UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
Commission file number: 1-12592
WALDEN RESIDENTIAL PROPERTIES, INC.
(Exact name of Registrant as specified in its Charter)
MARYLAND 75-2506197
(State or other jurisdiction (I.R.S. Employer
Identification of incorporation Number)
or organization)
5080 Spectrum Drive
Suite 1000 East
Dallas, Texas 75248
(Address of principal executive offices)
(972) 788-0510
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: As of
May 6, 1998, there were 18,643,216 shares of Common Stock, $0.01,
par value outstanding.
WALDEN RESIDENTIAL PROPERTIES, INC.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31,
1998 (Unaudited) and December 31, 1997 . . . . . . . . .2
Condensed Consolidated Statements of Income for the
Three Months Ended March 31, 1998 and 1997
(Unaudited). . . . . . . . . . . . . . . . . . . . . . .3
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1998 and 1997
(Unaudited). . . . . . . . . . . . . . . . . . . . . . .4
Notes to Condensed Consolidated Financial Statements
(Unaudited). . . . . . . . . . . . . . . . . . . . . . .5
Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . .10
Item 3. Quantitative and Qualitative Disclosures About
Market Risks. . . . . . . . . . . . . . . . . . . . .17
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . .18
Item 2. Changes in Securities . . . . . . . . . . . . . . . . .18
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . .18
Item 4. Submission of Matters to a Vote of Security Holders . .18
Item 5. Other Information . . . . . . . . . . . . . . . . . . .18
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . .18
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
WALDEN RESIDENTIAL PROPERTIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Real estate assets, at cost
Land . . . . . . . . . . . . . . . . . . $ 171,168 $ 173,635
Buildings. . . . . . . . . . . . . . . . 1,321,051 1,333,978
---------- ----------
1,492,219 1,507,613
Less: Accumulated depreciation . . . (85,407) (74,584)
---------- ----------
1,406,812 1,433,029
Real estate assets held for sale . . . . . 35,940 --
Rent and other receivables . . . . . . . . 2,189 1,613
Prepaid and other assets . . . . . . . . . 8,171 6,903
Deferred financing costs, net. . . . . . . 7,430 6,603
Cash and cash equivalents. . . . . . . . . 7,988 9,757
Restricted cash:
Escrow deposits. . . . . . . . . . . . . 11,397 9,047
Additional collateral on loans . . . . . 2,851 2,520
---------- ----------
Total assets. . . . . . . . . . . . . $1,482,778 $1,469,472
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable . . . . . . . . . $ 469,818 $ 428,354
Unsecured term loan. . . . . . . . . . . 200,000 200,000
Unsecured credit facility. . . . . . . . 56,000 74,000
Accrued real estate taxes. . . . . . . . 11,630 22,571
Accounts payable . . . . . . . . . . . . 11,518 13,648
Accrued expenses and other liabilities . 15,797 13,377
Preferred distribution payable to
minority interests. . . . . . . . . . . 391 391
---------- ----------
Total liabilities . . . . . . . . . . 765,154 752,341
Commitments and contingencies (Note 7)
Minority interests . . . . . . . . . . . . 318,296 321,916
Stockholders' equity:
Preferred stock. . . . . . . . . . . . . 57 57
Common stock . . . . . . . . . . . . . . 186 180
Additional paid in capital . . . . . . . 470,840 456,842
Notes receivable from Company officers
and directors . . . . . . . . . . . . . (8,823) (5,263)
Deferred compensation on Restricted
Stock . . . . . . . . . . . . . . . . . (1,458) (1,404)
Distributions in excess of net income. . (61,474) (55,197)
---------- ----------
Total stockholders' equity. . . . . . 399,328 395,215
---------- ----------
Total liabilities and stockholders'
equity . . . . . . . . . . . . . . $1,482,778 $1,469,472
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
WALDEN RESIDENTIAL PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share information)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1998 1997
---- ----
<S> <C> <C>
REVENUES
Rental income. . . . . . . . . . . . . . . . $65,907 $31,516
Other property income. . . . . . . . . . . . 2,546 1,272
Interest income. . . . . . . . . . . . . . . 361 503
------- -------
Total revenues. . . . . . . . . . . . . . 68,814 33,291
------- -------
EXPENSES
Property operating and maintenance . . . . . 22,512 10,569
Real estate taxes. . . . . . . . . . . . . . 6,948 3,149
General and administrative . . . . . . . . . 2,835 1,422
Interest . . . . . . . . . . . . . . . . . . 13,315 4,877
Amortization . . . . . . . . . . . . . . . . 233 211
Depreciation . . . . . . . . . . . . . . . . 14,333 6,328
------- -------
Total expenses. . . . . . . . . . . . . . 60,176 26,556
------- -------
Income before extraordinary item and income
allocated to minority interests . . . . . . . 8,638 6,735
Extraordinary loss on debt extinguishment. . . (24) --
------- -------
Income before income allocated to minority
interests . . . . . . . . . . . . . . . . . . 8,614 6,735
Income allocated to minority interests . . . . (2,898) (405)
------- -------
Net income . . . . . . . . . . . . . . . . . . 5,716 6,330
Preferred distributions. . . . . . . . . . . . (3,280) (3,312)
------- -------
Net income available to common stockholders. . $ 2,436 $ 3,018
======= =======
Basic net income per share . . . . . . . . . . $ 0.13 $ 0.18
======= =======
Diluted net income per share . . . . . . . . . $ 0.13 $ 0.17
======= =======
Basic weighted average number of common
shares outstanding. . . . . . . . . . . . . . 18,277 17,153
======= =======
Diluted weighted average number of common
shares and common share equivalents
outstanding . . . . . . . . . . . . . . . . . 18,472 17,346
======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
WALDEN RESIDENTIAL PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . $ 5,716 $ 6,330
Adjustments to reconcile net income to net
cash provided by operating activities:
Income allocated to minority interest . . . . 2,898 405
Depreciation and amortization . . . . . . . . 14,566 6,539
Amortization of deferred compensation on
Restricted Stock. . . . . . . . . . . . . . . 52 34
Amortization of prepaid interest expense. . . 304 --
Extraordinary loss on debt extinguishment . . 24 --
Net effect of changes in operating accounts:
Escrow deposits. . . . . . . . . . . . . . (2,350) (7)
Other assets . . . . . . . . . . . . . . . (1,921) (6)
Accrued real estate taxes. . . . . . . . . (10,941) (4,198)
Accounts payable . . . . . . . . . . . . . (2,989) (4)
Other liabilities. . . . . . . . . . . . . 3,001 (370)
------- -------
Net cash provided by operating
activities. . . . . . . . . . . . . . . 8,360 8,723
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of real estate assets. . . . . . . . (5,100) (5,742)
Real estate asset additions . . . . . . . . . (7,795) (7,198)
------- -------
Net cash used in investing activities. . . (12,895) (12,940)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock issuance, net of
issuance costs . . . . . . . . . . . . . . . 10,338 9,143
Distributions paid. . . . . . . . . . . . . . (18,511) (11,326)
Proceeds from mortgage notes payable and
credit facility. . . . . . . . . . . . . . . 76,533 --
Payment of mortgage notes payable and
credit facility. . . . . . . . . . . . . . . (62,585) --
Payment of financing costs. . . . . . . . . . (1,388) (4)
Additional collateral on loans. . . . . . . . (331) --
Principal reductions of debt. . . . . . . . . (1,290) (823)
------- -------
Net cash provided by (used in) financing
activities. . . . . . . . . . . . . . . . 2,766 (3,010)
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS . . . (1,769) (7,227)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD. 9,757 29,720
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD. . . . $ 7,988 $22,493
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest. . . . . . . . . . . . $10,887 $ 4,821
======= =======
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Accrued real estate asset additions . . . . . $ 241 $ 1,187
======= =======
Mortgages assumed . . . . . . . . . . . . . . $10,806 $ --
======= =======
Notes receivable for officer and director
stock purchases. . . . . . . . . . . . . . . $ 3,560 $ --
======= =======
Deferred compensation on Restricted stock . . $ 106 $ 2,834
======= =======
Distribution payable to minority interest
holders . . . . . . . . . . . . . . . . . . $ 391 $ 391
======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
WALDEN RESIDENTIAL PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Interim Unaudited Financial Information
Walden Residential Properties, Inc. (the "Company") is a
self-administered and self-managed equity real estate investment trust,
as defined under the Internal Revenue Code of 1986, as amended. As
of March 31, 1998, the Company owned 156 multifamily properties,
containing 42,858 apartment units, primarily in the Southwest and
Southeast regions of the United States.
The accompanying unaudited financial statements should be read
in conjunction with the consolidated financial statements and notes
thereto included in the Company's Form 10-K for the year ended
December 31, 1997, which was filed with the Securities and Exchange
Commission ("SEC"). The accompanying interim unaudited financial
information has been prepared pursuant to the rules and regulations
of the SEC. Certain information and footnote disclosures normally
included in the annual financial statements have been condensed or
omitted pursuant to rules and regulations of the SEC. Management
believes that the disclosures contained in this Form 10-Q are
adequate to make the information presented not misleading. In the
opinion of management, all adjustments and eliminations, consisting
only of normal recurring adjustments, necessary to present fairly
the consolidated financial position of the Company and its
subsidiaries as of March 31, 1998 and the consolidated results of
their operations and cash flows for the three months ended March
31, 1998 and 1997, have been included. The consolidated results of
operations for the three months ended March 31, 1998 are not
necessarily indicative of the results for the full year.
As of March 31, 1998, the Company had five apartment
properties held for sale. Management has determined that such
properties do not match the Company's long-term investment
strategies.
In June 1997, the FASB issued SFAS No. 130, Reporting
Comprehensive Income, and SFAS No. 131, Disclosures About Segments
of an Enterprise and Related Information. SFAS No. 130 establishes
standards for reporting comprehensive income and its components.
SFAS No. 131 establishes standards for the way that public business
enterprises report information about operating segments and related
information in interim and annual financial statements. Neither of
these statements affect the Company's financial reporting for the
quarter.
2. Acquisitions
On February 18,1998, the Company acquired two apartment
properties with a total of 376 units located in Tampa, Florida for
approximately $15.9 million. The Company funded these acquisitions
by assuming $5.7 million of variable rate tax-exempt debt maturing
in the year 2007, assuming $5.1 million of 7.35% fixed rate debt
maturing in the year 2005, and borrowing the remaining amount under
the Company's unsecured credit facility. The credit enhancement on
the $5.7 million variable rate debt expires in November 1998 and is
guaranteed by the Company.
3. Mortgage Notes Payable
On January 29, 1998 and February 12, 1998, the Company
refinanced $12.7 million and $6.9 million, respectively, of the
Company's variable rate tax-exempt mortgage indebtedness and
extended the related mortgage loan and credit enhancement maturity
to February 15, 2028. The Company has also received a commitment
to refinance the remaining variable rate tax-exempt mortgage loans
to provide a 30-year credit enhancement.
On March 25, 1998, $78.1 million of conventional fixed-rate
mortgage notes were refinanced with $110.0 million of fixed-rate
debt, of which $80.0 million of such debt bears interest at 6.62%
and matures in March 2007 and the remaining $30.0 million bears
interest at 7.22% and matures in June 2016. Of the excess
financing proceeds, $20 million was used to repay a portion of the
Company's credit facility.
In April 1998, the Company repaid $7.2 million of variable
rate indebtedness related to one property.
4. Stockholders' Equity and Minority Interests
Minority Interests
In connection with certain apartment property acquisitions,
certain partnership subsidiaries of the Company have issued Common
OP Units and Preferred OP Units which are exchangeable into the
Company's common stock and 9.00% redeemable preferred stock, with
detachable warrants, respectively. The holders of the Preferred OP
Units are entitled to receive quarterly distributions of $0.5625
per unit and the holders of the Common OP Units are entitled to
receive quarterly distributions equal to those paid on the
Company's common stock. A portion of the Common OP Units that are
exchangeable into 810,128 shares of the Company's common stock are
entitled to receive quarterly distributions of a minimum of
$369,000 in the aggregate. All OP Unit securities have been
recorded as minority interests in the accompanying balance sheets.
Public Offering
On February 19, 1998, the Company issued 323,232 shares of its
common stock at $23.515 per share for net proceeds of approximately
$7.6 million.
Restricted Stock
In February 1997, the Company adopted a Long-Term Incentive
Plan to attract and retain individuals to serve as directors,
officers and employees of the Company. Pursuant to this plan, the
Company issued 4,000 restricted shares of common stock ("Restricted
Stock") in February 1998 for $0.01 per share to two of its
executive officers. The shares issued vest ratably over a three-year period.
Deferred compensation on Restricted Stock was
computed based upon the market value of the shares at the date of
issuance. This deferred compensation is being amortized over the
respective vesting periods.
Officer Notes for Stock Purchases
On February 17, 1998, the Company implemented a new officer
loan program allowing officers to purchase the Company's common
stock at current market prices and to exercise vested stock options
with the assistance of loans from the Company. Under this program,
officers are eligible to purchase stock on March 1 and September 1
of each year in an aggregate amount of up to three times the
officer's annual salary. A cash payment of 5% to 15% of the
purchase price is required by the officer, depending upon the
amount of the purchase, with the remainder loaned on a full
recourse basis to the officer. Each loan is evidenced by a note
with a five-year term, requiring quarterly payments of interest
only at a fixed interest rate equal to the Company's then current
interest rate under its credit facility. The loan is secured by a
pledge of the shares of common stock purchased by each officer
pursuant to such loan.
On March 2, 1998, the Company issued loans to 25 officers
under the officer loan program in the amount of approximately $3.6
million, bearing interest at 7%. Such loans related to the
issuance of 138,692 shares of the Company's common stock, at $24.75
per share (the closing price of the common stock on the New York
Stock Exchange for the previous trading day) and the exercise of
26,192 common stock options at a stock option grant price of $19.25
per share.
Shareholder Rights Plan
On March 26, 1998, the Company adopted a shareholder rights
plan (the "Plan") designed to assure that all stockholders receive
fair treatment in the event of a proposed acquisition. The key
provisions of the Plan is a mechanism that will distribute, for
each outstanding share of the Company's Common Stock, one right
that becomes exercisable upon the occurrence of certain events.
The Plan entails a dividend of one right for each outstanding
share of the Company's common stock. Each right will entitle the
holder to buy one one-hundredth of a share of a new Series A Junior
Participating Preferred Stock, at an exercise price of $70.00 per
share. The rights will trade with the Company's common stock until
exercisable and will expire on April 20, 2008. The rights will not
be exercisable until ten days following a public announcement that
a person or group has acquired 15% or more of the Company's common
stock or until ten business days after a person or group begins a
tender offer that would result in ownership of 15% or more of the
Company's common stock, subject to certain extensions by the Board.
On April 20, 1998, the Company issued a dividend of one right for
each share of common stock owned by stockholders of record as of
April 7, 1998. Effective April 8, 1998, each share of the
Company's common stock has one right attached to it.
Associate Stock Purchase Plan
Effective April 1, 1998, the Company adopted an Associate
Stock Purchase Plan. This plan allows Company employees to
purchase shares of the Company's common stock at a 15% discount.
Distributions
In March 1998, the Company paid distributions of $12.0 million
to stockholders of record on February 18, 1998. The common
stockholders were paid $0.4825 per share; the 9.16% Convertible
Redeemable Preferred Stockholders were paid $0.5725 per share and
the 9.20% Senior Preferred Stockholders were paid $0.575 per share.
In March 1998, the Company paid distributions of $5.4
million on the Common OP Units (which represented $0.4825 per unit)
and $1.1 million on the Preferred OP Units (which represented
$0.5625 per unit).
5. Net Income per Share of Common Stock
Basic net income per share has been computed by dividing net
income available to common stockholders by the weighted average
number of common shares outstanding. Diluted net income per share
has been computed by dividing net income available to common
stockholders by the weighted average number of common shares
outstanding plus potential dilutive common share equivalents.
The following table presents information necessary to
calculate basic and diluted net income per share for the three
months ended March 31, 1998 and 1997 (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
1998 1997
---- ----
<S> <C> <C>
Net Income for Basic and Diluted Computation:
Income before extraordinary item and income
allocated to minority interests . . . . . . . . $ 8,638 $ 6,735
Extraordinary loss on debt extinguishment. . . . (24) --
------- -------
Income before minority interests . . . . . . . . 8,614 6,735
Income allocated to minority interests . . . . . (2,898) (405)
------- -------
Net income . . . . . . . . . . . . . . . . . . . 5,716 6,330
Preferred distributions. . . . . . . . . . . . . (3,280) (3,312)
------- -------
Net income available to common stockholders
(basic and diluted net income per share
computation). . . . . . . . . . . . . . . . . . $ 2,436 $ 3,018
======= =======
Basic Net Income per Share:
Before extraordinary item, less preferred
distributions . . . . . . . . . . . . . . . . . $ 0.13 $ 0.18
Extraordinary loss on debt extinguishment. . . . -- --
------- -------
Net income available to common stockholders. . . $ 0.13 $ 0.18
======= =======
Diluted Net Income per Share:
Before extraordinary item, less preferred
distributions . . . . . . . . . . . . . . . . . $ 0.13 $ 0.17
Extraordinary loss on debt extinguishment. . . . -- --
------- -------
Net income available to common stockholders. . . $ 0.13 $ 0.17
======= =======
Weighted Average Number of Shares Outstanding (a):
Basic. . . . . . . . . . . . . . . . . . . . . . 18,277 17,153
Dilutive effect of outstanding options . . . . . 195 193
------- -------
Diluted. . . . . . . . . . . . . . . . . . . . . 18,472 17,346
======= =======
</TABLE>
(a) Excludes the convertible preferred shares, warrants, Common OP
Units (see Note 4) and 193,750 stock options, which are anti-dilutive.
6. Pro Forma Statements of Income
The following unaudited condensed pro forma information for
the three months ended March 31, 1998 and 1997 was prepared from
the financial statements of the Company by adjusting for the effect
of all public offerings and property acquisitions and dispositions
in 1998 and 1997, including debt used to finance acquisitions or
repaid from proceeds of dispositions, as if all of these
transactions had occurred on January 1, 1997. The pro forma
results do not include gains on property dispositions or
extraordinary losses on the early extinguishment of debt.
The following information is not necessarily indicative of
what the performance would have been had the Company owned these
properties for the entire period, nor does it purport to represent
future results of operations of the Company. (In thousands, except
per share information.)
<TABLE>
<CAPTION>
Pro Forma
------------------
Three Months Ended
March 31,
------------------
1998 1997
---- ----
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . $69,150 $66,442
Expenses . . . . . . . . . . . . . . . . . . . 60,439 59,588
------- -------
Income before income allocated to minority
interests . . . . . . . . . . . . . . . . . . 8,711 6,854
Income allocated to minority interests . . . . (2,933) (2,278)
------- -------
Net income . . . . . . . . . . . . . . . . . . 5,778 4,576
Preferred distributions. . . . . . . . . . . . (3,280) (3,312)
------- -------
Net income available to common stockholders. . $ 2,498 $ 1,264
======= =======
Basic net income per share . . . . . . . . . . $ 0.14 $ 0.07
======= =======
Diluted net income per share . . . . . . . . . $ 0.14 $ 0.07
======= =======
</TABLE>
7. Commitments and Contingencies
In January 1998, the Company obtained a $57 million commitment
to refinance tax-exempt debt which is scheduled to mature in June
1998. The new financing provides the Company with 30-year credit
enhancement for weekly variable rate demand bonds, with the option
to convert at any time to fixed rate tax-exempt bond financing.
Under this commitment, the Company refinanced $19.6 million during
the quarter.
On February 27, 1998, the Company entered into a joint venture
agreement with The Grupe Company whereby The Grupe Company will
construct and the Company will later purchase, two Sacramento,
California area properties with a combined total of 616 apartment
units. The Company will purchase 100% of the properties for
approximately $47 million upon the completion of construction and
obtainment of certain targeted net operating income amounts. This
purchase is anticipated to occur sometime in late 1999.
8. Subsequent Events
On May 7, 1998, the Company declared distributions of $0.4825
per share of common stock, $0.5725 per share of convertible
preferred stock and $0.575 per share of senior preferred stock, all
of which are payable on June 3, 1998 to stockholders of record on
May 18, 1998.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
This Form 10-Q contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, which are
intended to be covered by the safe harbors created therein. These
statements include the plans and objectives of management for
future operations, including plans and objectives relating to
capital expenditures and rehabilitation costs on the properties
owned by the Company. The forward-looking statements included
herein are based on current expectations that involve numerous
risks and uncertainties. Assumptions relating to the foregoing
involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business
decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company.
Although the Company believes that the assumptions underlying the
forward-looking statements are reasonable, any of the assumptions
could be inaccurate and, therefore, there can be no assurance that
the forward-looking statements included in this Form 10-Q will
prove to be accurate. In light of the significant uncertainties
inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a
representation by the Company or any other person that the
objectives and plans of the Company will be achieved.
The Company will utilize both internal and external resources
to reprogram, replace and test its systems for the Year 2000
modifications. The Company anticipates completing the Year 2000
project by the end of 1998. However, there can be no guarantee
that the systems of other companies on which the Company's systems
rely will be timely converted and would not have an adverse effect
on the Company's operations. The cost of the new general
ledger/accounts payable system and the Year 2000 project is
estimated at $750,000, which is expected to be funded through cash
flow from operations.
The cost of the Year 2000 project and the estimated date of
completion of necessary modifications is based on the Company's
best estimates, which were derived from various assumptions of
future events, including the continued availability of certain
resources, third party modification plans and other factors.
However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those
anticipated.
The following discussion should be read in conjunction with
the "Supplemental Financial and Operating Data" and all of the
consolidated financial statements and notes thereto included
elsewhere in this Form 10-Q and the Company's Form 10-K for the
year ended December 31, 1997. Such financial statements and
information included in this Form 10-Q have been prepared to
reflect the historical condensed consolidated operations of the
Company for the three months ended March 31, 1998 and 1997, and the
condensed consolidated balance sheet data of the Company as of
March 31, 1998 and December 31, 1997.
The changes in revenues and expenses related to property
operations during the three months ended March 31, 1998 and 1997
are primarily the result of the increased number of apartment units
owned due to acquisitions of additional apartment properties by the
Company. Where appropriate, comparisons are made on a
dollars-per-weighted-average-unit basis in order to adjust for changes in the
number of units owned during each period.
The following financial and operating data (see Page 13) is
provided as supplemental information to all financial statements
included elsewhere in this Form 10-Q. Such supplemental
information is unaudited except the balance sheet data as of
December 31, 1997.
SUPPLEMENTAL FINANCIAL AND OPERATING DATA
(In thousands, except per share and property data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1998 1997
---- ----
<S> <C> <C>
OPERATING DATA
Revenues
Rental income. . . . . . . . . . . . . . . . . . $ 65,907 $ 31,516
Other property income. . . . . . . . . . . . . . 2,546 1,272
Interest income. . . . . . . . . . . . . . . . . 361 503
---------- ----------
Total revenues. . . . . . . . . . . . . . . . 68,814 33,291
---------- ----------
Expenses
Property operating and maintenance . . . . . . . 22,512 10,569
Real estate taxes. . . . . . . . . . . . . . . . 6,948 3,149
General and administrative . . . . . . . . . . . 2,835 1,422
Interest . . . . . . . . . . . . . . . . . . . . 13,315 4,877
Amortization . . . . . . . . . . . . . . . . . . 233 211
Depreciation . . . . . . . . . . . . . . . . . . 14,333 6,328
---------- ----------
Total expenses. . . . . . . . . . . . . . . . 60,176 26,556
---------- ----------
Income before extraordinary item and income
allocated to minority interests . . . . . . . . . 8,638 6,735
Extraordinary loss on debt extinguishment. . . . . (24) --
---------- ----------
Income before income allocated to minority
interests . . . . . . . . . . . . . . . . . . . . 8,614 6,735
Income allocated to minority interests . . . . . . (2,898) (405)
---------- ----------
Net income . . . . . . . . . . . . . . . . . . . . 5,716 6,330
Preferred distributions. . . . . . . . . . . . . . (3,280) (3,312)
---------- ----------
Net income available to common stockholders. . . . $ 2,436 $ 3,018
========== ==========
Distribution per share of common stock . . . . . . $ 0.4825 $ 0.4825
========== ==========
Basic weighted average number of common shares
outstanding . . . . . . . . . . . . . . . . . . . 18,277 17,153
========== ==========
- ------------------------------------------------------------------------------
PROPERTY DATA
Total properties (at end of period). . . . . . . . 156 68
Total units (at end of period) . . . . . . . . . . 42,858 21,615
Total units (weighted average) . . . . . . . . . . 42,657 21,599
Weighted average monthly property revenue per
unit. . . . . . . . . . . . . . . . . . . . . . . $ 535 $ 506
- ------------------------------------------------------------------------------
March 31, December 31,
1998 1997
--------- ------------
BALANCE SHEET DATA
Real estate assets, at cost, net . . . . . . . . . $1,442,752 $1,433,029
Mortgage notes payable, credit facility and
term loan . . . . . . . . . . . . . . . . . . . . 725,818 702,354
Minority interests . . . . . . . . . . . . . . . . 318,296 321,916
Stockholders' equity . . . . . . . . . . . . . . . 399,328 395,215
</TABLE>
Comparison of Three Months Ended March 31, 1998 to Three Months
Ended March 31, 1997
The weighted average number of units owned increased by 21,058
units, or 97.5%, from 21,599 units for the first quarter of 1997 to
42,657 units for the first quarter of 1998 as a result of the
acquisition of additional properties. Total units owned at March
31, 1997 and 1998 were 21,615 and 42,858, respectively. The
portfolio had a weighted average occupancy of 92.3% and 93.2% for
the first three months of 1997 and 1998, respectively.
The Company owned 64 properties with 20,845 units throughout
both periods in 1998 and 1997 ("same store"). A summary of the
operating performance for same store properties is as follows:
<TABLE>
<CAPTION>
First Quarter
-------------------
1998 1997 % Change
---- ---- --------
<S> <C> <C> <C>
Rental and other property revenue
(in thousands). . . . . . . . . . . . . . $32,650 $31,792 2.7%
Property operating expenses (in
thousands) (1). . . . . . . . . . . . . . 13,935 13,234 5.3%
------- -------
Property operating income (in thousands) . $18,715 $18,558 0.8%
======= =======
Weighted average physical occupancy. . . . 91.9% 92.3% N/A
======= =======
Average monthly revenue per unit . . . . . $ 522 $ 508 2.7%
======= =======
Average annualized operating and
maintenance expenses per unit . . . . . . $ 2,042 $ 1,957 4.3%
======= =======
Average annualized real estate taxes
per unit. . . . . . . . . . . . . . . . . $ 632 $ 583 8.4%
======= =======
Operating expense ratio. . . . . . . . . . 42.7% 41.6% N/A
======= =======
</TABLE>
(1) Consists of property operating and maintenance and real estate tax
expenses.
The operating performance of properties not owned throughout
both periods in 1998 and 1997 is summarized as follows:
<TABLE>
<CAPTION>
First Quarter
-------------------
1998 1997
---- ----
<S> <C> <C>
Rental and other property revenue
(in thousands). . . . . . . . . . . . . . $35,803 $ 996
Property operating expenses (in
thousands) (1). . . . . . . . . . . . . . 15,525 484
------- -------
Property operating income (in thousands) . $20,278 $ 512
======= =======
Weighted average number of units . . . . . 21,812 754
======= =======
Weighted average physical occupancy. . . . 94.5% 92.4%
======= =======
Average monthly revenue per unit . . . . . $ 547 $ 440
======= =======
Average annualized operating and
maintenance expenses per unit . . . . . . $ 2,177 $ 1,968
======= =======
Average annualized real estate taxes
per unit. . . . . . . . . . . . . . . . . $ 670 $ 599
======= =======
Operating expense ratio. . . . . . . . . . 43.4% 48.6%
======= =======
</TABLE>
(1) Consists of property operating and maintenance and real estate tax
expenses.
Interest income decreased $142,000 in 1998, or 28.2%, from
$503,000 in 1997 to $361,000 in 1998 primarily due to decreased
cash balances in 1998.
General and administrative expenses increased $1,413,000 in
1998, or 99.4%, from $1,422,000 in 1997 to $2,835,000 in 1998.
This represented a per unit increase of $2, or 0.8%, on an
annualized basis. The increase in general and administrative
expenses was primarily due to increased salaries expense and
increased professional services.
Interest expense increased $8,438,000 in 1998, or 173.0%, from
$4,877,000 in 1997 to $13,315,000 in 1998 primarily due to
indebtedness incurred on properties acquired during 1997.
Depreciation increased $8,005,000 in 1998, or 126.5%, from
$6,328,000 in 1997 to $14,333,000 in 1998 due to depreciation on
additional properties acquired and capital improvements on existing
properties.
The $24,000 extraordinary loss on debt extinguishment in 1998
resulted from the write off of unamortized deferred financing costs
due to the refinancing of certain of the Company's indebtedness
during the first quarter of 1998.
Liquidity and Capital Resources
The Company's principal demands for liquidity are
distributions to its stockholders, property operating and
maintenance costs, capital improvements to its properties,
acquisitions of properties, interest on indebtedness and debt
repayments.
During the first three months of 1998, cash flows from
operating activities were $8.4 million and the Company received
proceeds from stock offerings of $10.3 million, including $0.5
million from its dividend reinvestment plan. These funds, in
addition to $13.9 million of net proceeds from mortgage notes
payable and the credit facility, were used during the period to pay
for $5.1 million of the total acquisition cost of two apartment
properties (containing 376 units), distributions to stockholders of
$18.5 million, capital improvements to properties of $7.8 million,
payment of financing costs of $1.4 million and principal payments
of $1.3 million. As a result, the Company had a net decrease in
cash of $1.8 million.
The Company has a $150 million unsecured credit facility (the
"Credit Facility"), which expires in February 1999 ($94 million
unused at March 31, 1998). The Credit Facility has been used to
finance property acquisitions, including capital improvements, and
to meet short-term liquidity requirements. The availability of
funds to the Company under the Credit Facility is subject, however,
to certain borrowing base and other customary covenants.
Net cash provided by operating activities decreased $0.3
million for the first three months of 1998 compared to the same
period in 1997. Cash flow from operating activities before changes
in operating accounts increased $10.3 million, primarily due to an
increase in the number of units owned, which was offset by a
decrease in the net effect of changes in operating accounts of
$10.6 million. The net decrease in operating accounts resulted
primarily from an increase in the payment of real estate taxes.
During the first three months of 1998, net cash used in
investing activities was $12.3 million, compared to $12.9 million
for the same period in 1997. Of the $12.3 million, the Company
spent $5.1 million to purchase two apartment properties and $7.2
million for real estate asset additions.
Net cash provided by financing activities increased by $5.8
million for the first three months of 1998 compared to the same
period in 1997, primarily due to a net increase in mortgage notes
payable and credit facility of $13.9 million. This increase was
partially offset by an increase in distributions paid, including
distributions to minority interest holders, of $7.2 million.
The Company intends to meet its short-term liquidity
requirements, including capital expenditures related to maintenance
and improvements of its properties, through cash flow provided by
operations and when necessary will utilize unused portions of its
Credit Facility to meet working capital needs. Historically, the
cash provided by the Company's operating activities has been
adequate to meet both its operating requirements and distribution
obligations. During the first three months of 1998, the Company
has spent $5.3 million for recurring and non recurring capital
expenditures and $2.5 million for repositioning and acquisition
rehabilitation costs, respectively. Recurring and non recurring
capital expenditures and repositioning and acquisition
rehabilitation costs are anticipated to be approximately $18.7
million and $25.6 million, respectively, for the remainder of 1998.
The Company expects to meets its long-term liquidity
requirements, such as refinancing mortgage indebtedness and
property acquisitions, including capital improvements on property
acquisitions, through long-term borrowings, both secured and
unsecured, and the issuance of debt or equity securities.
As of March 31, 1998, the Company had outstanding indebtedness
in the aggregate principal amount of $725.8 million, consisting of
fixed rate debt of $398.9 million and variable rate debt of $326.9
million. The weighted average interest rate on the Company's
outstanding indebtedness at March 31, 1998 was approximately 7.4%.
Funds from Operations
Management of the Company generally considers funds from
operations ("FFO") an appropriate measure of the performance of an
equity real estate investment trust. FFO is defined as net income
(determined in accordance with generally accepted accounting
principles), excluding gains (or losses) from debt restructuring
and sales of property, plus depreciation of real estate assets,
amortization and income allocated to minority interests. The
Company believes that in order to facilitate a clear understanding
of its operating results, FFO should be examined in conjunction
with net income as presented herein. FFO does not represent cash
generated from operating, investing and financing activities in
accordance with generally accepted accounting principles and is not
necessarily indicative of cash available to fund cash needs and
cash distributions. FFO should not be considered as an alternative
to net income (determined in accordance with generally accepted
accounting principles) as an indication of the Company's
performance or as an alternative to cash flow (determined in
accordance with generally accepted accounting principles) as a
measure of liquidity.
Effective January 1, 1996, the Company adopted the modified
definition of FFO as recommended by the National Association of
Real Estate Investment Trusts; however, the Company's FFO is not
necessarily comparable to similar entitled items reported by other
REITs. FFO for the three months ended March 31, 1998 and 1997 are
as follows (unaudited):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1998 1997
---- ----
<S> <C> <C>
Funds from operations:
Net income available to common stockholders . $ 2,436 $ 3,018
Preferred distributions (1) . . . . . . . . . 980 1,012
Income allocated to minority interests (2). . 1,773 405
Extraordinary loss on debt extinguishment . . 24 --
Depreciation of real estate assets. . . . . . 14,219 6,269
------- -------
Funds from operations. . . . . . . . . . . $19,432 $10,704
======= =======
</TABLE>
(1) Distributions on convertible preferred stock are added back in
computing funds from operations since the conversion to common
shares has been assumed.
(2) Excludes distributions on the preferred operating partnership
units, which are not added back in computing funds from
operations ($1,125 for 1998).
<TABLE>
<S> <C> <C>
Cash flows provided by (used in):
Operating activities. . . . . . . . . . . . . $ 8,360 $ 8,723
Investing activities. . . . . . . . . . . . . (12,895) (12,940)
Financing activities. . . . . . . . . . . . . 2,766 (3,010)
</TABLE>
Inflation
The Company leases apartments under lease terms generally
ranging from six to 12 months. Management believes that such
short-term lease contracts lessen the impact of inflation on the
cost of property operations, as well as allows for the adjustment
of rental rates to market levels as leases expire.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
Not applicable.
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Amended and Restated Limited Partnership Agreement of
Walden/Drever Operating Partnership, L.P.
12.1 Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends
27.1 Financial Data Schedule
(b) Reports
Form 8-K/A Amendment No. 1 was filed on February 17, 1998
to amend Form 8-K originally dated December 16, 1997,
related to the purchase of six apartment properties and the
sale of one apartment property.
Two Form 8-Ks filed in 1997 were amended during the three
months ended March 31, 1998, by reclassifying the
convertible equity securities formerly reported as a
component of stockholders' equity in its consolidated
balance sheets to minority interests and by restating its
statements of income to reflect distributions or income on
such convertible equity securities as income allocated to
minority interests which is deducted in arriving at net
income.
Following are the two Form 8-K/As which were filed:
(1) Form 8-K/A Amendment No. 1 was filed on February
18, 1998 to amend Form 8-K originally dated April
21, 1997, related to the purchase of five apartment
properties.
(2) Form 8-K/A Amendment No. 1 was filed on February
18, 1998 to amend Form 8-K originally dated October
1, 1997, related to the acquisition of the assets
and business of Drever Partners, Inc. and its
affiliates.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
WALDEN RESIDENTIAL PROPERTIES, INC.
By: / s / Mark S. Dillinger
-------------------------
Mark S. Dillinger
Executive Vice President
& Chief Financial Officer
(Principal Financial Officer)
Date: May 14, 1998
-------------------------
EXHIBIT INDEX
Exhibit No. Description
3.1 Restated By-Laws
4.1 Rights Agreement by and between Walden
Residential Properties, Inc. and
BankBoston, N.A. (1)
10.1 Amended and Restated Limited Partnership
Agreement of Walden/Drever Operating
Partnership, L.P.
10.2 Limited Partnership Agreement of
Walden/Grupe Elk Grove, L.P.
10.3 Limited partnership Agreement of
Walden/Grupe Roseville, L.P.
10.4 Amended and Restated Loan Agreement between
Morgan Guaranty Trust Company of New York and
Walden/Drever Operating Partnership, L.P.
12.1 Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends
27.1 Financial Data Schedule
_______________
(1) Previously filed with the Company's Form 8-K filed with the
Securities and Exchange Commission on April 9, 1998 and
incorporated herein by reference.
AMENDED AND RESTATED
BYLAWS
OF
WALDEN RESIDENTIAL PROPERTIES, INC.
March 26, 1998
AMENDED AND
RESTATED BYLAWS
OF
WALDEN RESIDENTIAL PROPERTIES, INC.
TABLE OF CONTENTS
Page
ARTICLE I - MEETINGS OF STOCKHOLDERS. . . . . . . . . . . . 1
1.01. PLACE . . . . . . . . . . . . . . . . . . . . . 1
1.02. ANNUAL MEETING. . . . . . . . . . . . . . . . . 1
1.03. MATTERS TO BE CONSIDERED AT ANNUAL MEETING. . . 1
1.04. SPECIAL MEETINGS. . . . . . . . . . . . . . . . 3
1.05. NOTICE. . . . . . . . . . . . . . . . . . . . . 3
1.06. SCOPE OF NOTICE . . . . . . . . . . . . . . . . 3
1.07. QUORUM. . . . . . . . . . . . . . . . . . . . . 3
1.08. VOTING. . . . . . . . . . . . . . . . . . . . . 3
1.09. PROXIES . . . . . . . . . . . . . . . . . . . . 4
1.10. CONDUCT OF MEETINGS . . . . . . . . . . . . . . 4
1.11. TABULATION OF VOTES . . . . . . . . . . . . . . 4
1.12. INFORMAL ACTION BY STOCKHOLDERS . . . . . . . . 4
1.13. VOTING BY BALLOT. . . . . . . . . . . . . . . . 4
ARTICLE II - DIRECTORS. . . . . . . . . . . . . . . . . . . 5
2.01. GENERAL POWERS. . . . . . . . . . . . . . . . . 5
2.02. NUMBER, TENURE AND QUALIFICATION. . . . . . . . 5
2.03. NOMINATION OF DIRECTORS . . . . . . . . . . . . 5
2.04. ANNUAL AND REGULAR MEETINGS . . . . . . . . . . 7
2.05. SPECIAL MEETINGS. . . . . . . . . . . . . . . . 7
2.06. NOTICE. . . . . . . . . . . . . . . . . . . . . 7
2.07. QUORUM. . . . . . . . . . . . . . . . . . . . . 7
2.08. VOTING. . . . . . . . . . . . . . . . . . . . . 7
2.09. CONDUCT OF MEETINGS . . . . . . . . . . . . . . 7
2.10. RESIGNATIONS. . . . . . . . . . . . . . . . . . 8
2.11. REMOVAL OF DIRECTORS. . . . . . . . . . . . . . 8
2.12. VACANCIES . . . . . . . . . . . . . . . . . . . 8
2.13. INFORMAL ACTION BY DIRECTORS. . . . . . . . . . 8
2.14. COMPENSATION. . . . . . . . . . . . . . . . . . 8
ARTICLE III - COMMITTEES. . . . . . . . . . . . . . . . . . 9
3.01. NUMBER, TENURE AND QUALIFICATION. . . . . . . . 9
3.02. DELEGATION OF POWER . . . . . . . . . . . . . . 9
3.03. QUORUM AND VOTING . . . . . . . . . . . . . . . 9
3.04. CONDUCT OF MEETINGS . . . . . . . . . . . . . . 9
3.05. INFORMAL ACTION BY COMMITTEES . . . . . . . . . 9
ARTICLE IV - OFFICERS . . . . . . . . . . . . . . . . . . 10
4.01. POWERS AND DUTIES . . . . . . . . . . . . . . 10
4.02. REMOVAL . . . . . . . . . . . . . . . . . . . 10
4.03. VACANCIES . . . . . . . . . . . . . . . . . . 10
4.04. CHAIRMAN OF THE BOARD . . . . . . . . . . . . 10
4.05. PRESIDENT . . . . . . . . . . . . . . . . . . 10
4.06. VICE PRESIDENTS . . . . . . . . . . . . . . . 10
4.07. SECRETARY . . . . . . . . . . . . . . . . . . 11
4.08. TREASURER . . . . . . . . . . . . . . . . . . 11
4.09. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS 11
4.10. SUBORDINATE OFFICERS. . . . . . . . . . . . . 11
4.11. SALARIES. . . . . . . . . . . . . . . . . . . 11
ARTICLE V - SHARES OF STOCK . . . . . . . . . . . . . . . 12
5.01. NO CERTIFICATES FOR STOCK . . . . . . . . . . 12
5.02. ELECTION TO ISSUE CERTIFICATES. . . . . . . . 12
5.03. STOCK LEDGER. . . . . . . . . . . . . . . . . 12
5.04. RECORDING TRANSFERS OF STOCK. . . . . . . . . 12
5.05. LOST CERTIFICATES . . . . . . . . . . . . . . 13
5.06. FIXING OF RECORD DATE . . . . . . . . . . . . 13
ARTICLE VI - DIVIDENDS AND DISTRIBUTIONS. . . . . . . . . 13
6.01. DECLARATION . . . . . . . . . . . . . . . . . 13
6.02. CONTINGENCIES . . . . . . . . . . . . . . . . 13
ARTICLE VII - INDEMNIFICATION . . . . . . . . . . . . . . 14
7.01. INSURANCE . . . . . . . . . . . . . . . . . . 14
7.02. NON-EXCLUSIVE RIGHT TO INDEMNIFY; HEIRS AND
PERSONAL REPRESENTATIVES. . . . . . . . . . . 14
7.03. NO LIMITATION . . . . . . . . . . . . . . . . 14
ARTICLE VIII - NOTICES. . . . . . . . . . . . . . . . . . 14
8.01. NOTICES . . . . . . . . . . . . . . . . . . . 14
8.02. SECRETARY TO GIVE NOTICE. . . . . . . . . . . 14
8.03. WAIVER OF NOTICE. . . . . . . . . . . . . . . 15
ARTICLE IX - MISCELLANEOUS. . . . . . . . . . . . . . . . 15
9.01. BOOKS AND RECORDS . . . . . . . . . . . . . . 15
9.02. INSPECTION OF BYLAWS AND CORPORATE RECORDS. . 15
9.03. CONTRACTS . . . . . . . . . . . . . . . . . . 15
9.04. CHECKS, DRAFTS, ETC . . . . . . . . . . . . . 15
9.05. FISCAL YEAR . . . . . . . . . . . . . . . . . 15
9.06. ANNUAL REPORT . . . . . . . . . . . . . . . . 15
9.07. INTERIM REPORTS . . . . . . . . . . . . . . . 16
9.08. OTHER REPORTS . . . . . . . . . . . . . . . . 16
9.09. BYLAWS SEVERABLE. . . . . . . . . . . . . . . 16
ARTICLE X - AMENDMENT OF BYLAWS . . . . . . . . . . . . . 16
10.01. BY DIRECTORS. . . . . . . . . . . . . . . . . 16
10.02. BY STOCKHOLDERS . . . . . . . . . . . . . . . 16
ARTICLE I
MEETINGS OF STOCKHOLDERS
1.01 PLACE. All meetings of the holders of the issued and
outstanding capital stock of the Corporation (the "Stockholders")
shall be held at the principal executive office of the Corporation
or such other place within the United States as shall be stated in
the notice of the meeting.
1.02. ANNUAL MEETING. An annual meeting of the
Stockholders for the election of Directors and the transaction of
such other business as properly may be brought before the meeting
shall be held on the second Wednesday in May of each year or at
such other date and time as may be fixed by the Board of Directors.
If the date fixed for the annual meeting shall be a legal holiday,
such meeting shall be held on the next succeeding business day. If
no annual meeting is held on the date designated, a special meeting
in lieu thereof may be held, and such special meeting shall have,
for purposes of these Bylaws or otherwise, all the force and effect
of an annual meeting. Any and all references hereafter in these
Bylaws to an annual meeting or to annual meetings shall be deemed
to refer also to any special meeting(s) in lieu thereof. Failure
to hold an annual meeting shall not invalidate the Corporation's
existence or affect any otherwise valid corporate actions.
1.03. MATTERS TO BE CONSIDERED AT ANNUAL MEETING.
(a) At an annual meeting of Stockholders, only such business
shall be conducted, and only such proposals shall be acted upon, as
shall have been properly brought before the annual meeting (i) by,
or at the direction of, a majority of the Board of Directors, or
(ii) by any holder of record (both as of the time notice of such
proposal is given by the Stockholder as set forth below and as of
the record date for the annual meeting in question) of any shares
(the "Shares") of the Corporation's capital stock (the "Stock")
entitled to vote at such annual meeting who complies with the
procedures set forth in this Section 1.03. For a proposal to be
properly brought before an annual meeting by a Stockholder, other
than a stockholder proposal included in the Corporation's proxy
statement pursuant to Rule 14a-8 of the Securities Exchange Act of
1934, as amended, the Stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation, and such
Stockholder or his representative must be present in person at the
annual meeting. For the first annual meeting following the initial
public offering of common stock of the Corporation, a Stockholder's
notice shall be timely if delivered to, or mailed and received at,
the principal executive office of the Corporation not later than
the close of business on the 20th calendar day (or if that day is
not a business day for the Corporation, on the next business day)
following the date on which notice of the date of the first annual
meeting is mailed or otherwise transmitted to Stockholders. For
all subsequent annual meetings, a Stockholder's notice shall be
timely if delivered to, or mailed and received at, the principal
executive office of the Corporation (A) not less than 75 nor more
than 180 calendar days prior to the anniversary date of the
immediately preceding annual meeting of Stockholders or special
meeting in lieu thereof (the "Anniversary Date") or (B) in the
event that the annual meeting of Stockholders is called for a date
more than seven calendar days prior to the Anniversary Date, not
later than the close of business on (1) the 20th calendar day (or
if that day is not a business day for the Corporation, on the next
succeeding business day) following the earlier of (x) the date on
which notice of the date of such meeting was mailed to Stockholders
or (y) the date on which the date of such meeting was publicly
disclosed or (2) if such date of notice or public disclosure occurs
more than 75 calendar days prior to the scheduled date of such
meeting, then the later of (x) the 20th calendar day (or if that
day is not a business day for the Corporation, on the next
succeeding business day) following the date of the first to occur
of such notice or public disclosure or (y) the 75th calendar day
prior to such scheduled date of such meeting (or if that day is not
a business day for the Corporation, on the next succeeding business
day).
(b) A Stockholder's notice to the Secretary shall set forth
as to each matter the Stockholder proposes to bring before the
annual meeting (i) a brief description of the proposal desired to
be brought before the annual meeting and the reasons for conducting
such business at the annual meting, (ii) the name and address, as
they appear on the Corporation's stock transfer books, of the
Stockholder proposing such business and of the beneficial owners
(if any) of the Stock registered in such Stockholder's name and the
name and address of other Stockholders known by such Stockholder to
be supporting such proposal on the date of such Stockholder's
notice, (iii) the class and number of Shares which are beneficially
owned by the Stockholder and such beneficial owners (if any) on the
date of such Stockholder's notice and by any other Stockholders
known by such Stockholder to be supporting such proposal on the
date of such Stockholder's notice, and (iv) any financial interest
of the Stockholder or of any such beneficial owner in such
proposal.
(c) If the Board of Directors, or a designated committee
thereof, determines that any Stockholder proposal was not timely
made in accordance with the terms of this Section 1.03, such
proposal shall not be presented for action at the annual meeting in
question. If the Board of Directors, or a designated committee
thereof, determines that the information provided in a
Stockholder's notice does not satisfy the informational
requirements of this Section 1.03 in any material respect, the
Secretary of the Corporation shall promptly notify such Stockholder
of the deficiency in the notice. Such Stockholder shall have an
opportunity to cure the deficiency by providing additional
information to the Secretary within the period of time, not to
exceed five calendar days from the date such deficiency notice is
given to the Stockholder, determined by the Board of Directors or
such committee. If the deficiency is not cured within such period,
or if the Board of Directors or such committee determines that the
additional information provided by the Stockholder, together with
the information previously provided, does not satisfy the
requirements of this Section 1.03 in any material respect, then
such proposal shall not be presented for action at the annual
meeting in question.
(d) Notwithstanding the procedure set forth in the preceding
paragraph, if neither the Board of Directors nor such committee
makes a determination as to the validity of any Stockholder
proposal as set forth above, the presiding officer of the annual
meeting shall determine and declare at the annual meeting whether
the Stockholder proposal was made in accordance with the terms of
this Section 1.03. If the presiding officer determines that a
Stockholder proposal was made in accordance with the terms of this
Section 1.03, the presiding officer shall so declare at the annual
meeting. If the presiding officer determines that a Stockholder
proposal was not made in accordance with the provisions of this
Section 1.03, the presiding officer shall so declare at the annual
meeting and such proposal shall not be acted upon at the annual
meeting.
(e) This provision shall not prevent the consideration and
approval or disapproval at the annual meeting of reports of
Officers, Directors and committees of the Board of Directors, but
in connection with such reports, no new business shall be acted
upon at such annual meeting except in accordance with the
provisions of this Section 1.03.
1.04. SPECIAL MEETINGS. The Chairman of the Board, the
President or a majority of the Board of Directors may call special
meetings of the Stockholders. Special meetings of Stockholders
shall also be called by the Secretary upon the written request of
the holders of Shares entitled to cast a majority or more of the
votes entitled to be cast at such meeting. Such request shall
state the purpose or purposes of such meeting and the matters
proposed to be acted on at such meeting. The date, time, place and
record date for any special meeting, including a special meeting
called at the request of Stockholders, shall be established by the
Board of Directors or Officer calling the same.
1.05. NOTICE. Not less than 30 nor more than 90 calendar
days before the date of every meeting of Stockholders, written or
printed notice of such meeting shall be given, in accordance with
Article VIII of these Bylaws, to each Stockholder entitled to vote
or entitled to notice by statute, stating the time and place of the
meeting and, in the case of a special meeting or as otherwise may
be required by statute, the purpose or purposes for which the
meeting is called. Notice is given to a Stockholder when it is
personally delivered to him, left at his residence or usual place
of business or mailed to him at his address as it appears on the
records of the Corporation. Notwithstanding the foregoing
provisions, each person who is entitled to notice waives notice if
before or after the meeting he signs a waiver of the notice which
is filed with the records of stockholders' meetings, or is present
at the meeting in person or by proxy.
1.06. SCOPE OF NOTICE. No business shall be transacted at
a special meeting of Stockholders except as specifically designated
in the notice of the meeting. Any business of the Corporation may
be transacted at the annual meeting without being specifically
designated in the notice, except such business as is required by
statute to be stated in such notice.
1.07. QUORUM. At any meeting of Stockholders, the
presence in person or by proxy of Stockholders entitled to cast a
majority of the votes shall constitute a quorum, but this Section
1.07 shall not affect any requirement under any statute or the
Articles of Incorporation of the Corporation, as amended and/or
restated (the "Charter"), for the vote necessary for the adoption
of any measure. If, however, a quorum is not present at any
meeting of Stockholders, the Stockholders present in person or by
proxy shall have the power to adjourn the meeting from time to time
without notice other than announcement at the meeting until a
quorum is present and the meeting so adjourned may be reconvened
without further notice. At any adjourned meeting at which a quorum
is present, any business may be transacted that might have been
transacted at the meeting as originally notified. The Stockholders
present at a meeting which has been duly called and convened and at
which a quorum is present at the time counted may continue to
transact business until adjournment, notwithstanding the withdrawal
of enough Stockholders to leave less than a quorum.
1.08. VOTING. A majority of the votes cast at a meeting
of Stockholders duly called and at which a quorum is present shall
be sufficient to take or authorize action upon any matter which may
properly come before the meeting, unless more than a majority of
the votes cast is specifically required by statute, the Charter or
these Bylaws and except that a plurality of all the votes cast at
a meeting at which a quorum is present is sufficient to elect a
Director. Shares directly or indirectly owned by the Corporation
shall not be voted in any meeting and shall not be counted in
determining the total number of outstanding Shares entitled to vote
at any given time, but Shares of its own voting Stock held by it in
a fiduciary capacity may be voted and shall be counted in
determining the total number of outstanding Shares at any given
time.
1.09. PROXIES. A Stockholder may vote the Shares owned of
record by him or her, either in person or by proxy executed in
writing by the Stockholder or by his or her duly authorized
attorney in fact. Such proxy shall be filed with the Secretary of
the Corporation before or at the time of the meeting. No proxy
shall be valid after 11 months from the date of its execution,
unless otherwise provided in the proxy.
1.10. CONDUCT OF MEETINGS. The Chairman of the Board, or,
in the absence of the Chairman, the President, or, in the absence
of the Chairman and President, the Vice President (or in the event
there be more than one Vice President the Vice Presidents in the
order designated at the time of their election or, in the absence
of any such designation, then in order of their election) or, in
the absence of the Chairman, President and any Vice President, a
presiding officer elected at the meeting shall preside over
meetings of the Stockholders. The Secretary of the Corporation,
or, in the absence of the Secretary and Assistant Secretaries, the
person appointed by the presiding officer at the meeting shall act
as secretary of such meeting.
1.11. TABULATION OF VOTES. At any annual or special
meeting of Stockholders, the presiding officer shall be authorized
to appoint a teller for such meeting (the "Teller") . The Teller
may, but need not, be an Officer or employee of the Corporation.
The Teller shall be responsible for tabulating or causing to be
tabulated Shares voted at the meeting and reviewing or causing to
be reviewed all proxies. In tabulating votes, the Teller shall be
entitled to rely in whole or in part on tabulations and analyses
made by personnel of the Corporation, its counsel, its transfer
agent, its registrar or such other organizations that are
customarily employed to provide such services. The Teller shall be
authorized to determine the legality and sufficiency of all votes
cast and proxies delivered under the Charter, these Bylaws and
applicable law. The presiding officer may review all
determinations made by the Teller hereunder, and in doing so the
presiding officer shall be entitled to exercise his or her sole
judgment and discretion and he or she shall not be bound by any
determinations made by the Teller.
1.12. INFORMAL ACTION BY STOCKHOLDERS. An action required
or permitted to be taken at any meeting of Stockholders (other than
the annual meeting of Stockholders) may be taken without a meeting
if a consent in writing, setting forth such action, is signed by
all the Stockholders entitled to vote on the subject matter thereof
and any other Stockholders entitled to notice of a meeting of
Stockholders (but not to vote thereat) have waived in writing any
rights which they may have to dissent from such action, and such
consents and waivers are filed with the minutes of proceedings of
the Stockholders. Such consents and waivers may be signed by
different Stockholders on separate counterparts.
1.13. VOTING BY BALLOT. Voting on any question or in any
election may be by voice vote unless the presiding officer shall
order or any Stockholder shall demand that voting be by ballot.
ARTICLE II
DIRECTORS
2.01. GENERAL POWERS. The business and affairs of the
Corporation shall be managed by its Board of Directors. All powers
of the Corporation may be exercised by or under authority of the
Board of Directors, except as conferred on or reserved to the
Stockholders by statute, the Charter or these Bylaws.
2.02. NUMBER, TENURE AND QUALIFICATION. The number of
Directors of the Corporation shall be that number set forth in the
Charter or such other number as may be designated from time to time
by resolution of a majority of the entire Board of Directors;
provided, however, that the number of Directors shall never be more
than 15 nor less than the number required by Section 2-402 of the
Maryland General Corporation Law (the "MGCL"), as amended from time
to time, and further provided that the tenure of office of a
Director shall not be affected by any decrease in the number of
Directors. Each Director shall serve for the term set forth in the
Charter and until his or her successor is elected and qualified.
2.03. NOMINATION OF DIRECTORS.
(a) Nominations of candidates for election as Directors of
the Corporation at any annual meeting of Stockholders may be made
(i) by, or at the direction of, a majority of the Board of
Directors or by any committee of the Board of Directors established
for such purpose or (ii) by any holder of record (both as of the
time notice of such nomination is given by the Stockholder as set
forth below and as of the record date for the annual meeting in
question) of any Shares of Stock entitled to vote at such meeting
who complies with the procedures set forth in this Section 2.03.
Any Stockholder who seeks to make such a nomination, or his
representative, must be present in person at the annual meeting.
Only persons nominated in accordance with the procedures set forth
in this Section 2.03 shall be eligible for election as Directors at
an annual meeting of Stockholders.
(b) Nominations, other than those made by, or at the
direction of, the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation as set
forth in this Section 2.03. For the first annual meeting of the
Corporation following the initial public offering of common stock
of the Corporation, notice shall be timely if delivered to, or
mailed and received at, the principal executive office of the
Corporation not later than the close of business on the 20th
calendar day (or if that day is not a business day for the
Corporation, the next succeeding business day) following the date
on which notice of the first annual meeting is mailed or otherwise
transmitted to Stockholders. For all subsequent annual meetings of
the Corporation, a Stockholder's notice shall be timely if
delivered to, or mailed and received at, the principal executive
offices of the Corporation (i) not less than 75 nor more than 180
calendar days prior to the Anniversary Date or (ii) in the event
that the annual meeting of Stockholders is called for a date more
than seven calendar days prior to the Anniversary Date, not later
than the close of business on (A) the 20th calendar day (or if that
day is not a business day for the Corporation, on the next
succeeding business day) following the earlier of (1) the date on
which notice of the date of such meeting was mailed to Stockholders
or (2) the date on which the date of such meeting was publicly
disclosed, or (B) if such date of notice or public disclosure
occurs more than 75 calendar days prior to the scheduled date of
such meeting, then the later of (x) the 20th calendar day (or if
that day is not a business day for the Corporation, on the next
succeeding business day) following the date of the first to occur
of such notice or public disclosure or (y) the 75th calendar day
prior to such scheduled date of such meeting (or if that day is not
a business day for the Corporation, on the next succeeding business
day).
(c) A Stockholder's notice of nomination shall set forth as
to each person the Stockholder proposes to nominate for election as
a Director (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment
of such person for the past five years, (iii) the class and number
of Shares of Stock which are beneficially owned by such person on
the date of such notice, (iv) such nominee's written consent to be
named in the proxy statement as a nominee and to serve as a
Director if elected, and (v) any other information relating to such
person that is required to be disclosed in solicitations of proxies
with respect to nominees for election as may be deemed necessary or
desirable by the Corporation's counsel, in the exercise of his or
her discretion. Notice by a Stockholder shall, in addition to the
above-referenced information, set forth as to the Stockholder
giving the notice (A) the name and address, as they appear on the
Corporation's stock transfer books, of such Stockholder and of the
beneficial owners (if any) of the Stock registered in such
Stockholder's name; (B) the name and address of other Stockholders
known by such Stockholder to be supporting such nominees on the
date of such Stockholder's notice; (C) the class and number of
Shares of Stock which are beneficially owned by such Stockholder
and such beneficial owners (if any) on the date of such Stockholder
notice; and (D) the class and number of Shares of Stock which are
beneficially owned by any other Stockholders known by such
Stockholder to be supporting such nominees on the date of such
Stockholder notice. At the request of the Board of Directors, any
person nominated by or at the direction of the Board of Directors
for election as a Director at an annual meeting shall furnish to
the Secretary of the Corporation that information which would be
required to be set forth in a Stockholder's notice of nomination of
such nominee.
(d) No person shall be elected by the Stockholders as a
Director of the Corporation unless nominated in accordance with the
procedures set forth in this Section 2.03. If the Board of
Directors, or a designated committee thereof, determines that a
nomination made by any Stockholder was not timely made in
accordance with the terms of this Section 2.03, such nomination
shall not be considered at the annual meeting in question. If the
Board of Directors, or a designated committee thereof, determines
that the information provided in a Stockholder's notice does not
satisfy the informational requirements of this Section 2.03 in any
material respect, the Secretary of the Corporation shall promptly
notify such Stockholder of the deficiency in the notice. Such
Stockholder shall have an opportunity to cure the deficiency by
providing additional information to the Secretary within the period
of time, not to exceed five calendar days from the date such
deficiency notice is given to such Stockholder, determined by the
Board of Directors or such committee. If the deficiency is not
cured within such period, or if the Board of Directors or such
committee determines that the additional information provided by
such Stockholder, together with the information previously
provided, does not satisfy the requirements of this Section 2.03 in
any material respect, such nomination shall not be considered at
the annual meeting in question.
(e) Notwithstanding the procedures set forth in the preceding
paragraph, if neither the Board of Directors nor a designated
committee thereof makes a determination as to the validity of any
nominations by any Stockholder as set forth above, the presiding
officer of the Stockholders meeting shall determine and declare at
the Stockholders meeting whether a nomination was made in
accordance with the terms of this Section 2.03. If the presiding
officer determines that a nomination was not made in accordance
with the terms of this Section 2.03, such nomination shall be
disregarded, and the Board of Directors shall make all Director
nominations on behalf of the Corporation.
2.04. ANNUAL AND REGULAR MEETINGS. An annual meeting of
the Board of Directors may be held immediately after and at the
same place as the annual meeting of Stockholders, or at such other
time and place, either within or without the State of Maryland, as
is selected by resolution of the Board of Directors, and no notice
other than this Bylaw or such resolution shall be necessary. The
Board of Directors may provide, by resolution, the time and place,
either within or without the State of Maryland, for the holding of
regular meetings of the Board of Directors without other notice
other than such resolutions.
2.05. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the
Board, the President or a majority of the Directors then in office.
The person or persons authorized to call special meetings of the
Board of Directors may fix any place, either within or without the
State of Maryland, as the place for holding any special meeting of
the Board of Directors called by them.
2.06. NOTICE. Notice of any special meeting to be
provided herein shall be given by written notice delivered
personally, telegraphed or telecopied to each Director at his or
her business or residence at least 24 hours, or by mail at least
five calendar days, prior to the meeting. Neither the business to
be transacted at, nor the purpose of, any annual, regular or
special meeting of the Board of Directors need be specified in the
notice, unless specifically required by statute, the Charter or
these Bylaws.
2.07. QUORUM. A majority of the Board of Directors then
in office shall constitute a quorum for the transaction of business
at any meeting of the Board of Directors; provided, however, that
a quorum for the transaction of business with respect to any matter
in which any Director (or affiliate of such Director) who is not an
independent Director has any interest shall consist of a majority
of the Directors that includes a majority of the independent
Directors then in office. If less than a majority of the Board of
Directors is present at said meeting, a majority of the Directors
present may adjourn the meeting from time to time without further
notice.
2.08. VOTING. The act of a majority of the Directors
present at a meeting at which a quorum is present shall be the act
of the Board of Directors, unless the concurrence of a greater
proportion is required for such action by applicable statute, the
Charter or these Bylaws; provided, however, that no act relating to
any matter in which a Director (or affiliate of such Director) who
is not an independent Director has any interest shall be the act of
the Board of Directors unless such act has been approved by a
majority of the Board of Directors that includes a majority of the
independent Directors.
2.09. CONDUCT OF MEETINGS. All meetings of the Board of
Directors shall be called to order and presided over by the
Chairman of the Board, or, in the absence of the Chairman of the
Board, by the President (if a member of the Board of Directors) or,
in the absence of the Chairman of the Board and the President, by
a member of the Board of Directors selected by the members present.
The Secretary of the Corporation or, in the absence of the
Secretary, any Assistant Secretary, shall act as secretary at all
meetings of the Board of Directors, and in the absence of the
Secretary and Assistant Secretaries, the presiding officer of the
meeting shall designate any person to act as secretary of the
meeting. Members of the Board of Directors may participate in
meetings of the Board of Directors by conference telephone or
similar communications equipment by means of which all Directors
participating in the meeting can hear each other at the same time,
and participation in a meeting in accordance herewith shall
constitute presence in person at such meeting for all purposes of
these Bylaws.
2.10. RESIGNATIONS. Any Director may resign from the
Board of Directors or any committee thereof at any time. Such
resignation shall be made in writing and shall take effect at the
time specified therein, or if no time be specified, at the time of
the receipt of notice of such resignation by the President or the
Secretary of the Corporation.
2.11. REMOVAL OF DIRECTORS. Consistent with the Charter,
the Stockholders may, at any time, remove any Director, with or
without cause, by the affirmative vote of a majority of all the
votes entitled to be cast on the matter, and may elect a successor
to fill any resulting vacancy for the balance of the term of the
removed Director.
2.12. VACANCIES. The Stockholders may elect a successor
to fill a vacancy on the Board of Directors which results from the
removal of a Director, which successor shall fill such vacancy for
the balance of the term of the removed Director. Furthermore, any
vacancy occurring in the Board of Directors for any cause other
than by reason of an increase in the number of directors may be
filled by a majority vote of the remaining Directors, although such
majority is less than a quorum. Any vacancy occurring in the Board
of Directors by reason of an increase in the number of directors
may be filled by a majority vote of the entire Board of Directors.
A Director elected by the Board of Directors to fill a vacancy
shall hold office until the next annual meeting of Stockholders at
which the term of the class of Directors to which such Director is
elected expires or until his or her successor is elected and
qualified.
2.13. INFORMAL ACTION BY DIRECTORS. Any action required
or permitted to be taken at any meeting of the Board of Directors
may be taken without a meeting, if a consent in writing to such
action is signed by all of the Directors and such written consent
is filed with the minutes of the Board of Directors. Such consents
may be signed by different Directors on separate counterparts.
2.14. COMPENSATION. A fee for service and payment for
expenses of attendance at each meeting of the Board of Directors,
or of any committee thereof, may be allowed to any Director by
resolution of the Board of Directors.
ARTICLE III
COMMITTEES
3.01. NUMBER, TENURE AND QUALIFICATION. The Board of
Directors may appoint from among its members an executive committee
and other committees, composed of two or more Directors, to serve
at the pleasure of the Board of Directors. If any committee may
take or authorize any act as to any matter in which any Director
(or affiliate of such Director) who is an employee of the
Corporation has or may have any interest, a majority of the members
of such committee shall be Directors who are not employees of the
Corporation, except that any such committee consisting of only two
Directors may have one Director who is not an employee of the
Corporation and one Director who is an employee of the Corporation.
3.02. DELEGATION OF POWER. The Board of Directors may
delegate to those committees in the intervals between meetings of
the Board of Directors any of the powers of the Board of Directors
to manage the business and affairs of the Corporation, except those
powers which the Board of Directors is specifically prohibited from
delegating pursuant to Section 2-411 of the MGCL.
3.03. QUORUM AND VOTING. A majority of the members of any
committee shall constitute a quorum for the transaction of business
by such committee, and the act of a majority of the quorum shall
constitute the act of the committee, except that no act relating to
any matter in which any Director (or affiliate of such Director)
who is not an independent Director has any interest shall be the
act of any committee unless a majority of the independent Directors
on the committee votes for such act.
3.04. CONDUCT OF MEETINGS. Each committee shall designate
a presiding officer of such committee and, if not present at a
particular meeting, the committee shall select a presiding officer
for such meeting. Members of any committee may participate in
meetings of such committee by conference telephone or similar
communications equipment by means of which all Directors
participating in the meeting can hear each other at the same time,
and participation in a meeting in accordance herewith shall
constitute presence in person at such meeting for all purposes of
these Bylaws. Each committee shall keep minutes of its meetings,
and report the results of any proceedings at the next succeeding
annual or regular meeting of the Board of Directors.
3.05. INFORMAL ACTION BY COMMITTEES. Any action required
or permitted to be taken at any meeting of a committee of the Board
of Directors may be taken without a meeting, if a written consent
to such action is signed by all members of the committee and such
written consent is filed with the minutes of proceedings of such
committee. Such consents may be signed by different members on
separate counterparts.
ARTICLE IV
OFFICERS
4.01. POWERS AND DUTIES. The Officers of the Corporation
shall be elected annually by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of
Stockholders. If the election of Officers shall not be held at
such meeting, such election shall be held as soon thereafter as may
be convenient. Each officer shall hold office until his successor
is duly elected and qualified or until his death, resignation or
removal in the manner hereinafter provided. Any two or more
offices except President and Vice President may be held by the same
person. Election or appointment of an Officer or agent shall not
of itself create contract rights between the Corporation and such
Officer or agent.
4.02. REMOVAL. Any Officer or agent elected or appointed
by the Board of Directors may be removed by the Board of Directors
whenever in its judgment the best interests of the Corporation
would be served thereby, provided that the consequences of any such
removal shall be subject to any contractual arrangement such
Officer or agent may have with the Corporation. The fact that a
person is elected to an office, whether or not for a specified
term, shall not by itself constitute any undertaking or evidence of
any employment obligation of the Corporation to that person.
4.03. VACANCIES. A vacancy in any office may be filled by
the Board of Directors for the unexpired portion of the term of
such office.
4.04. CHAIRMAN OF THE BOARD. The Chairman of the Board
shall preside at all meetings of the Stockholders and of the Board
of Directors. In general, the Chairman of the Board shall perform
all duties incident to the office of Chairman of the Board and such
other duties as may be prescribed by the Board of Directors from
time to time.
4.05. PRESIDENT. Unless the Board of Directors shall
otherwise determine, the President shall be the Chief Executive
Officer and general manager of the Corporation and shall in general
supervise and control all of the business and affairs of the
Corporation. In the absence of the Chairman of the Board, the
President shall preside at all meetings of the Stockholders and of
the Board of Directors (if a member of the Board of Directors).
The President may sign any deeds, mortgages, bonds, contracts or
other obligations or instruments on behalf of the Corporation
except in cases where the execution thereof shall be expressly
delegated by the Board of Directors or by these Bylaws to some
other Officer or agent of the Corporation or shall be required by
law to be otherwise signed or executed. In general, the President
shall perform all duties incident to the office of President and
such other duties as may be prescribed by the Board of Directors
from time to time.
4.06. VICE PRESIDENTS. The Board of Directors may appoint
one or more Vice Presidents. In the absence of the President or in
the event of a vacancy in such office, the Vice President (or in
the event there be more than one Vice President, the Vice
Presidents in the order designated at the time of their election
or, in the absence of any designation, then in the order of their
election) shall perform the duties of the President and when so
acting shall have all the powers of and be subject to all the
restrictions upon the President. Every Vice President shall
perform such other duties as from time to time may be assigned to
him or her by the President or the Board of Directors.
4.07. SECRETARY. The Secretary shall (a) keep the minutes
of the proceedings of the Stockholders and Board of Directors in
one or more books provided for that purpose; (b) see that all
notices are duly given in accordance with the provisions of these
Bylaws or as required by law; (c) be custodian of the corporate
records of the Corporation; (d) unless a transfer agent is
appointed, keep a register of the post office address of each
Stockholder that shall be furnished to the Secretary by such
Stockholder and have general charge of the Stock Ledger of the
Corporation (as hereinafter defined); (e) when authorized by the
Board of Directors or the President, attest to or witness all
documents requiring the same; (f) perform all duties as from time
to time may be assigned to him or her by the President or the Board
of Directors; and (g) perform all the duties generally incident to
the office of secretary of a corporation.
4.08. TREASURER. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all moneys and other valuable effects
in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. The
Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of
Directors, at the regular meetings of the Board of Directors or
whenever they may require it, an account of all of his or her
transactions as Treasurer and of the financial condition of the
Corporation. The Board of Directors may engage a custodian to
perform some or all of the duties of the Treasurer, and if a
custodian is so engaged then the Treasurer shall be relieved of the
responsibilities set forth herein to the extent delegated to such
custodian and, unless the Board of Directors otherwise determines,
shall have general supervision over the activities of such
custodian. The custodian shall not be an Officer of the
Corporation.
4.09. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
Board of Directors or the President may appoint one or more
Assistant Secretaries or Assistant Treasurers. The Assistant
Secretaries and Assistant Treasurers (a) shall have all the powers
and shall perform all the duties of the Secretary and the
Treasurer, respectively, in such respective Officer's absence and
(b) shall perform such duties as shall be assigned to him or her by
the Secretary or Treasurer, respectively, or by the President or
the Board of Directors.
4.10. SUBORDINATE OFFICERS. The Corporation shall have
such subordinate officers as the Board of Directors may from time
to time elect. Each such Officer shall hold office for such period
and perform such duties as the Board of Directors, the President or
any designated committee or Officer may prescribe.
4.11. SALARIES. The salaries, if any, of the Officers
shall be fixed from time to time by the Board of Directors. No
Officer shall be prevented from receiving such salary, if any, by
reason of the fact that he or she is also a Director of the
Corporation.
ARTICLE V
SHARES OF STOCK
5.01. NO CERTIFICATES FOR STOCK. Unless the Board of
Directors authorizes the issuance of certificates pursuant to
Section 5.02, none of the Stock shall be represented by
certificates.
5.02. ELECTION TO ISSUE CERTIFICATES. The Board of
Directors may authorize the issuance of certificates representing
some or all of the shares of any or all of the classes or series of
Stock. If the Board of Directors so authorizes certificates, such
certificates shall be of such form, not inconsistent with the
Charter, as shall be approved by the Board of Directors. All
certificates, if issued, shall be signed by the Chairman of the
Board, the President, or a Vice President and countersigned by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary. Any signature or countersignature may be either a
manual or facsimile signature. All certificates, if issued, for
each class of Stock shall be consecutively numbered.
5.03. STOCK LEDGER. The Corporation shall maintain at its
principal executive office, at the office of its counsel,
accountants or transfer agent or at such other place designated by
the Board of Directors an original or duplicate stock ledger
containing the names and addresses of all the Stockholders and the
number of Shares of each class of Stock held by each Stockholder
(the "Stock Ledger"). The Stock Ledger shall be maintained
pursuant to a system that the Corporation shall adopt allowing for
the issuance, recordation and transfer of its Stock by electronic
or other means that can be readily converted into written form for
visual inspection and not involving any issuance of certificates.
Such system shall include provisions for notice to acquirers of
Stock (whether upon issuance or transfer of Stock) in accordance
with Sections 2-210 and 2-211 of the MGCL, and Section 8-408 of the
Commercial Law Article of the Code of the State of Maryland. The
Corporation shall be entitled to treat the holder of record of any
Share or Shares as the holder in fact thereof and, accordingly,
shall not be bound to recognize any equitable or other claim to or
interest in such Share on the part of any other person, whether or
not it shall have express or other notice thereof, except as
otherwise provided by the laws of the State of Maryland. Until a
transfer is duly effected on the Stock Ledger, the Corporation
shall not be affected by any notice of such transfer, either actual
or constructive. Nothing herein shall impose upon the Corporation,
the Board of Directors or Officers or their agents and
representatives a duty or limit their rights to inquire as to the
actual ownership of Shares.
5.04. RECORDING TRANSFERS OF STOCK. If transferred in
accordance with any restrictions on transfer contained in the
Charter, these Bylaws or otherwise, Shares of Stock shall be
recorded as transferred in the Stock Ledger upon provision to the
Corporation or the transfer agent of the Corporation of an executed
stock power duly guaranteed and any other documents reasonably
requested by the Corporation, and the surrender of the certificate
or certificates, if any, representing such Shares of Stock. Upon
receipt of such documents, the Corporation shall issue the
statements required by Sections 2-210 and 2-211 of the MGCL and
Section 8-408 of the Commercial Law Article of the Code of the
State of Maryland, issue as needed a new certificate or
certificates (if the transferred Shares were certificated) to the
persons entitled thereto, cancel any old certificates and record
the transaction upon its books.
5.05. LOST CERTIFICATES. The Board of Directors may
direct a new certificate to be issued in the place of any
certificate theretofore issued by the Corporation alleged to have
been stolen, lost or destroyed upon the making of an affidavit of
that fact by the person claiming the certificate of Stock to be
stolen, lost or destroyed. When authorizing such issue of a new
certificate, the Board of Directors may, in its discretion and as
a condition precedent to the issuance thereof, require the owner of
such stolen, lost or destroyed certificate or his legal
representative to advertise the same in such manner as it shall
require and/or to give a bond, with sufficient surety, to the
Corporation to indemnity it against any loss or claim which may
arise by reason of the issuance of a new certificates
5.06. FIXING OF RECORD DATE.
(a) The Board of Directors may fix, in advance, a date as the
record date for the purpose of determining Stockholders entitled to
notice of, or to vote at, any meeting of Stockholders, or
Stockholders entitled to receive payment of any dividend or the
allotment of any rights, or in order to make a determination of
Stockholders for any other proper purpose. Such date, in any case,
shall not be prior to the close of business on the day the record
date is fixed and shall be not more than 90 calendar days, and in
case of a meeting of Stockholders not less than 30 days, prior to
the date on which the meeting or particular action requiring such
determination of Stockholders is to be held or taken.
(b) If no record date is fixed for the determination of
Stockholders, (i) the record date for the determination of
Stockholders entitled to notice of, or to vote at, a meeting of
Stockholders shall be at the close of business on the later of the
day on which the notice of meeting is mailed or the 30th calendar
day before the meeting; and (ii) the record date for the
determination of Stockholders entitled to receive payment of a
dividend or an allotment of any rights shall be at the close of
business on the day on which the resolution of the Board of
Directors, declaring the dividend or allotment of rights, is
adopted.
(c) When a determination of Stockholders entitled to vote at
any meeting of Stockholders has been made as provided in this
Section 5.06, such determination shall apply to any adjournment
thereof, except where the determination has been made through the
closing of the stock transfer books and the stated period of
closing has expired.
ARTICLE VI
DIVIDENDS AND DISTRIBUTIONS
6.01. DECLARATION. Dividends and other distributions upon
the Stock may be declared by the Board of Directors as set forth in
the applicable provisions of the Charter and any applicable law, at
any meeting, limited only to the extent of Section 2-311 of the
MGCL. Dividends and other distributions upon the Stock may be paid
in cash, property or Stock of the Corporation, subject to the
provisions of law and of the Charter.
6.02. CONTINGENCIES. Before payment of any dividends or
other distributions upon the Stock, there may be set aside (but
there is no duty to set aside) out of any funds of the Corporation
available for dividends or other distributions such sum or sums as
the Board of Directors may from time to time, in its absolute
discretion, think proper as a reserve fund to meet contingencies,
for repairing or maintaining any property of the Corporation or for
such other purpose as the Board of Directors shall determine to be
in the best interests of the Corporation, and the Board of
Directors may modify or abolish any such reserve in the manner in
which it was created.
ARTICLE VII
INDEMNIFICATION
7.01. INSURANCE. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person to whom
indemnification is provided by the Corporation pursuant to the
terms of the Charter (an "Indemnified Person") against any
liability, whether or not the Corporation would have the power to
indemnify him or her against such liability.
