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Exhibit Index
on Page 4
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
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Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): February 13, 1997
GROVE REAL ESTATE ASSET TRUST
(Exact name of registrant as specified in its charter)
Maryland 1-13080 06-1391084
- ---------------------------- ------------ -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
598 Asylum Avenue Hartford, Connecticut 06105
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 246-1126
N/A
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(Former name or former address, if changed since last report.)
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Item 5. Other Events.
On February 14, 1997, the Registrant will mail to its shareholders a
Proxy Statement relating to a Special Meeting of Shareholders to be held on
March 10, 1997 (the "Proxy Statement"). The Proxy Statement contemplates certain
transactions (the "Consolidation Transactions") pursuant to which the Registrant
will become a self-administered and self-managed real estate investment trust
with control over a portfolio of 23 multi-family residential projects and a
neighborhood shopping center in the Northeastern United States. In connection
with the consummation of the Consolidation Transactions, the Registrant will
enter into (i) a Contribution Agreement the ("Contribution Agreement") among the
Registrant, Grove Operating, L.P., a Delaware limited partnership (the
"Operating Partnership") and certain other parties, and (ii) an Agreement of
Limited Partnership of the Operating Partnership among the Registrant and the
other partners named therein (the "Partnership Agreement"). Forms of the
Contribution Agreement and the Partnership Agreement are filed herewith as
Exhibits 10.1 and 10.2, respectively.
Item 7. Financial Statements and Exhibits.
(a) - (b) Not applicable.
(c) The following Exhibits are filed as a part of this
Report:
Exhibit No. Exhibit
- ----------- -------
10.1 Form of Contribution Agreement among Grove
Real Estate Asset Trust, Grove Operating, L.P.
and certain other parties.
10.2 Form of Agreement of Limited Partnership of
Grove Operating, L.P., among Grove Real Estate
Asset Trust and the other partners named therein.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GROVE REAL ESTATE ASSET TRUST
Date: February 13, 1997 /s/ DAMON NAVARRO
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Damon Navarro
President
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EXHIBIT INDEX
Exhibit No. Exhibit Page No.
- ----------- ------- --------
10.1 Form of Contribution Agreement among Grove Real
Estate Asset Trust, Grove Operating, L.P. and
certain other parties.
10.2 Form of Agreement of Limited Partnership of Grove
Operating, L.P., among Grove Real Estate Asset
Trust and the other partners named therein.
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Exhibit 10.1
Form of Contribution Agreement among Grove Real Estate Asset Trust,
Grove Operating, L.P. and certain other parties.
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FORM OF CONTRIBUTION AGREEMENT
by and between
GROVE REAL ESTATE ASSET TRUST,
a Maryland real estate investment trust,
GROVE OPERATING, L.P.,
a Delaware limited partnership
and
the Contributors named herein
DATED: As of _______, 1997
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TABLE OF CONTENTS
Page
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ARTICLE 1 DEFINITIONS......................................................1
1.1 Definitions......................................................1
1.2 References.......................................................7
ARTICLE 2 CONTRIBUTION AND ACCEPTANCE; OTHER TRANSACTIONS..................7
2.1 Contribution and Acceptance of GREAT Properties..................7
2.2 Contribution and Acceptance of New Equity Proceeds...............9
2.3 Non-Liquidating Property Partnerships............................9
2.4 Liquidating Property Partnerships................................9
2.5 Management Company Assets and Liabilities.......................10
2.6 Burgundy Studio Apartments......................................10
ARTICLE 3 CONSIDERATION...................................................11
3.1 Units and Cash..................................................11
3.2 Operating Partnership Agreement.................................11
ARTICLE 4 COVENANTS, REPRESENTATIONS AND WARRANTIES.......................12
4.1 Representations and Warranties of the Grove Contributors........12
4.2 Representations and Warranties of GREAT.........................18
4.3 Representations and Warranties of the Other Contributors........23
4.4 Representations and Warranties of the Operating Partnership.....25
4.5 Survival of Representations and Warranties......................26
ARTICLE 5 CLOSING MATTERS.................................................26
5.1 Closing.........................................................26
5.2 New York Style Closing..........................................26
5.3 Surveys, Title Commitments and Searches.........................26
5.4 Title Policies..................................................27
ARTICLE 6 CLOSING DELIVERIES..............................................27
6.1 The Contributors' Deliveries....................................27
6.2 The Operating Partnership's Deliveries..........................29
6.3 Concurrent Transactions.........................................30
6.4 Further Assurances..............................................30
6.5 Possession......................................................30
ARTICLE 7 APPORTIONMENTS; SECURITY DEPOSITS...............................30
7.1 Apportionments for Wholly-Owned Projects........................30
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Page
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7.2 Apportionments for Non-Liquidating Partnerships.................31
7.3 Apportionments for Management Company...........................32
