
days after the delivery by such Limited Partner to the General Partner
a notice of the existence of any such restriction, Transfer all or any
portion of the L.P. Units held by such Limited Partner free of any
restrictions imposed under this Agreement (other than those
restrictions required by federal or state laws, including securities,
and tax, laws, and subject to the prospective transferee meeting the
requirements of Section 12.2, and provided that the transferee Limited
Partner shall hold its L.P. Units subject to all of the terms of this
Agreement); but only if such Limited Partner cannot then exercise its
Exchange Rights or Put Rights for cash, and the Company has notified
the Limited Partner that the Company will not register for offer and
sale all shares of Common Stock issued upon the exercise of the
Exchange Rights within 90 days. In connection therewith, the Company
shall assist such Limited Partner in disposing of the L.P. Units held
by it in a prompt and orderly manner, and (at the request of such
Limited Partner) make available (and authorize such Limited Partner to
make available through the Company) financial and other information
concerning the Company and its Subsidiaries (including, without
limitation, the information described in Rule 144A(d)(4)) to any
prospective purchaser of
-39-
<PAGE>
such L.P. Units (it being agreed that such prospective purchaser shall
be either an "accredited investor" within the meaning of Rule 501 (a)
under the Securities Act or a "qualified institutional buyer" within
the meaning of Rule 144A(d)(1) under such Act to the extent that such
L.P. Units are "restricted securities" as such term is defined in Rule
144). The Company may require that each such prospective purchaser
keep confidential, pursuant to customary confidentiality requirements,
any information received by it pursuant to this provision.
11.4 SUBSTITUTED LIMITED PARTNERS. The General Partner shall have the
right to consent to the admission of a transferee who receives L.P. Units
pursuant to Section 11.3A, C, or E, which consent may be given or withheld by
the General Partner in its sole and absolute discretion. The General Partner's
failure or refusal to permit such transferee to become a Substituted Limited
Partner shall not give rise to any cause of action against the Partnership or
any Partner.
11.5 ASSIGNEES. If the General Partner, in its sole and absolute
discretion, does not consent to the admission of any transferee as a Substituted
Limited Partner, as described in Section 11.4, such transferee shall be
considered an Assignee for purposes of this Agreement. An Assignee shall be
deemed to have had assigned to it, and shall be entitled to receive
distributions from the Partnership and the share of Net Income, Net Losses and
any other Tax Items with respect to the L.P. Units assigned to such transferee,
but shall not be deemed to be a holder of L.P. Units for any other purpose under
this Agreement, and shall not be entitled to vote such L.P. Units in any matter
presented to the Limited Partners for a vote (such L.P. Units being deemed to
have been voted on such matter in the same proportion as all other L.P. Units
held by Limited Partners are voted). In the event the Assignee desires to make a
further assignment of any such L.P. Units, such Assignee shall be subject to all
of the provisions of this Article 11 to the same extent and in the same manner
as any Limited Partner desiring to make an assignment of L.P. Units.
11.6 EFFECT OF PROHIBITED TRANSFER. Any transfer made in violation of
Article 11 shall be null and void and of no force and effect.
11.7 GENERAL PROVISIONS.
A. No Limited Partner may withdraw from the Partnership other than as a
result of a permitted Transfer of all of such Limited Partner' s L.P.
Units in accordance with this Article 11, or pursuant to the tender or
exchange of all of its L.P. Units pursuant to the exercise of Put
Rights or Exchange Rights.
B. Any Limited Partner who shall Transfer all of its L.P. Units in a
Transfer permitted pursuant to this Article 11 shall cease to be a
Limited Partner upon the admission of all Assignees of such L.P. Units
as Substituted Limited Partners. Similarly, any Limited Partner who
shall Transfer all of its L.P. Units pursuant to a tender or exchange
of all of its L.P. Units pursuant to the exercise of Put Rights or
Exchange Rights shall cease to be a Limited Partner.
-40-
<PAGE>
C. Without the consent of the General Partner, permitted Transfers
pursuant to this Article 11 may be made effective only as of the first
day of a Quarter.
D. If any Partnership Interest is transferred or assigned during the year
in compliance with the provisions of this Article 11, or redeemed
pursuant to Section 8.7, or exchanged pursuant to the Exchange Rights
Agreement on any day other than the first day of a Partnership Year,
the Net Income, Net Losses, each item thereof, and all other Tax Items
attributable to such interest for such Partnership Year shall be
divided and allocated between the transferor Partner and the
transferee Partner by taking into account their varying interests
during the Partnership Year in accordance with Section 706(d) of the
Code, using the interim closing of the books method. Solely for
purposes of making such allocations, each of such items for the
calendar month in which the Transfer or assignment occurs shall be
allocated to the transferee Partner, and none of such items for the
calendar month in which an exchange occurs shall be allocated to the
exchanging Partner, provided, however, that the General Partner may
adopt such other conventions relating to allocations in connection
with transfers, assignments, or exchanges as it determines are
necessary or appropriate. All distributions of Available Cash
attributable to such L.P. Units with respect to which the Partnership
Record Date is before the date of such transfer, assignment, or
exchange shall be made to the transferor Partner or the exchanging
Partner, as the case may be, and in the case of a Transfer or
assignment other than an exchange, all distributions of Available Cash
thereafter attributable to such L.P. Units shall be made to the
transferee Partner.
ARTICLE 12. ADMISSION OF PARTNERS.
12.1 ADMISSION OF SUCCESSOR GENERAL PARTNER. A successor to all of the
General Partner Interest pursuant to Article 11 hereof who is proposed to be
admitted as a successor General Partner shall be admitted to the Partnership as
the General Partner, effective upon the Transfer. Any such transferee shall
carry on the business of the Partnership without dissolution. In each case, the
admission shall be subject to the successor General Partner executing and
delivering to the Partnership an acceptance of all of the terms and conditions
of this Agreement, the Acquisition Agreement, and such other documents or
instruments as may be required to effect the admission. In the case of such
admission on any day other than the first day of a Partnership Year, all items
attributable to the General Partner Interest for such Partnership Year shall be
allocated between the transferring General Partner and such successor as
provided in Section 11.6D.
12.2 ADMISSION OF ADDITIONAL AND SUBSTITUTED LIMITED PARTNERS.
A. A Person who makes a Capital Contribution to the Partnership in
accordance with this Agreement after the Effective Date and a
Permitted Transferee pursuant to Article 11 shall be admitted to the
Partnership as an Additional Limited Partner or a Substituted Limited
Partner only upon furnishing to the General Partner (i) evidence of
acceptance in form satisfactory to the General Partner of all of the
terms and conditions of this Agreement and the Acquisition Agreement,
including, without limitation, the power of attorney granted in
Section 2.4 hereof and (ii) such other
-41-
<PAGE>
documents or instruments as may be required in the discretion of the
General Partner in order to effect such Person's admission as an
Additional Limited Partner.
B. Notwithstanding anything to the contrary in this Section 12.2, no
Person shall be admitted as an Additional Limited Partner or a
Substituted Limited Partner without the consent of the General
Partner, which consent may be given or withheld in the General
Partner's sole and absolute discretion. The admission of any Person as
an Additional Limited Partner or a Substituted Limited Partner shall
become effective on the date upon which the name of such Person is
recorded on the books and records of the Partnership, following the
consent of the General Partner to such admission.
C. If any Additional Limited Partner is admitted to the Partnership on
any day other than the first day of a Partnership Year, then Net
Income, Net Losses, each other Tax Item and all other items allocable
among Partners and Assignees for such Partnership Year shall be
allocated among such Additional Limited Partner and all other Partners
and Assignees by taking into account their varying interests during
the Partnership Year in accordance with Section 706(d) of the Code,
using the interim closing of the books method. Solely for purposes of
making such allocations, each of such items for the calendar month in
which an admission of any Additional Limited Partner occurs shall be
allocated among all of the Partners and Assignees, including such
Additional Limited Partner. All distributions of Available Cash with
respect to which the Partnership Record Date is before the date of
such admission shall be made solely to Partners and Assignees, other
than the Additional Limited Partner, and all distributions of
Available Cash thereafter shall be made to all of the Partners and
Assignees, including such Additional Limited Partner.
D. A transferee who has been admitted as a Substituted Limited Partner or
an Additional Limited Partner shall have all the rights and powers and
be subject to all the restrictions and liabilities of a Limited
Partner under this Agreement.
12.3 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP. For
the admission to the Partnership of any Partner, the General Partner shall take
all steps necessary and appropriate under the Act to amend the records of the
Partnership and, if necessary, to prepare as soon as practical an amendment of
this Agreement (including an amendment of Appendix I) and, if required by law,
shall prepare and file an amendment to the Certificate and may for this purpose
exercise the power of attorney granted pursuant to Section 2.4 hereof.
ARTICLE 13. DISSOLUTION, LIQUIDATION AND TERMINATION.
13.1 DISSOLUTION. The Partnership shall not be dissolved by the admission
of Substituted Limited Partners or Additional Limited Partners or by the
admission of a successor General Partner in accordance with the terms of this
Agreement. In the event of the withdrawal of the General Partner, any successor
General Partner shall continue the business of the Partnership. The Partnership
shall dissolve, and its affairs
-42-
<PAGE>
shall be wound up, only upon the first to occur of any of the following
("Liquidating Events"):
(i) the expiration of its term as provided in Section 2.5 hereof;
(ii) an event of withdrawal of the General Partner, as defined in the
Act (other than an event of bankruptcy), unless, within 90 days after such
event of withdrawal a majority in interest of the remaining Partners agree
in writing to continue the business of the Partnership and to the
appointment, effective as of the date of withdrawal, of a successor General
Partner;
(iii)from and after the date of this Agreement through December 31,
2048, an election to dissolve the Partnership made by the General Partner,
with the Consent of Limited Partners holding 66-2/3% or more of the L.P.
Units (including L.P. Units held by the Company);
(iv) on or after January 1, 2049, an election to dissolve the
Partnership made by the General Partner, in its sole and absolute
discretion;
(v) entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Act;
(vi) the sale of all or substantially all of the assets and properties
of the Partnership;
(vii) a final and non-appealable judgment is entered by a court of
competent jurisdiction ruling that the General Partner is bankrupt or
insolvent, or a final and non-appealable order for relief is entered by a
court with appropriate jurisdiction against the General Partner, in each
case under any federal or state bankruptcy or insolvency laws as now or
hereafter in effect, unless prior to the entry of such order or judgment
all of the remaining Partners agree in writing to continue the business of
the Partnership and to the appointment, effective as of a date prior to the
date of such order or judgment, of a substitute General Partner.
13.2 WINDING UP.
A. Upon the occurrence of a Liquidating Event, the Partnership shall
continue solely for the purposes of winding up its affairs in an
orderly manner, liquidating its assets, and satisfying the claims of
its creditors and Partners. No Partner shall take any action that is
inconsistent with, or not necessary to or appropriate for, the winding
up of the Partnership's business and affairs. The General Partner, or,
in the event there is no remaining General Partner, any Person elected
by Limited Partners holding at least a majority of the Limited
Partnership Interests (the General Partner or such other Person being
referred to herein as the "Liquidator"), shall be responsible for
overseeing the winding up and dissolution of the Partnership and shall
take full account of the Partnership's liabilities and property and
the Partnership property shall be liquidated as promptly as is
consistent with obtaining the fair value thereof, and the
-43-
<PAGE>
proceeds therefrom (which may, to the extent determined by the General
Partner, include shares of beneficial interest or other securities of
the Company) shall be applied and distributed in the following order:
(i) First, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors other than the
Partners;
(ii) Second, to the payment and discharge of all of the
Partnership's debts and liabilities to the General Partner;
(iii)Third, to the payment and discharge of all of the
Partnership's debts and liabilities to the other Partners;
(iv) Fourth, to the General Partner and Limited Partners to the
extent of and in accordance with the positive balances in their
Capital Accounts, after giving effect to all contributions,
distributions, and allocations for all periods; and
(v) The balance, if any, to the Partners according to their
Percentage Interests.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2A hereof which require
liquidation of the assets of the Partnership, but subject to the order
of priorities set forth therein, if prior to or upon dissolution of
the Partnership the Liquidator determines that an immediate sale of
part or all of the Partnership's assets would be impractical or would
cause undue loss to the Partners, the Liquidator may, in its sole and
absolute discretion, defer for a reasonable time the liquidation of
any asset except those necessary to satisfy liabilities of the
Partnership (including to those Partners as creditors) and/or
distribute to the Partners, in lieu of cash, as tenants in common and
in accordance with the provisions of Section 13.2A hereof, undivided
interests in such Partnership assets as the Liquidator deems not
suitable for liquidation. Any such distributions in kind shall be made
only if, in the good faith judgment of the Liquidator, such
distributions in kind are in the best interests of the Partners, and
shall be subject to such conditions relating to the disposition and
management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such
properties at such time. The Liquidator shall determine the fair
market value of any property distributed in kind using such reasonable
method of valuation as it may adopt.
C. In the discretion of the Liquidator, a pro rata portion of the
distributions that would otherwise be made to the General Partner and
Limited Partners pursuant to this Article 13 may be:
(1) distributed to a trust established for the benefit of the
General Partner and Limited Partners for the purposes of liquidating
Partnership assets,
-44-
<PAGE>
collecting amounts owed to the Partnership, and paying any contingent
or unforeseen liabilities or obligations of the Partnership or the
General Partner arising out of or in connection with the Partnership.
The assets of any such trust shall be distributed to the General
Partner and Limited Partners from time to time, in the reasonable
discretion of the Liquidator, in the same proportions as the amount
distributed to such trust by the Partnership would otherwise have been
distributed to the General Partner and Limited Partners pursuant to
this Agreement; or
(2) withheld or escrowed to provide a reasonable reserve for
Partnership liabilities (contingent or otherwise) and to reflect the
unrealized portion of any installment obligations owed to the
Partnership, provided that such withheld or escrowed amounts shall be
distributed to the General Partner and Limited Partners in the manner
and order of priority set forth in Section 13.2A as soon as
practicable.
13.3 OBLIGATION TO CONTRIBUTE DEFICIT. In the event the Partnership is
"liquidated" within the meaning Section 1.704-1(b)(2)(ii)(G) of the Regulations,
if any Partner's Adjusted Contributions are less than zero (after giving effect
to all contributions, distributions, and allocations for all Fiscal Years,
including the Fiscal Year during which such liquidation occurs), such Partner
shall contribute to the capital of the Partnership the amount necessary to
restore such Partner's Capital Account to zero in compliance with Regulations
Section 1.704-1(b)(2(ii)(B)(3).
13.4 RIGHTS OF LIMITED PARTNERS. Except as otherwise provided in this
Agreement, each Limited Partner shall look solely to the assets of the
Partnership for the return of its Adjusted Capital Contributions and shall have
no right or power to demand or receive property other than cash from the
Partnership. Except as otherwise provided in this Agreement, no Limited Partner
shall have priority over any other Partner as to the return of its Adjusted
Capital Contributions, distributions, or allocations.
13.5 NOTICE OF DISSOLUTION. In the event a Liquidating Event occurs or an
event occurs that would, but for the provisions of an election or objection by
one or more Partners pursuant to Section 13.1, result in a dissolution of the
Partnership, the General Partner shall, within 30 days thereafter, provide
written notice thereof to each of the Partners.
13.6 TERMINATION OF PARTNERSHIP AND CANCELLATION OF CERTIFICATE OF LIMITED
PARTNERSHIP. Upon the completion of the liquidation of the Partnership' s
assets, as provided in Section 13.2 hereof, the Partnership shall be terminated,
a certificate of cancellation shall be filed, and all qualifications of the
Partnership as a foreign limited partnership in jurisdictions other than the
state of Delaware shall be canceled and such other actions as may be necessary
to terminate the Partnership shall be taken.
13.7 REASONABLE TIME FOR WINDING-UP. A reasonable time shall be allowed
for the orderly winding-up of the business and affairs of the Partnership and
the
-45-
<PAGE>
liquidation of its assets pursuant to Section 13.2 hereof in order to minimize
any losses otherwise attendant upon such winding-up, and the provisions of this
Agreement shall remain in effect among the Partners during the period of
liquidation.
13.8 WAIVER OF PARTITION. Each Partner hereby waives any right to
partition of the Partnership property.
13.9 DEEMED DISTRIBUTION AND RECONTRIBUTION. Notwithstanding any other
provisions of this Article 13, in the event the Partnership is liquidated within
the meaning of Regulations Section 1.704-1(b)(2)(ii)(G) but no Liquidating Event
has occurred, the Property shall not be liquidated, the Partnership's
liabilities shall not be paid or discharged, and the Partnership's affairs shall
not be wound up. Instead, the Partnership shall be deemed to have distributed
the Property in kind to the Partners, who shall be deemed to have assumed and
taken subject to all Partnership liabilities, all in accordance with their
respective Capital Accounts, and if any Partner has an Adjusted Capital Account
Deficit (after giving effect to all contributions, distributions, and
allocations for all Fiscal Years, including the Fiscal Year during which such
liquidation occurs) such Partner shall contribute to the capital of the
Partnership the amount necessary to restore such deficit balance to zero in
compliance with Regulations Section 1.704-1(b)(2(ii)(B)(3). Immediately
thereafter, the Partners shall be deemed to have recontributed the property in
kind to the Partnership, which shall be deemed to have assumed and taken subject
to all such liabilities.
ARTICLE 14. AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS.
14.1 AMENDMENTS.
A. Amendments to this Agreement may be proposed by the General Partner or
by any Limited Partners (other than the Company) holding in the
aggregate 25% or more of the Partnership Interests. Following such
proposal, the General Partner shall submit any proposed amendment to
the Limited Partners. The General Partner shall seek the written vote
of the Partners on the proposed amendment or shall call a meeting to
vote thereon and to transact any other business that it may deem
appropriate. For purposes of obtaining a written vote, the General
Partner may require a response within a reasonable specified time, but
not less than 15 days, and failure to respond in such time period
shall constitute a vote which is consistent with the General Partner's
recommendation with respect to the proposal. Except as provided in
Section 8.9, 13.1C, 14.1B, 14.1C or 14.1D, a proposed amendment shall
be adopted and be effective as an amendment hereto if it is approved
by the General Partner and it receives the Consent of Limited Partners
holding 50% or more of the Percentage Interests of the Limited
Partners (including Limited Partner Interests held by the Company).
B. Notwithstanding any provisions of Sections 8.9 and 14.1A to the
contrary, the General Partner shall have the power, without the
consent of the Limited Partners,
-46-
<PAGE>
to amend this Agreement as may be required to facilitate or implement
any of the following purposes:
(1) to add to the obligations of the General Partner or surrender
any right or power granted to the General Partner or any Affiliate of
the General Partner for the benefit of the Limited Partners;
(2) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement;
(3) to set forth the designations, rights, powers, duties, and
preferences of the holders of any additional Partnership Interests
issued pursuant to Section 4.3 hereof;
(4) to reflect a change that is of an inconsequential nature and
does not adversely affect the Limited Partners in any material
respect, or to cure any ambiguity, correct or supplement any provision
in this Agreement not inconsistent with law or with other provisions,
or make other changes with respect to matters arising under this
Agreement that will not be inconsistent with law or with the
provisions of this Agreement; and
(5) to satisfy any requirements, conditions, or guidelines
contained in any order, directive, opinion, ruling or regulation of a
federal or state agency or contained in federal or state law.
The General Partner shall provide notice to the Limited Partners when any action
under this Section 14.1B is taken.
C. Notwithstanding provision of Section 14.1A and 14.1B to the contrary,
this Agreement shall not be amended without the Consent of each
Partner adversely affected if such amendment would (i) convert a
Limited Partner's interest in the Partnership into a General Partner
Interest; (ii) modify the limited liability of a Limited Partner in a
manner adverse to such Limited Partner; (iii) alter rights of the
Partner to receive distributions pursuant to Article 5 or Article 13,
or the allocations specified in Article 6 (except as permitted
pursuant to Article IV and Section 14.1B(3) hereof); (iv) cause the
termination of the Partnership prior to the time set forth in Section
2.5 or 13.1; or (v) amend this Section 14.1C. Further, no amendment
may alter the restrictions on the General Partner' s authority set
forth in Section 13.1C without the Consent specified in that section.
14.2 MEETINGS OF THE PARTNERS.
A. Meetings of the Partners may be called by the General Partner and
shall be called upon the receipt by the General Partner of a written
request by Limited Partners (other than the Company) holding 25% or
more of the Partnership Interests. The request shall state the nature
of the business to be transacted. Notice of any such meeting shall be
given to all Partners not less than 7 days nor more than 30 days prior
-47-
<PAGE>
to the date of such meeting. Partners may vote in person or by proxy
at such meeting. Whenever the vote or Consent of the Limited Partners
is permitted or required under this Agreement, such vote or Consent
may be given at a meeting of the Partners or may be given in
accordance with the procedure prescribed in Section 14.1A hereof.
Except as otherwise expressly provided in this Agreement, the consent
of holders of a majority of the Percentage Interests held by Partners
(including Limited Partnership Interests held by the Company) shall
control.
B. Any action required or permitted to be taken at a meeting of the
Partners may be taken without a meeting if a written consent setting
forth the action so taken is signed by a majority of the Percentage
Interests of the Partners (or such other percentage as is expressly
required by this Agreement). Such consent may be in one instrument or
in several instruments, and shall have the same force and effect as a
vote of a majority of the Percentage Interests of the Partners (or
such other percentage as is expressly required by this Agreement).
Such consent shall be filed with the General Partner. An action so
taken shall be deemed to have been taken at a meeting held on the
effective date so certified.
C. Each Limited Partner may authorize any Person or Persons to act for
him by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the Limited
Partner or his attorney-in-fact. No proxy shall be valid after the
expiration of 11 months from the date thereof unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure
of the Limited Partner executing it, such revocation to be effective
upon the Partnership's receipt of written notice of such revocation
from the Limited Partner executing such proxy.
D. Each meeting of the Partners shall be conducted by the General Partner
or such other Person as the General Partner may appoint pursuant to
such rules for the conduct of the meeting as the General Partner or
such other Person deems appropriate. Meetings of Partners may be
conducted in the same manner as meetings of the shareholders of the
Company and may be held at the same time, and as part of, meetings of
the shareholders of the Company.
ARTICLE 15. GENERAL PROVISIONS.
15.1 ADDRESSES AND NOTICE. Any notice, demand, request or report required
or permitted to be given or made to a Partner or Assignee under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other means of written
communication to the Partner or Assignee (including electronic mail and
electronic facsimile transmission if delivery in that manner has been confirmed)
at the address set forth in Appendix I or such other address of which the
Partner shall notify the General Partner in writing.
15.2 TITLES AND CAPTIONS. All article or section titles or captions in
this Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions
-48-
<PAGE>
hereof. Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
15.3 PRONOUNS AND PLURALS. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
15.4 FURTHER ACTION. The parties shall execute and deliver all documents,
provide all information and take or refrain from taking action as may be
necessary or appropriate to achieve the purposes of this Agreement.
15.5 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assigns.
15.6 CREDITORS. Other than as expressly set forth herein with respect to
the Indemnitees, none of the provisions of this Agreement shall be for the
benefit of, or shall be enforceable by, any creditor of the Partnership.
15.7 WAIVER. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or condition.
15.8 COUNTERPARTS. This Agreement may be executed in counterparts, all of
which together shall constitute one agreement binding on all of the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
15.9 APPLICABLE LAW. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of laws thereof.
15.10 INVALIDITY OF PROVISIONS. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
15.11 ENTIRE AGREEMENT. This Agreement contains the entire understanding
and agreement among the Partners with respect to the subject matter hereof and
supersedes any other prior written or oral understandings or agreements among
them with respect thereto.
15.12 GUARANTY BY THE COMPANY. The Company unconditionally and irrevocably
guarantees to the Limited Partners the performance by the General Partner
-49-
<PAGE>
of the General Partner' s obligations under this Agreement. This guarantee is
exclusively for the benefit of the Limited Partners and shall not extend to the
benefit any creditor of the Partnership.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
MISSION WEST PROPERTIES, A CALIFORNIA CORPORATION
By: /s/ Michael J. Anderson
-------------------------------------
Michael J. Anderson
Its: Vice President and Chief Operating Officer
LIMITED PARTNERS:
/s/ Carl E. Berg
- ----------------------------------------
CARL E. BERG
/s/ Mary Ann Berg
- -----------------------------------------
MARY ANN BERG
/s/ Clyde J. Berg
- -----------------------------------------
CLYDE J. BERG
<PAGE>
<TABLE>
<CAPTION>
APPENDIX I
PARTNERS' [ADJUSTED] CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Name and Address Cash Agreed Total L.P. Percentage
of Partner Contributions Value Contribution Units Interest
of **
Contributed
Property**
=================================================================================================
GENERAL PARTNER
<S> <C> <C>
Mission West --- 10.91%
Properties
10050 Bandley Drive
Cupertino, CA 95014
LIMITED PARTNERS
Carl E. and Mary 18,024,576 44.545%
Ann Berg
10050 Bandley Drive
Cupertino, CA 95014
Clyde J. Berg 18,024,576 44.545%
10050 Bandley Drive
Cupertino, CA 95014
</TABLE>
* The Company's Cash Contribution shall be increased by all transaction costs
paid by the Company out of the Company cash pursuant to the Acquisition
Agreement.
** To be completed upon final adjustment of accounts at July 1, 1998 and
preparation of 1998 federal income tax return.
<PAGE>
APPENDIX II
ALLOCATIONS OF PARTNERSHIP INTERESTS
1. ALLOCATION OF NET INCOME AND NET LOSS.
(a) NET INCOME. Except as otherwise provided in this Appendix II, Net
Income (or items thereof) (other than Net Income, or items thereof, arising in
connection with a Terminating Capital Transaction) for any fiscal year or other
applicable period shall be allocated to the Partners in accordance with their
respective Percentage Interests.
(b) NET LOSS. Except as otherwise provided in this Appendix II, Net Loss
(or items thereof) of the Partnership for each fiscal year or other applicable
period shall be allocated to the Partners in accordance with the Partners'
respective Percentage Interests. Notwithstanding the preceding sentence, to the
extent any Net Loss (or items thereof) allocated to a Partner under this
subparagraph (b) would cause such Partner (hereinafter, a "Restricted Partner")
to have an Adjusted Capital Account Deficit, or increase the amount of an
existing Adjusted Capital Account Deficit, as of the end of the fiscal year or
other applicable period to which such Net Loss relates, such Net Loss shall not
be allocated to such Restricted Partner and instead shall be allocated to the
other Partner(s) (hereinafter, the "Permitted Partners") pro rata in accordance
with each Permitted Partner's Percentage Interest.
(c) TERMINATING CAPITAL TRANSACTION; LIQUIDATION. Allocations of Net
Income or Net Loss (or items thereof) in connection with a Terminating Capital
Transaction or Liquidation of the Partnership shall first be made so that, to
the extent possible, each Partner's Capital Account balance is equal to such
Partner's Adjusted Contribution, and the remainder of such Net Income or Net
Loss (or items thereof) shall be allocated to the Partners in accordance with
their Percentage Interests. Notwithstanding the preceding sentence, to the
extent any Net Loss (or items thereof) would be allocated to a Restricted
Partner under this subparagraph (c), such Net Loss shall not be allocated to
such Restricted Partner and instead shall be allocated to the Permitted Partners
pro rata in accordance with each Permitted Partner's Percentage Interest.
(d) RULES OF CONSTRUCTION.
(1) CAPITAL ACCOUNT INCREASES. For purposes of making allocations
pursuant to subparagraph 1(c) of this Appendix II, a Partner's Capital Account
balance shall be deemed to be increased by such Partner's share of any
Partnership Minimum Gain and Partner Minimum Gain remaining at the close of the
fiscal period in respect of which such allocations are being made.
(2) CHANGE IN PERCENTAGE INTERESTS. In the event any Partner's
Percentage Interest changes during a fiscal year for any reason, including
without limitation, the Transfer of any interest in the Partnership, the tax
allocations contained in this Appendix II shall be applied as necessary to
reflect the varying interests of the Partners during such year.
2. SPECIAL ALLOCATIONS.
Notwithstanding any provisions of paragraph 1 of this Appendix II, the
following special allocations shall be made.
(a) MINIMUM GAIN CHARGEBACK (NONRECOURSE LIABILITIES). Except as otherwise
provided in Section 1.704-2(f) of the Regulations, if there is a net decrease in
Partnership Minimum Gain for any Partnership fiscal year, each Partner shall be
specially allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount equal to such Partner's share of the
net decrease in Partnership Minimum Gain to the extent required by Regulations
Section 1.704-2(f). The items to be so allocated shall be determined in
accordance with Sections 1.704-2(f) and (j)(2) of the Regulations. This
subparagraph 2(a) is intended to comply with the minimum gain chargeback
requirement in said section of the Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this subparagraph 2(a) shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant hereto.
(b) PARTNER MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Section 1.704-2(i)(4) of the Regulations, if there is a net decrease in Partner
Minimum Gain attributable to a Partner Nonrecourse Debt during any fiscal year,
each Partner who has a share of the Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Section 1.704- 2(i)(5)
of the Regulations, shall be specially allocated items of Partnership income and
gain for such year (and, if necessary, subsequent years) in an amount equal to
that Partner's share of the net decrease in the Partner Minimum Gain
attributable to such Partner Nonrecourse Debt to the extent and in the manner
required by Section 1.704-2(i) of the Regulations. The items to be so allocated
shall be determined in accordance with Sections 1.704-2(i)(4) and (j)(2) of the
Regulations. This subparagraph 2(b) is intended to comply with the minimum gain
chargeback requirement with respect to Partner Nonrecourse Debt contained in
said Section 1.704-2(i)(4) of the Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this subparagraph 2(b) shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant hereto.
(c) QUALIFIED INCOME OFFSET. In the event a Partner unexpectedly receives
any adjustments, allocations or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, and such Partner has an
Adjusted Capital Account Deficit, items of Partnership income (including gross
income) and gain shall be specially allocated to such Partner in an amount and
manner sufficient to eliminate the Adjusted Capital Account Deficit as quickly
as possible as required by the Regulations. This subparagraph 2(c) is intended
to constitute a "qualified income offset" under Section 1.704-1(b)(2)(ii)(d) of
the Regulations and shall be interpreted consistently therewith.
(d) OTHER CHARGEBACK OF IMPERMISSIBLE NEGATIVE CAPITAL ACCOUNT. To the
extent any Partner has an Adjusted Capital Account Deficit at the end of any
Partnership Year, each such Partner shall be specially allocated items of
Partnership income (including gross income) and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
paragraph 2(d) shall be made if and only to the extent that such Partner would
have an Adjusted Capital Account Deficit after all other allocations provided
for in this Appendix II have been tentatively made as if this paragraph 2(d)
were not in the Agreement.
(e) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any fiscal year or
other applicable period shall be allocated to the Partners in accordance with
their respective Percentage Interests.
(f) PARTNER NONRECOURSE DEDUCTIONS. Partner Nonrecourse Deductions for any
fiscal year or other applicable period with respect to a Partner Nonrecourse
Debt shall be specially allocated to the Partner that bears the economic risk of
loss for such Partner Nonrecourse Debt (as determined under Sections
1.704-2(b)(4) and 1.704-2(i)(1) of the Regulations).
(g) INTENT OF ALLOCATIONS. The parties intend that the allocation
provisions of this Appendix II shall result in final Capital Account balances of
the Partners that initially are equal to each Partner's Adjusted Contribution
and are then in proportion to the Partners' respective Percentage Interests, so
that when liquidating distributions are made in accordance with such final
Capital Account balances under Section 13.2A(4) hereof, such distributions will
be able to return to each Partner its Adjusted Contribution and then will be
made in proportion to the Partners' respective Percentage Interests. To the
extent that such final Capital Account balances do not so reflect the provisions
of this Appendix II, income and loss of the Partnership for the current year and
future years, as computed for book purposes, shall be allocated among the
Partners so as to result in final Capital Account balances reflecting the
provisions of this Appendix II, and to the extent such allocations of items of
income (including gross income) and deduction do not result in such final
Capital Account balances, then, income and loss of the Partnership for prior
open years, as computed for book purposes (or items of gross income and
deduction of the Partnership for such years, as computed for book purposes)
shall be reallocated among the Partners consistent with the foregoing. This
subparagraph shall control notwithstanding any reallocation of income, loss, or
items thereof, as computed for book purposes, by the Internal Revenue Service or
any other taxing authority.
(h) SECTION 754 ADJUSTMENT. To the extent an adjustment to the adjusted
tax basis of any asset of the Partnership pursuant to Section 734(b) of the Code
or Section 743(b) of the Code is required pursuant to Regulations Section
1.704-1(b)(2)(iv)(m) to be taken into account in determining Capital Accounts,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such gain or loss shall be specially
allocated among the Partners in a manner consistent with the manner in which
each of their respective Capital Accounts are required to be adjusted pursuant
to such section of the Regulations.
(i) GROSS INCOME ALLOCATION. There shall be specially allocated to the
General Partner an amount of Partnership income and gain during each Partnership
Year or portion thereof, before any other allocations are made hereunder, which
is equal to the excess, if any, of the cumulative distributions of cash made to
the General Partner under Section 7.3B hereof over the cumulative allocations of
Partnership income and gain to the General Partner pursuant to this Section (i)
of this Appendix II.
3. TAX ALLOCATIONS.
(a) ITEMS OF INCOME OR LOSS. Except as is otherwise provided in this
Appendix II, an allocation of Partnership Net Income or Net Loss to a Partner
shall be treated as an allocation to such Partner of the same share of each item
of income, gain, loss, deduction and item of tax-exempt income or Section
705(a)(2)(B) expenditure (or item treated as such expenditure pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i)) ("Tax Items") that is taken into
account in computing Net Income or Net Loss.
(b) SECTION 1245/1250 RECAPTURE. If any portion of gain from the sale of
Partnership assets is treated as gain which is ordinary income by virtue of the
application of Code Sections 1245 or 1250 ("Affected Gain"), then such Affected
Gain shall be allocated among the Partners in the same proportion that the
depreciation and amortization deductions giving rise to the Affected Gain were
allocated. This subparagraph 3(b) shall not alter the amount of Net Income (or
items thereof) allocated among the Partners, but merely the character of such
Net Income (or items thereof). For purposes hereof, in order to determine the
proportionate allocations of depreciation and amortization deductions for each
fiscal year or other applicable period, such deductions shall be deemed
allocated on the same basis as Net Income and Net Loss for such respective
period.
