<PAGE>
FORM OF
THIRD AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
URBAN SHOPPING CENTERS, L.P.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I DEFINED TERMS...............................................................................1
ARTICLE II ORGANIZATIONAL MATTERS.....................................................................15
Section 2.1 Organization and Continuation; Application of Act..........................................15
Section 2.2 Name.......................................................................................15
Section 2.3 Principal Office...........................................................................15
Section 2.4 Term.......................................................................................15
ARTICLE III PURPOSE....................................................................................16
Section 3.1 Purpose and Business.......................................................................16
Section 3.2 Powers.....................................................................................16
ARTICLE IV CAPITAL CONTRIBUTIONS; ISSUANCE AND RIGHTS OF UNITS; CAPITAL ACCOUNTS......................16
Section 4.1 Capital Contributions of the Partners......................................................16
Section 4.2 Issuances of Additional Partnership Interests..............................................18
Section 4.3 No Preemptive Rights.......................................................................19
Section 4.4 Capital Accounts of the Partners...........................................................19
Section 4.5 Concurrent Transactions....................................................................21
Section 4.6 Class A Common Units.......................................................................22
Section 4.7 Series C Preferred Units...................................................................26
Section 4.8 Issuance of Series D Preferred Units.......................................................27
ARTICLE V DISTRIBUTIONS..............................................................................27
Section 5.1 Requirement and Characterization of Distributions..........................................27
Section 5.2 Amounts Withheld...........................................................................28
Section 5.3 Distributions Upon Liquidation.............................................................29
Section 5.4 Draw.......................................................................................29
ARTICLE VI ALLOCATIONS................................................................................29
Section 6.1 Allocations For Capital Account Purposes...................................................29
Section 6.2 Special Allocation Rules...................................................................35
Section 6.3 Allocations for Tax Purposes...............................................................37
ARTICLE VII MANAGEMENT AND OPERATIONS OF BUSINESS......................................................38
Section 7.1 Management.................................................................................38
Section 7.2 Certificate of Limited Partnership.........................................................41
Section 7.3 Restrictions on General Partner's Authority................................................42
Section 7.4 Responsibility for Expenses................................................................42
Section 7.5 Outside Opportunities of the General Partner...............................................43
Section 7.6 Transactions with Affiliates...............................................................43
Section 7.7 Indemnification............................................................................44
Section 7.8 Liability of the General Partner...........................................................45
Section 7.9 Other Matters Concerning the General Partner...............................................46
Section 7.10 Title to Partnership Assets................................................................47
Section 7.11 Reliance by Third Parties..................................................................47
ARTICLE VIII RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.................................................48
Section 8.1 Limitation of Liability....................................................................48
Section 8.2 Management of Business.....................................................................48
Section 8.3 Outside Activities of Limited Partners.....................................................48
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 8.4 Priority Among Partners....................................................................48
Section 8.5 Rights of Limited Partners Relating to the Partnership.....................................49
Section 8.6 Limited Partner Representative.............................................................50
ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS.....................................................50
Section 9.1 Records and Accounting.....................................................................50
Section 9.2 Fiscal Year................................................................................50
Section 9.3 Reports....................................................................................50
ARTICLE X TAX MATTERS................................................................................51
Section 10.1 Preparation of Tax Returns.................................................................51
Section 10.2 Tax Elections..............................................................................51
Section 10.3 Tax Matters Partner........................................................................51
ARTICLE XI TRANSFERS AND WITHDRAWALS..................................................................54
Section 11.1 Transfer...................................................................................54
Section 11.2 Transfer of General Partner's Partnership Interest.........................................54
Section 11.3 Limited Partners' Rights to Transfer.......................................................54
Section 11.4 Substituted Limited Partners...............................................................56
Section 11.5 Assignees..................................................................................56
Section 11.6 General Provisions.........................................................................57
ARTICLE XII ADMISSION OF PARTNERS......................................................................58
Section 12.1 Admission of Successor General Partner.....................................................58
Section 12.2 Admission of Additional Limited Partners...................................................58
Section 12.3 Amendment of Agreement and Certificate.....................................................58
ARTICLE XIII DISSOLUTION AND LIQUIDATION................................................................58
Section 13.1 Dissolution................................................................................58
Section 13.2 Winding Up.................................................................................59
Section 13.3 Compliance with Timing Requirements of Regulations; Allowance for Contingent or Unforeseen
Liabilities or Obligations.................................................................60
Section 13.4 Rights of Limited Partners.................................................................61
Section 13.5 Cancellation of Certificate of Limited Partnership.........................................61
Section 13.6 Reasonable Time for Winding-Up.............................................................61
ARTICLE XIV AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS...............................................61
Section 14.1 Amendments.................................................................................61
Section 14.2 Meetings of the Partners...................................................................64
ARTICLE XV GENERAL PROVISIONS.........................................................................64
Section 15.1 Addresses and Notice.......................................................................64
Section 15.2 Titles and Captions........................................................................65
Section 15.3 Pronouns and Plurals.......................................................................65
Section 15.4 Further Action.............................................................................65
Section 15.5 Binding Effect.............................................................................65
Section 15.6 Waiver of Partition........................................................................65
Section 15.7 Entire Agreement...........................................................................65
Section 15.8 Securities Law Provisions..................................................................65
Section 15.9 Remedies Not Exclusive.....................................................................65
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 15.10 Time.......................................................................................66
Section 15.11 Creditors..................................................................................66
Section 15.12 Waiver.....................................................................................66
Section 15.13 Execution Counterparts.....................................................................66
Section 15.14 Applicable Law.............................................................................66
Section 15.15 Invalidity of Provisions...................................................................66
Section 15.16 Voting Limits Regarding Organic Change.....................................................66
ARTICLE XVI POWER OF ATTORNEY..........................................................................66
Section 16.1 Power of Attorney..........................................................................66
EXHIBIT A PARTNERS AND PARTNERSHIP INTERESTS
EXHIBIT B AGREED VALUE OF PROPERTY AS OF THE EFFECTIVE DATE
EXHIBIT C FORM OF UNIT CERTIFICATION
EXHIBIT D MERGER DATE CASH DISTRIBUTIONS AND RECLASSIFICATION
OF LIMITED PARTNERSHIP INTERESTS ON MERGER DATE
EXHIBIT E RESTRICTED PROPERTIES
EXHIBIT F-1 SERIES C PREFERRED UNITS
EXHIBIT F-2 SERIES D PREFERRED UNITS
EXHIBIT G ORIGINAL POOL PROPERTIES
EXHIBIT H SCHEDULE OF ALLOCATION OF NONRECOURSE DEBT
EXHIBIT I CAPITAL ACCOUNTS OF PARTNERS
EXHIBIT J CONVERSION OF UNITS
EXHIBIT K PRO FORMA FFO CALCULATION
EXHIBIT L CERTAIN REGISTRATION RIGHTS AGREEMENTS
EXHIBIT M QUARTERLY DEBT INFORMATION
</TABLE>
iii
<PAGE>
THIRD AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
URBAN SHOPPING CENTERS, L.P.
THIS THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as
of __________, 2000 of Urban Shopping Centers, L.P. is entered into by and among
Head Acquisition, L.P., a Delaware limited partnership, as the General Partner
and the Persons whose names are set forth on Exhibit A as attached hereto, as
the Limited Partners, together with any other Persons who become Partners in the
Partnership as provided herein;
WHEREAS, the Partnership was formed by the filing of a certificate of
limited partnership with the Secretary of State of the State of Illinois as of
December 27, 1982 by and between Center Partners, Ltd., as general partner, and
Federated Department Stores, Inc., as limited partner, under the name
JMB/Federated Realty Associates, Ltd.;
WHEREAS, JMB Realty Corporation was subsequently admitted as a limited
partner of the Partnership and the interest of Federated Department Stores, Inc.
was acquired by Center Partners, Ltd.;
WHEREAS, the partners to the Partnership entered into a Second Amended and
Restated Agreement of Limited Partnership dated as of October 14, 1993 whereby,
among other changes, Urban Shopping Centers, Inc., a Maryland corporation, was
substituted as sole general partner (as amended, restated, supplemented or
modified until the date hereof, the "Original Agreement");
WHEREAS, on the date hereof pursuant to the terms of that certain Agreement
and Plan of Merger dated as of September 25, 2000 (the "Merger Agreement"),
Urban Shopping Centers, Inc. merged with and into Head Acquisition, L.P., a
Delaware limited partnership, with Head Acquisition, L.P., surviving as a
Delaware limited partnership, and succeeding to the assets and liabilities of
Urban Shopping Centers, Inc., including but not limited to its rights and
obligations as the General Partner hereof (the "Merger");
WHEREAS, concurrently with the Merger and as required pursuant to the terms
of the Merger Agreement, the Partners desire to ratify the continuation of the
Partnership as a limited partnership under the Revised Uniform Limited
Partnership Act of the State of Illinois, to amend and to restate the Original
Agreement and to set forth their respective rights and duties relating to the
Partnership on the amended and restated terms as provided herein;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein made and intending to be legally bound, the parties hereby agree as
follows:
ARTICLE I
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
<PAGE>
"Act" means the Illinois Revised Uniform Limited Partnership Act, as it may
be amended from time to time, and any successor to such statute.
"Additional Limited Partner" means a Person admitted to the Partnership as
a Limited Partner pursuant to SECTION 4.2 hereof and who is shown as such on the
books and records of the Partnership.
"Additional Pool Property" means each Additional Property; PROVIDED
HOWEVER, that if the aggregate sum of the Unadjusted Tax Basis of each
Additional Property and the Agreed Value (determined as of the date hereof or in
the case of an Original Pool Property described in clause (b)(ii) of the
definition of Original Pool Property, the initial Carrying Value thereof to the
extent included as Original Pool Property) of each Original Pool Property held
by the Partnership or a Subtier Entity on the last day of any Partnership
taxable year exceeds the Pool Property Growth Balance on the last day of such
Partnership taxable year, then only an undivided portion of each Additional
Property, equal to a fraction, the numerator of which is the excess of the Pool
Property Growth Balance over the sum of $3,337,381,000 plus the cash amounts
actually paid in respect of the scheduled additions to Partnership properties as
set forth in EXHIBIT G, and the denominator of which is the aggregate Unadjusted
Tax Basis of all Additional Properties, shall be an Additional Pool Property for
purposes of determining the Additional Properties that constitute Additional
Pool Property for such taxable year. A property shall be "held by" the
Partnership or a Subtier Entity for purposes of this definition only to the
extent of its applicable share of the adjusted tax basis of such property under
the Code.
"Additional Pool Property Adjusted Tax Basis" means, for each Partnership
taxable year ending after the date hereof, the aggregate adjusted tax basis in
Additional Pool Property on the last day of the relevant Partnership taxable
year (determined prior to any adjustment for any cost recovery, depreciation or
amortization available to the Partnership for such Partnership taxable year).
"Additional Property" means each property (other than money) owned directly
or indirectly either or both by the Partnership or any Subtier Entity that (i)
is not an Original Pool Property (including improvements to an Original Pool
Property and Partnership property to the extent acquired with proceeds from the
sale or other disposition, or through the exchange, of any Original Pool
Property not otherwise included in the definition of Original Pool Property) and
(ii) is placed in service for federal income tax purposes by the Partnership or
a Subtier Entity after the date hereof.
"Adjusted Capital Account" means the Capital Account maintained for each
Partner as of the end of each Partnership Year (a) increased by any amounts
which such Partner is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2 (i)(5) and (b)
decreased by the items described in Regulations Sections 1.704-1 (b) (2) (ii)
(d) (4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6). The foregoing
definition of Adjusted Capital Account is intended to comply with the provisions
of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
2
<PAGE>
"Adjusted Capital Account Deficit" means, with respect to any Partner, the
deficit balance, if any, in such Partner's Adjusted Capital Account as of the
end of the relevant Partnership Year.
"Adjusted Property" means any property the Carrying Value of which has been
adjusted pursuant to SECTION 4.4 hereof (including as of the date hereof).
"Affiliate" means, with respect to any Person, (a) any Person directly or
indirectly controlling, controlled by or under common control with such Person,
(b) any Person owning or controlling 10 percent or more of the outstanding
voting interests of such Person, (c) any Person of which such Person owns or
controls 10 percent or more of the voting interests, or (d) any officer,
director, general partner or trustee of such Person or any Person referred to in
clauses (a), (b), and (c) above.
"Agreed Value" means (a) in the case of any property owned by the
Partnership or any Subtier Entity as of the Effective Date, the Agreed Value of
such property as set forth on Exhibit B, (b) in the case of any Contributed
Property and as of the time of its contribution to the Partnership, the 704(c)
Value of such property or other consideration, reduced by any liabilities either
assumed by the Partnership upon such contribution or to which such property is
subject when contributed, and (c) in the case of any property distributed to a
Partner by the Partnership, the Partnership's Carrying Value of such property at
the time such property is distributed, reduced by any indebtedness either
assumed by such Partner upon such distribution or to which such property is
subject at the time of distribution as determined under Section 752 of the Code
and the regulations thereunder.
"Agreement" means this Third Amended and Restated Agreement of Limited
Partnership, as it may be amended, supplemented or restated from time to time.
"Assignee" means a Person to whom one or more Partnership Units have been
transferred in a manner permitted under this Agreement, but who has not become a
Substituted Limited Partner, and who has the rights and is subject to the
provisions of this Agreement as set forth in ARTICLE XI.
"Available Cash" means with respect to any period for which such
calculation is being made, (a) all cash revenues and funds received by the
Partnership from whatever source (excluding the proceeds of any Capital
Contribution to the Partnership) plus the amount of any reduction (including,
without limitation, a reduction resulting because the General Partner determines
such amounts are no longer necessary) in reserves of the Partnership, which
reserves are referred to in clause (b)(iv) below, and to the extent not
previously distributed with respect to such period as provided in SECTION 5.1;
(b) less the sum of the following (except to the extent made with
the proceeds of any Capital Contribution):
(i) all interest, principal and other payments on
Partnership debt made during such period by the Partnership,
3
<PAGE>
(ii) all cash expenditures (including capital expenditures)
made by the Partnership during such period,
(iii) investments in any entity (including loans made
thereto) to the extent that such investments are not otherwise
described in clauses (b)(i) or (ii), and
(iv) the amount of any increase in reserves established
during such period which the General Partner determines are
necessary or appropriate in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include
any cash received or reductions in reserves, or take into account any
disbursements made or reserves established, after commencement of the
dissolution and liquidation of the Partnership.
"Book-Tax Disparities" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for Federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all of
its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to SECTION 4.4 and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with Federal income
tax accounting principles.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in Chicago, Illinois are authorized or required by law to
close.
"Call Date" shall mean the date ten (10) years after the later of (x)
the death of the last to die of the children of Neil G. Bluhm or Judd D.
Malkin or (y) the death of the later to die of Neil G. Bluhm or Judd D.
Malkin.
"Call Option" has the meaning set forth in SECTION 4.6(e)(i).
"Call Option Notice" has the meaning set forth in SECTION 4.6(e)(i).
"Capital Account" means the Capital Account maintained for a Partner
pursuant to SECTION 4.4 hereof.
"Capital Contribution" means, with respect to any Partner, any cash, cash
equivalents or the Agreed Value of Contributed Property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to SECTION
4.1 or 4.2 hereof.
"Carrying Value" means (a) with respect to a Contributed Property or
Adjusted Property, the 704(c) Value of such property reduced (but not
below zero) by all Depreciation with respect to such property charged to
the Partners' Capital Accounts and (b) with respect to any other
Partnership property, the adjusted basis of such property for Federal
income tax purposes, all as of the time of determination. The Carrying
Value of any property shall be adjusted from time to
4
<PAGE>
time in accordance with SECTION 4.4 hereof (including as of the date hereof),
and to reflect changes, additions or other adjustments to the Carrying Value for
dispositions and acquisitions of Partnership properties, as deemed appropriate
by the General Partner.
"Certificate" means the Certificate of Limited Partnership relating to the
Partnership filed in the office of the Secretary of State of the State of
Illinois, as amended from time to time in accordance with the terms hereof and
the Act.
"Chase Loan" has the meaning set forth in SECTION 4.5(b) hereof.
"Class A Common Unit" has the meaning set forth in SECTION 4.6(a) hereof.
"Class A Limited Partner" means any Limited Partner holding a Class A
Common Unit.
"Class A Related Person Transfer" means a transfer by either (i) an
Original Class A Limited Partner (or his or her estate) or (ii) a direct or
indirect owner (or his or her estate) of such Original Class A Limited Partner
of either (a) all or a portion of the Class A Common Units held by such Original
Class A Limited Partner (or his or her estate) or such direct or indirect owner
(or his or her estate) or (b) an interest in an entity through which direct or
indirect ownership of such Original Class A Limited Partner (or his or her
estate) is held, which transfer is to either (I) such Person's estate; (II)
another Original Class A Limited Partner or a direct or indirect owner of an
Original Class A Limited Partner, (III) a member of the Immediate Family of the
transferor or (IV) an entity through which indirect ownership is held by the
foregoing.
"Code" means the Internal Revenue Code of 1986, as amended. Any reference
herein to a specific section or sections of the Code shall be deemed to include
a reference to any corresponding provision of future law.
"Common Unit" means any Class A Common Unit and any additional series of
common unit created by the General Partner pursuant to SECTION 4.2(b) on a
parity with the Class A Common Units except as to certain exclusive rights of
the Original Class A Limited Partners explicitly set forth herein.
"Consent" means the consent or approval of a proposed action by a Partner
given in accordance with SECTION 14.2 hereof.
"Contributed Property" means each property or other asset (but excluding
cash), in such form as may be permitted by the Act contributed or deemed
contributed to the Partnership. Once the Carrying Value of a Contributed
Property is adjusted pursuant to SECTION 4.4 hereof (including as of the date
hereof), such property shall no longer constitute a Contributed Property for
purposes of SECTION 4.4 hereof, but shall be deemed an Adjusted Property for
such purposes.
"Debt" means, as to any Person, as of any date of determination, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, which purchase price is due more than six months
after the date of placing such property in service or taking delivery and title
thereto or the completion of such services; (b) 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
5
<PAGE>
performance of obligations by such Person; (c) 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 (d) lease obligations of such Person
which, in accordance with generally accepted accounting principles, should be
capitalized.
"Depreciation" means for each Partnership taxable year, an amount equal to
the Federal income tax depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such year, except that if the
Carrying Value of an asset differs from its adjusted basis for Federal income
tax purposes at the beginning of such year or other period, Depreciation shall
be an amount which bears the same ratio to such beginning Carrying Value as the
Federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
that if the Federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the General Partner.
"Depreciation Amount" means for each Partnership taxable year ending after
the date hereof the lesser of (i) 100 percent of the amount of Depreciation for
the Pool Properties and (ii) the amount of Depreciation for the Pool Properties
that is required to be allocated to the Original Class A Limited Partners under
SECTION 6.2(h) so that the depreciation and cost recovery deductions for Federal
income tax purposes that are allocated to the Original Class A Limited Partners
under SECTIONS 6.3(a) and 6.3(b) for the Partnership taxable year (after taking
into account all adjustments under Code Sections 704(c) (or Code Section 704(c)
principles), and adjustments under Code Section 734 (other than from liquidation
of the Partnership pursuant to ARTICLE XIII or a Partner's Partnership Interest)
in respect of the Original Class A Limited Partners equal the product of (a) the
Depreciation Percentage times (b) the total depreciation and cost recovery
deductions for Federal income tax purposes that are available to the Partnership
with respect to the Pool Property Adjusted Tax Basis for the Partnership taxable
year.
"Depreciation Percentage" means 43 percent multiplied by the fraction, the
numerator of which is the number of Class A Common Units both outstanding at the
end of the applicable taxable year (or a portion thereof in the case of a
partial year) and held by Original Class A Limited Partners on such date, and
the denominator of which is the number of Class A Common Units held by Original
Class A Limited Partners on the date hereof; provided that such denominator of
such fraction shall be appropriately adjusted to take into account any
subdivision, reverse split or other organic adjustment in the number of Class A
Common Units held by Original Class A Limited Partners.
"Effective Date" means the Merger Date.
"Equity Securities" means, for a corporation, any capital stock of such
corporation, and, for a limited liability company or limited partnership, any
membership or limited partnership interests or units in such limited liability
company or limited partnership.
"Event of Dissolution" has the meaning set forth in SECTION 13.1.
6
<PAGE>
"Fair Market Value" means the price that would be paid for a given asset in
an arm's length transaction between a willing buyer and a willing seller within
the meaning of Regulation Section 1.704-1(b)(2)(iv)(H).
"FFO Per Unit", as of any date of determination, means Funds From
Operations of the Partnership DIVIDED BY the diluted weighted average number of
Common Units outstanding during the referenced calendar year as computed in
accordance with GAAP (except as otherwise provided in SECTION 4.6(d)(iv) with
respect to determining the Put Multiple prior to 2002).
"First Tier Distribution Shortfall" shall mean the balance of the
cumulative amount distributable to Original Class A Limited Partners and the
General Partner up to and including the immediately preceding calendar quarter
that have not been distributed under SECTION 5.1(d), which balance shall
increase at the rate of eight percent (8%) per annum compounded annually, as
determined by applying the Available Cash distributed to the relevant Partners
for all such quarters pursuant to such subsection of SECTION 5.1 on a priority
basis in respect of the earliest amount to which Original Class A Limited
Partners and the General Partner were entitled but did not receive (and unpaid
8% earnings thereon) first.
"Fully Junior Securities" has the meaning set forth in SECTION 4.6(c).
"Funds From Operations" means, with respect to any calendar year the
Partnerhip's net income (computed consistent with the methodology used in
calculating historical Funds From Operations as set forth on EXHIBIT K, except
for any changes on a going forward basis set forth on EXHIBIT K), excluding
gains (or losses) from debt restructuring and sales of property, plus
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures; provided, however, that for any date of
determination, "Funds From Operations" shall be determined based on Pro Forma
FFO and later recalculated for actual Funds From Operations, as set forth in
SECTION 4.6(d)(iv). The recalculation shall be made as of any date of
determination during any calendar year by calculating the sum of (A) the amount
obtained by multiplying actual Funds From Operations for such calendar year by a
fraction the numerator of which is the remaining number of full calendar months
in such calendar year and the denominator of which is 12 and (B) the amount
obtained by multiplying actual Funds From Operations for the next calendar year
by a fraction which when added to the fraction used in (A) above shall equal 1.
"General Partner" means Head Acquisition, L.P. or its successors as a
general partner of the Partnership or any additional general partner admitted to
the Partnership pursuant to the terms of this Agreement.
"General Partnership Interest" means a Partnership Interest held by a
General Partner that is a general partnership interest. A General Partnership
Interest may be expressed as a number of Partnership Units.
"GP Registered Shares" has the meaning set forth in SECTION 4.6(d)(iii).
"IRR Equity Return Date" means the date when the Partners on the Effective
Date (other than the holders of Series C Preferred Units and Series D Preferred
Units) have earned a 24.71953 percent per annum, pre-tax internal real (rather
than nominal) rate of return, compounded quarterly, on their aggregate Capital
Account balances on the Effective Date from
7
<PAGE>
the distributions hereunder; provided, however, that inflation shall be assumed
for purposes of this definition to be 1.98517 percent per annum, compounded
quarterly; PROVIDED, FURTHER, however, that after any listing of GP Registered
Shares, the rate of return in this sentence may be readjusted thereafter so that
it is expressed upon an annual, rather than a quarterly, compounding basis.
"IRS" means the Internal Revenue Service, which administers the internal
revenue laws of the United States, or any successor governmental agency.
"Immediate Family" means, with respect to any natural Person, (i) such
natural Person's spouse, parents, descendants, nephews, nieces, brothers, and
sisters and such natural Person's estate, heirs, legatees, devisees and all
beneficiaries of a natural person's estate, and (ii) any trust, the
beneficiaries of which are Persons described in the preceding clause (i).
"Incapacity" or "Incapacitated" means, (a) as to any individual Partner,
death, total physical disability or entry by a court of competent jurisdiction
adjudicating him incompetent to manage his Person or his estate; (b) as to any
corporation which is a Partner, the filing of a certificate of dissolution, or
its equivalent, for the corporation or the revocation of its charter; (c) as to
any partnership which is a Partner, the termination of the partnership; (d) as
to any estate which is a Partner, the distribution by the fiduciary of the
estate's entire interest in the Partnership; (e) as to any trustee of a trust
which is a Partner, the termination of the trust (but not the substitution of a
new trustee); or (f) 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 (i) the Partner commences a voluntary proceeding seeking
liquidation, reorganization or other relief under any bankruptcy, insolvency or
other similar law now or hereafter in effect, (ii) 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, (iii) the Partner executes and delivers a general
assignment for the benefit of the Partner's creditors, (iv) 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 (ii) above, (v) the Partner seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator for the
Partner or for all or any substantial part of the Partner's properties, (vi) 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 120 days after the commencement thereof, (vii) the
appointment without the Partner's consent or cquiescence of a trustee, receiver
or liquidator has not been vacated or stayed within 90 days of such appointment,
or (viii) an appointment referred to in clause (vii) is not vacated within 90
days after the expiration of any such stay.
"Indemnitee" means (a) any Person made a party to a proceeding by reason of
his status as (i) the General Partner or (ii) a director or officer of the
Partnership or the General Partner, and (b) such other Persons (including
Affiliates of the General Partner or the Partnership) as the General Partner may
designate from time to time, in its sole and absolute discretion.
"Junior Securities" has the meaning set forth in SECTION 4.6(c).
8
<PAGE>
"Lien" means any mortgage, deed of trust, security interest, lien, pledge,
claim or other encumbrance.
"Limited Partner" means any Person named as a Limited Partner in EXHIBIT A
attached hereto, as such Exhibit may be amended from time to time, or any
Substituted Limited Partner or Additional Limited Partner, in such Person's
capacity as a Limited Partner in the Partnership.
"Limited Partnership Interest" means a Partnership Interest of a Limited
Partner or an Assignee thereof in the Partnership representing a fractional part
of the Partnership Interests of all Limited Partners (and Assignees thereof) and
includes any and all benefits to which the holder of such a Partnership Interest
may be entitled as provided in this Agreement, together with all obligations of
such Person to comply with the terms and provisions of this Agreement. A Limited
Partnership Interest may be expressed as a number of Partnership Units.
"Liquidating 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, results in the sale or other disposition of
all or substantially all of the assets of the Partnership.
"Liquidator" has the meaning set forth in SECTION 13.2.
"Member" means either (i) a member which holds Equity Securities issued by
the General Partner, if the General Partner is a limited liability company, or
(ii) a partner which holds Equity Securities issued by the General Partner, if
the General Partner is a partnership.
"Merger" has the meaning set forth in the preamble hereto.
"Merger Agreement" has the meaning set forth in the preamble hereto.
"Merger Date" means the date upon which the Merger is deemed effective
pursuant to the terms of the Merger Agreement.
"Merger Date Distribution" means the total amount set forth on Exhibit D.
"Net Income" means for any taxable period for which allocations under
Article VI are being made, the excess, if any, of the Partnership's items of
income and gain for such taxable period over the Partnership's items of loss and
deduction for such taxable period, all of which shall be determined by excluding
from the computation of such excess all items of income, gain, loss and
deduction allocable under SECTION 6.2 (other than SECTION 6.2(j)). The items
included in the calculation of Net Income shall be determined in accordance with
SECTION 4.4(b).
"Net Loss" or "Net Losses" means for any taxable period, the excess, if
any, of the Partnership's items of loss and deduction for such taxable period
over the Partnership's items of income and gain for such taxable period, all of
which shall be determined by excluding from the computation of such excess all
items of loss, deduction, income and gain allocable under SECTION 6.2 (other
than SECTION 6.2(j)). The items included in the calculation of Net Loss shall be
determined in accordance with SECTION 4.4(b).
9
<PAGE>
"Nonrecourse Built-in Gain" means, with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or negative
pledge securing a Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Partners pursuant to SECTION 6.3(b) if such properties
were disposed of in a taxable transaction in full satisfaction of such
liabilities and for no other consideration.
"Nonrecourse Deductions" has the meaning set forth in Regulations Section
1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Partnership
taxable 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).
"Original Class A Limited Partner" means (a) any Limited Partner holding a
Class A Common Unit on the Effective Date and listed on EXHIBIT D attached
hereto or (b) a permitted transferee of such Limited Partner's Class A Common
Units pursuant to a Class A Related Person Transfer, and who is admitted as
Substituted Limited Partner. Original Class A Limited Partner shall not include
the General Partner or any Affiliate of the General Partner.
"Original Pool Property" means (a) each property owned by the Partnership
or a Subtier Entity set forth on EXHIBIT G plus all scheduled additions as set
forth in EXHIBIT G (to the extent actually made by the Partnership or a Subtier
Entity) and (b) each other property (i) that the Partnership or a Subtier Entity
receives in exchange for an Original Pool Property subject to Code Section 1031
(other than money) or (ii) that the Partnership or a Subtier Entity acquires
directly or indirectly with the proceeds from an Original Pool Property;
PROVIDED, HOWEVER, that any such property described in clause (b) shall be
Original Pool Property only to the extent its initial Carrying Value does not
exceed the Agreed Value (as of the date hereof) but in no event shall this
proviso result in a reduction in the adjusted tax basis of an Original Pool
Property, or initial cost basis in the case of scheduled additions set forth in
EXHIBIT G, of the Original Pool Property exchanged for such property or the
proceeds from which were used to acquire such property.
"Original Pool Property Adjusted Tax Basis" means for each Partnership
taxable year ending after the date hereof, the sum of (a) the adjusted tax basis
in each Original Pool Property as of the date hereof, or initial cost basis in
the case of scheduled additions set forth in EXHIBIT G, plus (b) any gain
recognized by the Partnership for federal income tax purposes after the date
hereof which was allocated to Original Class A Limited Partners and which does
not constitute Residual Gain, MINUS (c) the aggregate federal income tax
depreciation claimed for periods after the date hereof by the Partnership in
respect of the tax basis described in CLAUSE (a) of this definition and the
basis created by the gain described in CLAUSE (b) of this definition in all
prior Partnership taxable years.
"Ownership Limitation" means any ownership limitations in the General
Partner's organizational documents or otherwise which are generally applicable
to the holders of securities in the General Partner in order to assure
compliance with ownership limitations imposed on a REIT pursuant to the Code.
10
<PAGE>
"Partner" means a General Partner or a Limited Partner, and "Partners"
means the General Partner and the Limited Partners.
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regulations Section
1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(i)(2), and the amount of Partner Nonrecourse Deductions with
respect to a Partner Nonrecourse Debt for a Partnership taxable year shall be
determined in accordance with the rules of Regulations Section 1.704-2(i)(2).
"Partnership" means Urban Shopping Centers, L.P., the limited partnership
formed under the Act and continued and governed 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 Partnership taxable year
shall be determined in accordance with the rules of Regulations Section
1.704-2(d).
"Partnership Record Date" means the record date established by the General
Partner for the distribution of Available Cash pursuant to SECTION 5.1 hereof,
which record date shall be the same as the record date established by the
General Partner for a distribution to its Members of some or all of its portion
of such distribution in the event that Common Units are exchangeable for GP
Registered Shares.
"Partnership Unit" or "Unit" means a fractional undivided share of the
Partnership Interests of all Partners issued pursuant to SECTIONS 4.1 and 4.2,
in such number as set forth on EXHIBIT A attached hereto, as such Exhibit may be
amended from time to time, and, except where the context indicates otherwise,
includes Class A Common Units. The ownership of Partnership Units may be
evidenced by the form of non-transferable, non-negotiable certificate for units
attached hereto as EXHIBIT C.
"Partnership Year" means the fiscal year of the Partnership, which shall be
the calendar year.
"Percentage Interest" means, as to a Partner, its interest in the
Partnership as determined by dividing the Partnership Units owned by such
Partner by the total number of Partnership
11
<PAGE>
Units then outstanding and as specified in EXHIBIT A attached hereto, as such
Exhibit may be amended from time to time.
"Person" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other entity.
"Pool Properties" means for each Partnership taxable year ending on or
after the date hereof the aggregate of (i) each Original Pool Property and (ii)
each Additional Pool Property.
"Pool Property Adjusted Tax Basis" means, for each Partnership taxable year
ending after the date hereof, the sum of the Original Pool Property Adjusted Tax
Basis and the Additional Pool Property Adjusted Tax Basis.
"Pool Property Growth Balance" means the balance of (a) the cumulative
amount of $3,337,381,000 on the date hereof, plus the cash amounts actually paid
in respect of the additions to Partnership properties as set forth in Exhibit G,
plus (b) a growth rate of 2.8139425 percent per annum, compounded annually, on
the amounts described in clause (a).
"Pro Forma FFO" has the meaning set forth in SECTION 4.6(d)(iv).
"PTP" shall mean a "publicly traded partnership" within the meaning of
Section 7704 of the Code.
"Put Multiple" shall mean the number calculated pursuant to SECTION
4.6(d)(iv).
"Put Notice" has the meaning set forth in SECTION 4.6(d)(i).
"Put Right" has the meaning set forth in SECTION 4.6(d).
"Put Right Price" for a Class A Common Unit, as of any date of
determination, shall equal the sum of (i) FFO Per Unit MULTIPLIED BY the Put
Multiple, (ii) if greater than zero, the incremental amount which would have
been distributed pursuant to SECTION 5.1(i) in respect of such Class A Common
Unit assuming the Partnership assets were sold for their net asset value (as
determined on a reasonable basis by the General Partner reasonably consistent
with the method used for purposes of determining the General Partner's or any
Affiliate's annual financial reporting) and the proceeds were distributed under
SECTION 5.1 and (iii) both the First Tier Distribution Shortfall and the Second
Tier Distribution Shortfall for such Class A Common Unit through the date of
determination.
"Qualified Nonrecourse Liabilities" means "qualified nonrecourse financing"
under Section 465(b)(6)(B) of the Code for which a taxpayer is considered at
risk under Section 465(b)(6) of the Code.
"Reasonable Basis" for a position shall exist if such position may properly
be reported on a tax return both in accordance with Treasury Regulation Section
1.6662-3(b)(3) (or applicable successor provision) and without any penalties,
additions to tax or similar amounts imposed upon either the General Partner or
the Partnership.
12
<PAGE>
"Recapture Income" means any gain recognized for federal income tax
purposes by the Partnership (computed without regard to any adjustment required
by Section 734 or Section 743 of the Code) upon the disposition of any property
or asset of the Partnership, which gain is characterized as ordinary income
because it represents the recapture of deductions previously taken with respect
to such property or asset.
"Recourse Liabilities" has the meaning set forth in Regulations Section
1.752-1(a)(1).
"Regulations" means the Income Tax Regulations promulgated under the Code,
as such regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).
"REIT" means a real estate investment trust under Section 856 of the Code.
"Residual Gain" or "Residual Loss" means any item of gain or loss, as the
case may be, of the Partnership recognized for Federal income tax purposes
resulting from a sale, exchange or other disposition of Contributed Property or
Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to SECTION 6.3(b)(i)(A) or 6.3(b)(ii)(A) to eliminate Book-Tax
Disparities.