7.4 Payment of Apportionments.......................................32
7.5 Security Deposits...............................................32
ARTICLE 8 INDEMNITIES.....................................................32
8.1 The Contributors' Indemnity.....................................32
8.2 The Operating Partnership's Indemnity...........................33
8.3 Notice of Claims................................................33
8.4 Limitation on Liability.........................................33
8.5 Limitations on Indemnification Obligations......................34
ARTICLE 9 MISCELLANEOUS...................................................34
9.1 Expenses........................................................34
9.2 Brokerage.......................................................34
9.3 Survival........................................................34
9.4 Construction....................................................35
9.5 General.........................................................35
9.6 Headings........................................................35
9.7 Governing Law; Parties at Interest..............................35
9.8 Power of Attorney...............................................35
Schedules
Schedule A - Contributions
Schedule B - Cash Contributions by the Operating Partnership to Liquidating
Partnerships
Schedule C - Management Company Assets and Liabilities
Schedule D - GREAT Real Estate
Schedule E - Partnership Real Estate
Schedule F - Burgundy Real Estate
Schedule G - Rent Roll
Schedule H - Hazardous Materials; Environmental Matters
Schedule I - Financing Arrangements
Schedule J - Insurance
Schedule K - Service Contracts
Schedule L - Condition of Projects
Schedule M - Property Partnership Agreements
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FORM OF CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (the "Agreement") is made as of this ____ day
of __________, 1997, by and between: GROVE REAL ESTATE ASSET TRUST, a Maryland
real estate investment trust ("GREAT"), GROVE OPERATING, L.P., a Delaware
limited partnership (the "Operating Partnership" or the "OP"), and each of the
individuals and
entities listed on Schedule A hereto (each, a "Contributor" and, collectively,
the "Contributors").
W I T N E S S E T H:
WHEREAS, the Contributors own interests in 23 multi-family residential
projects, one neighborhood shopping center and certain other assets, all as set
forth herein.
WHEREAS, concurrently with the consummation of the other Consolidation
Transactions (as hereinafter defined), the Contributors desire to contribute to
the Operating Partnership all of their respective rights, title and interests in
and to such assets in exchange for Units (as hereinafter defined) and cash, all
pursuant to and in accordance with this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
respective representations, warranties, agreements, covenants and conditions
herein contained, and other good and valuable consideration, the parties hereby
agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used herein, the following terms shall have the
respective meanings indicated below:
Agreement: This Contribution Agreement, including the schedules attached
hereto, as this Contribution Agreement may be, amended, supplemented or modified
from time to time.
Burgundy: Burgundy Associates Limited Partnership, a Connecticut limited
partnership.
Burgundy Improvements: As defined in Section 2.6.B.
Burgundy Intangible Property: As defined in Section 2.6.D.
Burgundy Leases: As defined in Section 2.6.E.
Burgundy Personalty: As defined in Section 2.6.C.
Burgundy Project: As defined in Section 2.6.
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Burgundy Real Estate: As defined in Section 2.6.A.
Closing: As defined in Section 5.1 hereof.
Closing Date: As defined in Section 5.1 hereof.
Code: The Internal Revenue Code of 1986, as amended from time to time.
Consolidation Transactions: The consolidation transactions proposed to be
entered into by GREAT, the Operating Partnership and certain other parties, as
described in the Proxy Statement.
Contributors: As defined in the caption to this Agreement.
Damages: Any loss, liability, claim, obligation, damage or expense
(including reasonable legal fees and expenses).
Economic Interest:With respect to any Contributor's interest in a
Liquidating Partnership, all of such Contributor's right, title and interest in
and to the economic interests in such Liquidating Partnership, including,
without limitation, all of such Contributor's rights in the profits, losses,
capital, surplus, assets and distributions of such Liquidating Partnership.
ERISA: The Employee Retirement Income Security Act of 1974, as amended
from time to time.
Environment: Soil, surface waters, ground waters, land, stream sediments,
surface or subsurface strata and ambient air.
Environmental Laws: Any and all federal, state and local statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or other governmental
restrictions relating to the Environment or to emissions, discharges, releases
or threatened releases of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes into the Environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes.
Exchange Offer: The Offer to Exchange, dated December 2, 1996, from the
Operating Partnership to the limited partners of the Property Partnerships, as
amended and as supplemented from time to time.
Expenses: As defined in Section 9.1 hereof.
GREAT: Grove Real Estate Asset Trust, a Maryland real estate investment
trust.
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GREAT Improvements: As defined in Section 2.1.B.
GREAT Intangible Property: As defined in Section 2.1.D.
GREAT Leases: As defined in Section 2.1.E.
GREAT Personalty: As defined in Section 2.1.C.
GREAT Projects: As defined in Section 2.1.
GREAT Real Estate: As defined in Section 2.1.A.
Grove Contributors: Brian Navarro, Damon Navarro, Edmund Navarro, Joseph
LaBrosse, Grove Investment Group, Inc., the Management Company, Burgundy and
[other Grove-affiliated Contributors].