(c) PRECONTRIBUTION GAIN. The Partnership may elect the traditional method
of allocation contained in Section 1.704- 3(b) of the Regulations to take into
account any variation between the adjusted basis and the fair market value of
the Initial Contributed Property at the time of the contribution
("Precontribution Gain") on a Property-by-Property basis. By executing this
Agreement, each Partner hereby agrees to report income, gain, loss and deduction
on such Partner's federal income tax return in a manner that is consistent with
the use of the traditional method of allocation with respect to the Initial
Contributed Property. With respect to any Contributed Property, the Partnership
shall use any permissible method contained in the Regulations promulgated under
Section 704(c) of the Code selected by the General Partner, in its sole
discretion, to take into account any variation between the adjusted basis of
such asset and the fair market value of such asset as of the time of the
contribution. Each Partner hereby agrees to report income, gain, loss and
deduction on such Partner's federal income tax return in a manner consistent
with the method used by the Partnership.
(d) ALLOCATIONS RESPECTING SECTION 704(C) AND REVALUATIONS. If any asset
has a Gross Asset Value which is different from the Partnership's adjusted basis
for such asset for federal income tax purposes because the Partnership has
revalued such asset pursuant to Regulations Section 1.704-1(b)(2)(iv)(f), the
allocations of Tax Items shall be made in accordance with the principles of
Section 704(c) of the Code and the Regulations and the methods of allocation
promulgated thereunder, provided, however, that the General Partner shall elect
with respect to each Initial Contributed Property, to allocate the income, gain,
loss and deduction with respect to such Property using the "traditional method"
described in Regulations Section 1.704-3(b) unless the majority of the Limited
Partners affected thereby otherwise instruct the General Partner. The intent of
this Section 3(d) and Section 3(c) above is that each Partner who contributed to
the capital of the Partnership a Contributed Property will bear, through reduced
allocations of depreciation, increased allocations of gain or other items, the
tax detriments associated with any Precontribution Gain. This Section 3(d) and
Section 3(c) are to be interpreted consistently with such intent.
(e) EXCESS NONRECOURSE LIABILITY SAFE HARBOR. Pursuant to Regulations
Section 1.752-3(a)(3), solely for purposes of determining each Partner's
proportionate share of the "excess nonrecourse liabilities" of the Partnership
(as defined in Regulations Section 1.752-3(a)(3)), the Partners' respective
interests in Partnership profits shall be determined in accordance with each
Partner's Percentage Interest; provided, however, that each Partner who has
contributed an asset to the Partnership shall be allocated, to the extent
possible, a share of "excess nonrecourse liabilities" of the Partnership which
results in such Partner being allocated nonrecourse liabilities in an amount
which is at least equal to the amount of income pursuant to Section 704(c) of
the Code and the Regulations promulgated thereunder (the "Liability Shortfall").
In the event there is an insufficient amount of nonrecourse liabilities to
allocate to each Partner an amount of nonrecourse liabilities equal to the
Liability Shortfall, then an amount of nonrecourse liabilities in proportion to,
and to the extent of, the Liability Shortfall shall be allocated to each
Partner.
(f) REFERENCES TO REGULATIONS. Any reference in this Appendix II or the
Agreement to a provision of proposed and/or temporary Regulations shall, in the
event such provision is modified or renumbered, be deemed to refer to the
successor provision as so modified or renumbered, but only to the extent such
successor provision applies to the Partnership under the effective date rules
applicable to such successor provision.
(g) SUCCESSOR PARTNERS. For purposes of this Appendix II, a transferee of
a Partnership Interest shall be deemed to have been allocated the Net Income,
Net Loss and other items of Partnership income, gain, loss, deduction and credit
allocable to the transferred Partnership Interest that previously have been
allocated to the transferor Partner pursuant to this Agreement.
(h) LIMITATION TO PRESERVE REIT STATUS. Notwithstanding anything else in
this Agreement, to the extent that the amount paid, credited, distributed or
reimbursed by the Partnership or any Partners to, for or with respect any
Partner that is a REIT ("REIT Partner") or its officers, directors, employees or
agents, whether as a reimbursement, fee, expense or indemnity (a "REIT
Payment"), would constitute gross income to the REIT Partner for purposes of
Section 856 (c)(2) or Section 856(c)(3) of the Code, then, notwithstanding any
other provision of this Agreement, the amount of such REIT Payments, as selected
by the General Partner in its discretion from among items of potential
distribution, reimbursement, fees, expenses and indemnities, shall be reduced
for any Fiscal Year so that the REIT Payments, as so reduced, to, for or with
respect to such REIT Partner shall not exceed the lesser of:
(i) an amount equal to the excess, if any, of (x) four and
nine-tenths percent (4.9%) of the REIT Partner total gross income (but excluding
the amount of any REIT Payments) for the Fiscal Year that is described in
subsections (A) through (H) of Section 856(c)(2) over (y) the amount of gross
income (within the meaning of Section 856(c)(2)) derived by the REIT Partner
from sources other than those described in subsections (A) through (H) of
Section 856(c)(2) (but not including the amount of any REIT Payments); or
(ii) an amount equal to the excess, if any, of (x) 24% of the REIT
Partner's total gross income (but excluding the amount of any REIT Payments) for
the Fiscal Year that is described in subsections (A) through (I) of Section
856(c)(3) over (y) the amount of gross income (within the meaning of Section
856(c)(3)) derived by the REIT Partner from sources other than those described
in subsections (A) through (I) of Section 856(c)(3) (but not including the
amount of any REIT Payments);
PROVIDED, HOWEVER, that REIT payments in excess of the amounts set forth in
clauses (i) and (ii) above may be made if the General Partner, as a condition
precedent, obtains an opinion of tax counsel that the receipt of such excess
amounts shall not adversely affect the REIT Partner's ability to qualify as a
REIT. To the extent that REIT Payments may not be made in a Fiscal Year as a
consequence of the limitations set forth in this Section 3(h), such REIT
Payments shall carry over and shall be treated as arising in the following
Fiscal Year. Nothing in this Section 3(h) shall permit the General Partner to
allocate income of the Partnership to any Partner in excess of the income that
would otherwise be allocated to it under Article 6 without regard to this
Section 3(h). The purpose of the limitations contained in this Section 3(h) is
to prevent any REIT Partner from failing to qualify as a REIT under the Code by
reason of such REIT Partner's share of items, including distributions,
reimbursements, fees, expenses or indemnities, receivable directly or indirectly
from the Partnership or the Partners, and this Section 3(h) shall be interpreted
and applied to effectuate such purpose.
<PAGE>
- ---------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
MISSION WEST PROPERTIES, L.P. III
JULY 1, 1998
- ---------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
ARTICLE 1. Defined Terms..........................................2
1.1 "Act".......................................................2
1.2 "Acquisition Agreement".....................................2
1.3 "Additional Limited Partner"................................2
1.4 "Adjusted Capital Account Deficit"..........................2
1.5 "Adjusted Contribution".....................................2
1.6 "Affiliate".................................................3
1.7 "Agreement".................................................3
1.8 "Articles of Incorporation".................................3
1.9 "Assignee"..................................................3
1.10 "Available Cash"...........................................3
1.11 "Berg Acquisition".........................................3
1.12 "Berg Group"...............................................3
1.13 "Berg Land Holdings".......................................3
1.14 "Capital Account"..........................................4
1.15 "Capital Contribution".....................................5
1.16 "Capital Event"............................................5
1.17 "Certificate"..............................................5
1.18 "Change of Control Transaction"............................5
1.19 "Charter"..................................................5
1.20 "Code".....................................................5
1.21 "Common Stock".............................................5
1.22 "Common Stock Price".......................................6
1.23 "Company"..................................................6
1.24 "Consent"..................................................6
1.25 "Depreciation".............................................6
1.26 "Dividend Reinvestment Plan"...............................6
1.27 "Effective Date"...........................................6
1.28 "Employee Benefit Plan"....................................6
1.29 "Entity"...................................................7
1.30 "Equity Security"..........................................7
1.31 "ERISA"....................................................7
1.32 "Exchange Act".............................................7
1.33 "Exchange Factor"..........................................7
1.34 "Exchange Right"...........................................7
1.35 "Exchange Rights Agreement"................................7
1.36 "GAAP".....................................................7
1.37 "General Partner"..........................................7
1.38 "General Partner Interest".................................7
1.39 "Gross Asset Value"........................................7
1.40 "Immediate Family".........................................8
1.41 "Incapacity" or "Incapacitated"............................8
1.42 "Indemnitee"...............................................9
1.43 "Initial Contributed Property".............................9
- i -
<PAGE>
1.44 "Lien".....................................................9
1.45 "Limited Partner".........................................10
1.46 "Limited Partner Interest"................................10
1.47 "Liquidating Event".......................................10
1.48 "Liquidator"..............................................10
1.49 "L.P. Unit"...............................................10
1.50 "L.P. Unit Majority"......................................10
1.51 "Net Income" or "Net Loss"................................10
1.52 "New Equity Financing Right"..............................11
1.53 "Nonrecourse Deductions"..................................11
1.54 "Nonrecourse Liabilities".................................11
1.55 "Operating Partnership"...................................11
1.56 "Partner".................................................11
1.57 "Partner Minimum Gain"....................................11
1.58 "Partner Nonrecourse Debt"................................11
1.59 "Partner Nonrecourse Deductions"..........................11
1.60 "Partnership".............................................12
1.61 "Partnership Interest"....................................12
1.62 "Partnership Minimum Gain"................................12
1.63 "Partnership Record Date".................................12
1.64 "Partnership Year"........................................12
1.65 "Pending Development Projects"............................12
1.66 "Partnership Interest"....................................12
1.67 "Permitted Partners"......................................12
1.68 "Permitted Transferee"....................................12
1.69 "Person"..................................................12
1.70 "Precontribution Gain"....................................12
1.71 "Put Rights"..............................................12
1.72 "Protective Provisions Expiration Date"...................13
1.73 "Quarter".................................................13
1.74 "Regulations".............................................13
1.75 "REIT"....................................................13
1.76 "REIT Requirements".......................................13
1.77 "Restricted Partner"......................................13
1.78 "SEC".....................................................13
1.79 "Securities Act"..........................................13
1.80 "Stock Option Plan".......................................13
1.81 "Subsidiary"..............................................13
1.82 "Substituted Limited Partner".............................13
1.83 "Tax Items"...............................................13
1.84 "Terminating Capital Transaction".........................14
1.85 "Total Market Capitalization".............................14
1.86 "Transfer"................................................14
1.87 "Unit"....................................................14
- ii -
<PAGE>
1.88 "United States Person"....................................14
1.89 "Voting Securities".......................................14
ARTICLE 2. Organizational Matters................................14
2.1 Continuation...............................................14
2.2 Name.......................................................14
2.3 Registered Office and Agent; Principal Office..............15
2.4 Power of Attorney..........................................15
2.5 Term.......................................................16
ARTICLE 3. Purpose...............................................16
3.1 Purpose and Business.......................................16
3.2 Powers.....................................................17
ARTICLE 4. Capital Contributions.................................17
4.1 Capital Contributions of the Partners......................17
4.2 Additional Funds; Restrictions on Company..................17
4.3 Issuance of Additional Partnership Interests; Admission
of Additional Limited Partners.............................19
4.4 Repurchase of Company Equity Securities....................19
4.5 No Third Party Beneficiary.................................20
4.6 No Interest; No Return.....................................20
ARTICLE 5. Distributions.........................................20
5.1 Regular Distributions......................................20
5.2 Qualification as a REIT....................................20
5.3 Withholding................................................21
5.4 Additional Partnership Interests...........................21
5.5 Distributions Upon Liquidation.............................21
ARTICLE 6. Allocations...........................................21
ARTICLE 7. Management and Operation of Business..................21
7.1 Management.................................................21
7.2 Certificate of Limited Partnership.........................22
7.3 Reimbursement of the General Partner and the Company.......23
7.4 Outside Activities of the General Partner..................23
7.5 Contracts with Affiliates..................................23
7.6 Indemnification............................................24
- iii -
<PAGE>
7.7 Liability of the General Partner...........................26
7.8 Limited Partners' Right to Bring Derivative Lawsuits.......27
7.9 Other Matters Concerning the General Partner...............27
7.10 Title to Partnership Assets...............................27
7.11 Reliance by Third Parties.................................28
ARTICLE 8. Rights and Obligations of Limited Partners............28
8.1 Limitation of Liability....................................28
8.2 Management of Business.....................................28
8.3 Outside Activities of Limited Partners.....................29
8.4 Return of Capital..........................................29
8.5 Rights of Limited Partners Relating to the Partnership.....29
8.6 Exchange Rights............................................30
8.7 Put Rights.................................................30
8.8 New Equity Financing Rights................................32
8.9 Matters Requiring L.P. Unit Majority Approval..............32
8.10 Approval of Certain Taxable Sales.........................33
ARTICLE 9. Books, Records, Accounting and Reports................33
9.1 Records and Accounting.....................................33
9.2 Fiscal Year................................................34
ARTICLE 10. Tax Matters..........................................34
10.1 Preparation of Tax Returns................................34
10.2 Tax Elections.............................................34
10.3 Tax Matters Partner.......................................34
10.4 Organizational Expenses...................................36
10.5 Withholding...............................................36
ARTICLE 11. Transfers and Withdrawals............................37
11.1 Transfer..................................................37
11.2 Transfer of the Company's Partnership Interests...........37
11.3 Limited Partners' Rights to Transfer......................37
11.4 Substituted Limited Partners..............................40
11.5 Assignees.................................................40
11.6 Effect of Prohibited Transfer.............................41
11.7 General Provisions........................................41
ARTICLE 12. Admission of Partners................................41
- iv -
<PAGE>
12.1 Admission of Successor General Partner....................41
12.2 Admission of Additional and Substituted Limited Partners..42
12.3 Amendment of Agreement and Certificate of Limited
Partnership...............................................43
ARTICLE 13. Dissolution, Liquidation and Termination.............43
13.1 Dissolution...............................................43
13.2 Winding Up................................................44
13.3 Obligation to Contribute Deficit..........................45
13.4 Rights of Limited Partners................................46
13.5 Notice of Dissolution.....................................46
13.6 Termination of Partnership and Cancellation of
Certificate of Limited Partnership........................46
13.7 Reasonable Time for Winding-Up............................46
13.8 Waiver of Partition.......................................46
13.9 Deemed Distribution and Recontribution....................46
ARTICLE 14. Amendment of Partnership Agreement; Meetings.........47
14.1 Amendments................................................47
14.2 Meetings of the Partners..................................48
ARTICLE 15. General Provisions...................................49
15.1 Addresses and Notice......................................49
15.2 Titles and Captions.......................................49
15.3 Pronouns and Plurals......................................49
15.4 Further Action............................................49
15.5 Binding Effect............................................50
15.6 Creditors.................................................50
15.7 Waiver....................................................50
15.8 Counterparts..............................................50
15.9 Applicable Law............................................50
15.10 Invalidity of Provisions.................................50
15.11 Entire Agreement.........................................50
15.12 Guaranty by the Company..................................50
</TABLE>
- v -
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
MISSION WEST PROPERTIES, L.P. III
This AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF MISSION WEST
PROPERTIES, L.P. III (this "Agreement"), dated as of July 1, 1998, is entered
into by and among Mission West Properties, a California corporation (the
"Company" or the "General Partner") and the parties whose names are set forth on
Appendix I attached hereto (as it may be amended from time to time).
WHEREAS, the Partnership was organized initially as Kontrabecki Associates
I, a California limited partnership and became a limited partnership pursuant to
the Revised Uniform Limited Partnership Act of the State of Delaware by filing a
Certificate of Conversion of Limited Partnership and a Certificate of Limited
Partnership for Mission West Properties, L.P. III with the Secretary of State of
the State of Delaware on July 1, 1998;
WHEREAS, prior to its conversion to a Delaware limited partnership, the
Partnership has been operated and managed by John T. Kontrabecki ("Kontrabecki")
as sole general partner, pursuant to the terms of the Agreement of Limited
Partnership of Kontrabecki Associates I (the "Prior Agreement");
WHEREAS, pursuant to the terms of a Acquisition Agreement dated as of May
14, 1998, as amended as of July 1, 1998 (the "Acquisition Agreement"), the
Company has agreed to acquire a 10.91% general partner interest in the
Partnership and to become the sole general partner in the Partnership upon the
satisfaction of certain conditions set forth in the Acquisition Agreement, which
now have been satisfied or waived by the parties thereto;
WHEREAS, Kontrabecki and all of the limited partners in the Partnership
wish to admit the Company as a general partner, to file the certificate of
limited partnership of the Partnership to reflect the Company's admission as a
general partner, and to amend and restate the Prior Agreement as provided
herein; and
WHEREAS, upon the filing of the Certificate of Conversion of Limited
Partnership and the certificate of limited partnership of the Partnership with
the Secretary of State of the State of Delaware, Kontrabecki intends to resign
as a general
<PAGE>
partner and become a limited partner in the Partnership pursuant to the terms of
this Agreement.
NOW THEREFORE, in consideration of the mutual covenants herein contained,
and other valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties do hereby agree as follows:
ARTICLE 1. DEFINED TERMS.
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the following terms used in this
Agreement.
1.1 "ACT" the Delaware Revised Uniform Limited Partnership Act, as it may
be amended from time to time, and any successor to such statute.
1.2 "ACQUISITION AGREEMENT" means the agreement dated as of May 14, 1998,
as amended as of July 1, 1998, among the Partnership, the other partnerships
comprising the Operating Partnership, all of the partners therein, and the
Company concerning the acquisition of the Berg Properties, the Acquired
Properties and the Pending Development Projects by the Operating Partnership,
the Company's investment in and admission to the Operating Partnership as sole
general partner, and the rights and options of the limited partners in the
Operating Partnership to tender L.P. Units or acquire shares of Common Stock
under certain circumstances.
1.3 "ADDITIONAL LIMITED PARTNER" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 4.3 hereof and who is shown
as such on the books and records of the Partnership.
1.4 "ADJUSTED CAPITAL ACCOUNT DEFICIT" means with respect to any Partner,
the negative balance, if any, in such Partner's Capital Account as of the end of
any relevant fiscal year, determined after giving effect to the following
adjustments:
(a) credit to such Capital Account any portion of such negative balance
which such Partner (i) is treated as obligated to restore to the
Partnership pursuant to the provisions of Section 1.704-1(b)(2)(ii)(c)
of the Regulations, or (ii) is deemed to be obligated to restore to
the Partnership pursuant to the penultimate sentences of Sections
1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
(b) debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
1.5 "ADJUSTED CONTRIBUTION" means the Capital Contributions of any Partner
reduced by the total distributions to such Partner from Capital Events occurring
subsequent to the Closing Date under the Acquisition Agreement. For purposes of
this Agreement, the initial Capital Contribution of the Company shall be equal
to [$35,200,000] and the initial Adjusted Contribution of each Limited Partner
shall be
- 2 -
<PAGE>
equal to the value of the Limited Partner's interest in the Operating
Partnership as set forth in Appendix I of the Acquisition Agreement.
1.6 "AFFILIATE" means, (a) with respect to any individual Person, any
member of the Immediate Family of such Person or a trust established for the
benefit of such member, or (b) with respect to any Entity, any Person which,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, any such Entity.
1.7 "AGREEMENT" means this Amended and Restated Agreement of Limited
Partnership, as originally executed and as amended, modified, supplemented or
restated from time to time, as the context requires.
1.8 "ARTICLES OF INCORPORATION" means the Articles of Incorporation of the
Company, as amended and restated from time to time, or the articles of
incorporation, certificate of incorporation, operating agreement of other
Charter instrument of any corporation or other entity which is a successor to
the Company by merger or consolidation.
1.9 "ASSIGNEE" means a Person to whom one or more L.P. Units have been
transferred in a manner permitted under this Agreement, but who has not become a
Substituted Limited Partner, and who has the rights set forth in Section 11.5.
1.10 "AVAILABLE CASH" means the Partnership's share of the Operating
Partnership's Available Cash (as defined in the Acquisition Agreement) with
respect to the applicable period of measurement (i.e., any period beginning on
the first day of the fiscal year, quarter or other period commencing immediately
after the last day of the fiscal year, quarter or other applicable period for
purposes of the prior calculation of Available Cash for or with respect to which
a distribution has been made, and ending on the last day of the fiscal year,
quarter or other applicable period immediately preceding the date of the
calculation). Notwithstanding the foregoing, Available Cash shall not include
any cash received or reductions in reserves, nor shall the calculation of
Available Cash take into account any disbursements made or reserves established,
after commencement of the dissolution and liquidation of the Partnership.
1.11 "BERG ACQUISITION" has the meaning set forth in the Acquisition
Agreement.
1.12 "BERG GROUP" means Carl E. Berg, Clyde J. Berg, the members of their
respective Immediate Families, and any Entity which is an Affiliate of either
Carl E. Berg or Clyde J. Berg, excluding the Partnership and the Company.
1.13 "BERG LAND HOLDINGS" means certain land held by members of the Berg
Group which the Operating Partnership may acquire under certain circumstances
pursuant to the terms of the Acquisition Agreement and the related Berg Land
Holdings
- 3 -
<PAGE>
Option Agreement to be entered into by the parties thereto upon approval of
certain transactions by the Company's shareholders.
1.14 "CAPITAL ACCOUNT" means with respect to any Partner, the Capital
Account maintained for such Partner in accordance with the following provisions:
(a) to each Partner's Capital Account there shall be credited (i) such
Partner's Initial Adjusted Contribution as of the effective date of
this Agreement (ii) such Partner's Capital Contributions subsequent to
the Effective Date of this Agreement, (iii) such Partner's
distributive share of Net Income and any items in the nature of income
or gain which are specially allocated to such Partner pursuant to
Sections 1 and 2 of Appendix II and (iv) the amount of any Partnership
liabilities assumed by such Partner or which are secured by any asset
distributed to such Partner;
(b) to each Partner's Capital Account there shall be debited (i) the
amount of cash and the Gross Asset Value of any Property distributed
to such Partner pursuant to any provision of this Agreement, (ii) such
Partner's distributive share of Net Losses and any items in the nature
of expenses or losses which are specially allocated to such Partner
pursuant to Sections 1 and 2 of Appendix II, and (iii) the amount of
any liabilities of such Partner assumed by the Partnership or which
are secured by any asset contributed by such Partner to the
Partnership to the extent not assumed by the Partner; and
(c) in the event all or a portion of a Partnership Interest is transferred
in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it
relates to the transferred Partnership Interest.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Sections
1.704-1(b) and 1.704-2 of the Regulations, and shall be interpreted and applied
in a manner consistent with such Regulations. In the event the General Partner
shall reasonably determine that it is prudent to modify the manner in which the
Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed assets or which are assumed by the Partnership, the
General Partner or any Limited Partner) are computed in order to comply with
such Regulations, the General Partner may make such modification; provided that
it does not have an adverse effect on the amounts distributable to any Partner
pursuant to Article 13 hereof upon the dissolution of the Partnership.
1.15 "CAPITAL CONTRIBUTION" means, with respect to any Partner, any cash,
cash equivalents or the Gross Asset Value of property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Article 4
hereof.
1.16 "CAPITAL EVENT" means any Partnership transaction not in the ordinary
course of its business, including, without limitation, distribution to the
Partners in excess
- 4 -
<PAGE>
of distributive shares of income, principal payments, prepayments, prepayment
penalties, sales, exchanges, foreclosures or other dispositions of Property
owned by the Partnership, recoveries of damage awards and insurance proceeds not
used to rebuild (other than the receipt of contributions to the capital of the
Partnership and business or rental interruption insurance proceeds not used to
rebuild).
1.17 "CERTIFICATE" means the Certificate of Limited Partnership relating
to the Partnership to be filed in the office of the Delaware Secretary of State,
as amended from time to time in accordance with the terms hereof and the Act.
1.18 "CHANGE OF CONTROL TRANSACTION" shall mean (A) any transaction or
series of transactions occurring after the Effective Date, in which all Limited
Partners in the Operating Partnership are legally entitled to participate and
pursuant to which L.P. Units representing more than 50% of the total outstanding
L.P. Units of the Operating Partnership are purchased by a Person not controlled
by, in control of or under common control with the Company, any Affiliate of the
Company or any Affiliate of a Limited Partner, (B) the merger or consolidation
of the Partnership with another entity (other than a merger or consolidation in
which the holders of L.P. Units of the Partnership immediately before the merger
or consolidation own immediately after the merger or consolidation, Voting
Securities of the surviving or acquiring Entity or a parent party of such
surviving or acquiring Entity, possessing more than 50% of the voting power of
the surviving or acquiring Entity or parent party) resulting in the exchange of
the outstanding L.P. Units of the Partnership for cash, securities or other
property, or (C) any merger, sale, lease, license, exchange or other disposition
(whether in one transaction or a series of related transactions) of more than
50% of the assets of the Partnership.
1.19 "CHARTER" has the meaning set forth in Rule 405 of Regulation C
promulgated by the SEC under the Securities Act ("Rule 405").
1.20 "CODE" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provision of future
law.
1.21 "COMMON STOCK" means a share of Common Stock of the Company or any
shares of Voting Securities into which the Common Stock may be reclassified or
converted or for which shares of Common Stock may be exchanged in any
transaction made applicable or available to all holders of Common Stock as a
class.
1.22 "COMMON STOCK PRICE" means with respect to a particular valuation
event identified under this Agreement, the last reported sales price regular way
on such date or, in case no such reported sale takes place on such date, the
average of the reported closing bid and asked prices regular way on such date,
in either case on the American Stock Exchange, the New York Stock Exchange, or
if the Common Stock is not then listed or admitted to trading on any such
exchange, the Nasdaq or any comparable system on which the Common Stock is then
listed or admitted to trading or,
- 5 -
<PAGE>
if not then listed or admitted to trading on any national securities exchange,
the Nasdaq or any comparable system for the 10-trading day period ending with
the last day preceding the date of the valuation event.
1.23 "COMPANY" means Mission West Properties, a California corporation,
and any successor to such corporation.
1.24 "CONSENT" means the consent or approval of a proposed action by a
Partner given in accordance with Section 14.2 hereof.
1.25 "DEPRECIATION" means, with respect to any asset of the Partnership
for any fiscal year or other period, the depreciation, depletion, amortization
or other cost recovery deduction, as the case may be, allowed or allowable for
federal income tax purposes in respect of such asset for such fiscal year or
other period; provided, however, that except as otherwise provided in Section
1.704-2 of the Regulations, if there is a difference between the Gross Asset
Value (including the Gross Asset Value, as increased pursuant to paragraph (d)
of the definition of Gross Asset Value) and the adjusted tax basis of such asset
at the beginning of such fiscal year or other period, Depreciation for such
asset shall be an amount that bears the same ratio to the beginning Gross Asset
Value of such asset as the federal income tax depreciation, depletion,
amortization or other cost recovery deduction for such fiscal year or other
period bears to the beginning adjusted tax basis of such asset; provided,
further, that if the federal income tax depreciation, depletion, amortization or
other cost recovery deduction for such asset for such fiscal year or other
period is zero, Depreciation of such asset shall be determined with reference to
the beginning Gross Asset Value of such asset using any reasonable method
selected by the General Partner.
1.26 "DIVIDEND REINVESTMENT PLAN" has the meaning set forth in Rule 405.
1.27 "EFFECTIVE DATE" means the date of closing of the Berg Acquisition.
1.28 "EMPLOYEE BENEFIT PLAN" has the meaning set forth in Rule 405.
1.29 "ENTITY" means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, real estate investment trust,
limited liability company, cooperative or association.
1.30 "EQUITY SECURITY" has the meaning set forth in Rule 405.
1.31 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time (or any corresponding provisions of succeeding laws).
1.32 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
- 6 -
<PAGE>
1.33 "EXCHANGE FACTOR" has the meaning set forth in the Exchange Rights
Agreement, and is equal to the number of L.P. Units exchangeable for one share
of Common Stock, from time to time, under the Exchange Rights Agreement.
1.34 "EXCHANGE RIGHT" has the meaning set forth in the Exchange Rights
Agreement.
1.35 "EXCHANGE RIGHTS AGREEMENT" means the Exchange Rights Agreement among
the Company, and each of the limited partners of the partnerships comprising the
Operating Partnership.
1.36 "GAAP" means United States generally accepted accounting principles,
as in effect from time to time.
1.37 "GENERAL PARTNER" means the general partner of the Partnership, if
there is more than one general partner, all such general partners.
1.38 "GENERAL PARTNER INTEREST" means a Partnership Interest held by the
General Partner, in its capacity as general partner. A General Partner Interest
may be expressed as a number of Units, each of which shall represent the same
Percentage Interest in the Partnership as one L.P. Unit.
1.39 "GROSS ASSET VALUE" means, with respect to any asset of the
Partnership, such asset's adjusted basis for federal income tax purposes, except
as follows:
(a) the initial Gross Asset Value of any asset contributed by a Partner to
the Partnership shall be the gross fair market value of such asset,
without reduction for liabilities, as determined by the contributing
Partner and the Partnership on the date of contribution thereof;
(b) if the General Partner reasonably determines that an adjustment is
necessary or appropriate to reflect the relative economic interests of
the Partners, the Gross Asset Values of all Partnership assets shall
be adjusted in accordance with Sections 1.704-1(b)(2)(iv)(f) and (g)
of the Regulations to equal their respective gross fair market values,
without reduction for liabilities, as reasonably determined by the
General Partner, as of the following times:
(1) a Capital Contribution (other than a de minimis Capital
Contribution) to the Partnership by a new or existing Partner as
consideration for a Partnership Interest; or
(2) the distribution by the Partnership to a Partner of more than a
de minimis amount of Partnership assets as consideration for the
repurchase of a Partnership Interest; or
- 7 -
<PAGE>
(3) the liquidation of the Partnership within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations;
(c) the Gross Asset Values of Partnership assets distributed to any
Partner shall be the gross fair market values of such assets (taking
Section 7701(g) of the Code into account) without reduction for
liabilities, as reasonably determined by the General Partner as of the
date of distribution; and
(d) the Gross Asset Values of Partnership assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Sections 734(b) or 743(b) of the Code, but only to
the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the
Regulations (as set forth in Appendix II); provided, however, that
Gross Asset Values shall not be adjusted pursuant to this paragraph
(d) to the extent that the General Partner reasonably determines that
an adjustment pursuant to paragraph (b) above is necessary or
appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this paragraph (d).
At all times, Gross Asset Values shall be adjusted by any Depreciation
taken into account with respect to the Partnership's assets for purposes of
computing Net Income and Net Loss.
1.40 "IMMEDIATE FAMILY" means, with respect to any Person, such Person's
spouse, parents, parents-in-law, children, nephews, nieces, brothers, sisters,
brothers-in-law, sisters-in-law, stepchildren, sons-in-law and daughters-in-law
or any trust solely for the benefit of any of the foregoing family members whose
sole beneficiaries include the foregoing family members.
1.41 "INCAPACITY" OR "INCAPACITATED" means, (i) as to any individual
Partner, death, total physical disability or entry by a court of competent
jurisdiction adjudicating him incompetent to manage his person or his estate;
(ii) as to any corporation which is a Partner, the filing of a certificate of
dissolution, or its equivalent, for the corporation or the revocation of its
charter; (iii) as to any partnership which is a Partner, the dissolution and
commencement of winding up of the partnership; (iv) as to any estate which is a
Partner, the distribution by the fiduciary of the estate's entire interest in
the Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this definition,
bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner
commences a voluntary proceeding seeking liquidation, reorganization or other
relief under any bankruptcy, insolvency or other similar law now or hereafter in
effect; (b) the Partner is adjudged as bankrupt or insolvent, or a final and
nonappealable order for relief under any bankruptcy, insolvency or similar law
now or hereafter in effect has been entered against the Partner; (c) the Partner
executes and delivers a general assignment for the benefit of the Partner's
creditors; (d) the Partner files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in
- 8 -
<PAGE>
clause (b) above; (e) the Partner seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator for the Partner or for all or
any substantial part of the Partner's properties; (f) any proceeding seeking
liquidation, reorganization or other relief of or against such Partner under any
bankruptcy, insolvency or other similar law now or hereafter in effect has not
been dismissed within 120 days after the commencement thereof; (g) the
appointment without the Partner's consent or acquiescence of a trustee, receiver
or liquidator has not been vacated or stayed within 90 days of such appointment;
or (h) an appointment referred to in clause (g) which has been stayed is not
vacated within 90 days after the expiration of any such stay.
1.42 "INDEMNITEE" means (i) any Person made a party to a proceeding by
reason of (A) such Person's status as (1) the General Partner, (2) a director,
trustee or officer of the Partnership or the General Partner, or (3) a director,
trustee or officer of any other Entity, each Person serving in such capacity at
the request of the Partnership or the General Partner, or (B) his or its
liabilities, pursuant to a loan guarantee or otherwise, for any indebtedness of
the Partnership or any Subsidiary of the Partnership (including, without
limitation, any indebtedness which the Partnership or any Subsidiary of the
Partnership has assumed or taken assets subject to); and (ii) such other Persons
(including Affiliates of the General Partner or the Partnership) as the General
Partner may designate from time to time (whether before or after the event
giving rise to potential liability), in its sole and absolute discretion.
1.43 "INITIAL CONTRIBUTED PROPERTY" means the Properties as defined in the
Acquisition Agreement.
1.44 "LIEN" means, with respect to any asset of the Partnership, (i) any
mortgage, deed of trust, lien, pledge, encumbrance, charge, restriction or
security interest in or on such asset, (ii) the interest of a vendor or a lessor
under any conditional sale agreement, capital lease or title retention agreement
relating to such asset and (iii) in the case of securities, any purchase option,
call or similar right of a third party with respect to such securities.
1.45 "LIMITED PARTNER" means any Person named as a Limited Partner in
Appendix I, as such Appendix may be amended from time to time, or any
Substituted Limited Partner or Additional Limited Partner, in such Person's
capacity as a Limited Partner of the Partnership.
1.46 "LIMITED PARTNER INTEREST" means a Partnership Interest of a Limited
Partner in the Partnership representing a fractional part of the Partnership
Interests of all Partners and includes any and all benefits to which the holder
of such a Partnership Interest may be entitled, as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement. A Limited Partner Interest may be expressed as a
number of L.P. Units.
1.47 "LIQUIDATING EVENT" has the meaning set forth in Section 13.1 hereof.
- 9 -
<PAGE>
1.48 "LIQUIDATOR" has the meaning set forth in Section 13.2 hereof.
