<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
----------------------
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 3, 1996
TRINET CORPORATE REALTY TRUST, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Maryland
(STATE OF INCORPORATION)
1-11918 94-3175659
(COMMISSION FILE NUMBER) (IRS EMPLOYER ID. NUMBER)
Four Embarcadero Center, Suite 3150
San Francisco, CA 94111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(415) 391-4300
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
<PAGE>
Item 5. OTHER EVENTS
PROPERTY ACQUISITIONS. From April 1, 1996 through July 3, 1996 TriNet
Corporate Realty Trust, Inc. (the "Company") acquired nine additional
properties (the "Acquired Properties") for an aggregate purchase price of
approximately $75.3 million, plus aggregate acquisition costs of approximately
$1.3 million. As of July 3, 1996 the Company's portfolio consisted of 107
properties. The properties acquired from April 1, 1996 through July 3, 1996
are described below. Unless otherwise indicated, substantially all of the
purchase price for each property was funded by drawing on the Company's $200
million unsecured revolving credit facility (the "1995 Acquisition Facility")
with a group of 11 banks for which Morgan Guaranty Trust Company of New York is
the lead agent and The First National Bank of Boston is the managing co-agent
and any remainder was funded from working capital. Neither the Company, any
subsidiary of the Company nor any director or officer of the Company was
affiliated with or had a material relationship with the seller of any property
described below.
TERADYNE, INC. AND FRESENIUS USA, INC. On April 9, 1996, TriNet Essential
Facilities X, Inc. ("TriNet X"), a wholly owned subsidiary of the Company,
purchased two headquarters properties comprised of 145,000 square feet
located in Walnut Creek, California for approximately $11.5 million. The
property was purchased from Copley Realty Income Partners I. TriNet X
acquired a fee title interest in these properties. Teradyne, Inc. will
continue to use one of the properties under a triple net lease that expires
on December 31, 2000 subject to extension for two additional five year
terms at the tenant's option. As of July 1, 1996, current annual rent for
the Teradyne, Inc. property is $540,000. Fresenius USA, Inc. has occupied
the second building under a sublease with Teradyne since July of 1992, and
entered into a direct triple net lease on June 27, 1996 that expires on
June 30, 2002 subject to extension for a five year term at the tenant's
option. As of July 1, 1996, current annual rent on the Fresenius USA, Inc.
property is $739,500 with contractual escalations of 7.5% in 1998 and 7.78%
in 1999.
LOCKHEED MARTIN. On May 31, 1996, TriNet X purchased the 118,800 square
foot headquarters property occupied by a wholly owned subsidiary of General
Electric Company (d.b.a.: Lockheed Martin) located in suburban
Philadelphia, Pennsylvania for approximately $4.6 million. The property
was purchased from Olds Properties Corporation. TriNet X acquired a fee
title interest in this property. Lockheed Martin will continue to use the
property under a triple net lease that expires on August 31, 2000, subject
to extension for an additional 13.5 year term at the tenant's option.
Current annual rent for this building is $469,260.
SUNNYVALE RESEARCH CENTER. On June 26, 1996, TriNet Sunnyvale Partners, L.
P. a limited partnership in which the Company is the sole general partner
("Sunnyvale Partners") purchased a four building R&D campus comprised of
215,481 square feet located in Sunnyvale, California, for approximately
$30.6 million. Sunnyvale Partners purchased the fee title interest in this
property from O'Donnell, Brigham & Partners-Northern Developments
("O'Donnell"), whose partners are the limited partners in Sunnyvale
Partners. The property was purchased with $6.1 million in cash contributed
by the Company (which was funded with working capital and a $4.7 million
draw on the 1995 Acquisition Facility), equity interests in the property
contributed to Sunnyvale Partners by O'Donnell with an approximate value of
$7.6 million and the assumption of a $17.0 million first mortgage with
Chase Manhattan Bank. Under the terms of the Sunnyvale Partners Limited
Partnership Agreement, beginning in June 1998 O'Donnell has the right under
certain circumstances to request the redemption of its interest in
Sunnyvale Partners, the
<PAGE>
Company may satisfy the redemption request with
shares of the Company's Common Stock or cash. Mitsubishi Electronics
America, Inc. will continue to occupy three of the buildings, under a
triple net lease that expires on July 31, 2002, subject to extension for a
five year term at the tenant's option. Current annual rent for these three
buildings is $2,878,366. The fourth building is tenanted by Futuretel,
Inc. (subleasing from National Semiconductor Corporation ("National
Semiconductor")) and Kanematsu USA, Inc. ("Kanematsu"). Kanematsu will
continue to use a portion of the building under a triple net lease that
expires on August 14, 2000, subject to extension for a five year term at
the tenant's option. National Semiconductor, currently subleasing their
space to Futuretel, Inc., is the primary tenant under a triple net lease
that expires on January 31, 1998. Current annual rent under the separate
leases with Kanematsu and National Semiconductor, Inc. is $211,741, and
$269,100, respectively.
LAM RESEARCH CORPORATION. On June 27, 1996, TriNet X purchased a 120,576
square foot office/R&D facility occupied by Lam Research Corporation,
located in Milpitas, California from Aetna Life Insurance Company for a
purchase price of $12.6 million. TriNet X acquired a fee title interest in
this property. Lam Research Corporation will continue to use the property
under a triple net lease that expires on January 31, 2006, subject to
extension for a five year term at the tenant's option. Current annual rent
is $1,157,530 with contractual escalations of 4.0% annually through 2005.
BLUE CROSS & BLUE SHIELD UNITED OF WISCONSIN. On June 28, 1996, TriNet
Essential Facilities XX, Inc. ("TriNet XX"), a wholly owned subsidiary of
the Company, purchased a 236,218 square foot headquarters property occupied
by Blue Cross & Blue Shield United of Wisconsin ("BC & BS") located in
Milwaukee, Wisconsin for a purchase price of $16.0 million. TriNet XX
simultaneously net leased the property back to BC & BS. TriNet XX acquired
a fee title interest in this property. BC & BS will continue to use the
building under a triple net lease that expires on June 30, 2006, subject to
extension for three additional five year terms at the tenant's option.
Current annual rent is $1,609,600 with contractual escalations of 3.0%
annually through 2005.
PROPERTY DISPOSITIONS. From April 1, 1996 through July 3, 1996 the Company
sold two properties (the "Sold Properties") for an aggregate sales price of
$12.3 million. The properties sold from April 1, 1996 through July 3, 1996 are
described below. Unless otherwise noted, neither the Company, any subsidiary of
the Company nor any director or officer of the Company was affiliated with or
had a material relationship with the buyer of any property described below.
SCHWEGMANN GIANT SUPER MARKETS-DENHAM SPRINGS. On April 24, 1996, TriNet
Corporate Partners I, L. P. ("TCPI"), a wholly owned subsidiary of the
Company, sold a retail store located in Denham Springs, Louisiana to
Schwegmann Giant Super Markets for a sale price of $1.3 million. Prior to
the sale of this property, TCPI leased the property to Schwegmann Giant
Super Markets. TCPI recognized an insignificant gain on this transaction.
LINVATEC CORPORATION. On July 3, 1996, TriNet X sold a 124,950 square foot
office building occupied by Linvatec Corporation and located in Largo,
Florida to Largo Lakes-1 Limited Partnership for a sale price of
approximately $11.0 million. TriNet X recognized a gain of approximately
$0.65 million on this transaction.
<PAGE>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
FINANCIAL STATEMENTS
Because it would be impractical to provide audited income statements of the
operations of these properties in conformance with Regulation S-X, Rule 3-
14 at the time of this report, historical financial information concerning
certain Acquired Properties and pro forma financial statements of the
Company reflecting these transactions will be provided within 60 days from
the due date of this report under cover of Form 8.
EXHIBITS
10.1 Amended and Restated Agreement of Limited Partnership between TriNet
Corporate Realty Trust, Inc. and the O'Donnell Revocable Trust, the
Donald S. Grant Revocable Trust and John W. Hopkins, dated June 26, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRINET CORPORATE REALTY TRUST, INC.
By: /s/A. William Stein
---------------------------------------------------
A. William Stein
Executive Vice President and
Chief Financial Officer
(Authorized Officer of the Registrant
and Principal Financial Officer)
Dated: July 17, 1996
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
TRINET SUNNYVALE PARTNERS, L.P.
a Delaware limited partnership
---------------------------
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE PARTNERSHIP
AN OPINION OF COUNSEL SATISFACTORY TO THE PARTNERSHIP, IN
FORM AND SUBSTANCE SATISFACTORY TO THE PARTNERSHIP, TO THE
EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION
MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER
APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS.
dated as of June 26, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
Exhibit B
TABLE OF CONTENTS
Page
----
ARTICLE 1 DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 ORGANIZATIONAL MATTERS . . . . . . . . . . . . . . . . 17
Section 2.1 Organization . . . . . . . . . . . . . . . . . . . . . 17
Section 2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.3 Registered Office and Agent; Principal Office. . . . . 17
Section 2.4 Power of Attorney. . . . . . . . . . . . . . . . . . . 18
Section 2.5 Term . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 3 PURPOSE. . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.1 Purpose and Business . . . . . . . . . . . . . . . . . 19
Section 3.2 Powers . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.3 Partnership Only for Purposes Specified. . . . . . . . 19
Section 3.4 Representations and Warranties by the Limited Partners 19
ARTICLE 4 CAPITAL CONTRIBUTIONS. . . . . . . . . . . . . . . . . 21
Section 4.1 Capital Contributions of the Initial Partners. . . . . 21
Section 4.2 Additional Funding and Capital Contributions . . . . . 21
A. General. . . . . . . . . . . . . . . . . . . . . . . . 21
B. Notice of Additional Funds Requirement . . . . . . . . 21
C. Partner Loans. . . . . . . . . . . . . . . . . . . . . 21
D. Additional General Partner Contributions; Additional
Limited Partners . . . . . . . . . . . . . . . . . . 22
Section 4.3 Loans by Third Parties . . . . . . . . . . . . . . . . 22
Section 4.4 No Interest; No Return . . . . . . . . . . . . . . . . 22
ARTICLE 5 DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . 22
Section 5.1 Requirement and Characterization of Distributions. . . 22
Section 5.2 Distributions in Kind. . . . . . . . . . . . . . . . . 23
Section 5.3 Amounts Withheld . . . . . . . . . . . . . . . . . . . 23
Section 5.4 Distributions Upon Liquidation . . . . . . . . . . . . 23
Section 5.5 Restricted Distributions . . . . . . . . . . . . . . . 23
ARTICLE 6 ALLOCATIONS. . . . . . . . . . . . . . . . . . . . . . 24
Section 6.1 Timing and Amount of Allocations of Net Income and
Net Loss. . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.2 General Allocations. . . . . . . . . . . . . . . . . . 24
Section 6.3 Additional Allocation Provisions . . . . . . . . . . . 24
A. Special Allocations. . . . . . . . . . . . . . . . . . 24
B. Regulatory Allocations . . . . . . . . . . . . . . . . 24
(a) Minimum Gain Chargeback . . . . . . . . . . . . . 24
(b) Partner Minimum Gain Chargeback . . . . . . . . . 24
(c) Nonrecourse Deductions and Partner Nonrecourse
Deductions . . . . . . . . . . . . . . . . . . . 25
(d) Qualified Income Offset . . . . . . . . . . . . . 25
(e) Gross Income Allocation . . . . . . . . . . . . . 25
(f) Limitation on Allocation of Net Loss. . . . . . . 25
(g) Section 754 Adjustment. . . . . . . . . . . . . . 26
(h) Curative Allocations. . . . . . . . . . . . . . . 26
C. Allocation of Excess Nonrecourse Liabilities . . . . . 26
Section 6.4 Tax Allocations. . . . . . . . . . . . . . . . . . . . 26
ii
<PAGE>
Page
----
A. In General . . . . . . . . . . . . . . . . . . . . . . 26
B. Allocations Respecting Section 704(c) Revaluations . . 26
Section 6.5 Other Provisions . . . . . . . . . . . . . . . . . . . 27
A. Other Allocations Upon Change in Law . . . . . . . . . 27
B. Consistent Tax Reporting . . . . . . . . . . . . . . . 27
ARTICLE 7 MANAGEMENT AND OPERATIONS OF BUSINESS. . . . . . . . . 27
Section 7.1 Management . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.2 Certificate of Limited Partnership . . . . . . . . . . 29
Section 7.3 Restrictions on General Partner's Authority. . . . . . 29
Section 7.4 Refinancing, Sales . . . . . . . . . . . . . . . . . . 31
Section 7.5 Management Fee; Reimbursement of the General Partner . 35
Section 7.6 Other Business of the General Partner . . . . . . . . 35
Section 7.7 Indemnification. . . . . . . . . . . . . . . . . . . . 36
Section 7.8 Liability of the General Partner . . . . . . . . . . . 37
Section 7.9 Other Matters Concerning the General Partner . . . . . 38
Section 7.10 Title to Partnership Assets. . . . . . . . . . . . . . 39
ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS . . . . . . 39
Section 8.1 Limitation of Liability. . . . . . . . . . . . . . . . 39
Section 8.2 Management of Business . . . . . . . . . . . . . . . . 39
Section 8.3 Outside Activities of a Limited Partner. . . . . . . . 39
Section 8.4 Return of Capital. . . . . . . . . . . . . . . . . . . 40
Section 8.5 Rights of Limited Partners Relating to the Partnership 40
Section 8.6 Redemption Rights of Qualifying Parties. . . . . . . . 41
Section 8.7 Partnership Right to Call Limited Partner Interests. . 43
Section 8.8 Other Redemptions. . . . . . . . . . . . . . . . . . . 43
ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS . . . . . . . . 44
Section 9.1 Records and Accounting . . . . . . . . . . . . . . . . 44
Section 9.2 Fiscal Year. . . . . . . . . . . . . . . . . . . . . . 44
Section 9.3 Reports. . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 10 TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . 44
Section 10.1 Preparation of Tax Returns . . . . . . . . . . . . . . 44
Section 10.2 Tax Elections. . . . . . . . . . . . . . . . . . . . . 45
Section 10.3 Tax Matters Partner. . . . . . . . . . . . . . . . . . 45
Section 10.4 Withholding. . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 11 TRANSFERS AND WITHDRAWALS. . . . . . . . . . . . . . . 47
Section 11.1 Transfer . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.2 Transfer of General Partner's Partnership Interest . . 47
Section 11.3 Limited Partners' Rights to Transfer . . . . . . . . . 47
A. General. . . . . . . . . . . . . . . . . . . . . . . . 47
B. Incapacity . . . . . . . . . . . . . . . . . . . . . . 48
C. Opinion of Counsel . . . . . . . . . . . . . . . . . . 48
D. Adverse Tax Consequences . . . . . . . . . . . . . . . 48
Section 11.4 Additional or Substituted Limited Partners . . . . . . 48
Section 11.5 Assignees. . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.6 General Provisions . . . . . . . . . . . . . . . . . . 49
iii
<PAGE>
Page
----
Section 11.7 Incremental Costs. . . . . . . . . . . . . . . . . . . 51
ARTICLE 12 ADMISSION OF PARTNERS. . . . . . . . . . . . . . . . . 51
Section 12.1 Admission of Successor General Partner . . . . . . . . 51
Section 12.2 Admission of Additional Limited Partners and
Substituted Limited Partner . . . . . . . . . . . . . 52
Section 12.3 Amendment of Agreement and Certificate of
Limited Partnership . . . . . . . . . . . . . . . . . 52
Section 12.4 Limit on Number of Partners. . . . . . . . . . . . . . 52
ARTICLE 13 DISSOLUTION, LIQUIDATION AND TERMINATION . . . . . . . 53
Section 13.1 Dissolution. . . . . . . . . . . . . . . . . . . . . . 53
Section 13.2 Winding Up . . . . . . . . . . . . . . . . . . . . . . 53
Section 13.3 Deemed Distribution and Recontribution . . . . . . . . 54
Section 13.4 Rights of Limited Partners . . . . . . . . . . . . . . 55
Section 13.5 Notice of Dissolution. . . . . . . . . . . . . . . . . 55
Section 13.6 Cancellation of Certificate of Limited Partnership . . 55
Section 13.7 Reasonable Time for Winding-Up . . . . . . . . . . . . 55
ARTICLE 14 PROCEDURES FOR ACTIONS AND CONSENTS OF PARTNERS;
AMENDMENTS; MEETINGS . . . . . . . . . . . . . . . . . 56
Section 14.1 Procedures for Actions and Consents of Partners. . . . 56
Section 14.2 Amendments . . . . . . . . . . . . . . . . . . . . . . 56
Section 14.3 Meetings of the Partners . . . . . . . . . . . . . . . 56
ARTICLE 15 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . 57
Section 15.1 Addresses and Notice . . . . . . . . . . . . . . . . . 57
Section 15.2 Further Action . . . . . . . . . . . . . . . . . . . . 58
Section 15.3 Binding Effect . . . . . . . . . . . . . . . . . . . . 58
Section 15.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 15.5 Counterparts . . . . . . . . . . . . . . . . . . . . . 58
Section 15.6 Applicable Law . . . . . . . . . . . . . . . . . . . . 58
Section 15.7 Entire Agreement . . . . . . . . . . . . . . . . . . . 58
Section 15.8 Invalidity of Provisions . . . . . . . . . . . . . . . 59
Section 15.9 Limitation to Preserve REIT Status . . . . . . . . . . 59
Section 15.10 No Partition . . . . . . . . . . . . . . . . . . . . . 59
Section 15.11 No Third-Party Rights Created Hereby . . . . . . . . . 60
EXHIBIT A PARTNER SCHEDULE . . . . . . . . . . . . . . . . . . . 61
EXHIBIT B EXAMPLES REGARDING ADJUSTMENT FACTOR . . . . . . . . . 63
EXHIBIT C NOTICE OF REDEMPTION . . . . . . . . . . . . . . . . . 65
EXHIBIT D INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . 68
iv
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
TRINET SUNNYVALE PARTNERS, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF TRINET
SUNNYVALE PARTNERS, L.P., dated as of June 26, 1996 (the "EFFECTIVE DATE"), is
entered into by and among TriNet Corporate Realty Trust, Inc., a Maryland
corporation, as the General Partner, and John D. O'Donnell, Trustee of the J.
and P. O'Donnell Revocable Trust dated October 20, 1982; Donald S. Grant,
Trustee of the Donald S. Grant Revocable Trust dated May 5, 1987; and John W.
Hopkins (collectively, the "Original Limited Partners").
RECITALS
A. On June 25, 1996, O'Donnell Brigham & Partners/Northern Developments,
a California general partnership ("O'Donnell"), and the Original Limited
Partners formed a Delaware Limited Partnership (the "Original Limited
Partnership") pursuant to that certain Agreement of Limited Partnership of
Sunnyvale Partners, L.P. dated as of June 25, 1996. Concurrently therewith, the
Original Limited Partnership acquired the land, four (4) buildings and related
improvements commonly known as 1050, 1060, 1070, 1080, 1090 and 1092 East Arques
Avenue, Sunnyvale, California (collectively, the "Contributed Property").
B. Pursuant to that certain Contribution Agreement dated as of even date
herewith, among the General Partner and O'Donnell, the General Partner agreed to
contribute cash to the Partnership in consideration of Partnership Units and
replace O'Donnell as the General Partner hereof in accordance with the
provisions of this Agreement.
NOW THEREFORE, in consideration of the foregoing recitals and the covenants
and promises contained herein, and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
AGREEMENT
ARTICLE 1
DEFINED TERMS
As used in this Agreement, except as otherwise expressly provided or unless
the context otherwise requires, (i) the terms defined in this Article include
the plural as well as the singular; (ii) all accounting terms not otherwise
defined herein have the meanings ascribed to them in accordance with GAAP; (iii)
all references in this Agreement to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Agreement; (iv) the words "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision; (v) "including" shall mean "including,
without limitation," "including, without limiting the generality of the
foregoing," and other phrases of similar import; and (v) the following terms
shall have the meanings ascribed to them set forth below.
"ACT" means the Delaware Revised Uniform Limited Partnership Act, as it may
be amended from time to time, and any successor to such statute.
"ACTIONS" has the meaning set forth in Section 7.7 hereof.
"ADDITIONAL FUNDS" has the meaning set forth in Section 4.2.A hereof.
<PAGE>
"ADDITIONAL LIMITED PARTNER" means a Person admitted to the Partnership as
a Limited Partner pursuant to Section 4.2.D or 11.4 hereof and who is shown as
such on the books and records of the Partnership.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Partner, the
deficit balance, if any, in such Partner's Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the following adjustments:
(a) decrease such deficit by any amounts that such Partner is
obligated to restore pursuant to this Agreement or by operation of law upon
liquidation of such Partner's Partnership Interest or is deemed to be
obligated to restore pursuant to the penultimate sentence of each of
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) increase such deficit by the items described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of "ADJUSTED CAPITAL ACCOUNT DEFICIT" is intended to
comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.
"ADJUSTMENT FACTOR" means 1.0; PROVIDED, HOWEVER, that in the event that:
(a) the General Partner (i) declares or pays a dividend on its
outstanding REIT Shares in REIT Shares or makes a distribution to all
holders of its outstanding REIT Shares in REIT Shares, (ii) splits or
subdivides its outstanding REIT Shares or (iii) effects a reverse stock
split or otherwise combines its outstanding REIT Shares into a smaller
number of REIT Shares, the Adjustment Factor shall be adjusted by
multiplying the Adjustment Factor previously in effect by a fraction, (1)
the numerator of which shall be the number of REIT Shares issued and
outstanding on the record date for such dividend, distribution, split,
subdivision, reverse split or combination (assuming for such purposes that
such dividend, distribution, split, subdivision, reverse split or
combination has occurred as of such time) and (2) the denominator of which
shall be the actual number of REIT Shares (determined without the above
assumption) issued and outstanding on the record date for such dividend,
distribution, split, subdivision, reverse split or combination;
(b) in the event that the General Partner distributes any rights,
options or warrants to all holders of its REIT Shares to subscribe for or
to purchase or to otherwise acquire REIT Shares (or other securities or
rights convertible into, exchangeable for or exercisable for REIT Shares)
at a price per share less than the Value of a REIT Share on the record date
for such distribution (each a "DISTRIBUTED RIGHT"), then the Adjustment
Factor shall be adjusted by multiplying the Adjustment Factor previously in
effect by a fraction, (i) the numerator of which shall be the number of
REIT Shares issued and outstanding on the record date plus the maximum
number of REIT Shares purchasable under such Distributed Rights and (ii)
the denominator of which shall be the number of REIT Shares issued and
outstanding on the record date plus a fraction, (1) the numerator of which
is the maximum number of REIT Shares purchasable under such Distributed
Rights times the minimum purchase price per REIT Share under such
Distributed Rights and (2) the denominator of which is the Value of a REIT
Share as of the record date; PROVIDED, HOWEVER, that, if any such
Distributed Rights expire or become no longer exercisable, then the
Adjustment Factor shall be adjusted, effective retroactive to the date of
distribution of the Distributed Rights, to reflect a reduced maximum number
of REIT Shares or any change in the minimum purchase price for the purposes
of the above fractions; and
(c) in the event that the General Partner shall, by dividend or
otherwise,
2
<PAGE>
distribute to all holders of its REIT Shares evidences of its indebtedness
or assets (including securities, but excluding any cash dividend or any
dividend or distribution referred to in subsection (a) above), which
evidences of indebtedness or assets relate to assets not received by the
General Partner pursuant to a PRO RATA distribution by the Partnership,
then the Adjustment Factor shall be adjusted to equal the amount determined
by multiplying the Adjustment Factor in effect immediately prior to the
close of business on the date fixed for determination of shareholders
entitled to receive such distribution by a fraction, (i) the numerator
shall be such Value of a REIT Share on the date fixed for such
determination and (ii) the denominator shall be the Value of a REIT Share
on the dated fixed for such determination less the then Fair Market Value
(as reasonably determined by the General Partner) of the portion of the
evidences of indebtedness or assets so distributed applicable to one REIT
Share.
