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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): February 11, 1998
AMERICAN INDUSTRIAL PROPERTIES REIT
(Exact Name of Registrant as Specified in Charter)
TEXAS 1-9016 75-6335572
(State or Other Jurisdiction of (Commission File (I.R.S. Employer
Incorporation or Organization) Number) Identification Number)
6210 N. Beltline Road, Suite 170, Irving, Texas 75063
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (972) 756-6000
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
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The undersigned Registrant hereby amends its Current Report on Form
8-K filed and dated February 25, 1997, to recharacterize the Acquisition or
Disposition of Assets transaction as an Item 2 transaction, and to include the
exhibits required by Item 7(c).
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On February 11, 1998, American Industrial Properties REIT (the
"Trust") purchased the Spring Valley Business Park #6, a 94,304 square foot
office and service center development located in the North Dallas suburb of
Richardson, Texas, for total consideration of $9,250,000. The sale was
consummated after ALCU Investments, Ltd. assigned its right to purchase the
property, pursuant to an existing contract of sale, to AIP Operating, L.P. (the
"Partnership"), an indirect subsidiary of the Trust. In consideration for the
assignment, the Partnership issued 58,333 units of limited partnership interest
valued at $875,000, and paid $1,175,000 in cash to ALCU Investments, Ltd. Of
the $7,200,000 due under the contract of sale, $6,475,000 was satisfied with
the proceeds from a Prudential Securities Credit Corporation loan under an
existing $35,000,000 line of credit.
The property is 100 % leased to Northern Telecom (Nortel), a leading
provider of digital network solutions with 1997 consolidated revenues of $15.4
billion.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
Financial statements for Spring Valley Business Park will be filed
within sixty (60) days from the date this report is filed.
(b) Pro forma Financial Information.
Pro forma financial information will be filed within sixty (60) days
from the date this report is filed.
(c) EXHIBITS.
*10.1 Contract of Sale by and between Nationwide Life Insurance Company and
ALCU Investments, Inc.
*10.2 Assignment of Contract of Sale dated as of February 11, 1998, by and
among Nationwide Life Insurance Company, ALCU Investments, Inc., and
AIP Operating, L.P.
*10.3 Contribution and Exchange Agreement dated as of January 29, 1998, by
and among ALCU Investments, Ltd., AIP Operating, L.P., and American
Industrial Properties REIT.
*10.4 Amended and Restated Agreement of Limited Partnership of AIP
Operating, L.P. dated as of February 11, 1998, by and among American
Industrial Properties REIT, General Electric Capital Corporation, and
ALCU Investments, Ltd.
*10.5 Promissory Note by and among American Industrial Properties REIT, AIP
Operating, L.P., and Prudential Securities Credit Corporation.
*10.6 First Amendment to Credit Agreement dated as of February 11, 1998, by
and among American Industrial Properties REIT, AIP Operating, L.P.,
and Prudential Securities Credit Corporation.
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* Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN INDUSTRIAL PROPERTIES REIT
/s/ MARC A. SIMPSON
-----------------------------------
Marc A. Simpson
Chief Financial Officer
Dated: March 2, 1998
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EXHIBIT LIST
*10.1 Contract of Sale by and between Nationwide Life Insurance Company and
ALCU Investments, Inc.
*10.2 Assignment of Contract of Sale dated as of February 11, 1998, by and
among Nationwide Life Insurance Company, ALCU Investments, Inc., and
AIP Operating, L.P.
*10.3 Contribution and Exchange Agreement dated as of January 29, 1998, by
and among ALCU Investments, Ltd., AIP Operating, L.P., and American
Industrial Properties REIT.
*10.4 Amended and Restated Agreement of Limited Partnership of AIP
Operating, L.P. dated as of February 11, 1998, by and among American
Industrial Properties REIT, General Electric Capital Corporation, and
ALCU Investments, Ltd.
*10.5 Promissory Note by and among American Industrial Properties REIT, AIP
Operating, L.P., and Prudential Securities Credit Corporation.
*10.6 First Amendment to Credit Agreement dated as of February 11, 1998, by
and among American Industrial Properties REIT, AIP Operating, L.P.,
and Prudential Securities Credit Corporation.
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* Filed herewith.
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EXHIBIT 10.1
CONTRACT OF SALE
This Contract of Sale ("Contract") is effective November ___, 1997
entered into between NATIONWIDE LIFE INSURANCE COMPANY, an Ohio corporation
("Seller"), and ALCU INVESTMENTS, INC., a Texas limited partnership ("Buyer").
ARTICLE I
AGREEMENT OF PURCHASE AND SALE
Subject to those provisions to follow, Seller agrees to sell, and
Buyer agrees to buy, the following described properties (hereinafter referred
to collectively as the "Property"):
1.1 Fee Title. Seller's fee simple title in the real property
known as 1055, 1057 and 1059 S. Sherman Road, County of Dallas, City of
Richardson, State of Texas, as described more specifically in Exhibit "A"
attached hereto and incorporated herein, together with all and singular the
Seller's rights and appurtenances pertaining to such real property including,
without limitation, all easements, streets, alleys and rights-of-way and all
rights of Seller relating to ingress and egress and all strips and gores
between such real property and adjacent land (collectively referred to as the
"Land");
1.2 Improvements. All buildings and improvements,
("Improvements") located on the Land;
1.3 Personal Property. All mechanical systems, fixtures and
equipment including, but not limited to, compressors, and engines; electrical
systems, fixtures and equipment; plumbing fixtures, systems and equipment;
heating fixtures, systems and equipment; air conditioning fixtures, systems and
equipment; furniture, carpets, drapes and other furnishings; maintenance
equipment and tools; and all other machinery, equipment, fixtures and personal
property of every kind and character, if any, owned by the Seller and located
in, or on or used in connection with, the Land or the Improvements or the
operations thereon ("Personal Property");
1.4 Plans, Etc. All site plans, surveys, soil and substrata
studies, architectural renderings, plans and specifications, engineering plans
and studies, floor plans, landscape plans and other plans, diagrams or studies
of any kind, if any, in Seller's possession which relate to the Land, the
Improvements or the Personal Property;
1.5 Tenant Leases. Seller's interest in all leases and rental
agreements with tenants occupying, or having the right to occupy, space situated
in Improvements or otherwise having rights with regard to use of the land or the
Improvements ("Leases"), and all security deposits, if any, held in connection
with such leases.
1.6 Miscellaneous Documents. All leasing brochures, market
studies, appraisals, tenant data sheets and other materials of any kind in
Seller's possession solely related to the Improvements.
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ARTICLE II
PURCHASE PRICE
2.1 Purchase Price. The purchase price for the Property shall be
SEVEN MILLION TWO HUNDRED THOUSAND DOLLARS ($7,200,000) (the "Purchase Price").
The Purchase Price shall be payable by wire transfer or immediately available
funds at Closing (hereinafter defined).
2.2 Earnest Money Deposit. Within three (3) business days after
execution of this Contract, by Buyer and Seller, the Buyer shall deposit with
the Title Company (hereinafter defined), as an earnest money deposit in cash an
amount of FIFTY THOUSAND DOLLARS ($50,000) ("Earnest Money Deposit") with
Commonwealth Land Title Insurance Company, 1700 Pacific Avenue, Suite 4740,
First City Center, Dallas, Texas 75201, Attention: Judy Marcote ("Title
Company"). The Title Company shall hold and dispose of the Earnest Money
Deposit in strict compliance with this Contract. Buyer shall direct the
Earnest Money Deposit to be invested in an interest bearing account in a
financial institution insured by the Federal Deposit Insurance Corporation
chosen by Buyer, with such account having a maturity date not later than the
Closing Date (hereinafter defined). All interest earned on the Earnest Money
Deposit shall be Buyer's property prior to a default by Buyer. All interest
earned after the date of a default by Buyer shall be for Seller's account.
Buyer and Seller agree that prior to Buyer's deposit of the Earnest Money
Deposit with the Title Company, Seller shall have no obligation or liability
under this Contract, and that Buyer's obligation to deposit the Earnest Money
Deposit is an express condition precedent to Seller's obligation and
liabilities under this Contract. In the event that the Earnest Money Deposit
is not received by the Title Company within three (3) business days from the
date of Buyer's and Seller's execution of this Contract whichever is later,
this Contract shall be deemed null and void with neither party having any
further obligation to the other.
2.3 Independent Contract Consideration. Prior to or
contemporaneous with the execution hereof by Buyer and Seller, Buyer has paid,
and Seller hereby acknowledges receipt of the sum of $50.00 cash (the
"Independent Contract Consideration"), which amount Buyer and Seller bargained
for and agreed to as consideration for Seller's execution and delivery of this
Contract. The Independent Contract Consideration is nonrefundable and of the
purchase and sale of the Property is consummated pursuant to this Contract, the
Independent Contract Consideration shall be applied toward the cash portion of
the Purchase Price paid by Buyer. Seller shalt be entitled to retain the
Independent Contract Consideration notwithstanding any other provision of this
Contract to the contrary.
ARTICLE III
REVIEW OF TITLE, SURVEY AND OWNERSHIP DOCUMENTS
3.1 Title Commitment. Within fifteen (15) days after the
Effective Date of this
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Contract, Seller shall furnish to Buyer, at Seller's expense, a current
commitment for an owner's title insurance policy ("Commitment") issued by the
Title Company, setting forth the state of title to the Property and all
exceptions including: easements, restrictions, rights of way, covenants,
reservations, and other conditions, if any, affecting the Property which would
appear in Owner's Title Policy, if issued. No representations or warranties
are made by or shall be made or given by Seller with respect to the Survey or
the information contained therein.
3.2 Ownership Documents. Within fifteen (15) days after the
Effective Date of this Contract, Seller shall, if available, furnish to Buyer
true and correct copies of the items listed below (collectively, the "Ownership
Documents"):
(a) The most complete set of "as-built" plans,
specifications and plat plans for the improvements on
the Property, if any;
(b) The Survey (hereinafter defined);
(c) Annual income and expense statements for Seller's
period of ownership;
(d) The most current rent roll and lease summary;
(e) True and correct copies of all Leases (including
amendments creating rights to the property); and all
correspondence by and between Seller and Northern
Telecom, Inc ("Nortel");
(f) All management, maintenance or other service
agreements;
(g) An itemized inventory of the Personal Property;
(h) Copies of certificate(s) of occupancy and all other
certificates, permits and governmental licenses or
approvals relating to the Property or the operation
thereof, to the extent available to Seller; and
(i) Copies of tax statements and paid tax receipts and of
utility bills and paid utility receipts for the
immediately preceding year, and the tax statement and
the utility bills and paid utility receipts for the
current year, to the extent available to Seller.
3.3 Survey. Within twenty (20) days after the Effective Date of
this Contract, Seller shall, at Seller's sole cost and expense, cause to be
prepared and furnished to Buyer and the Title Company, a current plat of an "as
built" survey of the Land and Improvements (hereinafter referred to as the
"Survey"), and a field note description thereof, prepared and certified as to
all matters shown thereon by a licensed professional engineer or surveyor
acceptable to the Title Company and in such form and substance sufficient to
permit deletion from the Owner's Policy of Title Insurance of the survey
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exception except for "shortages in area". The Survey shall meet the
requirements of a Category 1A, Condition 11, Land Title Survey in accordance
with the Standards for Land Surveys for the Texas Society of Professional
Surveyors. The Survey shall locate accurately (and identify by volume and page
reference, if applicable) all existing buildings, improvements, fences, parking
spaces (including handicapped parking spaces), encumbrances, encroachments,
conflicts, protrusions and uses (including the location of all highways,
streets, roads, easements, alleys and rights-of-way upon or adjacent to the
Land) which are visible on the ground or listed on the Title Binder (as
hereinafter defined); shall recite the exact area of the Land; shall show all
building set back lines; shall include a metes and bounds description of the
Land; and shall show routes of ingress to and egress from the Land and the
distance to and names of the nearest intersecting streets. The Survey shall
contain a certificate specifically verifying that (i) the Survey was made on
the ground of the Land; (ii) the Survey is correct and (iii) there are no
improvements, visible easements or uses, encroachments, conflicts or
protrusions except as shown on the Survey. The Survey shall also show any
portions of the Land falling within any flood plain area or within an area
designated as having special flood hazards by any official of any federal,
state or local government or any instrumentality hereof and shall contain a
certificate that no portion of the Land falls within any such area except if
and as shown on the Survey.
3.4 Tenant Estoppel Certificates. Prior to closing, Seller shall
obtain and submit to Buyer a signed estoppel certificate from each tenant on
such form as shall be provided by Buyer's counsel, and an approval in writing
by Seller's counsel, for the purpose of verifying the status of each lease.
ARTICLE IV
CONDITIONS
4.1 Inspection Period.
(a) Inspection Period. Buyer shall have a period
commencing on the Effective Date of this Contract and extending sixty (60) days
thereafter to examine the title and Survey ("Title Inspection") and the
Property and any Ownership Documents not previously provided ("Property
Inspection") (collectively the "Inspection Period"). Such examination may
include any matters that Buyer finds relevant to its decision to purchase the
Property including, without limitation, an interview with any and all Tenant(s)
occupying all or part of the Property in the presence of real estate agents for
both Seller and Buyer, a soil, hazardous substance, engineering and feasibility
study. Buyer agrees that if it elects to have a Phase I environmental audit on
the Property that it will provide Seller with a copy of said report. Seller
shall assist Buyer in gaining access to the portion of the Property occupied
under any Leases, if applicable, so that any inspecting engineer retained by
Buyer can conduct those on-site structural inspections it deems necessary in
order to conclude that the improvements are structurally sound. All
inspections, unless otherwise stated herein, and studies conducted by Buyer or
at Buyer's direction shall be at Buyer's sole cost and expense. In conducting
such inspections, Buyer shall not unreasonably interfere with the use or
occupancy of the Property and/or Land. Buyer agrees to indemnify Seller and
hold Seller harmless from and against any injury,
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damage, loss, cost or expense related to or arising out of Buyer's inspection
of the Property pursuant to this Section whether foreseen or not, including,
but not limited to, costs of repairing damage to the Property, Land,
Improvement and/or Personal Property. After the expiration of the Inspection
Period, the sole obligation of Seller, except es provided herein, will be to
deliver possession of the Property in the same condition as existed on the date
of termination (ordinary wear and tear excepted). In the event the Buyer does
not elect to terminate the Contract (as provided herein) and except as
otherwise expressly provided herein, THE BUYER AGREES THAT THE PROPERTY,
INCLUDING BUT NOT LIMITED TO THE PERSONAL PROPERTY, IS BEING CONVEYED HEREUNDER
"AS IS, WHERE IS, AND WITH ALL FAULTS", WITHOUT ANY REPRESENTATION OR WARRANTY
BY SELLER EXCEPT AS EXPRESSLY SET FORTH HEREIN AND THE PERSONAL PROPERTY IS
BEING SOLD AND ASSIGNED HEREUNDER ONLY TO THE EXTENT THAT IT MAY BE OWNED BY
THE SELLER AND USED IN THE OPERATION OF THE PROPERTY. EXCEPT AS EXPRESSLY
PROVIDED HEREIN, SELLER HAS NOT MADE AND IS NOT MAKING ANY EXPRESS OR IMPLIED
REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE PROPERTY, INCLUDING WITHOUT
LIMITATION ANY REPRESENTATION OR WARRANTY REGARDING QUALITY OF CONSTRUCTION,
WORKMANSHIP, CONDITION, STATE OF REPAIR, SAFETY, MERCHANTABILITY OR FITNESS FOR
ANY PARTICULAR PURPOSE, ACCURACY OF DIMENSIONS, WHETHER THE IMPROVEMENTS ARE
STRUCTURALLY SOUND, IN GOOD CONDITION OR IN COMPLIANCE WITH APPLICABLE CITY,
COUNTY, STATE OR FEDERAL STATUTES, CODES, OR REGULATIONS, INCLUDING, WITHOUT
LIMITATION, TO HAZARDOUS MATERIALS OR ANY ENVIRONMENTAL MATTERS AND THE
AMERICANS WITH DISABILITIES ACT, OPERATION OF MECHANICAL SYSTEMS, EQUIPMENT AND
FIXTURES, SUITABILITY OF SOIL OR GEOLOGY, ABSENCE OF DEFECTS OR HAZARDOUS OR
TOXIC MATERIALS OR WASTES, ANY PAST, PRESENT OR FUTURE OPERATING RESULTS,
INCLUDING BOTH INCOME AND EXPENSES, ANY PROJECTIONS WITH RESPECT TO OPERATING
RESULTS, THE FINANCIAL VIABILITY OF THE PROPERTY, OR THE COMPLETENESS OR
ACCURACY OF ANY BOOKS OR RECORDS OF SELLER PERTAINING TO THE PROPERTY, AND
BUYER ACKNOWLEDGES THAT BUYER ACCEPTS THIS PROPERTY WITHOUT RELYING UPON ANY
SUCH REPRESENTATION OR WARRANTY BY SELLER OR BY ANY OTHER PERSON AND BASED
SOLELY UPON BUYER'S OWN INSPECTIONS, INVESTIGATIONS AND FINANCIAL ANALYSIS OF
THE PROPERTY.
(b) Seller's Cure Period. Buyer agrees to notify Seller
of all objections it may have based on Title Inspection within fifteen (15)
days of its receipt thereof. Seller shall have the right, but not the
obligation, to cure any or all of Buyer's objections based on the Title
Inspection. Any exceptions reflected in the Commitment to which Buyer does not
object or which are waived by Buyer shall be deemed permitted exceptions (the
"Permitted Exceptions"). Seller shall have no obligation to provide to Buyer
any response to Buyer's objections on or before the expiration of the
applicable Inspection Period and Seller's failure to respond to any such
objections shall in no way constitute an express or implied agreement to cure
such objections or to convey the Property free and clear of those or any other
matters to which Buyer has objected.
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4.2 Termination. In the event the Property is not satisfactory to
Buyer, in Buyer's sole and absolute discretion, Buyer agrees to notify Seller
in writing on or before the expiration of the Inspection Period of its intent
to terminate the Contract. If Buyer fails to give Seller timely written notice
of such termination, all objections will be waived and this Contract will
become binding on both parties. Seller shall have the right but not the
obligation to cure any reason or reasons given by the Buyer for its
termination. If the Seller does not cure, the Buyer may waive the objection or
terminate the Contract so long as it is still within the Inspection Period. If
Buyer terminates this Contract as provided herein in this Section, the Title
Company, without further authorization or direction from Seller, will
immediately refund the Earnest Money Deposit to Buyer. Thereafter, (except as
expressly provided for in this Contract) neither Buyer or Seller will have any
further obligations or liabilities under this Contract.
4.3 No Further Contracts. From the date hereof until the Closing
Date or the earlier termination of this Contract, Seller shall (a) maintain and
operate the Property in the same manner in which the Property was operated as
of the Effective Date, and will not knowingly permit to be committed any waste
on the Property, (b) continue all leases, if applicable, and insurance policies
relative to the Property in full force and effect, (c) neither cancel, amend,
enter into nor renew any lease, without the written consent of Buyer (which
consent will not be withheld unreasonably and notice of which approval or
disapproval shall be provided to Seller within five (5) days from Seller's
presentment to Buyer of the lease at issue), (d) not knowingly enter into any
agreement or instrument which would constitute an encumbrance on the Property
without prior written consent of Buyer (which consent will not be withheld
unreasonably and notice of which approval or disapproval shall be provided to
Seller within five (5) days from Seller's presentment to Buyer of the agreement
or instrument at issue) and (e) not remove Personal Property owned by Seller
from the Land, Improvements and/or Property. In the event that Buyer does not
provide Seller with notice required by this subsection within the time set
forth herein Buyer's approval shall be deemed to have been waived.
4.4 Financing Contingency. Buyers obligation to close is
contingent upon Buyer having obtained a commitment for financing (the
"Commitment) from a lender prior to the end of the Inspection Period Buyer
shall make written application for the loan on or before fifteen (15) days of
the Effective Date of this contract. Buyer shall diligently and timely pursue
the obtaining of the Commitment in good faith, execute all documents and
furnish all information and documents required by the lender in connection
therewith.
ARTICLE V
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller the following statements are
true on the Effective Date of this Contract and will be true on the Closing
Date:
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5.1 Buyer's Power and Authority. Buyer and its representatives
have all power and authority legally necessary to enter into this Contract,
execute and deliver the Closing documents and purchase the Property in
accordance with this Contract's terms.
5.2 No Actions Against Buyer. Buyer knows of no action, suit or
proceeding, pending or threatened against Buyer, which would, if determined
against Buyer, adversely and materially affect Buyer's ability to perform its
obligations under this Contract.
Buyer's tender of performance of its obligations under this Contract
shall constitute Buyer's confirmation that the above representations end
warranties are then also true and correct.
ARTICLE VI
SELLER'S REPRESENTATIONS AND WARRANTIES
6.1 Seller's Representations and Warranties. Seller hereby
represents to Buyer that the facts recited below are true and accurate and that
if prior to the date of Closing Seller discovers that one or more of such facts
are untrue or inaccurate it will inform Buyer in writing of it discovery. The
obligation of Buyer to consummate this transaction shall be contingent upon the
lack of any material variance with respect to the truth and accuracy of all
such facts as of the date scheduled for Closing, notwithstanding the fact that,
with respect to representations or warranties made to the best of Seller's
knowledge, Seller had no knowledge of the untruth or inaccuracy of such facts.
It is expressly agreed that no examination or investigation of the Property or
of the Operational Information pertaining thereto by or on behalf of Buyer
shall in any way modify, affect or diminish the representations and warranties
of Seller contained herein, and that such representations and warranties of
Seller shall survive Closing for a period of six (6) months. In accordance
with the immediately preceding sentences, Seller represents to Buyer as
follows:
(a) Seller has full right, power and authority and has
taken all requisite action to enter into this Contract and to sell and convey
the Property to Buyer as provided in this Contract and to carry out its
obligations as set forth hereunder.
(b) To Seller's knowledge, there are no structural or
other defects, including but not limited to, defects in the plumbing, heating,
air conditioning, foundation or electrical wiring of any of the Improvements.
(c) To Seller's knowledge, the continued ownership,
operation, use and occupancy of the Land or Improvements do not violate any
building, health, fire or similar law, ordinance, order, regulation or
restrictive covenant. To Seller's knowledge, there are no violations of any
federal, state, county or municipal law, ordinance, order, regulation or
requirement affecting any portion of the Land, Improvements or Personal
Property.
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(d) There is no action, suit, proceeding or claim
affecting Seller or the Property or any portion thereof or arising out of the
ownership, operation, use or occupancy of the Property pending or being
prosecuted by or before any federal, state, county or municipal department,
commission, board, bureau or agency or other governmental instrumentality nor,
to the knowledge of Seller, is any such action, suit, proceeding or claim
threatened or being asserted.
(e) To Seller's knowledge, there is no pending
condemnation or similar proceeding affecting the Land, Improvements or Personal
Property or any portion thereof. Seller has not received any written notice and
has no knowledge that any such proceeding is contemplated.
(f) Seller has received no notice of and, to Seller's
knowledge, there are no pending improvement, liens or special assessments to be
made against the Property by any governmental authority.
(g) To Seller's knowledge, there is no pending or
threatened interruption or reduction of any utility services presently provided
to the Property.
(h) Seller has entered into no outstanding contracts for
construction on the Land or Improvements, or any portion thereof. No work has
been performed or is in progress by Seller on the Land or Improvements, or any
portion thereof, and no materials have been furnished to, the Land or
Improvements or any portion thereof, which might give rise to mechanic's,
materialman's or other liens against the Land or Improvements or any portion
thereof.
(i) To Seller's knowledge no part of the Improvements or
Personal Property have been destroyed or damaged by fire or other casualty
except as may have been replaced.
(j) There are no contracts of employment, management,
service, supply, rental or any other type or nature outstanding which affect
any part of the Property covered by this Contract or the operation of the
Property which will not be terminated on or before the date of Closing.
(k) There are no tenant leases affecting the Land and
Improvements other than the Nortel lease. There are no persons or entities in
possession of the Property other than Seller and Nortel.
(l) There are no attachments, executions, assignments for
the benefit of creditors, receiverships, conservatorships or voluntary or
involuntary proceedings in bankruptcy or pursuant to any debtor relief laws
contemplated or filed by Seller or pending against Seller or the Property.
(m) There are no options, contracts or other obligations
outstanding for the sale, exchange or transfer of the Property or any portion
thereof or the business operated thereon.
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(n) Seller is not and has never been a "foreign person"
within the meaning of Section 1445 of the Internal Revenue Code of 1986, as
amended, and any applicable regulations promulgated thereunder.
(o) To Seller's knowledge, there has been no
introduction' spillage, release, discharge or disposal of any pollutants of any
kind into or on the surface water, ground water, soil or subsurface of any
portion of the Property or the Improvements. To Seller's knowledge, there is no
pending or threatened litigation or proceedings before any administrative
agency in which any person or entity alleges the presence, release, threat of
release, placement on or in any portion of the Property, or the generation,
transportation, storage, treatment, or disposal at any portion of the Property,
of any pollutants.
For purposes of this Agreement, the terms "to the best of Seller's
knowledge", "Seller's knowledge", and/or knowledge shall be limited to such
actual knowledge or written notice or report that has actually been received by
Paul H. Thomas, Jr., who is Seller's Manager of Real Estate Equity Assets or M.
Sue Jones, who is Seller's Manager of Real Estate Equity Assets.
6.2 Additional Conditions Precedent. The following shall be
additional conditions precedent to Buyer's obligations hereunder:
(a) On the date of Closing, there shall be no material
breach of any of Seller's representations or warranties and Seller shall have
substantially performed each covenant to have been performed by Seller
hereunder within the time specified.
(b) On the date of Closing, there shall be no material
and adverse change in the matters reflected in the Title Binder, Survey or the
UCC Reports, and there shall not exist any material and adverse encumbrance or
title defect affecting the Land, Improvements or Personal Property not
described in the Title Binder, Survey or the UCC Reports.
(c) On the date of Closing, the Improvements and the
Personal Property shall be in the Same condition and repair as at the date of
Buyer's inspection thereof, ordinary wear and tear due to normal conditions
excepted.
(d) On the date of Closing, there shall be no litigation
pending or threatened, seeking (i) to enjoin the consummation of the sale and
purchase hereunder, (ii) to recover title to the Property, or any part thereof
or any interest therein, (iii) to increase substantially ad valorem taxes
theretofore or thereafter assessed against the Land and Improvements or (iv)
to enjoin the violation of any law, rule, regulation, restrictive covenant or
zoning ordinance that may be applicable to the Land, Improvements or Personal
Property.
(e) On the date of Closing, the Nortel Lease Amendment
shall have been executed in form substantially similar to the form attached
hereto as Exhibit "B".
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(f) If any of the above described conditions precedent to
Buyer's obligations hereunder is not satisfied, Buyer may, at its option (a)
waive such condrtion and close this transaction, or (b) terminate this Contract
by notice in writing to Seller and receive back the Eamest Money Deposit.
ARTICLE VII
REQUEST FOR NONDISCLOSURE
7.1 Buyer and its representatives shall hold in strictest
confidence all data and information obtained with respect to the operation and
management of the Property, whether obtained before or after the execution and
delivery hereof, and shall not use such data or information for purposes
unrelated to this Contract or disclose the same to others except as expressly
permitted hereunder. The preceding sentence shall not be construed to prevent
Buyer from disclosing to its agents, consultants and lenders such information
with respect to the Property as is necessary for such agents, consultants and
lenders to perform their designated tasks in connection with Buyer's inspection
of the Property, so long as the Buyer causes such agents, consultants and
lenders to execute an agreement to keep such information confidential. However,
neither party shall have this obligation concerning information which: (a) is
published or becomes publicly available through no fault of either the Buyer or
Seller; (b) is rightfully received from a third party; or (c) is required to be
disclosed by law. In the event this Contract is terminated or Buyer fails to
perform hereunder, Buyer shall promptly return to Seller any statements,
documents, schedules, exhibits or other written information obtained from
Seller in connection with this Contract or the transactions contemplated hereby
(including all information which was provided to agents, consultants and/or
lenders). In the event of a breach or threatened breach by Buyer or its
agents, consultants and/or lenders of this paragraph, Seller shall be entitled
to an injunction restraining Buyer or its agents, consultants and/or lenders
from disclosing, in whole or in part, such confidential information Nothing
herein shall be construed as prohibiting Seller from pursuing any other
available remedy at law or in equity for such breach or threatened breach.
ARTICLE VIII
CLOSING
8.1 Date and Place of Closing. The Closing ("Closing") shall take
place at Commonwealth Title Insurance Company. The Closing Date ("Closing
Date") shall be within thirty (30) days after the Inspection Period; however,
Seller and Buyer may mutually designate an earlier date for Closing. At
Seller's option, Closing may occur in escrow, in which event the Title Company
shall act as escrow agent.
8.2 Seller's Closing Obligations. At the Closing or as provided
below, Seller shall deliver to Buyer, at Seller's sole cost and expense (except
as stated below), each of the following items:
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<PAGE> 11
(a) An Owner's Policy of Title Insurance ("Title Policy")
issued by the Title Company in Buyer's favor in the full amount of the Purchase
Price, insuring Buyer's fee simple title to the Property and in and to any
easements and restrictions which inure to the benefit of the Property, subject
only to the Pemnitted Exceptions;
(b) A special warranty deed ("Deed"), duly executed and
acknowledged by Seller, and in form for recording, conveying good and
indefeasible fee simple title to the Property to Buyer, subject only to the
Permitted Exceptions;
(c) A Bill of Sale transferring all of the Personal
Property "As Is" "Where Is" and "With All Faults" and an assignment of the
Personal Property.
(d) An Assignment of all Warranties, Guaranties and
Service Contracts, if any;
(e) All keys to the Property in Seller's possession;
(f) An assignment of all Leases, including all escrows
and escalation reserve payments paid by any tenant pursuant to said Leases;
(g) Executed originals of the Leases in Seller's
possession;
8.3 Adjustments at Closing. Any maintenance charges, rent,
expense escalation reimbursements, utilities, service and employment contracts
(if Buyer is to assume any), all other expenses and ad valorem taxes for the
then current year, shall be prorated at the Closing effective as of the Closing
Date. If the Closing Date occurs before the tax rate is fixed for the then
current year, the apportionment of taxes shall be on the basis of the tax rate
for the preceding year applied to the latest assessed valuation. Seller shall
be solely responsible for any taxes and assessments attributable to the
Property for any period prior to the Closing Date.
8.4 Buyer's Closing Obligations. At Closing, Buyer shall execute
those Closing documents to which Buyer is a party and direct the Title Company
to remit to Seller the Purchase Price, plus any other sums required to be paid
by Buyer, in accordance with this Contract.
8.5 Possession and Closing. Notwithstanding anything contained
herein, exclusive possession of the Property shall be delivered to Buyer by
Seller at Closing.