1.49 "L.P. UNIT" means a fractional, undivided share of the Partnership
Interests of all Partners issued pursuant to Sections 4.1, 4.2 and 4.3. The
number of L.P. Units outstanding and the Percentage Interests in the Partnership
represented by such L.P. Units are set forth in Appendix I, as such Appendix may
be amended from time to time. The ownership of L.P. Units shall be evidenced by
such form of certificate for units as the General Partner adopts from time to
time unless the General Partner determines that the L.P. Units shall be
uncertificated securities.
1.50 "L.P. UNIT MAJORITY" means the Limited Partners holding the right
to vote, in the aggregate, a majority of the total number of L.P. Units
outstanding in the Operating Partnership.
1.51 "NET INCOME" OR "NET LOSS" means, for each fiscal year or other
applicable period, an amount equal to the Partnership's taxable income or loss
for such year or period as determined for federal income tax purposes by the
General Partner, determined in accordance with Section 703(a) of the Code (for
this purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Section 703(a) of the Code shall be included in taxable
income or loss), adjusted as follows: (a) by including as an item of gross
income any tax-exempt income received by the Partnership and not otherwise taken
into account in computing Net Income or Net Loss; (b) by treating as a
deductible expense any expenditure of the Partnership described in Section
705(a)(2)(B) of the Code (or which is treated as a Section 705(a)(2)(B)
expenditure pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations) and not
otherwise taken into account in computing Net Income or Net Loss, including
amounts paid or incurred to organize the Partnership (unless an election is made
pursuant to Section 709(b) of the Code) or to promote the sale of interests in
the Partnership and by treating deductions for any losses incurred in connection
with the sale or exchange of Partnership property disallowed pursuant to Section
267(a)(1) or 707(b) of the Code as expenditures described in Section
705(a)(2)(B) of the Code; (c) by taking into account Depreciation in lieu of
depreciation, depletion, amortization and other cost recovery deductions taken
into account in computing taxable income or loss; (d) by computing gain or loss
resulting from any disposition of Partnership property with respect to which
gain or loss is recognized for federal income tax purposes by reference to the
Gross Asset Value of such property rather than its adjusted tax basis; (e) in
the event of an adjustment of the Gross Asset Value of any Partnership asset
which requires that the Capital Accounts of the Partnership be adjusted pursuant
to Sections 1.704-1(b)(2)(iv)(e), (f) and (g) of the Regulations, by taking into
account the amount of such adjustment as if such adjustment represented
additional Net Income or Net Loss pursuant to Appendix II; and (f) by not taking
into account in computing Net Income or Net Loss items separately allocated to
the Partners pursuant to Sections 1 and 2 of Appendix II.
1.52 "NEW EQUITY FINANCING RIGHT" has the meaning set forth in Section
8.8.
- 10 -
<PAGE>
1.53 "NONRECOURSE DEDUCTIONS" has the meaning set forth in Regulations
Sections 1.704-2(b)(1) and 1.704-2(c).
1.54 "NONRECOURSE LIABILITIES" has the meaning set forth in Regulations
Section 1.704-2(b)(3).
1.55 "OPERATING PARTNERSHIP" means, collectively, Mission West
Properties, L.P., Mission West Properties, L.P. I, Mission West Properties,
L.P. II and Mission West Properties, L.P. III.
1.56 "PARTNER" means the General Partner or a Limited Partner, and
"Partners" means the General Partner and the Limited Partners collectively.
1.57 "PARTNER MINIMUM GAIN" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
1.58 "PARTNER NONRECOURSE DEBT" has the meaning set forth in Regulations
Section 1.704-2(b)(4).
1.59 "PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership taxable
year shall be determined in accordance with the rules of Regulations Section
1.704-2(i)(2).
1.60 "PARTNERSHIP" means the limited partnership governed by this
Agreement, and any successor thereto.
1.61 "PARTNERSHIP INTEREST" means an ownership interest in the Partnership
representing an Adjusted Contribution by either a Limited Partner or the General
Partner and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement. A Partnership Interest may be expressed as a number of L.P.
Units.
1.62 "PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Regulations
Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as
any net increase or decrease in a Partnership Minimum Gain, for a Partnership
taxable year shall be determined in accordance with the rules of Regulations
Section 1.704-2(d).
1.63 "PARTNERSHIP RECORD DATE" means the record date established by the
General Partner for the distribution of Available Cash pursuant to Section 5.1,
which shall be the same as the record date established by the Company for a
distribution to its shareholders of some or all of its portion of such
distribution.
- 11 -
<PAGE>
1.64 "PARTNERSHIP YEAR" means the fiscal year of the Partnership, which is
the calendar year, as set forth in Section 9.2.
1.65 "PENDING DEVELOPMENT PROJECTS" means three Berg Group-owned R&D
Property development projects which the Operating Partnership has agreed to
acquire upon their completion pursuant to the terms of the Acquisition Agreement
and the related Pending Projects Option Agreement to entered into by the parties
thereto upon approval of certain transactions by the Company's shareholders.
1.66 "PARTNERSHIP INTEREST" means, as to a Partner, the fractional part of
the Partnership Interests owned by such Partner and expressed as a percentage as
specified in Appendix I, as such Appendix may be amended from time to time.
1.67 "PERMITTED PARTNERS" has the meaning set forth in Section 1(b) of
Appendix II.
1.68 "PERMITTED TRANSFEREE" means any person to whom L.P. Units are
Transferred in accordance with Section 11.3 of this Agreement.
1.69 "PERSON" means an individual or Entity.
1.70 "PRECONTRIBUTION GAIN" has the meaning set forth in Section 3(c) of
Appendix II.
1.71 "PUT RIGHTS" shall have the meaning provided in Section 8.7.
1.72 "PROTECTIVE PROVISIONS EXPIRATION DATE" means the date on which the
members of the Berg Group own less than 15% of the Common Stock, treating all
Equity Securities of the Company and all L.P. Units owned by such members as
Common Stock outstanding for this purpose.
1.73 "PROPERTIES" has the meaning given such term in the Acquisition
Agreement.
1.74 "QUARTER" means each of the three month periods ending on March 31,
June 30, September 30 and December 31.
1.75 "REGULATIONS" means the final, temporary or proposed Income Tax
Regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
1.76 "REIT" means a real estate investment trust as defined in Section 856
of the Code.
1.77 "REIT REQUIREMENTS" means all of the requirements imposed under the
Code on any entity seeking to qualify and remain qualified as a REIT.
- 12 -
<PAGE>
1.78 "RESTRICTED PARTNER" has the meaning set forth in Section 1(b) of
Appendix II.
1.79 "SEC" means the U.S. Securities and Exchange Commission.
1.80 "SECURITIES ACT" means the Securities Act of 1933, as amended.
1.81 "STOCK OPTION PLAN" means the Company's 1997 Stock Option Plan and
any other plan adopted from time to time by the Company pursuant to which shares
of Common Stock are issued, or options to acquire shares of Common Stock are
granted, to consultant, employees or directors of the Company, the Operating
Partnership or their respective Affiliates in consideration for services or
future services.
1.82 "SUBSIDIARY" means, with respect to any Person, any corporation,
partnership or other entity of which a majority of (i) the voting power of the
Voting Securities; or (ii) the outstanding equity interests, is owned, directly
or indirectly, by such Person.
1.83 "SUBSTITUTED LIMITED PARTNER" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.4 hereof.
1.84 "TAX ITEMS" has the meaning set forth in Appendix II.
1.85 "TERMINATING CAPITAL TRANSACTION" means any Change of Control
Transaction.
1.86 "TOTAL MARKET CAPITALIZATION" means the market value of the
outstanding Common Stock determined as if all L.P. Units in the Operating
Partnership had been converted into Common Stock at the Exchange Factor plus the
total debt of the Company and the Operating Partnership.
1.87 "TRANSFER" as a noun, means any sale, assignment, conveyance, pledge,
hypothecation, gift, encumbrance or other transfer, and as a verb, means to
sell, assign, convey, pledge, hypothecate, give, encumber or otherwise transfer.
1.88 "UNIT" means an equal undivided interest in all of the outstanding
Partnership Interests.
1.89 "UNITED STATES PERSON" means a holder of L.P. Units who is an
individual who is a citizen or resident of the United States; a corporation,
partnership or other entity created or organized in, or under the laws of, the
United States or any State; an estate the income of which from sources without
the United States is includable in gross income for United States federal income
tax purposes; a trust the primary supervision of which is exercisable by a court
within the United States and having one or more United States fiduciaries with
authority to control all substantial decisions of such trust; and any
- 13 -
<PAGE>
Person whose income or gain in respect of the L.P. Units is effectively
connected with the conduct of a United States trade or business.
1.90 "VOTING SECURITIES" means any Equity Security which entitles the
holder thereof to vote on all matters submitted for a vote of equity holders by
the issuer of such Equity Security, including the right to vote for directors in
the case of a corporation.
Certain additional terms and phrases have the meanings set forth in
Appendix II.
ARTICLE 2. ORGANIZATIONAL MATTERS.
2.1 CONTINUATION. The Partners hereby agree to continue the Partnership
under and pursuant to the Act. Except as expressly provided herein to the
contrary, the rights and obligations of the Partners and the administration and
termination of the Partnership shall be governed by the Act. The Partnership
Interest of each Partner shall be personal property for all purposes.
2.2 NAME. The name of the Partnership shall be Mission West Properties,
L.P. [ ]. The Partnership's business may be conducted under any other name or
names deemed advisable by the General Partner, including the name of the General
Partner or any Affiliate thereof. The words "Limited Partnership," "L.P.,"
"Ltd." or similar words or letters shall be included in the Partnership's name
where necessary to comply with the laws of any jurisdiction. The General Partner
in its sole and absolute discretion may, upon 5 days' prior written notice to
the Limited Partners, change the name of the Partnership.
2.3 REGISTERED OFFICE AND AGENT; PRINCIPAL OFFICE. The address of the
registered office of the Partnership in the State of Delaware and the name and
address of the registered agent for service of process on the Partnership in the
State of Delaware is The Corporation Trust Company, 1029 Orange Street,
Wilmington, Delaware 19801. The principal office of the Partnership shall be
10050 Bandley Drive, Cupertino, California 95014, or such other place as the
General Partner may from time to time designate by notice to the Limited
Partners. The Partnership may maintain offices at such other place or places
within or outside the State of Delaware as the General Partner deems advisable.
2.4 POWER OF ATTORNEY.
A. Each Limited Partner and each Assignee hereby constitutes and appoints
the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each
case with full power of substitution, as its true and lawful agent and
attorney-in-fact, with full power and authority in its name, place and
stead to:
(1) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (a) all certificates, documents and
other instruments (including, without limitation, this Agreement
and the Certificate and all
- 14 -
<PAGE>
amendments or restatements thereof) that the General Partner or
the Liquidator deems appropriate or necessary to form, qualify
or continue the existence or qualification of the Partnership as
a limited partnership (or a partnership in which the Limited
Partners have limited liability) in the State of Delaware and in
all other jurisdictions in which the Partnership may or plans
to conduct business or own property, including, without
limitation, any documents necessary or advisable to convey any
Contributed Property to the Partnership; (b) all instruments that
the General Partner deems appropriate or necessary to reflect any
amendment, change, modification or restatement of this Agreement
in accordance with its terms; (c) all conveyances and other
instruments or documents that the General Partner or the
Liquidator deems appropriate or necessary to reflect the
dissolution and liquidation of the Partnership pursuant to the
terms of this Agreement, including, without limitation, a
certificate of cancellation; (d) all instruments relating to the
admission, withdrawal, removal or substitution of any Partner
pursuant to, or other events described in, Article 11, 12 or 13,
or the Capital Contribution of any Partner; and (e) all
certificates, documents and other instruments relating to the
determination of the rights, preferences and privileges of
Partnership Interest; and
(2) execute, swear to, seal, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other instruments
appropriate or necessary, in the sole and absolute discretion of
the General Partner or any Liquidator, to make, evidence, give,
confirm or ratify any vote, consent, approval, agreement or other
action which is made or given by the Partners hereunder or is
consistent with the terms of this agreement or appropriate or
necessary, in the sole discretion of the General Partner or any
Liquidator, to effectuate the terms or intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General
Partner or any Liquidator to amend this Agreement except in accordance with
Article 14, or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, in recognition of the fact that
each of the Partners will be relying upon the power of the General
Partner and any Liquidator to act as contemplated by this Agreement in
any filing or other action by it on behalf of the Partnership, and it
shall survive and not be affected by the subsequent Incapacity of any
Limited Partner or Assignee and the Transfer of all or any portion of
such Limited Partner's or Assignee's L.P. Units and shall extend to
such Limited Partner's or Assignee's heirs, successors, assigns and
personal representatives. Each such Limited Partner or Assignee hereby
agrees to be bound by any representation made by the General Partner
or any Liquidator, acting in good faith pursuant to such power of
attorney, and each such Limited Partner or Assignee hereby waives any
and all defenses which may be available to contest, negate or
disaffirm the action of the General Partner or any Liquidator, taken
in good faith under such power of attorney. Each Limited Partner or
Assignee shall execute and deliver to the General Partner or
- 15 -
<PAGE>
the Liquidator, within 15 days after receipt of the General Partner's
or Liquidator's request therefor, such further designation, powers of
attorney and other instruments as the General Partner or the
Liquidator, as the case may be, deems necessary to effectuate this
Agreement and the purposes of the Partnership.
2.5 TERM. The term of the Partnership shall commence on the date hereof
and shall continue until December 31, 2048, unless the Partnership is dissolved
sooner pursuant to the provisions of Article 13 or as otherwise provided by law.
ARTICLE 3. PURPOSE.
3.1 PURPOSE AND BUSINESS. The purpose and nature of the business to be
conducted by the Partnership is to conduct any business that may be lawfully
conducted by a limited partnership organized pursuant to the Act including,
without limitation, to engage in the following activities: to acquire, hold,
own, develop, construct, improve, maintain, operate, sell, lease, transfer,
encumber, convey, exchange, and otherwise dispose of or deal with the
Properties, and the Pending Development Projects; to acquire, hold, own,
develop, construct, improve, maintain, operate, sell, lease, transfer, encumber,
convey, exchange, and otherwise dispose of or deal with real and personal
property of all kinds; to undertake such other activities as may be necessary,
advisable, desirable or convenient to the business of the Partnership; and to
engage in such other ancillary activities as shall be necessary or desirable to
effectuate the foregoing purposes.
3.2 POWERS. The Partnership is empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business for which it has
been formed and for the protection and benefit of the Partnership; provided,
that the Partnership shall not take, and shall refrain from taking, any action
which, in the judgment of the General Partner, in its sole and absolute
discretion, (i) could adversely affect the ability of the Company to continue to
qualify as a REIT; (ii) could subject the Company to any additional taxes under
Section 857 or Section 4981 of the Code; or (iii) could violate any law or
regulation of any governmental body or agency having jurisdiction over the
Company or its securities, unless such action (or inaction) shall have been
specifically consented to by the Company, if not the General Partner, and the
L.P. Unit Majority.
ARTICLE 4. CAPITAL CONTRIBUTIONS.
4.1 CAPITAL CONTRIBUTIONS OF THE PARTNERS.
A. At the time of the execution of this Agreement, the Partners have made
the Adjusted Contributions, or shall make the Capital Contributions
contemplated by the Acquisition Agreement, as set forth in Appendix I
to this Agreement. Each Limited Partner shall own L.P. Units in the
amount set forth for such Partner in Appendix I and shall have a
Percentage Interest in the Partnership as set forth in Appendix I,
which shall be adjusted in Appendix I from time to time by the General
Partner to the extent
- 16 -
<PAGE>
necessary to reflect accurately exchanges, additional Capital
Contributions, the issuance of additional Partnership Interests,
the exercise of Put Rights with respect to L.P. Units or similar
events having an effect on any Partner's Percentage Interest.
B. The number of Units held by the General Partner, in its capacity as
general partner, shall be deemed to be the General Partner Interest.
Except as provided in Sections 4.2, 10.5 and 13.3, the Partners shall
have no obligation to make any additional Capital Contributions.
4.2 ADDITIONAL FUNDS; RESTRICTIONS ON COMPANY.
A. The sums of money required to finance the business and affairs of the
Partnership shall be derived from the initial Capital Contributions
made to the Partnership by the Company as set forth in the Acquisition
Agreement and from funds generated from the operation and business of
the Partnership including, without limitation, distributions directly
or indirectly received by the Partnership from Available Cash provided
by the Operating Partnership. In the event additional financing is
needed from sources other than as set forth in the preceding sentence
for any reason, subject to the provisions of Sections 8.8 and 8.9, the
General Partner may, in its discretion, in such amounts and at such
times as it solely shall determine to be necessary or appropriate,
obtain additional funds for the Operating Partnership which shall be
allocated to each of the partnerships included therein, including the
Partnership, pro rata in proportion to the ratio of the number of
Units then outstanding in each such Partnership to the total number of
L.P. Units then outstanding in the Operating Partnership taken as a
whole ("Pro Rata Share"). Accordingly, to the extent of such Pro Rata
Share of the Partnership and subject to Section 8.9 and any other
limitations contained in this Agreement or the Acquisition Agreement,
the General Partner may, (i) cause the Partnership to issue additional
Partnership Interests and admit additional Limited Partners to the
Partnership in accordance with Section 4.3; (ii) make additional
Capital Contributions to the Partnership (subject to the provisions of
Section 4.2B); (iii) cause the Partnership to borrow money, enter into
loan arrangements, issue debt securities, obtain letters of credit or
otherwise borrow money on a secured or unsecured basis; or (iv) make
loans to the Partnership (subject to Section 4.2B). In no event shall
the Limited Partners be required to make any additional Capital
Contributions or any loan to, or otherwise provide any financial
accommodation for the benefit of, the Partnership pursuant to any such
permitted action by the General Partner, except insofar as a Limited
Partner has exercised its New Equity Financing Right pursuant to
Section 8.8.
B. Except as agreed otherwise at the time by vote or written consent of
the L.P. Unit Majority: (i) the Company shall lend to the Partnership
its Pro Rata Share of the proceeds of or consideration received by the
Company from all loans and advances to the Company pursuant to any
financial borrowing arrangement on the same financial terms and
conditions, including interest rate and repayment schedule, as shall
be applicable with respect to or incurred in connection with the
issuance of such loans and advances to the Company (which the
Partnership may, in turn, lend to any other
- 17 -
<PAGE>
partnership constituting part of the Operating Partnership); (ii) in
the case of Equity Securities senior or junior to the Common Stock as
to dividends and distributions on liquidation, which are not
convertible into Common Stock as of the issuance date, the Company
shall contribute to the Partnership the proceeds of or consideration
(including any property or other non-cash assets) received for such
Securities and the proceeds of, or consideration received from, any
subsequent exercise, exchange or conversion thereof (if applicable),
and shall receive from the Partnership, new Partnership Interests in
the Partnership in consideration therefor with the same financial
terms and conditions, including dividend, dividend priority,
liquidation preference, conversion and redemption rights, as are
applicable to such Equity Securities; (iii) in the case o f Common
Stock, or other Equity Securities convertible into Common Stock as of
the issuance date, including, without limitation, shares of Common
Stock or other Equity Securities issued upon exercise of options
issued under the Stock Option Plan or any other Employee Benefit Plan
of the Company, the Company shall contribute to the Partnership
the proceeds of or consideration (including any property or other
non-cash assets) received for such Securities and the proceeds of,
or consideration received from, any subsequent exercise, exchange or
conversion thereof (if applicable), and shall receive from the
Partnership a number of additional Units of General Partner Interest
in consideration therefor equal to the product of (x) the number of
shares of Common Stock or other Equity Securities issued by the
Company, multiplied by (y) the Exchange Factor in effect on the date
of such contribution; and (iv) in the case of Common Stock or other
Equity Securities issued upon the exercise or surrender of rights
under a stock option, warrant, or any other right for which the
company does not receive proceeds, and issues less than the number
of shares of Common Stock or other Equity Securities subject to such
option, warrant or other right to the holder thereof retaining the
excess of such shares as payment of the purchase price (a "net
exercise"), or where the Company uses the proceeds received pursuant
to a Dividend Reinvestment Plan to acquire shares of Common Stock or
other Equity Securities to be issued to the shareholder exercising
such right, the Company shall receive from the Partnership a number of
additional Units of General Partner Interest equal to the actual
number of shares of Common Stock or other Equity Securities so issued
to the shareholder multiplied by the Exchange Factor.
4.3 ISSUANCE OF ADDITIONAL PARTNERSHIP INTERESTS; ADMISSION OF ADDITIONAL
LIMITED PARTNERS. In addition to any Partnership Interests issuable by the
Partnership pursuant to Section 4.2, and subject to the provisions of Sections
8.8 and 8.9, the General Partner is authorized to cause the Partnership to issue
additional Partnership Interests (or options therefor) in the form of L.P. Units
or other Partnership Interests senior or junior to the L.P. Units to any Persons
at any time or from time to time, for consideration per Unit of Partnership
Interest not less than the Common Stock Price determined at the initial issuance
date divided by the Exchange Factor, and on such other terms and conditions, as
the General Partner shall establish provided, however, that (i) each partnership
included in the Operating Partnership shall effect its Pro Rata Share of such
issuance, (ii) such issuance does not cause the Partnership to become, with
respect to any Employee Benefit Plan subject to Title I of ERISA or Section 4975
of the Code, a "party in interest" (as defined in Section 3(14) of ERISA) or
- 18 -
<PAGE>
a "disqualified person" (as defined in Section 4975(e) of the Code); and (iii)
such issuance does not cause any portion of the assets of the Partnership to
constitute assets of any Employee Benefit Plan subject to Section 2510.3-101 of
the regulations of the United States Department of Labor. Subject to the
limitations set forth in the preceding sentence, the General Partner may take
such steps as it, in its reasonable discretion, deems necessary or appropriate
to admit any Person as a Limited Partner of the Partnership, including, without
limitation, amending the Certificate, Appendix I or any other provision of this
Agreement.
4.4 REPURCHASE OF COMPANY EQUITY SECURITIES. In the event the Company
shall elect to purchase from its shareholders shares of Common Stock for the
purpose of delivering such shares to satisfy an obligation under any Dividend
Reinvestment Plan or Employee Benefit Plan adopted by the Company, or shall
repurchase any other Equity Securities of the Company pursuant to any other
share repurchase obligation or arrangement undertaken by the Company with any
Company shareholder, including preferred stock redemptions, the purchase price
paid by the Company for such shares and any other expenses incurred by the
Company in connection with such purchase shall be considered expenses of the
Partnership and shall be reimbursed to the Company, subject to the condition
that: (i) if such shares subsequently are to be sold by the Company, the Company
shall pay to the Partnership any proceeds received by the Company for such
shares of Common Stock or other Equity Securities (provided that an exchange of
shares of Common Stock for L.P. Units pursuant to the Exchange Rights Agreement
would not be considered a sale for such purposes); and (ii) if such shares are
not re-transferred by the Company within 30 days after the purchase thereof, the
General Partner shall cause the Partnership to cancel the number of Units of
General Partner Interest held by the Company determined by multiplying (x) the
quotient obtained by dividing the total amount deemed paid by the Partnership by
the Common Stock Price determined as of the repurchase date, by (y) the Exchange
Factor in effect on the date of such repurchase.
4.5 NO THIRD PARTY BENEFICIARY. No creditor or other third party having
dealings with the Partnership shall have the right to enforce the right or
obligation of any Partner to make Capital Contributions or loans or to pursue
any other right or remedy hereunder or at law or in equity, it being understood
and agreed that the provisions of this Agreement shall be solely for the benefit
of, and may be enforced solely by, the parties hereto and their respective
successors and assigns.
4.6 NO INTEREST; NO RETURN. No Partner shall be entitled to interest on
its Capital Contribution or on such Partner's Capital Account. Except as
provided in Section 8.7 or Article 13 of this Agreement, or by law, no Partner
shall have any right to demand or receive the return of its Capital Contribution
from the Partnership.
ARTICLE 5. DISTRIBUTIONS.
5.1 REGULAR DISTRIBUTIONS. Except for distributions pursuant to Section
13.2 in connection with the dissolution and liquidation of the Partnership, and
subject to the provisions of Sections 5.3, 5.4 and 5.5, the General Partner
shall cause the Partnership
- 19 -
<PAGE>
to distribute, from time to time as determined by the General Partner, but in
any event not less frequently than once each Quarter, the Partnership's Pro Rata
Share of all Available Cash, to the Partners, in accordance with each Partner's
respective Percentage Interest; provided, however, that in no event may a
Limited Partner receive a distribution of Available Cash with respect to a L.P.
Unit, if such Limited Partner is entitled to receive a distribution out of such
Available Cash with respect to a share of Common Stock for which such L.P. Unit
has been exchanged.
5.2 QUALIFICATION AS A REIT. The General Partner shall be entitled to
cause the Partnership to distribute to the General Partner the Partnership's Pro
Rata Share of Available Cash distributed by the Operating Partnership to enable
the General Partner to pay shareholder dividends that will (i) satisfy the REIT
Requirements for distributions to shareholders, and (ii) avoid any federal
income or excise tax liability of the General Partner; provided, however, the
General Partner is not bound to comply with this covenant to the extent such
distributions would violate applicable Delaware law.
5.3 WITHHOLDING. With respect to any withholding tax or other similar tax
liability or obligation to which the Partnership may be subject as a result of
any act or status of any Partner or to which the Partnership becomes subject
with respect to any Unit, the Partnership shall have the right to withhold
amounts of Available Cash distributable to such Partner or with respect to such
Units, to the extent of the amount of such withholding tax or other similar tax
liability or obligation pursuant to the provisions contained in Section 10.5.
5.4 ADDITIONAL PARTNERSHIP INTERESTS. If the Partnership issues
Partnership Interests in accordance with Section 4.2 or 4.3 which are entitled
to certain distribution priorities, Section 5.1 shall be amended, as necessary,
to reflect the distribution priority of such Partnership Interests and
corresponding amendments shall be made to the provisions of Appendix II.
5.5 DISTRIBUTIONS UPON LIQUIDATION. Proceeds from a Terminating Capital
Transaction and any other cash received or reductions in reserves made after
commencement of the liquidation of the Partnership shall be distributed to the
Partners in accordance with Section 13.2.
ARTICLE 6. ALLOCATIONS.
The Net Income, Net Loss, and other Partnership items of income, gain,
loss, deduction or credit as provided under the Code, shall be allocated
pursuant to the provisions of Appendix II, as amended from time to time.
ARTICLE 7. MANAGEMENT AND OPERATION OF BUSINESS.
7.1 MANAGEMENT.
A. Except as otherwise expressly provided in this Agreement, and subject
to the provisions of Section 8.9, all management powers over the
business and affairs the
- 20 -
<PAGE>
Partnership are and shall be exclusively vested in the General
Partner, and no Limited Partner shall have any right to participate in
or exercise control or management power over the business and affairs
of the Partnership. The General Partner may not be removed by the
Limited Partners, with or without cause. In addition to the powers now
or hereafter granted a general partner of a limited partnership under
the Act or which are granted to the General Partner under any other
provision of this Agreement, the General Partner shall have full power
and authority to make contracts, sign documents, conduct litigation,
acquire and convey property, hire employees, consultants and
professionals, raise capital, borrow funds, incur liabilities, invest
funds, comply with all applicable laws, and do all other things deemed
necessary or desirable by the General Partner to conduct the business
of the Partnership on behalf of the Partnership; to exercise all
powers set forth in Section 3.2, and to effectuate the purposes set
forth in Section 3.1, provided that any exercise of the foregoing
rights and powers must be consistent with the REIT Requirements.
B. Except as provided in Section 8.9, each of the Limited Partners agrees
that the General Partner is authorized to execute, deliver and perform
the agreements and transactions on behalf of the Partnership without
any further act, approval or vote of the Partners, notwithstanding any
other provision of this Agreement to the fullest extent permitted
under the Act or other applicable law, rule or regulation. The
execution, delivery or performance by the General Partner or the
Partnership of any agreement authorized or permitted under this
Agreement shall not constitute a breach by the General Partner of any
duty that the General Partner may owe the Partnership or the Limited
Partners or any other Persons under this Agreement or of any duty
stated or implied by law or equity.
C. At all times from and after the date hereof, in accordance with the
provisions of the Acquisition Agreement, the General Partner may cause
the Partnership to establish and maintain at any and all times working
capital accounts and other cash or similar balances in such amount as
the General Partner, in its sole and absolute discretion, deems
appropriate and reasonable from time to time. Such accounts may
include funds of the General Partner and the other partnerships in the
Operating Partnership, which the General Partner shall be free to
commingle.
D. In exercising its authority under this Agreement, the General Partner
shall take into account the tax consequences to any Partner of any
action taken by it and shall select the alternative which appears at
the time to present the least adverse tax consequences to the Limited
Partners. By way of example, but not of limitation: If the General
Partner decides to refinance (directly or indirectly) any outstanding
indebtedness of the Partnership, the General Partner shall use
reasonable efforts to structure such refinancing in a manner that
minimizes any adverse tax
- 21 -
<PAGE>
consequences resulting therefrom to the Limited Partners. The General
Partner and the Partnership shall not have liability to a Limited
Partner under any circumstances as a result of an income tax liability
incurred by such Limited Partner as a result of a necessary action (or
inaction) by the General Partner taken pursuant to its authority under
and in accordance with this Agreement where avoiding the resulting
adverse tax consequences to a Limited Partner was not reasonably
practicable under the circumstances.
7.2 CERTIFICATE OF LIMITED PARTNERSHIP. The General Partner shall file the
[AMENDED CERTIFICATE] [CERTIFICATE] with the Secretary of State of Delaware as
required by the Act. The General Partner shall use all reasonable efforts to
cause to be filed such other certificates or documents as may be reasonable and
necessary or appropriate for the formation, continuation, qualification and
operation of a limited partnership (or a partnership in which the limited
partners have limited liability) in the State of Delaware and any other state,
or the District of Columbia, in which the Partnership may elect to do business
or own property. To the extent that such action is determined by the General
Partner to be reasonable and necessary or appropriate, the General Partner shall
file amendments to and restatements of the Certificate and do all of the things
to maintain the Partnership as a limited partnership (or a partnership in which
the limited partners have limited liability) under the laws of the State of
Delaware and each other state, or the District of Columbia, in which the
Partnership may elect to do business or own property. Subject to the terms of
Section 8.5A(iv) hereof, the General Partner shall not be required, before or
after filing, to deliver or mail a copy of the Certificate or any amendment
thereto to any Limited Partner.
7.3 REIMBURSEMENT OF THE GENERAL PARTNER AND THE COMPANY.
A. Except as provided in this Section 7.3 and elsewhere in this Agreement
(including the provisions of Articles 5 and 6 regarding distributions, payments,
and allocations to which it may be entitled), the General Partner shall not be
compensated for its services as general partner of the Partnership.
B. The General Partner, shall be reimbursed on a monthly basis, or such
other basis as it may determine in its sole and absolute discretion, for all
expenses that it incurs relating to the ownership and operation of, or for the
benefit of, the Partnership; provided, that the amount of any such reimbursement
shall be reduced by any interest earned by the General Partner with respect to
bank accounts or other instruments or accounts held by it in its name. Such
reimbursement shall be in addition to any reimbursement made as a result of
indemnification pursuant to Section 7.6.
7.4 OUTSIDE ACTIVITIES OF THE GENERAL PARTNER. The General Partner shall
not directly or indirectly enter into or conduct any business other than in
connection with the ownership, acquisition, development and disposition of
Partnership Interests and the management of the business of the Partnership, and
such activities as are incidental thereto. The General Partner and any
Affiliates of the General Partner may acquire Limited Partner Interests and
shall be entitled to exercise all rights of a Limited Partner relating to such
Limited Partner Interests.
7.5 CONTRACTS WITH AFFILIATES.
A. The Partnership may lend or contribute funds or other assets to its
Subsidiaries or other Persons in which it has an equity investment and
such Persons
- 22 -
<PAGE>
may borrow funds from the Partnership, on terms and conditions
established in the sole and absolute discretion of the General
Partner. The foregoing authority shall not create any right or benefit
in favor of any Subsidiary or any other Person.
B. Except as provided in Section 7.4, the Partnership may Transfer assets
to joint ventures, other partnerships, corporations or other business
entities in which it is or thereby becomes a participant upon such
terms and subject to such conditions consistent with this Agreement
and applicable law as the General Partner, in its sole and absolute
discretion, believes are advisable.
C. Except as expressly permitted by this Agreement or otherwise
contemplated by the Acquisition Agreement, neither the General Partner
nor any of its Affiliates shall sell, Transfer or convey any property
to, or purchase any property from, the Partnership, directly or
indirectly, except pursuant to transactions that are determined by the
General Partner in good faith to be fair and reasonable.
D. Except as provided otherwise in Section 8.9, the General Partner, in
its sole and absolute discretion and without the approval of the
Limited Partners, may propose and adopt, on behalf of the Partnership,
Employee Benefit Plans funded by the Partnership for the benefit of
employees of the General Partner, the Partnership, Subsidiaries of the
Partnership or any Affiliate of any of them in respect of services
performed, directly or indirectly, for the benefit of the Partnership,
the General Partner, or any Subsidiaries of the Partnership.
E. The General Partner is expressly authorized to enter into, in the name
and on behalf of the Partnership, a "right of first opportunity" or
"right of first offer" arrangement, non-competition agreements and
other conflict avoidance agreements with various Affiliates of the
Partnership and the General Partner, on such terms as the General
Partner, in its sole and absolute discretion, believes are advisable.
7.6 INDEMNIFICATION.
A. To the fullest extent permitted by Delaware law, the Partnership shall
indemnify each Indemnitee from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including, without
limitation, reasonable attorneys' fees and other legal fees and
expenses), judgments, fines, settlements, and other amounts arising
from any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative, that relate to the
operations of the Partnership or the Company as set forth in this
Agreement, in which such Indemnitee may be involved, or is threatened
to be involved, as a party or otherwise, except to the extent it is
finally determined by a court of competent jurisdiction, from which no
further appeal may be taken, that such Indemnitee's action constituted
intentional acts or omissions constituting willful misconduct or
fraud. Without limitation, the foregoing indemnity shall extend to any
liability of any Indemnitee, pursuant to a loan guaranty or otherwise
for any indebtedness of the Partnership or any Subsidiary of the
Partnership (including, without limitation, any indebtedness which the
Partnership or any Subsidiary of the Partnership has assumed or taken
subject to), except with respect to Partnership debt
- 23 -
<PAGE>
that has been assumed or guaranteed by an Indemnitee in its capacity
as a Limited Partner. The General Partner is hereby authorized and
empowered, on behalf of the Partnership, to enter into one or more
indemnity agreements consistent with the provisions of this Section
7.6 in favor of any Indemnitee having or potentially having liability
for any such indebtedness. Any indemnification pursuant to this
Section 7.6 shall be made only out of the assets of the Partnership,
and neither the General Partner nor any Limited Partner shall have any
obligation to contribute to the capital of the Partnership, or
otherwise provide funds, to enable the Partnership to fund its
obligations under this Section 7.6.