Any adjustments to the Adjustment Factor shall become effective immediately
after the effective date of such event, retroactive to the record date, if any,
for such event. For illustrative purposes, examples of adjustments to the
Adjustment Factor are set forth on EXHIBIT B attached hereto.
"AFFILIATE" means, with respect to any Person, any Person directly or
indirectly controlling or controlled by or under common control with such
Person. For the purposes of this definition, "CONTROL" when used with respect
to any Person means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the
foregoing.
"AGREEMENT" means this Agreement of Limited Partnership, as it may be
amended, supplemented or restated from time to time.
"APPLICABLE PERCENTAGE" has the meaning set forth in Section 8.6.B hereof.
"APPRAISAL" means, with respect to real property, including the Contributed
Property or any interest therein, the value determined by an appraiser appointed
by agreement among the General Partner and the Original Limited Partners or, in
the absence of such an agreement, the value determined in accordance with the
following procedures:
(a) the General Partner shall designate in a notice to the Original
Limited Partners the name of a Person selected to act as its appraiser and
such information as the Original Limited Partners shall reasonably need to
appraise the property, to the extent the same has not previously been
supplied to the Original Limited Partners;
(b) within ten (10) days after such notice, the Original Limited
Partners shall appoint a second Person to act as its appraiser;
(c) the appraisers thus appointed shall, within forty-five (45) days
following the date of the General Partner's notice, determine the Fair
Market Value of the property; PROVIDED, HOWEVER, that if the Original
Limited Partners shall have failed to appoint their appraiser within the
ten-day period set forth above, or if either party's appraiser shall not
have determined the Fair Market Value within the forty-five day period set
forth above, then, in the first instance the determination by the General
Partner's appraiser shall be final and, in the second instance the
determination of the appraiser who has made a determination within such
time period shall be final;
(d) if the two appraisers have made their determinations within such
forty-five day period, (i) if the difference between the amounts so
determined shall not exceed ten percent (10%) of the lesser of such
amounts, the Fair Market Value of the property shall be fifty percent (50%)
of the sum of the amounts so determined; and (ii) if the difference between
the amounts so determined shall equal or exceed ten percent (10%) of the
lesser of such amounts, (x) the two
3
<PAGE>
appraisers shall, within twenty (20) days, appoint a third appraiser (and
if no such appraiser shall have been appointed within such twenty-day
period, the General Partner or the Original Limited Partners may request
the American Arbitration Association (or any successor organization
thereto) to appoint an appraiser and such third appraiser shall determine
the Fair Market Value of the property within thirty (30) days after
appointment; and (y) the determination of the appraiser which differs the
most in terms of dollar amount from the determinations of the other two
appraisers shall be excluded, and fifty percent (50%) of the sum of the
remaining two determinations shall be the Fair Market Value of the
property;
(e) the General Partner, on the one hand, and the Original Limited
Partners, on the other hand, shall pay the fees and expenses of the
appraiser appointed by it and them, respectively, and one-half of the fees
and expenses of the third appraiser and one-half of all other cost and
expenses incurred in connection with each appraisal; and
(f) all appraisers must be a member of the Appraisal Institute (or
any successor organization thereto) with at least five (5) years of
experience in valuing commercial real estate in the general location of the
property being appraised.
With respect to any other asset or any asset following the death or Incapacity
of all of the Original Limited Partners, Appraisal shall mean the written
opinion of an independent third party experienced in the valuation of similar
assets, selected by the General Partner in good faith. Such opinion may be in
the form of an opinion by such independent third party that the Fair Market
Value for such asset as set by the General Partner is fair, from a financial
point of view, to the Partners and/or the Partnership.
"ASSIGNEE" means a Person to whom one or more Partnership Units have been
Transferred in a manner permitted under this Agreement, but who has not become
an Additional Limited Partner or a Substituted Limited Partner, and who has the
rights set forth in Section 11.5 hereof.
"AVAILABLE CASH" means, with respect to any period for which such
calculation is being made,
(a) the sum, without duplication, of:
(1) the Partnership's Net Income or Net Loss (as the case
may be) for such period;
(2) all payments of interest on account of Partner Loans;
(3) Depreciation and all other noncash charges to the
extent deducted in determining Net Income or Net Loss for such period;
(4) any reserves or increases in reserves (including
Working Capital Reserves) of the Partnership;
(5) the excess, if any, of the net cash proceeds from the
sale, exchange, disposition, financing or refinancing of Partnership
property for such period over the Net Income (or Net Loss, as the case
may be) attributable to and recognized as a result of such sale,
exchange, disposition, financing or refinancing during such period
(excluding Terminating Capital Transactions); and
(6) all other cash received (including amounts previously
accrued as Net Income and amounts of deferred income) or any net
amounts borrowed by the Partnership for such period that was not
included in determining Net Income or Net Loss for such period;
(b) LESS the sum, without duplication, of:
4
<PAGE>
(1) all principal debt payments made during such period by
the Partnership other than payments on account of Partner Loans in
which anyone other than the Holders of Preferred Partnership Units has
participated;
(2) the Management Fee paid or payable with respect to such
period, and for purposes of calculating Net Income and Net Loss, there
shall not be taken into account any other fee or fees paid to third
parties for the management or operation of the Contributed Property;
and
(3) any amount included in determining Net Income or Net
Loss for such period that was not received by the Partnership during
such period.
Notwithstanding the foregoing, Available Cash shall not include any cash
received or reductions in reserves, or take into account any disbursements made,
or reserves established, after dissolution and the commencement of the
liquidation and winding up of the Partnership.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in San Francisco, California or New York, New York are
authorized or required by law to close.
"CAPITAL ACCOUNT" means, with respect to any Partner, the Capital Account
maintained by the Partnership for such Partner on the Partnership's books and
records in accordance with the following provisions:
(a) To each Partner's Capital Account, there shall be added such
Partner's Capital Contributions, such Partner's distributive share of Net
Income and any items in the nature of income or gain that are specially
allocated pursuant to Section 6.3 hereof, and the principal amount of any
Partnership liabilities assumed by such Partner or that are secured by any
property distributed to such Partner.
(b) From each Partner's Capital Account, there shall be subtracted
the amount of cash and the Gross Asset Value of any property distributed to
such Partner pursuant to any provision of this Agreement, such Partner's
distributive share of Net Loss and any items in the nature of expenses or
losses that are specially allocated pursuant to Section 6.3 hereof and the
principal amount of any liabilities of such Partner assumed by the
Partnership or that are secured by any property contributed by such Partner
to the Partnership.
(c) In the event any interest in the Partnership is Transferred in
accordance with the terms of this Agreement, the transferee shall succeed
to the Capital Account of the transferor to the extent that it relates to
the Transferred interest.
(d) In determining the principal amount of any liability for purposes
of subsections (a) and (b) hereof, there shall be taken into account Code
Section 752(c) and any other applicable provisions of the Code and
Regulations.
(e) The provisions of this Agreement relating to the maintenance
of Capital Accounts are intended to comply with Regulations Sections 1.704-1(b)
and 1.704-2, and shall be interpreted and applied in a manner consistent with
such Regulations. If the General Partner shall determine that it is prudent to
modify the manner in which the Capital Accounts are maintained in order to
comply with such Regulations, the General Partner may make such modification
provided that such modification will not have a material effect on the amounts
distributable to any Partner without the Consent of the Limited Partners. The
General Partner also shall (i) make any adjustments that are
5
<PAGE>
necessary or appropriate to maintain equality between the Capital Accounts
of the Partners and the amount of Partnership capital reflected on the
Partnership's balance sheet, as computed for book purposes, in accordance
with Regulations Section 1.704-1(b)(2)(iv)(q) and (ii) make any appropriate
modifications in the event that unanticipated events might otherwise cause
this Agreement not to comply with Regulations Section 1.704-1(b) or Section
1.704-2.
"CAPITAL CONTRIBUTION" means, with respect to any Partner, the amount of
money and the initial Gross Asset Value of any Contributed Property that such
Partner contributes to the Partnership pursuant to Section 4.1 or Section 4.2.D
hereof.
"CASH AMOUNT" means an amount of cash equal to the product of (i) the Value
of a REIT Share and (ii) the REIT Shares Amount determined as of the applicable
Valuation Date attributable to the Tendered Units.
"CERTIFICATE" means the Certificate of Limited Partnership of the
Partnership filed in the office of the Secretary of State of the State of
Delaware, as amended from time to time in accordance with the terms hereof and
the Act.
"CHARTER" means the Articles of Incorporation of the General Partner filed
with the Maryland State Department of Assessments and Taxation, as amended,
supplemented or restated from time to time.
"CODE" means the Internal Revenue Code of 1986, as amended and in effect
from time to time or any successor statute thereto, as interpreted by the
applicable Regulations thereunder. Any reference herein to a specific section
or sections of the Code shall be deemed to include a reference to any
corresponding provision of future law.
"CONCERNED LIMITED PARTNERS" shall mean each of the Original Limited
Partners until (i) with respect to the J. and P. O' Donnell Revocable Trust
dated October 20, 1982, the death of John D. O'Donnell or his current spouse;
(ii) with respect to the Donald S. Grant Revocable Trust dated May 5, 1987, the
death of Donald S. Grant; and (iii) with respect to John W. Hopkins, his death
or the death of his current spouse.
"CONSENT" means the consent to, approval of, or vote on a proposed action
by a Limited Partner given in accordance with Article 14 hereof, which Consent
shall be obtained prior to the taking of any action for which it is required by
this Agreement and, except as otherwise provided in this Agreement, may be given
or withheld by the relevant Limited Partners, in their reasonable discretion.
"CONTRIBUTED PROPERTY" has the meaning set forth in Recital A hereof,
together with any other asset, in such form as may be permitted by the Act, but
excluding cash, contributed or deemed contributed to the Partnership (or deemed
contributed to the Partnership on termination and reconstitution thereof
pursuant to Code Section 708).
"CUT-OFF DATE" means with respect to Tendered Units covered by a Notice of
Redemption received by the General Partner (i) after December 1 of any calendar
year and prior to June 1 of the succeeding calendar year, June 30 of such
succeeding calendar year; and (ii) after June 1 and prior to December 1 of any
calendar year, December 31 of such calendar year. If June 30 is not a Business
Day, then the Cut-Off Date shall be the next following Business Day. If
December 31 is not a Business Day, the Cut-Off Date shall be the first Business
Day preceding December 31.
6
<PAGE>
"DEBT" means, as to any Person as of any date of determination, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services; (ii) all amounts owed by such Person to banks or
other Persons in respect of reimbursement obligations under letters of credit,
surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person; (iii) all indebtedness for borrowed
money or for the deferred purchase price of property or services secured by any
lien on any property owned by such Person, to the extent attributable to such
Person's interest in such property, even though such Person has not assumed or
become liable for the payment thereof; and (iv) lease obligations of such Person
that, in accordance with generally accepted accounting principles, should be
capitalized.
"DEPRECIATION" means, for each Fiscal Year or other applicable period, an
amount equal to the federal income tax depreciation, amortization or other cost
recovery deduction allowable with respect to an asset for such year or other
period, except that, if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such year or
period, Depreciation shall be in an amount that bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation, amortization
or other cost recovery deduction for such year or other period bears to such
beginning adjusted tax basis; PROVIDED, HOWEVER, that, if the federal income tax
depreciation, amortization or other cost recovery deduction for such year or
period is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the General
Partner.
"DESIGNATED PARTIES" means John D. O'Donnell and Donald S. Grant.
"DESIGNATED REPRESENTATIVE" shall mean, initially, John D. O'Donnell; in
the event of his death or Incapacity, Donald S. Grant; and in the event of his
death or Incapacity, John W. Hopkins; PROVIDED, HOWEVER, that the Designated
Parties and John W. Hopkins may at any time by notice to the General Partner
designate any of them to act as the Designated Representative.
"DISTRIBUTED RIGHT" has the meaning set forth in the definition of
"ADJUSTMENT FACTOR."
"EFFECTIVE DATE" has the meaning set forth in the preamble to this
Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"FAIR MARKET VALUE" shall mean, as of the time of determination, (i) with
respect to a Contributed Property or any interest therein, the value of the
Contributed Property or such interest determined by agreement of the General
Partner and the Original Limited Partners or, if no such agreement has been
reached, the value determined by Appraisal; (ii) with respect to other material
real property interests, the value of such property determined by agreement of
the General Partner or the Liquidator, as applicable, and the Original Limited
Partners or, if no such agreement has been reached, the value determined by
Appraisal; and (iii) with respect to other assets or any asset following the
death or Incapacity of all of the Original Limited Partners, the value thereof
determined by the General Partner or the Liquidator, as applicable, in its good
faith opinion.
"FAMILY MEMBERS" means, as to a Person that is an individual, (i) such
Person's spouse; (ii) such Person's ancestors; (iii) such Person's descendants
(whether by blood or by adoption); (iv) such Person's brothers and sisters; (v)
INTER VIVOS or testamentary trusts of which only such Person and/or his spouse,
ancestors, descendants (whether by blood or by adoption), brothers and/or
sisters are beneficiaries; and (vi) any partnership or limited liability
company all of whose partners or members consist of such Person and/or his
spouse, ancestors, descendants (whether by blood or by adoption), brothers
and/or sisters and/or INTER VIVOS or testamentary trusts of which only such
Person and/or his spouse, ancestors, descendants (whether by blood or by
adoption), brothers and/or sisters are beneficiaries.
7
<PAGE>
"FISCAL YEAR" means the fiscal year of the Partnership, which shall be the
calendar year.
"FUNDING NOTICE" has the meaning set forth in Section 4.2.B hereof.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accounts and statements and pronouncements of the
Financial Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the accounting profession), or in such
other statements by such entity as may be in general use by significant segments
of the United States accounting profession, which are applicable to the
circumstances on the date of determination.
"GENERAL PARTNER" means TriNet Corporate Realty Trust, Inc., a Maryland
corporation, and its successors and assigns, as the general partner of the
Partnership in their capacities as general partner of the Partnership.
"GENERAL PARTNER INTEREST" means the Partnership Interest held by the
General Partner, which Partnership Interest is an interest as a general partner
under the Act. A General Partner Interest may be expressed as a number of
Partnership Units.
"GROSS ASSET VALUE" means, with respect to any asset, the asset's adjusted
basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a
Limited Partner to the Partnership shall be set forth on the Partner
Schedule with respect to such Limited Partner.
(b) The Gross Asset Values of all Partnership assets immediately
prior to the occurrence of any event described in clause (1), clause (2),
clause (3), clause (4) or clause (5) hereof shall be adjusted to equal
their respective gross Fair Market Values as of the following times:
(1) the acquisition of an additional interest in the
Partnership (other than in connection with the execution of this
Agreement but including contributions or deemed contributions by a
Partner pursuant to Section 4.2 hereof) by a new or existing Partner
in exchange for more than a DE MINIMIS Capital Contribution, if the
General Partner reasonably determines that such adjustment is
necessary or appropriate to reflect the relative economic interests
of the Partners in the Partnership;
(2) 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, if the General Partner reasonably
determines that such adjustment is necessary or appropriate to reflect
the relative economic interests of the Partners in the Partnership;
(3) the liquidation of the Partnership within the meaning
of Regulations Section 1.704-1(b)(2)(ii)(g);
(4) upon the admission of a successor General Partner
pursuant to Section 12.1 hereof; and
(5) at such other times as the General Partner shall
reasonably determine necessary or advisable in order to comply with
Regulations Sections 1.704-1(b) and 1.704-2.
(c) The Gross Asset Value of any Partnership asset distributed to a
Partner shall
8
<PAGE>
be the Fair Market Value of such asset on the date of distribution.
(d) The Gross Asset Values of Partnership assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m);
PROVIDED, HOWEVER, that Gross Asset Values shall not be adjusted pursuant
to this subsection (d) to the extent that the General Partner reasonably
determines that an adjustment pursuant to subsection (b) above is necessary
or appropriate in connection with a transaction that would otherwise result
in an adjustment pursuant to this subsection (d).
(e) If the Gross Asset Value of a Partnership asset has been
determined or adjusted pursuant to subsection (a), subsection (b) or
subsection (d) above, such Gross Asset Value shall thereafter be adjusted
by the Depreciation taken into account with respect to such asset for
purposes of computing Net Income and Net Losses.
"GROSS INCOME" means, for each Fiscal Year of the Partnership, an amount
equal to the sum of all items of income and gain taken into account in
determining Net Income or Net Loss.
"HOLDER" means either (i) a Partner or (ii) an Assignee owning a
Partnership Unit that is treated as a member of the Partnership for federal
income tax purposes.
"INCAPACITY" or "INCAPACITATED" means, (i) as to any Partner who is an
individual, death, total physical disability or entry by a court of competent
jurisdiction adjudicating such Partner incompetent to manage his or her person
or his or her estate; (ii) as to any Partner that is a corporation or limited
liability company, the filing of a certificate of dissolution, or its
equivalent, for the corporation or limited liability company or the revocation
of its charter; (iii) as to any Partner that is a partnership, the dissolution
and commencement of winding up of the partnership; (iv) as to any Partner that
is an estate, the distribution by the fiduciary of the estate's entire interest
in the Partnership; (v) as to any trustee of a trust that is a Partner, the
termination of the trust (but not the substitution of a new trustee) other than
in connection with the distribution of the trust assets to a Designated Party or
his spouse; or (vi) as to any Partner, the bankruptcy of such Partner. For
purposes of this definition, bankruptcy of a Partner shall be deemed to have
occurred when (a) the Partner commences a voluntary proceeding seeking
liquidation, reorganization or other relief 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 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
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 has not been vacated or stayed
within ninety (90) days of such appointment; or (h) an appointment referred to
in clause (g) above 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 by reason of
its status as (A) the General Partner; (B) a director of the General Partner or
an officer or employee of the Partnership or the General Partner; or (C)
O'Donnell, a Limited Partner or a Designated Party unless such Person is made a
party by reason of acts or events which occurred prior to the Effective Date;
and (ii) such other Persons (including Affiliates of the General Partner or the
Partnership) as the General Partner may designate from time to time (whether
before or after the event giving rise to potential liability), in its reasonable
discretion.
9
<PAGE>
"INTEREST COVERAGE RATIO" means, as of any date of determination, the ratio
obtained by dividing (i) the sum of (A) the net income from the Contributed
Property (as long as the Property is net leased, rent and additional rent LESS
the Management Fee LESS depreciation and amortization), (B) depreciation and
amortization included in calculating such net income and (C) the interest
expense on the Debt of the Partnership secured by the Contributed Property
included in calculating such net income, in each instance determined in
conformity with GAAP; by (ii) the amount of clause (C), above, each calculated
for the fiscal period ended on such date of determination.
"IRS" means the Internal Revenue Service, which administers the internal
revenue laws of the United States.
"LIMITED PARTNER" means any Original Limited Partner or any Additional
Limited Partner or Substituted Limited Partner, in such Person's capacity as a
Limited Partner in the Partnership. In no event shall the General Partner
become or be construed to be a Limited Partner hereunder, even if the General
Partner acquires Partnership Units previously held by a Limited Partner, whether
pursuant to Section 8.6 hereof or otherwise.
"LIMITED PARTNER INTEREST" means a Partnership Interest of a Limited
Partner in the Partnership representing a fractional part of the Partnership
Interests of all Limited Partners and includes any and all benefits to which the
holder of such a Partnership Interest may be entitled as provided in this
Agreement, together with all obligations of such Person to comply with the terms
and provisions of this Agreement. A Limited 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.
"LOAN TO VALUE RATIO" shall mean the ratio of the principal amount of Debt
secured by a mortgage or deed of trust to the Fair Market Value of the property
securing such Debt, in each instance as of the time of determination.
"MAJORITY IN INTEREST OF THE LIMITED PARTNERS" means those Limited Partners
holding in the aggregate more than fifty percent (50%) of the aggregate
Partnership Units of all Limited Partners.
"MANAGEMENT FEE" has the meaning set forth in Section 7.5.A hereof.
"NET DISTRIBUTABLE AMOUNT" has the meaning set forth in Section 7.4.C(1)
hereof.
"NET INCOME" or "NET LOSS" means, for each Fiscal Year of the Partnership,
an amount equal to the Partnership's taxable income or loss for such year,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(a) Any income of the Partnership that is exempt from federal income
tax and not otherwise taken into account in computing Net Income (or Net
Loss) pursuant to this definition of "NET INCOME" or "NET LOSS" shall be
added to (or subtracted from, as the case may be) such taxable income (or
loss);
(b) Any expenditure of the Partnership described in Code Section
705(a)(2)(B) or treated as a Code Section 705(a)(2)(B) expenditure pursuant
to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Net Income (or Net Loss) pursuant to this definition
of "NET INCOME" or "NET LOSS," shall be subtracted from (or added to, as
the case may be) such taxable income (or loss);
10
<PAGE>
(c) In the event that the Gross Asset Value of any Partnership asset
is adjusted pursuant to subsection (b) or subsection (c) of the definition
of "GROSS ASSET VALUE," the amount of such adjustment shall be taken into
account as gain or loss from the disposition of such asset for purposes of
computing Net Income or Net Loss;
(d) Gain or loss resulting from any disposition of property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property
disposed of, notwithstanding that the adjusted tax basis of such property
differs from its Gross Asset Value;
(e) In lieu of the depreciation, amortization and other cost recovery
deductions that would otherwise be taken into account in computing such
taxable income or loss, there shall be taken into account Depreciation for
such Fiscal Year;
(f) To the extent that an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be
taken into account in determining Capital Accounts as a result of a
distribution other than in liquidation of a Partner's interest in the
Partnership, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases the basis of the asset) from the disposition of the
asset and shall be taken into account for purposes of computing Net Income
or Net Loss; and
(g) Notwithstanding any other provision of this definition of "NET
INCOME" or "NET LOSS," any item that is specially allocated pursuant to
Section 6.3.B hereof shall not be taken into account in computing Net
Income or Net Loss. The amounts of the items of Partnership income, gain,
loss or deduction available to be specially allocated pursuant to Section
6.3 hereof shall be determined by applying rules analogous to those set
forth in this definition of "NET INCOME" or "NET LOSS."