"Restricted Properties" shall mean those properties identified in Exhibit E
hereto and any "substituted basis property" under Code Section 7701(b)(42) owned
by the Partnership or any Subtier Entity that is determined by reference to a
property or transferor's basis in property identified in Exhibit E hereto.
"Second Tier Distribution Shortfall" shall mean the balance of the
cumulative amount distributable to Original Class A Limited Partners up to and
including the immediately preceding calendar quarter that have not been
distributed under SECTION 5.1(f), which balance shall increase at the rate of
eight percent (8%) per annum compounded annually, as determined by applying the
Available Cash distributed to the Original Class A Limited Partners for all such
quarters pursuant to such subsection of SECTION 5.1 on a priority basis in
respect of the earliest amount to which Original Class A Limited Partners were
entitled but did not receive (and unpaid 8% earnings thereon) first.
"Selling Partner" has the meaning set forth in SECTION 4.6(d)(i).
"Series C Exchanged Unit" shall mean any Series C Preferred Equity
Partnership Unit in the General Partner with all the rights and obligations
relating thereto as set forth in the limited partnership certificate and limited
partnership agreement or equivalent organizational documents for the General
Partner.
"Series C Preferred Distribution" has the meaning set forth in EXHIBIT F-1,
SECTION (c)(i).
"Series C Preferred Units" has the meaning set forth in SECTION 4.7.
"Series D Exchanged Unit" shall mean any Series D Preferred Equity
Partnership Unit in the General Partner with all the rights and obligations
relating thereto as set forth in the limited
13
<PAGE>
partnership certificate and limited partnership agreement or equivalent
organizational documents for the General Partner.
"Series D Preferred Distribution" has the meaning set forth in EXHIBIT F-2,
SECTION (c)(i).
"Series D Preferred Units" has the meaning set forth in SECTION 4.8.
"704(c) Value" of (a) any property held by the Partnership or any Subtier
Entity as of the Effective Date means the Agreed Value of such property as of
such date, and (b) any Contributed Property means the Fair Market Value of such
property or other consideration at the time of contribution as determined by the
General Partner using such reasonable method of valuation as it may adopt.
Subject to SECTION 4.4 hereof, the General Partner shall use such method as it
deems reasonable and appropriate to allocate the aggregate of the 704(c) Value
of Contributed Properties among each separate property on a basis in proportion
to its Fair Market Value.
"Subsidiary" means, with respect to any Person, any corporation or other
entity (a) of which fifty percent (50%) or more of the voting power or value of
the outstanding equity interests is owned, directly or indirectly, by such
Person or (b) which is controlled by such Person directly or indirectly through
one or more intermediaries.
"Substituted Limited Partner" means a Person who is admitted as a Limited
Partner to the Partnership pursuant to SECTION 11.4.
"Subtier Entity" means any partnership, grantor trust, limited liability
company or other entity, (i) to the extent that such entity either is
disregarded for federal income tax purposes or is a "flow through" or "pass
through" entity which is itself not subject to federal income tax and the owners
of such entity are instead subject to federal income tax upon the taxable income
of such entity, and (ii) in which the Partnership holds an interest directly or
indirectly through one or more Subtier Entities.
"Target Class A Common Unit Debt Allocation" means, for each Class A Common
Unit held by an Original Class A Limited Partner, the sum of, (A) $321.69 (as
such amount may be adjusted for any split, reverse split or similar adjustment
to the Class A Common Units); plus (B) the cumulative Depreciation Amount
allocated in respect of such Class A Common Unit.
"Term Expiration" has the meaning set forth in SECTION 2.4.
"Unadjusted Tax Basis" means the initial tax basis of a property, without
adjustment for any depreciation, amortization or cost recovery for federal
income tax purposes.
"Unrealized Gain" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the Fair Market
Value of such property (as determined under SECTION 4.4 hereof) as of such date,
over (b) the Carrying Value of such property (prior to any adjustment to be made
pursuant to SECTION 4.4 hereof) as of such date.
"Unrealized Loss" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the Carrying Value
of such property (prior to any
14
<PAGE>
adjustment to be made pursuant to SECTION 4.4 hereof) as of such date, over (b)
the Fair Market Value of such property (as determined under SECTION 4.4 hereof)
as of such date.
ARTICLE II
ORGANIZATIONAL MATTERS
Section 2.1 ORGANIZATION AND CONTINUATION; APPLICATION OF ACT.
(a) ORGANIZATION AND CONTINUATION OF PARTNERSHIP. The General
Partner and the Limited Partners do hereby continue the Partnership as
a limited partnership according to all of the terms and provisions of
this Agreement and otherwise in accordance with the Act. This
Agreement shall be effective beginning upon and as of the Effective
Date. The General Partner is the sole general partner and the Limited
Partners are the sole limited partners of the Partnership. All
Partnership profits, losses and distributive shares of tax items
accruing prior to the date of this Agreement shall be allocated in
accordance with, and the respective rights and obligations of partners
with respect to the period prior to the date of this Agreement shall
be governed by, the Partnership Agreement as in effect immediately
prior to the date hereof.
(b) APPLICATION OF ACT. The Partnership is a limited partnership
pursuant to the provisions of the Act and upon the terms and
conditions set forth in this Agreement. Except as expressly provided
herein to the contrary, the rights and obligations of the Partners and
the administration and termination of the Partnership shall be
governed by the Act. No Partner has any interest in any Partnership
property, and the Partnership Interest of each Partner shall be
personal property for all purposes.
Section 2.2 NAME. The name of the Partnership is Urban Shopping
Centers, L.P. The Partnership's business may be conducted under any other name
or names deemed advisable by the General Partner, including the name of the
General Partner or any Affiliate thereof. The words "Limited Partnership,"
"L.P.", "Ltd." or similar words or letters shall be included in the
Partnership's name where necessary for the purposes of complying with the laws
of any jurisdiction that so requires. The General Partner in its sole and
absolute discretion may change the name of the Partnership at any time and from
time to time and shall notify the Limited Partners of such change in the next
regular communication to the Limited Partners, provided that the name of the
Partnership may not be changed to include the name of any Limited Partner
without the written consent of that Limited Partner.
Section 2.3 PRINCIPAL OFFICE. The principal office of the Partnership
is 900 North Michigan Avenue, Suite 1500, Chicago, Illinois 60611, or such other
place as the General Partner may from time to time designate by notice to the
Limited Partners. The Partnership may maintain offices at such other place or
places within or outside the State of Illinois as the General Partner deems
advisable.
Section 2.4 TERM. The term of the Partnership commenced, and shall
continue until December 31, 2075, or, if later, the Call Date (the "Term
Expiration"), unless it is dissolved sooner pursuant to the provisions of
ARTICLE XIII or as otherwise provided by law.
15
<PAGE>
ARTICLE III
PURPOSE
Section 3.1 PURPOSE AND BUSINESS. The purpose and nature of the
business to be conducted by the Partnership is (a) to conduct any business that
may be lawfully conducted by a limited partnership organized pursuant to the
Act, (b) to enter into any partnership, joint venture or other similar
arrangement to engage in any of the foregoing or the ownership of interests in
any entity engaged in any of the foregoing and (c) to do anything necessary or
incidental to the foregoing, provided, however, that each of the foregoing
CLAUSES (a), (b), and (c) shall be limited and conducted in such a manner as to
permit the General Partner and any of its Members, as applicable, at all times
to be classified as a REIT, unless the General Partner provides notice to the
Partnership and each Original Class A Limited Partner that it and each of its
Members intends to cease or has ceased to qualify as a REIT.
Section 3.2 POWERS. The Partnership is empowered to do any and all
acts and things necessary, appropriate, proper, advisable, incidental to or
convenient for the furtherance and accomplishment of the purposes and business
described herein and for the protection and benefit of the Partnership, provided
that the Partnership shall not take, or refrain from taking, any action which,
in the judgment of the General Partner, in its sole and absolute discretion, (a)
could adversely affect the ability of the General Partner and any of its
Members, as applicable, to continue to qualify as a REIT, (b) could subject the
General Partner or any of its Members to any additional taxes under Section 857
or Section 4981 of the Code, or (c) could violate any law or regulation of any
governmental body or agency having jurisdiction over the General Partner or any
of its Members or their securities, unless such action (or inaction) is
otherwise provided in this Agreement or shall have been specifically consented
to by the General Partner in writing.
ARTICLE IV
CAPITAL CONTRIBUTIONS; ISSUANCE AND RIGHTS OF UNITS;
CAPITAL ACCOUNTS
Section 4.1 CAPITAL CONTRIBUTIONS OF THE PARTNERS.
(a) CAPITAL CONTRIBUTIONS. The Partners shall own Partnership
Units in the amounts and in the types set forth in EXHIBIT A and shall
have a Percentage Interest in the Partnership as set forth in EXHIBIT
A, which Percentage Interest shall be adjusted in EXHIBIT A from time
to time by the General Partner to the extent necessary to reflect
accurately transfers, redemptions, conversions, Capital Contributions,
the issuance of additional Partnership Units, or similar events having
an effect on a Partner's Percentage Interest. The Partnership Units
held by the General Partner shall be deemed to be the General
Partnership Interest.
(b) ADDITIONAL CAPITAL CONTRIBUTIONS.
(i) No Partner shall be assessed or, except as provided for
in SECTION 4.1(b)(ii) below, and subject to SECTION 10.3(e), be
required to contribute additional funds or other property to the
Partnership. Any additional funds or other property required by
the Partnership, as determined by the General Partner
16
<PAGE>
in its sole discretion, may, subject to SECTION 7.3(b), at the
option of the General Partner and without an obligation to do
so (except as provided for in SECTION 4.1(b)(ii) below), be
contributed by the General Partner as additional Capital
Contributions pursuant to SECTION 4.2(b). Except for any
contribution under SECTION 4.1(b)(ii), if and as the General
Partner or any other Partner makes additional Capital
Contributions to the Partnership, each such Partner shall
receive additional Partnership Units as provided for in
SECTION 4.2.
(ii) If the Partnership defaults on any of its Recourse
Liabilities, the Gregory L. Butcher Family Trust ("Butcher") and
the James M. Hietbrink Family Trust ("Hietbrink") will each make
a capital contribution to the Partnership of that amount of cash
sufficient to cure such default, with such capital contribution
to be made within thirty days of receiving notice of such default
from the General Partner; PROVIDED, HOWEVER, that any such
contribution shall be made by Butcher and Hietbrink on a pro rata
basis in the relative percentages of 50% and 50%, respectively,
and the obligation to make capital contributions under this
SECTION 4.1(b)(ii) shall be limited to an aggregate amount of
$601,000 for Butcher and $601,000 for Hietbrink, respectively. If
the interest in the Partnership of either Butcher or Hietbrink is
reduced for any reason, including the sale or other disposition
of such interest, the aggregate amount of the capital
contributions required to be made hereunder by Butcher or
Hietbrink, as the case may be, shall be reduced by the same
proportion as the proportion of the reduction of such interest in
the Partnership. Butcher and Hietbrink each expressly waives any
right to compel any other Person (including, but not limited to,
the Partnership or any other partner of the Partnership) to
contribute to, reimburse or indemnify either of them for all or
any portion of amounts paid by either of them pursuant to this
SECTION 4.1(b)(ii), and Butcher and Hietbrink each expressly
waives any rights of subrogation to the rights of the Partnership
or any other Person. To the extent of the aggregate amount of the
capital contributions required to be made hereunder by Butcher
and Hietbrink, less any capital contributions previously made
under this SECTION 4.1(b)(ii) by Butcher and Hietbrink, if an
obligation to make a capital contribution arises under this
SECTION 4.1(b)(ii), Butcher and Hietbrink shall be the only
Partners of the Partnership who shall have any obligation or
liability to make any capital contributions with respect to or
for payment of such Recourse Liabilities pursuant to this SECTION
4.2(b)(ii), provided, however, that the General Partner may
permit other Limited Partners to provide similar recourse
obligations. Butcher and Hietbrink hereby indemnify the General
Partner from and against any liability on the Recourse
Liabilities that the General Partner may incur as a result of the
failure of Butcher and Hietbrink to make capital contributions
under this SECTION 4.1(b)(ii). Any obligation of Butcher or
Hietbrink to make a capital contribution to the Partnership under
this SECTION 4.1(b)(ii) shall terminate one year after the
earlier of the date on which the remaining interest in the
Partnership of Butcher or Hietbrink, as the case may be, is sold
or otherwise disposed of, or the date on which such remaining
interest is terminated for any other reason.
(c) RETURN OF CAPITAL CONTRIBUTIONS. Except as otherwise
expressly provided herein, the Capital Contribution of each Limited
Partner will be returned to that Partner
17
<PAGE>
only in the manner and to the extent provided in ARTICLE V and
ARTICLE XIII hereof, and no Partner may withdraw from the
Partnership or otherwise have any right to demand or receive
the return of its Capital Contribution to the Partnership (as
such), except as specifically provided herein. Under
circumstances requiring a return of any Capital Contribution,
no Partner shall have the right to receive property other than
cash, except as specifically provided herein. No Partner shall
be entitled to interest on any Capital Contribution or Capital
Account notwithstanding any disproportion therein as between
the Partners. Except as specifically provided herein, the
General Partner shall not be liable for the return of any
portion of the Capital Contribution of any Limited Partner,
and the return of such Capital Contributions shall be made
solely from Partnership assets.
(d) LIABILITY OF LIMITED PARTNERS. No Limited Partner shall have
any further personal liability to contribute money to, or in respect
of, the liabilities or the obligations of the Partnership, nor shall
any Limited Partner be personally liable for any obligations of the
Partnership, except as otherwise provided in this ARTICLE IV or in the
Act. No Limited Partner shall be required to make any contributions to
the capital of the Partnership other than its Capital Contribution.
Section 4.2 ISSUANCES OF ADDITIONAL PARTNERSHIP INTERESTS.
(a) ISSUANCE TO OTHER THAN THE GENERAL PARTNER. Subject to the
limitations set forth in SECTION 4.6(g), SECTION (f)(ii) of Exhibit
F-1 and SECTION (f)(ii) of Exhibit F-2, the General Partner is hereby
authorized to cause the Partnership to issue such additional
Partnership Interests in the form of Partnership Units for any
Partnership purpose at any time or from time to time, to Persons other
than the General Partner or its Affiliates for such consideration and
on such terms and conditions as shall be established by the General
Partner in its sole and absolute discretion, all without the approval
of any Limited Partners except to the extent provided herein.
(b) ISSUANCE TO THE GENERAL PARTNER. Subject to the limitations
set forth in SECTIONS 4.6(g), SECTION (f)(ii) of EXHIBIT F-1, and
SECTION (f)(ii) of EXHIBIT F-2, the Partnership also may from time to
time issue to the General Partner or its Affiliates additional
Partnership Units or other Partnership Interests in one or more
classes, or one or more series of any of such classes, with such
designations, preferences and relative, participating, optional or
other special rights, powers and duties, including rights, powers and
duties senior to Limited Partnership Interests, all as shall be
determined by the General Partner, subject to Illinois law, including,
without limitation, with respect to (i) the allocations of items of
Partnership income, gain, loss, deduction and credit to each such
class or series of Partnership Interests; (ii) the right of each such
class or series of Partnership Interests to share in Partnership
distributions; and (iii) the rights of each such class or series of
Partnership Interests upon dissolution and liquidation of the
Partnership. Subject to the limitations set forth in SECTIONS 4.6(g),
SECTION (f)(ii) of EXHIBIT F-1 and SECTION (f)(ii) of EXHIBIT F-2, in
connection with the issuance of Partnership Interests, the General
Partner is authorized to modify or amend the distributions or
allocations hereunder solely to the extent necessary to give effect to
the designations, preferences and other rights pertaining to such
Partnership Interests.
18
<PAGE>
Section 4.3 NO PREEMPTIVE RIGHTS. Except as specifically provided in
this Agreement, no Person shall have any preemptive, preferential or other
similar right with respect to (a) additional Capital Contributions or loans to
the Partnership; or (b) issuance or sale of any Partnership Units.
Section 4.4 CAPITAL ACCOUNTS OF THE PARTNERS.
(a) GENERAL. The Partnership shall maintain for each Partner a
separate Capital Account in accordance with the rules of Regulations
Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by
(i) the amount of all Capital Contributions made by such Partner to
the Partnership pursuant to this Agreement and (ii) all items of
Partnership income and gain (including income and gain exempt from
tax) computed in accordance with SECTION 4.4(b) hereof and allocated
to such Partner pursuant to SECTIONS 6.1(a) and 6.2 of the Agreement,
and decreased by (x) the amount of cash or Agreed Value of all actual
and deemed distributions of cash or property made to such Partner
pursuant to this Agreement and (y) all items of Partnership deduction
and loss computed in accordance with SECTION 4.4(b) hereof and
allocated to such Partner pursuant to SECTIONS 6.1(b) and 6.2 of the
Agreement. Notwithstanding anything to the contrary in this Agreement,
the initial Capital Accounts of the Partners immediately after the
distribution made pursuant to SECTION 4.5(b) shall be reflected on
EXHIBIT I.
(b) INCOME, GAINS, DEDUCTIONS AND LOSSES. For purposes of
computing the amount of any item of income, gain, loss or deduction to
be reflected in the Partners' Capital Accounts, unless otherwise
specified in this Agreement, the determination, recognition and
classification of any such item shall be the same as its
determination, recognition and classification for Federal income tax
purposes determined in accordance with Section 703(a) of the Code (for
this purpose all items of income, gain, loss or deduction required to
be stated separately pursuant to Section 703(a)(1) of the Code shall
be included in taxable income or loss), with the following
adjustments:
(i) Except as otherwise provided in Regulations Section
1.704-1(b)(2)(iv)(m), the computation of all items of income,
gain, loss and deduction shall be made without regard to any
election under Section 754 of the Code which may be made by the
Partnership.
(ii) The computation of all items of income, gain, loss and
deduction shall be made without regard to the fact that items
described in Sections 705(a)(1)(B) or 705(a)(2)(B) of the Code
are not includable in gross income or are neither currently
deductible nor capitalized for Federal income tax purposes.
(iii) Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be determined as if
the adjusted basis of such property as of such date of
disposition were equal in amount to the Partnership's Carrying
Value with respect to such property as of such date.
19
<PAGE>
(iv) In lieu of the depreciation, amortization, and other
cost recovery deductions taken into account in computing such
taxable income or loss, there shall be taken into account
Depreciation for such fiscal year.
(v) In the event the Carrying Value of any Partnership Asset
is adjusted pursuant to SECTION 4.4(d) hereof, the amount of any
such adjustment shall be taken into account as gain or loss from
the disposition of such asset.
(c) TRANSFERS OF PARTNERSHIP UNITS. A transferee of a Partnership
Unit shall succeed to a pro rata portion of the Capital Account of the
transferor.
(d) UNREALIZED GAINS AND LOSSES.
(i) Consistent with the provisions of Regulations Section
1.704-1(b)(2)(iv)(f), and as provided in SECTION 4.4(d)(ii), the
Carrying Values of all Partnership assets (and accordingly the
Capital Accounts of all Partners) shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as of the times of the
adjustments provided in SECTION 4.4(d)(ii) hereof, as if such
Unrealized Gain or Unrealized Loss had been recognized on an
actual sale of each such property and allocated pursuant to
SECTIONS 6.1 and 6.2 of the Agreement.
(ii) Such adjustments shall be made as of the following
times: (A) immediately prior to the acquisition of an additional
interest in the Partnership by any new or existing Partner in
exchange for more than a DE MINIMIS Capital Contribution; (B) in
connection with the distribution by the Partnership to a Partner
of more than a DE MINIMIS amount of money or other property as
consideration for an interest in the Partnership (including
pursuant to the distribution made as of the date hereof pursuant
to SECTION 4.5(b), as reflected on EXHIBIT I); and (C)
immediately prior to the liquidation of the Partnership or the
General Partner's interest in the Partnership within the meaning
of Regulations Section 1.704-1(b)(2)(ii)(g). The adjustments
pursuant to clauses (A) and (B) above shall be made as reflected
in Exhibit I in connection with the execution of this Agreement
and at the request of any Original Class A Limited Partner to the
extent necessary to allocate the Depreciation Amount under
SECTION 6.2(h) hereof, but otherwise only if the General Partner
reasonably determines that such adjustments are necessary or
appropriate to reflect the relative economic interests of the
Partners in the Partnership.
(iii) In accordance with Regulations Section
1.704-1(b)(2)(iv)(e) the Carrying Value of Partnership assets
distributed in kind shall be adjusted upward or downward to
reflect any Unrealized Gain or Unrealized Loss attributable to
such Partnership property, as of the time any such asset is
distributed.
(iv) In determining such Unrealized Gain or Unrealized Loss
the aggregate cash amount and Fair Market Value of all
Partnership assets (including cash or cash equivalents) shall be
determined by the General Partner using such
20
<PAGE>
reasonable method of valuation as it may adopt, or in the case
of a liquidating distribution pursuant to ARTICLE XIII of this
Agreement, be determined and allocated by the Liquidator using
such reasonable methods of valuation as it may adopt. The
General Partner, or the Liquidator, as the case may be, shall
allocate such aggregate value among the assets of the
Partnership (generally in such manner as it determines in its
sole and reasonable discretion to arrive at a Fair Market
Value for individual properties and specifically with respect
to the Original Pool Properties by utilizing the valuation
method used for determining the values set forth on EXHIBIT I
for such properties.
(e) COMPLIANCE WITH SECTION 704(b). The provisions of this
Agreement relating to the maintenance of Capital Accounts are intended
to comply with Regulations Section 1.704-1(b), and shall be
interpreted and applied in a manner consistent with such Regulations.
Section 4.5 CONCURRENT TRANSACTIONS. Concurrently with the execution
and delivery of this Agreement, the following events shall occur, the following
transactions shall be consummated and the following documents shall be executed
and delivered:
(a) Urban Shopping Centers, Inc., the former general partner
hereof, shall merge with and into Head Acquisition, L.P., pursuant to
the terms of the Merger Agreement, with Head Acquisition, L.P.
surviving as a Delaware limited partnership and succeeding to all of
the assets and liabilities of Urban Shopping Centers, Inc., including,
but not limited to, the General Partnership Interest and the rights
and obligations of the General Partner hereof.
(b) The Partnership shall receive funds in an amount not less
than the Merger Date Distribution as set forth on Exhibit D from the
proceeds of a loan made by Chase, N.A., its affiliates or syndicate
arranged thereby ("Chase"), which loan shall be unsecured (but may be
recourse to the General Partner by operation of law), not guaranteed
by the General Partner or any of its Affiliates (provided that
Affiliates of the General Partner may commit to purchase the Chase
Loan upon payment default or bankruptcy or insolvency of the
Partnership provided that all rights under the Chase Loan shall inure
to the benefit of the purchasers), and which loan, together with all
other loans made in connection with the transactions contemplated by
the Merger Agreement, shall not be structured in a manner materially
different than the structure described in that certain commitment
letter dated September 25, 2000 (together with the summary of terms
and conditions attached thereto) (the "Chase Loan") without the
consent of Original Class A Limited Partners holding not less than a
majority of the Class A Common Units, which consent shall not be
unreasonably withheld. The Partnership shall distribute the proceeds
of the Chase Loan to the Limited Partners as set forth in EXHIBIT D
attached hereto. To the extent that the Partnership has not paid the
full amount of the Merger Date Distribution as set forth on EXHIBIT D
to the Original Class A Limited Partners pursuant to this SECTION
4.5(b) on the Effective Date, then (i) the Original Class A Limited
Partners shall be creditors of the Partnership for such unpaid amount,
(ii) the unpaid balance of such amount shall bear interest from the
Effective Date until paid at the rate specified in SECTION 10.3(e)
hereof, and (iii) the Partnership shall not make any distributions to
its
21
<PAGE>
Partners until the Partnership has paid such amount in full together
with any accrued interest thereon.
(c) The Partnership Units held by the Limited Partners other than
the Series C Preferred Units and the Series D Preferred Units are
hereby reclassified as Class A Common Units and converted into the
number of Class A Common Units set forth on EXHIBIT D attached hereto.
(d) The General Partner shall cause its Affiliates Hexalon Real
Estate, Inc. and Rodamco North America N.V. to deliver agreements whereby
each agrees to be bound by the restrictions set forth in SECTION 7.5
hereof.
Section 4.6 CLASS A COMMON UNITS.
(a) The Partnership hereby authorizes and creates a series of
Partnership Units designated as the "Class A Common Units" (the "Class A
Common Units"). The Partnership hereby issues 1,946,315* Class A Common
Units to the Original Class A Limited Partners as set forth on EXHIBIT D
on the Effective Date as a reclassification and conversion of their
Partnership Units existing after distribution described in SECTION 4.5.
The Partnership hereby issues 33,053,685 Class A Common Units to the
General Partner as a reclassification and conversion of its Partnership
Units existing on the Effective Date.
(b) [Intentionally Omitted.]
(c) So long as any Class A Common Units are outstanding, no
distributions (other than distributions paid solely in, or options,
warrants or rights to subscribe for or purchase, securities which are
junior to the Class A Common Units in the payment of distributions ("Junior
Securities")), shall be declared or paid or set apart for payment on Junior
Securities or on securities which are junior to the Class A Common Units in
the payment of distributions and the distribution of assets upon
liquidation, dissolution or winding-up ("Fully Junior Securities"), nor
shall any Junior Securities or Fully Junior Securities be redeemed,
purchased or otherwise acquired for any consideration (or any moneys be
paid to or made available for a sinking fund for the redemption of any
Junior Securities or Fully Junior Securities) by the General Partner or the
Partnership, directly or indirectly, unless in each case sufficient funds
shall be available for payment of the distributions under SECTIONS 5.1(c),
(d), (e), (f) and (g) for the current period and all prior periods with
respect to the Class A Common Units.
(d) PUT RIGHT OR EXCHANGE RIGHT.
(i) Notwithstanding anything herein to the contrary, any
Original Class A Limited Partner shall have the ongoing right to
sell to the Partnership and the General Partner all or any
portion of such holder's Class A Common Units for
-------------------
* Subject to adjustment as set forth on Exhibit D.
22
<PAGE>
the Put Right Price per Class A Common Unit (the "Put Right");
provided, that after giving effect to an exercise of the Put
Right for less then all of such holder's Class A Common Units
held directly, such holder must hold not less than Class A Common
Units [equal to 5% of Class A Common Units issued to Original
Class A Limited Partners on the Effective Date]. The Put Right
shall be exercisable in the sole discretion of such holder of
Class A Common Units (or his estate) either (A) at any time
during the first calendar month of each calendar quarter in any
Partnership Year commencing after the fifth anniversary of the
Effective Date, or (B) on or prior to the first anniversary of
the date of the death of such holder of Class A Common Units (the
"Death Put"). To exercise the Put Right, such holder of Class A
Common Units (or his estate) (the "Selling Partner") shall give
written notice (the "Put Notice") of his irrevocable election to
exercise the Put Right to the General Partner. The General
Partner may determine in its sole and absolute discretion whether
to cause the Partnership to purchase, or whether to purchase on
the General Partner's own behalf, any Class A Common Units
subject to a Put Notice. Notwithstanding anything in this
Agreement to the contrary, the General Partner shall have the
right to assign to any Person the General Partner's right to
acquire any Class A Common Units subject to a Put Notice;
provided, however, no such assignment shall relieve the General
Partner or the Partnership of its obligation to acquire such
Class A Common Units from a Selling Partner.
(ii) Unless the Selling Partner and the General Partner
agree otherwise, the closing for the purchase of the Selling
Partner's Class A Common Units shall be, and the purchase price
shall be paid, as soon as reasonably practicable but in no event
longer than six (6) months after the receipt of the Put Notice by
the General Partner. The Selling Partner and the General Partner
agree to execute and deliver such agreements and assignments and
provide customary warranties and other documents as may be
reasonably necessary to document and effect the sale and purchase
of the Selling Partner's Class A Common Units pursuant to this
SECTION 4.6(d).
(iii) At such time and for so long as the General Partner or
any of its Affiliates has a class of its common equity securities
registered on a national stock exchange and the Class A Limited
Partners are entitled to exchange their Class A Common Units into
such publicly-traded shares ("GP Registered Shares"), the Put
Right shall be suspended and be of no further force and effect
(except in the case of a Death Put, which right shall not be
suspended and shall continue in all respects). The Partners
hereto hereby agree that, in the event that the General Partner
or any of its Affiliates has registered a class of its common
equity securities on a national stock exchange, the Limited
Partners shall, to the extent their consent is required
hereunder, reasonably cooperate with the General Partner to amend
this Agreement, mutatis mutandis, to (A) reclassify, exchange,
convert or split the Class A Common Units, so long as such action
is effected with respect to all Class A Common Units and in a
manner which affects all Class A Common Units proportionately and
(B) so that the Class A Common Units held by the Limited Partners
are exchangeable into securities of the same class as the
23
<PAGE>
GP Registered Shares on terms substantially as set forth in
EXHIBIT J hereto. In the event the General Partner or any of its
Affiliates has such a class of registered common equity
securities into which the Class A Common Units are exchangeable,
the Limited Partners (and their respective successors and
assigns, to the extent permitted therein) shall be entitled to
the benefits of the registration rights agreements listed on
EXHIBIT L hereto beginning on the date which is six months from
the date the GP Registered Shares are first registered.
(iv) For all purposes of calculating the Put Right Price,
"Pro Forma FFO" shall be derived from taking Funds From
Operations as set forth in the Partnership's budget for the then
current calendar year (or if finalized, the next calendar year),
and the "Put Multiple" shall be the number determined by dividing
(i) $48 by (ii) the quotient of Pro Forma FFO for calendar year
2001 and the number of Common Units outstanding on the Effective
Date (immediately after giving effect to the recapitalization);
PROVIDED, HOWEVER, that the Put Multiple shall be recalculated in
2002 by using (A) the diluted weighted average number of Common
Units outstanding during calendar year 2001, as computed in
accordance with GAAP, instead of the actual number of Common
Units outstanding as of the Effective Date, and (B) the
Partnership's actual Funds From Operations for calendar year 2001
as reasonably determined by the General Partner based on the
Partnership's 2001 audited financial statements instead of Pro
Forma FFO. As an example of the exercise of the Put Right, if in
year 2001 the actual FFO Per Unit is $4, the Put Multiple would
be 12 (i.e., $48 DIVIDED BY $4 = 12). If in year 2010 the actual
FFO Per Unit is $8, then assuming that there were no amounts
payable described in clause (ii) and (iii) of the definition of
"Put Right Price," the Put Right Price for the determination date
of December 31, 2009, would be $96 (i.e., 12 x $8 = $96).
In the event any transaction has occurred using a Put
Right Price calculated based on Pro Forma FFO, the Partnership
and each Partner, on behalf of itself, its estate and its
successors and assigns, agree to pay or return such amounts, as
the case may be, so that the amounts paid in such transaction are
equal to what should have been paid had the Put Right Price been
determined using the actual Funds From Operations for the
referenced year and the diluted weighted average number of Common
Units outstanding during the referenced year, plus interest on
any such adjustment payment at a rate equal to the "Prime Rate"
announced from time to time by Chase or a comparable lending
institution.
(e) CALL OPTION.
(i) Except as set forth in SECTION 4.6(e)(ii), the
Partnership shall have the right, but not the obligation (the
"Call Option"), to redeem, at the Partnership's election, the
Class A Common Units held by the Original Class A Limited
Partners, in whole or in part, for cash in an amount equal to the
Put Right Price for each Class A Common Unit to be redeemed. If
fewer than all the outstanding Class A Common Units are to be
redeemed, the redemption shall be pro rata among all holders of
Class A Common Units then subject to redemption. The
24
<PAGE>
Call Option is exercisable only by delivery of written notice of
redemption (the "Call Option Notice") to the Original Class A
Limited Partners holding Class A Common Units subject to
redemption, which notice shall state: (A) the redemption date,
(B) the Put Right Price and (C) the aggregate number of Class A
Common Units to be redeemed, and if fewer than all of the
outstanding Class A Common Units are to be redeemed, the number
of Class A Common Units held by such holder to be redeemed, which
number shall equal such holder's pro rata share (based on the
percentage of the total number of outstanding Class A Common
Units held by such holder) of the aggregate number of Class A
Common Units to be redeemed. The closing of the purchase and sale
of the Class A Common Units subject to the Call Option shall take
place at the offices of counsel to the Partnership or such other
place as the General Partner shall determine and shall occur on
the date that is not later than one hundred (100) days following
the date the Call Option Notice is delivered to the Class A
Common Unit holders holding units subject to redemption unless
the Original Class A Limited Partners shall have agreed upon a
different date in writing. At such closing, (a) the Original
Class A Limited Partners shall deliver to the Partnership
reasonable and customary instruments of transfer sufficient to
transfer to the Partnership the Class A Common Units subject to
Call Option, free and clear of any Liens, (b) the Partnership
shall deliver to the holders of Class A Comon Units subject to
the redemption the Put Right Price in immediately available funds
in U.S. dollars, (c) each of the Class A Common Unit holders and
the Partnership shall (and shall cause their respective
Affiliates to) take such other actions as shall be reasonably
requested by the other to consummate the purchase and sale of the
Class A Common Units as contemplated by this SECTION 4.6(e)(i),
and (d) the Class A Common Unit holders shall discharge of record
all Liens, if any, affecting the Class A Common Units other than
Liens permitted hereby (and, if the Class A Common Unit holders
fail to do so, the Partnership may use any portion of the Put
Right Price to pay and discharge any such Liens and any related
expenses and may adjourn the closing for such reasonable period
not to exceed 30 days as may be necessary for such purpose).
(ii) Notwithstanding SECTION 4.6(e)(i) or any other
provision of this Agreement, the Class A Common Units held by
Original Class A Limited Partners shall not be redeemable by the
Partnership prior to the Call Date.
(iii) On and after the redemption date of any Class A Common
Unit subject to the Call Option, (A) distributions shall cease to
be paid on such Class A Common Units, (B) such units shall no
longer be deemed to be outstanding and (C) all rights of the
holders thereof as holders of such Class A Common Units shall
cease (except the right to receive the Put Right Price).
(f) With the exception of the General Partner, the holders of the
Class A Common Units shall not have any right to vote or consent to
Partnership matters or amendments to the this Agreement or to receive
notice of Partnership action, except as set forth in SECTIONS 4.6(g),
7.3, 7.6 and ARTICLE XIV and except as follows:
25
<PAGE>
(i) No amendment to this SECTION 4.6 shall be made without
the vote or consent of the holders of a majority of the Class A
Common Units then outstanding and a separate consent or vote of
Original Class A Limited Partners holding a majority of the Class
A Common Units then held by Original Class A Limited Partners;
and
(ii) No amendment to SECTION 7.3(b) shall be made without
the vote or consent of the holders of a majority of the Class A
Common Units then outstanding and a separate consent or vote of
Original Class A Limited Partners holding a majority of Class A
Common Units then held by Original Class A Limited Partners.