B. Reasonable expenses incurred by an Indemnitee who is a party to a
proceeding shall be paid or reimbursed by the Partnership in advance
of the final disposition of the proceeding.
C. The indemnification provided by this Section 7.6 shall be in addition
to any other rights to which an Indemnitee or any other Person may be
entitled under any agreement, pursuant to any vote of the Partners,
under the Company's Articles of Incorporation, as a matter of law, or
otherwise, and shall continue as to an Indemnitee who has ceased to
serve in such capacity unless otherwise provided in a written
agreement pursuant to which such Indemnities are indemnified.
D. The Partnership may, but shall not be obligated to, purchase and
maintain insurance, on behalf of the Indemnities and such other
Persons as the General Partner shall determine, against any liability
that may be asserted against or expenses that may be incurred by such
Person in connection with the Partnership's activities, regardless of
whether the Partnership would have the power to indemnify such Person
against such liability under the provisions of this Agreement.
E. For purposes of this Section 7.6, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an Employee
Benefit Plan whenever the performance by such Indemnitee of its duties
to the Partnership also imposes duties on, or otherwise involves
services by, such Indemnitee to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with
respect to an Employee Benefit Pan pursuant to applicable law shall
constitute fines within the meaning of this Section 7.6; and actions
taken or omitted by the Indemnitee with respect to an Employee Benefit
Plan in the performance of its duties for a purpose reasonably
believed by it to be in the interest of the participant and
beneficiaries of the plan shall be deemed to be for a purpose which is
not opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject any of the Limited Partners to
personal liability by reason of the indemnification provisions set
forth in this Agreement.
G. An Indemnitee shall not be denied indemnification in whole or in part
under this Section 7.6 because the Indemnitee had an interest in the
transaction with
- 24 -
<PAGE>
respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.6 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and
shall not be deemed to create any rights for the benefit of any other
Persons. Any amendment, modification or repeal of this Section 7.6 or
any provision hereof shall be prospective only and shall not in any
way affect the Partnership's liability to any Indemnitee under this
Section 7.6, as in effect immediately prior to such amendment,
modification, or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
I. The provisions of this Section 7.6 shall be inapplicable to any
investigation, claim, suit, or proceeding, or the portion thereof,
which concerns claims for breach of contract between the Partnership
and a Person contracting other than in such Person's capacity as a
Partner, or as an officer or director of the General Partner.
J. No provision of this Section 7.6 shall be construed as permitting any
contract or transaction which is prohibited by the provisions of
Section 9.2(b) of the Acquisition Agreement.
7.7 LIABILITY OF THE GENERAL PARTNER.
A. Notwithstanding anything to the contrary set forth in this Agreement,
the General Partner and its officers and directors shall not be liable
for monetary damages to the Partnership, any Partners or any Assignees
for losses sustained or liabilities incurred as a result of errors in
judgment or of any act or omission, if the General Partner acted in
good faith; provided, however, the foregoing shall not be deemed to
exculpate the Company from any liability the Company may have under
the Acquisition Agreement.
B. Subject to its obligations and duties as General Partner set forth in
Section 7.1A hereof, the General Partner may exercise any of the
powers granted to it by this Agreement and perform any of the duties
imposed upon it hereunder either directly or by or through its agent.
The General Partner shall not be liable for any acts or omissions on
the part of any such agent, except in circumstances for which the
General Partner may be liable under Section 7.7A or would not be
subject to indemnification under Section 7.6.
C. Any amendment, modification or repeal of this Section 7.7 or any
provision hereof shall be prospective only and shall not in any way
affect the limitations on the General Partner's and its officers' and
directors' liability to the Partnership and the Limited Partners under
this Section 7.7 as in effect immediately prior to such amendment,
modification or repeal with respect to claims arising from or relating
to
- 25 -
<PAGE>
matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be
asserted.
<PAGE>
7.8 LIMITED PARTNERS' RIGHT TO BRING DERIVATIVE LAWSUITS. Any Limited
Partner may bring an action on behalf of the Partnership, as permitted under the
Act and the laws of the State of Delaware, to recover a judgment in favor of the
Partnership if the General Partner has refused to bring the action or if an
effort to cause the General Partner to bring the action is not likely to
succeed.
7.9 OTHER MATTERS CONCERNING THE GENERAL PARTNER.
A. The General Partner may rely and shall be protected in acting, or
refraining from acting, upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond,
debenture, or other paper or document believed by it in good faith to
be genuine and to have been signed or presented by the proper party or
parties.
B. The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, architects,
engineers, environmental consultants and other consultants and
advisers selected by it, and any act taken or omitted to be taken in
reliance upon the opinion of such Persons as to matters which such
General Partner reasonably believes to be within such Person's
professional or expert competence shall be conclusively presumed to
have been done or omitted in good faith and in accordance with such
opinion.
C. The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly
authorized officers and duly appointed attorneys-in-fact. Each such
attorney shall, to the extent provided by the General Partner in the
power of attorney, have full power and authority to do and perform all
and every act and duty which is permitted or required to be done by
the General Partner hereunder.
D. Notwithstanding any other provisions of this Agreement or the Act, any
action of the General Partner on behalf of the Partnership or any
decision of the General Partner to refrain from acting on behalf of
the Partnership, undertaken in the good faith belief that such action
or omission is necessary or advisable in order (i) to protect the
ability of the Company to continue to qualify as a REIT; or (ii) to
avoid the Company incurring any taxes under Section 857 or Section
4981 of the Code, is expressly authorized under this Agreement and is
deemed approved by all of the Limited Partners.
7.10 TITLE TO PARTNERSHIP ASSETS. Title to Partnership assets, whether
real, personal or mixed and whether tangible or intangible, shall be deemed to
be owned by the Partnership as an entity, and no Partner, individually or
collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner or one or more nominees, as
the General Partner may determine, including Affiliates of the General Partner.
The General Partner hereby declares and warrants that any Partnership asset for
which legal title is held in the name of the General Partner or any nominee or
Affiliate of the General
- 27 -
<PAGE>
Partner shall be held by the General Partner for the use and benefit of the
Partnership in accordance with the provisions of this Agreement; provided, that
the General Partner shall use its best efforts to cause beneficial and record
title to such assets to be vested in the Partnership as soon as reasonably
practicable. All Partnership assets shall be recorded as the property of the
Partnership in its books and records, irrespective of the name in which legal
title to such Partnership assets is held.
7.11 RELIANCE BY THIRD PARTIES. Notwithstanding anything to the contrary
in this Agreement, any Person dealing with the Partnership shall be entitled to
assume that the General Partner has full power and authority, without consent or
approval of any other Partner or Person, to encumber, sell or otherwise use in
any manner any and all assets of the Partnership and to enter into any contracts
on behalf of the Partnership, and take any and all actions on behalf of the
Partnership, and such Person shall be entitled to deal with the General Partner
as if the General Partner were the Partnership's sole party in interest, both
legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies which may be available against such Person to
contest, negate or disaffirm any action of the General Partner in connection
with any such dealing. In no event shall any Person dealing with the General
Partner or its representatives be obligated to ascertain that the terms of this
Agreement have been complied with or to inquire into the necessity or expedience
of any act or action of the General Partner or its representatives. Each and
every certificate, document or other instrument executed on behalf of the
Partnership by the General Partner or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that: (i) at the time of the execution and delivery of such certificate,
document or instrument, this Agreement was in full force and effect; (ii) the
Person executing and delivering such certificate, document or instrument was
duly authorized and empowered to do so for and on behalf of the Partnership; and
(iii) such certificate, document or instrument was duly executed and delivered
in accordance with the terms and provisions of this Agreement and is binding
upon the Partnership.
ARTICLE 8. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.
8.1 LIMITATION OF LIABILITY. The Limited Partners shall have no liability
under this Agreement except as expressly provided in this Agreement, including
Sections 10.5 and 13.3 hereof, or under the Act. Notwithstanding the preceding
sentence, each Limited Partner shall have the right, but not the obligation, to
guarantee a portion of the indebtedness of the Partnership in accordance with
the terms of the Acquisition Agreement.
8.2 MANAGEMENT OF BUSINESS. No Limited Partner or Assignee (other than the
General Partner, any of its Affiliates or any officer, director, employee, agent
or trustee of the General Partner, the Partnership or any of their Affiliates,
in their capacity as such) shall take part in the operation, management or
control (within the meaning of the Act) of the Partnership's business, transact
any business in the Partnership's name or have the power to sign documents for
or otherwise bind the Partnership. The
- 28 -
<PAGE>
transaction of any such business by the General Partner, any of its Affiliates
or any officer, director, employee, partner, agent or trustee of the General
Partner, the Partnership or any of their Affiliates, in their capacity as such,
shall not affect, impair or eliminate the limitations on the liability of the
Limited Partners or Assignees under this Agreement.
8.3 OUTSIDE ACTIVITIES OF LIMITED PARTNERS. Subject to any agreements
entered into pursuant to Section 7.5 hereof and any other agreements entered
into by a Limited Partner or its Affiliates with the Partnership or any of its
Subsidiaries including the Acquisition Agreement, any Limited Partner (other
than the Company) and any officer, director, employee, agent, trustee, Affiliate
or shareholder of any Limited Partner (other than the Company) shall be entitled
to and may have business interests and engage in business activities in addition
to those relating to the Partnership, including business interests and
activities that are in direct competition with the Partnership or that are
enhanced by the activities of the Partnership. Neither the Partnership nor any
Partners shall have any rights by virtue of this Agreement in any business
ventures of any Limited Partner or Assignee which are permitted within the scope
of this Section 8.3. None of the Limited Partners (other than the Company) nor
any other Person shall have any rights by virtue of this Agreement or the
Partnership relationship established hereby in any business ventures of any
other Person and such Person shall have no obligation pursuant to this Agreement
to offer any interest in any such business ventures to the Partnership, any
Limited Partner or any such other Person, even if such opportunity is of a
character which, if presented to the Partnership, any Limited Partner or such
other Person, could be taken by such Person.
8.4 RETURN OF CAPITAL. Except in connection with the exercise of Exchange
Rights or Put Rights, no Limited Partner shall be entitled to the withdrawal or
return of its Capital Contribution, except to the extent of distributions made
pursuant to this Agreement or upon termination of the Partnership as provided
herein. Except to the extent provided by Appendix II, or as otherwise expressly
provided in this Agreement, no Limited Partner or Assignee shall have priority
over any other Limited Partner or Assignee, either as to the return of Capital
Contributions or as to profits, losses or distributions.
8.5 RIGHTS OF LIMITED PARTNERS RELATING TO THE PARTNERSHIP.
A. In addition to the other rights provided by this Agreement or by the
Act, and except as limited by Section 8.5B hereof, each Limited
Partner shall have the right, for a purpose reasonably related to such
Limited Partner's interest as a limited partner in the Partnership,
upon written demand with a statement of the purpose of such demand and
at such Limited Partner' s own expense (including such reasonable
copying and administrative charges as the General Partner may
establish from time to time): (i) to obtain a copy of the most recent
annual and quarterly reports filed by the Company with the SEC
pursuant to the Exchange Act; (ii) to obtain a copy of the
Partnership's federal, state and local income tax returns for each
Partnership Year; (iii) to obtain a current list of the name and last
known business, residence or mailing
- 29 -
<PAGE>
address of each Partner; (iv) to obtain a copy of this Agreement and
the Certificate and all amendments and/or restatements thereto,
together with executed copies of all powers of attorney pursuant to
which this Agreement, the Certificate and all amendments and/or
restatements thereto have been executed; and (v) to obtain true and
full information regarding the amount of cash and a description and
statement of any other property or services contributed by each
Partner and which each Partner has agreed to contribute in the future,
and the date on which each became a Partner.
B. Notwithstanding any other provision of this Section 8.5, the General
Partner may keep confidential from the Limited Partners, for such
period of time as the General Partner determines in its sole and
absolute discretion to be reasonable, any information that (i) the
General Partner reasonably believes to be in the nature of trade
secrets or other confidential information, the disclosure of which the
General Partner in good faith believes is not in the best interests of
the Partnership or the Company or could damage the Partnership or its
business; or (ii) the Partnership is required by law or by agreements
with an unaffiliated third party to keep confidential.
8.6 EXCHANGE RIGHTS. The Limited Partners may exchange all or a portion of
their L.P. Units for shares of Common Stock on the terms and subject to the
conditions and restrictions contained in the Exchange Rights Agreement.
8.7 PUT RIGHTS.
A. Upon the terms and subject to the conditions of this Agreement, each
Limited Partner (other than Carl E. Berg and Clyde J. Berg with
respect to all L.P. Units owned by them beneficially as of the
Effective Date) shall have the right to tender to the Partnership
outstanding L.P. Units no more than once during any 12-month period
commencing after December 29, 1999. The Partnership shall purchase
properly tendered L.P. Units for cash at a price (the "Tender Price")
equal to the average market value of the Common Stock price as of the
date the Limited Partner delivers to the General Partner, at the
address provided in Appendix II, a completed and duly executed Letter
of Transmittal in the form attached as Exhibit A to the Exchange
Rights Agreement, and any other documents required by the Letter of
Transmittal. Only a tender in this manner will constitute a valid
tender of L.P. Units pursuant to this Section 8.7A. The General
Partner shall make all determinations as to the validity and form of
any tender of L.P. Units in accordance with the provisions of this
Agreement, and upon rejection of a tender, shall give the tendering
holder written notice of such rejection, which shall include the
reasons therefor. Unless otherwise agreed by the General Partner or as
provided in Section 8.7C, tenders of L.P. Units pursuant to this
Section 8.7A shall be irrevocable and shall not be subject to
withdrawal or modification.
B. Within 15 days after the valid tender of L.P. Units pursuant to
Section 8.7A, the Company may make an election to purchase such L.P.
Units itself with cash of the Company (the "Cash Election"). If with
respect to any tender of L.P. Units pursuant to this Section 8.7, the
Company makes the Cash Election, then within 90 days after such tender
the Company shall pay to the tendering Limited Partner an aggregate
amount of cash equal to the purchase price of the tendered L.P. Units
with available cash,
- 30 -
<PAGE>
borrowed funds or the proceeds of an offering of new shares of Common
Stock. Upon acquiring the L.P. Units, the Company may cause the
Partnership to retire the L.P. Units and convert them to the same
number of Units of General Partner Interest, and the General Partner
shall amend Appendix I accordingly.
C. Notwithstanding the foregoing, if the purchase price for the L.P.
Units tendered by a Limited Partners in one year exceeds $1,000,000,
the Partnership or the Company shall be entitled to reduce
proportionally the number of L.P. Units to be acquired from each
Tendering Partner so that the total purchase price does not exceed
$1,000,000 if the Company so elects. In addition, if the Company does
not timely make the Cash Election, the Partnership shall deliver the
purchase price for the tendered L.P. Units to the Limited Partner
within 45 days after the Letter of Transmittal was delivered to the
General Partner. The General Partner may defer payment of the purchase
price until such time not to exceed 120 days after the valid tender of
L.P. Units pursuant to Section 8.7A as the Partnership has adequate
Available Cash after payment of the purchase price, in the reasonable
judgment of the General Partner, to fund current distributions
necessary for the Company to satisfy the REIT Requirements following
the waiver by the Company of its right to make the Cash Election. In
such event, the General Partner shall give the tendering Limited
Partner written notice of its decision to defer the payment with a
calculation supporting the General Partner's determination within 20
days after the Letter of Transmittal was delivered to the General
Partner. Upon receiving such notice, the Limited Partner may withdraw
the tender. In addition, the Limited Partner may instead exercise its
rights under the Exchange Rights Agreement. If a Limited Partner
tenders L.P. Units pursuant to this Section 8.7, the Limited Partner
shall pay the amount of any additional documentary, stamp or similar
issue or transfer tax which is due, and shall be responsible for all
income or other taxes as a result of such exchange.
D. Each tender of L.P. Units shall constitute a representation and
warranty by the tendering Limited Partner of each of the
representations and warranties set forth in the form of Letter of
Transmittal.
E. Until the holder of L.P. Units tendered pursuant to Section 8.7 has
received cash in exchange therefor, such Limited Partner shall
continue to hold and own such L.P. Units for all purposes of this
Agreement.
- 31 -
<PAGE>
8.8 NEW EQUITY FINANCING RIGHTS.
A. If the General Partner determines that it is in the best interests of
the Partnership to obtain additional funds through the issuance of
additional Partnership Interests, the General Partner shall first
offer to the Limited Partners in each of the partnerships comprising
the Operating Partnership, including the Partnership, the right of
first refusal to purchase that portion of such additional Partnership
Interests which their respective numbers of L.P. Units bear to the
total number of outstanding L.P. Units in the Operating Partnership.
The General Partner shall make this offer pursuant to a written notice
describing the offering price, class or series of Partnership
Interest, and all other material terms of the offer. Such notice shall
be sent to each Limited Partner at the address reflected in Appendix
I, as amended. The Limited Partners shall have 10 days from the date
of such notice to elect to purchase any such additional Partnership
Interests. Such election shall be made pursuant to a written
subscription form specifying the number of Units of additional Limited
Partnership Interests the Limited Partner intends to acquire and the
total purchase price therefor, and shall be signed by the Limited
Partner and delivered to the General Partner at the address set forth
on Appendix I. After such 10-day period, the General Partner shall be
free to offer any additional Limited Partnership Interests on
substantially similar terms to non-Partners and Partners alike.
B. The foregoing right of the Limited Partners to acquire additional
equity interests offered by the Partnership ("New Equity Financing
Right") shall not apply to any offering (i) which is part of a
transaction in which the Limited Partners had the ability to exercise
their New Equity Financing Rights under the Acquisition Agreement with
respect to an offering of Equity Securities by the Company, (ii) in
connection with a merger or other business combination subject to
approval by the L.P. Unit Majority pursuant to Section 8.9, (iii) to a
Person in connection with the acquisition of property or services by
the Partnership from such Person, or (iv) of any Partnership Interest
upon conversion of an outstanding Equity Security of the Partnership,
any Partnership Subsidiary, or the Company.
8.9 MATTERS REQUIRING L.P. UNIT MAJORITY APPROVAL.
The consent of the L.P. Unit Majority will be required with respect to the
following actions involving the Partnership: (i) the material amendment,
modification or termination of the Agreement; (ii) a general assignment for the
benefit of creditors or the appointment of a custodian, receiver or trustee for
any of the assets of the Partnership; (iii) the institution of any proceeding
for bankruptcy of the Partnership; (iv) the Transfer of any General Partnership
Interests, including transfers attendant to any merger, consolidation or
liquidation of the Company except as otherwise provided in 11.2C; (v) the
admission of any additional or substitute General Partner in the Partnership;
and (vi) a Change of Control Transaction. In addition, until the Protective
Provisions Expiration Date, the consent of the L.P. Unit Majority will also be
required with respect to: (i) any Terminating Capital Transaction; (ii) the
dissolution and liquidation of the Partnership; and (iii) the Partnership's
issuance of Limited Partner
- 32 -
<PAGE>
Interests having seniority over the L.P. Units with respect to distributing
assets, and voting rights.
8.10 APPROVAL OF CERTAIN TAXABLE SALES. Until the earlier of the tenth
anniversary of the closing of the Berg Acquisition and the Protective Provisions
Expiration Date, the General Partner must obtain the prior written consent of
Carl E. Berg, and upon Carl Berg's death if prior to the expiration of this
provision, Clyde J. Berg, before effecting any sale or other transfer of any of
the Properties identified on Schedules 1, 2, 3 or 5 to the Acquisition Agreement
on behalf of the Partnership which results in the recognition of taxable income
by any member of the Berg Group under the Code. Until the earlier of the tenth
anniversary of the Berg Acquisition and the date on which John T. Kontrabecki
ceases to beneficially own at least 750,000 L.P. Units, the General Partner
shall obtain his prior written consent prior to effecting any sale or other
transfer of any of the Properties (identified in Schedules 4 or 5 to the
Acquisition Agreement) as owned by Kontrabecki, Triangle Partners, or Berg
Ventures II, which will result in the recognition of taxable income by
Kontrabecki under the Code.
ARTICLE 9. BOOKS, RECORDS, ACCOUNTING AND REPORTS.
9.1 RECORDS AND ACCOUNTING.
The General Partner shall keep or cause to be kept at the principal office
of the Partnership those records and documents required to be maintained by the
Act and other books and records deemed by the General Partner to be appropriate
with respect to the Partnership's business, including, without limitation, all
books and records necessary to comply with applicable REIT Requirements and to
provide to the Limited Partners any information, lists and copies of documents
required to be provided pursuant to Sections 8.5A and 9.3 hereof. Any records
maintained by or on behalf of the Partnership in the regular course of its
business may be kept on, or be in the form of, punch cards, magnetic tape,
photographs, micrographics or any other information storage device, provided
that the records so maintained are convertible into clearly legible written form
within a reasonable period of time. The books of the Partnership shall be
maintained, for financial and tax reporting purposes, on an accrual basis in
- 33 -
<PAGE>
accordance with GAAP, or such other basis as the General Partner determines to
be necessary or appropriate.
9.2 FISCAL YEAR. The fiscal year of the Partnership shall be the
calendar year.
ARTICLE 10. TAX MATTERS.
10.1 PREPARATION OF TAX RETURNS. The General Partner shall arrange for the
preparation and timely filing of all Partnership returns for federal and state
income tax purposes and shall use all reasonable efforts to furnish, within
sixty (60) days of the close of each taxable year, the tax information
reasonably required by Limited Partners for their federal and state income tax
reporting purposes.
10.2 TAX ELECTIONS. The General Partner shall elect for the Partnership to
be considered a limited partnership on all applicable federal and state income
tax returns to be filed by the Partnership. Except as otherwise provided herein,
the General Partner shall, in its sole and absolute discretion, determine
whether to make any other available election pursuant to the Code.
Notwithstanding the above, in making any such tax election the General Partner
shall take into account the tax consequences to the Limited Partners resulting
from any such election. The General Partner shall make such tax elections on
behalf of the Partnership as the L.P. Unit Majority request, provided that the
General Partner believes that such election is not adverse to the interests of
the General Partner, including its interest in preserving its qualification as a
REIT under the Code. In addition, the General Partner shall elect the
"traditional method" of making Section 704(c) allocations pursuant to
Regulations Section 1.704-3 with respect to each Property under the Acquisition
Agreement. The General Partner shall have the right to seek to revoke any tax
election it makes (other than the election to use the traditional method of
making the Section 704(c) allocations described in this Section 10.2),
including, without limitation, the election under Section 754 of the Code, upon
the General Partner' s determination, in its sole and absolute discretion, that
such revocation is in the best interests of the Limited Partners taken as a
whole and with the approval of the L.P. Unit Majority until the Protective
Provisions Expiration Date. All such elections and determinations may be made on
a Property-by-Property basis, and the General Partner shall be required to
analyze the impact of all such elections and determinations on that basis.
10.3 TAX MATTERS PARTNER.
A. The General Partner shall be the "tax matters partner" of the
Partnership for federal income tax purposes. Pursuant to Section
6230(e) of the Code, upon receipt of notice from the Internal Revenue
Service of the beginning of an administrative proceeding with respect
to the Partnership, the tax matters partner shall furnish the Internal
Revenue Service with the name, address, taxpayer identification
number, and Percentage Interest of each of the Limited Partners and
the Assignees; provided, that such information is provided to the
Partnership by the Limited Partners and the Assignees.
- 34 -
<PAGE>
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the Internal Revenue Service
with respect to any administrative or judicial proceedings for
the adjustment of Partnership items required to be taken into
account by a Partner for income tax purposes (such administrative
proceedings being referred to as a "tax audit" and such judicial
proceedings being referred to as "judicial review"), and in the
settlement agreement the tax matters partner may expressly state
that such agreement shall bind all Partners, except that such
settlement agreement shall not bind any Partner (i) who (within
the time prescribed pursuant to the Code and Regulations) files a
statement with the Internal Revenue Service providing that the
tax matters partner shall not have the authority to enter into a
settlement agreement on behalf of such Partner; or (ii) who is a
"notice partner" (as defined in Section 6231(a)(8) of the Code)
or a member of a "notice group" (as defined in Section 6223(b)(2)
of the Code);
(2) in the event that a notice of a final administrative adjustment
at the Partnership level of any item required to be taken into
account by a Partner for tax purposes (a "final adjustment") is
mailed to the tax matters partner, to seek judicial review of
such final adjustment, including the filing of a petition for
readjustment with the Tax Court or the filing of a complaint for
refund with the United States Claims Court or the District Court
of the United States for the district in which the Partnership's
principal place of business is located;
(3) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the
Internal Revenue Service and, if any part of such request is not
allowed by the Internal Revenue Service, to file an appropriate
pleading (petition or complaint) for judicial review with respect
to such request;
(5) to enter into an agreement with the Internal Revenue Service to
extend the period for assessing any tax which is attributable to
any item required to be taken account of by a Partner for tax
purposes, or an item affected by such item; and
(6) to take any other action on behalf of the Partners or the
Partnership in connection with any tax audit or judicial review
proceeding to the extent permitted by applicable law or
regulations.
The taking of any action and the incurring of any expense by
the tax matters partner in connection with any such proceeding,
except to the extent required by law, is a matter in the sole and
absolute discretion of the tax matters partner and the provisions
relating to indemnification of the General Partner set forth in
- 35 -
<PAGE>
Section 7.6 of this Agreement shall be fully applicable to the
tax matters partner in its capacity as such.
C. The tax matters partner shall receive no compensation for its
services. All third party costs and expenses incurred by the tax
matters partner in performing its duties as such (including legal and
accounting fees and expenses) shall be borne by the Partnership.
Nothing herein shall be construed to restrict the Partnership from
engaging an accounting firm to assist the tax matters partner in
discharging its duties hereunder, so long as the compensation paid by
the Partnership for such services is reasonable.
10.4 ORGANIZATIONAL EXPENSES. The Partnership shall elect to deduct
expenses, if any, incurred by it in organizing the Partnership ratably over a
60-month period as provided in Section 709 of the Code.
10.5 WITHHOLDING. Each Limited Partner hereby authorizes the Partnership
to withhold from, or pay on behalf of or with respect to, such Limited Partner
any amount of federal, state, local, or foreign taxes that the General Partner
determines that the Partnership is required to withhold or pay with respect to
any amount distributable or allocable to such Limited Partner pursuant to this
Agreement, including, without limitation, any taxes required to be withheld or
paid by the Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of the
Code. Any amount paid on behalf of or with respect to a Limited Partner shall
constitute a loan by the Partnership to such Limited Partner, which loan shall
be repaid by such Limited Partner within 15 days after notice from the General
Partner that such payment must be made unless (i) the Partnership withholds such
payment from a distribution which would otherwise be made to the Limited
Partner; or (ii) the General Partner determines, in its sole and absolute
discretion, that such payment may be satisfied out of the amount of Available
Cash which would, but for such payment, be distributed to the Limited Partner.
Any amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be
treated as having been distributed to such Limited Partner. Each Limited Partner
hereby unconditionally and irrevocably grants to the Partnership a security
interest in such Limited Partner' s Partnership Interest to secure such Limited
Partner's obligation to pay to the Partnership any amounts required to be paid
pursuant to this Section 10.5. In the event that a Limited Partner fails to pay
when due any amounts owed to the Partnership pursuant to this Section 10.5, the
General Partner may, in its sole and absolute discretion, elect to make the
payment to the Partnership on behalf of such defaulting Limited Partner, and in
such event shall be deemed to have loaned such amount to such defaulting Limited
Partner and shall succeed to all rights and remedies of the Partnership as
against such defaulting Limited Partner. Without limitation, in such event, the
General Partner shall have the right to receive distributions that would
otherwise be distributable to such defaulting Limited Partner until such time as
such loan, together with all interest thereon, has been paid in full, and any
such distributions so received by the General Partner shall be treated as having
been distributed to the defaulting Limited Partner and immediately paid by the
defaulting Limited Partner to the General Partner in repayment of such loan. Any
amount payable by a Limited Partner
- 36 -
<PAGE>
hereunder shall bear interest at the highest base or prime rate of interest
published from time to time by any of Wells Fargo Bank, N.A., plus 4 percentage
points, but in no event higher than the maximum lawful rate of interest on such
obligation, such interest to accrue from the date such amount is due (i.e., 15
days after demand) until such amount is paid in full. Each Limited Partner shall
take such actions as the Partnership or the General Partner shall request in
order to perfect or enforce the security interest created hereunder.
ARTICLE 11. TRANSFERS AND WITHDRAWALS.
11.1 TRANSFER.
A. The term "Transfer," when used in this Article 11 with respect to a
Unit, shall be deemed to refer to a transaction by which the General
Partner purports to assign all or any part of its General Partner
Interest to another Person or by which a Limited Partner purports to
assign all or any part of its Limited Partner Interest to another
Person. The term "Transfer" when used in this Article 11 does not
include any exchange of L.P. Units for shares of Common Stock pursuant
to the Exchange Rights Agreement.
B. No Partnership Interest shall be Transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this
Article 11. Any Transfer or purported Transfer of a Partnership
Interest not made in accordance with this Article 11 shall be null and
void.
11.2 TRANSFER OF THE COMPANY'S PARTNERSHIP INTERESTS.
A. The General Partner may not withdraw as General Partner or transfer
its General Partner Interest or Limited Partner Interest unless (i)
the L.P. Unit Majority (excluding L.P. Units held by the Company)
consents to such Transfer or withdrawal, or (ii) such Transfer is to
an entity which is wholly-owned by the Company and is a Qualified REIT
Subsidiary under Section 856(i) of the Code.
B. In the event the General Partner withdraws as General Partner in
accordance with Section 11.2A, the General Partner's General Partner
Interest shall immediately be converted into a Limited Partner
Interest.
11.3 LIMITED PARTNERS' RIGHTS TO TRANSFER.
A. Subject to the provisions of this Section 11.3, a Limited Partner
(other than the Company) may, without the consent of the General
Partner:
(a) if such Limited Partner is a partnership or a limited liability
company, Transfer such Limited Partner's L.P. Units to any
partner of such Limited Partner or any member of such limited
liability company;
- 37 -
<PAGE>
(b) Transfer such Limited Partner's L.P. Units to any other Limited
Partner; and
(c) pledge such Limited Partner's L.P. Units to any financial
institution as collateral for any loan with respect to which such
Limited Partner is personally liable.
B. Subject to the provisions of this Section 11.3, a Limited Partner may
Transfer any of such Limited Partner's L.P. Units, other than in
accordance with Section 11.3A, only with the prior written consent of
the General Partner which may be withheld in its sole discretion.
C. If a Limited Partner is subject to Incapacity, the executor,
administrator, trustee, committee, guardian, conservator or receiver
of such Limited Partner's estate shall have all of the rights of a
Limited Partner, but not more rights than those enjoyed by other
Limited Partners, for the purpose of settling or managing the estate
and such power as the Incapacitated Limited Partner possessed to
Transfer all or any part of his or its interest in the Partnership.
The Incapacity of a Limited Partner, in and of itself, shall not
dissolve or terminate the Partnership.
D. No Transfer by a Limited Partner of its L.P. Units may be made to any
Person if (i) in the opinion of legal counsel for the Partnership, it
would result in the Partnership being treated as an association
taxable as a corporation; (ii) such Transfer would cause the
Partnership to become, with respect to any Employee Benefit Plan
subject to Title I of ERISA, a "party-in-interest" (as defined in
Section 3(14) of ERISA) or a "disqualified person" (as defined in
Section 4975(c) of the Code); (iii) such Transfer would, in the
opinion of legal counsel for the Partnership, cause any portion of the
assets of the Partnership to constitute assets of any Employee Benefit
Plan pursuant to Department of Labor Regulations Section 2510.2-101;
(iv) such Transfer would subject the Partnership to regulation under
the Investment Company Act of 1940, the Investment Advisors Act of
1940 or ERISA; or (v) such Transfer is a sale or exchange, and such
sale or exchange would, when aggregated with all other sales and
exchanges during the 12-month period ending on the date of the
proposed Transfer, result in a Change of Control Transaction.
E. Subject to the foregoing provisions of Section 11.3 and the terms of
Section 12.2, a Limited Partner may transfer L.P. Units to an
Affiliate and have such Affiliate become a Limited Partner.
In addition to the conditions set forth in Sections 11.3D, 11.4, and 12.2
any Transfer pursuant to this Article 11 is subject to the following conditions:
(1) unless such Transfer is being made pursuant to an effective
registration statement under the Securities Act, or pursuant to
Rule 144 or Rule 144A thereunder, the transferring Limited
Partner shall deliver to the Company a notice with respect to the
proposed transfer, together with an opinion of counsel in form
and substance satisfactory to the General Partner prepared by
counsel reasonably
- 38 -
<PAGE>
satisfactory to the General Partner (which shall include, without
limitation, counsel to each of the Limited Partners as of the
date hereof), to the effect that an exemption from registration
and qualification under such Securities Act is available;
(2) the transferring Limited Partner and its transferee shall each
provide a certificate to the General Partner, in form and
substance satisfactory to the General Partner, to the effect that
(i) the proposed transfer will not be effected on or through (a)
a United States national, regional or local securities exchange,
(b) a foreign securities exchange or (c) an interdealer quotation
system that regularly disseminates firm buy or sell quotations by
identified brokers or dealers (including, without limitation, the
Nasdaq) by electronic means or otherwise, and (ii) it is not, and
the proposed transfer will not be made by, through or on behalf
of, (a) a Person who regularly quotes equity interests in the
Partnership, such as a broker or dealer making a market in equity
interests in the Partnership or (b) a Person who regularly makes
available to the public (including customers or subscribers) bid
or offer quotes with respect to equity interests in the
Partnership and stands ready to effect buy or sell transactions
at the quoted prices for itself or on behalf of others; PROVIDED,
HOWEVER, that such certificate shall not be required for any
transfer in connection with a registered public offering;
(3) the transferee must be a United States Person for federal income
tax purposes; and
(4) such transfer must not cause the Partnership to terminate or lose
its status as a partnership for tax purposes.