8.6 Closing Costs. Unless otherwise specified in this contract,
all costs and expenses of Closing shall be allocated between Seller and Buyer.
Each party will be responsible for its own legal fees except in the event of
default.
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ARTICLE IX
TERMINATION. DEFAULTS AND REMEDIES
9.1 Buyer's Termination. If Seller is unable to convey title to
the Property, Buyer may, at Buyer's option, terminate this Contract by written
notice forwarded to Seller prior to the Closing Date or delivered to Seller on
the Closing Date or earlier date as specified in this Contract for such notice
of termination. If Buyer elects to terminate this Contract pursuant to a right
to do so expressly given to Buyer in this Contract, the Earnest Money Deposit
shall be promptly refunded to Buyer on written instruction to the Title Company
signed only by Buyer, and neither party shall have any further obligation or
liability to the other party hereunder. If the Earnest Money Deposit is to be
returned to Buyer in accordance with this Contract, Seller shall promptly, on
written request from Buyer, execute and deliver such documents as may be
required to cause the Title Company to return the Earnest Money Deposit to
Buyer.
9.2 Seller's Default: Buyer's Remedies. If Seller fails to
consummate this Contract for any reason (other than Buyer's default or a
termination of this Contract by Seller or Buyer pursuant to a right to do so
expressly provided for in this Contract), Buyer may elect to enforce the
specific performance of this Contract or terminate this Contract and receive a
refund of the Earnest Money Deposit; provided, however, in the event specific
performance of this Contract is frustrated due to Seller's conveyance of all or
part of the Property to a third party in breach of this Contract or due to
Seller's intentionally encumbering all or any part of the Property with a lien,
lease, easement, restriction or other encumbrance after the date of this
contract objected to by Buyer and not eliminated at or prior to Closing, Buyer
may pursue any remedies available to Buyer at law or in equity.
9.3 Buyer's Default: Seller's Remedy. If Buyer fails to
consummate this Contract for any reason (other than Seller's default or a
termination of this Contract by Seller or Buyer pursuant to a right to do so
expressly provided for in this Contract), Seller may, as Seller's sole and
exclusive remedy, terminate this Contract and retain the Earnest Money Deposit
as liquidated damages for breach of this Contract. Upon written notice of
termination by Seller to the Title Company and Buyer pursuant to this Section,
the Title Company, without further authorization from Buyer, shall immediately
deliver the Earnest Money Deposit to Seller. Such amount is agreed upon by and
between Seller and Buyer as liquidated damages, due to the difficulty and
inconvenience of ascertaining and measuring actual damages, and the uncertainty
thereof and the payment of the Earnest Money Deposit shall constitute full
satisfaction of Buyer's obligations under this Contract. Such amount is agreed
upon by and between Seller and Buyer as a reasonable estimate of just
compensation for the harm caused by Buyer's default.
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<PAGE> 13
ARTICLE X
DAMAGE OR DESTRUCTION PRIOR TO CLOSING
10.1 In the event that either the Improvements or Personal Property
should be damaged by any casualty prior to Closing, and if the cost of
repairing such damage, as estimated by an independent contractor ("Independent
Contractor") retained by Buyer (and approved by Seller, which approval shall
not be withheld unreasonably or unduly delayed) is:
(a) less than FIFTY THOUSAND DOLLARS ($50,000), then, at
Seller's option: (i) Seller shall repair such damage prior to the Closing
Date, restoring the damaged Property at least to its condition immediately
prior to such damage, or (ii) elect to close the transaction and Buyer shall
receive a credit at Closing in an amount necessary to make such repairs as
determined by the Independent Contractor; or if said cost is
(b) equal to or more than FIFTY THOUSAND DOLLARS
($50,000) then the Buyer may elect within twenty (20) days of notification to
Buyer of such occurrence to (i) terminate this Contract or (ii) require Seller
to assign to Buyer at Closing, all insurance proceeds payable for such damage,
and pay to Buyer at Closing the amount of any deductible required by Seller's
insurance policies, and the sale shall be closed without the Seller's repairing
such damage.
ARTICLE XI
CONDEMNATION
11.1 Eminent Domain. Immediately upon obtaining knowledge of the
institution of any proceedings for the condemnation of the Property, or any
portion thereof, or any other proceedings arising out of or damage to the
Property, or any portion thereof, Seller will notify Buyer of the pendency of
such proceedings. In the event that any condemnation proceedings affecting the
Land or Improvements, or any part thereof, shall be commenced prior to Closing,
Buyer may, at its option, (a) terminate this Contract by notice in writing to
Seller and receive back the Deposit, or (b) proceed to close this transaction
and receive at Closing all of the right, title and interest of Seller in and to
any condemnation proceeds or awards or sales price in lieu of condemnation.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Broker's Commission. If, and when the Closing occurs, Seller
hereby agrees to pay one and one-half percent (1.5%) of the purchase price to
CB Commercial Real Estate Group and one and one-half percent (1.5%) to Dal-Mac
Companies in cash for their services in connection with this Contract. Seller
and Buyer each represent and warrant to the other that there are no claims for
broker's commissions or finder's fees in connection with the execution and
delivery of this Contract
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<PAGE> 14
other than that of the Brokers named in this Section 12.1, and Seller and Buyer
each agree to indemnify the other against and hold such party harmless from all
liabilities arising from a breach of the representation and warranty made by
such party herein, including, without limitation, reasonable attorneys' fees
and related court costs.
12.2 Assignment. Buyer may not assign this Contract without
Seller's prior written consent unless the Buyer remains liable for all terms
and conditions under the Contract.
12.3 Notices. Any notice, approval, waiver, objection or other
communication (for convenience "Notice") required or permitted to be given
hereunder or given in regard to this Contract by one party to the other shall
be in writing and the same shall be given and be deemed to have been served and
given (a) if hand delivered, when delivered in person to the address set forth
hereinafter for the party to whom notice is given; (b) if mailed, (except where
actual receipt is specified in this Contract) when placed in the United States
mail, postage prepaid, by Certified Mail, Return Receipt Requested; addressed
to the parry at the address hereinafter specified; or (c) if by overnight
delivery, when received by the other party. Any party may change its address
for notices by notice theretofore given in accordance with this Section 12.3.
If to Seller: Nationwide Life Insurance Company
One Nationwide Plaza, 1-34-01
Columbus, Ohio 43215
Attention: Paul H. Thomas, Jr.
Telephone: 614-249-7694
Facsimile: 614-249-4247
With copy to: Nationwide Life Insurance Company
One Nationwide Plaza, 1-35-04
Columbus, Ohio 43215
Attention: Philip W. Whitaker, Esq.
Telephone: 614-249-7634
Facsimile: 614-249-7254
If to Buyer: ALCU Investments, Ltd.
c/o FJM, Inc.
5011 Shadywood Lane
Dallas, Texas 75209
Attention: Frank Macari
Telephone: 214-352-2699
Facsimile. 214-358-1389
With copy to: Michael C. Witt, Esq.
8235 Douglas Avenue, Suite 210
Dallas, Texas 75225
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<PAGE> 15
Telephone: 214-691-9488
Facsimile: 214-691-9419
12.4 Entire Agreement. This contract and the exhibits attached
hereto constitute the entire agreement between Seller and Buyer, and there are
no other covenants, agreements, promises, terms, provisions, conditions,
undertakings, or understandings, either oral or written, between them
concerning the Property other than those herein set forth. No subsequent
alteration, amendment change, deletion or addition to this Contract shall be
binding upon Seller or Buyer unless in writing and signed by both Seller and
Buyer.
12.5 Headings. The headings, captions, numbering system, etc., are
inserted only as a matter of convenience and may under no circumstances be
considered in interpreting the provisions of this Contract.
12.6 Binding Effect. All of the provisions of this Contract are
hereby made binding upon the personal representatives, heirs, successors, and
assigns of both parties hereto. Where required for proper interpretation,
words in the singular shall include the plural; the masculine gender shall
include the neuter and the feminine, and vice versa. The terms "heirs,
executors, administrators and assigns" shall include "successors, legal
representatives and assigns."
12.7 Time of Essence. Time is of the essence of this Contract.
12.8 Unenforceable or Inapplicable Provisions. If any provision
hereof is for any reason unenforceable or inapplicable, the other provisions
hereof will remain in full force and effect in the same manner as if such
unenforceable or inapplicable provision had never been contained herein.
12.9 Counterparts. This Contract may be executed in any number of
counterparts, each of which will for all purposes be deemed to be an original,
and all of which are identical.
12.10 Applicable Law. This Contract shall be construed under and in
accordance with the laws of the State of Texas.
12.11 Attorney's Fees. In the event either Buyer or Seller should
bring suit against the other in respect to any matters provided for in this
Contract, the prevailing party shall be entitled to recover from the other
party reasonable attorneys' fees in connection with such suit.
12.12 Authority. Each person executing this Contract, by his
execution hereof, represents and warrants that he is fully authorized to do so,
and that no further action or consent on the part of the party for whom he is
acting is required to the effectiveness and enforceability of this Contract
against such party following such execution.
12.13 Further Assurances. In addition to the acts and deeds recited
herein and contemplated to be performed at the Closing, Seller and Buyer agree
to perform such other acts, and to execute
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<PAGE> 16
and/or deliver such other instruments and documents as either Seller or Buyer,
or their respective counsel, may reasonably require in order to effect the
intents and purposes of this Contract. Further, Seller and Buyer each agree to
deliver to the Title Company affidavits and such other assurances as may
reasonably be necessary or required to enable the Title Company to issue the
Title Policy as contemplated in this Contract.
12.14 Time Periods. Unless otherwise expressly provided, all
periods for delivery or review and the like shall be determined on a "calendar"
day basis If any date for performance, approval, delivery or Closing falls on a
Saturday, Sunday or legal holiday, the time therefor shall be extended to the
next business day.
12.15 Survival. The representations, warranties and covenants
(except with respect to Section 12.1) of Buyer and Seller contained herein
shall survive the Closing for a period of six (6) months from the Closing Date
and shall thereafter be deemed void and of no force. The representations,
warranties and covenants contained in Section 12.1 shall survive the Closing
for an unlimited period and shall not merge with the delivery of the documents
at Closing.
12.16 Waiver of Right to Trial by Jury. The Buyer and the Seller
hereby waive any right to trial by jury of any claim, demand, action or cause
of action (i) arising under this Contract or any other instrument, document or
agreement executed or delivered in connection herewith or (ii) in any way
connected with or related or incidental to the dealings of the parties hereto
or any of them in respect of this Contract or any other instrument, document or
agreement executed or delivered in connection herewith or the transactions
related hereto, in each case whether now existing or hereafter arising, and
whether sounding in contract or tort or otherwise. The Buyer and the Seller
hereby agree and consent that any such claim, demand, action or cause of action
shall be decided by court trial without a jury and that any party may file an
original counterpart or a copy of this Contract with any court as written
evidence of the consent of the parties hereto to the waiver of their right to
trial by jury.
12.17 The effective date ("Effective Date") of this Contract shall
be the date on which the Title Company acknowledges receipt of the Earnest
Money Deposit.
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DATED this ___ day of November, 1997, which is the date this Contract
has been signed by whichever of Buyer or Seller is the last to sign this
Contract. All references to the "date of this Contract" or similar references
shall mean this date.
<TABLE>
<S> <C>
SELLER:
NATIONWIDE LIFE INSURANCE COMPANY,
an Ohio corporation
By:
--------------------------------------------- -------------------------------------------------------
Date Signed by Seller Robert H. McNaghten
Vice President-Real Estate Investments
BUYER:
ACLU INVESTMENTS, LTD.
a Texas limited partnership
11/11/97 By: /s/ FRANK J. MACARI
--------------------------------------------- -------------------------------------------------------
Date Signed by Seller Frank J. Macari
President
FJM, Inc., a Texas corporation
General Partner
Vice President-Real Estate Investments
</TABLE>
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EXHIBIT A
LEGAL DESCRIPTION
(TO BE REPLACED IF DIFFERENT FROM SURVEY)
BEING a tract of land situated in Dallas County, Texas out of the Isaac Wiley
Survey, Abstract No. 1575, said tract also being part of Lot 2 of the Spring
Valley Business Park, an addition to the City of Richardson, Texas, and being
more particularly described as follows:
COMMENCING at the intersection point of the South right-of-way line of Spring
Valley Road (100 foot R.O.W.) and the West right-of-way line of the Houston and
Texas Central Railroad (100 foot R.O.W.);
THENCE S 27 degrees 35' 00" W along the West right-of-way line of said Railroad
for a distance of 770.24 feet to the POINT OF BEGINNING;
THENCE S 27 degrees 35' 00" W continuing along the West right-of-way line of
said Railroad for a distance of 646.48 feet to a point for corner;
THENCE N 62 degrees 25' 00" W for a distance of 450.00 feet to a point for
corner, said point also being in the East right-of-way line of Sherman Street
(100 foot R.O.W.);
THENCE N 27 degrees 35' 00" E along the East right-of-way of said Sherman
Street, for a distance of 581.83 feet to a point, said point also being the
point of curvature to the right whose central angle is 5 degrees 17'57", a
radius of 700.00 feet and a tangent length of 32.39 feet;
THENCE Northeasterly along said curve for a distance of 64.74 feet to a point
for corner, said point also being in the East right-of-way line of said Sherman
Street;
THENCE S 62 degrees 25' 00" E for a distance of 447.01 feet to the POINT Of
BEGINNING;
CONTAINING 290,851.64 square feet or 6.67 acres of land.
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EXHIBIT B
THIRD AMENDMENT TO LEASE AGREEMENT
THE THIRD AMENDMENT TO LEASE AGREEMENT is made and entered into by and
between NATIONWIDE LIFE INSURANCE COMPANY, an Ohio corporation,
successor-in-interest to Spring Valley Business Park #6, Ltd. ("Landlord") and
NORTHERN TELECOM, INC., a Delaware corporation ("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into that certain Lease Agreement
dated January 29, 1988 (the "Original Lease"), wherein Landlord leased to
Tenant approximately 65,104 square feet of rentable area located within two (2)
buildings known as 1055 South Sherman 1057 South Sherman, Richardson, Texas,
all as is more fully described in the Lease; and
WHEREAS, Landlord and Tenant entered into that certain First Amendment
to Lease dated January 16, 1990 (the "First Amendment"); and
WHEREAS, Landlord and Tenant entered into that certain Second
Amendment to Lease dated January 1, 1993 (the "Second Amendment") (The Original
Lease, as amended by the First Amendment and the Second Amendment, shall be
referred to herein as the "Lease"); and
WHEREAS, Landlord and Tenant do hereby desire to amend the Lease in
certain respects;
NOW, THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby confessed and acknowledged, Landlord and Tenant
agree as follows (capitalized terms herein having the meaning attributed to
them in the Original Lease unless specifically otherwise provided):
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1. TERM. Section 1(d) of the Lease shall be amended to read: ""Lease
Term": A period of thirty-six (36) months, commencing on January 1, 1998 (the
"commencement date") and ending on December 31, 2000, unless such dates are
varied pursuant to the provisions of Paragraph 36 hereof."
2. RENTAL. Section l(e) of the Lease shall be amended to read: "Basic
Rental": shall mean Eleven and 75/100 Dollars ($11.75) per year per square foot
of the rentable area in the Premises.
3. ALLOWANCE. Landlord agrees to reimburse Tenant in an amount not to
exceed $282,912.00 for leasehold improvements made to the Premises and incurred
in connection with this Third Amendment. Reimbursement is subject to the
following conditions:
(1) Landlord's approval of construction plans. Said approval shall
not be unreasonably withheld or delayed.
(2) Satisfactory completion (in Landlord's architect's reasonable
judgement) of all improvements in accordance with approved
construction plans.
(3) Tenant furnishes Landlord with copies of all paid invoices as
documentation as to the nature and cost of labor and materials
furnished during the construction process.
(4) Tenant furnishes Landlord with fully executed lien waiver
affidavits covering all labor and materials furnished for the
leasehold improvement work.
4. EARLY TERMINATION. Provided Tenant is not in monetary default or in
default of any other provision beyond any applicable cure period under the
Lease at the time of exercise or on the effective date of termination, Tenant
shall have the right to terminate the Lease prior to the expiration date of the
Lease (as amended hereby), pursuant to the terms and conditions contained
herein. Tenant may terminate the Lease and the parties shall have no further
liability one to the other, except as hereinafter provided, such right of
termination to take effect after January 31, 2000, the twenty-fifth (25th)
month of the Term, upon Tenant giving nine (9) months prior written notice to
Landlord and the payment in cash at the time of giving such notice of a
termination fee (which
20
<PAGE> 21
shall be consideration for and a condition of the exercise by Tenant of its
option to terminate the Lease) equal to the unamortized allowance and
commission costs and two (2) months Basic Rental
5. RENEWAL OPTION. Notwithstanding anything in Section 34 of the Lease
to the contrary, Tenant shall have the right to extend the Lease Term (as
amended hereby) upon the terms set forth in Section 34 of the Lease except that
the Basic Rental for the renewal term shall be at the then prevailing Market
Rental Rate (as defined) in the Second Amendment for the Premises.
6. BROKERAGE COMMISSIONS. Landlord agrees to pay Fischer & Company
("Broker") a real estate brokerage commission as set forth in a separate
commission agreement between Landlord and Broker. The commission shall be four
percent (4%) of the gross revenue to be received by Landlord with respect to
the terms and conditions in this Third Amendment. Tenant hereby represents and
warrants to Landlord that Tenant has not employed any agents, brokers or other
such parties in connection with the extension of the term of the Lease as set
forth in this Third Amendment, and agrees that Tenant shall hold Landlord
harmless from and against any breach of the foregoing warranty.
7. MISCELLANEOUS.
(a) Except as expressly amended hereby, all other terms and provisions of the
Lease remain unchanged and in full force and effect.
(b) Except as expressly set forth in this Third amendment or the Lease to the
contrary, Landlord and Tenant hereby agree that Tenant's covenant to pay Basic
Rental and other sums due under this Third Amendment or the Lease (as amended
by the First and Second Amendments) shall be deemed separate and independent
from Landlord's covenant to provide services hereunder.
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(c) This Third Amendment may be executed in multiple counterparts, and by the
parties hereto on separate counterparts, each of which shall be deemed to be an
original, and all of which together shall constitute but one agreement.
IN WITNESS WHEREOF, executed as of the ___ Day of November, 1993.
LANDLORD:
NATIONWIDE LIFE INSURANCE COMPANY,
an Ohio Corporation
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
TENANT:
NORTHERN TELECOM INC.,
a Delaware corporation
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
22
<PAGE> 1
EXHIBIT 10.2
ASSIGNMENT OF
CONTRACT OF SALE
THIS ASSIGNMENT OF CONTRACT OF SALE ("Assignment"), is made as of this
____ day of February, 1998, by and between NATIONWIDE LIFE INSURANCE COMPANY,
an Ohio corporation ("Seller"), ALCU INVESTMENTS, LTD., a Texas limited
partnership ("Buyer"), and AIP OPERATING, L.P., a Delaware limited partnership
("Assignee") (Seller, Buyer and Assignee are sometimes referred herein,
collectively, as the "Parties"). All initially capitalized terms used herein
which are not otherwise defined herein shall have the meanings ascribed to them
in the Contract of Sale (as such term is defined below).
RECITALS
A. Seller and Buyer have entered into that certain Contract of Sale
("Contract of Sale"), dated as of November ____, 1997, for the sale of
the property described in the Contract of Sale ("Property") located in
the City of Richardson, County of Dallas, State of Texas and more
particularly described on EXHIBIT A attached hereto.
B. The Parties desire to enter into this Assignment to, among other
things, assign the Buyer's rights and interests in the Contract of
Sale to Assignee and to evidence Assignee's assumption of Buyer's
obligations and liabilities under the Contract of Sale.
ASSIGNMENT:
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. Assignment of Contract of Sale. Buyer hereby assigns and transfers to
Assignee all of Buyer's right, title, claim and interest in and to the Contract
of Sale, the Property, and all sums paid or deposited into escrow or to Seller
by Buyer in connection with the Contract of Sale.
2. Assumption. Assignee hereby acknowledges and agrees to all of the
terms of the Contract of Sale and accepts the foregoing assignment and assumes
and agrees to perform all obligations of Buyer under the Contract of Sale, in
accordance with the terms thereof.
3. Amendment to Contract of Sale. The Contract of Sale is hereby amended
in the following manner:
(i) The term "Buyer" as used in the Contract of Sale is
amended to mean Assignee.
<PAGE> 2
(ii) All exhibits to the Contract of Sale, as so amended,
shall be signed and delivered by Seller and Assignee in accordance
with the terms of the Contract of Sale.
4. Ratification of Agreements. Except as expressly amended and modified
under this Amendment, the Parties hereby ratify and affirm the terms and
provisions of the Contract of Sale in their entirety.
5. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Texas.
IN WITNESS WHEREOF, the parties have executed this Assignment as of
the day and year first above written.
BUYER: ALCU INVESTMENTS, LTD.,
a Texas limited partnership
By: FJM, Inc., a Texas corporation
General Partner
By: /s/ FRANK J. MACARI
-----------------------------------
Frank J. Macari
President
ASSIGNEE: AIP OPERATING, L.P.,
a Delaware limited partnership
By: AMERICAN INDUSTRIAL PROPERTIES REIT,
a Texas real estate investment trust
General Partner
By: /s/ MARC A. SIMPSON
------------------------------------
Name: Marc A. Simpson
----------------------------------
Title: V.P.
---------------------------------
SELLER: NATIONWIDE LIFE INSURANCE COMPANY,
an Ohio corporation
By: /s/ ROBERT H. McNAGHTEN
-------------------------------------------
Name: Robert H. McNaghten
-----------------------------------------
Title: Vice President
----------------------------------------
- ----------------------------------
ASSIGNMENT OF CONTRACT OF SALE
PAGE 2
<PAGE> 1
EXHIBIT 10.3
CONTRIBUTION AND EXCHANGE AGREEMENT
by and among
ALCU INVESTMENTS, LTD.,
a Texas limited partnership
as
the "Contributor"
and
AIP OPERATING, L.P., a
Delaware limited partnership
as
the "Operating Partnership"
and
AMERICAN INDUSTRIAL PROPERTIES REIT, a
Texas real estate investment trust
as
the "Company"
Dated as of January 29, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iii)
EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iii)
ARTICLE 1. SUBJECT OF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Assignment of the Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2. VALUE AND PAYMENT TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.1 Issuance of OP Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.2 Additional Contribution Consideration . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.3 Closing Under Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 3. DUE DILIGENCE INVESTIGATION; TITLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3.1 Earnest Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3.2 Independent Contract Consideration . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3.3 Inspection Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3.4 Inspection Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 4.1 The Contributor's Representations and Warranties . . . . . . . . . . . . . . . . . . 3
Section 4.2 Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.3 Contributor's Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE
OPERATING PARTNERSHIP AND THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5.1 The Transferee's Representations and Warranties . . . . . . . . . . . . . . . . . . 6
Section 5.2 Exception Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
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<PAGE> 3
<TABLE>
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ARTICLE 6. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6.1 Covenants of the Contributor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6.2 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 6.3 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 6.4 Time of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 7. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 7.1 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 7.2 Deliveries at the Closing by the Contributor . . . . . . . . . . . . . . . . . . . 10
Section 7.3 Deliveries at the Closing by the Transferee . . . . . . . . . . . . . . . . . . . 11
Section 7.4 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 8. CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 8.1 Conditions to Obligations of the Contributor . . . . . . . . . . . . . . . . . . . 12
Section 8.2 Conditions to Obligations of the Transferee . . . . . . . . . . . . . . . . . . . 12
ARTICLE 9. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 10. BROKERS/COMMISSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 11. DEFAULT/REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 11.1 Mutual Termination/Termination by Transferee . . . . . . . . . . . . . . . . . . . 13
Section 11.2 Default by the Transferee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 11.3 Default by Contributor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 12. NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
(ii)
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<TABLE>
<S> <C> <C> <C>
ARTICLE 13. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 13.1 Survival of Representation and Warranties . . . . . . . . . . . . . . . . . . . . 15
Section 13.2 Entire Agreement; No Third-Party Rights . . . . . . . . . . . . . . . . . . . . . 15
Section 13.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 13.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 13.5 Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 13.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 13.7 No Other Rights or Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 13.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 13.9 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 13.10 Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 13.11 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 13.12 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 13.13 Indemnity for Transferee Acts . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 13.14 Indemnity for Contributor Acts . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SCHEDULES
Schedule 1 Purchase Agreement
Schedule 5.1(e) Transferee Litigation
EXHIBITS
Exhibit 2.3 Form of Assignment and Assumption
Exhibit 6.1(e) Form of OP Agreement
</TABLE>
(iii)
<PAGE> 5
CONTRIBUTION AND EXCHANGE AGREEMENT
THIS CONTRIBUTION AND EXCHANGE AGREEMENT (the "AGREEMENT") dated as of
January 29, 1998 (the "EFFECTIVE DATE") is made and entered by ALCU
INVESTMENTS, LTD., a Texas limited partnership (the "CONTRIBUTOR"), AMERICAN
INDUSTRIAL PROPERTIES REIT, a Texas real estate investment trust (the
"COMPANY"), and AIP OPERATING, L.P., a Delaware limited partnership (the
"OPERATING PARTNERSHIP"). The Company and the Operating Partnership are
sometimes hereinafter collectively referred to as the "TRANSFEREE".
RECITALS
A. The Contributor owns the right to purchase approximately
94,304 rentable square feet of certain improved industrial real property
identified in that certain Contract of Sale attached hereto as Schedule 1 (the
"PURCHASE AGREEMENT") with Nationwide Life Insurance Company ("NATIONWIDE").
The term "PROPERTY" as used herein shall have the same meaning collectively
provided in the Purchase Agreement.
B. The Operating Partnership desires to acquire the right to
receive an assignment and contribution of the Contributor's right, title and
interest in and to the Purchase Agreement from the Contributor in exchange for
(i) units of limited partnership interest in the Operating Partnership (the "OP
UNITS"), which OP Units will be convertible into beneficial interests of the
Company (the "SHARES"), and (ii) certain cash consideration, as hereinafter
provided. Closing will be contingent on the Transferee's review and approval
of the Property and the Purchase Agreement. The OP Units shall be acquired by
the Contributor, FJM, Inc., Frank J. Macari, General Electric Capital
Corporation or one or more entities owned or controlled, directly or
indirectly, by such parties (the "CONTRIBUTION PARTIES").
NOW, THEREFORE, in consideration of the mutual promises hereinafter
set forth and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, do hereby agree as follows:
ARTICLE 1. SUBJECT OF ASSIGNMENT.
Section 1.1 Assignment of the Purchase Agreement. In accordance
with the terms and conditions of this Agreement and subject to the Transferee's
performance and satisfaction of the conditions, covenants and obligations
contained herein, the Contributor shall assign and contribute to the Operating
Partnership all of its right, title and interest in and to the Purchase
Agreement.
ARTICLE 2. VALUE AND PAYMENT TERMS.
Section 2.1 Issuance of OP Units. As consideration for the
assignment and contribution of the Purchase Agreement by the Contributor to the
Operating Partnership, at Closing, the Operating Partnership shall issue to the
Contributor 58,333 OP Units determined by dividing $875,000.00 by the Share
Price (subject to adjustment for Share splits and similar events implemented by
the Company). As used in this Agreement, the term "SHARE PRICE" shall
initially mean $15.00.
<PAGE> 6
Section 2.2 Additional Contribution Consideration. At the
Closing, the Operating Partnership shall pay the Contributor an amount of cash
equal to $1,175,000.00 evidencing the balance of the consideration to be paid
by the Transferee to the Contributor for the assignment and contribution of the
Purchase Agreement to the Operating Partnership.
Section 2.3 Closing Under Purchase Agreement. At Closing, the
Contributor shall assign and contribute all of its right, title and interest
in, to and under the Purchase Agreement to the Operating Partnership, and the
Operating Partnership shall accept such assignment and contribution, and
assume all of the Contributor's obligations under the Purchase Agreement, all
in accordance with that certain Assignment and Assumption of Purchase Agreement
in the form attached hereto as Exhibit 2.3 (the "ASSIGNMENT AND ASSUMPTION").
ARTICLE 3. DUE DILIGENCE INVESTIGATION; TITLE.
Section 3.1 Earnest Money. Concurrent with the full execution of
this Agreement, the Company, acting on behalf of the Operating Partnership,
shall deposit with Commonwealth Land Title Company, 1700 Pacific Avenue, Suite
4740, Dallas, Texas 75201, Attention: Ms. Jackie Holt (the "TITLE COMPANY"),
One Hundred Thousand Dollars ($100,000.00) as earnest money (the "EARNEST
MONEY"). The Title Company shall invest the Earnest Money in an interest
bearing account acceptable to the Company. Interest earned on the Earnest
Money shall be deemed to be a part of the Earnest Money. In the event the
contribution transaction contemplated by this Agreement is closed, the Earnest
Money shall be delivered into the escrow established under the Purchase
Agreement and delivered to Nationwide for application against the "Purchase
Price" under and defined in the Purchase Agreement, and the escrow holder under
the Purchase Agreement shall directly return to the Contributor and/or its
designee the "Earnest Money Deposit" under and defined in the Purchase
Agreement. In the event the transaction contemplated by this Agreement is not
closed, the Earnest Money shall be disbursed in accordance with the provisions
of this Agreement.
Section 3.2 Independent Contract Consideration.
Contemporaneously with the execution and delivery of this Agreement, the
Company has delivered to the Contributor, and the Contributor hereby
acknowledges the receipt of, a check in the amount of One Hundred Dollars
($100.00) ("INDEPENDENT CONTRACT CONSIDERATION"), which amount the parties
bargained for and agreed to as consideration for the Company's exclusive right
to consider accepting an assignment and contribution of the Purchase Agreement
to the Operating Partnership pursuant to this Agreement and for the
Contributor's execution, delivery and performance of this Agreement. The
Independent Contract Consideration is in addition to and independent of any
other consideration or payment provided in this Agreement, is nonrefundable,
and it is fully earned and shall be retained by the Contributor notwithstanding
any other provision of this Agreement.
2
<PAGE> 7
Section 3.3 Inspection Period.
(a) The Transferee acknowledges and agrees that prior to
the date hereof the Contributor has delivered to the Transferee what the
Contributor has represented as a complete copy of the Purchase Agreement and
what the Contributor has represented as copies of all documents, information
and materials in the Contributor's possession and control relating to the
Property and/or the Purchase Agreement (the "INSPECTION MATERIALS"). The
Transferee had until January 28, 1998 (the "INSPECTION PERIOD") to inspect and
investigate the Inspection Materials and the Property, either independently or
through agents of the Transferee's choosing, and the Inspection Period has
expired. The other conditions precedent to the Transferee's obligations
hereunder are as set forth in Section 9.2 below.