"NONRECOURSE DEDUCTIONS" has the meaning set forth in Regulations Section
1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Fiscal 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).
"NOTICE OF REDEMPTION" means the Notice of Redemption substantially in the
form of EXHIBIT C attached to this Agreement.
"ORIGINAL LIMITED PARTNERS" has the meaning set forth in the first
paragraph hereof; PROVIDED, HOWEVER, that "ORIGINAL LIMITED PARTNERS" does not
include any Assignee or other transferee, including any Additional Limited
Partner or Substituted Limited Partner succeeding to all or any part of the
Partnership Interest of an Original Limited Partner.
"ORIGINAL LIMITED PARTNERSHIP" has the meaning set forth in Recital A
hereto.
"OWNERSHIP LIMIT" means the applicable restriction on ownership of shares
of the General Partner currently imposed under the Charter; E.G., no ownership
of more than nine and 3/10ths percent (9.3%) of the REIT Shares issued and
outstanding.
"PARTNER" means the General Partner or a Limited Partner, and "PARTNERS"
means the General Partner and the Limited Partner(s).
"PARTNER LOAN" has the meaning set forth in Section 4.2.C hereof.
"PARTNER MINIMUM GAIN" means an amount, with respect to each Partner
Nonrecourse Debt,
11
<PAGE>
equal to the Partnership Minimum Gain that would result if such Partner
Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Regulations Section 1.704-2(i)(3).
"PARTNER NONRECOURSE DEBT" 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 Fiscal Year shall be determined in
accordance with the rules of Regulations Section 1.704-2(i)(2).
"PARTNER SCHEDULE" means a schedule, substantially in the form attached
hereto as EXHIBIT A and executed by the General Partner and a Limited Partner
(including the Original Limited Partners and any Additional Limited Partner or
Substituted Limited Partner), that shall set forth, with respect to a Limited
Partner to which Partnership Units are issued pursuant to this Agreement; (i)
the Gross Asset Values, as determined by the General Partner and agreed to by
the contributing Limited Partner, for any Contributed Property contributed by
such contributing Limited Partner; and (ii) the initial Partnership Units issued
to such Limited Partner.
"PARTNERSHIP" means the limited partnership formed under the Act and
pursuant to this Agreement, and any successor thereto.
"PARTNERSHIP INTEREST" means an ownership interest in the Partnership
representing a Capital Contribution by either a Limited Partner or the General
Partner and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement. A Partnership Interest may be expressed as a number of
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 Fiscal Year shall be
determined in accordance with the rules of Regulations Section 1.704-2(d).
"PARTNERSHIP RECORD DATE" means the record date established by the General
Partner, which record date shall initially be the same as the record date
established by the General Partner for a distribution to its shareholders.
"PARTNERSHIP UNIT" means a fractional share of the Partnership Interests of
all Partners issued pursuant to Section 4.1 or Section 4.2 hereof; PROVIDED,
HOWEVER, that the General Partner Interest and the Limited Partner Interests
shall have the differences in rights and privileges as specified in this
Agreement. The ownership of Partnership Units may (but need not, in the sole
and absolute discretion of the General Partner) be evidenced by a certificate
for Partnership Units issued by the General Partner.
"PERMITTED TRANSFER" has the meaning set forth in Section 11.3.A hereof.
"PERSON" means an individual or a corporation, partnership, trust,
unincorporated organization, association, limited liability company or other
entity.
"PREFERRED PARTNERSHIP UNITS" means Partnership Units issued to the
Original Limited Partners as of the Effective Date, whether subsequently held by
an Original Limited Partner, any other Limited Partner, an Assignee or the
General Partner (following the acquisition of Tendered Units pursuant to Section
8.6 hereof).
"PREFERRED RETURN PER UNIT" means with respect to Preferred Partnership
Units, nine percent (9%) per annum for any applicable period; PROVIDED, HOWEVER,
that such Return shall be increased or decreased, from time to time, by the same
incremental per share amount (and not proportionate amount) as any increase or
decrease, respectively, in the rate of the annualized cash dividends paid on
account of a REIT Share compared to such annualized rate on the Effective Date.
In the event the General Partner no
12
<PAGE>
longer qualifies as a REIT, the Preferred Return Per Unit shall be nine percent
(9%) per annum. The Preferred Return Per Unit shall not constitute a
"GUARANTEED PAYMENT" under Code Section 707(c).
"PRIME RATE" means the interest rate which Wells Fargo Bank, a national
banking association, announces from time to time as its prime lending rate;
PROVIDED, HOWEVER, that if such Bank (or any successor bank) no longer announces
a prime lending rate, the interest rate announced from time to time by another
bank designated by the General Partner which is one of the twenty (20) largest
national banks, measured by total assets.
"QUALIFIED TRANSFEREE" means an "ACCREDITED INVESTOR" as defined in Rule
501 promulgated under the Securities Act.
"QUALIFYING PARTY" means (i) an Original Limited Partner; (ii) a Designated
Party; (iii) an Additional Limited Partner or a Substituted Limited Partner; or
(iv) a Family Member or an Assignee who is also a Qualified Transferee;
PROVIDED, HOWEVER, that with respect to each such Family Member or Assignee
(other than such an Assignee in a Permitted Transfer pursuant to a pledge of
Partnership Units), until such time as the Original Limited Partner or
Designated Party from whom such Family Member or Assignee derived its
Partnership Units is deceased or Incapacitated, such Family Member or Assignee
shall effect a Redemption and any other rights pursuant to Section 8.6 hereof
solely through, by power of attorney or other method approved by the General
Partner, the Original Limited Partner or Designated Party from whom such Family
Member or Assignee derived its Partnership Units.
"REDEMPTION" has the meaning set forth in Section 8.6.A hereof.
"REDEMPTION DATE" means (i) with respect to Tendered Units exchanged for
REIT Shares if the aggregate of all Redemptions set forth in the Notices of
Redemption received by the General Partner in the six-month period ending June 1
or December 1, including the subject Notice of Redemption, exceeds Three Million
Dollars ($3,000,000), the date which is sixty (60) days following the Cut-Off
Date (or if such date is not a Business Day, then the next following Business
Day); or (ii) in all other instances, the Cut-Off Date.
"REGULATIONS" means the applicable income tax regulations under the Code,
whether such regulations are in proposed, temporary or final form, as such
regulations may be amended from time to time (including corresponding provisions
of succeeding regulations).
"REGULATORY ALLOCATIONS" has the meaning set forth in Section 6.3.B(h)
hereof.
"REIT" means a real estate investment trust qualifying under Code Section
856.
"REIT PARTNER" means a Partner or Assignee that is, or has made an election
to qualify as, a REIT.
"REIT PAYMENT" has the meaning set forth in Section 15.9 hereof.
"REIT REQUIREMENTS" has the meaning set forth in Section 5.1. hereof.
"REIT SHARE" means a share of the General Partner's common stock, par value
$0.01 per share or, with respect to any successor General Partner by way of any
merger in which such successor is the survivor, a share of the successor
General Partner's common stock; PROVIDED, HOWEVER, if the successor General
Partner has more than one class of stock or other publicly traded security, REIT
Share shall mean a share of that class of common stock or other publicly traded
security that was acquired by the shareholders of the General Partner as merger
consideration in connection with such merger.
"REIT SHARES AMOUNT" means a number of REIT Shares equal to the product of
(i) the number of Tendered Units and (ii) the Adjustment Factor; PROVIDED,
HOWEVER, that if the General Partner issues to all holders of REIT Shares as of
a certain record date rights, options, warrants or convertible or
13
<PAGE>
exchangeable securities entitling the General Partner's shareholders to
subscribe for or purchase REIT Shares, or any other securities or property
(collectively, the "RIGHTS"), with the record date for such Rights issuance
falling within the period starting on the date of the Notice of Redemption and
ending on the day immediately preceding the Redemption Date, which Rights will
not be distributed before the relevant Redemption Date, then the REIT Shares
Amount shall also include such Rights that a holder of that number of REIT
Shares would be entitled to receive, expressed, where relevant hereunder, in a
number of REIT Shares determined by the General Partner in good faith.
"RELATED PARTY" means, with respect to any Person, any other Person whose
ownership of shares of the General Partner's capital stock would be attributed
to the first such Person under either Code Section 544 (as modified by Code
Section 856(h)(1)(B)) or Code Section 318 (as modified by Code Section
856(d)(5)).
"RELATED PERSON" means with respect to a Partner or a Holder, a Person
bearing a relationship to such Partner or Holder, or a Person to whom such
Partner or Holder bears a relationship, specified in Regulations Section 1.752-
4(b).
"RIGHTS" has the meaning set forth in the definition of "REIT SHARES
AMOUNT."
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"SUBSTITUTED LIMITED PARTNER" means an Assignee who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.4 hereof. The term
"SUBSTITUTED LIMITED PARTNER" shall not include any Additional Limited Partner.
"TAX ITEMS" has the meaning set forth in Section 6.4.A hereof.
"TENDERED UNITS" has the meaning set forth in Section 8.6.A hereof.
"TENDERING PARTY" has the meaning set forth in Section 8.6.A hereof.
"TERMINATING CAPITAL TRANSACTION" means any sale or other disposition of
all or substantially all of the assets of the Partnership or a related series of
transactions that, taken together, result in the sale or other disposition of
all or substantially all of the assets of the Partnership.
"TRANSFER," when used with respect to a Partnership Unit or all or any
portion of a Partnership Interest, means any sale, assignment, bequest,
conveyance, devise, gift (outright or in trust), pledge, encumbrance,
hypothecation, mortgage, exchange, transfer or other disposition or act of
alienation, whether voluntary or involuntary or by operation of law; PROVIDED,
HOWEVER, that when the term is used in Article 11 hereof, Transfer does not
include (a) any Redemption of Partnership Units by the Partnership, or
acquisition of Tendered Units from the Limited Partners by the General Partner,
pursuant to Section 8.6 hereof or (b) any redemption of Partnership Units
pursuant to Section 8.7 or Section 8.8 hereof. The terms "TRANSFERRED" and
"TRANSFERRING" have correlative meanings.
"VALUATION DATE" means (a) in the case of a tender of Partnership Units for
Redemption, the date of receipt by the General Partner of a Notice of Redemption
or, if such date is not a Business Day, the immediately preceding Business Day
or (b) in any other case, the date specified in this Agreement.
"VALUE" means, on any Valuation Date with respect to a REIT Share, the
average of the daily market prices for five (5) consecutive trading days
immediately preceding the Valuation Date. The market price for any such trading
day shall be:
14
<PAGE>
(a) if the REIT Shares are listed or admitted to trading on any
securities exchange or The Nasdaq Stock Market's National Market System,
the closing price, regular way, on such day, or if no such sale takes place
on such day, the average of the closing bid and asked prices on such day,
in either case as reported in the principal consolidated transaction
reporting system;
(b) if the REIT Shares are not listed or admitted to trading on any
securities exchange or The Nasdaq Stock Market's National Market System,
the last reported sale price on such day or, if no sale takes place on such
day, the average of the closing bid and asked prices on such day, as
reported by a reliable quotation source designated by the General Partner;
or
(c) if the REIT Shares are not listed or admitted to trading on any
securities exchange or The Nasdaq Stock Market's National Market System and
no such last reported sale price or closing bid and asked prices are
available, the average of the reported high bid and low asked prices on
such day, as reported by a reliable quotation source designated by the
General Partner, or if there shall be no bid and asked prices on such day,
the average of the high bid and low asked prices, as so reported, on the
most recent day (not more than five (5) days prior to the date in question)
for which prices have been so reported;
PROVIDED, HOWEVER, that if there are no bid and asked prices reported during the
five (5) days prior to the date in question, the Value of the REIT Shares shall
be determined by Appraisal. In the event that the REIT Shares Amount includes
Rights that a holder of REIT Shares would be entitled to receive, then the Value
of such Rights shall be determined by Appraisal.
ARTICLE 2
ORGANIZATIONAL MATTERS
SECTION 2.1 ORGANIZATION
The Partnership is a limited partnership organized and reconstituted
pursuant to the provisions of the Act and upon the terms and subject to the
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 TriNet Sunnyvale Partners, L.P. The
Partnership's business may be conducted under any other name or names selected
by the General Partner, including the name of the General Partner or any
Affiliate thereof; PROVIDED, HOWEVER, that the Partnership shall not use in its
name the name of any Original Limited Partner, Designated Party or any
derivative of any 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 Partners of such change in the next regular communication to the Partners.
SECTION 2.3 REGISTERED OFFICE AND AGENT; PRINCIPAL OFFICE
The address of the registered office of the Partnership in the State of
Delaware is located at 1013 Centre Road, Wilmington DL 19805, and the registered
agent for service of process on the Partnership in the State of Delaware at such
registered office is The Prentice-Hall Corporation System, Inc. The principal
office of the Partnership is located at 1013 Centre Road, Wilmington, Delaware
19805, or such other place as the General Partner may from time to time
designate by notice to the Limited Partners. The
15
<PAGE>
Partnership may maintain offices at such other place or places within or outside
the State of Delaware as the General Partner deems advisable.
SECTION 2.4 POWER OF ATTORNEY
A. Each Limited Partner and each Assignee hereby irrevocably constitutes
and appoints the General Partner, any Liquidator and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case with
full power of substitution, as its true and lawful agent and attorney-in-fact,
with full power and authority in its name, place and stead to execute, swear to,
seal, acknowledge, deliver, file and record in the appropriate public offices
(a) all certificates, documents and other instruments (including this Agreement
and the Certificate and all amendments, supplements or restatements thereof)
that the General Partner or the Liquidator deems appropriate or necessary to
form, qualify or continue the existence or qualification of the Partnership as a
limited partnership (or a partnership in which the limited partners have limited
liability to the extent provided by applicable law) in the State of Delaware and
in all other jurisdictions in which the Partnership may conduct business or own
property; (b) all conveyances and other instruments or documents that are
appropriate or necessary to reflect the dissolution and liquidation of the
Partnership pursuant to the terms of this Agreement, including a certificate of
cancellation; (c) all conveyances and other instruments or documents that are
appropriate or necessary to reflect the distribution or exchange of assets of
the Partnership pursuant to the terms of this Agreement; (d) all instruments
relating to the admission, withdrawal, removal or substitution of any Partner
pursuant to, or other events described in, Article 11, Article 12 or Article 13
hereof or the Capital Contribution of any Partner; and (f) all certificates,
documents and other instruments relating to the determination of the rights,
preferences and privileges relating to Partnership Interests.
Nothing contained herein shall be construed as authorizing the General Partner
to amend this Agreement except in accordance with Article 14 hereof or as may be
otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be irrevocable
and a special power coupled with an interest, in recognition of the fact that
each of the Limited Partners and Assignees will be relying upon the power of the
General Partner 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 or Partnership Interest and shall extend to such Limited
Partner's or Assignee's heirs, successors, assigns and personal representatives.
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 the Liquidator's request therefor, such other instruments as the
General Partner or the Liquidator, as the case may be, deems necessary to
effectuate this Agreement and the purposes of the Partnership.
SECTION 2.5 TERM
The term of the Partnership shall commence on the Effective Date and shall
continue until December 31, 2050 unless the Partnership is dissolved sooner
pursuant to the provisions of Article 13 hereof or as otherwise provided by law.
ARTICLE 3
PURPOSE
SECTION 3.1 PURPOSE AND BUSINESS
The purpose and nature of the Partnership is to conduct the business of
ownership, construction, development and operation of the Contributed Property
and anything necessary or incidental to the foregoing; PROVIDED, HOWEVER, that
such business may be limited to and conducted in such a manner as to permit the
General Partner, in its sole and absolute discretion, at all times to be
classified as a REIT.
16
<PAGE>
SECTION 3.2 POWERS
A. The Partnership shall be 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.
B. Notwithstanding any other provision in this Agreement, the General
Partner may cause the Partnership not to take, or to refrain from taking, any
action that, in the judgment of the General Partner, in its sole and absolute
discretion, (i) could adversely affect the ability of the General Partner to
continue to qualify as a REIT, (ii) could subject the General Partner to any
additional taxes under Code Section 857 or Code Section 4981 or (iii) could
violate any law or regulation of any governmental body or agency having
jurisdiction over the General Partner, its securities or the Partnership, unless
such action (or inaction) under clause (i), clause (ii) or clause (iii) above
shall have been specifically consented to by the General Partner in writing.
SECTION 3.3 PARTNERSHIP ONLY FOR PURPOSES SPECIFIED
The Partnership shall be a limited partnership only for the purposes
specified in Section 3.1 hereof, and this Agreement shall not be deemed to
create a company, venture or partnership between or among the Partners with
respect to any activities whatsoever other than the activities within the
purposes of the Partnership as specified in Section 3.1 hereof. Except as
otherwise provided in this Agreement, no Partner shall have any authority to act
for, bind, commit or assume any obligation or responsibility on behalf of the
Partnership, its properties or any other Partner. No Partner, in its capacity
as a Partner under this Agreement, shall be responsible or liable for any
indebtedness or obligation of another Partner, nor shall the Partnership be
responsible or liable for any indebtedness or obligation of any Partner,
incurred either before or after the execution and delivery of this Agreement by
such Partner, except as to those responsibilities, liabilities, indebtedness or
obligations incurred pursuant to and as limited by the terms of this Agreement
and the Act.
SECTION 3.4 REPRESENTATIONS AND WARRANTIES BY THE LIMITED PARTNERS
A. Each Limited Partner that is an individual (including each Additional
Limited Partner or Substituted Limited Partner as a condition to becoming an
Additional Limited Partner or a Substituted Limited Partner) represents and
warrants to the Partnership, the General Partner and each other Limited Partner
that (i) the consummation of the transactions contemplated by this Agreement to
be performed by such Limited Partner will not result in a breach or violation
of, or a default under, any material agreement by which such Limited Partner or
any of such Limited Partner's property is bound, or any statute, regulation,
order or other law to which such Limited Partner is subject; (ii) such Limited
Partner is neither a "FOREIGN PERSON" within the meaning of Code Section 1445(f)
nor a "FOREIGN PARTNER" within the meaning of Code Section 1446(e); (iii) to the
best of its knowledge, after reasonable inquiry, such Limited Partner does not
own, directly or indirectly or by attribution under Code Section 318 (as
modified by Code Section 856(d)(5)), (A) stock of any corporation that is a
tenant of either (I) the General Partner, (II) the Partnership or (III) any
partnership, venture or limited liability company of which the General Partner
or the Partnership is a member; or (B) an interest in the assets or net profits
of any tenant of either (I) the General Partner; (II) the Partnership; or (III)
any partnership, venture or limited liability company of which the General
Partner or the Partnership is a member; (vi) such Limited Partner does not own,
directly or indirectly or by attribution under Code Section 544 (as modified by
Code Section 856(h)) stock of the General Partner; and (v) this Agreement is
binding upon and enforceable against such Limited Partner in accordance with its
terms.
B. Each Limited Partner that is not an individual (including each
Additional Limited Partner or Substituted Limited Partner as a condition to
becoming an Additional Limited Partner or a Substituted Limited Partner)
represents and warrants to the Partnership, the General Partner and each other
Limited Partner that (i) all transactions contemplated by this Agreement to be
performed by it have been duly authorized by all necessary action, including
that of its general partner(s), committee(s), trustee(s), beneficiaries,
directors and/or shareholder(s), as the case may be, as required; (ii) the
consummation of
17
<PAGE>
such transactions shall not result in a breach or violation of, or a default
under, its partnership or operating agreement, trust agreement, charter or
bylaws, as the case may be, any material agreement by which such Limited Partner
or any of such Limited Partner's properties or any of its partners, members,
beneficiaries, trustees or shareholders, as the case may be, is or are bound, or
any statute, regulation, order or other law to which such Limited Partner or any
of its partners, members, trustees, beneficiaries or shareholders, as the case
may be, is or are subject; (iii) such Limited Partner is neither a "FOREIGN
PERSON" within the meaning of Code Section 1445(f) nor a "FOREIGN PARTNER"
within the meaning of Code Section 1446(e); (iv) to the best of its knowledge,
after reasonable inquiry, such Limited Partner does not own, directly or
indirectly or by attribution under Code Section 318 (as modified by Code Section
856(d)(5)), (A) stock of any corporation that is a tenant of either (I) the
General Partner; (II) the Partnership; or (III) any partnership, venture or
limited liability company of which the General Partner or the Partnership is a
member; or (B) an interest in the assets or net profits of any tenant of either
(I) the General Partner; (II) the Partnership; or (III) any partnership, venture
or limited liability company of which the General Partner or the Partnership is
a member; (v) such Limited Partner does not own, directly or indirectly or by
attribution under Code Section 544 (as modified by Code Section 856(h)) stock of
the General Partner; and (vi) this Agreement is binding upon, and enforceable
against, such Limited Partner in accordance with its terms.
C. Each Limited Partner (including each Substituted Limited Partner as a
condition to becoming a Substituted Limited Partner) represents, warrants and
agrees that it has acquired and continues to hold its interest in the
Partnership for its own account for investment only and not for the purpose of,
or with a view toward, the resale or distribution of all or any part thereof,
nor with a view toward selling or otherwise distributing such interest or any
part thereof at any particular time or under any predetermined circumstances.
Each Limited Partner further represents and warrants that it is a sophisticated
investor, able and accustomed to handling sophisticated financial matters for
itself, particularly real estate investments, and that it has a sufficiently
high net worth that it does not anticipate a need for the funds that it has
invested in the Partnership in what it understands to be a highly speculative
and illiquid investment.
D. The representations and warranties contained in Sections 3.4.A, 3.4.B
and 3.4.C hereof shall survive the execution and delivery of this Agreement by
each Limited Partner (and, in the case of an Additional Limited Partner or a
Substituted Limited Partner, the admission of such Additional Limited Partner or
Substituted Limited Partner as a Limited Partner in the Partnership) and the
dissolution, liquidation and termination of the Partnership. The General
Partner may, in its sole and absolute discretion on behalf of the Partnership
and its Partners, grant waivers and exceptions to the representations and
warranties contained in Sections 3.4.A, 3.4.B and 3.4.C hereof, but any such
waiver or exception must be in writing, must refer to this Section 3.4.D and
must describe with particularity the representation or warranty as to which such
waiver or exception shall apply.
E. Each Limited Partner (including each Substituted Limited Partner as a
condition to becoming a Substituted Limited Partner) hereby represents that it
has consulted and been advised by its legal counsel and tax advisor in
connection with, and acknowledges that no representations have been made by any
Partner or any employee or representative or Affiliate of any Partner with
respect to, the potential profit, tax consequences of any sort (including the
tax consequences resulting from making a Capital Contribution, being admitted to
the Partnership or being allocated Tax Items), cash flows, funds from operations
or yield, if any, in respect of the Partnership, and that projections and any
other information, including financial and descriptive information and
documentation, that may have been in any manner submitted to such Limited
Partner shall not constitute any representation or warranty of any kind or
nature, express or implied.