7.02. NON-EXCLUSIVE RIGHT TO INDEMNIFY; HEIRS AND PERSONAL
REPRESENTATIVES. The rights to indemnification set forth in the
Charter are in addition to all rights which any Indemnified Person
may be entitled to as a matter of law, and shall inure to the
benefit of the heirs and personal representatives of each
Indemnified Person.
7.03. NO LIMITATION. In addition to any indemnification
permitted by the Charter, the Board of Directors shall, in its sole
discretion, have the power to grant such indemnification as it
deems in the interest of the Corporation to the full extent
permitted by law.
ARTICLE VIII
NOTICES
8.01. NOTICES. Except as otherwise specifically provided
herein, whenever notice is required to be given pursuant to these
Bylaws, it shall be construed to mean either written notice
personally served against written receipt, or notice in writing
transmitted by mail, by depositing the same in a post office box or
letter box, in a post-paid sealed wrapper, addressed, if to the
Corporation, 5400 LBJ Freeway, Suite 400, Dallas, Texas 75240 (or
any subsequent address selected by the Board of Directors),
attention: President, or if to a Stockholder, Director or Officer,
at the address of such person as it appears on the books of the
Corporation or in default of any other address at the general post
office situated in the city or county of his or her residence.
Unless otherwise specified, notice sent by mail shall be deemed to
be given at the time mailed.
8.02. SECRETARY TO GIVE NOTICE. All notices required by
law or these Bylaws to be given by the Corporation shall be given
by the Secretary or any other Officer of the Corporation designated
by the President. If the Secretary and Assistant Secretary are
absent or refuse or neglect to act, the notice may be given by any
person directed to do so by the President or, with respect to any
meeting called pursuant to these Bylaws upon the request of any
Stockholders or Directors, by any person directed to do so by the
Stockholders or Directors upon whose request the meeting is called.
8.03. WAIVER OF NOTICE. Whenever any notice is required
to be given pursuant to the Charter or these Bylaws or pursuant to
applicable law, a waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of
such notice. Neither the business to be transacted at nor the
purpose of any meeting need be set forth in the waiver of notice,
unless specifically required by statute. The attendance of any
person at any meeting, whether in person or by proxy, shall
constitute a waiver of notice of such meeting, except where such
person attends a meeting for the express purpose of objecting to
the transaction of any business on the ground that the meeting is
not lawfully claimed or convened.
ARTICLE IX
MISCELLANEOUS
9.01. BOOKS AND RECORDS. The Corporation shall keep
correct and complete books and records of its accounts and
transactions and minutes of the proceedings of its Stockholders and
Board of Directors meetings and of its executive or other
committees when exercising any of the powers or authority of the
Board of Directors. The books and records of the Corporation may
be in written form or in any other form that be converted within a
reasonable time into written form for visual inspection. Minutes
shall be recorded in written form, but may be maintained in the
form of a reproduction.
9.02. INSPECTION OF BYLAWS AND CORPORATE RECORDS. These
Bylaws, the accounting books and records of the Corporation, the
minutes of proceedings of the Stockholders, the Board of Directors
and the committees thereof, annual statements of affairs and any
voting trust agreements on record shall be open to inspection upon
written demand delivered to the Corporation by any Stockholder at
any reasonable time during usual business hours, for a purpose
reasonably related to such holder's interests as a Stockholder to
the extent permitted by the MGCL.
9.03. CONTRACTS. The Board of Directors may authorize any
Officer(s) or agent(s) to enter into any contract or to execute and
deliver any instrument in the name of and on behalf of the
Corporation, and such authority may be general or confined to
specific instances.
9.04. CHECKS, DRAFTS, ETC. All checks, drafts or other
orders for the payment of money, notes or other evidences of
indebtedness issued in the name of the Corporation shall be signed
by such Officers or agents of the Corporation and in such manner as
shall from time to time be determined by resolution of the Board of
Directors.
9.05. FISCAL YEAR. The Board of Directors shall have the
power, from time to time, to fix the fiscal year of the Corporation
by a duly adopted resolution, and, in the absence of such
resolution, the fiscal year shall be the period ending December 31.
9.06. ANNUAL REPORT. No later than 120 calendar days
after the close of each fiscal year, the Board of Directors of the
Corporation shall cause to be sent to the Stockholders an annual
report in such form as may be deemed appropriate by the Board of
Directors. The annual report shall include audited financial
statements and shall be accompanied by the report thereon of an
independent certified public accountant.
9.07. INTERIM REPORTS. The Corporation may send interim
reports to the Stockholders having such form and content as the
Board of Directors deem proper.
9.08. OTHER REPORTS. Any distributions to Stockholders of
income or capital assets shall be accompanied by a written
statement disclosing the source of the funds distributed unless at
the time of distribution they are accompanied by a written
explanation of the relevant circumstances. The statement as to
such source shall be sent to the Stockholders not later than 60
calendar days after the close of the fiscal year in which the
distributions were made.
9.09. BYLAWS SEVERABLE. The provisions of these Bylaws
are severable, and if any provision shall be held invalid or
unenforceable, that invalidity or unenforceability shall attach
only to that provision and shall not in any manner affect or render
invalid or unenforceable any other provision of these Bylaws, and
these Bylaws shall be carried out as if the invalid or
unenforceable provision were not contained herein.
ARTICLE X
AMENDMENT OF BYLAWS
10.01. BY DIRECTORS. The Board of Directors shall have the
power at any annual or regular meeting, or at any special meeting
if notice thereof is included in the notice of such special
meeting, to alter or repeal any Bylaws of the Corporation and to
make new Bylaws.
10.02. BY STOCKHOLDERS. The Stockholders, by affirmative
vote of two-thirds of the shares of common stock of the
Corporation, shall have the power, at any annual meeting (subject
to the requirements of Section 1.03 of these Bylaws), or at any
special meeting if notice thereof is included in the notice of such
special meeting, to alter or repeal any Bylaws of the Corporation
and to make new Bylaws.
The foregoing are certified as the Bylaws of the Corporation
adopted by the Board of Directors on March 26, 1998.
/ s / Edward H. Hatzenbueher
Edward H. Hatzenbueher,
Secretary
DALLAS_1\3011153
05051998 v1AMENDED ANDMzV 1
KBetts:14199-41
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
WALDEN/DREVER OPERATING PARTNERSHIP, L.P.
THE LIMITED PARTNERSHIP INTERESTS IN WALDEN/DREVER OPERATING
PARTNERSHIP, L.P. ARE SUBJECT TO THE RESTRICTIONS ON TRANSFER AND
OTHER TERMS AND CONDITIONS SET FORTH IN ARTICLE 8 OF THIS AGREEMENT
AND MAY NOT BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD,
ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE WITH THE
TERMS AND CONDITIONS THEREOF.
IN ADDITION, THE INTERESTS HAVE NOT BEEN REGISTERED (i) UNDER ANY
STATE SECURITIES LAWS (THE "STATE ACTS"), OR (ii) UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "FEDERAL SECURITIES
ACT"), IN RELIANCE UPON EXEMPTIONS PROVIDED THEREIN, AND NEITHER
THE INTERESTS NOR ANY PART THEREOF MAY BE OFFERED FOR SALE,
PLEDGED, HYPOTHECATED, SOLD, ASSIGNED, OR TRANSFERRED AT ANY TIME
EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
ANY APPLICABLE STATE ACTS OR IN A TRANSACTION THAT IS EXEMPT FROM
REGISTRATION UNDER SUCH STATE ACTS OR THAT IS OTHERWISE IN
COMPLIANCE WITH SUCH STATE ACTS, AND (2) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE FEDERAL SECURITIES ACT OR IN A
TRANSACTION THAT IS EXEMPT FROM REGISTRATION UNDER THE FEDERAL
SECURITIES ACT OR THAT IS OTHERWISE IN COMPLIANCE WITH THE FEDERAL
SECURITIES ACT.
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
WALDEN/DREVER OPERATING PARTNERSHIP, L.P.
TABLE OF CONTENTS
[TO BE INSERTED LATER]
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
WALDEN/DREVER OPERATING PARTNERSHIP, L.P.
This Amended and Restated Limited Partnership Agreement (this
"Agreement") of WALDEN/DREVER OPERATING PARTNERSHIP, L.P., a
limited partnership formed under the Delaware Revised Uniform
Limited Partnership Act (the "Partnership"), is made and entered
into as of this 12th day of August, 1997, by and among (i) WALDEN
RESIDENTIAL PROPERTIES, INC., a Maryland corporation, as the
General Partner (as defined below) and (ii) WDN PROPERTIES, INC.,
a New York corporation ("WDN Properties") and a direct wholly owned
subsidiary of the General Partner, as the Limited Partner (as
defined below).
WITNESSETH:
WHEREAS, the General Partner and the Limited Partner formed
the Partnership with Walden Residential Properties, Inc. as the
general partner and WDN Properties, Inc. as the limited partner
under the provisions of the Delaware Revised Uniform Limited
Partnership Act; and
WHEREAS, a certificate of limited partnership for the
Partnership was filed with the Office of the Secretary of State of
Delaware on February 6, 1997 and a certificate of amendment to such
certificate of limited partnership was filed on April 3, 1997; and
WHEREAS, the General Partner and the Limited Partner
previously entered into that certain Limited Partnership Agreement
of Walden/Drever Operating Partnership. L.P. dated as of May 21,
1997; and
WHEREAS, pursuant to the Exchange Documents and the
Contribution Agreement (each as defined below), certain persons
shall exchange on the Effective Date (as defined below) their
direct or indirect interests in the Drever Partnerships (as defined
below) for Partnership Interests (as defined below) in a manner
that is intended to be a tax-free, or partially tax-free,
contribution to capital of the Partnership under Section 721 of the
Code; and
WHEREAS, on the Effective Date, the Partnership shall enter
into the Agreement of General Partnership of Walden-WDOP Partners
in the form attached hereto as Exhibit B; and
WHEREAS, the General Partner and the Limited Partner wish to
amend and restate the Limited Partnership Agreement in its
entirety;
NOW, THEREFORE, in consideration of the mutual covenants set
forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby do agree as follows:
ARTICLE 1
DEFINED TERMS
1.1 Definitions. When used in this Agreement, the following
terms will have the meanings set forth below.
"Act" means the Delaware Revised Uniform Limited
Partnership Act, as amended from time to time.
"Additional Common Shares" has the meaning set forth in
Section 11.3(b) hereof.
"Additional Limited Partner" means a Person admitted to
the Partnership as a Limited Partner pursuant to Section 3.3 hereof
and who is shown as such on the books and records of the
Partnership.
"Additional Preferred Shares" has the meaning set forth
in Section 11.3(c) hereof.
"Adjusted Capital Account" means the Capital Account
maintained for each Partner as of the end of each Fiscal Year (i)
increased by any amounts that 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), (ii)
increased by such Partner's allocable share (as determined under
Section 752 of the Code) of any nonrecourse indebtedness of the
Partnership to the extent that such indebtedness could not be
repaid out of the Partnership's assets if all of the Partnership's
assets were sold at their respective Gross Asset Values as of the
end of the Fiscal Year and the proceeds from the sales were used to
pay the Partnership's liabilities, and (iii) 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.
"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 Fiscal Year.
"Affiliate" or "Affiliated" means, as to any Person, any
other Person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common
control with such specified Person. For the purposes of this
definition, "control" when used with respect to any Person means
the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "affiliated,"
"controlling" and "controlled" have the meanings correlative to the
foregoing. In the case of an individual, the term "Affiliate"
shall include (i) any lineal descendants of such individual and the
spouse of such individual or of such descendants, (ii) any trusts
controlled by, or established and maintained for the benefit of,
individuals included in (i) above, and (iii) the estate of any of
the foregoing. In the case of an estate, trust, or partnership,
the term "Affiliate" shall include any beneficiary or partner
thereof.
"Aggregate Common Units" means a numeric value equal to
the total outstanding Class B Common Units as of the Effective
Date. The amount of Aggregate Common Units shall be appropriately
reduced, from time to time, to reflect any reduction in the amount
of Class B Common Units that occurs as a result of (i) any
acquisition of a Class B Common Unit by the Company, WDN
Properties, or any of their Affiliates or (ii) any exchange of a
Class B Common Unit pursuant to Article 11 hereof.
"Aggregate Preferred Units" means a numeric value equal
to the total outstanding Class B Preferred Units as of the
Effective Date. The amount of Aggregate Preferred Units shall be
appropriately reduced, from time to time, to reflect any reduction
in the amount of Class B Preferred Units that occurs as a result of
(i) any acquisition of a Class B Preferred Unit by the Company, WDN
Properties, or any of their Affiliates, (ii) any redemption of a
Class B Preferred Unit pursuant to Section 8.8 hereof, or (iii) any
exchange of a Class B Preferred Unit pursuant to Article 11 hereof.
"Aggregate Preferred Value" means a numeric value equal
to the product of the Aggregate Preferred Units and $25.00.
"Agreement" has the meaning assigned to such term in the
first paragraph hereof.
"Applicable Portion of the Preferred Exchange
Consideration" has the meaning set forth in Section 11.10 hereof.
"Applicable Portion of the REIT Common Shares" has the
meaning set forth in Section 11.10 hereof.
"Approval" and "Approve" means approval in writing.
"Approval of the Special Committee" means the written or
verbal approval of at least three of the four members of the
Special Committee.
"Assignee" means a Person to whom one or more Partnership
Interests have been transferred in a manner permitted under this
Agreement, but who has not become a Substituted Partner.
"Available Cash" means the cash funds derived by the
Partnership from the operation of the Partnership's business and
from any other source whatsoever (including Capital Contributions
and loan proceeds) before any deduction for depreciation or
amortization and after deduction of:
(i) all operating expenses including property taxes;
(ii) all scheduled payments of principal, interest
and other charges due during any relevant period in respect of
any Partnership indebtedness;
(iii) all expenditures for capital improvements to the
Partnership assets or property;
(iv) all current liabilities (including, but not
limited to, trade payables and other accounts payable,
security deposits and property taxes payable); and
(v) a working capital reserve in such amounts as the
General Partner may deem reasonably necessary or advisable.
"Bankruptcy" means, with respect to any Partner, the
first to occur of (i) the entry of a decree or order for relief
against the Partner by a court of competent jurisdiction in any
involuntary case brought against the Partner under any bankruptcy,
insolvency or other similar law (collectively, "Debtor Relief
Laws") generally affecting the rights of creditors and relief of
debtors now or hereafter in effect; (ii) the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
other similar agent under applicable Debtor Relief Laws for the
Partner or for any substantial part of its assets or property;
(iii) the ordering of the winding up or liquidation of the
Partner's affairs; (iv) the filing of a petition in any such
involuntary bankruptcy case, which petition remains undismissed for
a period of 180 days or which is not dismissed or suspended
pursuant to Section 305 of the Federal Bankruptcy Code (or any
corresponding provision of any future United States bankruptcy
law); (v) the commencement by the Partner of a voluntary case under
any applicable Debtor Relief Law now or hereafter in effect; (vi)
the consent by the Partner to the entry of an order for relief in
an involuntary case under any such law or to the appointment of or
the taking of possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar agent under any
applicable Debtor Relief Laws for the Partner or for any
substantial part of its assets or property; (vii) the making by the
Partner of any general assignment for the benefit of its creditors;
or (viii) the failure by the Partner generally to pay its debts as
such debts become due.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York are authorized or
required by law to close.
"Capital Account" means, with respect to any Partner, the
capital account maintained for such Partner in accordance with the
rules of Section 1.704-1(b)(2)(iv) of the Regulations. Subject to
Section 1.704-1(b)(2)(iv) of the Regulations:
(i) To each Partner's Capital Account there shall be
credited such Partner's Capital Contribution (net of
liabilities that the Partnership is considered to assume or to
take subject to under Code Section 752) and such Partner's
distributive share of Profits and any items in the nature of
income or gain that are specially allocated pursuant to
Section 5.4 or Section 5.5 hereof.
(ii) To each Partner's Capital Account there shall be
debited the amount of cash and the Gross Asset Value of any
property distributed to such Partner pursuant to any provision
of this Agreement (net of liabilities that such Partner is
considered to assume or to take subject to under Code Section
752) and such Partner's distributive share of Losses and any
items in the nature of expenses or losses that are specially
allocated pursuant to Section 5.4 or Section 5.5 hereof.
(iii) In the event all or a portion of a Partnership
Interest is transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the Capital Account
of the transferor to the extent it relates to the transferred
Partnership Interest.
The provisions of this Agreement relating to the maintenance of
Capital Accounts are intended to comply with Section 1.704-1(b) of
the Regulations, and they shall be interpreted and applied in a
manner consistent with such Regulations.
"Capital Contribution" means, with respect to any
Partner, the total amount of cash or the Gross Asset Value of other
property contributed (or deemed to have been contributed) to the
Partnership with respect to the Partnership Interest held by such
Partner. Any reference to the Capital Contribution of a Partner
shall include the Capital Contribution made by a predecessor holder
of the Partnership Interest of such Partner and if the Company, WDN
Properties or any of their Affiliates acquires a Class B Common
Unit or a Class B Preferred Unit, whether pursuant to Article 11
hereof, by purchase, or otherwise, the Capital Contribution of the
Person who acquired such Class B Common Unit or Class B Preferred
Unit shall, upon and by virtue of such acquisition, include the
amount of the Capital Contribution attributable to the Class B
Common Unit or Class B Preferred Unit acquired.
"Carryover Amount" has the meaning set forth in Section
5.4(e) hereof.
"Certificate" means the Certificate of Limited
Partnership filed in the office of the Delaware Secretary of State
to form the Partnership, as amended from time to time in accordance
with the terms hereof and the Act.
"Class" means a class of Partnership Interests
distinguished by a specific alphabetical or other designation.
"Class A Limited Partner" means WDN Properties or any
other Person admitted pursuant to this Agreement as a Class A
Limited Partner either in connection with the issuance of a newly-created
Class A Limited Partner Interest or as a substitute with
respect to any transferred Class A Limited Partner Interest (or any
portion thereof), each for only so long as such Person remains as
a Class A Limited Partner in accordance with this Agreement and the
Act.
"Class A Limited Partner Interest" means a Partnership
Interest of a Class A Limited Partner.
"Class B Common Distribution" means, with respect to each
Partnership Common Record Date, the product of (x) the Aggregate
Common Units, (y) the Conversion Factor and (z) the REIT Common
Dividend which has a record date which is the same as the
Partnership Common Record Date; provided, however, that with
respect to the Fiscal Quarter that includes the Effective Date, the
numeric amount described in clause (z) immediately above shall be
multiplied by a fraction, the numerator of which is the number of
days from the day after the Effective Date to the end of such
Fiscal Quarter and the denominator of which is 90.
"Class B Common Limited Partner" means, as of the
Effective Date, each Person contributing a Drever Interest to the
Partnership in exchange for a Class B Common Unit pursuant to the
Transaction or any other Person admitted pursuant to this Agreement
as a Class B Common Limited Partner either in connection with the
issuance of a newly-created Class B Common Unit or as a substitute
with respect to any transferred Class B Common Unit, each for only
so long as such Person remains as a Class B Common Limited Partner
in accordance with this Agreement and the Act.
"Class B-TE Common Limited Partner" means, as of the
Effective Date, each Class B Common Limited Partner who is subject
to the unrelated business taxable income rules set forth under
Section 511 et seq. of the Code for only so long as such Person
remains as a Class B Common Limited Partner in accordance with this
Agreement and the Act.
"Class B Common Unit" means a Partnership Interest of a
Class B Common Limited Partner. The number of Class B Common Units
owned by each Class B Common Limited Partner on the Effective Date
shall be the number set forth opposite its name in the Ownership
Schedule under the column captioned "Common Units." The number of
Common Units held by any particular Class B Common Limited Partner
shall be appropriately reduced, from time to time, to reflect any
(i) acquisition of such Partner's Class B Common Units by the
Company, WDN Properties, or any of their Affiliates or (ii) any
exchange of such Class B Common Units pursuant to Article 11
hereof; provided, however, that if the Company, WDN Properties or
any of their Affiliates acquires a Class B Common Unit, whether
pursuant to Article 11 hereof, by purchase, or otherwise, such
Partnership Interest shall, upon and by virtue of such acquisition
and without any further action by the Partnership or any Partner,
automatically convert into a Class A Limited Partner Interest.
"Class B Group" means the Class B Common Limited Partners
other than the Class B-TE Common Limited Partners.
"Class B Group Tax Controversy Representative" means tax
counsel, a certified public accounting firm, or other
representative appointed by a Majority in Interest of the Class B
Group (determined on the basis of their Class B Common Limited
Partner Percentage Interests).
"Class B Limited Partner Interests" means the Class B
Common Units and the Class B Preferred Units.
"Class B Limited Partners" means the Class B Common
Limited Partners and the Class B Preferred Limited Partners.
"Class B Preferred Distribution" means, (i) with respect
to each Fiscal Quarter during which there was not at least one REIT
Preferred Share issued and outstanding on each day of such Fiscal
Quarter, the product of (x) the Aggregate Preferred Units and (y)
$.5625; provided, however, that with respect to the Fiscal Quarter
that includes the Effective Date, the numeric amount described in
clause (y) immediately above shall be multiplied by a fraction, the
numerator of which is the number of days from the day after the
Effective Date to the end of such Fiscal Quarter and the
denominator of which is 90 and (ii) with respect to each Fiscal
Quarter during which there was at least one REIT Preferred Share
issued and outstanding on each day of such Fiscal Quarter, the
product of (a) the Aggregate Preferred Units and (b) the REIT
Preferred Dividend which has a record date which is the same as the
Partnership Preferred Record Date.
"Class B Preferred Limited Partner" means, as of the
Effective Date, each Person contributing a Drever Interest to the
Partnership in exchange for a Class B Preferred Unit pursuant to
the Transaction or any other Person admitted pursuant to this
Agreement as a Class B Preferred Limited Partner either in
connection with the issuance of a newly-created Class B Preferred
Unit or as a substitute with respect to any transferred Class B
Preferred Unit, each for only so long as such Person remains as a
Class B Preferred Limited Partner in accordance with this Agreement
and the Act.
"Class B-TE Preferred Limited Partner" means, as of the
Effective Date, each Class B Preferred Limited Partner who is
subject to the unrelated business taxable income rules set forth
under Section 511 et seq. of the Code for only so long as such
Person remains as a Class B Preferred Limited Partner in accordance
with this Agreement and the Act.
"Class B Preferred Unit" means a Partnership Interest of
a Class B Preferred Limited Partner. The number of Class B
Preferred Units owned by each Class B Preferred Limited Partner on
the Effective Date shall be the number set forth opposite its name
in the Ownership Schedule under the column captioned "Preferred
Units." The number of Preferred Units held by any particular Class
B Preferred Limited Partner shall be appropriately reduced, from
time to time, to reflect any (i) acquisition of such Partner's
Class B Preferred Units by the Company, WDN Properties, or any of
their Affiliates or (ii) any exchange of such Class B Preferred
Units pursuant to Article 11 hereof; provided, however, that if the
Company, WDN Properties or any of their Affiliates acquires a Class
B Preferred Unit, whether pursuant to Article 11 hereof, by
purchase, or otherwise, such Class B Preferred Unit shall, upon and
by virtue of such acquisition and without any further action by the
Partnership or any Partner, automatically convert into a Class A
Limited Partner Interest.
"Class B Special Committee Member" means an individual
appointed pursuant to Section 7.4 hereof to serve as a member of
the Special Committee for the purpose of representing the interests
of the Class B Limited Partners.
"Closing" has the meaning set forth in Section 11.7
hereof.
"Closing Date" has the meaning set forth in Section 11.7
hereof.
"Code" means the Internal Revenue Code of 1986, as
amended and in effect from time to time, and any successor
statutory provisions thereto.
"Common Exchange Consideration" has the meaning set forth
in Section 11.1(a) hereof.
"Common Exchange Shares" has the meaning set forth in
Section 11.5(a) hereof.
"Company" means Walden Residential Properties, Inc., a
Maryland corporation.
"Contribution Agreement" means that certain Contribution
Agreement dated May 21, 1997 and entered into by and among the
Company, the Partnership, each of the shareholders of Drever
Partners, Inc., AOF II, Inc., and AOF, Inc., and each of the equity
participants in Drever Partners, Inc.
"Conversion Factor" means 1.0 until changed in accordance
with this definition; provided, however, that in the event that the
Company, at any time after the Effective Date, (i) declares a
dividend or other distribution on the REIT Common Shares payable in
REIT Common Shares, (ii) subdivides (by reclassification or
otherwise) the outstanding REIT Common Shares, or (iii) combines
(by reclassification or otherwise) the outstanding REIT Common
Shares into a smaller number of shares, the Conversion Factor shall
be adjusted by multiplying the Conversion Factor then in effect by
a fraction, the numerator of which shall be the number of REIT
Common Shares issued and outstanding on the record date for such
dividend or on the effective date of such subdivision or
combination (assuming for such purposes that such dividend,
subdivision or combination has occurred as of such time), and the
denominator of which shall be the actual number of REIT Common
Shares (determined without the above assumption) issued and
outstanding on the record date for such dividend, subdivision or
combination before giving effect thereto; and provided, further,
that in the event that the Company takes any action described in
Section 11.5(b), the Conversion Factor shall be adjusted by
multiplying the Conversion Factor then in effect by the fraction
described in Section 11.5(b), as applicable. Any adjustment to the
Conversion Factor shall become effective immediately after any
event listed above shall occur.
"Debtor Relief Laws" has the meaning assigned to such
term in the definition of "Bankruptcy" set forth in this Article 1.
"Depreciation" means, for each Fiscal 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 Gross Asset Value of an asset
differs from its adjusted basis for federal income tax purposes at
the beginning of such year or other period, Depreciation shall be
an amount that bears the same ratio to such beginning Gross Asset
Value as the federal income tax depreciation, amortization, or
other cost recovery deduction for such year bears to such beginning
adjusted 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 Gross Asset Value using any reasonable method
selected by the General Partner.
"Determination Year" has the meaning set forth in Section
5.4(e) hereof.
"Drever Interests" means (i) the partnership interests in
the Drever Partnerships which the Class B Limited Partners
contributed to the Partnership pursuant to the Exchange Documents
and (ii) the Shares, the Equity Rights, the General Partner Rights,
the CRF Shares and the CMC Shares (as each such term is defined in
the Contribution Agreement) which the Class B Limited Partners
contributed to the Partnership pursuant to the Contribution
Agreement.
"Drever Partnerships" means the partnerships identified
as the "Drever Partnerships" on Exhibit A attached hereto.
"Effective Date" means the date on which the Transaction
is consummated, as determined in accordance with the Exchange
Documents and the Contribution Agreement.
"Exchange Agreement" means that certain Exchange
Agreement dated May 21, 1997 and entered into by and among the
Company, the Partnership, Drever Partners, Inc., AOF II, Inc., and
AOF, Inc.
"Exchange Documents" means the "Exchange Offer Documents"
as such term is defined in the Exchange Agreement.
"Federal Securities Act" means the Securities Act of
1933, as amended.
"Fiscal Quarter" means (i) the period commencing on the
Effective Date and ending on December 31, 1997, (ii) any subsequent
three-month period commencing on each January 1, April 1, July 1
and October 1, and (iii) any portion of a period described in
clause (ii) that ends on the date the liquidation of the
Partnership is completed.
"Fiscal Year" means (i) the period commencing on the
Effective Date and ending on December 31, 1997, (ii) any subsequent
twelve-month period commencing on January 1 and ending on December
31, or (iii) any portion of a period described in clause (ii) that
is considered a short taxable year of the Partnership for federal
income tax purposes.
"General Partner" means, Walden Residential Properties,
Inc., a Maryland corporation, and any other Person admitted
pursuant to this Agreement in the capacity of general partner of
the Partnership, each for only so long as such Person remains as a
general partner in accordance with this Agreement and the Act.
"General Partner Interest" means a Partnership Interest
of a General Partner.
"Gross Asset Value" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as
follows:
(i) The Gross Asset Value of the assets acquired by
the Partnership on the Effective Date shall be the gross fair
market values of such assets as determined on a basis
consistent with the Transaction.
(ii) The initial Gross Asset Value of any asset
contributed (or deemed to have been contributed) by a Partner
to the Partnership, other than the assets of the Partnership
described in (i) immediately above, shall be the gross fair
market value of such asset, as determined by the contributing
Partner and the General Partner; provided, however, that if
the contributing Partner is the General Partner, WDN
Properties, or any of their Affiliates, the determination of
the fair market value of any contributed asset shall require
the Approval of the Special Committee.
(iii) The Gross Asset Values of all Partnership assets
shall be adjusted to equal their respective gross fair market
values, as determined by the General Partner and subject to
the Approval of the Special Committee, as of the following
times: (A) the acquisition of an additional Partnership
Interest by any new or existing Partner in exchange for more
than a de minimis Capital Contribution; (B) the distribution
by the Partnership to a Partner of more than a de minimis
amount of property as consideration for an Partnership
Interest; and (C) the liquidation of the Partnership within
the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Regulations.
(iv) The Gross Asset Value of any Partnership asset
distributed to any Partner shall be adjusted to equal the
gross fair market value of such asset on the date of the
distribution as determined by the General Partner and the
Partner receiving such distributed asset; provided, however,
that if the distributee Partner is the General Partner, WDN
Properties, or any of their Affiliates, the determination of
the fair market value of any distributed asset shall require
the Approval of the Special Committee.
(v) The Gross Asset Values of Partnership assets shall
be increased (or decreased) to reflect any adjustments to the
adjusted basis of such assets pursuant to Code Section 732(d),
Code Section 734(b) or Code Section 743(b), but only to the
extent that (x) such adjustments are taken into account in
determining Capital Accounts pursuant to clause (vi) of the
definition of "Profits" or "Losses" and (y) an adjustment
pursuant to clause (iii) immediately above is not required in
connection with the transaction.
"Incapacity" or "Incapacitated" means, (i) as to any
Partner who is a natural Person, death, total physical disability
or entry by a court of competent jurisdiction adjudicating such
Partner incompetent to manage such Partner's estate; (ii) as to any
corporation that is a Partner, the filing of a certificate of
dissolution, or its equivalent, for the corporation or revocation
of its charter; (iii) as to any partnership that is a Partner, the
dissolution of such partnership; (iv) as to any estate that is a
Partner, the distribution by the fiduciary of the estate's entire
Partnership Interest in the Partnership; (v) as to any trustee of
a trust that is a Partner, the termination of the trust (but not
the substitution of a new trustee); or (vi) as to any Partner, the
Bankruptcy of such Partner.
"Indemnitee" means (i) any Person made a party to a
proceeding by reason of such Person's status as (A) a Partner, (B)
a director, officer, shareholder or employee of a Partner, (C) a
Class B Special Committee Member, or (D) any Affiliate of any
Person described in (A), (B) or (C) hereof, and (ii) such other
Persons (including Affiliates of the General Partner or the
Partnership) as the General Partner may designate from time to time
(whether before or after the event giving rise to potential
liability).
"IRS" means the United States Internal Revenue Service or
any successor thereto.
"Limited Partner" means any Class A Limited Partner or
Class B Limited Partner. To the extent a General Partner is also
a Limited Partner, the General Partner shall be entitled to
exercise all rights associated with its Limited Partner Interest
without regard to any duties or obligations imposed on the General
Partner in its capacity as a General Partner.
"Limited Partner Interest" means a Partnership Interest
of a Limited Partner.
"Liquidating Event" has the meaning set forth in Section
9.1(b) hereof.
"Liquidator" has the meaning set forth in Section 9.2
hereof.
"Losses" has the meaning assigned to such term in the
definition of "Profits" and "Losses" as set forth in this Article
1.
"Major Action" has the meaning set forth in Section
7.3(b) hereof.
"Majority Approval" means, with respect to any group of
Partners and with respect to any matter submitted to such group for
its Approval, a situation in which Partners holding at least two-thirds
(2/3) of the Percentage Interests of the group have cast a
vote with respect to the matter and the Percentage Interests of the
Partners voting in favor of such matter exceed the Percentage
Interests of the Partners voting against such matter.
"Majority in Interest" means, with respect to any group
of Partners, one or more Partners of that group owning more than
50% of the Percentage Interests owned by all Partners of that
group.
"NASD" has the meaning set forth in Section 11.5(e)
hereof.
"Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse
Deductions for a Fiscal Year shall be determined in accordance with
the rules of Regulations Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in
Regulations Section 1.752-1(a)(2).
"Opinion" has the meaning set forth in Section 11.10
hereof.
"Original Properties" means (i) the Drever Interests;
(ii) any real property interests owned by the Drever Partnerships
on the Effective Date; (iii) all properties received in
transactions described in Section 7.3(c)(ii) hereof; and (iv) all
interests received in transactions described in Sections
7.3(c)(iii) and (iv) hereof.
"Ownership Schedule" has the meaning set forth in Section
3.1 hereof.
"Partner" means any General Partner or Limited Partner.
If a Partner transfers its Partnership Interest, such Person shall
remain a Partner in respect of such Partnership Interest until the
transferee is admitted as a Partner in respect of such Partnership
Interest in accordance with this Agreement and the Act, if ever.
"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 Fiscal Year shall be determined in
accordance the rules of Regulations Section 1.704-2(i)(2).
"Partnership" has the meaning assigned to such term in
the first paragraph of this Agreement.
"Partnership Common Record Date" means the record date
established by the General Partner for the distribution of
Available Cash pursuant to Section 5.1(a)(ii) hereof, which record
date shall be the same as the record date established by the
Company for a REIT Common Dividend.
"Partnership Interest" means an ownership interest in the
Partnership representing a Capital Contribution by a Partner and
includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement
and the Act, together with all obligations of such Person to comply
with the terms and provisions of this Agreement.
"Partnership Minimum Gain" has the meaning set forth in
Regulations Section 1.704-2(b)(2), and the amount of Partnership
Minimum Gain, as well as any net increase or decrease in
Partnership Minimum Gain, for a Fiscal Year shall be determined in
accordance with the rules of Regulations Section 1.704-2(d).
"Partnership Preferred Record Date" means the record date
established by the General Partner for the distribution of
Available Cash pursuant to Section 5.1(a)(i) hereof, which record
date shall be (i) the same as the record date established by the
Company for a REIT Preferred Dividend or, (ii) if the Company did
not establish a record date for a REIT Preferred Dividend, the
Partnership Common Record Date.
"Percentage Interest" means, with respect to any Partner,
as of any date, the ratio (expressed as a percentage) of such
Partner's Capital Contributions as of such date to the aggregate
Capital Contributions of all Partners as of such date. As of the
Effective Date, each Partner's Percentage Interest is the
percentage set forth opposite its name in the Ownership Schedule
under the column captioned "Percentage Interest."
"Person" means an individual or a corporation,
partnership, limited liability company, trust, unincorporated
organization, joint stock company, joint venture, association or
other entity, or any government, or any agency or political
subdivision thereof.
"Preferred Exchange Consideration" has the meaning set
forth in Section 11.1(b) hereof.
"Preferred Exchange Shares" has the meaning set forth in
Section 11.5(c) hereof.
"Prime Rate" means a rate per annum that from day to day
is equal to the base commercial rate of interest established by the
First National Bank of Boston or its successor from time to time
for short-term, unsecured loans to substantial and responsible
borrowers.
"Profits" and "Losses" means, for each Fiscal Year, an
amount equal to the Partnership's taxable income or loss as
reported on the Partnership's U.S. Partnership Return of Income
(Form 1065) for such Fiscal Year, determined in accordance with
Code Section 703(a) (for this purpose, all items of income, gain,
loss, or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or
loss), with the following adjustments:
(i) Any income of the Partnership that is exempt
from federal income tax and not otherwise taken into account
in computing Profits or Losses pursuant to this definition of
"Profits" and "Losses" shall be added to such taxable income
or loss;
(ii) Any expenditures of the Partnership described in
Code Section 705(a)(2)(B) or treated as Code Section
705(a)(2)(B) expenditures pursuant to Section 1.704-1(b)(2)(iv)(i)
of the Regulations, and not otherwise taken
into account in computing Profits and Losses shall be
subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any
Partnership asset is adjusted pursuant to clauses (iii) or
(iv) of the definition of Gross Asset Value, the amount of
such adjustment shall be taken into account as gain or loss
from the disposition of such asset for purposes of computing
Profits or Losses;
(iv) Gain or loss resulting from any disposition of
Partnership property with respect to which gain or loss is
recognized for federal income tax purposes shall be computed
by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value;
(v) The depreciation, amortization, and other cost
recovery deductions taken into account in computing such
taxable income or loss shall be taken into account for such
Fiscal year in accordance with Section 1.704-1(b)(2)(iv)(g) of
the Regulations;
(vi) To the extent an adjustment to the adjusted tax
basis of any Partnership asset pursuant to Code Section 734(b)
is required, pursuant to Section 1.704-1(b)(2)(iv)(m)(4) of
the Regulations, to be taken into account in determining
Capital Accounts as a result of a distribution other than in
liquidation of a Partner's Partnership Interest, the amount of
such adjustment shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) from the disposition of such
asset and shall be taken into account for purposes of
computing Profits or Losses; and
(vii) Notwithstanding any other provisions of this
definition, any items which are specially allocated pursuant
to Section 5.4 or Section 5.5 hereof shall not be taken into
account in computing Profits or Losses.
The amounts of the items of Partnership income, gain, loss or
deduction available to be specially allocated pursuant to Section
5.4 or Section 5.5 hereof shall be determined by applying rules
analogous to those set forth in clauses (i) through (vi) above.
"Proportionate Current Unpaid Class B Common
Distributions" has the meaning set forth in Section 11.3(d) hereof.
"Proportionate Current Unpaid Class B Preferred
Distributions" has the meaning set forth in Section 11.3(e) hereof.
"Proportionate Prior Unpaid Class B Common Distributions"
has the meaning set forth in Section 11.3(b) hereof.
"Proportionate Prior Unpaid Class B Preferred
Distributions" has the meaning set forth in Section 11.3(c) hereof.
"Recapture Income" means any gain recognized by the
Partnership 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.
"Redemption Closing" has the meaning set forth in Section
8.8 hereof.
"Redemption Closing Date" has the meaning set forth in
Section 8.8 hereof.
"Redemption Price" has the meaning set forth in Section
8.8 hereof.
"Regulations" means the Income Tax Regulations
promulgated by the United States Department of the Treasury, as
such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Regulatory Allocations" has the meaning set forth in
Section 5.5 hereof.
"REIT" means a "real estate investment trust" under
Section 856 of the Code.
"REIT Common Dividend" means any distribution of cash or
property (other than a property distribution that would cause an
adjustment under Section 11.5 hereof of the number of REIT Common
Shares to be acquired upon an exchange of a REIT Common Unit
pursuant to Article 11 hereof) per share declared payable on the
REIT Common Shares.
"REIT Common Share" means a share of common stock, par
value $.01 per share, of the Company.
"REIT Preferred Dividend" means any distribution of cash
or property (other than a property distribution that would cause an
adjustment under Section 11.5 hereof of the number of REIT
Preferred Shares to be acquired upon an exchange of a REIT
Preferred Unit pursuant to Article 11 hereof) per share declared
payable on the REIT Preferred Shares.
"REIT Preferred Share" means a share of 9.00% Redeemable
Preferred Stock (Liquidation Preference $25.00 Per Share) of the
Company as described in the Articles Supplementary of the Company
dated as of the Effective Date.
"REIT Shares" means a share of any outstanding capital
stock of the Company.
"Series B Warrant" means a warrant to purchase one-third
of a REIT Common Share at a price of $26.875 per share as more
fully described in that certain Series B Warrant Agreement between
the Company and The First National Bank of Boston dated as of the
Effective Date.
"Special Committee" means a committee established by the
Partnership and consisting of four, but not more than four,
individuals, no less than two of which individuals shall consist of
Class B Special Committee Members.
"State Acts" has the meaning set forth on the cover page
hereof.
"Substituted Partner" means a Person who is admitted as
a Partner to the Partnership pursuant to Section 8.4 hereof.
"Supermajority Approval" means, with respect to any group
of Partners and with respect to any matter submitted to such group
for its Approval, a situation in which Partners holding at least
two-thirds (2/3) of the Percentage Interests of the group have cast
a vote with respect to the matter and Partners holding more than
two-thirds (2/3) of the Percentage Interests of those Partners
casting votes have voted in favor of such matter.
"Terminating Capital Transaction" means any sale or other
disposition of all or substantially all of the assets of the
Partnership or a related series of transactions that, taken
together, result in the sale or other disposition of all or
substantially all of the assets of the Partnership.
"Transaction" means the transfer to the Partnership of
the Drever Interests as contemplated by the Exchange Documents and
the Contribution Agreement.
"Unpaid Common Distribution Account" means an account to
be maintained by the Partnership for the Class B Common Limited
Partners and to which will be credited (i) the amount of the Class
B Common Distributions not paid on the date the same is payable in
accordance with Section 5.1(a)(ii)(A) hereof, and (ii) an amount
calculated like interest thereon from such due date to the date of
payment, compounded annually, at a rate equal to the Prime Rate
plus 8%; (provided, however, that to the extent the amount
described in clause (i) above is attributable to a REIT Common
Dividend that was a distribution of property other than cash, the
rate referred to in clause (ii) above shall be equal to the Prime
Rate rather than the Prime Rate plus 8%), and from which will be
debited (x) the amount of any Available Cash which is distributed
pursuant to Section 5.1(a)(ii)(B) or Section 5.1(b) hereof and (y)
the amount of any payment or deemed payment made pursuant to
Section 11.3(b) hereof.
"Unpaid Preferred Distribution Account" means an account
to be maintained by the Partnership for the Class B Preferred
Limited Partners and to which will be credited (i) the amount of
the Class B Preferred Distributions not paid on the date the same
is payable in accordance with Section 5.1(a)(i)(A) hereof, and (ii)
an amount calculated like interest thereon from such due date to
the date of payment, compounded annually, at a rate equal to the
Prime Rate plus 8%; (provided, however, that to the extent the
amount described in clause (i) above is attributable to a REIT
Preferred Dividend that was a distribution of property other than
cash, the rate referred to in clause (ii) above shall be equal to
the Prime Rate rather than the Prime Rate plus 8%), and from which
will be debited (x) the amount of any Available Cash which is
distributed pursuant to Section 5.1(a)(i)(B) or Section 5.1(b)
hereof and (y) the amount of any payment or deemed payment made
pursuant to Section 11.3(c) hereof.
"WDN Properties" has the meaning assigned to such term in
the first paragraph of this Agreement.
1.2 Construction. As used herein, the singular shall
include the plural and the masculine gender shall include the
feminine and neuter, and vice versa, as the context requires; words
such as "herein," "hereinafter," "hereof," "hereto," "hereby" and
"hereunder," when used with reference to this Agreement, refer to
this Agreement as a whole, unless the context otherwise requires.
ARTICLE 2
GENERAL PROVISIONS
2.1 Investment Representations by the Limited Partners;
Nature of Investment, Legend, Etc.
(a) Each Limited Partner does hereby represent and
warrant to the Partnership and to the General Partner that it
acquired its Partnership Interest for investment solely for such
Limited Partner's own account, without any intention of
participating directly or indirectly in any distribution of any
portion of such interest, and without the financial participation
of any other Person in acquiring its Partnership Interest.
(b) Each Limited Partner does hereby acknowledge that it
is aware that its Partnership Interest has not been registered (i)
under the Federal Securities Act in reliance upon exemptions
contained therein, or (ii) under any State Act in reliance upon
exemptions contained therein. Each Limited Partner further
understands and acknowledges that its representations and
warranties contained in this Section 2.1 are being relied upon by
the Partnership and by the General Partner as the basis for the
exemption of such interest in the Partnership from the registration
requirements of the Federal Securities Act and the State Acts.
Each Limited Partner further acknowledges that the Partnership will
not and has no obligation to recognize any sale, transfer, or
assignment of all or any part of such Limited Partner's Partnership
Interest to any Person unless and until the provisions of Article
8 hereof have been fully satisfied.
(c) Each Limited Partner does hereby acknowledge that
prior to its execution of this Agreement, such Limited Partner has
(i) received a copy of this Agreement, together with various other
information and disclosures and (ii) examined such material or
caused such material to be examined by such Limited Partner's
representative or attorney. Each Limited Partner does hereby
further acknowledge that it or its representative or attorney is
familiar with all such material and with the Partnership's plans to
acquire, finance, manage, and operate the assets and liabilities of
the Partnership and that such Limited Partner does not desire any
further information or data relating to the Partnership, the
General Partner, or the assets and liabilities of the Partnership.
Each existing and future Limited Partner does hereby acknowledge
that it understands that the holding of its Partnership Interest is
a speculative investment involving a high degree of risk and does
hereby represent that it has a net worth sufficient to bear the
economic risk of its investment in the Partnership and to justify
its investing in a highly speculative venture of this type.
(d) Each Limited Partner does hereby acknowledge and
agree that a legend reflecting the restrictions imposed upon the
transfer of its Partnership Interest under Article 8 hereof, under
the Federal Securities Act, and under any applicable State Act
shall be placed on the cover page of this Agreement and on any
certificate representing its Partnership Interest.
2.2 Purpose. The purpose and nature of the business of the
Partnership is to invest in (either directly or through the
acquisition of interests in partnerships or other entities),
purchase (either directly or through the acquisition of interests
in partnerships or other entities), develop, own, manage, lease,
finance and dispose of multi-family real estate properties and any
improvements thereon, enter into any partnership, joint venture, or
similar arrangement to engage in any of the foregoing, or to own
interests in any entity engaged in any of the foregoing, as well as
any other activity as all of the Partners shall from time to time
approve, and to do anything necessary or appropriate to accomplish
the foregoing; provided, however, that such business and any
activities conducted in connection therewith shall be limited, and
conducted in such a manner as, to permit the Company at all times
to be classified as a REIT unless the Company ceases to qualify as
a REIT for reasons other than the conduct of the business of the
Partnership.
2.3 Powers. The Partnership shall be empowered to do any and
all acts 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, however, that the Partnership
shall not take, and shall refrain from taking, any action which, in
the judgment of the General Partner, in its sole and absolute
discretion (i) could preclude the Partnership from qualifying for
the passive-type income exception under Section 7704(c) of the
Code, or (ii)(A) could adversely affect the ability of the Company
to continue to qualify as a REIT, (B) could subject the Company to
any 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 Company or its securities,
unless such action (or inaction) shall have been specifically
consented to by the Company in writing.
2.4 Name. The name of the Partnership shall be
"Walden/Drever Operating Partnership, L.P." The Partnership's
business may be conducted under any other name or names approved by
the General Partner, including the name of the General Partner or
any Affiliate thereof; provided, however, that the name of a
Limited Partner or any derivative thereof may not be used by the
Partnership without the prior written consent of that Limited
Partner and each Class B Limited Partner hereby consents to the use
of the name "Walden/Drever Operating Partnership, L.P." 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 furnish written notification to the Limited Partners
no later than 90 days after making any such change.
2.5 Names and Addresses of Partners. The names and addresses
of the Partners are set forth in the books and records of the
Partnership.
2.6 Place of Business. The principal place of business of
the Partnership shall be at One Lincoln Centre, 5400 LBJ Freeway,
Suite 400, Dallas, Texas 75240. The General Partner may change the
place of business at any time and from time to time by providing
prompt notice to the Limited Partners. The Partnership also may
have such other offices or places of business as the General
Partner determines to be appropriate.
2.7 Additional Filings. On or before the Effective Date, or
as promptly thereafter as is reasonably possible, the Partnership
shall make any filings or disclosures required by the laws of any
other state with respect to the qualification of the Partnership as
a foreign limited partnership under the internal laws of each such
state.
2.8 Ownership. Unless otherwise required by applicable law,
the Partnership Interest of each Partner shall be treated as
personal property for all purposes.
2.9 No Partner Responsible for Other Partner's Commitments.
The Partnership shall not be responsible or liable for any
indebtedness or obligation of any Partner incurred, either before
or after the execution of this Agreement, in good faith in carrying
out the purpose of the Partnership, or hereafter undertaken or
incurred on behalf of the Partnership under or pursuant to the
terms of this Agreement, or assumed in writing by the Partnership,
and the Partnership hereby indemnifies and agrees to hold the
Partners harmless from all such obligations and indebtedness.
2.10 Term. The Partnership shall continue until the first to
occur of the following:
(a) December 31, 2017; or
(b) The dissolution of the Partnership pursuant to the
express provisions of Article 9 hereto or as otherwise provided by
law.
2.11 Registered Office; Registered Agent. The initial
registered office and registered agent of the Partnership in the
State of Delaware shall be as set forth in the Certificate. The
General Partner may from time to time change the registered office
and the registered agent. If the General Partner changes the
Partnership's registered office or agent (or if the General Partner
is notified of a change in the registered agent's office address),
the General Partner shall promptly notify each Limited Partner of
any such change.
ARTICLE 3
CAPITAL CONTRIBUTIONS
3.1 Capital Contributions. The Company and WDN Properties
have previously made Capital Contributions to the Partnership in
the amounts of $1 and $99, respectively. On the Effective Date,
(a) the Company and WDN Properties collectively shall make a
Capital Contribution in cash to the Partnership in an amount equal
to the amount necessary for the Partnership to fulfill its
obligations, as of the Effective Date, pursuant to the Transaction
and (b) each Person contributing its Drever Interests to the
Partnership pursuant to the Transaction shall (i) be admitted as a
Class B Limited Partner and (ii) make a Capital Contribution to the
Partnership of its Drever Interests. The Partners shall treat the
Capital Contributions described in clauses (a) and (b) immediately
above as tax-free, or partially tax-free, contributions to the
capital of the Partnership under Section 721 of the Code and for
all other income tax purposes. On a basis consistent with that
certain schedule described in section 10 of the Proration Mechanism
(as such term is defined in the Exchange Agreement), the General
Partner shall prepare, as soon as practicable following the
Effective Date, a schedule (the "Ownership Schedule") which shall
be included in the books and records of the Partnership maintained
by the General Partner and which shall reflect, as of the Effective
Date, (A) the number of Class B Common Units owned by each Class B
Common Limited Partner, (B) the number of Class B Preferred Units
owned by each Class B Preferred Limited Partner, (C) the Capital
Account of each Partner, and (D) the Percentage Interest of each
Partner, which Percentage Interest shall be adjusted in the
Ownership Schedule from time to time by the General Partner to the
extent necessary to reflect accurately redemptions, Capital
Contributions, the issuance of additional Partnership Interests,
the transfer of Partnership Interests or similar events having an
effect on a Partner's Percentage Interest. The Partners shall have
no obligation to make any additional Capital Contributions or loans
to the Partnership.
3.2 Issuances of Additional Partnership Interests. The
General Partner is hereby authorized to cause the Partnership from
time to time to issue to Persons, other than the Company, WDN
Properties, or any of their Affiliates, additional 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,
but not including rights, powers and duties senior to Class B
Preferred Units or Class B Common Units, all as shall be determined
by the General Partner in its sole and absolute discretion and
without the approval of any of the Limited Partners, subject to
provisions of the Act, including, without limitation, (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; provided, however,
that the General Partner, at all times during the existence of the
Partnership, shall maintain a 1% interest in all income, gain,
loss, deduction, or credit of the Partnership. The General Partner
is hereby authorized to cause the Partnership, from time to time,
to issue to the Company, WDN Properties, or any of their
Affiliates, additional Class A Limited Partner Interests. The
General Partner will provide prompt notice to all Limited Partners
of any additional Partnership Interests issued pursuant to this
Section 3.2.
3.3 Admission of Additional Limited Partners.
(a) After the Effective Date, a Person who makes a
Capital Contribution to the Partnership in accordance with this
Agreement shall be admitted to the Partnership as an "Additional
Limited Partner" only upon furnishing to the General Partner (i) a
written agreement in form satisfactory to the General Partner
accepting all of the terms and conditions of this Agreement,
including, without limitation, the power of attorney granted in
Section 10.2 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.
The General Partner shall provide prompt notice to all Limited
Partners of the admission to the Partnership of an Additional
Limited Partner.
(b) Notwithstanding anything to the contrary in this
Section 3.3, 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
as being a Partner, following the consent of the General Partner to
such admission.
(c) If any Additional Limited Partner is admitted to the
Partnership on any day other than the first day of a Fiscal Year,
then Profits, Losses, each item thereof and all other items
allocable among Partners and Assignees for such Fiscal Year shall
be allocated among such Additional Limited Partner and all other
Partners and Assignees by taking into account their varying
interests during the Fiscal Year in accordance with Section 706(d)
of the Code, using any permissible method selected by the General
Partner in its sole discretion. Solely for purposes of making such
allocations, each of such items for the calendar month in which an
admission of any Additional Limited Partner occurs shall be
allocated among all Partners and Assignees including such
Additional Limited Partner. All distributions of Available Cash
with respect to which the Partnership Common Record Date or the
Partnership Preferred Record Date is before the date of such
admission shall be made solely to Partners and Assignees other than
the Additional Limited Partner, and all distributions of Available
Cash thereafter shall be made to all the Partners and Assignees
including such Additional Limited Partners in accordance with, and
subject to the limitations of, this Agreement.
3.4 Return of Capital. No Partner shall have the right to
demand or receive the return of such Partner's Capital
Contributions to the Partnership.
3.5 Interest on Capital Contributions. Except as otherwise
expressly provided in the definition of Unpaid Common Distribution
Account and Unpaid Preferred Distribution Account, no Partner shall
receive any interest or amount computed like interest on such
Partner's Capital Contributions to the Partnership or such
Partner's Capital Account, notwithstanding any disproportion
therein as between or among the Partners.
3.6 No Preemptive Rights. No Person shall have any
preemptive, preferential or other similar right with respect to (i)
additional Capital Contributions or loans to the Partnership or
(ii) the issuance or sale of any Partnership Interests.
ARTICLE 4
ACCOUNTING; BOOKS AND RECORDS; TAX MATTERS
4.1 Books and Records. The books and records of the
Partnership shall, at the cost and expense of the Partnership, be
kept or caused to be kept on the accrual method of accounting for
financial and tax reporting purposes by the General Partner (or
such other Person as the General Partner may from time to time
designate) at the principal place of business of the Partnership.
Such books and records shall be kept on the basis of the
Partnership's Fiscal Year. Each Partner, at his own expense upon
not less than five Business Days prior written notice, shall have
the right to inspect the books and records of the Partnership
during business hours at the principal place of business of the
Partnership for any purpose.
4.2 Bank Accounts. All funds of the Partnership shall be
deposited in its name in an account or accounts maintained with
such bank as is determined by the General Partner. The funds of
the Partnership shall not be commingled with the funds of any other
Person except to the extent that the General Partner utilizes sweep
accounts with respect to the properties and other real property
owned or managed by affiliates of the General Partner. Checks
shall be drawn upon the Partnership account or accounts only for
the purposes of the Partnership and shall be signed by the General
Partner or such Person or Persons as are authorized by the General
Partner.
4.3 Reports.
(a) As soon as practicable, but in no event later than
90 days after the close of each calendar year, the General Partner
shall cause to be mailed to each Limited Partner as of the close of
the calendar year summary financial statements of the Partnership
for such calendar year, presented in accordance with generally
accepted accounting principles.
(b) The General Partner also may from time to time cause
to be prepared such reports and/or information as may be necessary
for the General Partner to determine the Company's continuing
compliance with the requirements for qualification as a REIT.
4.4 Preparation of Tax Returns. The General Partner shall
arrange for the preparation and timely filing of all returns of
Partnership income, gains, deductions, losses and other items
required of the Partnership for federal and state income tax
purposes and shall use all reasonable efforts to furnish to each
Limited Partner, within 90 days of the close of each taxable year,
IRS Form K-1, comparable state forms for the jurisdictions in which
income-producing property of the Partnership is located and any
other tax information reasonably required by Limited Partners for
federal and state income tax reporting purposes.
4.5 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. The General Partner shall have the right to seek to revoke
any such election upon the General Partner's determination in its
sole and absolute discretion that such revocation is in the best
interests of the Partners.
4.6 Tax Matters Partner.
(a) The General Partner shall be the "tax matters
partner" of the Partnership for federal income tax purposes. The
General Partner will timely notify the IRS as required of its
designation as Tax Matters Partner. Pursuant to Section 6230 of
the Code, upon receipt of notice from the IRS of the beginning of
an administrative proceeding with respect to the Partnership, the
tax matters partner shall furnish the IRS with the name, address
and profits interest of each of the Limited Partners and the
Assignees; provided, however, that such information is provided to
the Partnership by the Limited Partners and the Assignees.
(b) Except as required by applicable law, the tax
matters partner shall not take any positions for federal income tax
purposes contrary to the intended federal income tax treatment of
transactions, allocations, and distributions described in, or made
pursuant to, this Agreement. Upon the receipt of notice from the
IRS of the beginning of an administrative proceeding, the tax
matters partner shall (i) provide each Class B Limited Partner with
prompt written notice describing the nature, scope, and taxable
years to which such audit or controversy pertains and (ii) permit
the Class B Group Tax Controversy Representative to participate in
any proceedings related to such audit or controversy at the sole
expense of the Class B Group. In the event that the tax matters
partner determines to settle any particular tax issue and the Class
B Group Tax Controversy Representative objects in writing to such
settlement, the tax matters partner must first offer to the Class
B Group Tax Controversy Representative the opportunity to continue
to contest such tax audit or controversy at the sole expense of the
Class B Group and the Class B Group shall reimburse the tax matters
partner for its expenses (including legal and accounting fees and
expenses) of participating in and monitoring the group's contest of
such audit or controversy. The tax matters partner must approve
any settlement of a controversy contested by the Class B Group,
which approval shall not be unreasonably withheld. To the extent
not inconsistent with the foregoing provisions, 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, 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 of for
refund with the District Court of the
United States for the district in which
the Partnership's principal place of
business is located;
(ii) in the event that a notice of a final
administrative adjustment at the
Partnership level of any item required to
be taken into account by a Partner for
tax purposes (a "final adjustment") is
mailed to the tax matters partner, to
seek judicial review of such final
adjustment, including the filing of a
petition for readjustment with the Tax
Court or the United States Claims Court,
or the filing of a complaint for refund
with the District Court of the United
States for the district in which the
Partnership's principal place of business
is located;
(iii)to intervene in any action brought by any
other Partner for judicial review of a
final adjustment;
(iv) to file a request or an administrative
adjustment with the IRS at any time and
it any part of such request is not
allowed by the IRS, to file an
appropriate pleading (petition or
complaint) for judicial review with
respect to such request;
(v) to enter into an agreement with the IRS
to extend the period for assessing any
tax which is attributable to any item
required to be taken into account by a
Partner for tax purposes, or an item
affected by such item; and
(vi) to take any other action on behalf of the
Partners of the Partnership in connection
with any tax audit or judicial review
proceeding to the extent permitted by
law.
The taking of any action and the incurring of any expense by
the tax matters partner in connection with any such proceeding,
except to the extent required by law, is a matter in the sole and
absolute discretion of the tax matters partner and the provisions
relating to indemnification of the General Partner set forth in
Section 7.7 hereof shall be fully applicable to the tax matters
partner in its capacity as such.
(c) The tax matters partner shall receive no
compensation for its services. All third party costs and expenses
incurred by the tax matters partner in performing its duties as
such (including legal and accounting fees and expenses) shall be
borne by the Partnership. Nothing herein shall be construed to
restrict the Partnership from engaging an accounting firm or a law
firm to assist the tax matters partner in discharging its duties
hereunder, so long as the compensation paid by the Partnership for
such services is reasonable.
4.7 Certain Elections. The Partnership shall elect to deduct
expenses, if any, incurred by it in organizing the Partnership
ratably over a sixty-month period as provided in Section 709 of the
Code. In connection with the first transfer of a Partnership
Interest permitted under this Agreement, the General Partner shall
cause the Partnership, on behalf of the Partnership and at the time
and in the manner provided in Section 1.754-1(b) of the
Regulations, to make an election to adjust the basis of the
Partnership's property in the manner provided in Sections 734(b)
and 743(b) of the Code.
ARTICLE 5
DISTRIBUTIONS; ALLOCATIONS
5.1 Requirement and Characterization of Distributions.
(a) The General Partner shall cause the Partnership to
distribute within 60 days after the end of each Fiscal Quarter an
amount equal to 100% of the Available Cash of the Partnership in
the following order of priority:
(i) first, to the Class B Preferred Limited
Partners who are, and to any former Class
B Preferred Limited Partners who were,
Partners on the Partnership Preferred
Record Date with respect to such Fiscal
Quarter in accordance with their
respective Percentage Interests on such
Partnership Preferred Record Date until
the Class B Preferred Limited Partners
have received an amount pursuant to this
clause equal to the sum of (A) the Class
B Preferred Distribution in respect of
such Fiscal Quarter and (B) the balance
in the Unpaid Preferred Distribution
Account; provided, however, that the
allocation between the Class B Preferred
Limited Partners of amounts relating to
the Unpaid Preferred Distribution Account
shall take into account the effect of any
distribution pursuant to Section 5.1(b)
hereof; and
(ii) second, to the Class B Common Limited
Partners who are, and to any former Class
B Common Limited Partners who were,
Partners on the Partnership Common Record
Date with respect to such Fiscal Quarter
in accordance with their respective
Percentage Interests on such Partnership
Common Record Date until the Class B
Common Limited Partners have received an
amount pursuant to this clause equal to
the sum of (A) the Class B Common
Distribution in respect of such Fiscal
Quarter and (B) the balance in the Unpaid
Common Distribution Account; provided,
however, that the allocation between the
Class B Common Limited Partners of
amounts relating to the Unpaid Common
Distribution Account shall take into
account the effect of any distribution
pursuant to Section 5.1(b) hereof; and
(iii)thereafter, 1% to the General Partner and
99% to the Class A Limited Partners in
accordance with their respective
Percentage Interests.
(b) Following the receipt of a written notice of an
intention to exchange Class B Common Units or Class B Preferred
Units pursuant to the terms of Article 11 hereof, the General
Partner shall cause the Partnership to distribute, immediately
prior to the consummation of such exchange, to any Limited Partner
whose Partnership Interest is being exchanged an amount of
Available Cash at such time equal to the balance, if any, of the
Unpaid Common Distribution Account or the Unpaid Preferred
Distribution Account corresponding to the Class B Common Units or
Class B Preferred Units being exchanged.
(c) Subject to the Approval of the Special Committee,
the General Partner shall have the power to determine any
alternative minimum tax, adjustments and tax preference items in
such manner and in such amounts as the General Partner may
determine in the General Partner's discretion.
(d) If, pursuant to (i) any provision of the Code or the
Regulations or (ii) any comparable state law, the Partnership is
required to withhold any tax with respect to a Partner's
distributive share of partnership income, gain, loss, deduction or
credit, the Partnership shall withhold the required amount and pay
the same over to the taxing authorities as required by the Code,
the Regulations or state law. The amount withheld will be deducted
from the amount that would otherwise be distributed to that
Partner, but will be treated as though it had been distributed to
the Partner with respect to which the Partnership is required to
withhold. If at any time the amount required to be withheld by the
Partnership exceeds the amount of money that would otherwise be
distributed to the Partner with respect to which the withholding
requirement applies on the following Partnership Common Record Date
and Partnership Preferred Record Date (the "Excess Withholding
Amount"), then the Partnership shall provide notice and a brief
explanation to such Partner of the Excess Withholding Amount and if
such amount is not paid within 30 days from the date of such notice
the Excess Withholding Amount shall be considered a loan from the
Partnership to such Partner. Such loan shall bear interest at the
Prime Rate plus 8% until discharged by such Partner by repayment.
Any amounts otherwise distributable to such Partner on each
Partnership Record Date following the Record Dates referred to in
determining the Excess Withholding Amount will be treated as a
repayment of such loan.
5.2 Distributions Upon Liquidation. Proceeds from a
Terminating Capital Transaction, and any other cash received or
reductions in reserves made after commencement of the liquidation
of the Partnership, shall be distributed to the Partners in
accordance with Section 9.2 hereof.
5.3 Allocations of Profits and Losses. After giving effect
to the special allocations set forth in Sections 5.4 and 5.5
hereof, Profits and Losses for a Fiscal Year or other period shall
be allocated for both tax and Capital Account purposes, in the
following manner:
(a) Except as otherwise provided in Section 5.8(f),
Profits shall be allocated in the following order and priority:
(i) first, to the Class B Preferred Limited
Partners in proportion to their
respective Percentage Interests until the
amount of Profits allocated to the Class
B Preferred Limited Partners pursuant to
this clause (i) for the current Fiscal
Year equals the excess of (A) the sum of
(I) the cumulative amount of the Class B
Preferred Distribution for each Fiscal
Quarter of the current Fiscal Year and
all prior Fiscal Years and (II) the
cumulative amount of the interest
component of the Unpaid Preferred
Distribution Account described in clause
(ii) of the definition of Unpaid
Preferred Distribution Account in Article
1 hereof (but, in the case of both (I)
and (II) above, only to the extent that
such distributions or interest component
have been previously paid to the Class B
Preferred Limited Partners pursuant to
Sections 5.1(a)(i) or 5.1(b) hereof) over
(B) the cumulative amount of Profits
allocated to the Class B Preferred
Limited Partners pursuant to this clause
(i) for all prior Fiscal Years;
(ii) second, to the Class B Common Limited
Partners in proportion to their
respective Percentage Interests until the
amount of Profits allocated to the Class
B Common Limited Partners pursuant to
this clause (ii) for the current Fiscal
Year equals the excess of (A) the sum of
(I) the cumulative amount of the Class B
Common Distribution for each Fiscal
Quarter of the current Fiscal Year and
all prior Fiscal Years and (II) the
cumulative amount of the interest
component of the Unpaid Common
Distribution Account described in clause
(ii) of the definition of Unpaid Common
Distribution Account in Article 1 hereof
(but, in the case of both (I) and (II)
above, only to the extent that such
distributions or interest component have
been previously paid to the Class B
Common Limited Partners pursuant to
Sections 5.1(a)(ii) or 5.1(b) hereof)
over (B) the cumulative amount of Profits
allocated to the Class B Common Limited
Partners pursuant to this clause (ii) for
all prior Fiscal Years;
(iii) third, to the General Partner, in
proportion to and to the extent of an
amount equal to the excess, if any, of
(A) the cumulative Losses allocated to
such General Partner pursuant to the last
sentence of Section 5.6 hereof for all
prior Fiscal Years, over (B) the
cumulative Profits allocated to such
General Partner pursuant to this Section
5.3(a)(iii) for all prior Fiscal Years;
(iv) fourth, to the Partners (other than the
Class B Limited Partners), in proportion
to and to the extent of an amount equal
to the excess, if any, of (A) the
cumulative Losses allocated to such
Partners pursuant to Section 5.3(b)(iv)
hereof for all prior Fiscal Years, over
(B) the cumulative Profits allocated to
such Partners pursuant to this Section
5.3(a)(iv) for all prior Fiscal Years;
(v) fifth, to the Class B Preferred Limited
Partners, in proportion to and to the
extent of an amount equal to the excess,
if any, of (A) the cumulative Losses
allocated to each such Partner pursuant
to Section 5.3(b)(iii) hereof for all
prior Fiscal Years, over (B) the
cumulative Profits allocated to such
Partner pursuant to this Section
5.3(a)(v) for all prior Fiscal Years;
(vi) sixth, to the Class B Common Limited
Partners, in proportion to and to the
extent of an amount equal to the excess,
if any, of (A) the cumulative Losses
allocated to each such Partner pursuant
to Section 5.3(b)(ii) hereof for all
prior Fiscal Years, over (B) the
cumulative Profits allocated to such
Partner pursuant to this Section
5.3(a)(vi) for all prior Fiscal Years;
(vii) thereafter, to the
General Partner and
the Class A Limited
Partner in
accordance with
their respective
Percentage
Interests.
(b) Except as otherwise provided in Section 5.8(e),
Losses shall be allocated in the following order and priority:
(i) first, to the General Partner and the
Class A Limited Partners in proportion to
and until the amount of Losses allocated
pursuant to this clause (i) for the
current Fiscal Year equals the excess, if
any, of (A) the sum of (I) their
respective Capital Account balances on
the Effective Date, (II) the Capital
Contributions made by such Partners
subsequent to the Effective Date and
(III) the cumulative amount of Profits
allocated to such Partners pursuant to
Section 5.3(a)(vii) hereof over (B) the
sum of (I) cumulative amount of Losses
allocated to such Partners pursuant to
this clause (i) for all prior Fiscal
Years and (II) the cumulative amount of
distributions made to them pursuant to
Section 5.1(a)(iii) hereof;
(ii) second, to the Class B Common Limited
Partners, in proportion to their
respective Percentage Interests until the
amount of Losses allocated pursuant to
this clause (ii) for the current Fiscal
Year equals the excess, if any, of (A)
the sum of (I) the aggregate amount of
the portion of their Capital Account
balances on the Effective Date
attributable to Class B Common Units,
(II) the aggregate Capital Contributions
made by such Partners subsequent to the
Effective Date in respect of their Class
B Common Units, and (III) the cumulative
amount of Profits allocated to them
pursuant to Section 5.3(a)(ii) hereof
over (B) the sum of (I) cumulative amount
of Losses allocated to such Partners
pursuant to this clause (ii) for all
prior Fiscal Years and (II) the
cumulative amount of distributions made
to them pursuant to Section 5.1(a)(ii)
hereof;
(iii) third, to the Class B Preferred Limited
Partners, in proportion to their
respective Percentage Interests until the
amount of Losses allocated pursuant to
this clause (iii) for the current Fiscal
Year equals the excess, if any, of (A)
the sum of (I) the aggregate amount of
the portion of their Capital Account
balances on the Effective Date
attributable to Class B Preferred Units,
(II) the aggregate Capital Contributions
made by such Partners subsequent to the
Effective Date in respect of their Class
B Preferred Units, and (III) the
cumulative amount of Profits allocated to
them pursuant to Section 5.3(a)(i) hereof
over (B) the sum of (I) cumulative amount
of Losses allocated to such Partners
pursuant to this clause (iii) for all
prior Fiscal Years and (II) the
cumulative amount of distributions made
to them pursuant to Section 5.1(a)(i)
hereof; and
(iv) thereafter, 1% to the General Partner and
99% to the Limited Partners (other than
the Class B Limited Partners) in
accordance with their Percentage
Interests.
5.4 Special Allocations. The following special allocations
shall be made in the following order:
(a) Notwithstanding any other provision of this
Agreement to the contrary, if in any Fiscal Year there is a net
decrease in Partnership Minimum Gain, then each Partner shall first
be allocated items of Partnership income for such Fiscal Year (and,
if necessary, subsequent Fiscal Years) in an amount equal to the
portion of such Partner's share of the net decrease in Partnership
Minimum Gain, determined in accordance with the provisions of
Regulations Section 1.704-2(g). As provided in Regulations Section
1.704-2(j), income of the Partnership allocated for any Fiscal Year
under this subsection shall consist first of items of book gain
recognized from the disposition of Partnership property subject to
Nonrecourse Liabilities to the extent of the decrease in
Partnership Minimum Gain that is attributable to such disposition,
with any remaining allocated income deemed to be made up of a pro
rata portion of the Partnership's other items of gross income for
such taxable year.
(b) Notwithstanding any other provision of this
Agreement to the contrary, except as specified in Section 5.4(a),
if in any Fiscal Year there is a net decrease in Partner Minimum
Gain, then each Partner shall first be allocated items of
Partnership income for such Fiscal Year (and, if necessary,
subsequent Fiscal Years) in an amount equal to the portion of such
Partner's share of the net decrease in such Partner Minimum Gain,
determined in accordance with the provisions of Regulations Section
1.704-2(i). As provided in Regulations Section 1.704-2(j), income
of the Partnership allocated for any taxable year under this
subsection shall consist first of items of book gain recognized
from the disposition of Partnership property subject to Partner
Nonrecourse Debt to the extent of the decrease in Partner Minimum
Gain that is attributable to such disposition, with any remaining
allocated income deemed to be made up of a pro rata portion of the
Partnership's other items of gross income for such taxable year.
(c) In the event any Partner unexpectedly receives any
adjustments, allocations, or distributions described in 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)
of the Regulations, 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, the Adjusted Capital Account Deficit, if any, of such
Partner as quickly as possible, provided that an allocation
pursuant to this Section 5.4(c) 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 5
have been tentatively made as if this Section 5.4(c) were not in
the Agreement.
(d) In the event a Limited Partner (who is not also a
General Partner) has a deficit Capital Account at the end of any
Fiscal Year that is in excess of the sum of (i) the amount the
Limited Partner is obligated to restore pursuant to any provision
of this Agreement, and (ii) the amount the Limited Partner is
deemed to be obligated to restore pursuant to Section 1.704-1(b)(2)(ii)(c)
of the Regulations, the Limited Partner shall be
specially allocated items of Partnership income and gain in the
amount of such excess as quickly as possible, provided that an
allocation pursuant to this Section 5.4(d) shall be made only if
and to the extent that the Limited Partner would have a deficit
Capital Account in excess of such sum after all other allocations
provided for in this Article 5 have been made as if Section 5.4(c)
hereof and this Section 5.4(d) were not in the Agreement.
(e) Commencing on the first day of the month following
the first anniversary of the Effective Date, a special allocation
of Depreciation to the Class B Common Limited Partners, who
continue to be Class B Common Limited Partners on December 31 of
the taxable year in respect of which the special allocation of
depreciation pursuant to this Section 5.4(e) is to be made (the
"Determination Year") provided, however, that for the taxable year
which includes the first anniversary of the Effective Date, the
Determination Year shall begin on the first day of the month
following the first anniversary of the Effective Date, in
proportion to their respective Class B Common Limited Partner
Percentage Interests as determined on December 31 of the
Determination Year, in an aggregate amount equal to the lesser of
(I) the sum of (A) the product of (i) the amount of Depreciation
(determined in accordance with Section 1.704-1(b)(2)(iv)(g) of the
Regulations) that corresponds to $7,000,000 of tax depreciation and
(ii) a fraction (x) the numerator of which is the aggregate Class
B Common Limited Partner Percentage Interests of such Partners as
determined on December 31 of the Determination Year and (y) the
denominator of which is the aggregate Class B Common Limited
Partner Percentage Interests of the Class B Common Limited Partners
on the Effective Date and (B) the Carryover Amount and (II) the
aggregate amount of Profits allocated to such Partners for the
Determination Year pursuant to Section 5.3(a)(ii) hereof. For
purposes of this Agreement for any particular Determination Year,
the Carryover Amount shall be an amount equal to the excess, if
any, of (i) the amount described in (I) of the immediately
preceding sentence for the taxable year immediately preceding the
Determination Year over (ii) the amount described in (II) of the
immediately preceding sentence for the taxable year immediately
preceding the Determination Year; provided, however, that for the
Determination Year following the taxable year that includes the
first anniversary of the Effective Date the Carryover Amount shall
also include the excess, if any, of (x) the amount described in (i)
of the immediately preceding sentence for the taxable year
immediately preceding the Determination Year over (y) the amount
specially allocated pursuant to this Section 5.4(e) for the taxable
year immediately preceding the Determination Year.
(f) A special allocation of gross income shall be made
(i) to each Class B Common Limited Partner who has an obligation to
restore a portion of its deficit Capital Account pursuant to
Section 9.3 hereof and who, during the taxable year or during the
first 60 days of the following taxable year, exchanges all of his
Class B Common Units pursuant to the provisions of Article 11
hereof, in an amount equal to the lesser of (A) the aggregate
amount specially allocated to such Partner pursuant to Section
5.4(e) hereof for the current Fiscal Year and all prior Fiscal
Years and (B) the amount of the deficit balance in such Partner's
Capital Account (calculated as if all other allocations provided
for in this Article 5 had been made other than the allocation
pursuant to this Section 5.4(f)), (ii) to each Class B Limited
Partner who, during the taxable year, exchanges all or any portion
of his Class B Common Units or Class B Preferred Units, pursuant to
the provisions of Article 11 hereof, an amount, if any, equal to
the aggregate of the Proportionate Prior Unpaid Class B Common
Distributions, the Proportionate Prior Unpaid Class B Preferred
Distributions, the Proportionate Current Unpaid Class B Common
Distributions, and the Proportionate Current Unpaid Class B
Preferred Distributions paid to such Partner pursuant to Section
11.3 hereof, and (iii) to each Class B Limited Partner receiving or
entitled to receive distributions during such Fiscal Year pursuant
to Section 9.2(a)(iii) hereof, an amount, if any, equal to the
aggregate of the Proportionate Prior Unpaid Class B Common
Distributions, the Proportionate Prior Unpaid Class B Preferred
Distributions, the Proportionate Current Unpaid Class B Common
Distributions, and the Proportionate Current Unpaid Class B
Preferred Distributions that would have been paid to such Partner
pursuant to Section 11.3 hereof if such Partner had exercised the
rights set forth in Article 11 hereof.
(g) Nonrecourse Deductions related to any Original
Property for any Fiscal Year shall be allocated among the Partners
in accordance with their respective Percentage Interests.
(h) Notwithstanding anything to the contrary in this
Agreement, any Partner Nonrecourse Deductions for any Fiscal Year
or other period shall be 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.
(i) To the extent an adjustment to the adjusted tax
basis of any Partnership asset is required pursuant to Code Section
732(d), Code Section 734(b) or Code Section 743(b), the Capital
Accounts of the Partners shall be adjusted pursuant to Section
1.704-1(b)(2)(iv)(m) of the Regulations.
(j) During the Fiscal Years ending prior to or on
December 31, 1998, all allocations under this Agreement will be
made only to the extent that, and will be adjusted insofar as may
be required so that, the Partnership's allocations satisfy the
requirements of Code Section 514(c)(9)(E), applicable Regulations
promulgated thereunder and any other administrative guidelines or
pronouncements thereunder.
5.5 Curative Allocations. The allocations set forth in
Sections 5.4 and 5.6 hereof (the "Regulatory Allocations") are
intended to comply with certain requirements of the Regulations.
It is the intent of the Partners that, to the extent possible, all
Regulatory Allocations shall be offset either with other Regulatory
Allocations or with special allocations of other items of
Partnership income, gain, loss or deduction pursuant to this
Section 5.5. Therefore, notwithstanding any other provision of
this Article 5 (other than the Regulatory Allocations), the General
Partner shall make such offsetting special allocations of
Partnership income, gain, loss or deduction in whatever manner it
determines appropriate so that, after such offsetting allocations
are made, each Partner's Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Partner would
have had if the Regulatory Allocations were not part of the
Agreement and all Partnership items were allocated pursuant to
Section 5.3.