(b) On and after the Effective Date, the Contributor
shall use its best efforts to cause Nationwide to provide the Transferee's
representatives and independent accounting firm access to all financial and
other information relating to the Property which would be sufficient to enable
the Transferee's representatives and independent accounting firm to prepare
audited financial statements for 1996, 1997 and 1998 year-to-date in conformity
with generally accepted accounting principles and to enable them to prepare
such statements, reports or disclosures as the Transferee may deem necessary or
advisable. The Contributor shall reasonably cooperate with the Transferee's
representatives and independent accounting firm in connection with the
aforementioned financial analysis and shall provide, or use its best efforts to
cause Nationwide to provide, any additional information necessary to allow the
Transferee to make disclosures required by and otherwise comply with the
financial accounting requirements of the SEC (defined below). The Contributor
shall use its best efforts to cause Nationwide to provide the Transferee's
independent accounting firm a signed representation letter which will be
sufficient to enable an independent public accountant to render an opinion on
the financial statements related to the Property. If and to the extent
Nationwide's financial statements pertaining to the Property for any periods
during the years 1996, 1997 or 1998 year-to-date have been audited, promptly
after the execution of this Agreement, the Contributor shall use its best
efforts to cause Nationwide to provide the Transferee with copies of such
audited financial statements and shall cooperate with the Transferee's
representatives and independent public accountants to enable them to contact
the auditors who prepared such audited financial statements and to obtain, at
the Transferee's expense, a reissuance of such audited financial statements.
In the event the Transferee has not been provided evidence on or prior to the
Closing Date of Nationwide's agreement to execute an acceptable representation
letter, the Transferee shall have the right to terminate this Agreement and
receive a return of the Earnest Money net of the GECC Legal Fees (as
hereinafter defined), and the Contributor shall receive the GECC Legal Fees.
Section 3.4 Inspection Materials. At the Contributor's sole
expense, the Contributor shall cause all environmental, physical inspection and
appraisal reports prepared on behalf of the Contributor to be issued or
reissued and recertified to the Operating Partnership or to obtain one or more
reliance letters in form reasonably satisfactory to the Operating Partnership.
3
<PAGE> 8
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR.
Section 4.1 The Contributor's Representations and Warranties.
In order to induce the Company and the Operating Partnership to enter into this
Agreement and to perform their respective obligations hereunder, the
Contributor hereby warrants and represents to the Transferee the following:
(a) Organization, Good Standing and Power. The
Contributor is a limited partnership duly organized and validly existing under
the laws of the jurisdiction in which it was organized, is duly authorized to
transact business under the laws of each state in which the transaction of its
business makes such qualification necessary, and has all requisite power and
authority to execute and deliver this Agreement and all other documents and
instruments to be executed and delivered by it hereunder and to perform its
obligations hereunder and thereunder in accordance with the terms and
conditions hereof and thereof.
(b) Authorization; No Violation. Assuming the due and
valid authorization, execution and delivery of this Agreement by the
Transferee, this Agreement, and the other agreements and documents to be
executed by the Contributor hereunder, will be the legal, valid and binding
obligation of the Contributor, enforceable against the Contributor in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, moratorium or similar laws relating to creditors' rights and
general principles of equity. The performance by the Contributor of its duties
and obligations under this Agreement and the documents and instruments to be
executed and delivered by it hereunder will not conflict with, or result in a
breach of, or default under, any provision of any of the organizational
documents of the Contributor or any agreement, instrument, decree, judgment,
injunction, order, writ, law, rule or regulation, or any determination or award
of any court or arbitrator, to which the Contributor is a party or by which its
assets are or may be bound (a "LEGAL REQUIREMENT"), require any consent,
approval or authorization of, declaration, filing or registration with, or
notice to, (a "THIRD PARTY CONSENT") any federal, state or local governmental
or regulatory authority having jurisdiction over the Property or the
Contributor (a "GOVERNMENTAL AUTHORITY") or any other person or entity.
(c) Existence of Agreements and Leases. To the
Contributor's knowledge, except as reflected in the Inspection Materials, there
are no material service contracts, management or maintenance agreements, leases
or other material agreements affecting the use or occupancy of the Property.
To the Contributor's knowledge, all Inspection Materials heretofore delivered
by the Contributor to the Operating Partnership or its representatives for
examination, are complete copies thereof, and have not been amended except as
evidenced by amendments similarly delivered.
(d) Litigation. The Contributor has no knowledge of any
litigation, claim, audit, action, or proceeding pending or threatened before or
by any Governmental Authority or by any other person or entity in any manner
adversely affecting the ability of the Contributor to perform any of its
obligations hereunder.
(e) Solvency; Bankruptcy. The Contributor is solvent,
and has not made a general assignment for the benefit of creditors or a
transfer in fraud of creditors, or been adjudicated a bankrupt or insolvent,
nor has a receiver, liquidator, custodian, or trustee of the Contributor or any
4
<PAGE> 9
of its properties been appointed or taken possession of any of its properties,
or a petition filed by or against the Contributor for bankruptcy, composition,
rearrangement, extension, reorganization, or arrangement pursuant to the
Federal Bankruptcy Act or any similar federal or state insolvency or bankruptcy
law or statute, or any proceeding instituted for the dissolution or liquidation
of the Contributor.
(f) Validity of Purchase Agreement. The Purchase
Agreement is in full force and effect, and the Contributor has not received
written notice from Nationwide, nor does it otherwise have knowledge of, any
default or event of default thereunder.
(g) Property Reports. The Contributor has delivered to
the Operating Partnership complete copies of all environmental, engineering and
appraisal reports regarding the Property in its possession or control as part
of the Inspection Materials.
(h) The Contributor Not a Foreign Person. The
Contributor is not a "foreign person" which would subject the Operating
Partnership to the withholding tax provisions of Section 1445 of the Internal
Revenue Code of 1986, as amended.
(i) Purchase Agreement Valid. To the Contributor's
knowledge, Nationwide is not in breach of any of its representations and
warranties set forth in any of the Purchase Agreement.
(j) Material Facts. No representation or warranty by the
Contributor herein, contains any untrue statement of a material fact, or omits
or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading in any material respect. Each of
the items of Inspection Materials delivered to the Operating Partnership
pursuant to the terms of this Agreement are and shall be complete copies of the
same, except to the extent otherwise expressly noted by the Contributor to the
Operating Partnership upon delivery of a specific item, and the Contributor
shall notify the Operating Partnership of any matter of which the Contributor
obtains knowledge that must be disclosed to keep any item delivered from being
misleading in any material respect.
Section 4.2 Legend. The Contributor hereby acknowledges that
each certificate representing an OP Unit shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT
MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR (B) IF THE OPERATING PARTNERSHIP HAS
BEEN FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL FOR THE
HOLDER THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER."
5
<PAGE> 10
Section 4.3 Contributor's Knowledge. For purposes of this
Agreement and any document delivered at Closing, whenever the phrase "to the
Contributor's knowledge" or the "knowledge" of the Contributor or words of
similar import are used, they shall be deemed to refer to the current actual
knowledge of Frank J. Macari.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE OPERATING PARTNERSHIP
AND THE COMPANY.
Section 5.1 The Transferee's Representations and Warranties. In
order to induce the Contributor to enter into this Agreement and to perform its
obligations hereunder, the Operating Partnership and the Company hereby jointly
and severally warrant and represent the following:
(a) Organization, Good Standing and Power of the
Company. The Company is a real estate investment trust duly organized and
validly existing under the laws of the State of Texas, is duly authorized to
transact business under the laws of any state in which the character of the
properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary and has all requisite trust power
and authority to execute and deliver this Agreement and all other documents and
instruments to be executed and delivered by it hereunder and to perform its
obligations hereunder and thereunder in accordance with the terms and
conditions hereof and thereof.
(b) Organization, Valid Existence and Partnership Power
of the Operating Partnership. The Operating Partnership is a limited
partnership duly organized and validly existing under the laws of the State of
Delaware, is duly authorized to transact business under the laws of any state
in which the character of the properties owned or leased by it therein or in
which the transaction of its business makes such qualification necessary, and
has all requisite partnership power and authority to execute and deliver this
Agreement and all other documents and instruments to be executed and delivered
by it hereunder and to perform its obligations hereunder and thereunder in
accordance with the terms and conditions hereof and thereof.
(c) Authorization; No Violation. Assuming the due and
valid authorization, execution and delivery of this Agreement by the
Contributor, this Agreement and the other agreements and documents to be
executed and delivered by each of the Operating Partnership and the Company
hereunder, when duly executed and delivered, will be the legal, valid and
binding obligation of each of the Operating Partnership and the Company,
enforceable against the Operating Partnership and the Company in accordance
with their respective terms, subject to applicable bankruptcy, insolvency,
moratorium or similar laws relating to creditors' rights and general principles
of equity. The performance by each of the Operating Partnership and the
Company of its respective duties and obligations under this Agreement and the
documents and instruments to be executed and delivered by each of them
hereunder will not (i) conflict with, or result in a breach of, or default
under, any provision of any of the organizational documents of either of the
Operating Partnership or the Company or any agreements, instruments or Legal
Requirements to which either of the Operating Partnership or the Company is a
party or by which the assets of either are or may be bound, or (ii) require any
consent, approval or authorization of, or declaration, filing or registration
with, or notice to, any Governmental Authority.
6
<PAGE> 11
(d) Solvency; Bankruptcy. The Company and the Operating
Partnership is each solvent and each has not made a general assignment for the
benefit of creditors or a transfer in fraud of creditors, or been adjudicated,
bankrupt or insolvent, nor has a receiver, liquidator, custodian, or trustee of
the Company or the Operating Partnership or any of their respective properties
been appointed or taken possession of any of their respective properties, or a
petition filed by or against the Company or the Operating Partnership for
bankruptcy, composition, rearrangement, extension, reorganization, or
insolvency or bankruptcy law or statute, or any proceeding instituted for the
dissolution or liquidation of either the Company or the Operating Partnership.
(e) Litigation. Except as set forth in Schedule 5.1(e),
there is no pending or, to the Transferee's knowledge, threatened litigation
against the Operating Partnership or the Company that if adversely determined
would have a material adverse effect on the Transferee or its ability to
perform its obligations under this Agreement in a timely manner.
Section 5.2 Exception Matters.
(a) As used herein, the term "Exception Matter" shall
refer to a matter disclosed to the Transferee in writing by the Contributor
after the Effective Date hereof and before the Closing, that constitutes, as of
the date of this Agreement, a breach of a representation or warranty of the
Contributor contained in this Agreement or in any document or instrument
delivered pursuant hereto. Under no circumstances shall the Contributor have
any obligation to cure or remedy any Exception Matter.
(b) The Contribution shall promptly notify the Transferee
in writing of any Exception Matter of which the Contribution obtains knowledge
before the Closing. Upon receipt of any such written notice from the
Contributor, the Transferee shall have the right to terminate this Agreement by
written notice to the Contributor and the Company and receive an immediate
return of the Earnest Money. If the Transferee is notified by the Contributor
of any Exception Matter before the Closing, but nonetheless elects to proceed
with the acquisition of the Purchase Agreement, the Transferee shall consummate
the transactions contemplated by this Agreement subject to such Exception Matter
and the Contributor shall have no liability with respect to such Exception
Matter, notwithstanding any contrary provision, covenant, representation or
warranty contained in this Agreement. If the Transferee elects to terminate
this Agreement on the basis of any Exception Matter, the Earnest Money shall be
immediately returned to the Transferee and neither party shall have any further
rights or obligations hereunder, except as otherwise expressly provided herein.
Notwithstanding anything to the contrary contained herein, the Contributor shall
have no liability whatsoever to the Transferee with respect to any Exception
Matters.
7
<PAGE> 12
ARTICLE 6. COVENANTS.
Section 6.1 Covenants of the Contributor. The Contributor
covenants and agrees that between the Effective Date and the Closing Date,
unless the Transferee has consented in writing to any other act or omission
which shall not be unreasonably withheld, delayed or conditioned, it shall
perform or observe the following:
(a) The Contributor shall enforce Nationwide's
obligations under the Purchase Agreement and shall exercise its rights under
the Purchase Agreement in the same manner as the Contributor would enforce such
obligations and exercise such rights had the Contributor not entered into this
Agreement.
(b) The Contributor will comply in all material respects
with its obligations set forth in the Purchase Agreement and will not terminate
or amend the Purchase Agreement or (to the extent permitted in the Purchase
Agreement) consent to Nationwide entering into any new agreements or leases
affecting the Property or to Nationwide extending, renewing, amending,
canceling or terminating any existing agreements or leases affecting the
Property without first receiving the Operating Partnership's prior written
consent which shall not be unreasonably, withheld, delayed or conditioned.
(c) If the Contributor discovers any error or omission in
any Inspection Material or in any representation or warranty made in Section
4.1, the Contributor will give the Operating Partnership prompt written notice
thereof accompanied by reasonably detailed information.
(d) The Contributor shall promptly give the Operating
Partnership written notice of, and promptly deliver to the Operating
Partnership, a true and complete copy of any written notice the Contributor may
receive, on or before the Closing Date, from any Governmental Authority,
concerning a violation of any applicable Legal Requirement pertaining to the
Property or of any written notice of default from Nationwide under the Purchase
Agreement.
(e) At Closing, the Contributor and/or its designated
Contributor Parties shall execute and deliver the amended and restated
agreement of limited partnership of the Operating Partnership (the "OP
AGREEMENT") in the form attached hereto as Exhibit 6.1(e).
(f) The Contributor shall cooperate, to the extent
reasonably requested by the Transferee, in the preparation by the Company of
any reports, registration statements or other filings required to be filed by
the Company with the Securities and Exchange Commission ("SEC") relating to
this Agreement and the transaction(s) contemplated herein.
(g) The Contributor shall, and shall cause any other
person designated by it to receive OP Units to, execute and deliver to the
Operating Partnership and/or the Company at or prior to Closing a certificate
(the "INVESTOR CERTIFICATE") to the effect that each such person (a) is
acquiring the OP Units being acquired hereunder for investment (for its own
account or for accounts over which it exercises investment control), and not
with a view to, or for offer or sale in connection with, any distribution
thereof that would be in violation of the Securities Act of 1933, as amended
(the "1933 ACT"), without prejudice, however, to such person's right at all
times to sell or otherwise dispose of all or any part of such OP Units pursuant
to an effective registration statement under the 1933 Act, or under an
exemption from such registration available under the 1933 Act, and (b) is
8
<PAGE> 13
knowledgeable sophisticated and experienced in business and financial matters
and fully understands the limitations on transfer described above.
Section 6.2 Confidentiality. Except as hereinafter provided,
from and after the execution of this Agreement, the Transferee and the
Contributor shall abide by any confidentiality provisions of the Purchase
Agreement and shall keep the terms, conditions and provisions of this Agreement
confidential and neither shall make any public announcements hereof unless the
other first approves of same in writing, nor shall either disclose the terms,
conditions and provisions hereof, except to their respective employees, agents,
partners, investors, attorneys, accountants, engineers, surveyors, financiers
and bankers. The Contributor acknowledges and agrees that the Transferee is a
public company and as such will be required pursuant to the rules and
regulations of the SEC to disclose the terms of this Agreement and the
transactions contemplated herein. Notwithstanding the foregoing, in connection
with the performance of its obligations under this Agreement, the Transferee
will have the absolute right to prepare and file all necessary or required
registration statements and other papers, documents and instruments necessary
or required in Transferee's judgment and that of its attorneys and underwriters
to file a registration statement with respect to the Shares with the SEC and/or
similar state authorities and to cause same to become effective and to disclose
therein and thus to its underwriters, to the SEC and/or to similar state
authorities and to the public all of the terms, conditions and provisions of
this Agreement. The obligations of this Section 6.2 shall survive any
termination of this Agreement.
Section 6.3 Cooperation. Subject to the terms and conditions
herein provided, the parties to this Agreement shall (a) use their best efforts
to cooperate with each other in (i) determining which filings are required to
be made prior to the Closing Date with, and which consents, approvals, permits
or authorizations are required to be obtained prior to the Closing Date from,
Governmental Authorities, third party secured and unsecured lenders and rating
agencies in connection with the execution and delivery of this Agreement and
the transactions contemplated hereby and (ii) timely making all such filings
and timely seeking all such consents, approvals, permits or authorizations; (b)
use their best efforts to obtain in writing any consents required from third
parties necessary to effectuate the transactions contemplated hereby; and (c)
use commercially reasonable efforts to take, or cause to be taken, all other
actions and do, or cause to be done, all other things necessary, proper or
appropriate to consummate and make effective the transactions contemplated by
this Agreement. If, at any time after the Closing Date, any further action is
necessary or desirable to further carry out the purposes of this Agreement, the
proper officers and directors and other duly authorized representatives of the
parties shall take all such necessary action.
Section 6.4 Time of Closing. Each of the parties hereto shall
use commercially reasonable efforts to consummate the transactions contemplated
hereby on or prior to the Closing Date.
9
<PAGE> 14
ARTICLE 7. CLOSING.
Section 7.1 The Closing. The consummation of the transactions
contemplated hereunder (the "CLOSING") shall take place through the escrow
established under, and on the date of closing specified in the Purchase
Agreement (currently anticipated to be not later than February 9, 1998) or at
such other place or such other date as the parties hereto shall mutually agree
in writing (the "CLOSING DATE"), and shall occur simultaneously with, the
"Closing" under and defined in each of the Purchase Agreement, provided that,
notwithstanding the foregoing, (i) the Transferee shall have the right to elect
in its sole and absolute discretion to waive in writing the condition precedent
set forth in Section 9.2(d) below and to close the transactions described
herein prior to the "Closing" under and defined in each of the Purchase
Agreement, in which event the Closing shall occur on the day that is two (2)
business days after Contributor's receipt of such written waiver, and (ii) in
the event that the Closing has not occurred hereunder on or before 5:00 p.m.
C.S.T. on February 9, 1998 (the "Deadline Date") due to any reason other than
the failure of the transactions contemplated in the Purchase Agreement to close
simultaneously due to a default or breach by Nationwide (excluding Nationwide's
failure to agree to deliver a satisfactory representation letter), the
Contributor shall have the right in its sole and absolute discretion to either
terminate this Agreement or extend the Closing Date on a day-to- day basis up
to, but not after, February 13, 1998. In the event that the Contributor
terminates this Agreement pursuant to the immediately preceding clause (ii),
the Contributor shall have the right in its sole and absolute discretion to
proceed with the consummation of all or any of the transactions described in
the Purchase Agreement, free of any claims by the Transferee with respect to
the Property; provided however, if the Transferee is not in default hereunder
and the Transferee returns all of the Inspection Materials to the Contributor,
the Earnest Money shall be returned to the Transferee net of the GECC Legal
Fees, and the Contributor shall receive the GECC Legal Fees.
Section 7.2 Deliveries at the Closing by the Contributor. At
the Closing, the Contributor will deliver or cause to be delivered to the
Operating Partnership the Assignment and Assumption and:
(a) Any affidavits and such other documents or
instruments reasonably required by the Title Company to consummate the
transactions contemplated hereby.
(b) Affidavits and other instruments evidencing the power
and authority of the Contributor to enter into and perform this Agreement and
any documents to be delivered hereunder.
(c) A certificate executed by a duly authorized
representative of the Contributor stating that the representations and
warranties made by the Contributor in this Agreement are true and correct in
all material respects as of the Closing Date, or if there have been any
changes, a description thereof.
(d) In order to avoid the imposition of the withholding
tax payment pursuant to Section 1445 of the Code, a certificate signed by a
duly authorized representative of the Contributor to the effect that the
Contributor is not a "foreign person" as that term is defined in section
1445(f)(3) of the Code.
(e) The Investors' Certificates.
10
<PAGE> 15
(f) The OP Agreement.
(g) Such other documents as may be reasonably required or
appropriate to effectuate the consummation of the transactions contemplated by
this Agreement (provided that no such documents shall increase the
Contributor's obligations or liabilities under this Agreement).
(h) The Contributor shall provide the Company with
satisfactory documentation supporting the amount of the GECC Legal Fees.
Section 7.3 Deliveries at the Closing by the Transferee. At the
Closing, the Operating Partnership and the Company shall deliver or cause to be
delivered to the Contributor the following and, where appropriate, duly
executed by all necessary parties thereto other than the Contributor:
(a) The cash portion of the consideration specified in
Section 2.2.
(b) The certificates representing the OP Units to be
issued at the Closing properly issued to the appropriate party.
(c) The Assignment and Assumption.
(d) A certificate executed by a duly authorized
representative of the Operating Partnership and the Company stating that the
representations and warranties made by the Operating Partnership and the
Company in this Agreement are true and correct in all material respects as of
the Closing Date, or if there have been any changes, a description thereof.
(e) Affidavits and other instruments evidencing the power
and authority of the Operating Partnership and the Company to enter into and
perform this Agreement and any documents to be delivered hereunder.
(f) The OP Agreement.
(g) Up to, but not exceeding, $10,000.00 to reimburse the
Contributor for actual legal fees incurred between February 4, 1998 and
February 9, 1998 in connection with obtaining a loan from General Electric
Capital Corporation in connection with the purchase of the Property (the "GECC
Legal Fees").
(h) Such other documents as may be reasonably required or
appropriate to effectuate the consummation of the transactions contemplated by
this Agreement.
Section 7.4 Fees and Expenses. Subject to Section 13.11, each
party shall pay all other fees and expenses charged by the attorney engaged to
represent it. The parties shall share equally the Title Company's escrow
closing expenses, if any. The provisions of this Section 7.4 shall survive the
Closing.
11
<PAGE> 16
ARTICLE 8. CONDITIONS PRECEDENT TO CLOSING.
Section 8.1 Conditions to Obligations of the Contributor. The
obligations of the Contributor to assign and convey all of its right, title and
interest in and to the Purchase Agreement to the Operating Partnership and to
perform the other covenants and obligations to be performed by the Contributor
on the Closing Date shall be subject to satisfaction of the following
conditions (all or any of which may be waived, in whole or in part, by the
Contributor Group):
(a) The representations and warranties made by the
Operating Partnership and the Company herein shall be true and correct in all
material respects with the same force and effect as though such representations
and warranties had been made on and as of the Closing Date; provided, however,
that a failure of any representations or warranties to be true and correct in
all material respects shall not give rise to a claim or right of termination
by the Contributor hereunder so long as such matters do not have a material
adverse effect on the transactions contemplated herein.
(b) The Operating Partnership and the Company shall have
executed and delivered to the Contributor all of the items and documents
provided herein for said delivery.
(c) The Operating Partnership and the Company shall have
performed all covenants and obligations undertaken by the Operating Partnership
and the Company herein in all material respects and materially complied with
all conditions required by this Agreement to be performed or complied with by
them on or before the Closing Date.
(d) Nationwide shall not be in default or otherwise shall
have failed to satisfy any closing conditions specified in the Purchase
Agreement.
Section 8.2 Conditions to Obligations of the Transferee. The
obligations of the Operating Partnership to accept the assignment and
conveyance of the Purchase Agreement and the Operating Partnership's and the
Company's obligation to perform the other covenants and obligations to be
performed by the Operating Partnership and the Company on the Closing Date
shall be subject to satisfaction of the following conditions (all or any of
which may be waived, in whole or in part, by the Operating Partnership or the
Company):
(a) The representations and warranties made by the
Contributor herein shall be true and correct in all material respects with the
same force and effect as though such representations and warranties had been
made on and as of the Closing Date; provided, however, that a failure of a
representation or warranty to be true and correct in all material respects
shall not give rise to a claim or right of termination by the Operating
Partnership or the Company hereunder so long as such matters do not have a
material adverse effect on the transactions contemplated herein.
(b) The Contributor shall have executed and delivered to
the Operating Partnership and the Company all of the items and documents
provided herein for said delivery.
(c) The Contributor shall have performed all covenants
and obligations undertaken by the Contributor herein in all material respects
and materially complied with all conditions required by this Agreement to be
performed or complied with by it on or before the Closing Date.
12
<PAGE> 17
(d) The closings contemplated in the Purchase Agreement
shall occur simultaneously with Closing under this Agreement, subject to
Section 7.1 above.
(e) Nationwide shall not be in default or otherwise shall
have failed to satisfy any closing conditions specified in the Purchase
Agreement.
ARTICLE 9. ASSIGNMENT.
No party may assign this Agreement or any interest therein to any
other person without the prior written consent of the other parties hereto,
provided that the foregoing shall not limit the right of the Contributor to
designate certain of the Contribution Parties to recognize certain of the
benefits hereunder pursuant to the terms hereof.
ARTICLE 10. BROKERS/COMMISSIONS.
The Contributor and the Transferee covenant and agree one with the
other that no real estate commissions, finders' fees or brokers' fees have been
or will be incurred in connection with this Agreement or the transaction
contemplated other than a commission payable by the Contributor to CB
Commercial, Inc. pursuant to a separate written agreement. The Contributor and
the Transferee shall indemnify, defend and hold each other harmless from and
against any claims, liabilities, obligations or damages for commissions,
finders' or brokers' fees resulting from or arising out of the Transferee's
acquisition of the Property of the transactions contemplated hereby, asserted
against either party by any broker or other person claiming by, through or
under the indemnifying party or whose claim is based on the indemnifying
party's acts or omissions. The provisions of this Article 10 shall survive the
Closing or other termination of this Agreement.
ARTICLE 11. DEFAULT/REMEDIES.
Section 11.1 Mutual Termination/Termination by Transferee. The
Contributor and the Transferee may terminate this Agreement at any time prior
to Closing by mutual written agreement. Either the Transferee or the
Contributor may terminate this Agreement at any time prior to Closing upon a
material failure of any condition set forth in Section 8.2. Upon a termination
of this Agreement in its entirety under this Section 11.1, all Inspections
Materials shall be promptly returned to the Contributor, the Earnest Money
shall be immediately returned to the Transferee, the Contributor shall be
entitled to retain any Extension Fees, and neither the Contributor nor the
Transferee shall have any further rights or obligations hereunder, except for
such rights and obligations which survive termination. Notwithstanding the
preceding sentence, if the failure of a condition set forth in Section 8.2 was
caused by a default by the Contributor, the Transferee may, at its option,
exercise its rights and remedies under Section 11.3.
13
<PAGE> 18
Section 11.2 Default by the Transferee. In the event that the
transaction contemplated by this Agreement does not close on or prior to the
Closing Date by reason of the failure of a condition set forth in Section 8.1
the Contributor may, in addition to retaining any Extension Fees, as its sole
and exclusive remedy, terminate this Agreement by written notice to the
Transferee and the Title Company shall immediately deliver to the Contributor
the Earnest Money. In such event, the Contributor may recover the Earnest
Money as liquidated damages and not as a penalty. The Contributor and the
Transferee have agreed that such amount is a reasonable estimate of the damages
that the Contributor would be likely to sustain in the event of the
Transferee's default, as the actual amount of such damages would be difficult
or impracticable to determine.
Section 11.3 Default by Contributor. In the event that the
transaction contemplated by this Agreement does not close on or prior to the
Closing Date by reason of the failure of a condition set forth in Section 8.2
that was caused by a default by the Contributor hereunder, the Transferee may,
at its option, exercise any one or more of the following remedies as its sole
and exclusive remedies: (a) terminate this Agreement in its entirety by written
notice to the Contributor, and obtain an immediate refund of the Earnest Money;
or (b) enforce specific performance of this Agreement.
ARTICLE 12. NOTICE.
All notices, demands, requests, or other writings in this Agreement
provided to be given, made or sent, or which may be given, made or sent, by
either party hereto to the other, shall be in writing and shall be delivered by
depositing the same with any nationally recognized overnight delivery service,
or by telecopy or fax machine, in either event with all transmittal fees
prepaid, properly addressed, and sent to the following addresses:
If to the Contributor: ALCU Investments, Ltd.
5001 Shadywood Lane
Dallas, Texas 75209
Attn: Mr. Frank J. Macari
Fax: (214) 358-1389
with copies to: Michael C. Witt, Esq.
8235 Douglas Avenue
Suite 210
Dallas, Texas 75225
Fax: (214) 691-9419
If to the Operating Partnership American Industrial Properties REIT
or the Company: 6210 N. Beltline Rd., Suite 170
Irving, TX 75063
Attn: Mr. Lewis D. Friedland
Fax: (972) 756-0704
with a copy to: Liddell, Sapp, Zivley,
Hill & LaBoon, L.L.P.
2001 Ross Avenue, Suite 3000
Dallas, Texas 75201-8001
Attn: Brad B. Hawley, Esq.
Fax: (214) 849-5599
14
<PAGE> 19
or to such other address as either party may from time to time designate by
written notice to the other. Notices given by (i) overnight delivery service
as aforesaid shall be deemed received and effective on the first business day
following such dispatch and (ii) telecopy or fax machine shall be deemed given
at the time and on the date of machine transmittal provided same is sent prior
to 5:00 p.m., Dallas, Texas time, on a business day (if sent later, then notice
shall be deemed given on the next business day) and if the sending party
receives a written send confirmation on its machine and forwards a copy thereof
by regular mail accompanied by such notice or communication. Notices may be
given by counsel for the parties described above, and such notices shall be
deemed given by said party, for all purposes hereunder.
ARTICLE 13. MISCELLANEOUS.
Section 13.1 Survival of Representation and Warranties. The
representations and warranties made by the Contributor in Article 4 and by the
Transferee in Article 5 shall survive the Closing for a period of one (1) year.
Any claim which the Transferee may have at any time against the Contributor for
a breach of any representation or warranty, whether known or unknown, which is
not asserted by written notice to the Contributor within such one (1) year
period shall not be valid or effective, and the Contributor shall have no
liability with respect thereto.
Section 13.2 Entire Agreement; No Third-Party Rights. This
Agreement constitutes the entire agreement between the parties and incorporates
and supersedes all prior negotiations and discussions between the parties.
This Agreement shall be binding upon and inure solely to the benefit of each
party hereto and their successors and assigns, and nothing in the Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 13.3 Amendment. This Agreement cannot be amended, waived
or terminated orally, but only by an agreement in writing signed by each party
hereto.
Section 13.4 Governing Law. This Agreement shall be performable
in Dallas County, Texas and shall be interpreted and governed by the laws of
the State of Texas, without regard to its rules of conflicts of laws and shall
be binding upon the parties hereto and their respective successors and assigns.
Section 13.5 Section Headings. The caption headings in this
Agreement are for convenience only and are not intended to be part of this
Agreement and shall not be construed to modify, explain or alter any of the
terms, covenants or conditions herein contained.
Section 13.6 Severability. If any term, covenant or condition of
this Agreement is held to be invalid, illegal or unenforceable in any respect,
this Agreement shall be construed without such provision.
15
<PAGE> 20
Section 13.7 No Other Rights or Obligations. Nothing contained
in this Agreement shall be deemed to create any rights or obligations of
partnership, joint venture or similar association between the Contributor and
the Company.