F. If it shall become unlawful for any Limited Partner to continue to
hold some or all of the L.P. Units held by such Limited Partner, or by
reason of legal or regulatory restrictions the cost to such Limited
Partner to continue to hold such L.P. Units (in relation to the value
of such L.P. Units to such Limited Partner) has, in the reasonable
judgment of such Limited Partner, significantly increased, such
Limited Partner may, at any time following the date three business
days after the delivery by such Limited Partner to the General Partner
a notice of the existence of any such restriction, Transfer all or any
portion of the L.P. Units held by such Limited Partner free of any
restrictions imposed under this Agreement (other than those
restrictions required by federal or state laws, including securities,
and tax, laws, and subject to the prospective transferee meeting the
requirements of Section 12.2, and provided that the transferee Limited
Partner shall hold its L.P. Units subject to all of the terms of this
Agreement); but only if such Limited Partner cannot then exercise its
Exchange Rights or Put Rights for cash, and the Company has notified
the Limited Partner that the Company will not register for offer and
sale all shares of Common Stock issued upon the exercise of the
Exchange Rights within 90 days. In connection therewith, the Company
shall assist such Limited Partner in disposing of the L.P. Units held
by it in a prompt and orderly manner, and (at the request of such
Limited Partner) make available (and authorize such Limited Partner to
make available through the Company) financial and other information
concerning the Company and its Subsidiaries (including, without
limitation, the information described in Rule 144A(d)(4)) to any
prospective purchaser of
- 39 -
<PAGE>
such L.P. Units (it being agreed that such prospective purchaser shall
be either an "accredited investor" within the meaning of Rule 501 (a)
under the Securities Act or a "qualified institutional buyer" within
the meaning of Rule 144A(d)(1) under such Act to the extent that such
L.P. Units are "restricted securities" as such term is defined in Rule
144). The Company may require that each such prospective purchaser
keep confidential, pursuant to customary confidentiality requirements,
any information received by it pursuant to this provision.
11.4 SUBSTITUTED LIMITED PARTNERS. The General Partner shall have the
right to consent to the admission of a transferee who receives L.P. Units
pursuant to Section 11.3A, C, or E, which consent may be given or withheld by
the General Partner in its sole and absolute discretion. The General Partner's
failure or refusal to permit such transferee to become a Substituted Limited
Partner shall not give rise to any cause of action against the Partnership or
any Partner.
11.5 ASSIGNEES. If the General Partner, in its sole and absolute
discretion, does not consent to the admission of any transferee as a Substituted
Limited Partner, as described in Section 11.4, such transferee shall be
considered an Assignee for purposes of this Agreement. An Assignee shall be
deemed to have had assigned to it, and shall be entitled to receive
distributions from the Partnership and the share of Net Income, Net Losses and
any other Tax Items with respect to the L.P. Units assigned to such transferee,
but shall not be deemed to be a holder of L.P. Units for any other purpose under
this Agreement, and shall not be entitled to vote such L.P. Units in any matter
presented to the Limited Partners for a vote (such L.P. Units being deemed to
have been voted on such matter in the same proportion as all other L.P. Units
held by Limited Partners are voted). In the event the Assignee desires to make a
further assignment of any such L.P. Units, such Assignee shall be subject to all
of the provisions of this Article 11 to the same extent and in the same manner
as any Limited Partner desiring to make an assignment of L.P. Units.
11.6 EFFECT OF PROHIBITED TRANSFER. Any transfer made in violation of
Article 11 shall be null and void and of no force and effect.
11.7 GENERAL PROVISIONS.
A. No Limited Partner may withdraw from the Partnership other than as a
result of a permitted Transfer of all of such Limited Partner' s L.P.
Units in accordance with this Article 11, or pursuant to the tender or
exchange of all of its L.P. Units pursuant to the exercise of Put
Rights or Exchange Rights.
B. Any Limited Partner who shall Transfer all of its L.P. Units in a
Transfer permitted pursuant to this Article 11 shall cease to be a
Limited Partner upon the admission of all Assignees of such L.P. Units
as Substituted Limited Partners. Similarly, any Limited Partner who
shall Transfer all of its L.P. Units pursuant to a tender or exchange
of all of its L.P. Units pursuant to the exercise of Put Rights or
Exchange Rights shall cease to be a Limited Partner.
- 40 -
<PAGE>
C. Without the consent of the General Partner, permitted Transfers
pursuant to this Article 11 may be made effective only as of the first
day of a Quarter.
D. If any Partnership Interest is transferred or assigned during the year
in compliance with the provisions of this Article 11, or redeemed
pursuant to Section 8.7, or exchanged pursuant to the Exchange Rights
Agreement on any day other than the first day of a Partnership Year,
the Net Income, Net Losses, each item thereof, and all other Tax Items
attributable to such interest for such Partnership Year shall be
divided and allocated between the transferor Partner and the
transferee Partner by taking into account their varying interests
during the Partnership Year in accordance with Section 706(d) of the
Code, using the interim closing of the books method. Solely for
purposes of making such allocations, each of such items for the
calendar month in which the Transfer or assignment occurs shall be
allocated to the transferee Partner, and none of such items for the
calendar month in which an exchange occurs shall be allocated to the
exchanging Partner, provided, however, that the General Partner may
adopt such other conventions relating to allocations in connection
with transfers, assignments, or exchanges as it determines are
necessary or appropriate. All distributions of Available Cash
attributable to such L.P. Units with respect to which the Partnership
Record Date is before the date of such transfer, assignment, or
exchange shall be made to the transferor Partner or the exchanging
Partner, as the case may be, and in the case of a Transfer or
assignment other than an exchange, all distributions of Available Cash
thereafter attributable to such L.P. Units shall be made to the
transferee Partner.
ARTICLE 12. ADMISSION OF PARTNERS.
12.1 ADMISSION OF SUCCESSOR GENERAL PARTNER. A successor to all of the
General Partner Interest pursuant to Article 11 hereof who is proposed to be
admitted as a successor General Partner shall be admitted to the Partnership as
the General Partner, effective upon the Transfer. Any such transferee shall
carry on the business of the Partnership without dissolution. In each case, the
admission shall be subject to the successor General Partner executing and
delivering to the Partnership an acceptance of all of the terms and conditions
of this Agreement, the Acquisition Agreement, and such other documents or
instruments as may be required to effect the admission. In the case of such
admission on any day other than the first day of a Partnership Year, all items
attributable to the General Partner Interest for such Partnership Year shall be
allocated between the transferring General Partner and such successor as
provided in Section 11.6D.
12.2 ADMISSION OF ADDITIONAL AND SUBSTITUTED LIMITED PARTNERS.
A. A Person who makes a Capital Contribution to the Partnership in
accordance with this Agreement after the Effective Date and a
Permitted Transferee pursuant to Article 11 shall be admitted to the
Partnership as an Additional Limited Partner or a Substituted Limited
Partner only upon furnishing to the General Partner (i) evidence of
acceptance in form satisfactory to the General Partner of all of the
terms and conditions of this Agreement and the Acquisition Agreement,
including, without limitation, the power of attorney granted in
Section 2.4 hereof and (ii) such other
- 41 -
<PAGE>
documents or instruments as may be required in the discretion of the
General Partner in order to effect such Person's admission as an
Additional Limited Partner.
B. Notwithstanding anything to the contrary in this Section 12.2, no
Person shall be admitted as an Additional Limited Partner or a
Substituted Limited Partner without the consent of the General
Partner, which consent may be given or withheld in the General
Partner's sole and absolute discretion. The admission of any Person as
an Additional Limited Partner or a Substituted Limited Partner shall
become effective on the date upon which the name of such Person is
recorded on the books and records of the Partnership, following the
consent of the General Partner to such admission.
C. If any Additional Limited Partner is admitted to the Partnership on
any day other than the first day of a Partnership Year, then Net
Income, Net Losses, each other Tax Item and all other items allocable
among Partners and Assignees for such Partnership Year shall be
allocated among such Additional Limited Partner and all other Partners
and Assignees by taking into account their varying interests during
the Partnership Year in accordance with Section 706(d) of the Code,
using the interim closing of the books method. Solely for purposes of
making such allocations, each of such items for the calendar month in
which an admission of any Additional Limited Partner occurs shall be
allocated among all of the Partners and Assignees, including such
Additional Limited Partner. All distributions of Available Cash with
respect to which the Partnership Record Date is before the date of
such admission shall be made solely to Partners and Assignees, other
than the Additional Limited Partner, and all distributions of
Available Cash thereafter shall be made to all of the Partners and
Assignees, including such Additional Limited Partner.
D. A transferee who has been admitted as a Substituted Limited Partner or
an Additional Limited Partner shall have all the rights and powers and
be subject to all the restrictions and liabilities of a Limited
Partner under this Agreement.
12.3 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP. For
the admission to the Partnership of any Partner, the General Partner shall take
all steps necessary and appropriate under the Act to amend the records of the
Partnership and, if necessary, to prepare as soon as practical an amendment of
this Agreement (including an amendment of Appendix I) and, if required by law,
shall prepare and file an amendment to the Certificate and may for this purpose
exercise the power of attorney granted pursuant to Section 2.4 hereof.
ARTICLE 13. DISSOLUTION, LIQUIDATION AND TERMINATION.
13.1 DISSOLUTION. The Partnership shall not be dissolved by the admission
of Substituted Limited Partners or Additional Limited Partners or by the
admission of a successor General Partner in accordance with the terms of this
Agreement. In the event of the withdrawal of the General Partner, any successor
General Partner shall continue the business of the Partnership. The Partnership
shall dissolve, and its affairs
- 42 -
<PAGE>
shall be wound up, only upon the first to occur of any of the following
("Liquidating Events"):
(i) the expiration of its term as provided in Section 2.5 hereof;
(ii) an event of withdrawal of the General Partner, as defined in the Act
(other than an event of bankruptcy), unless, within 90 days after such
event of withdrawal a majority in interest of the remaining Partners
agree in writing to continue the business of the Partnership and to
the appointment, effective as of the date of withdrawal, of a
successor General Partner;
(iii)from and after the date of this Agreement through December 31, 2048,
an election to dissolve the Partnership made by the General Partner,
with the Consent of Limited Partners holding 66-2/3% or more of the
L.P. Units (including L.P. Units held by the Company);
(iv) on or after January 1, 2049, an election to dissolve the Partnership
made by the General Partner, in its sole and absolute discretion;
(v) entry of a decree of judicial dissolution of the Partnership pursuant
to the provisions of the Act;
(vi) the sale of all or substantially all of the assets and properties of
the Partnership;
(vii)a final and non-appealable judgment is entered by a court of competent
jurisdiction ruling that the General Partner is bankrupt or insolvent,
or a final and non-appealable order for relief is entered by a court
with appropriate jurisdiction against the General Partner, in each
case under any federal or state bankruptcy or insolvency laws as now
or hereafter in effect, unless prior to the entry of such order or
judgment all of the remaining Partners agree in writing to continue
the business of the Partnership and to the appointment, effective as
of a date prior to the date of such order or judgment, of a substitute
General Partner.
13.2 WINDING UP.
A. Upon the occurrence of a Liquidating Event, the Partnership shall
continue solely for the purposes of winding up its affairs in an
orderly manner, liquidating its assets, and satisfying the claims of
its creditors and Partners. No Partner shall take any action that is
inconsistent with, or not necessary to or appropriate for, the winding
up of the Partnership's business and affairs. The General Partner, or,
in the event there is no remaining General Partner, any Person elected
by Limited Partners holding at least a majority of the Limited
Partnership Interests (the General Partner or such other Person being
referred to herein as the "Liquidator"), shall be responsible for
overseeing the winding up and dissolution of the Partnership and shall
take full account of the Partnership's liabilities and property and
the Partnership property shall be liquidated as promptly as is
consistent with obtaining the fair value thereof, and the
- 43 -
<PAGE>
proceeds therefrom (which may, to the extent determined by the General
Partner, include shares of beneficial interest or other securities of
the Company) shall be applied and distributed in the following order:
(i) First, to the payment and discharge of all of the Partnership's
debts and liabilities to creditors other than the Partners;
(ii) Second, to the payment and discharge of all of the Partnership's
debts and liabilities to the General Partner;
(iii)Third, to the payment and discharge of all of the Partnership's
debts and liabilities to the other Partners;
(iv) Fourth, to the General Partner and Limited Partners to the extent
of and in accordance with the positive balances in their Capital
Accounts, after giving effect to all contributions,
distributions, and allocations for all periods; and
(v) The balance, if any, to the Partners according to their
Percentage Interests.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2A hereof which require
liquidation of the assets of the Partnership, but subject to the order
of priorities set forth therein, if prior to or upon dissolution of
the Partnership the Liquidator determines that an immediate sale of
part or all of the Partnership's assets would be impractical or would
cause undue loss to the Partners, the Liquidator may, in its sole and
absolute discretion, defer for a reasonable time the liquidation of
any asset except those necessary to satisfy liabilities of the
Partnership (including to those Partners as creditors) and/or
distribute to the Partners, in lieu of cash, as tenants in common and
in accordance with the provisions of Section 13.2A hereof, undivided
interests in such Partnership assets as the Liquidator deems not
suitable for liquidation. Any such distributions in kind shall be made
only if, in the good faith judgment of the Liquidator, such
distributions in kind are in the best interests of the Partners, and
shall be subject to such conditions relating to the disposition and
management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such
properties at such time. The Liquidator shall determine the fair
market value of any property distributed in kind using such reasonable
method of valuation as it may adopt.
C. In the discretion of the Liquidator, a pro rata portion of the
distributions that would otherwise be made to the General Partner and
Limited Partners pursuant to this Article 13 may be:
(1) distributed to a trust established for the benefit of the General
Partner and Limited Partners for the purposes of liquidating
Partnership assets,
- 44 -
<PAGE>
collecting amounts owed to the Partnership, and paying any
contingent or unforeseen liabilities or obligations of the
Partnership or the General Partner arising out of or in
connection with the Partnership. The assets of any such trust
shall be distributed to the General Partner and Limited Partners
from time to time, in the reasonable discretion of the
Liquidator, in the same proportions as the amount distributed to
such trust by the Partnership would otherwise have been
distributed to the General Partner and Limited Partners pursuant
to this Agreement; or
(2) withheld or escrowed to provide a reasonable reserve for
Partnership liabilities (contingent or otherwise) and to reflect
the unrealized portion of any installment obligations owed to the
Partnership, provided that such withheld or escrowed amounts
shall be distributed to the General Partner and Limited Partners
in the manner and order of priority set forth in Section 13.2A as
soon as practicable.
13.3 OBLIGATION TO CONTRIBUTE DEFICIT. In the event the Partnership is
"liquidated" within the meaning Section 1.704-1(b)(2)(ii)(G) of the Regulations,
if any Partner's Adjusted Contributions are less than zero (after giving effect
to all contributions, distributions, and allocations for all Fiscal Years,
including the Fiscal Year during which such liquidation occurs), such Partner
shall contribute to the capital of the Partnership the amount necessary to
restore such Partner's Capital Account to zero in compliance with Regulations
Section 1.704-1(b)(2(ii)(B)(3).
13.4 RIGHTS OF LIMITED PARTNERS. Except as otherwise provided in this
Agreement, each Limited Partner shall look solely to the assets of the
Partnership for the return of its Adjusted Capital Contributions and shall have
no right or power to demand or receive property other than cash from the
Partnership. Except as otherwise provided in this Agreement, no Limited Partner
shall have priority over any other Partner as to the return of its Adjusted
Capital Contributions, distributions, or allocations.
13.5 NOTICE OF DISSOLUTION. In the event a Liquidating Event occurs or an
event occurs that would, but for the provisions of an election or objection by
one or more Partners pursuant to Section 13.1, result in a dissolution of the
Partnership, the General Partner shall, within 30 days thereafter, provide
written notice thereof to each of the Partners.
13.6 TERMINATION OF PARTNERSHIP AND CANCELLATION OF CERTIFICATE OF LIMITED
PARTNERSHIP. Upon the completion of the liquidation of the Partnership' s
assets, as provided in Section 13.2 hereof, the Partnership shall be terminated,
a certificate of cancellation shall be filed, and all qualifications of the
Partnership as a foreign limited partnership in jurisdictions other than the
state of Delaware shall be canceled and such other actions as may be necessary
to terminate the Partnership shall be taken.
13.7 REASONABLE TIME FOR WINDING-UP. A reasonable time shall be allowed
for the orderly winding-up of the business and affairs of the Partnership and
the
- 45 -
<PAGE>
liquidation of its assets pursuant to Section 13.2 hereof in order to minimize
any losses otherwise attendant upon such winding-up, and the provisions of this
Agreement shall remain in effect among the Partners during the period of
liquidation.
13.8 WAIVER OF PARTITION. Each Partner hereby waives any right to
partition of the Partnership property.
13.9 DEEMED DISTRIBUTION AND RECONTRIBUTION. Notwithstanding any other
provisions of this Article 13, in the event the Partnership is liquidated within
the meaning of Regulations Section 1.704-1(b)(2)(ii)(G) but no Liquidating Event
has occurred, the Property shall not be liquidated, the Partnership's
liabilities shall not be paid or discharged, and the Partnership's affairs shall
not be wound up. Instead, the Partnership shall be deemed to have distributed
the Property in kind to the Partners, who shall be deemed to have assumed and
taken subject to all Partnership liabilities, all in accordance with their
respective Capital Accounts, and if any Partner has an Adjusted Capital Account
Deficit (after giving effect to all contributions, distributions, and
allocations for all Fiscal Years, including the Fiscal Year during which such
liquidation occurs) such Partner shall contribute to the capital of the
Partnership the amount necessary to restore such deficit balance to zero in
compliance with Regulations Section 1.704-1(b)(2(ii)(B)(3). Immediately
thereafter, the Partners shall be deemed to have recontributed the property in
kind to the Partnership, which shall be deemed to have assumed and taken subject
to all such liabilities.
ARTICLE 14. AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS.
14.1 AMENDMENTS.
A. Amendments to this Agreement may be proposed by the General
Partner or by any Limited Partners (other than the Company)
holding in the aggregate 25% or more of the Partnership
Interests. Following such proposal, the General Partner shall
submit any proposed amendment to the Limited Partners. The
General Partner shall seek the written vote of the Partners on
the proposed amendment or shall call a meeting to vote thereon
and to transact any other business that it may deem appropriate.
For purposes of obtaining a written vote, the General Partner may
require a response within a reasonable specified time, but not
less than 15 days, and failure to respond in such time period
shall constitute a vote which is consistent with the General
Partner's recommendation with respect to the proposal. Except as
provided in Section 8.9, 13.1C, 14.1B, 14.1C or 14.1D, a proposed
amendment shall be adopted and be effective as an amendment
hereto if it is approved by the General Partner and it receives
the Consent of Limited Partners holding 50% or more of the
Percentage Interests of the Limited Partners (including Limited
Partner Interests held by the Company).
B. Notwithstanding any provisions of Sections 8.9 and 14.1A to the
contrary, the General Partner shall have the power, without the
consent of the Limited Partners,
- 46 -
<PAGE>
to amend this Agreement as may be required to facilitate or
implement any of the following purposes:
(1) to add to the obligations of the General Partner or
surrender any right or power granted to the General Partner
or any Affiliate of the General Partner for the benefit of
the Limited Partners;
(2) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement;
(3) to set forth the designations, rights, powers, duties, and
preferences of the holders of any additional Partnership
Interests issued pursuant to Section 4.3 hereof;
(4) to reflect a change that is of an inconsequential nature and
does not adversely affect the Limited Partners in any
material respect, or to cure any ambiguity, correct or
supplement any provision in this Agreement not inconsistent
with law or with other provisions, or make other changes
with respect to matters arising under this Agreement that
will not be inconsistent with law or with the provisions of
this Agreement; and
(5) to satisfy any requirements, conditions, or guidelines
contained in any order, directive, opinion, ruling or
regulation of a federal or state agency or contained in
federal or state law.
The General Partner shall provide notice to the Limited Partners when any action
under this Section 14.1B is taken.
C. Notwithstanding provision of Section 14.1A and 14.1B to the contrary,
this Agreement shall not be amended without the Consent of each
Partner adversely affected if such amendment would (i) convert a
Limited Partner's interest in the Partnership into a General Partner
Interest; (ii) modify the limited liability of a Limited Partner in a
manner adverse to such Limited Partner; (iii) alter rights of the
Partner to receive distributions pursuant to Article 5 or Article 13,
or the allocations specified in Article 6 (except as permitted
pursuant to Article IV and Section 14.1B(3) hereof); (iv) cause the
termination of the Partnership prior to the time set forth in Section
2.5 or 13.1; or (v) amend this Section 14.1C. Further, no amendment
may alter the restrictions on the General Partner' s authority set
forth in Section 13.1C without the Consent specified in that section.
14.2 MEETINGS OF THE PARTNERS.
A. Meetings of the Partners may be called by the General Partner and
shall be called upon the receipt by the General Partner of a written
request by Limited Partners (other than the Company) holding 25% or
more of the Partnership Interests. The request shall state the nature
of the business to be transacted. Notice of any such meeting shall be
given to all Partners not less than 7 days nor more than 30 days prior
- 47 -
<PAGE>
to the date of such meeting. Partners may vote in person or by proxy
at such meeting. Whenever the vote or Consent of the Limited Partners
is permitted or required under this Agreement, such vote or Consent
may be given at a meeting of the Partners or may be given in
accordance with the procedure prescribed in Section 14.1A hereof.
Except as otherwise expressly provided in this Agreement, the consent
of holders of a majority of the Percentage Interests held by Partners
(including Limited Partnership Interests held by the Company) shall
control.
B. Any action required or permitted to be taken at a meeting of the
Partners may be taken without a meeting if a written consent setting
forth the action so taken is signed by a majority of the Percentage
Interests of the Partners (or such other percentage as is expressly
required by this Agreement). Such consent may be in one instrument or
in several instruments, and shall have the same force and effect as a
vote of a majority of the Percentage Interests of the Partners (or
such other percentage as is expressly required by this Agreement).
Such consent shall be filed with the General Partner. An action so
taken shall be deemed to have been taken at a meeting held on the
effective date so certified.
C. Each Limited Partner may authorize any Person or Persons to act for
him by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the Limited
Partner or his attorney-in-fact. No proxy shall be valid after the
expiration of 11 months from the date thereof unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure
of the Limited Partner executing it, such revocation to be effective
upon the Partnership's receipt of written notice of such revocation
from the Limited Partner executing such proxy.
D. Each meeting of the Partners shall be conducted by the General Partner
or such other Person as the General Partner may appoint pursuant to
such rules for the conduct of the meeting as the General Partner or
such other Person deems appropriate. Meetings of Partners may be
conducted in the same manner as meetings of the shareholders of the
Company and may be held at the same time, and as part of, meetings of
the shareholders of the Company.
ARTICLE 15. GENERAL PROVISIONS.
15.1 ADDRESSES AND NOTICE. Any notice, demand, request or report required
or permitted to be given or made to a Partner or Assignee under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other means of written
communication to the Partner or Assignee (including electronic mail and
electronic facsimile transmission if delivery in that manner has been confirmed)
at the address set forth in Appendix I or such other address of which the
Partner shall notify the General Partner in writing.
15.2 TITLES AND CAPTIONS. All article or section titles or captions in
this Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions
- 48 -
<PAGE>
hereof. Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
15.3 PRONOUNS AND PLURALS. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
15.4 FURTHER ACTION. The parties shall execute and deliver all documents,
provide all information and take or refrain from taking action as may be
necessary or appropriate to achieve the purposes of this Agreement.
15.5 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assigns.
15.6 CREDITORS. Other than as expressly set forth herein with respect to
the Indemnitees, none of the provisions of this Agreement shall be for the
benefit of, or shall be enforceable by, any creditor of the Partnership.
15.7 WAIVER. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or condition.
15.8 COUNTERPARTS. This Agreement may be executed in counterparts, all of
which together shall constitute one agreement binding on all of the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
15.9 APPLICABLE LAW. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of laws thereof.
15.10 INVALIDITY OF PROVISIONS. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
15.11 ENTIRE AGREEMENT. This Agreement contains the entire understanding
and agreement among the Partners with respect to the subject matter hereof and
supersedes any other prior written or oral understandings or agreements among
them with respect thereto.
15.12 GUARANTY BY THE COMPANY. The Company unconditionally and irrevocably
guarantees to the Limited Partners the performance by the General Partner
- - 49 -
<PAGE>
of the General Partner' s obligations under this Agreement. This guarantee is
exclusively for the benefit of the Limited Partners and shall not extend to the
benefit any creditor of the Partnership.
- 50 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
MISSION WEST PROPERTIES
A CALIFORNIA CORPORATION
By: /s/ Michael J. Anderson
- ----------------------------
Name: Michael J. Anderson
Title: Vice President and Chief Operating Officer
LIMITED PARTNERS:
/s/ John T. Kontrabecki
- ------------------------------
John T. Kontrabecki
/s/ Carl E. Berg
- -------------------------------
Carl E. Berg
/s/ Clyde J. Berg
- -------------------------------
Clyde J. Berg
- 51 -
<PAGE>
<TABLE>
<CAPTION>
APPENDIX I
PARTNERS' [ADJUSTED] CONTRIBUTIONS AND PARTNERSHIP INTERESTS
Name and Address Cash Agreed Total L.P. Percentage
of Partner Contributions Value of Contribution** Units Interest
Contributed
Property**
------------- ----------- -------------- ------- ----------
<S> <C> <C>
GENERAL PARTNER ___ 10.91%
Mission West Properties
10050 Bandley Drive
Cupertino, CA 95014
LIMITED PARTNER
John T. Kontrabecki 953,018 44.545%
2755 Campus Drive, #100
San Mateo, CA 94403
Carl E. Berg 476,509 22.2725%
10050 Bandley Drive
Cupertino, CA 95014
Clyde J. Berg 476,509 22.2725%
10050 Bandley Drive
Cupertino, CA 95014
</TABLE>
*The Company's Cash Contribution shall be increased by all transaction costs
paid by the Company out of the Company Cash pursuant to the Acquisition
Agreement.
**To be completed upon final adjustment of accounts at July 1, 1998 and
preparation of 1998 federal income tax return.
- 52 -
<PAGE>
APPENDIX II
ALLOCATIONS OF PARTNERSHIP INTERESTS
1. ALLOCATION OF NET INCOME AND NET LOSS.
(a) NET INCOME. Except as otherwise provided in this Appendix II, Net
Income (or items thereof) (other than Net Income, or items thereof,
arising in connection with a Terminating Capital Transaction) for any
fiscal year or other applicable period shall be allocated to the
Partners in accordance with their respective Percentage Interests.
(b) NET LOSS. Except as otherwise provided in this Appendix II, Net Loss
(or items thereof) of the Partnership for each fiscal year or other
applicable period shall be allocated to the Partners in accordance
with the Partners' respective Percentage Interests. Notwithstanding
the preceding sentence, to the extent any Net Loss (or items thereof)
allocated to a Partner under this subparagraph (b) would cause such
Partner (hereinafter, a "Restricted Partner") to have an Adjusted
Capital Account Deficit, or increase the amount of an existing
Adjusted Capital Account Deficit, as of the end of the fiscal year or
other applicable period to which such Net Loss relates, such Net Loss
shall not be allocated to such Restricted Partner and instead shall be
allocated to the other Partner(s) (hereinafter, the "Permitted
Partners") pro rata in accordance with each Permitted Partner's
Percentage Interest.
(c) TERMINATING CAPITAL TRANSACTION; LIQUIDATION. Allocations of Net
Income or Net Loss (or items thereof) in connection with a Terminating
Capital Transaction or Liquidation of the Partnership shall first be
made so that, to the extent possible, each Partner's Capital Account
balance is equal to such Partner's Adjusted Contribution, and the
remainder of such Net Income or Net Loss (or items thereof) shall be
allocated to the Partners in accordance with their Percentage
Interests. Notwithstanding the preceding sentence, to the extent any
Net Loss (or items thereof) would be allocated to a Restricted Partner
under this subparagraph (c), such Net Loss shall not be allocated to
such Restricted Partner and instead shall be allocated to the
Permitted Partners pro rata in accordance with each Permitted
Partner's Percentage Interest.
(d) RULES OF CONSTRUCTION.
(1) CAPITAL ACCOUNT INCREASES. For purposes of making allocations
pursuant to subparagraph 1(c) of this Appendix II, a Partner's
Capital Account balance shall be deemed to be increased by such
Partner's share of any Partnership Minimum Gain and Partner
Minimum Gain remaining at the close of the fiscal period in
respect of which such allocations are being made.
- 53 -
<PAGE>
(2) CHANGE IN PERCENTAGE INTERESTS. In the event any Partner's
Percentage Interest changes during a fiscal year for any reason,
including without limitation, the Transfer of any interest in the
Partnership, the tax allocations contained in this Appendix II
shall be applied as necessary to reflect the varying interests of
the Partners during such year.
2. SPECIAL ALLOCATIONS.
Notwithstanding any provisions of paragraph 1 of this Appendix II, the
following special allocations shall be made.
(a) MINIMUM GAIN CHARGEBACK (NONRECOURSE LIABILITIES). Except as otherwise
provided in Section 1.704-2(f) of the Regulations, if there is a net
decrease in Partnership Minimum Gain for any Partnership fiscal year,
each Partner shall be specially allocated items of Partnership income
and gain for such year (and, if necessary, subsequent years) in an
amount equal to such Partner's share of the net decrease in
Partnership Minimum Gain to the extent required by Regulations Section
1.704-2(f). The items to be so allocated shall be determined in
accordance with Sections 1.704-2(f) and (j)(2) of the Regulations.
This subparagraph 2(a) is intended to comply with the minimum gain
chargeback requirement in said section of the Regulations and shall be
interpreted consistently therewith. Allocations pursuant to this
subparagraph 2(a) shall be made in proportion to the respective
amounts required to be allocated to each Partner pursuant hereto.
(b) PARTNER MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Section 1.704-2(i)(4) of the Regulations, if there is a net decrease
in Partner Minimum Gain attributable to a Partner Nonrecourse Debt
during any fiscal year, each Partner who has a share of the Partner
Minimum Gain attributable to such Partner Nonrecourse Debt, determined
in accordance with Section 1.704- 2(i)(5) of the Regulations, shall be
specially allocated items of Partnership income and gain for such year
(and, if necessary, subsequent years) in an amount equal to that
Partner's share of the net decrease in the Partner Minimum Gain
attributable to such Partner Nonrecourse Debt to the extent and in the
manner required by Section 1.704-2(i) of the Regulations. The items to
be so allocated shall be determined in accordance with Sections
1.704-2(i)(4) and (j)(2) of the Regulations. This subparagraph 2(b) is
intended to comply with the minimum gain chargeback requirement with
respect to Partner Nonrecourse Debt contained in said Section
1.704-2(i)(4) of the Regulations and shall be interpreted consistently
therewith. Allocations pursuant to this subparagraph 2(b) shall be
made in proportion to the respective amounts required to be allocated
to each Partner pursuant hereto.
(c) QUALIFIED INCOME OFFSET. In the event a Partner unexpectedly receives
any adjustments, allocations or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, and such
Partner has an Adjusted Capital Account Deficit, items of Partnership
income (including gross income) and gain shall be specially allocated
to such Partner in an amount and manner sufficient to eliminate the
Adjusted Capital Account Deficit as quickly as possible as required by
the
- 54 -
<PAGE>
Regulations. This subparagraph 2(c) is intended to constitute a
"qualified income offset" under Section 1.704-1(b)(2)(ii)(d) of the
Regulations and shall be interpreted consistently therewith.
(d) OTHER CHARGEBACK OF IMPERMISSIBLE NEGATIVE CAPITAL ACCOUNT. To the
extent any Partner has an Adjusted Capital Account Deficit at the end
of any Partnership Year, each such Partner shall be specially
allocated items of Partnership income (including gross income) and
gain in the amount of such excess as quickly as possible, provided
that an allocation pursuant to this paragraph 2(d) shall be made if
and only to the extent that such Partner would have an Adjusted
Capital Account Deficit after all other allocations provided for in
this Appendix II have been tentatively made as if this paragraph 2(d)
were not in the Agreement.
(e) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any fiscal year or
other applicable period shall be allocated to the Partners in
accordance with their respective Percentage Interests.
(f) PARTNER NONRECOURSE DEDUCTIONS. Partner Nonrecourse Deductions for any
fiscal year or other applicable period with respect to a Partner
Nonrecourse Debt shall be specially allocated to the Partner that
bears the economic risk of loss for such Partner Nonrecourse Debt (as
determined under Sections 1.704-2(b)(4) and 1.704-2(i)(1) of the
Regulations).
(g) INTENT OF ALLOCATIONS. The parties intend that the allocation
provisions of this Appendix II shall result in final Capital Account
balances of the Partners that initially are equal to each Partner's
Adjusted Contribution and are then in proportion to the Partners'
respective Percentage Interests, so that when liquidating
distributions are made in accordance with such final Capital Account
balances under Section 13.2A(4) hereof, such distributions will be
able to return to each Partner its Adjusted Contribution and then will
be made in proportion to the Partners' respective Percentage
Interests. To the extent that such final Capital Account balances do
not so reflect the provisions of this Appendix II, income and loss of
the Partnership for the current year and future years, as computed for
book purposes, shall be allocated among the Partners so as to result
in final Capital Account balances reflecting the provisions of this
Appendix II, and to the extent such allocations of items of income
(including gross income) and deduction do not result in such final
Capital Account balances, then, income and loss of the Partnership for
prior open years, as computed for book purposes (or items of gross
income and deduction of the Partnership for such years, as computed
for book purposes) shall be reallocated among the Partners consistent
with the foregoing. This subparagraph shall control notwithstanding
any reallocation of income, loss, or items thereof, as computed for
book purposes, by the Internal Revenue Service or any other taxing
authority.
(h) SECTION 754 ADJUSTMENT. To the extent an adjustment to the adjusted
tax basis of any asset of the Partnership pursuant to Section 734(b)
of the Code or Section 743(b) of the Code is required pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m) to be taken into account in
determining Capital Accounts, the amount of such adjustment
- 55 -
<PAGE>
to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) and such gain or loss shall be
specially allocated among the Partners in a manner consistent with the
manner in which each of their respective Capital Accounts are required
to be adjusted pursuant to such section of the Regulations.
(i) GROSS INCOME ALLOCATION. There shall be specially allocated to the
General Partner an amount of Partnership income and gain during each
Partnership Year or portion thereof, before any other allocations are
made hereunder, which is equal to the excess, if any, of the
cumulative distributions of cash made to the General Partner under
Section 7.3B hereof over the cumulative allocations of Partnership
income and gain to the General Partner pursuant to this Section (i) of
this Appendix II.