5.6 Loss Limitation. The Losses allocated to a Limited
Partner pursuant to Section 5.3(b) hereof shall not exceed the
maximum amount of Losses that can be so allocated without causing
a Limited Partner to have an Adjusted Capital Account Deficit at
the end of any Fiscal Year. All Losses in excess of the
limitations set forth in this Section 5.6 shall be allocated to the
General Partner.
5.7 Tax Allocations: Code Section 704(c). In accordance
with Code Section 704(c) and the Regulations promulgated
thereunder, income, gain, loss, and deduction with respect to any
property contributed to the capital of the Partnership shall,
solely for tax purposes, be allocated among the Partners so as to
take account of any variation between the adjusted basis of such
property to the Partnership for federal income tax purposes and its
initial Gross Asset Value (computed in accordance with the
definition of Gross Asset Value in Section 1.1). In the event the
Gross Asset Value of any Partnership asset is adjusted pursuant to
clause (v) of the definition of Gross Asset Value in Section 1.1,
subsequent allocations of income, gain, loss, and deduction with
respect to such asset shall take account of any variation between
the adjusted basis of such asset for federal income tax purposes
and its Gross Asset Value in the same manner as under Code Section
704(c) and the Regulations promulgated thereunder. Subject to the
Approval of the Special Committee, any elections or other decisions
relating to allocations pursuant to this Section 5.7 will be made
in any manner that the General Partner determines in its sole
discretion (including any manner that may benefit the General
Partner and its Affiliates).
5.8 Other Allocation Rules.
(a) Profits and Losses, each item thereof and all other
items allocable among Partners for the Fiscal Year that includes
the Effective Date shall be allocated among the Partners by taking
into account their varying interests during such Fiscal Year in
accordance with Section 706(d) of the Code, using any permissible
method selected by the General Partner in its sole discretion.
(b) Any gain allocated to the Partners upon the sale or
other taxable disposition of any Partnership asset shall to the
extent possible, after taking into account other required
allocations of gain pursuant to this Article 5, be characterized as
Recapture Income in the same proportions and to the same extent as
such Partners have been allocated any deductions directly or
indirectly giving rise to the treatment of such gains as Recapture
Income. For purposes of this Agreement, any Class B Limited
Partner's share of a Section 751 asset in respect of any Original
Properties, as determined immediately prior to the Effective Date
and as appropriately adjusted pursuant to the Transaction, shall
not be diminished and shall be specially allocated to such Partner
under the principles of Section 704(c) upon a subsequent sale or
disposition of such asset.
(c) If a Partnership Interest is transferred during any
Fiscal Year, the Profits or Losses attributable to such Partnership
Interest for such Fiscal Year shall be divided and allocated
proportionately between the transferor and the transferee in
accordance with Section 8.6(d) hereof.
(d) In accordance with Section 752 of the Code and
Regulations Section 1.752-3(a)(3), excess Nonrecourse Liabilities
relating to the Original Properties shall be allocated to the
Partners in accordance with their respective Percentage Interests.
(e) Losses for the Fiscal Year ending December 31, 1997
shall be allocated to the General Partner, the Class B-TE Common
Limited Partners and the Class A Limited Partners in accordance
with their relative Percentage Interests until the balances in
their Capital Accounts are reduced to zero and any remaining Losses
shall be allocated in accordance with the provisions of Section
5.3(b)(ii) - (iv). Losses for the Fiscal Year ending December 31,
1998 shall be allocated to the General Partner, the Class B-TE
Common Limited Partners and the Class A Limited Partners in
accordance with either (i) their respective 1997 Income Percentages
or (ii) their Percentage Interests, whichever results in the Class
B-TE Common Limited Partners receiving a larger share of such
Losses, until the balances in their Capital Accounts are reduced to
zero and any remaining Losses shall be allocated in accordance with
the provisions of Section 5.3(b)(ii) - (iv). For purposes of this
Section 5.8(e) hereof, the term "1997 Income Percentages" means the
ratio, expressed as a percentage, of (i) the Profits allocated to
each such Partner in the Fiscal Year ending December 31, 1997 to
(ii) the total Profits for such Fiscal Year.
(f) Profits for the Fiscal Year ending December 31, 1998
shall be allocated first in accordance with the provisions of
Section 5.3(a)(i) hereof, second, in accordance with the provisions
of Section 5.3(a)(ii) hereof but the amount of Profits allocated to
Class B-TE Common Limited Partners for such Fiscal Year shall be
limited to an amount equal to the product of (i) the Profits of the
Partnership for such Fiscal Year and (ii) the percentage of Losses
of the Partnership that the Class B-TE Common Limited Partners were
allocated pursuant to Section 5.8(e) above for the Fiscal Year
ending December 31, 1997, and any remaining Profits shall be
allocated in accordance with the provisions of Section 5.3(a)(iii)
- - (vii).
ARTICLE 6
STATUS OF LIMITED PARTNERS
6.1 Participation in Management. The Limited Partners, as
such, shall not (i) participate in the management or control of the
Partnership's business, (ii) transact any business for the
Partnership, nor (iii) have the power to act for or bind the
Partnership, said powers being vested solely and exclusively in the
General Partner.
6.2 Limited Liability. No Limited Partner shall be bound by,
or personally liable for, the expenses, liabilities, or obligations
of the Partnership, except as provided in the Act.
6.3 Outside Activities of Limited Partners. Any Limited
Partner and any officer, director, employee, agent, trustee, family
member, partner, shareholder or Affiliate of any Limited Partner
shall be entitled to and may have business interests and activities
that are in direct competition with the Partnership or that are
enhanced by the activities that are in direct competition with the
Partnership or that are enhanced by the activities of the
Partnership. Neither the Partnership nor any Partners shall have
any rights by virtue of this Agreement in any business ventures of
any Limited Partner or Assignee. 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 even if such opportunity is of a
character that, if presented to the Partnership, any Limited
Partner or such other Persons, could be taken by such Person.
6.4 Rights of Limited Partners Relating to the Partnership.
(a) In addition to other rights provided by this
Agreement or by the Act, each Limited Partner shall have the right,
upon five Business Days prior written notice, at such Limited
Partner's own expense (including reimbursement for actual third
party copying and administrative charges that the General Partner
may incur):
(i) to obtain a list of the name and last
known business, residence or mailing
address of each Partner; and
(ii) to obtain additional copies 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.
(b) The Partnership shall promptly notify any Limited
Partner, on request, of the then current Conversion Factor. In
addition, the Partnership shall notify each of the Partners of any
change made to the Conversion Factor at such time that notice in
respect of any adjustment pursuant to Section 11.5 hereof would be
required to be given pursuant to Section 11.6 hereof.
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
7.1 Management.
(a) Except as otherwise expressly provided in this
Agreement, all management powers over the business and affairs of
the Partnership are and shall be exclusively vested in the General
Partner. The General Partner may not be removed by the Limited
Partners with or without cause. In addition to the powers now or
hereafter granted a general partner of a limited partnership under
the Act and other applicable law or that are granted to the General
Partner under any other provision of this Agreement, the General
Partner, subject to Section 7.3 hereof, shall have full power and
authority to do all things deemed necessary or desirable by the
General Partner to conduct the business of the Partnership, to
exercise all powers set forth in Section 2.3 hereof and to
effectuate the purposes set forth in Section 2.2 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 Company (so long as the
Company qualifies as a REIT) to
avoid liability for any federal
income tax (including, for this
purpose, any excise tax pursuant to
Section 4981 of the Code) and to
make distributions to its holders of
REIT Shares sufficient to permit the
Company to maintain REIT status),
the assumption or guarantee of, or
other contracting for, indebtedness
and other liabilities, the issuance
of evidences of indebtedness
(including the securing of same by
deed to secure debt, mortgage, deed
of trust or other lien of
encumbrance on the Partnership's
properties) 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,
mortgage, pledge, encumbrance,
hypothecation or exchange of any
properties of the Partnership
(including the exercise or grant of
any conversion, option, privilege,
or subscription right to any other
right available in connection with
any properties at any time held by
the Partnership);
(iv) the use of the assets of the
Partnership and Affiliates of the
Partnership controlled by the
Partnership (including, without
limitation, cash on hand) for any
purpose consistent with the terms of
this Agreement;
(v) either directly, or through one or
more contractors (as provided in
Section 7.1(a)(ix) hereof), the
management, operation, leasing,
landscaping, repair, alteration,
demolition or improvement of any
real property or improvements owned
by the Partnership;
(vi) the distribution of Partnership cash
or other Partnership properties in
accordance with this Agreement;
(vii) holding, managing, investing and
reinvesting cash and other assets of the
Partnership;
(viii) the collection and receipt of
revenues and income of the
Partnership;
(ix) the selection and dismissal of
employees, agents, outside
attorneys, accountants, consultants
and contractors of the Partnership
or the General Partner and the
determination of their compensation
and other terms of employment or
hiring;
(x) the maintenance of such insurance
for the benefit of the Partnership
and the Partners as it deems
necessary or appropriate;
(xi) the formation of, or acquisition of
an interest in, and the contribution
of property to, any further limited
or general partnerships, joint
venture or other relationships that
it deems desirable;
(xii) subject to Section 4.6 hereof, the
control of any matters affecting the
rights and obligations of the
Partnership, including the settlement,
compromise, submission to arbitration or
any other form of dispute resolution, or
abandonment of, any claim, cause of
action, liability, debt or damages, due
or owing to or from the Partnership, the
commencement or defense of suits, legal
proceedings, administrative proceedings,
arbitrations or other forms of dispute
resolution, and the representation of the
Partnership in all suits or legal
proceedings, administrative proceedings,
arbitrations or other forms of dispute
resolution, the incurring of legal
expense, and the indemnification of any
Person against liabilities and
contingencies to the extent permitted by
law;
(xiii) the undertaking of any action in
connection with the Partnership's
direct or indirect investment in any
other Person (including, without
limitation, the contribution or loan
of funds by the Partnership to such
Persons);
(xiv) subject to Approval of the Special
Committee, if required, the determination
of the fair market value of any
Partnership property distributed in kind
using such reasonable method of valuation
as it may adopt;
(xv) the exercise, directly or indirectly,
through any attorney-in-fact acting under
a general or limited power of attorney,
of any right, including the right to
vote, appurtenant to any asset, property
or investment held by the Partnership;
(xvi) the exercise of any of the powers of the
General Partner enumerated in this
Agreement on behalf of or in connection
with any other Person in which the
Partnership has a direct or indirect
interest, or jointly with any other
Person;
(xvii) the making, execution and delivery
of any and all deeds, leases, notes,
deeds to secure debt, mortgages,
deeds of trust, security agreements,
conveyances, contracts, guarantees,
warranties, indemnities, waivers,
releases or legal instruments or
agreements in writing necessary or
appropriate in the judgment of the
General Partner for the
accomplishment of any of the powers
of the General Partner enumerated in
this Agreement;
(xviii) the merger, consolidation or other
combination of the Partnership with
any other Person; and
(xix) the undertaking of any action necessary
to admit any Person as an Additional
Limited Partner pursuant to Section 3.3
hereof and to admit a Substituted Limited
Partner pursuant to Section 8.4 hereof.
(b) Each of the Limited Partners agrees that the General
Partner is authorized to perform the above-mentioned powers and to
enter into agreements and transactions in connection therewith on
behalf of the Partnership without any further act, approval or vote
of the Partners, notwithstanding any other provision of this
Agreement (except as provided in Section 7.3) hereof, the Act or
any applicable law, rule or regulation, to the fullest extent
permitted under the Act or other applicable law. The execution,
delivery or performance by the General Partner or the Partnership
of any agreement authorized under this Agreement shall not
constitute a breach by the General Partner of any duty that the
General Partner may owe the Partnership or the Limited Partners or
any other Persons under this Agreement or of any duty stated or
implied by law or equity.
(c) At all times from and after the date hereof, the
General Partner itself (subject to reimbursement by the
Partnership) may, or may cause the Partnership to, obtain and
maintain (i) casualty, liability and other insurance on the
properties of the Partnership and (ii) to the extent available,
liability insurance for the Indemnitees hereunder.
(d) At all times from and after the date hereof, the
General Partner may cause the Partnership to establish and maintain
any and all reserves, working capital accounts and other cash or
similar balances in such amounts as the General Partner, in its
sole and absolute discretion, deems appropriate and reasonable from
time to time.
(e) Except as otherwise expressly provided herein, 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. The General
Partner and the Partnership shall not have liability to a Limited
Partner under any circumstances as a result of an income tax
liability incurred by such Limited Partner as a result of an action
(or inaction) by the General Partner pursuant to its authority
under this Agreement.
7.2 Amendment of Agreement and Certificate of Limited
Partnership.
(a) To the extent that such action is determined by the
General Partner to be reasonable and necessary or appropriate and
provided that such action is not inconsistent with any provision of
this Agreement, the General Partner shall file amendments to and
restatements of the Certificate and do all the things to maintain
the Partnership as a limited partnership (or a partnership in which
the limited partners have limited liability) under the laws of the
State of Delaware and each other state or the District of Columbia
in which the Partnership may elect to do business or own property.
Subject to the terms of Section 6.4(a)(ii) hereof, the General
Partner shall not be required, before filing, to deliver or mail a
copy of the Certificate or any amendment thereto to any Limited
Partner. The General Partner shall use all reasonable efforts to
cause to be filed such other certificates or documents as may be
reasonable and necessary or appropriate for the formation,
continuation, qualification and operation of a limited partnership
(or a partnership in which the limited partners have limited
liability to the extent provided by applicable law) in the State of
Delaware and any other state or the District of Columbia in which
the Partnership may elect to do business or own property.
(b) Following the admission to the Partnership of any
Partner in accordance with this Agreement, the General Partner
shall take all steps necessary and appropriate under the Act to
amend the records of the Partnership and, if necessary, to prepare
as soon as practical an amendment of this Agreement (including an
amendment of the Ownership Schedule) and, if required by law, shall
prepare and file an amendment to the Certificate and may for this
purpose exercise the power of attorney granted pursuant to Section
10.1 hereof.
7.3 Restrictions on General Partner's Authority.
(a) The General Partner may not, without the Approval of
the requisite percentage of Limited Partners that would be required
to approve an amendment to authorize a particular action under
Section 12.1 hereof, take any such action in contravention of an
express prohibition contained in this Agreement.
(b) Without first obtaining the Majority Approval of (x)
in the case of any transaction described in clause (i) immediately
below, the Class B Limited Partners (excluding the Class B-TE
Common Limited Partners and the Class B-TE Preferred Limited
Partners) who would receive a special allocation of income as a
result of such transaction, and (y) in the case of the events
described in clauses (ii), (iii), (iv) and (v) immediately below,
the Class B Limited Partners, the General Partner shall not cause
or permit the Partnership to take any Major Action. Except as
provided in Section 7.3(c) hereof, the term "Major Action" means
any of the following actions or decisions:
(i) prior to the third anniversary of
the Effective Date, the sale,
exchange, transfer or other
disposition of any of the Original
Properties (including by way of
merger or consolidation with any
other Person); provided, however,
that for purposes of this Section
7.3(b)(i), the term "Major Action"
shall not include (A) any
disposition of the Original
Properties pursuant to Article 9
hereof, (B) a merger of the Drever
Partnerships into the Partnership or
any distribution in complete
liquidation of any or all of the
Drever Partnerships, in either case,
following the 15th Business Day
subsequent to the Effective Date and
(C) any other merger or
consolidation (I) which is subject
to treatment as a purchase
transaction for federal income tax
purposes or a contribution to the
capital of the Partnership under
Section 721 of the Code, (II) in
which the Partnership is the
surviving entity, for federal income
tax purposes, and continues to be
treated as a "partnership," and not,
as an association or a "publicly
traded partnership" taxable as a
corporation, for federal income tax
purposes, (III) where the terms of
such merger or consolidation do not
materially adversely affect the
interest of any Class B Limited
Partner, and (IV) the Class B
Limited Partners are given at least
15 Business Days prior written
notice of such merger or
consolidation and such notice
includes all documents that the
General Partner will execute in
connection with such merger or
consolidation;
(ii) the commencement by the Partnership
of a voluntary case under any
applicable Debtor Relief Law now or
hereafter in effect, the consent by
the Partnership to the entry of an
order for relief in an involuntary
case under any such law or to the
appointment of or the taking of
possession by a receiver,
liquidator, assignee, trustee,
custodian, sequestrator or other
similar agent under any applicable
Debtor Relief Laws for the
Partnership or for any substantial
part of its assets or property or
the making by the Partnership of any
general assignment for the benefit
of its creditors;
(iii) the taking of any action that makes
it impossible for the Partnership to
fulfill its stated purpose;
(iv) the General Partner withdraws from
the Partnership pursuant to Section 17-602
of the Act; provided, however, that
for purposes of this Agreement a
transfer of the General Partner's
Partnership Interest permitted by
Section 8.2 hereof shall not be
considered a withdrawal or cause the
General Partner to cease to be a
general partner under the Act; and
(v) prior to the tenth anniversary of
the Effective Date, effecting a
dissolution of the Partnership
pursuant to Section 9.1(b)(iv)
hereof.
(c) Provided that the Class B Limited Partners are given
at least 15 Business Days prior written notice and such notice
includes the then current drafts of all documents that the General
Partner will execute in connection therewith, the term "Major
Action" shall not include: (i) the sale, exchange, transfer or
other disposition (A) of an Original Property if no taxable income
or gain would be allocated to any Class B Limited Partners pursuant
to Section 704(c) of the Code, or (B) in the same Fiscal Year of
more than one of the Original Properties if such Original
Properties were held by the same Drever Partnership on the
Effective Date and if the taxable loss (which is not treated as a
loss from the sale or exchange of a capital asset) recognized upon
such sale, exchange, transfer or other disposition of any of such
properties and allocated (pursuant to Section 704(c) of the Code)
to each of the Class B Limited Partners who were formerly partners
in such Drever Partnership equals or exceeds the taxable income or
gain recognized upon such sale, exchange, transfer or other
disposition of such other Original Properties and allocated to each
of such Class B Limited Partners pursuant to Section 704(c) of the
Code; (ii) the exchange of one or more of the Original Properties
for other property or properties of like kind in which no taxable
gain is recognized to the Partnership by virtue of Section 1031 of
the Code; (iii) a contribution of one or more of the Original
Properties to an entity characterized for federal income tax
purposes as a partnership in which the Partnership holds an
interest and in which no taxable gain is recognized to the
Partnership by virtue of Section 721 of the Code; or (iv) a
contribution of one or more of the Original Properties to a
domestic entity if the Partnership is the single owner of such
entity and such entity would be disregarded as an entity separate
from its owner pursuant to Regulations Section 301.7701-3(b)(1).
(d) In the event that, after the third anniversary of
the Effective Date, the General Partner determines to sell,
exchange, transfer or otherwise dispose of any of the Original
Properties, including by way of merger, consolidation or other
combination with any Person (other than a merger, consolidation or
combination of any or all of the Drever Partnerships with the
Partnership), the General Partner shall provide to the Class B
Limited Partner who would receive a special allocation of income as
a result of such transaction 60 days written notice prior to the
consummation of any such transaction, which notice shall provide in
reasonable detail the nature of the transaction and a reasonable
estimate of the range of such anticipated, specially allocated
item(s) of income for each such Partner.
(e) The General Partner, in its capacity as General
Partner or otherwise, shall not, directly or indirectly through an
Affiliate or otherwise, cause or permit any Drever Partnership to
undertake any transaction or engage in any activity which, if such
transaction or activity were undertaken (or permitted to occur)
directly by the Partnership, would constitute a breach of this
Agreement.
7.4 Special Committee.
(a) The Partnership shall establish the Special
Committee on the Effective Date. The Special Committee shall
terminate and all references in this Agreement to the Special
Committee shall be rendered inoperative on the first date on which
the Percentage Interest of the Class B Limited Partners is reduced
below 33.33%.
(b) The General Partner hereby appoints Mark S.
Dillinger and Marshall B. Edwards to serve on the Special Committee
commencing with the Effective Date. The General Partner shall
appoint Special Committee members, from time to time, to fill any
Special Committee member vacancy other than a Class B Special
Committee Member vacancy. The General Partner may from time to
time remove, with or without cause and in its sole and absolute
discretion, any Special Committee member, other than a Class B
Special Committee Member which such Class B Special Committee
Member may only be removed in accordance with Section 7.4(c)
hereof.
(c) The initial Class B Special Committee Members shall
be Michael E. Masterson and Bryan A. Levy. A Class B Special
Committee Member shall serve on the Special Committee until such
member (i) suffers an Incapacity, (ii) determines to resign from
the Special Committee, or (iii) is removed by a vote of a Majority
in Interest of the Class B Limited Partners. Any Class B Special
Committee Member vacancy shall be filled by a vote of a Majority in
Interest of the Class B Limited Partners.
(d) No member of the Special Committee shall receive any
compensation for serving on the Special Committee.
(e) The Special Committee shall meet, from time to time,
as deemed necessary or advisable by its members, in person or
telephonically, to Approve or disapprove of any matter subject to
the review of the Special Committee as specified in this Agreement.
For purposes of the Approval of the Special Committee required by
Section 7.6 hereof, within the 60 days preceding or following the
first day of a Fiscal Year, the Special Committee shall meet, the
General Partner shall orally describe the Partnership's plans with
respect to the matters described in Sections 7.6(a) and (b) hereof,
and the members shall review and Approve such matters. With
respect to any other matter that requires the Approval of the
Special Committee, the verbal or written approval of the Class B
Special Committee Members shall not be unreasonably withheld. A
meeting of the Special Committee may be called by the delivery of
notice by any two Special Committee members to the other two
Special Committee members.
(f) The General Partner shall furnish, on a timely
basis, the Special Committee members with copies of all relevant
documents, schedules, reports, analyses, or any other information
that the members may deem necessary or advisable to consider in
connection with rendering a competent review of any matter subject
to the review of the Special Committee.
7.5 Reimbursement of the General Partner.
(a) Except for the reimbursement of expenses pursuant to
this Section 7.5 and Section 7.8 hereof, the General Partner shall
not be compensated for its services as general partner of the
Partnership.
(b) The General Partner shall be reimbursed on a monthly
basis, or such other basis as the General Partner may determine in
its sole and absolute discretion, for all expenses it incurs
directly relating solely to the ownership and operation of, or for
the benefit of, the Partnership, including, without limitation,
Federal and State securities law and other legal and accounting
compliance of the Partnership, and Federal and State and any other
applicable tax and regulatory compliance of the Partnership. Such
reimbursements shall be in addition to any reimbursement to the
General Partner as a result of any indemnification pursuant to
Section 7.7 hereof.
7.6 Contracts with Affiliates.
(a) Subject to the Approval of the Special Committee,
the Partnership may lend or contribute funds or other assets to the
Persons in which it has an equity investment and such Persons may
borrow funds from the Partnership, on terms and conditions
established in the sole and absolute discretion of the General
Partner. The foregoing authority shall not create any right or
benefit in favor of any Person.
(b) Subject to the Approval of the Special Committee,
the Partnership may transfer assets to joint ventures, other
partnerships, corporations or other business entities in which it
is or thereby becomes a participant upon such terms and subject to
such conditions consistent with this Agreement, the Act and
applicable law as the General Partner, in its sole and absolute
discretion, believes are advisable.
(c) Contracts between Affiliates of the Partnership and
the Partnership shall be on the same terms and conditions as
contracts between the Partnership and third parties.
(d) The General Partner is authorized to enter into and
comply with the provisions of the Agreement of General Partnership
of Walden-WDOP Partners of even date herewith. The granting of
consent or approval of any matter that requires the consent or
approval of the Partnership in its capacity as a partner of the
Agreement of General Partnership of Walden-WDOP Partners shall be
subject to the review and Approval of the Special Committee.
7.7 Indemnification.
(a) The Partnership shall indemnify each Indemnitee from
and against any and all losses, claims, damages, liabilities, joint
or several, expenses (including without limitation attorneys fees
and other legal fees and expenses), judgments, fines, settlements,
and other amounts arising from 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 such Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise;
provided, however, that the Partnership shall not indemnify an
Indemnitee (i) for fraud, intentional misconduct, knowing violation
of the law or gross negligence, or (ii) for any transaction for
which such Indemnitee received a personal benefit in violation or
breach of any provision of this Agreement. It is the intention of
this Section 7.7(a) that the Partnership indemnify each Indemnitee
to the fullest extent permitted under the Act. 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 of an Indemnitee or upon a plea of
nolo contendere or its equivalent by an Indemnitee, or an entry of
an order of probation against Indemnitee prior to judgment, creates
a rebuttable presumption that such Indemnitee acted in a manner
contrary to that specified in this Section 7.7(a) with respect to
the subject matter of such proceeding. Any indemnification
pursuant to this Section 7.7 shall be made only out of the assets
of the Partnership, and neither the General Partner nor any Limited
Partner shall have any obligation to contribute to the capital of
the Partnership or otherwise provide funds, to enable the
Partnership to fund its obligations under this Section 7.7.
(b) 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(a) has been met, and (ii) a written
undertaking by or on behalf of the Indemnitee to repay the amount
if it shall ultimately be determined that the standard of conduct
has not been met.
(c) The indemnification provided by this Section 7.7
shall be in addition to any other rights to which an Indemnitee or
any other Person may be entitled under any agreement, pursuant to
any vote of the Partners, as a matter of law or otherwise, and
shall continue as to an Indemnitee who has ceased to serve in such
capacity unless otherwise provided in a written agreement with such
Indemnitee or in the writing pursuant to which such Indemnitee is
indemnified.
(d) Any liabilities that an Indemnitee incurs as a
result of acting on behalf of the Partnership or the General
Partner (whether as a fiduciary or otherwise) in connection with
the operation, administration or maintenance of an employee benefit
plan or any related trust or funding mechanism (whether such
liabilities are in the form of excise taxes assessed by the IRS,
penalties assessed by the Department of Labor, restitutions to such
a plan or trust or other funding mechanism or to a participant or
beneficiary of such plan, trust or other funding mechanism, or
otherwise) shall be treated as liabilities or judgments or fines
under this Section 7.7 unless such liabilities arise as a result of
(i) such Indemnitee's fraud, intentional misconduct, knowing
violation of the law or gross negligence, or (ii) any transaction
in which such Indemnitee received a personal benefit in violation
or breach of any provision of this Agreement or applicable law.
(e) In no event shall any Partner be liable to any
Indemnitee by reason of the indemnification provisions set forth in
this Agreement.
(f) 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.
(g) The provisions of this Section 7.7 are for the
benefit of the Indemnitees, their heirs, successors, assigns and
administrators and shall not be deemed to create any rights for the
benefit of any other Persons. Any amendment, modification or
repeal of this Section 7.7 or any provision hereof shall be
prospective only and shall not in any way affect the rights of any
Indemnitee under this Section 7.7 as in effect immediately prior to
such amendment, modification or repeal with respect to claims
arising from or relating to matters occurring in whole or in part,
prior to such amendment, modification or repeal, regardless of when
such claims may arise or be asserted.
7.8 Liability of the General Partner.
(a) Notwithstanding anything to the contrary set forth
in this Agreement, the General Partner shall not be liable for
damages to the Partnership, any Partners or any Assignees for
losses sustained or liabilities incurred or benefits not derived as
a result of errors in judgment or of any act or omission if the
General Partner acted in good faith and without gross negligence.
(b) The Limited Partners expressly acknowledge that the
General Partner is acting on behalf of the Partnership and the
Partners, that, except as expressly provided herein, the General
Partner is under no obligation to consider the separate interests
of the Limited Partners alone in deciding whether to cause the
Partnership to take (or decline to take) any actions, and that the
General Partner shall not be liable for damages to the Partnership
or any Partner for losses sustained, liabilities incurred, or
benefits not derived by Limited Partners in connection with such
decisions, so long as the General Partner has acted in good faith
and with fair dealing and without gross negligence.
(c) The General Partner may exercise any of the powers
granted to it by this Agreement and perform any of the duties
imposed upon it hereunder either directly or by or through its
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 and without gross negligence.
(d) Any amendment, modification or repeal of this
Section 7.8 or any provision hereof shall be prospective only and
shall not in any way affect the limitations on the General
Partner's 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.
7.9 Other Matters Concerning the General Partner.
(a) The General Partner may rely and shall be protected
in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture, or other paper or
document believed by it in good faith to be genuine and to have
been signed or presented by the proper party or parties.
(b) The General Partner may consult with legal counsel,
accountants, appraisers, management consults, investment bankers,
architects, engineers, environmental consultants and other
consultants and advisers selected by it and any act taken or
omitted to be taken in reliance upon the opinion of such Persons as
to matters that the General Partner reasonably believes to be
within such Person's professional or expert competence shall be
presumed to have been done or omitted in good faith and in
accordance with such opinion.
(c) The General Partner shall have the right, in respect
of any of its powers or obligations hereunder, to act through any
of its duly authorized officers and a duly appointed attorney or
attorneys-in-fact. Each such attorney shall, to the extent
provided by the General Partner in the power of attorney, have full
power and authority to do and perform all and every act and duty
which is permitted or required to be done by the General Partner
hereunder.
(d) Notwithstanding any other provisions of this
Agreement or the Act, any action of the General Partner on behalf
of the Partnership or any decision of the General Partner to
refrain from acting on behalf of the Partnership, undertaken in the
good faith belief that such action or omission is necessary or
advisable in order (i) to protect the ability of the Company to
continue to qualify as a REIT or (ii) to allow the Company to avoid
incurring any liability for 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.
ARTICLE 8
TRANSFERS OF INTERESTS IN AND
WITHDRAWALS FROM THE PARTNERSHIP
8.1 Transfer.
(a) The term "transfer," when used in this Article 8
with respect to a Partnership Interest, shall be deemed to refer to
a transaction by which a Partner purports to assign all or any part
of its Partnership Interest to another Person, and includes a sale,
assignment, gift, pledge, encumbrance, hypothecation, mortgage,
exchange or any other disposition by law or otherwise. The term
"transfer" when used in this Article 8 does not include any
disposition of a Class B Limited Partner Interest pursuant to
Article 11 hereof.
(b) No Partnership Interest shall be transferred, in
whole or in part, except in accordance with the terms and
conditions set forth in this Article 8. Any transfer or purported
transfer of a Partnership Interest not made in accordance with this
Article 8 shall be null and void.
8.2 Transfer of General Partner's Partnership Interest. The
General Partner shall not transfer all or any part of its General
Partner Interest, whether now owned or hereafter acquired, except
in accordance with the terms of this Section 8.2. The General
Partner may transfer its General Partner Interest (a) without the
Approval of any other Partner if such transfer is made to (i) an
Affiliate of the General Partner, (ii) any Person with which the
General Partner merges or consolidates or effects some other
business combination, or (iii) any Person that acquires all or
substantially all of the assets of the General Partner or (b) with
the Approval of a Majority in Interest of the Limited Partners of
each Class, which the Limited Partners may, in their sole
discretion, grant or deny. To the extent that both the General
Partner that transfers its General Partner Interest in compliance
with this Section 8.2 and the transferee of such interest express
their intent in writing that the transferee become a Substituted
Partner in respect of the transferred General Partner Interest,
each Limited Partner hereby consents to such substitution.
8.3 Limited Partners' Rights to Transfer.
(a) The transfer of all or any portion of a Partnership
Interest by a Limited Partner shall not require the consent of any
other Limited Partner. No Limited Partner shall have the right to
transfer all or any portion of its Partnership Interest without the
prior written consent of the General Partner; provided, however,
that a Limited Partner (other than Class B-TE Common Limited
Partners and Class B-TE Preferred Limited Partners) shall have the
right to transfer (i) all or any portion of its Partnership
Interest to an Affiliate of such Limited Partner without the
consent of the General Partner and (ii) all or a portion of its
Partnership Interest with a value equal to at least $50,000 (as
determined on a basis consistent with the principles set forth in
Section 11.5(e) hereof) to any other Person with the prior written
consent of the General Partner, which consent may not be
unreasonably withheld.
(b) If a Limited Partner is subject to Incapacity, the
executor, administrator, trustee, committee, guardian, conservator
or receiver of such Limited Partner's estate shall have all the
rights of a Limited Partner, but no more rights than those enjoyed
by other Limited Partners, for the purpose of settling or managing
the estate and such power as the incapacitated Limited Partner
possessed to transfer all or any part of its Partnership Interest.
The Incapacity of a Limited Partner, in and of itself, shall not
dissolve or terminate the Partnership.
(c) Notwithstanding any provision herein to the
contrary, no transfer by a Limited Partner of such Partner's
Partnership Interest may be made to any Person if in the opinion of
legal counsel for the Partnership, it would result in (i) the
Partnership being treated, for federal income tax purposes, as an
association taxable as a corporation or a "publicly traded
partnership" within the meaning of Section 7704(b) of the Code or
(ii) the violation of any applicable law.
8.4 Substituted Limited Partners.
(a) Upon the transfer of a Limited Partner Interest
permitted by this Article 8, the transferee shall not become a
Substituted Partner unless and until (i) the transferee on or prior
to the date of the transfer agrees in writing to become a Partner
in the Partnership bound by all of the terms and conditions of this
Agreement, (ii) the transferee pays all reasonable expenses of the
Partnership incurred in connection with such substitution and
assumes all obligations of the transferring Partner under this
Agreement, (iii) the transferring Partner and its transferee
execute and deliver such instruments and agreements as counsel for
the Partnership deems reasonably necessary or desirable to effect
such substitution, and (iv) the General Partner consents to such
substitution which consent shall not be unreasonably withheld.
(b) A transferee who has been admitted as a Substituted
Partner in accordance with this Article 8 shall have all the rights
and powers and be subject to all the restrictions and liabilities
of a Limited Partner under this Agreement.
(c) Upon the admission of a Substituted Partner, the
General Partner shall amend the Ownership Schedule to reflect the
Capital Account and Percentage Interest of such Substituted
Partner and to eliminate or adjust, if necessary, the name, address
and interest of the predecessor of such Substituted Partner.
8.5 Assignees. If the transferee of a Partnership Interest
has not become a Substituted Partner pursuant to the terms of this
Article 8, such transferee shall be considered an Assignee for
purposes of this Agreement. To the extent so assigned, an Assignee
shall be entitled to receive distributions from the Partnership and
the share of Profits, Losses, Recapture Income, and any other items
of income, gain, loss, deduction and credit of the Partnership
attributable to the Partnership Interest assigned to such
transferee but shall not be deemed to be a holder of a Partnership
Interest for any other purpose under this Agreement, and shall not
be entitled to vote such Partnership Interest or Approve any matter
presented to the Partners for a vote or Approval (and the Partner
who assigned the Partnership Interest to the Assignee shall remain
entitled to vote such Partnership Interest or Approve but shall not
have any other rights under this Agreement with respect to such
Partnership Interest). In the event any such transferee desires to
make a further assignment of any such Partnership Interest, such
transferee shall be subject to all the provisions of this Article
8 to the same extent and in the same manner as any Partner desiring
to make an assignment of Partnership Interests.
8.6 General Provisions.
(a) No Limited Partner may withdraw from the Partnership
other than as a result of a permitted transfer of all of such
Limited Partner's Partnership Interest in accordance with this
Article 8.
(b) Any Limited Partner who shall transfer all of his
Partnership Interest in a transfer permitted pursuant to this
Article 8 shall cease to be a Limited Partner upon the admission of
all Assignees of such Partnership Interest as Substituted Limited
Partners.
(c) Other than with respect to Assignees under Section
8.5 hereof, transfers pursuant to this Article 8 may only be made
on the first or last day of a calendar month, unless the General
Partner otherwise agrees.
(d) If any Partnership Interest is transferred or
assigned in compliance with the provisions of this Article 8 or
transferred pursuant to Article 11 hereof, on any day other than
the first day of a Fiscal Year, then Profits, Losses, each item
thereof and all other items attributable to such Partnership
Interest for such Fiscal Year shall be allocated to the transferor
Partner and to the transferee Partner, by taking into account their
varying interests during the Fiscal Year in accordance with Section
706(d) of the Code, using any permissible method selected by the
General Partner, in its sole discretion. Solely for purposes of
making such allocations, for assignments that occur on or prior to
the 15th day of a calendar month each of such items for the
calendar month in which the assignment occurs shall be allocated to
the assignor, and for assignments that occur after the 15th day of
a calendar month each of such items for the calendar month in which
the assignment occurs shall be allocated to the Assignee. All
distributions of Available Cash attributable to such Partnership
Interest with respect to which the Partnership Record Date is
before the date of such transfer or assignment shall be made to the
transferor Partner and all distributions of Available Cash
thereafter attributable to such Partnership Interest shall be made
to the transferee Partner.
8.7 Admission of Successor General Partner. A successor to
all of the General Partner Interest pursuant to Section 8.2 hereof
shall be admitted to the Partnership as the Substituted General
Partner, effective as of the date of, and immediately prior to the
time of, such transfer. The successor General Partner shall carry
on the business of the Partnership without dissolution. The
admission of the successor General Partner shall be subject to such
successor's execution and delivery of a written agreement accepting
all of the terms and conditions of this Agreement, together with
such other documents or instruments as may be required by the Act
to effect the admission of the new General Partner to the
Partnership, including a certificate of amendment to this Agreement
and/or an amended Certificate. In the event that an admission
occurs on any day other than the first day of a Fiscal Year, all
items attributable to the General Partner Interest for such Fiscal
Year shall be allocated between the transferring General Partner
and such successor as provided in Section 8.6(d) hereof.
8.8 Optional Redemption Right. At any time following the
tenth anniversary of the Effective Date, the Partnership shall have
the right to redeem, on any Partnership Preferred Record Date, all
or any portion of the Class B Preferred Units (the "Redemption
Interest") for cash equal to the sum of (a) the product of (i) the
number of Preferred Units and (ii) $25.00 and (b) the portion of
the Unpaid Preferred Distribution Account relating to such
Redemption Interest (the "Redemption Price"). Any redemptions
pursuant to this Section shall be proportionate to all Class B
Preferred Limited Partners. If the Partnership desires to exercise
its redemption right under this Section, the Partnership shall send
a written notice to all Class B Preferred Limited Partners
specifying the Redemption Interest, the Redemption Price and the
Partnership Preferred Record Date, which is not earlier than 20
Business Days from the date of such notice (the "Redemption Closing
Date"), for the closing of such Redemption (the "Redemption
Closing") and providing each Class B Preferred Limited Partner with
an option to elect to receive, in lieu of the Redemption Price and
in accordance with the terms of Article 11 hereof, the Preferred
Exchange Consideration that such Partner would be entitled to
receive pursuant to Section 11.1(b) if the Closing Date was the
same day as the Redemption Closing Date. The Redemption Closing
shall occur on the Redemption Closing Date at the Partnership's
principal office or at such other place as may be agreed. At the
Redemption Closing, each Class B Preferred Limited Partner shall
(i) convey the Redemption Interest to the Partnership, and (ii)
warrant that it is the owner of the Redemption Interest conveyed,
free and clear of any liens, and that it has the power and
authority to convey such Redemption Interest, and the Partnership
shall pay the Redemption Price. Upon payment in full of such
amounts the Redemption Interest shall be deemed to have been
redeemed and canceled.
ARTICLE 9
DISSOLUTION
9.1 Dissolution Events.
(a) Except as set forth in this Article 9, no Partner
shall have the right to dissolve the Partnership. The Partnership
shall not be dissolved by the admission of Substituted Limited
Partners or Additional Limited Partners, by the admission of a
successor General Partner in accordance with the terms of this
Agreement. Upon the transfer of the Partnership Interest of the
General Partner under Section 8.2 hereof, any successor General
Partner shall continue the business of the Partnership.
(b) The Partnership shall dissolve, and its affairs
shall be wound up, upon the first to occur of any of the following
("Liquidating Event"):
(i) the expiration of its stated term as
provided in Section 2.10(a) hereof;
(ii) an event of withdrawal of the
General Partner, as defined in the
Act;
(iii) an election to dissolve the
Partnership is made by the General
Partner with the Approval of all
Limited Partners;
(iv) on or after the tenth anniversary of
the Effective Date and 20 Business
Days after the General Partner has
given the Limited Partners a notice
of intent to dissolve, an election
to dissolve the Partnership is made
by the General Partner, in its sole
and absolute discretion;
(v) the entry of a decree of judicial
dissolution of the Partnership
pursuant to Section 17-802 of the Act or
any successor provision;
(vi) the sale or disposition of all or
substantially all of the assets and
properties of the Partnership
pursuant to the terms of this
Agreement;
(vii) the Bankruptcy of the General Partner; or
(viii) a change in the Code, Regulations
and/or administrative rulings of the
IRS to the effect that ownership of
Partnership Interests by the General
Partner, WDN Properties or any
Affiliates thereof cause or likely
will cause the Company to fail to
qualify as a REIT.
(c) Election to Continue the Partnership. Following a
Liquidating Event described in Section 9.1(b)(ii) or (vii) hereof,
the business of the Partnership shall be continued with the
Partnership properties and assets, and such properties and assets
shall not be liquidated, provided the Partnership is continued as
set forth in this Section 9.1(c). If the Partnership is so
dissolved, the Partnership and its business shall be continued
pursuant to this Section 9.1(c) if, within 90 days after the
occurrence of such Liquidating Event, a Majority in Interest of the
remaining Partners elect to continue the Partnership and elect a
person or legal entity to be admitted to the Partnership as
successor General Partner. Upon the satisfaction of all conditions
necessary to the continuation of the Partnership, including the
admission of a successor General Partner and the amendment of the
Partnership's Certificate (if required by applicable law), the
Partnership shall be continued without any further Approval of any
Partner, in which case the Partnership shall continue to conduct
the business of the Partnership with the Partnership's properties
and assets in accordance with, and the Partnership and interests of
the Partners shall continue to be governed by, the terms and
provisions of this Agreement.
9.2 Winding Up.
(a) Upon the occurrence of a Liquidating Event (other
than those described in Section 9.1(b)(ii) or (vii) hereof) or upon
the expiration of the ninety (90) day period for continuation of
the Partnership set forth in Section 9.1(c) hereof with respect to
Liquidating Events described in Section 9.1(b)(ii) or (vii) hereof
if no election to continue the Partnership has occurred, the
Partnership shall continue solely for the purposes of winding up
its affairs in an orderly manner, liquidating its assets, and
satisfying the claims of its creditors and Partners. No Partner
shall take any action that is inconsistent with, or not necessary
to or appropriate for, the winding up of the Partnership's business
and affairs. The General Partner or, in the event there is no
remaining General Partner, any Person elected by a Majority in
Interest of the Limited Partners (the General Partner or such other
Person being referred to herein as the "Liquidator") shall be
responsible for overseeing the winding up and dissolution of the
Partnership and shall take full account of the Partnership's
liabilities and property and the Partnership property shall be
liquidated as promptly as is consistent with obtaining the fair
value thereof, and the proceeds therefrom 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; and
(iii) The balance, if any, to and among
the Partners pro rata in accordance
with the positive balances of their
Capital Accounts, after giving
effect to all contributions,
distributions, and allocations for
all periods (including, if
applicable, the allocation of Profit
and Loss realized from or in
connection with the Liquidating
Event and the winding up of the
Partnership under this Section 9.2).
The General Partner shall not receive any compensation for any
services performed pursuant to this Article 9.
(b) Notwithstanding the provisions of Section 9.2(a)
hereof that require liquidation of the assets of the Partnership,
but subject to the order of priorities set forth therein, if prior
to or upon dissolution of the Partnership the Liquidator determines
that an immediate sale of part or all of the Partnership's assets
would be impractical or would cause undue loss to the Partners, the
Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any assets except those
necessary to satisfy liabilities of the Partnership (including to
those Partners as creditors) and/or, with the Approval of a
Majority in Interest of the Partners, distribute to the Partners in
lieu of cash, as tenants in common and in accordance with the
provisions of Section 9.2(a) hereof, undivided interests in such
Partnership assets as the Liquidator deems not suitable for
liquidation. Any such distributions in kind shall be made only if
a Majority in Interest of all Classes of the Partners Approve that
distribution. The Liquidator shall determine the fair market value
of any property distributed in kind using such reasonable method of
valuation as it may adopt. In the event that assets of the
Partnership are distributed in kind to the Partners, adjustments to
the Partners' Capital Accounts for purposes of determining the
amount of such assets distributable to each of the Partners shall
be made by taking into account the hypothetical gain or loss that
would have been recognized had the assets been sold for their fair
market value on the date of the distribution in kind.
(c) In the discretion of the Liquidator, a pro rata
portion of the distributions that would otherwise be made to the
General Partner and Limited Partners pursuant to this Article 9 may
be:
(i) distributed to a trust established
for the benefit of the Partners for
the purposes of liquidating
Partnership assets, collecting
amounts owed to the Partnership, and
paying any contingent or unforeseen
liabilities or obligations of the
Partnership or the Partners arising
out of or in connection with the
Partnership. The assets of any such
trust shall be distributed to its
beneficiaries as soon as
practicable, 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 Partners who
are such beneficiaries or from whom
the beneficiaries derived such
status pursuant to this Agreement;
or
(ii) withheld or escrowed to provide a
reasonable reserve for Partnership
liabilities (contingent or
otherwise) and to reflect the
unrealized portion of any
installment obligations owed to the
Partnership, provided that such
withheld or escrowed amounts shall
be distributed to the Partners in
the manner and order of priority set
forth in Section 9.2(a) as soon as
practicable.
9.3 Timing; Negative Capital Accounts. In the event that the
Partnership is "liquidated" upon the occurrence of Liquidating
Event within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g),
distributions shall be made pursuant to this
Article 9 to the General Partner and Limited Partners who have
positive balances in their Capital Accounts in compliance with
Regulations Section 1.704-1(b)(2)(ii)(b)(2). No Partner shall be
liable to the Partnership or to any other Partner for any negative
balance outstanding in each such Partner's Capital Account, whether
such negative Capital Account results from the allocation of Losses
or other items of deduction and loss to such Partner or from
distributions to such Partner, and such Partner shall not have any
obligation to make any contribution to the capital of the
Partnership with respect to such deficit and such deficit shall not
be considered a debt owed to the Partnership or, except as required
by the Act with respect to a deficit of the General Partner, to any
other Person for any purpose whatsoever; provided, however, in the
case of a Class B Common Limited Partner who has agreed in writing
on the Effective Date to be expressly subject to the provisions of
this Section 9.3, if such Partner has a deficit balance in his
Capital Account following the liquidation of his interest in the
Partnership, as determined after taking into account all Capital
Account adjustments for the Partnership taxable year during which
such liquidation occurs, such Partner shall be unconditionally
required to restore the amount of such deficit balance to the
Partnership, but only to the extent of the aggregate amount of
depreciation specially allocated to such Partner pursuant to
Section 5.4(e) hereof, no later than the later of (i) the taxable
year during which such liquidation occurs or (ii) the 90th day
following such liquidation.
9.4 Deemed Distribution and Recontribution. Notwithstanding
any other provision of this Article 9, in the event the Partnership
is liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g)
but no Liquidating Event has occurred, the
Partnership's property shall not be liquidated, the Partnership's
liabilities shall not be paid or discharged, and the Partnership's
affairs shall not be wound up. Instead, for federal income tax
purposes and for purposes of maintaining Capital Accounts pursuant
to this Agreement, the Partnership shall be deemed to have
distributed the property in kind to the General Partner and Limited
Partners, who shall be deemed to have assumed and taken such
property subject to all Partnership liabilities, all in accordance
with their respective Capital Accounts. Immediately thereafter,
the General Partner and Limited Partners shall be deemed to have
recontributed the Partnership property in kind to the Partnership,
which shall be deemed to have assumed and taken such property
subject to all such liabilities.
9.5 Rights of Partners. Except as otherwise provided in this
Agreement, each Partner shall look solely to the assets of the
Partnership for the return of his Capital Contributions and shall
have no right or power to demand or receive property other than
cash from the Partnership. Except as otherwise provided in this
Agreement, no Partner shall have priority over any other Partner as
to the return of his Capital Contributions, distributions, or
allocations.
9.6 Notice of Dissolution. In the event a Liquidating Event
occurs or an event occurs that would, but for an election or vote
by one or more Partners required pursuant to Section 9.1 hereof,
result in a dissolution of the Partnership, the General Partner
shall, within 30 days thereafter, provide written notice thereof to
each of the Partners.
9.7 Termination of Partnership and Cancellation of
Certificate of Limited Partnership. Upon the completion of the
liquidation of the Partnership cash and property as provided in
Section 9.2 hereof, the Partnership shall be terminated, a
certificate of cancellation shall be filed, and all qualifications
of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware shall be canceled
and such other actions as may be necessary to terminate the
Partnership shall be taken.
9.8 Reasonable Time for Winding-Up. A reasonable time shall
be allowed for the orderly winding-up of the business and affairs
of the Partnership and the liquidation of its assets pursuant to
Section 9.2 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.
9.9 Waiver of Partition. Each Partner hereby waives any
right to partition of the Partnership property.
ARTICLE 10
POWER OF ATTORNEY
10.1 Power of Attorney.
(a) Each Limited Partner and each Assignee hereby
constitutes and appoints the General Partner, any Liquidator, and
authorized officers and attorneys-in-fact of each, and each of
those acting singly, in each case with full power of substitution,
as its true and lawful agent and attorney-in-fact, with full power
and authority in its name, place and stead to, and provided that
any action taken pursuant to the power granted to any such Person
pursuant to this Section 10.1 is not inconsistent with any other
provision of this Agreement,:
(i) execute, swear to, seal,
acknowledge, deliver, file and
record in the appropriate public
offices (A) all certificates,
documents and other instruments
(including, without limitation, this
Agreement and the Certificate and
all amendments or restatements
thereof) that the General Partner or
the Liquidator deems appropriate or
necessary to form, qualify or
continue the existence or
qualification of the Partnership as
a limited partnership (or a
partnership in which the limited
partners have limited liability to
the extent provided by applicable
law) in the State of Delaware and in
all other jurisdictions in which the
Partnership may or plans to conduct
business or own property; (B) all
instruments that the General Partner
or Liquidator deems appropriate or
necessary to reflect any amendment,
change, modification or restatement
of this Agreement as permitted in
and in accordance with this
Agreement; (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, Articles 8 or 9
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, seal, acknowledge
and file all ballots, consents,
approvals, waivers, certificates and
other instruments appropriate or
necessary, in the sole and absolute
discretion of the General Partner or
Liquidator, to evidence, confirm or
ratify any vote, consent, approval,
agreement or other action which is
made or given by the Partners
hereunder or is consistent with the
terms of this Agreement or
appropriate or necessary, in the
sole discretion of the General
Partner or Liquidator, to effectuate
the terms or intent of this
Agreement.
(b) Nothing contained herein shall be construed as
authorizing the General Partner or Liquidator to amend this
Agreement except in accordance with the terms of Section 12.1
hereof or as may be otherwise expressly provided for in this
Agreement.
10.2 Duration of Power. The power of attorney granted herein
is hereby declared to be irrevocable and a power coupled with an
interest in recognition of the fact that each of the Partners will
be relying upon the power of the General Partner or Liquidator to
act as contemplated by this Agreement in any filing or other action
by it on behalf of the Partnership, and it shall survive and not be
affected by the subsequent Incapacity of any Limited Partner or
Assignee and the transfer of all or any portion of such Limited
Partner's or Assignee's Partnership Interest, shall survive the
Incapacity of the Limited Partner, 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 action taken by the General Partner or
Liquidator, acting in good faith pursuant to such power of
attorney; and each such Limited Partner or Assignee hereby waives
any and all defenses that may be available to contest, negate or
disaffirm the action of the General Partner or Liquidator, taken in
good faith under such power of attorney. Each Limited Partner or
Assignee shall execute and deliver to the General Partner or the
Liquidator, within 15 days after receipt of the General Partner's
or Liquidator's request therefor, such further designation, powers
of attorney and other instruments as the General Partner or the
Liquidator, as the case may be, reasonably deems necessary to
effectuate this Agreement and the purposes of the Partnership.
ARTICLE 11
EXCHANGE OF CLASS B COMMON AND PREFERRED UNITS
11.1 Right of the Class B Limited Partners to Exchange Units.
(a) At any time, and from time to time, from and after
the first anniversary of the Effective Date, upon the terms and
subject to the conditions set forth in this Article, each Class B
Common Limited Partner shall have the right to exchange with the
Company (or with any Person that the Company may designate,
including, without limitation, WDN Properties) all or any of its
Class B Common Units for the number of REIT Common Shares
determined in accordance with Section 11.3 below (the "Common
Exchange Consideration").
(b) At any time, and from time to time, from and after
the first anniversary of the Effective Date, upon the terms and
subject to the conditions set forth in this Article, each Class B
Preferred Limited Partner shall have the right to exchange with the
Company (or with any Person that the Company may designate,
including, without limitation, WDN Properties) all or any of its
Class B Preferred Units for (i) the number of REIT Preferred Shares
determined in accordance with Section 11.3 below and (ii) three and
one-third (3 ) Series B Warrants (the "Preferred Exchange
Consideration").
(c) If any Class B Limited Partner elects to exchange
less than all of its respective Class B Common Units or its Class
B Preferred Units, such Class B Limited Partner must exchange at
least 100 Class B Common Units or 100 Class B Preferred Units. In
the event that a Class B Limited Partner shall exercise its option
to cause such exchange, the Company shall issue and deliver to the
Class B Limited Partner in exchange for its Class B Common Units or
Class B Preferred Units such number of REIT Common Shares or REIT
Preferred Shares and Series B Warrants, as applicable, as
determined in accordance with Section 11.3 hereof registered in
such names as such Class B Limited Partner may designate in
accordance with Section 11.8.
11.2 Exchange of Units Held By Class B-TE Limited Partners.
(a) No more than 90 days and not less than 30 days
preceding the first anniversary of the Effective Date, the General
Partner shall give notice that upon the first anniversary of the
Effective Date the General Partner shall take such actions as may
be necessary the effectuate the exchange of, (i) all Class B Common
Units held by Class B-TE Common Limited Partners into the right to
receive the Common Exchange Consideration registered in such names
as such Class B-TE Common Limited Partner may designate in
accordance with Section 11.8, and (ii) all Class B Preferred Units
held by Class B-TE Preferred Limited Partners into the right to
receive the Preferred Exchange Consideration registered in such
names as such Class B-TE Preferred Limited Partner may designate in
accordance with Section 11.8.
(b) Upon the occurrence of a Liquidating Event (other
than those described in Section 9.1(b)(ii) or (vii) hereof) or upon
the expiration of the ninety (90) day period for continuation of
the Partnership set forth in Section 9.1(c) hereof with respect to
Liquidating Events described in Section 9.1(b)(ii) or (vii) hereof
if no election to continue the Partnership has occurred, upon the
terms and subject to the conditions set forth in this Article, each
Class B Limited Partner shall be required to exchange all of its
Class B Common Units and all of its Class B Preferred Units on the
Closing Date (as hereinafter defined) for Common Exchange
Consideration or Preferred Exchange Consideration registered in
such names as such Class B Limited Partner may designate in
accordance with Section 11.8.
11.3 REIT Shares Issuable Upon Exchange.
(a) As of the Effective Date, (i) the Class B Common
Units shall be exchangeable for REIT Common Shares on the basis of
one Class B Common Unit for one REIT Common Share (subject to
adjustment as provided in Section 11.5 hereof) and (ii) the Class
B Preferred Units shall be exchangeable for (A) REIT Preferred
Shares on the basis of one Class B Preferred Unit for one REIT
Preferred Share (subject to adjustment as provided in Section 11.5
hereof) and (B) Series B Warrants on the basis of one Class B
Preferred Unit for three and one-third (3 ) Series B Warrants.
(b) In addition to Section 11.3(a), upon the exchange of
any Class B Common Unit pursuant to Sections 11.1 or 11.2 above, to
the extent that an amount equal to any Unpaid Common Distribution
Account existing as of the Closing Date of such exchange and
attributable to the Class B Common Unit being exchanged is not
distributed by the Partnership as required by Section 5.1(b), any
such unpaid amount (the "Proportionate Prior Unpaid Class B Common
Distributions") shall be purchased by the Company from the holder
of such Unit as follows: (i) to the extent a registration statement
with respect to the REIT Common Shares acquired (or which may be
acquired) upon exchange of the Class B Common Unit has been filed
by the Company with the Securities and Exchange Commission and is
effective on the Closing Date of such exchange of Class B Common
Unit, the Company may, at its sole option, elect to pay such
purchase price in cash or by the issuance by the Company of
additional REIT Common Shares (the "Additional Common Shares") to
the Class B Common Limited Partner in an amount equal to the
quotient of (x) the Proportionate Prior Unpaid Class B Common
Distributions divided by (y) the current market price of a REIT
Common Share (as determined pursuant to Section 11.5(e) hereof) as
of the Closing Date of such exchange, or (ii) if no such
registration statement has been declared and remains effective on
the Closing Date of such exchange, the Company shall pay such
purchase price in cash on the Closing Date of such exchange.
(c) In addition to Section 11.3(a), upon the exchange of
any Class B Preferred Unit pursuant to Sections 11.1 or 11.2 above,
to the extent that an amount equal to any Unpaid Preferred
Distribution Account existing as of the Closing Date of such
exchange and attributable to the Class B Preferred Unit being
exchanged is not distributed by the Partnership as required by
Section 5.1(b), any such unpaid amount (the "Proportionate Prior
Unpaid Class B Preferred Distributions") shall be purchased by the
Company from the holder of such Unit as follows: (i) to the extent
a registration statement with respect to the REIT Preferred Shares
acquired (or which may be acquired) upon exchange of the Class B
Preferred Unit has been filed by the Company with the Securities
and Exchange Commission and is effective on the Closing Date of
such exchange of Class B Preferred Unit, the Company may, at its
sole option, elect to pay such purchase price in cash or by the
issuance by the Company of additional REIT Preferred Shares (the
"Additional Preferred Shares") to the Class B Preferred Limited
Partner in an amount equal to the quotient of (x) the Proportionate
Prior Unpaid Class B Preferred Distributions divided by (y) the
current market price of a REIT Preferred Share (as determined
pursuant to Section 11.5(e) hereof) as of the Closing Date of such
exchange, or (ii) if no such registration statement has been
declared and remains effective on the Closing Date of such
exchange, the Company shall pay such purchase price in cash on the
Closing Date of such exchange.
(d) In addition to Section 11.3(a), following the
exchange of any Class B Common Unit pursuant to Sections 11.1 or
11.2 above, to the extent that any amount described in Section
5.1(a)(ii) attributable to the Class B Common Unit being exchanged
is not distributed by the Partnership as required by Section
5.1(a)(ii) any such unpaid amounts (collectively, the
"Proportionate Current Unpaid Class B Common Distributions") shall
be purchased by the Company from the holder of such Unit as
follows: (i) to the extent a registration statement with respect to
the REIT Common Shares acquired (or which may be acquired) upon
exchange of the Class B Common Unit has been filed by the Company
with the Securities and Exchange Commission and is effective on the
date any Proportionate Current Unpaid Class B Common Distribution
becomes purchasable by the Company (as hereinafter provided), the
Company may, at its sole option, elect to pay the purchase price
thereof in cash or by the issuance by the Company of Additional
Common Shares to the Class B Common Limited Partner in an amount
equal to the quotient of (x) the Proportionate Current Unpaid Class
B Common Distributions divided by (y) the current market price of
a REIT Common Share (as determined pursuant to Section 11.5(e)
hereof) as of the acquisition date, or (ii) if no such registration
statement has been declared and remains effective on the date any
Proportionate Current Unpaid Class B Common Distribution is to be
purchased by the Company, the Company shall pay such purchase price
in cash on the acquisition date. All Proportionate Current Unpaid
Class B Common Distributions shall be purchased by the Company
within five Business Days following the date on which such amounts
were required to be distributed by the Partnership.
(e) In addition to Section 11.3(b), following the
exchange of any Class B Preferred Unit pursuant to Sections 11.1 or
11.2 above, to the extent that any amount described in Section
5.1(a)(i) attributable to the Class B Preferred Unit being
exchanged is not distributed by the Partnership as required by
Section 5.1(a)(i) any such unpaid amounts (collectively, the
"Proportionate Current Unpaid Class B Preferred Distributions")
shall be purchased by the Company from the holder of such Unit as
follows: (i) to the extent a registration statement with respect to
the REIT Preferred Shares acquired (or which may be acquired) upon
exchange of the Class B Preferred Unit has been filed by the
Company with the Securities and Exchange Commission and is
effective on the date any Proportionate Current Unpaid Class B
Preferred Distribution becomes purchasable by the Company (as
hereinafter provided), the Company may, at its sole option, elect
to pay the purchase price thereof in cash or by the issuance by the
Company of Additional Preferred Shares to the Class B Preferred
Limited Partner in an amount equal to the quotient of (x) the
Proportionate Current Unpaid Class B Preferred Distributions
divided by (y) the current market price of a REIT Preferred Share
(as determined pursuant to Section 11.5(e) hereof) as of the
acquisition date, or (ii) if no such registration statement has
been declared and remains effective on the date any Proportionate
Current Unpaid Class B Preferred Distribution is to be purchased by
the Company, the Company shall pay such purchase price in cash on
the acquisition date. All Proportionate Current Unpaid Class B
Preferred Distributions shall be distributed by the Company within
five Business Days following the date on which such amounts were
required to be distributed by the Partnership.
(f) Notwithstanding the foregoing, the Company shall not
be required to issue fractional REIT Common Shares or REIT
Preferred Shares upon exchange of the Class B Common Units or the
Class B Preferred Units or to distribute certificates evidencing
fractional shares. In lieu of fractional REIT Common Shares or
REIT Preferred Shares, there shall be paid to the registered
holders of the Class B Common Unit(s) or the Class B Preferred
Unit(s) on the Closing Date of such exchange as herein provided an
amount in cash equal to the same fraction of the current market
price of a REIT Common Share or REIT Preferred Share (as determined
pursuant to Section 11.5(e) hereof).
11.4 Method of Exchange. The Class B Common Units and the
Class B Preferred Units may be exchanged by the Class B Common
Limited Partner(s) and the Class B Preferred Limited Partner(s)
pursuant to Section 11.1 by delivery, during normal business hours
on any Business Day, of a written notice to the General Partner and
the Company, in accordance with the provisions of Section 12.13
hereof, stating such Class B Limited Partner's intent to exchange
its Class B Common Unit or Class B Preferred Unit and specifying
the number of such units being exchanged if less than all. Each
exchange of Class B Common Units or Class B Preferred Units shall
be deemed to have been effected immediately prior to the close of
business on the Closing Date.
11.5 Adjustment of Number of REIT Shares. The number of REIT
Common Shares to be acquired upon the exchange of the Class B
Common Units and the number of REIT Preferred Shares to be acquired
upon the exchange of the Class B Preferred Units is subject to
adjustment from time to time upon the occurrence of the events
enumerated in this Section 11.5.
(a) In case the Company shall at any time after the
Effective Date (i) declare a dividend or other distribution on the
REIT Common Shares payable in REIT Common Shares, (ii) subdivide
the outstanding REIT Common Shares, (iii) combine the outstanding
REIT Common Shares into a smaller number of shares, or (iv) issue
any shares of its capital stock in a reclassification of the REIT
Common Shares (including any such reclassification in connection
with a consolidation or merger in which the Company is the
continuing corporation), the number of REIT Common Shares for which
each outstanding Class B Common Unit are exchangeable (the "Common
Exchange Shares") at the time of the record date for such dividend
or of the effective date of such subdivision, combination or
reclassification, and/or the number and kind of shares of capital
stock issuable on such date shall be proportionately adjusted so
that the Class B Common Limited Partner holding any Class B Common
Unit exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock which, if such
Class B Common Unit had been exercised immediately prior to such
date, it would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) In case the Company shall fix a record date for the
making of a distribution to all holders of REIT Common Shares
(including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness or assets (other than
cash dividends or cash distributions payable out of consolidated
earnings or earned surplus or dividends payable in REIT Common
Shares) or options, subscription rights or warrants (excluding
those issued to (i) employees, independent contractors or directors
of the Company or its Affiliates pursuant to any existing or future
employee benefit, stock option, stock purchase or stock bonus plan
or (ii) any existing stockholder pursuant to the Company's dividend
reinvestment and share purchase plan), the number of Common
Exchange Shares after such record date shall be determined by
multiplying such number of Common Exchange Shares immediately prior
to such record date by a fraction, of which the numerator shall be
the current market price per REIT Common Share (as determined
pursuant to Section 11.5(e) hereof) on such record date and of
which the denominator shall be such current market price less the
fair market value (as determined by the Board of Directors of the
Company, whose determination shall be conclusive) of the portion of
the assets or evidences of indebtedness so to be distributed or of
such subscription rights or warrants applicable to one REIT Common
Share. Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such distribution is
not so made, the number of Common Exchange Shares shall again be
adjusted to be such number of shares which would then be in effect
if such record date had not been fixed, but such adjustment shall
not affect the number of shares issued upon any exchange of Class
B Common Units prior to the date such adjustment is made.
(c) In case the Company shall at any time after the
Effective Date (i) declare a dividend or other distribution on the
REIT Preferred Shares payable in REIT Preferred Shares, (ii)
subdivide the outstanding REIT Preferred Shares, (iii) combine the
outstanding REIT Preferred Shares into a smaller number of shares,
or (iv) issue any shares of its capital stock in a reclassification
of the REIT Preferred Shares (including any such reclassification
in connection with a consolidation or merger in which the Company
is the continuing corporation), the number of REIT Preferred Shares
for which the each outstanding Class B Preferred Unit are
exchangeable (the "Preferred Exchange Shares") at the time of the
record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and/or the number and
kind of shares of capital stock issuable on such date shall be
proportionately adjusted so that the Class B Preferred Limited
Partner holding any Class B Preferred Units exercised after such
time shall be entitled to receive the aggregate number and kind of
shares of capital stock which, if such Class B Preferred Unit had
been exercised immediately prior to such date, it would have owned
upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification. Such
adjustment shall be made successively whenever any event listed
above shall occur.
(d) In case the Company shall fix a record date for the
making of a distribution to all holders of REIT Preferred Shares
(including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness or assets (other than
cash dividends or cash distributions payable out of consolidated
earnings or earned surplus or dividends payable in REIT Preferred
Shares) or options, subscription rights or warrants (excluding
those issued to (i) employees, independent contractors or directors
of the Company or its Affiliates pursuant to any existing or future
employee benefit, stock option, stock purchase or stock bonus plan
or (ii) any existing stockholder pursuant to the Company's dividend
reinvestment and share purchase plan), the number of Preferred
Exchange Shares after such record date shall be determined by
multiplying such number of Preferred Exchange Shares immediately
prior to such record date by a fraction, of which the numerator
shall be the current market price per REIT Preferred Share (as
determined pursuant to Section 11.5(e) hereof) on such record date
and of which the denominator shall be such current market price
less the fair market value (as determined by the Board of Directors
of the Company, whose determination shall be conclusive) of the
portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable
to one REIT Preferred Share. Such adjustment shall be made
successively whenever such a record date is fixed; and in the event
that such distribution is not so made, the number of Preferred
Exchange Shares shall again be adjusted to be such number of shares
which would then be in effect if such record date had not been
fixed, but such adjustment shall not affect the number of shares
issued upon any exchange of Class B Preferred Units prior to the
date such adjustment is made.
(e) For the purposes of this Article, the current market
price per REIT Common Share or REIT Preferred Share on any date
shall be deemed to be the average of the daily closing prices for
the 30 consecutive trading days on the New York Stock Exchange
commencing 45 trading days before such date. If the REIT Common
Shares or the REIT Preferred Shares are not then listed or admitted
to trading on such exchange, then such closing price shall be the
closing price on the principal national securities exchange on
which the REIT Common Shares or the REIT Preferred Shares are
listed or admitted to trading, or if the REIT Common Shares or the
REIT Preferred Shares are not then listed or admitted to trading on
any national securities exchange, the average of the highest
reported bid and lowest reported asked prices as furnished by the
National Association of Securities Dealers, Inc. ("NASD") or
similar organization if the NASD is no longer reporting such
information. If the REIT Common Shares or the REIT Preferred
Shares are not listed on a national exchange and if bid and asked
prices for the REIT Common Shares or the REIT Preferred Shares are
not furnished by the NASD, the current market price per share shall
be established by the Board of Directors of the Company in its sole
discretion in good faith as of a date which is within 15 Business
Days of the date on which such determination is made.
(f) In any case in which this Section 11.5 shall require
that an adjustment in the number of Common Exchange Shares or
Preferred Exchange Shares be made effective as of a record date for
a specified event, the Company may elect to defer until the
occurrence of such event the issuing to the Class B Limited
Partner, in respect of any Class B Common Units or Class B
Preferred Units exchanged after such record date, the REIT Common
Shares or the REIT Preferred Shares and other capital stock of the
Company, if any, issuable upon such exchange over and above the
REIT Common Shares or the REIT Preferred Shares and other capital
stock of the Company, if any, issuable upon such exchange on the
basis of such number of Common Exchange Shares or Preferred
Exchange Shares in effect prior to such adjustment.
(g) Upon each adjustment of the number of Common
Exchange Shares or Preferred Exchange Shares as a result of the
calculations made in Section 11.5(a), (b), (c) or (d), each Class
B Common Unit outstanding immediately prior to the making of such
adjustment shall thereafter evidence the right to acquire that
number of REIT Common Shares determined in accordance with the
provisions of this Section 11.5 and each Class B Preferred Unit
outstanding immediately prior to the making of such adjustment
shall thereafter evidence the right to acquire that number of REIT
Preferred Shares determined in accordance with the provisions of
this Section 11.5.
(h) In case of any capital reorganization of the
Company, or of any reclassification of the REIT Common Shares or
the REIT Preferred Shares (other than a change in par value, or
from par value to no par value, or from no par value to par value,
or as a result of subdivision or combination), or in the case of
consolidation of the Company with or the merger of the Company into
any other entity (other than a consolidation or merger in which the
Company is the continuing corporation) or of the sale of all or
substantially all of the properties and assets of the Company to
any other entity, each Class B Common Unit and each Class B
Preferred Unit shall, after such reorganization, reclassification,
consolidation, merger or sale, be exchangeable, upon the terms and
conditions specified in this Article, for the number of shares of
stock or other securities or property to which a holder of the
number of shares which can be acquired (at the time of such
reorganization, reclassification, consolidation, merger or sale)
upon exchange of such Class B Common Unit or such Class B Preferred
Unit would have been entitled upon such reorganization,
reclassification, consolidation, merger or sale; and in any such
case, if necessary, the provisions set forth in this Section 11.5
with respect to the rights and interests thereafter of the Class B
Limited Partners shall be appropriately adjusted so as to be
applicable, as nearly as may reasonably be, to any shares of stock
or other securities or property thereafter deliverable on the
exchange of the Class B Common Units and the Class B Preferred
Units. The subdivision or combination of REIT Common Shares or
REIT Preferred Shares at any time outstanding into a greater or
lesser number of shares shall not be deemed to be a
reclassification of the REIT Common Shares or the REIT Preferred
Shares for the purposes of this Section 11.5(h). The Company shall
not effect any such reorganization, reclassification, consolidation
or merger unless prior to or simultaneously with the consummation
thereof the successor entity (if other than the Company) resulting
from such reorganization, reclassification, consolidation or merger
shall assume, by written instrument executed and delivered to the
Class B Limited Partners, the obligation to deliver to the Class B
Limited Partners such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Class B Limited
Partners may be entitled to acquire and the other obligations under
this Article.
11.6 Notice to Class B Limited Partners. Upon any adjustment
pursuant to Section 11.5 hereof of the number of REIT Common Shares
or REIT Preferred Shares for which an outstanding Class B Common
Unit or Class B Preferred Units is exchangeable, the Company within
20 days thereafter shall cause to be mailed to (i) each Class B
Common Limited Partner a notice setting forth the adjusted number
of REIT Common Shares for which a Class B Common Unit is
exchangeable and setting forth in reasonable detail the method of
calculation and the facts upon which such calculations are based
and (ii) each Class B Preferred Limited Partner a notice setting
forth the adjusted number of REIT Preferred Shares for which a
Class B Preferred Unit is exchangeable and setting forth in
reasonable detail the method of calculation and the facts upon
which such calculations are based.
11.7 Closings. The closing of any exchange of Class B Common
Units or Class B Preferred Units as contemplated hereby (each a
"Closing") shall take place (i) in the event that the Class B
Limited Partners exercise their rights provided by Section 11.1
hereof, on the Business Day following the expiration of 30 days
from the date that the Company receives the notice of the exercise
of such right subject to Section 11.5(f) hereof, (ii) in the event
that the exchange of such Units is required by Section 11.2(a)
hereof on the first anniversary of the Effective Date, or (iii) in
the event that the exchange of such Units is effectuated pursuant
to Section 11.2(b) hereof on the 30th day following the delivery of
notice to the Class B Limited Partners pursuant to Section 11.2,
and in any such case as extended to give effect to any required
waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 or similar federal or state law. The date(s) of a
Closing, as determined in accordance with the immediately preceding
sentence with respect to the transaction in question, shall be
hereinafter referred to as the "Closing Date" for such transaction.
11.8 Deliveries at Closing. At a Closing, (i) Class B Limited
Partners exchanging Class B Common Units or Class B Preferred Units
shall deliver to the Company (a) a certificate, certificates or
other transfer instruments evidencing the Class B Common Units or
the Class B Preferred Units (or the transfer thereof) and any and
all rights associated therewith being transferred to the Company or
its designee in accordance herewith duly executed for transfer or
accompanied by appropriate transfer powers duly executed in blank,
and (b) a subscription agreement or such other document or
instrument reasonably satisfactory to the Company, containing
standard representations and warranties typically required in
connection with a private placement of securities exempt from the
registration requirements of the Federal Securities Act, and (ii)
the Company shall deliver to the Class B Limited Partners
exchanging Class B Common Units or Class B Preferred Units a
certificate or certificates evidencing the REIT Common Shares or
the Preferred Exchange Consideration, which REIT Common Shares or
Preferred Exchange Consideration shall be duly authorized, validly
issued, fully paid and non-assessable and free from any liens or
encumbrances, registered in such name or names as shall have been
requested by the Class B Limited Partners at least two Business
Days prior to the Closing Date.
11.9 Further Assurances. From and after the Closing Date (i)
the Class B Limited Partners, at the request of the Company or its
designee, shall take all such actions and deliver all such
documents as shall be reasonably necessary or appropriate to
confirm and vest title to the Class B Common Units or Class B
Preferred Units (and any and all rights associated therewith) in
the Company or its designee and otherwise enable the Company or its
designee to enjoy the benefits contemplated by this Agreement and
(ii) the Company, at the request of the Class B Limited Partners,
shall take all such actions and deliver all such documents as shall
be reasonably necessary or appropriate to affirm and vest title to
the REIT Common Shares or the Preferred Exchange Consideration in
the Class B Limited Partners and otherwise enable any thereof to
enjoy the benefits contemplated by this Agreement.
11.10 Conditions to Issuance of Securities. Notwithstanding
any provision contained herein to the contrary, prior to the
issuance of the REIT Common Shares, the REIT Preferred Shares, the
Series B Warrants, the Additional Common Shares or the Additional
Preferred Shares, the Company shall have received (i) a certificate
from the Class B Limited Partner holding any Class B Common Unit or
Class B Preferred Unit proposed to be exchanged for Common Exchange
Consideration or Preferred Exchange Consideration, containing
representations and warranties satisfactory to the Company to the
effect that such Class B Limited Partner is the record and
beneficial owner of the Class B Common Units or Class B Preferred
Units and has full power and authority to exchange them for REIT
Shares and (ii) an opinion from counsel to the Company (and at the
Company's expense) (the "Opinion") to the effect that (a) the
issuance and sale of the REIT Common Shares, the REIT Preferred
Shares, the Series B Warrants, the Additional Common Shares or the
Additional Preferred Shares has been registered under the Federal
Securities Act or is exempt from the registration requirements of
the Federal Securities Act, and (b) the issuance and sale of the
REIT Common Shares, the REIT Preferred Shares, the Series B
Warrants, the Additional Common Shares or the Additional Preferred
Shares to the Class B Limited Partners will not cause the Company
to fail to qualify as a real estate investment trust for federal
income tax purposes. In the event counsel to the Company is not
able to deliver the Opinion, the Company shall have no obligation
to issue the REIT Common Shares or the Additional Common Shares
(or, if applicable, the portion thereof which precludes counsel to
the Company from delivering the Opinion (such portion referred to
herein as the "Applicable Portion of the REIT Common Shares"))
pursuant to Sections 11.1, 11.2 or 11.3 above, but in lieu thereof,
the Company shall pay to Class B Common Limited Partner(s), cash in
an amount equal to the product of (a) the number of REIT Common
Shares (or the Applicable Portion of the REIT Common Shares)
issuable to each of the Class B Common Limited Partner(s) and (b)
the current market price of a REIT Common Share (as determined
pursuant to Section 11.5(e) hereof) on the date of such purported
issuance. In the event counsel to the Company is not able to
deliver the Opinion, the Company shall have no obligation to issue
the REIT Preferred Shares, the Series B Warrants or the Additional
Preferred Shares (or, if applicable, the portion thereof which
precludes counsel to the Company from delivering the Opinion (such
portion referred to herein as the "Applicable Portion of the
Preferred Exchange Consideration")) pursuant to Sections 11.1, 11.2
or 11.3 above, but in lieu thereof, the Company shall pay to Class
B Preferred Limited Partner(s), cash in an amount equal to the sum
of (a) the product of (i) the number of REIT Preferred Shares (or
the Applicable Portion of the Preferred Exchange Consideration)
issuable to each of the Class B Preferred Limited Partner(s) and
(ii) the current market price of a REIT Preferred Share (as
determined pursuant to Section 11.5(e) hereof) on the date of such
purported issuance plus (b) product of (i) the number of REIT
Common Shares that could be purchased upon the exercise of the
Series B Warrants (or the Applicable Portion of the Preferred
Exchange Consideration) and (ii) the difference between (a) the
current market price of a REIT Common Share (as determined pursuant
to Section 11.5(e) hereof) on the date of such purported issuance
and (b) the exercise price of a Series B Warrant.
11.11 Reservation of Stock. The Company will at all times
reserve and keep available, solely for issuance and delivery upon
exchange of Class B Limited Partner Interests, the number of REIT
Common Shares and REIT Preferred Shares from time to time issuable
upon exchange of all Class B Common Units and Class B Preferred
Units at the time outstanding.