Grove Leases: Collectively, the Partnership Leases and the Burgundy
Leases.
Grove Owners: Collectively, the Property Partnerships and Burgundy.
Grove Projects: Collectively, the Partnership Projects and the Burgundy
Project.
Hazardous Materials: As defined in Section 4.1.J hereof.
Improvements: Collectively, the GREAT Improvements, the Partnership
Improvements and the Burgundy Improvements.
Leases: Collectively, the GREAT Leases, the Partnership Leases and the
Burgundy Leases.
Liquidating Partnerships: The Property Partnerships identified on Schedule
A as being Liquidating Partnerships.
Liquidating Partnership Contributors: Collectively, the parties identified
on Schedule A as Contributors of interests in the Liquidating Partnerships.
Liquidating Partnership Projects: Collectively, the Partnership Projects
owned by the Liquidating Partnerships.
Management Company: Grove Property Services Limited Partnership, a
Connecticut limited partnership.
Management Company Assets and Liabilities: As defined in Section 2.5.
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Management Contracts: All contracts, commitments and agreements of the
Management Company relating to the provision of property management services by
the Management Company to Owners or any other Person.
Material Adverse Effect: With respect to any Person, a material adverse
effect on the properties, business, results of operation or financial condition
of such Person.
Multiemployer Plan: A multiemployer plan defined as such in Section 3(37)
of ERISA to which contributions have been made by a Contributor or Property
Partnership and which is covered by Title IV of ERISA.
New Equity Proceeds: As defined in Section 2.2.
Non-Liquidating Partnerships: The Property Partnerships identified on
Schedule A as being Non-Liquidating Partnerships.
Non-Liquidating Partnership Contributors: Collectively, the parties
identified on Schedule A as being Contributors of interests in the
Non-Liquidating Partnerships.
Obligations: All payments required to be made and all representations,
warranties, covenants, agreements and commitments required to be performed under
the provisions of this Agreement by the Contributors or the Operating
Partnership, as applicable.
OP: As defined in the caption to this Agreement.
Operating Partnership: As defined in the caption to this Agreement.
Operating Partnership Agreement: The Limited Operating Partnership
Agreement of the Operating Partnership to be entered into at or prior to Closing
by GREAT, as general partner, and the other Contributors and various other
persons, as limited partners, as amended, modified or supplemented from time to
time.
Other Contributors: The Contributors other than GREAT and the Grove
Contributors.
Owners: Collectively, GREAT, the Property Partnerships and Burgundy.
Partnership Improvements: Collectively, the apartment complexes, ancillary
parking lots, and any and all other improvements and structures located on the
Partnership Real Estate.
Partnership Intangible Property: Collectively, all intangible property or
interest therein now or hereafter owned or held by a Property Partnership
between the date hereof and the date of the Closing in connection with the
Partnership Real Estate (or any portion thereof), the Partnership Improvements,
the Partnership Personalty or any business or businesses conducted on the
Partnership Real Estate, or on any portion thereof, or in connection with the
ownership,
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operation, management or use thereof, including (1) any trade style or trade
name used in connection with the Partnership Real Estate or any of the
Partnership Improvements; (2) any assignable Service Contracts; (3) all
"as-built" plans and specifications or other construction drawings of any type
in the Property Partnerships' possession or control prepared in connection with
the construction of the Partnership Improvements; (4) all tests, studies and
reports in the Property Partnerships' possession or control prepared with
respect to the Partnership Real Estate or the Partnership Improvements
(including any environmental reports); (5) all of the Property Partnerships'
books and records with respect to the Partnership Real Estate or the Partnership
Improvements; and (6) all assignable guarantees and warranties (including
guarantees and warranties pertaining to the construction of the Partnership
Improvements or pertaining to the acquisition of the Partnership Real Estate, or
any parcel thereof, or any of the Partnership Improvements by a Property
Partnership), licenses and other governmental permits, approvals and permissions
(including the certificate of occupancy) relating to the Partnership Real
Estate, or any portion thereof, the Partnership Improvements, or the ownership,
operation, management or use thereof.
Partnership Leases: All leases or occupancy agreements for any units in
the Partnership Improvements or for any other portion of the Partnership Real
Estate or the Partnership Improvements.
Partnership Personalty: Collectively, all fixtures and other personal and
tangible property or interest therein owned by the Property Partnerships,
including the heating, sprinkler, plumbing, air conditioning and ventilation
systems, furniture, appliances, blinds, office equipment and furniture,
supplies, replacements, machinery, equipment, and any other personal property or
interest therein owned by Partnership, now or hereafter located on the
Partnership Real Estate, or on any portion thereof, or in any of the Partnership
Improvements, or used in connection with the ownership, operation, management or
use of the Partnership Real Estate, or any portion thereof, or any of the
Partnership Improvements.