3. TAX ALLOCATIONS.
(a) ITEMS OF INCOME OR LOSS. Except as is otherwise provided in this
Appendix II, an allocation of Partnership Net Income or Net Loss to a
Partner shall be treated as an allocation to such Partner of the same
share of each item of income, gain, loss, deduction and item of
tax-exempt income or Section 705(a)(2)(B) expenditure (or item treated
as such expenditure pursuant to Regulations Section
1.704-1(b)(2)(iv)(i)) ("Tax Items") that is taken into account in
computing Net Income or Net Loss.
(b) SECTION 1245/1250 RECAPTURE. If any portion of gain from the sale of
Partnership assets is treated as gain which is ordinary income by
virtue of the application of Code Sections 1245 or 1250 ("Affected
Gain"), then such Affected Gain shall be allocated among the Partners
in the same proportion that the depreciation and amortization
deductions giving rise to the Affected Gain were allocated. This
subparagraph 3(b) shall not alter the amount of Net Income (or items
thereof) allocated among the Partners, but merely the character of
such Net Income (or items thereof). For purposes hereof, in order to
determine the proportionate allocations of depreciation and
amortization deductions for each fiscal year or other applicable
period, such deductions shall be deemed allocated on the same basis as
Net Income and Net Loss for such respective period.
(c) PRECONTRIBUTION GAIN. The Partnership may elect the traditional method
of allocation contained in Section 1.704- 3(b) of the Regulations to
take into account any variation between the adjusted basis and the
fair market value of the Initial Contributed Property at the time of
the contribution ("Precontribution Gain") on a Property-by-Property
basis. By executing this Agreement, each Partner hereby agrees to
report income, gain, loss and deduction on such Partner's federal
income tax return in a manner that is consistent with the use of the
traditional method of allocation with respect to the Initial
Contributed Property. With respect to any Contributed Property, the
Partnership shall use any permissible method contained in the
Regulations promulgated under Section 704(c) of the Code selected by
the General Partner, in its sole discretion, to take into account any
variation between the adjusted basis of such asset and the fair market
value of such asset as of the time of the contribution. Each Partner
hereby agrees to report income, gain, loss and deduction on such
Partner's
- 56 -
<PAGE>
federal income tax return in a manner consistent with the method used
by the Partnership.
(d) ALLOCATIONS RESPECTING SECTION 704(C) AND REVALUATIONS. If any asset
has a Gross Asset Value which is different from the Partnership's
adjusted basis for such asset for federal income tax purposes because
the Partnership has revalued such asset pursuant to Regulations
Section 1.704-1(b)(2)(iv)(f), the allocations of Tax Items shall be
made in accordance with the principles of Section 704(c) of the Code
and the Regulations and the methods of allocation promulgated
thereunder, provided, however, that the General Partner shall elect
with respect to each Initial Contributed Property, to allocate the
income, gain, loss and deduction with respect to such Property using
the "traditional method" described in Regulations Section 1.704-3(b)
unless the majority of the Limited Partners affected thereby otherwise
instruct the General Partner. The intent of this Section 3(d) and
Section 3(c) above is that each Partner who contributed to the capital
of the Partnership a Contributed Property will bear, through reduced
allocations of depreciation, increased allocations of gain or other
items, the tax detriments associated with any Precontribution Gain.
This Section 3(d) and Section 3(c) are to be interpreted consistently
with such intent.
(e) EXCESS NONRECOURSE LIABILITY SAFE HARBOR. Pursuant to Regulations
Section 1.752-3(a)(3), solely for purposes of determining each
Partner's proportionate share of the "excess nonrecourse liabilities"
of the Partnership (as defined in Regulations Section 1.752-3(a)(3)),
the Partners' respective interests in Partnership profits shall be
determined in accordance with each Partner's Percentage Interest;
provided, however, that each Partner who has contributed an asset to
the Partnership shall be allocated, to the extent possible, a share of
"excess nonrecourse liabilities" of the Partnership which results in
such Partner being allocated nonrecourse liabilities in an amount
which is at least equal to the amount of income pursuant to Section
704(c) of the Code and the Regulations promulgated thereunder (the
"Liability Shortfall"). In the event there is an insufficient amount
of nonrecourse liabilities to allocate to each Partner an amount of
nonrecourse liabilities equal to the Liability Shortfall, then an
amount of nonrecourse liabilities in proportion to, and to the extent
of, the Liability Shortfall shall be allocated to each Partner.
(f) REFERENCES TO REGULATIONS. Any reference in this Appendix II or the
Agreement to a provision of proposed and/or temporary Regulations
shall, in the event such provision is modified or renumbered, be
deemed to refer to the successor provision as so modified or
renumbered, but only to the extent such successor provision applies to
the Partnership under the effective date rules applicable to such
successor provision.
(g) SUCCESSOR PARTNERS. For purposes of this Appendix II, a transferee of
a Partnership Interest shall be deemed to have been allocated the Net
Income, Net Loss and other items of Partnership income, gain, loss,
deduction and credit allocable to the transferred Partnership Interest
that previously have been allocated to the transferor Partner pursuant
to this Agreement.
- 57 -
<PAGE>
(h) LIMITATION TO PRESERVE REIT STATUS. Notwithstanding anything else in
this Agreement, to the extent that the amount paid, credited,
distributed or reimbursed by the Partnership or any Partners to, for
or with respect any Partner that is a REIT ("REIT Partner") or its
officers, directors, employees or agents, whether as a reimbursement,
fee, expense or indemnity (a "REIT Payment"), would constitute gross
income to the REIT Partner for purposes of Section 856 (c)(2) or
Section 856(c)(3) of the Code, then, notwithstanding any other
provision of this Agreement, the amount of such REIT Payments, as
selected by the General Partner in its discretion from among items of
potential distribution, reimbursement, fees, expenses and indemnities,
shall be reduced for any Fiscal Year so that the REIT Payments, as so
reduced, to, for or with respect to such REIT Partner shall not exceed
the lesser of:
(i) an amount equal to the excess, if any, of (x) four and
nine-tenths percent (4.9%) of the REIT Partner total gross income
(but excluding the amount of any REIT Payments) for the Fiscal
Year that is described in subsections (A) through (H) of Section
856(c)(2) over (y) the amount of gross income (within the meaning
of Section 856(c)(2)) derived by the REIT Partner from sources
other than those described in subsections (A) through (H) of
Section 856(c)(2) (but not including the amount of any REIT
Payments); or
(ii) an amount equal to the excess, if any, of (x) 24% of the REIT
Partner's total gross income (but excluding the amount of any
REIT Payments) for the Fiscal Year that is described in
subsections (A) through (I) of Section 856(c)(3) over (y) the
amount of gross income (within the meaning of Section 856(c)(3))
derived by the REIT Partner from sources other than those
described in subsections (A) through (I) of Section 856(c)(3)
(but not including the amount of any REIT Payments);
PROVIDED, HOWEVER, that REIT payments in excess of the amounts set forth in
clauses (i) and (ii) above may be made if the General Partner, as a condition
precedent, obtains an opinion of tax counsel that the receipt of such excess
amounts shall not adversely affect the REIT Partner's ability to qualify as a
REIT. To the extent that REIT Payments may not be made in a Fiscal Year as a
consequence of the limitations set forth in this Section 3(h), such REIT
Payments shall carry over and shall be treated as arising in the following
Fiscal Year. Nothing in this Section 3(h) shall permit the General Partner to
allocate income of the Partnership to any Partner in excess of the income that
would otherwise be allocated to it under Article 6 without regard to this
Section 3(h). The purpose of the limitations contained in this Section 3(h) is
to prevent any REIT Partner from failing to qualify as a REIT under the Code by
reason of such REIT Partner's share of items, including distributions,
reimbursements, fees, expenses or indemnities, receivable directly or indirectly
from the Partnership or the Partners, and this Section 3(h) shall be interpreted
and applied to effectuate such purpose.
- 58 -
EXCHANGE RIGHTS AGREEMENT
This Exchange Rights Agreement (this "Agreement") is made as of December
29, 1998 by and among Mission West Properties, a California corporation (the
"Company"), each of Mission West Properties, L.P., a Delaware limited
partnership ("MWP"), Mission West Properties, L.P. I, a Delaware limited
partnership ("MWP I"), Mission West Properties, L.P. II, a Delaware limited
partnership ("MWP II") and Mission West Properties, L.P. III, a Delaware limited
partnership (MWP III, and collectively with MWP, MWP I and MWP II, the
"Operating Partnership"), and each of the limited partners in the Operating
Partnership listed on the signature pages hereto (the "Limited Partners").
WHEREAS, the Limited Partners own all of the units of limited partnership
interest of the Operating Partnership ("L.P. Units") currently outstanding;
WHEREAS, pursuant to an Acquisition Agreement dated as of May 14, 1998 and
amended by an Amendment to Acquisition Agreement dated as of July 1, 1998
(collectively the "Acquisition Agreement") among the Company, the Operating
Partnership and the Contributing Entities (as that term is defined in the
Acquisition Agreement), the Company has acquired the general partnership
interests in the Operating Partnership in exchange for $35,200,000, and the
Operating Partnership will acquire certain properties from the Contributing
Entities in exchange for L.P. Units and the shareholders and/or limited partners
of the Contributing Entities will thereby become Limited Partners and parties to
an Operating Partnership Agreement of the Operating Partnership. For purposes of
this Agreement, L.P. Units shall include L.P. Units outstanding on the date
hereof, together with any L.P. Units of the Operating Partnership issued after
the date hereof.
WHEREAS, pursuant to the Acquisition Agreement the parties hereto are
entering into this Agreement to provide for the rights of the Limited Partners
to (i) tender L.P. Units in exchange for shares of the Company's common stock
(the "Common Stock"), cash or a combination of Common Stock and cash, on the
terms and conditions set forth herein (the "Exchange Rights") and (ii) register
shares of Common Stock;
NOW, THEREFORE, in consideration of the premises and the mutual covenant
set forth herein, the parties hereto agree as follows:
1. Definitions.
For purposes of this Agreement:
"Affiliate" shall mean (a) with respect to any individual person, any
member of the immediate family of such person or a trust established for the
benefit of such member, or (b) with respect to any entity, any person which,
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with any such entity.
"Beneficially Owning" means owning Common Stock directly, indirectly or
constructively by a person or entity through the application of Section 318(a)
of the Code, as modified by Section 856(d)(5) of the Code, or Section 544 of the
Code, as modified by Section 856(h) of the Code. The term "Beneficially Own"
shall have a correlative meaning.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time, as interpreted by the applicable regulations thereunder.
"Common Stock" means the shares of Common Stock, no par value per share, of
the Company or any shares of voting securities into which the Common Stock may
be reclassified or converted or for which shares of Common Stock may be
exchanged in any transaction made applicable or available to all holders of
Common Stock as a class.
"Closing Price" shall mean, with respect to a particular date, the last
reported sales price regular way on such date or, in case no such reported sale
takes place on such date, the average of the reported closing bid and asked
prices regular way on such date, in either case on the AMEX, or if the Common
Stock is not then listed or admitted to trading on such Exchange, on the
principal national securities exchange, the Nasdaq or any comparable system on
which the Common Stock is then listed or admitted to trading or, if not then
listed or admitted to trading on any national securities exchange, the Nasdaq or
any comparable system. The closing sale price on such date of the Common Stock
or if the Common Stock is not then quoted on Nasdaq or any comparable system,
the Board of Trustees of the Trust and the Board of Directors of the Corporation
shall in good faith determine the Closing Price.
"Exchange Factor" shall mean the ratio at which L.P. Units will be
exchangeable into Common Stock. The Exchange Factor shall initially be 1:1. The
initial Exchange Factor shall be subject to adjustment as provided in Section 7.
"Ownership Limit" has the meaning set forth in the Restated Articles, as
amended from time to time, or in the Acquisition Agreement with respect to the
Berg Group (as defined therein).
"Partnership Agreement" shall mean the Operating Partnership's Amended and
Restated Agreement of Limited Partnership, as amended from time to time.
"REIT Requirements" shall mean the requirements for the Company to (i)
qualify as a REIT under the Code and the rules and regulations promulgated
thereunder and (ii) avoid any federal income or excise tax liability.
"Restated Articles" means the Amended and Restated Articles of
Incorporation of the Mission West Properties, Inc., a Maryland corporation
("Mission West-Maryland"), as amended from time to time after the date of this
Agreement. Mission West-Maryland will be the successor corporation to the
Company upon the consummation of a merger by the Company with and into Mission
West-Maryland for the purpose of redomiciling the Company in Maryland.
2. Right to Tender L.P. Units.
2.1 General. Upon the terms and subject to the conditions of this
Agreement, after the first anniversary hereof each holder of L.P. Units shall
have the right to tender to the Company outstanding L.P. Units; provided, that
prior to the first anniversary of this Agreement, holders of L.P. Units may
tender L.P. Units solely in connection with (i) the registration of shares of
Common Stock acquired upon exchanging L.P. Units for Common Stock pursuant to a
registered public offering of Common Stock initiated by the Company to the
extent of 25% of the total shares sold in the offering (subject to the Ownership
Limit and the underwriter's unlimited right to reduce the participation of all
selling shareholders) and (ii) the registration of an aggregate of 500,000
shares of Common Stock acquired upon exchanging L.P. Units into such shares of
Common Stock on a Form S-3, or any successor form thereto (subject to the
Ownership Limit). Any registration of Common Stock received in exchange for L.P.
Units pursuant to this Section 2 shall comply in all respects with Section 8
hereof.
2.2 Certain Limitations. Notwithstanding any other provision of this
Agreement to the contrary, no Common Stock or cash shall be issued or paid in
respect of any tender of L.P. Units (i) if the right to tender L.P. Units and
receive Common Stock or cash would result in the Company not satisfying the REIT
Requirements in any respect or would result in any person or entity Beneficially
Owning Common Stock exceeding the applicable Ownership Limit, (ii) prior to the
expiration or termination of the waiting period applicable to such exchange and
issuance, if any, under the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
as it may be amended from time to time, or (iii) prior to the receipt of all
governmental and regulatory approvals which are required to be obtained prior to
such tender and issuance or payment. Such holder shall, as a condition to any
tender of L.P. Units which would result in any Limited Partner, together with
such Limited Partner's Affiliates, Beneficially Owning, in the aggregate more
than shares of outstanding Common Stock exceeding the applicable Ownership
Limit, give not less than ninety (90) days' written notice to the Company of its
intent to tender L.P. Units. In the event that the ability to receive Common
Stock or cash would result in the Company not satisfying the REIT Requirements
in any respect or would result in any person or entity Beneficially Owning
Common Stock exceeding the Ownership Limit, and as a result thereof no Common
Stock or cash may be issued or paid in respect of any tender of L.P. Units
pursuant to subsection (i) above, the parties hereto shall use their respective
best efforts to restructure the terms and provisions of this Agreement (and, if
necessary, the Partnership Agreement), or to agree to terms and provisions in
addition to such terms and provisions, so as to provide to each such party the
same substantive rights (or substantive rights as close thereto as is reasonably
practicable) as those provided by this Agreement and the Partnership Agreement.
2.3 Nature of the Offer. The right to exchange L.P. Units pursuant to this
Agreement constitutes a continuous offer and may not be withdrawn, amended or
modified by the Company without the prior written consent of each holder of
outstanding L.P. Units adversely affected by such withdrawal, amendment or
modification; provided that any withdrawal, amendment or modification that does
not adversely affect any holder of outstanding L.P. Units may be effected
without the consent of such holder.
3. Acceptance of Tender; Election of Method of Payment for Tendered L.P.
Units.
3.1 Form of Tender. Upon the terms and subject to the conditions of this
Agreement, the Company shall accept L.P. Units validly tendered in proper form
and meeting all of the requirements of this Agreement. In order for L.P. Units
to be validly tendered pursuant to this Agreement, the registered holder thereof
shall deliver to the Company, at the address provided pursuant to Section 12 (i)
a completed and duly executed Letter of Transmittal in the form attached hereto
as Exhibit A (the "Letter of Transmittal") and any other documents required by
the Letter of Transmittal and (ii) a calculation, to the best knowledge of such
registered holder after due inquiry (together with such supporting documentation
as the Company may reasonably request), of the maximum number of shares of
Common Stock that may be issued to such registered holder without causing either
(x) the Company to not satisfy the REIT Requirements in any respect or (y) any
person or entity to Beneficially Own Common Stock in excess of the applicable
Ownership Limit. The Company shall make all determinations as to the validity
and form of any tender of L.P. Units in accordance with the provisions of this
Agreement and upon rejection of a tender shall give the tendering holder written
notice of such rejection, which shall include the reasons therefor.
3.2 Revocability. Unless otherwise agreed to by the Company, tenders of
L.P. Units pursuant to this Agreement shall be irrevocable and shall not be
subject to withdrawal or modification; provided that if the Company makes the
Stock Election (as defined below) with respect to a tender, then within three
(3) days after such Stock Election the tendering holder may elect to revoke such
tender so long as (i) no public disclosure of such tender has been made prior to
such revocation and (ii) such tendering holder reimburses the Company for all
reasonable costs and expenses incurred in connection with such tender.
3.3 Company Elections. Within fifteen (15) days after the valid tender of
L.P. Units pursuant to this Agreement, the Company shall make an election to pay
for such L.P. Units by delivering either (i) Common Stock (the "Stock
Election"), (ii) cash (the "Cash Election") or (iii) a combination of Common
Stock and cash (the "Combined Election").
4. Stock Election.
4.1 Stock Exchange. If with respect to any tender of L.P. Units pursuant to
this Agreement, the Company makes the Stock Election, then within twenty (20)
days after such tender the Company shall deliver to the tendering holder one
share of Common Stock for each L.P. Unit validly tendered pursuant to the
provisions of this Agreement, as adjusted pursuant to Section 7.
4.2 Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon exchange of L.P. Units pursuant to this
Agreement. If more than one Letter of Transmittal shall be delivered at one time
by the same holder, the number of full shares which shall be issuable upon
exchange of the L.P. Units tendered thereby shall be computed on the basis of
the aggregate number of L.P. Units so tendered. Instead of any fractional shares
which would otherwise be issuable upon exchange of any L.P. Units, the Company
shall pay a cash adjustment in respect of such fraction in an amount equal to
the same fraction of the Closing Price.
4.3 Taxes. If a holder exchanges L.P. Units pursuant to this Agreement, the
Company shall pay any documentary, stamp or similar issue or transfer tax due on
any issue of Common Stock upon such exchange. Such holder, however, shall (i)
pay to the Company the amount of any additional documentary, stamp or similar
issue or transfer tax which is due (or shall establish to the satisfaction of
the Company the payment thereof) as a result of Common Stock being issued in a
name other than the name of such holder and (ii) be responsible for all income
or other taxes as a result of such exchange.
5. Cash Election.
If with respect to any tender of L.P. Units pursuant to this Agreement, the
Company makes the Cash Election, then within thirty (30) days after such tender
the Company shall pay to the tendering holder an aggregate amount of cash (the
"Aggregate Cash Payment") equal to the product of (i) the number of shares of
Common Stock which would have been delivered to such holder if the Company had
made the Stock Election with respect to such tender and (ii) the average Closing
Price for the ten (10) trading day period ending one (1) day prior to the date
of such tender.
6. Combined Election.
If with respect to any tender of L.P. Units pursuant to this Agreement, the
Company shall make the Combined Election, then within thirty (30) days after
such tender the Company shall (i) notify the tending holder of the number of
such tendered L.P. Units which will be exchanged for cash (the "Cash Units") and
the number of such tendered L.P. Units which will be exchanged for Common Stock
(the "Stock Units") as adjusted pursuant to Section 7, (ii) pay to the tendering
holder, in respect of each Cash Unit validly tendered pursuant to the provisions
of this Agreement, an amount of cash equal to the average Closing Price for the
ten trading-day period ending one (1) day prior to the date of such tender and
(iii) deliver to the tendering holder one share of Common Stock for each Stock
Unit validly tendered pursuant to the provisions of this Agreement.
The provisions of Sections 4.2 and 4.3 of this Agreement shall apply to the
issuance of Common Stock pursuant to this Section 6.
7. Exchange Factor; Adjustments To Exchange Factor.
7.1 Exchange Factor. Pursuant to Sections 4, 5 and 6, each L.P. Unit
initially shall be exchangeable, without the payment of additional consideration
by the holder thereof, into one (1) share of Common Stock or the equivalent
thereof in cash. The number of L.P. Units exchangeable for one share of Common
Stock ("Exchange Factor") shall be subject to adjustment as hereinafter
provided.
7.2 Adjustment for Stock Splits, Dividends and Combinations. If the Company
at any time or from time to time after the date hereof shall effect a
subdivision of the outstanding Common Stock, or shall fix a record date for
determination of shareholders entitled to receive a dividend of Common Stock on
its outstanding Common Stock, the Exchange Factor then in effect immediately
before such subdivision or as of such record date shall be proportionately
reduced, and if the Corporation shall combine the outstanding shares of Common
Stock, the Exchange Factor then in effect immediately before the combination
shall be proportionately increased. Any adjustment under this Section 7.2 shall
become effective at the close of business on the date the subdivision or
combination becomes effective or on the record date for determining holders of
any class of securities entitled to receive the dividend; provided that if such
record date shall have been fixed and such dividend shall not have been fully
paid on the date fixed therefor, the adjustment previously made in the Exchange
Factor that became effective on such record date shall be cancelled as of the
close of business on such record date, and thereafter the Exchange Factor shall
be adjusted pursuant to this Section 7.2 as of the time of actual payment of
such dividend.
7.3 Adjustments for Other Dividends and Distributions. In the event the
Company at any time or from time to time shall make or issue, or fix a record
date for the determination of holders of Common Stock entitled to receive, a
dividend or other distribution payable in securities of the Company other than
shares of Common Stock, then and in each such event provision shall be made so
that the holders of L.P. Units shall receive upon exchange thereof, in addition
to the number of shares of Common Stock receivable thereupon, the amount of such
securities of the Company that they would have received had their L.P. Units
been exchanged into Common Stock on the date of such event, giving effect to all
adjustments called for with respect to such securities during the period from
the date of such event to and including the exchange date.
7.4 Adjustment for Reclassification, Exchange and Substitution. If the
Common Stock issuable upon exchange of the L.P. Units shall be changed into the
same or different number of shares of any class or series of stock, whether by
capital reorganization, reclassification or otherwise (other than a subdivision
or combination of shares or stock dividend provided for in Sections 7.1 and 7.2
above, or a merger, consolidation, sale of assets or other transaction provided
for in Section 7.3 below), then and in each such event the holder of each L.P.
Unit shall have the right thereafter to exchange such share into the kind and
amount of shares of stock and other securities and property receivable upon such
reorganization, reclassification or other change by holders of the number of
shares of Common Stock into which such L.P. Unit might have been exchanged
immediately prior to such reorganization, reclassification or change, all
subject to further adjustment as provided herein.
7.5 Adjustment for Merger or Reorganization, etc. In the event of any
merger or consolidation of the Company with or into another corporation or the
conveyance of all or substantially all of the assets of the Company to another
corporation, each L.P. Unit shall thereafter be exchangeable into the number of
shares of stock or other securities or property to which a holder of the number
of shares of Common Stock of the Company deliverable upon exchange of such L.P.
Units would have been entitled upon such consolidation, merger or conveyance;
and, in any such case, appropriate adjustment (as determined by the Board of
Directors) shall be made in the application of the provisions herein set forth
with respect to the rights and interest thereafter of the holders of the L.P.
Units, to the end that the provisions set forth herein (including provisions
with respect to changes in and other adjustments of the Exchange Factor) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
share of stock or other property thereafter deliverable upon exchange of L.P.
Units.
7.6 No Impairment. The Company will not, by amendment of this Agreement or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed under this Section 7 and in the taking of all such action as may be
necessary or appropriate in order to protect the Exchange Rights of the holders
of L.P. Units against impairment.
7.7 Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment of the Exchange Factor pursuant to this Section 7, the Company
at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to each holder of L.P. Units, a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Company
shall, upon the written request at any time of any holder of L.P. Units, furnish
or cause to be furnished to such holder a like certificate setting forth (i)
such adjustments and readjustments, (ii) the ratio at which exchanges of L.P.
Units would be made at the time, and (iii) the number of shares of Common Stock
and the amount, if any, of other property which at the time would be received
upon exchange of such holder's L.P. Units.
8. Registration Rights.
The Company shall provide the following registration rights to the Limited
Partners:
8.1 Definitions. For purposes of this Section 8:
(a) The term "register", "registered", and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act and the declaration
or ordering of effectiveness of such registration statement or document;
(b) The term "Registrable Securities" means (1) the Common Stock of
the Company issued upon exchange of the L.P. Units (the "Exchange Stock")
and (2) any Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right, or other security which is
issued as) a dividend or other distribution with respect to, or in exchange
for or in replacement of, such Exchange Stock, excluding in all cases,
however, any Registrable Securities sold by a person in a transaction in
which such person's rights under this Agreement or the Partnership
Agreement were not assigned in conformity with this Agreement or the
Partnership Agreement;
(c) For this purpose, "Registration Expenses" mean any and all
expenses of the Company incident to performance of or compliance with this
Agreement, including, without limitation, (i) all SEC and securities
exchange registration and filing fees, (ii) all printing, messenger and
deliver expenses, (iii) all fees and expenses incurred in connection with
the listing of the Registrable Securities on any securities exchange, and
the fees and disbursements of counsel for the Company and of its
independent public accountants, but excluding underwriting discounts and
commissions and transfer taxes, if any;
(d) The term "Form S-3" or "Form S-11" means such form under the
Securities Act as in effect on the date hereof or any registration form
under the Securities Act subsequently adopted by the SEC which permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
8.2 Company Registration. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration effected
by the Company for shareholders other than the Limited Partners) any of its
stock or other securities under the Securities Act of 1933, as amended (the
"Securities Act") in connection with the public offering of such securities
solely for cash (other than a registration relating solely to the sale of
securities to participants in a Company stock plan, or a registration on any
form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities), the Company shall, at such time, promptly give each
Limited Partner written notice of such registration. Upon the written request of
each Limited Partner given within twenty (20) days after mailing of such notice
by the Company in accordance with Section 12 of this Agreement, the Company
shall, subject to the provisions of paragraph 8.9 below, cause to be registered
under the Securities Act the Registrable Securities that each such Limited
Partner has requested to be registered to the extent of 25% of the total shares
to be sold in the offering.
8.3 Shelf Registration. At any time, from time to time, following the first
anniversary of the date of the Agreement, upon the request of Limited Partners
holding at least five percent (5%) of the Registrable Securities ("Participating
Limited Partners"), the Company shall file, and use its best efforts to have
declared effective under the Securities Act by the sixtieth (60th) day after the
date the Company receives such request, a "shelf" registration statement
pursuant to the requirements of the Securities Act on Form S-3 or another
appropriate form pursuant to Rule 415 under the Securities Act (or any successor
rule or regulation) covering the disposition of at least 200,000 shares of the
Registrable Securities in one or more underwritten offerings, block
transactions, broker transactions, at-the-market transactions, and in such other
manner or manners as may be specified by such Participating Limited Partners,
provided, however , that the Company is only obligated to effect one (1) such
registration in any twelve (12)-month period. The Company shall use its best
efforts to keep such "shelf" registration continuously effective as long as the
delivery of a prospectus is required under the Securities Act in connection with
the disposition of the Registrable Securities registered thereby and in
furtherance of such obligation, shall supplement or amend such registration
statement if, as, and when required by the rules, regulations and instructions
applicable to the form used by the Company for such registration or by the
Securities Act or by any other rules and regulations thereunder applicable to
"shelf" registrations. The Company shall provide the Participating Limited
Partners with written notice of the filing of such "shelf" registration
statement within five (5) days after such registration statement has been filed
with the Securities and Exchange Commission ("SEC"). If the Company delivers to
the Participating Limited Partners a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of Directors of the
Company, it would be detrimental to the Company or its shareholders for the
Participating Limited Partners to offer or sell, or to continue to offer and
sell, any Registrable Securities under the shelf registration statement for a
period set forth in such certificate not to exceed one hundred twenty (120) days
and commencing no earlier than ten (10) days after the date such certificate is
so delivered (the "Blackout Period"), the Limited Partners shall not offer or
sell any Registrable Securities during such Blackout Period, provided that the
Company shall have the right to deliver such a certificate only once during any
twelve (12) month period.
8.4 Requests for Registration.
(a) Notwithstanding the limitations set forth in Section 8.3 above,
subject to the Ownership Limit and the discretion of the Company, all
Limited Partners in the aggregate may request the registration of L.P.
Units prior to the first anniversary of the Closing Date in connection with
the registration of an aggregate of 500,000 shares of Common Stock on a
Form S-3 or another appropriate form pursuant to Rule 415 under the
Securities Act (or any successor rule or regulation), upon converting L.P.
Units into shares of Common Stock. Such registration shall be subject to
the Blackout Period described in Section 8.3.
(b) If the Company shall receive a written request from Limited
Partners holding no fewer that 500,000 L. P. Units (the "Initiating
Holders") and the Company is not then eligible to file a registration
statement on Form S-3 or another appropriate form pursuant to Rule 415 of
the Securities Act (or any successor rule or regulation) in accordance with
the requirements of Section 8.3, the Company shall promptly give written
notice of such request to all Limited Partners and shall, subject to the
limitations set forth below, effect as soon as practicable, and in any
event with in one hundred twenty (120) days of the receipt of such request,
a registration on Form S-11, or an equivalent form, of all Registrable
Securities which the Limited Partners request to be registered within
twenty (20) days of the mailing of such notice by the Company in accordance
with Section 12 hereof in an underwritten public offering. The underwriter
will be selected by a majority in interest of the Initiating Holders and
shall be an underwriter of nationally recognized standing reasonably
acceptable to the Company. In such event, the right of any Limited Partner
to include such Limited Partner's Registrable Securities in such
registration shall be conditioned upon such Limited Partner's participation
in such underwriting and the inclusion of such Limited Partner's
Registrable Securities in the underwriting to the extent provided herein.
All Limited Partners proposing to distribute their securities through such
underwriting shall (together with the Company) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected
for such underwriting. Notwithstanding any other provision of this Section
8.4(b), if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Limited
Partners proposing to distribute Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Limited Partners, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable
Securities of the Company owned by each Holder; provided however, that the
number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities to be offered
for sale by any security holder are first entirely excluded from the
underwriting. In addition, any registration pursuant to this Section 8.4(b)
shall be subject to the Blackout Period described in Section 8.3.
8.5 Obligations of the Parties.
(a) Whenever required under Section 8.2, 8.3 or 8.4 to effect the
registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(i) prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to
cause such registration statement to become effective, and, upon the
request of a Limited Partner, keep such registration statement
effective until the completion of the sale of the Registrable
Securities subject to the registration statement, subject to the
provisions of Section 8.3;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement;
(iii)furnish to the Limited Partners such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may
reasonably request in order to facilitate the disposition of
Registrable Securities owned by the Limited Partners;
(iv) use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested
by the Limited Partner, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify
to do business or to file a general consent to service of process in
any such states or jurisdictions;
(v) in the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering.
The Limited Partner shall also enter into and perform its obligations
under such an agreement; and
(vi) notify the Limited Partners at any time when a prospectus
relating thereto is required to be delivered under the Securities Act
of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing.
(b) When requested by Limited Partners in connection with a "shelf"
registration pursuant to Section 8.3, the Company shall assist the Limited
Partners in obtaining a firm commitment underwriting agreement for such
resales from a qualified investment banking firm, as determined by the
Company.
(c) The Limited Partners agree that in connection with any
registration of the Registrable Securities by the Company pursuant to
Section 8.2, 8.3 or 8.4, except as permitted under Regulation M promulgated
under the Exchange Act, if the Registrable Securities of Holder are being
distributed pursuant to such registration, the Limited Partners shall not,
directly or indirectly, by the use of any means or instrumentality of
interstate commerce, or the mails, or any facility of any national
securities exchange, either alone or with one or more persons, bid for or
purchase for any account in which any Limited Partner has a beneficial
interest, any shares of the Common Stock of the Company until such Limited
Partner has completed the Limited Partner's participation in such
distribution.
8.6 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 8.2, 8.3 or
8.4 with respect to the Registrable Securities of a Limited Partner that the
Limited Partner shall furnish to the Company such information regarding itself,
the Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Limited
Partner's Registrable Securities.
8.7 Expenses of Requested Registrations. In connection with registrations,
filings, or qualifications pursuant to Sections 8.3 or 8.4, the Company shall
pay all Registration Expenses, other than selling expenses (including
commissions and separate counsel' fees of the Limited Partners).
8.8 Expenses of Company Registration. The Company shall bear and pay all
expenses incurred by the Company in connection with any registration, filing, or
qualification of Registrable Securities with respect to registrations pursuant
to Section 8.2 and the closing of the sale thereof, including (without
limitation) all registration, filing, qualification, printer's fees, attorneys'
and accounting fees and expenses; provided, however, that the Company shall not
be responsible for underwriting discounts and commissions or other charges
relating to the Registrable Securities, or for the Limited Partners' attorneys'
fees and expenses or any taxes imposed with respect to the Registrable
Securities on the sale and transfer thereof.
8.9 Underwriting Requirements. In connection with any offering involving an
underwriting of shares of the Company's capital stock pursuant to Section 8.2,
Limited Partners may include up to 25% of the shares sold in the offering,
provided however, that the Company shall not be required under Section 8.2, to
include any of the Limited Partners' Registrable Securities in such underwriting
unless the Limited Partner accepts the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it (or by other persons
entitled to select the underwriters), and then only in such quantity as the
underwriters determine in their sole discretion will not jeopardize the success
of the offering by the Company. If the total amount of securities, including
Registrable Securities, requested by the Participating Limited Partners to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, the Company shall be required to
include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling shareholders according to
the total amount of securities entitled to be included therein owned by each
selling shareholder or in such other proportions as shall mutually be agreed to
by such selling shareholders). For purposes of the preceding parenthetical
concerning apportionment, for any selling shareholder which is a Participating
Limited Partner of Registrable Securities and which is a partnership or
corporation, the partners, retired partners, and shareholders of such holder, or
the estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing persons shall be deemed to be a
single "selling shareholder", and any pro rata reduction with respect to such
"selling shareholder" shall be based upon the aggregate amount of shares
carrying registration rights owned by all entities and individuals included in
such "selling shareholder", as defined in this sentence.
8.10 Delay of Registration. The Limited Partners shall not have any right
to obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of any provision of this Section 8.