18
<PAGE>
ARTICLE 4
CAPITAL CONTRIBUTIONS
SECTION 4.1 CAPITAL CONTRIBUTIONS OF THE INITIAL PARTNERS
At the time of the execution of this Agreement, the Original Limited
Partners and the General Partner shall have made and shall make, respectively,
their respective Capital Contributions shown on EXHIBIT A attached hereto. The
Original Limited Partners and the General Partner shall initially own
Partnership Units in the respective amounts set forth on such EXHIBIT A. Except
as provided by law, in Section 4.2.C, Section 4.2.D or Section 10.4 hereof, or
as may be necessary to effect a Redemption, the Partners shall have no
obligation or right to make any additional Capital Contributions or loans to the
Partnership.
SECTION 4.2 ADDITIONAL FUNDING AND CAPITAL CONTRIBUTIONS
A. GENERAL. The General Partner may, at any time and from time to time,
determine that the Partnership requires additional funds ("ADDITIONAL FUNDS")
for such purposes as the General Partner may determine. Additional Funds may be
raised by the Partnership, at the election of the General Partner, in any manner
provided in, and in accordance with, the terms of this Section 4.2 or Section
4.3 hereof. No Person, including any Partner or Assignee, shall have any
preemptive, preferential, participation or similar right or rights to subscribe
for or acquire any Partnership Interest.
B. NOTICE OF ADDITIONAL FUNDS REQUIREMENT. The General Partner shall
give written notice (the "FUNDING NOTICE") to the Limited Partners of the need
for Additional Funds and the anticipated source(s) thereof.
C. PARTNER LOANS. The General Partner may lend Additional Funds to the
Partnership (a "PARTNER LOAN") on terms and conditions no less favorable to the
Partnership than would be available to the Partnership from any third party;
PROVIDED, HOWEVER, that each Limited Partner may elect, by delivering written
notice to the General Partner within thirty (30) days of the delivery of the
Funding Notice, to participate in the Partner Loan in the same proportionate
share as such Limited Partner's Units bears to the aggregate Units of all
Holders, including the General Partner, participating in such Loan, or such
other share as the General Partner and such Holders shall agree. In the event
the General Partner has not elected to lend Additional Funds to the Partnership
and a Limited Partner has made a good faith determination that the lack of
Additional Funds could cause the Partnership to default in its obligations to
third parties, including any holder of any Debt secured by a mortgage or deed of
trust on the Contributed Property, such Limited Partner may elect, by delivering
written notice to the General Partner and all other Limited Partners, to lend
Additional Funds to the Partnership as a Partner Loan on terms and conditions no
less favorable to the Partnership than would be available to the Partnership
from any third party. In such event, within thirty (30) days of the delivery of
the foregoing notice, each other Limited Partner may elect, by delivering
written notice to the notifying Limited Partner to participate in the Partner
Loan in the same proportionate share as such Limited Partner's Units bears to
the aggregate Units of all Holders participating in such Loan, or such other
share as the notifying Limited Partner and such Holders shall agree.
D. ADDITIONAL GENERAL PARTNER CONTRIBUTIONS; ADDITIONAL LIMITED PARTNERS.
Whether or not a Funding Notice is given to the Limited Partners, the General
Partner on behalf of the Partnership may raise all or any portion of the
Additional Funds by making additional Capital Contributions and/or accepting
additional Capital Contributions from any other Partners and/or third parties
and either (i) in the case of Partners (including the General Partner),
increasing such Partner's Partnership Units; or (ii) in the case of a third
party, admitting such third party as an Additional Limited Partner. Subject to
the terms of this Section 4.2 and to the definition of "GROSS ASSET VALUE," the
General Partner shall determine in good faith the amount, terms and conditions
of such additional Capital Contributions; PROVIDED, HOWEVER, that (i) in no
event shall any such Contribution entitle the maker thereof to a distribution or
return prior to, or with the same priority as, the distribution and return to
which the Holders of Preferred Partnership Units are entitled hereunder; and
(ii) in the case of an additional Capital Contribution by the General Partner,
19
<PAGE>
the Partnership shall issue to the General Partner the number of Partnership
Units derived by dividing (a) the amount of the additional Capital Contribution
(net of any liabilities assumed or taken subject to by the Partnership) by (b)
the Value determined as of the date of such Capital Contribution.
SECTION 4.3 LOANS BY THIRD PARTIES
The Partnership may incur or assume Debt, or enter into other similar
credit, guarantee, financing or refinancing arrangements, for any purpose, upon
such terms as the General Partner determines appropriate; SUBJECT, HOWEVER, to
the limitations of Sections 7.3 and 7.4 hereof.
SECTION 4.4 NO INTEREST; NO RETURN
No Partner shall be entitled to interest on its Capital Contribution or on
such Partner's Capital Account. Except as provided herein or by law, no Partner
shall have any right to demand or receive the return of its Capital Contribution
from the Partnership.
ARTICLE 5
DISTRIBUTIONS
SECTION 5.1 REQUIREMENT AND CHARACTERIZATION OF DISTRIBUTIONS
The General Partner shall cause the Partnership to distribute quarterly all
(or with respect to amounts to be distributed pursuant to clause (2) below, such
portion as the General Partner may in its sole and absolute discretion
determine) of the Available Cash generated by the Partnership with respect to
such quarter as follows:
(1) First, to each Holder of Preferred Partnership Units on the
Partnership Record Date, PARI PASSU, an amount equal to the sum of (i) the
product of (a) the Preferred Return Per Unit for such quarter and (b) the
number of Preferred Partnership Units held by such Holder as of the
Partnership Record Date; and (ii) any accrued but unpaid amounts previously
distributable to such Holder (or its predecessor) under clause (i), above,
PLUS interest thereon at the Prime Rate in effect on the scheduled date of
such distribution under such clause (i) for the period commencing with such
scheduled date and ending on the date of its distribution hereunder;
PROVIDED, HOWEVER, that the amount distributable pursuant to clause (i) to
any Additional Limited Partner holding Preferred Partnership Units admitted
to the Partnership in the quarter immediately preceding and ending with
such Partnership Record Date shall be prorated based on the number of days
that such Additional Limited Partner was a Holder of such Preferred
Partnership Units during such quarter; and
(2) Second, the balance, (i) ninety-nine percent (99%) to the General
Partner and (ii) one percent (1%) to the Holders of the Preferred
Partnership Units (including the General Partner) in proportion to their
Partnership Units as of the Partnership Record Date.
The General Partner in its sole and absolute discretion may distribute to the
Holders Available Cash in accordance with foregoing priorities on a more
frequent basis and provide for an appropriate record date.
SECTION 5.2 DISTRIBUTIONS IN KIND
No right is given to any Holder to demand or receive property other than
cash as provided in this Agreement. With the Consent of a Majority in Interest
of the Limited Partners, the General Partner may make a distribution in kind of
Partnership assets to the Holders and, in such event, subject to Section 8.8
hereof, such assets shall be distributed in such a fashion as to ensure that the
same are distributed and allocated in accordance with Articles 5, 6 and 10
hereof. In the event of a Terminating Capital Transaction, at the request of
any Concerned Limited Partner, the General Partner will use its best efforts to
make a distribution in kind of Partnership assets in accordance with the
preceding sentence.
20
<PAGE>
SECTION 5.3 AMOUNTS WITHHELD
All amounts withheld pursuant to the Code or any provisions of any state or
local tax law and Section 10.4 hereof with respect to any allocation, payment or
distribution to any Holder shall be treated as amounts paid or distributed to
such Holder pursuant to Section 5.1 hereof for all purposes under this
Agreement.
SECTION 5.4 DISTRIBUTIONS UPON LIQUIDATION
Notwithstanding the other provisions of this Article 5, net proceeds from a
Terminating Capital Transaction, and any other cash received or reductions in
reserves made after commencement of the liquidation of the Partnership, shall be
distributed to the Holders in accordance with Section 13.2 hereof.
SECTION 5.5 RESTRICTED DISTRIBUTIONS
Notwithstanding any provision to the contrary contained in this Agreement,
neither the Partnership nor the General Partner, on behalf of the Partnership,
shall make a distribution to any Holder on account of its Partnership Interest
or interest in Partnership Units if such distribution would violate Section 17-
607 of the Act or other applicable law.
ARTICLE 6
ALLOCATIONS
SECTION 6.1 TIMING AND AMOUNT OF ALLOCATIONS OF NET INCOME AND NET LOSS
Net Income and Net Loss of the Partnership shall be determined and
allocated with respect to each Fiscal Year of the Partnership as of the end of
each such year. Except as otherwise provided in this Article 6, and subject to
Section 11.6.C hereof, an allocation to a Holder of a share of Net Income or Net
Loss shall be treated as an allocation of the same share of each item of income,
gain, loss or deduction that is taken into account in computing Net Income or
Net Loss.
SECTION 6.2 GENERAL ALLOCATIONS
Except as otherwise provided in this Article 6 and subject to Section
11.6.C hereof, Net Income and Net Loss, net of the Gross Income allocated
pursuant to Section 6.3.A, shall be allocated as follows:
(1) ninety-nine percent (99%) to the General Partner; and
(2) one percent (1%) to the Limited Partners and Assignees (including
the General Partner following the acquisition of Tendered Units pursuant to
Section 8.6 hereof) in accordance with their respective Partnership Units
at the end of each Fiscal Year.
SECTION 6.3 ADDITIONAL ALLOCATION PROVISIONS
Notwithstanding the foregoing provisions of this Article 6:
A. SPECIAL ALLOCATIONS. Gross income shall be allocated to each Holder of
Partnership Units for any Fiscal Year (and, if necessary, subsequent Fiscal
Years) to the extent that such Holder receives a distribution of the Preferred
Return Per Unit pursuant to Section 5.1.1 of this Agreement.
21
<PAGE>
B. REGULATORY ALLOCATIONS
(a) MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Regulations Section 1.704-2(f), notwithstanding the provisions of Section
6.2 hereof, or any other provision of this Article 6, if there is a net
decrease in Partnership Minimum Gain during any Fiscal Year, each Holder
shall be specially allocated items of Partnership income and gain for such
year (and, if necessary, subsequent years) in an amount equal to such
Holder's share of the net decrease in Partnership Minimum Gain, as
determined under Regulations Section 1.704-2(g). Allocations pursuant to
the previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Holder pursuant thereto. The items to be
allocated shall be determined in accordance with Regulations Sections
1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.3.B(a) is intended to
qualify as a "MINIMUM GAIN CHARGEBACK" within the meaning of Regulations
Section 1.704-2(f) and shall be interpreted consistently therewith.
(b) PARTNER MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Regulations Section 1.704-2(i)(4) or in Section 6.3.B(a) hereof, if there
is a net decrease in Partner Minimum Gain attributable to a Partner
Nonrecourse Debt during any Fiscal Year, each Holder who has a share of the
Partner Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(5), shall be
specially allocated items of Partnership income and gain for such year
(and, if necessary, subsequent years) in an amount equal to such Holder's
share of the net decrease in Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made
in proportion to the respective amounts required to be allocated to each
General Partner, Limited Partner and other Holder pursuant thereto. The
items to be so allocated shall be determined in accordance with Regulations
Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 6.3.B(b) is
intended to qualify as a "CHARGEBACK OF PARTNER NONRECOURSE DEBT MINIMUM
GAIN" within the meaning of Regulations Section 1.704-2(i) and shall be
interpreted consistently therewith.
(c) NONRECOURSE DEDUCTIONS AND PARTNER NONRECOURSE DEDUCTIONS. Any
Nonrecourse Deductions for any Fiscal Year shall be specially allocated to
the Holders of Partnership Units in accordance with their share of Net Loss
under Section 6.2. Any Partner Nonrecourse Deductions for any Fiscal Year
shall be specially allocated to the Holder(s) who bears the economic risk
of loss with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable, in accordance with Regulations
Section 1.704-2(i).
(d) QUALIFIED INCOME OFFSET. If any Holder unexpectedly receives an
adjustment, allocation or distribution described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Partnership income and gain
shall be allocated, in accordance with Regulations Section 1.704-
1(b)(2)(ii)(d), to such Holder in an amount and manner sufficient to
eliminate, to the extent required by such Regulations, the Adjusted Capital
Account Deficit of such Holder as quickly as possible, provided that an
allocation pursuant to this Section 6.3.B(d) shall be made if and only to
the extent that such Holder would have an Adjusted Capital Account Deficit
after all other allocations provided in this Article 6 have been
tentatively made as if this Section 6.3.B(d) were not in the Agreement. It
is intended that this Section 6.3.B(d) qualify and be construed as a
"QUALIFIED INCOME OFFSET" within the meaning of Regulations Section 1.704-
1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
(e) GROSS INCOME ALLOCATION. In the event that any Holder has a
deficit Capital Account at the end of any Fiscal Year that is in excess of
the sum of (i) the amount (if any) that such Holder is obligated to restore
to the Partnership upon complete liquidation of such Holder's Partnership
Interest and (ii) the amount that such Holder 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), each such Holder shall be specially
allocated items of Partnership income and gain in the amount of such excess
to eliminate such deficit as quickly as
22
<PAGE>
possible, provided that an allocation pursuant to this Section 6.3.B(e)
shall be made if and only to the extent that such Holder would have a
deficit Capital Account in excess of such sum after all other allocations
provided in this Article 6 have been tentatively made as if this Section
6.3.B(e) and Section 6.3.B(d) hereof were not in the Agreement.
(f) LIMITATION ON ALLOCATION OF NET LOSS. To the extent that any
allocation of Net Loss would cause or increase an Adjusted Capital Account
Deficit as to any Holder of Partnership Units, such allocation of Net Loss
shall be reallocated among the other Holders of Partnership Units in
accordance with their respective Partnership Units, subject to the
limitations of this Section 6.3.B(f).
(g) SECTION 754 ADJUSTMENT. To the extent that an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Code Section 734(b)
or Code Section 743(b) is required, pursuant to Regulations Section 1.704-
1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining Capital Accounts as the result of a
distribution to a Holder of Partnership Units in complete liquidation of
its interest in the Partnership, the amount of such adjustment to the
Capital Accounts shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases such
basis), and such gain or loss shall be specially allocated to the Holders
in accordance with their Partnership Units in the event that Regulations
Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Holders to whom such
distribution was made in the event that Regulations Section 1.704-
1(b)(2)(iv)(m)(4) applies.
(h) CURATIVE ALLOCATIONS. The allocations set forth in Sections
6.3.B(a), (b), (c), (d), (e), (f) and (g) hereof (the "REGULATORY
ALLOCATIONS") are intended to comply with certain regulatory requirements,
including the requirements of Regulations Sections 1.704-1(b) and 1.704-2.
Notwithstanding the provisions of Section 6.1 hereof, the Regulatory
Allocations shall be taken into account in allocating other items of
income, gain, loss and deduction among the Holders so that, to the extent
possible without violating the requirements giving rise to the Regulatory
Allocations, the net amount of such allocations of other items and the
Regulatory Allocations to each Holder shall be equal to the net amount that
would have been allocated to each such Holder if the Regulatory Allocations
had not occurred.
C. ALLOCATION OF EXCESS NONRECOURSE LIABILITIES. For purposes of
determining a Holder's proportional share of the "EXCESS NONRECOURSE
LIABILITIES" of the Partnership within the meaning of Regulations Section 1.752-
3(a)(3), each Holder's interest in Partnership profits for a Fiscal Year shall
be as follows: one hundred percent (100%) to the Limited Partners and Assignees
(including the General Partner following the acquisition of Tendered Units
pursuant to Section 8.6 hereof) in accordance with their respective Partnership
Units at the end of such Fiscal Year.
SECTION 6.4 TAX ALLOCATIONS
A. IN GENERAL. Except as otherwise provided in this Section 6.4, for
income tax purposes under the Code and the Regulations each Partnership item of
income, gain, loss and deduction (collectively, "TAX ITEMS") shall be allocated
among the Holders in the same manner as its correlative item of "BOOK" income,
gain, loss or deduction is allocated pursuant to Sections 6.2 and 6.3 hereof.
B. ALLOCATIONS RESPECTING SECTION 704(C) REVALUATIONS. Notwithstanding
Section 6.4.A hereof, Tax Items with respect to the Contributed Property or
other property that is contributed to the Partnership with a Gross Asset Value
that varies from its basis in the hands of the contributing Partner immediately
preceding the date of contribution shall be allocated among the Holders for
income tax purposes pursuant to Regulations promulgated under Code Section
704(c) so as to take into account such variation. The Partnership shall account
for such variation under the "TRADITIONAL METHOD" approved under Code Section
704(c) and the applicable Regulations thereunder. In the event that the Gross
Asset Value of any Partnership asset is adjusted pursuant to subsection (b) of
the definition of "GROSS ASSET VALUE" (provided in Article 1 hereof), subsequent
allocations of Tax Items with respect to such asset shall take account of the
variation, if any, between the adjusted basis of such asset and its Gross Asset
Value in the same manner as under Code Section 704(c) and the applicable
Regulations.
23
<PAGE>
SECTION 6.5 OTHER PROVISIONS
A. OTHER ALLOCATIONS UPON CHANGE IN LAW. In the event that the Code or
any Regulations require allocations of items of income, gain, loss, deduction or
credit different from those set forth in this Article 6, the General Partner is
hereby authorized to make new allocations in reliance on the Code and such
Regulations, such new allocations shall be effected pursuant to the fiduciary
duty of the General Partner to the Partnership and the other Partners.
B. CONSISTENT TAX REPORTING. The Partners acknowledge and are aware of
the income tax consequences of the allocations made by this Article 6 and hereby
agree to be bound by the provisions of this Article 6 in reporting their shares
of Net Income, Net Losses and other items of income, gain, loss, deduction and
credit for federal, state and local income tax purposes.
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
SECTION 7.1 MANAGEMENT
A. Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs of the Partnership are 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 Partners with or without cause, except with the consent of the General
Partner. In addition to the powers now or hereafter granted a general partner
of a limited partnership under applicable law or that are granted to the General
Partner under any other provision of this Agreement, the General Partner,
subject to the other provisions hereof, including Sections 7.3 and 7.4 hereof,
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:
(1) the making of any expenditures, the lending or borrowing of money
(including 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 (so 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 Code Section 4981) and to make
distributions to its shareholders sufficient to permit the General Partner
to maintain REIT status or otherwise to satisfy the REIT Requirements), the
assumption or guarantee of, or other contracting for, indebtedness and
other liabilities, the issuance of evidences of indebtedness (including the
securing of same by mortgage, deed of trust or other lien or encumbrance on
the Partnership's assets) and the incurring of any obligations that it
deems necessary for the conduct of the activities of the Partnership;
(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, sale, transfer, exchange or other disposition of
any assets of the Partnership;
(4) the mortgage, pledge, encumbrance or hypothecation of any assets
of the Partnership (including the Contributed Property), the use of the
assets of the Partnership (including cash on hand) for any purpose
consistent with the terms of this Agreement and on any terms that it sees
fit, including the financing of the operations and activities of the
Partnership, and the repayment of obligations of the Partnership;
(5) the management, operation, leasing, landscap ing, repair,
alteration, demolition, replacement or improvement of any property,
including the Contributed Property, or other asset of the Partnership;
24
<PAGE>
(6) the negotiation, execution and performance of any contracts,
leases, conveyances or other instruments that the General Partner considers
useful or necessary to the conduct of the Partnership's operations or the
implementation of the General Partner's powers under this Agreement,
including contracting with property managers (including as to the
Contributed Property or other property, contracting with the contributing
or any other Limited Partner or its Affiliates for property management
services), 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; PROVIDED,
HOWEVER, that in no event shall the General Partner enter into any such
contract or lease for any consideration in excess of the amount an
independent third party would charge and expect to receive as reimbursable
expenses or compensation for comparable goods or services;
(7) the establishment and maintenance of working capital and other
reserves in such amounts as the General Partner, in its sole and absolute
discretion, deems appropriate from time to time;
(8) the distribution of Partnership cash or other Partnership assets
in accordance with this Agreement, the holding, management, investment and
reinvestment of cash and other assets of the Partnership and the collection
and receipt of revenues, rents and income of the Partnership;
(9) the selection and dismissal of agents, outside attorneys,
accountants, consultants and contractors of the Partnership or the General
Partner and the determination of their compensation and other terms of
employment or hiring;
(10) the maintenance of such insurance for the benefit of the
Partnership and the Partners as it deems necessary or appropriate,
including casualty insurance on the Contributed Property in an amount equal
to ninety percent (90%) or more of the replacement value (exclusive of
footings and foundations) thereof;
(11) 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, and 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;
(12) the enforcement of any rights against any Partner pursuant to
representations, warranties, covenants and indemnities relating to such
Partner's contribution of property or assets to the Partnership;
(13) the exercise, directly or indirectly, through any attorney-in-
fact acting under a general or limited power of attorney, of any right,
including the right to vote, appurtenant to any asset or investment held by
the Partnership;
(14) the making, execution and delivery of any and all deeds, leases,
notes, mortgages, deeds of trust, security agreements, conveyances,
contracts, guarantees, warranties, indemnities, waivers, releases or 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 enumerated in this Agreement; and
25
<PAGE>
(15) the issuance of additional Partnership Units in connection with
Capital Contributions by Additional Limited Partners and additional Capital
Contributions by Partners pursuant to Article 4 hereof.
B. Each of the Limited Partners agrees that, notwithstanding any other
provision of this Agreement, the Act or any applicable law, rule or regulation,
except as provided in Section 7.3 hereof, 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.
SECTION 7.2 CERTIFICATE OF LIMITED PARTNERSHIP
To the extent that such action is determined by the General Partner to be
reasonable and necessary or appropriate, the General Partner shall file
amendments to and restatements of the Certificate and do all the things to
maintain the Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) under the laws of the State of
Delaware, the State of California and any other state or the District of
Columbia or any other jurisdiction in which the Partnership may elect to do
business or own property. Subject to the terms of Section 8.5.A(4) hereof, the
General Partner shall not be required, before or after filing, to deliver or
mail a copy of the Certificate or any amendment thereto to any Limited Partner.
The General Partner shall use all reasonable efforts to cause to be filed such
other certificates or documents as may be reasonable and necessary or
appropriate for the formation, continuation, qualification and operation of a
limited partnership (or a partnership in which the limited partners have limited
liability to the extent provided by applicable law) in the State of Delaware,
the State of California and any other state or the District of Columbia or any
other jurisdiction in which the Partnership may elect to do business or own
property.
SECTION 7.3 RESTRICTIONS ON GENERAL PARTNER'S AUTHORITY
A. The General Partner may not take any action in contravention of this
Agreement. Specifically, the General Partner may not:
(1) take any action that would make it impossible to carry on the
ordinary business of the Partnership, except as provided in Article 13
hereof;
(2) possess Partnership property, or assign any rights in specific
Partnership property, for other than a Partnership purpose;
(3) admit a Person as a Partner, except as otherwise provided in this
Agreement;
(4) perform any act that would subject a Limited Partner to liability
as a general partner; or
(5) take or fail to take any action that prohibits or restricts, or
has the effect of prohibiting or restricting, the ability of (i) the
General Partner or the Partnership from satisfying its obligations under
Section 5.1 or Section 8.6 hereof in full or (ii) a Limited Partner from
exercising its rights under Section 8.6 hereof to effect a Redemption in
full, except, in either case, with the Consent of such Limited Partner
affected by the prohibition or restriction.