(g) Notwithstanding anything to the contrary contained herein, so
long as any Class A Common Units held by Original Class A Limited
Partners remain outstanding, the Partnership shall not, without the
affirmative vote of the holders of at least two-thirds of the Class A
Common Units held by Original Class A Limited Partners outstanding at
the time (A) authorize or create, or increase the authorized or issued
amount of, any class or series of Partnership Interests (other than
the Series C Preferred Units and the Series D Preferred Units
currently issued and outstanding) ranking (i) senior or on a parity
with the Original Class A Limited Partners with respect to
distributions to Original Class A Limited Partners pursuant to
SECTIONS 5.1(c), (d), (e), (f) and (g) (and accompanying allocations
under SECTION 6.1, allocations of Nonrecourse Liabilities under
SECTION 6.1(c) and (d), and Depreciation and Nonrecourse Deduction
allocations under SECTION 6.2(d) and (h) herein), or (ii) senior to
the Class A Common Units held by Original Class A Limited Partners
with respect to other distributions or rights to allocations, or both,
or reclassify any Partnership Interests of the Partnership into any
such Partnership Interests, or create, authorize or issue any
obligations or securities convertible into or evidencing the right to
purchase any such Partnership Interests; provided, however, that no
such vote of the Original Class A Limited Partners shall be required
if, at or prior to the time when such action is to take effect, the
Partnership has issued the Call Option Notice for all of the Class A
Common Units held by the Original Class A Limited Partners then
outstanding, or (B) amend, alter or repeal the provisions of this
Agreement, in a manner that would materially and adversely affect the
powers, rights, preferences, privileges or voting power of the Class A
Common Units held by the Original Class A Limited Partners; provided,
however, that any amendment, alteration or repeal of a provision that
affects all Class A Common Units and all holders of Class A Common
Units on a pro rata basis (i.e., a split or reverse split of Units),
or an increase in the amount of Partnership Interests or the creation
or issuance of any other class or series of Partnership Interests, in
each case ranking junior to the Class A Common Units held by Original
Class A Limited Partners with respect to their priority distribution
rights under SECTIONS 5.1(c), (d), (e), (f) and (g) (and accompanying
allocations under SECTION 6.1, allocations of Nonrecourse Liabilities
under SECTION 6.1(c) and (d), and Depreciation and Nonrecourse
Deduction allocations under SECTION 6.2(d) and (h)) shall not be
deemed to materially and adversely affect such rights, preferences,
privileges or voting powers and no vote of the Original Class A
Limited Partners shall be required in such case.
Section 4.7 SERIES C PREFERRED UNITS. The Partnership has issued
800,000 Series C
26
<PAGE>
Cumulative Redeemable Preferred Units (the "Series C Preferred Units"), which
shall be Limited Partnership Interests and shall be a separate class thereof.
The number and holders of the Series C Preferred Units issued and outstanding on
the Merger Date are as set forth on EXHIBIT A hereto. The rights and benefits of
the Series C Preferred Units are as set forth on EXHIBIT F-1 attached hereto.
Section 4.8 ISSUANCE OF SERIES D PREFERRED UNITS. The Partnership has
issued 3,400,000 Partnership Units designated as the "9.45% Series D Cumulative
Redeemable Preferred Units" (the "Series D Preferred Units"). The Series D
Preferred Units shall be Limited Partnership Interests and shall be a separate
class thereof. The number and holders of the Series D Preferred Units issued and
outstanding on the Merger Date are as set forth on EXHIBIT A hereto. The rights
and benefits of the Series D Preferred Units are as set forth on EXHIBIT F-2
attached hereto.
ARTICLE V
DISTRIBUTIONS
Section 5.1 REQUIREMENT AND CHARACTERIZATION OF DISTRIBUTIONS. The
General Partner shall distribute at the times set forth below an amount equal to
100% of Available Cash generated by the Partnership during such quarter to the
Partners who are Partners on the Partnership Record Date with respect to such
periods in the following priority:
(a) First, quarterly, to the extent that the amount of cash
distributed to the holders of the Series C Preferred Units and the
Series D Preferred Units for all prior quarters pursuant to SECTION
5.1(b) (other than the immediately preceding quarter) was less than
the Series C Preferred Distribution and Series D Preferred
Distribution for all such quarters and such deficiency was not
previously distributed pursuant to this SECTION 5.1(a) (a "Series C
and D Distribution Shortfall"), Available Cash shall be distributed
pro rata to the holders of the Series C Preferred Units and the Series
D Preferred Units in an amount equal to such Series C and D
Distribution Shortfall for all such prior quarters.
(b) Second, quarterly, Available Cash shall be distributed to the
holders of the Series C Preferred Units and the Series D Preferred
Units pro rata in an amount equal to one quarter of the Series C
Preferred Distribution and Series D Preferred Distribution for each
outstanding Series C Preferred Unit and Series D Preferred Unit.
(c) Third, quarterly (within 30 days of the end of each quarter),
Available Cash shall be distributed in an aggregate amount up to the
First Tier Class A Distribution Shortfall, (i) 43 percent to the
Original Class A Limited Partners, pro rata, in respect of their Class
A Common Units, and (ii) 57 percent to the General Partner, until the
First Tier Class A Distribution Shortfall has been distributed;
(d) Fourth, $10 million of Available Cash shall be distributed
annually in quarterly installments (within 30 days of the end of each
quarter), (i) 43 percent to the Original Class A Limited Partners, pro
rata, in accordance with their Class A Common Units, and (ii) 57
percent to the General Partner;
27
<PAGE>
(e) Fifth, quarterly (within 30 days of the end of each quarter),
Available Cash shall be distributed in an aggregate amount equal to
the Second Tier Class A Distribution Shortfall 100 percent to the
Original Class A Limited Partners, pro rata, in respect of their Class
A Common Units, until the Second Tier Class A Distribution Shortfall
has been distributed;
(f) Sixth, $1,500,000 of Available Cash shall be distributed
annually in quarterly installments (within the 30 days of the end of
each quarter) 100 percent to the Original Class A Limited Partners,
pro rata, in accordance with their respective Class A Common Units;
(g) Seventh, $100 million of Available Cash shall be distributed
annually in quarterly installments (within 30 days of the end of each
quarter), (i) 1 percent to the Original Class A Limited Partners, pro
rata, in accordance with their Class A Common Units, and (ii) 99
percent to the Partners other than Original Class A Limited Partners
pro rata in accordance with their Common Units;
(h) Eighth, quarterly (within 30 days of the end of each
quarter), Available Cash, if any, shall be distributed to the
Partners, pro rata, in accordance with their Common Units, until the
IRR Equity Return Date; and
(i) Ninth, quarterly (within 30 days of the end of each quarter),
the balance of Available Cash, if any, shall be distributed to the
holders of Class A Common Units, pro rata, in proportion to their
Class A Common Units; PROVIDED, HOWEVER, that any such Available Cash
distributable to the General Partner and the Original Class A Limited
Partners shall be distributed, pro rata, (i) 43 percent to the
Original Class A Limited Partners, pro rata, in accordance with their
respective Class A Common Units and (ii) 57 percent to the General
Partner.
The dollar amounts expressly stated in SECTIONS 5.1(d), (f) and (g), (i)
shall grow at a rate of 3% per annum, compounded annually, beginning on January
1, 2004, (II) shall be pro rated for any period shorter than a calendar quarter,
and (III) along with the percentages described in SECTIONS 5.1(c), (d), (g), and
(i), shall be adjusted proportionately for any reduction from the number of
Class A Common Units held by Original Class A Limited Partners on the Effective
Date (E.G., upon the first purchase of Class A Common Units from a Class A
Limited Partner pursuant to SECTION 4.6(d), if (A) the Partnership purchases 100
Class A Common Units from such Original Class A Limited Partner and (B) on the
Effective Date the Original Class A Limited Partners collectively held 1,000
Class A Common Units, then the percentages described in SECTIONS 5.1(c) and (d)
for the Original Class A Limited Partners shall be reduced to 38.70% and shall
be increased to 61.30% for the General Partner and the amount described in
SECTION 5.1(g) shall be reduced to $90,000,000.).
Section 5.2 AMOUNTS WITHHELD. All amounts withheld pursuant to the
Code or any provisions of any state or local tax law and SECTION 10.5 hereof
with respect to any allocation, payment or distribution to the General Partner,
or any Limited Partners or Assignees shall be treated as amounts distributed to
the General Partner or such Limited Partners, or Assignees pursuant to SECTION
5.1 for all purposes under this Agreement.
28
<PAGE>
Section 5.3 DISTRIBUTIONS UPON LIQUIDATION. Proceeds from a
Liquidating Transaction shall be distributed to the Partners in accordance with
SECTION 13.2.
Section 5.4 DRAW. Notwithstanding SECTION 5.1 hereof, to the extent
that a Partner would be distributed, pursuant to such Section during any
Partnership taxable year, an amount in excess of the maximum amount which could
be distributed to such Partner without creating an Adjusted Capital Account
Deficit, then such distribution shall be, to the extent permissible under the
Code, an advance or draw (as described in Regulations Section 1.731-1(a)(1)(ii))
against such Partner's allocations of Net Profits and items of income and gain
for the Partnership taxable year in which such distribution is made.
ARTICLE VI
ALLOCATIONS
Section 6.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES. For purposes of
maintaining the Capital Accounts and in determining the rights of the Partners
among themselves, the Partnership's items of income, gain, loss and deduction
(computed in accordance with SECTION 4.4 hereof) shall be allocated among the
Partners for each Partnership taxable year (or portion thereof) as provided
herein below in this ARTICLE VI and SECTION 13.2(a).
(a) NET INCOME. After giving effect to the special allocations
set forth in SECTION 6.2 below, Net Income shall be allocated as
follows:
(i) First, Net Income shall be allocated to the General
Partner until (1) the cumulative Net Income allocated pursuant to
this SECTION 6.1(a)(i) for all Partnership taxable years equals
(2) the cumulative Net Losses allocated pursuant to SECTION
6.1(b)(ix) for all Partnership taxable years;
(ii) Second, to the holders of Series C Preferred Units and
Series D Preferred Units until each holder has a Capital Account
as of the end of such Partnership taxable year (determined after
adding back to such Capital Account such person's share of
"partnership minimum gain" and "partner nonrecourse debt minimum
gain" for purposes of Treasury Regulation 1.704-2) at least equal
to the product of the Stated Value (as defined in EXHIBIT F-1)
times the number of its Series C Preferred Units and the Stated
Value (as defined in EXHIBIT F-2) times the number of its Series
D Preferred Units, respectively;
(iii) Third, to the General Partner and each Original Class
A Limited Partner, pro rata, in respect of its Class A Common
Units, until (1) the cumulative Net Income allocated to each of
these Partners in respect of such Partner's Class A Common Units
pursuant to this SECTION 6.1(a)(iii) for all Partnership taxable
years equals and does not exceed (2) the cumulative Net Losses
allocated to such Partner in respect of such Class A Common Units
pursuant to SECTION 6.1(b)(vii) for all prior Partnership taxable
years;
(iv) Fourth, any remaining Net Income shall be allocated to
the holders of Series C Preferred Units and Series D Preferred
Units in an amount equal to the excess of (1) the cumulative
Series C Preferred Distributions and Series D
29
<PAGE>
Preferred Distributions as of the end of such Partnership taxable
year (whether or not actually made for each quarter), over (2)
the cumulative Net Income and items of income and gain allocated
to the holders of Series C Preferred Units and Series D Preferred
Units in prior Partnership taxable years (net of allocations of
Net Loss under SECTION 6.1(b)(vi) which reversed such Net Income
and income allocations); PROVIDED, HOWEVER, that if the
cumulative Net Income and items of income and gain allocated to
the holders of Series C Preferred Units and Series D Preferred
Units (net of allocations of Net Loss under SECTION 6.1(b)(vi)
which reversed such Net Income and income allocations) are less
than the cumulative Series C Preferred Distributions and Series D
Preferred Distributions actually made to the holders of Series C
Preferred Units and Series D Preferred Units under SECTION 5.1,
then items of income and gain shall be allocated to the holders
of Series C Preferred Units and Series D Preferred Units to make
up such shortfall (and Net Income and Net Losses for the purpose
of making further allocations in respect of such taxable year
shall be recalculated accordingly);
(v) Fifth, any remaining Net Income shall be allocated 43%
to the Original Class A Limited Partners, pro rata in accordance
with their Class A Common Units and 57% to the General Partner
until (1) the cumulative distributions provided for by the end of
such Partnership taxable year and all prior taxable years under
SECTION 5.1(d) (whether or not actually made) in respect of such
Class A Common Units, equal (2) the cumulative Net Income and
items of income and gain allocated in respect of such Class A
Common Units under this SECTION 6.1(a)(v) in all Partnership
taxable years (net of allocations of Net Losses under SECTION
6.1(b)(v) which reversed such Net Income and income allocations);
provided, however, that if the cumulative Net Income and items of
income and gain allocated in respect of such Class A Common Units
under this SECTION 6.1(a)(v) (net of allocations of Net Losses
under SECTION 6.1(b)(v) which reversed such Net Income and income
allocations) are less than the cumulative distributions actually
made in respect of such Class A Common Units under SECTIONS
5.1(c) AND (d), then items of income and gain shall be allocated
under this SECTION 6.1(a)(v) to make up such shortfall (and Net
Income and Net Losses for purposes of making further allocations
in respect of such taxable year shall be recalculated
accordingly);
(vi) Sixth, any remaining Net Income shall be allocated to
each Original Class A Limited Partner, pro rata, in proportion to
its Class A Common Units, until (1) the cumulative distributions
provided for by the end of such Partnership taxable year and all
prior taxable years under SECTION 5.1(f) (whether or not actually
made) in respect of such Class A Common Units, equal (2) the
cumulative Net Income and items of income and gain allocated in
respect of such Class A Common Units under this SECTION
6.1(a)(vi) in all Partnership taxable years (net of allocations
of Net Losses under SECTION 6.1(b)(iv) which reversed such Net
Income and income allocations); PROVIDED, HOWEVER, that if the
cumulative Net Income and items of income and gain allocated
under this SECTION 6.1(a)(vi) (net of allocations of Net Losses
under SECTION 6.1(b)(iv) which reversed such Net Income and
income allocations) are less than the distributions
30
<PAGE>
actually made under SECTIONS 5.1(e) AND (f), then items of income
and gain shall be allocated under this SECTION 6.1(a)(vi) to make
up the shortfall (and Net Income and Net Losses for purposes of
making further allocations in respect of such taxable year shall
be recalculated accordingly);
(vii) Seventh, any remaining Net Income shall be allocated
1% to the Original Class A Limited Partners, pro rata in
accordance with their Class A Common Units and 99% to the
Partners other than Original Class A Limited Partners until (1)
the cumulative distributions provided for by the end of such
Partnership taxable year and all prior taxable years under
SECTION 5.1(g) in respect of such Class A Common Units equal (2)
the cumulative Net Income and items of income and gain allocated
under this SECTION 6.1(a)(vii) in all Partnership taxable years
(net of allocations of Net Losses under SECTION 6.1(b)(iii) which
reversed such Net Income and income allocations) in respect of
such Class A Common Units; PROVIDED, HOWEVER, that if the
cumulative Net Income and items of income and gain allocated
under this SECTION 6.1(a)(vii) (net of allocations of Net Losses
under SECTION 6.1(b)(iii) which reversed such Net Income and
income allocations) in respect of such Class A Common Units are
less than the distributions actually made in respect of such
Class A Common Units under SECTION 5.1(g), then items of income
and gain shall be allocated under this SECTION 6.1(a)(vii) to
make up such shortfall (and Net Income and Net Losses for
purposes of further allocations in respect of such taxable year
shall be recalculated accordingly);
(viii) Eighth, any remaining Net Income shall be allocated
to the Partners, pro rata, in accordance with their Class A
Common Units until (1) the cumulative distributions as of the end
of such Partnership taxable year and all prior taxable years
under SECTION 5.1(h) (whether or not actually made) in respect of
such Class A Common Units equal (2) the cumulative Net Income and
items of income and gain allocated under this SECTION
6.1(a)(viii) in all Partnership taxable years (net of allocations
of Net Losses under SECTION 6.1(b)(ii) which reversed such Net
Income and income allocations) in respect of such Class A Common
Units; PROVIDED, HOWEVER, that if the cumulative Net Income and
items of income and gain allocated under this SECTION
6.1(a)(viii) (net of allocations of Net Losses under SECTION
6.1(b)(ii) which reversed such Net Income and income allocations)
in respect of such Class A Common Units are less than the
distributions actually made in respect of such Class A Common
Units under SECTION 5.1(h), then items of income and gain shall
be allocated under this SECTION 6.1(a)(viii) to make up such
shortfall (and Net Income and Net Losses for purposes of further
allocations in respect of such taxable year shall be recalculated
accordingly);
(ix) Ninth, any remaining Net Income shall be allocated to
each Partner, pro rata, in respect of its Class A Common Units;
PROVIDED, HOWEVER, that such Net Income allocable to the General
Partner and the Original Class A Limited Partners in respect of
their Class A Common Units shall be allocated, pro rata, (i) 43
percent to the Original Class A Limited Partners, pro rata, in
accordance with their respective Class A Common Units and (ii) 57
percent to than the General Partner.
31
<PAGE>
For purposes of allocating the tranches of Net Income and items of income
and gain pursuant to this SECTION 6.1(a), the items of income, gain, loss and
deduction within Net Income or the items of income and gain allocated specially
under SECTION 6.1(a) shall consist of pro rata amounts of each such item, so
that, for example, one Partner's allocation of Net Income does not
disproportionally consist of ordinary income items while a different Partner's
allocation of Net Income disproportionally consists of capital gain items.
(b) NET LOSSES. After giving effect to the special allocations
set forth in SECTION 6.2 below, Net Losses shall be allocated as
follows:
(i) First, Net Losses shall be allocated to the Partners,
pro rata, in proportion to their Class A Common Units; PROVIDED,
HOWEVER, that such Net Losses allocable to the General Partner
and any Original Class A Limited Partner which were allocated Net
Income in respect of such Class A Common Units pursuant to the
proviso of SECTION 6.1(a)(ix), shall be allocated, pro rata, (i)
43 percent to such Original Class A Limited Partners, pro rata,
in accordance with their respective Class A Common Units and (ii)
57 percent to the General Partner until the cumulative Net Losses
allocated to each such Partner in respect of such Class A Common
Units under this SECTION 6.1(b)(i) for all Partnership taxable
years equal the cumulative Net Income allocated in respect of
such Partner's Class A Common Units under SECTION 6.1(a)(ix) for
all prior Partnership taxable years;
(ii) Second, any remaining Net Losses shall be allocated to
the Partners, pro rata, in respect of their respective Class A
Common Units, until the cumulative Net Losses allocated to each
such Partner under this SECTION 6.1(b)(ii) for all Partnership
taxable years in respect of such Class A Common Units, equal the
sum of the cumulative Net Income and items of income and gain
allocated under SECTION 6.1(a)(viii) for prior Partnership
taxable years in respect of such Class A Common Units;
(iii) Third, any remaining Net Losses shall be allocated 1%
to the Original Class A Limited Partners, pro rata, in respect of
their Class A Common Units and 99% to the Partners other than the
Original Class A Limited Partners, until the cumulative Net
Losses allocated to each such Partner in respect of such Class A
Common Units under this SECTION 6.1(b)(iii) for all Partnership
taxable years equal the sum of the cumulative Net Income and
items of income and gain allocated under SECTION 6.1(a)(vii) in
respect of such Partner's Class A Common Units for prior
Partnership taxable years;
(iv) Fourth, any remaining Net Losses shall be allocated to
each Original Class A Limited Partner, pro rata, in respect of
its Class A Common Units until the cumulative Net Losses
allocated to each Original Class A Limited Partner in respect of
such Class A Common Units under this SECTION 6.1(b)(iv) for all
Partnership taxable years equal the sum of the cumulative Net
Income and items of income and gain allocated in respect of such
Partner's Class A Common Units under SECTION 6.1(a)(vi) for prior
Partnership taxable years;
32
<PAGE>
(v) Fifth, any remaining Net Losses shall be allocated 43%
to the Original Class A Limited Partners, pro rata, in accordance
with their respective Class A Common Units and 57% to the General
Partner, until the cumulative Net Losses allocated to each such
Partner in respect of such Class A Common Units under this
SECTION 6.1(b)(v) for all prior Partnership taxable years equal
the sum of the cumulative Net Income and items of income and gain
allocated in respect of such Partner's Class A Common Units under
SECTION 6.1(a)(v) for all prior Partnership taxable years;
(vi) Sixth, any remaining Net Losses shall be allocated to
each holder of Series C Preferred Units and Series D Preferred
Units, respectively, until the cumulative Net Losses allocated to
each such holder of Series C Preferred Units and Series D
Preferred Units under this SECTION 6.1(b)(vi) for all Partnership
taxable years in respect of such Series C Preferred Units and
Series D Preferred Units, equal the sum of the cumulative Net
Income and items of income and gain allocated in respect of such
Series C Preferred Units and Series D Preferred Units under
SECTION 6.1(a)(iv) for prior Partnership taxable years;
(vii) Seventh, any remaining Net Losses shall be allocated
to the Original Class A Limited Partners and the General Partner,
pro rata, in accordance with their Class A Common Units, until
the Capital Account balance of any such Partner (as credited with
any amounts which such Partner 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)) has been reduced to
(and is not less than) zero and thereafter to the other Partners
until the foregoing standard set forth in SECTION 6.1(b)(vii) is
met;
(viii) Eighth, any remaining Net Losses shall be allocated
to the holders of Series C Preferred Units and Series D Preferred
Units until the Adjusted Capital Account balance of each such
holder has been reduced to zero; and
(ix) Ninth, any remaining Net Losses shall be allocated to
the General Partner.
For purposes of allocating the tranches of Net Losses pursuant to this
SECTION 6.1(b), the items of income, gain, loss and deduction within Net Losses
shall consist of pro rata amounts of each such item, so that, for example, one
Partner's allocation of Net Losses does not disproportionally consist of capital
loss items while a different Partner's allocation of Net Losses
disproportionally consists of ordinary deduction or loss items.
(c) EXCESS NONRECOURSE LIABILITIES. Except as provided in SECTION
6.1(d), the Partners agree that the interests of the Original Class A
Limited Partners (as a group) for purposes of allocating "excess
Nonrecourse Liabilities" (within the meaning of Regulation Section
1.752-3(a)(3)) shall be equal to the percentage specified for the
amount of Partnership "excess Nonrecourse Liabilities" (as defined
above) that are outstanding from time to time as reflected on EXHIBIT
H, and the General Partner shall allocate not less than the specified
percentage of such excess Partnership Nonrecourse
33
<PAGE>
Liabilities to the Original Class A Limited Partners. All of the share
of such excess Nonrecourse Liabilities allocated to the Original Class
A Limited Partners shall be from Partnership debt that constitutes
Qualified Nonrecourse Liabilities of the Partnership. It is understood
that in making the allocation of nonrecourse debt under Regulation
Section 1.752-3(a)(2), allocations will be made first to Partners in
the amount of Code Section 704(c) taxable gain prior to allocations to
Partners receiving allocations in connection with a revaluation of
Partnership property.
(d) NONRECOURSE LIABILITIES. The General Partner shall allocate
aggregate Nonrecourse Liabilities and Qualified Nonrecourse
Liabilities of the Partnership in excess of the sum of (i) the amount
of Partnership Minimum Gain and (ii) the total amount of Nonrecourse
Built-in Gain, for any Partnership taxable year ending on or including
the Call Date, utilizing any method for which there is at least a
Reasonable Basis under the Code, that results to the maximum extent
possible in the aggregate amount of Nonrecourse Liabilities and
Qualified Nonrecourse Liabilities allocated to each Original Class A
Limited Partner under Code Section 752 and Section 465, respectively,
at the end of the Partnership taxable year being at least equal to
such Original Class A Limited Partner's Target Class A Common Unit
Debt Allocation. If requested by Original Class A Limited Partners
holding a majority of the issued and outstanding Class A Common Units
held by Original Class A Limited Partners, the General Partner shall
inform each such Original Class A Limited Partner of the method chosen
by the General Partner for allocating excess Nonrecourse Liabilities
and Qualified Nonrecourse Liabilities to the Partners. To the extent
that such a majority of the Original Class A Limited Partners
disagrees with the method chosen by the General Partner for allocating
excess Nonrecourse Liabilities and Qualified Nonrecourse Liabilities
pursuant to the preceding sentence and notifies the General Partner of
this disagreement on a timely basis in writing, the General Partner
shall allocate these excess Nonrecourse Liabilities and Qualified
Nonrecourse Liabilities based upon the alternative method stated by
the Original Class A Limited Partners holding a majority of the issued
and outstanding Class A Common Units held by Original Class A Limited
Partners in the written notification; provided however, that, upon a
timely request by the General Partner to the Original Class A Limited
Partners holding a majority of the issued and outstanding Class A
Common Units held by Original Class A Limited Partners, the General
Partner receives a timely opinion of tax counsel, chosen by such a
majority of the Original Class A Limited Partners, reasonably
consented to by the General Partner, addressed to the General Partner
and the Partnership, that there is at least a Reasonable Basis for
such alternative method and provided, further, however that the
alternative method chosen by such majority of the Original Class A
Limited Partners shall not result in the aggregate amount of
Nonrecourse Liabilities and Qualified Nonrecourse Liabilities
allocated to each Original Class A Limited Partner under Code Section
752 and Section 465, respectively, at the end of such Partnership
taxable year to be less than the product of (x) the Targe Class A
Common Unit Debt Allocation multiplied by (y) the number of Class A
Common Units held by such Original Class A Limited Partner. For any
Partnership taxable year ending after the Call Date, these excess
Nonrecourse Liabilities shall be allocated among the Partners
utilizing any method under the Code.
34
<PAGE>
(e) The percentages described in SECTIONS 6.1(a) and (b) shall be
adjusted proportionately for any reduction from the number of Class A
Common Units held by Original Class A Limited Partners on the Effective
Date.
Section 6.2 SPECIAL ALLOCATION RULES. Notwithstanding any other
provision of the Agreement, the following special allocations shall be made in
the following order:
(a) MINIMUM GAIN CHARGEBACK. Notwithstanding any other provisions
of ARTICLE VI, if there is a net decrease in Partnership Minimum Gain
during any Partnership Year, each Partner shall be specially allocated
items of Partnership income and gain for such year (and, if necessary,
subsequent years) in an amount equal to such Partner's share of the
net decrease in Partnership Minimum Gain, as determined under
Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto. The items
to be so allocated shall be determined in accordance with Regulations
Section 1.704-2(f)(6). This SECTION 6.2(a) is intended to comply with
the minimum gain chargeback requirements in Regulations Section
1.704-2(f) and for purposes of this SECTION 6.2(a) only, each
Partner's Adjusted Capital Account Deficit shall be determined prior
to any other allocations pursuant to SECTION 6.1 of the Agreement with
respect to such Partnership taxable year and without regard to any
decrease in Partner Minimum Gain during such Partnership taxable year.
(b) PARTNER MINIMUM GAIN CHARGEBACK. Notwithstanding any other
provision of ARTICLE VI (except SECTION 6.2(a) hereof), if there is a
net decrease in Partner Minimum Gain attributable to a Partner
Nonrecourse Debt during any Partnership taxable year, each Partner who
has a share of the Partner Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i) (5), shall be specially allocated items of Partnership
income and gain for such year (and, if necessary, subsequent years) in
an amount equal to such Partner's share of the net decrease in Partner
Minimum Gain attributable to such Partner Nonrecourse Debt, determined
in accordance with Regulations Section 1.704-2(i)(5). Allocations
pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant
thereto. The items to be so allocated shall be determined in
accordance with Regulations Section 1.704-2(i)(4). This SECTION 6.2(b)
is intended to comply with the minimum gain chargeback requirement in
such Section of the Regulations and shall be interpreted consistently
therewith. Solely for purposes of this SECTION 6.2(b), each Partner's
Adjusted Capital Account Deficit shall be determined prior to any
other allocations pursuant to ARTICLE VI of this Agreement with
respect to such Partnership taxable year, other than allocations
pursuant to SECTION 6.2(a) hereof.
(c) PARTNER NONRECOURSE DEDUCTIONS. Any Partner Nonrecourse
Deductions for any Partnership taxable year shall be specially
allocated to the Partner who bears the economic risk of loss with
respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable in accordance with Regulations
Section 1.704-2(i)(2).
35
<PAGE>
(d) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions in respect of
each Partnership asset shall be allocated among the Partners in the
same proportion as the Partners are allocated Depreciation from that
Partnership asset pursuant to SECTION 6.2(g).
(e) QUALIFIED INCOME OFFSET. In the event any Partner
unexpectedly receives any adjustments, allocations or distributions
described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), such Partner has
an Adjusted Capital Account Deficit, items of Partnership income and
gain shall be specially allocated to such Partner in an amount and
manner sufficient to eliminate, to the extent required by the
Regulations, its Adjusted Capital Account Deficit created by such
adjustments, allocations or distributions as quickly as possible. This
SECTION 6.2(e) is intended to comply with Regulations Section
1.704-1(b)(2)(ii)(d) and will be applied and interpreted in accordance
with such regulation; PROVIDED, that an allocation pursuant to this
SECTION 6.2(e) shall be made only if and to the extent that such
Partner would have an Adjusted Capital Account Deficit after all other
allocations provided for in this ARTICLE VI have been tentatively made
as if this SECTION 6.2(e) were not in the Agreement.
(f) GROSS INCOME ALLOCATION. In the event any Partner has a
deficit Capital Account at the end of any Partnership taxable year in
excess of the sum of (i) the amount such Partner is obligated to
restore pursuant to any provision of this Agreement or pursuant to
Regulations Section 1.704-1(b)(2)(ii)(c) and (ii) the amount such
Partner 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 Partner shall be specially allocated items of
Partnership income and gain (consisting of a PRO RATA portion of each
item of Partnership income and gain) as quickly as possible to
eliminate such excess Capital Account deficit, PROVIDED, that an
allocation pursuant to this SECTION 6.2(f) will be made if and only to
the extent that such Partner would have a Capital Account deficit in
excess of such sum after all other allocations provided for in this
ARTICLE VI have been tentatively made as if SECTION 6.2(e) and this
SECTION 6.2(f) were not in the Agreement.
(g) CODE SECTION 754 ADJUSTMENTS. To the extent an adjustment to
the adjusted tax basis of any Partnership asset pursuant to Section
734(b) or 743(b) of the Code is required, pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining
Capital Accounts, the amount of such adjustment to the Capital
Accounts shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases
such basis), and such item of gain or loss shall be specially
allocated to the Partners in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted pursuant to
such Section of the Regulations.
(h) SPECIAL ALLOCATION OF DEPRECIATION. Depreciation in any
taxable year of the Partnership shall be allocated as follows:
(i) the Original Class A Limited Partners shall be
allocated, in proportion to their respective Class A Common
Units, the Depreciation Amount;
36
<PAGE>
(ii) any remaining Depreciation allocable in any taxable
year of the Partnership shall be allocated to all Partners, other
than the Original Class A Limited Partners, the Series C
Preferred Units and the Series D Preferred Units, in accordance
with their respective Class A Common Units.
(i) If any unanticipated item of Partnership income or gain is
recognized by a Partner as a result of the execution of this
Agreement, the Partner that recognized such unanticipated item shall
be allocated the corresponding item (if any) of Partnership loss or
deduction.
(j) GUARANTEED PAYMENTS. Any amount distributed as part of any
First Tier Distribution Shortfall or Second Tier Distribution
Shortfall that represents only the 8% compound earnings component of
the definition of either the First Tier Distribution Shortfall or
Second Tier Distribution Shortfall shall be treated as a guaranteed
payment pursuant to Code Section 707(c).
Section 6.3 ALLOCATIONS FOR TAX PURPOSES.
(a) GENERAL. Except as otherwise provided in this SECTION 6.3,
for Federal income tax purposes, each item of income, gain, loss and
deduction shall be allocated among the Partners in the same manner as
its correlative item of "book" income, gain, loss or deduction is
allocated pursuant to SECTIONS 6.1 and 6.2 of this Agreement.
(b) TO ELIMINATE BOOK-TAX DISPARITIES. In an attempt to eliminate
Book-Tax Disparities attributable to a Contributed Property or
Adjusted Property, items of income, gain, loss, and deduction shall be
allocated for Federal income tax purposes among the Partners as
follows:
(i) (A) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners
consistent with the principles of Section 704(c) of the Code that
takes into account the variation between the 704(c) Value of such
property and its adjusted basis at the time of contribution; and
(B) any item of Residual Gain or Residual Loss attributable to a
Contributed Property shall be allocated among the Partners in the
same manner as its correlative item of "book" gain or loss is
allocated pursuant to SECTIONS 6.1 and 6.2 of this Agreement.
(ii) (A) In the case of an Adjusted Property, such items
shall (1) first, be allocated among the Partners in a manner
consistent with the principles of Section 704(c) of the Code to
take into account the Unrealized Gain or Unrealized Loss
attributable to such property at the time of the adjustments
required in SECTION 4.4(d)(ii) and the allocations thereof
pursuant to SECTION 6.1 and (2) second, in the event such
property was originally a Contributed Property, be allocated
among the Partners in a manner consistent with SECTION
6.3(b)(i)(A); and (B) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be allocated among the
Partners in the same manner as its
37
<PAGE>
correlative item of "book" gain or loss is allocated pursuant to
SECTIONS 6.1 and 6.2 of this Agreement.
(iii) All other items of income, gain, loss and deduction
shall be allocated among the Partners in the same manner as their
correlative item of "book" gain or loss is allocated pursuant to
SECTIONS 6.1 and 6.2 of this Agreement.
(c) POWER OF GENERAL PARTNER TO ELECT METHOD. To the extent
Treasury Regulations promulgated pursuant to Section 704(c) of the
Code permit a partnership to utilize alternative methods to eliminate
Book-Tax Disparities, the General Partner shall have the authority to
elect the method to be used by the Partnership and such election shall
be binding on all Partners; provided, however, that the General
Partner shall elect the "traditional method" (without curative
allocations) as set forth in Regulations Section 1.704-3(b) with
respect to the elimination of any Book-Tax Disparities under SECTION
6.3(b)(ii)(A)(1) that exist on the date hereof.
(d) RECAPTURE INCOME. Any Recapture Income shall be allocated,
solely for income tax purposes in accordance with Regulations Sections
1.1245-1(e)(2) and (3) and 1.1250-1(f).
ARTICLE VII
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 MANAGEMENT.