Section 13.8 Counterparts. This Agreement may be executed by the
parties hereto in counterparts, all of which together shall constitute a single
Agreement.
Section 13.9 Construction. All references herein to any Section
or Schedule shall be to the Sections of this Agreement and to the Schedules
annexed hereto unless the context clearly dictates otherwise. All of the
Schedules annexed hereto are, by this reference, incorporated herein.
Section 13.10 Representatives. Any approval, consent, mutual
satisfaction or similar determination required to be made hereunder by the
Contributor or any person included within such term shall be granted
exclusively by any one of the "CONTRIBUTOR REPRESENTATIVES", who for purposes
of this Agreement, until further notice to the Transferee Representative, shall
be Frank J. Macari, President of FJM, Inc., a Texas corporation, the sole
general partner of the Contributor. Any approval, consent, mutual satisfaction
or similar determination required to be made hereunder by the Transferee or any
person included in such term shall be granted exclusively by the "TRANSFEREE
REPRESENTATIVES", who for purposes of this Agreement, until further notice to
the Contributor Representatives, shall be Lewis D. Friedland, Vice President of
the Company.
Section 13.11 Attorneys' Fees. In the event of any litigation or
alternative dispute resolution between the Operating Partnership or the
Company, on the one hand, and the Contributor, on the other hand, in connection
with this Agreement or the transactions contemplated herein, the non-prevailing
party in such litigation or alternative dispute resolution shall be responsible
for payment of all expenses and reasonable attorneys' fees incurred by the
prevailing party. The provisions of this Section 13.11 shall survive the
Closing.
Section 13.12 Interpretation. Whenever used herein, the singular
number shall include the plural, the plural shall include the singular, and the
use of any gender shall be applicable to all genders.
Section 13.13 Indemnity for Transferee Acts. The Transferee
hereby agrees to indemnify, defend and hold the Contributor harmless form and
against any and all claims, judgments, damages, losses, penalties, fines,
demands, liabilities, encumbrances, liens, costs and expenses (including
attorneys' fees, court costs and costs of appeal) suffered or incurred by the
Contributor (i) to the extent arising out of or resulting from any entry on the
Property by the Transferee or its employees, agents or contractors, (ii)
pursuant to Section 4.1 of the Purchase Agreement to the extent arising out of
or resulting from any act or omission of the Transferee or any of its agents,
employees or contractors, and (iii) any claims made by Nationwide or any other
third party that result from or are alleged to be based on any wrongful act or
omission by the Transferee or any of its agents, employees or contractors
relating to or arising out of or in connection with this Agreement, the
Purchase Agreement and/or the Property or any portion thereof.
16
<PAGE> 21
Section 13.14 Indemnity for Contributor Acts. The Contributor
hereby agrees to indemnify, defend and hold the Transferee harmless form and
against any and all claims, judgments, damages, losses, penalties, fines,
demands, liabilities, encumbrances, liens, costs and expenses (including
attorneys' fees, court costs and costs of appeal) suffered or incurred by the
Transferee (i) to the extent arising out of or resulting from any entry on the
Property by the Contributor or its employees, agents or contractors, (ii)
pursuant to Section 4.1 of the Purchase Agreement to the extent arising out of
or resulting from any act or omission of the Contributor or any of its agents,
employees or contractors, and (iii) any claims made by Nationwide or any other
third party that result from or are alleged to be based on any wrongful act or
omission by the Contributor or any of its agents, employees or contractors
relating to or arising out of or in connection with this Agreement, the
Purchase Agreements and/or the Property or any portion thereof.
17
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date.
ALCU INVESTMENTS, LTD.
By: FJM, Inc.
General Partner
By: /s/ FRANK J. MACARI
---------------------------------
Name: Frank J. Macari
-------------------------------
Title: President
------------------------------
AIP OPERATING, L.P.
By: American Industrial Properties REIT
General Partner
By: /s/ [ILLEGIBLE]
---------------------------------
Name: [ILLEGIBLE]
-------------------------------
Title: Vice President
------------------------------
AMERICAN INDUSTRIAL PROPERTIES REIT
By: /s/ [ILLEGIBLE]
------------------------------------------
Name: [ILLEGIBLE]
----------------------------------------
Title: Vice President
---------------------------------------
<PAGE> 23
SCHEDULE 5.1(e)
TRANSFEREE LITIGATION
On August 20, 1997, a purported class action lawsuit (the "Lawsuit"),
which was filed in the Superior Court of the State of Arizona, was served upon
USAA Real Estate Company and certain other affiliated entities, the individual
members of the boards of directors of certain entities and the Company. The
Lawsuit alleges, among other things, breaches of fiduciary duty in connection
with the transactions contemplated by a merger agreement involving the Company
and certain partnerships affiliated with USAA Real Estate Company. The Lawsuit
seeks, among other things, to enjoin the consummation of the merger and
damages, including attorneys' fees and expenses. The defendants in the Lawsuit
believe that the plaintiff's claims are without merit and intend to defend
vigorously against the Lawsuit. However, no assurance can be given that the
plaintiffs in the Lawsuit will not be successful. If such plaintiffs were to
succeed in the Lawsuit prior to the effective time, a condition to the
obligations of the Company and the partnerships to consummate the merger would
not be satisfied, which would entitle the general partner of any partnership or
the trust managers of the Company to terminate the merger agreement and abandon
the merger. If such plaintiffs were to succeed in the Lawsuit after the
effective time, it could have a material adverse effect on the Company.
<PAGE> 1
EXHIBIT 10.4
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
AIP OPERATING, L.P.
DATED AS OF FEBRUARY _______, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I.
DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II.
ORGANIZATIONAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.1 ORGANIZATION; CONTINUATION. . . . . . . . . . . . . 12
SECTION 2.2 NAME . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.3 REGISTERED OFFICE AND AGENT; PRINCIPAL OFFICE . . . 12
SECTION 2.4 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . 13
SECTION 2.5 TERM . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE III.
PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.1 PURPOSE AND BUSINESS . . . . . . . . . . . . . . . 14
SECTION 3.2 POWERS . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE IV.
CAPITAL CONTRIBUTIONS AND ISSUANCES
OF PARTNERSHIP INTERESTS . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4.1 CAPITAL CONTRIBUTIONS OF THE PARTNERS . . . . . . . 15
SECTION 4.2 LOANS . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 4.3 NO PREEMPTIVE RIGHTS . . . . . . . . . . . . . . . 16
SECTION 4.4 OTHER CONTRIBUTION PROVISIONS . . . . . . . . . . . 16
SECTION 4.5 NO INTEREST ON CAPITAL . . . . . . . . . . . . . . 16
ARTICLE V.
DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 5.1 REQUIREMENT AND CHARACTERIZATION OF DISTRIBUTIONS . 16
SECTION 5.2 AMOUNTS WITHHELD . . . . . . . . . . . . . . . . . 17
ARTICLE VI.
ALLOCATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VII.
MANAGEMENT AND OPERATIONS OF BUSINESS . . . . . . . . . . . . . . . 19
SECTION 7.1 MANAGEMENT . . . . . . . . . . . . . . . . . . . . 19
SECTION 7.2 CERTIFICATE OF LIMITED PARTNERSHIP . . . . . . . . 23
SECTION 7.3 RESTRICTIONS ON GENERAL PARTNER'S AUTHORITY . . . . 23
SECTION 7.4 REIMBURSEMENT OF THE GENERAL PARTNER . . . . . . . 24
SECTION 7.5 OUTSIDE ACTIVITIES OF THE GENERAL PARTNER . . . . . 24
SECTION 7.6 INDEMNIFICATION . . . . . . . . . . . . . . . . . . 25
SECTION 7.7 LIABILITY OF THE GENERAL PARTNER . . . . . . . . . 27
SECTION 7.8 OTHER MATTERS CONCERNING THE GENERAL PARTNER . . . 28
SECTION 7.9 TITLE TO PARTNERSHIP ASSETS . . . . . . . . . . . . 29
SECTION 7.10 RELIANCE BY THIRD PARTIES. . . . . . . . . . . . . 29
ARTICLE VIII.
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS . . . . . . . . . . . . . 30
SECTION 8.1 LIMITATION OF LIABILITY . . . . . . . . . . . . . . 30
SECTION 8.2 MANAGEMENT OF BUSINESS . . . . . . . . . . . . . . 30
SECTION 8.3 OUTSIDE ACTIVITIES OF LIMITED PARTNERS . . . . . . 30
SECTION 8.4 RETURN OF CAPITAL . . . . . . . . . . . . . . . . . 31
SECTION 8.5 RIGHTS OF LIMITED PARTNERS RELATING TO THE
PARTNERSHIP . . . . . . . . . . . . . . . . . . . . 31
SECTION 8.6 PUT RIGHT . . . . . . . . . . . . . . . . . . . . . 31
SECTION 8.7 CALL RIGHT. . . . . . . . . . . . . . . . . . . . . 33
SECTION 8.8 CERTAIN TRANSFERS NOT CONSIDERED LIQUIDATING EVENTS.35
ARTICLE IX.
BOOKS, RECORDS, ACCOUNTING AND REPORTS . . . . . . . . . . . . . . . 35
SECTION 9.1 RECORDS AND ACCOUNTING . . . . . . . . . . . . . . 35
SECTION 9.2 FISCAL YEAR . . . . . . . . . . . . . . . . . . . . 36
SECTION 9.3 REPORTS . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE X.
TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 10.1 PREPARATION OF TAX RETURNS . . . . . . . . . . . . 36
SECTION 10.2 TAX ELECTIONS . . . . . . . . . . . . . . . . . . . 36
SECTION 10.3 TAX MATTERS PARTNER . . . . . . . . . . . . . . . . 36
SECTION 10.4 ORGANIZATIONAL EXPENSES . . . . . . . . . . . . . . 38
SECTION 10.5 WITHHOLDING . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE XI.
TRANSFERS AND WITHDRAWALS . . . . . . . . . . . . . . . . . . . . . 39
SECTION 11.1 TRANSFER . . . . . . . . . . . . . . . . . . . . . 39
SECTION 11.2 LIMITED PARTNERS' RIGHTS TO TRANSFER . . . . . . . 40
SECTION 11.3 SUBSTITUTED LIMITED PARTNERS . . . . . . . . . . . 40
SECTION 11.4 ASSIGNEES . . . . . . . . . . . . . . . . . . . . . 41
SECTION 11.5 GENERAL PROVISIONS . . . . . . . . . . . . . . . . 41
ARTICLE XII.
ADMISSION OF PARTNERS . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 12.1 ADMISSION OF SUCCESSOR GENERAL PARTNER . . . . . . 42
SECTION 12.2 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED
PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE XIII.
DISSOLUTION AND LIQUIDATION . . . . . . . . . . . . . . . . . . . . 43
SECTION 13.1 DISSOLUTION . . . . . . . . . . . . . . . . . . . . 43
SECTION 13.2 WINDING UP . . . . . . . . . . . . . . . . . . . . 43
SECTION 13.3 DEFICIT CAPITAL ACCOUNTS . . . . . . . . . . . . . 45
SECTION 13.4 DEEMED DISTRIBUTION AND RECONTRIBUTION . . . . . . 45
SECTION 13.5 RIGHTS OF LIMITED PARTNERS . . . . . . . . . . . . 46
SECTION 13.6 NOTICE OF DISSOLUTION . . . . . . . . . . . . . . . 46
SECTION 13.7 TERMINATION OF PARTNERSHIP AND CANCELLATION OF
CERTIFICATE OF LIMITED PARTNERSHIP . . . . . . . . . . . . . 46
SECTION 13.8 REASONABLE TIME FOR WINDING UP . . . . . . . . . . 46
SECTION 13.9 WAIVER OF PARTITION . . . . . . . . . . . . . . . . 46
SECTION 13.10 LIABILITY OF LIQUIDATOR . . . . . . . . . . . . . . 46
ARTICLE XIV.
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS . . . . . . . . . . . . 47
SECTION 14.1 AMENDMENTS . . . . . . . . . . . . . . . . . . . . 47
SECTION 14.2 MEETINGS OF THE PARTNERS . . . . . . . . . . . . . 48
ARTICLE XV.
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 15.1 ADDRESSES AND NOTICE . . . . . . . . . . . . . . . 49
SECTION 15.2 TITLE AND CAPTIONS . . . . . . . . . . . . . . . . 50
SECTION 15.3 PRONOUNS AND PLURALS . . . . . . . . . . . . . . . 50
SECTION 15.4 FURTHER ACTION . . . . . . . . . . . . . . . . . . 50
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 15.5 BINDING EFFECT . . . . . . . . . . . . . . . . . . 50
SECTION 15.6 CREDITORS . . . . . . . . . . . . . . . . . . . . . 50
SECTION 15.7 WAIVER . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 15.8 COUNTERPARTS . . . . . . . . . . . . . . . . . . . 50
SECTION 15.9 APPLICABLE LAW . . . . . . . . . . . . . . . . . . 51
SECTION 15.10 INVALIDITY OF PROVISIONS . . . . . . . . . . . . . 51
SECTION 15.11 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . 51
SECTION 15.12 NO RIGHTS AS SHAREHOLDERS . . . . . . . . . . . . . 51
</TABLE>
EXHIBIT A PARTNERS, CAPITAL ACCOUNTS AND PARTNERSHIP INTERESTS
EXHIBIT B CAPITAL ACCOUNT MAINTENANCE RULES
EXHIBIT C SPECIAL ALLOCATION RULES
EXHIBIT D FORM OF PUT NOTICE
EXHIBIT E FORM OF CALL NOTICE
EXHIBIT F FORM OF PARTNERSHIP UNIT CERTIFICATE
(iv)
<PAGE> 6
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
AIP OPERATING, L.P.
This Amended and Restated Agreement of Limited Partnership, dated as
of February ____, 1998 (this "Agreement"), is entered into by and among
American Industrial Properties REIT, a Texas real estate investment trust, as
General Partner and General Electric Capital Corporation ("GECC") and ALCU
Investments, Ltd. ("ALCU"), each as a Limited Partner (from time to time herein
ALCU, GECC, and each other Person who shall be admitted to the Partnership as a
limited partner in accordance with the terms of this Agreement shall herein be
collectively referred to as "Limited Partners" and each in the singular as a
"Limited Partner").
WHEREAS, AIP Operating, L.P. (the "Partnership") was formed under the
Delaware Revised Uniform Limited Partnership Act pursuant to an Agreement of
Limited Partnership dated January ____, 1998;
WHEREAS, the original partners in the Partnership desire to admit each
of GECC and ALCU to the Partnership as a Limited Partner upon the terms and
conditions set forth herein in connection with the withdrawal of the initial
limited partner of the Partnership.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
to continue the Partnership upon the following terms and conditions:
ARTICLE I.
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Act" means the Delaware Revised Uniform Limited Partnership Act, as
it may be amended from time to time, and any successor to such statute.
"Adjusted Capital Account" means the Capital Account maintained for
each Partner as of the end of each Partnership Year (i) increased by any
amounts which such Partner is obligated to restore pursuant to any provision of
this Agreement or is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5)
and (ii) decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
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<PAGE> 7
1.704-1(b)(2)(ii)(d)(6). The foregoing definition of Adjusted Capital Account
is intended to comply with the provisions of Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Adjusted Capital Account as of
the end of the relevant Partnership Year.
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Exhibit B hereto.
"Affiliate" means, with respect to any Person, (i) any Person directly
or indirectly controlling, controlled by or under common control with such
Person, (ii) any Person owning or controlling ten percent (10%) or more of the
outstanding voting interests of such Person, (iii) any Person of which such
Person owns or controls ten percent (10%) or more of the voting interests or
(iv) any officer, director, general partner or trustee of such Person or any
Person referred to in clauses (i), (ii), and (iii) above. For purposes of this
definition, "control," when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreed Value" means (i) in the case of any Contributed Property, the
704(c) Value of such property as of the time of its contribution to the
Partnership, reduced by any liabilities either assumed by the Partnership upon
such contribution or to which such property is subject when contributed; (ii)
in the case of the Capital Contribution made by ALCU to the Partnership under
Section 4.1.A, the initial "Agreed Value" shall mean $437,500; (iii) in the
case of the Capital Contribution made by GECC to the Partnership under Section
4.1.A, the initial "Agreed Value" shall mean $437,500; and (iv) in the case of
any property distributed to a Partner by the Partnership, the Partnership's
Carrying Value of such property at the time such property is distributed,
reduced by any indebtedness either assumed by such Partner upon such
distribution or to which such property is subject at the time of distribution
as determined under Section 752 of the Code and the Regulations thereunder.
"Agreement" means this Amended and Restated Agreement of Limited
Partnership, as it may be amended, supplemented or restated from time to time.
"Assignee" means a Person to whom one or more Partnership Units have
been transferred in a manner permitted under this Agreement, but who has not
become a Substituted Limited Partner, and who has only the rights set forth in
Section 11.4 hereof.
"Book-Tax Disparities" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax
2
<PAGE> 8
purposes as of such date. A Partner's share of the Partnership's Book-Tax
Disparities in all of its Contributed Property and Adjusted Property will be
reflected by the difference between such Partner's Capital Account balance as
maintained pursuant to Exhibit B hereto and the hypothetical balance of such
Partner's Capital Account computed as if it had been maintained, with respect
to each such Contributed Property or Adjusted Property, strictly in accordance
with federal income tax accounting principles.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in Dallas, Texas are authorized or required by law to
close.
"Call Notice" means a Call Notice substantially in the form of Exhibit
E.
"Call Right" has the meaning assigned to it in Section 8.7.A.
"Capital Account" means the Capital Account maintained for a Partner
pursuant to Exhibit B hereto. The Capital Account balance of each Partner who
is a Partner on the Effective Date shall be set forth opposite such Partner's
name on Exhibit A hereto.
"Capital Contribution" means, with respect to any Partner, any cash,
cash equivalents or the Agreed Value of Contributed Property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Section
4.1 hereof.
"Carrying Value" means (i) with respect to a Contributed Property or
Adjusted Property, the 704(c) Value of such property reduced (but not below
zero) by all Depreciation with respect to such Contributed Property or Adjusted
Property, as the case may be, charged to the Partners' Capital Accounts and
(ii) with respect to any other Partnership property, the adjusted basis of such
property for federal income tax purposes, all as of the time of determination.
The Carrying Value of any property shall be adjusted from time to time in
accordance with Exhibit B hereto, and to reflect changes, additions or other
adjustments to the Carrying Value for dispositions and acquisitions of
Partnership properties, as deemed appropriate by the General Partner.
"Cash Amount" means an amount of cash equal to the average of the
daily market price per share of Shares for the five consecutive trading days
prior to the Valuation Date multiplied by the number of Shares which comprise
the Share Consideration as of the Valuation Date. The market price for each
such trading day shall be the closing price per Share for such trading day as
listed on the New York Stock Exchange.
"Certificate" means the Certificate of Limited Partnership relating to
the Partnership 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.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to
3
<PAGE> 9
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.
"Consent" means the consent or approval of a proposed action by a
Partner given in accordance with Section 14.2 hereof.
"Consideration" means (i) the Cash Amount or (ii) the Share
Consideration, as determined by the General Partner, in its sole discretion.
"Contributed Property" means each property or other asset contributed
to the Partnership, in such form as may be permitted by this Agreement and the
Act, but excluding cash contributed or deemed contributed to the Partnership.
Once the Carrying Value of a Contributed Property is adjusted pursuant to
Exhibit B hereto, such property shall no longer constitute a Contributed
Property for purposes of Exhibit B hereto, but shall be deemed an Adjusted
Property for such purposes.
"Contribution Agreement" has the meaning assigned to it in Section
4.1.A.
"Debt" means, as to any Person, as of any date of determination, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, (ii) all amounts owed by such Person to banks or
other Persons in respect of reimbursement obligations under letters of credit,
surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person, (iii) all indebtedness for borrowed
money or for the deferred purchase price of property or services secured by any
lien on any property owned by such Person, to the extent attributable to such
Person's interest in such property, even though such Person has not assumed or
become liable for the payment thereof, and (iv) obligations of such Person
incurred in connection with entering into a lease which, in accordance with
generally accepted accounting principles, should be capitalized.
"Declaration of Trust" means the Third Amended and Restated
Declaration of Trust of the General Partner, as amended.
"Depreciation" means, for each Partnership Year, an amount equal to
the federal income tax depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such year, except that if the
Carrying Value of an asset differs from its adjusted basis for federal income
tax purposes at the beginning of such year or other period, Depreciation shall
be an amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the General Partner.
4
<PAGE> 10
"Dissolution Notice" has the meaning assigned to it in Section 13.6.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"General Partner" means American Industrial Properties REIT, a Texas
real estate investment trust.
"General Partner Interest" means the Partnership Interest held by the
General Partner in the capacity of a general partner. A General Partner
Interest may be expressed as a number of Partnership Units.
"GP Capital Contribution" means that certain Capital Contribution of
cash in the sum of $1,950,000 made by the General Partner to the Partnership in
accordance with Section 4.1.A. of this Agreement and shall be increased by the
aggregate Capital Contributions made by the General Partner to the Partnership
in accordance with Section 4.1.C of this Agreement.
"GP Return" means an amount which accrues and accumulates at the rate
of twenty percent (20%) per annum on the balance of the General Partner's
Unreturned Capital.
"IRS" means the Internal Revenue Service, which administers the
internal revenue laws of the United States.
"Immediate Family" means, with respect to any natural Person, such
natural Person's spouse, parent's, descendants, nephews, nieces, brothers and
sisters.
"Incapacity" or "Incapacitated" means, (i) as to any individual
Partner, death, total physical disability or entry by a court of competent
jurisdiction adjudicating such Partner incompetent to manage such Person's
affairs or 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
trustee of a trust which is a Partner, the termination of the trust (but not
the substitution of a new trustee), or (v) 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 of or against such Partner
under any bankruptcy, insolvency or other similar law now or hereafter in
effect, (b) the Partner is adjudged as bankrupt or insolvent, or a final and
nonappealable order for relief under any bankruptcy, insolvency or similar law
now or hereafter in effect has been entered against the Partner, (c) the
Partner executes and delivers a general assignment for the benefit of the
Partner's creditors, (d) the Partner files an answer or other pleading
admitting or failing to contest the material allegations of a petition filed
against the Partner in any proceeding of the nature described in clause (b)
above, (e) the Partner seeks, consents to or acquiesces in the appointment of
5
<PAGE> 11
a trustee, receiver or liquidator for the Partner or for all or any substantial
part of the Partner's assets, (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 one hundred twenty (120) days after the commencement thereof,
(g) the appointment without the Partner's consent or acquiescence of a trustee,
receiver or liquidator that has not been vacated or stayed within ninety (90)
days of such appointment or (h) an appointment referred to in clause (g) is not
vacated within ninety (90) days after the expiration of any such stay.
"Indemnitee" means (i) any Person made a party to a proceeding or
threatened with being made a party to a proceeding by reason of the Person's
status as (A) the General Partner, (B) a Limited Partner or (C) a trustee,
director, officer, employee or agent of the Partnership or the General Partner
or an Affiliate and (ii) such other Persons (including Affiliates of the
General Partner, a Limited 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.
"Limited Partners" means each Person who is identified as a Limited
Partner on Exhibit A of this Agreement as well as the General Partner to the
extent that it owns Partnership Units in the Partnership other than its General
Partner Interest.
"Limited Partner Interest" means a Partnership Interest held by a
Limited Partner in the Partnership in the capacity of a limited partner
representing a fractional part of the Partnership Interests of all Limited
Partners. A Limited Partner Interest may be expressed as a number of
Partnership Units.
"Liquidating Event" has the meaning set forth in Section 13.1 hereof.
"Liquidator" has the meaning set forth in Section 13.2.A hereof.
"LP Capital Contribution" means with respect to ALCU, the Agreed Value
of the Capital Contribution by ALCU to the Partnership under Section 4.1.A; and
means with respect to GECC, the Agreed Value of the Capital Contribution made
by GECC to the Partnership under Section 4.1.A.
"LP Return" means with regard to any fiscal period of the Partnership
during which a Limited Partner owns Partnership Units upon one or more
applicable record dates for a dividend distribution of the General Partner, a
cash amount equal in value to the aggregate cash dividends that would have been
payable to such Limited Partner in the event that such Limited Partner owned
Shares equal in number to the Share Consideration upon each such applicable
record date during that particular fiscal period of the Partnership.
"Net Capital Proceeds" means the net cash proceeds received by the
Partnership in connection with (i) any condemnation or deeding in lieu of
condemnation of all or a portion of any Partnership asset, (ii) any collection
in respect of property, hazard, or casualty insurance (but not
6
<PAGE> 12
business interruption insurance) or any damage award; or (iii) any other
transaction the proceeds of which, in accordance with generally accepted
accounting principles, are considered to be capital in nature (other than a
transaction described in the definition of "Net Financing Proceeds" or the
definition of "Net Sale Proceeds"), after deduction of (a) all costs and
expenses incurred by the Partnership with regard to such transactions and (b)
all amounts expended by the Partnership for the acquisition of additional
Partnership assets or for capital repairs or improvements to the Property with
such cash proceeds.
"Net Cash Flow from Capital Transactions" means for any fiscal period
of the Partnership, Net Financing Proceeds, plus Net Sale Proceeds, plus Net
Capital Proceeds.
"Net Cash Flow from Operations" shall mean, with respect to any fiscal
period of the Partnership, the excess, if any, of "Operating Receipts" over
"Expenditures." For purposes hereof, the term "Operating Receipts" means the
sum of (i) all cash receipts of the Partnership from all sources for such
period, other than Net Sale Proceeds, Net Financing Proceeds, Net Capital
Proceeds and Capital Contributions (other than such Capital Contributions as
shall be made by the General Partner to the Partnership under Section 4.1.C
hereof in order to repay any Unpaid L P Returns owing the Limited Partners),
plus (ii) any amounts held as reserves as of the last day of the period
immediately prior to such fiscal period that the General Partner deems to no
longer be necessary for any capital or operating expenditure permitted
hereunder. The term "Expenditures" means the sum of (a) all expenses of the
Partnership of any nature for such period, (b) all amounts attributable to
principal payments and interest on account of any indebtedness of the
Partnership including principal payments and interest on account of any
indebtedness owed to a Partner during such period, (c) any amounts attributable
to reasonable reserves (including, without limitation, reserves for expenses
which may be paid on an annual, semi-annual or other basis which occurs less
frequently than the fiscal period of the Partnership in question) which the
General Partner in its reasonable discretion deems necessary for any capital or
operating expenditures permitted hereunder or reasonable reserves for any other
purpose that the General Partner in its reasonable discretion shall determine
to be appropriate, and (d) any amounts attributable to working capital accounts
or other cash or similar balances which the General Partner reasonably
determines to be necessary or appropriate in its reasonable discretion.
"Net Financing Proceeds" shall mean the cash proceeds received by the
Partnership in connection with any borrowing or refinancing of borrowing by or
on behalf of the Partnership (whether or not secured), after deduction of (i)
all costs and expenses incurred by the Partnership in connection with such
borrowing, (ii) that portion of such proceeds used to repay any other
indebtedness of the Partnership, or any interest or premium thereon, and (iii)
that portion of such proceeds used to acquire additional property or assets for
the Partnership or to make any capital improvement or repair on the Property.
"Net Sale Proceeds" means the cash proceeds received by the
Partnership in connection with a sale of any asset by or on behalf of the
Partnership after deduction of (i) any costs or expenses
7
<PAGE> 13
incurred by the Partnership, or payable specifically out of the proceeds of
such sale (including, without limitation, any repayment of any indebtedness
required to be repaid as a result of such sale or which the General Partner
elects to repay out of the proceeds of such sale, together with accrued
interest and premium, if any, thereon and any sales commissions or other costs
and expenses due and payable to any Person in connection with a sale, including
to a Partner or its Affiliates), or (ii) any such proceeds reinvested in the
Property for capital repairs or improvements or otherwise used to acquire
additional assets for the Partnership.
"Net Income" means, for any taxable period, the excess, if any, of the
Partnership's items of income and gain for such taxable period over the
Partnership's items of loss and deduction for such taxable period. The items
included in the calculation of Net Income shall be determined in accordance
with Exhibit B hereto. If an item of income, gain, loss or deduction that has
been included in the initial computation of Net Income is subjected to the
special allocation rules in Exhibit C hereto, Net Income or the resulting Net
Loss, whichever the case may be, shall be recomputed without regard to such
item.
"Net Loss" means, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction for such taxable period over the
Partnership's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance with
Exhibit B hereto. If an item of income, gain, loss or deduction that has been
included in the initial computation of Net Loss is subjected to the special
allocation rules in Exhibit C hereto, Net Loss or the resulting Net Income,
whichever the case may be, shall be recomputed without regard to such item.
"Nonrecourse Built-in Gain" means, with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or negative
pledge securing a Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Partners pursuant to Section 2.B of Exhibit C hereto
if such properties were disposed of in a taxable transaction in full
satisfaction of such liabilities and for no other consideration.
"Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a
Partnership Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations
Section 1.752-1(a)(2).
"Partner" means the General Partner or a Limited Partner, and
"Partners" means the General Partner and the Limited Partners.
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
8
<PAGE> 14
"Partner Nonrecourse Debt" has the meaning set forth in Regulations
Section 1.704-2(b)(4).
"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 Year
shall be determined in accordance with the rules of Regulations Section
1.704-2(i)(2).
"Partnership" means the limited partnership formed under the Act and
continued upon the terms and conditions set forth in this Agreement, and any
successor thereto.
"Partnership Interest" means a Limited Partner Interest or the General
Partner Interest and includes any and all benefits to which the holder of such
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 Partnership Units.
"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 Partnership Minimum Gain, for a Partnership
Year shall be determined in accordance with the rules of Regulations Section
1.704-2(d).
"Partnership Unit" means a fractional, undivided share of the
Partnership Interests of all Partners issued pursuant to Section 4.1 hereof,
and includes any classes or series of Partnership Units established after the
date hereof. The number of Partnership Units outstanding and the Percentage
Interests in the Partnership represented by such Partnership Units are set
forth in Exhibit A hereto, as such Exhibit A may be amended and restated from
time to time. The ownership of Partnership Units may be evidenced by a
certificate in a form approved by the General Partner.
"Partnership Unit Certificate" means a certificate representing the
Partnership Interest of a Partner and issued in the form attached hereto as
Exhibit F.
"Partnership Year" means the fiscal year of the Partnership, which
shall be the calendar year.
"Percentage Interest" means, as to a Partner the Percentage Interest
expressed as a percentage of the whole set forth in Exhibit A attached hereto,
as such exhibit may be amended and restated from time to time.
"Person" means a natural person, partnership (whether general or
limited), trust, real estate investment trust, business trust, estate,
association, corporation, limited liability company, unincorporated
organization, custodian, nominee or any other individual or entity in its own
or any representative capacity.