B. The General Partner shall not, without the prior Consent of the
Limited Partners, undertake, on behalf of the Partnership, any of the following
actions or enter into any transaction that would have the effect of any such
action:
(1) enter into any employment agreement or otherwise create an
employer/employee relationship between the Partnership and any Person;
(2) enter into any contract or agreement with any Affiliate on terms
which are more favorable to the Affiliate than would be negotiated with an
unaffiliated third party;
(3) except as provided in Section 7.3.D hereof, amend, modify or
terminate this
26
<PAGE>
Agreement other than to reflect the admission, substitution, termination or
withdrawal of Partners pursuant to Article 11 or Article 12 hereof;
(4) make a general assignment for the benefit of creditors or appoint
or acquiesce in the appointment of a custodian, receiver or trustee for all
or any part of the assets of the Partnership;
(5) institute any proceeding for bankruptcy on behalf of the
Partnership; or
(6) subject to the rights of Transfer provided in Section 11.2
hereof, approve or acquiesce to the Transfer of the Partnership Interest of
the General Partner, or admit into the Partnership any additional or
successor General Partners.
C. Notwithstanding Section 7.3.B hereof, the General Partner shall have
the power, without the Consent of the Limited Partners, to amend this Agreement
as may be required to facilitate or implement any of the following purposes:
(1) to add to the obligations of the General Partner or surrender any
right or power granted to the General Partner for the benefit of the
Limited Partners;
(2) to reflect the admission, substitution or withdrawal of Partners
or the termination of the Partnership in accordance with this Agreement;
(3) to reflect a change that is of an inconsequential nature and does
not adversely affect the Limited Partners in any material respect;
(4) to satisfy any requirements, conditions or guidelines contained
in any order, directive, opinion, ruling or regulation of a federal or
state agency or contained in federal or state law; and
(5) to reflect such changes as are reasonably necessary for the
General Partner to maintain its status as a REIT or to satisfy the REIT
Requirements.
The General Partner will provide notice to the Limited Partners when any action
under this Section 7.3.C is taken.
D. Notwithstanding any other provision hereof, this Agreement shall not
be amended, and no action may be taken by the General Partner, without the
Consent of each Limited Partner adversely affected, if such amendment or action
would (i) convert a Limited Partner Interest in the Partnership into a General
Partner Interest (except as a result of the General Partner acquiring such
Partnership Interest); (ii) modify the limited liability of a Limited Partner;
(iii) alter the rights of the Holders of Preferred Partnership Units to receive
distributions pursuant to Article 5 or Section 13.2.A hereof, including amending
or modifying any related definitions, or the allocations specified in Article 6
hereof; (iv) alter or modify the Redemption rights, Cash Amount or REIT Shares
Amount, or amend or modify any related definitions; or (v) amend this Section
7.3 or Section 7.4. Further, no amendment may alter the restrictions on the
General Partner's authority set forth elsewhere in this Section 7.3 or Section
7.4 without the Consent specified therein. Any such amendment or action
consented to by any Limited Partner shall be effective as to that Limited
Partner, notwithstanding the absence of such Consent by any other Limited
Partner.
SECTION 7.4 REFINANCING, SALES
A. The General Partner shall not, without the prior Consent of the
Concerned Limited Partners, incur on behalf of, or cause the Partnership to
incur, any Debt under which a breach, violation or default would be deemed to
occur by virtue of the Transfer of any Limited Partner Interest. The General
Partner shall, absent the prior consent of the Concerned Limited Partners to the
contrary, cause the Partnership to maintain Debt secured by a mortgage or deed
of trust on the Contributed Property which (i) is nonrecourse to the
Partnership; (ii) prior to the second anniversary of the Effective Date, has an
original principal amount of not more than Eighteen Million Dollars
($18,000,000); (iii) has a principal
27
<PAGE>
amount of not less than Ten Million Six Hundred Thousand Dollars ($10,600,000);
(iv) has an Interest Coverage Ratio of not less than 2:1; (v) has a Loan to
Value Ratio of not more than sixty percent (60%); and (vi) is NOT provided by a
Partner, a Holder or a Related Person; in each instance other than with respect
to clause (iii), above, as of the time of the issuance or assumption of the
Debt, as the case may be.
B. Notwithstanding the foregoing, if despite its best efforts, the
General Partner is unable to procure refinancing Debt that satisfies the
restrictions set forth in Section 7.4.A hereof, or if (i) the annual interest
rate to be charged with respect to such refinancing Debt that complies with such
restrictions is one and one-half percent (1.5%) or more than the annual interest
rate to be charged with respect to Debt that does not satisfy such restrictions
but is otherwise available to the Partnership or (ii) the amount of such
refinancing Debt that complies with such restrictions is at least Three Million
Dollars ($3,000,000) less than the amount of Debt that does not comply with such
restrictions but is otherwise available to the Partnership, then such
restrictions may be modified to accommodate the Partnership's incurring such
non-complying refinancing Debt otherwise available to the Partnership; PROVIDED,
HOWEVER, that if such non-complying Debt is recourse Debt, or is provided by the
General Partner or a Related Person, or the General Partner is required to
guaranty such Debt, each Concerned Limited Partner shall have the right, but not
the obligation, to indemnify the General Partner with respect to such Debt in
such amounts as it may elect; PROVIDED, FURTHER, that such indemnity shall cover
only the General Partner's liability for the "last dollar" of such Debt; e.g.,
that portion of such guaranteed Debt from zero dollars to the amount such
Concerned Limited Partner elects to include.
C. The General Partner shall not, without the prior Consent of the
Concerned Limited Partners, offer to sell or solicit or entertain offers to buy
the Contributed Property prior to the expiration of the second anniversary of
the Effective Date unless, in the good faith opinion of the General Partner, a
sale of the Contributed Property may be necessary to enable the General Partner
to preserve its status as a REIT or preserve, or prevent a downgrade of, the
rating of any security of the General Partner; PROVIDED, HOWEVER, that no rating
impact attributable to the transactions occurring hereunder and under the
Contribution Agreement as of the Effective Date shall permit the General
Partner to offer to sell or solicit or entertain offers to buy the Contributed
Property prior to the second anniversary of the Effective Date. Further, if at
any time the General Partner intends to either sell the Contributed Property, or
solicit offers from Persons to acquire the Contributed Property, the General
Partner shall offer to the Concerned Limited Partners the opportunity to acquire
all, but not less than all, of the General Partner Interest on the following
terms and conditions:
(1) As soon as practicable following a determination by the General
Partner to either sell the Contributed Property or solicit offers from
Persons to buy the Contributed Property, the General Partner shall send a
written notice (the "Offer Notice") to that effect to each Concerned
Limited Partner. The Offer Notice shall describe (i) the principal terms
and conditions of any offer which the General Partner has either
conditionally accepted or intends to accept or which the General Partner
would accept in response to the General Partner's solicitation of offers;
and (ii) the estimated amount, determined by the General Partner in good
faith, of the net cash proceeds which would be distributable to either (i)
the General Partner, including amounts distributable to the General Partner
on account of any Preferred Partnership Units acquired by the General
Partner following the acquisition of Tendered Units pursuant to Section 8
hereof, whether prior to the Offer Notice or thereafter; or (ii) any other
Holder of Partnership Units which are not Preferred Partnership Units, if
the Contributed Property were sold in a Terminating Capital Transaction on
the terms set forth in the Offer Notice and the Partnership were liquidated
in accordance with the provisions of Section 13.2 hereof (the "Net
Distributable Amount").
(2) As soon as practicable and in any event within thirty (30) days
following the date of the Offer Notice, each Concerned Limited Partner
shall notify the General Partner in writing if, either individually or in
conjunction with other Concerned Limited Partners, it elects to acquire
all, but not less than all, of the General Partner Interest. If more than
one Concerned Limited Partner elects to acquire the General Partner
Interest, the Concerned Limited Partners so electing shall acquire the
respective portion of the General Partner's Partnership Units which bears
the same relationship as does the ratio of each
28
<PAGE>
such Concerned Limited Partner's Partnership Units to the aggregate number of
Partnership Units held by all of the Concerned Limited Partners so electing or
on such other basis as the Concerned Limited Partners so electing shall agree.
(3) If one or more Concerned Limited Partners elects to acquire the
General Partner Interest, each of the other Holders of Preferred
Partnership Units shall be deemed to be a Tendering Party pursuant to
Section 8.6 hereof with respect to all of the Preferred Partnership Units
held by such Holder as of the date of the Offer Notice with the Cut-Off
Date and Redemption Date for such purposes being the closing date of the
acquisition by the Concerned Limited Partner or Partners of the General
Partner Interest pursuant to Section (4) hereof.
(4) The acquisition of the General Partner Interest shall be effected
through an escrow with Lawyer's Title Insurance Corporation or other entity
who regularly acts as an escrow agent designated by the General Partner
("Escrow Agent"). Nothing contained herein shall prohibit the Concerned
Limited Partner or Partners from effecting such acquisition in conjunction
with a third party or parties. The General Partner shall deposit or cause
to be deposited with the Escrow Agent an executed assignment or assignments
to the electing Concerned Limited Partner or Partners or its or their
nominees of the entirety of the General Partner Interest as well as the
Partnership Units of all Holders other than the Concerned Limited Partner
or Partners electing to acquire the General Partner Interest, with
warranties to the effect that such Interest is being conveyed free and
clear of all liens, claims, security interests and other encumbrances. The
electing Concerned Limited Partner or Partners or its or their nominees
shall deposit with the Escrow Agent cash in the amount of the Net
Distributable Amount; PROVIDED, HOWEVER, that a Concerned Limited Partner
and a nominee that has been approved as to character, reputation and
financial responsibility by the General Partner, which such approval will
not be unreasonably withheld or delayed, but no other nominee, may deliver
a note in lieu of cash for some or all of its allocable share of the Net
Distributable Amount. In such event, such note shall:
(a) have a term of three (3) years from the close of
escrow;
(b) (i) bear interest at an annual rate equal to three
hundred (300) basis points over the current annualized yield for
United States government bonds and notes maturing in the sixtieth
(60th) month following the closing, as quoted in the WALL STREET
JOURNAL on the third (3rd) Business Day preceding the Closing; and
(ii) provide the payee of the note with additional interest to the
extent the amount of Available Cash distributions that the Holder of
the General Partner Interest is entitled to receive pursuant to clause
(2) of Section 5.1 hereof on account of such Interest for the period
from the issuance of the note to its due date exceeds the amount of
interest calculated under clause (b)(i) above; PROVIDED, HOWEVER, that
in no event will the amount of such interest exceed, over the term of
the note, the amount of interest that may be lawfully collected on an
obligation by the General Partner;
(c) interest shall be payable at the rate set forth in
clause (b)(i), above, monthly in arrears to the extent of Available
Cash, until the due date of such note whereupon the unpaid principal
amount thereof, together with all interest accrued thereon, and any
additional interest due by reason of clause (b)(ii), above, shall be
due and payable regardless of Available Cash;
(d) be secured by an assignment of the Partnership Interest
of such maker, including the Partnership Interests acquired from the
General Partner and such maker's Limited Partnership Interest; and
(e) be nonrecourse to the maker thereof; PROVIDED, HOWEVER,
that the maker thereof, or any corresponding Designated Party, shall
guaranty the obligations of the maker thereunder in the event the
Partnership seeks, or is otherwise subject to bankruptcy.
The note, assignment and other instruments securing such note shall be on
terms and conditions
29
<PAGE>
reasonably satisfactory to the General Partner and the electing Concerned
Limited Partners. The escrow shall close as soon as practicable and in any
event within one hundred eighty (180) days following the date of the Offer
Notice. Effective as of such closing, the provisions of Section 8.6 hereof
shall be of no further force and effect with respect to the Preferred
Partnership Units held by the Concerned Limited Partner or Partners
electing to purchase the General Partner Interest hereunder and the
Preferred Return Per Unit shall be the greater of (i) the Preferred Return
Per Unit in effect on the date of the Offer Notice and (ii) nine percent
(9%) per annum.
(4) If no Concerned Limited Partner elects within the thirty-day
period following the Offer Notice to acquire the General Partner's Units,
the General Partner shall be free to cause the Partnership to sell the
Contributed Property on terms and conditions which are no less favorable to
the Partnership than the terms and conditions set forth in the Offer Notice
at any time prior to (i) the first anniversary of the date of the Offer
Notice with respect to transactions resulting from a solicitation by the
General Partner of offers to buy the Contributed Property or (ii) one
hundred eighty (180) days from the date of the Offer Notice with respect to
other transactions; PROVIDED, HOWEVER, that either such period may be
extended by no more than one hundred eighty (180) additional days if at the
end of the corresponding period the General Partner is engaged in good
faith negotiations with a proposed purchaser or purchasers of the
Contributed Property. If the Contributed Property is not sold within the
relevant period, the Contributed Property may no longer be sold or offered
for sale without the General Partner once again complying with the
provisions of this Section 7.4.C.
(5) If an electing Concerned Limited Partner desires to verify the
estimate of the Net Distributable Amount contained in the Offer Notice by
the accountants customarily performing the annual audit for the
Partnership, such Limited Partner, at its expense, may retain such
accountant to verify such Amount, assuming a sale of the Contributed
Property on the terms specified in the Offer Notice and a liquidating
distribution in accordance with Section 13.2 hereof. If the accountants
calculate the Net Distributable Amount (without taking into account amounts
attributable to Preferred Partnership Units acquired by the General Partner
after the date of the Offer Notice) to be three percent (3%) or more LESS
than the estimate of the Net Distributable Amount set forth in the Offer
Notice, the General Partner shall have a period of ten (10) days following
written notice from the accountants to either accept the accountants'
determination of the Net Distributable Amount or give written notice to the
Limited Partners of its withdrawal of the Offer Notice and, in either
event, the General Partner shall reimburse the electing Concerned Limited
Partner for the fees and reimbursable expenses actually paid to such
accountants in connection with calculating the Net Distributable Amount.
If required to do so and the General Partner does not give a notice of
withdrawal within such ten-day period, the General Partner shall
conclusively be deemed to have withdrawn the Offer Notice.
D. If the General Partner has determined that it cannot or will not cause
the Partnership to raise Additional Funds and as a result thereof, has
determined to either convey the Contributed Property to the holder or holders of
Debt secured by a mortgage or deed of trust on the Contributed Property or not
to contest any foreclosure or attempted foreclosure of such mortgage or deed of
trust, the General Partner shall give written notice of such determination to
each Concerned Limited Partner which such notice shall, for all purposes, be
deemed to be an Offer Notice to sell the Contributed Property for a Net
Distributable Amount of Ten and No/100 Dollars ($10.00). If no Concerned
Limited Partner elects to acquire all of the General Partner Interest pursuant
to Section 7.4.C hereof, the General Partner shall be free to convey the
Contributed Property to the holder or holders of the Debt secured by a mortgage
or deed of trust on the Contributed Property or otherwise cooperate with such
holder or holders in enabling it or them to acquire the Contributed Property.
E. Nothing contained herein shall prohibit the General Partner from
selling all or any portion of the Contributed Property in a condemnation
proceeding or in lieu of any such proceeding.
30
<PAGE>
SECTION 7.5 MANAGEMENT FEE; REIMBURSEMENT OF THE GENERAL PARTNER
A. In consideration of its management of the Contributed Property and the
Partnership, the General Partner shall be entitled to a management fee (the
"Management Fee") of two (2) percent of all receipts of the Partnership
attributable to the Contributed Property with respect to any period for which
such calculation is being made; PROVIDED, HOWEVER, that such receipts shall not
include any receipts attributable to (i) the sale or other disposition or the
financing or refinancing of the Contributed Property; (ii) insurance, other than
rental abatement or business interruption insurance; (iii) condemnation proceeds
other than proceeds payable for a temporary taking of all or a portion of the
Contributed Property; or (iv) the proceeds of any Capital Contributions or
Partner Loans. The Management Fee shall be payable by the Partnership prior to
any distribution of Available Cash Flow. The General Partner shall not
otherwise be compensated for its services as general partner of the Partnership;
EXCLUDING, HOWEVER, distributions, payments and allocations to which it may be
entitled in its capacity as the General Partner.
B. Subject to Sections 7.5.C and 15.9 hereof, the Partnership shall be
liable, and shall reimburse the General Partner on a monthly basis (or such
other basis as the General Partner may reasonably determine), for all sums
expended in connection with the Partnership's business. Any such reimbursements
shall be in addition to any reimbursement of the General Partner as a result of
indemnification pursuant to Section 7.7 hereof.
C. To the extent practicable, Partnership expenses shall be billed
directly to and paid by the Partnership. Subject to Section 15.9 hereof,
reimbursements to the General Partner or any of its Affiliates by the
Partnership shall be allowed, however, for the cost of goods, materials and
services provided to the partnership by the General Partner or any of its
Affiliates for (i) Partnership operations, (ii) Partnership accounting, (iii)
legal services, and (iv) tax services. The cost for such services to be
reimbursed to the General Partner or any Affiliate thereof shall be the lesser
of the General Partner's or Affiliate's actual cost, or the amount the
Partnership would be required to pay to independent parties for comparable
administrative services in the same geographic location. Notwithstanding the
foregoing, the Partnership shall not reimburse the General Partner or any
Affiliate thereof under this Section 7.5 for:
(1) Any rent, depreciation, utilities or other administrative items
generally constituting the General Partner's or Affiliate's overhead; or
(2) Any of the salaries or fringe benefits incurred or allocated to
any director, officer or other employee of the General Partner or any
Affiliate thereof.
Subject to Section 15.9 hereof, the Management Fee and reimbursements to the
General Partner or any of its Affiliates (if and to the extent such
reimbursements constitute gross income to the recipient (as opposed to direct
payments by the Partnership of its own expenses)) by the Partnership pursuant to
this Section 7.5 shall be treated as "GUARANTEED PAYMENTS" within the meaning of
Code Section 707(c).
SECTION 7.6 OTHER BUSINESS OF THE GENERAL PARTNER
The General Partner may engage independently or with others in other
business ventures of every nature and description, including the ownership of
other properties and the making or management of other investments. Nothing in
this Agreement shall be deemed to prohibit the General Partner or any Affiliate
of the General Partner from dealing, or otherwise engaging in business with,
Persons transacting business with the Partnership, or from providing services
related to the purchase, sale, financing, management, development or operation
of real or personal property and receiving compensation therefor, and may have
business interests and engage in business activities in addition to those
relating to the Partnership, including business interests and activities that
are in direct or indirect competition with the Partnership or that may conflict
with or detract from the activities of the Partnership. Neither the Partnership
nor any Partner 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 competitive with the business of the Partnership, shall
not be deemed wrongful or improper and neither the General Partner or any
Affiliate of the General Partner shall have any obligation pursuant to this
Agreement to offer any interest in any such venture or activity to the
Partnership, any Limited Partner or any such Person, even if such opportunity is
of a character that, if presented to the Partnership, any Limited Partner or
such other
31
<PAGE>
Person, could be taken by such Person.
SECTION 7.7 INDEMNIFICATION
A. To the fullest extent permitted by applicable law, the Partnership
shall indemnify each Indemnitee from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including attorney's fees and
other legal fees and expenses), judgments, fines, settlements and other amounts
arising from any and all claims, demands, actions, suits or proceedings, civil,
criminal, administrative or investigative, that relate to the operations of the
Partnership as set forth in this Agreement ("ACTIONS") in which such Indemnitee
may be involved, or is threatened to be involved, as a party or otherwise;
PROVIDED, HOWEVER, that the Partnership shall not indemnify an Indemnitee (i)
for willful misconduct, gross negligence or a knowing violation of the law; (ii)
for any transaction for which such Indemnitee received an improper personal
benefit in violation or breach of any provision of this Agreement; or (iii) for
liabilities incurred in violation of the terms of this Agreement. The foregoing
indemnity shall extend to any liability of any Indemnitee, pursuant to a loan
guaranty or otherwise, for any indebtedness of the Partnership (including any
indebtedness which the Partnership has assumed or taken subject to), and the
General Partner is hereby authorized and empowered, on behalf of the
Partnership, to enter into one or more indemnity agreements consistent with the
provisions of this Section 7.7 in favor of any Indemnitee having or potentially
having liability for any such indebtedness. It is the intention of this Section
7.7.A that the Partnership indemnify each Indemnitee to the fullest extent
permitted by law. The termination of any proceeding by judgment, order or
settlement does not create a presumption that the Indemnitee did not meet the
requisite standard of conduct set forth in this Section 7.7.A. Any
indemnification pursuant to this Section 7.7 shall be made only out of the
assets of the Partnership, and neither the General Partner nor any Limited
Partner shall have any obligation to contribute to the capital of the
Partnership or otherwise provide funds to enable the Partnership to fund its
obligations under this Section 7.7.
B. To the fullest extent permitted by applicable law, each Partner shall
indemnify each Indemnitee from and against any and all Actions in which such
Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise attributable to such Partner's willful misconduct, gross negligence,
knowing violation of the law or transaction for which such Partner received an
improper personal benefit in violation or breach of any provision of this
Agreement.
C. To the fullest extent permitted by law, expenses incurred by an
Indemnitee who is a party to a proceeding or otherwise subject to or the focus
of or is involved in any Action shall be paid or reimbursed by the indemnifying
party as incurred by the Indemnitee in advance of the final disposition of the
Action upon receipt by the indemnifying party 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 indemnifying party under this
Section 7.7 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 such
standard of conduct has not been met.
D. The indemnification provided by this Section 7.7 shall be in addition
to any other rights to which an Indemnitee or any other Person may be entitled
under any agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, and shall continue as to an Indemnitee who has ceased to serve in
such capacity and shall inure to the benefit of the heirs, successors, assigns
and administrators of the Indemnitee unless otherwise provided in a written
agreement with such Indemnitee or in the writing pursuant to which such
Indemnitee is indemnified.
E. The Partnership may, but shall not be obligated to, purchase and
maintain insurance, on behalf of any of the Indemnitees and such other Persons
as the General Partner shall determine, against any liability that may be
asserted against or expenses that may be incurred by such Person in connection
with the Partnership's activities.
F. 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.
G. An Indemnitee shall not be denied indemnification in whole or in part
under this Section 7.7 because the Indemnitee had an interest in the transaction
with respect to which the indemnification
32
<PAGE>
applies if the transaction was otherwise permitted by the terms of this
Agreement.
H. The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons. Any
amendment, modification or repeal of this Section 7.7 or any provision hereof
shall be prospective only and shall not in any way affect the limitations on the
Partnership's liability to any Indemnitee under this Section 7.7 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
I. It is the intent of the Partners that any amounts paid by the
Partnership to a Partner pursuant to this Section 7.7 shall be treated as
"GUARANTEED PAYMENTS" within the meaning of Code Section 707(c).