11.12 Legends.
(a) Each Class B Limited Partner agrees that the
certificates representing any REIT Common Shares, REIT Preferred
Shares, Series B Warrants, Additional Common Shares or Additional
Preferred Shares acquired upon or following exchange of the Class
B Limited Partner Interests shall bear a legend in substantially
the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO RESTRICTIONS ON OWNERSHIP AND TRANSFER FOR THE
PURPOSE OF THE CORPORATION'S MAINTENANCE OF ITS STATUS AS
A REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED (THE "CODE"). EXCEPT AS
OTHERWISE PROVIDED PURSUANT TO THE CHARTER OF THE
CORPORATION, NO PERSON MAY (1) BENEFICIALLY OWN SHARES OF
STOCK IN EXCESS OF 9.0% (OR SUCH OTHER PERCENTAGE AS MAY
BE PROVIDED IN THE CHARTER OF THE CORPORATION) OF THE
AGGREGATE VALUE OF ALL OUTSTANDING STOCK OR (2)
BENEFICIALLY OWN STOCK THAT WOULD RESULT IN THE
CORPORATION BEING "CLOSELY HELD" UNDER SECTION 856(h) OF
THE CODE. ANY PERSON WHO ATTEMPTS TO BENEFICIALLY OWN
SHARES OF STOCK IN EXCESS OF THE ABOVE LIMITATIONS MUST
IMMEDIATELY NOTIFY THE CORPORATION. IF THE RESTRICTIONS
ON OWNERSHIP OR TRANSFER ARE VIOLATED, THE SHARES OF
STOCK REPRESENTED HEREBY WILL BE AUTOMATICALLY CONVERTED
INTO SHARES OF EXCESS STOCK WHICH WILL BE HELD IN TRUST
BY THE CORPORATION. THE CORPORATION HAS THE OPTION TO
REDEEM SHARES OF EXCESS STOCK UNDER CERTAIN
CIRCUMSTANCES. ALL TERMS IN THIS LEGEND NOT OTHERWISE
DEFINED HEREIN HAVE THE MEANINGS ASCRIBED THERETO IN THE
CORPORATION'S CHARTER, AS THE SAME MAY BE FURTHER AMENDED
FROM TIME TO TIME, A COPY OF WHICH, INCLUDING THE
RESTRICTIONS ON OWNERSHIP OR TRANSFER, WILL BE SENT
WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS.
(b) In the event that any certificates representing
Class B Limited Partner Interests or any REIT Common Shares, REIT
Preferred Shares, Series B Warrants, Additional Common Shares or
Additional Preferred Shares acquired upon or following exchange of
the Class B Limited Partner Interests are not registered under the
Federal Securities Act, each Class B Limited Partner agrees that
the certificates representing such Interests or unregistered shares
shall, upon original issuance and until such time as the same is no
longer required under the applicable requirements of the Federal
Securities Act, bear a legend in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE
REOFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID
ACT OR EVIDENCE SATISFACTORY TO THE PARTNERSHIP OR
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
11.13 Right of First Refusal. If, under Debtor Relief Laws
or other laws affecting the disposition of any of the Class B
Common Units or the Class B Preferred Units, the right of the
Company to require the Class B Limited Partners to exchange their
Class B Common Units or Class B Preferred Units pursuant to the
terms of Section 11.2 hereof is voided or declared unenforceable as
to any of the Class B Common Units or the Class B Preferred Units
by any court of competent jurisdiction, the Company shall have a
right of first refusal to purchase any or all Class B Common Units
or Class B Preferred Units in the event of any proposed transfer
thereof by any trustee, receiver, conservator, liquidator, guardian
or other transferee of the person holding the Class B Common Units
or the Class B Preferred Units who is, or whose assets are, subject
to such laws at the same price and on the same terms as such Class
B Common Units or Class B Preferred Units are proposed to be sold
by such trustee, receiver, conservator, liquidator, guardian or
other transferee.
11.14 Fees and Expenses. All fees and expenses incurred by
any of the parties hereto in connection with this Article or the
transactions contemplated hereby shall be borne and paid solely by
the party incurring such fees and expenses.
ARTICLE 12
MISCELLANEOUS
12.1 Amendments.
(a) Amendments to this Agreement may be proposed by the
General Partner and the General Partner shall submit any proposed
amendment to all of the Limited Partners entitled to vote thereon
or Approve. The General Partner shall seek the Approval of the
Partners on the proposed amendment or shall call a meeting to vote
thereon and to transact any other business that it may deem
appropriate. Except as provided in Section 12.1(b) or 12.1(c), a
proposed amendment shall be adopted and be effective as an
amendment hereto if it is approved by the General Partner and it
receives the Supermajority Approval of all Partners.
(b) Notwithstanding Section 12.1(a) hereof, the General
Partner shall have the power, without the Approval of the Limited
Partners, to amend this Agreement as may be required to facilitate
or implement any of the following purposes:
(i) to add to the obligations of the
General Partner or surrender any
right or power granted to the
General Partner or any Affiliate of
the General Partner for the benefit
of the Limited Partners;
(ii) to reflect the admission,
substitution, termination, or
withdrawal of Partners in accordance
with this Agreement;
(iii) to set forth the designations,
rights powers, duties and
preferences of the holders of any
additional Partnership Interests
issued pursuant to Section 3.2(a)
hereof;
(iv) to reflect any change that does not
adversely affect the Limited
Partners in any material respect, or
to cure any ambiguity, correct or
supplement any provision in this
Agreement not inconsistent with law
or with other provisions, or make
other changes with respect to
matters arising under this Agreement
that will not be inconsistent with
law or with the provisions of this
Agreement; and
(v) to satisfy any requirements,
conditions, or guidelines contained
in any order, directive, opinion,
ruling, or regulations of a federal
or state agency or contained in
federal or state law.
The General Partner shall provide notice promptly to the Limited
Partners when any action under this Section 12.1(b) is taken.
(c) Notwithstanding Sections 12.1(a) and 12.1(b) hereof,
this Agreement, including any definitional provisions under Article
1 hereof, shall not be amended without the Approval of each Partner
adversely affected if such amendment would (i) convert a Limited
Partner Interest in the Partnership into a General Partner
Interest, (ii) modify the limited liability of a Limited Partner in
a manner adverse to such Limited Partner, (iii) alter rights of the
Partner to receive distributions pursuant to Article 5 or the
allocations specified in Article 5 or Article 9 in a manner adverse
to such Partner (except as permitted pursuant to Section 3.2 and
Section 12.1(b)(iii) hereof), (iv) cause the termination of the
Partnership prior to the time set forth in Sections 2.10 or 9.1
hereof, or (v) amend Section 2.9, Section 2.10, Section 6.2,
Article 7, Article 8, Article 9, Article 11 or any provision of
this Section 12.1(c).
12.2 Meetings of the Partners.
(a) 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 Business Days nor more than 30
Business Days prior to the date of such meeting. Partners may vote
in person or by proxy at such meeting. Whenever the vote or
Approval of Partners is permitted or required under this Agreement,
such vote or Approval may be given at a meeting of Partners or may
be given in accordance with the procedure prescribed in the
definition of "Approved" or "Approval" or Section 12.2(b) hereof.
Except as otherwise expressly provided in this Agreement, the
Approval of holders of a majority of the Percentage Interests held
by Limited Partners shall control.
(b) Any action required or permitted to be taken at a
meeting of the Partners may be taken without a meeting if, after
five Business Days prior written notice to all Partners whose vote
or Approval is required with respect to such action, a written
consent setting forth the action so taken is signed by a majority
of the Percentage Interests of the Partners (or such other
percentage as is expressly required by this Agreement) whose vote
or consent is required with respect to such action. Such consent
may be in one instrument or in several instruments and shall have
the same force and effect as a vote of a majority of the Percentage
Interests of the Partners (or such other percentage as is expressly
required by this Agreement) whose vote or consent is required with
respect to such action. Such consent shall be filed with the
General Partner. An action so taken shall be deemed to have been
taken at a meeting held on the effective date so certified.
(c) Each Limited Partner may authorize any Person or
Persons to act for him by proxy on all matters in which a Limited
Partner is entitled to participate, including waiving notice of any
meeting, or voting or participating at a meeting. Every proxy must
be signed by the Limited Partner or his attorney-in-fact. No proxy
shall be valid after the expiration of eleven (11) months from the
date thereof unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the Limited Partner executing
it, such revocation to be effective upon the Partnership's receipt
of written notice of such revocation from the Limited Partner
executing such proxy.
(d) Each meeting of Partners shall be conducted by the
General Partner or such other Person as the General Partner may
appoint pursuant to such rules for the conduct of the meeting as
the General Partner or such other Person deems appropriate in his
sole discretion.
12.3 Complete Agreement. This Agreement and each agreement
referred to herein and therein constitutes the complete and
exclusive statement of the agreement between the Partners and
replaces and supersedes any other oral or written agreements by and
among the Partners or any of them.
12.4 Governing Law. This agreement and the rights of the
parties hereunder shall be governed by, interpreted and enforced in
accordance with, the internal laws (exclusive of the choice of law
provisions thereof) of the State of Delaware as to all matters,
including, but not limited to, matters of validity, construction,
effect, performance and remedies.
12.5 Binding Effect. Subject to the provisions of this
Agreement relating to transferability, this Agreement shall be
binding upon and inure to the benefit of the parties signatory
hereto, and their respective distributes, successors and assigns.
12.6 Headings. All headings, title or captions herein are
inserted only for convenience and ease of reference and are not to
be considered in the construction or interpretation of any
provision of this Agreement.
12.7 Severability. If any provision of this Agreement or the
application thereof to any Person or circumstances is or becomes
invalid or unenforceable to any extent, the remainder of this
Agreement and the application of such provisions to other Persons
or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
12.8 Multiple Counterparts; Facsimile Signatures. This
Agreement may be executed in several counterparts, each of which
shall be deemed an original but all of which shall constitute one
and the same instrument. However, in making proof hereof it shall
be necessary to produce only one copy hereof signed by the party
against whom enforcement is sought. Each party hereto hereby
acknowledges the effectiveness of, and agrees to accept, facsimile
signatures of any other party hereto for purposes of executing this
Agreement; provided, however, that any party executing this
Agreement by facsimile signature shall provide the General Partner
with the number of original signatures pages as the General Partner
may specify as soon as is practicable following a request for same
by the General Partner.
12.9 Execution of Documents. Each party hereto agrees to
execute, with acknowledgment or affidavit, if required, any and all
documents and writings which may be necessary or expedient in
connection with the achievement of the Partnership's purposes,
specifically including the amendment to the Partnership's
Certificate contemplated by the terms hereof and all further
amendments thereto or cancellation thereof.
12.10 Reliance on Authority. In no event shall any Person
dealing with the General Partner be obligated to ascertain that the
terms of this Agreement have been complied with, or be obligated
to inquire into the necessity or expediency of any act or action of
the General Partner; and every contract, agreement, deed, mortgage,
promissory note, or other instrument or document executed by the
General Partner with respect to the Partnership shall be conclusive
evidence in favor of any and every Person relying thereon or
claiming thereunder that (i) at the time of the execution and/or
delivery thereof, this Agreement was in full force and effect,
(ii) such instrument or document was duly executed in accordance
with the terms and provisions of this Agreement and is binding upon
the Partnership and all of the Partners thereof, and (iii) the
General Partner was duly authorized and empowered to execute and
deliver any and every such instrument or documents for and on
behalf of the Partnership.
12.11 No Third Party Beneficiary. Except as otherwise
provided herein, this Agreement is made solely and specifically
among and for the benefit of the parties hereto and their
respective successors and assigns, and no other Person shall have
any rights, interest or claims hereunder or be entitled to any
benefits under or on account of this Agreement as a third party
beneficiary or otherwise.
12.12 References to this Agreement. Numbered or lettered
articles, sections and subsections herein contained refer to
articles, sections and subsections of this Agreement unless
otherwise expressly stated.
12.13 Notices. All notices and other communications provided
for herein shall be given or made by telex, telecopy, facsimile,
telegraph, cable or in writing and telexed, telecopied, faxed,
telegraphed, cabled, mailed or delivered to the intended recipient
at the address set forth in the books and records of the
Partnership. Except as otherwise provided in this Agreement, all
such communications shall be deemed to have been duly given when
received by telex, telecopy, facsimile, telegraph or cable or
personally delivered by a courier service or, by mail, postage
prepaid and return receipt requested, in each case given or
addressed as aforesaid. Any party hereto may, at any time by
giving ten Business Days prior written notice to the other parties
hereto, designate any other address in substitution of the
foregoing address to which such notice shall be given.
12.14 Title to Partnership Property. Title to Partnership
property, whether real, personal or mixed and whether tangible or
intangible, and all interests in such property 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 property or any portion thereof except as a
Partner in the Partnership. Title to any or all of the Partnership
property 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
property 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 for the use and benefit of the Partnership in accordance with
the provisions of this Agreement; provided, however, that, subject
to the provisions of the Agreement of General Partnership of
Walden-WDOP Partners, the General Partner shall use its best
efforts to cause beneficial and record title to such property to be
vested in the Partnership as soon as reasonably practicable. All
Partnership assets and properties 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 property is held.
12.15 Reliance on Authority of Person Signing Agreement. In
the event that a Partner is any Person other than a natural person,
neither the Partnership nor any Partner shall (i) be required to
determine the authority of the Person signing this Agreement to
make any commitment or undertaking on behalf of such first Person
or to determine any fact or circumstance bearing upon the existence
of the authority of such Person; or (ii) be required to see to the
application or distribution of proceeds paid or credited to persons
signing this Agreement on behalf of such first Person.
12.16 Waiver. No failure by any party to insist upon strict
performance of any covenant, duty, agreement or condition of this
Agreement or to the exercise of any right or remedy resulting from
a breach thereof shall constitute, or be deemed to constitute, a
waiver of any such breach or any other covenant, duty, agreement or
condition.
IN WITNESS WHEREOF, the General Partner and the Limited
Partner have executed this Agreement on the date set forth opposite
their signatures.
SIGNATURE PAGES OF PARTNERS ATTACHED
This signature page is attached to that certain Amended and
Restated Limited Partnership Agreement of Walden/Drever Operating
Partnership, L.P.
GENERAL PARTNER:
WALDEN RESIDENTIAL PROPERTIES, INC.,
a Maryland corporation
Date: August 12, 1997 By: / s / Mark S. Dillinger
Name: Mark S. Dillinger
Title: Executive Vice President
and Chief Financial Officer
This signature page is attached to that certain Amended and
Restated Limited Partnership Agreement of Walden/Drever Operating
Partnership, L.P.
LIMITED PARTNER:
WDN PROPERTIES, INC.,
a New York corporation
Date: August 12, 1997 By: / s / Nancy Bisgaier
Name: Nancy Bisgaier
Title: President
EXHIBIT A
Drever Partnerships
EXHIBIT B
Agreement of General Partnership of Walden-WDOP Partners
I:\FINANCE\SECFIL~1\01-Q-98\EX-10-1.WPD
LIMITED PARTNERSHIP AGREEMENT
OF
WALDEN/GRUPE ELK GROVE, L.P.
This Limited Partnership Agreement (this "Agreement") is
executed as of February 27, 1998, by and between ELK GROVE-LAKESIDE
APARTMENTS, L.P., a California limited partnership ("EGLALP"), as
the sole general partner and WALDEN DEVELOPMENT CORPORATION, a
Delaware corporation ("Walden"), as the sole limited partner.
ARTICLE 1.
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms
have the meanings:
"Acquisition Fee" means an amount equal to the greater of (a)
$28,000 or (b) the product of (i) $100 and (ii) the number of
units in the Project as shown by the final architectural
drawings. The Acquisition Fee is payable in accordance with
the provisions of Subsection 4.2(b).
"Adjusted Capital Account Deficit" means, with respect to any
Partner, the deficit balance, if any, in the Partner's Capital
Account as of the end of the relevant Fiscal Year, after
giving effect to the following adjustments:
(a) The Capital Account will be increased by any amounts that
the Partner is obligated to restore to the Partnership or
is deemed obligated to restore under Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5).
(b) The Capital Account will be decreased by the items
described in Sections 1.704-1(b)(2)(ii)(d)(4), (5), and
(6) of the Regulations.
This definition of Adjusted Capital Account Deficit and the
application of the term in the manner provided in this
Agreement are intended to comply with the provisions of
Section 1.704-1(b)(2)(ii)(d) of the Regulations and will be
interpreted consistently therewith.
"Adjustment Period" means any period of time that begins on
the Closing Date (in the case of the first Adjustment Period)
or the day following the end of the immediately preceding
Adjustment Period (with respect to each subsequent Adjustment
Period) and ends on the first to occur of: (a) the last day
of a Fiscal Year, (b) the day immediately preceding the date
of the "liquidation" of a Partner's interest in the
Partnership (within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations), or (c) the date on
which the Partnership is terminated under Article 9.
"Affiliate" (including the term "Affiliated") means, with
respect to any Person, any other Person who is controlled by,
under common control with, or in control of, the first Person.
As used in this definition, the term "control" means the
possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by
contract, or otherwise. For purposes of this definition, any
Person that owns, directly or indirectly, more than 10% of the
issued and outstanding stock or other equity interests of
another Person is deemed to control the other Person and any
Person that is an executive officer, trustee, general partner,
managing member or director of another Person is deemed to
control the other Person.
"Agreement" means this Limited Partnership Agreement,
including the Exhibits attached hereto, as amended and in
effect from time to time.
"Ancillary Income" means an amount, determined as of the
Purchase Price Computation Date, equal to the annualized
Partnership net income from sources other than rental of
apartment units, including garage or parking rents, revenue
from telephone and cable systems, operation of vending
machines, nonrefundable application fees, credit check and
other miscellaneous fees, and forfeited security deposits, but
not including security deposits which by their terms have not
been forfeited to the Partnership.
"Approval of" or "Approved by" a Partner or Partners means the
written consent or approval of the matter in question in
accordance with Section 7.12.
"Bankrupt Partner" means any Partner with respect to which an
event of the type described in Section 402(a)(4) or (5) of the
Partnership Act has occurred, subject to the lapsing of any
period of time therein specified.
"Base Rate" has the meaning given that term in the Initial
Loan Documents.
"Bonus Project Value" means the value of the Project
determined by applying a 9.25% cap rate to the Project's 1999
Net Income. For purposes of computing the Bonus Project
Value, 1999 Net Income means (a) the annualized effective
rents in place from Non-Defaulting Tenants as of the Purchase
Price Computation Date (with market rental values as of the
Purchase Price Computation Date being substituted for any
leases expiring during the 90 day period following the
Purchase Price Computation Date) using the greater of 95%
occupancy or the actual occupancy rate for Qualifying Tenants,
plus (b) Ancillary Income, less (c) the Purchase Price
Expenses.
"Bonus Purchase Price" means the sum of (a) the Investment
Amount plus (b) the lesser of (i) the excess, if any, of the
Bonus Project Value over $19,423,157 and (ii) $721,059.
"Book Depreciation" means, for each Adjustment Period, an
amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to a Partnership
asset for the Adjustment Period, except that if the Book Value
of an asset differs from its adjusted basis for federal income
tax purposes at the beginning of the Adjustment Period, Book
Depreciation with respect to that asset will be an amount that
bears the same ratio to the beginning Book Value as the
federal income tax depreciation, amortization, or other cost
recovery deduction with respect to that asset for the
Adjustment Period bears to the beginning adjusted tax basis;
provided, however, that if the federal income tax
depreciation, amortization, or other cost recovery deduction
with respect to that asset for the Adjustment Period is zero,
Book Depreciation will be determined with reference to the
beginning Book Value using any reasonable method approved by
the Partners.
"Book Gain" or "Book Loss" means the gain or loss recognized
by the Partnership for book purposes in any Adjustment Period
by reason of a disposition (as determined under Section 1001
of the Code) of all or part of the assets. The Book Gain and
Book Loss will be computed by reference to the Book Value of
the assets as of the date of the sale or other disposition,
rather than by reference to the tax basis of the assets as of
the date. If a Partnership asset is distributed to a Partner,
the difference between the fair market value of the asset and
its Book Value will be considered a Book Gain or a Book Loss.
"Book Value" of the assets means, as of any particular date,
the value at which the assets are properly reflected on the
books of the Partnership, as of the date, in accordance with
the provisions of Section 1.704-1(b) of the Regulations. The
initial Book Values of the assets will be the gross fair
market value of the assets (without reduction for indebtedness
to which the assets may be subject) as determined by the
General Partner. The Book Value will be adjusted for Book
Depreciation with respect to the assets, rather than for the
cost recovery deductions to which the Partnership is entitled
for income tax purposes with respect to the assets.
"Business Day" means Monday through Friday of each week,
except that a legal holiday recognized as such by the
government of the United States or the State of Texas shall
not be regarded as a Business Day.
"Capital Account" has the meaning given it in Section 3.4.
"Capital Contribution" means the amount of cash or the fair
market value of property of any nature (net of liabilities
assumed or taken subject to by the Partnership) contributed by
a Partner to the Partnership pursuant to the provisions of
this Agreement.
"Certificate" means, at any date, the Certificate of Limited
Partnership of the Partnership filed with the Secretary of
State of the State of Delaware under the Partnership Act, as
amended or restated at such date.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, or
from and after the date any successor statute becomes, by its
terms, applicable to the Partnership, the successor statute,
in each case as amended at such time by amendments that are,
at that time, applicable to the Partnership. All references
to sections of the Code include any corresponding provision or
provisions of any such successor statute.
"Company" means Walden Residential Properties, Inc., a
Maryland corporation.
"Completion Date" means the date on which each of the
following two conditions are satisfied: (i) the final
certificate of occupancy for the Project is issued and (ii)
the General Partner certifies that the Project is free of all
liens (other than those existing in connection with the
Initial Loan) and provides the Limited Partner with
documentation, in a form satisfactory to the Limited Partner,
of customary lien releases.
"Construction Contract" means that certain contract between
the Partnership and Contractor in the form attached hereto as
Exhibit D.
"Construction Period" means the period commencing on the
commencement of construction of the Project and ending upon
issuance of the final certificate of occupancy for the
Project.
"Contractor" means Marchbrook Building Company, a California
corporation.
"Contractor Fee" means $455,851 which represents approximately
three percent (3%) of the amount that is described in the
"Total Direct Construction Costs" category of the Project
Budget. The Contractor Fee is payable to Contractor in
accordance with the terms and provisions of the Construction
Contract.
"Cost Overruns" means any amounts by which actual Total
Project Costs exceed the amount of Total Project Costs that
were included in the Project Budget.
"Developer" means Marchbrook Building Company, a California
corporation.
"Development Fee" means $455,851 which represents
approximately three percent (3%) of the amount that is
described in the "Total Direct Construction Costs" category of
the Project Budget. The Development Fee shall be earned by
and payable to Developer in accordance with the provisions of
Subsection 4.2(c).
"Distributable Cash" of the Partnership means at any time all
cash funds of the Partnership on hand at such time after
payment of all Operating Expenses of the Partnership as of
such time less such reserve(s) that the General Partner may,
in its reasonable discretion, establish in order to provide
for payment of outstanding and unpaid obligations of the
Partnership or other purposes. Prior to the Purchase
Settlement Date, Distributable Cash shall include the amount
that could be drawn as "interest reserve or interest
contingency" pursuant to the Initial Loan. On the Purchase
Settlement Date, Distributable Cash shall include all amounts
that would otherwise comprise Distributable Cash plus all
amounts that could be drawn pursuant to the Initial Loan less
an estimated amount equal to the normal prorations that the
Partnership would be required to pay if it had sold the
Project to an unrelated buyer on such date (the "Proration
Reserve"). The General Partner shall be required to fund the
Proration Reserve on the Purchase Settlement Date.
"Distributable Land Equity Account" means an account to be
maintained by the Partnership which will have a balance equal
to $875,851 on the Closing Date and which will be decreased,
but not below zero, by Excess Cost Overruns. If the
Completion Date does not occur on or before the Final Date,
the balance in the Distributable Land Equity Account will be
reduced to zero.
"Distribution Date" means, commencing with the calendar
quarter beginning April 1, 2000, a date selected by the
General Partner once each calendar quarter which date will be
during the first 30 days of such calendar quarter.
"Event of Withdrawal" means the occurrence, with respect to
the General Partner, of any event described in Section 402(a)
of the Partnership Act other than an event described in
Subsection 402(a)(4) or (5) of the Partnership Act (unless the
Limited Partner approves an event described in Subsection
402(a)(4) or (5) of the Partnership Act as being an Event of
Withdrawal, in which case it will be an Event of Withdrawal);
provided, however, that neither a Transfer nor the
substitution of another Person as a Partner in respect all or
any portion of the General Partner's Partnership Interest
without violation of this Agreement will be an Event of
Withdrawal and, to the extent the Partnership Act would
otherwise require, each Partner hereby agrees to continue the
business of the Partnership following any such event.
"Excess Cost Overruns" means the amount by which Cost Overruns
exceed the Development Fee.
"Excess Operating Shortfall" means the amount by which
Operating Expenses exceed the sum of (a) Distributable Cash,
and (b) the balance in the Land Equity Account.
"Excess Real Estate Taxes" means the amount, if any, by which
(a) the real estate taxes for a twelve month taxable period
calculated using the then current tax rates of the appropriate
taxing authorities and based on the Bonus Project Value or the
Target Project Value (as appropriate), exceed (b) $305,396.
"Final Date" means December 10, 1999; provided, however, that
if the aggregate period of Excusable Delays (as that term is
defined in the Construction Contract) exceeds 224 days the
Final Date shall be the date which follows December 10, 1999
by a number of days equal to such excess.
"Fiscal Year" means the year commencing on January 1 of each
year (or the Closing Date, with respect to 1998) and ending on
the following December 31.
"General Partner" means EGLALP or any other Person admitted
under this Agreement in the capacity of a general partner in
the Partnership, each for only so long as the Person remains
as a general partner in accordance with this Agreement and the
Partnership Act.
"GP Computed Expenses" means the Operating Expenses for an
entire year of operation computed by the General Partner based
on various computations of the General Partner showing
averages per unit for different expenses at various occupancy
levels plus a replacement reserve of $200 per unit. The GP
Computed Expenses shall include the then current real estate
taxes for a twelve month taxable period calculated using the
then current tax rates of the appropriate taxing authorities
and based on the Bonus Project Value or the Target Project
Value (as appropriate), the salaries and burden for the normal
amount of personnel required to operate, pursuant to good real
estate management practices, a project similar in size to the
Project, a 3% management fee, and all other normal and
customary operating expenses of a project similar in size to
the Project and shall be determined pursuant to Subsection
7.8(h).
"GP Loan" means a loan required to be made by the General
Partner to the Partnership pursuant to Subsection 3.3(b)
hereof. Each GP Loan shall: (a) bear no interest, (b) be
repayable only from Distributable Cash other than proceeds of
the Initial Loan, (c) be unsecured, and (d) be with recourse
solely to the assets of the Partnership and no Partner will
have any obligation or liability on account thereof.
"GP Put Notice" has the meaning given it in Subsection 7.8(f).
"GP Put Option" has the meaning given it in Subsection 7.8(f).
"Gross Income" means, for each Adjustment Period, an amount
equal to the Partnership's gross income as determined for
federal income tax purposes for the Adjustment Period but
computed with the adjustments in paragraphs (a) through (d) of
the definition of Net Profit or Net Loss.
"Guaranteed Cost Overruns" means the amount by which Cost
Overruns exceed the sum of: (a) the Development Fee, and (b)
$875,851.
"Indemnifiable Costs" has the meaning given it in Section
10.2.
"Indemnified Affiliates" means, with respect to any Person,
its owners and the officers, directors, partners, agents,
employees, owners, and other Affiliates of such Person or any
of its owners (other than the Partnership).
"Indemnified Person" means any Person who is within the
category of Persons entitled to indemnification in accordance
with this Agreement (assuming the prerequisites for
indemnification are satisfied).
"Initial Lender" means BankBoston, N.A., the lender of the
Initial Loan.
"Initial Loan" means the $19,423,157 loan contemplated by the
Construction Loan Agreement, dated as of February 27, 1998
among the Partnership, the Initial Lender, individually and as
agent, and various other financial institutions now or
thereafter parties thereto.
"Initial Loan Documents" means the loan documents described on
Exhibit E.
"Investment Amount" means the amount that would be
distributable to the General Partner on the Purchase
Settlement Date pursuant to Section 4.1, assuming that Section
4.1 contained no time restrictions.
"Land" means the real property more particularly described on
Exhibit B,
"Land Equity Account" means an account to be maintained by the
Partnership which will have a balance equal to $875,851 on the
Closing Date and which will be decreased, but not below zero,
by Excess Cost Overruns and Operating Shortfalls.
"Leasing Commencement Date" means the date on which leasing
commences for the Project or any part thereof.
"Limited Partner" means Walden or any other Person admitted
under this Agreement in the capacity of a limited partner in
the Partnership, each for only so long as the Person remains
as a limited partner in accordance with this Agreement and the
Partnership Act.
"Liquidating Manager" means the General Partner(s) who did not
wrongfully dissolve the Partnership who remain after the
Partnership is dissolved, if it is not properly reconstituted,
or, in the absence of any such remaining General Partner, the
Person or Persons selected to effect the liquidation of the
Partnership by the Limited Partner or, in both the absence of
any such remaining General Partner and the failure of the
Limited Partner to select a Liquidating Manager within the
period of time during which the Partnership may be properly
reconstituted following its dissolution, the Person or Persons
appointed by a court of competent jurisdiction pursuant to
Section 803(a) of the Partnership Act.
"LP Call Notice" has the meaning given it in Subsection
7.8(g).
"LP Call Option" has the meaning given it in Subsection
7.8(g).
"LP Loan" means a loan made by the Limited Partner to the
Partnership pursuant to Section 3.8 hereof. Unless otherwise
agreed by the Limited Partner and approved by the General
Partner, each such loan shall (a) bear interest at the Base
Rate plus 2% from the date the loan is made until the date of
payment, but in no event more than the maximum rate permitted
by applicable law, (b) require interest and principal to be
payable in a single installment on demand and, if no demand is
made, one year after the date of such advance, (c) be
unsecured, and (d) be with recourse solely to the assets of
the Partnership and no Partner will have any obligation or
liability on account thereof.
"LP Put/Call Closing Notice" means a notice from the Limited
Partner or its designee to the General Partner designating the
Purchase Settlement Date.
"Management Agreement" has the meaning given it in Section
7.9.
"Manager" means Franklin Landings Management Company, a
California corporation.
"Net Profit" or "Net Loss" means, for each Adjustment Period,
the Partnership's taxable income or taxable loss for the
Adjustment Period, as determined under Section 703(a) of the
Code, and Section 1.703-1 of the Regulations (and for this
purpose all items of income, gain, loss, or deduction required
to be stated separately under Section 703(a)(1) of the Code
will be included in taxable income or taxable loss), but with
the following adjustments:
(a) Any tax-exempt income, as described in
Section 705(a)(1)(B) of the Code, realized by the
Partnership during the Adjustment Period will be taken
into account in computing the taxable income or taxable
loss as if it were taxable income.
(b) Any expenditures of the Partnership described in Section
705(a)(2)(B) of the Code for the Adjustment Period,
including any items treated under Section
1.704-1(b)(2)(iv)(i) of the Regulations as items
described in Section 705(a)(2)(B) of the Code, will be
taken into account in computing the taxable income or
taxable loss as if they were deductible items.
(c) Book Depreciation for the Adjustment Period will be taken
into account in computing the taxable income or taxable
loss in lieu of any amortization, depreciation, or cost
recovery deduction to which the Partnership is entitled
for the Adjustment Period with respect to Partnership
assets.
(d) Any Book Loss or Book Gain recognized by the Partnership
during the Adjustment Period by reason of a sale or other
disposition of all or part of the assets will be taken
into account in computing the taxable income or taxable
loss in lieu of any tax gain or tax loss recognized by
the Partnership during any Adjustment Period by reason of
the sale or other disposition.
(e) Any item of income, gain, loss, or deduction required to
be allocated to the Partners under Sections 5.4, 5.5, and
5.6 will not be taken into account in computing the
taxable income or taxable loss.
If the Partnership's taxable income or taxable loss for the
Adjustment Period, as adjusted in the manner provided in
paragraphs (a) through (e) above, is a positive amount, the
amount will be the Partnership's Net Profit for the Adjustment
Period; and if negative, the amount will be the Partnership's
Net Loss for the Adjustment Period.
"Non-Defaulting Tenant" means a Qualifying Tenant whose
financial obligations to the Partnership are not more than 2
weeks delinquent.
"Operating Budget" means the operating budget prepared by the
General Partner and Approved by the Limited Partner.
"Operating Expenses" means all ordinary and necessary costs,
expenses, or charges with respect to the ownership,
improvement, operation, maintenance, and upkeep of Partnership
assets, including, without limitation, administrative
expenses, ad valorem taxes, advertising and promotional
expenses, insurance expenses, management fees, repair and
maintenance expenses, reserves, utilities, and debt service,
including principal and interest payable in respect of the
Initial Loan and other Partnership indebtedness (other than GP
Loans). Operating Expenses do not include (a) items to be
expended after the end of the Construction Period which are
included in Total Project Costs, (b) any sums necessary to pay
any loan when the same matures (even if matured through
acceleration upon default), or (c) non-cash items such as
depreciation.
"Operating Shortfall" means as of the last day of any calendar
month ending after the Closing Date the amount, if any, by
which unpaid Operating Expenses for such calendar month exceed
the Distributable Cash on the last day of such calendar month.
"Partner" means the General Partner or the Limited Partner and
"Partners" means, collectively, the General Partner and the
Limited Partner. If a Partner Transfers its Partnership
Interest, that Partner will remain a Partner in respect of the
Partnership Interest until another Person is admitted as a
Partner in respect of the Partnership Interest in accordance
with this Agreement and the Partnership Act, if ever.
"Partner Nonrecourse Debt" means any nonrecourse debt of the
Partnership for which any Partner bears the economic risk of
loss as determined under Sections 1.704-2(b)(4) and 1.752-2 of
the Regulations.
"Partner Nonrecourse Debt Minimum Gain" means the minimum gain
attributable to Partner Nonrecourse Debt as determined under
Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Deductions" means any loss, deduction, or
Code Section 705(a)(2)(B) expenditure, or item thereof, that
is attributable to a Partner Nonrecourse Debt as determined
under Regulations Section 1.704-2(i)(2).
"Partnership" means the limited partnership formed pursuant to
this Agreement.
"Partnership Act" means the Delaware Revised Uniform Limited
Partnership Act or, from and after the date any successor
statute becomes, by its terms, applicable to the Partnership,
the successor statute, in each case as amended at the time by
amendments that are, at that time, applicable to the
Partnership (to the extent the provisions of the Partnership
Act are not modified by the Certificate or this Agreement).
All references to sections of the Partnership Act include any
corresponding provision or provisions of any such successor
statute.
"Partnership Interest" means the ownership interest in the
Partnership held by a Partner, representing a fractional part
of the Partnership Interests of all Partners, and includes any
and all benefits to which the holder of such a Partnership
Interest may be entitled as provided in this Agreement,
including a Partner's share of the profits and losses of the
Partnership and the right to receive distributions of the
Partnership's assets, together with all obligations of such
Person to comply with the terms and provisions of this
Agreement.
"Partnership Minimum Gain" means the amount computed under
Regulations Section 1.704-2(d).
"Partnership Nonrecourse Deductions" means any loss,
deduction, or Code Section 705(a)(2)(B) expenditure, or item
thereof, that is attributable to nonrecourse liabilities of
the Partnership as defined in Regulations Section
1.752-1(a)(2).
"Person" means any individual, partnership, limited
partnership, joint venture, corporation, limited liability
company, trust, estate, custodian, trustee, executor,
administrator, nominee, representative, unincorporated
organization, sole proprietorship, trust, employee benefit
plan, tribunal, governmental entity, department, or agency, or
other entity.
"Plans" means the plans and specifications described in
Exhibit C hereto, as amended as permitted by this Agreement.
"Project" means the Land, together with all buildings,
structures, garages, open parking areas, and other
improvements thereon, all fixtures installed on or in such
real property or such improvements, all materials, supplies,
equipment, and other items installed on or in such real
property or such improvements, and all rights, titles, and
interests appurtenant thereto.
"Project Budget" means the budget of the Total Project Costs
shown on Exhibit F hereto, as the same may be amended as
permitted by this Agreement.
"Purchase Price Computation Date" means (a) the date specified
by the General Partner in the GP Put Notice, or (b) the date
specified by the Limited Partner in the LP Call Notice.
"Purchase Price Expenses" means the greater of (a) the sum of
(i) $936,577, and (ii) the Excess Real Estate Taxes, or (b)
the GP Computed Expenses.
"Purchase Settlement Closing" means the Transfer of the
General Partner's Partnership Interest pursuant to Subsection
7.8(f) or Subsection 7.8(g) which shall occur on the Purchase
Settlement Date.
"Purchase Settlement Date" means the later of (a) the date
specified by the Limited Partner in the LP Put/Call Closing
Notice, provided, however, that if the General Partner
exercises the GP Put Option, the Limited Partner must specify
a date on or before January 14, 2000. and (b) the date on
which all of the procedures and actions described in
Subsection 7.8(h)(i) - (vi) have occurred.
"Qualifying Tenant" has the meaning given it in the Management
Agreement.
"Regulations" means the income tax regulations promulgated
under the Code and effective as of the date of this Agreement,
and any future amendments to the regulations and any
corresponding provisions of succeeding regulations that are
mandatory. The term will also be deemed to include any future
amendments or succeeding regulations that call for an election
by the Partnership as to the application of the amendment or
succeeding regulation to the Partnership if the Tax Matters
Partner so elects, on behalf of the Partnership, which the Tax
Matters Partner may do only after determining that any such
amendments and succeeding regulations do not adversely affect
the economic interests of the Partners hereunder.
"REIT" means a "real estate investment trust" under Section
856 of the Code.
"Section" means a section of this Agreement, unless the text
indicates otherwise.
"Sharing Ratio" means 51% in the case of the General Partner
and 49% in the case of the Limited Partner.
"Subsection" means a subsection of this Agreement, unless the
text indicates otherwise.
"Target Project Value" means the value of the Project
determined by applying a 9.15% cap rate to the Project's 1999
Net Income. For purposes of computing the Target Project
Value, 1999 Net Income means the difference between (a) the
annualized effective rents in place from Non-Defaulting
Tenants as of Purchase Price Computation Date (without market
rental values being substituted for any leases expiring during
the 90 day period following the Purchase Price Computation
Date) using the greater of 95% occupancy or the actual
occupancy rate for Qualifying Tenants, plus (b) Ancillary
Income, less (c) the Purchase Price Expenses.
"Target Purchase Price" means the sum of (a) the Investment
Amount plus (b) lesser of (i) the excess, if any, of the
Target Project Value over $19,423,157 and (ii) $516,059.
"Tax Matters Partner" has the meaning given to it in Section
6.3.
"Total Interest Cost" means accrued interest on the Initial
Loan from the first date amounts are outstanding under such
loan to the end of the Construction Period.
"Total Project Cost" means the sum of (a) $1,680,000, and (b)
the total cost to the Partnership of designing, developing,
financing, constructing, and leasing the Project. Total
Project Cost shall include, without limitation, the Contractor
Fee, the Developer Fee, and all costs within the categories
set forth in the Project Budget (excluding the categories
described as "Interest Reserve" and "Interest Contingency"
which are included in Total Interest Cost).
"Transfer" means (a) any sale, encumbrance, gift, donation,
assignment, pledge, hypothecation, mortgage, exchange, or
other disposition of any Partnership Interest or any interest
therein, in each case whether voluntary or involuntary,
including any Transfer by operation of law, by court order, by
judicial process, or by foreclosure, levy, or attachment; or
(b) the act of making any of the foregoing.
1.2 Other Definitions. Certain other terms are defined elsewhere
herein and have the meanings so given them.
1.3 Construction. Whenever the context requires, the gender of
all words used in this Agreement includes the masculine,
feminine, and neuter. All references to Exhibits are to
Exhibits attached to this Agreement, each of which is made a
part of this Agreement for all purposes. All references in
this Agreement to "dollars" or "$" means United States of
America dollars. The term "including" and variations of the
term mean including without limitation and without
duplication.
1.4 Interest Calculations. Any interest or amounts like interest
that are to be calculated under this Agreement shall be
computed on the daily outstanding balance of the amount on
which interest or amounts like interest accrue hereunder. The
calculation of interest and amounts like interest under this
Agreement shall be made monthly and shall be computed on the
basis of a fraction, the denominator of which is 360 and the
numerator of which is the actual number of days in the period
for which interest or amounts like interest are being
calculated.
ARTICLE 2.
GENERAL PROVISIONS
2.1 Formation. EGLALP and Walden hereby form, effective as of the
date indicated in Section 2.8, the Partnership pursuant to the
Partnership Act.
2.2 Name of Partnership. The name of the Partnership is
"Walden/Grupe Elk Grove, L.P." and all Partnership business
must be conducted in that name or such other name or names
that comply with applicable law as the General Partner may
select from time to time.
2.3 Name and Address of Partners. The name and address of each
initial Partner of the Partnership are set forth on Exhibit A.
Each such Person is admitted to the Partnership as a general
partner or limited partner, as the case may be, at the time
the Partnership's existence begins under Section 2.8. The
name and address of each Person who later becomes a Partner
will be as set forth in the records of the Partnership and
Exhibit A will be deemed amended appropriately. The records
of the Partnership will be prima facie evidence of the status
of any Person as a Partner.
2.4 Registered Office and Registered Agent. The General Partner
will use commercially reasonable efforts to ensure that the
Partnership complies with applicable provisions of the
Partnership Act regarding the maintenance of a registered
office and registered agent in the State of Delaware. The
initial registered office and registered agent of the
Partnership in the State of Delaware will be as set forth in
the Certificate. From time to time, the General Partner may
change the Partnership's registered office and registered
agent in the State of Delaware or either in the manner
provided in the Partnership Act.
2.5 Principal Office and Other Offices. The Partnership's
principal place of business will be initially located at 3255
West March Lane, Stockton, California 95219. The General
Partner may change the principal office of the Partnership at
any time and from time to time by notice to the Limited
Partner. The Partnership may also establish such additional
places of business as the General Partner may determine to be
appropriate.
2.6 Purpose. The purpose of the Partnership shall be (a) to
acquire, own, hold, develop, construct, improve, renovate,
rehabilitate, refurbish, maintain, lease, operate, finance,
refinance, sell, dispose of, and otherwise deal with the
Project and (b) to engage in such other businesses and
activities as the Partners approve; provided, however, that
upon receiving specific written instructions from the Limited
Partner, the General Partner will use its reasonable efforts
to cause the Partnership's business and any activities
conducted in connection therewith to be limited and conducted
in such a manner as to permit the Company at all times to be
classified as a REIT unless the Company ceases to qualify as
a REIT for reasons other than the conduct of the business of
the Partnership.
2.7 Powers. The Partnership shall be empowered to do any and all
acts 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, however, that the
Partnership shall not take, and shall refrain from taking, any
action which was described in a written notice from the
Limited Partner to the other Partners as being an action that,
in the judgment of the Limited Partner, in its sole and
absolute discretion (a) could adversely affect the ability of
the Company to continue to qualify as a REIT, (b) could
subject the Company to any 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 Company or its securities, unless such action (or
inaction) shall have been specifically consented to by the
Company in writing.
2.8 Governmental Certificates. Prior to commencing any activities
in any jurisdiction other than the State of Delaware, the
Partners will execute and acknowledge, and the Partnership
will promptly file or record with the proper offices in such
jurisdiction, such certificates as are required or permitted
by any partnership or fictitious name act or similar statute
in effect in such jurisdiction or political subdivision. The
Partners will further execute and acknowledge, and the
Partnership will promptly file or record as aforesaid, such
amended certificates or additional certificates as may from
time to time be required by the statutes to permit the
continued existence and operation of the Partnership.
2.9 Term. The term of the Partnership did or will commence on the
date on which the Certificate was or is filed in the office of
the Secretary of State of the State of Delaware and will
continue until it terminates in accordance with Article 9
following dissolution.
2.10 Mergers and Exchanges. The Partnership may adopt and effect
a plan of merger and may adopt and effect a plan of exchange
if the action is approved by all Partners.
ARTICLE 3.
CAPITAL CONTRIBUTIONS; PARTNER LOANS
3.1 Initial Capital Contributions. On the Closing Date, the
General Partner will make a Capital Contribution of $455,851
in cash and hereby contributes (and agrees to execute such
further assignments and other documents and to make physical
delivery and to take such further acts as may be necessary to
fully evidence and effect such contribution) to the
Partnership all of its interest in the Land, Plans, studies,
commitments, leases, letters of intent, construction
contracts, construction in progress, and other contracts,
assets, rights, and properties relating to the acquisition,
ownership, and development of the Project. The Partners agree
that the General Partner shall be treated as making an initial
Capital Contribution of $875,851 and shall receive a credit to
its Capital Account in the same amount. The Limited Partner
shall not be required to make an initial Capital Contribution
to the Partnership.
3.2 Additional Capital Contributions. The Partners may make
additional Capital Contributions to the Partnership from time
to time but shall be obligated to do so only if, when, and to
the extent they agree in writing to do so.
3.3 Additional Obligations of General Partner.
(a) If Guaranteed Cost Overruns occur, the General Partner
shall pay to the Partnership in cash any amount required
to satisfy the Partnership's obligations in connection
with such Guaranteed Cost Overruns. Any amount paid by
the General Partner pursuant to this Subsection 3.3(a)
shall not be considered a Capital Contribution or a loan
to the Partnership.
(b) If at any time there is an Excess Operating Shortfall,
the General Partner shall make a GP Loan to the
Partnership in an amount equal to the Excess Operating
Shortfall. On the Purchase Settlement Date, the General
Partner shall make a Capital Contribution to the
Partnership of all outstanding GP Loans.
3.4 Capital Accounts. A separate capital account (a "Capital
Account") shall be established and maintained for each Partner
in accordance with Section 1.704-2(b)(2)(iv) of the
Regulations.
3.5 No Other Capital Contributions Required. Except as set forth
in this Article 3, no Partner is required to make any Capital
Contribution to the Partnership.
3.6 Return of Contributions. Except as otherwise expressly set
forth in this Agreement, a Partner is not entitled to the
return of any part of its Capital Contributions to the
Partnership or to be paid interest in respect of either its
Capital Account or its Capital Contributions. An unrepaid
Capital Contribution to the Partnership is not a liability of
the Partnership or of any Partner.
3.7 No Duty to Restore Negative Capital Account. A Partner is not
required to contribute or lend any cash or property to the
Partnership to enable the Partnership to return any other
Partner's Capital Contributions or to make any distribution to
any other Partner, even if the first Partner has a deficit
balance in its Capital Account.
3.8 Loans by Partners. No Partner has or will have any obligation
to loan any funds to the Partnership. However, Walden, so
long as it is a Limited Partner, may make LP Loans to the
Partnership. Not all Partners must be given the opportunity
to make an LP Loan. An LP Loan constitutes a loan to the
Partnership and is not a Capital Contribution.
3.9 Project Financing. Walden shall obtain the Initial Loan and
the Company, Walden/Drever Operating Partnership, L.P. and The
Grupe Company shall act as guarantors of the Initial loan.
The principal amount of the Initial Loan shall be at least
$19,423,157, the loan fee due to the Initial Lender shall not
exceed 1% of the principal amount of the Initial Loan, the
Initial Loan shall have a term of three years, and the
Initial Loan shall accrue interest in accordance with the
Construction Loan Agreement referenced on Exhibit E. The
Partnership shall, upon the formation and commencement of the
Partnership, enter into the Initial Loan Documents. The
Partners hereby authorize: (a) the Partnership to obtain the
Initial Loan pursuant to the Initial Loan Documents, and (b)
the General Partner to execute and deliver, on behalf of the
Partnership, the Initial Loan Documents. The Partnership
shall borrow the Initial Loan on the terms and conditions
contained in the Initial Loan Documents. The Initial Loan
shall be used to pay Total Project Costs and Total Interest
Cost or for any other permissible purpose mutually agreed to
by the Partners. Notwithstanding the foregoing, nothing in
this Agreement shall be construed as superseding, modifying or
otherwise affecting the terms and provisions of the Initial
Loan Documents. To the extent that any provision of this
Agreement is in conflict with any provision of any Initial
Loan Document, such provision of the Initial Loan Documents
shall control.
3.10 Guarantee. The Grupe Company guarantees to the Partnership
and the Limited Partner, the General Partner's obligation to
make payments pursuant to Section 3.3 hereof. In addition, if
the General Partner, in its capacity as General Partner,
commits fraud, criminal conduct, willful misconduct or gross
negligence, The Grupe Company guarantees to the Partnership
and the Limited Partner, the General Partner's payment of
damages to the Partnership as a result of such described acts.
Any amount paid by the Grupe Company pursuant to this Section
3.10 shall not be considered a Capital Contribution or a loan
to the Partnership.
ARTICLE 4.
DISTRIBUTIONS
4.1 Distributions of Distributable Cash. Until the earlier of the
day immediately following the Purchase Settlement Date or
April 1, 2000, Distributable Cash shall be retained and held
in reserve for payment of Operating Expenses and Total
Interest Cost. On the day immediately following the Purchase
Settlement Date and on each Distribution Date following March
31, 2000, Distributable Cash shall be applied by the
Partnership and distributed to the Partners in accordance with
the following priorities (subject to any requirements of
applicable law with respect to the priority of creditors of
the Partnership, if any):
(a) First, to the Limited Partner in an amount equal to the
outstanding balance of all LP Loans applied first to
outstanding interest and then to outstanding principal;
(b) Second, to the General Partner in an amount equal to the
outstanding balance of all GP Loans;
(c) Third, to the General Partner in an amount equal to the
balance, if any, in the Distributable Land Equity
Account; and
(d) Fourth, the balance, if any, to the Partners pro rata in
accordance with their Sharing Ratios.
4.2 Special Payments.
(a) Contractor Fee. The Contractor Fee shall be payable to
Contractor in accordance with the terms and provisions of
the Construction Contract.
(b) Acquisition Fee. The Acquisition Fee shall be payable to
the Company as follows: (i) $14,000 on the Closing Date
and (ii) the balance upon the Partnership's receipt of an
invoice or other statement calculating the proper amount
of such fee.
(c) Development Fee. In connection with the Developer's
agreement to perform the services necessary to develop
the Project and if the Completion Date occurs on or prior
to the Final Date, the Partnership shall pay to the
Developer an amount equal to the excess, if any, of the
Development Fee over the aggregate amount of Cost
Overruns. The amount due pursuant to this Subsection
4.2(c) is to be paid in cash on the Completion Date.
ARTICLE 5.
ALLOCATIONS
5.1 Allocation of Net Profit. After applying the provisions of
Section 5.4 and except as otherwise provided in Section 9.9,
Net Profit for any Adjustment Period will be allocated in the
following order and priority:
(a) first, if the aggregate amount of Net Loss previously
allocated to any Partner exceeds the aggregate amount of
Net Profit previously allocated to such Partner (for the
current and all previous Adjustment Periods), then to
such Partner, or among such Partners, so as to reverse
the effect of the prior allocation of Net Loss in the
following order and priority:
(i) first, to the extent Net Loss was allocated to the
General Partner pursuant to Subsection 5.2(d) for
any prior Adjustment Period, Net Profit shall be
allocated to the General Partner to the extent of
such previously allocated Net Loss;
(ii) second, to the extent Net Loss was allocated to any
Partner(s) pursuant to Subsection 5.2(c) for any
prior Adjustment Period, Net Profit shall be
allocated to Partner(s) to the extent of such
previously allocated Net Loss (among the Partner(s)
in proportion to their respective shares of Net
Loss being offset);
(iii) third, to the extent Net Loss was allocated to
the General Partner pursuant to Subsection
5.2(b) for any prior Adjustment Period, Net
Profit shall be allocated to the General
Partner to the extent of such previously
allocated Net Loss;
(b) second, to the Partners in accordance with their Sharing
Ratios.
5.2 Allocation of Net Loss. After applying the provisions of
Section 5.4 and except as otherwise provided in Section 9.9,
Net Loss for any Adjustment Period will be allocated in the
following order and priority:
(a) first, to the extent Net Profit has been allocated
pursuant to Section 5.1(b) for prior Adjustment Periods,
Net Loss shall be allocated to offset such previously
allocated Net Profit (among the Partner(s) in proportion
to their respective shares of the Net Profit being
offset);
(b) second, if the General Partner's Land Equity Account
(computed as of the close of the Adjustment Period)
exceeds the cumulative amount previously allocated to the
General Partner under this Subsection 5.2(b), then to the
General Partner to the extent of the excess;
(c) third, to the Partners in proportion to and to the extent
of their respective positive Capital Account balances
until the Capital Account balance of each such Partner is
reduced to zero; and
(d) fourth, to the General Partner.
5.3 Limitation on Allocation of Net Loss. Notwithstanding the
provisions of Section 5.2, if the amount of Net Loss for any
Adjustment Period that would otherwise be allocated to a
Limited Partner under Section 5.2 would cause or increase an
Adjusted Capital Account Deficit of the Limited Partner as of
the last day of the Fiscal Year, then a proportionate part of
the Net Loss equal to the excess will be allocated to the
General Partner, and the remainder of the Net Loss, if any,
will be allocated to the Limited Partner.
5.4 Special Allocations. The following special allocations will
be made in the following order before allocations of Net
Profit or Net Loss are made:
(a) Minimum Gain Chargeback. Notwithstanding any other
provision of this Agreement to the contrary, if in any
Adjustment Period there is a net decrease in Partnership
Minimum Gain, then each Partner shall first be allocated
items of Gross Income for the Adjustment Period (and, if
necessary, subsequent Adjustment Periods) in an amount
equal to the portion of the Partner's share of the net
decrease in Partnership Minimum Gain, determined in
accordance with Regulations Section 1.704-2(g), that is
attributable to the disposition of Partnership property
subject to one or more nonrecourse liabilities of the
Partnership that are not Partner Nonrecourse Debts;
provided, however, if there is insufficient Gross Income
in an Adjustment Period to make the above allocation for
all Partners for the Adjustment Period, the Gross Income
will be allocated among the Partners in proportion to the
respective amounts they would have been allocated had
there been an unlimited amount of Gross Income for the
Adjustment Period.
(b) Minimum Gain Chargeback for Partner Nonrecourse Debt.
Notwithstanding any other provision of this Agreement to
the contrary other than Subsection 5.4(a), if in any
Adjustment Period there is a net decrease in Partner
Nonrecourse Debt Minimum Gain, then each Partner shall
first be allocated items of Gross Income for the
Adjustment Period (and, if necessary, subsequent
Adjustment Periods) in an amount equal to the portion of
the Partner's share of the net decrease in the Minimum
Gain during the Adjustment Period (as determined in
accordance with Regulations Section 1.704-2(i))
attributable to the disposition of Partnership property
subject to one or more Partner Nonrecourse Debts;
provided, however, if there is insufficient Gross Income
in an Adjustment Period to make the above allocation for
all Partners for the year, the Gross Income will be
allocated among the Partners in proportion to the
respective amounts they would have been allocated had
there been an unlimited amount of Gross Income for the
Adjustment Period.
(c) Qualified Income Offset. After application of
Subsections 5.4(a) and 5.4(b), if in any taxable year a
Limited Partner unexpectedly receives any adjustment,
allocation, or distribution described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5), or (6) and if the
Limited Partner has an Adjusted Capital Account Deficit
as of the first day of the taxable year, items of Gross
Income will be allocated to the Limited Partner in the
amount and in the manner sufficient to eliminate the
Adjusted Capital Account Deficit as quickly as possible;
provided, however, that an allocation under this
Subsection 5.4(c) will be made only if and to the extent
that the Limited Partner would have an Adjusted Capital
Account Deficit after all other allocations provided for
in this Article 5 have been tentatively made as if this
Subsection 5.4(c) were not in this Agreement.
(d) Partner Nonrecourse Deductions. Partner Nonrecourse
Deductions for any Adjustment Period or other period will
be allocated to the Partner who bears the economic risk
of loss with respect to the Partner Nonrecourse Debt to
which the Partner Nonrecourse Deductions are
attributable.
5.5 Curative Allocations. In the event that any Gross Income, Net
Profit (or items thereof), Net Loss (or items thereof) or
deductions are allocated under Sections 5.3 or 5.4 subsequent
Gross Income, Net Profit (or items thereof), or Net Loss (or
items thereof) will first be allocated (subject to
Sections 5.3 and 5.4) to the Partners in a manner that will
result in each Partner having a Capital Account balance equal
to that which would have resulted if the original allocation
of Gross Income, Net Profit (or items thereof), Net Loss (or
items thereof) or deductions under Sections 5.3 or 5.4 had not
occurred; provided, however, no allocations under this
Section 5.5 that are intended to offset allocations under
Subsection 5.4(a) or 5.4(b) will be made prior to the taxable
year during which there is a net decrease in Partner
Nonrecourse Debt Minimum Gain or Partnership Minimum Gain, and
then only to the extent necessary to avoid any potential
economic distortions caused by the net decrease in Partner
Nonrecourse Debt Minimum Gain or Partnership Minimum Gain, and
no such allocation under this Section 5.5 will be made to the
extent that the General Partner reasonably determines that it
is likely to duplicate a subsequent mandatory allocation under
Subsection 5.4(a) or 5.4(b).
5.6 Tax Allocations - Code Section 704(c). In accordance with
Code Section 704(c) and the related Regulations, income, gain,
loss, and deduction with respect to any property contributed
to the capital of the Partnership, solely for tax purposes,
will be allocated among the Partners so as to take account of
any variation between the adjusted basis to the Partnership of
the property for federal income tax purposes and the Book
Value of the property. The Partnership shall use the
"remedial allocation method" described in Section 1.704-3(d)
of the Regulations with respect to all property contributed to
the capital of the Partnership in connection with the
formation of the Partnership. Any other elections or other
decisions relating to allocations under this Section 5.6 will
be made by the General Partner with the consent of the Limited
Partner. Allocations under this Section 5.6 are solely for
purposes of federal, state and local taxes and will not
affect, or in any way be taken into account in computing, any
Partner's Capital Account or share of Net Profit, Net Loss or
other items or distributions under any provision of this
Agreement.
5.7 Other Allocation Rules.
(a) For purposes of determining the Net Profit, Net Loss, or
any other item allocable to any period, Net Profit, Net
Loss, and any such other item will be determined on a
daily, monthly, or other basis, as determined by the
General Partner using any permissible method under
Section 706 of the Code and the Regulations thereunder.
(b) If any Partnership Interest is Transferred, or the
Sharing Ratios are increased or decreased by reason of
the admission of a new Partner or otherwise, during any
Adjustment Period, each item of Net Profit or Net Loss
and other Partnership profit and loss for such Adjustment
Period shall be assigned pro rata to each day in the
particular period of such Adjustment Period to which such
item is attributable (i.e., the day on or during which it
is accrued or otherwise incurred) and the amount of each
such item so assigned to any such day shall be allocated
among the Partners based upon their respective interests
in the Partnership at the close of such day. For the
purpose of accounting convenience and simplicity, the
Partnership shall treat a Transfer of, or an increase or
decrease in, a Partnership Interest or an increase or
decrease in a Partner's Sharing Ratios which occurs at
any time during a semi-monthly period as having been
consummated on the first day of such semi-monthly period,
regardless of when during such semi-monthly period such
Transfer, increase or decrease actually occurs (i.e.,
Transfers or increases or decreases made during the first
15 days of any month will be deemed to have been made on
the first day of the month and Transfers or increases or
decreases thereafter will be deemed to have been made on
the 16th day of the month).
ARTICLE 6.
OTHER FINANCIAL MATTERS
6.1 Compensation of General Partner; Reimbursement of General
Partner. The General Partner shall not be entitled to any
compensation for services rendered as General Partner.
However, the General Partner shall be reimbursed promptly by
the Partnership for costs and expenses reasonably incurred by
it in connection with the performance of its duties to the
Partnership, but only to the extent anticipated in the Project
Budget or Operating Budget or otherwise as Approved by the
Limited Partner.
6.2 Books, Records, Accounting and Reports.
(a) Records and Accounting. The General Partner shall keep
or cause to be kept appropriate books and records with
respect to the Partnership's business at the principal
office of the Partnership or such other office as the
General Partner may designate for that purpose. The
books of the Partnership shall be maintained for
financial reporting purposes on the cash or accrual
basis, in accordance with generally accepted accounting
principles and applicable law. Any Partners shall have
the right to inspect and copy the books and records of
the Partnership at its discretion and at the expense of
the Partnership.
(b) Fiscal Year. The fiscal year of the Partnership shall be
the calendar year.
(c) Reports.
(i) Annual Reports. By no later than March 31 of the
following year, the General Partner shall cause to
be delivered to the Limited Partner reports
containing unaudited financial statements of the
Partnership for the fiscal year just concluded,
presented on a cash basis, including a balance
sheet and a statement of income and cash flow. The
Limited Partner shall have the right, at its
expense, to require an audit of the Partnership's
financial statements for any fiscal year.
(ii) Quarterly Reports. Within 30 days after the
expiration of the respective quarter, the General
Partner shall cause to be delivered to the Limited
Partner a report containing unaudited financial
statements of the Partnership for such just
concluded quarter consisting of at least a balance
sheet and cash flow statement.
(iii) Monthly Reports. Beginning with the Leasing
Commencement Date, within 30 days after the
end of each calendar month, the General
Partner shall cause to be delivered to the
Limited Partner a rent roll and an operating
statement for the Project.
(iv) Initial Lender Reports. The General Partner shall
promptly provide the Limited Partner with copies of
all draw requests and all other material
correspondence, notices and other written
communication to or from the Initial Lender. On or
before five days prior to each due date thereof,
the General Partner shall provide the Limited
Partner, via facsimile, with written evidence of
the payment of all amounts due on the Initial Loan.
6.3 Tax Matters.
(a) Preparation of Tax Returns. The General Partner shall
arrange for the preparation of all returns of Partnership
income, gain, loss, deduction, credit, and other items
necessary for federal, state, and local income tax
purposes and shall cause the same to be filed in a timely
manner. The General Partner shall furnish to the Limited
Partner a copy of each such return, together with any tax
information reasonably required for federal and state
income tax reporting purposes. If required, within 60
days after the end of each fiscal quarter of the
Partnership, the General Partner shall furnish to the
Partners the tax information reasonably required for the
Partners to determine quarterly tax estimate payments.
(b) Tax Elections. The General Partner shall determine
whether to make any available tax election.
(c) Tax Controversies. Subject to the provisions hereof, the
General Partner is designated the Tax Matters Partner (as
defined in Section 6231 of the Code) and is authorized
and required to represent the Partnership, at the
Partnership's expense, in connection with all
examinations of the Partnership's affairs by tax
authorities, including resulting administrative and
judicial proceedings, and to expend Partnership funds for
professional services and costs associated therewith.
The General Partner shall deliver to the Limited Partner,
within ten Business Days following receipt thereof, a
copy of any notice or other communication with respect to
the Partnership received by the General Partner from the
Internal Revenue Service (or other governmental tax
authority), and if requested by any Limited Partner,
shall provide to counsel designated by such Limited
Partner a copy of any submission to be made to the
Internal Revenue Service (or other governmental tax
authority) or any court with respect to any
administrative or judicial proceeding involving the
Partnership prior to the submission thereof to the
Internal Revenue Service (or other governmental tax
authority) or the court, as the case may be, and shall
direct counsel for the Partnership to confer with counsel
of such Limited Partner and to consider in good faith all
comments or suggestions of counsel for such Limited
Partner. The Limited Partner agrees to cooperate with
the General Partner in connection with such proceedings.
(d) Organizational Expenses. The Partnership shall elect to
deduct expenses incurred in organizing the Partnership
ratably over a 60-month period as provided in Section 709
of the Code.
(e) Taxation as a Partnership. No election shall be made by
the Partnership or by any Partner for the Partnership to
be excluded from the application of any of the provisions
of Subchapter K, Chapter 1 of Subtitle A of the Code or
from any similar provisions of any state tax laws.
ARTICLE 7.
POWERS, RIGHTS, AND DUTIES OF PARTNERS
7.1 Obligation of the General Partner. The General Partner shall
conduct the business of the Partnership in accordance with
this Agreement.
7.2 Authority of Limited Partners. The Limited Partners as such
(a) have no rights or powers in the management of the
Partnership, (b) have no power to sign for or bind the
Partnership, and (c) may not attempt to take part in the
management of the business of the Partnership. The rights of
the Limited Partners to consent to and approve of certain
matters under the provisions of this Agreement shall not be
construed as participation in the operation and management of
the business of the Partnership or the exercise of control
over the Partnership affairs.
7.3 Powers and Duties of the General Partner.
(a) In General. Subject to the limitations set forth in this
Agreement, the General Partner is responsible for the
day-to-day management of Partnership operations and
performing or overseeing the performance of all acts
needed to carry on the Partnership business on a daily
basis. Its responsibilities include, without limitation,
oversight of the Partnership's operation and maintenance
of Partnership property, management of Partnership
operations, maintenance of financial and tax accounting
records, preparation and filing of tax and securities
laws reports, dissemination and receipt of communications
with the Limited Partner, dissemination of distributions,
and establishment and management of a reasonable cash
reserve. The General Partner has the power and authority
to execute, without the joinder of any other Partner,
instruments evidencing matters approved of in accordance
with the terms of this Agreement.
(b) Powers of the General Partner. The General Partner shall
have the right (except for those matters set forth in
Section 7.4 hereof) and the duty to take any and all
actions the General Partner deems necessary or advisable,
in the General Partner's reasonable opinion, in order to
carry out the purpose of the Partnership, and, without
limitation:
(i) to execute and to deliver, for and on behalf of the
Partnership, any promissory notes, deeds of trust,
mortgages, security agreements, financing
statements, assignments of leases, "master leases",
or other instruments required or advisable in
connection with any permitted loans, mortgages,
pledges or hypothecations, specifically including
the Initial Loan Documents;
(ii) to design and construct the Project and to develop
and improve the Land or to cause the Project to be
designed and constructed and the Land to be
developed and improved;
(iii) to administer all matters pertaining to
insurance with respect to Partnership
property;
(iv) to institute, prosecute and defend any legal or
administrative actions or proceedings on behalf of
or against the Partnership;
(v) to operate and maintain, or cause to be operated
and maintained the Project, or any part or parts
thereof;
(vi) to employ, terminate employment, supervise and
compensate out of Partnership funds all Persons for
and in connection with the business of the
Partnership or the acquisition, improvement,
operation, maintenance, management, leasing,
financing, refinancing, sale, exchange, or other
disposition of the Project, or any interest
therein;
(vii) to acquire, repair and replace such tangible
and intangible personal property as may be
necessary to carry on the business of the
Partnership;
(viii) to negotiate and execute leases for
prospective tenants or other occupancy
agreements with prospective concessionaires in
the Project;
(ix) to collect all rentals and all other sums due to
the Partnership and to enforce the obligations of
tenants, concessionaires, and guests of the
Project;
(x) to negotiate and contract with all utility
companies servicing the Project;
(xi) to apply for and maintain all licenses and permits
required to be obtained and maintained by the
Partnership;
(xii) to negotiate the amounts of all taxes,
assessments, and other impositions applicable
to Partnership Property with the proper
authorities and, when appropriate, undertake
any action or proceeding seeking to reduce
such taxes, assessments or impositions;
(xiii) to deposit all monies received by General
Partner for or on behalf of the Partnership
into such accounts as may be designated by the
General Partner and to disburse and to pay all
funds on deposit on behalf of the Partnership
in such amounts and at such time as the same
are required in connection with the ownership,
construction, development, maintenance and
operation of the Partnership;
(xiv) to supervise and coordinate construction and
architectural services, to engage in the
leasing of rooms, apartments or other space in
the Project, and to perform accounting and
other functions normally performed by
development partners;
(xv) to take such actions (and promptly thereafter, send
written notice to the Limited Partner) as it, in
its reasonable judgment, deems necessary for the
protection of life or health or the preservation of
the assets of the Partnership, if, under the
circumstances, any delay would materially increase
the risk to life or health or the preservation of
such assets; and
(xvi) to take all actions, undertake such
proceedings, exercise all rights and execute
all documents not expressly described herein
deemed necessary or advisable by the General
Partner to perform any of the foregoing or any
rights or obligations of the General Partner
set forth elsewhere in this Agreement or to
conduct or carry out the business of the
Partnership.
(c) Project Budget. The General Partner shall supervise the
construction of the Project in accordance with the Plans
and the Project Budget. During the Construction Period,
the Limited Partner shall receive copies of all materials
the Partnership is required to provide to the Initial
Lender.
(d) Decorator/Designer. The General Partner shall retain
Carol Campbell as the decorator for the Project's
clubhouse and model and Walter Von Rochsburg as the
architect to design the signage and graphics for the
Project. If the proposals submitted by either Carol
Campbell or Walter Von Rochsburg are not consistent with
the Plans and the Project Budget, the General Partner
shall have the authority to remove either person and
replace them with any person qualified to perform the
required task.
(e) Duties of General Partner. The General Partner shall
manage and control the affairs of the Partnership to the
best of its ability and conduct the operations
contemplated hereby in a careful and prudent manner and
in accordance with good industry practice. The General
Partner in its capacity as such shall devote as much time
to the performance of its duties under this Agreement as
is necessary to carry on the affairs of the Partnership.
Without limiting the foregoing, the General Partner shall
diligently (i) conduct all operations of the Partnership
in accordance with good business practices and in an
efficient and economical manner, (ii) cause the
Partnership to comply with all laws and regulations,
including zoning and other governmental ordinances
affecting the Partnership and the Project, (iii) cause
the Partnership to comply with the terms and conditions
of this Agreement, the Initial Loan Documents and all
other agreements, contracts and obligations of the
Partnership, (iv) use reasonable efforts to adhere to the
Time Schedule for construction and completion of the
Project set forth in Exhibit G, and (v) following the
Purchase Price Computation Date but prior to the Purchase
Settlement Date submit draw requests to the Initial
Lender for all remaining amounts that could be drawn
pursuant to the Initial Loan. The General Partner shall,
at all times, act in a manner consistent with its
fiduciary duties to the Partnership and the Limited
Partner.
7.4 Restrictions on the Authority of the General Partner.
(a) The General Partner may not:
(i) Acquire any property in exchange for interests in
the Partnership;
(ii) Commingle Partnership funds with those of any other
Person or permit Partnership funds or assets to be
employed in any manner except for the exclusive
benefit of the Partnership;
(iii) Permit any Person who makes a loan to the
Partnership to acquire, as a result of making
such loan, any direct or indirect interest in
the profits, capital, or assets of the
Partnership other than an interest as a
secured creditor;
(iv) Make, execute, or deliver any adjustment,
compromise, or settlement of any claim against the
Partnership other than in the ordinary course of
business;
(v) Except as required by the Initial Loan Documents or
otherwise in the ordinary course of business,
encumber or grant a lien on any Partnership
property;
(vi) Sell any general or limited partner interests in
the Partnership, or add any Partner;
(vii) Do any act in contravention of this Agreement;
(viii) Mortgage, pledge, hypothecate, for and on
behalf of the Partnership, all or any part of
the property of the Partnership, in order to
secure any loans to the Partnership for the
refinancing of the Initial Loan;
(ix) Sell, transfer or convey the Project or any
material part thereof or interest therein (divided
or undivided) or sell, transfer or convey any other
material assets of the Partnership;
(x) Make any agreement of merger or consolidation of
the Partnership or change or reorganize the
Partnership into any other legal form;
(xi) Possess Partnership property or assign the rights
of the Partnership in any Partnership property for
other than a Partnership purpose;
(xii) Borrow money on behalf of the Partnership
(except for the Initial Loan, the GP Loans and
the LP Loans) or grant any mortgage or lien to
secure any borrowing (except for the mortgages
and liens securing the Initial Loan);
(xiii) Amend in any material manner the terms of,
renew or extend the Initial Loan or any
document evidencing or securing the same;
(xiv) Settle any litigation by or against the
Partnership except for litigation arising in
the ordinary course of business;
(xv) Take any action which under federal tax law in
effect as of the date of this Agreement would cause
the Partnership to be treated as an association
taxable as a corporation for federal income tax
purposes;
(b) Without the prior approval of the Initial Lender, the
General Partner may not:
(i) Amend any contract or agreement with an Affiliate
which has previously been Approved by the Initial
Lender or the Limited Partner or, or otherwise
enter into or amend any contract or agreement that
delegates to any other Person or entity
discretionary authority over the management or
operation of the Partnership;
(ii) Confess a judgment in excess of $5,000 against the
Partnership;
(iii) Make any material or substantive changes to
the scope or quality of the Project;
(iv) Make changes to the Plans which alter the size,
appearance, utility or value of the Project;
(v) Except for the Construction Contract, the
Management Agreement and any apartment lease with
Executive Living that otherwise complies with the
terms of the Management Agreement, enter into any
contract with an Affiliate of the General Partner
or The Grupe Company;
(vi) Execute any changes in the Plans unless the amount
of such change is less than $25,000 and all changes
theretofore made are less than $100,000 in the
aggregate;
(vii) Make any material change to the insurance
carried by the Partnership;
(viii) Except as necessary to reflect changes in the
Plans permitted to be made pursuant to
Subsection 7.4(b)(vi) hereof, amend, modify,
or terminate the Construction Contract or
enter into any additional construction
contract.
7.5 Reliance on Authority. In its dealings with the Partnership,
a third party may rely on the authority of the General Partner
to bind the Partnership without reviewing the provisions of
this Agreement or confirming compliance with the provisions of
this Agreement; however, as between the Partners and as
between the General Partner and the Partnership, the authority
of the General Partner to act on behalf of the Partnership
shall be determined from the pertinent provisions of this
Agreement.
7.6 Title to Partnership Assets. Title to the properties and
assets of the Partnership, 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 properties or assets or any portion thereof.
7.7 Removal of General Partner. The Limited Partner may remove
the General Partner for Cause. The term "Cause" is defined to
mean: (a) a material breach resulting from an act of fraud or
gross negligence by the General Partner of its obligations
under this Agreement, (b) a material breach, not resulting
from an act of fraud or gross negligence, by the General
Partner of its obligations under this Agreement, which breach
continues unremedied for a period of 30 days after any Limited
Partner gives notice to the defaulting General Partner
specifying the default, (c) the bankruptcy or insolvency of
the General Partner, (d) the material breach resulting from an
act of fraud or gross negligence by any Affiliate of the
General Partner of a duty or obligation under a material,
written contract or agreement with the Partnership, (e) the
material breach, not resulting from an act of fraud or gross
negligence, by any Affiliate of the General Partner of a duty
or obligation under a material, written contract or agreement
with the Partnership if within a period of 30 days after any
Limited Partner gives notice to the General Partner and the
defaulting Affiliate specifying the default, either the
default has not either been cured or the contract or the
agreement replaced with a substitute which does not otherwise
adversely impact the Partnership, (f) the dissolution or
cessation of business of the General Partner, or (g) the
Completion Date does not occur on or before the Final Date.
Nothing contained herein shall limit any other rights or
remedies which are, at law, afforded to the Limited Partner.
7.8 Transfer of Interests.
(a) Transfer. No Partnership Interest may be Transferred, in
whole or in part, except in accordance with the terms and
conditions set forth in this Section 7.8. Any Transfer
or purported Transfer of any Partnership Interest not
made in accordance with this Section 7.8 is null and
void. A Person who alleges to be a transferee of a
Partnership Interest that was not Transferred in
accordance with this Agreement has no right to require
any information or account of the Partnership's
transactions or to inspect the Partnership's books. The
Partnership is entitled to treat the alleged transferor
of a Partnership Interest as the absolute owner thereof
in all respects and incurs no liability to any alleged
transferee for distributions to the Partner owning such
Partnership Interest of record or for allocations of Net
Income, Net Losses, deductions or credits or for
transmittal of reports and notices required to be given
to holders of Partnership Interests.
(b) Assignment. Any Partner may, upon prior written notice
to the General Partner but without any consent required,
assign to any Person or entity all or any part of (i)
such Partner's right to distributions under Article 4
hereof, or (ii) any other economic right or benefit under
this Agreement attributable to such Partner's Partnership
Interest; provided, however, that notwithstanding any
provision to the contrary contained in this Agreement or
the Act, in no event may this Subsection 7.8(b) result in
the Transfer of any voting rights or other non-economic
attributes of the assigned interest. No assignee
acquiring the economic rights and benefits of a Partner
solely by reason of this Subsection 7.8(b) may exercise
any rights of a Partner, and to the extent that any
Partner assigns its Partnership Interest solely pursuant
to this Subsection 7.8(b), it shall not cease to be a
Partner.
(c) Transfer by General Partner. The General Partner may not
Transfer its Partnership Interest to any Person without
the Approval of the Limited Partner.
(d) Transfer by a Limited Partner. Except as otherwise
provided in Subsection 7.8(b), a Limited Partner may not
Transfer its Partnership Interest to any Person unless it
has first obtained the Approval of the General Partner.
(e) Substituted Limited Partner. An assignee or transferee
(other than an existing Partner) of the Partnership
Interest of a Limited Partner may be admitted as a
substitute partner ("Substituted Partner") upon the
receipt by the General Partner of an appropriate
supplement to this Agreement pursuant to which such
Substituted Partner agrees to be bound by all the terms
and provisions of this Agreement. Unless the assignee is
already a General Partner, any assignee of a Partnership
Interest satisfying these requirements shall become and
shall have only the rights and duties of a Limited
Partner and the assigned Partnership Interest shall
thereafter be a Limited Partner's Partnership Interest.
The General Partner shall reflect the admission of a
Substituted Partner and the withdrawal of the
transferring Partner, if appropriate, by preparing a
supplemental Exhibit, dated as of the date of such
admission and withdrawal, and by filing it with the
records of the Partnership. Any Substituted Partner
shall, if required by the General Partner, prior to such
admission, also execute any other documents requested by
the General Partner, including, without limitation, an
irrevocable power of attorney in form satisfactory to the
General Partner appointing the General Partner as such
Person's attorney-in-fact with full power to execute,
swear to, acknowledge, and file all certificates and
other instruments necessary to carry out the provisions
of the Agreement, including, without limitation, such
undertakings as the General Partner may require for the
payment of all fees and costs necessary to effect any
such Transfer and admission. Upon admission, such
Substituted Partner shall be subject to all provisions of
this Agreement in the place and stead of his assignor as
if the Substituted Partner originally was a party to this
Agreement.
(f) General Partner Put Option. The Limited Partner hereby
grants to the General Partner an option to require the
Limited Partner to purchase the entire Partnership
Interest of the General Partner at the greater of the
Bonus Purchase Price or the Target Purchase Price (the
"GP Put Option"). At any time on or before December 10,
1999, the General Partner may deliver to the Limited
Partner a written notice (the "GP Put Notice") that the
General Partner desires to exercise the GP Put Option.