(a) POWERS OF GENERAL PARTNER. Except as otherwise expressly
provided in this Agreement, all management powers over the business
and affairs of the Partnership are 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. Notwithstanding anything to the contrary in this
Agreement, the General Partner may not be removed by the Limited
Partners with or without cause. In addition to the powers now or
hereafter granted a general partner of a limited partnership under
applicable law or which are granted to the General Partner under any
other provision of this Agreement, the General Partner, subject to
SECTION 7.3 hereof and any other restriction expressly provided
herein, shall have full power and authority to do all things deemed
necessary or desirable by it to conduct the business of the
Partnership, to exercise all powers set forth in SECTION 3.2 hereof
and to effectuate the purposes set forth in SECTION 3.1 hereof,
including, without limitation:
(i) the making of any expenditures, the lending or borrowing
of money (including, without limitation, making prepayments on
Loans and borrowing money to permit the Partnership to make
distributions to its Partners in such amounts as will permit the
General Partner or any Member thereof (so long as the General
Partner or such Member qualifies as a REIT) to avoid the payment
of any Federal income tax (including, for this purpose, any
excise tax pursuant to Section 4981 of the Code) and to make
distributions to its shareholders sufficient
38
<PAGE>
to permit the General Partner or any Member thereof to maintain
REIT status), the assumption or guarantee of, or other
contracting for, indebtedness and other liabilities, the issuance
of evidences of indebtedness (including the securing of same by
mortgage, deed of trust or other lien or encumbrance on the
Partnership's assets) and the incurring of any obligations it
deems necessary for the conduct of the activities of the
Partnership;
(ii) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental or other
agencies having jurisdiction over the business or assets of the
Partnership;
(iii) the acquisition, disposition, conveyance, mortgage,
pledge, encumbrance, hypothecation or exchange of any assets of
the Partnership or the merger or other combination of the
Partnership with or into another entity (all of the foregoing
subject to prior approval which may be required by SECTION 7.3
hereof) on such terms as the General Partner deems proper;
provided that any amendment to this Agreement may require
approval pursuant to SECTION 14.1;
(iv) the use of the assets of the Partnership (including,
without limitation, cash on hand) for any purpose consistent with
the terms of this Agreement and on any terms it sees fit,
including, without limitation, financing of any administrative,
marketing, employee and other similar costs of the General
Partner which to the extent the General Partner has operations
other than through the Partnership or its Subsidiaries shall be
allocated between the General Partner and the Partnership on a
basis which is fair and reasonable to the Limited Partners,
financing the conduct of the operations of the Partnership or any
of the Partnership's Subsidiaries or Subtier Entities, the
lending of funds to other Persons (including the Partnership's
Subsidiaries or Subtier Entities) and the repayment of
obligations of the Partnership and its Subsidiaries or Subtier
Entities and any other Person in which it has an equity
investment and the making of capital contributions to its
Subsidiaries or Subtier Entities, the holding of any real,
personal and mixed property of the Partnership in the name of the
Partnership or in the name of a nominee or trustee (subject to
SECTION 7.10), the creation, by grant or otherwise, of easements
or servitudes, and the performance of any and all acts necessary
or appropriate to the operation of the Partnership assets
including, but not limited to, applications for rezoning,
objections to rezoning, constructing, altering, improving,
repairing, renovating, rehabilitating, razing, demolishing or
condemning any improvements or property of the Partnership;
(v) the negotiation, execution, and performance of any
contracts, conveyances or other instruments (including with
Affiliates of the Partnership to the extent provided in SECTION
7.6) 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,
without limitation, the execution and delivery of leases on
behalf of or in the name of the Partnership (including the lease
of Partnership property for any purpose and without limit as to
the term thereof, whether or not such term (including renewal
terms) shall
39
<PAGE>
extend beyond the date of termination of the Partnership and
whether or not the portion so leased is to be occupied by the
lessee or, in turn, subleased in whole or in part to others);
(vi) the opening and closing of bank accounts, the
investment of Partnership funds in securities, certificates of
deposit and other instruments, and the distribution of
Partnership cash or other Partnership assets in accordance with
this Agreement;
(vii) the selection and dismissal of employees of the
Partnership or the General Partner (including, without
limitation, employees having titles such as "president", "vice
president", "secretary" and "treasurer"), and the engagement and
dismissal of agents, outside attorneys, accountants, engineers,
appraisers, consultants, contractors and other professionals on
behalf of the General Partner or the Partnership and the
determination of their compensation and other terms of employment
or hiring;
(viii) the maintenance of such insurance for the benefit of
the Partnership and the Partners as it deems necessary or
appropriate;
(ix) the formation of, or acquisition of an interest in, and
the contribution of property to, any further limited or general
partnerships, joint ventures or other relationships that it deems
desirable (including, without limitation, the acquisition of
interests in, and the contribution of property to, its
Subsidiaries and any other Person in which it has an equity
investment from time to time);
(x) the control of any matters affecting the rights and
obligations of the Partnership, including the conduct of
litigation and the incurring of legal expense and the settlement
of claims and litigation, and the indemnification of any Person
against liabilities and contingencies to the extent permitted by
law;
(xi) the undertaking of any action in connection with the
Partnership's direct or indirect investment in its Subsidiaries
or any other Person (including, without limitation, the
contribution or loan of funds by the Partnership to such
Persons);
(xii) the determination of the fair market value of any
Partnership property distributed in kind using such reasonable
method of valuation as it may adopt; and
(xiii) the execution, acknowledgement and delivery of any
and all documents and instruments to effectuate any or all of the
foregoing.
(b) NO APPROVAL REQUIRED FOR ABOVE POWERS. Each of the Limited
Partners agrees that the General Partner is authorized to execute,
deliver and perform the above-mentioned agreements and transactions on
behalf of the Partnership without any further act, approval or vote of
the Partners (except as expressly provided herein), the Act or any
40
<PAGE>
applicable law, rule or regulation. The execution, delivery or
performance by the General Partner or the Partnership of any agreement
authorized or permitted under this Agreement shall not constitute a
breach by the General Partner of any duty that the General Partner may
owe the Partnership or the Limited Partners or any other Persons under
this Agreement or of any duty stated or implied by law or equity.
(c) INSURANCE. At all times from and after the date hereof, the
General Partner may cause the Partnership to obtain and maintain (i)
casualty, liability and other insurance on the properties of the
Partnership and (ii) liability insurance for the Indemnitees
hereunder. It is agreed and acknowledged that the Partnership may
retain JMB Insurance Agency Co. for insurance brokerage services so
long as it provides such services on rates and other terms no less
favorable than would be obtained from an unaffiliated third party in
connection therewith.
(d) WORKING CAPITAL RESERVES. At all times from and after the
date hereof, the General Partner may cause the Partnership to
establish and maintain working capital reserves in such amounts as the
General Partner, in its sole and absolute discretion, deems
appropriate and reasonable from time to time.
(e) NO OBLIGATION TO CONSIDER TAX CONSEQUENCES TO LIMITED
PARTNERS. Except as specifically provided herein or in any written
agreement between the General Partner or the Partnership and any
individual or group of Limited Partners, in exercising its authority
under this Agreement, the General Partner may, but shall be under no
obligation to, take into account the tax consequences to any Partner
of any action taken by it. Except as provided for herein or in any
such written agreement neither the General Partner nor the Partnership
shall have liability to a Limited Partner under any circumstances as a
result of an income tax liability incurred by such Limited Partner as
a result of an action (or inaction) by the General Partner pursuant to
its authority under this Agreement.
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 Illinois or in any other jurisdiction
in which the General Partner may elect in its sole discretion for the
Partnership to do business or own property. Subject to the terms of SECTION
8.5(a)(iv) hereof, the General Partner shall not be required, before or after
filing, to deliver or mail a copy of the Certificate, as it may be amended or
restated from time to time, to any Limited Partner. The General Partner shall
use all reasonable efforts to cause to be filed such other certificates or
documents as may be reasonable and necessary or appropriate for the formation,
continuation, qualification and operation of a limited partnership (or a
partnership in which the Limited Partners have limited liability) in the State
of Illinois or in any other jurisdiction in which the General Partner may elect
in its sole discretion for the Partnership to do business or own property.
41
<PAGE>
Section 7.3 RESTRICTIONS ON GENERAL PARTNER'S AUTHORITY.
(a) UNANIMOUS CONSENT REQUIRED. The General Partner may not,
without the written Consent of all of the Limited Partners, take any
action in contravention of this Agreement, including, without
limitation:
(i) take any action that would make it impossible to carry
on the ordinary business of the Partnership, except as otherwise
provided in this Agreement;
(ii) possess Partnership property, or assign any rights in
specific Partnership property, for other than a Partnership
purpose except as otherwise provided in this Agreement; or
(iii) perform any act that would subject a Limited Partner
to liability as a general partner in any jurisdiction or any
other liability except as provided herein or under the Act.
(b) ACTION WITH REQUIRED APPROVAL OF ORIGINAL CLASS A LIMITED
PARTNERS. The General Partner may not without the prior written
consent of Original Class A Limited Partners holding a majority of the
issued and outstanding Class A Common Units then held by Original
Class Limited Partners:
(i) Prior to the Call Date, sell, assign, transfer or
otherwise dispose of any of the Restricted Properties to the
extent that any such transaction would result in the recognition
of a taxable gain under the Code by the Original Class A Limited
Partners.
(ii) Prior to the second anniversary hereof, (A) allow the
Partnership to guarantee debt of the General Partner or (B) sell,
assign, transfer or otherwise dispose of any of the Partnership
properties to the extent that such transaction would result in
the Partnership and its Subtier Entities having sold,
transferred, assigned or otherwise having disposed of properties,
the Fair Market Value of which is greater than or equal to 50% of
the Fair Market Value of all properties owned by the Partnership
and its Subtier Entities on the Effective Date; or
(iii) Prior to the second anniversary of the date hereof,
make or permit any other Person to make any non-de minimis
Capital Contribution to the Partnership for the purpose of paying
any Debt of the Partnership or making distributions of Available
Cash for the purpose of a Partner paying principal on any Debt.
Section 7.4 RESPONSIBILITY FOR EXPENSES.
(a) NO COMPENSATION. Except as provided in this SECTION 7.4 and
elsewhere in this Agreement (including the provisions of ARTICLES V
and VI regarding distributions, payments, and allocations to which it
may be entitled), the General Partner shall not be compensated for its
services as general partner of the Partnership.
42
<PAGE>
(b) RESPONSIBILITY FOR OWNERSHIP AND OPERATION EXPENSES. The
Partnership shall be responsible for and shall pay all expenses
relating to the Partnership's ownership of its assets, and the
operation of, or for the benefit of, the Partnership, and the General
Partner shall be reimbursed on a monthly basis, or such other basis as
the General Partner may determine in its sole and absolute discretion,
for all expenses it incurs relating to the Partnership's ownership of
its assets and the operation of, or for the benefit of, the
Partnership. Such reimbursements shall be in addition to any
reimbursement to the General Partner as a result of indemnification
pursuant to SECTION 7.7 hereof.
(c) RESPONSIBILITY FOR ADMINISTRATION AND MERGER EXPENSES. The
Partnership shall be responsible for and shall pay all expenses
incurred relating to the Merger or the administration of the
Partnership.
Section 7.5 OUTSIDE OPPORTUNITIES OF THE GENERAL PARTNER. The General
Partner covenants and agrees that it will pursue and engage in retail
development and acquisition opportunities only through the Partnership or a
Subtier Entity, other than development opportunities with respect to properties
owned by Affiliates of the General Partner on the Effective Date or pursuant to
contractual obligations existing on the Effective Date with Kravco Company or
its Affiliates with respect to certain activities in the areas of Bangor, Maine
and King of Prussia, Pennsylvania.
Section 7.6 TRANSACTIONS WITH AFFILIATES.
(a) TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES. Except (i)
as expressly permitted by this Agreement or (ii) with approval of
Limited Partners holding a majority of the Class A Common Units then
outstanding (excluding for this purpose any Class A Common Units then
held by the General Partner or any Affiliate of the General Partner),
neither the General Partner nor any of its Affiliates shall engage in
any transaction with the Partnership or any Subsidiary of the
Partnership, including, without limitation, the making of any loan
from the Partnership, or any of its Subsidiaries (including any
guarantee or other credit enhancement) or to the Partnership or any of
its Subsidiaries, the transfer of any assets (including cash) of the
Partnership to any joint venture, other partnership or corporation or
other business entity in which the General Partner or any of its
Affiliates has an interest, or the sale, transfer or conveyance of any
property to, or the purchase of any property from, the Partnership,
directly or indirectly, except pursuant to transactions that are on
terms that are fair and reasonable and no less favorable to the
Partnership than would be obtained from an unaffiliated third party in
connection therewith.
(b) EMPLOYEE BENEFIT PLANS. The General Partner, in its sole and
absolute discretion and without the approval of the Limited Partners,
may propose and adopt on behalf of the Partnership employee benefit
plans funded by the Partnership for the benefit of employees of the
General Partner, the Partnership, Subsidiaries of the Partnership or
any Affiliate of any of them in respect of services performed,
directly or indirectly, for the benefit of the Partnership, or any of
the Partnership's Subsidiaries, including any such plan which requires
the Partnership, the General Partner or any of the Partnership's
Subsidiaries to issue or transfer Partnership Units to employees.
43
<PAGE>
Section 7.7 INDEMNIFICATION.
(a) GENERAL. The Partnership shall indemnify an Indemnitee from
and against any and all losses, claims, damages, liabilities, joint or
several, expenses (including legal fees and expenses), judgments,
fines, settlements, and other amounts arising from any and all claims,
demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, that relate to the operations of the
Partnership as set forth in this Agreement in which any Indemnitee may
be involved, or is threatened to be involved, as a party or otherwise,
unless it is established that: (i) the act or omission of the
Indemnitee was material to the matter giving rise to the proceeding
and either was committed in bad faith or was the result of active and
deliberate dishonesty; (ii) the Indemnitee actually received an
improper personal benefit in money, property or services; or (iii) in
the case of any criminal proceeding, the Indemnitee had reasonable
cause to believe that the act or omission was unlawful. The
termination of any proceeding by judgment, order or settlement does
not create a presumption that the Indemnitee did not meet the
requisite standard of conduct set forth in this SECTION 7.7(a). The
termination of any proceeding by conviction or upon a plea of nolo
contendere or its equivalent, or an entry of an order of probation
prior to judgment, creates a rebuttable presumption that the
Indemnitee acted in a manner contrary to that specified in this
SECTION 7.7(a). Any indemnification pursuant to this SECTION 7.7 shall
be made only out of the assets of the Partnership.
(b) IN ADVANCE OF FINAL DISPOSITION. Reasonable expenses incurred
by an Indemnitee who is a party to a proceeding may be paid or
reimbursed by the Partnership in advance of the final disposition of
the proceeding upon receipt by the Partnership of (i) a written
affirmation by the Indemnitee of the Indemnitee's good faith belief
that the standard of conduct necessary for indemnification by the
Partnership as authorized in 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 the standard of
conduct has not been met.
(c) OTHER THAN BY THIS SECTION. The indemnification provided by
this SECTION 7.7 shall be in addition to any other rights to which an
Indemnitee or any other Person may be entitled under any agreement,
pursuant to any vote of the Partners, as a matter of law or otherwise,
and shall continue as to an Indemnitee who has ceased to serve in such
capacity.
(d) INSURANCE. The Partnership may purchase and maintain
insurance, on behalf of the Indemnitees and such other Persons as the
General Partner shall determine, against any liability that may be
asserted against or expenses that may be incurred by such Person in
connection with the Partnership's activities, regardless of whether
the Partnership would have the power to indemnify such Person against
such liability under the provisions of this Agreement.
(e) EMPLOYEE BENEFIT PLANS. For purposes of this SECTION 7.7, the
Partnership shall be deemed to have requested an Indemnitee to serve
as fiduciary of an employee benefit plan whenever the performance by
it of its duties to the Partnership also imposes duties on, or
otherwise involves services by, it to the plan or participants or
beneficiaries
44
<PAGE>
of the plan; excise taxes assessed on an Indemnitee with respect to an
employee benefit plan pursuant to applicable law shall constitute
fines within the meaning of SECTION 7.7(a); and actions taken or
omitted by the Indemnitee with respect to an employee benefit plan in
the performance of its duties for a purpose reasonably believed by it
to be in the interest of the participants and beneficiaries of the
plan shall be deemed to be for a purpose which is not opposed to the
best interests of the Partnership.
(f) NO PERSONAL LIABILITY FOR LIMITED PARTNERS. In no event may
an Indemnitee subject the Limited Partners to personal liability by
reason of the indemnification provisions set forth in this Agreement.
(g) INTERESTED TRANSACTIONS. An Indemnitee shall not be denied
indemnification in whole or in part under this SECTION 7.7 because the
Indemnitee had an interest in the transaction with respect to which
the indemnification applies if the transaction was otherwise permitted
by the terms of this Agreement.
(h) BINDING EFFECT. 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.
Section 7.8 LIABILITY OF THE GENERAL PARTNER.
(a) GENERAL. Notwithstanding anything to the contrary set forth
in this Agreement, the General Partner shall not be liable for
monetary damages to the Partnership or any Partners for losses
sustained or liabilities incurred as a result of errors in judgment or
of any act or omission if the General Partner acted in good faith and
in a manner reasonably believed to be within its power and authority
under this Agreement; provided that the foregoing shall not restrict
the liability of the General Partner (i) to the extent that losses
sustained or liabilities incurred by the Partnership or such Partner
were a result of the gross negligence or willful misconduct of the
General Partner; (ii) to the extent that the General Partner or any of
its Affiliates actually received an improper benefit or profit in
money, property, or services for the amount of the benefit or profit
in money, property, or services actually received; or (iii) to the
extent that a judgment or other final adjudication adverse to the
General Partner is entered in a proceeding based on a finding in the
proceeding that the General Partner's action, or failure to act, was
the result of active and deliberate dishonesty and was material to the
cause of action adjudicated in the proceeding.
(b) NO OBLIGATION TO CONSIDER INTERESTS OF LIMITED PARTNERS. The
Limited Partners expressly acknowledge that the General Partner is
acting on behalf of the Partnership and the direct and indirect
holders of beneficial interests in the General Partner collectively,
and that except to the extent set forth in another Section of this
Agreement or as specifically set forth in a written agreement entered
into by the General Partner or the Partnership and any individual or
group of Limited Partners on or after the Merger Date, the General
Partner is under no obligation to consider the separate interests of
the Limited Partners (including, without limitation, the tax
consequences to Limited Partners or Assignees) in deciding whether the
cause the Partnership to take (or decline to
45
<PAGE>
take) any actions which the General Partner has undertaken in good
faith on behalf of the Partnership, and that the General Partner shall
not be liable for monetary damages for losses sustained, liabilities
incurred, or benefits not derived by Limited Partners in connection
with such decisions, provided that the General Partner has acted in
good faith.
(c) ACTS OF AGENTS. Subject to its obligations and duties as
General Partner set forth in SECTION 7.1(a) hereof, the General
Partner may exercise any of the powers granted to it by this Agreement
and perform any of the duties imposed upon it hereunder either
directly or by or through its agents. The General Partner shall not be
responsible for any misconduct or negligence on the part of any such
agent appointed by it in good faith.
(d) EFFECT OF AMENDMENT. 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
liability to the Partnership and the Limited Partners under this
SECTION 7.8 as in effect immediately prior to such amendment,
modification or repeal with respect to claims arising from or relating
to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be
asserted.
Section 7.9 OTHER MATTERS CONCERNING THE GENERAL PARTNER.
(a) RELIANCE ON DOCUMENTS. The General Partner may rely and shall
be protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, bond, debenture, or other paper or document believed
by it to be genuine and to have been signed or presented by the proper
party or parties.
(b) RELIANCE ON CONSULTANTS AND ADVISERS. The General Partner may
consult with legal counsel, accountants, appraisers, management
consultants, investment bankers and other consultants and advisers
selected by it, and any act taken or omitted to be taken in reliance
upon the opinion of such Persons as to matters which such General
Partner reasonably believes to be within such Person's professional or
expert competence shall be conclusively presumed to have been done or
omitted in good faith and in accordance with such opinion.
(c) ACTION THROUGH OFFICERS AND ATTORNEYS. The General Partner
shall have the right, in respect of any of its powers or obligations
hereunder, to act through any of its duly authorized officers and a
duly appointed attorney or attorneys-in-fact. Each such attorney
shall, to the extent provided by the General Partner in the power of
attorney, have full power and authority to do and perform all and
every act and duty which is permitted or required to be done by the
General Partner hereunder.
(d) ACTIONS TO MAINTAIN REIT STATUS OR AVOID TAXATION OF GENERAL
PARTNER. Notwithstanding any other provisions of this Agreement or the
Act, any action of the General Partner on behalf of the Partnership or
any decision of the General Partner to refrain from acting on behalf
of the Partnership, undertaken in the good faith belief that
46
<PAGE>
such action or omission is necessary or advisable in order (i) to
protect the ability of the General Partner or any Member thereof to
continue to qualify as a REIT or (ii) to avoid the General Partner or
any Member thereof incurring any taxes under Section 857 or Section
4981 of the Code, is expressly authorized under this Agreement and is
deemed approved by all of the Limited Partners; provided, however,
that this Section shall not relieve the General Partner or the
Partnership of any obligation for indemnification pursuant to a
written agreement entered into on or after the Effective Date with any
individual or group of Limited Partners; provided further, however,
this Section shall not authorize the General Partner to amend, alter
or modify any provision of this Agreement except as expressly
permitted by the provisions of ARTICLE XIV hereof.
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, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner or one or more nominees, as
the General Partner may determine, including Affiliates of the General Partner.
The General Partner hereby declares and warrants that any Partnership assets for
which legal title is held in the name of the General Partner or any nominee or
Affiliate of the General Partner shall be held by the General Partner for the
use and benefit of the Partnership in accordance with the provisions of this
Agreement; provided, however, that the General Partner shall use its
commercially reasonable efforts to cause beneficial and record title to such
assets to be vested in the Partnership as soon as reasonably practicable. All
Partnership assets shall be recorded as the property of the Partnership in its
books and records, irrespective of the name in which legal title to such
Partnership assets is held.
Section 7.11 RELIANCE BY THIRD PARTIES. Notwithstanding anything to
the contrary in this Agreement, any Person dealing with the Partnership shall be
entitled to assume that the General Partner has full power and authority to
encumber, sell or otherwise use in any manner any and all assets of the
Partnership and to enter into any contracts on behalf of the Partnership, and
such Person shall be entitled to deal with the General Partner as if it were the
Partnership's sole party in interest, both legally and beneficially. Each
Limited Partner hereby waives any and all defenses or other remedies which may
be available against such Person to contest, negate or disaffirm any action of
the General Partner in connection with any such dealing. In no event shall any
Person dealing with the General Partner or its representatives be obligated to
ascertain that the terms of this Agreement have been complied with or to inquire
into the necessity or expedience of any act or action of the General Partner or
its representatives. Each and every certificate, document or other instrument
executed on behalf of the Partnership by the General Partner or its
representatives shall be conclusive evidence in favor of any and every Person
relying thereon or claiming thereunder that (a) at the time of the execution and
delivery of such certificate, document or instrument, this Agreement was in full
force and effect, (b) the Person executing and delivering such certificate,
document or instrument was duly authorized and empowered to do so for and on
behalf of the Partnership and (c) such certificate, document or instrument was
duly executed and delivered in accordance with the terms and provisions of this
Agreement and is binding upon the Partnership.
47
<PAGE>
ARTICLE VIII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 LIMITATION OF LIABILITY. The Limited Partners shall have
no liability under this Agreement except as expressly provided in this
Agreement, including SECTION 10.5 hereof, or under the Act.
Section 8.2 MANAGEMENT OF BUSINESS. No Limited Partner or Assignee
(other than the General Partner, any of its Affiliates or any officer, director,
employee, partner, agent or trustee of the General Partner, the Partnership or
any of their Affiliates, in their capacity as such) shall take part in the
operation, management or control (within the meaning of the Act) of the
Partnership's business, transact any business in the Partnership's name or have
the power to sign documents for or otherwise bind the Partnership. The
transaction of any such business by the General Partner, any of its Affiliates
or any officer, director, employee, partner, agent or trustee of the General
Partner, the Partnership or any of their Affiliates, in their capacity as such,
shall not affect, impair or eliminate the limitations on the liability of the
Limited Partners or Assignees under this Agreement.
Section 8.3 OUTSIDE ACTIVITIES OF LIMITED PARTNERS. Subject to any
agreements entered into by a Limited Partner or its Affiliates with the General
Partner, the Partnership or a Subsidiary, the following rights shall govern
outside activities of Limited Partners: (a) any Limited Partner (other than the
General Partner) and any officer, director, employee, agent, trustee, Affiliate
or shareholder of any Limited Partner shall be entitled to and may have business
interests and engage in business activities in addition to those relating to the
Partnership, including business interests and activities in direct competition
with the Partnership; (b) neither the Partnership nor any Partners shall have
any rights by virtue of this Agreement in any business ventures of any Limited
Partner or Assignee; (c) none of the Limited Partners nor any other Person shall
have any rights by virtue of this Agreement or the partnership relationship
established hereby in any business ventures of any other Person, and no Person
shall have any obligation pursuant to this Agreement to offer any interest in
any such business ventures to the Partnership, any Limited Partner or any such
other Person, even if such opportunity is of a character which, if presented to
the Partnership, any Limited Partner or such other Person, could be taken by
such Person; (d) the fact that a Limited Partner may encounter opportunities to
purchase, otherwise acquire, lease, sell or otherwise dispose of real or
personal property and may take advantage of such opportunities himself or
introduce such opportunities to entities in which it has or has not any
interest, shall not subject such Partner to liability to the Partnership or any
of the other Partners on account of the lost opportunity; and (e) except as
otherwise specifically provided herein, nothing contained 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 relating to
the purcase, sale, rental, management or operation of real or personal property
(including real estate brokerage services) and receiving compensation therefor,
from any Persons who have transacted business with the Partnership or other
third parties.
Section 8.4 PRIORITY AMONG PARTNERS. No Partner (Limited or General)
or Assignee shall have priority over any other Partner (Limited or General) or
Assignee either as to the return of Capital Contributions or, except to the
extent provided by SECTIONS 5.1, 6.1 or 6.2 hereof or as
48
<PAGE>
permitted by SECTION 4.6(g), or otherwise expressly provided in this
Agreement, as to profits, losses or distributions.
Section 8.5 RIGHTS OF LIMITED PARTNERS RELATING TO THE PARTNERSHIP.
(a) COPIES OF BUSINESS RECORDS. In addition to other rights
provided by this Agreement or by the Act, and except as limited by
SECTION 8.5(b) hereof, each Limited Partner shall have the right, for
a purpose reasonably related to such Limited Partner's interest as a
limited partner in the Partnership, upon written demand with a
statement of the purpose of such demand and at such Limited Partner's
own expense:
(i) to obtain a copy of the Partnership's Federal, state and
local income tax returns for each Partnership Year;
(ii) to obtain a current list of the name and last known
business, residence or mailing address of each Partner;
(iii) 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
(iv) to obtain true and full information regarding the
amount of cash and a description and statement of any other
property or services contributed by each Partner and which each
Partner has agreed to contribute in the future, and the date on
which each became a Partner.
(b) CONFIDENTIAL INFORMATION. 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
Partnership information that (i) the General Partner believes to be in
the nature of trade secrets or other information the disclosure of
which the General Partner in good faith believes is not in the best
interests of the Partnership or (ii) the Partnership is required by
law or by agreements with unaffiliated third parties to keep
confidential.
(c) NOTICE OF CERTAIN EVENTS. In the event of (i) a dissolution or
liquidation of the Partnership or the General Partner, (ii) a merger,
consolidation or combination of the Partnership or the General Partner with
or into another Person, (iii) the sale of all or substantially all of the
assets of the Partnership or the General Partner, (iv) the transfer by the
General Partner of all or any part of its interest in the Partnership, (v)
any material transaction between the Partnership and the General Partner or
an Affiliate of the General Partner, or (vi) any capital contributions, the
General Partner shall cause written notice thereof to be delivered to each
Original Class A Limited Partner reasonably promptly after the occurrence
of such event, which notice may be quarterly but not less frequently than
quarterly, and provided that the notice contemplated by this Section shall
be deemed to have been given if the transaction, matter or event is
effectively described in an amendment to this Agreement or Partnership
financial statement which is delivered to an
49
<PAGE>
Original Class A Limited Partner. All such notices shall be in writing and
shall include a reasonably detailed description of the transaction. The
General Partner shall also provide such other information reasonably
requested by a Partner.
Section 8.6 LIMITED PARTNER REPRESENTATIVE. Each Limited Partner
(other than a natural person) shall appoint one representative to be described
in Exhibit A ("Limited Partner Representative"). Whenever, under the terms of
this Agreement, matters require the Consent of the Limited Partners, any action
taken by a Limited Partner Representative shall be fully binding on the Limited
Partner, it being the intention of each Limited Partner that its Limited Partner
Representative shall have full power and authority to take, authorize or approve
all action, which the Limited Partners are authorized to take, authorize or
approve under the provisions of this Agreement. Each Limited Partner shall have
the right, at any time, within its sole discretion, to appoint a temporary
substitute acceptable to the General Partner in its reasonable discretion to act
for a Limited Partner Representative unable to act, or to vest in only one of
the Limited Partner Representatives the sole power to exercise rights of the
Limited Partner Representative hereunder. The Limited Partner Representative
shall be appointed by a Limited Partner in writing, a copy of which shall be
delivered to the General Partner. Any appointments of a Limited Partner
Representative made hereunder shall remain effective until rescinded in a
writing delivered to the General Partner and the General Partner shall have the
right and authority to rely (and shall be fully protected in so doing) on the
actions taken and directions given by such Limited Partner Representative
without any further evidence of his or her authority or further action by the
Limited Partners.
ARTICLE IX
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 RECORDS AND ACCOUNTING. The General Partner shall keep or
cause to be kept at the principal office of the Partnership appropriate books
and records with respect to the Partnership's business, including, without
limitation, all books and records necessary to provide to the Limited Partners
any information, lists and copies of documents required to be provided pursuant
to SECTION 9.3 hereof. Any records maintained by or on behalf of the Partnership
in the regular course of its business may be kept on, or be in the form of,
punch cards, magnetic tape, photographs, micrographics or any other information
storage device, provided that the records so maintained are convertible into
clearly legible written form within a reasonable period of time. The books of
the Partnership shall be maintained for financial purposes on an accrual basis
in accordance with generally accepted accounting principles and for tax
reporting purposes on the accrual basis.
Section 9.2 FISCAL YEAR. The fiscal year of the Partnership shall be
the calendar year.
Section 9.3 REPORTS.
(a) ANNUAL REPORTS. As soon as practicable, but in no event later
than 120 days after the close of each Partnership Year, the General
Partner shall cause to be mailed to each Limited Partner as of the
close of the Partnership Year, an annual report containing financial
statements of the Partnership, or of the General Partner if such
statements are prepared solely on a consolidated basis with the
General Partner, for such
50
<PAGE>
Partnership Year, presented in accordance with generally accepted
accounting principles, such statements to be audited by a nationally
recognized firm of independent public accountants selected by the
General Partner.
(b) QUARTERLY REPORTS. As soon as practicable, but in no event
later than 60 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 as of the last day of the
calendar quarter, a report containing unaudited financial statements
of the Partnership, or of the General Partner, if such statements are
prepared solely, on a consolidated basis with the General Partner, and
such other information as set forth on Exhibit M or as may be required
by applicable law or regulation, or as the General Partner determines
to be appropriate.
ARTICLE X
TAX MATTERS
Section 10.1 PREPARATION OF TAX RETURNS. The General Partner shall
arrange for a nationally recognized accounting firm to prepare and timely file
all returns of Partnership income, gains, deductions, losses and other items
required of the Partnership for Federal and state income tax purposes and shall
use all reasonable efforts to furnish, within 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. Upon request of the Original
Class A Limited Partners holding a majority of the Class A Common Units then
held by Original Class A Limited Partners, the General Partner shall provide
each Original Class A Limited Partner with a reasonably accurate draft of the
Federal income tax return of the Partnership (as well as supporting data and
work papers) for each year, not less than 120 days prior to the required date
for filing such return (taking actual extensions into account). The General
Partner shall direct the Partnership's accounting firm which prepared the draft
return to reasonably cooperate with the Original Class A Limited Partners and
the accounting firm chosen by Original Class A Limited Partners holding a
majority of the Class A Common Units then held by Original Class A Limited
Partners on a timely basis (including answering questions posed by the reviewing
accounting firm).
Section 10.2 TAX ELECTIONS. Except as otherwise provided herein, the
General Partner shall, in its sole and absolute discretion, determine whether to
make any available election pursuant to the Code; provided, however, that the
General Partner shall make the election under Section 754 of the Code in
accordance with applicable regulations thereunder in respect of the Partnership
and in respect of each Subtier Entity for each of their respective taxable
years. The General Partner shall not revoke the Section 754 election made with
respect to the Partnership or any Subtier Entity.
Section 10.3 TAX MATTERS PARTNER.
(a) GENERAL. The General Partner shall at all times be the "tax
matters partner" of the Partnership for Federal income tax purposes.
Pursuant to Section 6223(c) of the Code, upon receipt of notice from
the IRS of the beginning of an administrative proceeding with respect
to the Partnership, the tax matters partner shall furnish the IRS
51
<PAGE>
with the name, address and profit interest of each of the Limited
Partners; provided, however, that such information is provided to the
Partnership by the Limited Partners. The General Partner shall provide
to each Original Class A Limited Partner the same information it or
the Internal Revenue Service would provide to a "notice partner" as
defined in Section 6231(b)(8) of the Code.
(b) POWERS. The tax matters partner is authorized, but not
required:
(i) to enter into any settlement with the IRS with respect
to any administrative or judicial proceedings for the adjustment
of Partnership items required to be taken into account by a
Partner for income tax purposes (such administrative proceedings
being referred to as a "tax audit" and such judicial proceedings
being referred to as "judicial review"), and in the settlement
agreement the tax matters Partner may expressly state that such
agreement shall bind all Partners, except that such settlement
agreement shall not bind any Partner (A) who (within the time
prescribed pursuant to the Code and Regulations) files a
statement with the IRS providing that the tax matters partner
shall not have the authority to enter into a settlement agreement
on behalf of such Partner or (B) who is a "notice partner" (as
defined in Section 6231 of the Code) or a member of a "notice
group" (as defined in Section 6223(b)(2) of the Code);
(ii) in the event that a notice of a final administrative
adjustment at the Partnership level of any item required to be
taken into account by a partner for tax purposes (a "final
adjustment") is mailed or otherwise given to the tax matters
partner, to seek judicial review of such final adjustment,
including the filing of a petition for readjustment with the Tax
Court or the United States Claims Court, or the filing of a
complaint for refund with the District Court of the United States
for the district in which the Partnership's principal place of
business is located;
(iii) to intervene in any action brought by any other
partner for judicial review of a final adjustment;
(iv) to file a request for an administrative adjustment with
the IRS at any time and, if any part of such request is not
allowed by the IRS, to file an appropriate pleading (petition,
complaint or other document) for judicial review with respect to
such request;
(v) to enter into an agreement with the IRS to extend the
period for assessing any tax which is attributable to any item
required to be taken into account by a Partner for tax purposes,
or an item affected by such item; and
(vi) to take any other action on behalf of the Partners of
the Partnership in connection with any tax audit or judicial
review proceeding to the extent permitted by applicable law or
regulations.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole and absolute discretion of the tax
matters partner, and the provisions relating to indemnification
52
<PAGE>
of the General Partner set forth in SECTION 7.7 of this Agreement shall be fully
applicable to the tax matters partner in its capacity as such.
(c) REIMBURSEMENT. The tax matters partner shall receive no
compensation for its services. All third-party costs and expenses
incurred by the tax matters partner in performing its duties as such
(including legal and accounting fees) shall be borne by the
Partnership. Nothing herein shall be construed to restrict the
Partnership from engaging an accounting firm and a law firm to assist
the tax matters partner in discharging his duties hereunder, so long
as the compensation paid by the Partnership for such services is
reasonable.