Partnership Projects: Collectively, the Partnership Real Estate,
Partnership Improvements, Partnership Personalty, Partnership Intangible
Property and Partnership Leases.
Partnership Real Estate: Collectively, the land described on Schedules E-1
through E-[___] attached hereto and made a part hereof, together with all of the
rights, privileges, easements and appurtenances belonging or appertaining to
such land, including all oil, gas and mineral rights belonging to the Property
Partnerships, all right, title and interest of the Property Partnerships in and
to all land lying in any street, alley, road or avenue, open or proposed, in
front of or adjoining such land, to the centerline thereof, all rights-of-way
adjacent to such land and all right, title and interest of the Property
Partnerships in and to any award made or to be made in lieu thereof and in and
to any unpaid award for damage to such land by reason of change of grade of any
street.
PBGC: The Pension Benefit Guaranty Corporation or any entity succeeding to
any or all of its functions under ERISA.
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Permitted Exceptions: Any liens, encumbrances, restrictions, exceptions
and other matters specified on the Searches, Title Commitments, Title Policies
or Surveys, to which title to the Real Estate may be subject on the Closing
Date.
Person: Any individual, a partnership, a joint venture, a corporation, a
trust, a limited liability company, an unincorporated organization or a
government or any department or agency thereof.
Plan: An employee benefit or other plan established or maintained by a
Contributor, Property Partnership or the Management Company and which is covered
by Title IV of ERISA, other than a Multiemployer Plan.
Projects: The GREAT Projects, the Partnership Projects and the Burgundy
Project.
Property Partnerships: The partnerships listed on Schedule A hereto.
Property-Related Representations and Warranties: The representations and
warranties of the Grove Contributors set forth in subsections [F-J and L-Z] of
Section 4.1 and the representations and warranties of GREAT set forth in
subsections [F-J and L-Z] of Section 4.2.
Proxy Statement: The proxy statement relating to a special meeting of
shareholders of GREAT to be held on or about March 10, 1997.
Real Estate: Collectively, the GREAT Real Estate, the Partnership Real
Estate and the Burgundy Real Estate.
Searches: As defined in Section 5.3(c) hereof.
Securities Act: As defined in Section 4.1.DD.
Service Contracts: All laundry equipment leases, management, leasing,
repair, maintenance, operating, supply, purchase, consulting, advertising,
service, equipment, concession and other contracts, commitments and agreements
(excluding the Leases) relating to the Real Estate.
Surveys: Collectively, the surveys for the Projects delivered in
accordance with Section 5.3(a) hereof.
Title Commitments: Collectively, the commitments for title insurance
delivered in accordance with Section 5.3(b) hereof.
Title Company: __________.
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Title Defect: Any lien, claim, charge, security interest, restriction,
title exception, defect or encumbrance other than a Permitted Exception.
[Title Policies: Collectively, the policies of title insurance delivered
in accordance with Section 5.3 hereof.]
Transfer: As defined in Section 4.1.DD.
Units: Units of beneficial interest in the Operating Partnership. Except
for Units issued to GREAT, which shall be Units of general partnership interest,
all Units referred to in this Agreement shall be Units of limited partnership
interest.
Unit Value: The per Unit value of the Units at the time of the
consummation of the Consolidation Transactions (which per Unit value shall be
equal to the value of a Unit as set forth in the Exchange Offer).
Withdrawing General Partner: Each Contributor identified on Schedule A as
being a Withdrawing General Partner.
Wholly-Owned Projects: Collectively, the GREAT Projects, the Liquidating
Partnership Projects and the Burgundy Project.
1.2 References. Except as otherwise specifically indicated, all references
to Section and Subsection numbers refer to Sections and Subsections of this
Agreement, and all references to Schedules refer to the Schedules attached
hereto. The words "hereby," "hereof," "herein," "hereto," "hereunder,"
"hereinafter," and words of similar import refer to this Agreement as a whole
and not to any particular Section or Subsection hereof. The word "hereafter"
shall mean after, and the term "heretofore" shall mean before, the date of this
Agreement. The word "including" shall mean "including, without limitation."
Captions used herein are for convenience only and shall not be used to construe
the meaning of any part of this Agreement.
ARTICLE 2
CONTRIBUTION AND ACCEPTANCE; OTHER TRANSACTIONS
2.1 Contribution and Acceptance of GREAT Properties. Subject to the terms
and conditions contained in this Agreement, GREAT agrees to contribute and
assign to the Operating Partnership, and the Operating Partnership agrees to
accept, the following (collectively, the "GREAT Projects"):
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A. All of the land described on Schedules D-1 through D-4 attached
hereto and made a part hereof, together with all of the rights, privileges,
easements and appurtenances belonging or appertaining to such land, including
all oil, gas and mineral rights belonging to GREAT, all right, title and
interest of GREAT in and to all land lying in any street, alley, road or avenue,
open or proposed, in front of or adjoining such land, to the centerline thereof,
all rights-of-way adjacent to such land and all right, title and interest of
GREAT in and to any award made or to be made in lieu thereof and in and to any
unpaid award for damage to such land by reason of change of grade of any street
(such land and all such rights, privileges, easements and appurtenances are
collectively referred to herein as the "GREAT Real Estate").