The GP Put Option shall expire if the GP Put Notice is
not issued on or before December 10, 1999. The purchase
price shall be determined and the transfer consummated in
accordance with Subsection 7.8(h).
(g) Limited Partner Call Options.
(i) The General Partner hereby grants to the Limited
Partner or its designee an option to purchase the
entire Partnership Interest of the General Partner
(the "LP Call Option"). At any time after December
10, 1999, the Limited Partner or its designee may
deliver to the General Partner a written notice
(the "LP Call Notice") that the Limited Partner
desires to exercise the LP Call Option at the
greater of the Bonus Purchase Price or the Target
Purchase Price. The purchase price shall be
determined and the transfer consummated in
accordance with Subsection 7.8(h).
(ii) At any time prior to December 11, 1999, the Limited
Partner or its designee may deliver to the General
Partner a LP Call Notice that the Limited Partner
desires to exercise the LP Call Option for a
purchase price equal to the sum of the Investment
Amount plus $721,059.
(h) Put/Call Procedures.
(i) The GP Put Notice (A) shall set forth the Purchase
Price Computation Date, which shall not be later
than December 10, 1999, and (B) shall contain the
General Partner's calculation of the GP Computed
Expenses, the Purchase Price Expenses, and the
Ancillary Income. The General Partner shall attach
to the GP Put Notice all workpapers, schedules and
other materials supporting or explaining the
General Partner's calculation of the GP Computed
Expenses, the Purchase Price Expenses, and the
Ancillary Income.
(ii) The LP Call Notice shall set forth the Purchase
Price Computation Date, which, unless the LP Call
Option is being exercised pursuant to Subsection
7.8(g)(ii), shall not be earlier than December 11,
1999. If the LP Call Option is being exercised
pursuant to Subsection 7.8(g)(i), within ten days
following receipt of the LP Call Notice, the
General Partner shall submit to the Limited Partner
the General Partner's calculation of the GP
Computed Expenses, the Purchase Price Expenses, and
the Ancillary Income. The General Partner shall
attach to its submission all workpapers, schedules
and other materials supporting or explaining the
General Partner's calculation of the GP Computed
Expenses, the Purchase Price Expenses and the
Ancillary Income.
(iii) During the ten day period following the
Limited Partner's receipt of the General
Partner's calculation of the GP Computed
Expenses and the Ancillary Income, the parties
shall endeavor to agree on the amount of the
GP Computed Expenses and the Ancillary Income.
If the parties are unable to agree on the
amount of the GP Computed Expenses, the
Purchase Price Expenses shall be presumed to
be equal to $936,577 plus the Excess Real
Estate Taxes. If the parties are unable to
agree on the amount of the Ancillary Income,
the Ancillary Income will be presumed to be
equal to the sum of (A) $144 per unit/per year
based on 95% occupancy, and (B) an annualized
amount based on the preceding three month net
effective garage rental per garage assuming
95% of the available garages are occupied.
(iv) As soon as practicable following the Purchase Price
Computation Date, the General Partner shall
deliver to the Limited Partner a certified rent
roll (as of the Purchase Price Computation Date)
for apartments and garages and the General
Partner's calculation of the greater of the Bonus
Purchase Price or the Target Purchase Price. The
Limited Partner shall have the right to audit the
Partnership's records including the rent roll,
leases and tenant files to verify the number of
Qualified Tenants and Non-Defaulting Tenants. If
the parties are unable to agree on the proper
calculation of the Bonus Purchase Price of the
Target Purchase Price, either party may submit the
matter to arbitration pursuant to Section 10.10.
(v) As soon as practicable following the determination
of the appropriate purchase price, the Limited
Partner shall deliver to the General Partner the LP
Put/Call Closing Notice.
(vi) The Limited Partner's obligations pursuant to this
Section 7.8 shall be conditioned upon and subject
to (A) delivery of an as built survey and a
downdate endorsement, (B) the General Partner's
certification that as of the Purchase Settlement
Closing the units in the Project will be in
substantially a rent ready condition and (C) the
Limited Partner's right to walk the units to ensure
that such units are in such condition.
(vii) The Limited Partner shall pay the General
Partner the appropriate purchase price in cash
at the Purchase Settlement Closing to occur by
the Purchase Settlement Date. After the
Purchase Settlement Date, the General Partner
will have no additional obligations under the
Partnership Agreement or with respect to the
Partnership, the Limited Partner or the
Project. The Limited Partner will defend,
indemnify, and hold the General Partner (and
its Affiliates and agents) harmless from and
against all claims, losses, costs, liabilities
and expenses (including attorneys' fees)
related to the Partnership or the Project
which are attributable to actions, events or
periods occurring after the Purchase
Settlement Date.
7.9 Management of the Project. The operation, management and
maintenance of the Project (other than the construction and
development thereof) shall be conducted by a Manager (or, upon
its resignation, termination or expiration of its Management
Agreement without the same being renewed, or any other event
which results in its no longer serving as the Manager, then by
a successor Manager) pursuant to a management agreement
between the Partnership and the Manager (each such management
agreement being herein called the "Management Agreement").
The form, terms, and provisions of the Management Agreement
must be Approved by all Partners. The Manager and each
successor Manager shall be selected and appointed by the
General Partner. The initial Manager shall be Franklin
Landings Management Company. All Partners hereby authorize
the General Partner, on behalf of the Partnership, to enter
into a Management Agreement with Manager in the form Approved
by all Partners. The Limited Partner may elect to cause the
Partnership to terminate the Management Agreement if the
Partnership has the right to do so under the applicable
Management Agreement.
7.10 Budgetary Approval Process.
(a) The Project Budget is attached hereto as Exhibit F. The
General Partner may freely reallocate to contingency any
savings in any line item in the Project Budget. Subject
to the terms of the Initial Loan, the General Partner may
freely reallocate from contingency to any other line item
in the Project Budget.
(b) Beginning on the Leasing Commencement Date, the Project
shall be operated pursuant to an approved Operating
Budget. At least 45 days prior to the beginning of a
Fiscal Year (or at least 45 days prior to the Leasing
Commencement Date, as the case may be) in the case of the
Operating Budget for such Fiscal Year, the General
Partner shall submit the proposed Operating Budget to the
Limited Partner.
7.11 Services By and Payments to the General Partner and Certain
Affiliates Thereof.
(a) No commissions shall be paid by the Partnership to the
General Partner for leases heretofore or hereafter
entered into by the Partnership.
(b) The actual salaries, benefits, bonuses and burdens for
any employees of the General Partner and/or its
Affiliates actually and directly involved in the
development, construction, marketing or leasing of the
Project shall be payable as Total Project Costs,
provided, that such Total Project Costs will not include
the salaries of any employees of Contractor other than a
superintendent, assistant superintendent and a job cost
accountant.
7.12 Approvals and Consents. Whenever the approval, satisfaction
or consent of a party hereto is required or requested, such
approval, satisfaction or consent may be granted or withheld
in such party's reasonable discretion unless expressly
provided herein to the contrary. Any approval, satisfaction,
or consent hereunder must be express and in writing duly
executed and delivered by the party to be bound thereby,
unless otherwise specified to the contrary in this Agreement.
No Partner shall unreasonably delay its response to a request
for approval, satisfaction or consent hereunder.
7.13 Notices and Meetings. Whenever any notice is required to be
given to any Partner under the provisions of this Agreement,
or under any provision of the Partnership Act, a waiver
thereof, in writing, signed by the Person or Persons entitled
to such notice, whether before or after the time stated
therein, is equivalent to the giving of such notice. Except
as provided in the next sentence, any action, vote, approval
or consent required or permitted to be taken or made by any
Partner pursuant to this Agreement may be taken or made only
by the vote of such Partner at a duly called meeting thereof.
Any action which could be taken at any meeting of the Partners
may be taken without a meeting, without prior notice, and
without a vote if a consent (or consents) in writing, setting
forth the action so taken, is signed by all Persons entitled
to vote with respect to the action that is the subject of the
consent. Subject to the giving of the required notice (or a
waiver executed in lieu thereof), the Partners may participate
and hold a meeting by telephone conference or similar
communications equipment by which all Persons participating in
the meeting can hear each other, and participating in such a
meeting constitutes the presence in Person at such meeting,
except where a Person participates in the meeting for the
express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called
or convened or that proper notice of such business has not
been given.
7.14 Compliance with Financing Documents. The Partnership and each
Partner shall comply with each provision of the Initial Loan
Documents applicable to it.
ARTICLE 8.
CERTAIN COVENANTS AND REPRESENTATIONS OF PARTNERS
8.1 Information. In addition to the other rights specifically set
forth in this Agreement, each Partner is entitled to all
information to which that Partner is entitled to have access
under the Partnership Act under the circumstances and subject
to the conditions therein stated. No Person to whom a Transfer
is purported to be made without compliance with this Agreement
will be entitled to have access to any information about the
Partnership.
8.2 Conflicts of Interest. Nothing in this Agreement will prevent
or restrict a Partner or any of its Affiliates from engaging
in or possessing interests in other business ventures of any
and every type and description, independently or with others,
including ones in direct competition with the Partnership. No
such action will be deemed wrongful or improper under this
Agreement and neither the Partnership nor any other Partner
will have any right to participate therein.
ARTICLE 9.
DISSOLUTION, LIQUIDATION, AND TERMINATION
9.1 Dissolution. The Partnership will dissolve upon the first to
occur of the following events:
(a) The 15th anniversary of the date of this Agreement (or
such later date that the Partners may approve in
writing);
(b) At the time as there is only one Partner;
(c) The dissolution by the written agreement of all Partners;
(d) The sale or other disposition of the Project, unless such
sale or other disposition involves any deferred payment
of the consideration therefor, in which case the
Partnership will not be dissolved until the last day of
the calendar year during which the Partnership collects
the full amount of the deferred payment or otherwise
ceases to have any rights to collect the deferred payment
as a result of the bankruptcy of the obligor or
otherwise;
(e) The entry of a decree of judicial dissolution under the
Partnership Act; and
(f) The occurrence of an Event of Withdrawal with respect to
the General Partner unless the Limited Partner agrees in
writing, within 90 days after the occurrence of the Event
of Withdrawal, to continue the Partnership and to the
appointment, effective as of the date of the Event of
Withdrawal, of a new general partner if necessary or
desired.
9.2 Interim Manager. If the Partnership is dissolved as a result
of the General Partner's being a Bankrupt Partner, the Limited
Partner may appoint an interim manager of the Partnership (the
"Interim Manager"), who will have and may exercise only the
rights, powers, and duties of a general partner necessary to
preserve the Partnership assets, until (a) a new general
partner, if any, is elected, if the Partnership is
reconstituted or (b) the Liquidating Manager is appointed, if
the Partnership is not reconstituted as permitted by Section
9.1. The Interim Manager will not be liable as a general
partner to the Partners.
9.3 Winding Up and Liquidation.
(a) Winding Up. Upon the dissolution of the Partnership, if
it is not reconstituted by the Partners as permitted in
this Agreement, the Liquidating Manager will proceed to
wind up the affairs and business of the Partnership. A
reasonable time will be allowed for the orderly
liquidation of the Partnership's assets under this
Article 9 in order to minimize the risk of loss that
might be attendant upon the a liquidation. In connection
with the winding up, the Liquidating Manager will sell or
otherwise dispose of the Partnership's assets; provided,
however, that, without the written consent of the Limited
Partner, except to the extent required to satisfy the
debts and liabilities of the Partnership, the Liquidating
Manager will not sell any of the assets of the
Partnership. If such consent is not obtained, the assets
of the Partnership, to the extent they need not be
liquidated to satisfy the debts and liabilities of the
Partnership, shall be distributed in kind to the
Partners. Each Partner hereby consents to such in-kind
distribution.
(b) Powers. Until final distribution, the Liquidating
Manager will continue to operate the Partnership
properties with all of the power and authority of the
General Partner.
(c) Distributions in Liquidation. Liquidating distributions
will be applied and distributed as follows:
(i) to the repayment of debts and liabilities of the
Partnership, including those owed to Partners; then
(ii) to the establishment of the cash reserves as the
Liquidating Manager deems appropriate for any
contingent or unforeseen liabilities of the
Partnership; provided, however, that at the
expiration of the period as the Liquidating Manager
deems advisable, the balance of the cash reserves
will be distributed to the Partners in the manner
hereinafter provided; and then
(iii) to the Partners in accordance with Article 4.
(d) In-Kind Distributions. Except as contemplated by
Subsection 9.3(a), no in-kind distributions will be made
to the Partners without the Approval of all Partners.
9.4 Cost of Winding Up; Audit. The costs of winding up and
liquidation will be borne by the Partnership. At the election
of the Limited Partner, the Liquidating Manager will cause an
independent auditor to prepare a complete and final certified
audit of the books, records, and accounts of the Partnership
and all adjustments between the Partners will be made upon the
basis of the certified audit.
9.5 Termination of Interest. The distribution of cash or property
to a Partner in accordance with the provisions of this Article
constitutes a complete return to the Partner of its capital
contributions and a complete distribution to the Partner in
respect of its Partnership Interest and all the Partnership's
property and constitutes a compromise to which all Partners
have consented for purposes of the Partnership Act. To the
extent that a Partner returns funds to the Partnership, it has
no claim against any other Partner for those funds.
9.6 Subsequent Distributions. If at any time (whether before or
after termination of the Partnership) any of the funds placed
in reserve(s)under this Article are released because, in the
opinion of the Liquidating Manager, the need for the
reserve(s) has ended, the funds will be distributed in
accordance with this Article.
9.7 Filing Certificate of Cancellation. Promptly after the
distribution of assets under this Article (other than funds
that are reserved under this Article), the General Partner (or
the other Person or Persons as the Partnership Act may require
or permit) will cause a Certificate of Cancellation to be
filed with the Secretary of State of the State of Delaware,
cancel any other filings made under Section 2.7, and take such
other actions as may be necessary to terminate the
Partnership.
9.8 Date of Termination. The Partnership will be terminated when
all of its assets (other than those to be distributed in kind
pursuant to this Agreement) have been converted into cash, all
promissory notes or other evidences of indebtedness derived by
the Partnership from the conversion of its assets (other than
those to be distributed in kind pursuant to this Agreement)
have been collected or otherwise converted into cash, and all
the cash, together with any other cash held by the Partnership
and the assets to be distributed in kind pursuant to this
Agreement, has been applied and distributed in accordance with
the provisions of this Article. The establishment of any cash
reserves under this Article will not have the effect of
extending the term of the Partnership, but any such cash
reserves will be applied and distributed in the manner
provided in the Section upon expiration of the period of the
reserve.
9.9 Allocations in Year of Liquidation. It is the intent of the
Partners that the allocations set forth in Article 5 will
cause the positive balance of the Capital Account of each of
the Partners to equal the distributions required under this
Article to such Partner. Accordingly, if after giving
hypothetical effect to the allocations set forth in Article 5
and all adjustments attributable to contributions and
distributions of money and property effected prior to the
distributions under Subsection 9.3(c)(iii), the positive
Capital Account of each of the Partners is not equal to the
distributions to be made to each Partner under this Article,
Net Profit (or items thereof), Net Loss (or items thereof),
and gross income will be allocated among the Partners so that
the positive balance in each Partner's Capital Account, prior
to the distributions under this Article, equals the amount of
distributions to be received by the Partner under Subsection
9.3(c)(iii) in the order of priority set forth therein.
ARTICLE 10.
MISCELLANEOUS
10.1 Extent of Liability.
(a) The General Partner shall be fully liable for any
liability or loss incurred or suffered by the Partnership
or any other Partner caused by any act or omission of the
General Partner or any of the General Partner's
Affiliates that: (i) constitutes bad faith, active and
deliberate fraud, dishonesty, willful neglect, willful
misconduct or gross negligence, (ii) is outside the scope
of authority of the General Partner under this Agreement,
(iii) results in the General Partner or any of its
Affiliates actually and knowingly receiving an improper
benefit in money, property, or services, (iv) is criminal
if the General Partner had reasonable cause to believe
that such act or omission was criminal, or (v) is a
material breach of any of the obligations of the General
Partner under this Agreement (other than the obligations
to make a Capital Contribution).
(b) The Limited Partner is not and will not be liable to the
Partnership or any other Partner except for a breach by
the Limited Partner of its obligations under this
Agreement.
10.2 Indemnification by the Partnership.
(a) Obligation. To the fullest extent permitted by law, the
Partnership hereby agrees to indemnify, defend, and hold
harmless each Partner and its Indemnified Affiliates from
and against any and all claims, demands, actions, rights
of action, losses, costs, expenses, and liabilities,
including attorneys' fees and court costs (collectively,
"Indemnifiable Costs"), that any of them may incur as a
result of or in connection with anything done or omitted
to be done by the Partner or its Indemnified Affiliates
for or on behalf of the Partnership and in furtherance of
its interests, SPECIFICALLY INCLUDING THE SOLE, PARTIAL,
OR CONCURRENT NEGLIGENCE OF THE PARTNER OR INDEMNIFIED
AFFILIATE, but excluding any such items incurred as a
result of something for which the Partner or Indemnified
Affiliate is liable under Section 10.1 hereof. In
addition and to the extent not encompassed within the
preceding sentence, the Partnership will indemnify the
Limited Partner and its Indemnified Affiliates for
Indemnifiable Costs that any of them may incur as a
result of the Limited Partner's being deemed to have
participated in the control of the Partnership's business
as a result of exercising, or attempting to exercise, its
rights and powers under this Agreement. On request by an
Indemnified Person, the Partnership will advance to that
Indemnified Person the expenses associated with the
defense of any related action. Notwithstanding anything
contained in this Subsection to the contrary, the
Partnership's liability under the indemnification will be
limited to the extent of the Partnership's assets, but
the limitation will not affect any insurance coverage
that may be available for the indemnification.
(b) Insurance. The General Partner may cause the Partnership
to purchase directors and officers liability or similar
insurance for the benefit of the Partnership, each
Partner, and each other Indemnified Person that insures
them against any liability for which they are entitled to
be indemnified hereunder.
10.3 Offset. If a Partner has any obligation to pay money to the
Partnership at a time that the Partnership or the other
Partner is required to make any payment or distribution to the
obligated Partner, the Partnership may deduct the amount of
the liability from its payment or distribution to the
obligated Partner and the other Partner may fulfill its
requirement to make a payment to the obligated Partner by
paying the amount of the obligated Partner's liability to the
Partnership instead of to the Partner. If a Partner has any
obligation to pay money to the other Partner at a time that
the other Partner is required to make any payment to the
obligated Partner, the other Partner may deduct the amount of
the liability from its payment to the obligated Partner.
10.4 Entire Agreement; Supersedure. This Agreement, including the
Exhibits hereto, constitutes the entire agreement of the
Partners relating to the internal affairs of the Partnership
and supersedes all prior contracts or agreements with respect
to the internal affairs of the Partnership, whether oral or
written.
10.5 Governing Law. THIS AGREEMENT IS GOVERNED BY AND WILL BE
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE,
EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT
REFER THE GOVERNANCE OR THE CONSTRUCTION OF THIS AGREEMENT TO
THE LAW OF ANOTHER JURISDICTION. In the event of a direct
conflict between the provisions of this Agreement and any
mandatory provision of the Partnership Act, the applicable
provision of the Partnership Act will control.
10.6 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signing parties
had signed the same document. All counterparts will be
construed together and constitute the same instrument. In
making proof of this Agreement, it will not be necessary to
account for more than one counterpart executed by the Person
against whom enforcement is sought.
10.7 Captions. The captions, headings, and arrangements used in
this Agreement are for convenience only and do not in any way
affect, limit, amplify, or modify the terms and provisions
hereof.
10.8 Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid, or unenforceable under present or
future laws effective during the term of this Agreement, the
provision will be fully severable; this Agreement will be
construed and enforced as if the illegal, invalid, or
unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by
the illegal, invalid, or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of each
such illegal, invalid, or unenforceable provision, there will
be added automatically as a part of this Agreement a provision
as similar in terms to the illegal, invalid, or unenforceable
provision as may be possible and be legal, valid, and
enforceable.
10.9 Successors and Assigns. Each and every covenant, term,
provision, and agreement herein contained will be binding upon
each of the Partners and their respective heirs, legal
representatives, successors, and assigns and will inure to the
benefit of each of the Partners. Unless and until properly
admitted as a Partner, no assignee will have any rights of a
Partner beyond those provided by the Partnership Act to
assignees or otherwise expressly provided herein to assignees.
10.10 Arbitration. Any controversy, claim, or dispute arising
out of or relating to this Agreement, including any
alleged breach or threatened breach of the provisions
contained in this Agreement will, upon demand of a party
to the controversy, claim, or dispute, be resolved by
arbitration administered by the American Arbitration
Association ("AAA") in accordance with the Commercial
Arbitration Rules of the AAA and, to the maximum extent
applicable, pursuant to the Federal Arbitration Act, 9
U.S.C. 1 et seq. An award rendered in any such proceeding
shall be final, binding, and non-appealable, and judgment
thereon may be entered in any court having competent
jurisdiction. With respect to a controversy, claim, or
dispute in which the claim or amount in controversy does
not exceed $100,000, a single arbitrator will be
impaneled, who will have authority to render a maximum
award of $100,000, including all damages of any kind and
costs, fees, interest, and the like. With respect to a
controversy, claim, or dispute in which the claim or
amount in controversy exceeds $100,000, the dispute will
be decided by a majority vote of three arbitrators.
Subject to the limitations contained in this Agreement,
the arbitrators may grant any remedy or relief they deem
just and equitable, including any provisional and
injunctive remedies available at law (in which case the
party receiving such relief may apply to the court of
competent jurisdiction for enforcement of such
provisional or injunctive order, without prejudice to the
continued arbitration of the matter); provided, however,
that the AAA may, upon the demand of any party to the
controversy, claim, or dispute, administratively appoint
a single "provisional relief" arbitrator on an expedited
basis to consider any request for, and grant, such
provisional or injunctive remedy. The arbitrators will
resolve all disputes in accordance with the laws of the
State of Delaware. The arbitrators will be knowledgeable
in the subject matter of the dispute. The arbitrators
will make specific, written findings of fact and
conclusions of law. The arbitrators' findings of fact
will be binding on all parties and will not be subject to
further review.
[THIS SPACE LEFT BLANK INTENTIONALLY]
Executed on the date or dates indicated below, to be effective
as of the day and year first written above.
GENERAL PARTNER:
ELK GROVE-LAKESIDE APARTMENTS, L.P., a
California limited partnership
By: LSAC G.P. CORPORATION, a California
corporation, its general partner
By:
Name:
Title:
Date: February 27, 1998
LIMITED PARTNER:
WALDEN DEVELOPMENT CORPORATION, a
Delaware corporation
By:
Name:
Title:
Date: February 27, 1998
LIMITED JOINDER
The Grupe Company hereby executes this Agreement for the
limited purpose of agreeing to be bound by the provisions of
Section 3.10.
THE GRUPE COMPANY, a California
corporation
By:
Name:
Title:
Date: February 27, 1998
EXHIBIT A
Name of Partner
Address for Notices/Service
of Process
Sharing
Ratio
Capital
Contributions
Elk Grove-Lakeside
Apartments,
L.P.
3255 West March Lane
Stockton, California 95219
Attention: Nelson Bahler
Facsimile: 209-473-6187
51%
$875,851
Walden
Development
Corporation
One Lincoln Centre
5400 LBJ Freeway, LB 45
Suite 400
Dallas, Texas 75240
Attention: Charlie Geiss
Facsimile: 972-788-1550
49%
$ -0-
EXHIBIT B
THE PROJECT
EXHIBIT C
PLANS AND SPECIFICATIONS
EXHIBIT D
CONSTRUCTION CONTRACT
EXHIBIT E
INITIAL LOAN DOCUMENTS
A. Construction Loan Agreement.
B. Note payable to BankBoston, N.A. for $19,423,157.
C. Construction Deed of Trust with Assignment of Rents,
Security Agreement and Fixture Filing.
D. Absolute Assignment of Leases and Rents.
E. Unconditional Guaranty of Payment and Performance
(Company).
F. Unconditional Guaranty of Payment and Performance (WDOP).
G. Unconditional Guaranty of Payment and Performance (The
Grupe Company).
H. Agreement Regarding Fees.
I. Any other promissory notes, deeds of trust, mortgages,
security agreements, financing statements, assignments of
leases, or other instruments required or advisable in
connection with any other Initial Loan Document.
EXHIBIT F
PROJECT BUDGET
EXHIBIT G
TIME SCHEDULE
Site work March 1998
Construction Start April 1998
First Units Leased October 1998
Last Units Completed May 1999
Target 95% Leased October 1, 1999
I:\FINANCE\SECFIL~1\01-Q-98\EX-10-2.WPD
LIMITED PARTNERSHIP AGREEMENT
OF
WALDEN/GRUPE ROSEVILLE, L.P.
This Limited Partnership Agreement (this "Agreement") is
executed as of February 27, 1998, by and between ANTELOPE CREEK
APARTMENTS, L.P., a California limited partnership ("ACALP"), as
the sole general partner and WALDEN DEVELOPMENT CORPORATION, a
Delaware corporation ("Walden"), as the sole limited partner.
ARTICLE 1.
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms
have the meanings:
"Acquisition Fee" means an amount equal to the greater of (a)
$33,600 or (b) the product of (i) $100 and (ii) the number of
units in the Project as shown by the final architectural
drawings. The Acquisition Fee is payable in accordance with
the provisions of Subsection 4.2(b).
"Adjusted Capital Account Deficit" means, with respect to any
Partner, the deficit balance, if any, in the Partner's Capital
Account as of the end of the relevant Fiscal Year, after
giving effect to the following adjustments:
(a) The Capital Account will be increased by any amounts that
the Partner is obligated to restore to the Partnership or
is deemed obligated to restore under Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5).
(b) The Capital Account will be decreased by the items
described in Sections 1.704-1(b)(2)(ii)(d)(4), (5), and
(6) of the Regulations.
This definition of Adjusted Capital Account Deficit and the
application of the term in the manner provided in this
Agreement are intended to comply with the provisions of
Section 1.704-1(b)(2)(ii)(d) of the Regulations and will be
interpreted consistently therewith.
"Adjustment Period" means any period of time that begins on
the Closing Date (in the case of the first Adjustment Period)
or the day following the end of the immediately preceding
Adjustment Period (with respect to each subsequent Adjustment
Period) and ends on the first to occur of: (a) the last day
of a Fiscal Year, (b) the day immediately preceding the date
of the "liquidation" of a Partner's interest in the
Partnership (within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations), or (c) the date on
which the Partnership is terminated under Article 9.
"Affiliate" (including the term "Affiliated") means, with
respect to any Person, any other Person who is controlled by,
under common control with, or in control of, the first Person.
As used in this definition, the term "control" means the
possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by
contract, or otherwise. For purposes of this definition, any
Person that owns, directly or indirectly, more than 10% of the
issued and outstanding stock or other equity interests of
another Person is deemed to control the other Person and any
Person that is an executive officer, trustee, general partner,
managing member or director of another Person is deemed to
control the other Person.
"Affiliate Loan" means the funds advanced to the General
Partner in the aggregate amount of $589,878.12 by LSAC G.P.
Corporation, the general partner of the General Partner, which
amount will be assumed by the Partnership and repaid on the
Closing Date out of the proceeds of the Initial Loan.
"Agreement" means this Limited Partnership Agreement,
including the Exhibits attached hereto, as amended and in
effect from time to time.
"Ancillary Income" means an amount, determined as of the
Purchase Price Computation Date, equal to the annualized
Partnership net income from sources other than rental of
apartment units, including garage or parking rents, revenue
from telephone and cable systems, operation of vending
machines, nonrefundable application fees, credit check and
other miscellaneous fees, and forfeited security deposits, but
not including security deposits which by their terms have not
been forfeited to the Partnership.
"Approval of" or "Approved by" a Partner or Partners means the
written consent or approval of the matter in question in
accordance with Section 7.12.
"Bankrupt Partner" means any Partner with respect to which an
event of the type described in Section 402(a)(4) or (5) of the
Partnership Act has occurred, subject to the lapsing of any
period of time therein specified.
"Base Rate" has the meaning given that term in the Initial
Loan Documents.
"Bonus Project Value" means the value of the Project
determined by applying a 9.25% cap rate to the Project's 1999
Net Income. For purposes of computing the Bonus Project
Value, 1999 Net Income means (a) the annualized effective
rents in place from Non-Defaulting Tenants as of the Purchase
Price Computation Date (with market rental values as of the
Purchase Price Computation Date being substituted for any
leases expiring during the 90 day period following the
Purchase Price Computation Date) using the greater of 95%
occupancy or the actual occupancy rate for Qualifying Tenants,
plus (b) Ancillary Income, less (c) the Purchase Price
Expenses.
"Bonus Purchase Price" means the sum of (a) the Investment
Amount plus (b) the lesser of (i) the excess, if any, of the
Bonus Project Value over $25,835,450 and (ii) $1,135,238.
"Book Depreciation" means, for each Adjustment Period, an
amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to a Partnership
asset for the Adjustment Period, except that if the Book Value
of an asset differs from its adjusted basis for federal income
tax purposes at the beginning of the Adjustment Period, Book
Depreciation with respect to that asset will be an amount that
bears the same ratio to the beginning Book Value as the
federal income tax depreciation, amortization, or other cost
recovery deduction with respect to that asset for the
Adjustment Period bears to the beginning adjusted tax basis;
provided, however, that if the federal income tax
depreciation, amortization, or other cost recovery deduction
with respect to that asset for the Adjustment Period is zero,
Book Depreciation will be determined with reference to the
beginning Book Value using any reasonable method approved by
the Partners.
"Book Gain" or "Book Loss" means the gain or loss recognized
by the Partnership for book purposes in any Adjustment Period
by reason of a disposition (as determined under Section 1001
of the Code) of all or part of the assets. The Book Gain and
Book Loss will be computed by reference to the Book Value of
the assets as of the date of the sale or other disposition,
rather than by reference to the tax basis of the assets as of
the date. If a Partnership asset is distributed to a Partner,
the difference between the fair market value of the asset and
its Book Value will be considered a Book Gain or a Book Loss.
"Book Value" of the assets means, as of any particular date,
the value at which the assets are properly reflected on the
books of the Partnership, as of the date, in accordance with
the provisions of Section 1.704-1(b) of the Regulations. The
initial Book Values of the assets will be the gross fair
market value of the assets (without reduction for indebtedness
to which the assets may be subject) as determined by the
General Partner. The Book Value will be adjusted for Book
Depreciation with respect to the assets, rather than for the
cost recovery deductions to which the Partnership is entitled
for income tax purposes with respect to the assets.
"Business Day" means Monday through Friday of each week,
except that a legal holiday recognized as such by the
government of the United States or the State of Texas shall
not be regarded as a Business Day.
"Capital Account" has the meaning given it in Section 3.4.
"Capital Contribution" means the amount of cash or the fair
market value of property of any nature (net of liabilities
assumed or taken subject to by the Partnership) contributed by
a Partner to the Partnership pursuant to the provisions of
this Agreement.
"Certificate" means, at any date, the Certificate of Limited
Partnership of the Partnership filed with the Secretary of
State of the State of Delaware under the Partnership Act, as
amended or restated at such date.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, or
from and after the date any successor statute becomes, by its
terms, applicable to the Partnership, the successor statute,
in each case as amended at such time by amendments that are,
at that time, applicable to the Partnership. All references
to sections of the Code include any corresponding provision or
provisions of any such successor statute.
"Company" means Walden Residential Properties, Inc., a
Maryland corporation.
"Completion Date" means the date on which each of the
following two conditions are satisfied: (i) the final
certificate of occupancy for the Project is issued and (ii)
the General Partner certifies that the Project is free of all
liens (other than those existing in connection with the
Initial Loan) and provides the Limited Partner with
documentation, in a form satisfactory to the Limited Partner,
of customary lien releases.
"Construction Contract" means that certain contract between
the Partnership and Contractor in the form attached hereto as
Exhibit D.
"Construction Period" means the period commencing on the
commencement of construction of the Project and ending upon
issuance of the final certificate of occupancy for the
Project.
"Contractor" means Marchbrook Building Company, a California
corporation.
"Contractor Fee" means $608,286 which represents three percent
(3%) of the amount that is described in the "Total Direct
Construction Costs" category of the Project Budget. The
Contractor Fee is payable to Contractor in accordance with the
terms and provisions of the Construction Contract.
"Cost Overruns" means any amounts by which actual Total
Project Costs exceed the amount of Total Project Costs that
were included in the Project Budget.
"Developer" means Marchbrook Building Company, a California
corporation.
"Development Fee" means $608,286 which represents three
percent (3%) of the amount that is described in the "Total
Direct Construction Costs" category of the Project Budget.
The Development Fee shall be earned by and payable to
Developer in accordance with the provisions of Subsection
4.2(c).
"Distributable Cash" of the Partnership means at any time all
cash funds of the Partnership on hand at such time after
payment of all Operating Expenses of the Partnership as of
such time less such reserve(s) that the General Partner may,
in its reasonable discretion, establish in order to provide
for payment of outstanding and unpaid obligations of the
Partnership or other purposes. Prior to the Purchase
Settlement Date, Distributable Cash shall include the amount
that could be drawn as "interest reserve or interest
contingency" pursuant to the Initial Loan. On the Purchase
Settlement Date, Distributable Cash shall include all amounts
that would otherwise comprise Distributable Cash plus all
amounts that could be drawn pursuant to the Initial Loan less
an estimated amount equal to the normal prorations that the
Partnership would be required to pay if it had sold the
Project to an unrelated buyer on such date (the "Proration
Reserve"). The General Partner shall be required to fund the
Proration Reserve on the Purchase Settlement Date.
"Distributable Land Equity Account" means an account to be
maintained by the Partnership which will have a balance equal
to $1,830,286 on the Closing Date and which will be decreased,
but not below zero, by Excess Cost Overruns. If the
Completion Date does not occur on or before the Final Date,
the balance in the Distributable Land Equity Account will be
reduced to zero.
"Distribution Date" means, commencing with the calendar
quarter beginning April 1, 2000, a date selected by the
General Partner once each calendar quarter which date will be
during the first 30 days of such calendar quarter.
"Event of Withdrawal" means the occurrence, with respect to
the General Partner, of any event described in Section 402(a)
of the Partnership Act other than an event described in
Subsection 402(a)(4) or (5) of the Partnership Act (unless the
Limited Partner approves an event described in Subsection
402(a)(4) or (5) of the Partnership Act as being an Event of
Withdrawal, in which case it will be an Event of Withdrawal);
provided, however, that neither a Transfer nor the
substitution of another Person as a Partner in respect all or
any portion of the General Partner's Partnership Interest
without violation of this Agreement will be an Event of
Withdrawal and, to the extent the Partnership Act would
otherwise require, each Partner hereby agrees to continue the
business of the Partnership following any such event.
"Excess Cost Overruns" means the amount by which Cost Overruns
exceed the Development Fee.
"Excess Operating Shortfall" means the amount by which
Operating Expenses exceed the sum of (a) Distributable Cash,
and (b) the balance in the Land Equity Account.
"Excess Real Estate Taxes" means the amount, if any, by which
(a) the real estate taxes for a twelve month taxable period
calculated using the then current tax rates of the appropriate
taxing authorities and based on the Bonus Project Value or the
Target Project Value (as appropriate), exceed (b) $356,421.
"Final Date" means December 10, 1999; provided, however, that
if the aggregate period of Excusable Delays (as that term is
defined in the Construction Contract) exceeds 163 days the
Final Date shall be the date which follows December 10, 1999
by a number of days equal to such excess.
"Fiscal Year" means the year commencing on January 1 of each
year (or the Closing Date, with respect to 1998) and ending on
the following December 31.
"General Partner" means ACALP or any other Person admitted
under this Agreement in the capacity of a general partner in
the Partnership, each for only so long as the Person remains
as a general partner in accordance with this Agreement and the
Partnership Act.
"GP Computed Expenses" means the Operating Expenses for an
entire year of operation computed by the General Partner based
on various computations of the General Partner showing
averages per unit for different expenses at various occupancy
levels plus a replacement reserve of $200 per unit. The GP
Computed Expenses shall include the then current real estate
taxes for a twelve month taxable period calculated using the
then current tax rates of the appropriate taxing authorities
and based on the Bonus Project Value or the Target Project
Value (as appropriate), the salaries and burden for the normal
amount of personnel required to operate, pursuant to good real
estate management practices, a project similar in size to the
Project, a 3% management fee, and all other normal and
customary operating expenses of a project similar in size to
the Project and shall be determined pursuant to Subsection
7.8(h).
"GP Loan" means a loan required to be made by the General
Partner to the Partnership pursuant to Subsection 3.3(b)
hereof. Each GP Loan shall: (a) bear no interest, (b) be
repayable only from Distributable Cash other than proceeds of
the Initial Loan, (c) be unsecured, and (d) be with recourse
solely to the assets of the Partnership and no Partner will
have any obligation or liability on account thereof.
"GP Put Notice" has the meaning given it in Subsection 7.8(f).
"GP Put Option" has the meaning given it in Subsection 7.8(f).
"Gross Income" means, for each Adjustment Period, an amount
equal to the Partnership's gross income as determined for
federal income tax purposes for the Adjustment Period but
computed with the adjustments in paragraphs (a) through (d) of
the definition of Net Profit or Net Loss.
"Guaranteed Cost Overruns" means the amount by which Cost
Overruns exceed the sum of: (a) the Development Fee, and (b)
$1,830,286.
"Indemnifiable Costs" has the meaning given it in Section
10.2.
"Indemnified Affiliates" means, with respect to any Person,
its owners and the officers, directors, partners, agents,
employees, owners, and other Affiliates of such Person or any
of its owners (other than the Partnership).
"Indemnified Person" means any Person who is within the
category of Persons entitled to indemnification in accordance
with this Agreement (assuming the prerequisites for
indemnification are satisfied).
"Initial Lender" means BankBoston, N.A., the lender of the
Initial Loan.
"Initial Loan" means the $25,835,450 loan contemplated by the
Construction Loan Agreement, dated as of February 27, 1998
among the Partnership, the Initial Lender, individually and as
agent, and various other financial institutions now or
thereafter parties thereto.
"Initial Loan Documents" means the loan documents described on
Exhibit E.
"Investment Amount" means the amount that would be
distributable to the General Partner on the Purchase
Settlement Date pursuant to Section 4.1, assuming that Section
4.1 contained no time restrictions.
"Land" means the real property more particularly described on
Exhibit B,
"Land Equity Account" means an account to be maintained by the
Partnership which will have a balance equal to $1,830,286 on
the Closing Date and which will be decreased, but not below
zero, by Excess Cost Overruns and Operating Shortfalls.
"Land Loan" means the loan from Guaranty Federal to the
General Partner in the amount of $521,714, which amount will
be assumed by the Partnership and repaid on the Closing Date
out of the proceeds of the Initial Loan.
"Leasing Commencement Date" means the date on which leasing
commences for the Project or any part thereof.
"Limited Partner" means Walden or any other Person admitted
under this Agreement in the capacity of a limited partner in
the Partnership, each for only so long as the Person remains
as a limited partner in accordance with this Agreement and the
Partnership Act.
"Liquidating Manager" means the General Partner(s) who did not
wrongfully dissolve the Partnership who remain after the
Partnership is dissolved, if it is not properly reconstituted,
or, in the absence of any such remaining General Partner, the
Person or Persons selected to effect the liquidation of the
Partnership by the Limited Partner or, in both the absence of
any such remaining General Partner and the failure of the
Limited Partner to select a Liquidating Manager within the
period of time during which the Partnership may be properly
reconstituted following its dissolution, the Person or Persons
appointed by a court of competent jurisdiction pursuant to
Section 803(a) of the Partnership Act.
"LP Call Notice" has the meaning given it in Subsection
7.8(g).
"LP Call Option" has the meaning given it in Subsection
7.8(g).
"LP Loan" means a loan made by the Limited Partner to the
Partnership pursuant to Section 3.8 hereof. Unless otherwise
agreed by the Limited Partner and approved by the General
Partner, each such loan shall (a) bear interest at the Base
Rate plus 2% from the date the loan is made until the date of
payment, but in no event more than the maximum rate permitted
by applicable law, (b) require interest and principal to be
payable in a single installment on demand and, if no demand is
made, one year after the date of such advance, (c) be
unsecured, and (d) be with recourse solely to the assets of
the Partnership and no Partner will have any obligation or
liability on account thereof.
"LP Put/Call Closing Notice" means a notice from the Limited
Partner or its designee to the General Partner designating the
Purchase Settlement Date.
"Management Agreement" has the meaning given it in Section
7.9.
"Manager" means Franklin Landings Management Company, a
California corporation.
"Net Profit" or "Net Loss" means, for each Adjustment Period,
the Partnership's taxable income or taxable loss for the
Adjustment Period, as determined under Section 703(a) of the
Code, and Section 1.703-1 of the Regulations (and for this
purpose all items of income, gain, loss, or deduction required
to be stated separately under Section 703(a)(1) of the Code
will be included in taxable income or taxable loss), but with
the following adjustments:
(a) Any tax-exempt income, as described in
Section 705(a)(1)(B) of the Code, realized by the
Partnership during the Adjustment Period will be taken
into account in computing the taxable income or taxable
loss as if it were taxable income.
(b) Any expenditures of the Partnership described in Section
705(a)(2)(B) of the Code for the Adjustment Period,
including any items treated under Section
1.704-1(b)(2)(iv)(i) of the Regulations as items
described in Section 705(a)(2)(B) of the Code, will be
taken into account in computing the taxable income or
taxable loss as if they were deductible items.
(c) Book Depreciation for the Adjustment Period will be taken
into account in computing the taxable income or taxable
loss in lieu of any amortization, depreciation, or cost
recovery deduction to which the Partnership is entitled
for the Adjustment Period with respect to Partnership
assets.
(d) Any Book Loss or Book Gain recognized by the Partnership
during the Adjustment Period by reason of a sale or other
disposition of all or part of the assets will be taken
into account in computing the taxable income or taxable
loss in lieu of any tax gain or tax loss recognized by
the Partnership during any Adjustment Period by reason of
the sale or other disposition.
(e) Any item of income, gain, loss, or deduction required to
be allocated to the Partners under Sections 5.4, 5.5, and
5.6 will not be taken into account in computing the
taxable income or taxable loss.
If the Partnership's taxable income or taxable loss for the
Adjustment Period, as adjusted in the manner provided in
paragraphs (a) through (e) above, is a positive amount, the
amount will be the Partnership's Net Profit for the Adjustment
Period; and if negative, the amount will be the Partnership's
Net Loss for the Adjustment Period.
"Non-Defaulting Tenant" means a Qualifying Tenant whose
financial obligations to the Partnership are not more than 2
weeks delinquent.
"Operating Budget" means the operating budget prepared by the
General Partner and Approved by the Limited Partner.
"Operating Expenses" means all ordinary and necessary costs,
expenses, or charges with respect to the ownership,
improvement, operation, maintenance, and upkeep of Partnership
assets, including, without limitation, administrative
expenses, ad valorem taxes, advertising and promotional
expenses, insurance expenses, management fees, repair and
maintenance expenses, reserves, utilities, and debt service,
including principal and interest payable in respect of the
Initial Loan and other Partnership indebtedness (other than GP
Loans). Operating Expenses do not include (a) items to be
expended after the end of the Construction Period which are
included in Total Project Costs, (b) any sums necessary to pay
any loan when the same matures (even if matured through
acceleration upon default), or (c) non-cash items such as
depreciation.
"Operating Shortfall" means as of the last day of any calendar
month ending after the Closing Date the amount, if any, by
which unpaid Operating Expenses for such calendar month exceed
the Distributable Cash on the last day of such calendar month.
"Partner" means the General Partner or the Limited Partner and
"Partners" means, collectively, the General Partner and the
Limited Partner. If a Partner Transfers its Partnership
Interest, that Partner will remain a Partner in respect of the
Partnership Interest until another Person is admitted as a
Partner in respect of the Partnership Interest in accordance
with this Agreement and the Partnership Act, if ever.
"Partner Nonrecourse Debt" means any nonrecourse debt of the
Partnership for which any Partner bears the economic risk of
loss as determined under Sections 1.704-2(b)(4) and 1.752-2 of
the Regulations.
"Partner Nonrecourse Debt Minimum Gain" means the minimum gain
attributable to Partner Nonrecourse Debt as determined under
Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Deductions" means any loss, deduction, or
Code Section 705(a)(2)(B) expenditure, or item thereof, that
is attributable to a Partner Nonrecourse Debt as determined
under Regulations Section 1.704-2(i)(2).
"Partnership" means the limited partnership formed pursuant to
this Agreement.
"Partnership Act" means the Delaware Revised Uniform Limited
Partnership Act or, from and after the date any successor
statute becomes, by its terms, applicable to the Partnership,
the successor statute, in each case as amended at the time by
amendments that are, at that time, applicable to the
Partnership (to the extent the provisions of the Partnership
Act are not modified by the Certificate or this Agreement).
All references to sections of the Partnership Act include any
corresponding provision or provisions of any such successor
statute.
"Partnership Interest" means the ownership interest in the
Partnership held by a Partner, representing a fractional part
of the Partnership Interests of all Partners, and includes any
and all benefits to which the holder of such a Partnership
Interest may be entitled as provided in this Agreement,
including a Partner's share of the profits and losses of the
Partnership and the right to receive distributions of the
Partnership's assets, together with all obligations of such
Person to comply with the terms and provisions of this
Agreement.
"Partnership Minimum Gain" means the amount computed under
Regulations Section 1.704-2(d).
"Partnership Nonrecourse Deductions" means any loss,
deduction, or Code Section 705(a)(2)(B) expenditure, or item
thereof, that is attributable to nonrecourse liabilities of
the Partnership as defined in Regulations Section
1.752-1(a)(2).
"Person" means any individual, partnership, limited
partnership, joint venture, corporation, limited liability
company, trust, estate, custodian, trustee, executor,
administrator, nominee, representative, unincorporated
organization, sole proprietorship, trust, employee benefit
plan, tribunal, governmental entity, department, or agency, or
other entity.
"Plans" means the plans and specifications described in
Exhibit C hereto, as amended as permitted by this Agreement.
"Project" means the Land, together with all buildings,
structures, garages, open parking areas, and other
improvements thereon, all fixtures installed on or in such
real property or such improvements, all materials, supplies,
equipment, and other items installed on or in such real
property or such improvements, and all rights, titles, and
interests appurtenant thereto.
"Project Budget" means the budget of the Total Project Costs
shown on Exhibit F hereto, as the same may be amended as
permitted by this Agreement.
"Purchase Price Computation Date" means (a) the date specified
by the General Partner in the GP Put Notice, or (b) the date
specified by the Limited Partner in the LP Call Notice.
"Purchase Price Expenses" means the greater of (a) the sum of
(i) $1,122,010, and (ii) the Excess Real Estate Taxes, or (b)
the GP Computed Expenses.
"Purchase Settlement Closing" means the Transfer of the
General Partner's Partnership Interest pursuant to Subsection
7.8(f) or Subsection 7.8(g) which shall occur on the Purchase
Settlement Date.
"Purchase Settlement Date" means the later of (a) the date
specified by the Limited Partner in the LP Put/Call Closing
Notice, provided, however, that if the General Partner
exercises the GP Put Option, the Limited Partner must specify
a date on or before January 14, 2000. and (b) the date on
which all of the procedures and actions described in
Subsection 7.8(h)(i) - (vi) have occurred.
"Qualifying Tenant" has the meaning given it in the Management
Agreement.
"Regulations" means the income tax regulations promulgated
under the Code and effective as of the date of this Agreement,
and any future amendments to the regulations and any
corresponding provisions of succeeding regulations that are
mandatory. The term will also be deemed to include any future
amendments or succeeding regulations that call for an election
by the Partnership as to the application of the amendment or
succeeding regulation to the Partnership if the Tax Matters
Partner so elects, on behalf of the Partnership, which the Tax
Matters Partner may do only after determining that any such
amendments and succeeding regulations do not adversely affect
the economic interests of the Partners hereunder.
"REIT" means a "real estate investment trust" under Section
856 of the Code.
"Section" means a section of this Agreement, unless the text
indicates otherwise.
"Sharing Ratio" means 51% in the case of the General Partner
and 49% in the case of the Limited Partner.
"Subsection" means a subsection of this Agreement, unless the
text indicates otherwise.
"Target Project Value" means the value of the Project
determined by applying a 9.15% cap rate to the Project's 1999
Net Income. For purposes of computing the Target Project
Value, 1999 Net Income means the difference between (a) the
annualized effective rents in place from Non-Defaulting
Tenants as of Purchase Price Computation Date (without market
rental values being substituted for any leases expiring during
the 90 day period following the Purchase Price Computation
Date) using the greater of 95% occupancy or the actual
occupancy rate for Qualifying Tenants, plus (b) Ancillary
Income, less (c) the Purchase Price Expenses.
"Target Purchase Price" means the sum of (a) the Investment
Amount plus (b) lesser of (i) the excess, if any, of the
Target Project Value over $25,835,450 and (ii) $967,238.
"Tax Matters Partner" has the meaning given to it in Section
6.3.
"Total Interest Cost" means accrued interest on the Initial
Loan from the first date amounts are outstanding under such
loan to the end of the Construction Period.
"Total Project Cost" means the sum of (a) $2,941,878.12, which
is the Book Value of the Land, and (b) the total cost to the
Partnership of designing, developing, financing, constructing,
and leasing the Project excluding Total Interest Cost and
excluding $589,878.12 of such cost (which represent amounts
paid by the general partner of the General Partner and assumed
by the Partnership). Total Project Cost shall include,
without limitation, the Contractor Fee, the Developer Fee, and
all costs within the categories set forth in the Project
Budget (excluding the categories described as "Interest
Reserve" and "Interest Contingency" which are included in
Total Interest Cost).
"Transfer" means (a) any sale, encumbrance, gift, donation,
assignment, pledge, hypothecation, mortgage, exchange, or
other disposition of any Partnership Interest or any interest
therein, in each case whether voluntary or involuntary,
including any Transfer by operation of law, by court order, by
judicial process, or by foreclosure, levy, or attachment; or
(b) the act of making any of the foregoing.
1.2 Other Definitions. Certain other terms are defined elsewhere
herein and have the meanings so given them.
1.3 Construction. Whenever the context requires, the gender of
all words used in this Agreement includes the masculine,
feminine, and neuter. All references to Exhibits are to
Exhibits attached to this Agreement, each of which is made a
part of this Agreement for all purposes. All references in
this Agreement to "dollars" or "$" means United States of
America dollars. The term "including" and variations of the
term mean including without limitation and without
duplication.
1.4 Interest Calculations. Any interest or amounts like interest
that are to be calculated under this Agreement shall be
computed on the daily outstanding balance of the amount on
which interest or amounts like interest accrue hereunder. The
calculation of interest and amounts like interest under this
Agreement shall be made monthly and shall be computed on the
basis of a fraction, the denominator of which is 360 and the
numerator of which is the actual number of days in the period
for which interest or amounts like interest are being
calculated.
ARTICLE 2.
GENERAL PROVISIONS
2.1 Formation. ACALP and Walden hereby form, effective as of the
date indicated in Section 2.8, the Partnership pursuant to the
Partnership Act.
2.2 Name of Partnership. The name of the Partnership is
"Walden/Grupe Roseville, L.P." and all Partnership business
must be conducted in that name or such other name or names
that comply with applicable law as the General Partner may
select from time to time.
2.3 Name and Address of Partners. The name and address of each
initial Partner of the Partnership are set forth on Exhibit A.
Each such Person is admitted to the Partnership as a general
partner or limited partner, as the case may be, at the time
the Partnership's existence begins under Section 2.8. The
name and address of each Person who later becomes a Partner
will be as set forth in the records of the Partnership and
Exhibit A will be deemed amended appropriately. The records
of the Partnership will be prima facie evidence of the status
of any Person as a Partner.
2.4 Registered Office and Registered Agent. The General Partner
will use commercially reasonable efforts to ensure that the
Partnership complies with applicable provisions of the
Partnership Act regarding the maintenance of a registered
office and registered agent in the State of Delaware. The
initial registered office and registered agent of the
Partnership in the State of Delaware will be as set forth in
the Certificate. From time to time, the General Partner may
change the Partnership's registered office and registered
agent in the State of Delaware or either in the manner
provided in the Partnership Act.
2.5 Principal Office and Other Offices. The Partnership's
principal place of business will be initially located at 3255
West March Lane, Stockton, California 95219. The General
Partner may change the principal office of the Partnership at
any time and from time to time by notice to the Limited
Partner. The Partnership may also establish such additional
places of business as the General Partner may determine to be
appropriate.
2.6 Purpose. The purpose of the Partnership shall be (a) to
acquire, own, hold, develop, construct, improve, renovate,
rehabilitate, refurbish, maintain, lease, operate, finance,
refinance, sell, dispose of, and otherwise deal with the
Project and (b) to engage in such other businesses and
activities as the Partners approve; provided, however, that
upon receiving specific written instructions from the Limited
Partner, the General Partner will use its reasonable efforts
to cause the Partnership's business and any activities
conducted in connection therewith to be limited and conducted
in such a manner as to permit the Company at all times to be
classified as a REIT unless the Company ceases to qualify as
a REIT for reasons other than the conduct of the business of
the Partnership.
2.7 Powers. The Partnership shall be empowered to do any and all
acts 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, however, that the
Partnership shall not take, and shall refrain from taking, any
action which was described in a written notice from the
Limited Partner to the other Partners as being an action that,
in the judgment of the Limited Partner, in its sole and
absolute discretion (a) could adversely affect the ability of
the Company to continue to qualify as a REIT, (b) could
subject the Company to any 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 Company or its securities, unless such action (or
inaction) shall have been specifically consented to by the
Company in writing.
2.8 Governmental Certificates. Prior to commencing any activities
in any jurisdiction other than the State of Delaware, the
Partners will execute and acknowledge, and the Partnership
will promptly file or record with the proper offices in such
jurisdiction, such certificates as are required or permitted
by any partnership or fictitious name act or similar statute
in effect in such jurisdiction or political subdivision. The
Partners will further execute and acknowledge, and the
Partnership will promptly file or record as aforesaid, such
amended certificates or additional certificates as may from
time to time be required by the statutes to permit the
continued existence and operation of the Partnership.
2.9 Term. The term of the Partnership did or will commence on the
date on which the Certificate was or is filed in the office of
the Secretary of State of the State of Delaware and will
continue until it terminates in accordance with Article 9
following dissolution.
2.10 Mergers and Exchanges. The Partnership may adopt and effect
a plan of merger and may adopt and effect a plan of exchange
if the action is approved by all Partners.
ARTICLE 3.
CAPITAL CONTRIBUTIONS; PARTNER LOANS
3.1 Initial Capital Contributions. On the Closing Date, the
General Partner hereby contributes (and agrees to execute such
further assignments and other documents and to make physical
delivery and to take such further acts as may be necessary to
fully evidence and effect such contribution) to the
Partnership all of its interest in the Land, Plans, studies,
commitments, leases, letters of intent, construction
contracts, construction in progress, and other contracts,
assets, rights, and properties relating to the acquisition,
ownership, and development of the Project. In connection with
the General Partner's contribution of the Land, the
Partnership agrees to assume the Land Loan and the Affiliate
Loan, each of which shall be paid in full on the Closing Date
from the proceeds of the Initial Loan. The Partners agree
that the General Partner shall be treated as making an initial
Capital Contribution of $1,830,286 (after taking into account
the Partnership's assumption of the Land Loan and the
Affiliate Loan) and shall receive a credit to its Capital
Account in the same amount. The Limited Partner shall not be
required to make an initial Capital Contribution to the
Partnership.
3.2 Additional Capital Contributions. The Partners may make
additional Capital Contributions to the Partnership from time
to time but shall be obligated to do so only if, when, and to
the extent they agree in writing to do so.
3.3 Additional Obligations of General Partner.
(a) If Guaranteed Cost Overruns occur, the General Partner
shall pay to the Partnership in cash any amount required
to satisfy the Partnership's obligations in connection
with such Guaranteed Cost Overruns. Any amount paid by
the General Partner pursuant to this Subsection 3.3(a)
shall not be considered a Capital Contribution or a loan
to the Partnership.
(b) If at any time there is an Excess Operating Shortfall,
the General Partner shall make a GP Loan to the
Partnership in an amount equal to the Excess Operating
Shortfall. On the Purchase Settlement Date, the General
Partner shall make a Capital Contribution to the
Partnership of all outstanding GP Loans.
3.4 Capital Accounts. A separate capital account (a "Capital
Account") shall be established and maintained for each Partner
in accordance with Section 1.704-2(b)(2)(iv) of the
Regulations.
3.5 No Other Capital Contributions Required. Except as set forth
in this Article 3, no Partner is required to make any Capital
Contribution to the Partnership.
3.6 Return of Contributions. Except as otherwise expressly set
forth in this Agreement, a Partner is not entitled to the
return of any part of its Capital Contributions to the
Partnership or to be paid interest in respect of either its
Capital Account or its Capital Contributions. An unrepaid
Capital Contribution to the Partnership is not a liability of
the Partnership or of any Partner.
3.7 No Duty to Restore Negative Capital Account. A Partner is not
required to contribute or lend any cash or property to the
Partnership to enable the Partnership to return any other
Partner's Capital Contributions or to make any distribution to
any other Partner, even if the first Partner has a deficit
balance in its Capital Account.
3.8 Loans by Partners. No Partner has or will have any obligation
to loan any funds to the Partnership. However, Walden, so
long as it is a Limited Partner, may make LP Loans to the
Partnership. Not all Partners must be given the opportunity
to make an LP Loan. An LP Loan constitutes a loan to the
Partnership and is not a Capital Contribution.
3.9 Project Financing. Walden shall obtain the Initial Loan and
the Company, Walden/Drever Operating Partnership, L.P. and The
Grupe Company shall act as guarantors of the Initial loan.
The principal amount of the Initial Loan shall be at least
$25,835,450, the loan fee due to the Initial Lender shall not
exceed 1% of the principal amount of the Initial Loan, the
Initial Loan shall have a term of three years, and the
Initial Loan shall accrue interest in accordance with the
Construction Loan Agreement referenced on Exhibit E. The
Partnership shall, upon the formation and commencement of the
Partnership, enter into the Initial Loan Documents. The
Partners hereby authorize: (a) the Partnership to obtain the
Initial Loan pursuant to the Initial Loan Documents, and (b)
the General Partner to execute and deliver, on behalf of the
Partnership, the Initial Loan Documents. The Partnership
shall borrow the Initial Loan on the terms and conditions
contained in the Initial Loan Documents. The Initial Loan
shall be used to pay Total Project Costs and Total Interest
Cost or for any other permissible purpose mutually agreed to
by the Partners. Notwithstanding the foregoing, nothing in
this Agreement shall be construed as superseding, modifying or
otherwise affecting the terms and provisions of the Initial
Loan Documents. To the extent that any provision of this
Agreement is in conflict with any provision of any Initial
Loan Document, such provision of the Initial Loan Documents
shall control.
3.10 Guarantee. The Grupe Company guarantees to the Partnership
and the Limited Partner, the General Partner's obligation to
make payments pursuant to Section 3.3 hereof. In addition, if
the General Partner, in its capacity as General Partner,
commits fraud, criminal conduct, willful misconduct or gross
negligence, The Grupe Company guarantees to the Partnership
and the Limited Partner, the General Partner's payment of
damages to the Partnership as a result of such described acts.
Any amount paid by the Grupe Company pursuant to this Section
3.10 shall not be considered a Capital Contribution or a loan
to the Partnership.
ARTICLE 4.
DISTRIBUTIONS
4.1 Distributions of Distributable Cash. Until the earlier of the
day immediately following the Purchase Settlement Date or
April 1, 2000, Distributable Cash shall be retained and held
in reserve for payment of Operating Expenses and Total
Interest Cost. On the day immediately following the Purchase
Settlement Date and on each Distribution Date following March
31, 2000, Distributable Cash shall be applied by the
Partnership and distributed to the Partners in accordance with
the following priorities (subject to any requirements of
applicable law with respect to the priority of creditors of
the Partnership, if any):
(a) First, to the Limited Partner in an amount equal to the
outstanding balance of all LP Loans applied first to
outstanding interest and then to outstanding principal;
(b) Second, to the General Partner in an amount equal to the
outstanding balance of all GP Loans;
(c) Third, to the General Partner in an amount equal to the
balance, if any, in the Distributable Land Equity
Account; and
(d) Fourth, the balance, if any, to the Partners pro rata in
accordance with their Sharing Ratios.
4.2 Special Payments.
(a) Contractor Fee. The Contractor Fee shall be payable to
Contractor in accordance with the terms and provisions of
the Construction Contract.
(b) Acquisition Fee. The Acquisition Fee shall be payable to
the Company as follows: (i) $16,800 on the Closing Date
and (ii) the balance upon the Partnership's receipt of an
invoice or other statement calculating the proper amount
of such fee.
(c) Development Fee. In connection with the Developer's
agreement to perform the services necessary to develop
the Project and if the Completion Date occurs on or prior
to the Final Date, the Partnership shall pay to the
Developer an amount equal to the excess, if any, of the
Development Fee over the aggregate amount of Cost
Overruns. The amount due pursuant to this Subsection
4.2(c) is to be paid in cash on the Completion Date.
ARTICLE 5.
ALLOCATIONS
5.1 Allocation of Net Profit. After applying the provisions of
Section 5.4 and except as otherwise provided in Section 9.9,
Net Profit for any Adjustment Period will be allocated in the
following order and priority:
(a) first, if the aggregate amount of Net Loss previously
allocated to any Partner exceeds the aggregate amount of
Net Profit previously allocated to such Partner (for the
current and all previous Adjustment Periods), then to
such Partner, or among such Partners, so as to reverse
the effect of the prior allocation of Net Loss in the
following order and priority:
(i) first, to the extent Net Loss was allocated to the
General Partner pursuant to Subsection 5.2(d) for
any prior Adjustment Period, Net Profit shall be
allocated to the General Partner to the extent of
such previously allocated Net Loss;
(ii) second, to the extent Net Loss was allocated to any
Partner(s) pursuant to Subsection 5.2(c) for any
prior Adjustment Period, Net Profit shall be
allocated to Partner(s) to the extent of such
previously allocated Net Loss (among the Partner(s)
in proportion to their respective shares of Net
Loss being offset);
(iii) third, to the extent Net Loss was allocated to
the General Partner pursuant to Subsection
5.2(b) for any prior Adjustment Period, Net
Profit shall be allocated to the General
Partner to the extent of such previously
allocated Net Loss;
(b) second, to the Partners in accordance with their Sharing
Ratios.
5.2 Allocation of Net Loss. After applying the provisions of
Section 5.4 and except as otherwise provided in Section 9.9,
Net Loss for any Adjustment Period will be allocated in the
following order and priority:
(a) first, to the extent Net Profit has been allocated
pursuant to Section 5.1(b) for prior Adjustment Periods,
Net Loss shall be allocated to offset such previously
allocated Net Profit (among the Partner(s) in proportion
to their respective shares of the Net Profit being
offset);
(b) second, if the General Partner's Land Equity Account
(computed as of the close of the Adjustment Period)
exceeds the cumulative amount previously allocated to the
General Partner under this Subsection 5.2(b), then to the
General Partner to the extent of the excess;
(c) third, to the Partners in proportion to and to the extent
of their respective positive Capital Account balances
until the Capital Account balance of each such Partner is
reduced to zero; and
(d) fourth, to the General Partner.
5.3 Limitation on Allocation of Net Loss. Notwithstanding the
provisions of Section 5.2, if the amount of Net Loss for any
Adjustment Period that would otherwise be allocated to a
Limited Partner under Section 5.2 would cause or increase an
Adjusted Capital Account Deficit of the Limited Partner as of
the last day of the Fiscal Year, then a proportionate part of
the Net Loss equal to the excess will be allocated to the
General Partner, and the remainder of the Net Loss, if any,
will be allocated to the Limited Partner.
5.4 Special Allocations. The following special allocations will
be made in the following order before allocations of Net
Profit or Net Loss are made:
(a) Minimum Gain Chargeback. Notwithstanding any other
provision of this Agreement to the contrary, if in any
Adjustment Period there is a net decrease in Partnership
Minimum Gain, then each Partner shall first be allocated
items of Gross Income for the Adjustment Period (and, if
necessary, subsequent Adjustment Periods) in an amount
equal to the portion of the Partner's share of the net
decrease in Partnership Minimum Gain, determined in
accordance with Regulations Section 1.704-2(g), that is
attributable to the disposition of Partnership property
subject to one or more nonrecourse liabilities of the
Partnership that are not Partner Nonrecourse Debts;
provided, however, if there is insufficient Gross Income
in an Adjustment Period to make the above allocation for
all Partners for the Adjustment Period, the Gross Income
will be allocated among the Partners in proportion to the
respective amounts they would have been allocated had
there been an unlimited amount of Gross Income for the
Adjustment Period.
(b) Minimum Gain Chargeback for Partner Nonrecourse Debt.
Notwithstanding any other provision of this Agreement to
the contrary other than Subsection 5.4(a), if in any
Adjustment Period there is a net decrease in Partner
Nonrecourse Debt Minimum Gain, then each Partner shall
first be allocated items of Gross Income for the
Adjustment Period (and, if necessary, subsequent
Adjustment Periods) in an amount equal to the portion of
the Partner's share of the net decrease in the Minimum
Gain during the Adjustment Period (as determined in
accordance with Regulations Section 1.704-2(i))
attributable to the disposition of Partnership property
subject to one or more Partner Nonrecourse Debts;
provided, however, if there is insufficient Gross Income
in an Adjustment Period to make the above allocation for
all Partners for the year, the Gross Income will be
allocated among the Partners in proportion to the
respective amounts they would have been allocated had
there been an unlimited amount of Gross Income for the
Adjustment Period.
(c) Qualified Income Offset. After application of
Subsections 5.4(a) and 5.4(b), if in any taxable year a
Limited Partner unexpectedly receives any adjustment,
allocation, or distribution described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5), or (6) and if the
Limited Partner has an Adjusted Capital Account Deficit
as of the first day of the taxable year, items of Gross
Income will be allocated to the Limited Partner in the
amount and in the manner sufficient to eliminate the
Adjusted Capital Account Deficit as quickly as possible;
provided, however, that an allocation under this
Subsection 5.4(c) will be made only if and to the extent
that the Limited Partner would have an Adjusted Capital
Account Deficit after all other allocations provided for
in this Article 5 have been tentatively made as if this
Subsection 5.4(c) were not in this Agreement.
(d) Partner Nonrecourse Deductions. Partner Nonrecourse
Deductions for any Adjustment Period or other period will
be allocated to the Partner who bears the economic risk
of loss with respect to the Partner Nonrecourse Debt to
which the Partner Nonrecourse Deductions are
attributable.
5.5 Curative Allocations. In the event that any Gross Income, Net
Profit (or items thereof), Net Loss (or items thereof) or
deductions are allocated under Sections 5.3 or 5.4 subsequent
Gross Income, Net Profit (or items thereof), or Net Loss (or
items thereof) will first be allocated (subject to
Sections 5.3 and 5.4) to the Partners in a manner that will
result in each Partner having a Capital Account balance equal
to that which would have resulted if the original allocation
of Gross Income, Net Profit (or items thereof), Net Loss (or
items thereof) or deductions under Sections 5.3 or 5.4 had not
occurred; provided, however, no allocations under this
Section 5.5 that are intended to offset allocations under
Subsection 5.4(a) or 5.4(b) will be made prior to the taxable
year during which there is a net decrease in Partner
Nonrecourse Debt Minimum Gain or Partnership Minimum Gain, and
then only to the extent necessary to avoid any potential
economic distortions caused by the net decrease in Partner
Nonrecourse Debt Minimum Gain or Partnership Minimum Gain, and
no such allocation under this Section 5.5 will be made to the
extent that the General Partner reasonably determines that it
is likely to duplicate a subsequent mandatory allocation under
Subsection 5.4(a) or 5.4(b).
5.6 Tax Allocations - Code Section 704(c). In accordance with
Code Section 704(c) and the related Regulations, income, gain,
loss, and deduction with respect to any property contributed
to the capital of the Partnership, solely for tax purposes,
will be allocated among the Partners so as to take account of
any variation between the adjusted basis to the Partnership of
the property for federal income tax purposes and the Book
Value of the property. The Partnership shall use the
"remedial allocation method" described in Section 1.704-3(d)
of the Regulations with respect to all property contributed to
the capital of the Partnership in connection with the
formation of the Partnership. Any other elections or other
decisions relating to allocations under this Section 5.6 will
be made by the General Partner with the consent of the Limited
Partner. Allocations under this Section 5.6 are solely for
purposes of federal, state and local taxes and will not
affect, or in any way be taken into account in computing, any
Partner's Capital Account or share of Net Profit, Net Loss or
other items or distributions under any provision of this
Agreement.
5.7 Other Allocation Rules.
(a) For purposes of determining the Net Profit, Net Loss, or
any other item allocable to any period, Net Profit, Net
Loss, and any such other item will be determined on a
daily, monthly, or other basis, as determined by the
General Partner using any permissible method under
Section 706 of the Code and the Regulations thereunder.
(b) If any Partnership Interest is Transferred, or the
Sharing Ratios are increased or decreased by reason of
the admission of a new Partner or otherwise, during any
Adjustment Period, each item of Net Profit or Net Loss
and other Partnership profit and loss for such Adjustment
Period shall be assigned pro rata to each day in the
particular period of such Adjustment Period to which such
item is attributable (i.e., the day on or during which it
is accrued or otherwise incurred) and the amount of each
such item so assigned to any such day shall be allocated
among the Partners based upon their respective interests
in the Partnership at the close of such day. For the
purpose of accounting convenience and simplicity, the
Partnership shall treat a Transfer of, or an increase or
decrease in, a Partnership Interest or an increase or
decrease in a Partner's Sharing Ratios which occurs at
any time during a semi-monthly period as having been
consummated on the first day of such semi-monthly period,
regardless of when during such semi-monthly period such
Transfer, increase or decrease actually occurs (i.e.,
Transfers or increases or decreases made during the first
15 days of any month will be deemed to have been made on
the first day of the month and Transfers or increases or
decreases thereafter will be deemed to have been made on
the 16th day of the month).
ARTICLE 6.
OTHER FINANCIAL MATTERS
6.1 Compensation of General Partner; Reimbursement of General
Partner. The General Partner shall not be entitled to any
compensation for services rendered as General Partner.
However, the General Partner shall be reimbursed promptly by
the Partnership for costs and expenses reasonably incurred by
it in connection with the performance of its duties to the
Partnership, but only to the extent anticipated in the Project
Budget or Operating Budget or otherwise as Approved by the
Limited Partner.
6.2 Books, Records, Accounting and Reports.
(a) Records and Accounting. The General Partner shall keep
or cause to be kept appropriate books and records with
respect to the Partnership's business at the principal
office of the Partnership or such other office as the
General Partner may designate for that purpose. The
books of the Partnership shall be maintained for
financial reporting purposes on the cash or accrual
basis, in accordance with generally accepted accounting
principles and applicable law. Any Partners shall have
the right to inspect and copy the books and records of
the Partnership at its discretion and at the expense of
the Partnership.
(b) Fiscal Year. The fiscal year of the Partnership shall be
the calendar year.
(c) Reports.
(i) Annual Reports. By no later than March 31 of the
following year, the General Partner shall cause to
be delivered to the Limited Partner reports
containing unaudited financial statements of the
Partnership for the fiscal year just concluded,
presented on a cash basis, including a balance
sheet and a statement of income and cash flow. The
Limited Partner shall have the right, at its
expense, to require an audit of the Partnership's
financial statements for any fiscal year.
(ii) Quarterly Reports. Within 30 days after the
expiration of the respective quarter, the General
Partner shall cause to be delivered to the Limited
Partner a report containing unaudited financial
statements of the Partnership for such just
concluded quarter consisting of at least a balance
sheet and cash flow statement.
(iii) Monthly Reports. Beginning with the Leasing
Commencement Date, within 30 days after the
end of each calendar month, the General
Partner shall cause to be delivered to the
Limited Partner a rent roll and an operating
statement for the Project.
(iv) Initial Lender Reports. The General Partner shall
promptly provide the Limited Partner with copies of
all draw requests and all other material
correspondence, notices and other written
communication to or from the Initial Lender. On or
before five days prior to each due date thereof,
the General Partner shall provide the Limited
Partner, via facsimile, with written evidence of
the payment of all amounts due on the Initial Loan.
6.3 Tax Matters.
(a) Preparation of Tax Returns. The General Partner shall
arrange for the preparation of all returns of Partnership
income, gain, loss, deduction, credit, and other items
necessary for federal, state, and local income tax
purposes and shall cause the same to be filed in a timely
manner. The General Partner shall furnish to the Limited
Partner a copy of each such return, together with any tax
information reasonably required for federal and state
income tax reporting purposes. If required, within 60
days after the end of each fiscal quarter of the
Partnership, the General Partner shall furnish to the
Partners the tax information reasonably required for the
Partners to determine quarterly tax estimate payments.
(b) Tax Elections. The General Partner shall determine
whether to make any available tax election.
(c) Tax Controversies. Subject to the provisions hereof, the
General Partner is designated the Tax Matters Partner (as
defined in Section 6231 of the Code) and is authorized
and required to represent the Partnership, at the
Partnership's expense, in connection with all
examinations of the Partnership's affairs by tax
authorities, including resulting administrative and
judicial proceedings, and to expend Partnership funds for
professional services and costs associated therewith.
The General Partner shall deliver to the Limited Partner,
within ten Business Days following receipt thereof, a
copy of any notice or other communication with respect to
the Partnership received by the General Partner from the
Internal Revenue Service (or other governmental tax
authority), and if requested by any Limited Partner,
shall provide to counsel designated by such Limited
Partner a copy of any submission to be made to the
Internal Revenue Service (or other governmental tax
authority) or any court with respect to any
administrative or judicial proceeding involving the
Partnership prior to the submission thereof to the
Internal Revenue Service (or other governmental tax
authority) or the court, as the case may be, and shall
direct counsel for the Partnership to confer with counsel
of such Limited Partner and to consider in good faith all
comments or suggestions of counsel for such Limited
Partner. The Limited Partner agrees to cooperate with
the General Partner in connection with such proceedings.
(d) Organizational Expenses. The Partnership shall elect to
deduct expenses incurred in organizing the Partnership
ratably over a 60-month period as provided in Section 709
of the Code.
(e) Taxation as a Partnership. No election shall be made by
the Partnership or by any Partner for the Partnership to
be excluded from the application of any of the provisions
of Subchapter K, Chapter 1 of Subtitle A of the Code or
from any similar provisions of any state tax laws.
ARTICLE 7.
POWERS, RIGHTS, AND DUTIES OF PARTNERS
7.1 Obligation of the General Partner. The General Partner shall
conduct the business of the Partnership in accordance with
this Agreement.
7.2 Authority of Limited Partners. The Limited Partners as such
(a) have no rights or powers in the management of the
Partnership, (b) have no power to sign for or bind the
Partnership, and (c) may not attempt to take part in the
management of the business of the Partnership. The rights of
the Limited Partners to consent to and approve of certain
matters under the provisions of this Agreement shall not be
construed as participation in the operation and management of
the business of the Partnership or the exercise of control
over the Partnership affairs.
7.3 Powers and Duties of the General Partner.
(a) In General. Subject to the limitations set forth in this
Agreement, the General Partner is responsible for the
day-to-day management of Partnership operations and
performing or overseeing the performance of all acts
needed to carry on the Partnership business on a daily
basis. Its responsibilities include, without limitation,
oversight of the Partnership's operation and maintenance
of Partnership property, management of Partnership
operations, maintenance of financial and tax accounting
records, preparation and filing of tax and securities
laws reports, dissemination and receipt of communications
with the Limited Partner, dissemination of distributions,
and establishment and management of a reasonable cash
reserve. The General Partner has the power and authority
to execute, without the joinder of any other Partner,
instruments evidencing matters approved of in accordance
with the terms of this Agreement.
(b) Powers of the General Partner. The General Partner shall
have the right (except for those matters set forth in
Section 7.4 hereof) and the duty to take any and all
actions the General Partner deems necessary or advisable,
in the General Partner's reasonable opinion, in order to
carry out the purpose of the Partnership, and, without
limitation:
(i) to execute and to deliver, for and on behalf of the
Partnership, any promissory notes, deeds of trust,
mortgages, security agreements, financing
statements, assignments of leases, "master leases",
or other instruments required or advisable in
connection with any permitted loans, mortgages,
pledges or hypothecations, specifically including
the Initial Loan Documents;
(ii) to design and construct the Project and to develop
and improve the Land or to cause the Project to be
designed and constructed and the Land to be
developed and improved;
(iii) to administer all matters pertaining to
insurance with respect to Partnership
property;
(iv) to institute, prosecute and defend any legal or
administrative actions or proceedings on behalf of
or against the Partnership;
(v) to operate and maintain, or cause to be operated
and maintained the Project, or any part or parts
thereof;
(vi) to employ, terminate employment, supervise and
compensate out of Partnership funds all Persons for
and in connection with the business of the
Partnership or the acquisition, improvement,
operation, maintenance, management, leasing,
financing, refinancing, sale, exchange, or other
disposition of the Project, or any interest
therein;
(vii) to acquire, repair and replace such tangible
and intangible personal property as may be
necessary to carry on the business of the
Partnership;
(viii) to negotiate and execute leases for
prospective tenants or other occupancy
agreements with prospective concessionaires in
the Project;
(ix) to collect all rentals and all other sums due to
the Partnership and to enforce the obligations of
tenants, concessionaires, and guests of the
Project;
(x) to negotiate and contract with all utility
companies servicing the Project;
(xi) to apply for and maintain all licenses and permits
required to be obtained and maintained by the
Partnership;
(xii) to negotiate the amounts of all taxes,
assessments, and other impositions applicable
to Partnership Property with the proper
authorities and, when appropriate, undertake
any action or proceeding seeking to reduce
such taxes, assessments or impositions;
(xiii) to deposit all monies received by General
Partner for or on behalf of the Partnership
into such accounts as may be designated by the
General Partner and to disburse and to pay all
funds on deposit on behalf of the Partnership
in such amounts and at such time as the same
are required in connection with the ownership,
construction, development, maintenance and
operation of the Partnership;
(xiv) to supervise and coordinate construction and
architectural services, to engage in the
leasing of rooms, apartments or other space in
the Project, and to perform accounting and
other functions normally performed by
development partners;
(xv) to take such actions (and promptly thereafter, send
written notice to the Limited Partner) as it, in
its reasonable judgment, deems necessary for the
protection of life or health or the preservation of
the assets of the Partnership, if, under the
circumstances, any delay would materially increase
the risk to life or health or the preservation of
such assets; and
(xvi) to take all actions, undertake such
proceedings, exercise all rights and execute
all documents not expressly described herein
deemed necessary or advisable by the General
Partner to perform any of the foregoing or any
rights or obligations of the General Partner
set forth elsewhere in this Agreement or to
conduct or carry out the business of the
Partnership.