(d) ORGANIZATIONAL EXPENSES. The Partnership shall elect to
deduct expenses, if any, incurred by it in organizing the Partnership
ratably over a 60 month period as provided in Section 709 of the Code.
(e) 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 Partnership is required to withhold or pay with respect
to any amount distributable or allocable to such Limited Partner
pursuant to this Agreement, including, without limitation, any taxes
required to be withheld or paid by the Partnership pursuant to Section
1441, 1442, 1445, or 1446 of the Code. Any amount paid on behalf of or
with respect to a Limited Partner shall constitute a loan by the
Partnership to such Limited Partner, which loan shall be repaid by
such Limited Partner within 15 days after notice from the General
Partner that such payment must be made unless (a) the Partnership
withholds such payment from a distribution which would otherwise be
made to the Limited Partner or (b) the General Partner determines, in
its sole and absolute discretion, that such payment may be satisfied
out of the available funds of the Partnership which would, but for
such payment, be distributed to the Limited Partner. Any amounts
withheld pursuant to the foregoing CLAUSES (a) or (b) shall be treated
as having been distributed to such Limited Partner. Each Limited
Partner hereby unconditionally and irrevocably grants to the
Partnership a security interest in such Limited Partner's Partnership
Interest to secure such Limited Partner's obligation to pay to the
Partnership any amounts required to be paid pursuant to this SECTION
10.3(e). In the event that a Limited Partner fails to pay any amounts
owed to the Partnership pursuant to this SECTION 10.3(e) when due, the
General Partner may, in its sole and absolute discretion, elect to
make the payment to the Partnership on behalf of such defaulting
Limited Partner, and in such event shall be deemed to have loaned such
amount to such defaulting Limited Partner and shall succeed to all
rights and remedies of the Partnership as against such defaulting
Limited Partner (including, without limitation, the right to receive
distributions). Any amounts payable by a Limited Partner hereunder
shall bear interest at the base rate on corporate loans at large
United States money center commercial banks, as published from time to
time in the WALL STREET JOURNAL, plus four percentage points (but not
higher than the maximum lawful rate) from the date such amount is due
(i.e., 15 days after demand) until such amount is paid in full. Each
Limited Partner shall take such actions as the Partnership or the
General Partner shall request in order to perfect or enforce the
security interest created hereunder.
53
<PAGE>
ARTICLE XI
TRANSFERS AND WITHDRAWALS
Section 11.1 TRANSFER.
(a) DEFINITION. The term "transfer, " when used in this ARTICLE
XI with respect to a Partnership Unit, shall be deemed to refer to a
transaction by which the General Partner purports to assign its
General Partnership Interest to another Person or by which a Limited
Partner purports to assign its Limited Partnership Interest to another
Person, and includes a sale, assignment, gift, pledge, encumbrance,
hypothecation, mortgage, exchange or any other disposition by law or
otherwise.
(b) REQUIREMENTS. No Partnership Interest shall be transferred,
in whole or in part, except in accordance with the terms and
conditions set forth in this ARTICLE XI. Any transfer or purported
transfer of a Partnership Interest not made in accordance with this
ARTICLE XI shall be null and void.
Section 11.2 TRANSFER OF GENERAL PARTNER'S PARTNERSHIP INTEREST.
(a) GENERAL. So long as any Class A Common Units held by Original
Class A Limited Partners, Series C Preferred Units or Series D
Preferred Units remain outstanding, the General Partner may not
transfer all of its General Partnership Interests, other than a pledge
of its General Partnership Interest to secure any Debt, or withdraw as
a General Partner; provided, that so long as any Series C Preferred
Units and Series D Preferred Units remain outstanding, the General
Partner may transfer any portion, but not all, of its General
Partnership Interests to any Person and such person may hold the
Partnership Interest transferred as a Limited Partner or as an
additional general partner of the Partnership. At such time as no
Series C Preferred Units or Series D Preferred Units remain
outstanding, the General Partner may transfer any or all of its
General Partnership Interests to any Person; PROVIDED, HOWEVER, in the
event of such transfer of all or a portion of such General Partnership
Interest to any Person, such Person executes and delivers such
documents as are required of a successor General Partner under SECTION
12.1 and such transfer does not result in the withdrawal of the sole
General Partner resulting in an Event of Dissolution pursuant to
SECTION 13.1(b).
Section 11.3 LIMITED PARTNERS' RIGHTS TO TRANSFER.
(a) GENERAL. Subject to the provisions of SECTION 11.4 as to the
substitution of transferees as Limited Partners, a Limited Partner may
transfer all or any portion of his Class A Common Units and any of
such Limited Partner's related rights as a Limited Partner, without
the prior written consent of the General Partner; provided, however,
that any transferee who is not an Original Class A Limited Partner as
defined and otherwise set forth in this Agreement shall cease to be
treated and have the rights of an Original Class A Limited Partner for
all purposes of this Agreement, except as specifically set forth in
this SECTION 11.3(a). In order to effect such transfer, the Limited
Partner must deliver to the General Partner a duly executed copy of
the instrument making such transfer and such instrument must evidence
the written acceptance by the assignee of all
54
<PAGE>
of the terms and conditions of this Agreement and represent that such
assignment was made in accordance with all applicable laws and
regulations. The General Partner agrees and acknowledges that an
Original Class A Limited Partner may, without restriction, cause a
Class A Related Person Transfer of Class A Common Units.
(b) INCAPACITATED LIMITED PARTNERS. 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 (including the
right to exercise the Put Right or the Death Put), but not more rights
than those enjoyed by other Limited Partners for the purpose of
settling or managing the estate and such power as the Incapacitated
Limited Partner possessed to transfer all or any part of his or its
interest in the Partnership. The Incapacity of a Limited Partner, in
and of itself, shall not dissolve or terminate the Partnership.
(c) TRANSFERS CONTRARY TO SECURITIES LAWS. The General Partner
may prohibit any transfer otherwise permitted under SECTION 11.3 by a
Limited Partner of his Partnership Units if, in the opinion of legal
counsel to the Partnership, such transfer would require filing of a
registration statement under the Securities Act of 1933 or would
otherwise violate any Federal or state securities laws or regulations
applicable to the Partnership or the Partnership Unit.
(d) TRANSFERS RESULTING IN CORPORATION STATUS; TRANSFERS THROUGH
ESTABLISHED SECURITIES OR SECONDARY MARKETS. No transfer by a Limited
Partner of his Partnership Units (or any economic or other interest,
right or attribute therein) 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 Section 7704 of the Code.
Notwithstanding anything to the contrary in this Agreement, (A) no
interests in the Partnership shall be issued in a transaction that is
(or transactions that are) registered or required to be registered
under the Securities Act of l933; and (B) no Person shall be admitted
as or shall otherwise constitute a Partner unless such Partner or its
predecessor made an initial capital contribution to the Partnership of
at least $20,000.
(e) TRANSFERS TO HOLDERS OF NONRECOURSE LIABILITIES. No transfer
of any Partnership Units may be made to a lender to the Partnership or
any Person who is related (within the meaning of Section 1.752-4(b) of
the Regulations) to any lender to the Partnership whose loan
constitutes a Nonrecourse Liability without the consent of the
Original Class Limited Partners holding a majority of the Class A
Common Units then held by the Original Class A Limited Partners.
(f) TRANSFERS WITHOUT SPECIAL PROVISIONS. For clarity and an
avoidance of doubt, the Partners agree and acknowledge that an
Original Class A Limited Partner shall forfeit its priority
distribution rights under SECTIONS 5.1(c), (d), (e) and (f) (and
accompanying allocations under SECTION 6.1, allocations of Nonrecourse
Liabilities under SECTION 6.1(c), and Depreciation allocations under
SECTION 6.2(h) to the extent there is a direct or indirect transfer of
such rights in respect of a Class A Common Unit, from and
55
<PAGE>
after such direct or indirect transfer, and thereafter such Person (or
transferee) shall have only the rights of a Limited Partner not an
Original Class A Limited Partner with respect to such Class A Common
Unit, unless such indirect or direct transfer is a Class A Related
Person Transfer.
Section 11.4 SUBSTITUTED LIMITED PARTNERS.
(a) CONSENT OF GENERAL PARTNER REQUIRED. A Limited Partner shall
have the right to substitute a transferee as a Limited Partner in its
place, but only if such transfer is made pursuant to a Class A Related
Person Transfer. With respect to any other transfers, the General
Partner shall, however, have the right to consent to the admission of
a transferee of the interest of a Limited Partner pursuant to this
SECTION 11.4 as a Substituted Limited Partner, which consent may be
given or withheld by the General Partner in its sole and absolute
discretion; provided, however, the General Partner agrees to admit as
a Substituted Limited Partner any transferee of an Original Class A
Limited Partner pursuant to a Class A Related Person Transfer;
provided further, however, that if an Original Class A Limited Partner
transfers less than all of its Units (unless the aggregate number of
Units being transferred by an Original Class A Limited Partner (A) is
less than fifty percent of the aggregate number of Units held by such
Original Class A Limited Partner and (B) exceeds 72,900 Common Units,
in which case the transferee shall appoint its own Limited Partner
Representative pursuant to SECTION 8.6), such transferee shall appoint
and authorize the Limited Partner Representative of the transferring
Limited Partner 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 for the transferee to make, evidence, give,
confirm or ratify any vote, consent, approval, agreement or other
action which is made by or given to the Partners pursuant to SECTIONS
4.5(b), 4.6, 7.3, 7.6, 8.5, 10.1, 13.1 or ARTICLE XIV hereunder, in
the sole discretion of the Limited Partner Representative of the
transferring Limited Partner. Such power of attorney shall remain
effective at all times and shall be exercisable by or else reissued to
any successor Limited Partner Representative appointed by the then
current Limited Partner Representative or the transferring Limited
Partner (or its predecessor or successor, as the case may be) pursuant
to SECTION 8.6. The General Partner and the Limited Partners may rely
on such Limited Partner Representative for all purposes.
(b) RIGHTS AND DUTIES OF SUBSTITUTED LIMITED PARTNERS. A
transferee who has been admitted as a Substituted Limited Partner in
accordance with this ARTICLE XI shall have all the rights and powers
and be subject to all the restrictions and liabilities of a Limited
Partner under this Agreement.
(c) AMENDMENT OF EXHIBIT A. Upon the admission of a Substituted
Limited Partner, the General Partner shall amend EXHIBIT A to reflect
the name, address, number of Partnership Units, and Percentage
Interest of such Substituted Limited Partner and to eliminate or
adjust, if necessary, the name, address and interest of the
predecessor of such Substituted Limited Partner.
Section 11.5 ASSIGNEES. Subject to SECTIONS 11.3(a) and 11.4(a), if
the General Partner, in its sole and absolute discretion, does not consent to
the admission of any transferee as a
56
<PAGE>
Substituted Limited Partner, as described in SECTION 11.4, such transferee shall
be considered an Assignee and shall be subject to the effects of all other
provisions of this Agreement. An Assignee shall be entitled only to the economic
rights to distributions and allocations of an assignee of the Partnership Units
transferred (provided that an assignee of an Original Class A Limited Partner
shall not be entitled to the economic rights of an Original Class A Limited
Partner, but only the economic rights of a Class A Limited Partner who is not an
Original Class A Limited Partner with respect to each Class A Common Unit),
including the right to receive distributions from the Partnership and the share
of Net Income, Net Losses, gain, loss and Recapture Income attributable to the
Partnership Units assigned to such transferee, but shall not be deemed to be a
holder of Partnership Units for any other purpose under this Agreement, and
shall not be entitled to vote such Partnership Units in any matter presented to
the Limited Partners for a vote (such Partnership Units being deemed to have
been voted on such matter in the same proportion as all Partnership Units held
by Limited Partners are voted). For clarity and the avoidance of doubt, any
Assignee shall only have the rights (including economic rights) of a holder of
Class A Common Units who is not an Original Class A Limited Partner. In the
event any such transferee desires to make a further assignment of any such
Partnership Units, such transferee shall be subject to all the provisions of
this ARTICLE XI 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) WITHDRAWAL OF LIMITED PARTNER. No Limited Partner may
withdraw from the Partnership other than as at result of a permitted
transfer of all of such Limited Partner's Partnership Units in
accordance with this ARTICLE XI or pursuant to SECTION 4.6(d) or
SECTION 4.6(e).
(b) TRANSFER OF ALL PARTNERSHIP UNITS BY LIMITED PARTNER. Any
Limited Partner who shall transfer (other than pursuant to a pledge or
other agreement for security purposes) all of his Partnership Units in
a transfer permitted pursuant to this ARTICLE XI or pursuant to
SECTION 4.6(d) or SECTION 4.6(e) shall cease to be a Limited Partner.
(c) TIMING OF TRANSFERS. Transfers pursuant to this ARTICLE XI
may only be made on the first day of a fiscal quarter of the
Partnership, unless the General Partner otherwise agrees.
(d) ALLOCATION WHEN TRANSFER OCCURS. If any Partnership Interest
is transferred (other than pursuant to a pledge or other agreement for
security purposes) during any quarterly segment of a Partnership
taxable year in compliance with the provisions of this ARTICLE XI or
pursuant to SECTION 4.6(d) or SECTION 4.6(e), Net Income, Net Losses,
each item thereof and all other items attributable to such interest
for such Partnership taxable year shall be divided and allocated
between the transferor Partner and the transferee Partner by taking
into account their varying interests during the Partnership taxable
year in accordance with Section 706 (d) of the Code, using the interim
closing of the books method. Solely for purposes of making such
allocations, each of such items for the calendar month in which the
transfer or redemption occurs shall be allocated to the Person who is
a Partner as of midnight on the last day of said month. All
distributions of Available Cash with respect to which the Partnership
Record Date is before the date of
57
<PAGE>
such transfer or redemption shall be made to the transferor Partner,
and all distributions of Available Cash thereafter shall be made to
the transferee Partner.
ARTICLE XII
ADMISSION OF PARTNERS
Section 12.1 ADMISSION OF SUCCESSOR GENERAL PARTNER. A successor to
any or all of the General Partner's General Partnership Interest pursuant to
SECTION 11.2 hereof who is proposed to be admitted as a successor, General
Partner or an additional general partner, as the case may be, shall be admitted
to the Partnership effective upon such transfer. Any such transferee shall carry
on the business of the Partnership without dissolution. In each case, the
admission shall be subject to the successor General Partner or additional
general partner executing and delivering to the Partnership an acceptance of all
of the terms and conditions of this Agreement and such other documents or
instruments as may be required to effect the admission.
Section 12.2 ADMISSION OF ADDITIONAL LIMITED PARTNERS.
(a) GENERAL. A Person who makes a Capital Contribution to the
Partnership in accordance with this Agreement, who is a transferee of
any Partnership Units held by the General Partner (or any additional
general partner) and desires to hold such Partnership Units as a
Limited Partner, or who exercises an option to receive Partnership
Units, shall be admitted to the Partnership as an Additional Limited
Partner only upon furnishing to the General Partner (i) evidence of
acceptance in form satisfactory to the General Partner of all of the
terms and conditions of this Agreement, including, without limitation,
the power of attorney granted in ARTICLE XVI hereof and (ii) such
other documents or instruments as may be required in the discretion of
the General Partner in order to effect such Person's admission as an
Additional Limited Partner.
(b) CONSENT OF GENERAL PARTNER REQUIRED. Notwithstanding anything
to the contrary in this SECTION 12.2, no Person shall be admitted as
an Additional Limited Partner without the consent of the General
Partner, which consent may be given or withheld in the General
Partner's sole and absolute discretion. The admission of any Person as
an Additional Limited Partner shall become effective on the date upon
which the name of such Person is recorded on the books and records of
the Partnership, following the consent of the General Partner to such
admission.
Section 12.3 AMENDMENT OF AGREEMENT AND CERTIFICATE. 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 update or amendment of EXHIBIT A) and, if required by
law, shall prepare and file an amendment to the Certificate and may for this
purpose exercise the power of attorney granted pursuant to ARTICLE XVI hereof.
ARTICLE XIII
DISSOLUTION AND LIQUIDATION
Section 13.1 DISSOLUTION. The Partnership shall not be dissolved by
the admission of Substituted Limited Partners or Additional Limited Partners or
by the admission of a successor
58
<PAGE>
or additional General Partner in accordance with the terms of this Agreement.
The Partnership shall dissolve, and its affairs shall be wound up, upon the
first to occur of any of the following ("Events of Dissolution"):
(a) EXPIRATION OF TERM. The expiration of its term as provided
in SECTION 2.4 hereof;
(b) WITHDRAWAL OF GENERAL PARTNER. An event of withdrawal, as
defined in the Act, of the last remaining General Partner unless,
within 90 days after the withdrawal, Original Class A Limited Partners
holding a majority of the Class A Common Units then held by Original
Class A Limited Partners (unless a greater number is then required by
applicable law) agree in writing to continue the business of the
Partnership and to the appointment, effective as of the date of
withdrawal, of a substitute General Partner. In the event that there
is more than one general partner, a general partner may withdraw from
the Partnership and the business of the Partnership shall be continued
by the remaining general partner(s) and the Partnership shall not be
dissolved upon the happening of such a withdrawal;
(c) DISSOLUTION PRIOR TO EXPIRATION OF TERM. Prior to the Term
Expiration, and subject to the rights of any other class of
Partnership Units, an election to dissolve the Partnership made by the
General Partner, unless Original Class A Limited Partners holding at
least five percent (5%) of the Class A Common Units initially issued
on the Effective Date to all Original Limited Partners object in
writing to such dissolution within thirty (30) days of receiving
written notice of such election from the General Partner; or
(d) JUDICIAL DISSOLUTION DECREE. Entry of a decree of judicial
dissolution of the Partnership pursuant to the provisions of the Act.
Section 13.2 WINDING UP.
(a) GENERAL. Upon the occurrence of an Event of Dissolution, the
Partnership shall continue solely for the purposes of winding up its
affairs in an orderly manner, liquidating its assets, and satisfying
the claims of its creditors and Partners. No Partner shall take any
action that is inconsistent with, or not necessary to or appropriate
for, the winding up of the Partnership's business and affairs. The
General Partner (or its designee (the "Liquidator")) shall be
responsible for overseeing the winding up and dissolution of the
Partnership and shall take full account of the Partnership's
liabilities and property and the Partnership property shall be
liquidated as promptly as is consistent with obtaining the fair value
thereof, and the proceeds therefrom shall be applied and distributed
in the following order:
(i) First, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors other than the
Partners;
(ii) Second, to the payment and discharge of all of the
Partnership's debts and liabilities to the Partners, pro rata in
accordance with amounts owed to each such Partner;
59
<PAGE>
(iii) Third, to the payment, with respect to the holders of
Parity Preferred Units, of a liquidation preference equal to (A)
the Series C Stated Value or the Series D Stated Value, as
appropriate, and (B) an amount equal to any accumulated but
unpaid Series C Preferred Distribution and Series D Preferred
Distribution, as appropriate, thereon, whether or not declared,
to the date of payment; provided that, if, upon such voluntary or
involuntary liquidation, dissolution or winding-up, there are
insufficient assets to permit full payment of liquidating
distributions to the holders of any class or series of such Units
as to rights upon liquidation, dissolution or winding-up of the
Partnership, all payments of liquidating distributions on such
Units shall be made so that the payments on such Units shall in
all cases bear to each other the same ratio that the respective
rights of such Units upon liquidation, dissolution or winding-up
of the Partnership bear to each other; and
(iv) The balance, if any, to the General Partner and Limited
Partners in accordance with their Capital Accounts, after giving
effect to all contributions, distributions, and allocations for
all periods.
It is intended that such distributions will result in the Partners
receiving aggregate distributions in the order of and equal to the amount of
distributions that would have been received if the liquidating distributions
were made in accordance with SECTION 5.1. However, if the balances in the
Capital Accounts do not result in such intention being satisfied, items of
income, gain, loss and deduction will be reallocated among the Partners for the
year of the liquidation (and, if necessary and permissible, prior Partnership
taxable years) so as to cause the balances in the Capital Accounts to be in the
amounts necessary to assure that such result is achieved.
(b) WHERE IMMEDIATE SALE OF PARTNERSHIP'S ASSETS IMPRACTICAL.
Notwithstanding the provisions of SECTION 13.2(a) hereof which require
liquidation of the assets of the Partnership, but subject to the order
of priorities set forth therein, if prior to or upon dissolution of
the Partnership the Liquidator determines that an immediate sale of
part or all of the Partnership's assets would be impractical or would
cause undue loss to the Partners, the Liquidator may, in its sole and
absolute discretion, defer for a reasonable time the liquidation of
any assets except those necessary to satisfy liabilities of the
Partnership (including to those Partners as creditors).
Section 13.3 COMPLIANCE WITH TIMING REQUIREMENTS OF REGULATIONS;
ALLOWANCE FOR CONTINGENT OR UNFORESEEN LIABILITIES OR OBLIGATIONS.
Notwithstanding anything to the contrary in this Agreement, in the event the
Partnership is "liquidated" within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), distributions shall be made pursuant to this ARTICLE XIII
to the General Partner and Limited Partners who have positive Capital Accounts
(after such Capital Accounts have been adjusted to take into account payments
accrued but unpaid as priority returns and return of Stated Value of any Series
C or Series D Units) in compliance with Regulations Section
1.704-1(b)(2)(ii)(b)(2) (including any timing requirements therein). In the
discretion of the Liquidator, a pro rata portion of the distributions that would
otherwise be made to the General Partner and Limited Partners pursuant to this
ARTICLE XIII may be: (i) distributed to a liquidating trust established for the
benefit of the General Partner and Limited Partners for
60
<PAGE>
the purposes of liquidating Partnership assets, collecting amounts owed to the
Partnership, and paying any contingent or unforeseen liabilities or obligations
of the Partnership or of the General Partner arising out of or in connection
with the Partnership. (The assets of any such trust shall be distributed to the
General Partner and Limited Partners from time to time, in the reasonable
discretion of the Liquidator, in the same proportions as the amount distributed
to such trust by the Partnership would otherwise have been distributed to the
General Partner and Limited Partners pursuant to this Agreement); or (ii)
withheld to provide a reasonable reserve for Partnership liabilities (contingent
or otherwise) and to reflect the unrealized portion of any installment
obligations owed to the Partnership, provided that such withheld amounts shall
be distributed to the General Partner and Limited Partners as soon as
practicable.
Section 13.4 RIGHTS OF LIMITED PARTNERS. Except as specifically
provided in this Agreement, each Limited Partner shall look solely to the assets
of the Partnership for the return of his Capital Contribution and shall have no
right or power to demand or receive property other than cash from the
Partnership. Except as specifically provided in this Agreement, no Limited
Partner shall have priority over any other Partner as to the return of his
Capital Contributions, distributions, or allocations.
Section 13.5 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 and the Certificate and all
qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Illinois shall be canceled and such other
actions as may be necessary to terminate the Partnership shall be taken.
Section 13.6 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.
ARTICLE XIV
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 AMENDMENTS.
(a) GENERAL. To the extent Consent is required of any Partner for
an amendment of this Agreement pursuant to SECTIONS 14.1(c) or (d),
the General Partner may submit any proposed amendment to the Limited
Partners in the manner described in SECTION 15.1 and seek the written
consent of the Partners as contemplated by SECTION 14.2(b) or the
General Partner may call a meeting of the Partners as contemplated by
SECTION 14.2 to vote thereon and to transact any other business that
it may deem appropriate. For purposes of obtaining a written vote, the
General Partner may require a response within a reasonable specified
time, but not less than 30 days.
(b) GENERAL PARTNER'S POWER TO AMEND. Notwithstanding SECTION
14.1(a), the General Partner shall have the power, without the consent
of the Limited Partners, to
61
<PAGE>
amend this Agreement as may be required to facilitate or implement any
of the following purposes:
(i) to add to the obligations of the General Partner or
surrender any right or power granted to the General Partner or
any Affiliate of the General Partner for the benefit of the
Limited Partners;
(ii) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement;
(iii) to set forth the rights, powers, duties, and
preferences of the holders of any additional Partnership
Interests issued pursuant to SECTION 4.2 hereof;
(iv) to reflect a change that is of an inconsequential
nature and does not adversely affect the Limited Partners in any
material respect, or to cure any ambiguity, correct or supplement
any provision in this Agreement not inconsistent with law or with
material rights of the Limited Partners pursuant to the
provisions of this Agreement, or make other changes with respect
to matters arising under this Agreement that will not be
inconsistent with law or with the material rights of the Limited
Partners pursuant to the provisions of this Agreement;
(v) to satisfy any requirements, conditions, or guidelines
contained in any order, directive, opinion, ruling or regulation
of a Federal or state agency or contained in Federal or state
law; and
(vi) in the event the General Partner or any of its
Affiliates propose to register the GP Registered Shares, to
effect the registration of such securities of the General Partner
or any of its Affiliates, including, without limitation, any
amendments that may be required by the underwriters of such
offering; PROVIDED no such amendment shall relieve the General
Partner its obligations under of any written agreement between
the General Partner or the Partnership and any individual or
group of Limited Partners.
(vii) to effect any other amendment for which Consent is not
required pursuant to SECTIONS 14.1(c) or (d).
The General Partner will provide copies of any amendments effected during
any Partnership Year to the Limited Partners within 30 days after the adoption
of such amendments.
(c) CONSENT OF ADVERSELY AFFECTED PARTNER REQUIRED.
Notwithstanding SECTION 14.1(b) hereof, this Agreement shall not be
amended without the Consent of each Partner adversely affected if such
amendment would (i) convert a Limited Partner's interest in the
Partnership into a general partner's interest, (ii) modify the limited
liability of a Limited Partner, (iii) (except as permitted pursuant to
SECTION 4.2 or 14.1(b)(iii) hereof and not prohibited by SECTION 4.6)
alter rights of the Partner to receive distributions pursuant to
ARTICLE V or under the provisions of ARTICLE VI, (iv) alter the rights
of an Original Class A Limited Partner under SECTIONS 4.6, 10.1,
11.3(a) and (b) or
62
<PAGE>
11.4, (v) cause the termination of the Partnership prior to the time
set forth in SECTIONS 2.4 or 13.1, or (vi) amend SECTION 13.2 or this
SECTION 14.1(c). Further, no amendment may alter the restrictions on
the General Partner's authority set forth in SECTION 7.3 without the
Consent specified in that section.
(d) WHEN CONSENT OF MAJORITY OF LIMITED PARTNERSHIP INTERESTS
REQUIRED. Notwithstanding SECTION 14.1(a), (b) or (c) hereof, the
General Partner shall not amend (i) SECTIONS 4.2, 4.5, 4.6, 7.5, 7.6,
7.8, 11.2, 11.3, 11.4, 13.1, 13.2 or this SECTION 14.1(d) or the
defined terms used in any of those Sections (the amendment of which
definitions would adversely affect the rights of Limited Partners
holding Class A Common Units) without the Consent of Limited Partners
holding a majority of the Class A Common Units then held by Limited
Partners (excluding any Units held by the General Partner or an
Affiliate of the General Partner) or (ii) SECTIONS 4.5, 7.5, 7.8,
7.9(d) (the proviso clauses only), 10.2, 10.3, 11.2, 13.1, 13.2 or
14.1 or the defined terms used in any of those Sections, the amendment
of which would adversely affect the rights of the Original Class A
Limited Partners pursuant to any such Section, without the Consent of
Original Class A Limited Partners holding a majority of the Class A
Common Units then held by Original Class A Limited Partners, but only
if Original Class A Limited Partners could reasonably be expected to
be adversely affected by such amendment; provided further, however,
that when Original Class A Limited Partners hold in the aggregate less
than ______ Class A Common Units [20% of Class A Common Units issued
to Original Class A Limited Partners on the Effective Date], the
consent rights of Original Class A Limited Partners set forth in
clause (ii) of this SECTION 14.1(d) (other than with respect to an
amendment of the rights provided in SECTION 14.1(c)) shall no longer
be required and shall cease to be in force or effect.
(e) REGISTRATION AND SALE OF GP REGISTERED SHARES. In the event
the General Partner or any of its affiliates propose to register GP
Registered Shares, and the General Partner reasonably determines that
in connection therewith or in connection with the sale of such GP
Registered Shares in an underwritten offering, it is necessary or
appropriate to amend a provision of the Agreement for which a Limited
Partner's consent is required under SECTION 14.1(c) or (d) and for
which such consent has been obtained, each Limited Partner agrees to
and shall reasonably and in good faith cooperate with the General
Partner to effect any such amendment proposed by the General Partner.
(f) POWER TO RECONSTITUTE PARTNERSHIP. The General Partner, in
its sole discretion, may take such actions, and amend this Agreement
in such manner, as it deems reasonable to reconstitute the Partnership
as a limited partnership in any other state of the United States of
America. The Limited Partners hereby agree to execute and deliver any
amendments to this Agreement and any other agreements or documents,
such as any merger agreements, reasonably requested by the General
Partner to effectuate such reconstitution. Any such reconstitution of
the Partnership shall be at the sole cost and expense of the General
Partner and may only be undertaken by the General Partner to the
extent it does not materially affect the rights and obligations of the
Partners.
(g) MERGERS. For clarity and the avoidance of doubt, any
modification, amendment or restatement to this Agreement (or any
partnership agreement or similar
63
<PAGE>
governing document of a surviving entity if this Partnership is not
the surviving entity) pursuant to a merger or consolidation shall be
considered an amendment to this Agreement for purposes of this SECTION
14.1, regardless of whether this Partnership or another Person
survives after such merger or consolidation.
Section 14.2 MEETINGS OF THE PARTNERS.
(a) GENERAL. Meetings of the Partners may be called by the
General Partner. The call shall state the nature of the business to be
transacted. Notice of any such meeting shall be given to all Partners
not less than seven days nor more than 30 days prior to the date of
such meeting. Partners may vote in person or by proxy at such meeting.
Whenever the vote or Consent of Partners is permitted or required
under this Agreement, such vote or Consent may be given at a meeting
of Partners or may be given in accordance with the procedure
prescribed in SECTION 14.2(b) hereof. Except as otherwise expressly
provided in this Agreement, the Consent of holders of a majority of
the Percentage Interests shall control.
(b) INFORMAL ACTION. 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 so required for
such action (or such other percentage as is expressly required by this
Agreement). Such Consent may be in one instrument or in several
instruments, and shall have the same force and effect as a vote of
Partners holding a majority of the Partnership Units so required for
such action (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) PROXIES. Each Limited Partner may authorize any Person or
Persons to act for him by proxy on all matters in which a Limited
Partner is entitled to participate, including waiving notice of any
meeting, or voting or participating at a meeting. Every proxy must be
signed by the Limited Partner or his attorney-in-fact. No proxy shall
be valid after the expiration of 11 months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the Limited Partner executing it.
(d) CONDUCT OF MEETING. Each meeting of Partners shall be
conducted by the General Partner or such other Person as the General
Partner may appoint pursuant to such rules for the conduct of the
meeting as the General Partner or such other Person deems appropriate.
ARTICLE XV
GENERAL PROVISIONS
Section 15.1 ADDRESSES AND NOTICE. All notices and demands under this
Agreement shall be in writing, and may be either delivered personally (which
shall include deliveries by courier), by telefax, telex or other wire
transmission (with request for assurance of receipt in a
64
<PAGE>
manner appropriate with respect to communications of that type, provided that a
confirmation copy is concurrently sent by a nationally recognized express
courier for overnight delivery) or mailed, postage prepaid, by certified or
registered mail, return receipt requested, directed to the parties at their
respective addresses set forth on EXHIBIT A attached hereto, as it may be
amended from time to time, and, if to the Partnership, such notices and demands
sent in the aforesaid manner must be delivered at its principal place of
business set forth above. Unless delivered personally or by telefax, telex or
other wire transmission as above (which shall be effective on the date of such
delivery or transmission), any notice shall be deemed to have been made three
(3) days following the date so mailed. Any party hereto may designate a
different address to which notices and demands shall thereafter be directed by
written notice given in the same manner and directed to the Partnership at its
office hereinabove set forth.
Section 15.2 TITLES AND CAPTIONS. All article or section titles or
captions in this Agreement are for convenience only. They shall not be deemed
part of this Agreement and in no way define, limit, extend or describe the scope
or intent of any provisions hereof. Except as specifically provided otherwise,
references to "Articles" and "Sections" are to Articles and Sections of this
Agreement.
Section 15.3 PRONOUNS AND PLURALS. Whenever the context may require,
any pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa and references to "herein" or "hereof"
are to the entire Agreement.
Section 15.4 FURTHER ACTION. The parties shall execute and deliver all
documents, provide all information and take or refrain from taking action as may
be necessary or appropriate to achieve the purposes of this Agreement.
Section 15.5 BINDING EFFECT. This Agreement shall be binding upon and
inure the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and permitted assigns.
Section 15.6 WAIVER OF PARTITION. The Partners hereby agree that the
Partnership properties are not and will not be suitable for partition.
Accordingly, each of the Partners hereby irrevocably waives any and all rights
(if any) that it may have to maintain any action for partition of any of the
Partnership properties.
Section 15.7 ENTIRE AGREEMENT. Except as expressly entered into among,
or effective between, the parties in writing on the Merger Date, this Agreement
constitutes the entire agreement among the parties with respect to the matters
contained herein; it supersedes any prior agreements or understandings among
them and it may not be modified or amended in any manner other than pursuant to
ARTICLE XIV.
Section 15.8 SECURITIES LAW PROVISIONS. The Partnership Units have not
been registered under the Federal or state securities laws of any state and,
therefore, may not be resold unless appropriate Federal and state securities
laws, as well as the provisions of ARTICLE XI hereof, have been complied with.
Section 15.9 REMEDIES NOT EXCLUSIVE. Any remedies herein contained for
breaches of
65
<PAGE>
obligations hereunder shall not be deemed to be exclusive and shall not impair
the right of any party to exercise any other right or remedy, whether for
damages, injunction or otherwise.
Section 15.10 TIME. Time is of the essence of this Agreement.
Section 15.11 CREDITORS. None of the provisions of this Agreement
shall be for the benefit of, or shall be enforceable by, any creditor of the
Partnership.
Section 15.12 WAIVER. No failure by any party to insist upon the
strict performance of any covenant, duty, agreement or condition of this
Agreement or to exercise any right or remedy consequent upon a breach thereof
shall constitute waiver of any such breach or any other covenant, duty,
agreement or condition.
Section 15.13 EXECUTION COUNTERPARTS. This Agreement may be executed
in counterparts, all of which together shall constitute one agreement binding on
all the parties hereto, notwithstanding that all such parties are not
signatories to the original or the same counterpart. Each party shall become
bound by this Agreement immediately upon affixing its signature hereto.
Section 15.14 APPLICABLE LAW. This Agreement shall be construed in
accordance with and governed by the laws of the State of Illinois, without
regard to the principles of conflicts of law.
Section 15.15 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 15.16 VOTING LIMITS REGARDING ORGANIC CHANGE. In the event of
any subdivision, reclassification, combination or other organic adjustment in
the number of Class A Common Units held by Original Class A Limited Partners
(for clarity and avoidance of doubt, an organic change does not include changes
as a result of exercise of the Put Right, Call Option or an exchange for GP
Registered Shares), the amounts set forth in SECTIONS 4.6(d)(i), 11.4(a), and
14.1(d) not expressed as percentages and applicable to consent and other rights
of Original Class A Limited Partners shall be adjusted accordingly.