SECTION 7.8 LIABILITY OF THE GENERAL PARTNER
A. Notwithstanding anything to the contrary set forth in this Agreement,
neither the General Partner nor any of its directors or officers shall be liable
or accountable in damages or otherwise 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 or such director or officer acted in good faith.
B. The Limited Partners expressly acknowledge that the General Partner is
acting for the benefit of the Partnership, the Limited Partners and the General
Partner's shareholders collectively and that the General Partner is under no
obligation to give priority to the separate interests of the Limited Partners or
the General Partner's shareholders (including the tax consequences to Limited
Partners, Assignees or the General Partner's shareholders) in deciding whether
to cause the Partnership to take (or decline to take) any actions.
C. 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 employees or agents (subject to the supervision
and control of the General Partner).
D. Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the General Partner's, and its officers' and directors',
liability to the Partnership or the Limited Partners under this Section 7.8 as
in effect immediately prior to such amendment, modification or repeal with
respect to claims arising from or relating to matters occurring, in whole or in
part, prior to such amendment, modification or repeal, regardless of when such
claims may arise or be asserted.
E. To the fullest extent permitted by law, no officer, director or
shareholder of the General Partner shall be liable to the Partnership for money
damages except for (a) active and deliberate dishonesty; or (b) actual receipt
of an improper benefit or profit in money, property or services. This Agreement
is executed by the officers of the General Partner solely as officers of the
same and not in their own individual capacities.
F. To the extent that, at law or in equity, the General Partner has
duties (including fiduciary duties) and liabilities relating thereto to the
Partnership or the Limited Partners, the General Partner shall not be liable to
the Partnership or to any other Partner for its good faith reliance on the
provisions of this Agreement. The provisions of this Agreement, to the extent
that they restrict the duties and liabilities of the General Partner otherwise
existing at law or in equity, are agreed by the Partners to replace such other
duties and liabilities of such General Partner.
G. Notwithstanding anything to the contrary set forth in this Agreement,
the General Partner acknowledges that the obligation of the Partnership to
redeem Tendered Units in accordance with Section 8.6.A hereof, and the
obligation of the General Partner to cause the Partnership to deliver the Cash
Amount for Tendered Units in accordance with Section 8.6.B hereof if the General
Partner has failed to exchange REIT Shares for Tendered Units in accordance with
the provisions thereof, are affirmative obligations of the General Partner on
behalf of the Partnership or on its own behalf, and no Tendering
33
<PAGE>
Party shall be obligated to seek or exhaust its remedies against the Partnership
prior to seeking the Cash Amount directly from the General Partner.
SECTION 7.9 OTHER MATTERS CONCERNING THE GENERAL PARTNER
A. Except as otherwise provided to the contrary herein, the General
Partner shall at all times act in its fiduciary capacity as a general partner of
a limited partnership.
B. 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.
C. The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, architects, engineers,
environmental consultants and other consultants and advisers selected by it, and
any act taken or omitted to be taken in reliance upon the opinion of such
Persons as to matters that the General Partner reasonably believes to be within
such Person's professional or expert competence shall be conclusively presumed
to have been done or omitted in good faith and in accordance with such opinion.
D. Notwithstanding any other provisions of this Agreement or the Act, any
action of the General Partner on behalf of the Partnership or any decision of
the General Partner to refrain from acting on behalf of the Partnership,
undertaken in the good faith belief that such action or omission is necessary or
advisable in order (i) to protect the ability of the General Partner to continue
to qualify as a REIT, (ii) for the General Partner otherwise to satisfy the REIT
Requirements or (iii) to avoid the General Partner incurring any taxes under
Code Section 857 or Code Section 4981, is expressly authorized under this
Agreement and is deemed approved by all of the Limited Partners.
SECTION 7.10 TITLE TO PARTNERSHIP ASSETS
Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner, individually or collectively with other Partners or
Persons, shall have any ownership interest in such Partnership assets or any
portion thereof.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
SECTION 8.1 LIMITATION OF LIABILITY
Except for the capital contributed by the Original Limited Partners
pursuant to Section 4.1 hereof, the Original Limited Partners shall have no
further obligation to fund any amounts to the Partnership. The Limited Partners
shall have no liability under this Agreement except as expressly provided in
this Agreement or under the Act.
SECTION 8.2 MANAGEMENT OF BUSINESS
No Limited Partner or Assignee (other than the General Partner, any of its
Affiliates or any officer, director, member, 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 operations, management or control
(within the meaning of the Act) of the Partnership's business, transact any
business in the Partnership's name or have the power to sign documents for or
otherwise bind the Partnership. The transaction of any such business by the
General Partner, any of its Affiliates or any officer, director, member,
employee, partner, agent, representative, 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 A LIMITED PARTNER
34
<PAGE>
A Limited Partner may engage independently or with others in other business
ventures of every nature and description, including the ownership of other
properties and the making or management of other investments. Nothing in this
Agreement shall be deemed to prohibit a Limited Partner or any Affiliate of a
Limited Partner from dealing, or otherwise engaging in business with, Persons
transacting business with the Partnership, or from providing services related to
the purchase, sale, financing, management, development or operation of real or
personal property and receiving compensation therefor, and may have business
interests and engage in business activities in addition to those relating to the
Partnership, including business interests and activities that are in direct or
indirect competition with the Partnership or that may conflict with or detract
from the activities of the Partnership. Neither the Partnership nor any Partner
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
competitive with the business of the Partnership, shall not be deemed wrongful
or improper and neither a Limited Partner or any Affiliate of a Limited Partner
shall have any obligation pursuant to this Agreement to offer any interest in
any such venture or activity to the Partnership, the General Partner, any other
Limited Partner or any such Person, even if such opportunity is of a character
that, if presented to the Partnership, the General Partner, any other Limited
Partner or such other Person, could be taken by such Person.
SECTION 8.4 RETURN OF CAPITAL
Except pursuant to the rights of Redemption set forth in Section 8.6
hereof, no Limited Partner shall be entitled to the withdrawal or return of its
Capital Contribution, except to the extent of distributions made pursuant to
this Agreement or upon termination of the Partnership as provided herein.
Except to the extent provided in Sections 5.1 and 13.2 hereof or otherwise
expressly provided in this Agreement, no Limited Partner or Assignee shall have
priority over any other Limited Partner or Assignee either as to the return of
Capital Contributions or as to profits, losses or distributions.
SECTION 8.5 RIGHTS OF LIMITED PARTNERS RELATING TO THE PARTNERSHIP
A. In addition to other rights provided by this Agreement or by the Act,
and except as limited by Section 8.5.C hereof, each Limited Partner shall have
the right, upon written demand and at such Limited Partner's own expense:
(1) to obtain a copy of (i) the most recent annual and quarterly
reports filed with the SEC by the General Partner pursuant to the Exchange
Act and (ii) each report or other written communication sent to the
shareholders of the General Partner;
(2) to obtain a copy of the Partnership's federal, state and local
income tax returns for each Fiscal Year;
(3) to obtain a current list of the name and last known business,
residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the Certificate and all
amendments thereto, together with executed copies of all powers of attorney
pursuant to which this Agreement, the Certificate and all amendments
thereto have been executed; and
(5) to obtain true and full information regarding the amount of cash
and a description and statement of any other property or services
contributed by each Partner and that each Partner has agreed to contribute
in the future, and the date on which each became a Partner.
B. On written request, the Partnership shall notify any Limited Partner
that is a Qualifying Party of the then current Adjustment Factor or any change
made to the Adjustment Factor or to the REIT Shares Amount applicable to such
Limited Partner.
C. Notwithstanding any other provision of this Section 8.5, the General
Partner may keep confidential from the Limited Partners, for such period of time
as the General Partner determines in its sole and absolute discretion to be
reasonable, any information that the Partnership or the General Partner
35
<PAGE>
is required by law or by agreements with unaffiliated third parties to keep
confidential.
D. Until such time as there is no longer a Designated Representative, (i)
the Limited Partners shall act through, and the General Partner shall be
entitled to rely on, the Designated Representative as speaking for and binding
the Majority in Interest of the Limited Partners; and (ii) the Concerned Limited
Partners shall act through, and the General Partner shall be entitled to rely
on, the Designated Representative for purposes of choosing appraisers in
accordance with the procedures set forth in the definition of Appraisal and
determining Fair Market Value, whether with or without an Appraisal.
SECTION 8.6 REDEMPTION RIGHTS OF QUALIFYING PARTIES
A. At any time following the second anniversary of the Effective Date, a
Qualifying Party, but no other Limited Partner or Assignee (the "TENDERING
PARTY"), shall have the right (subject to the terms and conditions set forth
herein) to require the Partnership to redeem all or a portion of the Preferred
Partnership Units held by such Tendering Party (such Preferred Partnership Units
being hereafter called "TENDERED UNITS") in exchange (a "REDEMPTION") for the
Cash Amount, which Cash Amount shall be due and payable on the Cut-Off Date.
Any Redemption shall be exercised pursuant to a Notice of Redemption delivered
to the General Partner by the Qualifying Party when exercising the Redemption
right. In the event of a Redemption, the Cash Amount shall be delivered in
exchange for the Tendered Units by a certified check payable to the Tendering
Party or otherwise in immediately available funds.
B. Notwithstanding the provisions of Section 8.6.A hereof, on or before
the close of business on the Cut-Off Date, the General Partner may, in its sole
and absolute discretion but subject to the Ownership Limit, acquire some or all
(such percentage being referred to as the "APPLICABLE PERCENTAGE") of the
Tendered Units from the Tendering Party in exchange for REIT Shares. If the
General Partner so elects, on the Redemption Date the Tendering Party shall sell
such number of the Tendered Units to the General Partner in exchange for a
number of REIT Shares equal to the product of the REIT Shares Amount and the
Applicable Percentage; PROVIDED, HOWEVER, that in lieu of any fractional REIT
Share resulting from such calculation, the General Partner may tender the Cash
Amount attributable to such fractional REIT Share. The Tendering Party shall
submit (i) such information, certification or affidavit as the General Partner
may reasonably require in connection with the application of the Ownership Limit
and other restrictions and limitations of the Charter to any such acquisition
and (ii) such written representations, investment letters, legal opinions or
other instruments necessary, in the General Partner's good faith opinion, to
effect compliance with the Securities Act. The REIT Shares shall be delivered
by the General Partner as duly authorized, validly issued, fully paid and
nonassessable and fully registered REIT Shares free of any pledge, lien,
encumbrance or restriction, other than the Ownership Limit and, if applicable,
the Rights shall be delivered free of any pledge, lien, encumbrance or
restriction other than the Ownership Limit and the Securities Act and relevant
state securities or "BLUE SKY" laws. In the event that either (i) the General
Partner has not or cannot deliver the REIT Shares and, if applicable, the
Rights, subject in each instance only to the foregoing restrictions, on or
before the Redemption Date; or (ii) the Tendering Party is unable to satisfy the
requirements of clauses (i) or (ii), above, the General Partner shall cause the
Partnership to deliver to the Tendering Party, in lieu thereof, the Cash Amount
in accordance with the provisions of Section 8.6.A hereof.
C. Notwithstanding the provisions of Section 8.6.B hereof, the General
Partner shall not, under any circumstances, elect to acquire Tendered Units in
exchange for the REIT Shares Amount if such exchange would be prohibited under
the Charter.
D. Notwithstanding anything herein to the contrary, with respect to any
Redemption or acquisition of Tendered Units pursuant to Section 8.6.B hereof:
(1) All Partnership Units acquired by the General Partner pursuant to
Section 8.6.B hereof shall automatically, and without further action
required, be converted into and deemed to be General Partner Interests
comprised of the same number of Partnership Units.
(2) No Tendering Party, where the Redemption would consist of less
than all the Partnership Units held by Partners other than the General
Partner, shall be entitled to elect or effect a Redemption to the extent
that the aggregate Partnership Units of the
36
<PAGE>
Limited Partners would be reduced, as a result of the Redemption (or the
acquisition of the Tendered Units by the General Partner pursuant to
Section 8.6.B hereof), to less than one percent (1%) of all Partnership
Units outstanding immediately prior to delivery of the Notice of
Redemption.
(3) Subject to the Ownership Limit, no Tendering Party may effect a
Redemption for less than fifteen thousand (15,000) Partnership Units or, if
such Tendering Party holds (as a Limited Partner or, economically, as an
Assignee) less than fifteen thousand (15,000) Partnership Units, all of the
Partnership Units held by such Tendering Party.
(4) The consummation of such Redemption (or an acquisition of
Tendered Units by the General Partner pursuant to Section 8.6.B hereof, as
the case may be) shall be subject to the expiration or termination of the
applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
(5) The Tendering Party shall continue to own (subject, in the case
of an Assignee, to the provisions of Section 11.5 hereof) all Partnership
Units subject to any Redemption, and be treated as a Limited Partner or an
Assignee, as applicable, with respect such Partnership Units for all
purposes of this Agreement, until such Partnership Units are either paid
for by the Partnership pursuant to Section 8.6.A hereof or transferred to
the General Partner and paid for, by the issuance of the REIT Shares,
pursuant to Section 8.6.B hereof on the Redemption Date. Until a
Redemption Date and an acquisition of the Tendered Units by the General
Partner pursuant to Section 8.6.B hereof, the Tendering Party shall have no
rights as a shareholder of the General Partner with respect to the REIT
Shares issuable in connection with such acquisition.
For purposes of determining compliance with the restrictions set forth in this
Section 8.6.D, all Partnership Units beneficially owned by a Related Party of a
Tendering Party shall be considered to be owned or held by such Tendering Party.
E. In connection with an exercise of Redemption rights pursuant to this
Section 8.6, the Tendering Party shall submit the following to the General
Partner, in addition to the Notice of Redemption:
(1) A written affidavit, dated the same date as, and accompanying,
the Notice of Redemption, (a) disclosing the actual and constructive
ownership, as determined for purposes of Code Sections 856(a)(6), 856(h),
856(d)(2)(B) and 856(d)(5), of REIT Shares by (i) such Tendering Party and
(ii) any Related Party and (b) representing that, after giving effect to
the Redemption or an acquisition of the Tendered Units by the General
Partner pursuant to Section 8.6.B hereof, neither the Tendering Party nor
any Related Party will own REIT Shares in excess of the Ownership Limit;
(2) A written representation that neither the Tendering Party nor any
Related Party has any intention to acquire any additional REIT Shares prior
to the closing of the Redemption or an acquisition of the Tendered Units by
the General Partner pursuant to Section 8.6.B hereof on the Redemption
Date; and
(3) An undertaking to certify, at and as a condition to the closing
of (i) the Redemption or (ii) the acquisition of the Tendered Units by the
General Partner pursuant to Section 8.6.B hereof on the Redemption Date,
that either (a) the actual and constructive ownership of REIT Shares by the
Tendering Party and any Related Party remain unchanged from that disclosed
in the affidavit required by Section 8.6.E(1); or (b) after giving effect
to the Redemption or an acquisition of the Tendered Units by the General
Partner pursuant to Section 8.6.B hereof, neither the Tendering Party nor
any Related Party shall own REIT Shares in violation of the Ownership
Limit.
F. Notwithstanding any other provision of this Agreement, a Limited
Partner or Assignee shall not be entitled to effect an exchange for REIT Shares
to the extent the ownership or right to acquire REIT Shares pursuant to such
exchange by such Partner or Assignee would cause such Partner or any
37
<PAGE>
other Person to violate the Ownership Limit. To the extent any attempted
exchange would be in violation of this Section 8.6.F, it shall be null and void
AB INITIO and such Limited Partner or Assignee shall not require any rights or
economic interests in REIT Shares otherwise issuable upon such exchange.
SECTION 8.7 PARTNERSHIP RIGHT TO CALL LIMITED PARTNER INTERESTS
Notwithstanding any other provision of this Agreement, on and after the
date on which the aggregate Partnership Units of the Limited Partners are less
than fifteen thousand (15,000), the Partnership shall have the right, but not
the obligation, from time to time and at any time to redeem any and all
outstanding Limited Partner Interests by treating any Limited Partner as a
Tendering Party who has delivered a Notice of Redemption pursuant to Section 8.6
hereof for the amount of Partnership Units to be specified by the General
Partner, in its sole and absolute discretion, by notice to such Limited Partner
that the Partnership has elected to exercise its rights under this Section 8.7.
Such notice given by the General Partner to a Limited Partner pursuant to this
Section 8.7 shall be treated as if it were a Notice of Redemption delivered to
the General Partner by such Limited Partner. For purposes of this Section 8.7,
(a) any Limited Partner (whether or not otherwise a Qualifying Party) may, in
the General Partner's sole and absolute discretion, be treated as a Qualifying
Party that is a Tendering Party; and (b) the provisions of Sections 8.6.D(2)
through 8.6.D(4) hereof shall not apply.
SECTION 8.8 OTHER REDEMPTIONS
Nothing in this Agreement shall preclude the redemption of a Limited
Partner Interest or Partnership Units by the Partnership upon such terms and
conditions as may be negotiated between the Limited Partner or Assignee holding
such Limited Partner Interest or Partnership Units, on the one hand, and the
General Partner, on the other hand, in their sole and absolute discretion;
PROVIDED, HOWEVER, in no event may any such redemption impair or otherwise
affect (i) the amount of Available Cash required to satisfy, on a current basis,
the distribution priority to the Holders of Preferred Partnership Units; or (ii)
the rights of the Tendering Parties to effect a Redemption or the ability of the
Partnership to perform its obligations under Section 8.6.A. Such a redemption
may include the payment of cash by the Partnership to the Limited Partner or
Assignee, in a lump sum or in installments, or the distribution in kind of
Partnership assets to such Limited Partner or Assignee (which assets may be
encumbered), including assets to be designated by the Limited Partner or
Assignee and acquired (with or without debt financing) by the Partnership. In
effecting any such redemption by negotiated agreement, none of the Partnership,
the General Partner, the Limited Partner and the Assignee, as the case may be,
shall have any duty to offer the same or similar terms for redemption of any
other Limited Partner Interest or Partnership Units.
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 9.1 RECORDS AND ACCOUNTING
A. The General Partner shall keep or cause to be kept at the principal
office of the Partnership separate books and records for the Partnership as
required to be maintained by the Act or otherwise necessary or appropriate with
respect to the Partnership's business, including all books and records necessary
to provide to the Limited Partners any information, lists and copies of
documents required to be provided pursuant to Section 8.5.A or Section 9.3
hereof. Any records maintained by or on behalf of the Partnership in the
regular course of its business may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, micrographics or any other information
storage device, provided that the records so maintained are convertible into
clearly legible written form within a reasonable period of time.
B. Each Limited Partner, but no Assignee, shall have the right, at its
sole cost and expense following reasonable advance notice to the General
Partner, to inspect and copy, or to cause an independent certified public
accountant to inspect and copy, the books and records of the Partnership at such
time, in such place and in such manner as the General Partner may reasonably
determine.
C. The books of the Partnership shall be maintained, for financial and
tax reporting purposes, on an accrual basis in accordance with GAAP, or on such
other basis as the General Partner determines to be necessary or appropriate.
38
<PAGE>
SECTION 9.2 FISCAL YEAR
The Fiscal Year of the Partnership shall be the calendar year.
SECTION 9.3 REPORTS
A. As soon as practicable, but in no event later than one hundred five
(105) days after the close of each Fiscal Year, the General Partner shall cause
to be mailed to each Limited Partner of record as of the close of the Fiscal
Year an annual report containing financial statements of the Partnership for
such Fiscal Year, presented in accordance with GAAP. Such statements of the
Partnership need not be audited but, if not audited, shall be accompanied by a
letter or certificate from the accountants for the Partnership certifying that
the same were or will be used in connection with the audited financial
statements of the General Partner for the period covered thereby.
B. As soon as practicable, but in no event later than one hundred five
(105) days after the close of each calendar quarter (except the last calendar
quarter of each year), the General Partner shall cause to be mailed to each
Limited Partner of record as of the last day of the calendar quarter a report
containing unaudited financial statements of the Partnership and such other
information as may be required by applicable law or regulation or as the General
Partner determines to be appropriate.
ARTICLE 10
TAX MATTERS
SECTION 10.1 PREPARATION OF TAX RETURNS
The General Partner shall arrange for the preparation and timely filing of
all returns with respect to 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. The
Limited Partners shall promptly provide the General Partner with such
information relating to the Contributed Property, including tax basis and other
relevant information, as may be reasonably requested by the General Partner
from time to time.
SECTION 10.2 TAX ELECTIONS
Except as otherwise provided herein, the General Partner shall, in its sole
and absolute discretion, determine whether to make or revoke any available
election pursuant to the Code. Notwithstanding the preceding sentence, the
General Partner shall elect to use, on behalf of the Partnership, (i) if
requested by a Limited Partner or Assignee within thirty (30) days of the end of
a taxable year, the optional adjustment to basis of property of the Partnership
as provided by and in accordance with Code Section 754 and (ii) the "RECURRING
ITEM" method of accounting provided under Code Section 461(h) with respect to
property taxes imposed on the Partnership's Properties.
SECTION 10.3 TAX MATTERS PARTNER
A. The General Partner shall be the "TAX MATTERS PARTNER" of the
Partnership for federal income tax purposes. The tax matters partner shall
receive no compensation for its services. All third-party costs and expenses
incurred by the tax matters partner in performing its duties as such (including
legal and accounting fees and expenses) shall be borne by the Partnership in
addition to any reimbursement pursuant to Section 7.5 hereof. Nothing herein
shall be construed to restrict the Partnership from engaging an accounting firm
to assist the tax matters partner in discharging its duties hereunder, so long
as the compensation paid by the Partnership for such services is reasonable. At
the request of any Limited Partner, the General Partner agrees to consult with
such Limited Partner with respect to the preparation and filing of any returns
and with respect to any subsequent audit or litigation relating to such returns;
PROVIDED, HOWEVER, that the filing of such returns shall be in the sole and
absolute discretion of the General Partner.
B. The tax matters partner is authorized, but not required:
39
<PAGE>
(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 Code Section 6231) or a
member of a "NOTICE GROUP" (as defined in Code Section 6223(b)(2));
(2) in the event that a notice of a final adminis trative 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 United States
Tax Court or the United States Claims Court, or the filing of a complaint
for refund with the District Court of the United States for the district in
which the Partnership's principal place of business is located;
(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 that 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 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 within the discretion of the tax matters partner and the
provisions relating to indemnification of the General Partner set forth in
Section 7.7 hereof shall be fully applicable to the tax matters partner in its
capacity as such.
40
<PAGE>
SECTION 10.4 WITHHOLDING
Each Limited Partner hereby authorizes the Partnership to withhold from or
pay on behalf of or with respect to such Limited Partner any amount of federal,
state, local or foreign taxes that the General Partner determines that the
Partnership is required to withhold or pay with respect to any amount
distributable or allocable to such Limited Partner pursuant to this Agreement,
including any taxes required to be withheld or paid by the Partnership pursuant
to Code Section 1441, Code Section 1442, Code Section 1445 or Code Section 1446.