B. The apartment complexes, ancillary parking lots, and any and all
other improvements and structures located on the GREAT Real Estate (hereinafter
collectively called the "GREAT Improvements").
C. All fixtures and other personal and tangible property or interest
therein owned by GREAT, including the heating, sprinkler, plumbing, air
conditioning and ventilation systems, furniture, appliances, blinds, office
equipment and furniture, supplies, replacements, machinery, equipment, and any
other personal property or interest therein owned by GREAT, now or hereafter
located on the GREAT Real Estate, or on any portion thereof, or in any of the
GREAT Improvements, or used in connection with the ownership, operation,
management or use of the GREAT Real Estate, or any portion thereof, or any of
the GREAT Improvements (all of the foregoing are hereinafter collectively called
the "GREAT Personalty").
D. All intangible property or interest therein now or hereafter
owned or held by GREAT between the date hereof and the date of the Closing in
connection with the GREAT Real Estate (or any portion thereof), the GREAT
Improvements, the GREAT Personalty or any business or businesses conducted on
the GREAT Real Estate, or on any portion thereof, or in connection with the
ownership, operation, management or use thereof, including (1) any trade style
or trade name used in connection with the GREAT Real Estate or any of the GREAT
Improvements; (2) any assignable Service Contracts; (3) all "as-built" plans and
specifications or other construction drawings of any type in GREAT's possession
or control prepared in connection with the construction of the GREAT
Improvements; (4) all tests, studies and reports in GREAT's possession or
control prepared with respect to the GREAT Real Estate or the GREAT Improvements
(including any environmental reports); (5) all of GREAT's books and records with
respect to the GREAT Real Estate or the GREAT Improvements; and (6) all
assignable guarantees and warranties (including guarantees and warranties
pertaining to the construction of the GREAT Improvements or pertaining to the
acquisition of the GREAT Real Estate, or any parcel thereof, or any of the GREAT
Improvements by GREAT), licenses and other governmental permits, approvals and
permissions (including the certificate of occupancy) relating to the GREAT Real
Estate, or any portion thereof, the GREAT Improvements, or the ownership,
operation, management or use thereof (all of the foregoing are hereinafter
collectively called the "GREAT Intangible Property").
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E. All leases or occupancy agreements for any units in the GREAT
Improvements or for any other portion of the GREAT Real Estate or the GREAT
Improvements (the "GREAT Leases").
2.2 Contribution and Acceptance of New Equity Proceeds. Subject to the
terms and conditions contained in this Agreement, GREAT agrees to contribute to
the Operating Partnership, and the Operating Partnership agrees to accept, up to
$30 million, which amount shall equal the gross proceeds of a private placement
by GREAT of up to 3,333,333 Common Shares to one or more investors ("New Equity
Proceeds").
2.3 Non-Liquidating Property Partnerships.
A. Withdrawing General Partners. Subject to the terms and conditions
contained in this Agreement, each of the Withdrawing General Partners hereby
agrees to withdraw as a general partner of the applicable Non-Liquidating
Property Partnership, effective immediately prior to consummation of the
transactions contemplated by Subsection 2.3.B, which withdrawal will, in
accordance with the partnership agreement of such Non-Liquidating Property
Partnership, cause such general partnership interest to be automatically
converted into a limited partnership interest in the applicable Property
Partnership.
B. Contribution or Transfer; Acceptance. Subject to the terms and
conditions contained in this Agreement, each of the Non-Liquidating Partnership
Contributors hereby agrees to contribute and/or assign to the Operating
Partnership or GREAT, as the case may be, the interests in the Non-Liquidating
Partnerships, as set forth on Schedule A.
2.4 Liquidating Property Partnerships.
A. Contribution; Acceptance. Subject to the terms and conditions of
this Agreement, each Liquidating Partnership Contributor hereby agrees to
contribute to the Operating Partnership, and the Operating Partnership agrees to
accept, all of such Liquidating Partnership Contributor's Economic Interests in
the Liquidating Partnerships, as set forth on Schedule A.