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<PAGE> 15
"Property" means the land and improvements to be acquired by the
Partnership in accordance with the provisions of the Contribution Agreement.
"Put Notice" means a Put Notice substantially in the form of Exhibit
D.
"Put Right" has the meaning assigned to it in Section 8.6.A.
"Recapture Income" means any gain recognized by the Partnership
(computed without regard to any adjustment required by Sections 734, 743, and
754 of the Code) upon the disposition of any property or asset of the
Partnership, which gain is characterized as ordinary income because it
represents the recapture of deductions previously taken with respect to such
property or asset.
"Regulations" means the Income Tax Regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"REIT" means a real estate investment trust under Sections 856 through
859 of the Code.
"Residual Gain" or "Residual Loss" means any item of gain or loss, as
the case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of Contributed Property or
Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 2.B.(1)(b) or 2.B.(2)(b) of Exhibit C hereto to eliminate
Book-Tax Disparities.
"Return on Capital" means, collectively, the GP Return and the LP
Return.
"Securities Act" means the Securities Act of 1933, as amended.
"704(c) Value" means with respect to any Contributed Property the fair
market value of such property at the time of contribution as determined by the
General Partner using such reasonable method of valuation as it may adopt. The
General Partner shall, in its sole and absolute discretion, use such method as
it deems reasonable and appropriate to allocate the aggregate of the 704(c)
Values of Contributed Properties in a single or integrated transaction among
each separate property on a basis proportional to their fair market values.
"Share" means a common share of beneficial interest (or other
comparable common equity interest) of the General Partner.
"Share Consideration" means with respect to ALCU 29,166.5 Shares and
with respect to GECC 29,166.5. The number of Shares which constitute a Limited
Partner's Share Consideration hereunder shall automatically be adjusted in the
event of any (i) Share split, (ii) Share dividend, (iii) recapitalization, (iv)
merger or reorganization (collectively, an "Equity Adjustment"). In the event
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that an Equity Adjustment occurs with respect to the Shares prior to the
exercise of the Put Right or the Call Right, the Share Consideration with
respect to a Limited Partner shall automatically be adjusted to equal that
number of Shares into which the number of Shares which constitute the Share
Consideration (prior to the foregoing adjustment) would have been converted
following the Equity Adjustment, if such Limited Partner were the owner of such
Shares immediately prior to such Equity Adjustment.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership or joint venture, or other entity of
which a majority of (i) the voting power of the voting equity securities or
(ii) the value of outstanding equity interests is owned, directly or
indirectly, by such Person.
"Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.3 hereof.
"Unpaid Additional Return" means the Additional Preferred Return owing
the General Partner reduced by all amounts distributed to the General Partner
in reduction thereof.
"Unpaid LP Return" means the aggregate unpaid LP Return owing a
Limited Partner less all amounts distributed by the Partnership to the Limited
Partner in reduction thereof.
"Unpaid GP Return" means the accrued and unpaid GP Preferred Return on
the General Partner's Unreturned Capital reduced by all amounts distributed to
the General Partner in reduction thereof.
"Unrealized Gain" means, with respect to any item of Partnership
property as of any date of determination, the excess, if any, of (i) the fair
market value of such property (as determined under Exhibit B hereto) as of such
date, over (ii) the Carrying Value of such property (prior to any adjustment to
be made pursuant to Exhibit B hereto) as of such date.
"Unrealized Loss" means, with respect to any item of Partnership
property as of any date of determination, the excess, if any, of (i) the
Carrying Value of such property (prior to any adjustment to be made pursuant to
Exhibit B hereto) as of such date, over (ii) the fair market value of such
property (as determined under Exhibit B hereto) as of such date.
"Unreturned Capital" means (i) with respect to the General Partner
$1,950,000, less all amounts distributed by the Partnership to the General
Partner under Section 5.1.A(iii) and Section 13.2.A(5), in reduction thereof;
(ii) with respect to ALCU $437,500 less all amounts distributed by the
Partnership to ALCU under Section 13.2.A(6) in reduction thereof; and with
respect to GECC $437,500 less all amount distributed by the Partnership to GECC
under Section 13.2.A(6) in reduction thereof.
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"Valuation Date" means with respect to the Call Right, the date upon
which the General Partner delivers the pertinent Call Notice to a Limited
Partner, and with respect to the Put Right, the date upon which a Limited
Partner delivers the pertinent Put Notice to the General Partner.
ARTICLE II.
ORGANIZATIONAL MATTERS
SECTION 2.1 ORGANIZATION; CONTINUATION.
The Partnership is a limited partnership which is organized pursuant
to the provisions of the Act and continued upon the terms and conditions set
forth in this Agreement. 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.
SECTION 2.2 NAME.
The name of the Partnership is AIP Operating, L.P. The Partnership's
business may be conducted under any other name or names deemed advisable by the
General Partner, including the name of the General Partner or any Affiliate
thereof. The words "Limited Partnership," "L.P." "Ltd." or similar words or
letters shall be included in the Partnership's name where necessary for the
purposes of complying with the laws of any jurisdiction that so requires. The
General Partner in its sole and absolute discretion may change the name of the
Partnership at any time and from time to time and shall notify the Limited
Partners of such change in the next regular communication to the Limited
Partners.
SECTION 2.3 REGISTERED OFFICE AND AGENT; PRINCIPAL OFFICE.
The registered office of the Partnership in the State of Delaware
shall be located at The Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801 and the registered agent for
service of process on the Partnership in the State of Delaware at such
registered office shall be The Corporation Trust Company. The principal office
of the Partnership shall be 6210 N. Beltline Rd., Suite 170, Irving, Texas
75063, or such other place as the General Partner may from time to time
designate by notice to the Limited Partners. The Partnership may maintain
offices at such other place or places within or outside the State of Delaware
as the General Partner deems advisable.
SECTION 2.4 POWER OF ATTORNEY.
A. GENERAL. Each Limited Partner and each Assignee who accepts
Partnership Units (or any rights, benefits or privileges associated therewith)
is deemed to irrevocably constitute and
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appoint 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 any 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, (b) all
instruments that the General Partner or any Liquidator deems appropriate or
necessary to reflect any amendment, change, modification or restatement of this
Agreement in accordance with its terms, (c) all deeds, other conveyance
documents and other instruments or documents that the General Partner or any
Liquidator deems appropriate or necessary to reflect the dissolution and
liquidation of the Partnership pursuant to the terms of this Agreement,
including, without limitation, a certificate of cancellation, (d) all
instruments relating to the admission, withdrawal, removal or substitution of
any Partner pursuant to, or other events described in, Article XI, XII or XIII
hereof or the Capital Contribution of any Partner and (e) all certificates,
documents and other instruments relating to the determination of the rights,
preferences and privileges of Partnership Interests; and
(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.
B. IRREVOCABLE NATURE. 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 or any Liquidator to act as contemplated by this Agreement in
any filing or other action by it on behalf of the Partnership, and it shall
survive and not be affected by the subsequent Incapacity of any Limited Partner
or Assignee and the transfer of all or any portion of such Limited Partner's or
Assignee's Partnership Units and shall extend to such Limited Partner's or
Assignee's heirs, successors, assigns and personal representatives. Each such
Limited Partner or Assignee hereby agrees to be bound by any representation
made by the General Partner or any Liquidator, acting in good faith pursuant to
such power of attorney; and each such Limited Partner or Assignee hereby waives
any and all defenses which may be available to contest, negate or disaffirm the
action of the General Partner or any Liquidator, taken in good faith under such
power of attorney. Each Limited Partner or Assignee shall execute and deliver
to the General Partner or the Liquidator, within fifteen (15) days after
receipt of the General Partner's or Liquidator's request therefor, such further
designations, powers of attorney and other instruments as
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the General Partner or the Liquidator, as the case may be, deems necessary to
effectuate this Agreement and the purposes of the Partnership.
SECTION 2.5 TERM.
The term of the Partnership commenced upon the date on which the
Certificate was filed in the office of the Secretary of State of the State of
Delaware in accordance with the Act, and shall continue until December 31,
2047, unless the Partnership is dissolved sooner pursuant to the provisions of
Article XIII hereof or as otherwise provided by law.
ARTICLE III.
PURPOSE
SECTION 3.1 PURPOSE AND BUSINESS.
The purpose and nature of the business to be conducted by the
Partnership is (i) to conduct any business that may be lawfully conducted by a
limited partnership organized pursuant to the Act; provided, however, that such
business shall be limited to and conducted in such a manner as to permit the
General Partner at all times to be classified as a REIT, unless the General
Partner ceases to qualify, or is not qualified, as a REIT for any reason or
reasons not related to the business conducted by the Partnership; (ii) to enter
into any partnership, joint venture, limited liability company or other similar
arrangement to engage in any of the foregoing or the ownership of interests in
any entity engaged, directly or indirectly, in any of the foregoing; and (iii)
to do anything necessary or incidental to the foregoing. In connection with
the foregoing, and without limiting the General Partner's right in its sole
discretion to cease qualifying as a REIT, the Partners acknowledge that the
status of the General Partner as a REIT inures to the benefit of all the
Partners and not solely the General Partner or its Affiliates.
SECTION 3.2 POWERS.
The Partnership is empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described herein
and for the protection and benefit of the Partnership, including, without
limitation, full power and authority, directly or through its ownership
interest in other entities, to enter into, perform and carry out contracts of
any kind, borrow money and issue evidences of indebtedness whether or not
secured by mortgage, deed of trust, pledge or other lien, acquire, own, manage,
improve and develop real property, and lease, sell, transfer and dispose of
real property; provided, however, that the Partnership shall not take, or shall
refrain from taking, any action which, in the judgment of the General Partner,
in its sole and absolute discretion, (i) could
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adversely affect the ability of the General Partner to continue to qualify as a
REIT, (ii) could subject the General Partner 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
General Partner or its securities, unless such action (or inaction) shall have
been specifically consented to by the General Partner in writing.
ARTICLE IV.
CAPITAL CONTRIBUTIONS AND ISSUANCES
OF PARTNERSHIP INTERESTS
SECTION 4.1 CAPITAL CONTRIBUTIONS OF THE PARTNERS.
A. CAPITAL CONTRIBUTIONS TO THE PARTNERSHIP. Upon the
effective date hereof, (i) the General Partner shall make a cash contribution
to the Partnership in the sum of $1,950,000 (the "GP Capital Contribution"),
and each of ALCU and GECC shall contribute all of their respective right, title
and interest in and to that certain Contract of Sale by and between ALCU and
Nationwide Life Insurance Company to the Partnership, pursuant to the terms and
provisions of that certain Contribution Agreement dated to be effective January
29, 1998, by and among ALCU, the General Partner and the Partnership (the
"Contribution Agreement"). Upon the effective date hereof, the Partners'
Capital Accounts, the Partnership Units assigned to each Partner and the
Percentage Interest in the Partnership represented by such Partnership Units
shall be as set forth in the attached Exhibit A.
B. GENERAL PARTNER INTEREST. A number of Partnership
Units held by the General Partner equal to one percent (1%) of all outstanding
Partnership Units from time to time shall be deemed to be the Partnership Units
held by the General Partner as a general partner and shall be the General
Partner Interest. All other Partnership Units held by the General Partner shall
be deemed to be Limited Partner Interests, shall be held by the General Partner
in its capacity as a Limited Partner in the Partnership and shall entitle the
General Partner to all of the rights as a Limited Partner hereunder.
C. NO OBLIGATION TO MAKE ADDITIONAL CAPITAL
CONTRIBUTIONS. Except as provided in this Section 4.1.C and Section 10.5
hereof, the Partners shall have no obligation to make any additional Capital
Contributions or provide any additional funding to the Partnership (whether in
the form of loans, repayments of loans or otherwise). As soon as reasonably
practicable folloiwing the conclusion of each fiscal quarter of the
Partnership, the General Partner shall make additional Capital Contributoins to
the Partnership in such amount as shall be necessary to enable the Partnership
to repay any and all Unpaid L P Returns owing the Limited Partners. No Partner
shall
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have any obligation to restore any deficit that may exist in its Capital
Account, either upon a liquidation of the Partnership or otherwise.
SECTION 4.2 LOANS.
A. LOANS BY THE GENERAL PARTNER. The General Partner
may solicit and accept loans to the Partnership from such Persons (including
Affiliates of the Partnership or any Partner), at such times, in such amounts
and upon such terms as the General Partner, in its sole and absolute
discretion, may determine to be advisable.
SECTION 4.3 NO PREEMPTIVE RIGHTS.
Except to the extent expressly granted by the Partnership pursuant to
another agreement (as determined in good faith by the General Partner), no
Person shall have any preemptive, preferential or other similar right with
respect to (i) additional Capital Contributions or loans to the Partnership or
(ii) issuance or sale of any Partnership Units or other Partnership Interests.
SECTION 4.4 OTHER CONTRIBUTION PROVISIONS.
In the event that any Partner is admitted to the Partnership and is
given a Capital Account in exchange for services rendered to the Partnership,
such transaction shall be treated by the Partnership and the affected Partner
as if the Partnership had compensated such Partner in cash, and the Partner had
contributed such cash to the capital of the Partnership, unless the General
Partner and such affected Partner specifically agree otherwise.
SECTION 4.5 NO INTEREST ON CAPITAL.
No Partner shall be entitled to interest on its Capital Contributions
or its Capital Account. Under no circumstances shall the Return on Capital to
which a Partner may be entitled hereunder be construed as interest.
ARTICLE V.
DISTRIBUTIONS
SECTION 5.1 REQUIREMENT AND CHARACTERIZATION OF DISTRIBUTIONS.
A. NET CASH FLOW FROM OPERATIONS. The General Partner
shall distribute at least quarterly Net Cash Flow from Operations in such
amount as shall be determined by the General Partner in its reasonable
discretion in the following manner: (i) first, to the Limited Partners, pro
rata in proportion to the Unpaid LP Return owing each such Limited Partner, in
an amount equal to the
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Unpaid LP Return owing the Limited Partners; (ii) second, to the General
Partner in repayment of any Unpaid GP Return owing the General Partner; (iii)
third, to the General Partner in return of any Unreturned Capital due the
General Partner; and (iv) finally, to the Partners in accordance with their
Percentage Interests.
B. NET CASH FLOW FROM CAPITAL TRANSACTIONS. The General
Partner shall distribute at least quarterly Net Cash Flow from Capital
Transactions in such amount as shall be determined by the General Partner in
its reasonable discretion in accordance with the provisions of Section 13.2.A
hereof.
C. PUT/CALL DISTRIBUTIONS. If the exercise of the Put
Right or Call Right entitles a Limited Partner to any dividend on Shares owned
or deemed owned by such Limited Partner on or after the record date for such
dividend, the distributions pursuant to this Article V with respect to any
Unpaid LP Return to which a Limited Partner would otherwise be entitled for the
period including such record date shall be offset (and the LP Return reduced)
by any such dividend to which such Limited Partner is entitled.
D. SECTION 707 OF THE CODE. The General Partner shall
make such reasonable efforts, as determined by the General Partner in its sole
and absolute discretion and consistent with the qualification of the General
Partner as a REIT, to make distributions to the Partners so as to preclude any
such distribution or portion thereof from being treated as part of a sale of
property of the Partnership by a Partner under Section 707 of the Code or the
Regulations thereunder; provided that the General Partner and the Partnership
shall not have liability to any Partner under any circumstances as a result of
any distribution to a Limited Partner being so treated.
SECTION 5.2 AMOUNTS WITHHELD.
All amounts withheld pursuant to the Code or any provisions of any
state or local tax law and Section 10.5 hereof with respect to any allocation,
payment or distribution to the General Partner, the Limited Partners or
Assignees shall be treated as amounts distributed to the General Partner,
Limited Partners or Assignees pursuant to Section 5.1 above for all purposes
under this Agreement.
ARTICLE VI.
ALLOCATIONS
SECTION 6.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES
For purposes of maintaining the Capital Accounts and in determining
the rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Exhibit B hereto) shall
be allocated among the Partners in each taxable year (or
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portion thereof) as provided herein below.
A. NET INCOME. After giving effect to the special
allocations set forth in Section 1 of Exhibit C, Net Income (and to the extent
necessary to accomplish the purposes hereof, items of gross income and gain)
shall be allocated (i) first, to each Limited Partner in an amount equal to the
cumulative distributions by the Partnership to each such Limited Partner which
are attributable to the LP Return payable to such Limited Partner less the
cumulative allocations of Net Income made previously to such Limited Partner
under this clause (i); (ii) second, to the General Partner in an amount equal
to the cumulative distributions by the Partnership to the General Partner which
are attributable to the GP Return payable to the General Partner less the
cumulative allocations of Net Income made previously to the General Partner
under this clause (ii); (iii) third, to the General Partner in an amount equal
to the cumulative Net Losses allocated to the General Partner pursuant to
clause (iii) of Section 6.1.B below less the cumulative allocations of Net
Income made previously to the General Partner under this clause (iii); (iv)
fourth, to each Limited Partner in an amount equal to the cumulative Net Losses
allocated to each such Limited Partner under clause (ii) of Section 6.1.B less
the cumulative allocations of Net Income made previously by the Partnership to
each such Limited Partner under this clause (iv); and (v) finally, the balance,
if any, shall be allocated to the Partners in accordance with and in proportion
to their respective Percentage Interests in the Partnership.
B. NET LOSSES. After giving effect to the special
allocations set forth in Section 1 of Exhibit C, Net Losses (and to the extent
necessary to accomplish the purposes hereof, items of loss, expense and
deduction) shall be allocated (i) first, to the Partners until the cumulative
Net Losses allocated to the Partners under this clause (i) equal the cumulative
Net Income allocated to each Partner under clause (v) of Section 6.1.A.; (ii)
second, to the Limited Partners pro rata in proportion to the Adjusted Capital
Account balance of each Partner, prior to the allocation under this clause (ii)
until each Limited Partner's Adjusted Capital Account Balance shall be reduced
to zero; (iii) third, to the General Partner, in an amount equal to the General
Partner's Adjusted Capital Account balance prior to the allocation under this
clause (iii); (iv) fourth, to the General Partner, to the extent that any
further allocation of Net Losses to the Limited Partners would result in any
such Limited Partner having an Adjusted Capital Account Deficit.
C. ALLOCATION OF NONRECOURSE DEBT. For purposes of
Regulations Section 1.752-3(a), the Partners agree that Nonrecourse Liabilities
of the Partnership in excess of the sum of (i) the amount of Partnership
Minimum Gain and (ii) the total amount of Nonrecourse Built-in Gain shall be
allocated among the Partners in accordance with their respective Percentage
Interests.
D. RECAPTURE INCOME. Any gain allocated to the Partners
upon the sale or other taxable disposition of any Partnership asset shall, to
the extent possible after taking into account other required allocations of
gain pursuant to Exhibit C hereto, be characterized as Recapture Income in the
same proportions and to the same extent as such Partners have been allocated
any deductions directly or indirectly giving rise to the treatment of such
gains as Recapture Income.
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E. ALLOCATIONS BY GENERAL PARTNER TO REFLECT ECONOMIC
RIGHTS. In the event the General Partner shall determine, in its good faith
judgment, that it is necessary to modify the manner in which the Partnership's
items of income, gain, loss and deduction shall be allocated among the Partners
in a taxable year (or portion thereof) in order to cause such allocation to
reflect accurately the relative economic rights of the Partners, the General
Partner may make such a modification; provided that such modification is not
reasonably expected to have an adverse effect on the amounts distributable to
any Partner pursuant to Section 13.2 hereof upon the dissolution of the
Partnership (assuming for this purpose that such distributions are intended to
be made as set forth in Article V hereof).
ARTICLE VII.
MANAGEMENT AND OPERATIONS OF BUSINESS
SECTION 7.1 MANAGEMENT.
A. POWERS OF GENERAL PARTNER. Except as otherwise
expressly provided in this Agreement, all management powers over the business
and affairs of the Partnership are and shall be exclusively vested in the
General Partner, and no Limited Partner shall have any right to participate in
or exercise control or management power over the business and affairs of the
Partnership. The General Partner may not be removed by the Limited Partners
with or without cause. In addition to the powers now or hereafter granted a
general partner of a limited partnership under applicable law or which are
granted to the General Partner under any other provision of this Agreement, the
General Partner, subject to Section 7.3 below, shall have full power and
authority to do all things deemed necessary or desirable by it to conduct the
business of the Partnership, to exercise all powers set forth in Section 3.2
hereof and to effectuate the purposes set forth in Section 3.1 hereof,
including, without limitation:
(1) the making of any expenditures, the lending or
borrowing of money (including, without limitation, making prepayments on loans
and borrowing money to permit the Partnership to make distributions to its
Partners in such amounts as will permit the General Partner (as long as the
General Partner qualifies as a REIT) to avoid the payment of any federal income
tax (including, for this purpose, any excise tax pursuant to Section 4981 of
the Code) and to make distributions to its shareholders sufficient to permit
the General Partner to maintain REIT status), the assumption or guarantee of,
or other contracting for, indebtedness and other liabilities, the issuance of
evidences of indebtedness (including the securing of same by deed to secure
debt, mortgage, deed of trust or other lien or encumbrance on the Partnership's
assets) and the incurring of any obligations the General Partner deems
necessary for the conduct of the activities of the Partnership and the granting
of security interests in the assets of the Partnership in order to secure
indebtedness of the Partnership, the General Partner or their respective
Affiliates;
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(2) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership;
(3) the acquisition, disposition, mortgage, pledge,
encumbrance, hypothecation or exchange of any or all of the assets of the
Partnership (including the exercise or grant of any conversion, option,
privilege or subscription right or other right available in connection with any
assets at any time held by the Partnership) or the merger or other combination
of the Partnership with or into another entity, on such terms as the General
Partner deems proper (all of the foregoing subject to any prior approval only
to the extent required by Section 7.3 hereof);
(4) the use of the assets of the Partnership (including,
without limitation, cash on hand) for any purpose consistent with the terms of
this Agreement and on any terms it sees fit, including, without limitation, the
financing of the conduct of the operations of the General Partner, the
Partnership or any of the Partnership's Subsidiaries, the lending of funds to
other Persons (including, without limitation, the General Partner, and its
Affiliates) and the repayment of obligations of the Partnership and its
Affiliates and/or any other Person in which the Partnership has an equity
investment and the making of capital contributions to its Affiliates;
(5) the management, operation, leasing, landscaping,
repair, alteration, demolition or improvement of any real property or
improvements owned by the Partnership or any Subsidiary of the Partnership;
(6) the negotiation, execution, and performance of any
contracts, conveyances or other instruments that the General Partner considers
useful or necessary to the conduct of the Partnership's operations or the
implementation of the General Partner's powers under this Agreement, including
contracting with contractors, developers, consultants, accountants, legal
counsel, other professional advisors and other agents and the payment of their
expenses and compensation out of the Partnership's assets;
(7) the distribution of Partnership cash or other
Partnership assets in accordance with this Agreement;
(8) the holding, managing, investing and reinvesting of
cash and other assets of the Partnership;
(9) the collection and receipt of revenues and income of
the Partnership;
(10) the establishment of one or more divisions of the
Partnership, the selection and dismissal of employees of the Partnership, any
division of the Partnership, or the General Partner (including, without
limitation, employees having titles such as "president," "vice president,"
"secretary" and "treasurer") and agents, outside attorneys, accountants,
consultants and contractors
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of the General Partner, the Partnership, or any division of the Partnership and
the determination of their compensation and other terms of employment or
hiring;
(11) the maintenance of such insurance for the benefit of
the Partnership and the Partners as it deems necessary or appropriate;
(12) the formation of, or acquisition of an interest in,
and the contribution of property to, any corporation, limited or general
partnerships, joint ventures, limited liability companies or other
relationships that it deems desirable (including, without limitation, the
acquisition of interests in, and the contributions of property to its
Subsidiaries and any other Person in which may have an equity investment from
time to time);
(13) the control of any matters affecting the rights and
obligations of the Partnership, including the settlement, compromise,
submission to arbitration or any other form of dispute resolution or
abandonment of any claim, cause of action, liability, debt or damages due or
owing to or from the Partnership, the commencement or defense of suits, legal
proceedings, administrative proceedings, arbitrations or other forms of dispute
resolution, the representation of the Partnership in all suits or legal
proceedings, administrative proceedings, arbitrations or other forms of dispute
resolution, the incurring of legal expense and the indemnification of any
Person against liabilities and contingencies to the extent permitted by law;
(14) the undertaking of any action in connection with the
Partnership's direct or indirect investment in its Subsidiaries or any other
Person (including, without limitation, the contribution or loan of funds by the
Partnership to such Persons), incurring indebtedness on behalf of such Persons
or the guarantee of the obligations of such Persons;
(15) the determination of the fair market value of any
Partnership property distributed in kind, using such reasonable method of
valuation as the General Partner may adopt;
(16) the exercise, directly or indirectly, through any
attorney-in-fact acting under a general or limited power of attorney, of any
right, including the right to vote, appurtenant to any assets or investment
held by the Partnership;
(17) the exercise of any of the powers of the General
Partner enumerated in this Agreement on behalf of or in connection with any
Subsidiary of the Partnership or any other Person in which the Partnership has
a direct or indirect interest, individually or jointly with any such Subsidiary
or other Person;
(18) the exercise of any of the powers of the General
Partner enumerated in this Agreement on behalf of any Person in which the
Partnership does not have any interest pursuant to contractual or other
arrangements with such Person;
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(19) the making, executing and delivering of any and all
deeds, leases, notes, deeds to secure debt, mortgages, deeds of trust, security
agreements, conveyances, contracts, guarantees, warranties, indemnities,
waivers, releases or other legal instruments or agreements in writing necessary
or appropriate in the judgment of the General Partner for the accomplishment of
any of the powers of the General Partner under this Agreement;
(20) the amendment and restatement of Exhibit A hereto to
reflect accurately at all times the Capital Accounts, Partnership Units, and
Percentage Interests of the Partners as the same are adjusted from time to time
to the extent necessary to reflect redemptions, Capital Contributions, the
issuance of Partnership Units, the admission of any Substituted Limited Partner
or otherwise, as long as the matter or event being reflected in Exhibit A
hereto otherwise is authorized by this Agreement; and
(21) the employment and compensation of Persons to provide
goods and/or services to the Partnership and the adoption on behalf of the
Partnership, of employee benefit plans for the benefit of employees of the
General Partner, the Partnership or any Affiliate or Subsidiary of either of
them in respect of services performed for the benefit of the Partnership or its
Subsidiaries.
B. NO APPROVAL BY LIMITED PARTNERS. Each of the Limited
Partners agrees that the General Partner is authorized to execute, deliver and
perform the above-mentioned agreements and transactions on behalf of the
Partnership without any further act, approval or vote of the Partners,
notwithstanding any other provision of this Agreement (except as expressly
provided to the contrary in Section 7.3), the Act or any applicable law, rule
or regulation, to the full extent permitted under the Act or other applicable
law. 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. INSURANCE. At all times from and after the date
hereof, the General Partner, at the expense of the Partnership, may cause the
Partnership to obtain and maintain (i) casualty, liability and other insurance
on the properties of the Partnership, (ii) liability insurance for the
Indemnities hereunder and (iii) such other insurance as the General Partner, in
its reasonable discretion, determines to be necessary.
D. WORKING CAPITAL AND OTHER RESERVES. At all times from
and after the date hereof, the General Partner may cause the Partnership to
establish and maintain working capital reserves in such amounts as the General
Partner, in its sole and absolute discretion, deems appropriate and reasonable
from time to time.
E. NO OBLIGATIONS TO CONSIDER TAX CONSEQUENCES OF
LIMITED PARTNERS. In
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exercising its authority under this Agreement, the General Partner may, but
shall be under no obligation to, take into account the tax consequences to any
Partner (including the Limited Partners) of any action taken (or not taken) by
it. The General Partner and the Partnership shall not have liability to any
Limited Partner for monetary damages or otherwise for losses sustained,
liabilities incurred or benefits not derived by such Limited Partner in
connection with such decisions.
F. PARTNER LOANS. Notwithstanding the provisions of
Section 7.1.A of this Agreement, the General Partner shall not cause the
Partnership to borrow funds from any Partner nor any Affiliate unless any such
loan shall be upon such terms and conditions as could reasonably be obtained by
the Partnership from an unrelated third party lender.
SECTION 7.2 CERTIFICATE OF LIMITED PARTNERSHIP.
The General Partner shall use all reasonable efforts to cause to be
filed a Certificate of Limited Partnership and such certificates or documents
as may be reasonable and necessary or appropriate for the formation,
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, the District of Columbia or other jurisdiction 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 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, the
District of Columbia or other jurisdiction in which the Partnership may elect
to do business or own property. 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.
SECTION 7.3 RESTRICTIONS ON GENERAL PARTNER'S AUTHORITY.
A. GENERAL. The General Partner may not take any action
in contravention of an express prohibition or limitation of this Agreement or
any action that reasonably could be expected to cause the Partnership not to
qualify as a "partnership" for federal income tax purposes without the written
Consent of (i) all of the Limited Partners or (ii) such lower percentage of the
Limited Partner Interests as may be specifically provided for under a provision
of this Agreement or the Act.
B. RESTRICTIONS WITH RESPECT TO THE PROPERTY.
Notwithstanding any provision of this Agreement to the contrary, during the
period commencing upon the effective date hereof and ending upon February 12,
1999, without the prior unanimous written consent of the Limited Partners, the
General Partner shall not sell all or any portion of the Property.
SECTION 7.4 REIMBURSEMENT OF THE GENERAL PARTNER.
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A. NO COMPENSATION. Except as provided in this Section
7.4 and elsewhere in this Agreement (including the provisions of Articles V and
VI hereof 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. RESPONSIBILITY FOR PARTNERSHIP EXPENSES. The
Partnership shall be responsible for and shall pay all expenses relating to the
Partnership's organization, the ownership of its assets and its operations. The
General Partner shall be reimbursed on a monthly basis, or such other basis as
the General Partner may determine in its good faith discretion, for all
expenses it, and/or its Affiliates incur relating to the operation of, or for
the benefit of, the Partnership. The General Partner shall determine in good
faith the amount of expenses incurred by the General Partner and its Affiliates
related to the operation of, or for the benefit of, the Partnership. In the
event that certain expenses are incurred for the benefit of both the
Partnership and other entities (including the General Partner or any of its
Affiliates), such expenses will be allocated to the Partnership and such other
entities in such a manner as the General Partner in its good faith discretion
deems fair and reasonable. Such reimbursements shall be in addition to any
reimbursement to the General Partner, and/or its Affiliates pursuant to Section
10.3.C hereof and as a result of indemnification pursuant to Section 7.6 below.
All payments and reimbursements hereunder shall be characterized for federal
income tax purposes as expenses of the Partnership incurred on its behalf, and
not as expenses of the General Partner, and/or its Affiliates.