Any amount paid on behalf of or with respect to a Limited Partner shall
constitute a loan by the Partnership to such Limited Partner, which loan shall
be repaid by such Limited Partner within fifteen (15) days after notice from the
General Partner that such payment must be made unless (i) the Partnership
withholds such payment from a distribution that would otherwise be made to the
Limited Partner or (ii) the General Partner reasonably determines that such
payment may be satisfied out of the Available Funds of the Partnership that
would, but for such payment, be distributed to the 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 10.4. In the event that a Limited Partner
fails to pay any amounts owed to the Partnership pursuant to this Section 10.4
when due, the General Partner may, in its sole and absolute discretion, elect to
make the payment to the Partnership on behalf of such defaulting Limited
Partner, and in such event shall be deemed to have loaned such amount to such
defaulting Limited Partner and shall succeed to all rights and remedies of the
Partnership as against such defaulting Limited Partner (including the right to
receive distributions). Any amounts payable by a Limited Partner hereunder
shall bear interest at the Prime Rate plus four (4) percentage points (but not
higher than the maximum lawful rate) 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.
ARTICLE 11
TRANSFERS AND WITHDRAWALS
SECTION 11.1 TRANSFER
A. No part of the interest of a Partner shall be subject to the claims of
any creditor and may not be voluntarily or involuntarily alienated or encumbered
except as may be specifically provided for in this Agreement.
B. No Partnership Interest shall be Transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article 11.
Any Transfer or purported Transfer of a Partnership Interest not made in
accordance with this Article 11 shall be null and void AB INITIO.
SECTION 11.2 TRANSFER OF GENERAL PARTNER'S PARTNERSHIP INTEREST
A. The General Partner may not Transfer any of its General Partner
Interest or withdraw from the Partnership except as provided in Section 11.2.B
hereof.
B. The General Partner shall not withdraw from the Partnership and shall
not Transfer all or any portion of its interest in the Partnership without the
Consent of the Limited Partners, which Consent may be given or withheld in the
sole and absolute discretion of the Limited Partners; PROVIDED, HOWEVER, that no
such Consent shall be required in the event of a Transfer or constructive
Transfer to a successor to all or substantially all of the assets of the General
Partner or to a successor by operation of law or otherwise in connection with
the merger or consolidation of the General Partner. Upon any Transfer or
constructive Transfer of such a Partnership Interest pursuant to the Consent of
the Limited Partners or otherwise in accordance with the provisions of this
Section 11.2.B, the transferee shall become a successor General Partner for all
purposes herein, and shall be vested with the powers and rights of the
transferor General Partner, and shall be liable for all obligations and
responsible for all duties of the General Partner, once such transferee has
executed such instruments as may be necessary to effectuate such admission and
to confirm the agreement of such transferee to be bound by all the terms and
provisions of this Agreement with respect to the Partnership Interest so
acquired. It is a condition to any Transfer otherwise permitted hereunder that
the transferee assumes, by operation of law or express
41
<PAGE>
agreement, all of the obligations of the transferor General Partner under this
Agreement with respect to such Transferred Partnership Interest, and such
Transfer shall relieve the transferor General Partner of its obligations under
this Agreement without the Consent of the Limited Partners. In the event that
the General Partner withdraws from the Partnership, in violation of this
Agreement or otherwise, or otherwise dissolves or terminates, or upon the
bankruptcy of the General Partner, a "MAJORITY IN INTEREST" (as such phrase is
used in Section 17-801(3) of the Act) of the remaining Partners may elect to
continue the Partnership business by selecting a successor General Partner in
accordance with the Act.
SECTION 11.3 LIMITED PARTNERS' RIGHTS TO TRANSFER
A. GENERAL. No Limited Partner shall Transfer all or any portion of its
Partnership Interest to any transferee without the consent of the General
Partner, which consent may be withheld in the sole and absolute discretion of
the General Partner; PROVIDED, HOWEVER, that a Limited Partner may (i) at any
time, without the consent of the General Partner, Transfer all or part of its
Partnership Interest to a Qualified Transferee who is also (A) a Designated
Party; (B) a Family Member of such Limited Partner; (C) a trust, whether or not
revocable, of which such Limited Partner or such Limited Partner's Family
Members or Designated Party are the sole beneficiaries; (D) an organization
described in Code Section 501(c)(3); or (E) an Affiliate; or (ii) pledge all or
any portion of its Partnership Interest to a lending institution that is not an
Affiliate of such Limited Partner, as collateral or security for a BONA FIDE
loan or other extension of credit, and Transfer such pledged Partnership
Interest to such lending institution in connection with the exercise of remedies
under such loan or extension of credit. Any Transfer permitted by this proviso
is hereinafter referred to as a "PERMITTED TRANSFER". It is a condition to any
Transfer otherwise permitted hereunder (whether or not such Transfer is a
Permitted Transfer) that the transferee assume by operation of law or express
agreement all of the obligations of the transferor Limited Partner under this
Agreement with respect to such Transferred Partnership Interest.
Notwithstanding the foregoing, any transferee of any Transferred Partnership
Interest shall be subject to any and all ownership limitations (including the
Ownership Limit) contained in the Charter that may limit or restrict such
transferee's ability to exercise its Redemption rights, including the Ownership
Limit. Any transferee, whether or not admitted as an Additional Limited Partner
or a Substituted Limited Partner, shall take subject to the obligations of the
transferor hereunder. Unless admitted as an Additional Limited Partner or a
Substituted Limited Partner, no transferee, whether by a voluntary Transfer, by
operation of law or otherwise, shall have any rights hereunder other than the
rights of an Assignee as provided in Section 11.5 hereof.
B. INCAPACITY. If a Limited Partner is subject to Incapacity, the
executor, administrator, trustee, committee, guardian, conservator or receiver
of such Limited Partner's estate shall have all the rights of a Limited Partner,
but not more rights than those enjoyed by other Limited Partners, for the
purpose of settling or managing the estate, and such power as the Incapacitated
Limited Partner possessed to Transfer all or any part of its interest in the
Partnership. The Incapacity of a Limited Partner, in and of itself, shall not
dissolve or terminate the Partnership.
C. OPINION OF COUNSEL. In connection with any Transfer of a Limited
Partner Interest, the General Partner shall have the right to receive an opinion
of counsel reasonably satisfactory to it to the effect that the proposed
Transfer may be effected without registration under the Securities Act and will
not otherwise violate any federal or state securities laws or regulations
applicable to the Partnership or the Partnership Interests Transferred. If, in
the opinion of such counsel, such Transfer would require the 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 Units, the General Partner may prohibit any Transfer otherwise
permitted under this Section 11.3 by a Limited Partner of Partnership Interests.
D. ADVERSE TAX CONSEQUENCES. No Transfer by a Limited Partner of its
Partnership Interests (including any Redemption, any other acquisition of
Partnership Units by the General Partner or any acquisition of Partnership Units
by the Partnership) may be made to any person if (i) in the opinion of legal
counsel for the Partnership, it would result in the Partnership being treated as
an association taxable as a corporation; or (ii) such Transfer is effectuated
through an "ESTABLISHED SECURITIES MARKET" or a "SECONDARY MARKET (OR THE
SUBSTANTIAL EQUIVALENT THEREOF)" within the meaning of Code Section 7704.
SECTION 11.4 ADDITIONAL OR SUBSTITUTED LIMITED PARTNERS
42
<PAGE>
A. No Limited Partner shall have the right to substitute a transferee
(including any transferee pursuant to Transfers permitted by Section 11.3
hereof) as a Limited Partner in its place. A transferee of the entire interest
of a Limited Partner may be admitted as a Substituted Limited Partner and a
transferee of a portion of the interest of a Limited Partner may be admitted as
an Additional Limited Partner only with the consent of the General Partner,
which consent may be given or withheld by the General Partner in its sole and
absolute discretion; PROVIDED, HOWEVER, that such consent shall be granted to
any transfer to a Designated Party as long as such Designated Party continues to
be a Qualified Transferee. The failure or refusal by the General Partner to
otherwise permit a transferee of any such interests to become an Additional
Limited Partner or a Substituted Limited Partner shall not give rise to any
cause of action against the Partnership or the General Partner. Subject to the
foregoing, an Assignee shall not be admitted as an Additional Limited Partner or
a Substituted Limited Partner until and unless it furnishes to the General
Partner (i) evidence of acceptance, in form and substance satisfactory to the
General Partner, of all the terms, conditions and applicable obligations of this
Agreement, including the power of attorney granted in Section 2.4 hereof; (ii)
a Partner Schedule executed by such Assignee; and (iii) such other documents and
instruments as may be reasonably required or advisable to effect such Assignee's
admission as a Substituted Limited Partner or an Additional Limited Partner, as
the case may be.
B. A transferee who has been admitted as an Additional Limited Partner or
a Substituted Limited Partner in accordance with this Article 11 shall have all
the rights and powers and be subject to all the restrictions and liabilities of
a Limited Partner under this Agreement.
C. Upon the admission of an Additional Limited Partner or a Substituted
Limited Partner, the General Partner shall amend the Partner Schedule(s) to
eliminate, if necessary, the name and address of the predecessor of a
Substituted Limited Partner. In addition, the Additional Limited Partner or
Substituted Limited Partner and the General Partner shall execute a Partner
Schedule with respect to such Additional Limited Partner or Substituted Limited
Partner, which Partner Schedule shall supersede, to the extent necessary, the
Partner Schedule for the predecessor of the Additional Limited Partner or
Substituted Limited Partner.
SECTION 11.5 ASSIGNEES
If the General Partner does not consent to the admission of any Permitted
Transferee under Section 11.3 hereof or Section 11.4 hereof as an Additional
Limited Partner or a Substituted Limited Partner, such transferee shall be
considered an Assignee for purposes of this Agreement. An Assignee shall be
entitled to all the rights of an assignee of a limited partnership interest
under the Act, including the right to receive distributions from the Partnership
and the share of Gross Income, Net Income, Net Loss and other items of income,
gain, loss, deduction and credit of the Partnership attributable to the
Partnership Units assigned to such transferee and the rights to Transfer the
Partnership Units provided in this Article 11, but shall not be deemed to be a
Holder of Partnership Units for any other purpose under this Agreement (other
than as expressly provided in Section 8.6 hereof with respect to a Qualifying
Party that becomes a Tendering Party), and shall not be entitled to effect a
Consent or vote with respect to such Partnership Units on any matter presented
to the Limited Partners for approval (which such right shall remain with the
transferor Limited Partner). In the event that any such transferee desires to
make a further assignment of any such Partnership Units, such transferee shall
be subject to all the provisions of this Article 11 to the same extent and in
the same manner as any Limited Partner desiring to make an assignment of
Partnership Units.
SECTION 11.6 GENERAL PROVISIONS
A. No Limited Partner may withdraw from the Partnership other than as a
result of a Transfer permitted pursuant to this Article 11 where such transferee
was admitted as a Substituted Limited Partner, or pursuant to a Redemption (or
acquisition by the General Partner) of all of its Partnership Units under
Section 8.6 hereof.
B. Any Limited Partner who shall Transfer all of its Partnership Units in
a Transfer (i) permitted pursuant to this Article 11 where such transferee was
admitted as a Substituted Limited Partner; (ii) pursuant to the exercise of its
rights to effect a Redemption of all of its Partnership Units under Section 8.6
hereof; or (iii) to the General Partner, whether or not pursuant to Section
8.6.B hereof, shall cease to
43
<PAGE>
be a Limited Partner.
C. If any Partnership Unit is Transferred in compliance with the
provisions of this Article 11, or is redeemed by the Partnership or acquired by
the General Partner pursuant to Section 8.6 hereof, on any day other than the
first day of a Fiscal Year, then Gross Income, Net Income, Net Loss, each item
thereof and all other items of income, gain, loss, deduction and credit
attributable to such Partnership Unit for such Fiscal Year shall be allocated to
the transferor Partner or the Tendering Party, as the case may be, and, in the
case of a Transfer or assignment other than a Redemption, to the transferee
Partner (including the General Partner in the case of an acquisition of
Partnership Units pursuant to Section 8.6.B hereof) or Assignee, by taking into
account their varying interests during the Fiscal Year in accordance with Code
Section 706(d), using the "DAILY PRORATION" or "INTERIM CLOSING OF THE BOOKS"
method or another permissible method selected by the General Partner. Solely
for purposes of making such allocations, the General Partner, in its sole and
absolute discretion, may determine that each of such items for the calendar
month in which a Transfer occurs shall be allocated to the transferee Partner or
Assignee and none of such items for the calendar month in which a Transfer or a
Redemption occurs shall be allocated to the transferor Partner or the Tendering
Party, as the case may be, if such Transfer occurs on or before the fifteenth
(15th) day of the month; otherwise such items for such calendar month shall be
allocated to the transferor. All distributions of Available Cash attributable
to such Partnership Unit with respect to which the Partnership Record Date is
before the date of such Transfer, assignment or Redemption shall be made to the
transferor Partner or the Tendering Party, as the case may be, and, in the case
of a Transfer other than a Redemption, all distributions of Available Cash
thereafter attributable to such Partnership Unit shall be made to the transferee
Partner or Assignee.
D. In addition to any other restrictions on Transfer herein contained, in
no event may any Transfer or assignment of a Partnership Interest by any Partner
(exclusive of any acquisition of Partnership Units by the General Partner or any
other acquisition of Partnership Units by the Partnership) be made:
(1) to any person or entity who lacks the legal right, power or
capacity to own a Partnership Interest;
(2) in violation of applicable law;
(3) of any component portion of a Partnership Interest, such as the
Capital Account, or rights to distributions, separate and apart from all
other components of a Partnership Interest;
(4) in the event that such Transfer could, in the good faith opinion
of the General Partner, cause the General Partner to cease to comply with
the REIT Requirements;
(5) if such Transfer could, in the opinion of counsel to the
Partnership or the General Partner, cause a termination of the Partnership,
in either case for federal or state income tax purposes (except as a result
of the Redemption (or acquisition by the General Partner) of all
Partnership Units held by all Limited Partners);
(6) if such Transfer could, in the opinion of legal counsel to the
Partnership, cause the Partnership either (i) to cease to be classified as
a partnership or (ii) to be classified as a publicly traded partnership, in
either case for federal income tax purposes (except as a result of the
Redemption (or acquisition by the General Partner) of all Partnership Units
held by all Limited Partners);
(7) if such Transfer could, in the opinion of legal counsel to the
Partnership, cause the Partnership to become, with respect to any employee
benefit plan subject to Title I of ERISA, a "PARTY-IN-INTEREST" (as defined
in ERISA Section 3(14)) or a "DISQUALIFIED PERSON" (as defined in Code
Section 4975(c));
(8) if such Transfer could, in the opinion of legal counsel to the
Partnership, cause any portion of the assets of the Partnership to
constitute assets of any employee benefit plan pursuant to Department of
Labor Regulations Section 2510.2-101;
44
<PAGE>
(9) if such Transfer requires the registration of such Partnership
Interest pursuant to any applicable federal or state securities laws;
(10) if such Transfer could cause the Partnership to have more than
one hundred (100) Partners (including as Partners for such purpose those
Persons indirectly owning an interest in the Partnership through another
partnership, a limited liability company, subchapter S corporation or a
grantor trust, if substantially all the value of such Person's interest in
any such entity is attributable to such entity's interest (direct or
indirect) in the Partnership);
(11) if such Transfer causes the Partnership (as opposed to the
General Partner) to become a reporting company under the Exchange Act; or
(12) if such Transfer subjects the Partnership to regulation under
the Investment Company Act of 1940, the Investment Advisors Act of 1940 or
ERISA, each as amended.
11.7 INCREMENTAL COSTS.
The General Partner shall be entitled to be reimbursed for its reasonable
incremental administrative costs incurred in connection with making payments to,
preparing reports and statements for, effecting Redemptions with respect to and
otherwise servicing all transferees of Preferred Partnership Units, whether
directly or indirectly and, whether or not such transferee is an Additional
Limited Partner, a Substituted Limited Partner or an Assignee, over and above
the amount of such costs incurred in connection with providing such services to
the General Partner and an aggregate of ten (10) additional Holders or
transferees of Preferred Partnership Units. Such costs may include a reasonable
allocation of the General Partner's internal costs and expenses, including a pro
rata portion of the salaries or wages, benefits and overhead of its employees
engaged in servicing the Holders and transferees. The General Partner may
effect such reimbursement by deducting the reimbursable amount from the
distributions otherwise payable to the Holders of the Preferred Partnership
Units pursuant to Section 5.1(1) hereof.
ARTICLE 12
ADMISSION OF PARTNERS
SECTION 12.1 ADMISSION OF SUCCESSOR GENERAL PARTNER
A successor to all of the General Partner's General Partner Interest
pursuant to Section 11.2 hereof who is proposed to be admitted as a successor
General Partner shall be admitted to the Partnership as the General Partner,
effective immediately prior to such Transfer. Any such successor shall carry on
the business of the Partnership without dissolution. In each case, the
admission shall be subject to the successor General Partner executing and
delivering to the Partnership an acceptance of all of the terms, conditions and
applicable obligations of this Agreement and such other documents or instruments
as may be required to effect the admission.
SECTION 12.2 ADMISSION OF ADDITIONAL LIMITED PARTNERS AND SUBSTITUTED
LIMITED PARTNER
A. After the admission to the Partnership of the Original Limited
Partners on the date hereof, a Person (other than an existing Partner) who is
admitted to the Partnership as an Additional Limited Partner or a Substitute
Limited Partner shall furnish to the General Partner (i) evidence of acceptance,
in form and substance satisfactory to the General Partner, of all of the terms,
conditions and applicable of this Agreement, including the power of attorney
granted in Section 2.4 hereof; (ii) a Partner Schedule executed by such Person;
and (iii) such other documents or instruments as may be reasonably required with
respect to Designated Parties, or may be required in the sole and absolute
discretion of the General Partner with respect to other Persons, in order to
effect such Party's or other Person's admission as an Additional Limited Partner
or a Substitute Limited Partner.
B. If any Additional Limited Partner or Substituted Limited Partner is
admitted to the Partnership on any day other than the first day of a Fiscal
Year, then Gross Income, Net Income, Net Loss, each item thereof and all other
items of income, gain, loss, deduction and credit allocable among
45
<PAGE>
Partners and Assignees for such Fiscal Year shall be allocated among such
Additional Limited Partner or Substituted Limited Partner and all other Partners
and Assignees by taking into account their varying interests during the Fiscal
Year in accordance with Code Section 706(d), using the "INTERIM CLOSING OF THE
BOOKS" method or another permissible method selected by the General Partner.
Solely for purposes of making such allocations, each of such items for the
calendar month in which an admission of any Additional Limited Partner or
Substituted Limited Partner occurs shall be allocated among all the Partners and
Assignees, including such Additional Limited Partner or Substituted Limited
Partner, in accordance with the principles described in Section 11.6.C hereof.
All distributions of Available Cash with respect to which the Partnership Record
Date is before the date of such admission shall be made solely to Partners and
Assignees other than the Additional Limited Partner or Substituted Limited
Partner, and all distributions of Available Cash thereafter shall be made to all
the Partners and Assignees including such Additional Limited Partner or
Substituted Limited Partner.
SECTION 12.3 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED
PARTNERSHIP
For the admission to the Partnership of any Partner, the General Partner
shall take all steps necessary and appropriate under the Act to amend the
records of the Partnership and, if necessary, to prepare as soon as practical an
amendment of this Agreement (including an amendment to the Partner Schedule(s)
and, if required by law, shall prepare and file an amendment to the Certificate
and may for this purpose exercise the power of attorney granted pursuant to
Section 2.4 hereof.
SECTION 12.4 LIMIT ON NUMBER OF PARTNERS
No Person shall be admitted to the Partnership as a Substituted Limited
Partner or an Additional Limited Partner if the effect of such admission would
be to cause the Partnership to have more than one hundred (100) Partners
including as Partners for such purpose those Persons indirectly owning an
interest in the Partnership through another partnership, a limited liability
company, a subchapter S corporation or a grantor trust, if substantially all the
value of such Person's interest in any such entity is attributable to such
entity's interest (direct or indirect) in the Partnership, or otherwise cause
the Partnership to become a reporting company under the Exchange Act.
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
SECTION 13.1 DISSOLUTION
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the withdrawal of the General Partner, any successor General Partner shall
continue the business of the Partnership without dissolution. However, the
Partnership shall dissolve, and its affairs shall be wound up, upon the first to
occur of any of the following (each a "LIQUIDATING EVENT"):
(1) the expiration of its term as provided in Section 2.5 hereof;
(2) an event of withdrawal, as defined in the Act (including
bankruptcy), of the sole General Partner unless, within ninety (90) days
after the withdrawal, a "MAJORITY IN INTEREST" (as such phrase is used in
Section 17-801(3) of the Act) of the remaining Partners and all of the
Concerned Limited Partners agree in writing, in their sole and absolute
discretion, to continue the business of the Partnership and to the
appointment, effective as of the date of withdrawal, of a successor General
Partner;
(3) entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Act;
(4) the occurrence of a Terminating Capital Transaction; or
(5) the Redemption (or acquisition by the General Partner) of all
Partnership Units other than Partnership Units held by the General Partner.
46
<PAGE>
SECTION 13.2 WINDING UP
A. Upon the occurrence of a Liquidating Event, the Partnership shall
continue solely for the purposes of effecting any Redemptions or the acquisition
by the General Partner of Tendered Units and winding up its affairs in an
orderly manner, liquidating its assets and satisfying the claims of its
creditors and Partners. After the occurrence of a Liquidating Event, no Partner
shall take any action that is inconsistent with, or not necessary to or
appropriate for, such purposes. The General Partner (or, in the event that
there is no remaining General Partner or the General Partner has dissolved,
become bankrupt within the meaning of the Act or ceased to operate, any Person
elected by a Majority in Interest of the Limited Partners (the General Partner
or such other Person being referred to herein as the "LIQUIDATOR")) shall be
responsible for overseeing the winding up and dissolution of the Partnership and
shall take full account of the Partnership's liabilities and property, and the
Partnership property shall be liquidated as promptly as is consistent with
obtaining the fair value thereof, and the proceeds therefrom (which may, to the
extent determined by the General Partner, include shares of stock in the General
Partner) shall be applied and distributed in the following order:
(1) First, to the satisfaction of all of the Partnership's debts and
liabilities to creditors other than the Partners and their Assignees
(whether by payment or the making of reasonable provision for payment
thereof);
(2) Second, to the satisfaction of all of the Partnership's debts and
liabilities to the General Partner other than Partner Loans (whether by
payment or the making of reasonable provision for payment thereof),
including amounts due as reimbursements under Section 7.5 hereof;
(3) Third, to the payment of the accrued but unpaid amounts payable
to the Holders of Preferred Partnership Units, PARI PASSU in accordance
with their ownership of such Units, pursuant to Section 5.1(1) hereof;
(4) Fourth, to the satisfaction of all of the Partnership's debts and
liabilities to the other Partners and any Assignees, including the
repayment of Partner Loans, PARI PASSU in accordance with their ownership
of such Loans (whether by payment or the making of reasonable provision for
payment thereof); and
(5) The balance, if any, to the General Partner, the Limited Partners
and any Assignees in accordance with and in proportion to their positive
Capital Account balances, after giving effect to all contributions,
distributions and allocations for all periods.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2.A hereof that 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 defer for a reasonable time the liquidation of any
assets except those necessary to satisfy liabilities of the Partnership
(including to those Partners as creditors) and/or distribute to the Partners, in
lieu of cash, as tenants in common and in accordance with the provisions of
Section 13.2.A hereof, undivided interests in such Partnership assets as the
Liquidator deems not suitable for liquidation. Any such distributions in kind
shall be made only if, in the good faith judgment of the Liquidator, such
distributions in kind are in the best 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.