B. Liquidation and Distribution of Assets. Subject to the terms and
conditions of this Agreement, each Liquidating Partnership Contributor hereby
agrees to cause each Liquidating Partnership in which it holds interests to
liquidate in accordance with its partnership agreement immediately after
consummation of the transactions contemplated by Subsection 2.4.A, and in
connection with such liquidation, to make an "in-kind" distribution to the
Operating Partnership (or a subsidiary of the Operating Partnership) in
accordance with its partnership agreement of 100% of the Partnership Project
held by such Liquidating Partnership. As partial consideration for such
distribution and simultaneously therewith, the Operating Partnership shall
contribute cash to each Liquidating Partnership, in the amounts set forth on
Schedule B, which amounts shall be sufficient to permit distribution to those
limited partners of such Liquidating Partnership not
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electing to participate in the Exchange Offer of cash equivalent to such
limited partners' allocable portion of the assets of the Liquidating
Partnership to which they are entitled in accordance with the partnership
agreement of such Liquidating Partnership. In connection with such
liquidation each Liquidating Partnership Contributor hereby agrees to cause
such Liquidating Partnership to distribute such cash to such limited
partners, all in accordance with the partnership agreement of the Liquidating
Partnership.
2.5 Management Company Assets and Liabilities. Subject to the terms and
conditions contained in this Agreement, the Management Company hereby agrees to
contribute and assign to the Operating Partnership, and the Operating
Partnership agrees to accept and assume, all of the Contributors' right, title
and interest in and to the assets and liabilities of the Management Company as
of the Closing Date relating primarily to the property management business of
the Management Company, including, without limitation, the Management Contracts,
the trade name "Grove Property Services" and the assets and liabilities set
forth on Schedule C hereto (the "Management Company Assets and Liabilities").
2.6 Burgundy Studio Apartments. Subject to the terms and conditions
contained in this Agreement, Burgundy hereby agrees to contribute to the
Operating Partnership, and the Operating Partnership agrees to accept, the
following (collectively, the "Burgundy Project"):
A. All of the land described on Schedule F attached hereto and made
a part hereof, together with all of the rights, privileges, easements and
appurtenances belonging or appertaining to such land, including all oil, gas and
mineral rights belonging to Burgundy, all right, title and interest of Burgundy
in and to all land lying in any street, alley, road or avenue, open or proposed,
in front of or adjoining such land, to the centerline thereof, all rights-of-way
adjacent to such land and all right, title and interest of Burgundy in and to
any award made or to be made in lieu thereof and in and to any unpaid award for
damage to such land by reason of change of grade of any street (such land and
all such rights, privileges, easements and appurtenances are collectively
referred to herein as the "Burgundy Real Estate").
B. The apartment complexes, ancillary parking lots, and any and all
other improvements and structures located on the Burgundy Real Estate
(hereinafter collectively called the "Burgundy Improvements").
C. All fixtures and other personal and tangible property or interest
therein owned by Burgundy, including the heating, sprinkler, plumbing, air
conditioning and ventilation systems, furniture, appliances, blinds, office
equipment and furniture, supplies, replacements, machinery, equipment, and any
other personal property or interest therein owned by Burgundy, now or hereafter
located on the Burgundy Real Estate, or on any portion thereof, or in any of the
Burgundy Improvements, or used in connection with the ownership, operation,
management or use of the Burgundy Real Estate, or any portion thereof, or any of
the Burgundy Improvements (all of the foregoing are hereinafter collectively
called the "Burgundy Personalty").
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D. All intangible property or interest therein now or hereafter
owned or held by Burgundy between the date hereof and the date of the Closing in
connection with the Burgundy Real Estate (or any portion thereof), the Burgundy
Improvements, the Burgundy Personalty or any business or businesses conducted on
the Burgundy Real Estate, or on any portion thereof, or in connection with the
ownership, operation, management or use thereof, including (1) any trade style
or trade name used in connection with the Burgundy Real Estate or any of the
Burgundy Improvements; (2) any assignable Service Contracts; (3) all "as-built"
plans and specifications or other construction drawings of any type in
Burgundy's possession or control prepared in connection with the construction of
the Burgundy Improvements; (4) all tests, studies and reports in Burgundy's
possession or control prepared with respect to the Burgundy Real Estate or the
Burgundy Improvements (including any environmental reports); (5) all of
Burgundy's books and records with respect to the Burgundy Real Estate or the
Burgundy Improvements; and (6) all assignable guarantees and warranties
(including guarantees and warranties pertaining to the construction of the
Burgundy Improvements or pertaining to the acquisition of the Burgundy Real
Estate, or any parcel thereof, or any of the Burgundy Improvements by Burgundy),
licenses and other governmental permits, approvals and permissions (including
the certificate of occupancy) relating to the Burgundy Real Estate, or any
portion thereof, the Burgundy Improvements, or the ownership, operation,
management or use thereof (all of the foregoing are hereinafter collectively
called the "Burgundy Intangible Property").
E. All leases or occupancy agreements for any units in the Burgundy
Improvements or for any other portion of the Burgundy Real Estate or the
Burgundy Improvements (the "Burgundy Leases").
ARTICLE 3
CONSIDERATION
3.1 Units and Cash. In consideration of the contributions, conveyances,
assignments and transfers to be made by the Contributors under Article 2 hereof,
the Operating Partnership agrees to issue and sell to each Contributor the Units
set forth with respect to such Contributor set forth on Schedule A hereto, and
GREAT agrees to pay to each Contributor the cash amounts set forth with respect
to such Contributor on Schedule A hereto, as adjusted pursuant to Section 7.4
hereof and after accounting for any credits or adjustments pursuant to any other
provision of this Agreement.