C. REIMBURSEMENT NOT A DISTRIBUTION. If and to the
extent any reimbursement made pursuant to this Section 7.4 is determined for
federal income tax purposes not to constitute a payment of expenses of the
Partnership, the amount so determined shall constitute a guaranteed payment
under Section 707 of the Code, shall be treated consistently therewith by the
Partnership and all Partners and shall not be treated as a distribution for
purposes of computing the Partners' Capital Accounts.
SECTION 7.5 OUTSIDE ACTIVITIES OF THE GENERAL PARTNER.
The General Partner shall devote to the Partnership such time
as may be necessary for the proper performance of its duties as General
Partner, but the General Partner is not required, and is not expected, to
devote its full time to the performance of such duties. It is understood that
the General Partner, and its officers, directors, employees, agents, trustees,
Affiliates, Subsidiaries and shareholders shall have substantial business
interests and engage in substantial business activities in addition to those
relating to the Partnership, including, without limitation, engaging in other
business interests and activities which are in direct or indirect competition
with the Partnership. Neither the Partnership nor any Partners shall have any
right by virtue of this Agreement or the partnership relationship established
hereby in or to such other ventures or activities or to the income or proceeds
derived therefrom, and the pursuit of such ventures, even if directly
competitive with the business of the Partnership, shall not be deemed wrongful
or improper in any manner. Neither the General Partner nor any Affiliate of
the General Partner shall be obligated to present any
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particular opportunity to the Partnership even if such opportunity is of a
character which, if presented to the Partnership, could be taken by the
Partnership, and, regardless of whether or not such opportunity is competitive
with the Partnership. The General Partner, and any Affiliate of the General
Partner shall have the right to take for its own account (individually or as a
shareholder, member, trustee, partner or fiduciary), or to recommend to others,
any such particular opportunity. The General Partner, and its Affiliates may
hold Limited Partner Interests and shall be entitled to exercise all rights of
a Limited Partner relating to such Limited Partner Interests.
SECTION 7.6 INDEMNIFICATION.
A. GENERAL. THE PARTNERSHIP SHALL INDEMNIFY EACH
INDEMNITEE FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES,
JOINT OR SEVERAL, EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND
OTHER LEGAL FEES AND EXPENSES), JUDGMENTS, FINES, SETTLEMENTS AND OTHER AMOUNTS
ARISING FROM OR IN CONNECTION WITH ANY AND ALL CLAIMS, DEMANDS, ACTIONS, SUITS
OR PROCEEDINGS, CIVIL, CRIMINAL, ADMINISTRATIVE OR INVESTIGATIVE INCURRED BY
THE INDEMNITEE AND RELATING TO THE PARTNERSHIP, OR ITS OPERATIONS, AS SET FORTH
IN THIS AGREEMENT, IN WHICH ANY SUCH INDEMNITEE MAY BE INVOLVED, OR IS
THREATENED TO BE INVOLVED, AS A PARTY OR OTHERWISE, UNLESS IT IS ESTABLISHED BY
A FINAL DETERMINATION OF A COURT OF COMPETENT JURISDICTION THAT: (I) THE ACT OR
OMISSION OF THE INDEMNITEE WAS MATERIAL TO THE MATTER GIVING RISE TO THE
PROCEEDING AND EITHER WAS COMMITTED IN BAD FAITH OR WAS THE RESULT OF ACTIVE
AND DELIBERATE DISHONESTY, (II) THE INDEMNITEE ACTUALLY RECEIVED AN IMPROPER
PERSONAL BENEFIT IN MONEY, PROPERTY OR SERVICES OR (III) IN THE CASE OF ANY
CRIMINAL PROCEEDING, THE INDEMNITEE HAD REASONABLE CAUSE TO BELIEVE THAT THE
ACT OR OMISSION WAS UNLAWFUL. WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL
EXTEND TO ANY LIABILITY OF ANY INDEMNITEE, PURSUANT TO A LOAN GUARANTEE,
CONTRACTUAL OBLIGATIONS FOR ANY INDEBTEDNESS OR OTHER OBLIGATIONS OR OTHERWISE,
FOR ANY INDEBTEDNESS OF THE PARTNERSHIP OR ANY SUBSIDIARY OF THE PARTNERSHIP
(INCLUDING, WITHOUT LIMITATION, ANY INDEBTEDNESS WHICH THE PARTNERSHIP OR ANY
SUBSIDIARY OF THE PARTNERSHIP HAS ASSUMED OR TAKEN SUBJECT TO), AND THE GENERAL
PARTNER IS HEREBY AUTHORIZED AND EMPOWERED, ON BEHALF OF THE PARTNERSHIP, TO
ENTER INTO ONE OR MORE INDEMNITY AGREEMENTS CONSISTENT WITH THE PROVISIONS OF
THIS SECTION 7.6.A IN FAVOR OF ANY INDEMNITEE HAVING OR POTENTIALLY HAVING
LIABILITY FOR ANY SUCH INDEBTEDNESS. THE TERMINATION OF ANY PROCEEDING BY
JUDGMENT, ORDER OR SETTLEMENT DOES NOT CREATE A PRESUMPTION THAT THE
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INDEMNITEE DID NOT MEET THE REQUISITE STANDARD OF CONDUCT SET FORTH IN THIS
SECTION 7.6.A. THE TERMINATION OF ANY PROCEEDING BY CRIMINAL CONVICTION OR UPON
A PLEA OF NOLO CONTENDERE OR ITS EQUIVALENT, OR AN ENTRY OF AN ORDER OF
PROBATION PRIOR TO JUDGMENT, CREATES A REBUTTABLE PRESUMPTION THAT THE
INDEMNITEE ACTED IN A MANNER CONTRARY TO THAT SPECIFIED IN THIS SECTION 7.6.A
WITH RESPECT TO THE SUBJECT MATTER OF SUCH PROCEEDING. ANY INDEMNIFICATION
PURSUANT TO THIS SECTION 7.6.A SHALL BE MADE ONLY OUT OF THE ASSETS OF THE
PARTNERSHIP, AND ANY INSURANCE PROCEEDS FROM THE LIABILITY POLICY COVERING THE
GENERAL PARTNER AND ANY INDEMNITIES, 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.A.
B. ADVANCEMENT OF EXPENSES. Reasonable expenses
expected to be incurred by an Indemnitee shall be paid or reimbursed by the
Partnership in advance of the final disposition of any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative
made or threatened against an Indemnitee upon receipt by the Partnership of (i)
a written affirmation by the Indemnitee of the Indemnitee's good faith belief
that the standard of conduct necessary for indemnification by the Partnership
as authorized in Section 7.6.A has been met and (ii) a written undertaking by
or on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
C. NO LIMITATION OF RIGHTS. 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, 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 Indemnitee is
indemnified.
D. INSURANCE. The Partnership may 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 Persons in connection with the
Partnership's activities, regardless of whether the Partnership would have the
power to indemnify such Persons against such liability under the provisions of
this Agreement.
E. NO PERSONAL LIABILITY FOR LIMITED PARTNERS. In no
event may an Indemnitee subject any of the Partners to personal liability by
reason of the indemnification provisions set forth in this Agreement.
F. INTERESTED TRANSACTIONS. 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
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with respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
G. BENEFIT. The provisions of this Section 7.6 are for
the benefit of the Indemnities, 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 obligation 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 related 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.
H. INDEMNIFICATION PAYMENTS NOT DISTRIBUTIONS. If and
to the extent any payments to any Partner pursuant to this Section 7.6
constitute gross income to such Partner (as opposed to the repayment of
advances made on behalf of the Partnership), such amounts shall constitute
guaranteed payments within the meaning of Section 707(c) of the Code, shall be
treated consistently therewith by the Partnership and all Partners, and shall
not be treated as distributions for purposes of computing the Partners' Capital
Accounts.
SECTION 7.7 LIABILITY OF THE GENERAL PARTNER.
A. GENERAL. Notwithstanding anything to the contrary
set forth in this Agreement, neither the General Partner, nor the trustees,
directors and officers of the General Partner, or any Affiliate of the General
Partner, shall be liable for monetary damages to the Partnership, any Partners
or any Assignees for losses sustained, liabilities incurred or benefits not
derived as a result of errors in judgment or mistakes of fact or law or of any
act or omission if the General Partner acted in good faith.
B. NO OBLIGATION TO CONSIDER SEPARATE INTERESTS OF
LIMITED PARTNERS OR SHAREHOLDERS. The Limited Partners expressly acknowledge
that the General Partner is acting on behalf of the Partnership, and the
shareholders of the General Partner collectively, that the General Partner is
under no obligation to consider the separate interests of the Limited Partners
(including, without limitation, the tax consequences to Limited Partners or
Assignees) in deciding whether to cause the Partnership to take (or decline to
take) any actions, and that neither the General Partner, nor any of its
Affiliates, shall be liable for monetary damages or otherwise for losses
sustained, liabilities incurred or benefits not derived by Limited Partners in
connection with such decisions, provided that the General Partner has acted in
good faith.
C. ACTIONS OF AGENTS. The General Partner may exercise
any of the powers granted to it by this Agreement and perform any of the duties
imposed upon it hereunder either directly or by or through its agents. Neither
the General Partner, nor any of its Affiliates, shall be responsible for any
misconduct or negligence on the part of any such agent appointed by the General
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Partner in good faith.
D. EFFECT OF AMENDMENT. 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 liability of the General
Partner, or any Affiliate of the General Partner, to the Partnership and the
Limited Partners under this Section 7.7 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be
asserted.
SECTION 7.8 OTHER MATTERS CONCERNING THE GENERAL PARTNER.
A. RELIANCE ON DOCUMENTS. 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. RELIANCE ON ADVISORS. The General Partner may consult
with legal counsel, accountants, appraisers, management consultants, investment
bankers, architects, engineers, environmental consultants and other consultants
and advisors selected by it, and any act taken or omitted to be taken in
reliance upon the opinion of such Persons as to matters which the General
Partner reasonably believes to be within such Persons' professional or expert
competence shall be conclusively presumed to have been done or omitted in good
faith and in accordance with such opinion.
C. ACTION THROUGH AGENTS. The General Partner shall have
the right, in respect of any of its powers or obligations hereunder, to act
through any of its duly authorized officers and a duly appointed attorney or
attorneys-in-fact. Each such attorney shall, to the extent provided by the
General Partner in the power of attorney, have full power and authority to do
and perform each and every act and duty which is permitted or required to be
done by the General Partner hereunder.
D. ACTIONS TO MAINTAIN REIT STATUS OR AVOID TAXATION OF
THE GENERAL PARTNER. 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 General
Partner to continue to qualify as a REIT or (ii) to allow the General Partner
to avoid incurring any liability for taxes under Section 857 or 4981 of the
Code, is expressly authorized under this Agreement and is deemed approved by
all of the Limited Partners.
SECTION 7.9 TITLE TO PARTNERSHIP ASSETS.
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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 assets for which
legal title is held in the name of the General Partner or any nominee or
Affiliate of the General Partner shall be held by the General Partner for the
use and benefit of the Partnership in accordance with the provisions of this
Agreement. All Partnership assets shall be recorded as the property of the
Partnership in its books and records, irrespective of the name in which legal
title to such Partnership assets is held.
SECTION 7.10 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, to enter into any contracts on behalf of the
Partnership and to 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.
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ARTICLE VIII.
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
SECTION 8.1 LIMITATION OF LIABILITY.
The Limited Partners shall have no liability under this Agreement
except as expressly provided in this Agreement, including Section 10.5 hereof,
or under the Act.
SECTION 8.2 MANAGEMENT OF BUSINESS.
No Limited Partner or Assignee (other than the General Partner, any of
its Affiliates or any trustee, officer, director, employee, partner, agent or
trustee of the General Partner, the Partnership or any of their Affiliates, in
their capacity as such) shall take part in the operation, management or control
(within the meaning of the Act) of the Partnership's business, transact any
business in the Partnership's name or have the power to sign documents for or
otherwise bind the Partnership. The transaction of any such business by the
General Partner, any of its Affiliates or any trustee, 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.
SECTION 8.3 OUTSIDE ACTIVITIES OF LIMITED PARTNERS.
Any Limited Partner and any trustee, officer, director, employee,
agent, trustee, Affiliate or shareholder of any Limited Partner shall be
entitled to and may have business interests and engage in business activities
in addition to those relating to the Partnership, including business interests
and activities in direct or indirect competition with 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. None of
the Limited Partners nor any other Person shall have any rights by virtue of
this Agreement or the partnership relationship established hereby in any
business ventures of any other Person, 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 Partnership,
Limited Partner or Person.
SECTION 8.4 RETURN OF CAPITAL.
No Limited Partner shall be entitled to the withdrawal or return of
its Capital Contributions, except to the extent of distributions made pursuant
to this Agreement or upon termination of the Partnership as provided herein.
Except to the extent expressly provided to the contrary by Exhibit C hereto or
as permitted by Sections 5.1., 6.1 and 13.2 hereof or otherwise expressly
provided in this Agreement, no Limited Partner or Assignee shall have priority
over any other Partner or Assignee either as to the return of Capital
Contributions or as to profits, losses, distributions or credits.
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SECTION 8.5 RIGHTS OF LIMITED PARTNERS RELATING TO THE
PARTNERSHIP.
A. GENERAL. In addition to other rights provided by this
Agreement or by the Act, each Limited Partner shall have the right, for a
purpose reasonably related to such Limited Partner's Partnership Interest, upon
written demand and at the expense of the Partnership:
(1) to obtain a copy of the Partnership's federal, state
and local income tax returns for each Partnership Year; and
(2) to obtain a copy of this Agreement and the
Certificate and all amendments thereto.
SECTION 8.6 PUT RIGHT.
A. GENERAL.
(1) Subject to Section 8.6.C below, on or after February
12, 1999, each Limited Partner shall have the right (the "Put Right") to
require the General Partner to purchase all or a portion of the Partnership
Units held by the Limited Partner at a price equal to and in the form of the
Consideration. The Put Right shall be exercised pursuant to a Put Notice
delivered to the General Partner by the Limited Partner. Notwithstanding any
provision herein to the contrary, no Limited Partner may exercise the Put Right
for fewer than 14,584 Partnership Units and in the event that any Partner shall
at any time own 14,584 or fewer Partnership Units, then such Partner may not
exercise the Put Right for less than all of its Partnership Units.
(2) A Limited Partner shall have no right with respect to
any interest in the Partnership after providing the Put Notice described above,
other than the right to receive payment for its interest in the Partnership in
accordance with this Section 8.6.
(3) The Assignee of a Limited Partner may exercise the
rights of such Limited Partner pursuant to this Section 8.6, and such Limited
Partner shall be deemed to have assigned such rights to such Assignee and shall
be bound by the exercise of such rights by such Limited Partner's Assignee. In
connection with any exercise of such rights by an Assignee on behalf of a
Limited Partner, the Consideration shall be paid by the General Partner
directly to such Assignee and not to the Limited Partner.
(4) Notwithstanding the provisions of Section 8.6.A, upon
the occurrence of a Liquidating Event, the General Partner shall provide each
Limited Partner with a Dissolution Notice in accordance with Section 13.6 and
following the occurrence of any such Liquidating Event, a Limited Partner may
exercise the Put Right hereunder by providing the General Partner with a Put
Notice during the thirty day period (the "Extended Option Period") following
delivery of the Dissolution Notice to such Limited Partner. If any Limited
Partner shall fail to timely deliver the
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Put Notice during such Extended Option Period, such Limited Partner shall be
unable to exercise the Put Right and the Put Right shall lapse upon the
expiration of the Extended Option Period unless and until the Partners shall
continue the business of the Partnership under Article XIII.
B. PAYMENT OF CONSIDERATION.
(1) No earlier than the thirty-first (31st) day following
the delivery of the Put Notice by a Limited Partner under this Section 8.6 and
no later than the thirty-sixth (36th) day following the delivery of such Put
Notice by such Limited Partner under this Section 8.6, (or such other time
period as shall be mutually agreed upon by the partners) the General Partner
(subject to the limitations set forth in Section 8.6C) shall transfer and
deliver the Consideration to such Limited Partner or, as applicable, its
Assignee whereupon the General Partner (or its designee) shall acquire the
Partnership Units offered by the Limited Partner or, as applicable, its
Assignee and shall be treated for all purposes of this Agreement as the owner
of such Partnership Units.
(2) In the event that the General Partner elects to pay
the Consideration to a Limited Partner in the form of the Share Consideration
and such Share Consideration is not a whole number of Shares, such Limited
Partner shall be paid (i) that number of Shares which equals the nearest whole
number less than such amount plus (ii) an amount of cash which the General
Partner determines, in its reasonable discretion, to represent the fair value
of the remaining fractional Share which would otherwise be payable to such
Limited Partner.
(3) Each Limited Partner agrees to deliver to the General
Partner the Partnership Unit Certificate(s) representing its Limited Partner
Interest and to execute such documents as the General Partner may reasonably
require in connection with the issuance of Shares upon exercise of the Put
Right (including without limitation an assignment of Partnership Units pursuant
to the terms of which each such Limited Partner agrees to indemnify and hold
General Partner harmless from and all liabilities, charges, costs and expenses
relating to such Limited Partner's Partnership Units which are subject to the
Put Right or the exercise of the Put Right).
C. EXCEPTIONS TO EXERCISE OF PUT RIGHT.
Notwithstanding the provisions of Sections 8.6.A and 8.6.B above, a
Limited Partner shall not be entitled to exercise the Put Right pursuant to
Section 8.6.A above if (i) a Liquidating Event has occurred and the Limited
Partner has failed to timely deliver a Put Notice to the General Partner during
the Extended Option Period, in accordance with Section 8.6.A(4) hereof; or
(ii) the delivery of Shares to the Limited Partner (a) would be prohibited
under the Declaration of Trust of the General Partner, (b) would adversely
affect the ability of the General Partner to continue to qualify as a REIT or
subject the General Partner to any additional taxes under Section 857 or
Section 4981 of the Code, or (c) would be prohibited under applicable federal
or state securities laws or regulations.
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D. NO LIENS ON PARTNERSHIP UNITS DELIVERED.
Each Limited Partner covenants and agrees with the General Partner
that all Partnership Units delivered in connection with the Put Right shall be
delivered to the General Partner, free and clear of all liens and encumbrances
and, notwithstanding anything contained herein to the contrary, the General
Partner shall not be under any obligation to acquire any Limited Partner's
Partnership Units, (1) to the extent that any such Partnership Units are
subject to any liens or encumbrances, or (2) in the event that such Limited
Partner shall fail to give the General Partner adequate assurances that such
Partnership Units are not subject to any such liens or encumbrances or shall
fail to agree to fully indemnify the General Partner from any such liens or
encumbrances as well as the liabilities, charges, costs and expenses referenced
in the last sentence of Section 8.6.B(3). Each Limited Partner further agrees
that, in the event any state or local transfer tax is payable as a result of
the transfer of its Partnership Units to the General Partner, such Limited
Partner shall assume and pay such transfer tax.
SECTION 8.7 CALL RIGHT.
A. GENERAL.
(1) Subject to Section 8.7.C below, on or after February
12, 2000 the General Partner shall have the right (the "Call Right") to
purchase all of the Partnership Units held by each Limited Partner at a price
equal to and in the form of the Consideration. The Call Right shall be
exercised pursuant to a Call Notice delivered by the General Partner to any
such Limited Partner (and may be exercised separately with regard to each such
Limited Partner). The General Partner may not exercise the Call Right for less
than the entire interest of any Limited Partner in the Partnership.
(2) No Limited Partner shall have any right with respect
to any interest in the Partnership after receiving the Call Notice described
above, other than the right to receive payment for its interest in the
Partnership in accordance with this Section 8.7.
(3) The Assignee of a Limited Partner shall be bound by
and subject to the Call Right of the General Partner pursuant to this Section
8.7. In connection with any exercise of such Call Right by the General Partner
with respect to an Assignee, the Consideration shall be paid by the General
Partner directly to such Assignee and not to such Limited Partner.
(4) Upon the occurrence of a Liquidating Event the
General Partner may exercise the Call Right with respect to a Limited Partner's
Partnership Units by delivery of a Call Notice to such Limited Partner during
the Extended Option Period. In the event that following the occurrence of a
Liquidating Event the General Partner shall fail to timely deliver the Call
Notice during the Extended Option Period, the Call Right shall lapse unless the
Partners shall continue the business of the Partnership under Article XIII.
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B. PAYMENT OF CONSIDERATION.
(1) Within thirty (30) days of the delivery of the Call
Notice by the General Partner to a Limited Partner under this Section 8.7, the
General Partner (subject to the limitations set forth in Section 8.6.C) shall
transfer and deliver the Consideration to such Limited Partner or as applicable
its Assignee whereupon the General Partner (or its designee) shall acquire the
Partnership Units of such Limited Partner or as applicable its Assignee and
shall be treated for all purposes of this Agreement as the owner of such
Partnership Units.
(2) In the event that the General Partner elects to pay
the consideration to a Limited Partner in the form of the Share Consideration
and such Share Consideration is not a whole number of Shares, such Limited
Partner shall be paid (i) that number of Shares which equals the nearest whole
number less than such amount plus (ii) an amount of cash which the General
Partner determines, in its reasonable discretion, to represent the fair value
of the remaining fractional Share which would otherwise be payable to such
Limited Partner.
(3) Each Limited Partner agrees to deliver to the General
Partner the Partnership Unit Certificate(s) representing its Limited Partner
Interest and to execute such documents as the General Partner may reasonably
require in connection with the issuance of Shares upon exercise of the Call
Right (including without limitation an assignment of Partnership Units pursuant
to the terms of which each such Limited Partner agrees to indemnify and hold
General Partner harmless from and all liabilities, charges, costs and expenses
relating to such Limited Partner's Partnership Units which are subject to the
Call Right or the exercise of the Call Right).
C. EXCEPTIONS TO EXERCISE OF CALL RIGHT.
Notwithstanding the provisions of Sections 8.7.A and 8.7.B
above, the General Partner shall not be entitled to exercise the Call Right
with respect to a Limited Partner's Partnership Units pursuant to the Section
8.7.A above if (i) a Liquidating Event has occurred with regard to the
Partnership, the General Partner has failed to deliver a Call Notice during the
Extended Option Period and the Partnership has not been continued under Article
XIII hereof; or (ii) the delivery of Shares to such Limited Partner (a) would
be prohibited under the Declaration of Trust of the General Partner, (b) would
adversely affect the ability of the General Partner to continue to qualify as a
REIT or subject the General Partner to any additional taxes under Section 857
or Section 4981 of the Code, or (c) would be prohibited under applicable
federal or state securities laws or regulations.
D. NO LIENS ON PARTNERSHIP UNITS DELIVERED.
Each Limited Partner covenants and agrees with the General Partner
that all Partnership Units delivered in connection with the Call Right shall be
delivered to the General Partner, free and clear of all liens and encumbrances
and, notwithstanding anything contained herein to the contrary, the General
Partner shall not be under any obligation to acquire any Limited Partner's
Partnership Units,
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(1) to the extent that any such Partnership Units are subject to any liens or
encumbrances, or (2) in the event that such Limited Partner shall fail to give
the General Partner adequate assurances that such Partnership Units are not
subject to any such liens or encumbrances or shall fail to agree to fully
indemnify the General Partner from any such liens or encumbrances as well as
the liabilities, charges, costs and expenses referenced in the last sentence of
Section 8.7.B(3). Each Limited Partner further agrees that, in the event any
state or local transfer tax is payable as a result of the transfer of its
Partnership Units to the General Partner, such Limited Partner shall assume and
pay such transfer tax.
SECTION 8.8 CERTAIN TRANSFERS NOT CONSIDERED LIQUIDATING EVENTS.
For purposes of Sections 8.6.A and 8.7.A of this Agreement any transfer of the
GP Interest held by the General Partner in the Partnership (and the admission
of such transferee to the Partnership as a substitute general partner) which is
authorized by the provisions of this Agreement shall not be considered a
Liquidating Event.
ARTICLE IX.
BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 9.1 RECORDS AND ACCOUNTING.
The General Partner shall keep or cause to be kept at the principal
office of the Partnership appropriate books and records with respect to the
Partnership's business. 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 or other media, photographs, micro graphics
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 on
an accrual basis in accordance with generally accepted accounting principles
for financial reporting purposes and in accordance with tax accounting
principles for tax reporting purposes.
SECTION 9.2 FISCAL YEAR.
The fiscal year of the Partnership shall be the calendar year.
SECTION 9.3 REPORTS.
As soon as practicable after the conclusion of each Partnership Year,
the General Partner shall cause to be mailed to each Limited Partner an annual
report, as of the close of such Partnership Year, containing financial
statements of the Partnership, or of the General Partner if such statements are
prepared on a consolidated basis with the Partnership, for such Partnership
Year.
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ARTICLE X.
TAX MATTERS
SECTION 10.1 PREPARATION OF TAX RETURNS.
The General Partner shall arrange for the preparation and timely
filing of all returns of Partnership income, gains, deductions, losses and
other items required of the Partnership for federal and state income tax
purposes and shall use all reasonable efforts to furnish, within ninety (90)
days of the close of each taxable year, the tax information reasonably required
by Limited Partners for federal and state income tax reporting purposes.
SECTION 10.2 TAX ELECTIONS.
Except as otherwise provided herein, the General Partner shall, in its
sole and absolute discretion, determine whether to make any available election
pursuant to the Code (including, without limitation, the election available
under Section 754 of the Code). The General Partner shall have the right to
seek to revoke any such election upon the General Partner's determination in
its sole and absolute discretion that such revocation is in the best interests
of the Partners.
SECTION 10.3 TAX MATTERS PARTNER.
A. GENERAL. The General Partner shall be the "tax matters
partner" of the Partnership for federal income tax purposes. Pursuant to
Section 6223(c)(3) of the Code, upon receipt of notice from the IRS of the
beginning of an administrative proceeding with respect to the Partnership, the
tax matters partner shall furnish the IRS with the name, address, taxpayer
identification number and profit interest of each of the Limited Partners and
any Assignees; provided, however, that such information is provided to the
Partnership by the Limited Partners.
B. POWERS. The tax matters partner is authorized, but not
required:
(1) to enter into any settlement with the IRS with
respect to any administrative or judicial proceedings for the adjustment of
Partnership items required to be taken into account by a Partner for income tax
purposes (such administrative proceedings being referred to as a "tax audit"
and such judicial proceedings being referred to as "judicial review"), and in
the settlement agreement the tax matters partner may expressly state that such
agreement shall bind all Partners, except that such settlement agreement shall
not bind any Partner (i) who (within the time prescribed pursuant to the Code
and Regulations) files a statement with the IRS providing that the tax matters
partner shall not have the authority to enter into a settlement agreement on
behalf of such Partner or (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);
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(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 IRS at any time and, if any part of such request is not allowed by the
IRS, to file an appropriate pleading (petition or complaint) for judicial
review with respect to such request;
(5) to enter into an agreement with the IRS to extend the
period for assessing any tax which is attributable to any item required to be
taken into account by a Partner for tax purposes, or an item affected by such
item; and
(6) to take any other action on behalf of the Partners of
the Partnership in connection with any tax audit or judicial review proceeding
to the extent permitted by applicable law or regulations.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole and absolute discretion of the tax
matters partner and the provisions relating to indemnification of the General
Partner set forth in Section 7.6 hereof shall be fully applicable to the tax
matters partner in its capacity as such.
C. REIMBURSEMENT.
The tax matters partner shall receive no compensation for its
services. All costs and expenses incurred by the tax matters partner in
performing its duties as such (including legal and accounting fees and expenses
and expenses reimbursable under Section 7.4 hereof) shall be borne by the
Partnership. Nothing herein shall be construed to restrict the Partnership
from engaging an accounting firm or a law firm to assist the tax matters
partner in discharging its duties hereunder.
SECTION 10.4 ORGANIZATIONAL EXPENSES.
The Partnership shall elect to deduct expenses, if any, incurred by it
in organizing the Partnership ratably over a sixty (60) month period as
provided in Section 709 of the Code.
SECTION 10.5 WITHHOLDING.
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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 Section 1441, 1442, 1445, or 1446 of the Code. Any
amount paid on behalf of or with respect to a Limited Partner shall constitute
a recourse loan by the Partnership to such Limited Partner, which loan shall be
repaid by such Limited Partner within fifteen (15) days after notice from the
General Partner that such payment must be made unless (i) the Partnership
withholds such payment from a distribution which would otherwise be made to the
Limited Partner or (ii) the General Partner determines, in its sole and
absolute discretion, that such payment may be satisfied out of the available
funds of the Partnership which would, but for such payment, be distributed to
the Limited Partner. Any amounts withheld pursuant to the foregoing clauses (i)
or (ii) shall be treated as having been distributed to such Limited Partner.
Each Limited Partner hereby unconditionally and irrevocably grants to the
Partnership a security interest in such Limited Partner's Partnership Interest
to secure such Limited Partner's obligation to pay to the Partnership any
amounts required to be paid pursuant to this Section 10.5. In the event that a
Limited Partner fails to pay any amounts owed to the Partnership pursuant to
this Section 10.5 when due, the General Partner may, in its sole and absolute
discretion, elect to make the payment to the Partnership on behalf of such
defaulting Limited Partner, and in such event shall be deemed to have loaned
such amount to such defaulting Limited Partner and shall succeed to all rights
and remedies of the Partnership as against such defaulting Limited Partner. 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 amounts payable by a Limited Partner hereunder
shall bear interest at the lesser of (A) the base rate on corporate loans at
large United States money center commercial banks, as published from time to
time in the Wall Street Journal, plus four (4) percentage points or (B) the
maximum lawful rate of interest on such obligation, such interest to accrue
from the date such amount is due (i.e., fifteen (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.
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ARTICLE XI.
TRANSFERS AND WITHDRAWALS
SECTION 11.1 TRANSFER.
A. DEFINITION. The term "transfer," when used in this
Article XI with respect to a Partnership Interest or a Partnership Unit, shall
be deemed to refer to a transaction by which a Partner purports to assign all
or any part of its interest in the Partnership to another Person, and includes
a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage,
exchange or any other disposition by law or otherwise. However, the term
"transfer" when used in this Article XI does not include any purchase of
Partnership Units by the General Partner from a Limited Partner pursuant to the
exercise of the Put Right or Call Right in accordance with the provisions of
Section 8.6 or 8.7, respectively, hereof.
B. GENERAL. No Partnership Interest held by a Limited Partner
may be transferred, in whole or in part, except in accordance with the terms
and conditions set forth in this Article XI. Any transfer or purported transfer
of a Limited Partner Interest not made in accordance with this Article XI shall
be null and void.