ARTICLE XVI
POWER OF ATTORNEY
Section 16.1 POWER OF ATTORNEY.
(a) SCOPE. Each Limited Partner and each Assignee constitutes and
appoints the General Partner, any Liquidator, and authorized officers
and attorneys-in-fact of each, and each of those acting singly, in
each case with full power of substitution, as its true and lawful
agent and attorney- in-fact, with full power and authority in its
name, place and stead to:
(i) execute, swear to, acknowledge, deliver, file and record
in the appropriate public offices (A) all certificates, documents
and other instruments
66
<PAGE>
(including, without limitation, this Agreement and the
Certificate and all amendments or restatements thereof) that the
General Partner or the Liquidator deems appropriate or necessary
to form, qualify or continue the existence or qualification of
the Partnership as a limited partnership (or a partnership in
which the limited partners have limited liability) in the State
of Illinois and in all other jurisdictions in which the
Partnership may conduct business or own property; (B) all
instruments that the General Partner deems appropriate or
necessary to reflect any amendment, change, modification or
restatement of this Agreement in accordance with its terms; (C)
all conveyances and other instruments or documents that the
General Partner deems appropriate or necessary to reflect the
dissolution and liquidation of the Partnership pursuant to the
terms of this Agreement, including, without limitation, a
certificate of cancellation; (D) all instruments relating to the
admission, withdrawal, removal or substitution of any Partner
pursuant to, or other events described in, ARTICLE XI, XII or
XIII hereof or the Capital Contribution of any Partner; and (E)
all certificates, documents and other instruments relating to the
determination of the rights, preferences and privileges of
Partnership Interests; and
(ii) execute, swear to, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other instruments
appropriate or necessary, in the sole and absolute discretion of
the General Partner, to make, evidence, give, confirm or ratify
any vote, consent, approval, agreement or other action which is
made or given by the Partners hereunder or is consistent with the
terms of this Agreement or appropriate or necessary, in the sole
discretion of the General Partner, to effectuate the terms or
intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General
Partner to amend this Agreement except in accordance with ARTICLE XIV hereof or
as may be otherwise expressly provided for in this Agreement.
(b) IRREVOCABILITY. The foregoing power of attorney is hereby
declared to be irrevocable and a power coupled with an interest, in
recognition of the fact that each of the Partners will be relying upon
the power of the General Partner to act as contemplated by this
Agreement in any filing or other action by it on behalf of the
Partnership, and it shall survive and not be affected by the
subsequent incapacity of any Limited Partner or Assignee and the
transfer of all or any portion of such Limited Partner's or Assignee's
Partnership Units and shall extend to such Limited Partner's or
Assignee's heirs, successors, assigns and personal representatives.
Each such Limited Partner or Assignee hereby agrees to be bound by any
representation made by the General Partner, acting in good faith
pursuant to such power of attorney; and each such Limited Partner or
Assignee hereby waives any and all defenses which may be available to
contest, negate or disaffirm the action of the General Partner, taken
in good faith under such power of attorney. Each Limited Partner or
Assignee shall execute and deliver to the General Partner or the
Liquidator, within 15 days after receipt of the General Partner's
request therefor, such further designation, powers of attorney and
other instruments as the General Partner or the Liquidator, as the
case may be, deems necessary to effectuate this Agreement and the
purposes of the Partnership.
67
<PAGE>
[SIGNATURE PAGE FOLLOWS]
68
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this as of the date
first written above.
GENERAL PARTNER:
HEAD ACQUISITION, L.P.
By: Head
By:____________________________
LIMITED PARTNERS:
Center Partners, Ltd.
By: JMB Realty Corporation
General Partner
By: ___________________________
Title: ________________________
Urban-Water Tower Associates
By: UIDC Holdings, L.P.
General Partner
By: JMB Realty Corporation
General Partner
By: ___________________________
Title: ________________________
Miami Associates, L.P.
By: JMB Realty Corporation
General Partner
By: ___________________________
Title: ________________________
<PAGE>
Old Orchard Limited Partnership
By: UIDC Holdings, L.P.
General Partner
By: JMB Realty Corporation
General Partner
By: ___________________________
Title: ________________________
Butcher Properties, LLC*
By: ___________________________
Title: ________________________
James M. Hietbrink Family Trust*
By: ___________________________
Trustee
_______________________________
Matthew S. Dominski*
_______________________________
James L. Czech*
Kenwood Plaza Limited Partnership*
By: ___________________________
Title: ________________________
_______________________________
Max Reiswerg*
* May convert and sell all or a portion of Units as part of the tender offer
and/or merger involving Urban Shopping Centers, Inc.
<PAGE>
EXHIBIT A
PARTNERS AND PARTNERSHIP INTERESTS
<TABLE>
<CAPTION>
Name and Address of
Limited Partner Percentage
Name and Address of Partner Representative Partnership Units Interest(1)
--------------------------- ------------------- ----------------- ---------
<S> <C> <C> <C>
Head Acquisition, L.P. 33,054,128 Class A 94.4404%
Common Units
Center Partners, Ltd. 692,784 Class A 1.9794%
900 N. Michigan Ave. Common Units
Chicago, Illinois 60611
Urban-Water Tower Associates 388,003 Class A 1.1086%
900 N. Michigan Ave. Common Units
Chicago, Illinois 60611
Miami Associates, L.P. 39,709 Class A 0.1134%
900 N. Michigan Ave. Common Units
Chicago, Illinois 60611
Old Orchard Limited Partnership 714,321 Class A 2.0409%
900 N. Michigan Ave. Common Units
Chicago, Illinois 60611
Butcher Properties, LLC* 10,919 Class A 0.0312%
400 Emerald Bay Common Units
Laguna Beach, California 92651
James M. Hietbrink Family Trust* 10,919 Class A 0.0312%
587 San Nicolas Drive, Suite 450 Common Units
Newport Beach, California 92660
Matthew S. Dominski* 17,384 Class A 0.0497%
1015 Sunset Road Common Units
Winnetka, Illinois 60093
</TABLE>
-------------------
(1) The Partnership Units and Percentage Interests may be re-allocated as
among the Limited Partners holding Class A Common Units so long as the
aggregate number of Partnership Units owned by such Partners does not
change.
A-1
<PAGE>
<TABLE>
<S> <C> <C> <C>
James L Czech* 13,690 Class A 0.0391%
900 West Deerpath Road Common Units
Lake Forest, Illinois 60045
Kenwood Plaza Limited Partnership* 57,876 Class A 0.1654%
1000 Potomac Street, N.W., Suite 200 Common Units
Washington, DC. 20007
Max Reiswerg* 267 Class A 0.0007%
900 N. Michigan Ave. Common Units
Chicago, Illinois 60611
Meadowbrook Equity Fund II, LLC 800,000 Series C Not Applicable
Bessemer Trust Company, N.A. Preferred Units
630 Fifth Avenue
New York, New York 10111
Belair Real Estate Corporation 1,000,000 Series D Not Applicable
C/o Eaton Vance Management Preferred Units
The Eaton Vance Building
255 State Street
Boston, Massachusetts 02109
Belcrest Realty Corporation 2,400,000 Series D Not Applicable
C/o Eaton Vance Management Preferred Units
The Eaton Vance Building
255 State Street
Boston, Massachusetts 02109
</TABLE>
*May convert and sell all or a portion of Units as part of the tender
offer and/or merger involving Urban Shopping Centers, Inc., in which case the
amount of Class A Common Units held by each remaining Partner shall be adjusted
accordingly, and the Percentage Interest of each remaining Partner shall be
recomputed.
A-2
<PAGE>
EXHIBIT B
AGREED VALUE OF PROPERTY AS OF THE EFFECTIVE DATE
<TABLE>
<CAPTION>
PROPERTY: AGREED VALUE (IN 000S):
-------- ----------------------
<S> <C>
Oakbrook Center
Old Orchard Center
The Galleria
Fox Valley Center
Hawthorn Center
MainPlace
Galleria at Roseville
Citrus Park Town Center
Woodland Hills Mall
Wolfchase Galleria
Penn Square Mall
Brandon TownCenter
Miami International Mall
Coral Square Mall
Century City Shopping Center
Water Tower Place
San Francisco Shopping Centre
Copley Place
Streets at Southpoint
The Plaza at Citrus Park
The Plaza at Brandon TownCenter
Sawmill Plaza
New York Square
Westheimer Triangle
Valencia Town Center
Brandon Land
Hawthorn Theatre
South Alabama (expansion land for Houston Galleria)
Bed, Bath & Beyond Parcel adjacent to Wolfchase
Galleria
Bed, Bath & Beyond Parcel adjacent to
Brandon TownCenter
Thomasville Furniture Parcel adjacent to
Brandon TownCenter
</TABLE>
---------------
$3,337,381,000
===============
B-1
<PAGE>
EXHIBIT C
FORM OF UNIT CERTIFICATION
NON-NEGOTIABLE, NON-TRANSFERABLE, NON-ASSIGNABLE
URBAN SHOPPING CENTERS, L.P.
The undersigned hereby acknowledges that Units in Urban Shopping Centers,
L.P., a limited partnership (the "Partnership") organized under the Revised
Uniform Limited Partnership Act of the State of Illinois, are registered on the
records of said Partnership in the amount and in the type set forth below:
Taxpayer
Certificate Social Security Number Identification Number
Number and Name and Address Number Type of Units
----------- ---------------------- -------------- ---- --------
This Certificate is issued solely to evidence that the above number of
Units stands in the name of such Holder of Units, as of the date hereof pursuant
to the Partnership's Third Amended and Restated Agreement of Limited
Partnership, as amended (the "Partnership Agreement"), and does not grant or
carry with it any rights to the income, profit or assets of the Partnership all
such rights being derived solely from the Partnership Agreement. This document
is NON-NEGOTIABLE, NON-TRANSFERABLE and NON-ASSIGNABLE. Assignment of Units can
only be accomplished in accordance with the procedure set forth in the
Partnership Agreement, and such assignment is subject to certain limitations
contained in Article XI of the Partnership Agreement, and any substitution of
any assignee of Units as a Limited Partner of the Partnership shall be subject
to the consent of the General Partner which consent may be granted or withheld
in its sole discretion. THIS DOCUMENT IS NOT A SECURITY UNDER THE APPLICABLE
PROVISIONS OF THE UNIFORM COMMERCIAL CODE, AND NEGOTIATION, TRANSFER OR
ASSIGNMENT OF THESE INTERESTS CANNOT BE ACCOMPLISHED BY ANY ATTEMPT TO
NEGOTIATE, TRANSFER OR ASSIGN THIS CERTIFICATE. Copies of the Partnership
Agreement may be obtained from the General Partner by contacting Urban Shopping
Centers, L.P., 900 North Michigan Avenue, Suite 1500, Chicago, Illinois 60611,
Attention: __________________________.
THE PARTNERSHIP UNITS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
TRANSFERRED ABSENT REGISTRATION THEREUNDER OR EXEMPTION THEREFROM.
______________________, L.P., General Partner
By: ___________________________
its general partner
By: ___________________________
Name:__________________________
Title:_________________________
C-1
<PAGE>
EXHIBIT A
MERGER DATE CASH DISTRIBUTIONS AND RECLASSIFICATION
OF LIMITED PARTNERSHIP INTERESTS ON MERGER DATE
<TABLE>
<CAPTION>
CLASS OF LIMITED
PARTNERSHIP UNITS HELD CLASS A COMMON
NAME OF INTEREST IMMEDIATELY MERGER DATE UNITS HELD
LIMITED PARTNER POST-RECLASSIFICATION BEFORE THE MERGER DISTRIBUTION1 POST-RECLASSIFICATION(1)
--------------- --------------------- ----------------- ------------- ------------------------
<S> <C> <C> <C> <C>
Center Partners, Ltd. Class A Common Units 3,827,672 $157,810,608 692,784
Urban-Water Tower Associates Class A Common Units 2,177,088 $89,984,688 388,003
Miami Associates, L.P. Class A Common Units 127,277 $4,623,744 39,709
Old Orchard Limited Class A 1,018,182 $22,149,360 714,321
Partnership Common Units
Butcher Properties, LLC* Class A 42,552 $1,634,016 10,919
Common Units
James M. Hietbrink Family Class A 42,552 $1,634,016 10,919
Trust* Common Units
Matthew S. Dominski* Class A 67,747 $2,601,504 17,384
Common Units
James L. Czech* Class A 53,352 $2,048,736 13,690
Common Units
Kenwood Plaza Limited Class A 225,542 $8,660,832 57,876
Partnership* Common Units
Max Reiswerg* Class A 1,042 $40,032 267
Common Units --------------- ----------------- ------------------
Total 7,583,006 $291,187,536 1,945,872
=============== ================= ==================
</TABLE>
(1) The "Merger Date Distribution" and/or the "Class A Common Units
Held Post-Reclassification" may be re-allocated as among the holders of the
Class A Common Units so long as the aggregate "Merger Date Distribution"
and/or "Class A Common Units Held Post-Reclassification," as the case may be,
does not change.
* May convert and sell all or a portion of Units as part of the tender
offer and/or merger involving Urban Shopping Centers, Inc., in which case the
"Units Held Immediately Before the Merger, " the "Merger Date Distribution" and
the "Class A Common Units Held Post-Reclassification" shall be recomputed.
D-1
<PAGE>
EXHIBIT E
RESTRICTED PROPERTIES
1. The so-called "Central Area" portion of the property commonly referred
to as "Copley Place," comprised of a two-level indoor shopping center,
four office towers, below-ground parking, and the adjacent Dartmouth
Street garage, located in Boston, Massachusetts.
2. The property commonly referred to as "Old Orchard Center," an open-air
regional shopping center and seven-story professional building located
in Skokie, Illinois.
3. The office, retail, and garage portion of the property commonly
referred to as "Water Tower Place," comprised of an eight-level indoor
retail mall, with one floor of office space, and a four-level
below-grade parking structure, located in Chicago, Illinois.
4. The property commonly referred to as "MainPlace," a two-level enclosed
regional mall located in Santa Ana, California, subject to certain
rights of affiliates of JMB Realty Corporation and interests
associated with Segerstrom to construct an office building and/or a
hotel in certain defined areas.
E-1
<PAGE>
EXHIBIT F-1
SERIES C PREFERRED UNITS
(a) DESIGNATION AND NUMBER. The Partnership has issued 800,000 Series C
Cumulative Redeemable Preferred Units (the "Series C Preferred Units"), which
shall be Limited Partnership Interests and shall be a separate class thereof.
The number and holders of the Series C Preferred Units issued and outstanding on
the Merger Date are as set forth on Exhibit A hereto.
(b) RANK. The Series C Preferred Units shall, with respect to distributions
or rights upon voluntary or involuntary liquidation, winding-up or dissolution
of the Partnership, or both, rank senior to all other classes or series of
Partnership Interests now or hereafter authorized, issued or outstanding, other
than any class or series of Partnership Interests now or hereafter authorized
and issued and expressly designated in accordance with the Partnership Agreement
as ranking on a parity with or senior to the Series C Preferred Units with
respect to distributions or rights upon voluntary or involuntary liquidation,
winding-up or dissolution of the Partnership, or both. The Series C Preferred
Units rank on a parity, with respect to distributions and rights upon voluntary
or involuntary liquidation, winding-up or dissolution of the Partnership, with
the Series D Preferred Units of the Partnership.
As used in this EXHIBIT F-1, the following terms are defined as follows:
"Parity Preferred Units" shall be used to refer to any class or series
of Partnership Interests now or hereafter authorized, issued or outstanding
that are expressly designated by the Partnership to rank on a parity with
Series C Preferred Units with respect to distributions or rights upon
voluntary or involuntary liquidation, winding-up or dissolution of the
Partnership, or both, as the context may require, whether or not the
distribution rates, distribution payment dates or redemption or liquidation
prices per unit or conversion rights or exchange rights shall be different
from those of the Series C Preferred Units, and shall include, without
limitation, the Series D Preferred Units of the Partnership.
"Priority Return" shall mean, with respect to the Series C Preferred
Units, an amount equal to 9 1/8% per annum, determined on the basis of a
360-day year of twelve 30-day months (or actual days for any month that is
shorter than a full monthly period), cumulative to the extent not
distributed for any given distribution period, of the Stated Value of the
Series C Preferred Units, commencing on the date of issuance of such Series
C Preferred Units, and, with respect to the other Parity Preferred Units,
the amount set forth in the respective amendment of this Agreement
establishing the terms of such other Parity Preferred Units.
"PTP" shall mean a "publicly traded partnership" within the meaning of
Section 7704 of the Code.
"Senior Preferred Units" shall be used to refer to any class or series
of Partnership Interests of the Partnership now or hereafter authorized,
issued or outstanding that are expressly designated by the Partnership to
rank senior to Series C Preferred Units with respect to distributions or
rights upon voluntary or involuntary liquidation, winding-up or
F-1-1
<PAGE>
dissolution of the Partnership, or both, as the context may require,
whether or not the distribution rates, distribution payment dates or
redemption or liquidation prices per unit or conversion rights or exchange
rights shall be different from those of the Series C Preferred Units.
"Stated Value" shall mean, with respect to the Series C Preferred
Units, an amount equal to $50.00 per Series C Preferred Unit, the original
Capital Contribution per Series C Preferred Unit, and, with respect to the
other Parity Preferred Units, the amounts set forth in the respective
amendment of this Agreement establishing the terms of such other Parity
Preferred Units.
(c) DISTRIBUTIONS.
(i) PAYMENT OF DISTRIBUTIONS. Subject to the rights of holders of
Senior Preferred Units and Parity Preferred Units, if any, holders of Series C
Preferred Units shall be entitled to receive, when, as and if authorized and
declared by the Partnership acting through the General Partner, out of Available
Cash, cumulative preferential cash distributions at the rate per annum of 9 1/8%
of the Stated Value of the Series C Preferred Units (the "Series C Preferred
Distribution"). Such distributions shall be cumulative, shall accrue from the
original date of issuance and all distributions accrued to the scheduled date of
payment shall be payable in cash (A) quarterly in arrears, on or before March
15, June 15, September 15 and December 15 of each year commencing on September
15, 1999 and, (B) in the event of (1) an exchange of Series C Preferred Units
into Series C Exchanged Units, or (2) a redemption of Series C Preferred Units,
on the exchange date or redemption date, as applicable (each a "Preferred Unit
Distribution Payment Date"). The amount of the distribution payable for any
period shall be computed on the basis of a 360-day year of twelve 30-day months
and the amount of the distribution payable on the initial Preferred Unit
Distribution Payment Date and for any other period shorter or longer than a full
quarterly period for which distributions are computed shall be computed on the
basis of the actual number of days elapsed. If any date on which distributions
are to be made on the Series C Preferred Units is not a Business Day, then
payment of the distribution to be made on such date shall be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay) except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date. Distributions on the Series C Preferred Units shall be made to the
holders of record of the Series C Preferred Units on the relevant record dates
to be fixed acting through the General Partner, which record dates shall be not
more than 60 days prior to the relevant Preferred Unit Distribution Payment Date
(each, a "Preferred Unit Partnership Record Date").
(ii) LIMITATION ON DISTRIBUTIONS. No distribution on the Series C
Preferred Units shall be declared or paid or set apart for payment by the
Partnership at such time as the terms and provisions of any agreement of the
Partnership relating to its indebtedness (other than any agreement with a holder
of Partnership Interests or an Affiliate thereof), prohibit such declaration,
payment or setting apart for payment or provide that such declaration, payment
or setting apart for payment would constitute a breach thereof or a default
thereunder, or if such declaration, payment or setting apart for payment shall
be restricted or prohibited by law.
F-1-2
<PAGE>
Nothing in this SECTION (c)(ii) shall be deemed to modify or in any manner limit
the provisions of SECTIONS (c)(iii) or (c)(iv) hereof.
(iii) DISTRIBUTIONS CUMULATIVE. Distributions on the Series C
Preferred Units shall accrue whether or not the terms and provisions of any
agreement of the Partnership (including any agreement relating to its
indebtedness) at any time prohibit the current payment of distributions, whether
or not (A) the Partnership has earnings, (B) there are funds legally available
for the payment of such of such distributions and (C) such distributions are
authorized. Accrued but unpaid distributions on the Series C Preferred Units
shall accumulate as of the Preferred Unit Distribution Payment Date on which
they first become payable. Distributions on account of arrears for any past
distribution periods may be declared and paid at any time, without reference to
a regular Preferred Unit Distribution Payment Date, to holders of record of the
Series C Preferred Units on the record date fixed by the Partnership acting
through the General Partner, which date shall be not more than 45 days prior to
the payment date. Accumulated and unpaid distributions shall not bear interest.
(iv) PRIORITY AS TO DISTRIBUTIONS.
(A) So long as any Series C Preferred Units are outstanding, no
distribution of cash or other property shall be authorized,
declared, paid or set apart for payment on or with respect
to any class or series of Partnership Interests of the
Partnership ranking junior to the Series C Preferred Units
with respect to distributions (collectively, "Junior
Units"), nor shall any cash or other property be set aside
for or applied to the purchase, redemption or other
acquisition for consideration of any Series C Preferred
Units, any Parity Preferred Units with respect to
distributions or any Junior Units (other than for purposes
of an employee incentive or benefit plan of the Partnership
or any of its Subsidiaries), unless, in each case, all
distributions accumulated on all Series C Preferred Units
and all classes and series of outstanding Parity Preferred
Units with respect to distributions have been paid in full
or declared and set apart for payment. The foregoing
sentence shall not prohibit (1) distributions payable
solely in Junior Units or in options, warrants or rights to
subscribe or purchase Junior Units, (2) the conversion of
Junior Units or Parity Preferred Units into Junior Units,
or (3) the redemption of Partnership Interests pursuant to
the Partnership Agreement to the extent required to
preserve the General Partner's or any of its Members', as
applicable, status as a real estate investment trust.
(B) So long as distributions have not been paid in full (or a
sum sufficient for such full payment is not irrevocably
deposited in trust for payment) upon the Series C Preferred
Units, all distributions authorized and declared on the
Series C Preferred Units and on all classes or series of
outstanding Parity Preferred Units with respect to
distributions shall be authorized and declared so that
the amount
F-1-3
<PAGE>
of distributions authorized and declared per Series C
Preferred Unit and such other classes or series of Parity
Preferred Units shall in all cases bear to each other the
same ratio that accrued distributions per Series C Preferred
Unit and such other classes or series of Parity Preferred
Units (which shall not include any accumulation in respect
of unpaid distributions for prior distribution periods if
such class or series of Parity Preferred Units does not have
cumulative distribution rights) bear to each other.
(v) NO FURTHER RIGHTS. Holders of Series C Preferred Units shall not
be entitled to any distributions, whether payable in cash, units, other property
or otherwise, in excess of the full cumulative distributions described herein.
(d) LIQUIDATION PREFERENCE.
(i) PAYMENT OF LIQUIDATING DISTRIBUTIONS. Subject to the rights of
holders of Senior Preferred Units and Parity Preferred Units with respect to
rights upon any voluntary or involuntary liquidation, dissolution or winding-up
of the Partnership, the holders of Series C Preferred Units shall be entitled to
receive out of the assets of the Partnership legally available for distribution
or the proceeds thereof, after payment or provision for debts and other
liabilities of the Partnership, but before any payment or distributions of the
assets shall be made to holders of units that rank junior to the Series C
Preferred Units with respect to rights upon liquidation, dissolution or
winding-up of the Partnership, an amount equal to the sum of (A) a liquidation
preference equal to the Stated Value of such Series C Preferred Units, and (B)
any accumulated and unpaid Priority Return thereon, whether or not declared, to
the date of payment. If, upon such voluntary or involuntary liquidation,
dissolution or winding-up, there are insufficient assets to permit full payment
of liquidating distributions to the holders of Series C Exchanged Units and any
Parity Preferred Units with respect to rights upon liquidation, dissolution or
winding-up of the Partnership, all payments of liquidating distributions on the
Series C Preferred Units and such Parity Preferred Units shall be made so that
the payments on the Series C Preferred Units and such Parity Preferred Units
shall in all cases bear to each other the same ratio that the respective rights
of the Series C Preferred Unit and such other Parity Preferred Units (which
shall not include any accumulation in respect of unpaid distributions for prior
distribution periods if such Parity Preferred Units do not have cumulative
distribution rights) upon liquidation, dissolution or winding-up of the
Partnership bear to each other.
(ii) NOTICE. Written notice of any such voluntary or involuntary
liquidation, dissolution or winding-up of the Partnership, stating the payment
date or dates when, and the place or places where, the amounts distributable in
such circumstances shall be payable, shall be given by first class mail, postage
pre-paid, not less than 30 and not more than 60 days prior to the payment date
stated therein, to each record holder of the Series C Preferred Units at the
respective addresses of such holders as the same shall appear on the transfer
records of the Partnership.
(iii) NO FURTHER RIGHTS. After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of Series C
Preferred Units shall have no right or claim to any of the remaining assets of
the Partnership.
F-1-4
<PAGE>
(iv) CONSOLIDATION, MERGER OR CERTAIN OTHER TRANSACTIONS. The
voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all of the
property or assets of the General Partner to, or the consolidation or merger or
other business combination of the General Partner or the Partnership with or
into, any corporation, trust or other entity (or of any corporation, trust or
other entity with or into the Partnership) or a statutory share exchange of the
General Partner shall not be deemed to constitute a liquidation, dissolution or
winding-up of the Partnership.
(e) OPTIONAL REDEMPTION.
(i) RIGHT OF OPTIONAL REDEMPTION. The Series C Preferred Units may not
be redeemed prior to the fifth anniversary of the issuance date. On or after
such date, the Partnership shall have the right to redeem the Series C Preferred
Units, in whole or in part, at any time or from time to time, upon not less than
30 nor more than 60 days' written notice, at a redemption price, payable in
cash, equal to the Capital Account balance of the holder of Series C Preferred
Units (the "Redemption Price"); provided, however, that no redemption pursuant
to this SECTION (e) will be permitted if the Redemption Price does not equal or
exceed the Stated Value per Series C Preferred Unit and all accrued and unpaid
distributions thereon to the redemption date. If fewer than all of the
outstanding Series C Preferred Units are to be redeemed, the Series C Preferred
Units to be redeemed shall be selected pro rata (as nearly as practicable
without creating fractional units).
(ii) LIMITATION ON REDEMPTION. The Partnership may not redeem fewer
than all of the outstanding Series C Preferred Units unless all accumulated and
unpaid distributions have been paid or declared and set apart for payment on all
Series C Preferred Units for all quarterly distribution periods terminating on
or prior to the date of redemption.
(iii) NOTICE OF REDEMPTION. Notice of redemption will be mailed by the
Partnership, by certified mail, postage prepaid, not less than 30 nor more than
60 days prior to the redemption date, addressed to the holders of record of the
Series C Preferred Units to be redeemed at their respective addresses as they
appear on the records of the Partnership. No failure to give or defect in such
notice shall affect the validity of the proceedings for the redemption of any
Series C Preferred Units except as to the holder to whom such notice was
defective or not given. In addition to any information required by law, each
such notice shall state: (A) the redemption date, (B) the Redemption Price, (C)
the aggregate number of Series C Preferred Units to be redeemed and if fewer
than all of the outstanding Series C Preferred Units are to be redeemed, the
number of Series C Preferred Units to be redeemed held by such holder, which
number shall equal such holder's pro rata share (based on the percentage of the
total number of outstanding Series C Preferred Units held by such holder) of the
aggregate number of Series C Preferred Units to be redeemed, and (D) the place
or places where certificates representing such Series C Preferred Units are to
be surrendered for payment of the Redemption Price.
(iv) PROCEDURES FOR REDEMPTION. If the Partnership gives a notice of
redemption in respect of Series C Preferred Units (which notice will be
irrevocable) then the Partnership's obligation to make available the redemption
price shall be deemed fulfilled if, on or before the redemption date, the
Partnership pays each holder of Series C Preferred Units in cash
F-1-5
<PAGE>
directly or the Partnership deposits irrevocably in trust for the benefit of the
Series C Preferred Units being redeemed funds sufficient to pay the applicable
Redemption Price with irrevocable instructions and authority to pay such
Redemption Price to the holders of the Series C Preferred Units upon surrender
of the Series C Preferred Units by such holders at the place designated in the
notice of redemption. If the Series C Preferred Units are evidenced by a
certificate and if fewer than all Series C Preferred Units evidenced by any
certificate are being redeemed, a new certificate shall be issued upon surrender
of the certificate evidencing all Series C Preferred Units, evidencing the
unredeemed Series C Preferred Units without cost to the holder thereof. On and
after the redemption date, (A) distributions shall cease to accumulate on the
Series C Preferred Units or portions thereof called for redemption, unless the
Partnership defaults in the payment thereof, (B) such units shall no longer be
deemed to be outstanding and (C) all rights of the holders thereof as holders of
Series C Preferred Units shall cease (except the right to receive the redemption
price and any accumulated and unpaid distributions), unless the Partnership
defaults in the payment thereof. If any date fixed for redemption of Series C
Preferred Units is not a Business Day, then payment of the Redemption Price
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay)
except that, if such Business Day falls in the next calendar year, such payment
will be made on the immediately preceding Business Day, in each case with he
same force and effect as if made on such date fixed for redemption. If payment
of the Redemption Price is improperly withheld or refused and not paid by the
Partnership, distributions on such Series C Preferred Units will continue to
accumulate from the original redemption date to the date of payment, in which
case the actual payment date will be considered the date fixed for redemption
for purposes of calculating the applicable Redemption Price.
(f) VOTING RIGHTS.
(i) GENERAL. Holders of the Series C Preferred Units shall not have
any voting rights or right to consent to any matter requiring the consent or
approval of the Limited Partners, except as otherwise expressly set forth in the
Partnership Agreement and except as set forth below.
(ii) CERTAIN VOTING RIGHTS. So long as any Series C Preferred Units
remain outstanding, the Partnership shall not, without the affirmative vote of
the holders of at least two-thirds of the Series C Preferred Units outstanding
at the time (A) authorize or create, or increase the authorized or issued amount
of, any class or series of Partnership Interests ranking senior to the Series C
Preferred Units with respect to distributions or rights upon liquidation,
dissolution or winding-up or reclassify any Partnership Interests of the
Partnership into any such Partnership Interests, or create, authorize or issue
any obligations or securities convertible into or evidencing the right to
purchase any such Partnership Interests; provided, however, that no such vote of
the holders of the Series C Preferred Units shall be required if, at or prior to
the time when such action is to take effect, the Partnership provides for the
redemption of all of the Series C Preferred Units then outstanding, (B)
authorize or create, or increase the authorized or issued amount of, any Parity
Preferred Units or reclassify any Partnership Interest of the Partnership into
any such Parity Preferred Units or create, authorize or issue any obligations or
security convertible into or evidencing the right to purchase any such Parity
Preferred Units but only to the extent such Parity Preferred Units are issued to
JMB Realty Corporation or any of its Affiliates, other than the General Partner
to the extent the issuance of such interests was to allow
F-1-6
<PAGE>
the General Partner to issue corresponding preferred stock to persons other than
JMB Realty Corporation or any of its Affiliates (provided that the Partnership
may issue Parity Preferred Units corresponding to convertible preferred stock
issued by the General Partner or any Member thereof in a public offering to JMB
Realty Corporation and its Affiliates up to the extent necessary for JMB Realty
Corporation and its Affiliates to maintain their percentage ownership of the
General Partner's or any Members' common stock on a fully diluted basis) or (C)
amend, alter or repeal the provisions of the Partnership Agreement, in a manner
that would materially and adversely affect the powers, rights, preferences,
privileges or voting power of the Series C Preferred Units or the holders
thereof; provided, however, that any increase in the amount of Partnership
Interests or the creation or issuance of any other class or series of
Partnership Interests, in each case ranking either (1) junior to te Series C
Preferred Units with respect to distributions and rights upon liquidation,
dissolution or winding-up, or (2) on a parity with the Series C Preferred Units
with respect to distributions and rights upon liquidation, dissolution or
winding-up, shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers and no vote of the holders of Series C
Preferred Units shall be required in such case.
(g) TRANSFER RESTRICTIONS.
(i) The Series C Preferred Units shall be subject to the provisions of
Article 11 of the Partnership Agreement.
(ii) No transfer of the Series C Preferred Units may be made without
the consent of the General Partner, which consent may be given or withheld in
its sole and absolute discretion.
(h) EXCHANGE RIGHTS.
(i) RIGHT TO EXCHANGE.
(A) Series C Preferred Units shall be exchangeable in whole or
in part at any time on or after May 27, 2009, at the option
of the holders thereof, for Series C Exchanged Units at an
exchange rate of one Series C Exchanged Unit for one Series
C Preferred Unit, subject to adjustment as described below
(the "Series C Exchange Price"), provided that the Series C
Preferred Units will become exchangeable at any time, in
whole or in part, at the option of the holders of Series C
Preferred Units for Series C Exchanged Units if (1) at any
time full distributions shall be in arrears on any Series C
Preferred Unit with respect to six prior quarterly
distribution periods, whether or not consecutive, or (2)
upon receipt by a holder or holders of Series C Preferred
Units of (I) notice from the General Partner that the
General Partner or a Subsidiary of the General Partner has
taken the position that the Partnership is, or upon the
occurrence of a defined event in the immediate future will
be, a PTP and (II) an opinion rendered by an outside
nationally recognized independent counsel familiar with such
matters,
F-1-7
<PAGE>
addressed to a holder or holders of Series C Preferred
Units, that the Partnership is or likely is, or upon the
occurrence of a defined event in the immediate future will
be or likely will be, a PTP. In addition, the Series C
Preferred Units may be exchanged for Series C Exchanged
Units, in whole or in part, at the option of any holder
prior to the tenth anniversary of the issuance date and
after the third anniversary thereof if such holder of a
Series C Preferred Units shall deliver to the General
Partner either (A) a private ruling letter addressed to such
holder of Series C Preferred Units or (B) an opinion of
independent counsel reasonably acceptable to the General
Partner based on the enactment of temporary or final
Treasury Regulations or the publication of a Revenue Ruling,
in either case to the effect that an exchange of the Series
C Preferred Units at such earlier time would not cause the
Series C Preferred Units tobe considered "stock and
securities" within the meaning of Section 351(e) of the
Code, for purposes of determining whether the holder of such
Series C Preferred Units is an "investment company" under
Section 721(b) of the Code if an exchange is permitted at
such earlier date. Furthermore, the Series C Preferred Units
may be exchanged in whole or in part for Series C Exchanged
Units at any time after the date hereof, if both (AA) the
holder thereof concludes based on results or projected
results that there exists (in the reasonable judgment of the
holder) an imminent and substantial risk that the holder's
interest in the Partnership does or will represent more than
19.5% of the total profits or capital interests in the
Partnership (determined in accordance with Treasury
Regulations Section 1.731-2(e)(4)) for a taxable year, and
(BB) the holder delivers to the General Partner an opinion
of nationally recognized independent counsel to the effect
that there is an imminent and substantial risk that the
holder's interest in the Partnership does or will represent
more than 19.5% of the total profits or capital interests in
the Partnership (determined in accordance with Treasury
Regulations Section 1.731-2(e)(4)) for a taxable year.