3.2 Operating Partnership Agreement. At or prior to Closing, the Operating
Partnership and the Contributors receiving Units pursuant to Section 3.1 shall
enter into the Operating Partnership Agreement with all other parties thereto.
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ARTICLE 4
COVENANTS, REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Grove Contributors. To induce
the Operating Partnership to execute, deliver and perform this Agreement, each
of the Grove Contributors represents and warrants, jointly and severally, to
GREAT and the Operating Partnership on and as of the date hereof as follows:
A. Existence. Each Grove Contributor that is not a natural person,
and each of the Property Partnerships and the Management Company: (i) is duly
organized and validly existing under the laws of the state of its organization;
(ii) has all requisite power, and has all material governmental licenses,
authorizations, consents and approvals necessary to own its assets and carry on
its business as now being or as proposed to be conducted; and (iii) is qualified
to do business in all jurisdictions in which the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified would not have a Material Adverse Effect on such Grove
Contributor.
B. Authorization, Execution, Etc. Each Grove Contributor has, in the
case of any Grove Contributor other than an individual, all necessary power and
authority, and in the case of a natural person, the legal capacity to execute,
deliver and perform its obligations under this Agreement; the execution,
delivery and performance by each Grove Contributor of this Agreement have been
duly authorized by all necessary action on its part; and this Agreement has been
duly and validly executed and delivered by each Grove Contributor and
constitutes its legal, valid and binding obligation, enforceable in accordance
with its terms, subject to bankruptcy, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights in general and to general
principles of equity.
C. No Breach. None of the execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby and compliance with the
terms and provisions hereof by the Grove Contributors will conflict with or
result in a breach of, or require any consent (except such consents as have been
obtained) under (i) the organizational documents of any Grove Contributor,
Property Partnership or the Management Company, (ii) any material applicable law
or regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, or (iii) any material agreement or instrument
to which any Grove Contributor, Property Partnership or the Management Company
is a party or by which it is bound or to which it is subject, or constitute a
default under any such agreement or instrument, or result in the creation or
imposition of any lien upon any of the revenues or assets of any Grove
Contributor, Property Partnership or the Management Company pursuant to the
terms of any such agreement or instrument.
D. Litigation. There are no legal or arbitral proceedings or any
proceedings by or before any governmental or regulatory authority or agency, now
pending or, to the knowledge of the Grove Contributors, threatened against any
of the Grove Contributors, Property
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Partnerships or the Management Company, except for such proceedings which, if
decided adversely to such Person would not have a Material Adverse Effect on
such Person.
E. Approvals. The Grove Contributors have obtained all material
authorizations, approvals or consents of, and have made all material filings or
registrations with, any governmental or regulatory authority or agency that are
necessary for the execution, delivery or performance by the Grove Contributors
of this Agreement or for the validity or enforceability thereof.
F. Rent Roll. Schedule G hereto is a true and correct list of the
rent rolls for the Grove Projects copies of which have been delivered to the
Operating Partnership. Each rent roll is a true and correct rent roll for the
applicable Grove Project, showing, for each apartment unit the following
information: (i) whether the unit is occupied and, if occupied, (ii) the name(s)
of the tenant(s), (iii) the amount of rent, (iv) the amount of any security
deposit, (v) the starting and termination date of the lease term, (vi) whether
there is any delinquency and, if so, how much, (vii) unit type (e.g., 1, 2 or 3
bedroom) and number of baths, (viii) rentable square footage per unit, (ix)
renewal options, if any, and (x) any utilities which are furnished as part of
the rent.
G. Parties In Possession. Except as shown on the rent rolls listed
on Schedule G, no Person is in possession of any Grove Project or any portion
thereof, and no Person has any interest in any Project, or any portion thereof,
except for the Grove Owners.
H. Leases. A correct and complete copy of each Grove Lease
(including all amendments thereto) has been provided to the Operating
Partnership and each Grove Lease is unmodified (except for such amendments) and
in full force and effect and neither the Grove Owners nor, to the Grove
Contributors' knowledge, any other party to any thereof is in default
thereunder.
I. ERISA. Each Grove Contributor, Property Partnership and the
Management Company has fulfilled its obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan and is in compliance
in all material respects with the presently applicable provisions of ERISA and
the Code, and have not incurred any liability to the PBGC or any Plan or
Multiemployer Plan (other than to make contributions in the ordinary course of
business).
J. Hazardous Materials. To the Grove Contributors' knowledge, except
as disclosed in Schedule H hereto or in any environmental reports or audits
furnished to the Operating Partnership prior to the date hereof, each Grove
Owner has obtained all permits, licenses and other authorizations which it is
required to obtain under all Environmental Laws, and each Grove Owner is in
compliance with the terms and conditions of all such permits, licenses and
authorizations, and is also in compliance in all material respects with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any applicable
Environmental Law or in any regulation, code, plan,
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order, decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder.