C. TRANSFER BY GENERAL PARTNER. The General Partner may not
transfer its General Partner Interest in the Partnership without the Consent of
all Limited Partners unless (1) the transfer of the General Partner Interest is
to an Affiliate of the General Partner in connection with any proposed
financing as further described in Section 14.1.B(5), or (2) the transfer of the
General Partner Interest is pursuant to or in connection with a merger
(including a triangular merger), consolidation or other combination with or
into another Person, reclassification, recapitalization or change of
outstanding Shares (a "Business Combination"), unless either (a) the Business
Combination has been approved by the Consent of all Limited Partners, or (b) an
Equity Adjustment is made to the Consideration to be received by each Limited
Partner.
D. WITHDRAWAL BY GENERAL PARTNER. Except as expressly authorized
by the provisions of this Agreement (including Section 11.1.C hereof), the
General Partner shall not withdraw from the Partnership.
SECTION 11.2 LIMITED PARTNERS' RIGHTS TO TRANSFER.
A. GENERAL. Except to the extent expressly permitted in Section
11.2.B or in connection with the exercise of a Put Right or Call Right pursuant
to Sections 8.6 and 8.7, respectively, and subject to the provisions of Article
3 of that certain Registration Rights Agreement by and among the General
Partner and the Limited Partners effective as of February 5, 1998, a Limited
Partner may not transfer all or any portion of its Limited Partner Interest, or
any of such Limited Partner's economic rights as a Limited Partner, without the
prior written consent of the General Partner, which
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consent will not unreasonably be withheld by the General Partner. Any transfer
otherwise permitted under Section 11.2.B shall be subject to the conditions set
forth in Sections 11.2.C and 11.2.D, and all permitted transfers shall be
subject to Section 11.3 and Section 11.4.
B. INCAPACITATED LIMITED PARTNERS. If a Limited Partner is
Incapacitated, the executor, administrator, trustee, committee, guardian,
conservator or receiver of such Limited Partner's estate shall have all the
rights of a Limited Partner, but not more rights than those enjoyed by other
Limited Partners for the purpose of settling or managing the estate and such
power as the Incapacitated Limited Partner possessed to transfer all or any
part of its interest in the Partnership. The Incapacity of a Limited Partner,
in and of itself, shall not dissolve or terminate the Partnership.
C. NO TRANSFERS VIOLATING SECURITIES LAWS. The General Partner
may in its sole discretion, prohibit any transfer of Partnership Units by a
Limited Partner if, in the opinion of legal counsel to the Partnership, such
transfer would require filing of a registration statement under the Securities
Act or would otherwise violate any federal, or state securities laws or
regulations applicable to the Partnership or the Partnership Unit.
D. GENERAL PARTNER AUTHORITY WITH REGARD TO OTHER TRANSFERS. The
General Partner may, in its sole discretion, prohibit any transfer of
Partnership Units by a Limited Partner, if (i) in the opinion of legal counsel
it would result in the termination of the Partnership of the Partnership for
federal income tax purposes, (ii) in the opinion of legal counsel for the
Partnership, it would adversely affect the ability of the General Partner to
continue to qualify as a REIT or would subject the General Partner to any
additional taxes under Section 857 or Section 4981 of the Code or (iii) such
transfer is effectuated through an "established securities market" or a
"secondary market (or the substantial equivalent thereof)" within the meaning
of Section 7704 of the Code.
SECTION 11.3 SUBSTITUTED LIMITED PARTNERS.
A. CONSENT OF GENERAL PARTNER. No Limited Partner shall have the
right to substitute a transferee as a Limited Partner in its place (whether or
not the transfer of the Limited Partner's Partnership Interest is permitted
under Section 11.2). The General Partner shall, however, have the right to
consent to the admission of a transferee of the interest of a Limited Partner
pursuant to this Section 11.3 as a Substituted Limited Partner, which consent
shall not be unreasonably withheld by the General Partner. The General
Partner's failure or refusal to permit a transferee of any such interests to
become a Substituted Limited Partner shall not give rise to any cause of action
against the Partnership or any Partner.
B. RIGHTS OF SUBSTITUTED LIMITED PARTNER. A transferee who has
been admitted as a Substituted Limited Partner in accordance with this Article
XI shall have all the rights and powers and be subject to all the restrictions
and liabilities of a Limited Partner under this Agreement. The admission of any
transferee as a Substituted Limited Partner shall be conditioned upon the
transferee executing and delivering to the Partnership an acceptance of all the
terms and conditions of this
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Agreement (including, without limitation, the provisions of Section 2.4) and
such other documents or instruments as may be required to effect the admission.
C. AMENDMENT AND RESTATEMENT OF EXHIBIT A. Upon the admission of
a Substituted Limited Partner, the General Partner shall amend and restate
Exhibit A hereto to reflect the name, address, Capital Account, number of
Partnership Units, and Percentage Interest of such Substituted Limited Partner
and to eliminate or adjust, if necessary, the name, address, Capital Account
and Percentage Interest of the predecessor of such Substituted Limited Partner
(and any other Partner, as necessary).
SECTION 11.4 ASSIGNEES.
If the General Partner, in its sole and absolute discretion, does not
consent to the admission of any permitted transferee under Section 11.3 as a
Substituted Limited Partner, such transferee shall be considered an Assignee
for purposes of this Agreement. An Assignee of a Limited Partner shall be
entitled to all the rights of an assignee of a limited partner interest under
the Act, including the right to receive distributions from the Partnership and
the share of Net Income, Net Losses, gain, loss and Recapture Income
attributable to the Partnership Units assigned to such transferee, and, as
applicable shall have the rights granted to such Limited Partner under Section
8.6 (and be subject to the Call Right granted to the General Partner under
Section 8.7), but shall not be deemed to be a holder of Partnership Units for
any other purpose under this Agreement, and shall not be entitled to vote such
Partnership Units in any matter presented to the Limited Partners for a vote
(such Partnership Units being deemed to have been voted in the same manner as
the Partnership Units held by the General Partner). In the event any such
transferee desires to make a further assignment of any such Partnership Units,
such transferee shall be subject to all the provisions of this Article XI to
the same extent and in the same manner as any Limited Partner desiring to make
an assignment of Partnership Units. The General Partner shall have no liability
under any circumstances with respect to any Assignee as to which it does not
have actual notice.
SECTION 11.5 GENERAL PROVISIONS.
A. WITHDRAWAL OF LIMITED PARTNER. No Limited Partner may
withdraw from the Partnership other than as a result of a permitted transfer of
all of such Limited Partner's Partnership Units in accordance with this Article
XI or, as applicable, pursuant to the transfer of all of its Partnership Units
under Section 8.6 or 8.7 hereof.
B. TERMINATION OF STATUS AS LIMITED PARTNER. Any Limited Partner
who shall transfer all of its Partnership Units in a transfer permitted
pursuant to this Article XI or pursuant to the exercise of the Put Right under
Section 8.6 or 8.7 hereof shall immediately cease to be a Limited Partner.
C. ALLOCATIONS. If any Partnership Interest is transferred in
compliance with the
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provisions of this Article XI or, as applicable, transferred pursuant to
Section 8.6 or 8.7 hereof, Net Income, Net Losses, each item thereof and all
other items attributable to such interest shall be divided and allocated
between the transferor Partner and the transferee Partner by taking into
account their varying interests during the fiscal year in accordance with
Section 706 of the Code, using any permissible method of allocation under such
Code Section.
ARTICLE XII.
ADMISSION OF PARTNERS
SECTION 12.1 ADMISSION OF SUCCESSOR GENERAL PARTNER.
A successor to all of the General Partner's General Partner Interest
pursuant to Section 11.1.C hereof who is proposed to be admitted as a successor
General Partner shall be admitted to the Partnership as the General Partner.
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's executing and delivering to the Partnership an acceptance of
all of the terms and conditions of this Agreement and such other documents or
instruments as may be reasonably required by the Limited Partners to effect the
admission.
SECTION 12.2 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 (including an amendment and restatement of
Exhibit A hereto) and, if necessary, to prepare as soon as practicable an
amendment of this Agreement and, if required by law, shall prepare and file an
amendment to the Certificate and may for such purpose exercise the power of
attorney granted pursuant to Section 2.4 hereof.
ARTICLE XIII.
DISSOLUTION AND LIQUIDATION
SECTION 13.1 DISSOLUTION.
The Partnership shall not be dissolved by the admission of a
Substituted Limited Partner or by the admission of a successor General Partner
in accordance with the terms of this Agreement. Upon the withdrawal of the
General Partner, any successor General Partner shall continue the business of
the Partnership. The Partnership shall dissolve, and its affairs shall be wound
up, upon the first to occur of any of the following ("Liquidating Events") :
(1) the expiration of its term as provided in Section 2.5
hereof;
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(2) an event of withdrawal of the General Partner, as
defined in the Act (other than an event of bankruptcy), unless, within ninety
(90) days after the withdrawal a "majority in interest" (as defined below) of
the remaining Partners Consent in writing to continue the business of the
Partnership and to the appointment, effective as of the date of withdrawal, of
a substitute General Partner;
(3) the sale of all or substantially all of the assets of
the Partnership;
(4) on or after February 12, 1999, upon the election of
the General Partner, in its sole discretion, to dissolve the Partnership;
(5) the entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Act;
(6) the sale of the Property;
(7) a final and non-appealable judgment is entered by a
court of competent jurisdiction ruling that the General Partner is bankrupt or
insolvent, or a final and non-appealable order for relief is entered by a court
with appropriate jurisdiction against the General Partner, in each case under
any federal or state bankruptcy or insolvency laws as now or hereafter in
effect, unless prior to or within ninety days after of the entry of such order
or judgment a "majority in interest" (as defined below) of the Partners Consent
in writing to continue the business of the Partnership and to the appointment,
effective as of a date prior to the date of such order or judgment, of a
substitute General Partner.
As used herein, a "majority in interest" shall refer to Partners who hold more
than fifty percent (50%) of the outstanding Percentage Interests.
SECTION 13.2 WINDING UP.
A. GENERAL. Upon the occurrence of a Liquidating Event, and as
applicable, the failure of the Partners to continue the business of the
Partnership, the Partnership shall continue solely for the purposes of winding
up its affairs in an orderly manner, liquidating its assets, and satisfying the
claims of its creditors and Partners. No Partner shall take any action that is
inconsistent with, or not necessary to or appropriate for, the winding up of
the Partnership's business and affairs. The General Partner (or, in the event
there is no remaining General Partner, any Person elected by a majority in
interest of the Limited Partners (the "Liquidator")) shall be responsible for
overseeing the winding up and dissolution of the Partnership and shall take
full account of the Partnership's liabilities and property and the Partnership
property shall be liquidated as promptly as is consistent with obtaining the
fair value thereof, and the proceeds therefrom shall be applied and distributed
in the following order:
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(1) first, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors other than the Partners;
(2) second, to the payment and discharge of all of the
Partnership's debts and liabilities to the Partners;
(3) third, to the Limited Partners pro rata in proportion
to the Unpaid LP Return owing each such Limited Partner, in an amount equal to
the Unpaid LP Return owing such Limited Partners;
(4) fourth, to the General Partner in an amount equal to
any Unpaid GP Return owing the General Partner;
(5) fifth, to the General Partner in an amount equal to
the Unreturned Capital owing the General Partner;
(6) sixth, to the Limited Partners pro rata in proportion
to the Unreturned Capital owing each such Limited Partner, in an amount equal
to the Unreturned Capital owing such Limited Partners; and
(7) finally, the balance, if any, shall be distributed to
the Partners pro rata, in accordance with their respective Percentage
Interests.
B. DEFERRED LIQUIDATION. Notwithstanding the provisions of
Section 13.2.A above which require liquidation of the assets of the
Partnership, but subject to the order of priorities set forth therein, if prior
to or upon dissolution of the Partnership the Liquidator determines that an
immediate sale of part or all of the Partnership's assets would be impractical
or would cause undue loss to the Partners, the Liquidator may, in its sole and
absolute discretion, defer for a reasonable time the liquidation of any assets
except those necessary to satisfy liabilities of the Partnership (including to
those Partners as creditors) or distribute to the Partners, in lieu of cash, as
tenants in common and in accordance with the provisions of Section 13.2.A
above, undivided interests in such Partnership assets as the Liquidator deems
not suitable for liquidation. Any such distributions in kind shall be made only
if, in the good faith judgment of the Liquidator, such distributions in kind
are in the best interest of the Partners, and shall be subject to such
conditions relating to the disposition and management of such properties as the
Liquidator deems reasonable and equitable and to any agreements governing the
operation of such properties at such time. The Liquidator shall determine the
fair market value of any property distributed in kind using such reasonable
method of valuation as it may adopt.
C. LIQUIDATING TRUST. In the discretion of the General Partner, a
pro rata portion of the distributions that would otherwise be made to the
General Partner and Limited Partners pursuant to
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this Article XIII may be: (A) distributed to a trust established for the
benefit of the General Partner and Limited Partners for the purposes of
liquidating Partnership assets, collecting amounts owed to the Partnership and
paying any contingent or unforeseen liabilities or obligations of the
Partnership or of the General Partner arising out of or in connection with the
Partnership (in which case 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 General Partner, 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 (B) withheld 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 amounts shall be distributed to the General Partner and Limited
Partners in the manner and order of priority set forth in Section 13.2.A as
soon as practicable.
SECTION 13.3 DEFICIT CAPITAL ACCOUNTS.
If any Partner has a deficit balance in its Capital Account (after
giving effect to all contributions, distributions and allocations for all
taxable years, including the year during which such liquidation occurs), such
Partner shall have no obligation to make any contribution to the capital of the
Partnership with respect to such deficit, and such deficit shall not be
considered a debt owed to the Partnership or to any other Person for any
purpose whatsoever.
SECTION 13.4 DEEMED DISTRIBUTION AND RECONTRIBUTION.
Notwithstanding any other provision of this Article XIII, in the event
the Partnership is deemed liquidated within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g) but no Liquidating Event has occurred, the Partnership's
property shall not be liquidated, the Partnership's liabilities shall not be
paid or discharged and the Partnership's affairs shall not be wound up.
Instead, for federal income tax purposes and for purposes of maintaining
Capital Accounts pursuant to Exhibit B hereto, the Partnership shall be deemed
to have distributed its assets in kind to the General Partner and Limited
Partners, who shall be deemed to have assumed and taken such assets subject to
all Partnership liabilities, all in accordance with their respective Capital
Accounts. Immediately thereafter, the General Partner and Limited Partners
shall be deemed to have recontributed the Partnership assets in kind to the
Partnership, which shall be deemed to have assumed and taken such assets
subject to all such liabilities.
SECTION 13.5 RIGHTS OF LIMITED PARTNERS.
Except as otherwise provided in this Agreement, each Limited Partner
shall look solely to the assets of the Partnership for the return of its
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 Capital Contributions, distributions, or allocations.
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SECTION 13.6 NOTICE OF DISSOLUTION.
In the event a Liquidating Event occurs or an event occurs that would,
but for provisions of an election or objection by one or more Partners pursuant
to Section 13.1 above, result in a dissolution of the Partnership, the General
Partner shall, within fifteen (15) days thereafter, provide written notice
thereof to each of the Partners (the "Dissolution Notice").
SECTION 13.7 TERMINATION OF PARTNERSHIP AND CANCELLATION OF
CERTIFICATE OF LIMITED PARTNERSHIP.
Upon the completion of the liquidation of the Partnership cash and
property as provided in Section 13.2 above, all Partnership Units shall be
canceled, including the Call Right and Put Right associated therewith, the
Partnership shall be terminated, the Certificate and all qualifications of the
Partnership as a foreign limited partnership in jurisdictions other than the
State of Delaware shall be canceled, and such other actions as may be necessary
to terminate the Partnership shall be taken.
SECTION 13.8 REASONABLE TIME FOR WINDING UP.
A reasonable time shall be allowed for the orderly winding up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2 above, 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.
SECTION 13.9 WAIVER OF PARTITION.
Each Partner hereby waives any right to partition of the Partnership
property.
SECTION 13.10 LIABILITY OF LIQUIDATOR.
THE LIQUIDATOR SHALL BE INDEMNIFIED AND HELD HARMLESS BY THE
PARTNERSHIP FROM AND AGAINST ANY AND ALL CLAIMS, LIABILITIES, COSTS, DAMAGES,
AND CAUSES OF ACTION OF ANY NATURE WHATSOEVER ARISING OUT OF OR INCIDENTAL TO
THE LIQUIDATOR'S TAKING OF ANY ACTION AUTHORIZED UNDER OR WITHIN THE SCOPE OF
THIS AGREEMENT; PROVIDED, HOWEVER, THAT THE LIQUIDATOR SHALL NOT BE ENTITLED TO
INDEMNIFICATION, AND SHALL NOT BE HELD HARMLESS, WHERE THE CLAIM, DEMAND,
LIABILITY, COST, DAMAGE OR CAUSE OF ACTION AT ISSUE ARISES OUT OF (I) A MATTER
ENTIRELY UNRELATED TO THE LIQUIDATOR'S ACTION OR CONDUCT PURSUANT TO THE
PROVISIONS OF THIS AGREEMENT OR (II) THE PROVEN WILLFUL MISCONDUCT OR GROSS
NEGLIGENCE OF THE LIQUIDATOR.
46
<PAGE> 52
ARTICLE XIV.
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
SECTION 14.1 AMENDMENTS.
A. GENERAL. Amendments to this Agreement may be proposed by the
General Partner or by any Limited Partners holding twenty-five percent (25%) or
more of the Partnership Interests. Following such proposal (except an amendment
pursuant to Section 14.1.B below), 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 five
(5) 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 14.1.B, 14.1.C or 14.1.D below, 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 Partners
holding a majority of the Partnership Units then held by Limited Partners
(including Limited Partner Interests held by the General Partner).
B. AMENDMENTS NOT REQUIRING LIMITED PARTNER APPROVAL.
Notwithstanding Section 14.1.A or Section 14.1.C hereof, the General Partner
shall have the power, without the Consent of any Limited Partner, 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 any Partner in accordance with this Agreement;
(3) to reflect a change that does not adversely affect
any of 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 or as may be expressly provided by any other
provisions of this Agreement;
(4) to satisfy any requirements, conditions, or
guidelines contained in any order, directive, opinion, ruling or regulation of
a federal, state or local agency or contained in federal, state or local law;
and
47
<PAGE> 53
(5) to convert the Partnership into a single purpose
entity, to admit an Affiliate of the General Partner to the Partnership as a
substitute general partner in connection therewith and to otherwise reflect any
such provisions and terms as may be required by any lender (other than any
Partner or any Affiliate of a Partner) providing conduit financing to the
Partnership.
The General Partner shall notify the Limited Partners when any action under
this Section 14.1.B is taken.
C. OTHER AMENDMENTS REQUIRING CERTAIN LIMITED PARTNER APPROVAL.
Notwithstanding anything in this Section 14.1 to the contrary, this Agreement
shall not be amended without the Consent of such Partner adversely affected if
such amendment would (i) convert a Limited Partner's interest in the
Partnership into a general partner's interest, (ii) modify the limited
liability of a Limited Partner, (iii) alter rights of Partners to receive
distributions pursuant to Article V or XIII or the allocations specified in
Article VI, (iv) amend Section 8.6 or 8.7 or any defined terms set forth in
Article I that relate to the Put Right or Call Right, or (v) amend this Section
14.1.C.
D. AMENDMENT AND RESTATEMENT OF EXHIBIT A NOT AN AMENDMENT.
Notwithstanding anything in this Article XIV or elsewhere in this Agreement to
the contrary, any amendment and restatement of Exhibit A hereto by the General
Partner to reflect events or changes otherwise authorized or permitted by this
Agreement, whether pursuant to Section 7.1.A(20) hereof or otherwise, shall not
be deemed an amendment of this Agreement and may be done at any time and from
time to time, as necessary by the General Partner without the Consent of any
Limited Partner.
SECTION 14.2 MEETINGS OF THE PARTNERS.
A. GENERAL. Meetings of the Partners may be called by the General
Partner and shall be called upon the receipt by the General Partner of a
written request by Limited Partners holding twenty-five percent (25%) or more
of the Partnership Interests. The call shall state the nature of the business
to be transacted. Notice of any such meeting shall be given to all Partners not
less than five (5) days nor more than thirty (30) days prior to the date of
such meeting. Partners may vote in person or by proxy at such meeting. Whenever
the vote or Consent of Partners is permitted or required under this Agreement,
such vote or Consent may be given at a meeting of Partners or may be given in
accordance with the procedure prescribed in Section 14.1.A above. Except as
otherwise expressly provided in this Agreement, the Consent of holders of a
majority of the Percentage Interests held by Limited Partners (including
Limited Partner Interests held by the General Partner) shall control.
B. ACTIONS WITHOUT A MEETING. 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 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
required by this Agreement). Such consent shall be filed with
48
<PAGE> 54
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. PROXY. 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 its attorney-in-fact. No proxy shall be valid after the expiration of eleven
(11) months from the date thereof unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the Limited Partner executing it,
such revocation to be effective upon the Partnership's receipt of written
notice thereof.
D. CONDUCT OF MEETING. Each meeting of Partners shall be
conducted by the General Partner or such other Person as the General Partner
may appoint pursuant to such rules for the conduct of the meeting as the
General Partner or such other Person deems appropriate in its sole discretion.
ARTICLE XV.
GENERAL PROVISIONS
SECTION 15.1 ADDRESSES AND NOTICE.
Any notice, demand, request or report required or permitted to be
given or made to a Partner or Assignee under this Agreement shall be in writing
and shall be deemed given or made when delivered in person or when sent by
first class United States mail or by other means of written communication to
the Partner or Assignee at the address set forth in Exhibit A hereto or such
other address as the Partners shall notify the General Partner in writing. Such
communications shall be deemed sufficiently given, served, sent or received for
all purposes at such time as delivered to the addressee (with the return
receipt or delivery receipt being deemed conclusive evidence of such delivery)
or at such time as delivery is refused by the addressee upon presentation.
SECTION 15.2 TITLE AND CAPTIONS.
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
SECTION 15.3 PRONOUNS AND PLURALS.
Whenever the context may require, any pronoun used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns, pronouns and
49
<PAGE> 55
verbs shall include the plural and vice versa.
SECTION 15.4 FURTHER ACTION.
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
SECTION 15.5 BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
SECTION 15.6 CREDITORS.
Other than as expressly set forth herein with regard to any
Indemnitee, none of the provisions of this Agreement shall be for the benefit
of, or shall be enforceable by, any creditor of the Partnership.
SECTION 15.7 WAIVER.
No failure 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.
SECTION 15.8 COUNTERPARTS.
This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or
the same counterpart. Each party shall become bound by this Agreement
immediately upon affixing its signature hereto.
SECTION 15.9 APPLICABLE LAW.
This Agreement shall be governed by and construed in accordance with
the laws, including choice of law rules, of the State of Delaware. The federal
and state courts of competent jurisdiction located in Dallas County, Texas,
shall have exclusive personal jurisdiction over the parties to this Agreement.
Each party agrees to process being effected upon it by registered mail sent to
the address and in the manner specified in Section 15.1. Each party hereby
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to any suit, action or proceeding arising out of
or relating to this Agreement being brought in the federal or state courts
50
<PAGE> 56
of competent jurisdiction located in Dallas County, Texas, and hereby further
irrevocably waives any claim that any such suit, action or proceeding brought
in any such court has been brought in an inconvenient forum. In any litigation
between the parties to this Agreement, the prevailing party shall be entitled
to recover from the non-prevailing party all costs and expenses (including,
without limitation, fees and expenses of advisors and attorneys and related
court costs) incurred by the prevailing party in such litigation. All
obligations to be performed under this Agreement shall be performed in Dallas
County, Texas.
SECTION 15.10 INVALIDITY OF PROVISIONS.
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
SECTION 15.11 ENTIRE AGREEMENT.
This Agreement contains the entire understanding and agreement among
the Partners with respect to the subject matter hereof and supersedes the Prior
Agreement and any prior written oral understandings or agreements among them
with respect thereto.
SECTION 15.12 NO RIGHTS AS SHAREHOLDERS.
Nothing contained in this Agreement shall be construed as conferring
upon the holders of the Partnership Units any rights whatsoever as shareholders
of the General Partner, including, without limitation, any right to receive
dividends or other distributions made to shareholders of the General Partner or
to vote or to consent or receive notice as shareholders in respect to any
meeting of shareholders for the election of directors of the General Partner or
any other matter.
51
<PAGE> 57
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GENERAL PARTNER:
AMERICAN INDUSTRIAL PROPERTIES REIT
By: /s/ MARC A. SIMPSON
---------------------------------
Name: Marc A. Simpson
-------------------------------
Title: Vice President
------------------------------
LIMITED PARTNERS:
ACLU INVESTMENTS, LTD.
By: /s/ FRANK J. MACARI
---------------------------------
FJM INC. A TEXAS CORPORATION,
GENERAL PARTNER
By: /s/ FJM INC. A TEXAS CORPORATION,
GENERAL PARTNER
---------------------------------
Name: Frank J. Macari
-------------------------------
Title: President
------------------------------
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ BYRON PRESCOTT
---------------------------------
Name: Byron Prescott
-------------------------------
Title: Operations Manager
------------------------------
52
<PAGE> 58
EXHIBIT A
PARTNERS, CAPITAL ACCOUNTS AND PARTNERSHIP INTERESTS
<TABLE>
<CAPTION>
Name Initial Capital Number of Percentage
and Address Account Balance Partnership Units Interest
----------- --------------- ----------------- --------
<S> <C> <C> <C>
GENERAL PARTNER:
American Industrial Properties REIT $1,950,000 130,000 99%
LIMITED PARTNERS:
ALCU Investments, Ltd. $437,500 29,166.5 .50%
General Electric $437,500 29,166.5 .50%
Capital Corporation
</TABLE>
<PAGE> 59
EXHIBIT B
CAPITAL ACCOUNT MAINTENANCE RULES
1. CAPITAL ACCOUNTS OF THE PARTNERS.
A. The Partnership shall maintain for each Partner a separate
Capital Account in accordance with the rules of Regulations Section
l.704-l(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of
all Capital Contributions and any other deemed contributions made by such
Partner to the Partnership pursuant to this Agreement and (ii) all items of
Partnership income and gain (including income and gain exempt from tax)
computed in accordance with Section 1.B hereof and allocated to such Partner
pursuant to Section 6.1 of the Agreement and Exhibit C of the Agreement, and
decreased by (x) the amount of cash or Agreed Value of all actual and deemed
distributions of cash or property made to such Partner pursuant to the
Agreement and (y) all items of Partnership deduction and loss computed in
accordance with Section 1.B hereof and allocated to such Partner pursuant to
Section 6.1 of the Agreement and Exhibit C of the Agreement.
B. For purposes of computing the amount of any item of income,
gain, deduction or loss to be reflected in the Partners' Capital Accounts,
unless otherwise specified in the Agreement, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes 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)(1) of the Code shall be included in taxable income or loss),
with the following adjustments:
(1) Except as otherwise provided in Regulations Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and
deduction shall be made without regard to any election under Section 754 of the
Code which may be made by the Partnership, provided that the amounts of any
adjustments to the adjusted bases of the assets of the Partnership made
pursuant to Section 734 of the Code as a result of the distribution of property
by the Partnership to a Partner (to the extent that such adjustments have not
previously been reflected in the Partners' Capital Accounts) shall be reflected
in the Capital Accounts of the Partners in the manner and subject to the
limitations prescribed in Regulations Section l.704-1(b)(2)(iv) (m)(4).
(2) The computation of all items of income, gain, and
deduction shall be made without regard to the fact that items described in
Sections 705(a)(l)(B) or 705(a)(2)(B) of the Code are not includable in gross
income or are neither currently deductible nor capitalized for federal income
tax purposes.
(3) Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be determined as if the adjusted
basis of such property as of such date of
<PAGE> 60
disposition were equal in amount to the Partnership's Carrying Value with
respect to such property as of such date.
(4) In lieu of the depreciation, amortization, and other
cost recovery deductions taken into account in computing such taxable income or
loss, there shall be taken into account Depreciation for such fiscal year.
(5) In the event the Carrying Value of any Partnership
Asset is adjusted pursuant to Section 1.D hereof, the amount of any such
adjustment shall be taken into account as gain or loss from the disposition of
such asset.
(6) Any items specially allocated under Section 2 of
Exhibit C of the Agreement shall not be taken into account.
C. Generally, a transferee (including any Assignee) of a
Partnership Unit shall succeed to a pro rata portion of the Capital Account of
the transferor.
D. (1) Consistent with the provisions of Regulations Section
1.704-1(b)(2)(iv)(f), and as provided in Section 1.D(2), the Carrying Values of
all Partnership assets shall be adjusted upward or downward to reflect any
Unrealized Gain or Unrealized Loss attributable to such Partnership property,
as of the times of the adjustments provided in Section 1.D(2) hereof, as if
such Unrealized Gain or Unrealized Loss had been recognized on an actual sale
of each such property and allocated pursuant to Section 6.1 of the Agreement.
(2) Such adjustments shall be made as of the following
times: (a) immediately prior to the acquisition of an additional interest in
the Partnership by any new or existing Partner in exchange for more than a
deminimis Capital Contribution; (b) immediately prior to the distribution by
the Partnership to a Partner of more than a de minimis amount of property as
consideration for an interest in the Partnership; and (c) immediately prior to
the liquidation of the Partnership within the meaning of Regulations Section
1.704-l(b)(2)(ii)(g), provided however that adjustments pursuant to clauses (a)
and (b) above shall be made only if the General Partner determines that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership.
(3) In accordance with Regulations Section
1.704-l(b)(2)(iv)(e), the Carrying Value of Partnership assets distributed in
kind shall be adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership property, as of the time any
such asset is distributed.
(4) In determining Unrealized Gain or Unrealized Loss for
purposes of this Exhibit B, the aggregate cash amount and fair market value of
all Partnership assets (including cash or cash equivalents) shall be determined
by the General Partner using such reasonable method of
<PAGE> 61
valuation as it may adopt, or in the case of a liquidating distribution
pursuant to Article XIII of the Agreement, shall be determined and allocated by
the Liquidator using such reasonable methods of valuation as it may adopt. The
General Partner, or the Liquidator, as the case may be, shall allocate such
aggregate fair market value among the assets of the Partnership in such manner
as it determines in its sole and absolute discretion to arrive at a fair market
value for individual properties.
E. The provisions of the Agreement (including this Exhibit B and
the other Exhibits to the Agreement) relating to the maintenance of Capital
Accounts are intended to comply with Regulations Section 1.704-1(b), and shall
be interpreted and applied in a manner consistent with such Regulations. In the
event the General Partner shall determine that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits thereto
(including, without limitation, debits or credits relating to liabilities which
are secured by contributed or distributed property or which are assumed by the
Partnership, the General Partner, or the Limited Partners) are computed in
order to comply with such Regulations, the General Partner may make such
modification without regard to Article XIV of the Agreement, provided that it
is not likely to have a material effect on the amounts distributable to any
Person pursuant to Article XIII of the Agreement upon the dissolution of the
Partnership. The General Partner also shall (i) make any adjustments that are
necessary or appropriate to maintain equality between the Capital Accounts of
the Partners and the amount of Partnership capital reflected on the
Partnership's balance sheet, as computed for book purposes, in accordance with
Regulations Section l.704-l(b)(2)(iv)(q), and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulations Section l.704-1(b).