C. In the event that the Partnership is "LIQUIDATED" within the meaning
of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made
pursuant to this Article 13 to the Partners and Assignees that have positive
Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2)
to the extent of, and in proportion to, their respective positive Capital
Account balances. If any Partner has a
47
<PAGE>
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. In the sole
and absolute discretion of the General Partner or the Liquidator, a PRO RATA
portion of the distributions that would otherwise be made to the Partners
pursuant to this Article 13 may be withheld or escrowed to provide a reasonable
reserve for Partnership liabilities (contingent or otherwise) and to reflect
the unrealized portion of any installment obligations owed to the Partnership,
provided that such withheld or escrowed amounts shall be distributed to the
General Partner and Limited Partners in the manner and order of priority set
forth in Section 13.2.A hereof as soon as practicable.
SECTION 13.3 DEEMED DISTRIBUTION AND RECONTRIBUTION
Notwithstanding any other provision of this Article 13, in the event that
the Partnership is liquidated within the meaning of Regulations Section 1.704-
1(b)(2)(ii)(g), but no Liquidating Event has occurred, the Partnership's
property shall not be liquidated, the Partnership's liabilities shall not be
paid or discharged and the Partnership's affairs shall not be wound up.
Instead, for federal income tax purposes the Partnership shall be deemed to have
distributed the property in kind to the Partners and the Assignees, who shall be
deemed to have assumed and taken such property subject to all Partnership
liabilities, all in accordance with their respective Capital Accounts.
Immediately thereafter, the Partners and the Assignees shall be deemed to have
recontributed the Partnership property in kind to the Partnership, which shall
be deemed to have assumed and taken such property subject to all such
liabilities; PROVIDED, HOWEVER, that nothing in this Section 13.4 shall be
deemed to have constituted any Assignee as a Substituted Limited Partner without
compliance with the provisions of Section 11.4 hereof.
SECTION 13.4 RIGHTS OF LIMITED PARTNERS
Except as provided in Section 8.6 hereof, (i) each Partner shall look
solely to the assets of the Partnership for the return of its Capital
Contribution and (ii) no Partner shall have the right or power to demand or
receive property other than cash from the Partnership. Except as provided in
Sections 5.1 and 13.2.A hereof, no Partner shall have priority over any other
Partner as to the return of its Capital Contributions, distributions or
allocations.
SECTION 13.5 NOTICE OF DISSOLUTION
In the event that a Liquidating Event occurs or an event occurs that would,
but for an election or objection by one or more Partners pursuant to Section
13.1 hereof, result in a dissolution of the Partnership, the General Partner
shall, within thirty (30) days thereafter, provide written notice thereof to
each of the Partners and, in the General Partner's sole and absolute discretion
or as required by the Act, to all other parties with whom the Partnership
regularly conducts business, and the General Partner may, or, if required by the
Act, shall, publish notice thereof in a newspaper of general circulation in each
place in which the Partnership regularly conduct business.
SECTION 13.6 CANCELLATION OF CERTIFICATE OF LIMITED PARTNERSHIP
Upon the completion of the liquidation of the Partnership as provided in
Section 13.2 hereof, the Partnership shall be terminated, a certificate of
cancellation shall be filed with the State of Delaware, all qualifications of
the Partnership as a foreign limited partnership or association in jurisdictions
other than the State of Delaware shall be cancelled and such other actions as
may be necessary to terminate the Partnership shall be taken.
SECTION 13.7 REASONABLE TIME FOR WINDING-UP
A reasonable time shall be allowed for the orderly winding-up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2 hereof, in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect between the Partners during the period of liquidation.
48
<PAGE>
ARTICLE 14
PROCEDURES FOR ACTIONS AND CONSENTS
OF PARTNERS; AMENDMENTS; MEETINGS
SECTION 14.1 PROCEDURES FOR ACTIONS AND CONSENTS OF PARTNERS
The actions requiring Consent of the Limited Partners pursuant to this
Agreement, including Sections 7.3 or 7.4 hereof, or otherwise pursuant to
applicable law, are subject to the procedures set forth in this Article 14.
SECTION 14.2 AMENDMENTS
Amendments to this Agreement may be proposed by the General Partner or by a
Majority in Interest of the Limited Partners. Following any such proposal by
the General Partner, the General Partner shall submit the proposed amendment to
the Limited Partners. The General Partner may seek the written consent of the
Limited Partners on any other proposed amendment or call a meeting to vote
thereon and to transact any other business that the General Partner may deem
appropriate. For purposes of obtaining a written Consent, the General Partner
may require a response within a reasonable specified time, but not less than
fifteen (15) days, and failure to respond in such time period shall constitute a
Consent that is consistent with the General Partner's recommendation with
respect to the proposal; PROVIDED, HOWEVER, that an action shall become
effective at such time as requisite Consents are received even if prior to such
specified time.
SECTION 14.3 MEETINGS OF THE PARTNERS
A. Meetings of the Partners may be called by the General Partner and
shall be called upon the receipt by the General Partner of a written request by
a Majority in Interest of the Limited Partners. The call shall state the nature
of the business to be transacted. Notice of any such meeting shall be given to
all Partners not less than seven (7) 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 Limited Partners is permitted or
required under this Agreement, such vote or Consent may be given at a meeting of
Partners or may be given in accordance with the procedure prescribed in Section
14.3.B hereof.
B. Any action required or permitted to be taken at a meeting of the
Partners may be taken without a meeting if a written consent setting forth the
action so taken is signed by Partners holding a majority of the Partnership
Units (or such other percentage as is expressly required by this Agreement for
the action in question). Such consent may be in one instrument or in several
instruments, and shall have the same force and effect as a vote of Partners
holding a majority of the Partnership Units (or such other percentage as is
expressly required by this Agreement). Such consent shall be filed with the
General Partner. An action so taken shall be deemed to have been taken at a
meeting held on the effective date so certified.
C. Each Limited Partner may authorize any Person or Persons to act for
him by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting or voting or participating
at a meeting. Every proxy must be signed by the Limited Partner or 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 (or there is
receipt of a proxy authorizing a later date). Every proxy shall be revocable at
the pleasure of the Limited Partner executing it, such revocation to be
effective upon the Partnership's receipt of written notice of such revocation
from the Limited Partner executing such proxy.
D. Each meeting of Partners shall be conducted by the General Partner or
such other Person as the General Partner may appoint pursuant to such rules for
the conduct of the meeting as the General Partner or such other Person deems
appropriate. Meetings of Partners may be conducted in the same manner as
meetings of the General Partner's shareholders and may be held at the same time
as, and as part of, the meetings of the General Partner's shareholders.
49
<PAGE>
ARTICLE 15
GENERAL PROVISIONS
SECTION 15.1 ADDRESSES AND NOTICE
Any notice, demand, request or report required or permitted to be given or
made to a Partner or Assignee under this Agreement shall be in writing and shall
be deemed given or made (i) when delivered in person, (ii) three (3) Business
Days following deposit in the United States mail if sent by certified mail,
return receipt requested or (iii) the next Business Day if sent by a nationally-
recognized commercial courier service (A) in the case of a Partner, to such
Partner at the address set forth below or, if not set forth below, on the
Partner Schedule with respect to such Partner) or such other address of which
the Partner shall notify the General Partner in writing; and (B) in the case of
an Assignee, to the address of which such Assignee shall notify the General
Partner in writing:
TriNet Corporate Realty Trust, Inc.
Four Embarcadero Center, Suite 3150
San Francisco, CA 94111
(415) 391-6259 (fax)
Attention: Mark S. Whiting
John D. O'Donnell
c/o The O'Donnell Group
2201 Dupont Drive, Suite 750
Irvine, California 92715
(714) 851-8284 (fax)
Donald S. Grant
c/o Institutional Housing Partners
2201 Dupont Drive, Suite 750
Irvine, California 92715
(714) 851-8284 (fax)
John W. Hopkins
98 Main Street, Suite 343
Tiburon, California 94920
(415) 435-4913 (fax)
If to any of Pinto, Gromet, Dubia & Worcester
the foregoing 2 Park Plaza, Suite 300
Limited Partners, Irvine, California 92714
with a copy to:(714) 833-2067 (fax)
Attention: Saul Pinto, Esq.
SECTION 15.2 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 15.3 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 15.4 WAIVER
A. 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.
50
<PAGE>
B. The restrictions, conditions and other limitations on the rights and
benefits of the Limited Partners contained in this Agreement, and the
representations, duties, covenants and other requirements of performance or
notice by the Limited Partners, are for the benefit of the Partnership and may
be waived or relinquished by the General Partner, in its sole and absolute
discretion, on behalf of the Partnership in one or more instances from time to
time and at any time; PROVIDED, HOWEVER, that any such waiver or relinquishment
may not made if it would have the effect of (i) creating liability for any other
Limited Partner; (ii) causing the Partnership to cease to qualify as a limited
partnership; (iii) reducing the amount of cash otherwise distributable to the
Limited Partners; (iv) resulting in the classification of the Partnership as an
association or publicly traded partnership taxable as a corporation; or (v)
violating the Securities Act, the Exchange Act or any state "BLUE SKY" or other
securities laws; PROVIDED, FURTHER, that any waiver relating to compliance with
the Ownership Limit or other restrictions in the Charter shall be made and shall
be effective only as provided in the Charter.
SECTION 15.5 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 or upon execution of a Partner Schedule.
SECTION 15.6 APPLICABLE LAW
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware, without regard to the principles
of conflicts of law. In the event of a conflict between any provision of this
Agreement and any non-mandatory provision of the Act, the provisions of this
Agreement shall control and take precedence.
SECTION 15.7 ENTIRE AGREEMENT
This Agreement contains all of the understandings and agreements between
and among the Partners with respect to the subject matter of this Agreement and
the rights, interests and obligations of the Partners with respect to the
Partnership.
SECTION 15.8 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 15.9 LIMITATION TO PRESERVE REIT STATUS
Notwithstanding anything else in this Agreement, to the extent that the
amount paid, credited, distributed or reimbursed by the Partnership to, for or
with respect to any REIT Partner or its officers, directors, employees or
agents, whether as a reimbursement, fee, expense or indemnity (a "REIT
PAYMENT"), would constitute gross income to the REIT Partner for purposes of
Code Section 856(c)(2) or Code Section 856(c)(3), then, notwithstanding any
other provision of this Agreement, the amount of such REIT Payments, as selected
by the General Partner in its discretion from among items of potential
distribution, reimbursement, fees, expenses and indemnities, shall be reduced
for any Fiscal Year so that the REIT Payments, as so reduced, to, for or with
respect to such REIT Partner shall not exceed the lesser of:
(1) an amount equal to the excess, if any, of (i) four and nine-
tenths percent (4.9%) of the REIT Partner's total gross income (but
excluding the amount of any REIT Payments) for the Fiscal Year that is
described in subsections (A) through (H) of Code Section 856(c)(2) over
(ii) the amount of gross income (within the meaning of Code Section
856(c)(2)) derived by the REIT Partner from sources other than those
described in subsections (A) through (H) of Code Section 856(c)(2) (but not
including the amount of any REIT Payments); or
51
<PAGE>
(2) an amount equal to the excess, if any, of (i) twenty-four percent
(24%) of the REIT Partner's total gross income (but excluding the amount of
any REIT Payments) for the Fiscal Year that is described in subsections (A)
through (I) of Code Section 856(c)(3) over (ii) the amount of gross income
(within the meaning of Code Section 856(c)(3)) derived by the REIT Partner
from sources other than those described in subsections (A) through (I) of
Code Section 856(c)(3) (but not including the amount of any REIT Payments);
PROVIDED, HOWEVER, that REIT Payments in excess of the amounts set forth in
clauses (a) and (b) above may be made if the General Partner, as a condition
precedent, obtains an opinion of tax counsel that the receipt of such excess
amounts shall not adversely affect the REIT Partner's ability to qualify as a
REIT. To the extent that REIT Payments may not be made in a Fiscal Year as a
consequence of the limitations set forth in this Section 15.9, such REIT
Payments shall carry over and shall be treated as arising in the following
Fiscal Year. The purpose of the limitations contained in this Section 15.9 is
to prevent any REIT Partner from failing to qualify as a REIT under the Code by
reason of such REIT Partner's share of items, including distributions,
reimbursements, fees, expenses or indemnities, receivable directly or indirectly
from the Partnership, and this Section 15.9 shall be interpreted and applied to
effectuate such purpose.
SECTION 15.10 NO PARTITION
No Partner nor any successor-in-interest to a Partner shall have the right
while this Agreement remains in effect to have any property of the Partnership
partitioned, or to file a complaint or institute to any proceeding at law or in
equity to have such property of the Partnership partitioned, and each Partner,
on behalf of itself and its successors and assigns hereby waives any such right.
It is the intention of the Partners that the rights of the parties hereto and
their successors-in-interest to Partnership property, as among themselves, shall
be governed by the terms of this Agreement, and that the rights of the Partners
and their successors-in-interest shall be subject to the limitations and
restrictions as set forth in this Agreement.
SECTION 15.11 NO THIRD-PARTY RIGHTS CREATED HEREBY
The provisions of this Agreement are solely for the purpose of defining the
interests of the Partners, INTER SE; and no other person, firm or entity (I.E.,
a party who is not a signatory hereto or a permitted successor to such signatory
hereto) shall have any right, power, title or interest by way of subrogation or
otherwise, in and to the rights, powers, title and provisions of this Agreement.
No creditor or other third party having dealings with the Partnership shall
have the right to enforce the right or obligation of any Partner to make Capital
Contributions or loans to the Partnership or to pursue any other right or remedy
hereunder or at law or in equity. None of the rights or obligations of the
Partners herein set forth to make Capital Contributions or loans to the
Partnership shall be deemed an asset of the Partnership for any purpose by any
creditor or other third party, nor may any such rights or obligations be sold,
transferred or assigned by the Partnership or pledged or encumbered by the
Partnership to secure any debt or other obligation of the Partnership or any of
the Partners.
52
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
TRINET CORPORATE REALTY TRUST, INC.,
a Maryland corporation
By_______________________________________
Mark S. Whiting,
President
By_______________________________________
JoAnn Chitty
Senior Vice President, Asset Management
ORIGINAL LIMITED PARTNERS:
_________________________________________
JOHN D. O'DONNELL, Trustee of the J. and P.
O'Donnell Revocable Trust Dated
October 20, 1982
_________________________________________
DONALD S. GRANT, Trustee of the Donald S.
Grant Revocable Trust Dated May 5, 1987
__________________________________________
JOHN W. HOPKINS
53
<PAGE>
EXHIBIT A
THIS PARTNER SCHEDULE is executed by TriNet Corporate Realty Trust, Inc., a
Maryland corporation (the "GENERAL PARTNER"), and the party named below (the
"NEW PARTNER") in respect of TriNet Sunnyvale Partners, L.P., a Delaware limited
partnership (the "PARTNERSHIP").
1. NAME, ADDRESS AND TAXPAYER IDENTIFICATION NUMBER OF NEW PARTNERS
_______________________________
_______________________________
_______________________________
TIN:
_______________________________
_______________________________
_______________________________
TIN:
_______________________________
_______________________________
_______________________________
TIN:
2. CAPITAL CONTRIBUTIONS
Cash contribution: General Partner $6,077,345.51
PLUS expenditures actually incurred by the General Partner in connection
with the transactions contemplated under the Contribution Agreement that would
ordinarily be capitalized in accordance with GAAP; PROVIDED, HOWEVER, in no
event shall the aggregate amount of the foregoing result in the issuance of
Partnership Units to the General Partner in excess of the aggregate number of
Partnership Units issued to the Original Limited Partners.
Contributed Property: Original Limited Partners
Gross Asset Value $30,600,000
Initial Indebtedness 23,400,000
----------
Net Asset Value $ 7,200,000
The Gross Asset Value will be allocated $11,000,000 to land and $17,600,000
to improvements.
3. Capital Contributions by Predecessor Partner (if applicable)
The Partner has succeeded to the following Capital Contributions made to
the Partnership by its predecessor:
Name of Predecessor: ____________________________________________
Capital Contribution: $________________________
54
<PAGE>
4. PARTNERSHIP UNITS
General Partner: 209,265
Original Limited Partners:
O'Donnell Trust: 110,030
Grant Trust" 38,834
Hopkins: 110,030
5. Admission of Substituted Partner (if applicable)
The Partner is admitted to the Partnership as an Additional Limited Partner
or a Substituted Limited Partner. The General Partner hereby consents to such
admission. The Partner acknowledges receipt of a copy of, and agrees to be
bound by, the Agreement of Limited Partnership, as amended, for the Partnership.
The Partner specifically confirms (a) the representations and warranties
contained in Section 3.4 of such Agreement of Limited Partnership, as amended,
for the Partnership and (b) the grant of the power of attorney set forth in
Section 2.4 of such Agreement.
6. ADDITIONAL TERMS AND CONDITIONS
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
IN WITNESS WHEREOF, the parties have executed this Partner Schedule as of
the Effective Date.
"GENERAL PARTNER":
TRINET CORPORATE REALTY TRUST, INC., as
General Partner of TRINET SUNNYVALE
PARTNERS, L.P.
By
-------------------------------
" PARTNER"
-----------------
By
------------------------------
55
<PAGE>
EXHIBIT B
EXAMPLES REGARDING ADJUSTMENT FACTOR
For purposes of the following examples, it is assumed that (a) the
Adjustment Factor in effect on June 30, 1995 is 1.0 and (b) on July 1, 1995 (the
"PARTNERSHIP RECORD DATE" for purposes of these examples), prior to the events
described in the examples, there are 100 REIT Shares issued and outstanding.
EXAMPLE 1
On the Partnership Record Date, the General Partner declares a dividend on
its outstanding REIT Shares in REIT Shares. The amount of the dividend is one
REIT Share paid in respect of each REIT Share owned. Pursuant to Paragraph (i)
of the definition of "ADJUSTMENT FACTOR," the Adjustment Factor shall be
adjusted on the Partnership Record Date, effective immediately after the stock
dividend is declared, as follows:
1.0 X (200 DIVIDED BY 100) = 2.0
Accordingly, the Adjustment Factor after the stock dividend is declared is 2.0.
EXAMPLE 2
On the Partnership Record Date, the General Partner distributes options to
purchase REIT Shares to all holders of its REIT Shares. The amount of the
distribution is one option to acquire one REIT Share in respect of each REIT
Share owned. The strike price is $4.00 a share. The Value of a REIT Share on
the Partnership Record Date is $5.00 per share. Pursuant to Paragraph (ii) of
the definition of "ADJUSTMENT FACTOR," the Adjustment Factor shall be adjusted
on the Partnership Record Date, effective immediately after the options are
distributed, as follows:
1.0 X ((100 + 100) DIVIDED BY (100 + (100 * $4.00) DIVIDED BY $5.00)) = 1.1111
Accordingly, the Adjustment Factor after the options are distributed is 1.1111.
If the options expire or become no longer exercisable, then the retroactive
adjustment specified in Paragraph (ii) of the definition of "ADJUSTMENT FACTOR"
shall apply.
EXAMPLE 3
On the Partnership Record Date, the General Partner distributes assets to
all holders of its REIT Shares. The amount of the distribution is one asset
with a Fair Market Value of $1.00 in respect of each REIT Share owned. It is
also assumed that the assets do not relate to assets received by the General
Partner pursuant to a PRO RATA distribution by the Partnership. The Value of a
REIT Share on the Partnership Record Date is $5.00 a share. Pursuant to
Paragraph (iii) of the definition of "ADJUSTMENT FACTOR," the Adjustment Factor
shall be adjusted on the Partnership Record Date, effective immediately after
the assets are distributed, as follows:
1.0 X ($5.00 DIVIDED BY ($5.00 - $1.00)) = 1.25
Accordingly, the Adjustment Factor after the assets are distributed is 1.25.
56
<PAGE>
EXHIBIT C
NOTICE OF REDEMPTION
To: TriNet Corporate Realty Trust, Inc.
Four Embarcadero Center, Suite 3150
San Francisco, CA 94111
The undersigned Limited Partner or Assignee[, acting on behalf of
_______________ as Assignee] hereby irrevocably tenders for Redemption
__________ Partnership Units of [the undersigned and/or _______________ as
Assignee] in TriNet Sunnyvale Partners, L.P. in accordance with the terms of the
Agreement of Limited Partnership of TriNet Sunnyvale Partners, L.P., dated as of
___________, 1996, as amended (the "AGREEMENT"), and the Redemption rights
referred to therein. The undersigned:
(a) undertakes (i) to surrender such Partnership Units and any
certificate therefor at the closing of the Redemption and (ii) to furnish
to the General Partner, prior to the Redemption Date, the documentation,
instruments and information required under Section 8.6 of the Agreement;
(b) directs that the certified check representing the Cash Amount
deliverable upon the closing of such Redemption be delivered to the address
specified below;
(c) represents, warrants, certifies and agrees that:
(1) the undersigned Limited Partner or the Assignee is a
Qualifying Party,
(2) the undersigned Limited Partner or the Assignee has,
and at the closing of the Redemption will have, good, marketable and
unencumbered title to such Partnership Units, free and clear of the
rights or interests of any other person or entity,
(3) the undersigned Limited Partner or the Assignee has,
and at the closing of the Redemption will have, the full right, power
and authority to tender and surrender such Partnership Units as
provided herein, and
(4) the undersigned Limited Partner or the Assignee has
obtained the consent or approval of all persons and entities, if any,
having the right to consent to or approve such tender and surrender;
and
(d) acknowledges that he or such Assignee will continue to own such
Partnership Units until and unless either (1) such Partnership Units are
acquired by the General Partner pursuant to Section 8.6.B of the Agreement
or (2) such Redemption transaction closes.
All capitalized terms used herein and not otherwise defined shall have the
same meaning ascribed to them respectively in the Agreement.
Dated:
------------------------
Name of Limited Partner [or Assignee]:
-----------------------------------------------------
-----------------------------------------------------
57
<PAGE>
(Signature of Limited Partner [or Assignee]:
-----------------------------------------------------
(Street Address)
-----------------------------------------------------
(City) (State) (Zip Code)
Issue Check Payable to:
-------------------------------------------
Please insert social security or
identifying number:
-------------------------------------------
58