(c) Project Budget. The General Partner shall supervise the
construction of the Project in accordance with the Plans
and the Project Budget. During the Construction Period,
the Limited Partner shall receive copies of all materials
the Partnership is required to provide to the Initial
Lender.
(d) Decorator/Designer. The General Partner shall retain
Carol Campbell as the decorator for the Project's
clubhouse and model and Walter Von Rochsburg as the
architect to design the signage and graphics for the
Project. If the proposals submitted by either Carol
Campbell or Walter Von Rochsburg are not consistent with
the Plans and the Project Budget, the General Partner
shall have the authority to remove either person and
replace them with any person qualified to perform the
required task.
(e) Duties of General Partner. The General Partner shall
manage and control the affairs of the Partnership to the
best of its ability and conduct the operations
contemplated hereby in a careful and prudent manner and
in accordance with good industry practice. The General
Partner in its capacity as such shall devote as much time
to the performance of its duties under this Agreement as
is necessary to carry on the affairs of the Partnership.
Without limiting the foregoing, the General Partner shall
diligently (i) conduct all operations of the Partnership
in accordance with good business practices and in an
efficient and economical manner, (ii) cause the
Partnership to comply with all laws and regulations,
including zoning and other governmental ordinances
affecting the Partnership and the Project, (iii) cause
the Partnership to comply with the terms and conditions
of this Agreement, the Initial Loan Documents and all
other agreements, contracts and obligations of the
Partnership, (iv) use reasonable efforts to adhere to the
Time Schedule for construction and completion of the
Project set forth in Exhibit G, and (v) following the
Purchase Price Computation Date but prior to the Purchase
Settlement Date submit draw requests to the Initial
Lender for all remaining amounts that could be drawn
pursuant to the Initial Loan. The General Partner shall,
at all times, act in a manner consistent with its
fiduciary duties to the Partnership and the Limited
Partner.
7.4 Restrictions on the Authority of the General Partner.
(a) The General Partner may not:
(i) Acquire any property in exchange for interests in
the Partnership;
(ii) Commingle Partnership funds with those of any other
Person or permit Partnership funds or assets to be
employed in any manner except for the exclusive
benefit of the Partnership;
(iii) Permit any Person who makes a loan to the
Partnership to acquire, as a result of making
such loan, any direct or indirect interest in
the profits, capital, or assets of the
Partnership other than an interest as a
secured creditor;
(iv) Make, execute, or deliver any adjustment,
compromise, or settlement of any claim against the
Partnership other than in the ordinary course of
business;
(v) Except as required by the Initial Loan Documents or
otherwise in the ordinary course of business,
encumber or grant a lien on any Partnership
property;
(vi) Sell any general or limited partner interests in
the Partnership, or add any Partner;
(vii) Do any act in contravention of this Agreement;
(viii) Mortgage, pledge, hypothecate, for and on
behalf of the Partnership, all or any part of
the property of the Partnership, in order to
secure any loans to the Partnership for the
refinancing of the Initial Loan;
(ix) Sell, transfer or convey the Project or any
material part thereof or interest therein (divided
or undivided) or sell, transfer or convey any other
material assets of the Partnership;
(x) Make any agreement of merger or consolidation of
the Partnership or change or reorganize the
Partnership into any other legal form;
(xi) Possess Partnership property or assign the rights
of the Partnership in any Partnership property for
other than a Partnership purpose;
(xii) Borrow money on behalf of the Partnership
(except for the Initial Loan, the GP Loans and
the LP Loans) or grant any mortgage or lien to
secure any borrowing (except for the mortgages
and liens securing the Initial Loan);
(xiii) Amend in any material manner the terms of,
renew or extend the Initial Loan or any
document evidencing or securing the same;
(xiv) Settle any litigation by or against the
Partnership except for litigation arising in
the ordinary course of business;
(xv) Take any action which under federal tax law in
effect as of the date of this Agreement would cause
the Partnership to be treated as an association
taxable as a corporation for federal income tax
purposes;
(b) Without the prior approval of the Initial Lender, the
General Partner may not:
(i) Amend any contract or agreement with an Affiliate
which has previously been Approved by the Initial
Lender or the Limited Partner or, or otherwise
enter into or amend any contract or agreement that
delegates to any other Person or entity
discretionary authority over the management or
operation of the Partnership;
(ii) Confess a judgment in excess of $5,000 against the
Partnership;
(iii) Make any material or substantive changes to
the scope or quality of the Project;
(iv) Make changes to the Plans which alter the size,
appearance, utility or value of the Project;
(v) Except for the Construction Contract, the
Management Agreement and any apartment lease with
Executive Living that otherwise complies with the
terms of the Management Agreement, enter into any
contract with an Affiliate of the General Partner
or The Grupe Company;
(vi) Execute any changes in the Plans unless the amount
of such change is less than $25,000 and all changes
theretofore made are less than $100,000 in the
aggregate;
(vii) Make any material change to the insurance
carried by the Partnership;
(viii) Except as necessary to reflect changes in the
Plans permitted to be made pursuant to
Subsection 7.4(b)(vi) hereof, amend, modify,
or terminate the Construction Contract or
enter into any additional construction
contract.
7.5 Reliance on Authority. In its dealings with the Partnership,
a third party may rely on the authority of the General Partner
to bind the Partnership without reviewing the provisions of
this Agreement or confirming compliance with the provisions of
this Agreement; however, as between the Partners and as
between the General Partner and the Partnership, the authority
of the General Partner to act on behalf of the Partnership
shall be determined from the pertinent provisions of this
Agreement.
7.6 Title to Partnership Assets. Title to the properties and
assets of the Partnership, 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 properties or assets or any portion thereof.
7.7 Removal of General Partner. The Limited Partner may remove
the General Partner for Cause. The term "Cause" is defined to
mean: (a) a material breach resulting from an act of fraud or
gross negligence by the General Partner of its obligations
under this Agreement, (b) a material breach, not resulting
from an act of fraud or gross negligence, by the General
Partner of its obligations under this Agreement, which breach
continues unremedied for a period of 30 days after any Limited
Partner gives notice to the defaulting General Partner
specifying the default, (c) the bankruptcy or insolvency of
the General Partner, (d) the material breach resulting from an
act of fraud or gross negligence by any Affiliate of the
General Partner of a duty or obligation under a material,
written contract or agreement with the Partnership, (e) the
material breach, not resulting from an act of fraud or gross
negligence, by any Affiliate of the General Partner of a duty
or obligation under a material, written contract or agreement
with the Partnership if within a period of 30 days after any
Limited Partner gives notice to the General Partner and the
defaulting Affiliate specifying the default, either the
default has not either been cured or the contract or the
agreement replaced with a substitute which does not otherwise
adversely impact the Partnership, (f) the dissolution or
cessation of business of the General Partner, or (g) the
Completion Date does not occur on or before the Final Date.
Nothing contained herein shall limit any other rights or
remedies which are, at law, afforded to the Limited Partner.
7.8 Transfer of Interests.
(a) Transfer. No Partnership Interest may be Transferred, in
whole or in part, except in accordance with the terms and
conditions set forth in this Section 7.8. Any Transfer
or purported Transfer of any Partnership Interest not
made in accordance with this Section 7.8 is null and
void. A Person who alleges to be a transferee of a
Partnership Interest that was not Transferred in
accordance with this Agreement has no right to require
any information or account of the Partnership's
transactions or to inspect the Partnership's books. The
Partnership is entitled to treat the alleged transferor
of a Partnership Interest as the absolute owner thereof
in all respects and incurs no liability to any alleged
transferee for distributions to the Partner owning such
Partnership Interest of record or for allocations of Net
Income, Net Losses, deductions or credits or for
transmittal of reports and notices required to be given
to holders of Partnership Interests.
(b) Assignment. Any Partner may, upon prior written notice
to the General Partner but without any consent required,
assign to any Person or entity all or any part of (i)
such Partner's right to distributions under Article 4
hereof, or (ii) any other economic right or benefit under
this Agreement attributable to such Partner's Partnership
Interest; provided, however, that notwithstanding any
provision to the contrary contained in this Agreement or
the Act, in no event may this Subsection 7.8(b) result in
the Transfer of any voting rights or other non-economic
attributes of the assigned interest. No assignee
acquiring the economic rights and benefits of a Partner
solely by reason of this Subsection 7.8(b) may exercise
any rights of a Partner, and to the extent that any
Partner assigns its Partnership Interest solely pursuant
to this Subsection 7.8(b), it shall not cease to be a
Partner.
(c) Transfer by General Partner. The General Partner may not
Transfer its Partnership Interest to any Person without
the Approval of the Limited Partner.
(d) Transfer by a Limited Partner. Except as otherwise
provided in Subsection 7.8(b), a Limited Partner may not
Transfer its Partnership Interest to any Person unless it
has first obtained the Approval of the General Partner.
(e) Substituted Limited Partner. An assignee or transferee
(other than an existing Partner) of the Partnership
Interest of a Limited Partner may be admitted as a
substitute partner ("Substituted Partner") upon the
receipt by the General Partner of an appropriate
supplement to this Agreement pursuant to which such
Substituted Partner agrees to be bound by all the terms
and provisions of this Agreement. Unless the assignee is
already a General Partner, any assignee of a Partnership
Interest satisfying these requirements shall become and
shall have only the rights and duties of a Limited
Partner and the assigned Partnership Interest shall
thereafter be a Limited Partner's Partnership Interest.
The General Partner shall reflect the admission of a
Substituted Partner and the withdrawal of the
transferring Partner, if appropriate, by preparing a
supplemental Exhibit, dated as of the date of such
admission and withdrawal, and by filing it with the
records of the Partnership. Any Substituted Partner
shall, if required by the General Partner, prior to such
admission, also execute any other documents requested by
the General Partner, including, without limitation, an
irrevocable power of attorney in form satisfactory to the
General Partner appointing the General Partner as such
Person's attorney-in-fact with full power to execute,
swear to, acknowledge, and file all certificates and
other instruments necessary to carry out the provisions
of the Agreement, including, without limitation, such
undertakings as the General Partner may require for the
payment of all fees and costs necessary to effect any
such Transfer and admission. Upon admission, such
Substituted Partner shall be subject to all provisions of
this Agreement in the place and stead of his assignor as
if the Substituted Partner originally was a party to this
Agreement.
(f) General Partner Put Option. The Limited Partner hereby
grants to the General Partner an option to require the
Limited Partner to purchase the entire Partnership
Interest of the General Partner at the greater of the
Bonus Purchase Price or the Target Purchase Price (the
"GP Put Option"). At any time on or before December 10,
1999, the General Partner may deliver to the Limited
Partner a written notice (the "GP Put Notice") that the
General Partner desires to exercise the GP Put Option.
The GP Put Option shall expire if the GP Put Notice is
not issued on or before December 10, 1999. The purchase
price shall be determined and the transfer consummated in
accordance with Subsection 7.8(h).
(g) Limited Partner Call Options.
(i) The General Partner hereby grants to the Limited
Partner or its designee an option to purchase the
entire Partnership Interest of the General Partner
(the "LP Call Option"). At any time after December
10, 1999, the Limited Partner or its designee may
deliver to the General Partner a written notice
(the "LP Call Notice") that the Limited Partner
desires to exercise the LP Call Option at the
greater of the Bonus Purchase Price or the Target
Purchase Price. The purchase price shall be
determined and the transfer consummated in
accordance with Subsection 7.8(h).
(ii) At any time prior to December 11, 1999, the Limited
Partner or its designee may deliver to the General
Partner a LP Call Notice that the Limited Partner
desires to exercise the LP Call Option for a
purchase price equal to the sum of the Investment
Amount plus $1,135,238.
(h) Put/Call Procedures.
(i) The GP Put Notice (A) shall set forth the Purchase
Price Computation Date, which shall not be later
than December 10, 1999, and (B) shall contain the
General Partner's calculation of the GP Computed
Expenses, the Purchase Price Expenses, and the
Ancillary Income. The General Partner shall attach
to the GP Put Notice all workpapers, schedules and
other materials supporting or explaining the
General Partner's calculation of the GP Computed
Expenses, the Purchase Price Expenses, and the
Ancillary Income.
(ii) The LP Call Notice shall set forth the Purchase
Price Computation Date, which, unless the LP Call
Option is being exercised pursuant to Subsection
7.8(g)(ii), shall not be earlier than December 11,
1999. If the LP Call Option is being exercised
pursuant to Subsection 7.8(g)(i), within ten days
following receipt of the LP Call Notice, the
General Partner shall submit to the Limited Partner
the General Partner's calculation of the GP
Computed Expenses, the Purchase Price Expenses, and
the Ancillary Income. The General Partner shall
attach to its submission all workpapers, schedules
and other materials supporting or explaining the
General Partner's calculation of the GP Computed
Expenses, the Purchase Price Expenses and the
Ancillary Income.
(iii) During the ten day period following the
Limited Partner's receipt of the General
Partner's calculation of the GP Computed
Expenses and the Ancillary Income, the parties
shall endeavor to agree on the amount of the
GP Computed Expenses and the Ancillary Income.
If the parties are unable to agree on the
amount of the GP Computed Expenses, the
Purchase Price Expenses shall be presumed to
be equal to $1,122,010 plus the Excess Real
Estate Taxes. If the parties are unable to
agree on the amount of the Ancillary Income,
the Ancillary Income will be presumed to be
equal to the sum of (A) $144 per unit/per year
based on 95% occupancy, and (B) an annualized
amount based on the preceding three month net
effective garage rental per garage assuming
95% of the available garages are occupied.
(iv) As soon as practicable following the Purchase Price
Computation Date, the General Partner shall
deliver to the Limited Partner a certified rent
roll (as of the Purchase Price Computation Date)
for apartments and garages and the General
Partner's calculation of the greater of the Bonus
Purchase Price or the Target Purchase Price. The
Limited Partner shall have the right to audit the
Partnership's records including the rent roll,
leases and tenant files to verify the number of
Qualified Tenants and Non-Defaulting Tenants. If
the parties are unable to agree on the proper
calculation of the Bonus Purchase Price of the
Target Purchase Price, either party may submit the
matter to arbitration pursuant to Section 10.10.
(v) As soon as practicable following the determination
of the appropriate purchase price, the Limited
Partner shall deliver to the General Partner the LP
Put/Call Closing Notice.
(vi) The Limited Partner's obligations pursuant to this
Section 7.8 shall be conditioned upon and subject
to (A) delivery of an as built survey and a
downdate endorsement, (B) the General Partner's
certification that as of the Purchase Settlement
Closing the units in the Project will be in
substantially a rent ready condition and (C) the
Limited Partner's right to walk the units to ensure
that such units are in such condition.
(vii) The Limited Partner shall pay the General
Partner the appropriate purchase price in cash
at the Purchase Settlement Closing to occur by
the Purchase Settlement Date. After the
Purchase Settlement Date, the General Partner
will have no additional obligations under the
Partnership Agreement or with respect to the
Partnership, the Limited Partner or the
Project. The Limited Partner will defend,
indemnify, and hold the General Partner (and
its Affiliates and agents) harmless from and
against all claims, losses, costs, liabilities
and expenses (including attorneys' fees)
related to the Partnership or the Project
which are attributable to actions, events or
periods occurring after the Purchase
Settlement Date.
7.9 Management of the Project. The operation, management and
maintenance of the Project (other than the construction and
development thereof) shall be conducted by a Manager (or, upon
its resignation, termination or expiration of its Management
Agreement without the same being renewed, or any other event
which results in its no longer serving as the Manager, then by
a successor Manager) pursuant to a management agreement
between the Partnership and the Manager (each such management
agreement being herein called the "Management Agreement").
The form, terms, and provisions of the Management Agreement
must be Approved by all Partners. The Manager and each
successor Manager shall be selected and appointed by the
General Partner. The initial Manager shall be Franklin
Landings Management Company. All Partners hereby authorize
the General Partner, on behalf of the Partnership, to enter
into a Management Agreement with Manager in the form Approved
by all Partners. The Limited Partner may elect to cause the
Partnership to terminate the Management Agreement if the
Partnership has the right to do so under the applicable
Management Agreement.
7.10 Budgetary Approval Process.
(a) The Project Budget is attached hereto as Exhibit F. The
General Partner may freely reallocate to contingency any
savings in any line item in the Project Budget. Subject
to the terms of the Initial Loan, the General Partner may
freely reallocate from contingency to any other line item
in the Project Budget.
(b) Beginning on the Leasing Commencement Date, the Project
shall be operated pursuant to an approved Operating
Budget. At least 45 days prior to the beginning of a
Fiscal Year (or at least 45 days prior to the Leasing
Commencement Date, as the case may be) in the case of the
Operating Budget for such Fiscal Year, the General
Partner shall submit the proposed Operating Budget to the
Limited Partner.
7.11 Services By and Payments to the General Partner and Certain
Affiliates Thereof.
(a) No commissions shall be paid by the Partnership to the
General Partner for leases heretofore or hereafter
entered into by the Partnership.
(b) The actual salaries, benefits, bonuses and burdens for
any employees of the General Partner and/or its
Affiliates actually and directly involved in the
development, construction, marketing or leasing of the
Project shall be payable as Total Project Costs,
provided, that such Total Project Costs will not include
the salaries of any employees of Contractor other than a
superintendent, assistant superintendent and a job cost
accountant.
7.12 Approvals and Consents. Whenever the approval, satisfaction
or consent of a party hereto is required or requested, such
approval, satisfaction or consent may be granted or withheld
in such party's reasonable discretion unless expressly
provided herein to the contrary. Any approval, satisfaction,
or consent hereunder must be express and in writing duly
executed and delivered by the party to be bound thereby,
unless otherwise specified to the contrary in this Agreement.
No Partner shall unreasonably delay its response to a request
for approval, satisfaction or consent hereunder.
7.13 Notices and Meetings. Whenever any notice is required to be
given to any Partner under the provisions of this Agreement,
or under any provision of the Partnership Act, a waiver
thereof, in writing, signed by the Person or Persons entitled
to such notice, whether before or after the time stated
therein, is equivalent to the giving of such notice. Except
as provided in the next sentence, any action, vote, approval
or consent required or permitted to be taken or made by any
Partner pursuant to this Agreement may be taken or made only
by the vote of such Partner at a duly called meeting thereof.
Any action which could be taken at any meeting of the Partners
may be taken without a meeting, without prior notice, and
without a vote if a consent (or consents) in writing, setting
forth the action so taken, is signed by all Persons entitled
to vote with respect to the action that is the subject of the
consent. Subject to the giving of the required notice (or a
waiver executed in lieu thereof), the Partners may participate
and hold a meeting by telephone conference or similar
communications equipment by which all Persons participating in
the meeting can hear each other, and participating in such a
meeting constitutes the presence in Person at such meeting,
except where a Person participates in the meeting for the
express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called
or convened or that proper notice of such business has not
been given.
7.14 Compliance with Financing Documents. The Partnership and each
Partner shall comply with (a) each provision of the Initial
Loan Documents applicable to it, and (b) the Affordable Rental
Housing Development Agreement with the city of Roseville dated
October 22, 1997.
ARTICLE 8.
CERTAIN COVENANTS AND REPRESENTATIONS OF PARTNERS
8.1 Information. In addition to the other rights specifically set
forth in this Agreement, each Partner is entitled to all
information to which that Partner is entitled to have access
under the Partnership Act under the circumstances and subject
to the conditions therein stated. No Person to whom a Transfer
is purported to be made without compliance with this Agreement
will be entitled to have access to any information about the
Partnership.
8.2 Conflicts of Interest. Nothing in this Agreement will prevent
or restrict a Partner or any of its Affiliates from engaging
in or possessing interests in other business ventures of any
and every type and description, independently or with others,
including ones in direct competition with the Partnership. No
such action will be deemed wrongful or improper under this
Agreement and neither the Partnership nor any other Partner
will have any right to participate therein.
ARTICLE 9.
DISSOLUTION, LIQUIDATION, AND TERMINATION
9.1 Dissolution. The Partnership will dissolve upon the first to
occur of the following events:
(a) The 15th anniversary of the date of this Agreement (or
such later date that the Partners may approve in
writing);
(b) At the time as there is only one Partner;
(c) The dissolution by the written agreement of all Partners;
(d) The sale or other disposition of the Project, unless such
sale or other disposition involves any deferred payment
of the consideration therefor, in which case the
Partnership will not be dissolved until the last day of
the calendar year during which the Partnership collects
the full amount of the deferred payment or otherwise
ceases to have any rights to collect the deferred payment
as a result of the bankruptcy of the obligor or
otherwise;
(e) The entry of a decree of judicial dissolution under the
Partnership Act; and
(f) The occurrence of an Event of Withdrawal with respect to
the General Partner unless the Limited Partner agrees in
writing, within 90 days after the occurrence of the Event
of Withdrawal, to continue the Partnership and to the
appointment, effective as of the date of the Event of
Withdrawal, of a new general partner if necessary or
desired.
9.2 Interim Manager. If the Partnership is dissolved as a result
of the General Partner's being a Bankrupt Partner, the Limited
Partner may appoint an interim manager of the Partnership (the
"Interim Manager"), who will have and may exercise only the
rights, powers, and duties of a general partner necessary to
preserve the Partnership assets, until (a) a new general
partner, if any, is elected, if the Partnership is
reconstituted or (b) the Liquidating Manager is appointed, if
the Partnership is not reconstituted as permitted by Section
9.1. The Interim Manager will not be liable as a general
partner to the Partners.
9.3 Winding Up and Liquidation.
(a) Winding Up. Upon the dissolution of the Partnership, if
it is not reconstituted by the Partners as permitted in
this Agreement, the Liquidating Manager will proceed to
wind up the affairs and business of the Partnership. A
reasonable time will be allowed for the orderly
liquidation of the Partnership's assets under this
Article 9 in order to minimize the risk of loss that
might be attendant upon the a liquidation. In connection
with the winding up, the Liquidating Manager will sell or
otherwise dispose of the Partnership's assets; provided,
however, that, without the written consent of the Limited
Partner, except to the extent required to satisfy the
debts and liabilities of the Partnership, the Liquidating
Manager will not sell any of the assets of the
Partnership. If such consent is not obtained, the assets
of the Partnership, to the extent they need not be
liquidated to satisfy the debts and liabilities of the
Partnership, shall be distributed in kind to the
Partners. Each Partner hereby consents to such in-kind
distribution.
(b) Powers. Until final distribution, the Liquidating
Manager will continue to operate the Partnership
properties with all of the power and authority of the
General Partner.
(c) Distributions in Liquidation. Liquidating distributions
will be applied and distributed as follows:
(i) to the repayment of debts and liabilities of the
Partnership, including those owed to Partners; then
(ii) to the establishment of the cash reserves as the
Liquidating Manager deems appropriate for any
contingent or unforeseen liabilities of the
Partnership; provided, however, that at the
expiration of the period as the Liquidating Manager
deems advisable, the balance of the cash reserves
will be distributed to the Partners in the manner
hereinafter provided; and then
(iii) to the Partners in accordance with Article 4.
(d) In-Kind Distributions. Except as contemplated by
Subsection 9.3(a), no in-kind distributions will be made
to the Partners without the Approval of all Partners.
9.4 Cost of Winding Up; Audit. The costs of winding up and
liquidation will be borne by the Partnership. At the election
of the Limited Partner, the Liquidating Manager will cause an
independent auditor to prepare a complete and final certified
audit of the books, records, and accounts of the Partnership
and all adjustments between the Partners will be made upon the
basis of the certified audit.
9.5 Termination of Interest. The distribution of cash or property
to a Partner in accordance with the provisions of this Article
constitutes a complete return to the Partner of its capital
contributions and a complete distribution to the Partner in
respect of its Partnership Interest and all the Partnership's
property and constitutes a compromise to which all Partners
have consented for purposes of the Partnership Act. To the
extent that a Partner returns funds to the Partnership, it has
no claim against any other Partner for those funds.
9.6 Subsequent Distributions. If at any time (whether before or
after termination of the Partnership) any of the funds placed
in reserve(s)under this Article are released because, in the
opinion of the Liquidating Manager, the need for the
reserve(s) has ended, the funds will be distributed in
accordance with this Article.
9.7 Filing Certificate of Cancellation. Promptly after the
distribution of assets under this Article (other than funds
that are reserved under this Article), the General Partner (or
the other Person or Persons as the Partnership Act may require
or permit) will cause a Certificate of Cancellation to be
filed with the Secretary of State of the State of Delaware,
cancel any other filings made under Section 2.7, and take such
other actions as may be necessary to terminate the
Partnership.
9.8 Date of Termination. The Partnership will be terminated when
all of its assets (other than those to be distributed in kind
pursuant to this Agreement) have been converted into cash, all
promissory notes or other evidences of indebtedness derived by
the Partnership from the conversion of its assets (other than
those to be distributed in kind pursuant to this Agreement)
have been collected or otherwise converted into cash, and all
the cash, together with any other cash held by the Partnership
and the assets to be distributed in kind pursuant to this
Agreement, has been applied and distributed in accordance with
the provisions of this Article. The establishment of any cash
reserves under this Article will not have the effect of
extending the term of the Partnership, but any such cash
reserves will be applied and distributed in the manner
provided in the Section upon expiration of the period of the
reserve.
9.9 Allocations in Year of Liquidation. It is the intent of the
Partners that the allocations set forth in Article 5 will
cause the positive balance of the Capital Account of each of
the Partners to equal the distributions required under this
Article to such Partner. Accordingly, if after giving
hypothetical effect to the allocations set forth in Article 5
and all adjustments attributable to contributions and
distributions of money and property effected prior to the
distributions under Subsection 9.3(c)(iii), the positive
Capital Account of each of the Partners is not equal to the
distributions to be made to each Partner under this Article,
Net Profit (or items thereof), Net Loss (or items thereof),
and gross income will be allocated among the Partners so that
the positive balance in each Partner's Capital Account, prior
to the distributions under this Article, equals the amount of
distributions to be received by the Partner under Subsection
9.3(c)(iii) in the order of priority set forth therein.
ARTICLE 10.
MISCELLANEOUS
10.1 Extent of Liability.
(a) The General Partner shall be fully liable for any
liability or loss incurred or suffered by the Partnership
or any other Partner caused by any act or omission of the
General Partner or any of the General Partner's
Affiliates that: (i) constitutes bad faith, active and
deliberate fraud, dishonesty, willful neglect, willful
misconduct or gross negligence, (ii) is outside the scope
of authority of the General Partner under this Agreement,
(iii) results in the General Partner or any of its
Affiliates actually and knowingly receiving an improper
benefit in money, property, or services, (iv) is criminal
if the General Partner had reasonable cause to believe
that such act or omission was criminal, or (v) is a
material breach of any of the obligations of the General
Partner under this Agreement (other than the obligations
to make a Capital Contribution).
(b) The Limited Partner is not and will not be liable to the
Partnership or any other Partner except for a breach by
the Limited Partner of its obligations under this
Agreement.
10.2 Indemnification by the Partnership.
(a) Obligation. To the fullest extent permitted by law, the
Partnership hereby agrees to indemnify, defend, and hold
harmless each Partner and its Indemnified Affiliates from
and against any and all claims, demands, actions, rights
of action, losses, costs, expenses, and liabilities,
including attorneys' fees and court costs (collectively,
"Indemnifiable Costs"), that any of them may incur as a
result of or in connection with anything done or omitted
to be done by the Partner or its Indemnified Affiliates
for or on behalf of the Partnership and in furtherance of
its interests, SPECIFICALLY INCLUDING THE SOLE, PARTIAL,
OR CONCURRENT NEGLIGENCE OF THE PARTNER OR INDEMNIFIED
AFFILIATE, but excluding any such items incurred as a
result of something for which the Partner or Indemnified
Affiliate is liable under Section 10.1 hereof. In
addition and to the extent not encompassed within the
preceding sentence, the Partnership will indemnify the
Limited Partner and its Indemnified Affiliates for
Indemnifiable Costs that any of them may incur as a
result of the Limited Partner's being deemed to have
participated in the control of the Partnership's business
as a result of exercising, or attempting to exercise, its
rights and powers under this Agreement. On request by an
Indemnified Person, the Partnership will advance to that
Indemnified Person the expenses associated with the
defense of any related action. Notwithstanding anything
contained in this Subsection to the contrary, the
Partnership's liability under the indemnification will be
limited to the extent of the Partnership's assets, but
the limitation will not affect any insurance coverage
that may be available for the indemnification.
(b) Insurance. The General Partner may cause the Partnership
to purchase directors and officers liability or similar
insurance for the benefit of the Partnership, each
Partner, and each other Indemnified Person that insures
them against any liability for which they are entitled to
be indemnified hereunder.
10.3 Offset. If a Partner has any obligation to pay money to the
Partnership at a time that the Partnership or the other
Partner is required to make any payment or distribution to the
obligated Partner, the Partnership may deduct the amount of
the liability from its payment or distribution to the
obligated Partner and the other Partner may fulfill its
requirement to make a payment to the obligated Partner by
paying the amount of the obligated Partner's liability to the
Partnership instead of to the Partner. If a Partner has any
obligation to pay money to the other Partner at a time that
the other Partner is required to make any payment to the
obligated Partner, the other Partner may deduct the amount of
the liability from its payment to the obligated Partner.
10.4 Entire Agreement; Supersedure. This Agreement, including the
Exhibits hereto, constitutes the entire agreement of the
Partners relating to the internal affairs of the Partnership
and supersedes all prior contracts or agreements with respect
to the internal affairs of the Partnership, whether oral or
written.
10.5 Governing Law. THIS AGREEMENT IS GOVERNED BY AND WILL BE
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE,
EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT
REFER THE GOVERNANCE OR THE CONSTRUCTION OF THIS AGREEMENT TO
THE LAW OF ANOTHER JURISDICTION. In the event of a direct
conflict between the provisions of this Agreement and any
mandatory provision of the Partnership Act, the applicable
provision of the Partnership Act will control.
10.6 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signing parties
had signed the same document. All counterparts will be
construed together and constitute the same instrument. In
making proof of this Agreement, it will not be necessary to
account for more than one counterpart executed by the Person
against whom enforcement is sought.
10.7 Captions. The captions, headings, and arrangements used in
this Agreement are for convenience only and do not in any way
affect, limit, amplify, or modify the terms and provisions
hereof.
10.8 Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid, or unenforceable under present or
future laws effective during the term of this Agreement, the
provision will be fully severable; this Agreement will be
construed and enforced as if the illegal, invalid, or
unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by
the illegal, invalid, or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of each
such illegal, invalid, or unenforceable provision, there will
be added automatically as a part of this Agreement a provision
as similar in terms to the illegal, invalid, or unenforceable
provision as may be possible and be legal, valid, and
enforceable.
10.9 Successors and Assigns. Each and every covenant, term,
provision, and agreement herein contained will be binding upon
each of the Partners and their respective heirs, legal
representatives, successors, and assigns and will inure to the
benefit of each of the Partners. Unless and until properly
admitted as a Partner, no assignee will have any rights of a
Partner beyond those provided by the Partnership Act to
assignees or otherwise expressly provided herein to assignees.
10.10 Arbitration. Any controversy, claim, or dispute arising
out of or relating to this Agreement, including any
alleged breach or threatened breach of the provisions
contained in this Agreement will, upon demand of a party
to the controversy, claim, or dispute, be resolved by
arbitration administered by the American Arbitration
Association ("AAA") in accordance with the Commercial
Arbitration Rules of the AAA and, to the maximum extent
applicable, pursuant to the Federal Arbitration Act, 9
U.S.C. 1 et seq. An award rendered in any such proceeding
shall be final, binding, and non-appealable, and judgment
thereon may be entered in any court having competent
jurisdiction. With respect to a controversy, claim, or
dispute in which the claim or amount in controversy does
not exceed $100,000, a single arbitrator will be
impaneled, who will have authority to render a maximum
award of $100,000, including all damages of any kind and
costs, fees, interest, and the like. With respect to a
controversy, claim, or dispute in which the claim or
amount in controversy exceeds $100,000, the dispute will
be decided by a majority vote of three arbitrators.
Subject to the limitations contained in this Agreement,
the arbitrators may grant any remedy or relief they deem
just and equitable, including any provisional and
injunctive remedies available at law (in which case the
party receiving such relief may apply to the court of
competent jurisdiction for enforcement of such
provisional or injunctive order, without prejudice to the
continued arbitration of the matter); provided, however,
that the AAA may, upon the demand of any party to the
controversy, claim, or dispute, administratively appoint
a single "provisional relief" arbitrator on an expedited
basis to consider any request for, and grant, such
provisional or injunctive remedy. The arbitrators will
resolve all disputes in accordance with the laws of the
State of Delaware. The arbitrators will be knowledgeable
in the subject matter of the dispute. The arbitrators
will make specific, written findings of fact and
conclusions of law. The arbitrators' findings of fact
will be binding on all parties and will not be subject to
further review.
Executed on the date or dates indicated below, to be effective
as of the day and year first written above.
GENERAL PARTNER:
ANTELOPE CREEK APARTMENTS, L.P., a
California limited partnership
By: LSAC G.P. CORPORATION, a California
corporation, its general partner
By:
Name:
Title:
Date: February 27, 1998
LIMITED PARTNER:
WALDEN DEVELOPMENT CORPORATION, a
Delaware corporation
By:
Name:
Title:
Date: February 27, 1998
LIMITED JOINDER
The Grupe Company hereby executes this Agreement for the
limited purpose of agreeing to be bound by the provisions of
Section 3.10.
THE GRUPE COMPANY, a California
corporation
By:
Name:
Title:
Date: February 27, 1998
EXHIBIT A
Name of Partner
Address for Notices/Service
of Process
Sharing
Ratio
Capital
Contributions
Antelope Creek
Apartments,
L.P.
3255 West March Lane
Stockton, California 95219
Attention: Nelson Bahler
Facsimile: 209-473-6187
51%
$1,830,286
Walden
Development
Corporation
One Lincoln Centre
5400 LBJ Freeway, LB 45
Suite 400
Dallas, Texas 75240
Attention: Charlie Geiss
Facsimile: 972-788-1550
49%
$ -0-
EXHIBIT B
THE PROJECT
EXHIBIT C
PLANS AND SPECIFICATIONS
EXHIBIT D
CONSTRUCTION CONTRACT
EXHIBIT E
INITIAL LOAN DOCUMENTS
A. Construction Loan Agreement.
B. Note payable to BankBoston, N.A. for $25,835,450.
C. Construction Deed of Trust with Assignment of Rents,
Security Agreement and Fixture Filing.
D. Absolute Assignment of Leases and Rents.
E. Unconditional Guaranty of Payment and Performance
(Company).
F. Unconditional Guaranty of Payment and Performance (WDOP).
G. Unconditional Guaranty of Payment and Performance (The
Grupe Company).
H. Agreement Regarding Fees.
I. Any other promissory notes, deeds of trust, mortgages,
security agreements, financing statements, assignments of
leases, or other instruments required or advisable in
connection with any other Initial Loan Document.
EXHIBIT F
PROJECT BUDGET
EXHIBIT G
TIME SCHEDULE
Site work March 1998
Construction Start April 1998
First Units Leased October 1998
Last Units Completed July 1999
Target 95% Leased November 15, 1999
I:\FINANCE\SECFIL~1\01-Q-98\EX-10-3.WPD
AMENDED AND RESTATED LOAN AGREEMENT
AMENDED AND RESTATED LOAN AGREEMENT, dated as of March
25, 1998 (this "Loan Agreement"), between MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Trustee under Declaration of Trust dated
December 9, 1960, as amended, for the Commingled Pension Trust
Fund (Fixed Income-Mortgage Private Placements) ("Lender"), with
an address at 522 Fifth Avenue, New York, New York 10036 and
WALDEN/DREVER OPERATING PARTNERSHIP, L.P., a Delaware limited
partnership, as successor by merger to Apartment Opportunity Fund
II, L.P., a California limited partnership ("Borrower"), with an
address at One Lincoln Center, 5400 LBJ Freeway, LB45, Suite 400,
Dallas, Texas 75240.
Background:
Pursuant to a Loan Agreement dated June 23, 1994 (as
previously supplemented and amended, the "Existing Loan
Agreement"), between Lender (formerly Morgan Guaranty Trust
Company of New York, as Trustee under Declaration of Trust, dated
December 9, 1960, as amended, for the Commingled Pension Trust
Fund (Fixed Income - Mortgages) and Apartment Opportunity Fund
II, L.P., a California limited partnership ("AOF"), as Borrower,
Lender previously made certain loans to AOF (the "Existing
Loans") in the aggregate original principal amount of
$81,475,000.00, of which the aggregate principal amount of
$78,051,958.80 remains outstanding as of the date hereof. The
Existing Loans are evidenced by the promissory notes described on
Annex 1 hereto (the "Existing Notes"). The Existing Notes are
secured by the deeds of trusts or mortgages, as the case may be,
described on Annex 2 hereto (the "Existing Mortgages") covering
the real property described therein.
Borrower now desires to (a) amend and restate the terms
of the Existing Loans, (b) borrow from Lender an additional
$1,948,041.20 on the same terms as the amended and restated
Existing Loans, and (c) borrow from Lender an additional
$30,000,000, all as provided in this Loan Agreement.
Borrower has agreed that the Existing Loans, as amended
and restated hereunder, shall continue to be, and all new loans
made under this Loan Agreement shall be, secured by liens on the
Collateral (as hereinafter defined), as provided in this Loan
Agreement.
Lender is willing to make such loans and permit such
amendments, all provided in this Loan Agreement.
NOW, THEREFORE, in consideration of the mutual promises
and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree that the Existing
Loan Agreement is amended and restated in its entirety as of the
date hereof, upon all of the following terms and conditions:
Section 1. Definitions; Principles of Construction.
1.1 Definitions.
When used herein, the following capitalized terms shall
have the following meanings:
"Acquisition Cost" shall mean, with respect to each of
the Mortgaged Properties, the purchase price paid by Borrower in
acquiring such Mortgaged Property, including closing costs
relating to the acquisition and, in the plural, all such costs.
"Affiliate" shall mean, with respect to any Person, any
Person controlled by, in control of or under common control with
such Person. For purposes of this definition, the term "control"
means the possession, directly or indirectly, of the power to
direct or cause the direction of management and policies of a
Person, whether through ownership of common stock or partnership
agreement, by contract or otherwise.
"AOF" shall mean Apartment Opportunity Fund, II, a
California limited partnership which was merged into Borrower.
"Aggregate Property Valuation" shall mean, with respect
to all Mortgaged Properties, the sum of the Property Valuations
for such Mortgaged Properties.
"Amendment of Mortgage" shall have the meaning set
forth in Section 7(c)(i).
"Amended and Restated Notes" shall mean each Amended
and Restated Note dated as of the date hereof executed by
Borrower in favor of Lender in replacement of each Existing Note,
substantially in the form of Exhibit C, evidencing the respective
Mortgage Loans listed on Schedule 1.1-B under the caption "Loan
A".
"Assigned Contracts" shall mean all Contracts entered
into by Borrower with third parties (including, without
limitation, the Property Management Agreements) relating to the
management or operation of any of the Mortgaged Properties.
"Banking Day" shall mean any day other than (a)
Saturday, (b) Sunday or (c) a day on which commercial banks
located in New York City are required or authorized by applicable
law or executive order to close.
"Borrower" shall mean Walden/Drever Operating
Partnership, L.P., a Delaware limited partnership, as successor
by merger to AOF, together with its permitted successors and
assigns.
"Borrower's General Partner" shall mean Walden
Residential Properties, Inc., a Maryland corporation.
"Borrower's Knowledge" shall mean to the best knowledge
of Borrower.
"Building Engineers" shall mean A-Tec Associates, Inc.
or any other independent firm approved by Lender.
"Buildings" shall mean, with respect to any Property,
the "Buildings" as defined in the Mortgage encumbering such
Property and, where the context so requires, the "Buildings" as
defined in all of the Mortgages.
"Called Principal" shall mean, with respect to any
Mortgage Note, the principal amount of such Mortgage Note that is
to be paid or prepaid in accordance with the terms of this Loan
Agreement or is declared to be or becomes immediately due and
payable following an Event of Default, as the context requires.
"Casualty" shall mean, with respect to any Mortgaged
Property, any loss of, damage to or destruction of all or any
part of such Mortgaged Property.
"Certificate of Limited Partnership" shall mean the
Certificate of Limited Partnership of Borrower, as amended, in
effect on the date hereof and attached hereto as Exhibit A.
"Charges" shall have the meaning set forth in Section
15.14.
"Collateral" shall mean the Mortgaged Properties, the
Leases, the Rents, the Assigned Contracts and all other
collateral which may from time to time secure the Obligations as
provided in the Loan Documents.
"Collateral Assignment of Property Management
Agreements" shall mean a Collateral Assignment of Property
Management Agreements, executed by Borrower, and also among the
Property Manager and Lender, as may be amended from time to time,
in form and substance satisfactory to Lender assigning to Lender
as Collateral for the Obligations each Property Management
Agreement entered into by Borrower from time to time from and
after the date hereof.
"Condemnation" shall mean, with respect to any
Mortgaged Property, any actual or, to the knowledge of Borrower,
proposed, contemplated or threatened taking of all or any part of
such Mortgaged Property by reason of any public improvements or
condemnation or similar proceeding.
"Condemnation Proceeds" shall mean the condemnation
award proceeds or other compensation payable to Borrower in
respect of a Condemnation of all or any part of a Mortgaged
Property.
"Contract" shall mean any oral or written contract,
agreement, franchise, warranty, guarantee, document, undertaking,
commitment, understanding, arrangement, lease, license,
registration, authorization, easement, servitude, right-of-way,
mortgage, bond, note or any other instrument or obligation or
interest therein or right thereunder.
"Debt Service Coverage Ratio" shall mean, as of any
date of determination, the debt service coverage ratio for a
given Mortgaged Property, calculated as the ratio of (x) the
annual Net Operating Income of such Mortgaged Property based on
the most recent month's certified rent roll of Borrower
(multiplied by 12) provided that there shall be an assumed
vacancy rate equal to the greater of 5% or the actual vacancy
rate shown on such rent roll, over (y) the projected debt service
payable on the then aggregate outstanding principal amount of the
Related Loan for such Mortgaged Property for the succeeding 12
months, based on a 9% constant rate.
"Deeds" shall mean all of the deeds and other
instruments pursuant to which fee title to the Mortgaged
Properties has been conveyed to Borrower.
"Default" shall mean the occurrence of any event
specified in Section 12, whether or not any requirement in
connection with such event, for the giving of notice or the lapse
of time, or both, shall have been satisfied.
"Default Rate" shall mean, (A) with respect to the
Mortgage Loans, a rate of interest that is equal to the sum of
(i) the higher of (x) the Prime Rate from time to time in effect
and (y) the Interest Rate from time to time in effect, plus (ii)
five percent (5%) per annum and (B) with respect to any other
Obligations, a rate of interest equal to the sum of (i) the Prime
Rate from time to time in effect plus (ii) five percent (5%) per
annum.
"Discounted Prepayment Value" shall mean, with respect
to the Called Principal of any Mortgage Note, the amount obtained
by discounting all Remaining Scheduled Payments with respect to
such Called Principal from their respective scheduled due dates
to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount
factor (applied on a monthly basis) equal to the sum of the
Reinvestment Yield plus 50 basis points.
"Dollars" or "$" shall mean the lawful money of the
United States of America.
"Encumbrance" shall mean any mortgage, deed of trust,
pledge, lien, encumbrance, easement, reservation, restriction,
right of way, option, right of first refusal, right of redemption
or other similar right, Lease, assignment by way of security,
hypothecation, security interest, conditional sale, capital lease
or other title retention or security arrangement securing any
Liability of any Person.
"Environmental Consultants" shall mean Law
Environmental, Inc. or Fugro Environmental Inc., or any other
independent consultant, expert or advisor approved by Lender.
"Environmental Indemnity" shall mean the Environmental
Indemnity Agreement, dated as of June 23, 1994, originally
executed by AOF and confirmed by Borrower herein, in favor of
Lender, a copy of which is attached hereto as Exhibit B, as
amended hereby and as may be further amended from time to time.
"Equipment" shall mean, with respect to any Property,
the "Equipment" as defined in the Mortgages encumbering such
Property and, where the context so requires, the "Equipment" as
defined in all of the Mortgages.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time, or any
successor statute, and the regulations promulgated and the
rulings issued thereunder.
"ERISA Affiliate" shall mean each trade or business
(whether or not incorporated) which, together with Borrower, is
treated as a single employer under Title IV of ERISA or Section
414(b), (c), (m) or (o) of the Internal Revenue Code.
"Escrow Agent" shall mean Holliday Fenoglio Fowler,
L.P. or any successor escrow agent designated pursuant to the
terms of the Escrow Agreement.
"Escrow Agreement" shall mean the Amended and Restated
Escrow Agreement, dated as of the date hereof, among Borrower,
Lender and Escrow Agent, in the form attached hereto as Exhibit
G, as may be further amended from time to time.
"Event of Default" shall mean the occurrence of any
event specified in Section 12.
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
"Existing Loan Agreement" shall have the meaning set
forth in the first background paragraph.
"Existing Loans" shall have the meaning set forth in
the first background paragraph.
"Existing Notes" shall have the meaning set forth in
the first background paragraph.
"Existing Mortgages" shall have the meaning set forth
in the first background paragraph.
"Financing Statements" shall mean (i) all UCC-1
financing statements in connection with Loan A originally
executed by AOF, (ii) all UCC-3 amendments to such UCC-1
financing statements executed by Borrower in connection with this
Loan Agreement, and (iii) all new UCC-1 (and, in the case of
Mortgaged Property located in Georgia, UCC-2) financing
statements executed by Borrower in connection with Loan A, Loan B
or Loan C, in each case with respect to the Equipment, Fixtures
and Personalty, in favor of Lender and filed with the appropriate
Governmental Authorities as security for the Obligations.
"Fixtures" shall mean, with respect to any Property,
the "Fixtures" as defined in the Mortgage encumbering such
Property and, where the context so requires, "Fixtures" as
defined in all of the Mortgages.
"GAAP" shall mean generally accepted accounting
principles in the United States.
"Governmental Authority" shall mean any court, board,
agency, commission, office or authority of any nature whatsoever
for any governmental, judicial, legislative, executive,
administrative or regulatory unit (foreign, federal, state,
county, district, municipal, city or otherwise) whether now or
hereafter in existence.
"Impositions" shall mean all real estate and personal
property taxes, water, sewer and vault charges and all other
taxes, levies, assessments and other similar charges, general and
special, ordinary and extraordinary, foreseen and unforeseen, of
every kind and nature whatsoever, which at any time prior to, at
or after the execution hereof may be assessed, levied or imposed
by, in each case, a Governmental Authority upon any Mortgaged
Property or the Rents or the ownership, use, occupancy or
enjoyment thereof, and any interest, costs or penalties with
respect to any of the foregoing.
"Indebtedness" shall mean, with respect to any Person,
(a) any debt of such Person, contingent or otherwise, (i) for
borrowed money, the advance of credit, a conditional sale or a
transfer with recourse or with an obligation to repurchase,
obligations under a lease required to be capitalized for
financial reporting purposes, or purchase money obligations or
(ii) evidenced by a note, debenture, letter of credit or similar
instrument given in connection with the acquisition of any
property or assets, (b) any debt of others described in (a) above
which such Person has guaranteed or for which it is otherwise
liable and (c) any amendment, renewal, extension or refunding of
any such debt.
"Indemnitees" shall mean Lender and each of its
respective officers, directors, agents, parents, affiliates and
its respective successors and assigns.
"Insurance Policies" shall have the meaning set forth
in section 10.1(i)(i).
"Insurance Premiums" shall have the meaning set forth
in Section 5.
"Insurance Proceeds" shall mean any payments, proceeds
or other amounts received at any time by any Person under any
insurance policy as compensation in respect of a Casualty.
"Insurance Standards" shall mean those requirements or
prerequisites imposed upon Borrower by the casualty, property or
liability insurers in connection with the underwriting of
insurance for each respective Mortgaged Property.
"Interest Rate" shall mean (i) with respect to each of
Loan A and Loan C, 6.62% per annum, and (ii) with respect to Loan
B, (A) from (and including) the date hereof through (but
excluding) the effective date on which the Loan Facility shall
become unsecured pursuant to and in accordance with the terms of
Section 11 of this Loan Agreement (the "Conversion Date"), 7.06%
per annum, and (B) from and after the Conversion Date, 7.10% per
annum.
"Internal Revenue Code" shall mean the Internal Revenue
Code of 1986, as amended from time to time, or any successor
statute, and the regulations promulgated and the rulings issued
thereunder.
"Judgments" shall mean any and all judgments, orders,
directives, rulings, decisions, injunctions (temporary,
preliminary or permanent), bankruptcy plans or reorganizations,
decrees or awards of any arbitrator or Governmental Authority.
"Land" shall mean, with respect to any Property,
"Land," as defined and more particularly described in the
mortgage encumbering such Property and, where the context so
requires, "Land" as defined in all of the Mortgages.
"Laws" shall mean all laws (whether statutory or common
law), ordinances, decrees, rules, regulations and Judgments of
any Governmental Authority including, without limitation, those
applicable to zoning, historical landmark preservation, building
and land use.
"Lease" shall mean, with respect to any Mortgaged
Property, any lease, or, to the extent of the interest therein of
Borrower, any sublease or sub-sublease, license, concession or
other agreement (whether written or oral and whether now or
hereafter in effect) pursuant to which any Person is granted a
possessory interest in, or right to use or occupy all or any
portion of such Mortgaged Property, and every modification,
amendment or other agreement relating to such lease, sublease or
other agreement and every guarantee of the performance and
observance of the covenants, conditions and agreements to be
performed and observed by the other party thereto.
"Lease Assignment" shall mean, with respect to each
Mortgaged Property, (i) each Assignment of Rents and Leases
originally executed by AOF and confirmed by Borrower herein in
connection with Loan A, and (ii) each new Assignment of Rents and
Leases executed and delivered by Borrower to Lender concurrently
herewith in connection with Loan B and Loan C, in each case as
amended from time to time, pursuant to which the Rents and Leases
in respect of each Mortgaged Property are assigned by Borrower to
Lender and, in the plural, all such Assignments of Rents and
Leases.
"Legal Rate" shall have the meaning set forth in
Section 15.14.
"Legal Requirements" shall mean, with respect to each
Mortgaged Property, all federal, state, county, municipal and
other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions of Governmental
Authorities (including, without limitation, environmental laws)
affecting such Mortgaged Property or any part thereof or the
construction, use, alteration or operation thereof, or any part
thereof, including, without limitation, those applicable to
zoning, subdivision, wetlands, historical landmark preservation,
building and land use, whether now or hereafter enacted and in
force, and all permits, licenses, authorizations and regulations
relating thereto, and all covenants, agreements, restrictions and
encumbrances contained in any instruments, either of record or
known to Borrower, at any time in force affecting such Mortgaged
Property or any part thereof (other than Leases, management
agreements and service contracts now in effect or hereafter
entered into in accordance with the terms of the Loan Documents),
including, without limitation, any such covenants, agreements,
restrictions and encumbrances which may (i) require repairs,
modifications or alterations in or to such Mortgaged Property or
any part thereof, or (ii) in any material way limit the existing
use and enjoyment thereof.
"Lender" shall mean initially the Person identified as
Lender on the first page of this Loan Agreement and shall
include, for purposes of this Loan Agreement and the other Loan
Documents, all of such Person's successors and assigns from time
to time.
"Liability" shall mean any debt, obligation,
commitment, responsibility or liability of any Person.
"Lien" shall mean, with respect to each Mortgaged
Property, any mortgage, deed of trust, deed to secure debt, lien,
pledge, hypothecation, collateral assignment, security interest,
or any other encumbrance, charge or collateral transfer of, on or
affecting such Mortgaged Property or any portion thereof or any
interest therein, including, without limitation, any conditional
sale or other title retention agreement, any financing lease
having substantially the same economic effect as any of the
foregoing, the filing of any financing statement (other than one
giving notice of a true lease) and mechanic's, materialmen's and
other similar liens and encumbrances.
"Loan A" shall mean all of the Mortgage Loans listed on
Schedule 1.1-B hereof under the caption "Loan A", as amended and
restated as of the date hereof and evidenced by the Amended and
Restated Mortgage Notes.
"Loan A Maturity Date" shall have the meaning set forth
in Section 3.3.
"Loan B" shall mean the new Mortgage Loan made on the
date hereof and listed on Schedule 1.1-B hereof under the caption
"Loan B", as evidenced by the New Mortgage Note therefor.
"Loan B Maturity Date" shall have the meaning set forth
in Section 3.3.
"Loan C" shall mean the new Mortgage Loan made on the
date hereof and listed on Schedule 1.1-B hereof under the caption
"Loan C", as evidenced by the New Mortgage Note therefor.
"Loan C Maturity Date" shall have the meaning set forth
in Section 3.3.
"Loans" shall mean Loan A, Loan B and Loan C,
collectively.
"Loan Documents" shall mean collectively, this Loan
Agreement, the Mortgage Notes, the Mortgages, the Lease
Assignments, any Collateral Assignment of Property Management
Agreements, the Financing Statements, the Escrow Agreement, the
Environmental Indemnity and all other agreements and
understandings relating thereto or executed in connection with
the making of the Mortgage Loans and the Loan Facility.
"Loan Facility" shall mean the aggregate $110,000,000
first mortgage loan facility provided by Lender to Borrower
comprised of Loan A, Loan B and Loan C pursuant to the terms of
this Loan Agreement.
"Lockout Period" shall mean the period from the date
hereof through the first anniversary of the date hereof.
"Major Casualty/Condemnation" shall mean any Casualty
or Condemnation to a Mortgaged Property if as a result of such
Casualty or Condemnation, in Lender's reasonable estimation,
either (a) fifty percent (50%) or more (in the aggregate) of the
total rentable square footage of such Mortgaged Property
(exclusive of common areas and leasable square footage which is
not then subject to a Lease) is rendered untenantable or (b)
occupants that, immediately prior to such Casualty or
Condemnation, generated fifty percent (50%) or more (in the
aggregate) of the aggregate Rents generated by all occupants of
such Mortgaged Property exercise their rights to cancel their
Leases or are exercising their rights to abate their rent and
such abatement is not covered by rent interruption/abatement
insurance; in each case, such percentages to be estimated by
Lender on or before and as of a date which is no later than
thirty days (30) after any such Casualty or Condemnation.
"Material Adverse Effect" shall mean any circumstance
or event that (i) has or would reasonably be expected to have a
material adverse effect upon the validity, priority, perfection
or enforceability of the Loan Documents taken as a whole, or (ii)
has or would have a material adverse effect on the prospect of
timely payment of interest on and principal of the Mortgage Loans
or the value of, or Lender's ability to have recourse as set
forth in the Loan Documents against, the Mortgaged Properties
taken as a whole.
"Maturity Date" shall mean (i) with respect to Loan A,
the Loan A Maturity Date, (ii) with respect to Loan B, the Loan B
Maturity Date, and (iii) with respect to Loan C, the Loan C
Maturity Date.
"Monthly Report" shall have the meaning set forth in
Section 9.1(g).
"Mortgaged Property" shall mean, collectively, the
Land, the Buildings, the Fixtures, the Equipment and the
Personalty with respect to a Property and, in the plural,
collectively, the Land, the Buildings, the Fixtures, the
Equipment and the Personalty with respect to all of the
Properties.
"Mortgage" shall mean, with respect to each Mortgaged
Property, (i) the Deed of Trust, Security Agreement, Fixture
Filing Statement, Assignment of Leases and Rents and Financing
Statement or Deed to Secure Debt, Security Agreement, Fixture
Filing Statement, Assignment of Leases and Rents and Financing
Statement, or Mortgage, Security Agreement, Fixture Filing
Statement, Assignment of Leases and Rents and Financing
Statement, as the case may be, each as may be amended from time
to time, including concurrently herewith, originally executed by
AOF and confirmed herein or by amendment thereto by Borrower, in
favor of Lender, pursuant to which Borrower has granted a first
priority lien thereon as security for Loan A, and (ii) each Deed
of Trust, Security Agreement, Fixture Filing Statement,
Assignment of Leases and Rents and Financing Statement or Deed to
Secure Debt, Security Agreement, Fixture Filing Statement,
Assignment of Leases and Rents and Financing Statement, or
Mortgage, Security Agreement, Fixture Filing Statement,
Assignment of Leases and Rents and Financing Statement, as the
case may be, each as may be amended from time to time, executed
by Borrower in favor of Lender concurrently herewith, pursuant to
which Borrower has granted a first priority lien thereon as
security for Loan B and Loan C, respectively, and (iii) in the
plural, all such documents.
"Mortgage Loan" shall mean each loan made by Lender to
Borrower identified on Schedule 1.1-B as the mortgage loan for
each Mortgaged Property, in the amount specified on Schedule 1.1-B for
such loan and, in the plural, all of the loans identified
as mortgage loans on Schedule 1.1-B.
"Mortgage Loan Balance" shall mean, as of any date of
determination, the aggregate outstanding principal balance of all
of the Mortgage Loans.
"Mortgage Note" shall mean, (i) with respect to Loan A,
each Amended and Restated Mortgage Note, (ii) with respect to
each of Loan B and Loan C, the New Mortgage Note therefor, and
(iii) in the plural, all such promissory notes.
"Net Operating Income" shall mean, with respect to a
Mortgaged Property for the relevant calculation period, the
Property Income for such calculation period minus the Normalized
Operating Expenses for such calculation period.
"New Mortgage Note" shall mean a promissory note dated
as of the date hereof executed by Borrower in favor of Lender,
substantially in the form of Exhibit C-2 and C-3, respectively,
evidencing the Mortgage Loans listed on Schedule 1.1-B under the
caption "Loan B" and "Loan C", respectively.
"Normalized Operating Expenses" shall mean, in respect
of each Mortgaged Property for the relevant calculation period,
the sum of all ordinary and customary expenses in the ordinary
course of owning and operating such Mortgaged Property as an
apartment project, accrued during such period including, without
limitation, real estate taxes and other Impositions, accounting
and audit expenses, insurance premiums and management fees (such
fees to be the greater of 2.5% of Property Income or actual
management fees), plus an annual $250/unit capital improvement
reserve; excluding, however, debt service payments in respect of
the Related Loan, income taxes of any Person, capital expenses
and non-cash items such as depreciation.
"Obligations" shall mean, collectively, all of the
obligations of Borrower under the Loan Documents.
"Partner's Certificate" shall mean a certificate duly
executed on behalf of Borrower by Borrower's General Partner and
addressed to Lender.
"Partnership Agreement" shall mean the Agreement of
Limited Partnership of Borrower, as amended, attached hereto as
Exhibit D.
"Payment Date" with respect to any Payment Period for
any Mortgage Loan shall mean the Period Commencement Date which
begins the following Payment Period or, in the case of the final
Payment Period for any Mortgage Loan, the Maturity Date.
"Payment Period" shall mean each period commencing on
(and including) a Period Commencement Date and ending on (but
excluding) the next succeeding Period Commencement Date, or, in
the case of the final Payment Period for any Mortgage Loan, the
Maturity Date.
"Period Commencement Date" shall mean, in the case of
the initial Period Commencement Date, the date hereof, and
thereafter until the Mortgage Loans are repaid in full, the first
day of each calendar month (or, if any such day is not a Banking
Day, the following Banking Day).
"Permits" shall mean any and all permits, licenses,
operating authorizations, certificates, including certificates of
occupancy or other similar instruments required for the
occupation and use of a property in the applicable jurisdiction,
variances, waivers, approvals or other authorizations of any kind
issued or granted by any Governmental Authority which are
required in connection with the management, maintenance and
operation of the Mortgaged Properties.
"Permitted Encumbrances" shall mean, collectively, the
"Permitted Encumbrances" as defined in each of the Mortgages and,
where the context so requires, the "Permitted Encumbrances"
relating to a particular Mortgaged Property, and in each case
shall include any Encumbrance created by any Loan Document.
"Person" shall mean an individual, corporation,
company, partnership, limited liability company, limited
liability partnership, trust, joint stock company, joint venture,
unincorporated association, government, Governmental Authority or
other entity.
"Personalty" shall mean, with respect to any Property,
"Personalty," as defined in the Mortgages encumbering such
Property and, where the context so requires, "Personalty" as
defined in all of the Mortgages.
"Plan" shall mean at any time an employee benefit plan
which is subject to Title IV of ERISA or subject to the minimum
funding standards under Section 412 of the Internal Revenue Code
or Section 302 of ERISA and (i) which is maintained for employees
of Borrower or any ERISA Affiliate or in which any such employees
participate or to which contributions are made or required to be
made by Borrower or any ERISA Affiliate, or (ii) with respect to
which Borrower or any ERISA Affiliate could be subjected to any
liability under Title IV of ERISA (including without limitation
Section 4069 of ERISA) in the event that such plan has been or
were to be terminated or in the event Borrower or any ERISA
Affiliate has withdrawn or were to withdraw from such plan.
"Prepaid Rent" shall mean any payment of Rents by a
Tenant under a Lease prior to the due date therefor specified in
such Lease.
"Prepayment Date" shall have the meaning set forth in
Section 6(c)(i), and (b) with respect to any prepayment in
connection with a Condemnation or Casualty.
"Prepayment Premium" means, with respect to any
Mortgage Note, a premium equal to the excess, if any, of the
Discounted Prepayment Value of the Called Principal of such
Mortgage Note over such Called Principal.
"Prime Rate" shall mean the rate of interest publicly
announced by Morgan Guaranty Trust Company of New York in New
York City from time to time as its Prime Rate.
"Prohibited Transfer" shall have the meaning set forth
in Section 14 (a).
"Properties" shall mean the apartment projects listed
on Schedule 1.1-C as amended from time to time.
"Property Income" shall mean, with respect to each
Mortgaged Property, all Rents (including Prepaid Rent but only to
the extent the same is applied to the applicable Tenant's
obligations under its Lease) and other benefits now or hereafter
received or collected by or on behalf of Borrower from the
related premises or the related Equipment or under or in
connection with the related Leases including, without limitation,
all income received from tenants, transient guests, lessees,
licensees and concessionaires and other persons occupying space
at such Mortgaged Property and/or rendering services to such
Mortgaged Property's Tenants; excluding, however, (i) Tenant
security deposits; (ii) Insurance Proceeds; (iii) Condemnation
Proceeds; and (iv) Prepaid Rents, except as set forth above.
"Property Management Agreement" shall mean, with
respect to any Mortgaged Property, any agreement for the
management of such Mortgaged Property on behalf of Borrower and,
in the plural, all such agreements with respect to the Mortgaged
Properties.
"Property Manager" shall mean any other property
manager engaged by Borrower to operate and manage one or more of
the Mortgaged Properties and approved by Lender.
"Property Valuation" shall mean, with respect to each
of the Mortgaged Properties, a valuation of such Mortgaged
Property by an independent MAI appraiser, satisfactory to Lender
in its sole discretion, it being understood and agreed that such
valuation shall be determined by applying a 9% capitalization
rate to the Net Operating Income of such Mortgaged Property for
the fiscal year ended December 31, 1997.
"Reinvestment Yield" shall mean, with respect to the
Called Principal of any Mortgage Note, the yield to maturity
implied by (i) the yields reported, as of 10:00 A.M. (New York
City time) on the third Business Day preceding the Settlement
Date with respect to such Called Principal, on the display
designated as "Page 678" on the Telerate Service (or such other
display as may replace Page 678 on the Telerate Service) for
actively traded U.S. Treasury securities having a maturity equal
to the weighted average remaining life of the Called Principal
being paid or prepaid as of such Settlement Date, or (ii) if such
yields shall not be reported as of such time or the yields
reported as of such time shall not be ascertainable, the Treasury
Constant Maturity Series yields reported, for the latest day for
which such yields shall have been so reported as of the third
Business Day preceding the Settlement Date with respect to such
Called Principal, in Federal Reserve Statistical Release
H.15(519) (or any comparable successor publication) for actively
traded U.S. Treasury securities having a constant maturity equal
to the weighted average remaining life of the Called Principal
being paid or prepaid as of such Settlement Date. Such implied
yield shall be determined, if necessary, by (a) converting U.S.
Treasury bill quotations to bond-equivalent yields in accordance
with accepted financial practice and (b) interpolating linearly
between reported yields.
"REIT" shall mean a real estate investment trust as
defined in Section 856(a) of the Internal Revenue Code.
"Related Loan" shall mean, with respect to any
Mortgaged Property, (i) the Amended and Restated Mortgage Note
with respect to such Mortgaged Property or (ii) that portion of
each New Mortgage Note allocated to such Mortgaged Property on
Schedule 4.3(b)-1 and 4.3(b)-2, as the case may be, secured by
the Mortgage encumbering such Mortgaged Property.
"Remaining Scheduled Payments" shall mean, with respect
to the Called Principal of any Mortgage Note, all payments of
such Called Principal and interest thereon (other than interest
accrued to the Settlement Date) that would be due on or after the
Settlement Date with respect to such Called Principal if no
payment of such Called Principal were made prior to its expressed
maturity date.
"Rent Rolls" shall mean the rent rolls relating to each
of the Mortgaged Properties.
"Rents" shall mean, with respect to any Mortgaged
Property, "Rents" as defined in the Mortgages encumbering such
Mortgaged Property and, where the context so requires, "Rents" as
defined in all of the Mortgages.
"Secured Charges" means, in the aggregate, all charges
and claims with respect to all Mortgaged Properties that are
secured by a lien of the type described in Section 10.2(a)(ii) or
(iii).
"Settlement Date" shall mean, with respect to the
Called Principal of any Mortgage Note, the date on which such
Called Principal is to be prepaid in accordance with the terms of
this Loan Agreement or is declared to be or becomes immediately
due and payable following an Event of Default, as the context
requires.
"Successor Borrower" shall have the meaning set forth
in Section 14(b).
"Tax" shall mean any (i) tax, assessment, levy, impost,
duty, license fee, registration fee, withholding, or other
similar governmental charge, including, without limitation,
income tax, franchise tax, transfer tax or fee, sales tax, excise
tax, ad valorem tax, withholding tax, minimum tax and social
security tax, and (ii) interest, penalty or addition to tax
imposed on a Tax described in clause (i), in each case, imposed
by any Governmental Authority.
"Tax and Insurance Deposits" shall have the meaning set
forth in Section 5.
"Tenant" shall mean any Person which holds a possessory
interest in any of the Mortgaged Properties under any of the
Leases.
"Title Company" shall mean, collectively, the title
insurers insuring the Encumbrance of the Mortgages upon the
Mortgaged Properties, and their respective successors and
assigns.
"Title Policies" shall mean the mortgagee title
insurance policies (i) with respect to Loan A, described on Annex
3, and (ii) with respect to each of Loan B and Loan C, dated and
issued on the date hereof, in each case as amended, endorsed
and/or redated from time to time, including concurrently
herewith, insuring Lender's interest as the holder of valid first
liens on the Mortgaged Properties securing the Mortgage Loans.
"Total Cost" shall mean, with respect to each Mortgaged
Property, the sum of the Acquisition Cost thereof, property
renovation costs and reserves thereof, reserves for contingency
and due diligence, and all closing and professional costs
thereof.
"Work" shall have the meaning set forth in Section
6(c)(ii).
1.2 Principles of Interpretation.
All references herein to sections, schedules and
exhibits are to sections, schedules and exhibits in or to this
Loan Agreement unless otherwise specified. Unless otherwise
specified, the words "hereof", "herein" and "hereunder" and words
of similar import when used in this Loan Agreement shall refer to
this Loan Agreement as a whole and not to any particular
provision of this Loan Agreement. All references herein to any
time period "before" a certain date are to the time period ending
at 12:01 A.M. on such date. Unless otherwise specified, all
meanings attributed to defined terms herein shall be equally
applicable to both the singular and plural forms of the terms so
defined. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP. Unless otherwise
specified, all agreements or other instruments defined herein are
deemed to include amendments, restatements, replacements,
supplements or other modifications made to such agreements or
instruments from time to time, except as prohibited by this Loan
Agreement.
Section 2. Nonrecourse Obligations.
2.1 Nonrecourse Obligations.
Except as otherwise explicitly set forth herein, the
Obligations of Borrower are intended to be non-recourse
obligations of Borrower, and recourse may be had in respect of
the Obligations only to the Collateral. No recourse in respect
of such obligations may be had against Borrower's General Partner
or any limited partner of Borrower, or any officers, directors,
employees or agents of any of them solely by virtue of such
Person being such a partner, shareholder, officer, director,
employee or agent except for acts of fraud, misapplication or
misappropriation of funds or willful misconduct, in which case
recourse may be had to Borrower and to Borrower's General Partner
and to their respective assets.
Section 3. Loan; Disbursement to Borrower.
3.1 Loan.
On the date hereof, Lender is amending the Loan
Facility with respect to Loan A and making Loan B and Loan C to
Borrower, subject to and upon all of the terms and conditions
hereof. As of the date hereof, each of the Existing Notes is
hereby amended and restated in accordance with the terms of this
Agreement. Accordingly, on the date hereof, Lender will
surrender each Existing Note held by Lender to Borrower and
Borrower will deliver in exchange for each such Existing Note,
without expense to Lender, an Amended and Restated Mortgage Note
having a principal amount equal to the unpaid principal amount of
such Existing Note. On the date hereof, Borrower shall pay to
Lender (in immediately available funds to such account as Lender
shall direct) all interest on the Existing Notes accrued to (but
excluding) the date hereof. Borrower agrees and covenants to
repay all Mortgage Loans and to observe and comply with all of
the other terms and provisions of this Loan Agreement.
3.2 Notes.
The Mortgage Loans shall be evidenced by the Mortgage
Notes. Each Mortgage Note shall be entitled to the benefits of
the Loan Documents as provided therein.
3.3 Term.
The Mortgage Loans comprising Loan A shall mature and
become due and payable on March 31, 2007 (or, if such day is not
a Banking Day, the following Banking Day) (the "Loan A Maturity
Date"). The Mortgage Loans comprising Loan C shall also mature
and become due and payable on March 31, 2007 (or, if such day is
not a Banking Day, the following Banking Day) (the "Loan C
Maturity Date"). The Mortgage Loans comprising Loan B shall
mature and become due and payable on June 30, 2016 (or, if such
day is not a Banking Day, the following Banking Day) (the "Loan B
Maturity Date").
3.4 Use of Proceeds.
Borrower represents and warrants that it used the
proceeds of Loan A to finance or refinance the purchase of
Properties. Borrower covenants that it shall use the proceeds of
Loan B and Loan C to repay certain current outstanding
indebtedness of the Borrower and to finance the working capital
needs of the Borrower. None of the proceeds of the Loan Facility
have been or will be used, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of buying or
carrying any "margin stock" within the meaning of Regulation G,
T, U or X of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
Section 4. Payments of Principal and Interest; Lien
Releases.
4.1 Principal Payments.
Borrower shall repay any unpaid principal of any
Mortgage Note on the Maturity Date for such Mortgage Note.
4.2 Prepayments.
(a) Borrower has the right to prepay the principal of
one or all of Loan A, Loan B and Loan C in full (and not in
part) on any Payment Date after the end of the Lockout
Period, upon thirty (30) days' prior written notice to
Lender, provided that Borrower shall also pay, together with
the interest accrued and any other unpaid Obligations with
respect to the Loan(s) to be prepaid then due and the
principal to be prepaid, the Prepayment Premium with respect
to such Loan(s). The calculation of the Prepayment Premium
shall be made by Lender and shall, absent manifest error, be
conclusive. Subject to paragraph (c) below, the Prepayment
Premium for any prepayment hereunder, pursuant to Section
4.2(a), 4.2(d), 4.3(a), 4.3(b) or otherwise, shall in no
event be less than one percent (1%) of the principal amount
of the aggregate principal amount of the Loan(s) being
prepaid. Any Prepayment Premium payable pursuant to this
Loan Agreement shall constitute a portion of the
Obligations.
(b) In the event that one or more Mortgage Notes are
prepaid (in whole or in part) from Insurance Proceeds or
Condemnation Proceeds in accordance with Section 6 of this
Loan Agreement, then no Prepayment Premium shall be due or
payable with respect to such prepayment.
(c) Notwithstanding the foregoing, each of Loan A,
Loan B and Loan C may be prepaid in full (but not in part)
without a Prepayment Premium on any Payment Date during the
sixty (60) day period prior to the Maturity Date for such
Loan.
(d) Upon acceleration of any Mortgage Note in
accordance with its terms and the terms of the Loan
Agreement and the other Loan Documents, Borrower agrees to
pay the Prepayment Premium described above in the amount
that would be due if a voluntary payment were made on the
date of such acceleration. A tender of payment of the
amount necessary to pay and satisfy the entire unpaid
principal balance of the Mortgage Notes or any portion
thereof at any time after an Event of Default under this
Loan Agreement or an acceleration by Lender of the
indebtedness evidenced hereby, whether such payment is
tendered voluntarily, during or after foreclosure of the
Mortgage, or pursuant to realization upon other security,
shall constitute a purposeful evasion of the prepayment
terms of this Loan Agreement, shall be deemed to be a
voluntary prepayment hereof, and Borrower shall be required
to pay the Prepayment Premium as described above.
4.3 Lien Releases.
(a) (i) Except as set forth in this Section 4.3, no
payment or prepayment of principal on the Mortgage Loans
shall cause, give rise to a right to require or otherwise
result in the release of the Mortgages encumbering the
Mortgaged Properties.
(ii) Borrower may obtain the release of the Mortgages
on all of the Mortgaged Properties and the release of the
Encumbrances on the other Collateral under the Loan
Documents, in each case only to the extent securing the
Loan(s) then being repaid, in the case of a prepayment in
full of the entire outstanding principal amount of Loan A,
Loan B and/or Loan C pursuant either to Section 4.2(a) or on
the Maturity Date for such Loan(s), upon payment in full
also of all interest accrued under such Loan(s) and all
other unpaid Obligations with respect to such Loan(s) under
the Loan Documents (including under Section 4.2(a), if
applicable).
(iii) During the Lockout Period, the Borrower shall
have the right to obtain the release of all Mortgages on any
Mortgaged Property, and the release of the Encumbrances on
the other Collateral under the Loan Documents with respect
to such Mortgaged Property, provided that all of the
following conditions shall have been satisfied (in the sole
discretion of the Lender) effective as of the date of such
release: (a) the Mortgaged Property to be released shall be
located in the State of Texas; (b) the Borrower shall have
provided substitute Collateral for the Loans substantially
similar to such released Mortgaged Property satisfactory to
the Lender (in its sole discretion), (c) no Default or Event
of Default shall exist under this Loan Agreement or any
other Loan Document (both before and immediately after
giving effect to such release and substitution), (d) the
Borrower shall have executed and delivered such
documentation containing such terms and conditions as the
Lender shall require to give effect to such substitution,
the inclusion of such substituted Collateral as "Property",
"Mortgaged Property" and "Collateral" hereunder and under
the other Loan Documents (including, without limitation, the
Environmental Indemnity) and the granting of valid and
enforceable first priority liens and security interests with
respect thereto, (e) the Borrower shall have delivered or
caused to be delivered such legal opinions with respect to
such substitution, the Loan Documents and the documentation
and matters referred to in clause (d) as the Lender shall
request (in its sole discretion), (f) all of the conditions
set forth in Section 7(i) of this Loan Agreement shall be
satisfied (treating such substitute Collateral as "Mortgaged
Property" hereunder) on and as of the effective date of such
release and substitution (except that the Debt Service
Coverage Ratio referred to in Section 7(i)(v) shall be
1.35:1 for such substitute Collateral, and not 1.25:1);
(g) all of the conditions set forth in Sections 7(a), (c),
(d), (g) and (h) of this Loan Agreement shall be satisfied
(treating such substitute Collateral as "Mortgaged Property"
hereunder) on and as of the effective date of such release
and substitution; (h) the Borrower shall have paid to the
Lender a substitution fee in the amount of 1% of the amount
of the outstanding principal amount of the Loans to be
secured by the substitute Collateral, and (i) the Borrower
shall have paid to the Lender all of the Lender's costs and
expenses, including reasonable attorneys' fees and expenses,
in connection with such release and substitution of
Collateral.
(b) After the end of the Lockout Period, Borrower may
obtain the release of all Mortgages on any individual
Mortgaged Property and the release of all Encumbrances of
the Loan Documents on the other Collateral relating to such
Mortgaged Property under the Loan Documents by making a
prepayment of (i) with respect to the Mortgage Notes
comprising Loan A, the principal amount of the Mortgage Note
with respect to such Mortgaged Property, and (ii) with
respect to the respective Mortgage Note evidencing Loan B or
Loan C, the portion of the principal amount of such Mortgage
Note allocated to such Mortgaged Property on Schedule
4.3(b)-1 or 4.3(b)-2, as the case may be, and in each case
together with the Prepayment Premium and all other amounts
specified in Section 4.2(a) and in accordance with the
requirements of that Section. If, with respect to any
Mortgaged Property as to which a Major Casualty/Condemnation
has occurred, Lender elects to apply Condemnation Proceeds
or Insurance Proceeds to prepay the Related Loan pursuant to
Section 6(b)(i), and such Condemnation Proceeds or Insurance
Proceeds are sufficient (or if insufficient, together with
other sums made available by Borrower on account of such
prepayment) to prepay all amounts that would be required to
be paid in order for Borrower to obtain a release of such
Mortgaged Property under this Section 4.3(b), then following
such application Borrower shall be entitled to obtain a
release of the Mortgage on such Mortgaged Property as
provided in this Section 4.3(b).
(c) Concurrently with the release of any Mortgages
pursuant to this Section 4.3, Lender, upon the written
request and at the expense of Borrower, will execute and
deliver (i) at Borrower's election, either a satisfaction or
an assignment of the related Mortgages, subject to
applicable law, without any representation or warranty by or
recourse to Lender, and the other Loan Documents relating to
the Mortgaged Property and the other Collateral being
released, (ii) UCC-3 termination statements, and (iii) such
other documents as Borrower may reasonably request, each in
customary form and as may be mutually agreed upon by
Borrower and Lender, and Lender shall simultaneously return
the duplicate originals of such Mortgages and the originals
of the related Mortgage Notes to Borrower. Borrower shall
pay or reimburse on demand, concurrently or following such
release, all reasonable costs and expenses incurred by
Lender pursuant to Sections 4.2 and 4.3 in connection with
such release.