2. NO INTEREST.
No interest shall be paid by the Partnership on Capital Contributions
or on balances in Partners' Capital Accounts.
3. NO WITHDRAWAL.
No Partner shall be entitled to withdraw any part of its Capital
Contribution or Capital Account or to receive any distribution from the
Partnership, except as provided in Articles V and XIII of the Agreement.
<PAGE> 62
EXHIBIT C
SPECIAL ALLOCATION RULES
1. SPECIAL ALLOCATION RULES.
Notwithstanding any other provision of the Agreement or this Exhibit
C, the following special allocations shall be made in the following order:
A. MINIMUM GAIN CHARGEBACK. Notwithstanding the provisions of
Section 6.1 of the Agreement or any other provisions of this Exhibit C, if
there is a net decrease in Partnership Minimum Gain during any Partnership
Year, each Partner shall be specially allocated items of Partnership income and
gain for such year (and, if necessary, subsequent years) in an amount equal to
such Partner's share of the net decrease in Partnership Minimum Gain, as
determined under Regulations Section 1.704-2(g). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto. The items to be so
allocated shall be determined in accordance with Regulations Section
1.704-2(f)(6). This Section 1.A is intended to comply with the minimum gain
chargeback requirements in Regulations Section 1.704-2(f) and for purposes of
this Section 1.A only, each Partner's Adjusted Capital Account Deficit shall be
determined prior to any other allocations pursuant to Section 6.1 of this
Agreement with respect to such Partnership Year and without regard to any
decrease in Partner Minimum Gain during such Partnership Year.
B. PARTNER MINIMUM GAIN CHARGEBACK. Notwithstanding any other
provision of Section 6.1 of this Agreement or any other provisions of this
Exhibit C (except Section 1.A hereof), if there is a net decrease in Partner
Minimum Gain attributable to a Partner Nonrecourse Debt during any Partnership
Year, each Partner who has a share of the Partner Minimum Gain attributable to
such Partner Nonrecourse Debt, determined in accordance with Regulations
Section 1.704-2(i) (5), shall be specially allocated items of Partnership
income and gain for such year (and, if necessary, subsequent years) in an
amount equal to such Partner's share of the net decrease in Partner Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in accordance
with Regulations Section 1.704-2(i) (5). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each General Partner and Limited Partner pursuant thereto. The
items to be so allocated shall be determined in accordance with Regulations
Section 1.704-2(i) (4). This Section 1.B is intended to comply with the minimum
gain chargeback requirement in such Section of the Regulations and shall be
interpreted consistently therewith. Solely for purposes of this Section 1.B,
each Partner's Adjusted Capital Account Deficit shall be determined prior to
any other allocations pursuant to Section 6.1 of the Agreement or this Exhibit
C with respect to such Partnership Year, other than allocations pursuant to
Section 1.A hereof.
C. QUALIFIED INCOME OFFSET. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in Regulations
Sections 1.704-l(b)(2)(ii)(d)(4),
<PAGE> 63
l.704-1(b)(2)(ii)(d)(5), or 1.704-l(b)(2)(ii)(d)(6), and after giving effect to
the allocations required under Sections 1.A and 1.B hereof with respect to such
Partnership Year, such Partner has an Adjusted Capital Account Deficit, items
of Partnership income and gain (consisting of a pro rata portion of each item
of Partnership income, including gross income and gain for the Partnership
Year) shall be specially allocated to such Partner in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, its
Adjusted Capital Account Deficit created by such adjustments, allocations or
distributions as quickly as possible. This Section 1.C is intended to
constitute a "qualified income offset" under Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
D. GROSS INCOME ALLOCATION. In the event that any Partner has an
Adjusted Capital Account Deficit at the end of any Partnership Year (after
taking into account allocations to be made under the preceding paragraphs
hereof with respect to such Partnership Year), each such Partner shall be
specially allocated items of Partnership income and gain (consisting of a pro
rata portion of each item of Partnership income, including gross income and
gain for the Partnership Year) in an amount and manner sufficient to eliminate,
to the extent required by the Regulations, its Adjusted Capital Account
Deficit.
E. NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any
Partnership Year shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the General Partner determines in its good
faith discretion that the Partnership's Nonrecourse Deductions must be
allocated in a different ratio to satisfy the safe harbor requirements of the
Regulations promulgated under Section 704(b) of the Code, the General Partner
is authorized, upon notice to the Limited Partners, to revise the prescribed
ratio for such Partnership Year to the numerically closest ratio which would
satisfy such requirements.
F. PARTNER NONRECOURSE DEDUCTIONS. Any Partner Nonrecourse
Deductions for any Partnership Year shall be specially allocated to the Partner
who bears the economic risk of loss with respect to the Partner Nonrecourse
Debt to which such Partner Nonrecourse Deductions are attributable in
accordance with Regulations Sections 1.704-2(b)(4) and 1.704-2(i).
G. CODE SECTION 754 ADJUSTMENTS. To the extent an adjustment to
the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or
743(b) of the Code is required, pursuant to Regulations Section
1.704-l(b)(2)(iv)(m), to be taken into account in determining Capital Accounts,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis), and such item of gain or loss shall be
specially allocated to the Partners in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted pursuant to such
Section of the Regulations.
<PAGE> 64
2. ALLOCATIONS FOR TAX PURPOSES.
A. Except as otherwise provided in this Section 2, for federal
income tax purposes, each item of income, gain, loss and deduction shall be
allocated among the Partners in the same manner as its correlative item of
"book" income, gain, loss or deduction is allocated pursuant to Section 6.1 of
the Agreement and Section 1 of this Exhibit C.
B. In an attempt to eliminate Book-Tax Disparities attributable
to a Contributed Property or Adjusted Property, items of income, gain, loss,
and deduction shall be allocated for federal income tax purposes among the
Partners as follows:
(1) (a) In the case of a Contributed Property, such
items attributable thereto shall be allocated among the Partners consistent
with the principles of Section 704(c) of the Code to take into account the
variation between the 704(c) Value of such property and its adjusted basis at
the time of contribution; and
(b) any item of Residual Gain or Residual Loss
attributable to a Contributed Property shall be allocated among the Partners in
the same manner as its correlative item of "book" gain or loss is allocated
pursuant to Section 6.1 of the Agreement and Section 1 of this Exhibit C.
(2) (a) In the case of an Adjusted Property, such
items shall
(i) first, be allocated among the
Partners in a manner consistent with the principles of Section 704(c) of the
Code to take into account the Unrealized Gain or Unrealized Loss attributable
to such property and the allocations thereof pursuant to Exhibit B;
(ii) second, in the event such property
was originally a Contributed Property, be allocated among the Partners in a
manner consistent with Section 2.B(1) of this Exhibit C; and
(b) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be allocated among the Partners in
the same manner its correlative item of "book" gain or loss is allocated
pursuant to Section 6.1 of the Agreement and Section 1 of this Exhibit C.
C. To the extent Regulations promulgated pursuant to Section
704(c) of the Code permit a Partnership to utilize alternative methods to
eliminate the disparities between the Carrying Value of property and its
adjusted basis, the General Partner shall have the authority in its sole
discretion to elect the method to be used by the Partnership and such election
shall be binding on all Partners.
<PAGE> 65
EXHIBIT D
FORM OF PUT NOTICE
The undersigned hereby irrevocably (i) exercises its Put Right with
regard to [___________] of its Partnership Units in AIP Operating, L.P. in
accordance with the terms of the Amended and Restated Agreement of Limited
Partnership of AIP Operating, L.P., as amended, (the "Partnership Agreement")
and the Put Right referred to therein, (ii) surrenders such Partnership Units
and all right, title and interest therein and (iii) directs that the
Consideration (as determined in accordance with the provisions of the
Partnership Agreement) deliverable upon exercise of the Put Right be delivered
to the address specified below, and if Shares are to be delivered, such Shares
be registered or placed in the name(s) and at the address(es) specified below.
The undersigned hereby represents, warrants, and certifies that the undersigned
(a) has marketable and unencumbered title to such Partnership Units, free and
clear of the rights of or interests of any other person or entity, (b) has the
full right, power and authority to transfer and surrender such Partnership
Units as provided herein and (c) has obtained the consent or approval of all
persons or entities, if any, having the right to consult or approve such
redemption and surrender.
Dated:
By:
Name:
Title:
SHARES ARE TO BE ISSUED TO:
Name:
Address:
Please insert social security or taxpayer identification number:
<PAGE> 66
EXHIBIT E
FORM OF CALL NOTICE
The undersigned hereby irrevocably exercises its Call Right with
regard to all of the Partnership Units owned by __________ in AIP Operating,
L.P. in accordance with the terms of the Amended and Restated Agreement of
Limited Partnership of AIP Operating, L.P., as amended (the "Partnership
Agreement") and the Call Right referred to therein. The undersigned shall pay
the [Cash Amount/Share Consideration] (as determined in accordance with the
provisions of the Partnership Agreement) to __________ at the notice address of
__________ provided in the Partnership Agreement upon receipt of (1) the duly
executed Partnership Unit Certificate of __________ transferring all right,
title and interest in __________ to the undersigned, (2) if Shares are to be
delivered, instructions as to the name and address and taxpayer identification
number of the person to whom such Shares will be registered or placed, and (3)
the representation, warranty and certification of __________ that __________
(a) has marketable and unencumbered title to such Partnership Unit, free and
clear of the rights of or interests of any other person or entity, (b) has the
full right, power and authority to transfer and surrender such Partnership Unit
as provided herein, and (c) has obtained the consent or approval of all persons
or entities, if any, having the right to consult or approve such redemption and
surrender.
By:
Name:
Title:
<PAGE> 67
EXHIBIT F
Number Units
- -------- --------
AIP OPERATING, L.P.
This Certifies that is the owner
of Units of the above Limited Partnership transferable only on
the books of the Limited Partnership by the holder hereof in person or by a duly
authorized Attorney upon surrender of this Certificate properly endorsed.
Transfer of these Units is subject to substantial restrictions as set forth in
the Amended and Restated Agreement of Limited Partnership of AIP Operating, L.P.
(the "Partnership Agreement").
The Partnership will furnish without charge to each rightful holder
hereof who so requests, a copy of the Partnership Agreement which sets forth
the powers, designations, preferences and relative participation rights of
Partners and the qualifications, limitations or restrictions of such rights.
In Witness Whereof, the said Limited Partnership has caused this
Certificate to be signed by and to be sealed
with the Seal of the Limited Partnership if one is adopted.
Dated:
<PAGE> 1
EXHIBIT 10.5
PROMISSORY NOTE
$6,475,000 February ___, 1998
FOR VALUE RECEIVED, AMERICAN INDUSTRIAL PROPERTIES REIT, a Texas real
estate investment trust and AIP OPERATING, L.P., a Delaware limited partnership
having their principal place of business at 6210 North Beltline, Suite 170,
Irving, Texas 75063, (collectively the "Borrower") hereby joint and severally
promise to pay to the order of PRUDENTIAL SECURITIES CREDIT CORPORATION (the
"Lender"), at the following address: One New York Plaza, New York, New York
10292, or such other place as the holder hereof may from time to time designate
in writing, the principal sum of Six Million Four Hundred Seventy-Five Thousand
($6,475,000) Dollars or so much thereof as shall be outstanding from time to
time pursuant to this Promissory Note (this "Note"), in lawful money of the
United States of America, with interest thereon to be computed from the date of
disbursement under this Note at the Applicable Interest Rate (hereinafter
defined), and to be paid in installments as follows:
A. Payments of interest on the unpaid amount of each Loan made
pursuant to Section 2.02(a) of the Agreement (as hereinafter
defined), which interest payments shall be calculated and
payable in accordance with Section 1 hereof; and
B. The principal sum, all unpaid interest thereon and all other
amounts owed pursuant to this Note, and the other Loan
Documents, or otherwise in connection with the Loans evidenced
by this Note shall be due and payable on December 29, 1998.
(the "Maturity Date").
If any payment on this Note becomes due and payable on a day other
than a Business Day (as defined in the Agreement), the payment thereof shall be
extended to the next succeeding Business Day, and, with respect to payments of
principal, interest thereon shall be payable at the then applicable rate during
such extension. All payments to be made by the Borrower then to the Lender
shall be deemed received by the Lender only upon the Lender's actual receipt of
same.
This is a "Note" referred to in the Credit Agreement dated December
29, 1997 between the Lender and the Borrower (as amended, restated,
supplemented or otherwise modified from time to time, the "Agreement") and is
entitled to the benefits thereof and is subject to mandatory prepayment in
whole or in part as provided therein. Capitalized terms used herein but not
defined herein shall have the meanings assigned to them in the Agreement.
Presentment for payment, demand, notice of dishonor, protest, notice
of protest and all other demands and notices in connection with the delivery,
performance and enforcement of this Note are hereby waived, except as otherwise
expressly provided in the Agreement.
<PAGE> 2
1. Interest Rate. (a) Each Loan shall bear interest on the
unpaid principal amount thereof from the date such Loan is extended to the
Borrower pursuant to the Agreement until such principal amount is paid in full
at a rate or rates per annum determined in accordance with this Section 1.
Subject to subsection (c) below, the Borrower shall pay interest on the unpaid
amount of each Loan at the rate per annum (the "Applicable Interest Rate")
equal to the sum of (i) LIBOR in effect from time to time applicable to each
Interest Period for such Loan, plus (ii) the Applicable Margin, payable in
arrears (A) in the case of the initial Loan, on the day in the calendar month
following the Initial Borrowing Date corresponding to such Initial Borrowing
Date, and each corresponding day in each calendar month thereafter (unless such
date falls on a non-Business Day, then the next Business Day, but in no event
later than the Expiration Date) (each such date, an "Interest Payment Date")
and (B) in the case of each subsequent Loan, on each applicable Interest
Payment Date, commencing with the first of such dates to occur after the date
of such Loan and ending on the date the principal amount of such Loan shall be
paid or prepaid, to the extent of the interest accrued on the principal amount
of such Loan so paid or prepaid.
(b) Interest shall be calculated on the daily outstandings on a basis
of a 360-day year for the actual number of days elapsed. To the extent that
interest is required to be calculated at the Base Rate plus the Applicable
Margin pursuant to Section 2.11 of the Agreement, any change in the interest
rate on the Loans shall become effective as of the opening of business on the
day on which such change in the Base Rate becomes effective. The Lender shall,
as soon as practicable, notify the Borrower of the effective date and the
amount of each such change in the Base Rate; provided, however, that any
failure by the Lender to give the Borrower any such notice shall not affect the
application of such change in the Base Rate. Each determination of an interest
rate by the Lender pursuant to any provision of this Note or the Agreement
shall be, absent manifest error, presumed to be correct.
(c) If any of the events described in Section 2.11 of the Agreement
shall have occurred, then the Applicable Interest Rate shall be determined by
reference to the Base Rate in accordance with such Section 2.11.
(d) Anything herein to the contrary notwithstanding, the obligations
of the Borrower under this Note shall be subject to the limitation that
payments of interest shall not be required to the extent that receipt thereof
would be contrary to provisions of law applicable to the Lender limiting rates
of interest which may be charged or collected by the Lender. If the Borrower
pay the Lender interest in excess of the maximum amount permitted by applicable
law, such excess shall be applied in reduction of the principal balance of the
Note, and any remaining excess shall be refunded to the Borrower.
2. Late Charge. The Borrower shall, jointly and severally, pay a
late charge (the "Late Charge") of five percent (5%) of each monthly payment
not paid within ten (10) days after the date upon which such payment was due
(which amount the Borrower and the Lender agree is a fair and reasonable
estimate of the Lender's damages in light of all of the facts and
<PAGE> 3
circumstances as of the date of this Agreement). Such late charge shall be due
and payable by the Borrower concurrently with the late payment for which such
charge is assessed hereunder.
3. Security; Defined Terms; Incorporation by Reference. This Note
is secured by the Mortgages and the other Collateral Documents. The term
"Other Security Documents" means all documents other than this Note or the
Collateral Documents now or hereafter executed and/or delivered by the Borrower
and/or others and to or in favor of the Lender, which wholly or partially
secure, evidence or guarantee payment of the Obligations, provide for any
indemnity in favor of or payment to the Lender related to the Obligations, the
Notes, the Loan Documents or the Collateral Properties, provide for any
escrow/holdback arrangements or for any actions to be completed by Borrower
subsequent to the date hereof, or are otherwise related to the Loans evidenced
by this Note or the other Notes executed by Borrower under the Agreement.
Where appropriate, the singular number shall include the plural, the plural
shall include the singular, and the words "Lender" and "Borrower" shall include
their respective successors, assigns, heirs, personal representatives,
executors and administrators. The terms, covenants, and conditions of the
Agreement, the Collateral Documents, the Other Security Documents and the other
Loan Documents are hereby incorporated herein by reference and are made a part
of this Note to the same extent as if they were fully set forth herein.
4. Prepayment.
(a) The Borrower may, upon at least two (2) Business Days prior
notice to the Lender, voluntarily prepay any Loan in whole at any time or in
part from time to time, with accrued interest to the date of such prepayment on
the amount prepaid but, subject to clause (b) below, without premium or
penalty, in an amount not less than $100,000 or an integral multiple of
$100,000 in excess thereof. Each such notice shall be made in accordance with
Section 2.06 of the Agreement, shall be irrevocable and shall bind the Borrower
to make such prepayment in accordance with such notice.
(b) The Lender shall not be obligated to accept any prepayment of
the principal balance of this Note or of any other Notes unless it is
accompanied by all applicable Breakage Fees due in connection therewith. The
Borrower acknowledges that such Breakage Fees are a bargained for consideration
and not a penalty, and the Borrower recognizes that the Lender would incur
substantial additional costs and expenses in the event of a prepayment of the
Obligations, and that the Breakage Fees compensates the Lender for such costs
and expenses (including without limitation, the loss of the Lender's investment
opportunity during the period from the Prepayment Date until the Maturity
Date). Notwithstanding the foregoing, no Breakage Fees shall be due and owing
to the Lender with respect to any Loan repaid on an Interest Payment Date,
regardless of the date such Loan was extended to the Borrower.
(c) If following the occurrence of any Event of Default, the
Borrower shall tender payment of an amount sufficient to satisfy in full the
Obligations at any time prior to a sale of the Collateral Properties (either
through foreclosure or the exercise of the other remedies available to the
Lender under the Collateral Documents or the Other Security Documents), such
tender by the Borrower shall be deemed to be a voluntary prepayment under this
Note and all other Notes in
<PAGE> 4
the amount tendered and in such case the Borrower shall also pay to the Lender,
with respect to the amount tendered, the applicable Breakage Fees, if any, set
forth in this Note and all other Notes which Breakage Fees shall be immediately
due and payable.
(d) This Note is subject to mandatory prepayment in whole or in
part as provided in Section 2.05 of the Agreement.
5. Default. An "Event of Default" shall occur if:
(a) the Borrower fails to pay any outstanding principal (including
mandatory prepayments), interest or other amounts due hereunder on the date
when due (whether on the Maturity Date, upon acceleration or otherwise) under
this Note or any other Note; or
(b) any other Event of Default shall have occurred under the
Agreement.
6. Acceleration. If any Event of Default shall have occurred and
be continuing, the Lender may by written notice to the Borrower (i) declare the
commitment of the Lender to make Loans hereunder to be terminated, whereupon
the same shall forthwith terminate, and/or (ii) declare the Loans, all interest
thereon, any Obligations and accrued and unpaid fees and all other amounts
payable hereunder or in respect of the Loans to be forthwith due and payable,
whereupon they shall become and be forthwith due and payable, without
presentment, demand, protest, or further notice of any kind, all of which are
hereby expressly waived by the Borrower. Notwithstanding the foregoing, upon
the occurrence of any Event of Default described in Sections 8.01(i) or (j) of
the Agreement, the commitment of the Lender to make Loans shall automatically
be terminated and the Loans, all interest thereon and all accrued and unpaid
fees and all other amounts payable hereunder or in respect of the Loans shall
immediately become due and payable, without any requirement on the part of the
Lender to give notice, or make declaration, of any kind regarding such Event of
Default and without presentment, demand, protest or any other requirement on
the part of the Lender, all of which are hereby expressly waived by the
Borrower.
7. Default Interest. From and after the occurrence of any Event
of Default hereunder (including without limitation, the failure of Borrower to
pay the Obligations in full on the Maturity Date), and for so long as such
Event of Default shall continue (after as well as before judgment), the unpaid
principal amount of each Loan and any other amount then due and payable but not
yet paid hereunder shall bear interest at a rate per annum (the "Default Rate")
equal to the then interest rate of such outstanding Loan determined in
accordance with Section 1 above plus three hundred (300) basis points per
annum, payable on demand. Overdue interest shall be compounded and bear
interest, to the extent permitted by law, on each date for payment of interest
on the Loans hereunder. The Default Rate shall be computed from the occurrence
of the Event of Default until the actual payment in full of the Obligations.
This charge shall be added to the Obligations, and shall be deemed secured by
the Mortgage and the Other Security Documents. This clause, however, shall not
be construed as an agreement or privilege to extend the Maturity Date, nor as a
waiver of any other right or remedy accruing to the Lender by reason of the
occurrence of any Event of Default.
<PAGE> 5
8. Attorney's Fees. In the event that the Lender employs
attorney(s) to collect the Obligations, to enforce the provisions of this Note
or to protect or foreclose the security hereof, the Borrower agrees to pay the
Lender's reasonable attorneys' fees and disbursements, whether or not suit be
brought. Such fees shall be immediately due and payable.
9. No Oral Amendments. This Note may not be modified, amended,
waived, extended, changed, discharged or terminated orally or by any act or
failure to act on the part of the Borrower or the Lender, but only by an
agreement in writing signed by the party against whom enforcement of any
modification, amendment, waiver, extension, change, discharge or termination is
sought.
10. Full Authority. The Borrower represents that it has full
power, authority and legal right to execute, deliver and perform its
obligations pursuant to this Note, the Agreement, the Collateral Documents, the
Other Security Documents and the other Loan Documents and that the documents
constitute legal, valid and binding obligations of the Borrower.
11. No Waiver. Any failure by the Lender to insist upon strict
performance by the Borrower or any of the provisions of this Note, the
Agreement, the Collateral Documents, the Other Security Documents or the other
Loan Documents shall not be deemed to be a waiver of any of the terms or
provisions of this Note, the Agreement, the Collateral Documents, the Other
Security Documents or the other Loan Documents, and the Lender shall have the
right thereafter to insist upon strict performance by the Borrower of any and
all of the terms and provisions of this Note, the Agreement, the Collateral
Documents, the Other Security Documents or the other Loan Documents.
12. Notices. Except as otherwise specified herein, any notice,
consent, request or other communication required or permitted to be given
hereunder shall be in writing, addressed to the other party as set forth in
Section 9.01 of the Agreement.
13. WAIVER OF JURY TRIAL. THE BORROWER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO (A) A TRIAL BY
JURY AND (B) ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN RESPECT OF
ANY ACTION OR PROCEEDING BASED ON THE LOANS EVIDENCED BY THIS NOTE OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE, THE AGREEMENT, THE COLLATERAL
DOCUMENTS OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF THE BORROWER
AND/OR THE LENDER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER'S
MAKING OF THE LOANS SECURED BY THE COLLATERAL DOCUMENTS AND THE OTHER SECURITY
DOCUMENTS.
<PAGE> 6
IN WITNESS WHEREOF, the Borrower has duly executed this Promissory
Note to be effective the day and year first above written.
AIP OPERATING, L.P.,
a Delaware limited partnership
By: AMERICAN INDUSTRIAL PROPERTIES REIT,
a Texas real estate investment trust,
its General Partner
By: /s/ MARC A. SIMPSON
------------------------------------
Name: Marc A. Simpson
Title: Vice President
AMERICAN INDUSTRIAL PROPERTIES REIT,
a Texas real estate investment trust
By: /s/ MARC A. SIMPSON
------------------------------------
Name: Marc A. Simpson
Title: Vice President
<PAGE> 1
EXHIBIT 10.6
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT dated as of February 11, 1998
(this "Amendment") between American Industrial Properties REIT (the "REIT
Borrower"), a Texas real estate investment trust and AIP Operating, L.P.
("AIP"), a Delaware limited partnership (collectively the "Borrower"), and
Prudential Securities Credit Corporation, a Delaware corporation (the
"Lender"),
W I T N E S S E T H:
WHEREAS, Lender and the REIT Borrower entered into a certain Credit
Agreement dated December 29, 1997 (the "Credit Agreement") under the terms of
which Lender agreed to extend certain financial accommodations of up to
$35,000,000 to the REIT Borrower in connection with (i) the financing of the
acquisition (the "Acquisition") by the REIT Borrower of the Acquisition
Properties (as therein defined) and the related costs, and (ii) the financing
of the Transaction Costs (as therein defined); and
WHEREAS, the REIT Borrower and AIP have requested that Lender extend
the financial accommodations set forth in the Credit Agreement to AIP and the
REIT Borrower in connection with the acquisition of certain real property known
as Spring Valley Business Park, Richardson, Texas (the "Spring Valley
Property") more particularly described in Exhibit A hereto; and
WHEREAS, Lender has agreed to extend the financial accommodations set
forth in the Credit Agreement to AIP and the REIT Borrower for the acquisition
of the Spring Valley Property subject to the terms and conditions of the Credit
Agreement and this First Amendment to Credit Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree that the
Credit Agreement is hereby amended as follows:
1. The term "Borrower" as used in the Credit Agreement shall mean
American Industrial Properties REIT and AIP Operating, L.P., their respective
successors and assigns and their obligations under the Credit Agreement, the
Loan Documents and the Collateral Documents (both as defined therein) shall
from and after the date hereof be joint and several.
1
<PAGE> 2
2. Section 3.01 of the Credit Agreement is deleted and the
following Section is substituted therefor:
Section 3.01. Organization and Powers; REIT Status. American
Industrial Properties REIT (the "REIT Borrower") is a real estate investment
trust duly organized and validly existing and in good standing under the laws
of the State of Texas. AIP Operating, L.P. ("AIP") is a limited partnership
duly organized and validly existing and in good standing under the laws of the
State of Delaware. Both the REIT Borrower and AIP are duly qualified to do
business as a foreign corporation or entity and are in good standing in each
jurisdiction (other than the state of its respective incorporation or
organization) in which they conduct of their respective business or the
ownership or operation of their respective properties or assets makes such
qualification necessary, except where the failure to so qualify would not have
a Material Adverse Effect. Both the REIT Borrower and AIP have full power and
authority to own their respective properties and assets and carry on their
respective business as now conducted. The REIT Borrower has not taken any
action that would prevent it from maintaining its qualification as a REIT.
3. In Section 3.12 of the Credit Agreement, the term "Borrower"
shall be changed each time it appears in that Section to "REIT Borrower".
4. Section 5.01 of the Credit Agreement is hereby deleted and the
following Section is substituted therefor:
Section 5.01. Maintenance of Existence, Properties and REIT Status.
The Borrower shall do or cause to be done all things necessary to preserve and
keep in full force and effect its existence and continue to conduct its
business substantially as now and proposed to be conducted. The Borrower shall
(i) do or cause to be done all things necessary to preserve and keep in full
force and effect all of its other rights and franchises, and comply with all
laws applicable to it, except for violations thereof which would not have a
Material Adverse Effect; (ii) at all times, maintain, preserve and protect all
material franchises and Intellectual Property; and (iii) preserve all the
remainder of its material properties and keep the same in good repair, working
order and condition and from time to time make, or cause to be made, all
necessary and proper repairs, renewals and replacements, betterments and
improvements thereto so that the business carried on in connection therewith
may be properly conducted at all times. The REIT Borrower shall at all times
maintain its status as a REIT and shall not take any action which could lead to
its disqualification as a REIT. The REIT Borrower shall not engage in any
business other than the business of acting as a REIT.
5. Except as modified by this First Amendment to Credit
Agreement, the Credit Agreement shall remain in full force and effect.
2
<PAGE> 3
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWER:
AMERICAN INDUSTRIAL PROPERTIES REIT,
a Texas real estate investment trust
By: /s/ MARC A. SIMPSON
-------------------------------------
Name: Marc A. Simpson
Title: Vice President
AIP OPERATING, L.P.,
a Delaware limited partnership
By: AMERICAN INDUSTRIAL PROPERTIES REIT,
a Texas real estate investment trust,
its General Partner
By: /s/ MARC A. SIMPSON
-------------------------------------
Name: Marc A. Simpson
Title: Vice President
LENDER:
PRUDENTIAL SECURITIES CREDIT CORPORATION,
a Delaware corporation
By:
-------------------------------------
Name: Elizabeth Castagna
Title:
------------------------------
3
<PAGE> 4
EXHIBIT A
Legal description of land:
BEING a tract of land situated in the Isaac Wiley Survey, Abstract No. 575,
City of Richardson, Dallas County, Texas and being all of a Replat of Lot 2,
Block B, Spring Valley Business Park according to the plat thereof recorded in
Volume 81163, Page 292, Map Records, Dallas County, Texas and being more
particularly described as follows:
COMMENCING at the intersection of the south right-of-way line of Spring Valley
Road (100' R.O.W.) and the west right-of- way line of Houston & Texas Central
Railroad (100' R.O.W.);
THENCE South 27 degrees 35 minutes 00 seconds W, along the west right-of-way
line of said railroad, a distance of 770.24 feet to a 1/2 inch iron rod found
for the northeast corner of said Replat of Lot 2, Block B, Spring Valley
Business Park and the Point of Beginning;
THENCE South 27 degrees 35 minutes 00 seconds W, continuing along said west
right-of-way line, a distance of 646.48 feet to a 1/2 inch iron rod found for
corner;
THENCE North 62 degrees 25 minutes 00 seconds W, a distance of 450.00 feet to
an "x" found in concrete in the east right-of-way line of Sherman Street (100'
R.O.W.);
THENCE North 27 degrees 35 minutes 00 seconds E, along the east right-of-way
line of Sherman Street, a distance of 581.83 feet to a 1/2 inch iron rod found
for the beginning of a curve to the right having a central angle of 05 degrees
17 minutes 57 seconds and a radius of 700.00 feet;
THENCE along the east right-of-way line of Sherman Street and curve to the
right, a distance of 64.74 feet to a 1/2 inch iron rod found for corner;
THENCE South 62 degrees 25 minutes 00 seconds E, a distance of 447.01 feet to
the Point of Beginning and containing 290,852 square feet or 6.677 acres of
land, more or less.
4