8.11 Indemnification. In the event any Registrable Securities are included
in a registration statement under this Section 8:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless a Limited Partner, any underwriter (as defined in the Act)
for a Limited Partner and each person, if any, who controls a Limited
Partner or underwriter within the meaning of the Act or the Exchange Act,
against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Act, or the Exchange Act, or other
federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon
any of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary
to make the statements therein not misleading, or (iii) any violation or
alleged violation by the Company of the Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Act, or the
Exchange Act or any state securities law; and the Company will pay to a
Limited Partner, underwriter or controlling person, as incurred, any legal
or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
subsection (a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable to any indemnitee for any such
loss, claim, damage, liability, or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished by such indemnitee expressly
for use in connection with such registration.
(b) To the extent permitted by law, a Limited Partner will indemnify
and hold harmless the Company, each of its directors, each of its officers
who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any
other shareholder selling securities in such registration statement and any
controlling person of any such underwriter or other shareholder, against
any losses, claims, damages, or liabilities (joint or several) to which any
of the foregoing persons may become subject, under the Act, or the Exchange
Act, or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by a Limited Partner expressly for use in
connection with such registration; and a Limited Partner will pay, as
incurred, any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this subsection (b), in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
subsection (b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of the a Limited Partner, which consent shall not be
unreasonably withheld; and provided, that, in no event shall any indemnity
obligation under this subsection (b) (together with any obligation to
contribute under subsection (d)) exceed the gross proceeds from the
offering received by a Limited Partner.
(c) Promptly after receipt by an indemnified party under this Section
8.11 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section
8.11, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an indemnified party (together with all other
indemnified parties which may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees
and expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential differing interests
between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve
such indemnifying party of any liability to the indemnified party under
this Section 8.11, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section 8.11.
(d) If the indemnification provided for in this Section 8.11 is held
by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the indemnifying party, in lieu of indemnifying
such indemnified party hereunder, shall contribute to the amount paid or
payable by such indemnified party as a result of such loss, liability,
claim, damage, or expense in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense
as well as any other relevant equitable considerations. The relative fault
of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or
omission. In no event shall any a Limited Partner's obligation to
contribute under this subsection (d) (together with any obligation to
indemnify under subsection (b)) exceed the gross proceeds from the offering
received by such a Limited Partner.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with an underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and a Limited Partner under this
Section 8.11 shall survive the completion of any offering of Registrable
Securities in a registration statement filed pursuant to Section 8.2, 8.3
or 8.4, and otherwise.
8.12 Reports Under Securities Exchange Act of 1934. With a view to making
available to the Limited Partners the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit the Limited Partners to sell securities of the Company to the public
without registration or pursuant to a registration on Form S-3, the Company
agrees to use reasonable efforts to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times;
(b) take such action as is necessary to enable the Limited Partners to
utilize Form S-3 for the sale of Registrable Securities as soon as
permitted pursuant to this Section 8 after the date of the Agreement;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act of 1934 as amended (the "Exchange Act"); and
(d) furnish to a Limited Partner, so long as a Limited Partner owns
any Registrable Securities, forthwith upon request (i) a written statement
by the Company that it has complied with the reporting requirements of SEC
Rule 144, the Securities Act, and the Exchange Act, or that it qualifies as
a registrant whose securities may be resold pursuant to Form S-3 (at any
time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so
filed by the Company, and (iii) such other information as may be reasonably
requested in availing a Limited Partner of any rule or regulation of the
SEC which permits the selling of any such securities without registration
or pursuant to such form.
8.13 Exercise of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 8 may be exercised by a
Limited Partner or by any transferee or assignee of such securities who, after
such assignment or transfer, holds at least 500,000 shares of Registrable
Securities (subject to appropriate adjustment for stock splits, stock dividends,
combinations, and other recapitalizations), provided, in the case of any such
transferee or assignee, the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned and such transferee or assignee agrees to
comply with all obligations imposed on a Limited Partner under applicable
provisions of this Section 8; and provided, further, that such assignment shall
be effective only if immediately following such transfer the further disposition
of such securities by the transferee or assignee is restricted under the
Securities Act. For the purposes of determining the number of shares of
Registrable Securities held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are partners or retired partners
of such partnership (including spouses and ancestors, lineal descendants, and
siblings of such partners or spouses who acquire Registrable Securities by gift,
will, or intestate succession) shall be aggregated together and with the
partnership; and provided that all assignees and transferees who would not
qualify individually for an assignment of the registration rights as provided
herein shall have a single attorney-in-fact for the purpose of exercising any
rights, receiving notices, or taking any action under applicable provisions of
this Section 8.
8.14 "Market Stand-Off" Agreement. The Limited Partners hereby agree that,
during the period of duration (not to exceed one hundred eighty (180) days)
specified by the Company and an underwriter of Common Stock or other securities
of the Company, following the effective date of any registered underwritten
public offering of the Company's securities, it shall not, to the extent
requested by the Company and such underwriter, directly or indirectly sell,
offer to sell, contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of (other than to
donees who agree to be similarly bound) any securities of the Company held by it
at any time during such period except Common Stock included in such
registration; provided, however, that all officers and directors of the Company,
and all other persons with registration rights (whether or not pursuant to this
Agreement) enter into similar agreements. In order to enforce the foregoing
covenant, the Company may impose stop-transfer instructions with respect to the
Registrable Securities of the Limited Partners (and the shares or securities of
every other person subject to the foregoing restriction) until the end of such
period.
8.15 Delayed Payment Units Registration. If at any time after one year from
the date of this Agreement, (a) a Limited Partner validly tenders L.P. Units
pursuant to the provisions of this Agreement, (b) the Company makes the Stock
Election or the Combined Election with respect to such tender, (c) as a result
of the Ownership Limit such Limited Partner cannot receive the full number of
shares of Common Stock otherwise issuable to such Limited Partner pursuant to
such tender and such election (without giving effect to the Ownership Limit),
then:
(i) subject to the other terms and conditions of this Agreement, such
Limited Partner shall be entitled to receive the number of shares of Common
Stock which it can receive pursuant to such tender, such election and the
Ownership Limit; and
(ii) if such Limited Partner shall make a written request for
registration of Common Stock pursuant to this Section 8, the Company shall
cause there to be filed with the SEC a registration statement and the
Company shall register and sell pursuant thereto a number of shares of
Common Stock equal to the number of shares of such Unissued Common Stock.
Within two (2) business days after the receipt by the Company of the
proceeds of any sale (after underwriting discounts and commissions) of such
Common Stock pursuant to such registration, the Company shall pay such
proceeds to the tendering holder of the Delayed Payment Units, in full
payment for the tender of such Delayed Payment Units.
(iii)For purposes of this Section 8.15, the number of shares of Common
Stock which such Limited Partner cannot receive pursuant to such tender as
a result of the Ownership Limit are referred to as the "Unissued Common
Stock" and the L.P. Units tendered in respect of such Unissued Common Stock
are referred to as the "Delayed Payment Units."
9. Representations of Tendering Holder.
Each tender of L.P. Units shall constitute a representation and warranty by
the tendering holder of each of the representations and warranties set forth in
the form of Letter of Transmittal. Without limiting the generality of the
foregoing, unless, at the time of a tender for exchange of L.P. Units pursuant
to this Agreement, a registration statement relating to Common Stock to be
delivered upon such tender is effective under the Securities Act, such tender
shall constitute a representation and warranty by the tendering holder to the
Company that such tendering holder (i) is an "accredited investor" within the
meaning of Rule 501 under the Securities Act, (ii) has sufficient knowledge and
experience in financial and business matters and in investing in entities
similar to the Operating Partnership and the Company, so as to be able to
evaluate the risks and merits of its investment in the Operating Partnership and
the Company and it is able financially to bear the risks thereof, (iii) has had
an opportunity to discuss the business, management and financial affairs of the
Operating Partnership and the Company with the management of the Operating
Partnership and the Company and (iv) understands that the Common Stock has not
been registered under the Securities Act by reason of their issuance in a
transaction exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) thereof or Rule 506 promulgated under the Securities
Act and such Common Stock must be held indefinitely unless a subsequent
disposition thereof is registered under the Securities Act and applicable state
securities laws or is exempt from such registration.
10. Status of Tendering Holder.
Until the holder of L.P. Units tendered pursuant to this Agreement becomes
a holder of record of the Common Stock issued in exchange therefor (in the case
of a Stock Election or a Combined Election) or until such holder has received
cash in exchange therefor (in the case of a Cash Election or a Combined
Election), such holder shall continue to hold and own such L.P. Units for all
purposes of the Partnership Agreement. In the case of a Stock Election or a
Combined Election, no such holder shall have any rights as a shareholder of the
Company in respect of such Common Stock until such holder becomes a holder of
record of such Common Stock.
11. Reservation of Shares; Closing of Transfer Books.
11.1 The Company shall reserve and shall at all times have reserved out of
its authorized by but unissued Common Stock, solely for the purpose of effecting
the exchange of L.P. Units pursuant to this Agreement, enough shares of Common
Stock to permit the exchange of the then outstanding L.P. Units. All Common
Stock which may be issued upon exchange of L.P. Units shall be validly issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issuance thereof other than income taxes resulting from such
exchange.
11.2 The Company shall not close its transfer books so as to prevent the
timely issuance of Common Stock pursuant to this Agreement.
12. General.
12.1 Survival. The covenants, representations and warranties of the parties
to this Agreement shall survive the execution and delivery of this Agreement.
12.2 Binding Effect; Benefits; Assignment. All of the terms of this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
and against the successors and permitted assigns of the Company, the Operating
Partnership and all the Limited Partners. Nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies
under or by reason of this Agreement except as expressly indicated in this
Agreement. The Company agrees that persons admitted as limited partners in the
Operating Partnership (i.e., any one of the limited partnerships therein) shall
be entitled to become parties to this Agreement upon execution of an appropriate
addendum hereto and consent by the Operating Partnership.
12.3 Further Action. Each of the parties to this Agreement shall execute
such documents and other papers and take such further actions as may be
reasonably required or desirable to carry out the provisions of this Agreement
and the transactions contemplated in this Agreement or, at or after the date
hereof, to evidence the consummation of the transactions contemplated in this
Agreement. Each of the parties to this Agreement shall take, or cause to be
taken, all actions and to do, or cause to be done, all other things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement, to satisfy the conditions to
this Agreement and to obtain in a timely manner all necessary waivers, consents,
and approvals and to effect all necessary registrations and filings.
12.4 Governing Law. This Agreement shall be governed by the laws of the
State of California without regard to its principles governing conflicts of
laws.
12.5 Notices. All notices, requests, demands and other communications to be
given pursuant to the terms of this Agreement shall be in writing and shall be
delivered personally, telecopied or sent by nationally recognized overnight
delivery service, and shall be deemed given and effective when so delivered
personally, telecopied or sent, as follows:
(a) If to the Company:
Mission West Properties
10050 Bandley Drive
Cupertino, California 95014
Telecopier: 408/725-1626
Attention: Carl E. Berg
with a copy to:
Graham & James LLP
600 Hansen Way
Palo Alto, California 94304
Telecopier: 650/856-3619
Attention: Alan B. Kalin
(b) If to the Limited Partners:
At the address of such Limited Partner set forth in the applicable
Operating Partnership Agreement.
Each party may change its address or telecopier number by prior written
notice to the other parties.
12.6 Counterparts. This Agreement may be executed in counterparts and
transmitted by facsimile, each of which when so executed and transmitted shall
be deemed to be an original, and such counterparts shall together constitute one
and the same instrument.
12.7 Expenses. The Company and the Limited Partners shall pay their own
respective expenses, costs and fees (including, without limitation, attorneys'
and accountants' fees) incurred in connection with the negotiation, preparation,
execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement.
12.8 Entire Agreement. This Agreement sets forth the entire agreement and
understanding of the Company and the Limited Partners with respect to the
transactions contemplated by this Agreement, and supersede all prior agreements,
arrangements and understandings relating to the subject matter of this
Agreement.
12.9 Amendment and Waiver. This Agreement may be amended, modified,
superseded or canceled, and any of the terms, covenants, representations,
warranties or conditions of this Agreement may be waived, only by a written
instrument executed by the Company and a majority in interest of the Limited
Partners or, in the case of a waiver, by or on behalf of the party waiving
compliance. The failure of any party at any time to require performance of any
provision of this Agreement shall in no manner affect the right at a later time
to enforce the same. No waiver by any party of any condition or of any breach of
any term, covenant, representation or warranty contained in this Agreement, in
any one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or of any breach of any such term,
covenant, representation or warranty or any other term, covenant, representation
or warranty set forth in this Agreement.
12.10 Headings. The headings of the sections and paragraphs of this
agreement have been inserted for convenience or reference only and shall in no
way restrict or otherwise modify any of the terms or provisions of this
Agreement.
12.11 No Third Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended to or shall (a) confer on any person other than the parties
hereto and their respective successors or assigns any rights (including
third-party beneficiary rights), remedies, obligations or liabilities under or
by reason of this Agreement or (b) constitute the parties hereto as partners or
as participants in a joint venture. This Agreement shall not provide third
parties with any remedy, claim, liability, reimbursement, cause of action or
other right in excess of those existing without reference to the terms of this
Agreement. No third party shall have any right, independent of any right that
exists irrespective of this Agreement, under or granted by this Agreement, to
bring any suit at law or equity for any matter governed by or subject to the
provisions of this Agreement.
12.12 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation or rule of
construction providing that ambiguities in any agreement or other document will
be construed against the party drafting such agreement or document.
12.13 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto.
[Remainder of page intentionally left blank]
<PAGE>
Signature Pages of Exchange Rights Agreement
In Witness Whereof, the parties hereto have hereunto executed this
Agreement as of the first date written above, and a party's signature hereon in
any capacity shall constitute such party's execution of this Agreement in all
capacities which the party holds for purposes of this Agreement.
Mission West Properties, a California Corporation
By:
________________________________
Michael J. Anderson
Its: Vice President and Chief Operating Officer
Mission West Properties, L.P., a Delaware limited partnership
By: Mission West Properties, a California corporation
Its: General Partner
By:
_____________________________
Michael J. Anderson
Its: Vice President and Chief Operating Officer
1981 Kara Ann Berg Trust
By:
________________________________
Clyde J. Berg, Trustee
Sonya L. Berg Trust
By:
________________________________
Thelmer Aalgaard, Trustee
Sherri L. Berg Trust
By:
________________________________
Thelmer Aalgaard, Trustee
Michael L. Knapp
By:
________________________________
Michael L. Knapp
Triangle Development Company, a California General Partnership
By: Berg Venture I
Its: General Partner
By:
______________________________
John T. Kontrabecki
Its: General Partner
Berg Venture II, a California Limited Partnership
By:
________________________________
John T. Kontrabecki
Its: General Partner
Baccarat Fremont Developers, LLC, a California Limited Liability Company
By:
________________________________
Michael L. Knapp
Its: Managing Member
Baccarat Cambrian, a California General Partnership
By:
________________________________
Carl E. Berg
Its: General Partner
Berg & Berg Enterprises Inc., a California Corporation
By:
________________________________
Carl E. Berg
Its: President
De Anza Office Partners, a California general partnership
By:
________________________________
Carl E. Berg
Its: General Partner
Mission West Properties, L.P. I, a Delaware limited partnership
By: Mission West Properties
Its: General Partner
By:
_____________________________
Michael J. Anderson
Its: Vice President and Chief Operating Officer
Berg Living Trust UTA dated May 1, 1981
By:
________________________________
Carl E. Berg
Its: Trustee
By:
________________________________
Mary Ann Berg
Its: Trustee
Clyde J. Berg, Trustee, 1995 Clyde J. Berg Revocable Trust, dated April 4, 1995
By:
________________________________
Clyde J. Berg
Its: Trustee
Clyde J. Berg, Trustee, Carl Berg Child's Trust UTA dated June 2, 1978
By:
________________________________
Clyde J. Berg
Its: Trustee
Mission West Properties, L.P. II, a Delaware limited partnership
By: Mission West Properties Limited Liability
Its: General Partner
By:
_____________________________
Michael J. Anderson
Its: Vice President and Chief Operating Officer
________________________________
Carl E. Berg
________________________________
Mary Ann Berg
________________________________
Clyde J. Berg
Mission West Properties, L.P. III, a Delaware Limited Partnership
By: Mission West Properties, a California Corporation
Its: General Partner
By:
_____________________________
Michael J. Anderson
Its: Vice President and Chief Operating Officer
________________________________
John T. Kontrabecki
PENDING PROJECTS ACQUISTION AGREEMENT
This Pending Project Acquisition Agreement ("Agreement") is entered into as
of December 29, 1998 by and between Mission West Properties, a California
corporation (the "Company"), Mission West Properties, L.P., a Delaware limited
partnership ("MWP"), Mission West Properties, L.P. I, a Delaware limited
partnership ("MWP I"), Mission West Properties, L.P. II, a Delaware limited
partnership ("MWP II") and Mission West Properties, L.P. III, a Delaware limited
partnership ("MWP III"; MWP, MWP I, MWP II and MWP III are referred to as the
"Operating Partnership"; the Company and the Operating Partnership are referred
to collectively as the "Purchaser"), on the one hand, and the individuals and
entities listed on Appendix I who own the properties set forth opposite such
individuals' and entities' names thereon (the "Sellers") on the other hand.
RECITALS
A. The Sellers are the owners of certain real property located in Santa
Clara County, California, and described in attached EXHIBIT A, together with all
rights, privileges, easements, and appurtenances (collectively, the "Pending
Projects"); and all personal property, entitlements, licenses, permits,
development rights, air rights, authorizations, certificates, surveys, plans,
specifications, reports, studies, test results and all unexpired warranties and
guaranties given by unaffiliated third parties owned by the Sellers and
pertaining to or used exclusively in connection with the Pending Projects (the
"Personal Property"); (the Pending Projects and Personal Property shall be
collectively referred to herein as the "Pending Projects").
B. In connection with the Acquisition Agreement dated as of May 14, 1998
(the "Acquisition Agreement"), to which the Purchaser and the Sellers all are
parties, the Operating Partnership has agreed to issue L.P. Units to all of the
limited partners therein, the Company has agreed to become the general partner
of the Operating Partnership, and the Company has agreed to permit holders of
L.P. Units to exchange them for shares of the Company's common stock ("Common
Stock") under certain circumstances.
C. The Operating Partnership is governed by the Operating Partnership
Agreement and the Acquisition Agreement.
D. The Purchaser desires to acquire the Pending Projects and the Sellers
desire to convey the Pending Projects on the terms and conditions of this
Agreement, and pursuant to the Acquisition Agreement have agreed that the
Company or the Operating Partnership shall acquire each of the 12 buildings
comprising the Pending Projects as soon as such building (each an "acquired
property" herein) has been completed and fully leased by issuing additional L.P.
Units to the Sellers at a value of $4.50 per L.P. Unit, or at the Sellers'
option, they may receive cash or a combination of cash and L.P. Units.
AGREEMENT
For good and valuable consideration, the receipt and adequacy of which are
acknowledged, the parties agree as follows:
1. ACQUISITION. At the Closing Date (as defined herein) for the acquisition
of each of the buildings included in the Pending Projects, the Sellers who own
that building (as indicated on Appendix I) (the "Participating Sellers") agree
to convey, and the Purchaser agrees to acquire, such property subject to the
terms and conditions of this Agreement. The Sellers' shall appoint one
representative to act as their agent in connection with the acquisition and
conveyance of each acquired property (the "Sellers' Representative"). The
Sellers' Representative is authorized to receive written notices from the
Purchaser on behalf of all of the Sellers of such property.
2. ACQUISITION VALUE. The acquisition value for the conveyance of each of
the buildings in the Pending Projects will be the amount set forth in Appendix
I, subject to adjustment if the actual average monthly rental per square foot
for the term of the lease or leases in effect with respect thereto as of the
Closing Date (as defined herein) differs from the projected rental rate set
forth in Appendix I. Consequently, the actual Acquisition Value will be equal to
the acquisition value set forth in Appendix I multiplied by the ratio of the
actual average monthly rental rate per square foot divided by the projected
rental rate set forth in Appendix I (the "Acquisition Value"):
3. CONSIDERATION.
(a) ITEMS. The Purchaser shall provide the following items of consideration
to the Sellers upon the Purchaser's acquisition of the Pending Projects:
(i) the Acquisition Value of each building as set forth in Appendix I, as
such amount shall be adjusted as of the Closing Date (as defined herein),
payable, at the election of the Participating Sellers, as provided in Section
3(b), (A) in cash in an amount equal to (x) such Acquisition Value minus (y) the
sum of the principal amount of all debt encumbering the building (other than
assessment leins) as of the Closing Date, and all accrued, unpaid interest and
other financing charges applicable to such debt (the "Net Acquisition Value"),
or (ii) through the issuance to the Participating Sellers of that number of L.P.
Units (with each receiving his, her or its proportionate share based on their
ownership interests in the acquired property) equal to the quotient obtained by
dividing the Net Acquisition Value by $4.50;
(ii) the assumption of all indebtedness encumbering the acquired property
as of the Closing Date; and
(iii)assumption and payment of all prorations and reimbursements which the
Purchaser is obligated to pay pursuant to Section 10.
(b) The Participating Sellers shall decide among themselves whether to
receive cash or L.P. Units, or both, upon their conveyance of the acquired
property to the Purchaser, and through one representative who they select, shall
deliver to the Purchaser, a written notice of election specifying the number of
L.P. Units, the amount of cash, or the number and amount of each, to be
delivered to each Participating Seller not less than 10 days prior to the
Closing Date.
(c) The purchaser of each acquired property at the Closing may be the
Operating Partnership or the Company; provided that pursuant to the terms of the
Operating Partnership Agreement the Company shall contribute such property to
the Operating Partnership in exchange for additional partnership interests as
provided therein. The Purchaser shall notify the Sellers which entity will be
acquiring the property not less than 3 days prior to the Closing Date.
4. CLOSING DATE. The acquisition of each building in the Pending Projects
shall occur on the 3rd business day after the last to occur of (i) the
completion of the building and receipt of required occupancy permits; (ii) the
execution of written leases with respect to 100% of the rentable square footage
in such building, (iii) satisfaction of all closing conditions set forth in
Section 5 and 6 as set forth in certificates which each party shall deliver to
the other, and (iv) the Participating Sellers' delivery to the Purchaser of
their election as to the form of consideration they intend to receive for the
acquired property (the "Closing Date").
5. CONDITIONS TO THE PURCHASER'S PERFORMANCE. The Purchaser's obligation to
acquire any of the buildings included in the Pending Projects is subject in each
instance to the following conditions precedent:
(a) The Sellers' representations and warranties in this Agreement being
correct in all material respects as of each Closing Date;
(b) The Sellers' compliance with the provisions of Section 15 with respect
to such acquired property;
(c) There shall not have occurred after the date hereof any material
adverse physical change in the acquired property, other than as contemplated by
the parties in connection with the completion of the property, from its
condition as of the date hereof.
(d) The Purchaser shall not have elected to terminate such obligation in
conformity with the provisions of Section II or Section 12.
The foregoing conditions shall be for the benefit of, and may be waived by,
the Purchaser. Upon the non-satisfaction of any of the foregoing conditions,
unless waived by the Purchaser, the Purchaser's obligations to acquire the
particular property shall terminate.
6. CONDITIONS TO THE SELLERS' PERFORMANCE. The Sellers' obligation to
convey each building included in the Pending Projects is subject in each
instance to the following conditions precedent:
(a) The Purchaser's representations and warranties in this Agreement being
correct in all material respects as of each Closing Date; and
(b) The Purchaser's performance of all of its obligations to acquire such
property under this Agreement.
(c) The Purchaser shall not have elected to terminate such obligation in
conformity with the provisions of Section II or Section 12.
The foregoing conditions shall be for the benefit of, and may be waived
only by, the Participating Sellers with respect to each acquired property. Upon
the non-satisfaction of any of the foregoing conditions, unless waived by such
Participating Sellers, their obligation to convey the particular property shall
terminate.
7. ACCESS.
(a) Access to the Pending Projects prior to the Closing Date shall be given
to the Purchaser during normal business hours upon at least one (1) business
day's prior notice to the Seller.
(b) The Purchaser and the Purchaser's contractors and consultants shall
have the right, from the date hereof until the Closing Date for an acquired
property, to enter onto such property, at its own cost and risk, for any
purposes, including but not limited to, inspecting the property. The Purchaser's
contractors and consultants shall be duly licensed and insured. As a condition
of such entry, the Purchaser shall provide evidence reasonably satisfactory to
the Sellers of the existence of general liability insurance prior to any such
entry, inspection, test or study. The Sellers agree to cooperate reasonably with
the Purchaser in the inspection of the Pending Projects and agree to make
available to the Purchaser all information in the Sellers' possession or control
pertaining to the condition of the Pending Projects, including engineering and
environmental reports, studies, tests, monitoring results, and related
documentation.
(c) The Purchaser shall indemnify and defend the Sellers against and hold
the Sellers harmless from all losses, costs, damages, liabilities, and expenses,
arising out of any personal injury or physical damage to the Pending Projects in
connection with the Purchaser's inspection of or presence, prior to the Closing
Date, on the Pending Projects. Furthermore, the Purchaser shall indemnify,
defend and hold the Sellers harmless from and against any mechanic's lien claims
that may arise in connection with the Purchaser's inspection of or presence,
prior to the Closing Date, on the Pending Projects.
8. TITLE. Title to the Pending Projects shall be such as will be insured,
solely in the name of the applicable Purchasors as good and marketable title by
a title insurance company acceptable to the Purchaser at regular rates pursuant
to the standard stipulations and conditions of the 1970 Form B ALTA Owner's
Title Insurance Policy as revised in 1984, and as the same may be modified by
such endorsements, affirmative coverage and other matters which have been
requested by the Purchaser prior to each of the Closing Dates, free and clear of
all liens and encumbrances, except those liens and encumbrances which the
Purchaser agrees to accept and/or assume in writing as of each Closing Date.
9. CLOSE OF THE PURCHASE AND SALE.
(a) CONVEYANCE OF TITLE. At each close of escrow, good and marketable title
to the Pending Projects shall be conveyed by the Sellers to the Purchaser by the
Deed (as defined below) subject only to the following permitted liens:
(i) A lien for real property taxes and assessments not then
delinquent;
(ii) Matters of title respecting the Pending Projects approved or
deemed approved by the Purchaser in accordance with this Agreement;
(iii) Title and survey matters which would be disclosed by an ALTA
survey and approved or deemed approved by the Purchaser;
(iv) Matters affecting the condition of title to the Pending Projects
created by or with the written consent of the Purchaser; and
(v) Indebtedness for borrowed funds incurred by the Sellers with their
written agreement.
As of each of the Closing Dates, all of the Sellers' right, title and
interest in and to the Personal Property shall be conveyed by the Sellers to the
Purchaser by the Warranty Bill of Sale in the form attached hereto as EXHIBIT B
(the "Bill of Sale").
(b) THE SELLERS' DELIVERIES ON THE CLOSING DATE. The Sellers shall deliver
to the Purchaser on every Closing Date the following documents:
(i) Statutory grant deeds executed and acknowledged by the Sellers
(the "Deed");
(ii) The Sellers' affidavits of non-foreign status as contemplated by
Section 1445 of the Internal Revenue Code of 1986, as amended, or a release
from the Internal Revenue Service in form and content reasonably acceptable
to the Purchaser, indicating that the Purchaser is excused from any
withholding requirements under federal law ("FIRPTA Affidavit") executed by
the Sellers, but undated;
(iii)The Sellers' affidavits as contemplated by Revenue and Taxation
Code Section 18662 or a release from the California Franchise Tax Board in
form and content reasonably acceptable to the Purchaser, indicating that
the Purchaser is excused from any withholding requirements under California
law (the "Withholding Affidavit") executed by the Sellers, but undated;
(iv) Bills of Sale duly executed by the Sellers, but undated; and
(v) Such other documents as the Purchaser may reasonably require in
order to close the transactions in accordance with the terms hereof.
(c) PURCHASER'S DELIVERIES ON THE CLOSING DATE. The Purchaser shall deliver
to the Sellers on every Closing Date the following:
(i) The consideration in accordance with Section 3(a) together with
the Purchaser's share of closing costs; and
(ii) Such other documents as the Sellers may reasonably require to
close the transactions in accordance with the terms hereof.
(d) CLOSING COSTS. The closing costs shall be allocated and prorated as
follows:
(i) THE SELLERS SHALL PAY:
(A) any costs of clearing title to the Pending Projects;
(B) any document preparation fees for the Deed; and
(C) all documentary and/or real property transfer taxes due upon
the transfer of the Pending Projects.
(ii) THE PURCHASER SHALL PAY:
(A) all charges in connection with the issuance of a title
policy; and
(B) the recording charges in connection with recordation of the
Deed.
Any closing costs not addressed herein shall be allocated in accordance
with the custom and practice then prevailing in Santa Clara County.
(iii) REAL ESTATE TAXES, BONDS AND ASSESSMENTS. Current real
property taxes, any current installment of any bond or assessment that
constitutes a lien on the Pending Projects, rents and license fees, if
any, including any additional property taxes or installments of any
bond or assessment lien that may be assessed after the Closing Date,
but that relate to a period prior to the Closing Date, regardless of
when notice of those taxes, dues or assessments are received or who
receives the notice shall be prorated as of the Closing Date.
10. POSSESSION. Exclusive possession of the Pending Projects shall be
delivered to the Purchaser on each Closing Date.
11. DAMAGE AND DESTRUCTION.
(a) In the event of damage or destruction of a building included in the
Pending Projects or any portion of the Pending Projects prior to a Closing Date
in an amount not exceeding Ten Thousand Dollars ($10,000), the Purchaser and the
Sellers shall consummate the transaction, provided that the Sellers shall assign
to the Purchaser such Sellers' rights under any insurance policy covering the
damage or destruction and shall indemnify the Purchaser with respect to any
costs incurred by the Purchaser in repairing and restoring the building after
the Closing Date that are not paid by the insurance up to the amount of Ten
Thousand Dollars ($10,000) or may, at the Sellers' election, grant the Purchaser
a credit in said amount against the Acquisition Value.
(b) In the event of damage or destruction of a building included in the
Pending Projects or any portion of the Pending Projects prior to the Closing
Date in an amount in excess of Ten Thousand Dollars ($10,000), the Purchaser may
elect within ten (10) days following such event of damage or destruction, either
to terminate its obligation to acquire such property under the terms of this
Agreement upon written notice to the Sellers, or to consummate the transaction,
in which event the Sellers shall assign to the Purchaser the Sellers' rights
under any insurance policy covering the damage or destruction, but without the
indemnity provided in subsection (a) above. The Purchaser's failure to
affirmatively elect whether to terminate or consummate the transaction within
said ten (10) day period shall be deemed the Purchaser's election to consummate
the transaction. If the Purchaser elects to terminate its obligation to acquire
such property under the terms of this Agreement pursuant to this provision,
neither party shall have any further obligations to acquire or convey such
property under this Agreement.
12. CONDEMNATION.
(a) If any portion of a building included in the Pending Projects is taken
by condemnation or eminent domain or is the subject of a threatened or pending
condemnation or eminent domain proceeding that has not been consummated prior to
the Closing Dates resulting in a decrease in the value of the Pending Projects
in an amount not exceeding Ten Thousand Dollars ($10,000), the Purchaser and the
Sellers shall consummate the transaction, provided that the Sellers shall assign
to the Purchaser such Sellers' rights to all awards for the condemnation or
taking and shall indemnify the Purchaser with respect to any costs incurred by
the Purchaser in repairing and restoring the property that are not paid by the
condemnation awards up to the amount of Ten Thousand Dollars ($10,000) or may,
at the Sellers' election, grant the Purchaser a credit in such amount against
the consideration payable for the acquired property.
(b) If any portion of a building included in the Pending Projects is taken
by condemnation or eminent domain or is the subject of a threatened or pending
condemnation or eminent domain proceeding that has not been consummated prior to
the Closing Date resulting in a decrease in the value of such property in an
amount in excess of Ten Thousand Dollars ($10,000), the Purchaser may elect
within ten (10) days following such event, either to terminate its obligation,
to acquire the property under this Agreement upon written notice to the Sellers,
or to consummate the transaction, in which event the Sellers shall assign to the
Purchaser such Sellers' rights to all awards for the condemnation or taking, but
without the indemnity provided in subsection (a) above. The Purchaser's failure
to affirmatively elect whether to terminate or consummate the transaction within
said ten (10) day period shall be deemed the Purchaser's election to consummate
the transaction. If the Purchaser elects to terminate its obligation to acquire
the property under this Agreement pursuant to this provision, neither party
shall have any further obligations to acquire or convey such property under this
Agreement, except as otherwise provided in this Agreement.
13. SELLERS' REPRESENTATIONS AND WARRANTIES. The Sellers jointly and
severally represent and warrant to the Purchaser that as of the date of this
Agreement and as of each of the respective Closing Dates:
(a) The Sellers have full right, power and authority to enter into and
perform the Sellers' obligations under this Agreement in accordance with its
terms;
(b) None of the Sellers is a "foreign person" within the meaning of Section
1445(f)(3) of the Internal Revenue Code of 1954, as amended, and is a "resident"
of the State of California within the meaning of Section 18662 of the California
Revenue and Taxation Code, as amended;
(c) There is not pending, or to the Sellers' actual knowledge, threatened,
any litigation with respect to the Pending Projects (excluding any properties
conveyed to the Purchaser hereunder prior to the Closing Date); and
(d) Except as disclosed to the Purchaser and to the Sellers' actual
knowledge, no toxic or hazardous chemicals, waste, or substances of any kind
have ever been spilled, disposed of, or stored on, under, or at the Pending
Projects in violation of any applicable law, rule or regulation (excluding any
properties conveyed to the Purchaser hereunder prior to the Closing Date).
The continued accuracy in all respects of the Sellers' foregoing
representations and warranties of the Sellers shall be a condition precedent to
the Purchaser's obligation to close the acquisition of each property. All such
representations and warranties contained in this Agreement shall be deemed
remade as of the Closing Dates for each acquired property.
14. PURCHASER REPRESENTATIONS AND WARRANTIES. The Purchaser represents and
warrants to the Sellers that as of the date of this Agreement and as of each of
the respective Closing Dates the Purchaser has full right, power and authority
to buy the Pending Projects from the Sellers and to perform the Purchaser's
obligations under this Agreement in accordance with its terms.
15. SELLERS' COVENANTS. Commencing on the date hereof and continuing with
respect to each building included in the Pending Projects until the Closing Date
for the acquisition of such property:
(a) The Sellers shall not create or consent to any liens, encumbrances, or
easements on or affecting the Pending Projects, except for the permitted liens
described in Section 9(a) as contemplated by the submitted plans and issued
permits for such Projects and for secured debt.