(d) Notwithstanding the release of any Mortgages and
the other Loan Documents with respect to any Mortgaged
Property pursuant to this Section 4.3, the Environmental
Indemnity shall continue to apply to such Mortgaged Property
to the extent specified therein (but shall not constitute a
continuing lien on such Mortgaged Property).
4.4 Interest Payments.
Subject to the provisions of Section 4.6, Borrower
shall pay on or prior to each Payment Date interest on each of
the Mortgage Loans for the applicable Payment Period, at a rate
equal to the Interest Rate for each such Mortgage Loan for such
Payment Period, on the outstanding principal balance of each such
Mortgage Loan, from (and including) the date hereof to (but not
including) the Maturity Date of such Mortgage Loan.
4.5 Default Rate; Post-Maturity Interest.
If Borrower shall fail to make any payment of principal
of or interest on a Mortgage Loan, or any other amount owed under
the Loan Documents, due on a scheduled due date, by acceleration
or otherwise, and shall not have rendered such payment within
five days (5) following such due date, Borrower shall pay
interest at the Default Rate upon demand from time to time, to
the extent permitted by applicable law, on such defaulted amount
from the scheduled due date to the date of payment. Payment or
acceptance of the increased interest rate provided for in this
subsection is not a permitted alternative to timely payment and
shall not constitute a waiver of any Event of Default or an
amendment to this Loan Agreement or otherwise prejudice or limit
any rights or remedies of Lender hereunder.
4.6 Computations.
Interest payable hereunder on any Mortgage Loan shall
be computed on the basis of a 360-day year of twelve 30-day
months.
4.7 Method of Payments.
Each payment by Borrower hereunder or under any
Mortgage Note shall be made by one certified or other check or
one wire transfer to Lender, in funds immediately available in
New York City, by 2:00 P.M., New York City time, on the date such
payment is due to Lender, by deposit to the account set forth
below Borrower's name on the signature page hereof, or to such
other account in the continental U.S. as Lender may have last
designated by written notice to Borrower.
Section 5. Deposits for Taxes and Insurance
Premiums and Capital.
In order to assure the payment of Taxes and premiums
payable with respect to all Insurance Policies ("Insurance
Premiums") as and when the same shall become due and payable:
(a) Borrower shall, upon Lender's election, deposit
with Lender or its designated representative on the first
Banking Day of each and every month, an amount equal to
one-twelfth (1/12) of the Taxes and Insurance Premiums to become
due upon each Mortgaged Property between one (1) and
thirteen (13) months after the date of such deposit. The
amounts of such deposits (collectively referred to herein as
"Tax and Insurance Deposits") shall be based upon Lender's
reasonable estimate as to the amount of Taxes and Insurance
Premiums. To the extent that current bills for Taxes are
not yet available, the amount deposited hereunder shall not
exceed 103% of the amount of the prior year's taxes.
Borrower shall promptly upon the demand of Lender make
additional Tax and Insurance Deposits as Lender may from
time to time reasonably require due to: (i) failure of
Lender to require or failure of Borrower to make Tax and
Insurance Deposits in previous months, (ii) underestimation
of the amounts of Taxes and/or Insurance Premiums, (iii) the
particular due dates and amounts of Taxes and/or Insurance
Premiums or (iv) insufficiency of the Tax and Insurance
Deposits. All Tax and Insurance Deposits shall be held by
Lender in an interest-bearing account for the benefit of
Borrower.
(b) Lender shall, out of the Tax and Insurance
Deposits, upon the presentation to Lender by Borrower of the
bills therefor, pay the Taxes and Insurance Premiums or, if
Borrower, in Borrower's sole discretion, pays such Taxes and
Insurance Premiums from Borrower's own funds other than
those funds held in escrow by Lender pursuant to this
Section 5, upon the presentation of receipted bills
therefor, reimburse Borrower for such payments made by
Borrower. If the total Tax and Insurance Deposits on hand
shall not be sufficient to pay all of the Taxes and
Insurance Premiums when the same shall become due, then
Borrower shall pay to Lender on demand the amount necessary
to make up the deficiency.
(c) Any excess amounts of Tax and Insurance Deposits
during any year shall be retained by Lender and applied to
pay Taxes and Insurance Premiums in the next calendar year
and credited to reduce the Tax and Insurance Deposits due by
Borrower during such calendar year, and all excess amounts
remaining when the Obligations have been paid and discharged
in full shall be returned to Borrower.
(d) Upon an Event of Default, Lender may, at its
option without being required so to do, apply any Tax and
Insurance Deposits on hand to any of the Obligations, in
such order and manner as Lender may elect. All Tax and
Insurance Deposits are hereby pledged as additional security
for the Obligations, and shall be held by Lender irrevocably
to be applied for the purposes for which made as herein
provided, and shall not be subject to the direction or
control of Borrower.
(e) Notwithstanding anything herein contained to the
contrary, Lender shall not be liable for any failure to
apply the Tax and Insurance Deposits unless Borrower, while
no default exists hereunder, shall have requested Lender in
writing to make application of such Tax and Insurance
Deposits on hand to the payment of the Taxes or Insurance
Premiums, for the payment of which such Tax and Insurance
Deposits were made, accompanied by the bills therefor.
(f) No provision of this Loan Agreement shall be
construed as creating in any party other than Borrower and
Lender any rights in and to the Tax and Insurance Deposits
or any rights to have the Tax and Insurance Deposits applied
to payment of Taxes and Premiums. Lender shall have no
obligation or duty to any third party to collect Tax and
Insurance Deposits.
(g) Notwithstanding the foregoing, Borrower will not
be obligated to deposit any Insurance Premiums with Lender
so long as no default exists under this Loan Agreement or
any of the other Loan Documents, and Borrower will not be
obligated to deposit any Taxes with Lender so long as (i) no
default exists under this Loan Agreement or any of the other
Loan Documents, (ii) the Loan Facility has not been assigned
to another entity other than Lender and (iii) Borrower
maintains an aggregate Debt Service Coverage Ratio with
respect to all of the Mortgaged Properties of at least
1.25:1.
Section 6. Condemnation and Casualty.
(a) Borrower shall give prompt written notice to
Lender of any Casualty or Condemnation, whether commenced or
threatened, affecting all or any portion of any Mortgaged
Property. All Insurance Proceeds and Condemnation Proceeds
shall be payable to Lender, and Borrower hereby authorizes
and directs any affected insurance company, Governmental
Authority or other Person to make payment of such Insurance
Proceeds or Condemnation Proceeds directly to Lender, and
all Insurance Proceeds and all Condemnation Proceeds shall
be applied and disbursed in accordance with the provisions
of this Section 6; provided, however, that in the case of
any Casualty or Condemnation relating to a Mortgaged
Property as to which the total Condemnation Proceeds or
Insurance Proceeds are less than $250,000, such Proceeds
shall be paid directly to Borrower, and Sections 6(b) and
6(c) below shall not apply, except that Borrower shall
comply with the standards in Section 6(c) (ii) (A) through
(G) below in respect of any Work undertaken.
(b) With respect to any Insurance Proceeds or
Condemnation Proceeds relating to a Mortgaged Property that
are received in respect of a Major Casualty/Condemnation,
Lender shall have the option, in its sole discretion, to:
(i) upon notice to Borrower, apply all or part of
such Insurance Proceeds or Condemnation Proceeds to the
prepayment of the Related Loan in full or in part in
accordance with Section 4.2 on the next Payment Date
occurring after receipt of such Insurance Proceeds or
Condemnation Proceeds (such Payment Date, the
"Prepayment Date" with respect to such prepayment); or
(ii) upon notice to Borrower, permit Borrower to
elect under paragraph (c) below to apply the Insurance
Proceeds or Condemnation Proceeds to the restoration of
the Mortgaged Property or to apply the Insurance
Proceeds or the Condemnation Proceeds to the prepayment
of the Related Loan in accordance with the provisions
contained in Section 4.2.
(c) With respect to any Insurance Proceeds or
Condemnation Proceeds relating to a Mortgaged Property (x)
that are received in respect of a Casualty or Condemnation
that is not a Major Casualty/Condemnation or (y) with
respect to which Lender has permitted Borrower to exercise
the option described in Section 6 (b) (ii) above, Borrower
shall have the option to:
(i) apply such Insurance Proceeds or Condemnation
Proceeds to the prepayment of the Related Loan in full
or in part in accordance with Section 4.2 on the first
Payment Date occurring after the expiration of forty-five
(45) days from the receipt of such Insurance
Proceeds or Condemnation Proceeds (such Payment Date,
the "Prepayment Date" with respect to such prepayment),
in an amount not less than the amount of Insurance
Proceeds or Condemnation Proceeds received by Borrower;
or
(ii) upon notice to Lender no later than forty-five
(45) days after receipt of such Insurance Proceeds
or Condemnation Proceeds, elect irrevocably to apply
such proceeds to the restoration of the related
Mortgaged Property, in which event Borrower shall
comply with the following conditions in connection with
the performance of all of such restoration
(hereinafter, "Work"):
(A) no Work shall be undertaken until
Borrower shall have procured and paid for, so far
as the same may be required from time to time, all
permits and consents of all Governmental
Authorities having jurisdiction;
(B) any Work done pursuant to this Section 6
(c) (ii) shall be conducted under the supervision
of a licensed architect and/or engineer selected
by Borrower and approved by Lender, and no such
Work shall be done except in accordance with plans
and specifications and cost estimates prepared and
approved in writing by (x) Borrower's architect
and/or engineer, and (y) if the cost of such Work
exceeds the lesser of twenty-five percent (25%) of
the outstanding principal balance of the Related
Loan for such Mortgaged Property and $1,000,000,
also approved by Lender (provided that Lender
shall not unreasonably withhold or delay such
approval). Prior to the commencement of any Work
and promptly thereafter, Borrower shall deliver to
Lender copies of all plans and specifications,
cost estimates relating to any such Work and any
changes thereto regardless of the cost to be
incurred in connection therewith;
(C) any Work shall be commenced promptly and
in any event within one hundred sixty-five days
(165) after receipt of the Insurance Proceeds or
the Condemnation Proceeds (except insofar as
commencement within such time is rendered
impossible due to force majeure) and, once
commenced, shall be prosecuted diligently to
completion in a good and workmanlike manner and in
compliance with all applicable permits and
authorizations and with all other applicable Laws;
(D) the Work shall be performed with the
objective of restoring the Mortgaged Property to
at least its value and general utility prior to
the relevant Casualty or Condemnation (as
determined by any MAI-licensed appraiser
associated with a nationally recognized appraisal
firm reasonably acceptable to Borrower, as
selected by Lender);
(E) any Work shall be completed free and
clear of all Encumbrances, subject to the
provisions of Section 10.2(a)(iii) hereof, and in
accordance with the plans and specifications
therefor;
(F) during the performance of any such Work,
Borrower shall procure and maintain the Insurance
Coverages required under Section l0.l (i) hereof;
and
(G) Borrower shall reimburse Lender for all
reasonable fees and expenses incurred by Lender in
connection with review of such Work, including but
not limited to the reasonable fees and expenses of
any architect selected by Lender to review the
plans and specifications and to inspect the Work
on behalf of Lender.
If Borrower fails to elect to restore the Mortgaged Property
within the time period specified above for the making of such
election, and provided the Insurance Proceeds or Condemnation
Proceeds are sufficient to prepay the Related Loan in full,
Borrower shall be deemed to have elected to prepay the Related
Loan pursuant to Section 6(c)(i).
(d) Lender shall disburse any Insurance Proceeds or
Condemnation Proceeds to be used to restore the related
Mortgaged Property pursuant to Section 6(c)(ii) above to or
for the account of Borrower, upon request, in installments,
to pay the costs and expenses associated with the
restoration of such Mortgaged Property, as set forth below.
Upon the payment of such costs and expenses, the balance of
such Insurance Proceeds or Condemnation Proceeds, if any,
shall be paid to Borrower.
(i) Each request for payment shall be made on 10
days' prior notice to Lender and shall be accompanied
by a certificate to be made by the supervising
architect or engineer or by an officer of Borrower,
stating that the sum requested is justly required to
reimburse Borrower for payments by Borrower to, or is
justly due to, the contractor, subcontractors,
materialmen, laborers, engineers, architects or other
Persons rendering services or materials for the Work
(giving a brief description of such services and
materials); and
(ii) each request shall be accompanied by waivers
of liens reasonably satisfactory to Lender covering
that part of the Work for which payment or
reimbursement is being requested, or by other evidence
reasonably satisfactory to Lender that there has not
been filed with respect to such Mortgaged Property any
mechanics' or other lien or instrument for the
retention of title in respect of any part of the Work
not discharged of record or bonded to the reasonable
satisfaction of Lender.
(e) All Insurance Proceeds and Condemnation Proceeds
received or held by or deposited with Lender shall be held
in interest-bearing accounts and all interest accruing
thereon shall be deemed part of such Insurance Proceeds or
Condemnation Proceeds.
(f) At any time when an Event of Default has occurred
and is continuing, Lender shall have the right to settle,
adjust or compromise any claim under any policy of insurance
or in connection with a Condemnation subject to Borrower's
consent. In all other cases, (i) Borrower may settle,
adjust or compromise any such claim which is less than
$100,000; and (ii) with respect to any claim in excess of
$100,000, Lender and Borrower shall consult and cooperate
with each other and each shall be entitled to participate in
all meetings and negotiations with respect to the settlement
of such claim.
(g) Nothing in this Section 6 shall prevent Lender
from applying at any time all or any part of any Insurance
Proceeds or Condemnation Proceeds then held by Lender to the
payment or prepayment of the Obligations following the
acceleration of the obligations under Section 13.1.
Section 7. Conditions Precedent.
The obligation of Lender to enter into this Loan
Agreement and amend and restate the Existing Loans and make the
new loans contemplated hereby is subject to the fulfillment by
Borrower, to the satisfaction of Lender, or waiver by Lender, of
the following conditions precedent on or prior to the date
hereof:
(a) Representations and Warranties; Compliance with
Conditions. Lender shall have received a Partner's
Certificate of Borrower, dated the date hereof, certifying
that:
(i) The representations and warranties of
Borrower contained in this Loan Agreement and the other
Loan Documents are true and correct in all material
respects on and as of the date hereof with the same
effect as if made on and as of such date;
(ii) No event has occurred and is continuing that
constitutes or would constitute, by reason of the
execution, delivery and performance of this Loan
Agreement, the other Loan Documents, the grant of the
Encumbrances on the Collateral contemplated by the Loan
Documents, the making of the Mortgage Loans or the
consummation of the other transactions contemplated by
this Loan Agreement or the other Loan Documents, a
Default or an Event of Default; and
(iii) Borrower is in compliance in all
material respects with all terms and conditions set
forth in this Loan Agreement and in each other Loan
Document to be observed or performed on its part.
(b) Delivery of Certain Agreements. Lender shall have
received originals of the following agreements and
instruments, in each case duly executed and delivered on
behalf of Borrower:
(i) this Loan Agreement;
(ii) the Mortgage Notes;
(iii) the Financing Statements;
(iv) the Environmental Indemnity, with any
appropriate amendments; and
(v) the Escrow Agreement, with any appropriate
amendments.
(c) Delivery of Loan Documents Related to the
Mortgaged Properties.
(i) Mortgages and Lease Assignments. Lender
shall have received from Borrower fully executed and
acknowledged counterparts of (i) an amendment to each
Existing Mortgage (an "Amendment of Mortgage") and to
each existing Lease Assignment on the Mortgaged
Properties with respect to Loan A and (ii) new
Mortgages and new Lease Assignments on the Mortgaged
Properties with respect to Loan B and Loan C, in each
case together with evidence that counterparts of each
such amendment, Mortgage and Lease Assignment have been
delivered to the Title Company for recording, so as to
effectively continue or create upon such recording, as
the case may be, (A) in the case of the Mortgages,
valid and enforceable first priority Mortgages on each
Mortgaged Property, subject only to Permitted
Encumbrances, and (B) in the case of the Lease
Assignments, valid and enforceable first priority
assignments of the Leases and Rents on each Mortgaged
Property, in each case in favor of Lender (or such
other trustee as may be required or desired under local
law).
(ii) Title Insurance. Lender shall have received
new or redated ALTA loan policies (or other loan
policies reasonably acceptable to Lender) of title
insurance relating to each Mortgage issued by the Title
Company dated, endorsed and/or redated as of the date
hereof, providing Lender with title insurance in
respect of the Mortgages encumbering the Mortgaged
Properties in an amount not less than 100% of the
aggregate Acquisition Costs of the Mortgaged Properties
covered by each such title policy (or such lesser
amount as Lender shall approve for title policies
subject to a first loss and tie-in endorsement where
such endorsements are available), including such
affirmative coverages and endorsements as Lender shall
reasonably require. Lender shall receive copies of all
title exceptions. The policies shall be substantially
consistent with the title insurance commitments agreed
to by Lender's representatives, Lender and the title
insurers in preparation for the execution hereof. Each
such policy shall insure Lender that each such Mortgage
creates a valid and enforceable first priority Mortgage
on the Mortgaged Property or Mortgaged Properties
encumbered thereby, free and clear of all exceptions
from coverage other than Permitted Encumbrances and
exclusions from coverage (as modified by the terms of
any endorsements or other affirmative insurance), and
name Lender and its successors and assigns as the
insured party thereunder. Lender also shall have
received evidence that all premiums in respect of such
policies have been paid. Additionally, Lender shall
have received evidence that a reinsurance plan,
including, without limitation, direct access
endorsements reasonably acceptable to Lender, is in
place. With respect to each existing Title Policy for
an Existing Mortgage on Mortgaged Property located in
the State of Texas, Lender shall also have received a
so-called "P-9b(3) endorsement" to each such Title
Policy, in form and substance acceptable to Lender,
stating that the Title Company will not claim that
coverage under such Title Policy has terminated or that
has been reduced solely by reason of the execution,
delivery or recordation or otherwise of this Loan
Agreement or any other Loan Document and maintaining
the Title Company's liability for the period of
limitation applicable to the Obligations secured by the
lien of the Mortgage insured by such Title Policy
calculated from the renewed and extended maturity date
of such Obligations as provided herein.
(iii) Surveys. Lender shall have received a
current survey of each Mortgaged Property, certified to
the Title Company and Lender and its successors and
assigns, in form and content reasonably satisfactory to
Lender and prepared by a professional and properly
licensed land surveyor reasonably satisfactory to
Lender in accordance with the minimum standard detail
requirements for A.L.T.A./A.C.S.M. Land Title Surveys
1992, and meeting the accuracy requirements of an Urban
Survey as defined therein, except that the accuracy and
precision requirements shall be modified to meet the
current minimum technical accuracy requirements of the
State in which each such Mortgaged Property is located,
and which shall include and accurately show the
following: (A) the complete and correct legal
description of the related Land as shown on the title
insurance commitment or preliminary title report (NOTE:
It must be possible to trace the legal description of
the related Land on the survey by following the
bearings and dimensions around the boundaries of the
related Land); (B) the location of all recorded
easements and of all unrecorded easements ascertainable
by an inspection of the related Land, which benefit or
burden the related Land (NOTE: All recorded easements
are to be identified by a document recording number or
by book and page numbers of recording); (C) all areas
affected by any recorded restrictions or access
limitations (NOTE: All such areas are to be identified
by a document recording number or by book and page
numbers of recording); (D) the location of all
monuments designating corners and other boundaries of
the related Land; (E) the point of commencement and
point of beginning (located with reference to a
specifically identifiable point) and the distances and
bearings of all boundaries of the property and the
location of all changes in bearing; (F) in the case of
curved boundaries, complete curve data, including
length of the arc, and the chord distance and bearing;
(G) the location of all adjoining streets, roads,
highways and alleys, with names, rights-of-way widths
and distances from the related Land noted, and, if none
adjoin the related Land, then the location of the
nearest public street, road or highway and its distance
from the related Land, together with the location of
the private access easement thereto; (H) the location
of public access to the related Land and of all
entrance drives and curb-cuts; (I) the exact dimensions
of any encroachments on the related Land and
protrusions from the related Land; (J) a directional
indicator showing North; (K) the street address of each
improvement; (L) the zoning designation of the related
Land; (M) the dimensions of the related Land; (N) the
perimeter dimensions of each improvement and the
location of each improvement as measured from the two
(2) nearest property lines or other defined points and,
depictions of any aboveground projections of buildings
and other improvements beyond the ground level
dimensions thereof; (0) the distance from the exterior
face of any building to any applicable set-back line;
(P) the number of stories of each structure; (Q) the
location (and striping) of all paved parking areas and
the number and dimension of parking spaces contained
therein (including a breakdown as to the number of
spaces for handicapped parking and the location of the
spaces designated for handicapped parking); (R) the
location of all curbing, walkways, sidewalks,
driveways, and improvements such as swimming pools,
tennis courts and the like; (S) interior lot lines, if
any; (T) all applicable municipal or private building
set-back lines; (U) the location of existing on-site
and service lines for natural gas, telephone,
electricity, water and sanitary and storm sewers, and
their points of connection with the public system; (V)
the area of the related Land, expressed in acreage and
square feet; (W) the total net usable area of the
related Land, exclusive of easements, roads and rights
of way appurtenant to the related Land, and
encroachments, if any, over any adjoining land; (X) the
square foot area of each building; (Y all entrances and
exits to and from each building; (Z) any portion of the
Land which is located in a flood plain or in any other
flood hazard, mudslide hazard or flood danger area as
designated by applicable governmental authorities; (AA)
the scale to which the survey has been prepared and a
legend which defines all abbreviations used therein;
(BB) all survey revision dates; and, (CC) a surveyor's
certificate, in form satisfactory to Lender and
Lender's counsel. Notwithstanding anything to the
contrary contained in this Section 7(c)(iii), no such
survey shall be required to identify dimensions,
markings or items which are either underground or
otherwise not visible from above ground unless such
information is filed of record in the county in which
the relevant Mortgaged Property is located.
(iv) Insurance. Lender shall have received
binders in respect of the insurance coverage required
pursuant to Section 10.1 to be carried evidencing (A)
the issuance of such policies, (B) the payment of all
premiums payable for the existing policy period, but
not in excess of one year, and (C) coverage which meets
all of the requirements set forth in Section 10.1.
(v) Environmental Assessments. Borrower shall
deliver, with respect to each of the Mortgaged
Properties, a Phase 1 environmental report acceptable
to Lender and its counsel in their sole discretion.
Each such report shall be prepared by an environmental
engineering firm approved by Lender and will be
addressed to both Borrower and Lender. If any such
report states that there exists any hazardous material
on or beneath, or stored at a Mortgaged Property (other
than those materials generally accepted and used
routinely in the maintenance of the Mortgaged Property)
which may become a hazard to public health or violate
any law or regulation requiring removal, containment or
treatment, but such report is otherwise acceptable to
Lender, Borrower will deliver a further environmental
engineer's Phase 2 report, acceptable to Lender and its
counsel in their sole discretion, describing the
feasibility and estimating the cost of such remediation
with respect to such Mortgaged Property. If such
report and the proposed remediation program are
acceptable to Lender in its sole discretion, such cost
will be reserved by Borrower in an escrow account held
by Lender as more specifically described in the Escrow
Agreement. Upon satisfactory showing of timely
completion by Borrower of the remediation recommended
in such Phase 2 report in a timely fashion, the amounts
reserved in such escrow will be released to Borrower.
If Lender does not approve Borrower's proposed method
or the cost of environmental remediation, then Lender
will not be required to finance such Mortgaged Property
and Borrower may seek financing for such Mortgaged
Property elsewhere but will still be bound by the other
terms of this Loan Agreement.
(vi) Title and Deeds. Lender shall have received
copies of all deeds transferring the Mortgaged
Properties to Borrower in recordable form and such
other evidence of Borrower's title to the Mortgaged
Properties as Lender shall require.
(vii) Engineering Reports. Lender shall have
received final engineering reports prepared by the
Building Engineers relating to each Mortgaged Property,
which shall in each case be acceptable to Lender in its
sole discretion.
(viii) Certificates of Occupancy. Lender shall
have received certificates of occupancy or like
documents relating to each of the Mortgaged Properties.
(ix) Additional Matters. Lender shall have
received evidence reasonably satisfactory to Lender
that (A) each of the Mortgaged Properties (a) complies
with all Laws applicable to zoning and land use, it
being agreed that letters with respect to each
Mortgaged Property from the appropriate Governmental
Authorities concerning such matters in a form
acceptable to Lender, shall constitute satisfactory
evidence thereof; (b) is an independent unit which does
not rely on any drainage, sewer, access, parking,
structural or other facilities located on any property
not included in such Mortgaged Property or on public or
utility easements for (i) the fulfillment of any
zoning, building code or other requirement of any
Governmental Authority having jurisdiction over such
Mortgaged Property, (ii) structural support or (iii)
the fulfillment of the requirements of any Lease or
other agreement affecting such Mortgaged Property; (c)
Borrower, directly or indirectly, has the right to use
all amenities, easements, public or private utilities,
parking, access routes or other items necessary or
currently used for the operation of the Mortgaged
Property owned by it; and (d) each of the Mortgaged
Properties is (1) contiguous to or (2) benefits from an
irrevocable easement permitting access from such
Mortgaged Property to, a physically open, dedicated
all-weather public street, and has all necessary
Permits for ingress and egress, is adequately serviced
by public water, sewer systems and utilities, is on a
tax parcel separate and apart from any other property,
and (B) no building or other improvement not located on
the Mortgaged Properties relies on any part of any of
the Mortgaged Properties to fulfill any zoning
requirements, building code or other governmental or
municipal requirement for structural support or to
furnish to such building or improvement any essential
building systems or utilities.
(d) Encumbrances. Borrower shall have taken or caused
to be taken such actions in such a manner so that Lender has
(and, in the case of Mortgages securing Mortgage Notes
comprising Loan A, continues to have) valid and perfected
first priority mortgages or other security interests, as the
case may be, in the Collateral as of (i) in the case of
Mortgages and the other Collateral securing Mortgage Notes
comprising Loan A, the original date of each such Mortgage,
and (ii) in the case of Mortgages and the other Collateral
first created concurrently herewith, the date hereof;
subject, in the case of the Mortgaged Properties, to
applicable Permitted Encumbrances, and Lender shall have
received reasonably satisfactory evidence thereof. Such
actions shall include the execution by Borrower and delivery
in form ready for filing of Financing Statements in all
jurisdictions as may be necessary or desirable to perfect
security interests in the Collateral and the delivery of
evidence reasonably requested by Lender that all other
filings, recordings and other actions Lender deems
reasonably necessary or desirable to establish, preserve and
perfect the encumbrances granted to Lender shall have been
made.
(e) Delivery of Organizational Documents.
(i) On or before the date hereof, Borrower shall
have delivered or caused to be delivered to Lender the
following:
(A) (1) a copy of the Certificate of Limited
Partnership of Borrower certified by the Secretary of
State of Delaware, as amended through the date hereof;
(2) a copy of the Partnership Agreement of Borrower, as
amended through the date hereof; (3) a good standing
certificate with respect to Borrower from the State of
Delaware; (4) a certificate of authority to do
business, or other evidence satisfactory to Lender,
indicating that Borrower is authorized to do business
in each state in which a Mortgaged Property is located
and (5) a Partner's Certificate dated the date hereof
certifying as to each of (1) through (4) above;
(B) a signature and incumbency certificate of a
duly authorized officer of Borrower's General Partner;
and
(C) a consent and authorization of Borrower's
General Partner.
(ii) On or before the date hereof, Borrower's
General Partner shall deliver or cause to be delivered
to Lender the following:
(A) certified copies of the by-laws and
certificate of incorporation of Borrower's General
Partner;
(B) certified copies of the Board Resolutions of
Borrower's General Partner;
(C) a signature and incumbency certificate of the
duly authorized officer executing this Loan Agreement
and the other Loan Documents on behalf of Borrower's
General Partner;
(D) a good standing certificate with respect to
Borrower's General Partner; and
(E) a certificate of authority to do business, or
other evidence satisfactory to Lender, indicating that
Borrower's General Partner is authorized to do business
in the jurisdictions in which the Mortgaged Properties
are located.
(f) Opinions of Counsel. On the date hereof, Borrower
shall have delivered or caused to be delivered the following
opinions of counsel: (i) the opinion of counsel for Borrower
as to the valid existence, due organization and good
standing of Borrower and Borrower's General Partner, the due
authorization and delivery by Borrower and Borrower's
General Partner of the Loan Documents and the validity and
enforceability of Borrower's Partnership Agreement; (ii)
opinions of counsel for Borrower in each state in which any
Mortgaged Property is located with respect to the legal,
valid, binding and enforceable nature of the Loan Documents
governed by the laws of such state and including an opinion
that the Mortgage Loans do not violate the usury laws of
such state; and (iii) the opinion of Borrower's New York
counsel, with respect to the legal, valid, binding and
enforceable nature of the Loan Documents governed by the
laws of New York, in each case in form and substance
reasonably satisfactory to Lender, dated as of the date
hereof and addressing such additional matters as Lender may
reasonably request and addressed to Lender and its
successors and assigns.
(g) Completion of Proceedings. All proceedings taken
or to be taken in connection with the transactions
contemplated by this Loan Agreement, the other Loan
Documents, and all documents incidental thereto shall have
been completed in a manner satisfactory in form and
substance to Lender, and Lender shall have received all such
counterpart originals or certified copies of such documents
as Lender may reasonably request, including, without
limitation, evidence of any required approvals of insurance
regulatory authorities.
(h) Rent Rolls. Borrower shall have delivered to
Lender the Rent Rolls described in Section 10.1(aa).
(i) Other Conditions.
(i) The aggregate outstanding principal under the
Loan Facility immediately after the making of the Loans
on the date hereof shall not exceed 50% of the
aggregate Total Costs of the Mortgaged Properties.
(ii) The aggregate outstanding principal under the
Loan Facility immediately after the making of the Loans
on the date hereof shall not exceed 65% of (x) the
aggregate Acquisition Costs of the Mortgaged Properties
and (y) the Aggregate Property Valuation.
(iii) The outstanding principal amount of each
individual Related Loan shall not exceed (x) 75% of the
Acquisition Cost of the Mortgaged Property securing
such Related Loan or (y) 65% of the Property Valuation
of the Mortgaged Property securing such Related Loan.
(iv) The portion of the Loan Facility allocable to
each Mortgaged Property shall not exceed $25,000 per
apartment unit, unless approved specifically by Lender.
(v) The Debt Service Coverage Ratio on the date
hereof for each Mortgaged Property shall be equal to or
greater than 1.25:1, provided, however, that if the
Debt Service Coverage Ratio on a Mortgaged Property is
less than 1.25:1, and all other closing conditions in
this Section 7 have been satisfied as of the date
hereof, then Lender shall nonetheless make the Related
Loan but the amount of Net Operating Income lacking for
such Mortgaged Property to achieve a Debt Service
Coverage Ratio of 1.25:1 on an annual basis will be
escrowed in an interest-bearing account as more
particularly described in the Escrow Agreement until
such Mortgaged Property achieves this ratio
continuously for six months, at the conclusion of which
the funds in such escrow will be released to Borrower.
(vi) Each of the Mortgaged Properties shall be
separately metered for gas and electricity.
(vii) None of the Mortgaged Properties may be
pre-1975 construction.
(viii) Each of the Mortgaged Properties will be
located in one of the metropolitan areas listed on
Exhibit E attached hereto, unless otherwise
specifically approved by Lender.
(ix) Lender shall have performed a site inspection
satisfactory to Lender in its sole discretion on each
Mortgaged Property being financed.
(x) An appraisal shall have been performed by an
independent qualified third-party appraiser conforming
to the regulations promulgated pursuant to the
Financial Institutions, Reform, Recovery and
Enhancement Act of 1989, as amended. Such appraisal
shall show, with respect to each Mortgaged Property,
the value of such Mortgaged Property "As Is", "As
Renovated" and "As Stabilized".
(xi) Lender shall have received such other
documents, materials, opinions and information as
Lender may reasonably request.
Section 8. Representations and Warranties of
Borrower.
Borrower hereby represents and warrants to Lender with
respect to itself and to each of the Mortgaged Properties owned
by it and its obligations under this Loan Agreement and the other
Loan Documents (which representations and warranties shall
survive authentication and delivery of the Mortgage Notes and
their repayment and which shall be determined to be true as of
the date hereof) that:
(a) Organization.
(i) Borrower has been duly organized and is
validly existing and in good standing as a limited
partnership under the laws of the State of Delaware,
with requisite partnership power and authority to own
its properties and to transact the businesses in which
it is now engaged. Borrower is duly qualified to do
business and is in good standing in each jurisdiction
where it is required to be so qualified in connection
with its properties, businesses and operations, and
with the execution, delivery and performance of this
Loan Agreement and the other Loan Documents. Borrower
possesses all material rights, licenses, permits and
authorizations, governmental or otherwise, necessary to
entitle it to own each Mortgaged Property and to
transact the businesses in which it is now engaged.
The sole business of Borrower is the ownership,
management and operation of the Mortgaged Properties
and other multi-family apartment projects similar to
the Mortgaged Properties. Borrower's Partnership
Agreement has been duly executed, delivered and, to the
extent required by applicable law filed, is in full
force and effect in accordance with its terms and has
not been modified or amended from the form reflected in
Exhibit D hereto.
(ii) Borrower's General Partner has been duly
organized and is validly existing and in good standing
as a corporation under the laws of the State of
Maryland, with requisite corporate power and authority
to operate each Mortgaged Property and to transact the
businesses in which it is now engaged, including,
without limitation, to be the general partner in
Borrower. Borrower's General Partner is duly qualified
to do business and is in good standing in each
jurisdiction where it is required to be so qualified in
connection with its properties, businesses and
operations, and the execution, delivery and (to the
extent applicable to it) performance of this Loan
Agreement and the other Loan Documents. Borrower's
General Partner possesses all rights, licenses, permits
and authorizations, governmental or otherwise,
necessary to entitle it to operate the Mortgaged
Properties on behalf of Borrower and to transact the
businesses in which it is now engaged, and the sole
business of Borrower's General Partner is to be the
sole general partner in Borrower. Borrower's General
Partner's certificate of incorporation and by-laws,
together with any amendments thereto, have been duly
executed, delivered and, to the extent required by
applicable law filed, and are in full force and effect
in accordance with their terms and have not been
modified or amended from the form reflected in Exhibit
F hereto.
(iii) Borrower is a single-purpose limited
partnership, the sole business of which is to own,
operate, lease and finance the Mortgaged Properties and
other multi-family apartment projects similar to the
Mortgaged Properties. The sole general partner of
Borrower is Borrower's General Partner. Borrower's
General Partner is the owner and holder of a 1% general
partner interest and a 0.24% limited partner interest
in Borrower. WDN Properties, Inc. is the owner and
holder of a 24.08% limited partnership interest in
Borrower. Walden Residential Operating Partnership,
L.P. is the owner and holder of a 13.95% limited
partnership interest in Borrower. The remaining 60.73%
of the limited partnership interests in Borrower are
owned and held by private investors none of which is an
Affiliate of Borrower.
(b) Authorization; Binding Obligation. Each of
Borrower and Borrower's General Partner has taken all
necessary corporate or partnership action, as the case may
be, to authorize the execution, delivery and performance of
this Loan Agreement and the other Loan Documents. This Loan
Agreement and the other Loan Documents have been duly
executed and delivered by or on behalf of Borrower and
Borrower's General Partner, as applicable, and constitute
legal, valid and binding obligations of Borrower and
Borrower's General Partner, as applicable, enforceable
against such parties in accordance with their respective
terms, subject to applicable bankruptcy, insolvency and
similar laws affecting rights of creditors generally, and
subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(c) No Conflicts. The execution, delivery and
performance by Borrower and Borrower's General Partner of
the Loan Documents will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of
any lien, charge or encumbrance (other than pursuant to the
Loan Documents) upon any of the property or assets of
Borrower or Borrower's General Partner, as applicable,
pursuant to the terms of any indenture, mortgage, deed of
trust, deed to secure debt, loan agreement, partnership
agreement or other agreement or instrument to which Borrower
or Borrower's General Partner, as applicable, is a party or
by which any of such parties is or are bound or to which any
of its or their property or assets is subject, nor will such
action result in any material violation of the provisions of
any charter, by-law, stockholder's agreement, partnership
agreement, certificate or any statute or any order, rule or
regulation of any court or governmental agency or body
having jurisdiction over Borrower or over Borrower's General
Partner or any of its or their properties or assets, and any
consent, approval, authorization, order, registration or
qualification of or with any court or any such regulatory
authority or other governmental agency or body required for
the execution, delivery and performance by Borrower or by
Borrower's General Partner of the Loan Documents, has been
obtained and is in full force and effect.
(d) No Litigation. Borrower has not received any
notice of any actions, suits, proceedings at law or in
equity by or before any Governmental Authority or other
agency, arbitrations or investigations now pending or
threatened against or affecting Borrower or Borrower's
General Partner or any of the Mortgaged Properties, which,
individually or in the aggregate, if determined against
Borrower or any of the Mortgaged Properties, might
materially and adversely affect the condition (financial or
otherwise) or business of Borrower or the condition,
operations or ownership of any of the Mortgaged Properties
or which would draw into question the validity of this Loan
Agreement or any of the Loan Documents or which would be
likely to impair materially the ability of Borrower or
Borrower's General Partner to perform their obligations
under the terms of this Loan Agreement or the other Loan
Documents.
(e) Agreements. Except for Permitted Encumbrances,
Borrower is not a party to any agreement or instrument or
subject to any restriction which might materially and
adversely affect Borrower or any of the Mortgaged
Properties, or Borrower's business, properties or assets,
operations or condition, financial or otherwise. Borrower
is not in default in any material respect in the
performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any
material agreement or instrument to which it is a party or
by which Borrower or any of the Mortgaged Properties are
bound.
(f) Title. As of the date hereof, Borrower is the
sole owner of and has good and indefeasible title in fee to
the real property comprising part of each Mortgaged Property
and good title to the balance of each such Mortgaged
Property, in each case, after giving effect to the
transactions contemplated by the Loan Documents, free and
clear of all Liens whatsoever except the Permitted
Encumbrances, such other Liens as are permitted pursuant to
the Loan Documents and the Liens created by the Loan
Documents. Each of the Mortgages have been properly
recorded in the appropriate public records, together with
any Financing Statements required to be filed in connection
therewith, and create (i) valid and perfected, first
priority Liens on each Mortgaged Property, subject only to
Permitted Encumbrances and such other Liens as are permitted
pursuant to the Loan Documents and (ii) perfected first
priority security interests in and to, and perfected first
priority assignments of all Personalty (including the
Leases) which can be perfected by the filing of Financing
Statements, all in accordance with the terms thereof, in
each case subject only to any applicable Permitted
Encumbrances and such other Liens as are permitted pursuant
to the Loan Documents. Except for any Permitted
Encumbrance, such other Liens as are permitted pursuant to
the Loan Documents or any Lien which has been "insured
around" or bonded to the satisfaction of Lender, after
giving effect to the transactions contemplated by the Loan
Documents, there are no Liens or claims for work, labor or
materials affecting the Mortgaged Properties which are or
may be prior to, or of equal priority with, the Liens
created by the Loan Documents.
(g) No Bankruptcy Filing. None of Borrower,
Borrower's General Partner, Borrower's limited partners or
any material Affiliate of any of them is contemplating or
has pursued either the filing of a petition by it under any
state or federal bankruptcy or insolvency laws or the
liquidation of all or a major portion of its assets or
property, and Borrower has no knowledge of any Person
contemplating the filing of any such petition against it or
any of the foregoing described entities. Neither Borrower
nor Borrower's General Partner has had a receiver,
conservator or liquidating agent or similar person appointed
for all or a substantial portion of its assets, or given
notice of insolvency or suspension of its operations to any
Person or made an assignment for the benefit of its
creditors or taken any other similar action for the
protection or benefit of creditors.
(h) Full and Accurate Disclosure. No statement of
fact made by Borrower in this Loan Agreement or in any of
the other Loan Documents contains any untrue statement of a
material fact or omits to state any material fact necessary
to make statements contained herein or therein not
materially misleading. There is no material fact presently
known to Borrower which has not been disclosed to Lender
(including, without limitation, facts that would have been
disclosed in the reports described in Sections 7(c)(v) and
7(c)(vii), or by the inspection contemplated by Section
7(i)(ix), or by more recent surveys under Section 7(c)(iii),
had Lender not waived the delivery of such reports and the
conduct of such inspection as a condition to closing
hereunder, in each case at Borrower's request) which
materially and adversely affects, nor as far as Borrower can
reasonably foresee, is likely to materially and adversely
affect, any Mortgaged Property or the business, operations
or condition (financial or otherwise) of Borrower.
(i) Tax Filings; Impositions. Each of Borrower and
Borrower's General Partner has filed all federal, state and
local tax returns required to be filed and has paid or made
adequate provision for the payment of all federal, state and
local taxes, charges and assessments payable by them. Each
of Borrower and Borrower's General Partner believes that
their respective tax returns, if any, properly reflect their
respective income and taxes for the periods covered thereby,
subject only to reasonable adjustments required by the
Internal Revenue Service or other applicable tax authority
upon audit. All past-due Impositions in respect of the
Mortgaged Properties have been paid, together with all
interest and penalties due in connection therewith.
(j) Compliance. (i) Borrower and each Mortgaged
Property and the use thereof comply in all material respects
with all applicable Legal Requirements, including, without
limitation, building and zoning ordinances and codes.
Borrower has duly obtained and is in compliance with all
Permits necessary or required by applicable law or insurance
standards for the conduct of its business or the use or
occupancy of the Mortgaged Properties; all such Permits are
valid and in full force and effect and have not been
modified or qualified in a manner detrimental to the
operation of each such Mortgaged Property. (ii) Borrower is
not in default or violation of any order, writ, injunction,
decree or demand of any Governmental Authority, the
violation of which might materially and adversely affect the
condition (financial or otherwise) or business of Borrower
or any Mortgaged Property.
(k) Use of Proceeds. All Mortgage Loans which have
been disbursed to Borrower prior to the date hereof have
been, and all Mortgage Loans disbursed to Borrower on the
date hereof will be, used solely for the respective purposes
set forth in Section 3.4.
(1) Financial Information. All financial data,
including, without limitation, the statements of cash flow
and income and operating expenses, that have been delivered
to Lender in respect of each Mortgaged Property (i) are true
and correct in all material respects, (ii) accurately
represent the financial condition of such Mortgaged Property
as of the date of such reports in all material respects, and
(iii) to the extent prepared by an independent certified
public accounting firm, have been prepared in accordance
with GAAP consistently applied throughout the periods
covered, except as disclosed therein. Except for the
Permitted Encumbrances and the Loan Documents, as of the
date of this Loan Agreement, and except as disclosed on
Schedule 8(l), neither Borrower nor Borrower's General
Partners has any material contingent liability, liability
for taxes or other unusual forward commitment. Since
December 31, 1997, there has been no material adverse change
in the results of operations of the Mortgaged Properties.
Neither Borrower nor Borrower's General Partner has incurred
any obligation or liability, contingent or otherwise, which
might materially and adversely affect their respective
business operations or any Mortgaged Property, except for
Permitted Encumbrances.
(m) Condemnation. Borrower has no knowledge that any
Condemnation has been commenced or is contemplated with
respect to all or any portion of any Mortgaged Property or
for the relocation of roadways providing access to any
Mortgaged Property.
(n) Debt. Neither Borrower nor Borrower's General
Partner has incurred or is the obligor with respect to any
Indebtedness other than the obligations under the Loan
Documents, obligations of Borrower's General Partner to
Borrower's limited partners which relate to Borrower's
General Partner's capital contributions to the Partnership
made pursuant to the Partnership Agreement, or obligations
disclosed on Schedule 8(l).
(o) Independent Units. (i) Except as set forth on the
Title Policies, each of the Mortgaged Properties is an
independent unit which does not rely on any drainage, sewer,
access, parking, structural or other facilities located on
any property not included in such property or on public or
utility easements (a) to fulfill any zoning, building code
or other requirement of any Governmental Authority that has
jurisdiction over the Mortgaged Properties, (b) for
structural support or (c) to fulfill the requirements of any
Lease or other agreement affecting any such Mortgaged
Property; (ii) Borrower directly or indirectly has the right
to use all amenities, easements, public or private
utilities, parking, access routes or other items necessary
or currently used for the operation of each Mortgaged
Property; (iii) all public utilities are installed and
operating at each of the Mortgaged Properties and all such
utilities are connected so as to serve such Mortgaged
Property without passing over other property (except with
respect to easements therefor benefiting the relevant
Mortgaged Property); and (iv) either (a) each of the
Mortgaged Properties is contiguous, or (b) Borrower has the
benefit of an irrevocable easement permitting access from
such property, to a physically open, dedicated all-weather
public street, and has all necessary Permits for ingress and
egress, has adequate service from public water, sewer
systems, sanitary sewer, storm drainage and utilities. No
building or other improvement not included in any Mortgaged
Property relies on any part of such Mortgaged Property to
fulfill any zoning, building code or other governmental or
municipal requirement for structural support or the
furnishing to such building or improvement of any essential
building systems or utilities.
(p) Not Foreign Person. Borrower is not a "foreign
person" within the meaning of Section 1445(f)(3) of the Internal
Revenue Code and Borrower agrees to execute any and all
documents necessary or required by the Internal Revenue
Service in connection with such declaration.
(q) Separate Lots. Each Mortgaged Property is
comprised of one (1) or more parcels which constitutes a
separate tax lot or lots and does not constitute a portion
of any other tax lot not part of such Mortgaged Property.
(r) Assessments. Except for any assessments described
in the Permitted Encumbrances, Borrower has no notice of any
pending or proposed special or other assessments for public
improvements or otherwise affecting any Mortgaged Property,
nor are there any contemplated improvements to any Mortgaged
Property that may result in such special or other
assessments.
(s) Enforceability. The Loan Documents executed by or
otherwise binding upon Borrower are not subject to any
presently existing right of rescission, set-off,
counterclaim or defense by Borrower, including the defense
of usury, and Borrower has not asserted any right of
rescission, set-off, counterclaim or defense with respect
thereto.
(t) No Prior Assignment. As of the date hereof, (i)
Lender is the sole assignee of Borrower's interests under
the Leases, and (ii) there are no prior assignments of the
Leases or any portion of the Property Income due and payable
or to become due and payable which are presently
outstanding.
(u) Insurance. Borrower has obtained and delivered to
Lender a true and complete copy of the Insurance Policies,
and an original certificate thereof in form and substance
satisfactory to Lender, reflecting the insurance coverages,
amounts and other requirements set forth in Section 10.1(i)
in respect of each Mortgaged Property.
(v) Flood Zone. Except as otherwise shown on Schedule
8.l annexed hereto, no Mortgaged Property is located in a
flood hazard area as defined by the Federal Insurance
Administration.
(w) Physical Condition. Each Mortgaged Property is
free of material structural defects, whether latent or
otherwise, and all building systems contained therein,
including, without limitation, all buildings, improvements,
parking facilities, sidewalks, storm drainage systems,
roofs, plumbing systems, HVAC systems, fire protection
systems, electrical systems, equipment, elevators, exterior
sidings and doors, landscaping, irrigation systems and all
structural components are in good working order in all
material respects, subject to ordinary wear and tear.
(x) Filing and Recording Taxes. All transfer taxes,
deed stamps, intangible taxes or other amounts in the nature
of transfer taxes required to be paid by any Person under
applicable Legal Requirements currently in effect in
connection with the transfer of each Mortgaged Property to
Borrower have been paid. All mortgage, mortgage recording,
stamp, intangible or other similar taxes required to be paid
by any Person under applicable Legal Requirements currently
in effect in connection with the execution, delivery,
recordation, filing, registration, perfection or enforcement
of any of the Loan Documents, including, without limitation,
the Mortgages, have been paid, and, under current Legal
Requirements, the Mortgages are enforceable in accordance
with their terms by Lender (or any subsequent holder
thereof), subject to applicable bankruptcy, insolvency, and
similar laws affecting the rights of creditors generally,
and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(y) Certain Conditions. Each of the conditions
specified in Section 7(i)(i) through (viii) is satisfied as
of the date hereof.
(z) Permitted Encumbrances. The Permitted
Encumbrances do not materially and adversely affect
Borrower's ability to meet its payment obligations in
respect of the Mortgage Loans or any other indebtedness of
Borrower.
(aa) [Intentionally omitted]
(bb) Leases.
(i) Borrower is the sole owner and holder of the
landlord's interest under all of the Leases related to
each Mortgaged Property. There are no assignments of
the landlord's interest in any of the Leases or any
portion of the Rents, additional rents, charges, issues
or profits due and payable or to become due and payable
thereunder which remain in effect on the date hereof,
except in connection with the Loan Documents.
(ii) With regard to each Mortgaged Property, each
of the Tenants thereof occupies all or a portion of the
respective Mortgaged Property pursuant to a Lease which
is in full force and effect and other than those Leases
in favor of Tenants presently in effect, the Mortgaged
Property is not subject to any leases or other
agreements granting any rights to use, occupy or
possess the Mortgaged Property; other than those
Tenants who are parties to those Leases presently in
effect, no Person has any leasehold or possessory or
occupancy right or interest in the Mortgaged Property;
and each of the Tenants occupies and uses only that
portion of the Mortgaged Property leased by it pursuant
to the applicable Lease.
(iii) All of the Leases are in full force and
effect and will remain in full force and effect
following the consummation of the transactions
contemplated hereby and by the other Loan Documents.
None of the Tenants are in monetary default under the
Leases, except as disclosed on the Rent Rolls, and to
Borrower's Knowledge, there are no material
non-monetary defaults by the Tenants under the Leases.
Borrower has complied with the terms of the Leases and
is not in default in respect of any of its obligations
under any of the Leases. Borrower has not received any
notice of default from any of the Tenants, except as
disclosed on the Rent Rolls.
(iv) None of the Tenants or any other Person has
any outstanding exercisable rights with respect to the
purchase or sale of any Mortgaged Property including,
without limitation, any purchase option, right of first
offer or right of first refusal.
(v) Except as disclosed in the Rent Rolls, none
of the Tenants has been given any free rent or
concessions or abatements relating to the payment of
rent or additional rent which remain unexpired on the
date hereof, nor have any of the Tenants been given any
credit for or offset or claim against the obligation to
pay any fixed rent or additional rent by reason of
prepayment of rent or otherwise.
(vi) Borrower has no actual knowledge of any
circumstances or conditions affecting any of the
Tenants' credit standing or with respect to any pending
litigation or other legal proceedings involving such
Tenants that could adversely affect the operation,
income or value of any of the Mortgaged Properties.
(vii) All Rent Rolls delivered in connection
with the execution and delivery hereof are true and
complete in all material respects.
(cc) No Encroachments. Except as disclosed on the
surveys referred to in Section 7(c)(iii) and in the Title
Policies, none of the Buildings located on any of the
Mortgaged Properties encroaches upon the property of any
other Person nor lies outside of the boundaries and building
restriction lines of such Mortgaged Property and no Building
located on any property adjoining any Mortgaged Property
lies within the boundaries of or in any way encroaches upon
such Mortgaged Property.
(dd) Deeds of Trust. If any of the Mortgages are deeds
of trust, a trustee, duly qualified under applicable law to
serve as such, has been properly designated and currently so
serves and is named in the deed of trust or has been
substituted in accordance with applicable law, and no fees
or expenses are or will become payable to the trustee under
the deed of trust, except in connection with a trustee's
sale after default by Borrower or in connection with the
release of the Mortgaged Property or related security for
the Mortgage Loan following payment of such Mortgage Loan in
full.
(ee) Investment Company Act. Borrower is not an
"investment company" or a company "controlled" by an
investment company within the meaning of the Investment
Company Act of 1940, as amended from time to time.
(ff) No Commissions. Neither Borrower nor any
Affiliate or representative of Borrower has dealt with any
finder, broker or other Person that may be entitled to, any
commission or compensation in connection with the
consummation of the transactions contemplated by this Loan
Agreement and the Loan Documents, and Borrower agrees to
indemnify and hold Lender harmless from any and all claims,
liabilities or obligations with respect to any fees asserted
by any Person.
(gg) No Plans. Neither Borrower nor any ERISA
Affiliate (i) currently maintains, contributes to or
participates in any Plan, (ii) has agreed to or is obligated
to maintain, contribute to or participate in any Plan or
(iii) has at any time in the past maintained, contributed to
or participated in any Plan with respect to which Borrower
or any ERISA Affiliate may have any liability that has not
been disclosed to Lender in writing.
(hh) No Liability. No event has occurred, and no sale
of any Mortgaged Property to Borrower was a transaction, in
connection with which Borrower, directly or indirectly,
could be subject to any material liability under Section
406, 409, 502(i) or 502(l) of ERISA or Section 4975 of the
Internal Revenue Code, or under any agreement, instrument,
statute, rule of law or regulation pursuant to or under
which Borrower has agreed to indemnify or is required to
indemnify any person against liability incurred under, or
for a violation or failure to satisfy the requirements of
such statutory provisions.
(ii) No Plan Assets. Borrower is not an "employee
benefit plan," as defined in Section 3(3) of ERISA, subject
to Title I of ERISA, or a "plan" as defined in Section
4975(e)(1) of the Internal Revenue Code, subject to Section
4975 of the Internal Revenue Code, and none of the assets of
Borrower constitutes or will constitute "plan assets" of one
or more such employee benefit plans or other plans within
the meaning of 29 C.F.R. Section 2510.3-101.
(jj) No Prohibited Transaction. Assuming that Lender
is a bank and the source of funds to be used by Lender to
make the Mortgage Loans hereunder is a "collective
investment fund" as defined in Section IV(e) of Prohibited
Transaction Class Exemption 91-38 and that Lender has
disclosed to Borrower in writing the identity of each
"employee benefit plan" (as defined in Section 3(3) of
ERISA) that is subject to Title I of ERISA and each "plan"
(as defined in Section 4975 of the Internal Revenue Code)
that is subject to Section 4975 of the Internal Revenue Code
whose assets in such collective investment fund exceed or
are expected to exceed 10% of the total assets of such
collective investment fund as of the date hereof (for
purposes of this paragraph (jj), all employee benefit plans
maintained by the same employer or employee organization are
deemed to be a single plan), the execution and delivery of
this Loan Agreement and the Loan Documents, the making of
the Mortgage Loans and purchase of the Mortgage Notes
hereunder and the use of the proceeds thereof by Borrower
will not involve any transaction that is prohibited under
Section 406(a) of ERISA or which is a "prohibited
transaction" as defined in Section 4975 of the Internal
Revenue Code, in either case for which a statutory or
administrative exemption is not available.
Section 9. General Covenants of Borrower.
Borrower hereby covenants and agrees with Lender as
follows:
9.1 Affirmative Covenants.
(a) Existence. Borrower shall (i) keep in full force
and effect its rights as a limited partnership under the
laws of the State of Delaware, and (ii) obtain and preserve
its qualification to do business in each jurisdiction in
which such qualification is or shall be necessary to own and
operate the Mortgaged Properties.
(b) Extension of Partnership Term. If Borrower has
not paid in full all of the Obligations prior to the date
which is eighteen (18) months before the Maturity Date,
Borrower shall extend the term of its existence until at
least the second anniversary of the Maturity Date.
(c) Governmental Authorizations. Borrower shall
obtain and maintain in full force and effect, and abide by
and satisfy the material terms and conditions of all
material permits, licenses, registrations and other
authorizations with or granted by any Governmental
Authorities that may be required from time to time with
respect to the performance of its Obligations under this
Loan Agreement and the other Loan Documents. Borrower is
duly licensed and qualified to do business, and will
maintain such licenses and qualifications and its good
standing, in each state where it owns any Mortgaged
Properties if the laws of such state require such licensing
or qualification in order to conduct business of the type
conducted by Borrower.
(d) Payment and Discharge of Liabilities. Borrower
shall pay and discharge all of its material Liabilities as
they become due and payable, including, without limitation,
taxes, assessments and other governmental charges, levies or
claims of any kind against it or on or with respect to any
of its properties, as well as claims of any kind which, if
unpaid, might become a lien upon any of its properties;
provided, however, that Borrower shall not be required to
pay or discharge any Liability covered by this paragraph (d)
so long as (i) it shall contest the validity thereof in good
faith by appropriate proceedings and shall have set aside on
its books adequate reserves in accordance with GAAP with
respect thereto and (ii) such contest does not and would not
(and if such contest were decided adversely to Borrower,
such Liabilities would not) have a Material Adverse Effect.
(e) Notices. Borrower shall, promptly upon obtaining
knowledge thereof, give written notice to Lender of the
occurrence of any event that (i) constitutes, or with the
giving of notice or the lapse of time or both would
constitute, an Event of Default or (ii) has or could
reasonably be expected to have a Material Adverse Effect.
(f) [Intentionally Omitted]
(g) Financial Statements. Borrower shall furnish to
Lender, within 45 days after the close of each quarter of
its fiscal year beginning with the quarter ending March 31,
1998, quarterly reports prepared in accordance with GAAP
consistently applied (but including a reconciliation to a
cash basis), including a balance sheet, an income and
expense statement (itemized) and a cash flow statement, in
each case certified in a Partner's Certificate of Borrower
as being true, complete and accurate and as fairly
presenting the financial condition of Borrower as at the
close of such quarter and the results of its operations for
such quarter. In addition, Borrower shall furnish to
Lender, within 90 days of the end of its fiscal year, an
annual certified financial statement prepared in accordance
with GAAP consistently applied (but including a
reconciliation to a cash basis), including a balance sheet,
an income and expense statement (itemized), and a profit and
loss statement. All financial statements to be supplied by
Borrower shall be certified by an officer of Borrower; such
financial statements shall not be required to be certified
by an independent accountant or by a certified public
accountant.
(h) [Intentionally Omitted]
(i) Compliance with Other Agreements. Borrower shall
in a timely manner observe, perform and fulfill each and
every covenant, term and provision of the Loan Documents
applicable to it.
(j) Further Assurances. Borrower shall execute,
acknowledge, record and/or file such further statements,
documents, agreements, UCC financing and continuation
statements and such other instruments and do such further
acts as Lender from time to time may reasonably request as
necessary, desirable or proper (i) to carry out more
effectively the purposes and intent of this Loan Agreement
and the other Loan Documents, (ii) to subject to the
Encumbrance of the Mortgages or the other Loan Documents any
property intended by the terms hereof or thereof to be
subject thereto, including, without limitation, any
renewals, additions, substitutions, replacements,
betterments or appurtenances to any Mortgaged Property or
the Collateral, (iii) to perfect or otherwise implement or
assure any Encumbrance intended by the terms hereof or the
Mortgages to be created thereby, (iv) to create and perfect
security interests in favor of Lender in all Contracts
related to the Mortgaged Properties to which Borrower is a
party including, without limitation, Property Management
Agreements and Permits of any type or (v) in order to
exercise or enforce its rights under this Loan Agreement and
the other Loan Documents. In addition, at the reasonable
request of Lender, Borrower hereby agrees to execute and
deliver amendments or modifications to any of the Loan
Documents recommended by local counsel to Lender in any
jurisdiction in which any Mortgaged Property is located in
order to ensure the enforceability of such Loan Documents or
to provide terms and remedies customarily included in
similar documents in such jurisdiction.
(k) Inspection Rights. Borrower shall enable
representatives of Lender to examine its books and records,
the books and records of any of its employees, agents and
representatives and any of the Mortgaged Properties during
normal business hours on forty eight hours' advance notice.
(1) ERISA Plan Notification. Borrower shall notify
Lender in writing within five Banking Days after Borrower or
any ERISA Affiliate adopts, maintains, contributes to or
begins to participate in any Plan, or agrees or becomes
obligated to adopt, maintain, contribute to or participate
in any Plan, of such fact, including the name of such Plan,
the identity of the employers maintaining such Plan, and a
summary of the obligations of the Borrower and/or such ERISA
Affiliate, as the case may be, with respect to such Plan.
(m) Certain Changes. Borrower will not (i) change its
name, identity or corporate structure in any manner or (ii)
change the location of its chief executive office or chief
place of business, in each case unless it shall have given
Lender prior notice thereof and delivered an opinion of
counsel with respect thereto in accordance with Section
9.1(n) below.
(n) Perfection Opinions. Not more than six months nor
less than 30 days prior to (i) each anniversary of the date
hereof during the term of this Agreement and (ii) each date
on which Borrower proposes to take any action contemplated
by Section 9.1(m) above, Borrower shall, at its sole cost
and expense, cause to be delivered to Lender an opinion of
counsel, in form and substance satisfactory to Lender, to
the effect that all financing statements and amendments or
supplements thereto, continuation statements and other
documents required to be recorded or filed in order to
perfect and protect the Liens in the Collateral created by
the Loan Documents for a period, specified in such opinion,
continuing until a date not earlier than eighteen months
from the date of such opinion, against all creditors of and
purchasers from Borrower have been filed in each filing
office necessary for such purpose and that all filing fees
and taxes, if any, payable in connection with such filings
have been paid in full.
9.2 Negative Covenants.
(a) Business. Borrower shall not (i) engage in any
business or activity other than those relating to the
ownership and operation of the Mortgaged Properties or other
similar type properties or (ii) change its purpose as set
forth in its Partnership Agreement on the date hereof.
(b) Partnership Agreement. Except in connection with
transfers permitted pursuant to Section 14, Borrower shall
not modify or rescind any material provision of its
Partnership Agreement (except for such amendments as may be
necessary to admit new limited partners in accordance with
the terms thereof) without Lender's prior written consent.
(c) Transactions With Affiliates. Except as may be
required by the Partnership Agreement, Borrower shall not
enter into any transaction with any of its Affiliates except
in the ordinary course of business and upon fair and
reasonable terms no less favorable to Borrower than would be
obtained in a comparable arm's length transaction with a
Person not an Affiliate.
(d) Indebtedness. Neither Borrower nor Borrower's
General Partner shall create, incur, assume or suffer to
exist or otherwise become or be liable in respect of any
Indebtedness other than (i) Indebtedness created by virtue
of the Loan Documents; (ii) ordinary course trade payables
incurred in connection with the ownership and operation of
the Mortgaged Properties not to exceed amounts reasonable
and customary for properties of the type, size and character
of such Mortgaged Property in the area in which such
Mortgaged Property is located; or (iii) Indebtedness
existing as of the date hereof and disclosed on Schedule
8(l).
(e) Consolidation, Merger; Purchase or Disposition of
Assets. Except as expressly set forth below in Section 14,
Borrower shall not (i) consolidate with or merge into or
with any other partnership, corporation or entity, (ii)
purchase or otherwise acquire all or substantially all of
the assets or business (or all or substantially all the
rights to the assets or business) of any Person (or of any
division thereof) or any other material assets after the
date hereof, or (iii) sell, transfer or assign all or
substantially all its assets or business (or all or
substantially all of the rights to its assets or business)
as an entirety or in a series of related transactions.
(f) Sale of Collateral. Except as expressly set forth
below in Section 14, Borrower shall not, directly or
indirectly, conditionally or absolutely, sell, transfer,
convey, assign or otherwise dispose of, any of the
Collateral (other than the Equipment and the Personalty) or
any part thereof and except for transfers of Borrower's
Partnership Interests permitted by its Agreement of Limited
Partnership.
(g) Encumbrances. Borrower shall not create, incur,
assume or suffer to exist any Encumbrances on any
Collateral, except Permitted Encumbrances, inchoate
mechanics' liens and immaterial easements.
(h) Transfers of Equity Ownership. Borrower shall not
permit any general or limited partnership interest or other
equity interest in it to be transferred to or held by any
Person other than the Persons who hold such interests on the
date hereof except as permitted by Borrower's Partnership
Agreement or in Section 14.
Section 10. Property-Specific Covenants of Borrower.
Borrower covenants and agrees with Lender with respect
to each of the Mortgaged Properties as follows:
10.1 Affirmative Covenants.
(a) Payments of Interest and Principal. Borrower
shall make (i) all payments of principal of and interest on
all Mortgage Loans, and (ii) all other payments required to
be made by Borrower under this Loan Agreement and under the
other Loan Documents, in each case in accordance with the
applicable provisions hereof and of the other Loan
Documents.
(b) Warranty and Defense of Title. Borrower shall
warrant and defend (i) its title to the Mortgaged Properties
and every part thereof, subject only to Encumbrances
permitted pursuant to Section 10.2(a) (including Permitted
Encumbrances), and (ii) the validity and first lien priority
and security interest status of the Encumbrance of each
Mortgage and Lease Assignment, as the case may be, subject
only to Encumbrances permitted pursuant to Section 10.2(a)
(including Permitted Encumbrances), in each case against the
claims of all Persons whomsoever, except to the extent such
Persons are lawfully in occupancy of such Mortgaged Property
pursuant to a Lease. Borrower shall reimburse Lender for
any losses, reasonable costs, damages or reasonable expenses
(including attorneys' fees and court costs) incurred by
Lender in defending any claim by any Person of an interest
in any Mortgaged Property, other than as permitted
hereunder.
(c) Qualified Property Manager. At any time that
Borrower does not manage any Mortgaged Property itself,
Borrower shall retain for such Mortgaged Property, at its
expense, a qualified professional property manager that is,
in Lender's reasonable judgment, qualified to act as such to
operate and manage such Mortgaged Property and the Leases in
respect thereof pursuant to the terms and conditions of a
management agreement in form and substance satisfactory to
Lender in its reasonable discretion. There are no Property
Management Agreements in effect on the date hereof.
Borrower shall assign to Lender each Property Management
Agreement entered into by Borrower on or after the date
hereof pursuant to a Collateral Assignment of Property
Management Agreements, evidencing each related Property
Manager's consent to the required provisions. In the event
that Lender gives notice to Borrower that the agreements
pursuant to which a property manager managing one or more of
the Mortgaged Properties are not acceptable to Lender in its
reasonable discretion, Borrower shall use reasonable efforts
to either (x) cause such agreements to be modified so as to
be reasonably acceptable to Lender, or (y) enter into new
agreements, in substitution thereof, reasonably acceptable
to Lender. Borrower shall (i) pay all sums required to be
paid by it under each Property Management Agreement to which
it is a party, if any, except to the extent such Borrower
shall contest in good faith such payment, (ii) diligently
perform and observe all of the terms, covenants and
conditions of such Property Management Agreements on its
part to be performed and observed to the end that all things
shall be done which are necessary to keep unimpaired its
rights under such Property Management Agreements, except to
the extent Borrower shall contest in good faith such terms,
covenants and conditions, (iii) diligently enforce its
rights under such Property Management Agreements in a
commercially reasonable manner so as to require full and
faithful performance by the Property Managers of their
obligations under such Property Management Agreements, (iv)
promptly notify Lender of the giving of any notice to
Borrower or one of the Property Managers of any respective
material default in the performance or observance of any of
the material terms, covenants or conditions of such Property
Management Agreements and deliver to Lender a true copy of
each such notice and (v) cause each Property Manager or any
leasing agent to comply with the terms and conditions of
this Loan Agreement and the other Loan Documents. Borrower
shall not without the prior written consent of Lender, which
consent shall not be unreasonably withheld or delayed,
replace, renew, cancel, materially abridge or materially
amend or modify any Property Management Agreement in any
respect, eitherorally or in writing, and Borrower hereby
assigns to Lender on the terms set forth in the Mortgages as
further security for the payment of the Obligations and for
the performance and observance of the terms, covenants and
conditions of this Loan Agreement, all of its rights,
privileges and prerogatives to replace, renew, cancel,
abridge or materially modify any Property Management
Agreement in any respect, and any such replacement, renewal,
cancellation, abridgment or material modification of any
such management agreements without the prior consent of
Lender shall be void and of no force and effect; provided,
however, that Borrower may, without the consent of Lender,
extend or renew any such Property Management Agreements if
such extension or renewal does not provide for a material
diminution in the responsibilities or scope of services of
the Property Manager thereunder or alter the terms of such
Property Management Agreements in any material respect. If
Borrower defaults in the performance or observance of any
material term, covenant or condition of such Property
Management Agreements to which it is a party on the part of
Borrower to be performed or observed, then, if such default
is not remedied by Borrower within 30 days after Borrower's
receipt of notice of the occurrence of such default, without
limiting the generality of the other provisions of this Loan
Agreement, and without waiving or releasing Borrower from
any of its obligations hereunder, Lender shall have the
right, but shall be under no obligation, to pay any sums as
may be appropriate to cause such term, covenant or condition
of such Property Management Agreements on the part of
Borrower to be promptly performed or observed on behalf of
Borrower, to the end that the rights of Borrower into and
under such Property Management Agreements shall be kept
unimpaired and free from default; and Borrower hereby agrees
to pay to Lender, immediately upon demand, all sums so
expended by Lender, together with interest thereon from the
date of such payment at the Default Rate, and until so paid
by Borrower, all sums so expended by Lender and the interest
thereon shall be added to the Obligations secured by the
lien and legal operation and effect of the Mortgages
encumbering the related Mortgaged Property. Lender shall be
entitled conclusively to rely on any notice received from
the Property Manager under any Property Management
Agreement, and such notice shall constitute evidence of the
matters set forth therein. Borrower shall, from time to
time, use its reasonable efforts to obtain from each
Property Manager under each Property Management Agreement to
which it is a party such certificates of estoppel with
respect to compliance by Borrower with the terms of such
Property Management Agreement as may be requested by Lender
(and the Property Management Agreements shall contain
provisions obligating each Property Manager to provide such
a certificate). Borrower shall not enter into an agreement
with any Property Manager for management of any Mortgaged
Property without the prior approval of Lender, which
approval will not be unreasonably withheld or delayed. If
Lender elects to exercise its rights pursuant to the
Collateral Assignment of Property Management Agreements,
following an Event of Defaul, to replace any Property
Manager, Lender will, to the extent Lender deems it possible
without materially prejudicing any right of Lender, consult
with Borrower and permit Borrower a reasonable period of
time to take action requested by Lender before Lender takes
any such action.
(d) Permits. Borrower shall obtain and maintain, and
each of the Mortgaged Properties shall have the benefit of
and shall be in compliance in all material respects with the
terms of, all material Permits required, whether by
applicable Laws or Insurance Standards, with respect to the
ownership, operation or use of the Mortgaged Properties.
Borrower shall maintain all such Permits in full force and
effect and shall not modify or qualify such Permits in a
manner detrimental to the operation of the Mortgaged
Properties. All Permits relating to the use, operation and
maintenance of the Mortgaged Properties shall be owned by or
issued in the name of Borrower or any applicable Property
Manager. If Borrower receives from any Governmental
Authority or insurer any written notification or threat of
any actions or proceedings, regarding the non-compliance or
non-conformity of the Mortgaged Properties with any Laws or
any Permits or Insurance Standards, respectively, it shall
give prompt notice thereof to Lender.
(e) Compliance with Laws. Borrower shall, and shall
cause the Mortgaged Properties to, promptly and faithfully
comply with, conform to and obey in all material respects
all Laws whether or not the same shall necessitate
structural changes in or improvements to, or interfere with
the use or enjoyment of, any Mortgaged Property, provided,
however, that Borrower shall have the right diligently and
in good faith to contest any such Laws for so long as the
Mortgaged Property affected thereby shall be in no danger of
being sold, forfeited or lost pursuant to such contest and
provided that adequate reserves have been set aside by
Borrower, in accordance with GAAP, to pay the costs
necessary to comply with such Laws in the event Borrower
fails to prevail in such contest.
(f) Governmental Authorizations. Borrower shall
obtain and continuously maintain in full force and effect,
and will abide by and satisfy all material terms and
conditions of, all material Permits required for (i)
construction of improvements which constitute Mortgaged
Property, (ii) any permitted use of any Mortgaged Property
or any part thereof or (iii) the lawful and proper
ownership, operation and maintenance of any Mortgaged
Property, provided that Borrower shall have the right
diligently and in good faith to contest the requirement for,
or the terms and conditions of, such Permits for so long as
the Mortgaged Property affected thereby shall be in no
danger of being sold, forfeited or lost pursuant to such
contest and provided that adequate reserves have been set
aside by Borrower, in accordance with GAAP, to pay the costs
necessary to comply with such Laws in the event Borrower
fails to prevail in such contest.
(g) Compliance with Leases.
(i) Borrower shall promptly and fully keep,
observe and perform, or cause to be kept, observed and
performed, all of the material terms, covenants,
provisions and agreements imposed upon or assumed by
Borrower under any Leases now or hereafter in effect,
including any amendments or supplements to such Leases,
and Borrower will not do or fail to do, or permit or
fail to permit to be done, any act or thing, the doing
or omission of which will give any party a right to
terminate any of such Leases or to abate any rental or
other material payment due thereunder, other than in
the ordinary course of business. Borrower shall use
its reasonable efforts in the ordinary course of
business to cause each and every lessee and guarantor
(if any) of each Lease to which it is a party to
perform and observe each and every material covenant,
obligation and agreement to be performed or observed on
the part of such lessee and/or guarantor under or in
respect of each Lease or guaranty thereof.
(ii) If Borrower fails in any material manner to
comply with subparagraph (i) above, Borrower agrees
that Lender may (but shall not be obligated to) take,
upon five (5) days' written notice to Borrower (or upon
lesser notice, or without notice, if Lender reasonably
deems that the same is required to protect its interest
in any Mortgaged Property), any action which Lender
shall reasonably deem necessary or desirable to keep,
observe and perform or cause to be kept, observed or
performed any such terms, covenants, provisions or
agreements and to enter upon the Mortgaged Property and
take all action thereon as may be necessary therefor,
or to prevent or cure any default by Borrower in the
performance of or compliance with any of Borrower's
covenants or obligations under said Leases. Lender may
rely on any notice of default received from any Tenant
unless, in connection with any such default or alleged
default Borrower in good faith notifies Lender of
Borrower's intention to contest such default by
appropriate procedures and diligently pursues such
contest. Borrower shall, upon Lender's request,
promptly deliver to Lender a copy of any notice
relating to defaults received from any Tenant that is a
party, or the trustee, receiver or successor for or to
a party, to any of said Leases. Lender may expend such
sums of money as are reasonable and necessary for any
such purposes, and Borrower hereby agrees to pay to
Lender, immediately upon demand, all sums so expended
by Lender, together with interest thereon from the date
of such payment at the Default Rate, and until so paid
by Borrower, all sums so expended by Lender and the
interest thereon shall be added to the Obligations
secured by the lien and legal operation and effect of
the Mortgages encumbering the related Mortgaged
Property.
(h) Payment of Taxes and Claims; Insurance. Borrower
shall, subject to Section 10.2(a)(ii), duly pay and
discharge, or cause to be paid and discharged, the
Impositions as well as claims and final, non-appealable
Judgments of any kind which, if unpaid, might become an
Encumbrance upon the Mortgaged Property owned by it.
(i) Insurance.
(i) Borrower shall at all times provide, maintain
and keep in force or cause to be provided, maintained
and kept in force, at no expense to Lender, the
following policies of insurance (unless any such policy
or policies are no longer commercially available, in
which case Borrower shall replace any such unavailable
policy or policies with one or more policies covering
substantially similar casualties, risks, perils,
liabilities and other hazards to the extent any
substitute policy is commercially available and is
maintained by owners of property of similar standard to
the Mortgaged Properties) with respect to each of the
Mortgaged Properties (the "Insurance Policies"), as
applicable:
(A) All risk property insurance for the full
replacement value, including soft costs of the
Mortgaged Property covering physical loss or damage to
such Mortgaged Property, which shall include extended
coverage against such perils of fire, lightning,
windstorm, collapse, liquid damage and sprinkler
leakage. Such policy shall also provide (1)
comprehensive boiler and machinery coverage, including
pressure vessels, air tanks, boilers, machinery
pressure piping, heating, air conditioning, elevator
equipment, escalator equipment and production
equipment, (2) earthquake coverage, if applicable and
available at commercially reasonable rates in the
region where such Mortgaged Property is located, and
(3) flood coverage as to Buildings located in a special
flood hazard area as designated by the Director of the
Federal Emergency Management Agency.
(B) Commercial comprehensive general liability
insurance written on an occurrence form covering bodily
injury and property damage for not less than $5,000,000
per Mortgaged Property. Such coverage shall include
but not be limited to premises/operations, products
liability/completed operations, broad form contractual
(including "X", "C" and "U" hazards), broad form
property damage, independent contractors, personal
injury (employee exclusion deleted), "X", "C" and "U"
exclusions deleted, incidental medical malpractice,
host liquor and broad form comprehensive general
liability endorsement form GL404, or its equivalent,
with exclusions I(B)(4)(5), II(B)(1) and (X)(B)(1)
deleted.
(C) Loss of rents or business interruption
insurance written on an all risk form which shall at
least cover the perils specified in this clause (i) (to
the extent applicable) and which shall be in an amount
sufficient to cover the annual gross rentals net of
noncontinuing expenses for the Mortgaged Property,
which amount shall be adjusted from time to time.
(D) Umbrella excess liability insurance for not
less than $40,000,000 per Mortgaged Property.
(E) Worker's Compensation and other statutory
coverages, as applicable.
(F) In addition to the policies set forth in
subparagraphs (A) through (E) of this Section
10.1(i)(i), if and while the Mortgaged Property is
under construction, rehabilitation or rebuilding such
Mortgaged Property shall also be covered by (1) all-risk
builders coverage for full replacement value
including soft costs and loss of rents; (2) statutory
workers' compensation, if applicable to Borrower; (3)
employers' liability coverage for not less than
$1,000,000 (with no exclusion for occupational
disease), if applicable to Borrower; and (4) products
liability/completed operations coverage for two years
following construction.
(G) All such policies with respect to property
insurance shall (1) provide for deductibles not to
exceed $50,000 for all perils and in an amount
satisfactory to Lender in respect of flood, windstorm
and earthquake insurance and (2) contain a "Replacement
Cost Endorsement" without any deduction made for
depreciation as well as waiving co-insurance penalties
by attaching an "Agreed Amount Endorsement"
satisfactory to Lender, with loss payable solely to
Borrower and Lender as its interest may appear, without
contribution, under a "standard" or "New York"
mortgagee clause acceptable to Lender. Borrower shall
increase the amount of property insurance required to
equal the 100% replacement cost pursuant to the
provisions of this Section 10 at the time of the
renewal of each policy.