(B) Notwithstanding anything to the contrary set forth in
SECTION (h)(i)(A) or (h)(i)(C) hereof, if a Series C
Exchange Notice (as defined below) has been delivered to the
General Partner, then the General Partner may, at its
option, elect to redeem or cause the Partnership to redeem
all or a portion of the outstanding Series C Preferred Units
for cash in an amount equal to the Stated Value per Series C
Preferred Unit and all accrued and unpaid distributions
thereon to the date of redemption. The General Partner may
exercise its option to redeem the Series C Preferred Units
for cash pursuant to this SECTION (h)(i)(B) by giving each
holder of record of Series C Preferred Units notice of its
election to redeem for cash, within five Business Days after
receipt of the Exchange
F-1-8
<PAGE>
Notice, by registered mail, postage paid, at the address of
each holder set forth in the records of the Partnership
stating (1) the redemption date, which shall be no later
than 60 days following the receipt of the Exchange Notice,
(2) the redemption price, (3) the place or places where the
Series C Preferred Units are to be surrendered for payment
of the redemption price, and (4) the aggregate number of
Series C Preferred Units to be redeemed, and if fewer than
all of the outstanding Series C Preferred Units are to be
redeemed, the number of Series C Preferred Units to be
redeemed held by such holder, which number shall equal such
holder's pro rata share (based on the percentage of the
total number of outstanding Series C Preferred Units held by
such holder) of the aggregate number of Series C Preferred
Units being redeemed.
(C) Upon the occurrence of an event giving rise to exchange
rights pursuant to SECTION (h)(i)(A) hereof, in the event an
exchange of all or a portion of Series C Preferred Units
pursuant to SECTION (h)(i)(A) hereof would violate the
Ownership Limitation of the General Partner, the General
Partner shall give written notice thereof to each holder of
record of Series C Preferred Units, within five Business
Days following receipt of the Exchange Notice, by registered
mail, postage prepaid, at the address of each such holder
set forth in the records of the Partnership. In such event,
each holder of Series C Preferred Units shall be entitled to
exchange, pursuant to the provision of SECTION (h)(ii)
hereof, a number of Series C Preferred Units which would
comply with the Ownership Limitation of the General Partner
and any Series C Preferred Units not so exchanged (the
"Excess Units") shall be redeemed by the Partnership for
cash in an amount equal to the Stated Value per Excess Unit
and all accrued and unpaid distributions thereon to the date
of redemption. The written notice of the General Partner
shall state (1) the number of Excess Units held by such
holder, (2) the redemption price, (3) the redemption date,
which date shall be no later than 60 days following the
receipt of the Exchange Notice, and (4) the place or places
where such Excess Units are to be surrendered for payment of
the Redemption Price. If an exchange would result in Excess
Units, as a condition to such exchange, each holder of such
Excess Units agrees to provide representations and covenants
reasonably requested by the General Partner relating to (I)
the widely held nature of the interests in such holder,
sufficient to assure the General Partner that the holder's
ownership of stock of the General Partner (without regard to
the limits described above) will not cause any individual to
own in excess of 9.8% of the Equity Securities of the
General Partner; (II) to the extent such holder can so
represent and covenant without obtaining information from
its owners, the holder's ownership of tenants of the
Partnership and its affiliates and (III) any other
information
F-1-9
<PAGE>
required by the limited partnership agreement or limited
partnership certificate or other equivalent organizational
documents of the General Partner.
(D) The redemption of Series C Preferred Units described in
SECTIONS (h)(i)(B) and (C) hereof shall be subject to the
provisions of SECTION (e)(ii) hereof; provided, however,
that for purposes hereof the term "Redemption Price" in
SECTION (e)(ii) hereof shall be read to mean the Stated
Value per Series C Preferred Unit being redeemed plus all
accrued and unpaid distributions to the redemption date.
(ii) PROCEDURE FOR EXCHANGE.
(A) Any exchange shall be exercised pursuant to a notice of
exchange (the "Exchange Notice") delivered to the General
Partner by the holder who is exercising such exchange right,
by certified mail, postage prepaid. Upon request of the
General Partner, such holder delivering the Exchange Notice
shall provide to the General Partner in writing such
information as the General Partner may reasonably request to
determine whether any portion of the exchange by the
delivering holder will result in the violation of the
Ownership Limitation of the General Partner. The exchange of
Series C Preferred Units, or a specified portion thereof,
may be effected after the fifth Business Day following
receipt by the General Partner of the Exchange Notice and
such requested information by delivering certificates, if
any, representing such Series C Preferred Units to be
exchanged together with, if applicable, written notice of
exchange and a proper assignment of such Series C Preferred
Units to the office of the General Partner maintained for
such purpose. Currently, such office is located at 900 N.
Michigan Avenue, Suite 1500, Chicago, IL 60611. Each
exchange will be deemed to have been effected immediately
prior to the close of business on the date on which such
Series C Preferred Units to be exchanged (together with all
required documentation) shall have been surrendered and
notice shall have been received by the General Partner as
aforesaid and the Exchange Price shall have been paid. Any
Series C Exchanged Units issued pursuant to this SECTION (h)
shall be delivered as Series C Exchanged Units which are
duly authorized, validly issued, fully paid and
nonassessable, free of pledge, lien, encumbrance or
restriction other than those provided in the limited
partnership certificate or limited partnership agreement or
other equivalent organizational documents of the General
Partner, Securities Act and relevant state securities or
blue sky laws.
F-1-10
<PAGE>
(B) In the event of an exchange of Series C Preferred Units for
Series C Exchanged Units, an amount equal to the accrued and
unpaid distributions that are not paid pursuant to SECTION
(c)(i) hereof, whether or not declared, to the date of
exchange on any Series C Preferred Units tendered for
exchange shall (1) accrue and be payable by the General
Partner from and after the date of exchange on the Series C
Exchanged Units into which such Series C Preferred Units
are exchanged, and (2) continue to accrue on such Series C
Preferred Units, which shall remain outstanding following
such exchange, with the General Partner as the holder of
such Series C Preferred Units. Notwithstanding anything
to the contrary set forth herein, in no event shall a
holder of a Series C Preferred Unit that was validly
exchanged into Series C Exchanged Units pursuant to this
section (other than the General Partner now holding such
Series C Preferred Unit), receive a distribution out of
Available Cash of the Partnership with respect to any
Series C Preferred Units so exchanged.
(C) Fractional Series C Exchanged Units shall not be issued upon
exchange but, in lieu thereof, the General Partner shall pay
a cash adjustment based upon the fair market value of the
Series C Exchanged Units on the day prior to the exchange
date as determined in good faith by the general partner of
the General Partner.
(iii) ADJUSTMENT OF EXCHANGE.
(A) The Series C Exchange Price is subject to adjustment upon
certain events, including, (1) subdivisions, combinations
and reclassification of the Series C Exchanged Units, and
(2) distributions to all holders of the Series C Exchanged
Units of evidences of indebtedness of the General Partner
or assets (including securities, but excluding dividends and
distributions paid in cash out of equity applicable to the
Series C Exchanged Units).
(B) In case the General Partner shall be a party to any
transaction (including, without limitation, a merger,
consolidation, statutory share exchange, tender offer for
all or substantially all of the General Partner's capital
stock (or other Equity Securities) or sale of all or
substantially all of the General Partner's assets), in each
case as a result of which the Series C Exchanged Units will
be converted into the right to receive shares of capital
stock, other securities or other property (including cash
or any combination thereof), each Series C Preferred Unit
will thereafter be exchangeable into the kind and amount of
shares of capital stock and other securities and property
receivable (including cash or any
F-1-11
<PAGE>
combination thereof) upon the consummation of such
transaction by a holder of that number of the Series C
Exchanged Units or fraction thereof into which one
Series C Preferred Unit was exchangeable immediately prior
to such transaction. The General Partner may not become a
party to any such transaction unless the terms thereof are
consistent with the foregoing.
(i) NO CONVERSION RIGHTS. The holders of the Series C Preferred Units shall
not have any rights to convert such shares into shares of any other class or
series of stock or into any other securities of, or interest in, the
Partnership.
(j) NO SINKING FUND. No sinking fund shall be established for the
retirement or redemption of the Series C Preferred Units.
F-1-12
<PAGE>
EXHIBIT F-2
SERIES D PREFERRED UNITS
(a) DESIGNATION AND NUMBER. A series of Partnership Units in the
Partnership designated as the "9.45% Series D Cumulative Redeemable Preferred
Units" (the "Series D Preferred Units") has been established by the Partnership.
The Series D Preferred Units shall be Limited Partnership Interests and shall be
a separate class thereof. The number and holders of the Series D Preferred Units
issued and outstanding on the Merger Date are as set forth on EXHIBIT A hereto.
(b) RANK. The Series D Preferred Units shall, with respect to distributions
and rights upon voluntary or involuntary liquidation, winding-up or dissolution
of the Partnership, rank senior to all other classes or series of Partnership
Interests now or hereafter authorized, issued or outstanding, other than any
class or series of Partnership Interests now or hereafter authorized and issued
and expressly designated in accordance with the Partnership Agreement as ranking
on a parity with or senior to the Series D Preferred Units with respect to
distributions or rights upon voluntary or involuntary liquidation, winding-up or
dissolution of the Partnership, or both. The Series D Preferred Units rank on a
parity, with respect to distributions and rights upon voluntary or involuntary
liquidation, winding-up or dissolution of the Partnership, with the Series C
Preferred Units of the Partnership.
As used in this EXHIBIT F-2, the following terms are defined as follows:
"Parity Preferred Units" shall be used to refer to any class or series
of Partnership Interests of the Partnership now or hereafter authorized,
issued or outstanding that are expressly designated by the Partnership to
rank on a parity with Series D Preferred Units with respect to
distributions or rights upon voluntary or involuntary liquidation,
winding-up or dissolution of the Partnership, or both, whether or not the
distribution rates, distribution payment dates or redemption or liquidation
prices per unit or conversion rights or exchange rights shall be different
from those of the Series D Preferred Units, and shall include, without
limitation, the Series C Preferred Units.
"Priority Return" shall mean, with respect to the Series D Preferred
Units, an amount equal to 9.45% per annum, determined on the basis of a 360
day year of twelve 30 day months (and for any period shorter than a full
quarterly period for which distributions are computed, the amount of the
distribution payable shall be computed based on the ratio of the actual
number of days elapsed in such period to 90 days), cumulative to the extent
not distributed for any given distribution period pursuant to Section 5.1
of the Partnership Agreement, of the Stated Value of the Series D Preferred
Units, commencing on the date of issuance of such Series D Preferred Units,
and, with respect to the other Parity Preferred Units, the amount set forth
in the respective amendment of the Partnership Agreement establishing the
terms of such other Parity Preferred Units.
"PTP" shall mean a "publicly traded partnership" within the meaning of
Section 7704 of the Code.
F-2-1
<PAGE>
"Senior Preferred Units" shall be used to refer to any class or series
of Partnership Interests of the Partnership hereafter authorized, issued or
outstanding that are expressly designated by the Partnership to rank senior
to Series D Preferred Units with respect to distributions and rights upon
voluntary or involuntary liquidation, winding-up or dissolution of the
Partnership, whether or not the distribution rates, distribution payment
dates or redemption or liquidation prices per unit or conversion rights or
exchange rights shall be different from those of the Series D Preferred
Units.
"Stated Value" shall mean, with respect to the Series D Preferred
Units, an amount equal to the original Capital Contribution per Series D
Preferred Unit of $25.00, and, with respect to the other Parity Preferred
Units, the amounts set forth in the respective amendment of the Partnership
Agreement establishing the terms of such other Parity Preferred Units.
(c) DISTRIBUTIONS.
(i) PAYMENT OF DISTRIBUTIONS. Subject to the rights of holders of
Senior Preferred Units and Parity Preferred Units, if any, holders of Series D
Preferred Units shall be entitled to receive, when, as and if authorized and
declared by the Partnership acting through the General Partner, out of Available
Cash, cumulative preferential cash distributions at the rate per annum of 9.45%
of the Stated Value of the Series D Preferred Units (the "Series D Preferred
Distribution"). Distributions shall be cumulative, shall accrue from the
original date of issuance and all distributions accrued to the scheduled date of
payment shall be payable in cash (A) quarterly (such quarterly periods for
purposes of payment and accrual will be the quarterly periods ending on and
including the dates specified in this sentence and not calendar year quarters)
in arrears, on March 15, June 15, September 15 and December 15 of each year
commencing on December 15, 1999 (with the first such payment to include the
amount accrued from the period commencing October 1, 1999 and ending December
15, 1999) and, (B) in the event of (1) an exchange of Series D Preferred Units
into Series D Exchanged Units, or (2) a redemption of Series D Preferred Units,
on the exchange date or redemption date, as applicable (each a "Preferred Unit
Distribution Payment Date"). The amount of the distribution payable for any
period shall be computed on the basis of a 360-day year of twelve 30-day months,
and the amount of the distribution payable on the initial Preferred Unit
Distribution Payment Date and for any period shorter than a full quarterly
period for which distributions are computed shall be computed based on the ratio
of the actual number of days elapsed in such quarterly period to 90 days. If any
date on which distributions are to be made on the Series D Preferred Units is
not a Business Day, then payment of the distribution to be made on such date
shall be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay) except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such date. Distributions on the Series D Preferred Units
shall be made to the holders of record of the Series D Preferred Units on the
relevant record dates to be fixed by the Partnership acting through the General
Partner, which record dates shall be not more than 60 days prior to the relevant
Preferred Unit Distribution Payment Date.
(ii) LIMITATION ON DISTRIBUTIONS. No distribution on the Series D
Preferred Units shall be declared or paid or set apart for payment by the
Partnership at such time as the
F-2-2
<PAGE>
terms and provisions of any agreement of the Partnership relating to its
indebtedness (other than any agreement with a holder of Partnership Interests or
an Affiliate thereof), prohibit such declaration, payment or setting apart for
payment or provide that such declaration, payment or setting apart for payment
would constitute a breach thereof or a default thereunder, or if such
declaration, payment or setting apart for payment shall be restricted or
prohibited by law. Nothing in this SECTION (c)(ii) shall be deemed to modify or
in any manner limit the provisions of SECTIONS (c)(iii) or (c)(iv).
(iii) DISTRIBUTIONS CUMULATIVE. Distributions on the Series D
Preferred Units shall accrue whether or not (A) the terms and provisions of any
agreement of the Partnership, including any agreement relating to its
indebtedness at any time prohibit the current payment of distributions, (B) the
Partnership has earnings, (C) there are funds legally available for the payment
of such distributions and (D) such distributions are authorized and declared.
Accrued but unpaid distributions on the Series D Preferred Units shall
accumulate as of the Preferred Unit Distribution Payment Date on which they
first become payable. Distributions on account of arrears for any past
distribution periods may be declared and paid at any time, without reference to
a regular Preferred Unit Distribution Payment Date to holders of record of the
Series D Preferred Units on the record date fixed by the Partnership acting
through the General Partner which date shall be not more than 45 days prior to
the payment date. Accumulated and unpaid distributions shall not bear interest.
(iv) PRIORITY AS TO DISTRIBUTIONS.
(A) So long as any Series D Preferred Units are outstanding, no
distribution of cash or other property shall be authorized,
declared, paid or set apart for payment on or with respect
to any class or series of Partnership Interests of the
Partnership ranking junior to the Series D Preferred Units
with respect to distributions (collectively, "Junior
Units"), nor shall any cash or other property be set aside
for or applied to the purchase, redemption or other
acquisition for consideration of any Series D Preferred
Units, any Parity Preferred Units with respect to
distributions or any Junior Units (other than Junior Units
for purposes of an employee incentive or benefit plan of the
Partnership, the General Partner or any of their respective
Subsidiaries), unless, in each case, all distributions
accumulated and payable on all Series D Preferred Units and
all classes and series of outstanding Parity Preferred Units
with respect to distributions have been paid in full or
declared and irrevocably deposited in trust for immediate
payment. Without limiting Section (f) hereof, the foregoing
sentence shall not prohibit (1) distributions payable solely
in Junior Units or in options, warrants or rights to
subscribe or purchase Junior Units, (2) the conversion of
Junior Units or Parity Preferred Units into Junior Units, or
(3) the redemption of Partnership Interests pursuant to the
Partnership Agreement to the extent required to preserve the
General Partner's or any of its Members', as applicable,
status as a real estate investment trust.
F-2-3
<PAGE>
(B) So long as distributions have not been paid in full (or a
sum sufficient for such full payment is not irrevocably
deposited in trust for immediate payment) upon the Series D
Preferred Units, all distributions authorized and declared
on the Series D Preferred Units and all classes or series of
outstanding Parity Preferred Units with respect to
distributions shall be authorized and declared so that the
amount of distributions authorized and declared per Series D
Preferred Unit and such other classes or series of Parity
Preferred Units shall in all cases bear to each other the
same ratio that accrued distributions per Series D Preferred
Unit and such other classes or series of Parity Preferred
Units (which shall not include any accumulation in respect
of unpaid distributions for prior distribution periods if
such class or series of Parity Preferred Units does not have
cumulative distribution rights) bear to each other.
(iv) NO FURTHER RIGHTS. Holders of Series D Preferred Units shall not
be entitled to any distributions, whether payable in cash, units, other property
or otherwise, in excess of the full cumulative distributions described herein.
(d) LIQUIDATION PREFERENCE.
(i) PAYMENT OF LIQUIDATING DISTRIBUTIONS. Subject to the rights of
holders of Senior Preferred Units and Parity Preferred Units with respect to
rights upon any voluntary or involuntary liquidation, dissolution or winding-up
of the Partnership, the holders of Series D Preferred Units shall be entitled to
receive out of the assets of the Partnership legally available for distribution
or the proceeds thereof, after payment or provision for debts and other
liabilities of the Partnership, but before any payment or distributions of the
assets shall be made to holders of units that rank junior to the Series D
Preferred Units with respect to rights upon liquidation, dissolution or
winding-up of the Partnership, an amount equal to the sum of (A) a liquidation
preference equal to their positive Capital Account balances determined after
taking into account all Capital Account adjustments for the Partnership taxable
year in which the liquidation occurs (other than those made as a result of the
liquidating distribution set forth in this Section (d)) and (B) any accumulated
and unpaid Priority Return thereon, whether or not authorized or declared, to
the date of payment. If, upon such voluntary or involuntary liquidation,
dissolution or winding-up, there are insufficient assets to permit full payment
of liquidating distributions to the holders of Series D Preferred Units and any
Parity Preferred Units with respect to rights upon liquidation, dissolution or
winding-up of the Partnership, all payments of liquidating distributions on the
Series D Preferred Units and such Parity Preferred Units shall be made so that
the payments on the Series D Preferred Units and such Parity Preferred Units
shall in all cases bear to each other the same ratio that the respective rights
of the Series D Preferred Units and such other Parity Preferred Units (which
shall not include any accumulation in respect of unpaid distributions for prior
distribution periods if such Parity Preferred Units do not have cumulative
distribution rights) upon liquidation, dissolution or winding-up of the
Partnership bear to each other.
F-2-4
<PAGE>
(ii) NOTICE. Written notice of any such voluntary or involuntary
liquidation, dissolution or winding-up of the Partnership, stating the payment
date or dates when, and the place or places where, the amounts distributable in
such circumstances shall be payable, shall be given by first class mail, postage
pre-paid, not less than 30 and not more than 60 days prior to the payment date
stated therein, to each record holder of the Series D Preferred Units at the
respective addresses of such holders as the same shall appear on the transfer
records of the Partnership.
(iii) NO FURTHER RIGHTS. After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of Series D
Preferred Units shall have no right or claim to any of the remaining assets of
the Partnership.
(iv) CONSOLIDATION, MERGER OR CERTAIN OTHER TRANSACTIONS. The
voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all of the
property or assets of the General Partner or the Partnership to, or the
consolidation or merger or other business combination of the General Partner or
the Partnership with or into, any corporation, trust, partnership, limited
liability company or other entity (or of any corporation, trust, partnership,
limited liability company or other entity with or into the Partnership) or a
statutory share exchange of the General Partner shall not be deemed to
constitute a liquidation, dissolution or winding-up of the Partnership.
(e) OPTIONAL REDEMPTION.
(i) RIGHT OF OPTIONAL REDEMPTION. Without limiting SECTION (h)(i)(B)
or (C) hereof, the Series D Preferred Units may not be redeemed prior to the
fifth anniversary of the issuance date. On or after such date, the Partnership
shall have the right to redeem the Series D Preferred Units, in whole or in
part, at any time or from time to time, upon not less than 30 nor more than 60
days' written notice, at a redemption price, payable in cash, equal to the
Capital Account balance of the holders of Series D Preferred Units (the
"Redemption Price"); provided, however, that no redemption pursuant to this
SECTION (e) will be permitted if the Redemption Price does not equal or exceed
the Stated Value per Series D Preferred Unit and all accrued and unpaid
distributions thereon to the redemption date. If fewer than all of the
outstanding Series D Preferred Units are to be redeemed, the Series D Preferred
Units to be redeemed shall be selected pro rata (as nearly as practicable
without creating fractional units).
(ii) LIMITATION ON REDEMPTION. The Partnership may not redeem fewer
than all of the outstanding Series D Preferred Units unless all accumulated and
unpaid distributions have been paid or declared and irrevocably deposited in
trust for immediate payment on all Series D Preferred Units for all quarterly
distribution periods terminating on or prior to the date of redemption.
(iii) NOTICE OF REDEMPTION. Notice of redemption will be mailed by the
Partnership, by certified mail, postage prepaid, not less than 30 nor more than
60 days prior to the redemption date, addressed to the holders of record of the
Series D Preferred Units to be redeemed at their respective addresses as they
appear on the records of the Partnership. No failure to give or defect in such
notice shall affect the validity of the proceedings for the redemption of any
Series D Preferred Units except as to the holder to whom such notice was
F-2-5
<PAGE>
defective or not given. In addition to any information required by law, each
such notice shall state: (A) the redemption date, (B) the Redemption Price, (C)
the aggregate number of Series D Preferred Units to be redeemed and if fewer
than all of the outstanding Series D Preferred Units are to be redeemed, the
number of Series D Preferred Units to be redeemed held by such holder, which
number shall equal such holder's pro rata share (based on the percentage of the
total number of outstanding Series D Preferred Units held by such holder) of the
aggregate number of Series D Preferred Units to be redeemed and (D) the place or
places where certificates representing such Series D Preferred Units are to be
surrendered for payment of the Redemption Price.
(iv) PROCEDURES FOR REDEMPTION. If the Partnership gives a notice of
redemption in respect of Series D Preferred Units (which notice will be
irrevocable) then the Partnership's obligation to make available the Redemption
Price shall be deemed fulfilled if, on or before the redemption date, the
Partnership pays each holder of Series D Preferred Units in cash directly or the
Partnership deposits irrevocably in trust for the benefit of the Series D
Preferred Units being redeemed funds sufficient to pay the applicable Redemption
Price with irrevocable instructions and authority to pay such Redemption Price
to the holders of the Series D Preferred Units upon surrender of the Series D
Preferred Units by such holders at the place designated in the notice of
redemption. If the Series D Preferred Units are evidenced by a certificate and
if fewer than all Series D Preferred Units evidenced by any certificate are
being redeemed, a new certificate shall be issued upon surrender of the
certificate evidencing all Series D Preferred Units, evidencing the unredeemed
Series D Preferred Units without cost to the holder thereof. On and after the
redemption date, (i) distributions shall cease to accumulate on the Series D
Preferred Units or portions thereof called for redemption, (ii) such units shall
no longer be deemed to be outstanding and (iii) all rights of the holders
thereof as holders of Series D Preferred Units shall cease (except the right to
receive the Redemption Price and any accumulated and unpaid distributions),
unless the Partnership defaults in the payment thereof. If any date fixed for
redemption of Series D Preferred Units is not a Business Day, then payment of
the Redemption Price payable on such date will be made on the next succeeding
day that is a Business Day (and without any interest or other payment in respect
of any such delay) except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date fixd for
redemption. If payment of the Redemption Price is improperly withheld or not
paid by the Partnership, distributions on such Series D Preferred Units will
continue to accumulate from the original redemption date to the date of payment,
in which case the actual payment date will be considered the date fixed for
redemption for purposes of calculating the applicable Redemption Price. No
interest shall accrue for the benefit of the holders of the Series D Preferred
Units to be redeemed on any cash set aside by the Partnership. Subject to
applicable escheat laws, any cash deposited in trust by the Partnership that is
unclaimed at the end of two years after the redemption date shall revert to the
general funds of the Partnership, after which reversion the holders of the
Series D Preferred Units so called for redemption shall look only to the general
funds of the Partnership for the payment of such cash.
(f) VOTING RIGHTS.
(i) GENERAL. Holders of the Series D Preferred Units shall not have
any voting rights or right to consent to any matter requiring the consent or
approval of the Limited
F-2-6
<PAGE>
Partners, except as otherwise expressly set forth in the Partnership Agreement
and except a set forth below.
(ii) CERTAIN VOTING RIGHTS. So long as any Series D Preferred Units
remain outstanding, the Partnership shall not, without the affirmative vote of
the holders of at least two-thirds of the Series D Preferred Units outstanding
at the time (A) (1) authorize or create, or increase the authorized or issued
amount of, any class or series of Partnership Interests ranking senior to the
Series D Preferred Units with respect to distributions or rights upon
liquidation, dissolution or winding-up, or (2) reclassify any Partnership
Interests of the Partnership into any such senior Partnership Interests, or (3)
create, authorize or issue any obligations or securities convertible into or
evidencing the right to purchase any such senior Partnership Interests, (B) (1)
authorize or create, or increase the authorized or issued amount of, any Parity
Preferred Units, or (2) reclassify any Partnership Interest into any such Parity
Preferred Units or (3) create, authorize or issue any obligations or securities
convertible into or evidencing the right to purchase any such Parity Preferred
Units, or (C) either (1) consolidate, merge into or with, or convey, transfer or
lease its assets substantially as an entirety to, any corporation or other
entity or (2) amend, alter or repeal the provisions of the Partnership Agreement
whether by merger, consolidation or otherwise, in either case in a manner that
would materially and adversely affect the powers, rights, preferences,
privileges or voting power of the Series D Preferred Units or the holders
thereof; provided, however, that (I) with respect to the occurrence of a merger,
consolidation or sale or lease of all of the Partnership's assets as an
entirety, so long as (a) the Partnership is the surviving entity and the Series
D Preferred Units remain outstanding with the terms thereof unchanged, (b) the
resulting, surviving or transferee entity is a partnership, limited liability
company or other pass-through entity organized under the laws of any state and
substitutes for the Series D Preferred Units other preferred units having
substantially the same terms and same rights as the Series D Preferred Units,
including with respect to distributions, voting rights upon liquidation,
dissolution or winding-up or (c) such merger or consolidation occurs after
October 1, 2004, then the occurrence of such event shall not be deemed to
materially and adversely affect the powers, rights, preferences, privileges or
voting power of the Series D Preferred Units and no vote of the Series D
Preferred Units shall be required in such case, but, in the case of any merger
or consolidation described in CLAUSE (C)(2)(I)(c) above, unless either SUBCLAUSE
(a) or (b) of CLAUSE (C)(2)(I) is satisfied with respect to such merger or
consolidation, or such merger or consolidation is otherwise approved by a vote
of the holders of at least two-thirds of the Series D Preferred Units
outstanding, the Series D Preferred Units shall be exchangeable for authorized
and previously unissued Series D Exchanged Units at the Exchange Price (as
defined below) and otherwise in accordance with the provisions of SECTION (h)
hereof; and (II) any increase in the amount of Partnership Interests or the
creation or issuance of any other class or series of Partnership Interests, in
each case ranking either (y) junior to the Series D Preferred Units with respect
to distributions and rights upon liquidation, dissolution or winding-up, or (z)
on a parity with the Series D Preferred Units with respect to distributions or
rights upon liquidation, dissolution or winding-up to the extent such Parity
Preferred Units are not issued to the General Partner or an Affiliate thereof
(including, without limitation, JMB Realty Corporation and its Affiliates)
(provided that the Partnership may issue Parity Preferred Units to (i) the
General Partner to the extent the issuance of such interests was to allow the
General Partner or any of its Members to issue corresponding preferred stock or
membership units permitted to be issued without the consent of holders of Series
D Exchanged Units pursuant to the terms of the organizational documents of the
General Partner, or (ii) any other Affiliate of the Partnership
F-2-7
<PAGE>
provided the same are issued upon terms no less favorable to the Partnership
than would be obtained in an arm's length transaction with an unaffiliated party
as determined by the board of directors of the general partner of the General
Partner (including a majority of any independent directors) in good faith) shall
not be deemed to materially and adversely affect such powers, rights,
preferences, privileges or voting powers and no vote of the holders of Series D
Preferred Units shall be required in such case. Notwithstanding the foregoing,
no vote of the holders of the Series D Preferred Units shall be required
pursuant to this SECTION (f), if, at or prior to the time such action is to take
effect, the Partnership is entitled to and provides for the redemption of the
Series D Preferred Units then outstanding at the Series D Redemption Price set
forth in SECTION (e) hereof in accordance with the redemption procedures set
forth therein.
(g) TRANSFER RESTRICTIONS.
(i) The Series D Preferred Units shall be subject to the provisions of
Article XI of the Partnership Agreement, provided, however, that (i) the General
Partner shall not unreasonably withhold its consent to the admission of
transferees of Series D Preferred Units as Substituted Limited Partners provided
that if such transfer occurs prior to October 1, 2004, each such transferee must
comply with the following (A) such transferee shall not cause the total number
of persons holding Series D Preferred Units (for the purposes of Treasury
Regulation Section 1.7704-1(h)) to exceed five and (B) such transferee shall be
a "qualified purchaser" within the meaning of Section 2(a)(51)(A) of the
Investment Company Act of 1940, as amended; and (ii) the last sentence of
Section 11.4.1 shall not be applicable to transfers of Series D Preferred Units.
(ii) Notwithstanding anything to the contrary herein or otherwise in
the Partnership Agreement, no transfers of Series D Preferred Units shall be
permitted unless the transferee shall (i) not be "closely held" within the
meaning of Section 856(a)(6) of the Code as then in effect and (ii) covenant
that for so long as such transferee shall hold Series D Preferred Units, such
transferee shall (A) not become "closely held" within the meaning of Section
856(a)(6) of the Code as in effect at the time of transfer and (B) notify the
General Partner in the event such transferee shall become "closely held" within
the meaning of Section 856(a)(6) of the Code.
(h) EXCHANGE RIGHTS.
(i) RIGHT TO EXCHANGE.
(A) Series D Preferred Units shall be exchangeable in whole or
in part at any time on or after October 1, 2009, at the
option of the holders thereof, for Series D Exchanged Units
at an exchange rate of one Series D Exchanged Unit for one
Series D Preferred Unit, subject to adjustment as described
below (the "Exchange Price"), provided that the Series D
Preferred Units will become exchangeable at any time, in
whole or in part, at the option of the holders of Series D
Preferred Units for Series D Exchanged Units if (1) at any
time full distributions shall not have been timely made on
the applicable Preferred Unit Distribution Payment Date on
any Series D
F-2-8
<PAGE>
Preferred Unit with respect to 6 prior quarterly
distribution periods, whether or not consecutive, provided,
however, that a distribution in respect of Series D
Preferred Units shall be considered timely made if made
within two Business Days after the applicable Preferred Unit
Distribution Payment Date if at the time of such late
payment there shall not be any prior quarterly distribution
periods in respect of which full distributions were made
more than two Business Days after the applicable Preferred
Unit Distribution Payment Date, or (2) upon receipt by a
holder or holders of Series D Preferred Units of (I) notice
from the General Partner that the General Partner or a
Subsidiary of the General Partner has taken the position
that the Partnership is, or upon the occurrence of a defined
event in the immediate future will be, a PTP and (II) an
opinion rendered by an outside nationally recognized
independent counsel familiar with such matters addressed to
a holder or holders of Series D Preferred Units, that the
Partnership is or likely is, or upon the occurrence of a
defined event in the immediate future will be or likely will
be, a PTP. In addition, the Series D Preferred Units may be
exchanged for Series D Exchanged Units, in whole or in part,
at the option of any holder prior to the tenth anniversary
of the issuance date and after the third anniversary thereof
if suh holder of a Series D Preferred Units shall deliver to
the General Partner either (a) a private letter ruling
addressed to such holder of Series D Preferred Units or (b)
an opinion of independent counsel reasonably acceptable to
the General Partner based on the enactment of temporary or
final Treasury Regulations or the publication of a Revenue
Ruling, in either case to the effect that an exchange of the
Series D Preferred Units at such earlier time would not
cause the Series D Preferred Units to be considered "stock
and securities" within the meaning of Section 351(e) of the
Code for purposes of determining whether the holder of such
Series D Preferred Units is an "investment company" under
Section 721(b) of the Code if an exchange is permitted at
such earlier date. Furthermore, the Series D Preferred Units
may be exchanged in whole but not in part by any holder
thereof which is a real estate investment trust within the
meaning of Sections 856 through 859 of the Code for Equity
Securities of the General Partner (but only if the exchange
in whole may be accomplished consistently with the Ownership
Limitation of the General Partner, if at any time, (i) the
Partnership reasonably determines that the assets and income
of the Partnership for a taxable year after 1999 would not
satisfy the income and assets tests of Section 856 of the
Code for such taxable year if the Partnership were a real
estate investment trust within the meaning of the Code or
(ii) any such holder of Series D Preferred Units shall
deliver to the Partnership and the General Partner Entity an
opinion of independent counsel
F-2-9
<PAGE>
reasonably acceptable to the General Partner to the effect
that, based on the assets and income of the Partnership for
a taxable year after 1999, the Partnership would not satisfy
the income and assets tests of Section 856 of the Code for
such taxable year if the Partnership were a real estate
investment trust within the meaning of the Code and that
such failure would create a meaningful risk that a holder of
the Series D Prefered Units would fail to maintain
qualification as a real estate investment trust.
(B) Notwithstanding anything to the contrary set forth in this
Agreement, if an Exchange Notice (as defined below) has been
delivered to the General Partner, then the General Partner
may, at its sole option, elect to redeem or cause the
Partnership to redeem all or a portion of the outstanding
Series D Preferred Units for cash in an amount equal to the
Stated Value per Series D Preferred Unit and all accrued and
unpaid distributions thereon to the date of redemption. The
General Partner may exercise its option to redeem the Series
D Preferred Units for cash pursuant to this SECTION
(h)(i)(B) by giving each holder of record of Series D
Preferred Units notice of its election to redeem for cash,
within five Business Days after receipt of the Exchange
Notice, by registered mail, postage paid, at the address of
each holder set forth in the records of the Partnership
stating (1) the redemption date, which shall be no later
than 60 days following the receipt of the Exchange Notice,
(2) the redemption price, (3) the place or places where the
Series D Preferred Units are to be surrendered for payment
of the redemption price, and (4) the aggregate number of
Series D Preferred Units to be redeemed, and if fewer than
all of the outstanding Series D Preferred Units are to be
redeemed, the number of Series D Preferred Units to be
redeemed held by such holder, which number shall equal such
holder's pro-rata share (based on the percentage of the
total number of outstanding Series D Preferred Units held by
such holder) of the aggregate number of Series D Preferred
Units being redeemed.