(b) The Sellers shall not permit any act of waste or act that would
materially to diminish the value of the Pending Projects for any reason, except
that caused by ordinary wear and tear.
(c) The Sellers will promptly (after learning of same) notify the Purchaser
in writing of any adverse material changes affecting the physical condition of
the Pending Projects.
(d) The Sellers shall complete and maintain the Pending Projects in
conformity with applicable building codes, laws, and sound construction and
property management practices.
(e) Unless the acquisition of an acquired property is sooner terminated by
the Purchaser (when permitted under this Agreement), the Sellers will not make,
accept, negotiate or otherwise pursue any offers for the disposition (whether
directly, through a joint venture, ground lease, financing, or otherwise) of any
interest in the Pending Projects.
16. "AS-IS" SALE. Except as expressly set forth herein, the Purchaser
acknowledges that it is buying the Pending Projects in "As-Is, Where-Is"
condition, in reliance on its own investigations.
17. BROKERS AND FINDERS. The Purchaser and the Sellers each represent and
warrant to the other party that no broker or finder has been utilized in the
purchase and sale contemplated by this Agreement. In the event of a claim for
broker's fees, finder's fees, commissions or other similar compensation in
connection herewith: (i) the Purchaser, if such claim is based upon any
agreement alleged to have been made by the Purchaser, shall indemnify, defend,
and hold the Sellers harmless (using counsel reasonably satisfactory to the
Sellers) from and against any and all damages, liabilities, costs, expenses and
losses (including, but not limited to, attorneys' fees and costs) that the
Sellers sustain or incur by reason of such claim; and (ii) the Sellers, if such
claim is based upon any agreement alleged to have been made by the Sellers,
shall indemnify, defend and hold the Purchaser harmless (using counsel
reasonably satisfactory to the Purchaser) from and against any and all damages,
liabilities, costs, expenses and losses (including, but not limited to,
attorneys' fees and costs) that the Purchaser sustains or incurs by reason of
such claim.
18. SURVIVAL. Except to the extent specifically provided to the contrary
hereunder, each and every covenant, agreement, representation and warranty of
each of the parties hereto shall survive the Closing Date and shall not merge
with the Sellers' deliveries of the Deeds or other documents to the Purchaser.
19. ASSIGNMENT; SUCCESSORS AND ASSIGNS. The Purchaser shall have the right
to assign this Agreement with the prior written consent of the Sellers'
Representative or all Sellers, which consent shall not be unreasonably withheld.
This Agreement, and the terms, covenants and conditions herein contained, shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors, heirs and assigns.
20. NOTICES. All notices to be given under this Agreement shall be in
writing and sent by:
(a) certified mail, return receipt requested, in which case notice shall be
deemed delivered three (3) business days after deposit, postage prepaid in the
United States Mail,
(b) a nationally recognized overnight courier, in which case notice shall
be deemed delivered one (1) business day after deposit with that courier, or
(c) facsimile or similar means if a copy of the notice is also sent by
United States Certified Mail, in which case notice shall be deemed delivered on
transmittal by facsimile or other similar means, provided that a transmission
report is generated by reflecting the accurate transmission of the notices, as
follows:
If to the Purchaser:
Mission West Properties
10050 Bandley Drive
Cupertino, CA 95014
Attention: Independent Directors Committee
Fax No. (408) 725-1626
If to the Sellers:
c/o Berg & Berg Enterprises, Inc.
10050 Bandley Drive
Cupertino, CA 95014
Attention: Carl E. Berg
Fax No. (408) 725-1626
21. ARBITRATION OF DISPUTES. Any dispute or claim in law or equity solely
between the Purchaser and Sellers arising out of this Agreement shall be decided
by neutral, binding arbitration. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association ("AAA") then
obtaining using a single arbitrator. The decision of the arbitrator shall be
final and binding. In all other respects, the arbitration shall be conducted in
accordance with Part III, Title 9 of the California Code of Civil Procedure.
Judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof. The parties shall have the right to discovery
in accordance with code of Civil Procedure Section 1283.05. The arbitration
shall take place in the County of Santa Clara. The filing of a judicial action
to enable the recording of a notice of pending action, for order of attachment,
receivership, injunction, or other provisional remedies, shall not constitute a
waiver of the right to arbitrate under this provision.
22. ATTORNEYS' FEES. If any arbitration or court action is commenced
between the parties, the prevailing party in that arbitration or court action
shall be entitled to recover from the non-prevailing party all reasonable
attorneys' fees and costs.
23. ENTIRE AGREEMENT. This Agreement contains the entire agreement between
the parties to this Agreement and shall not be modified in any manner except by
an instrument in writing executed by the parties or their respective successors
in interest.
24. SEPARATE CONTENTS. The acquisition and conveyance of the real property
and improvements constituting each of the buildings included in the Pending
Projects or identified on Appendix I is a separate transaction, and the parties'
obligations with respect to each such property constitutes a separate contract
under this Agreement.
25. SEVERABILITY. If any term or provision of this Agreement shall, to any
extent, be held invalid or unenforceable, the remainder of this Agreement shall
not be affected.
26. WAIVERS. A waiver or breach of covenant or provision in this Agreement
shall not be deemed a waiver of any other covenant or provision in this
Agreement, and no waiver shall be valid unless in writing and executed by the
waiving party. An extension of time for performance of any obligation or act
shall not be deemed an extension of the time for performance of any other
obligation or act.
27. CONSTRUCTION. The section headings and captions of this Agreement are,
and the arrangement of this instrument is, for the sole convenience of the
parties to this Agreement. The section headings, captions, and arrangement of
this instrument do not in any way affect, limit, amplify, or modify the terms
and provisions of this Agreement. The singular form shall include plural, and
vice versa. This Agreement shall not be construed as if it had been prepared by
one of the parties, but rather as if both parties have prepared it. Unless
otherwise indicated, all references to sections are to this Agreement. All
exhibits referred to in this Agreement are attached to it and incorporated in it
by this reference. Capitalized terms used in this Agreement have the meaning
ascribed to them in the Acquisition Agreement under indicated otherwise.
28. MERGER. All of the terms, provisions, representations and covenants of
the parties under this Agreement shall survive the Closing Dates and shall not
be merged in the Deeds.
29. COUNTERPARTS. This Agreement may be executed in one or more
counterparts.
30. TIME OF THE ESSENCE. Time is of the essence in this Agreement.
31. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of California.
32. EXHIBITS. Each exhibit to which reference is made in this Agreement is
deemed incorporated into this Agreement in its entirety by such reference. The
exhibits to this Agreement are the following:
Exhibit A Legal Description of Pending Projects
Exhibit B Warranty Bill of Sale
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
PURCHASER: SELLERS:
MISSION WEST PROPERTIES, a By: /s/Carl E. Berg
California Corporation ______________________________
Carl E. Berg
By: /s/ Michael J. Anderson
______________________________ By: /s/Clyde J. Berg
______________________________
Its: Vice President Clyde J. Berg
_____________________________
MISSION WEST PROPERTIES, L.P., a BERG & BERG ENTERPRISES, INC., a
Delaware Limited Partnership California Corporation
By: Mission West Properties, a By: /s/ Carl E. Berg
California Corporation, as ______________________________
General Partner
Its: President
By: /s/ Michael J. Anderson _____________________________
______________________________
Its: Vice President
_____________________________
MISSION WEST PROPERTIES, L.P. I, a BACCARAT FREMONT, LLC, a California
Delaware Limited Partnership Limited Liability Company
By: Mission West Properties, a By: /s/ Michael Knapp
California Corporation, as ______________________________
General Partner
Its: Manager
By: /s/ Michael J. Anderson _____________________________
______________________________
Its: Vice President
_____________________________
MISSION WEST PROPERTIES, L.P. II, a
Delaware Limited Partnership
By: Mission West Properties, a By: /s/ Thelmer Aalgaard
California Corporation, as ______________________________
General Partner Thelmer Aalgaard
By: /s/ Michael J. Anderson By: /s Patricia Aalgaard
______________________________ ______________________________
Patricia Aalgaard
Its: Vice President
_____________________________ By: /s/ Clyde J. Berg
______________________________
Clyde J. Berg, Trustee of the 1981
Kara Ann Berg Trust
MISSION WEST PROPERTIES, L.P. III, a
Delaware Limited Partnership
By: Mission West Properties, a
California Corporation, as
General Partner
By: /s/ Michael J. Anderson
______________________________
Its: Vice President
_____________________________
<PAGE>
<TABLE>
<CAPTION>
APPENDIX I
LIST OF PENDING PROJECTS, OWNERS
AND
INITIAL ACQUISITION VALUE
Projected
Projected Average
Triple Monthly
Approximate Net Rental Rate
Building Annual Per Square Acquisition
PENDING PROJECT AND OWNERS Size Base Rent Foot Value
=============================================================================================
<S> <C> <C> <C> <C>
GREAT OAKS 54,240 $715,968 $1.10 $5,226,043
Carl Berg and Clyde Berg
MEMOREX DRIVE 52,800 $ 535,560 $0.85 $3,347,250
Carl Berg and Clyde Berg
RICHARD AVE. 58,740 $599,148 $0.85 $3,744,675
Carl Berg and Clyde Berg
AUTOMATION PARKWAY
Berg & Berg Enterprises,
Inc. Bldg. 1 114,028 $1,778,036 $1.30 $12,705,971
2 80,640 $1,257,984 $1.30 $8,985,600
3 80,640 $1,257,984 $1.30 $8,985,600
4 61,056 $952,474 $1.30 $6,803,386
L'AVENIDA
Baccarat Fremont, LLC, Bldg. 1 94,134 $3,219,382 $2.85 $18,937,541
a California limited
liability company, Thelmer 2 101,622 $3,475,724 $2.85 $20,445,435
Aalgaard and Patricia
Aalgaard, husband and wife, 3 93,314 $3,191,339 $2.85 $18,772,582
and Clyde Berg, Trustee of
the 1981 Kara Ann Berg Trust 4 126,236 $4,317,271 $2.85 $25,395,717
5 98,166 $3,357,277 $2.85 $19,748,688
</TABLE>
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF THE PENDING PROJECTS
THE LAND REFERRED TO IN THIS REPORT IS SITUATED IN THE STATE OF CALIFORNIA, AND
IS DESCRIBED AS FOLLOWS:
GREAT OAKS:
This land is located in south San Jose, California and consists of approximately
3 gross acres of unimproved land. The land is described by the following
Assessor's Parcel Number:
706-02-025
MEMOREX DRIVE AND RICHARD AVE.:
This land is located in north Santa Clara, California and consists of
approximately a 6 acre portion of land. This portion of land is described by the
following Assessor's Parcel Number:
224-65-006
AUTOMATION PARKWAY:
This land is located in north San Jose, California and consists of approximately
21 gross acres of unimproved land. The land is described by the following
Assessor's Parcel Numbers:
Portions of 244-13-10, and 244-15-18.
L' AVENIDA:
This land is located in Mountain View, California and consists of approximately
32 gross acres of unimproved land. The land is described by the following
Assessor's Parcel Numbers:
116-16-63, 116-16-60, 116-16-65, 116-16-59, 116-16-75, 116-16-70, 116-16-69,
116-16-74
<PAGE>
EXHIBIT B
WARRANTY BILL OF SALE
This Warranty Bill of Sale ("Bill of Sale") is executed as of March ___,
1998 by the individuals and entities listed on Appendix I ("Sellers") in favor
of Mission West Properties, a California corporation (the "Company"), Mission
West Properties, L.P. ("MWP"), Mission West Properties, L.P. I ("MWP I"),
Mission West Properties, L.P. II ("MWP II"), Mission West Properties, L.P. III
("MWP III, and collectively with the Company, MWP, MWP I and MWP II, the
"Purchaser")
RECITALS
A. The Sellers and the Purchaser have entered into that certain Pending
Projects Acquistion Agreement dated of even date herewith (the "Purchase
Agreement"), in which the Purchaser has agreed to purchase real property in
Santa Clara County, State of California, more particularly described in attached
Schedule 1, (the "Pending Projects") incorporated in this Bill of Sale.
B. Pursuant to the Purchase Agreement, the Sellers have agreed to transfer
to the Purchaser all the Sellers' right, title and interest in all licenses,
permits, development rights, air rights, authorizations, certificates, surveys,
plans, specifications, reports, studies, test results and all unexpired
warranties and guaranties given by unaffiliated third parties owned by the
Sellers and pertaining to or used exclusively in connection with the Pending
Projects (collectively, "Personal Property") concurrent with the Closing Dates
(as defined in the Purchase Agreement).
For good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Sellers agree as follows:
AGREEMENT
1. TRANSFER. Effective as of the Closing Dates, the Sellers hereby
transfer, sell, assign, grant and convey to the Purchaser all of the Sellers'
right, title, and interest in the Personal Property.
2. SELLERS'S COVENANTS. The Sellers covenant to the Purchaser that the
Sellers have good and marketable title to the Personal Property, free of all
liens, and has the right to transfer the Personal Property. The Sellers further
agree that the Sellers will defend the Purchaser's title to the Personal
Property against the demands of anyone claiming through the Sellers.
3. ATTORNEYS' FEES. If any suit, action or other proceeding is instituted
to enforce the rights of either party under this Bill of Sale, the successful
party, as adjudicated by a court, shall be entitled to reasonable attorney fees
and court costs.
4. GOVERNING LAW. This Bill of Sale shall be governed and construed in
accordance with California law.
The Sellers have executed this Bill of Sale as of the date first above
written.
SELLERS:
_______________________________________
By:
____________________________________
Its:
___________________________________
By:
____________________________________
Its:
___________________________________
BERG LAND HOLDINGS OPTION AGREEMENT
OPTIONEE: Mission West Properties, a California corporation, Mission West
Properties, L.P., a Delaware limited partnership, Mission West
Properties, L.P.I, a Delaware limited partnership, Mission West
Properties, L.P.II, a Delaware limited partnership, Mission West
Properties, L.P.III, a Delaware limited partnership
OPTIONOR: BB&K, a California general partnership, Baccarat Fremont
Developers, LLC, a California limited liability company
PROPERTY: King Ranch Business Park, San Jose, CA
Hellyer and Piercy, San Jose, CA
Fremont and Cushing, Fremont, CA
Dated: December 29, 1998
<PAGE>
BERG LAND HOLDINGS
OPTION AGREEMENT
This Berg Land Holdings Option Agreement ("Agreement") is entered into as
of December 29, 1998 by and between Mission West Properties, a California
corporation (the "Company"), Mission West Properties, L.P., a Delaware limited
partnership ("MWP"), Mission West Properties, L.P. I, a Delaware limited
partnership ("MWP I"), Mission West Properties, L.P. II, a Delaware limited
partnership ("MWP II") and Mission West Properties, L.P. III, a Delaware limited
partnership ("MWP III"; MWP, MWP I, MWP II and MWP III are referred to as the
"Operating Partnership"; the Company and the Operating Partnership are referred
to collectively as the "Optionee"), on the one hand, and the individuals and
entities listed on Appendix I who own or have the right to acquire the
properties set forth opposite such individuals' and entities' names thereon (the
"Optionors") on the other hand.
RECITALS
A. The Optionors are the owners of, or have the right to acquire, three
(3) tracts of real property located in Santa Clara County and Alameda County,
California, commonly known as King Ranch Business Park, Hellyer and Piercy, and
Fremont and Cushing, and described in attached Exhibit A, together with all
rights, privileges, easements, and appurtenances (collectively, the "Berg Land
Holdings"); and all personal property, entitlements, licenses, permits,
development rights, air rights, authorizations, certificates, surveys, plans,
specifications, reports, studies, test results and all unexpired warranties and
guaranties given by unaffiliated third parties owned by the Optionors and
pertaining to or used exclusively in connection with the Berg Land Holdings (the
"Personal Property"); (the Berg Land Holdings and Personal Property shall be
collectively referred to herein as the "Berg Land Holdings").
B. In connection with the Acquisition Agreement dated as of May 14, 1998
(the "Acquisition Agreement"), to which the Optionee and the Optionors all are
parties, the Operating Partnership has agreed to issue L.P. Units to all of the
limited partners therein, the Company has agreed to become the general partner
of the Operating Partnership, and the Company has agreed to permit holders of
L.P. Units to exchange them for shares of the Company's common stock ("Common
Stock") under certain circumstances.
C. The Operating Partnership is governed by the Operating Partnership
Agreement and the Acquisition Agreement.
D. The Optionee desires to have an option to acquire the Berg Land
Holdings and the Optionors desire to grant such an option to Optionee on the
terms and conditions of this Agreement, and pursuant to the Acquisition
Agreement have agreed that the Company or the Operating Partnership shall have
the option to acquire each of the buildings comprising the Berg Land Holdings as
soon as such building (each an "acquired property" herein) has been completed
and fully leased by issuing either additional L.P. Units to the Optionors based
upon the Acquisition Value (as defined below), or at the Optionors' option, they
may receive cash or a combination of cash and L.P.
Units equal to the Acquisition Value.
E. This Agreement shall become effective December 29, 1998 (the "Option
Effective Date").
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants and promises of
the parties, the parties hereto agree as follows:
1. Option. Optionor grants Optionee an exclusive option ("Option") to
purchase each of the acquired properties comprising the Berg Land Holdings. The
Option shall be "rolling" and shall apply to each acquired property. The fact
that Optionee does not exercise the Option with respect to a given acquired
property shall not impact Optionee's right to exercise the Option with respect
to a subsequent acquired property. The Optionors' shall appoint one
representative to act as their agent in connection with the acquisition and
conveyance of each acquired property (the "Optionors' Representative"). The
Optionors' Representative is authorized to receive written notices from the
Optionee on behalf of all of the Optionors of such property. This Option does
not create any right to acquire any portion of the Berg Land Holdings prior to
the development of a completed building thereon, fully leased.
2. Term of Option. The term of the Option ("Term") shall commence on the
Option Effective Date and, unless Optionee has timely exercised the Option in
accordance with the provisions hereof, shall terminate on the sooner of (i) the
"Percentage Interest Date" (as defined below), or (ii) 11:59 p.m. on December
31, 2010. The Percentage Interest Date shall be the date on which the "Berg
Group" as defined in the Acquisition Agreement no longer owns or has the right
to acquire 65% of the Company's Common Stock, determined as though all L.P.
Units owned in the aggregate by the Berg Group were exchanged for shares of
Common Stock at the Exchange Factor.
3. Consideration. As consideration for the Option, Optionee has paid to
Optionor the sum of Ten and No/100 Dollars ($10. 00) ("Option Consideration"),
the receipt and sufficiency of which are hereby acknowledged.
4. Development of Berg Land Holdings. Optionor intends to develop the Berg
Land Holdings and construct thereon various industrial buildings, subject to
obtaining the necessary governmental permits and approvals. This development
will occur over several years and shall be accomplished in a manner that
Optionor determines, in its sole discretion, is prudent based upon market
conditions. The properties commonly known as Hellyer and Piercy and Fremont and
Cushing are not yet owned by Optionors, but are subject to acquisition
agreements wherein the Optionors have the right to acquire such properties. If
the Optionors decide not to exercise their rights to acquire such properties,
then such properties shall no longer be deemed to be part of the Berg Land
Holdings and shall no longer be subject to the terms of this Option.
5. Exercise. The exercise of the Option with respect to a given acquired
property must occur within thirty (30) days of receipt of the "Completion
Notice" from Optionor's Representative to Optionee. The Completion Notice shall
be delivered by Optionor's Representative to Optionee with respect to each
acquired property in the Berg Land Holdings once the following has occurred (i)
the completion of the building and receipt of required occupancy permits; (ii)
the execution of written leases with respect to one hundred percent (100%) of
the rentable square footage in such building, and (iii) the Optionors' election
as to the form of consideration they intend to receive for the acquired
property. Optionee may exercise the Option at any time during such thirty
(30)-day period by written notice ("Notice") to Optionor, stating the date upon
which Optionee desires to close escrow (provided that escrow shall not close
later than the sixtieth (60th) day following receipt of the Completion Notice).
6. Acquisition Value. In the event that Optionee exercises the Option, the
Acquisition Value for the subject acquired property shall be equal to (i) the
full construction cost of all improvements on or servicing the acquired
property, plus (ii) 10% of the amount set forth in subsection (i), plus (iii)
interest at LIBOR plus 1.65% per annum on the amounts set forth in subsection
(i) from the date paid by Optionor and ending at the close of escrow, plus (iv)
the acquisition value of the parcel on which the improvements were constructed
as set forth in the schedule below and carrying costs of 10% per annum thereon
from January 1, 1998 until the close of escrow, minus (v) the sum of the
principal amount of all debt (other than assessment liens) encumbering the
subject acquired property as of the closing. Optionee shall assume all
assessments that are a lien against the subject acquired property. The
acquisition value of each parcel of the Berg Land Holdings shall be as follows:
<TABLE>
<CAPTION>
Location: Acquisition Value per Acquisition Value per
square foot of acre of Acquired
Acquired Property: Property:
--------------------- ---------------------
<S> <C> <C>
King Ranch Business Park $10.00 per square foot $435,600
Hellyer and Piercy $8.50 per square foot $370,260
Fremont and Cushing $20.00 per square foot $871,200
</TABLE>
7. Payment of Acquisition Value. The Acquisition Value shall be paid in
cash or L.P. Units, at the election of the Optionor's Representative. To the
extent the Optionor's Representative elects to receive L.P. Units, the number of
L.P. Units (N) paid to Optionor shall be determined as follows:
(A-B)/C=N; where:
A = Acquisition Value
B = Any cash portion of the Acquisition Value paid to Optionor
C = The average market value of the Common Stock over the 30 trading-day
period preceding the exercise of the Option.
8. Agreement of Purchase and Sale. Within seven (7) days after exercise of
the Option by Optionee, Optionee and Optionors each shall execute an agreement
of purchase and sale for the purchase of the subject acquired property by
Optionee from Optionors. This purchase and sale agreement shall be consistent
with this Agreement and shall also reflect (a) the date of execution of the
purchase and sale agreement, (b) the method of payment and the amount of the
Acquisition Value, (c) the outside date of the close of escrow, and (d) the
legal description of the acquired property to be transferred.
9. Representations and Warranties. Optionors warrant that Optionors are the
owners of, or have a valid and binding agreement to acquire, the Berg Land
Holdings, and have (or will have prior to the close of escrow under the purchase
and sale agreement) insurable fee simple title to the acquired property clear of
restrictions, leases, liens, and other encumbrances, except as permitted in the
purchase and sale agreement. If this option is exercised by Optionee, Optionors
will convey (or cause the underlying owner to convey) title to the acquired
property by California statutory grant deed.
10. Assignment. Optionee shall have the right to assign the Option with the
prior consent of Optionors (whose consent shall be subject to their sole and
absolute discretion).
11. No Transfer of Parcel. From and after the Option Effective Date, unless
and until this Agreement is terminated, Optionors shall not sell or convey or
grant an option to sell or convey all or any portion of the Berg Land Holdings
if such sale, conveyance or grant might in any way impair Optionors' ability to
transfer the Berg Land Holdings to Optionee.
12. Miscellaneous.
(a) Successors and Assigns. The terms, covenants and conditions herein
contained shall be binding upon and inure to the benefit of the successors
and assigns of the parties hereto.
(b) Entire Agreement. This Agreement contains all of the covenants,
conditions and agreements between the parties and shall supersede all prior
correspondence, agreements and understandings, both oral and written.
(c) Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California.
(d) Notices. All notices required or permitted to be given hereunder
shall be in writing and mailed postage prepaid by certified or registered
mail, return receipt requested, or by personal delivery, to the appropriate
address indicated in this paragraph, or at such other place or places as
either Optionee or Optionors' Representative respectively may designate
from time to time in a written notice given to the other. Notices shall be
deemed sufficiently given upon receipt if by personal delivery, overnight
carrier or facsimile or three (3) days after the date of mailing thereof.
(i) Optionee's Address for Notice:
Mission West Properties
10050 Bandley Drive
Cupertino, CA 95014
Attention: Independent Directors Committee
Facsimile No.: (408) 725-0700
(ii) Optionors' Address for Notice:
Berg & Berg Enterprises, Inc.
10050 Bandley Drive
Cupertino, CA 95014
Attention: Carl E. Berg
Facsimile No.: (408) 725-0700
(e) Headings. The title and headings of the paragraphs hereof are
intended solely for means of reference and are not intended to modify,
explain or place any construction on any of the provisions of this
Agreement.
(f) Third-Party Rights. Nothing in this Agreement, express or implied,
is intended to confer on any person, other than the parties to this
Agreement and their respective successors and assigns, any rights or
remedies under or by reason of this Agreement.
(g) Authority of Parties. All persons executing this Agreement on
behalf of any party to this Agreement warrant that they have the authority
to execute this Agreement on behalf of that party.
(h) Partial Invalidity. Any provisions of this Agreement that is
unenforceable or invalid or the inclusion of which would adversely affect
the validity, or enforceability of this Agreement shall be of no effect,
but all the remaining provisions of this Agreement shall remain in full
force.
(i) Counterparts. This Agreement may be executed in one or more
counterparts.
(j) Amendment. This Agreement may not be modified, amended or
otherwise changed in any manner except by a writing executed by both
Optionee and Optionor.
(k) Time. Time is of the essence of every provision herein contained.
(l) Exhibits. The following exhibits are attached to, and made a part
of, this Agreement:
(m) Construction. The section headings and captions of this Agreement
are, and the arrangement of this instrument is, for the sole convenience of
the parties to this Agreement. The section headings, captions, and
arrangement of this instrument do not in any way affect, limit, amplify, or
modify the terms and provisions of this Agreement. The singular form shall
include plural, and vice versa. This Agreement shall not be construed as if
it had been prepared by one of the parties, but rather as if both parties
have prepared it. Unless otherwise indicated, all references to sections
are to this Agreement. All exhibits referred to in this Agreement are
attached to it and incorporated in it by this reference. As used herein all
capitalized terms shall have the meanings ascribed to them in the
Acquisition Agreement, unless otherwise expressed.
Exhibit A - Description of the Berg Land Holdings
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in one
or more counterparts, on the date(s) set forth below, effective as of the day
and year first above written.
"Optionor"
BB&K, a California general partnership
By: /s/ Carl E. Berg
__________________________________
Its: General Partnership
_________________________________
BACCARAT FREMONT DEVELOPERS, LLC, a California Limited
Liability Company
By: /s/ Michael Knapp
__________________________________
Its: Magager
_________________________________
"Optionee"
MISSION WEST PROPERTIES, a California Corporation
By: /s/ Michael J. Anderson
__________________________________
Its: Vice President
_________________________________
MISSION WEST PROPERTIES, L.P., a Delaware limited partnership
By: Mission West Properties, a California Corporation,
as General Partner
By: /s/ Michael J. Anderson
_____________________________
Its: Vice President
____________________________
MISSION WEST PROPERTIES, L.P.I, a Delaware Limited Partnership
By: Mission West Properties, a California Corporation,
as General Partner
By: /s/ Michael J. Anderson
_____________________________
Its: Vice President
____________________________
MISSION WEST PROPERTIES, L.P.II, a Delaware Limited Partnership
By: Mission West Properties, a California Corporation,
as General Partner
By: /s/ Michael J. Anderson
_____________________________
Its: Vice President
____________________________
MISSION WEST PROPERTIES, L.P.III, a Delaware Limited Partnership
By: Mission West Properties, a California corporation,
as General Partner
By: /s/ Michael J. Anderson
_____________________________
Its: Vice President
____________________________
<PAGE>
<TABLE>
<CAPTION>
APPENDIX I
OPTIONORS OF THE BERG LAND HOLDINGS
OPTIONOR PROPERTY
- -------- --------
<S> <C>
BB&K, a California General King Ranch Business Park, San
Partnership Jose, CA
Baccarat Fremont Developers, LLC, Hellyer and Piercy, San Jose, CA
a California Limited Liability
Company
Baccarat Fremont Developers, LLC, Fremont and Cushing, Fremont, CA
a California Limited Liability
Company
</TABLE>
<PAGE>
EXHIBIT A
Legal Description of the Berg Land Holdings
THE LAND REFERRED TO IN THIS REPORT IS SITUATED IN THE STATE OF CALIFORNIA, AND
IS DESCRIBED AS FOLLOWS:
King Ranch Business Park:
This land is located in south San Jose, California and consists of approximately
123 gross acres of unimproved land. The land is described by the following
Assessor's Parcel Numbers:
678-14-033, 678-14-052, 678-14-058, 678-14-060, 678-14-62, 678-14-066,
678-14-74, 678-14-079, 678-14-081, 678-16-005, portion of 678-16-006,
678-16-007, 678-16-008, and 678-16-011
Hellyer and Piercy:
This land is located in south San Jose, California and consists of approximately
7 gross acres of unimproved land. The land is described by the following
Assessor's Parcel Number:
678-08-003
Fremont and Cushing:
This land is located in Fremont, California and consists of approximately 32
gross acres of unimproved land. The land is described by the following
Assessor's Parcel Numbers:
519-0850-014-57, and 519-0850-014-54
Mission West Properties, Inc.
Registration Rights Agreement
To: Each purchaser of shares of
Mission West Properties common
stock in May 1998 private
placement transactions
You have agreed to acquire the number of shares of common stock of Mission
West Properties, a California corporation, identified below under the terms of a
Stock Purchase Agreement dated as of May __, 1998 (the "Agreement"). These
shares are "restricted securities" as defined in Rule 144(a)(3) under the
Securities Act of 1933, as amended (the "Securities Act"). As described in
Section 4.8 of the Agreement, these shares are subject to a minimum holding
period of one year from the date of purchase and you must comply with other
resale restrictions contained in Rule 144 before they can be resold without
registration under the Securities Act. One such restriction is a limit on the
number of shares that you can sell during any three-month period which generally
is equal to the greater of 1% of the total number of outstanding shares and the
average weekly reported trading volume during the four calendar weeks preceding
the date on which you file a notice of the proposed sale on SEC Form 144, (the
"Volume Limitation"). These restrictions will no longer apply when you are not
an affiliate of Mission West Properties and have held the shares for at least
two years.
Following approval of the shareholders of Mission West Properties at a
Special Meeting to be held on December 28, 1998 and the closing of the purchase
of your Mission West Properties shares, Mission West Properties will
reincorporate in the State of Maryland by merging into its wholly owned
subsidiary Mission West Properties, Inc. (the "Company"). In the merger, each
share of Mission West Properties common stock that you have purchased will be
exchanged for one share of common stock, $.001 par value, of the Company.
The Company has registered with the Securities and Exchange Commission
("SEC") certain securities of the Company to be exchanged in the reincorporation
pursuant to a Registration Statement on Form S-4 (the "Registration Statement").
In addition, the Company has registered the resale of the shares of the Company
(the "Shares") that you will acquire in exchange for the shares of Mission West
Properties common stock that you have purchased under the Agreement.
The Company intends to maintain the effectiveness of the Registration
Statement for the resale of your shares until December 31, 1999; provided that
events may arise which result in the Company's determination that it would be
detrimental to the Company or its stockholders for you and other selling
stockholders to continue offering or selling their Shares under the Registration
Statement. In that event, the Company, in its sole discretion, will direct you
by written notice ("Stop Trading Notice") to refrain from offering or selling
your Shares during a period, which shall not exceed 30 days (the "Blackout
Period"), designated by the Company. In addition, the Company may direct its
transfer agent to refuse to transfer any of your Shares subject to the Stop
Trading Notice. Any Stop Trading Notice will take effect, and the Blackout
Period will commence, at 9:00 a.m. Eastern Time on the second business day
following the date of that Notice and will continue for the number of days
stated in the Notice. By signing where indicated below and returning a signed
copy of this agreement to the Company you will have agreed not to offer and sell
any of your Shares pursuant to the Registration Statement during any Blackout
Period.
The Company intends to issue a Stop Trading Notice at such times, if any,
when the Company has decided not to disclose material nonpublic information
which it has no duty to disclose to the public. The Company does not expect this
to be a frequent occurrence.
The Company expects to withdraw the effectiveness of the Registration
Statement for the resale of your Shares after December 31, 1999. Thereafter, the
Company will exert its good faith efforts to include your Shares in any "shelf"
registration or other resale registration statement filed by the Company, if
your restricted holdings exceed the maximum number of shares that you could then
sell under Rule 144, taking into account the Volume Limitation. The Company will
provide you with prior written notice of such registration statements if you are
eligible to participate in such registrations at the time. Participation in the
registration will be subject to all of the terms of the particular offering,
including any agreements with underwriters.
Please note further that the Company will continue to include you as a
Selling Stockholder under the Registration Statement only if you sign and return
this Registration Rights Agreement to the Company before January 5, 1999.
Dated: December 29, 1998.
Sincerely,
MISSION WEST PROPERTIES, INC.
By:
------------------------------------------
Its:
------------------------------------------
Dated:
------------------------------------------
Accepted and agreed:
By:
------------------------------------------------
Signature
------------------------------------------------
Print name
------------------------------------------------
Title, if applicable
------------------------------------------------
Represented entity, trust, or other stockholder.
------------------------------------------------
Number of shares
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Post-Effective Amendment No. 1 to Form S-4
Registration Statement on Form S-3 of Mission West Properties, Inc., formerly
Mission West Properties, of our report dated February 11, 1997, except as to the
1 for 30 reverse stock split discussed in Note 1, which is as of November 10,
1997, appearing on page F-3 of Mission West Properties' Annual Report on Form
10-K for the year ended December 31, 1997. We also consent to the reference to
us under the heading "Experts" in such Prospectus.
San Diego, California /S/ PricewaterhouseCoopers LLP
February 10, 1999 -------------------------------
Exhibit 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the Prospectus constituting part of this
Post-Effective Amendment No. 1 to Form S-4 Registration Statement on Form S-3
(File No. 333-52835-99) of our report dated April 17, 1998 on our audits of the
combined financial statements and financial statement schedule of The Berg
Properties as of December 31, 1997 and 1996 and for the years ended December 31,
1997, 1996 and 1995 and our reports dated April 17, 1998 on our audits of the
Combined Statements of Revenue and Certain Expenses of the Kontrabecki
Properties for the years ended December 31, 1997, 1996 and 1995 and the
Statement of Revenue and Certain Expenses of the Fremont Properties for the year
ended December 31, 1997. Additionally, we consent to the incorporation by
reference of our report dated March 20, 1998 on our audit of the consolidated
financial statements of Mission West Properties, Inc., formerly Mission West
Properties, as of and for the year ended November 30, 1997 and one month period
ended December 31, 1997. We also consent to the references to our firm under the
caption "Experts".
San Francisco, California
February 10, 1999 /s/ PricewaterhouseCoopers LLP
-------------------------------