(ii) Such insurance policies shall be endorsed to
provide that:
(A) Lender is named as Mortgagee with respect to
the all risk property and loss payee with respect to
all rent/business interruption/extra expense coverages
and as additional named insureds on all liability
coverages, with the understanding that any obligation
imposed upon the insureds (including without limitation
the liability to pay premiums) shall be the sole
obligation of Borrower and not of any other insured;
(B) The interests of Lender shall not be
invalidated by any action or inaction of Borrower or
any other Person, and such policies shall insure Lender
regardless of any breach or violation by Borrower or
any other Person of any warranties, declarations or
conditions in such policies;
(C) The insurer under each such policy shall
waive all rights of subrogation against Lender, any
right to set-off and counterclaim and any other right
to deduction, whether by attachment or otherwise;
(D) Such insurance shall be primary and without
right of contribution of any other insurance carried by
or on behalf of Lender or Borrower with respect to
their respective interests in the Mortgaged Property;
(E) If such insurance is cancelled for any reason
whatsoever, including nonpayment of premium, or any
substantial modification, change or reduction in
coverage is made in the coverage which affects the
interests of Lender, such cancellation, modification,
change or reduction in coverage shall not be effective
as to Lender until 30 days after receipt by Lender of
written notice sent by registered mail from such
insurer of such cancellation, modification, change or
reduction in coverage;
(F) Any insurance shall be endorsed to provide
that, inasmuch as the policy is written to cover more
than one insured, all terms, conditions, insuring
agreements and endorsements, with the exception of
limits of liability, shall operate in the same manner
as if there were a separate policy covering each
insured; and
(G) Such insurance shall contain "cut-through"
endorsements providing Lender with direct access to any
reinsurers.
(iii) Borrower shall deliver to Lender a copy
of each insurance policy required to be maintained by
it, or a certificate of such insurance acceptable to
Lender, together with a copy of the declaration page
for each such policy. Not later than fifteen (15) days
prior to the expiration of each policy to be furnished
pursuant to the provisions of this Section 10, Borrower
shall deliver a renewed policy or policies, or
duplicate original or originals thereof, marked
"premium paid", or accompanied by such other evidence
of payment satisfactory to Lender with standard non-
contributory mortgagee clause in favor of and
acceptable to Lender. Upon request of Lender, Borrower
shall cause its insurance underwriter or broker to
certify to Lender in writing that all the requirements
of this Loan Agreement applicable to Borrower governing
insurance have been satisfied. Borrower shall comply
promptly with and conform to (A) all provisions of each
such insurance policy, and (B) all requirements of the
insurers applicable to Borrower as respects use,
occupancy, possession, operation, maintenance,
alteration or repair of the Mortgaged Properties.
Borrower shall not use or permit the use of the
Mortgaged Properties in any manner which would permit
any insurer to cancel any insurance policy or void
coverage required to be maintained by this Loan
Agreement.
(iv) If Borrower fails to provide to Lender the
policies of insurance required by this Section 10.1(i)
or by any other Loan Document, then, in any such case,
Lender may (but shall have no obligation to) procure
such insurance or single-interest insurance for such
risks covering Lender's interest, and Borrower will pay
all premiums thereon promptly upon demand by Lender,
and until such payment is made by Borrower, the amount
of all such premiums shall bear interest at the Default
Rate and shall constitute additions to the Obligations.
(v) All Insurance Policies shall be in form and
maintained with companies and in amounts to be
consented to by Lender, such consent not to be
unreasonably withheld or delayed. Without limiting
Lender's ability to approve the aforementioned, an
insurance company shall not be reasonably satisfactory
unless such insurance company (a) has a rating of at
least A with a financial size of Class VIII or better
as specified in Best's Key Rating Guide, (b) is
licensed or authorized to do business, as required
under applicable law, in the State where the Mortgaged
Property is located, (c) if it is a mutual company, is
a nonassessable company and (d) does not provide
insurance on any one building in excess of 10% of its
policyholder's surplus (including capital). All
Insurance Policies insuring against casualty, rent loss
and business interruption and other appropriate
policies shall provide that no claims be paid
thereunder without twenty (20) days' advance written
notice to Lender.
(vi) If Borrower receives from any insurer any
written notification or threat of any actions or
proceedings regarding the non-compliance or non-conformity
of any Mortgaged Property with any insurance
requirements, it shall give prompt notice thereof to
Lender. Borrower shall not use, maintain, operate or
occupy, or allow the use, maintenance, operation or
occupancy of, any portion of any Mortgaged Property in
any manner which would make void, voidable or
cancelable, or substantially increase the premium of,
any insurance then in force with respect thereto.
(j) Maintenance. Borrower shall maintain, preserve
and operate each of the Mortgaged Properties in good and
safe working order and repair in a manner at least at a
level customary for properties of similar use, value, age,
nature and construction, and shall make all necessary
repairs and replacements. If Borrower receives notice from
any insurance company or bonding company of any defects or
inadequacies in any Mortgaged Property, or any part thereof,
which would adversely affect the insurability of the same or
cause the imposition of extraordinary premiums or charges
thereof or of any termination or threatened termination of
any policy of insurance or bond then Borrower shall promptly
forward a copy of such notice to Lender and undertake the
cure of such defects or inadequacies. Borrower shall
promptly notify Lender of all material claims against any
contractor, architect or other party with respect to the
condition of the Mortgaged Properties or the existence of
any structural or other material defect therein and shall
diligently prosecute all such claims unless doing so would
materially adversely affect Borrower or any of the Mortgaged
Properties. Borrower shall promptly notify Lender of any
assessment against or affecting any Mortgaged Properties or
any part thereof. Except as otherwise provided herein
(including, without limitation in respect of any Work) and
as otherwise provided in Section 6 hereof, none of the
Buildings, the Fixtures or the Equipment relating to any of
the Mortgaged Properties shall be removed, demolished or
materially altered without the prior written consent of
Lender, except that Borrower shall have the right without
such consent to (x) make such alterations of the Buildings
(which may include demolition) as Borrower, acting in a
manner which is consistent with good real estate industry
practice generally applicable to the ownership and operation
of property similar to the relevant Mortgaged Property or as
may be required by law, and (y) to remove and dispose of
Equipment, free from the lien of ny applicable Mortgage and
the security interest created by such Mortgage, (i) as from
time to time may become worn or obsolete, provided that such
Equipment shall be replaced with other Equipment with a
value at least equal to that of the replaced Equipment and
free from any other security interest or lien other than a
lease thereof, and by such removal and replacement, Borrower
shall be deemed to have subjected such new Equipment to the
lien of the related Mortgage, or (ii) as from time to time
may become worn or obsolete, provided that such Equipment is
not material in its use to the value and operation of the
related Mortgaged Property or (iii) as from time to time may
in the reasonable judgment of Borrower be determined to be
unusable or unnecessary for the continued operation of the
related Mortgaged Property. Borrower shall complete
promptly and in a good and workmanlike manner any
improvement which may be now or hereafter constructed on the
Mortgaged Properties. In any case and to the extent the
completion of any such improvement is also the obligation of
a third party in possession, Borrower shall not be obligated
to complete such improvement itself, but shall use
commercially reasonable efforts to cause performance of such
obligation by such third party. Provided Insurance Proceeds
are made available to Borrower pursuant to Section 6(b),
Borrower shall promptly restore or cause to be restored in
like manner any portion of the improvements which may be
damaged or destroyed thereon from any cause whatsoever
(except as may be otherwise expressly provided in Section
6), and pay or cause to be paid when due all claims for
labor performed and materials furnished therefor, subject to
Borrower's rights of contest set forth in Section
10.2(a)(iii) hereof. Borrower shall comply in all material
respects with all Laws and all covenants, conditions and
restrictions now or hereafter affecting the Mortgaged
Properties or requiring any alterations or improvements
thereto. In any case and to the extent where compliance
with any such Laws, covenant, condition or restriction is
the obligation of a third party in possession, Borrower
shall not be obligated to undertake such compliance itself,
but shall use commercially reasonable efforts to cause
performance of such obligation by such third party.
(k) Inspection. Borrower shall permit any Person
designated by Lender, at Lender's expense (or if a Default
shall have occurred and be continuing, then at Borrower's
expense), to (i) visit and inspect, during normal business
hours and upon 48 hours' prior notice, any Mortgaged
Property and the books and records maintained by it or by
any of its agents, employees or representatives in respect
of such Mortgaged Property, and to make copies of and to
take extracts from such records as are reasonably necessary
for Lender's evaluation of such Mortgaged Property, (ii)
discuss, with Borrower, the affairs, finances and accounts
of such Mortgaged Property, and (iii) verify the amount,
quantity, quality, value and/or condition of, or any other
matter reasonably relating to, any or all of such Mortgaged
Property, all at such reasonable times and as often as
Lender may reasonably request; provided, however, (x) that
Lender shall not interfere with the rights of any of the
Tenants in any Mortgaged Property under the Leases or
disturb the conduct of their business or interfere with the
rights of any other party or with the conduct of Borrower's
business thereon and (y) any information obtained as
referred to in clauses (i), (ii) or (iii) above shall be
treated with an appropriate level of confidentiality.
(l) Taxes and Fees. Borrower shall pay, together with
interest, fines, and penalties, if any, any Impositions due
under applicable Laws in connection with the making,
execution, delivery, filing of record, recordation, release,
or discharge of any of the Mortgages.
(m) Other Taxes. If any Tax (other than a franchise
tax imposed on, and other taxes imposed on, or measured by,
the net income or capital (including branch profits tax) of
Lender) is levied, assessed or charged by the United States
or any political subdivision or taxing authority thereof or
therein upon any Mortgage, the Obligations, the interest of
Lender in any Mortgaged Property, or Lender by reason of or
as holder of any Mortgage, Borrower shall pay all such Tax
to, for, or on account of Lender (or provide funds to Lender
for such payment) as they become due and payable and shall
promptly furnish written notice of the date and amount of
such payment to Lender. In the event of passage of any law
or regulation permitting, authorizing or requiring such Tax
to be levied, assessed or charged, which law or regulation
in the reasonable opinion of counsel to Lender may prohibit
Borrower from paying the Tax to or for Lender, Borrower
shall enter into such further instruments as may be
permitted by law to obligate Borrower to pay such Tax. In
the event that Lender assigns any Mortgage Loan, Borrower's
payment obligation under this Section 10.1(m) shall not
apply to any greater extent than if such Mortgage Loan had
not be assigned.
(n) Notice Regarding Special Flood Hazards. If
Borrower receives evidence that any Mortgaged Property is
within a zone identified by the Director of the Federal
Emergency Management Agency as a special flood hazard zone
described in 12 CFR Section 22.2, Borrower shall furnish Lender
with a copy of the notice regarding Federal disaster relief
assistance referred to in the Appendix to 12 CFR Part 22.
(o) Amendment to Legal Description. If it becomes
evident, either by virtue of the surveys to be delivered to
Lender or otherwise, that the legal description attached to
any Loan Document is inaccurate or does not fully describe
all of the real property in which Borrower has an interest,
Borrower hereby agrees to amendment of such legal
description and the legal description contained in the
corresponding title policy so that such error is corrected
and to execute and cause to be recorded, if applicable, such
documentation as may be appropriate for such purpose.
(p) Notices. Borrower shall, promptly upon obtaining
knowledge thereof, give written notice to Lender of the
occurrence of any event that has or could reasonably be
expected to have a material adverse effect on the use,
value, ownership or operation of any Mortgaged Property.
(q) Compliance with Other Instruments. Borrower shall
in a timely manner observe, perform and fulfill each and
every covenant, term and provision of each Loan Document
applicable to it.
(r) Estoppel Certificates. Within 10 days following
the request of Lender, Borrower shall certify to Lender, by
an instrument in form satisfactory to Lender in its
reasonable discretion, duly acknowledged, among other
things, the amount then owing by Borrower to Borrower's
Knowledge under the Loan Documents and the date through
which interest thereon has been paid, and whether any
offsets, counterclaims, credits, or defenses exist against
payment thereof or performance of any obligation of Borrower
under this Loan Agreement or the other Loan Documents.
Lender shall have the right to rely on any such
certification.
(s) Creation and Recordation of Additions and
Betterments. Borrower shall arrange for timely recording or
filing as required by Lender of all documents having to do
with additions to or betterments of any portion of the
Mortgaged Property owned by it, and the covenants and
agreements set forth in this Loan Agreement shall apply to
all such additions and betterments.
(t) Consents. Borrower shall obtain and maintain the
consent or approval of any Person whose consent or approval
is required to the granting of an Encumbrance on any of the
Collateral in favor of Lender.
(u) Environmental Assessments and Remediation.
Borrower shall cause all environmental remediation,
maintenance and monitoring which is recommended or called
for or otherwise indicated by any environmental reports
obtained by it pursuant to Section 7(c)(v) or otherwise
(subject to review at Lender's discretion by the
Environmental Consultants) to be promptly and diligently
undertaken and completed.
(v) No Contractual Defaults. There shall be no
material defaults by Borrower under any material Contract to
which Borrower is a party relating to any of the Mortgaged
Properties, including, without limitation, any management,
rental, service, supply, security, maintenance or similar
contract; provided, however, that no default by Borrower
shall be deemed to violate the covenant set forth in this
paragraph (v) so long as (i) it shall contest the validity
thereof in good faith by appropriate proceedings and shall
have set aside on its books adequate reserves in accordance
with GAAP with respect thereto and (ii) such contest does
not and would not (and if such contest were decided
adversely to Borrower, would not) have a Material Adverse
Effect.
(w) No Encroachments. Except as disclosed on the
surveys referred to in Section 7(c)(iii) and in the Title
Policies, none of the improvements located on any of the
Mortgaged Properties shall materially encroach upon the
property of any other Person or lie outside of the
boundaries and building restriction lines of such Mortgaged
Property and no improvement located on any property
adjoining any of the Mortgaged Properties shall lie within
the boundaries of or in any way encroach upon such Mortgaged
Property.
(x) Impositions. Borrower shall file all property,
personal property and similar tax returns required to be
filed by it with respect to the Mortgaged Properties and
shall pay all water and sewer charges and, unless such
amounts have been deposited by Borrower with Lender for the
payment of Taxes pursuant to Section 5, all other taxes,
levies, assessments and governmental charges that, on or
prior to the date hereof, were due and owing with respect to
such Mortgaged Property; provided, however, that Borrower
shall not be required to pay or discharge any charges
covered by this paragraph so long as (i) it shall contest
the validity thereof in good faith by appropriate
proceedings and shall have set aside on its books adequate
reserves in accordance with GAAP with respect thereto and
(ii) such contest does not and would not (and if such
contest were decided adversely to Borrower, would not) have
a Material Adverse Effect.
(y) No Rights of First Offer or First Refusal.
Borrower shall not, without Lender's prior written consent,
grant any exercisable rights with respect to the purchase or
sale of any of the Mortgaged Properties including, without
limitation, any purchase option, right of offer or right of
refusal.
(z) Status of the Landlord Under the Leases. Borrower
shall be the sole owner and holder of the landlord's
interest under all of the Leases related to the Mortgaged
Properties, subject only to the Encumbrances created by the
Loan Documents. Borrower shall not make any assignment of
the landlord's interest in any of the Leases or any portion
of the Rents, additional rents, charges, issues or profits
due and payable or to become due and payable thereunder
except pursuant to the Loan Documents.
(aa) Rent Rolls. Upon the execution and delivery
hereof, and on or before February 15 of each calendar year
while any Obligations remain outstanding, beginning with
calendar year 1999, Borrower shall furnish to Lender one or
more Rent Rolls for each Mortgaged Property covering the
prior calendar year. All Rent Rolls provided to Lender
shall be accurate and complete in all material respects for
the period reflected therein. Except to the extent the term
of any Lease has terminated or expired, each of the Tenants
listed on such Rent Rolls shall be obligated pursuant to
their Leases to occupy all or a portion of the Mortgaged
Properties pursuant to a Lease which is then in full force
and effect; other than those Leases in favor of Tenants
listed on the Rent Rolls or entered into after the date of
the then most recently delivered Rent Rolls, the Mortgaged
Properties shall not be subject to any Lease.
(bb) No Free or Prepaid Rent. Except as stated in
writing to Lender, as of the date of each Rent Roll, none of
the Tenants shall have been given any material free rent or
concessions or abatements relating to the payment of rent or
additional rent, nor shall any of the Tenants have been
given any material credit for or offset or claim against the
obligations to pay any fixed rent or additional rent by
reason of prepayment of rent or otherwise. Notwithstanding
the foregoing, nothing contained herein shall prohibit
Borrower from granting to the Tenants any of the concessions
stated in this paragraph (bb) if such concessions are, in
Borrower's reasonable judgment, consistent with good
business and marketing practices.
(cc) Subordination. All future Leases at the Mortgaged
Properties (i) shall be subordinate to the Liens created by
the Mortgages, and (ii) shall obligate the Tenant to attorn
to Lender or any purchaser in the event of foreclosure, deed
in lieu of foreclosure or exercise of possessory rights by
or on behalf of Lender in connection with Lender's right
under any of the Loan Documents.
10.2 Negative Covenants.
(a) Encumbrances. Without Lender's express written
consent, Borrower shall not create, incur, assume or suffer
to exist any Encumbrance on the Mortgaged Properties,
except:
(i) Permitted Encumbrances;
(ii) liens for taxes, assessments or other
governmental charges not yet due or which are being
diligently contested in good faith and by appropriate
proceedings, provided that (v) if the aggregate amount
of all Secured Charges is less than or equal to
$100,000, adequate reserves shall have been set aside
therefor in the books of such Borrower in accordance
with generally accepted accounting principles, (w) if
the aggregate amount of all Secured Charges exceeds
$100,000 either (l) cash or cash equivalents in an
amount not less than the amount of such claims shall
have been deposited with Lender, in escrow, to be held
by Lender during the pendency of such contests or (2)
Borrower shall have caused such liens to be duly bonded
in accordance with applicable law such that the lien in
question attaches only to the bond and not to any
Mortgaged Property, (x) no risk of sale, forfeiture or
loss of any interest in any Mortgaged Property or any
part thereof arises or would arise during the pendency
of such contests, (y) such contests do not or would
not, in the aggregate, have a material adverse effect
on the use, value, operation or ownership of any
Mortgaged Property and (z) Borrower shall give prompt
notice thereof to Lender;
(iii) carriers', warehousemen's, mechanic's,
materialmen's, repairmen's and other similar liens
arising in the ordinary course of business and which
are being diligently contested in good faith and by
appropriate proceedings, provided that (v) if the
aggregate amount of all Secured Charges is less than or
equal to $100,000, adequate reserves shall have been
set aside therefor in the books of Borrower in
accordance with generally accepted accounting
principles, (w) if the aggregate amount of all Secured
Charges exceeds $100,000, either (1) cash or cash
equivalents in an amount not less than the amount of
such claims shall have been deposited with Lender, in
escrow, to be held by Lender during the pendency of
such contests or (2) Borrower shall have caused such
liens to be duly bonded in accordance with applicable
law such that the lien in question attaches to the bond
and not to any Mortgaged Property, (x) no risk of sale,
forfeiture or loss of any interest in any Mortgaged
Property or any part thereof arises or would arise
during the pendency of such contest, (y) such contests
do not or would not, in the aggregate, have a material
adverse effect on the use, value, operation or
ownership of any Mortgaged Property and (z) Borrower
shall give prompt notice thereof to Lender; and
(iv) zoning restrictions, easements, rights-of-way,
restrictions on use of real property and other
similar Encumbrances incurred or entered into in the
ordinary course of business which do not or would not,
in the aggregate, have a material adverse effect on the
use, value, operation or ownership of the Mortgaged
Property subject thereto or materially interfere with
the operation and use of, or the ordinary conduct of
the business on, the Mortgaged Property subject
thereto.
(b) Sale of Equipment and Personalty. Borrower shall
not, directly or indirectly, sell, transfer, convey, assign
or otherwise dispose of, in whole or in part, any Equipment
or other Personalty at any of the Mortgaged Properties;
provided, however, that the foregoing shall not apply to (i)
Equipment or other Personalty as from time to time may
become worn or obsolete, so long as such Equipment or other
Personalty shall be replaced with other Equipment or other
Personalty (x) with a value at least equal to that of the
replaced Equipment or other Personalty and free from any
Encumbrance thereon other than a lease thereof and (y)
properly made subject to the Encumbrance of the relevant
Mortgage, or (ii) Equipment or other Personalty as from time
to time may in the reasonable judgment of Borrower be
determined to be unusable or unnecessary for the continued
operation of the relevant Mortgaged Property.
(c) Zoning. Borrower shall not initiate or consent to
any zoning reclassification of any Mortgaged Property or
seek any variance under any existing zoning ordinance or use
or permit the use of any Mortgaged Property in any manner
that is reasonably likely to result in such use becoming a
non-conforming use under any zoning ordinance or any other
applicable land use law, rule or regulation.
(d) Use Violations. Borrower shall not use, maintain,
operate or occupy, or allow the use, maintenance, operation
or occupancy of, any portion of any Mortgaged Property in
any manner which would result in a violation of Section
l0.l(e) above or make void, voidable or cancelable, or
substantially increase the premium of, any insurance then in
force with respect thereto.
(e) Waste. Borrower shall not commit or permit any
waste of any of the Mortgaged Property owned by it or permit
any nuisance to be maintained thereon.
Section 11. Conversion to Unsecured Loans.
At Borrower's request, this secured Loan Facility may
be converted to an unsecured Loan Facility, and if Borrower shall
also request Borrower's General Partner may be substituted as the
borrower hereunder, and the Mortgaged Properties and any other
Collateral released from the Liens of the Loan Documents, subject
to and upon the following conditions: (i) Borrower (or if
Borrower's General Partner is to be substituted as borrower
hereunder, then Borrower's General Partner) shall have received a
credit rating on its senior unsecured long-term debt of not lower
than (x) Baa3 from Moody's Investors Service, Inc. and (y) BBB-
from Standard & Poor's Rating Services, a division of McGraw
Hill, Inc.; (ii) no Default or Event of Default shall exist under
this Loan Agreement or any other Loan Document; (iii) Borrower
shall have delivered to Lender guarantees of the Loans, in form
and substance acceptable to Lender, from one or more Persons
acceptable to Lender, in each case in Lender's sole and absolute
discretion; (iv) Borrower (and if Borrower's General Partner is
to be substituted as the borrower hereunder, then Borrower's
General Partner) shall have executed and delivered to Lender
appropriate new or amended Loan Documents to reflect the
unsecured nature of the Loans (and, if applicable, the
substitution of Borrower's General Partner as the new borrower
hereunder), which shall include such covenants, defaults and
other provisions as Lender shall determine to be consistent with
then-customary documentation for unsecured loans by prudent
institutional lenders to REITs with similar credit ratings and of
similar quality, in each case in form and substance acceptable to
Lender in Lender's sole and absolute discretion (it being
understood and agreed, however, that from and after such
conversion (x) interest shall be payable, in arrears, in semi-annual
(and not monthly) installments, and (y) the discount
factor to be applied in the calculation of a Prepayment Premium
shall be applied on a semi-annual (and not monthly) basis); (v)
from and after the effective date of such conversion, the
Interest Rate with respect to Loan B of the Loan Facility shall
be increased to be 7.10% per annum; (vi) Lender shall have
received one or more opinions of counsel acceptable to Lender
with respect to all of the foregoing and (vii) Borrower shall
have paid to Lender all of Lender's out-of-pocket expenses in
connection with the foregoing.
Section 12. Events of Default.
If one or more of the following events (each, an "Event
of Default") occurs and is continuing (whether any such event
shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or
regulation of any Governmental Authority), Lender shall be
entitled to the remedies set forth in Section 13:
(a) Borrower fails:
(i) to perform or observe any agreement or
covenant to be performed or observed by it pursuant to
Section 4.1, 4.4 (and such failure has not been
remedied before the fifth day after it occurs), 9.1(e),
9.2(e), 9.2(f), 9.2(g), 10.l(a) (and such failure has
not been remedied before the fifth day after it
occurs), 10.2(a), 10.1(h) (and such failure has not
been remedied before the fifteenth day after it
occurs), or 10.l(i) (and such failure is either a
material failure or has not been remedied before the
eleventh day after Borrower receives written notice
from any Person of the facts giving rise to any such
failure or prospective failure); or
(ii) to observe any agreement or covenant to be
observed or performed by it pursuant to Section 5; or
(iii) to perform or observe any agreement or
covenant (other than those referred to in subparagraph
(i) or (ii)) to be performed or observed by it pursuant
to this Loan Agreement or any of the other Loan
Documents and fails to remedy the failure before the
thirty-first day after it occurs, provided, however,
that if Borrower has promptly begun and diligently
pursued all reasonable measures to cure any failure
which is the subject of this Section 12(a)(iii) and
continues to do so, any failure that would otherwise
constitute an Event of Default under this Section
12(a)(iii) will not constitute an Event of Default
unless such cure has not been effected before the
ninety-first day after such failure occurs.
(b) Any representation or warranty made by Borrower in
this Loan Agreement (including, without limitation, Section
8) or in any other Loan Document, or any representation,
warranty, statement or information contained in any
Partner's Certificate made or delivered or caused to be made
or delivered to Lender by Borrower in connection with or
pursuant to this Loan Agreement or any other Loan Document,
shall have been false in any material respect as of the date
made or deemed to be made.
(c) An involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking:
(i) relief in respect of Borrower or Borrower's
General Partner, or of a substantial part of the
property or assets of Borrower or Borrower's General
Partner, under Title 11 of the United States Code, as
now constituted or hereafter amended, or any successor
to or replacement of such statute, or any other
Federal, state or foreign, bankruptcy, insolvency,
reorganization, dissolution, conservation, liquidation,
rehabilitation, delinquency, receivership or similar
law;
(ii) the appointment of a receiver,
rehabilitation, conservation, trustee, custodian,
sequestrator, conservator or similar official for
Borrower or Borrower's General Partner or for a
substantial part of either of their respective
properties or assets; or
(iii) the winding-up or liquidation of
Borrower or Borrower's General Partner;
and in each case such proceeding or petition shall
continue undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall be
entered.
(d) Borrower or Borrower's General Partner shall:
(i) consent to, or fail to contest in a timely
and appropriate manner, the commencement against it of
delinquency, rehabilitation, liquidation, conservation,
reorganization, dissolution or similar proceedings,
including without limitation, summary proceedings,
under any laws, rules or regulations applicable to it
as in effect from time to time;
(ii) be dissolved;
(iii) fail, be unable or admit in writing its
inability to pay its debts generally as they become
due;
(iv) commence a voluntary case or file any
petition seeking relief under Title 11 of the United
States Code, as now constituted or hereafter amended,
or any successor to or replacement of such statute, or
any other applicable bankruptcy, insolvency,
reorganization, dissolution, conservation, liquidation,
rehabilitation, delinquency, receivership or similar
law of any jurisdiction;
(v) consent by answer or otherwise to, or fail to
contest in a timely and appropriate manner, the
commencement against it of any proceeding described in
paragraph (c) above or this paragraph (d);
(vi) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator, conservator
or similar official for itself or for a substantial
part of its property or assets;
(vii) file an answer admitting the material
allegations of a petition filed against it in any
proceeding described in paragraph (c) above or this
paragraph (d);
(viii) make a general assignment for the
benefit of creditors; or
(ix) take any action for the purpose of effecting
any of the foregoing.
(e) (i) Any Loan Document shall cease in any material
respect to be in full force and effect, or (ii) any Mortgage
shall cease to constitute a first priority lien on the
Mortgaged Property or Mortgaged Properties which it
encumbers, in each case other than in accordance with its
terms and other than any Permitted Encumbrance.
(f) an event of default has occurred under any of the
other Loan Documents.
(g) Borrower has committed a Prohibited Transfer under
Section 14.
(h) Borrower or any ERISA Affiliate shall adopt,
maintain, contribute to or begin to participate in any Plan,
or agree or become obligated to adopt, maintain, contribute
to or participate in any Plan, unless Lender shall have
given its prior written consent to any such action.
Section 13. Remedies.
13.1 Remedies.
(a) If any Event of Default (other than an event
described in paragraph (c), (d) or (e) of Section 12) shall
occur and be continuing, (i) Lender may in its sole
discretion declare the unpaid principal of and the accrued
interest on any or all of the Mortgage Loans and any or all
other Obligations of Borrower to Lender under the Loan
Documents immediately due and payable, whereupon the
principal of such Mortgage Loans, together with the accrued
interest thereon, applicable Prepayment Premiums in
connection with the acceleration of such Mortgage Loans,
and/or such other Obligations of Borrower accrued under this
Loan Agreement and under the other Loan Documents shall
become forthwith due and payable, without need for
presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived by Borrower,
anything contained herein or in any other Loan Document to
the contrary notwithstanding, and (ii) Lender may pursue any
of its other rights and remedies under the Loan Documents or
otherwise available at law or in equity.
(b) If any Event of Default described in paragraph
(c), (d) or (e) of Section 12 shall occur and be continuing,
then (i) the unpaid principal of and accrued interest on all
of the Mortgage Loans and all other Obligations of Borrower
to Lender under this Loan Agreement and the other Loan
Documents (including, without limitation, the obligation to
pay applicable Prepayment Premiums in connection with the
acceleration of the Mortgage Loans), shall automatically
become due and payable, without need for presentment,
demand, protest or any other notice of any kind, all of
which are hereby expressly waived by Borrower anything
contained herein or in any other Loan Document to the
contrary notwithstanding, and (ii) Lender may pursue any of
its other rights and remedies under the Loan Documents or
otherwise available at law or in equity.
(c) During the continuance of any Event of Default,
Borrower will furnish Lender, within 14 days following any
request from Lender, with Borrower's balance sheet as of the
date of such request and its income and cash flow statements
for the period from the date of the last balance sheet
delivered for Borrower pursuant to any provision of this
Loan Agreement to the date of such request, certified in a
Partner's Certificate of Borrower as fairly presenting the
financial condition of Borrower as at, and for the period
ending on, the date of such request.
13.2 Foreclosure Proceeds.
The net proceeds realized by Lender in connection with
the foreclosure of any Mortgaged Property or the exercise by
Lender of any other rights in respect of the Collateral shall be
applied in accordance with the Mortgage on such Mortgaged
Property.
Section 14. Restrictions on Transfer.
(a) Except as otherwise permitted in paragraphs (b)
through (e) of this Section 14, Borrower shall not, directly
or indirectly (i) sell, assign, convey, transfer or
otherwise dispose of legal or equitable title to any of the
Mortgaged Properties or any portions thereof or interest
therein or (ii) sell, assign, convey, transfer or otherwise
dispose of any legal or beneficial interest in Borrower or
permit any owner directly or indirectly, of a beneficial
interest in Borrower, to transfer any such legal or
beneficial interest, directly or indirectly, whether by
transfer of any shares of capital stock of Borrower's
General Partner or a corporation which is the owner of
substantially all of the capital stock of Borrower's General
Partner or by transfer of any other legal or beneficial
interest in any such entity or otherwise; in each case
whether any such sale, assignment, conveyance, transfer or
disposal is effected directly, indirectly, voluntarily or
involuntarily, by operation of law or otherwise (each, a
"Prohibited Transfer"); provided, however, that the
foregoing provisions of this paragraph (a) shall not apply
to any transfers of any of the Mortgaged Properties, or
parts thereof, or legal or beneficial interests therein, or
shares of stock or partnership or joint venture interests,
as the case may be, by or on behalf of any incompetent or
deceased owner to such owner's heirs, legatees, devisees,
executors, administrators, estate or personal
representatives.
(b) Borrower shall have the option to transfer one or
more of the Mortgaged Properties (in whole and not in part),
to one or more successor borrowers (each, a "Successor
Borrower") provided the following conditions, with respect
to each such transferred Mortgaged Property are met to
Lender's reasonable satisfaction: (i) upon each such
transfer, Borrower shall pay to Lender a transfer fee equal
to one percent (1%) of such outstanding principal amount of
the Related Loan; (ii) the ownership structure of each such
Successor Borrower shall be reasonably acceptable to Lender;
(iii) Lender shall reasonably approve in writing the
creditworthiness, credibility, real estate experience and
management ability of each such Successor Borrower and its
property manager after review of all documents, records and
current financial information of each such Successor
Borrower reasonably requested by Lender; (iv) no Default or
Event of Default shall exist under this Loan Agreement or
any other Loan Document; (v) payment to Lender of its
out-of-pocket expenses in connection with the transfer shall be
made; (vi) each such Successor Borrower expressly assumes
all of the obligations and liabilities of Borrower under the
Loan Documents relating to the Mortgaged Property to be
transferred and the Related Loan (or, in the case of a
merger under Section 14(e), under all Loan Documents), and
executes such additional or amended documentation to such
effect as Lender shall reasonably require (and which shall,
in the case of a merger under Section 14(e) include such
additional covenants, defaults and other provisions as
Lender shall deem appropriate); (vii) Lender receives
opinions of counsel reasonably acceptable to Lender
containing equivalent opinions, to the extent applicable
with respect to each such Successor Borrower, equivalent to
those given with respect to Borrower on the date hereof,
including but not limited to opinions that each such
Successor Borrower is duly organized and validly existing,
and that the Successor Borrower has duly assumed Borrower's
obligations and liabilities under the Loan Documents and
with respect to the enforceability thereof; (viii) the
purchase price paid by the Successor Borrower for such
Mortgaged Property is at least double the original principal
amount of the Related Loan; (ix) the Debt Service Coverage
Ratio for such Mortgaged Property is equal to at least
1.35:1, and the aggregate Debt Service Coverage Ratio for
all other Mortgaged Properties is equal to at least 1.35:1;
and (x) Borrower shall continue to be liable, jointly and
severally with the Successor Borrower, for all of the
obligations and liabilities of Borrower under the
Environmental Indemnity. Unless otherwise approved by
Lender, the purchase price for any such transfer shall be
paid in cash.
(c) Borrower may, upon prior notice to Lender but
without Lender's prior written consent, permit a change in
the composition of its limited partners by permitting a
transfer of up to 30% of the limited partnership interests
in Borrower. Any change in the composition of Borrower's
limited partners above such 30% (unless solely among the
existing limited partners of Borrower) shall be subject to
the transfer fee described in clause (i) of paragraph (b)
above, and to the other conditions set forth in paragraph
(b) above, with the exception of the conditions set forth in
clauses (vi) and (viii) thereof, or else constitute a
Prohibited Transfer and an Event of Default hereunder.
(d) Changes in the ownership of the capital stock of
the Borrower's General Partner shall be permitted; provided
that no Person or group of Persons (within the meaning of
Section 13 or 14 of the Exchange Act) shall acquire, without
the consent of Lender, beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the Securities and
Exchange Commission under the Exchange Act) of more than 5%
of the outstanding shares of capital stock of the Borrower's
General Partner. Any transfer of shares of capital stock of
Borrower's General Partner not in accordance with this
paragraph (d) shall constitute a Prohibited Transfer and an
Event of Default hereunder.
(e) Borrower may merge into a publicly-traded
corporation that has been duly organized under the laws of
any State of the United States and that qualifies as a REIT
under the Internal Revenue Code, provided that in such
event, all of the terms and conditions set forth in clauses
(ii) through (vii) of Section 14(b) shall also be deemed to
apply to such merger (such corporation, for such purpose,
also being referred to as a "Successor Borrower") and
Borrower shall have satisfied and complied with all of the
same. Any non-compliance by Borrower with the provisions of
this paragraph (e) shall constitute a Prohibited Transfer
and an Event of Default hereunder.
Section 15. Miscellaneous.
15.1 Amendments.
The terms of this Loan Agreement shall not be altered,
modified, amended or supplemented in any manner whatsoever except
by a written instrument signed on behalf of Borrower and Lender.
15.2 Binding Effect; Successors and Assigns.
This Loan Agreement shall be binding upon and inure to
the benefit of the parties hereto and their permitted successors
and assigns. The terms and provisions of this Loan Agreement and
all other Loan Documents shall inure to the benefit of any
assignee or transferee of any of the Mortgage Loans or the
Mortgage Notes, and in the event of such transfer or assignment,
the rights and privileges herein and therein conferred upon
Lender shall automatically extend to and be vested in such
transferee or assignee, all subject to the terms and conditions
hereof and thereof. Except as set forth in Section 14 hereof,
Borrower shall not assign its rights, interests and obligations
hereunder or under any of the other Loan Documents without the
prior written consent of Lender.
15.3 Captions. Section headings and the Table of Contents are for
convenience only and shall not be construed as a part of this
Loan Agreement.
15.4 Counterparts.
This Loan Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed
and delivered shall be an original for all purposes, but all such
counterparts shall together constitute but one and the same
instrument.
15.5 Severability.
If any term or provision of this Loan Agreement or any
other Loan Document or the application thereof to any
circumstance shall, in any jurisdiction and to any extent, be
invalid, illegal or unenforceable, such term or such provision
shall be ineffective as to such jurisdiction to the extent of
such invalidity, illegality or unenforceability without
invalidating or rendering unenforceable any remaining terms and
provisions hereof or the application of such term or provision to
circumstance other than those as to which it is held invalid,
illegal or unenforceable.
15.6 Expenses. (a) Whether or not the transactions contemplated
hereby are consummated, Borrower agrees to reimburse Lender upon
receipt of written notice from Lender for all reasonable costs
and expenses (including reasonable attorneys' fees and
disbursements, but excluding Lender's overhead or administrative
costs or expenses) incurred by Lender in connection with:
(i) the preparation, negotiation, execution and
delivery of the Loan Documents and the consummation of
the transactions contemplated thereby and all costs of
counsel for Borrower in preparing or furnishing any
opinions (including without limitation (x) any opinions
requested by Lender as to any legal matters arising
under the Loan Documents or with respect to the
Mortgaged Properties and (y) any costs associated with
obtaining any Property Valuation);
(ii) Borrower's ongoing performance of and
compliance with all agreements and covenants contained
in the Loan Documents to be performed or complied with
on its part on or after the date hereof including,
without limitation, the fees and expense of any
Environmental Consultant;
(iii) Lender's ongoing performance and
compliance with all agreements and conditions contained
in the Loan Documents to be performed or complied with
on its part on or after the date hereof;
(iv) the negotiation, preparation, execution,
delivery and administration of any consents,
amendments, waivers or other modifications to the Loan
Documents;
(v) the filing and recording fees, taxes
(including intangible recording taxes) and expenses,
title insurance and reasonable fees and expenses of
counsel for providing to Lender the opinions delivered
pursuant to Section 7(f), and other similar expenses
incurred in creating and perfecting Encumbrances in
favor of Lender pursuant to the Loan Documents;
(vi) enforcing or preserving any rights in
response to third party claims or prosecuting or
defending of any action or proceeding or other
litigation, in each case against, under or affecting
Borrower, the Loan Documents, any party (other than
Borrower) to any Loan Document or the Collateral; and
(vii) enforcing, after the occurrence and
during the continuance of an Event of Default, any
obligations of or collecting any amounts in respect of
the Obligations by reason of such Event of Default or
in connection with any refinancing or restructuring of
the credit arrangements provided under this Loan
Agreement in the nature of a "work-out" or of any
insolvency or bankruptcy proceedings.
(b) In addition to but without duplication of the
payment of expenses pursuant to paragraph (a) above or the
indemnification provided for in the Environmental Indemnity,
whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to indemnify, pay and hold
harmless the Indemnitees, and each of them, from and against
any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs,
expenses and disbursements of any kind or nature whatsoever
(including, without limitation, the reasonable fees and
disbursements of counsel for such Indemnitee in connection
with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such
Indemnitee shall be designated a party thereto), that may be
imposed on, incurred by, or asserted against such Indemnitee
in any manner relating to or arising out of (i) the Loan
Documents, or (ii) Lender's agreement to make the Mortgage
Loans hereunder or the use or intended use of the proceeds
of the Mortgage Loans; provided, however, that Borrower
shall have no obligation to an Indemnitee hereunder to the
extent that such indemnified liabilities arise from the
gross negligence or willful misconduct of such Indemnitee.
To the extent that the undertaking to indemnify, pay and
hold harmless set forth in the preceding sentence may be
unenforceable because it violates any law or public policy,
Borrower shall contribute the maximum portion that it is
permitted to pay and satisfy under applicable law to the
payment and satisfaction of all such indemnified liabilities
incurred by the Indemnities or any of them.
(c) Borrower hereby acknowledges and agrees that each
Indemnitee (other than Lender and its successors and
assigns) is an intended third-party beneficiary of this
Section 15.6.
15.7 Survival of Representations, Etc.
Except for any longer period set forth in the
Environmental Indemnity and except for Section 15.6(b) (which
shall survive indefinitely), all representations, warranties,
covenants and agreements made herein by Borrower and in Partner's
Certificates delivered by Borrower pursuant to the Loan Documents
shall survive any investigation or inspection made by or on
behalf of Lender and shall continue in full force and effect
until the Mortgage Loans and all accrued interest thereon and all
the other Obligations are finally paid in full.
15.8 Notices.
(a) Except as otherwise provided herein, all notices
and other communications required under the terms and provisions
hereof shall be in writing and shall be delivered by hand or by a
nationally recognized overnight courier or registered first class
mail, postage prepaid, return receipt requested, or by facsimile,
to the parties at the addresses and fax numbers set forth below
until such party or its successors and assigns shall have
designated otherwise in a notice given in accordance with this
Section 15.8:
If to Lender:
Morgan Guaranty Trust Company of New York
c/o J.P Morgan Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Attention: J. Daniel Adkinson
Fax: (212) 837-2646
with a copy to:
Holliday Fenoglio Fowler, L.P.
3003 West Alabama
Houston, Texas 77098
Attention: Ms. Rebecca Browning
Fax: (713) 285-5824
with an additional copy to:
Howard, Darby & Levin
1330 Avenue of the Americas
New York, NY 10019
Attention: John P. Gourary
Fax: (212) 841-1010
If to Borrower:
Walden/Drever Operating Partnership, L.P.
One Lincoln Center
5400 LBJ Freeway
LB45, Suite 400
Dallas, Texas 75240
Attention: Mark S. Dillinger
Fax: (972) 788-1550
with a copy to:
Munsch Hardt Kopf Harr & Dinan
1445 Ross Avenue
4000 Fountain Place
Dallas, Texas 75202
Attention: Robin K. Minick
Fax: (214) 855-7584
(b) Such notices, requests, approvals, communications
and demands shall be deemed given on the date on which
delivered or on the date on which the attempted initial
delivery is refused or cannot be made because of a change of
address of which the sending party has not been notified.
15.9 [Intentionally Omitted]
15.10 Waivers.
Lender shall not by any act, delay, omission or
otherwise be deemed to have waived any of its rights, remedies or
privileges hereunder and no waiver shall be valid unless in
writing, signed by Lender, and then only to the extent therein
set forth. A waiver by Lender of any right, remedy or privilege
hereunder on any one occasion shall not be construed as a bar to
any right, remedy or privilege which Lender would otherwise have
had on any future occasion. No failure to exercise nor any delay
in exercising on the part of Lender any right, power or privilege
hereunder or under the other Loan Documents shall be deemed a
waiver of any default or acquiescence therein or shall preclude
any other or further exercise thereof or the exercise of any
other right, power or privilege. All rights and remedies
existing under the Loan Documents are cumulative and not
exclusive of each other and any rights or remedies otherwise
available.
15.11 Marshalling; Payments Set Aside.
Lender shall not be under any obligation to marshal any
assets in favor of Borrower or any other party or against or in
payment of any or all of the obligations of Borrower under the
Loan Documents. To the extent that Borrower makes a payment or
payments to Lender or Lender enforces its Encumbrances or
exercises any rights of setoff, and such payment or payments or
the proceeds of such enforcement or setoff or any part thereof
are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law,
state or Federal law, common law or equitable cause, then to the
extent of such recovery, the obligation or part thereof
originally intended to be satisfied, and all such Encumbrances
and rights and remedies therefor, shall be revived and continue
in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
15.12 Liens Absolute, Multisite Real Estate Collateral Transaction.
Borrower acknowledges that the Loan Documents
collectively secure the Obligations. Borrower agrees that
Lender's Encumbrances on the Collateral and all the Obligations
hereunder shall be absolute and unconditional and shall not in
any manner be affected or impaired by:
(a) any lack of validity or enforceability of any of
the Loan Documents, any agreement with respect to any of the
Obligations or any other agreement or instrument relating to
any of the foregoing;
(b) any acceptance by Lender of any additional
security for or guarantees of any of the Obligations;
(c) any failure, neglect or omission on the part of
Lender to realize upon or protect any of the Obligations or
any Collateral or due to any other circumstance which might
otherwise constitute a defense available to, or a discharge
of, Borrower in respect of the Obligations or any of the
Loan Documents (other than the indefeasible payment in full
in cash of all of the Obligations);
(d) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations;
(e) any release (except as to the property released),
sale, pledge, surrender, compromise, settlement,
nonperfection, renewal, extension, indulgence, alteration,
exchange, modification or disposition of any of the
Obligations hereby secured or of any of the Collateral;
(f) any amendment or waiver of or any consent to any
departure from any of the Loan Documents or of any guaranty
thereof, if any, and Lender may in its discretion foreclose,
exercise any power of sale, or exercise any other remedy
available to it under any or all of the Loan Documents; and
(g) any exercise of the rights or remedies of Lender
under any of the other Loan Documents.
Borrower specifically consents and agrees that Lender may
exercise its rights and remedies hereunder and under the other
Loan Documents separately or concurrently and in any order that
Lender may deem appropriate.
15.13 Waiver of Jury Trial.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE
PARTIES TO THIS LOAN AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS LOAN AGREEMENT, ANY OTHER LOAN
DOCUMENT, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT
MATTER OF THIS CREDIT TRANSACTION AND LENDER/BORROWER
RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER
IS INTENDED TO ENCOMPASS ANY AND ALL DISPUTES THAT MAY BE FILED
IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS LOAN AGREEMENT
AND THE OTHER LOAN DOCUMENTS, AND THAT EACH WILL CONTINUE TO RELY
ON THE WAIVER IN THEIR RELATED FUTURE DEALING. EACH PARTY HERETO
FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS LOAN AGREEMENT, ANY SECURITY DOCUMENT, OR
ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE MORTGAGE LOANS.
IN THE EVENT OF LITIGATION, THIS LOAN AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
15.14 Interest Rate Limitation.
Notwithstanding anything in this Loan Agreement or in
the Mortgage Notes to the contrary, if at any time the Interest
Rate, together with all fees and charges which are treated as
interest under applicable law, including the Default Rate
(collectively, the "Charges"), as provided for in this Loan
Agreement or in any other document executed in connection
herewith, or otherwise contracted for, charged, received, taken
or reserved by Lender, shall exceed the maximum lawful rate (the
"Legal Rate") which may be contracted for, charged, taken,
received or reserved by Lender in accordance with applicable law,
the interest rate applicable to each Mortgage Note held by
Lender, together with all Charges payable to Lender, shall be
limited to the Legal Rate and any interest or Charges not so
charged, taken, received or reserved by Lender at such time shall
be spread, prorated or amortized over the term of this Loan
Agreement or such Mortgage Note to the fullest extent permitted
by law.
15.15 Entire Agreement; Confirmation of Prior Agreements.
(a) This Loan Agreement and the other Loan Documents
and any additional agreements signed on the date
hereof, or previously signed and confirmed in writing
on the date hereof, constitute the entire agreement
among the parties pertaining to the subject matter
hereof and thereof and supersede all prior agreements,
understandings, representations or other arrangements,
whether express or implied, written or oral, of the
parties in connection herewith or therewith except to
the extent expressly incorporated or specifically
referred to herein.
(b) Borrower hereby confirms that it assumes all of
the obligations of the Borrower under each Loan Document
that is not otherwise being amended or confirmed pursuant to
separate written agreement concurrently with the execution
of this Loan Agreement, including without limitation each
Environmental Indemnity and Lease Assignment, and confirms
that except to the extent expressly amended by Section
15.15(c) below or elsewhere in this Loan Agreement, each
such document remains unmodified and in full force and
effect. The Borrower also hereby confirms and assumes all
of the obligations under each Loan Document that is being
amended pursuant to separate written agreement concurrently
with the execution and delivery hereof, as amended by each
such respective separate written agreement.
(c)(i) The following exhibit and schedule to the
Environmental Indemnity are hereby amended and replaced with
the version of such exhibit and schedule attached hereto:
Schedule I Environmental Reports
Exhibit A List of Mortgaged Properties.
(ii) Each of the representations and warranties made by
Borrower in the Environmental Indemnity shall be deemed made
on (and as of) the date hereof with respect to the Mortgaged
Properties.
(iii) All notices and communications to be given
under the Environmental Indemnity shall be given to the
Persons and to the addresses and fax numbers set forth in
Section 15.8 of this Loan Agreement in lieu of such
information set forth in Section 7 of the Environmental
Indemnity.
(iv) Each capitalized term used in the Environmental
Indemnity and also defined in this Loan Agreement shall have
the meaning in the Environmental Indemnity given to such
term in this Loan Agreement.
15.16 Relationship of Lender to Borrower and Third
Parties.
Borrower agrees that Lender (a) shall not be liable to
any contractor, subcontractor, supplier, laborer, architect,
engineer or any other party for services performed or materials
supplied in connection with any Mortgaged Property, (b) shall not
be liable for any debts or claims accruing in favor of any such
parties against Borrower or others against any Mortgaged
Property, and (c) are not now, and upon the exercise of any or
all of their respective remedies under this Loan Agreement or any
of the other Loan Documents, shall not be, joint venturers or
partners with Borrower in any manner whatsoever. Lender shall
not be deemed to be in privity of contract with any contractor or
provider of services to any Mortgaged Property, nor shall any
payment of funds directly to a contractor, subcontractor or
provider of services be deemed to create any third party
beneficiary status or recognition of same by Lender. Borrower
agrees that Lender shall have no duty to detect or warn Borrower
or any third party of any deficiency or defect in any matter or
thing submitted to Lender for approval or otherwise. Approvals
granted by Lender to Borrower for any matters covered under this
Loan Agreement or the other Loan Documents shall be narrowly
construed to cover only the parties and facts identified in any
written approval or, if not in writing, such approvals shall be
solely for benefit of Borrower. Borrower is not, nor shall it
be, an agent of Lender for any purposes.
15.17 GOVERNING LAW.
THIS LOAN AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED
BY, AND BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS PRINCIPLES OF
CONFLICTS OF LAWS.
15.18 JURISDICTION; SERVICE OF PROCESS.
THE PARTIES HERETO CONSENT FOR THEMSELVES AND IN
RESPECT OF THEIR PROPERTIES, GENERALLY, UNCONDITIONALLY AND
IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE FEDERAL AND
STATE COURTS IN THE STATE OF NEW YORK WITH RESPECT TO ANY
PROCEEDING RELATING TO ANY MATTER, CLAIM OR DISPUTE ARISING UNDER
THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.
BORROWER FURTHER CONSENTS, GENERALLY, UNCONDITIONALLY AND
IRREVOCABLY, TO THE NONEXCLUSIVE JURISDICTION OF THE STATE AND
FEDERAL COURTS OF EACH STATE IN WHICH ANY OF THE COLLATERAL IS
LOCATED IN RESPECT OF ANY PROCEEDING RELATING TO ANY MATTER,
CLAIM OR DISPUTE ARISING WITH RESPECT TO SUCH COLLATERAL.
BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS,
GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, AT THE ADDRESSES SET
FORTH IN SECTION 15.8 HEREOF IN CONNECTION WITH ANY OF THE
AFORESAID PROCEEDINGS IN ACCORDANCE WITH THE RULES APPLICABLE TO
SUCH PROCEEDINGS. BORROWER HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW HAVE OR HAVE IN THE FUTURE TO THE
LAYING OF VENUE IN RESPECT OF ANY OF THE AFORESAID PROCEEDINGS
BROUGHT IN THE COURTS REFERRED TO ABOVE AND AGREES NOT TO PLEAD
OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO SERVE
PROCESS IN ANY MANNER PERMITTED BY LAW OR TO COMMENCE PROCEEDINGS
OR OTHERWISE PROCEED AGAINST BORROWER IN ANY JURISDICTION.
* * *
IN WITNESS WHEREOF, Borrower and Lender have caused
this Loan Agreement to be duly executed as of the date and year
first above written.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
as Trustee under Declaration of
Trust dated December 9, 1960, as
amended, for the Commingled Pension
Trust Fund (Fixed Income-Mortgage
Private Placements)
By:___________________________________
Name:
Title:
WALDEN/DREVER OPERATING
PARTNERSHIP, L.P.
By: Walden Residential Properties, Inc., a
Maryland corporation, its sole
general partner
By:_________________________________
Name:
Title:
Initial account for payments to
Lender pursuant to Section 4.7:
Nationsbank of Texas, N.A.
Dallas, TX
ABA #111000025
Holliday Fenoglio, Inc.
Clearing Account #1390002220
ANNEX 1
List of Existing Notes
1. Canyon Ridge: Mortgage Note 1, dated June
23, 1994, in the amount of
$2,500,000.00
2. Holiday on Hayes: Mortgage Note 2, dated June
23, 1994, in the amount of
$5,000,000.00
3. Bayou Oaks: Mortgage Note 3, dated June
23, 1994, in the amount of
$2,900,000.00
4. Shadowridge: Mortgage Note 4, dated June
23, 1994, in the amount of
$2,780,000.00
5. Montfort Oaks: Mortgage Note 5, dated June
23, 1994, in the amount of
$5,400,000.00
6. Saratoga Springs (f/k/a Pleasant Lake): Mortgage Note 6,
dated June 23, 1994, in the
amount of $4,600,000.00
7. Northwoods: Mortgage Note 7, dated June
30, 1994, in the amount of
$2,980,000.00
8. Shadow Creek (f/k/a Stoney Creek): Mortgage Note 8, dated
June 30, 1994, in the amount
of $6,350,000.00
9. Bent Creek: Mortgage Note 9, dated June
30, 1994, in the amount of
$4,360,000.00
10. Silverado: Mortgage Note 10, dated July
7, 1994, in the amount of
$5,250,000.00
11. Creekwood: Mortgage Note 11, dated
August 18, 1994, in the amount
of $5,325,000.00
12. Sun Ridge (f/k/a/ Horizon): Mortgage Note 12, dated
September 29, 1994, in the
amount of $3,375,000.00
13. Felicita Creek: Mortgage Note 13, dated
September 29, 1994, in the
amount of $3,250,000.00
14. Shannon Chase: Mortgage Note 14, dated
October 27, 1994, in the
amount of $3,150,000.00
15. Cimarron Park: Mortgage Note 15, dated
November 30, 1994, in the
amount of $2,350,000.00
16. Rafters: Mortgage Note 16, dated
November 30, 1994, in the
amount of $4,100,000.00
17. Willowick: Mortgage Note 17, dated
November 30, 1994, in the
amount of $4,075,000.00
18. Wharf: Mortgage Note 18, dated
November 30, 1994, in the
amount of $4,055,000.00
19. Trinity Mills: Mortgage Note 19, dated
February 28, 1995, in the
amount of $3,675,000.00
20. Park Bonita: Mortgage Note 20, dated April
25, 1995, in the amount of
$6,000,000.00
<PAGE>
ANNEX 2
List of Existing Mortgages
All Mortgages granted by Borrower to Lender with
respect to the Mortgaged Properties, including, without
limitation, the following:
GEORGIA
(1) Deed to Secure Debt, Security Agreement, Fixture
Filing Statement, Assignment of Leases and Rents and Financing
Statement made by Apartment Opportunity Fund II, L.P., as
predecessor in interest to Borrower, for the benefit of Lender,
dated as of June 23, 1994 and filed for record on June 30, 1994 in
Book 10457, Page 0223, in the Office, Clerk Superior Court,
Gwinnett County, Georgia, as amended by instrument dated July 25,
1995, recorded August 9, 1995 in Book 11586, Page 153;
(2) Deed to Secure Debt, Security Agreement, Fixture
Filing Statement, Assignment of Leases and Rents and Financing
Statement made by Borrower for the benefit of Lender, dated as of
October 27, 1994, and filed for record on December 30, 1994 in Deed
Book 19125, Page 229, with the Clerk of the Superior Court of
Fulton County, Georgia, as amended by instrument dated July 25,
1995, recorded August 7, 1995 in Deed Book 19847, Page 145.
TEXAS
(1) Deed of Trust, Security Agreement, Fixture Filing
Statement, Assignment of Leases and Rents and Financing Statement
made by Borrower for the benefit of Lender, dated as of June 23,
1994 and filed for record in the Deed of Trust Records of Dallas
County, Texas on June 29, 1994 in Volume 94124, Page 02573, in
the Official Public Records of Real Property of Harris County,
Texas on June 29, 1994 under County Clerk's File No. P935776, and
in the Real Property Records of Rockwall County, Texas on June
29, 1994 in Volume 0915, Page 247 (the "June 23 Deed of Trust");
(2) Deed of Trust, Security Agreement, Fixture Filing
Statement, Assignment of Leases and Rents and Financing Statement
made by Borrower for the benefit of Lender, dated as of June 30,
1994 and filed for record in the Deed of Trust Records of Dallas
County, Texas on June 30, 1994 in Volume 94125, Page 04835, in
the Official Public Records of Real Property of Harris County,
Texas on June 30, 1994 under County Clerk's File No. P938540, in
the Real Property Records of Travis County, Texas on June 30,
1994 in Volume 12219, Page 0553, and in the Real Property Records
of Rockwall County, Texas on July 1, 1994 in Volume 0916, Page
202 (the "June 30 Deed of Trust");
(3) Deed of Trust, Security Agreement, Fixture Filing
Statement, Assignment of Leases and Rents and Financing Statement
made by Borrower for the benefit of Lender, dated July 7, 1994
and filed for record in the Deed of Trust Records of Dallas
County, Texas on July 8, 1994 in Volume 94130, Page 01932, in the
Official Public Records of Real Property of Harris County, Texas
on July 8, 1994 under County Clerk's File No. P950733, in the
Real Property Records of Travis County, Texas on July 8, 1994 in
Volume 12224, Page 1746, and in the Real Property Records of
Rockwall County, Texas on July 8, 1994 in Volume 0919, Page 144
(the "July 7 Deed of Trust" and, collectively with the June 30
Deed of Trust, each as amended by the First Amendment, the "June
30 and July 7 Deeds of Trust", which June 30 and July 7 Deeds of
Trust were previously amended by that certain Amendment of Deeds
of Trust and Assignments of Rents and Leases executed by Borrower
and Lender, dated as of September 29, 1994, and filed for record
in the Deed Records of Dallas County, Texas on November 2, 1994
in Volume 94212, Page 01873, in the Official Public Records of
Real Property of Harris County, Texas on November 3, 1994, under
County Clerk's File No. R131490, in the Real Property Records of
Travis County, Texas on November 2, 1994 in Volume 12306, Page
0230, and in the Real Property Records of Rockwall County, Texas
on November 2, 1994 in Volume 0955, Page 047 (the "First
Amendment");
(4) Deed of Trust, Security Agreement, Fixture Filing
Statement, Assignment of Leases and Rents and Financing Statement
made by Borrower for the benefit of Lender, dated August 18, 1994
and filed for record in the Deed of Trust Records of Dallas
County, Texas on August 19, 1994 in Volume 94161, Page 02306, in
the Official Public Records of Real Property of Harris County,
Texas on August 19, 1994 under County Clerk's File No. R018785,
in the Real Property Records of Travis County, Texas on August
19, 1994 in Volume 12254, Page 0567, and in the Real Property
Records of Rockwall County, Texas on August 19, 1994 in Volume
0932, Page 136 (the "August 18 Deed of Trust");
(5) Deed of Trust, Security Agreement, Fixture Filing
Statement, Assignment of Leases and Rents and Financing Statement
made by Borrower for the benefit of Lender, dated November 30,
1994 and filed for record in the Deed of Trust Records of Dallas
County, Texas on December 2, 1994 in Volume 94232, Page 01943, in
the Official Public Records of Real Property of Harris County,
Texas on December 2, 1994 under County Clerk's File No. R173345,
in the Real Property Records of Travis County, Texas on December
2, 1994 in Volume 12325, Page 1458, in the Real Property Records
of Rockwall County, Texas on December 2, 1994 in Volume 0963,
Page 034, in the Official Public Records of Real Property of
Montgomery County, Texas on December 2, 1994 under Clerk's File
No. 9466759, and in the Official Public Records of Nueces County,
Texas on December 1, 1994 as Document No. 940270 (the "November
30 Deed of Trust"); and
(6) Deed of Trust, Security Agreement, Fixture Filing
Statement, Assignment of Leases and Rents and Financing Statement
made by Borrower for the benefit of Lender, dated February 28,
1995 and filed for record in the Deed of Trust Records of Dallas
County, Texas on March 2, 1995 in Volume 95042, Page 00645, in
the Official Public Records of Real Property of Harris County,
Texas on March 2, 1995 under County Clerk's File No. R290632, in
the Real Property Records of Travis County, Texas on March 2,
1995 in Volume 12385, Page 0223, in the Real Property Records of
Rockwall County, Texas on March 2, 1995 in Volume 0987, Page 061,
in the Official Public Records of Real Property of Montgomery
County, Texas on March 2, 1995 under Clerk's File No. 9511324,
and in the Official Public Records of Nueces County, Texas on
March 2, 1995 as Document No. 952224 (the "February 28 Deed of
Trust");
All as amended by that certain Amendment of Deeds of
Trust dated as of July 25, 1995, and filed for record in (a) the
Deed Records of Dallas County, Texas, on March 22, 1996 in Volume
95150, Page 5799, (b) the Official Public Records of Real
Property of Harris County, Texas under County Clerk's File No.
R512003, (c) the Real Property Records of Travis County, Texas on
August 3, 1995, in Volume 1028, Page 207, (d) the Real Property
Records of Rockwall County, Texas on July 25, 1995 in Volume
1028, Page 207, and (e) the Official Public Records of Nueces
County, Texas under Clerk's File No. 972258 (the "Second
Amendment").
CALIFORNIA
(1) Deed of Trust, Security Agreement, Fixture Filing
Statement, Assignment of Leases and Rents and Financing Statement
made by Borrower for the benefit of Lender, dated as of September
29, 1994 and filed for record on October 31, 1994 as Document No.
1994-0635741 in the Official Records of the San Diego County
Recorder's Office in San Diego, California (the "Felicita Creek
Deed of Trust");
(2) Deed of Trust, Security Agreement, Fixture Filing
Statement, Assignment of Leases and Rents and Financing Statement
made by the Borrower for the benefit of Lender, dated as of
September 29, 1994, and filed for record on October 31, 1994 as
Document No. 1994-0635739 in the Official Records of the San
Diego County Recorder's Office in San Diego, California (the
"Horizon Deed of Trust"); and
(3) Deed of Trust, Security Agreement, Fixture Filing
Statement, Assignment of Leases and Rents and Financing Statement
made by the Borrower for the benefit of Lender, dated as of April
25, 1995, and filed for record on April 25, 1995 as Document No.
1995-0173250 in the Official Records of the San Diego County
Recorder's Office in San Diego, California (the "Park Bonita Deed
of Trust");
each as amended by Amendment of Deeds of Trust, dated as of July
25, 1995, filed for record on August 3, 1995 as Document #1995-0336143
in the Official Records of the San Diego County
Recorder's Office in San Diego, California
ANNEX 3
List of Title Policies
EXHIBIT A
Certificate of Limited Partnership
EXHIBIT B
Form of Environmental Indemnity Agreement
EXHIBIT C-1
Form of Amended and Restated Mortgage Note - Loan A
EXHIBIT C-2
Form of New Mortgage Note - Loan B
EXHIBIT C-3
Form of New Mortgage Note - Loan C
EXHIBIT D
Partnership Agreement
EXHIBIT E
Metropolitan Area List
Texas
Dallas
Houston
Conroe
Clearlake
Austin
San Antonio
Fort Worth
Georgia
Atlanta
Savannah
California
Major Metropolitan Areas
<PAGE>
EXHIBIT F
Borrower's General Partner's Certificate of Incorporation
EXHIBIT G
Form of Amended and Restated Escrow Agreement
SCHEDULE 1.1-B
List of Mortgage Loans
A. Loan A
Apartment Project Loan Amount
Saratoga Springs
(f/k/a Pleasant Lake) $4,404,237.27
Canyon Ridge $2,393,607.23
Holiday on Hayes $4,787,214.48
Bayou Oaks $2,776,584.44
Shadowridge $2,661,689.77
Montfort Oaks $5,170,191.40
Northwoods $2,853,178.35
Bent Creek $4,174,448.18
Shadow Creek
(f/k/a Stoney Creek) $6,079,758.99
Silverado $5,026,571.68
Creekwood $5,098,381.54
Felicita Creek $3,111,685.93
Sun Ridge (f/k/a Horizon) $3,231,364.67
Shannon Chase $3,015,941.67
Cimarron Park $2,249,987.53
Rafters $3,925,515.75
Willowick $3,901,574.80
Wharf $3,882,431.23
Trinity Mills $3,530,578.32
Park Bonita $5,777,015.57
B. Loan B
All Properties $30,000,000.00
Loan C
All Properties $1,948,041.20
SCHEDULE 1.1-C
List of Properties
Saratoga Springs (f/k/a Pleasant Lake Village), Duluth, Georgia
Canyon Ridge Apartments, Rockwall, Texas
Holiday on Hayes Apartments, Houston, Texas
Bayou Oaks Apartments, Houston, Texas
Shadowridge Village Apartments, Dallas, Texas
Montfort Oaks Apartments, Dallas, Texas
Northwoods, Houston, Texas
Shadow Creek (f/k/a Stoney Creek), Austin, Texas
Bent Creek, Dallas, Texas
Silverado, Houston, Texas
Creekwood, Dallas, Texas
Felicita Creek, Escondido, California
Sun Ridge (f/k/a Horizon), Santee, California
Shannon Chase, Union City, Georgia
Cimarron Park, Conroe, Texas
Rafters, Corpus Christi, Texas
Willowick, Corpus Christi, Texas
Wharf, Corpus Christi, Texas
Trinity Mills, Carrollton, Texas
Park Bonita, National City, California
<PAGE>
SCHEDULE 4.3(b)-1
Allocation of Loan B Among Mortgaged Properties
SCHEDULE 4.3(b)-2
Allocation of Loan C Among Mortgaged Properties
SCHEDULE 8(l)
Certain Debt
SCHEDULE 8(v)
List of Properties Located in Flood Zones
Bayou Oaks: a portion of the Bayou Oaks property is
located in a one hundred year flood
plain
Bent Creek: a portion of the Bent Creek property is
located in a one hundred year flood
plain
Stoney Creek: a portion of the Stoney Creek property
is located in a one hundred year flood
plain
Silverado: a portion of the Silverado property is
located in a one hundred year flood
plain
Shannon Chase: a portion of the Shannon Chase property
is located in a five hundred year flood
plain
<PAGE>
SCHEDULE 15.15(a)
Revised Schedule I to
Environmental Indemnity
SCHEDULE I
Environmental Reports
1. Pleasant Lake Village Community, Atlanta, Georgia Phase I
Environmental Site Assessment and Limited Asbestos Sampling,
dated November 24, 1993, prepared by Fugro Environmental,
Inc.
2. The Canyon Ridge Apartments, Rockwall, Texas Report of
Preliminary Environmental Site Assessment and Limited
Asbestos Survey, dated December 8, 1993, prepared by Law
Engineering, Inc.
3. Holiday on Hayes Apartments, Houston, Texas Report of
Phase I Environmental Site Assessment and Limited Asbestos
Survey, dated December 14, 1993, prepared by Law
Engineering, Inc.
4. The Bayou Oaks Apartments, Houston, Texas Report of Phase
I Environmental Site Assessment and Limited Asbestos Survey,
dated December 21, 1993, prepared by Law Engineering, Inc.
5. The Shadowridge Village Apartments, Dallas, Texas Phase I
Environmental Site Assessment and Limited Environmental
Sampling, dated March 22, 1994, prepared by Fugro
Environmental, Inc.
6. Montfort Oaks, Dallas, Texas Phase I Environmental Site
Assessment and Limited Asbestos Survey, dated March 22,
1994, prepared by Law Engineering, Inc.
7. Northwoods Apartments, Houston, Texas Phase I
Environmental Site Assessment and Limited Environmental
Sampling, dated March 22, 1994, prepared by Fugro
Environmental, Inc.
8. Bent Creek Apartments, Dallas, Texas Phase I Environmental
Site Assessment and Limited Environmental Sampling, dated
March 22, 1994, prepared by Fugro Environmental, Inc.
9. Stoney Creek Apartments, Austin, Texas Phase I
Environmental Site Assessment and Limited Environmental
Sampling, dated March 22, 1994, prepared by Fugro
Environmental, Inc.
10. Silverado Apartments, Houston, Texas Phase I Environmental
Site Assessment and Limited Environmental Sampling, dated
June 22, 1994, prepared by Fugro Environmental, Inc.
11. Creekwood Apartments, Dallas, Texas Phase I Environmental
Assessment and Limited Asbestos Survey, dated August 8,
1994, prepared by Law Engineering, Inc.
12. Felicita Creek Apartments, Escondido, California Phase I
Environmental Site Assessment and Limited Asbestos Sampling,
dated July 29, 1994, prepared by Fugro West, Inc.
13. Horizon Apartments, Santee, California Phase I
Environmental Assessment and Limited Asbestos Survey, dated
July 14, 1994, prepared by Law/Crandall, Inc.
14. Shannon chase Apartments, Union City, Georgia Phase I
Environmental Site Assessment and Limited Environmental
Sampling, dated August 5, 1994, prepared by Fugro
Environmental, Inc.
15. Cimarron Park Apartments, Conroe, Texas Phase I
Environmental Site Assessment, Limited Asbestos Survey and
Environmental Sampling, dated September 28, 1994, prepared
by Law Engineering and Environmental Services.
16. Rafters Apartments, Corpus Christi, Texas Phase I
Environmental Site Assessment and Limited Asbestos Sampling,
dated September 13, 1994, prepared by Fugro Environmental,
Inc.
17. Willowick Apartments, Corpus Christi, Texas Phase I
Environmental Site Assessment and Limited Environmental
Sampling, dated September 14, 1994, prepared by Fugro
Environmental, Inc.
18. The Wharf Apartments, Corpus Christi, Texas Phase I
Environmental Site Assessment and Limited Asbestos Sampling,
dated September 13, 1994, prepared by Fugro Environmental,
Inc.
19. Trinity Mills Apartments, Carrollton, Texas Phase I
Environmental Site Assessment and Limited Asbestos Sampling,
dated December 5, 1994, and Phase II Environmental Site
Assessment Subsurface Investigation, dated January 5, 1995,
prepared by Fugro Environmental, Inc.
20. Park Bonita Apartments, National City, California Phase I
Environmental Site Assessment and Limited Asbestos Survey,
dated April 12, 1995, prepared by Law/Crandall, Inc., and
Law Engineering, Inc.
SCHEDULE 15.15(b)
Revised Exhibit A to
Environmental Indemnity
EXHIBIT A
List of Properties
Saratoga Springs (f/k/a Pleasant Lake Village), Duluth, Georgia
Canyon Ridge Apartments, Rockwall, Texas
Holiday on Hayes Apartments, Houston, Texas
Bayou Oaks Apartments, Houston, Texas
Shadowridge Village Apartments, Dallas, Texas
Montfort Oaks Apartments, Dallas, Texas
Northwoods, Houston, Texas
Shadow Creek (f/k/a Stoney Creek), Austin, Texas
Bent Creek, Dallas, Texas
Silverado, Houston, Texas
Creekwood, Dallas, Texas
Felicita Creek, Escondido, California
Horizon, Santee, California
Shannon Chase, Union City, Georgia
Cimarron Park, Conroe, Texas
Rafters, Corpus Christi, Texas
Willowick, Corpus Christi, Texas
Wharf, Corpus Christi, Texas
Trinity Mills, Carrollton, Texas
Park Bonita, National City, California
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions; Principles of Construction.. . . . . . . . . . . .2
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . .2
1.2 Principles of Interpretation.. . . . . . . . . . . . . . . . 15
Section 2. Nonrecourse Obligations.. . . . . . . . . . . . . . . . . . . 15
2.1 Nonrecourse Obligations. . . . . . . . . . . . . . . . . . . 15
Section 3. Loan; Disbursement to Borrower. . . . . . . . . . . . . . . . 15
3.1 Loan.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.2 Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.3 Term.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.4 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . 16
Section 4. Payments of Principal and Interest; Lien Releases.. . . . . . 16
4.1 Principal Payments.. . . . . . . . . . . . . . . . . . . . . 16
4.2 Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . 16
4.3 Lien Releases. . . . . . . . . . . . . . . . . . . . . . . . 17
4.4 Interest Payments. . . . . . . . . . . . . . . . . . . . . . 19
4.5 Default Rate; Post-Maturity Interest.. . . . . . . . . . . . 19
4.6 Computations.. . . . . . . . . . . . . . . . . . . . . . . . 20
4.7 Method of Payments.. . . . . . . . . . . . . . . . . . . . . 20
Section 5. Deposits for Taxes and Insurance Premiums and Capital. 20
Section 6. Condemnation and Casualty.. . . . . . . . . . . . . . . . . . 22
Section 7. Conditions Precedent. . . . . . . . . . . . . . . . . . . . . 25
Section 8. Representations and Warranties of Borrower. . . . . . . . . . 33
Section 9. General Covenants of Borrower.. . . . . . . . . . . . . . . . 43
9.1 Affirmative Covenants. . . . . . . . . . . . . . . . . . . . 43
9.2 Negative Covenants.. . . . . . . . . . . . . . . . . . . . . 46
Section 10. Property-Specific Covenants of Borrower. . . . . . . . . . . 47
10.1 Affirmative Covenants.. . . . . . . . . . . . . . . . . . . 47
10.2 Negative Covenants. . . . . . . . . . . . . . . . . . . . . 60
Section 11. Conversion to Unsecured Loans.. . . . . . . . . . . . . . . 62
Section 12. Events of Default.. . . . . . . . . . . . . . . . . . . . . 62
Section 13. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . 65
13.1 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . 65
13.2 Foreclosure Proceeds. . . . . . . . . . . . . . . . . . . . 66
Section 14. Restrictions on Transfer. . . . . . . . . . . . . . . . . . 66
Section 15. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . 68
15.1 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . 68
15.2 Binding Effect; Successors and Assigns. . . . . . . . . . . 68
15.3 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . 68
15.4 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 68
15.5 Severability. . . . . . . . . . . . . . . . . . . . . . . . 69
15.6 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 69
15.7 Survival of Representations, Etc. . . . . . . . . . . . . . 70
15.8 Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . 71
15.9 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . 72
15.10 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . 72
15.11 Marshalling; Payments Set Aside. . . . . . . . . . . . . . 72
15.12 Liens Absolute, Multisite Real Estate Collateral
Transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . 73
15.13 Waiver of Jury Trial.. . . . . . . . . . . . . . . . . . . 74
15.14 Interest Rate Limitation.. . . . . . . . . . . . . . . . . 74
15.15 Entire Agreement; Confirmation of Prior
Agreements.. . . . . . . . . . . . . . . . . . . . . . . . . . . 75
15.16 Relationship of Lender to Borrower and Third
Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
15.17 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . 76
15.18 JURISDICTION; SERVICE OF PROCESS.. . . . . . . . . . . . . 76
ANNEXES
ANNEX 1: List of Existing Notes
ANNEX 2: List of Existing Mortgages
ANNEX 3: List of Title Policies
EXHIBITS
EXHIBIT A: Certificate of Limited Partnership
EXHIBIT B: Form of Environmental Indemnity Agreement
EXHIBIT C: Forms of Mortgage Notes
Exhibit C-1: Form of Amended and Restated
Mortgage Note - Loan A
Exhibit C-2: Form of New Mortgage Note - Loan B
Exhibit C-3: Form of New Mortgage Note - Loan C
EXHIBIT D: Partnership Agreement
EXHIBIT E: Metropolitan Area List
EXHIBIT F: Borrower's General Partner's Certificate of
Incorporation
EXHIBIT G: Form of Amended and Restated Escrow Agreement
SCHEDULES
SCHEDULE 1.1-A: . . . . . . . . . . . . . . . . . . . . .Omitted
SCHEDULE 1.1-B: . . . . . . . . . . . . . List of Mortgage Loans
SCHEDULE 1.1-C: . . . . . . . . . . . . . . . List of Properties
SCHEDULE 4.3(b)-1: . . . . . Allocation of Loan B Among Mortgaged
Properties
SCHEDULE 4.3(b)-2: . . . . . Allocation of Loan C Among Mortgaged
Properties
SCHEDULE 8(l): . . . . . . . . . . . . . . . . . . . Certain Debt
SCHEDULE 8(v): . . . . .List of Properties Located in Flood Zones
SCHEDULE 15.15(a): . . . . . .Revised Schedule I to Environmental Indemnity
SCHEDULE 15.15(b): . . . . . . Revised Exhibit A to Environmental Indemnity
Exhibit 12.1
WALDEN RESIDENTIAL PROPERTIES, INC.
COMPUTATION OF RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1998 1997
---- ----
<S> <C> <C>
Income before extraordinary item and income
allocated to minority interests . . . . . . . . . . $ 8,638 $ 6,735
Add:
Interest on indebtedness . . . . . . . . . . . . . 13,315 4,877
Amortization . . . . . . . . . . . . . . . . . . . 233 211
------- -------
Earnings. . . . . . . . . . . . . . . . . . . . $22,186 $11,823
======= =======
Fixed charges and preferred stock dividends:
Interest on indebtedness . . . . . . . . . . . . . $13,315 $ 4,877
Amortization . . . . . . . . . . . . . . . . . . . 233 211
------- -------
Fixed charges . . . . . . . . . . . . . . . . . 13,548 5,088
Add:
Preferred stock dividends (1) . . . . . . . . . 4,796 3,717
------- -------
Combined fixed charges and preferred
stock dividends. . . . . . . . . . . . . . . $18,344 $ 8,805
======= =======
Ratio of earnings to fixed charges . . . . . . . . . 1.64x 2.32x
Ratio of earnings to fixed charges and preferred
stock dividends . . . . . . . . . . . . . . . . . . 1.21x 1.34x
(1) Includes dividends on preferred stock and preferred
distributions to minority interest holders.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 7,988 22,493
<SECURITIES> 0 0
<RECEIVABLES> 2,189 1,011
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 1,535,147 697,642
<DEPRECIATION> 89,545 47,977
<TOTAL-ASSETS> 1,482,778 690,093
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
57 58
0 0
<COMMON> 186 174
<OTHER-SE> 716,888 415,762
<TOTAL-LIABILITY-AND-EQUITY> 1,482,778 690,093
<SALES> 0 0
<TOTAL-REVENUES> 68,453 32,788
<CGS> 0 0
<TOTAL-COSTS> 29,460 13,718
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 13,315 4,877
<INCOME-PRETAX> 5,740 6,330
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 5,740 6,330
<DISCONTINUED> 0 0
<EXTRAORDINARY> (24) 0
<CHANGES> 0 0
<NET-INCOME> 5,716 6,330
<EPS-PRIMARY> 0.13 0.18
<EPS-DILUTED> 0.13 0.17
</TABLE>