(C) If an exchange of all or a portion of Series D Preferred
Units pursuant to SECTION (h)(i)(A) hereof would violate the
Ownership Limitation of the General Partner (as and to the
extent that such Ownership Limitation has heretofore been
waived by the General Partner), the General Partner shall
give written notice thereof to each holder of record of
Series D Preferred Units, within five Business Days
following receipt of the Exchange Notice, by registered
mail, postage prepaid, at the address of each such holder
set forth in the records of the Partnership. In such event,
provided such holder shall then be able to make the
representation that it is not "closely held" within the
meaning of Section 856(a)(6) of the Internal Revenue Code of
1986, each holder of Series D Preferred
F-2-10
<PAGE>
Units shall be entitled to exchange, pursuant to the
provision of SECTION (h)(ii) a number of Series D
Preferred Units which would comply with such Ownership
Limitation (as the General Partner's general partner or
other governing entity, as applicable, may, at its sole
discretion, waive such Ownership Limitation with respect
to such holder) and any Series D Preferred Units not so
exchanged (the "Excess Units") shall be redeemed by the
Partnership for cash in an amount equal to the Stated
Value per Excess Unit, and all accrued and unpaid
distributions thereon, to the date of redemption. The
written notice of the General Partner shall state (1) the
number of Excess Units held by such holder, (2) the
redemption price, (3) the redemption date which date
shall be no later than 60 days following the receipt of
the Exchange Notice, and (4) the place or places where
such Excess Units are to be surrendered for payment of
the Redemption Price. If an exchange would result in
Excess Units, as a condition to such exchange, each
holder of such Excess Units agrees to provide
representations and covenants reasonably requested by the
General Partner relating to (I) the widely held nature of
the interests in such holder, sufficient to assure the
General Partner that the holder's ownership of stock of
the General Partner (without regard to the limits
described above) will not cause any individual to own in
excess of the Ownership Limitation (taking into account
any waiver thereof); (II) to the extent such holder can
so represent and covenant without obtaining information
from its owners, the holder's ownership of tenants of the
Partnership and its affiliates and (III) any other
information required by the limited partnership agreement
or limited partnership certificate or other equivalent
organizational documents of the General Partner.
(D) The redemption of Series D Preferred Units described in
SECTION (h)(i)(B) and (C) hereof shall be subject to the
provisions of SECTION (e)(iii) hereof; provided, however,
that for purposes hereof the term "Redemption Price" in
SECTION (e)(iii) shall be read to mean the Stated Value per
Series D Preferred Unit being redeemed plus all accrued and
unpaid distributions to the redemption date.
(iii) PROCEDURE FOR EXCHANGE.
(A) Any exchange shall be exercised pursuant to a notice of
exchange (the "Exchange Notice") delivered to the General
Partner by the holder who is exercising such exchange right,
by certified mail postage prepaid. Upon request of the
General Partner, such holder delivering the Exchange Notice
shall provide to the General Partner in writing such
information as the General Partner may reasonably request to
determine whether any portion of the exchange by the
delivering holder will result in the violation of the
F-2-11
<PAGE>
Ownership Limitation of the General Partner. The exchange of
Series D Preferred Units, or a specified portion thereof,
may be effected after the fifth Business Day following
receipt by the General Partner of the Exchange Notice and
such requested information by delivering certificates, if
any, representing such Series D Preferred Units to be
exchanged together with, if applicable, written notice of
exchange and a proper assignment of such Series D Preferred
Units to the office of the General Partner maintained for
such purpose. Currently, such office is located at 900 North
Michigan Avenue, Suite 1500, Chicago, Illinois 60611. Each
exchange will be deemed to have been effected immediately
prior to the close of business on the date on which such
Series D Preferred Units to be exchanged (together with all
required documentation) shall have been surrendered and
notice shall have been received by the General Partner as
aforesaid and the Exchange Price shall have been paid. Any
Series D Exchanged Units issued pursuant to this SECTION (h)
shall be delivered as shares which are duly authorized,
validly issued, fully paid and nonassessable, free of
pledge, lien, encumbrance or restriction other than those
provided in the limited partnership agreement or certificate
of limited partnership or other relevant organizational
documents of the General Partner, the Securities Act and
relevant state securities or blue sky laws.
(B) In the event of an exchange of Series D Preferred Units for
shares of Series D Preferred Stock, an amount equal to the
accrued and unpaid distributions that are not paid pursuant
to SECTION (c)(i) hereof, whether or not declared, to the
date of exchange on any Series D Preferred Units tendered
for exchange shall (1) accrue and be payable by the General
Partner from and after the date of exchange on the Series D
Exchanged Units into which such Series D Preferred Units are
exchanged, and (2) continue to accrue on such Series D
Preferred Units, which shall remain outstanding following
such exchange, with the General Partner as the holder of
such Series D Preferred Units. Notwithstanding anything to
the contrary set forth herein, in no event shall a holder of
a Series D Preferred Unit that was validly exchanged into
Series D Exchanged Units pursuant to this Section (other
than the General Partner now holding such Series D Preferred
Unit), receive a distribution out of Available Cash of the
Partnership, with respect to any Series D Preferred Units so
exchanged.
(C) Fractional Series D Exchanged Units shall not be issued upon
exchange but, in lieu thereof, the General Partner shall pay
a cash adjustment based upon the fair market value of the
Exchanged Units on the day prior to the exchange date as
determined in good faith by the general partner of the
General Partner.
F-2-12
<PAGE>
(iii) ADJUSTMENT OF EXCHANGE PRICE.
(A) The Exchange Price is subject to adjustment upon certain
events, including, (1) subdivisions, combinations and
reclassification of the Series D Exchanged Units, and (2)
distributions to all holders of Series D Exchanged Units of
evidences of indebtedness of the General Partner or assets
(including securities, but excluding dividends and
distributions paid in cash out of equity applicable to
Series D Exchanged Units).
(B) In case the General Partner shall be a party to any
transaction (including, without limitation, a merger,
consolidation, statutory share exchange, tender offer for
all or substantially all of the General Partner's capital
stock (or other Equity Securities) or sale of all or
substantially all of the General Partner's assets), in each
case as a result of which the Series D Exchanged Units will
be converted into the right to receive shares of capital
stock, other securities or other property (including cash or
any combination thereof), each Series D Exchanged Unit will
thereafter be exchangeable into the kind and amount of
shares of capital stock and other securities and property
receivable (including cash or any combination thereof) upon
the consummation of such transaction by a holder of that
number of Series D Exchanged Units or fraction thereof into
which one Series D Preferred Unit was exchangeable
immediately prior to such transaction. The General Partner
may not become a party to any such transaction unless the
terms thereof are consistent with the foregoing.
(i) NO CONVERSION RIGHTS. The holders of the Series D Preferred Units
shall not have any rights to convert such units into any other class or series
of Partnership Interests in the Partnership or into any other interest in the
Partnership.
(j) NO SINKING FUND. No sinking fund shall be established for the
retirement or redemption of Series D Preferred Units.
F-2-13
<PAGE>
EXHIBIT G
ORIGINAL POOL PROPERTIES
PROPERTIES OWNED BY THE PARTNERSHIP OR A SUBTIER ENTITY:
1. The property commonly referred to as "Oakbrook Center," located in Oak
Brook, Illinois.
2. The property commonly referred to as "Old Orchard Center," located in
Skokie, Illinois.
3. The property commonly referred to as "The Galleria," located in Houston,
Texas.
4. The property commonly referred to as "Fox Valley Center," including the
former theatre outparcel and Chicago Health Club outparcel, located in
Aurora, Illinois.
5. The property commonly referred to as "The Streets at Southpoint," located
in Durham, North Carolina.
6. The property commonly referred to as "Hawthorn Center," including the
former theatre outparcel, located in Vernon Hills, Illinois.
7. The property commonly referred to as "MainPlace," located in Santa Ana,
California.
8. The property commonly referred to as "Galleria at Roseville," located in
Roseville, California.
9. The property commonly referred to as "Citrus Park Town Center," located in
Tampa, Florida.
10. The property commonly referred to as "Woodland Hills Mall," located in
Tulsa, Oklahoma.
11. The property commonly referred to as "Wolfchase Galleria," located in
Memphis, Tennessee.
12. The property commonly referred to as "Penn Square Mall," located in
Oklahoma City, Oklahoma.
13. The property commonly referred to as "Brandon TownCenter," located in
Tampa, Florida.
14. The property commonly referred to as "Miami International Mall," located in
Miami, Florida.
15. The property commonly referred to as "Coral Square Mall," located in Coral
Springs, Florida.
16. The property commonly referred to as "Century City Shopping Center,"
located in Los Angeles, California.
G-1
<PAGE>
17. The property commonly referred to as "Water Tower Place," located in
Chicago, Illinois.
18. The property commonly referred to as "Valencia Town Center," located in
Valencia, California.
19. The property commonly referred to as "San Francisco Shopping Centre,"
located in San Francisco, California.
20. The property commonly referred to as "Copley Place," located in Boston,
Massachusetts.
21. The property commonly referred to as "The Plaza at Citrus Park," including
outparcels held for sale or lease, located in Tampa, Florida.
22. The property commonly referred to as "The Plaza at Brandon TownCenter,"
located in Tampa, Florida.
23. The property commonly referred to as "Sawmill Plaza," located in Columbus,
Ohio.
24. The property commonly referred to as "New York Square," located in Aurora,
Illinois.
25. The property commonly referred to as "Westheimer Triangle," located in
Houston, Texas.
26. The property commonly referred to as "Brandon Land," located in Tampa,
Florida.
27. The property commonly referred to as "Hawthorn Theatre," located in Vernon
Hills, Illinois.
28. The property commonly referred to as "South Alabama" (the expansion land
for the property commonly referred to as "Houston Galleria"), located in
Houston, Texas.
29. The property commonly referred to as "Bed Bath & Beyond Parcel" adjacent to
the property commonly referred to as "Wolfchase Galleria," located in
Memphis, Tennessee.
30. The property commonly referred to as "Bed Bath & Beyond Parcel" adjacent to
the property commonly referred to as "Brandon TownCenter," located in
Tampa, Florida.
31. The property commonly referred to as the "Thomasville Furniture Parcel"
adjacent to the property commonly referred to as "Brandon TownCenter,"
located in Tampa, Florida.
SCHEDULED ADDITIONS:
1. The expansion to the property commonly referred to as "Old Orchard Center,"
located in Skokie, Illinois.
2. The renovation to the property commonly referred to as "Water Tower Place,"
located in Chicago, Illinois.
G-2
<PAGE>
3. The expansion to the property commonly referred to as "Century City
Shopping Center," located in Los Angeles, California.
4. The renovation and expansion to the property commonly referred to as
"Houston Galleria," located in Houston, Texas.
5. The renovation to the property commonly referred to as "Penn Square Mall,"
located in Oklahoma City, Oklahoma.
G-3
<PAGE>
EXHIBIT H
SCHEDULE OF ALLOCATION OF NONRECOURSE DEBT
<TABLE>
<CAPTION>
If the Amount of Partnership "Excess
Nonrecourse Liabilities" (within the
meaning of Regulation
Section 1.752-3(a)(3))
Outstanding (all of which shall be Specified Percentage
Qualified Nonrecourse Liabilities) is: for Each Amount
------------------------------------- --------------------
<S> <C>
$ 750,000,000 85%
1,000,000,000 65%
1,100,000,000 58%
1,200,000,000 55%
1,300,000,000 50%
1,400,000,000 50%
1,500,000,000 47%
2,000,000,000 43%
2,500,000,000 43%
3,000,000,000 43%
3,500,000,000 43%
4,000,000,000 43%
4,500,000,000 43%
5,000,000,000 43%
5,500,000,000 43%
6,000,000,000 or more 43%
</TABLE>
For purposes of this Exhibit, if the actual amount of Partnership "excess
Nonrecourse Liabilities" (within the meaning of Regulation Section
1.752-3(a)(3)) is between two amounts specified, the amount utilized shall be
rounded to the next lowest amount. As required by SECTION 6.1(c), all of the
excess nonrecourse liabilities (within the meaning of Section 1.752-3(a)(3))
shall be Qualified Nonrecourse Liabilities of the Partnership. Unless otherwise
expressly stated, no inference is intended under this Agreement or any other
agreement with respect to the statement in this Exhibit of "excess nonrecourse
liabilities" in an amount which is less than $1,350,000,000.
H-1
<PAGE>
EXHIBIT I
CAPITAL ACCOUNTS OF PARTNERS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
NAME CAPITAL ACCOUNT BALANCE IMMEDIATELY AFTER
SECTION 4.5(b) DISTRIBUTION(1)
-------------------------------------------------------------------------------
<S> <C>
General Partner $746,346,901
-------------------------------------------------------------------------------
Original Class A Limited Partners $563,033,627
-------------------------------------------------------------------------------
</TABLE>
-------------------
(1) These amounts shall be recomputed to the extent that the aggregate value
of all Class A Common Units outstanding immediately after the Effective Date
differs from $1,309,380,528, so that the General Partner's Capital Account
balance is 57%, and the Original Class A Limited Partners' Capital Account
balance is 43%, of such revised aggregate value.
I-1
<PAGE>
EXHIBIT J
CONVERSION OF UNITS
(A) For purposes of this EXHIBIT J, "Unit Adjustment Factor" shall mean
initially 1.0; provided, however the Unit Adjustment Factor may be adjusted in
the following manner:
(1) if, at any time or from time to time, the General Partner has more
than a relatively minor amount of assets other than its interest in the
Partnership (or liabilities) or income (or loss) other than through the
Partnership ("GP Other Operations"), and either the General Partner or
Original Class A Limited Partners holding a majority of the Class A Common
Units then held by Original Class A Limited Partners reasonably believe,
based on advice of a nationally recognized investment banking firm, that
the Unit Adjustment Factor should be other than "1" because the pricing of
the GP Registered Shares will be affected by the GP Other Operations, then
upon written notice (the "Adjustment Notice") from either the General
Partner to the Original Class A Limited Partners or from the Original Class
A Limited Partners holding a majority of the Class A Common Units held by
Original Class A Limited Partners to the General Partner, the initial Unit
Adjustment Factor shall be redetermined as the ratio of the net asset value
of a Class A Common Unit in the Partnership determined as of the date of
the Adjustment Notice (net asset value as determined on a reasonable basis
by the General Partner reasonably consistent with any method used for
purposes of determining the General Partner's and any of its Affiliates'
annual financial reporting), to the average closing price of the GP
Registered Shares over the 20 trading days immediately preceding the date
of the Adjustment Notice; and
(2) if the General Partner (a) declares or pays a dividend on its
outstanding GP Registered Shares in GP Registered Shares or makes a
distribution to all holders of its outstanding GP Registered Shares in GP
Registered Shares, (b) subdivides its outstanding GP Registered Shares, or
(c) combines its outstanding GP Registered Shares into a smaller number of
GP Registered Shares, the Unit Adjustment Factor shall be adjusted by
multiplying the Unit Adjustment Factor by a fraction, the numerator of
which shall be the number of GP Registered Shares issued and outstanding on
the record date (assuming for such purposes that such dividend,
distribution, subdivision or combination has occurred as of such time), and
the denominator of which shall be the actual number of GP Registered Shares
(determined without the above assumption) issued and outstanding on the
record date for such dividend, distribution, subdivision or combination;
and, provided, further, however, that if the component within clause (ii)
of the definition of Put Right Price is positive, the Unit Adjustment
Factor shall be adjusted by multiplying the Unit Adjustment Factor by a
fraction, the numerator of which shall be the Put Right, and the
denominator of which shall be Put Right Price without taking into account
any amount described within clause (ii) of the definition of Put Right
Price. Any adjustment to the Unit Adjustment Factor shall become effective
immediately after the effective date of such event retroactive to the
record date, if any, for such event.
(B) Subject to the further provisions of this EXHIBIT J, beginning 180 days
after the effective date of the listing of any GP Registered Shares (except as
otherwise contractually
J-1
<PAGE>
restricted), the General Partner shall grant to each Limited Partner holding
Class A Common Units the right (the "Conversion Right") to exchange any or all
of the Class A Common Units held by that Partner for GP Registered Shares;
provided that in the event the General Partner issues to any holders of GP
Registered Shares rights, options, warrants or convertible or exchangeable
securities entitling the shareholders to subscribe for or purchase GP Registered
Shares, or any other securities or property (collectively, the "GP Share
Rights"), then (except to the extent such rights have already been reflected in
an adjustment to the Unit Adjustment Factor as provided in (A)(2) above) the
converting partner shall also be entitled to receive such GP Share Rights that a
holder of that number of GP Registered Shares would be entitled to receive. The
Conversion Right may be exercised by a Limited Partner (a "Converting Partner")
at any time and from time to time by delivering a Notice of Conversion to the
General Partner not less than ten (10) days prior to such exchange. The General
Partner shall at all times reserve and keep available out of its authorized but
unissued GP Registered Shares, solely for the purpose of effecting the exchange
of Class A Common Units for GP Registered Shares, such number of GP Registered
Shares as shall from time to time be sufficient to effect the conversion of all
outstanding Class A Common Units not owned by the General Partner. No Limited
Partner shall, solely by virtue of being the holder of one or more Class A
Common Units, be deemed to be a shareholder of or have any other interest in the
General Partner.
(C) In the event of any change in the Unit Adjustment Factor, the number of
Class A Common Units held by each Partner shall be proportionately adjusted by
multiplying the number of Class A Common Units held by such Partner immediately
prior to the change in the Unit Adjustment Factor by the new Unit Adjustment
Factor; the intent of this provision is that one Partnership Unit remains
exchangeable for one GP Registered Share without dilution. In the event the
General Partner issues any GP Registered Shares in exchange for Class A Common
Units pursuant to this EXHIBIT J, any such Class A Common Units so acquired by
the General Partner shall immediately thereafter be cancelled by the Partnership
and the Partnership shall issue to the General Partner new Class A Common Units
pursuant to SECTION 4.2(b) hereof. Each Converting Partner agrees to execute
such documents as the General Partner may reasonably require in connection with
the issuance of GP Registered Shares upon exercise of the Conversion Right.
Notwithstanding the foregoing provisions of this EXHIBIT J, a Limited Partner
shall not have the right to exchange Class A Common Units for GP Registered
Shares if (i) in the opinion of counsel for the General Partner, the General
Partner would, as a result thereof, no longer qualify (or it would be more
likely than not that the General Partner no longer would qualify) as a real
estate investment trust under the Code; or (ii) such exchange would in the
opinion of counsel for the General Partner, constitute or be more likely than
not to constitute a violation of applicable securities laws.
J-2
<PAGE>
EXHIBIT K
PRO FORMA FFO CALCULATION
CONSOLIDATED STATEMENTS OF OPERATIONS
EXHIBIT K
<TABLE>
<CAPTION>
($000's omitted, except share and per share amounts) Years ended December 31
-------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Shopping center revenues:
Minimum rents $ 142,879 $ 118,290 $ 94,812
Percentage rents 9,200 7,322 5,575
Recoveries from tenants 76,282 65,108 47,493
Other 12,402 6,866 4,480
-------------------------------------------------------------------------------------------------------------------------
240,763 197,586 152,360
Interest income 971 1,103 1,620
-------------------------------------------------------------------------------------------------------------------------
241,734 198,689 153,980
-------------------------------------------------------------------------------------------------------------------------
Expenses:
Shopping center expenses 84,096 72,538 52,138
Mortgage and other interest 60,226 43,751 33,876
Ground rent 4,484 4,596 4,689
Depreciation and amortization 50,784 41,463 33,866
General and administrative 6,171 4,829 3,269
Write-off of assets 1,668 186 140
-------------------------------------------------------------------------------------------------------------------------
207,429 167,363 127,978
-------------------------------------------------------------------------------------------------------------------------
Operating income 34,305 31,326 26,002
Income from unconsolidated partnerships 12,858 10,778 6,227
Income (loss) from the Management Company 1,183 264 (438)
-------------------------------------------------------------------------------------------------------------------------
Income before other gains, minority interest and extraordinary
items 48,346 42,368 31,791
Other gains 632 479 3,673
Minority interest (17,877) (13,540) (12,560)
-------------------------------------------------------------------------------------------------------------------------
Income before extraordinary items 31,101 29,307 22,904
Extraordinary items (net of taxes and minority interest) (1,618) - (5,719)
-------------------------------------------------------------------------------------------------------------------------
Net income 29,483 29,307 17,185
Dividends on preferred stock (8,452) (6,359) (811)
-------------------------------------------------------------------------------------------------------------------------
Income applicable to common and unit voting common stock $ 21,031 $ 22,948 $ 16,374
-------------------------------------------------------------------------------------------------------------------------
Basic income per common and unit voting common share:
Before extraordinary items $ 1.26 $ 1.29 $ 1.27
Extraordinary items (.09) - (.33)
-------------------------------------------------------------------------------------------------------------------------
Net income $ 1.17 $ 1.29 $ 0.94
-------------------------------------------------------------------------------------------------------------------------
Diluted income per common and unit voting common share:
Before extraordinary items $ 1.25 $ 1.27 $ 1.25
Extraordinary items (.09) - (.33)
-------------------------------------------------------------------------------------------------------------------------
Net income $ 1.16 $ 1.27 $ 0.92
-------------------------------------------------------------------------------------------------------------------------
Weighted-average common and unit voting common shares outstanding:
Basic 17,910,152 17,744,072 17,440,454
Diluted 18,096,529 18,013,943 17,707,581
-------------------------------------------------------------------------------------------------------------------------
Dividends declared and paid per common and unit voting
common share $ 2.24 $ 2.10 $ 2.03
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
K-1
<PAGE>
The chart below shows the calculation of diluted funds from operations for the
years 1997 through 1999:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income before extraordinary items and minority interest $ 48,978 $ 42,847 $ 35,464
Plus depreciation and amortization 48,417 39,512 31,435
Plus Company's share of depreciation and amortization from
unconsolidated partnerships and Urban Retail Properties Co. 12,553 9,177 6,502
Plus incentive unit dividends 556 436 195
Less perpetual preferred unit distributions (4,178) - -
-------------------------------------------------------------------------------------------------------------------------
Diluted funds from operations $ 106,326 $ 91,972 $ 73,596
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
K-2
<PAGE>
URBAN SHOPPING CENTERS, INC.
Consolidated Statements of Operations
Three and Six Months Ended June 30, 2000 and 1999
(Unaudited)
($000's omitted, except share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
----------------------------- -----------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Shopping center revenues:
Minimum rents..................................... $ 39,700 $ 34,755 $ 78,858 $ 66,007
Percentage rents.................................. 1,017 881 1,826 1,526
Recoveries from tenants........................... 22,745 19,837 43,770 36,164
Other............................................. 2,646 2,535 5,541 4,022
----------- ----------- ----------- -----------
66,108 58,008 129,995 107,719
Interest income....................................... 68 196 196 377
----------- ----------- ----------- -----------
66,176 58,204 130,191 108,096
Expenses:
Shopping center expenses.............................. 22,588 20,867 45,833 39,178
Mortgage and other interest........................... 17,010 14,258 34,114 26,234
Ground rent........................................... 1,169 1,142 2,300 2,229
Depreciation and amortization......................... 14,141 12,264 28,253 23,109
General and administrative............................ 1,588 1,417 3,101 2,921
Write-off of assets................................... - 1,393 - 1,393
----------- ----------- ----------- -----------
56,496 51,341 113,601 95,064
----------- ----------- ----------- -----------
Operating income................................. 9,680 6,863 16,590 13,032
Income from unconsolidated partnerships................... 4,032 2,908 7,034 5,409
Income from the Management Company........................ 944 276 2,193 308
----------- ----------- ----------- -----------
Income before other gains, minority
interest and extraordinary items................ 14,656 10,047 25,817 18,749
Other gains............................................... - - 259 -
Minority interest......................................... (6,477) (3,348) (11,898) (5,951)
----------- ----------- ----------- -----------
Income before extraordinary items................ 8,179 6,699 14,178 12,798
Extraordinary items (net of taxes and
minority interest).................................... - (486) - (1,618)
----------- ----------- ----------- -----------
Net income....................................... 8,179 6,213 14,178 11,180
Dividends on preferred stock.............................. (2,226) (2,113) (4,452) (4,226)
----------- ----------- ----------- -----------
Income applicable to common and
unit voting common stock............................ $ 5,953 $ 4,100 $ 9,726 $ 6,954
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Basic income per common and unit voties common share:
Before extraordinary items............................ $ .33 $ .26 $ .54 $ .48
Extraordinary items................................... - (.03) - (.09)
----------- ----------- ----------- -----------
Net income.................................... $ .33 $ .23 $ .54 $ .39
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Diluted income per common and unit voting common share:
Before extraordinary items........................... $ .32 $ .26 .53 .47
Extraordinary items.................................. - (.03) - (.09)
----------- ----------- ----------- -----------
Net income................................... $ .32 $ .23 .53 .38
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted-average common adn unit voting common shares
outstanding:
Basic........................................... 18,125,934 17,905,975 18,088,627 17,895,881
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Diluted......................................... 18,352,690 18,128,795 18,263,395 18,106,836
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Dividends declared and paid per common and
unit voting common share............................... $ .59 $ .56 $ 1.18 $ 1.12
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
K-3
<PAGE>
REVIEW OF OPERATIONS
FUNDS FROM OPERATIONS. Funds from operations should not be considered as an
alternative to net income or any other GAAP measurement of performance, as an
indicator of operating performance or as an alternative to cash flows from
operating, investing or financing activities as a measure of liquidity. The
chart below shows the calculation of diluted funds from operations:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
----------------------------- -----------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income before minority interest and
extraordinary items.................................. $ 14,656 $ 10,047 $ 26,076 $ 18,749
Plus depreciation and amortization..................... 13,443 11,617 26,845 22,009
Plus Company's share of depreciation
and amortization from unconsolidated
partnerships and the Management
Company.............................................. 4,835 2,901 9,730 5,792
Plus incentive unit dividends.......................... 144 139 289 278
Less perpetual preferred unit
distributions........................................ (2,920) (345) (5,841) (345)
----------- ----------- ----------- -----------
Diluted funds from operations.......................... $ 30,158 $ 24,359 $ 57,099 $ 46,483
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
Notes:
The calculation of FFO presented above has been calculated in accordance, and
consistent, with the guidance contained in that portion of the NAREIT White
Paper on Funds From Operations dated March 1995 attached hereto as Annex I.
In addition, in calculating FFO, the calculation begins with net income before
extraordinary items so that extraordinary or unusual items and significant
non-recurring events do not materially distort the comparative measure of
performance; the only depreciation and amortization which has been added back is
that which is uniquely significant to the real estate industry; the
contributions of unconsolidated partnerships and joint ventures have been
reflected on the same basis as Urban Shopping Centers' own operations; gains
and losses from sales of securities and undepreciated land have been included in
the calculation of FFO.
On a going forward basis, gains and sales from undepreciated property incidental
to the main business of the Partnership will not be included in the calculation
of FFO.
K-4
<PAGE>
III. DISCUSSION OF FFO DEFINITION
A. AMORTIZATION AND DEPRECIATION.
The 1991 definition of FFO specified that depreciation and amortization
were to be added back to net income, without specifying what amortized items
are to be included. As a result, different capitalization policies among
reporting REITs led to widely varying lists of items being "added back" in the
calculation.
In addition, some analysts questioned the propriety of adding back
any depreciation other than depreciation of real estate, since the original
justification for the add back was that historical cost depreciation is
inappropriate for real estate assets. Their argument has been that
depreciation of assets other than real estate is no less real when they are
owned by a REIT than when they are owned by a company in another industry,
and that there is therefore no reason to add back their depreciation in
measuring the operating performance of a REIT.
NAREIT AGREES THAT THE LOGIC UNDERLYING THE CONCEPT OF FFO IS
INCONSISTENT WITH THE ADD BACK OF DEPRECIATION OR AMORTIZATION OF ASSETS OTHER
THAN THOSE UNIQUELY SIGNIFICANT TO THE REAL ESTATE INDUSTRY. IT URGES ALL MEMBER
COMPANIES REPORTING FFO TO ADD BACK ONLY THOSE ITEMS THAT MEET THIS STANDARD.
Examples of items that should be added back include real property
depreciation, amortization of capitalized leasing expenses, tenant allowances
or improvements, and the like. Specifically excluded are the add back of items
such as the amortization of deferred financing costs, depreciation of computer
software, company office improvements, and other items commonly found in other
industries and required to be recognized as expenses in the calculation of net
income.
K-5
<PAGE>
B. TREATMENT OF NON-RECURRING ITEMS
NAREITs intent in the creation of FFO was to try to produce a measure
of operating performance that is recurring in nature. ACCORDINGLY, NAREIT
BELIEVES THAT ITEMS CLASSIFIED BY GAAP AS EXTRAORDINARY OR UNUSUAL, ALONG
WITH SIGNIFICANT NON-RECURRING EVENTS THAT MATERIALLY DISTORT THE COMPARATIVE
MEASUREMENT OF COMPANY PERFORMANCE OVER TIME, ARE NOT MEANT TO BE REDUCTIONS
OR INCREASES IN FFO, AND SHOULD BE DISREGARDED IN ITS CALCULATION. THIS CAN
BE ACCOMPLISHED IN ONE OF TWO WAYS: (1) BEGIN THE RECONCILIATION TO FFO
WITH NET INCOME BEFORE EXTRAORDINARY ITEMS; OR (2) BEGIN THE RECONCILIATION
TO FFO WITH NET INCOME AFTER EXTRAORDINARY ITEMS AND REFLECT EXTRAORDINARY
AND NON-RECURRING ITEMS IN THE RECONCILIATION. HOWEVER, CLEAR AND EXPLANATORY
DISCLOSURE OF THESE ADJUSTMENTS SHOULD BE PROVIDED EVEN IF NOT OTHERWISE
REQUIRED.
C. ENTITIES ADDRESSED BY THE FFO DEFINITION.
The 1991 definition of FFO addressed the treatment of unconsolidated
partnerships and joint ventures. Specifically, REITs were instructed to
reflect the contributions of unconsolidated partnerships and joint ventures
to the REIT's FFO on the same basis as the REIT's own operations. It appears
that the original drafters intended that the term joint ventures include both
unincorporated associations or corporations in which a REIT holds an active
interest.
Nevertheless, REITs increasingly use corporations, the operations of
which are not reported on a consolidated basis with those of the REITs.
NAREIT BELIEVES THAT THE USE OF A CORPORATE FORM INSTEAD OF A PARTNERSHIP
SHOULD NOT AFFECT THE DETERMINATION OF WHETHER AN ENTITY IS TO BE TREATED AS
A JOINT VENTURE FOR PURPOSES OF THE DEFINITION.
D. DISCLOSURE OF FFQ
Many companies have reported FFO without providing sufficient disclosure
to allow analysts to determine how it is being calculated. In turn, this has
made it more difficult to evaluate the degree to which reported FFO results
are inconsistent with the definition.
NAREIT believes that an important benefit to all REITs has arisen from
the increased use of FFO as a supplement to net income in the measurement of
REIT operating performance. In order to continue that benefit, NAREIT
ENCOURAGES ITS MEMBER COMPANIES TO REPORT THEIR FFO ON A QUARTERLY BASIS, AND
IN ALL SEC FILINGS, INCLUDING 10Ks,10Qs, AND REGISTRATION STATEMENTS
along with a statement showing how FFO is calculated.
K-6
<PAGE>
The format for the statement of FFO should reconcile to net income from
the statement of operations and include a line item breakdown of each of the
adjustments being used in the calculation of FFO. The reconciliation should
be sufficiently detailed to provide readers with a clear understanding of the
material differences between net income and FFO.
In addition to depreciation of real estate, examples of important items
that should be considered for inclusion in the reconciliation itemized both
for wholly owned entities and partially owned entities, when applicable,
include the following:
- separate itemized listing of each of the following: amortization or
depreciation of tenant allowances, tenant improvements, or capitalized
leasing costs;
- adjustments for extraordinary, unusual, or non-recurring items;
- gains or losses on asset dispositions, to the extent not included in
both net income and FFO; and
- distributions to minority interests, if applicable.
NAREIT encourages REITs reporting FFO to make this change as soon as
practical, but in no event later than for fiscal periods beginning in 1996.
E. GAINS AND LOSSES ON PROPERTY SALES
A number of REITs sell undepreciated property incidental to their main
business, most often sales of securities or parcels of land peripheral to
operating properties. The prohibition against the inclusion of gains or
losses on property sales in FFO was not meant to address this kind of
activity, but rather the gain or loss on previously depreciated operating
properties.
[THOSE REITS THAT CHOOSE TO INCLUDE SUCH GAINS OR LOSSES ON SALES OF
SECURITIES OR UNDEPRECIATED LAND] IN THEIR FFO SHOULD DISCLOSE THE AMOUNT OF
SUCH GAINS OR LOSSES FOR EACH APPLICABLE REPORTING PERIOD. THOSE THAT DO NOT
SHOULD ADDRESS THE AMOUNT OF SUCH GAINS OR LOSSES IN THEIR RECONCILIATION OF
NET INCOME TO FFO.
K-7
<PAGE>
EXHIBIT L
CERTAIN REGISTRATION RIGHTS AGREEMENTS
1. Registrations Rights and Lock-Up Agreement, dated as of October 14, 1993,
between Urban Shopping Centers, Inc. and certain Investors
2. Registration Rights Agreement, dated November 13, 1997, by and between
Urban Shopping Centers, Inc. and Security Capital Preferred Growth
Incorporated
3. Registration Rights Agreement, dated December 21, 1998, by and among Urban
Shopping Centers, Inc., Urban Shopping Centers, L.P. and Kenwood Plaza
Limited Partnership
4. Registration Rights Agreement, dated June 10, 1999, by and among Urban
Shopping Centers, Inc., Urban Shopping Centers, L.P. and Kenwood Plaza
Limited Partnership
L-1
<PAGE>
EXHIBIT M
QUARTERLY DEBT INFORMATION
For each calendar quarter, the following information in reasonable detail:
(A) Any
(i) sale, transfer, exchange, distribution or other disposition of
Partnership property,
(ii) contribution of property to a joint venture,
(iii) pay down, forgiveness, or other reduction in the principal amount of
debt,
(iv) guarantee or purchase of any Partnership Nonrecourse Debt by (A) the
General Partner, (B) an affiliate of the General Partner, or (C) to
the General Partner's knowledge, any Partner (other than the General
Partner) or any 10% affiliate of such Partner,
(v) conversion or contribution of Partnership debt to equity of the
Partnership, and
(vi) other transaction or series of related transactions,
which occurred during the quarter and could reasonably be expected to reduce the
amount of Partnership Nonrecourse Liabilities allocable to an Original Class A
Limited Partner below its Target Class A Common Unit Debt Allocation.
(B) the aggregate amount by which the Partnership's Nonrecourse Liabilities
were reduced as a result of the events described in (A) above, and
(C) the aggregate amount of Partnership Nonrecourse Liabilities as of the end
of the quarter covered in such report.
L-2