In addition, to the Grove Contributors' knowledge, except as
disclosed in Schedule H hereto or in any environmental reports or audits
furnished to the Operating Partnership prior to the date hereof:
(1) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened, by any governmental or other entity with respect to any alleged
failure by a Grove Owner to have any permit, license or authorization required
in connection with the conduct of its business with respect to any generation,
treatment, storage, recycling, transportation, release or disposal, or any
release as defined in 42 U.S.C. ss. 9601(22), of any substance regulated under
Environmental Laws ("Hazardous Materials") generated by a Grove Owner.
(2) No Grove Owner has handled any Hazardous Material, other
than as a generator, on any property now or previously owned or leased by it.
(3) No polychlorinated biphenyls are or have been present at
any property now or previously owned or leased by a Grove Owner.
(4) No asbestos is or has been present at any property now or
previously owned or leased by a Grove Owner.
(5) There are no underground storage tanks for Hazardous
Materials, active or abandoned, at any property now or previously owned or
leased by a Grove Owner.
(6) No Hazardous Materials have been released and continue to
affect the subject property, in a reportable quantity, where such a quantity has
been established by statute, ordinance, rule, regulation or order, at, on or
under any property now or previously owned or leased by a Grove Owner.
(7) No Hazardous Materials have been otherwise released at, on
or under any property now or previously owned or leased by a Grove Owner.
(8) No Grove Owner has transported or arranged for the
transportation of any Hazardous Material to any location which is listed on the
National Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), listed for
possible inclusion on the National Priorities List by the Environmental
Protection Agency in CERCLIS or on any similar state list or which is the
subject of federal, state or local enforcement actions or other investigations
which may reasonably be expected to lead to claims against a Grove Owner for
clean-up costs, remedial work, damages to natural resources or for personal
injury claims, including claims under CERCLA.
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(9) No notification of a release of a Hazardous Material has
been filed by or on behalf of a Grove Owner and no property now or previously
owned or leased by a Grove Owner is listed or proposed for listing on the
National Priority List promulgated pursuant to CERCLA, on CERCLIS or on any
similar state list of sites requiring investigation or clean-up.
(10) There are no liens arising under or pursuant to any
Environmental Laws on any of the real property or properties owned or leased by
a Grove Owner, and no government actions have been taken or are in process which
could subject any of such properties to such liens and no Grove Owner would be
required to place any notice or restriction relating to the presence of
Hazardous Materials at any property owned or leased by it in any deed to such
property.
(11) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by or which are in the
possession of a Grove Owner in relation to any property or facility now or
previously owned or leased by it which have not been made available to the
Operating Partnership.
K. Title. The Grove Owners are the sole beneficial owners of, and
have good and marketable title to, the Grove Projects, free and clear of all
Title Defects. The Management Company is the sole beneficial owner of, and has
good and marketable to, assets included in the Management Company Assets and
Liabilities free and clear of all security interests, liens or other
encumbrances.
L. Financing Arrangements. Schedule I hereto is a true and correct
list of all financing agreements to which any of the Property Partnerships is a
party (other than those which are to be repaid or refinanced as part of the
Consolidation Transactions), setting forth with respect to each the names of the
parties, the dates thereof and of any modifications, amendments or supplements
thereto, and the principal amount of the indebtedness evidenced or secured
thereby.
M. Employees. Each of the Property Partnerships and the Management
Company has complied in all material respects with all laws relating to the
employment of labor, including any provisions thereof relating to wages, hours,
collective bargaining and the payment of social security and similar taxes (in
each case except where any statute of limitations applicable to non-compliance
has expired without any claim having been made with respect to such
non-compliance), and is not liable for any arrearage of wages, taxes or
penalties for failure to comply with any of the foregoing.
N. Solvency. None of the transactions contemplated by this Agreement
will be or have been made with an actual intent to hinder, delay or defraud any
present or future creditors of the Grove Contributors, and the Grove
Contributors are not and will not be rendered insolvent by such transactions or
will have received fair and reasonably equivalent value in good faith for the
contribution and sale of assets pursuant to this Agreement. The Grove
Contributors
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are able to pay their debts as they become due, including contingent obligations
reasonably likely to become due.
O. Delinquent Property Liens. Except for claims which are not
material in amount or which are expressly permitted to exist under this
Agreement or which otherwise constitute Permitted Exceptions, there is no
delinquent tax, sewer rent, water charge, assessment or other outstanding
charges against any of the Partnership Real Estate or the Burgundy Real Estate.
Except as shown in the title policy, there are no mechanics' liens or similar
Title Defects or, to the Grove Contributors' knowledge, claims for overdue
payment for work performed by or on behalf of the Grove Owners, labor or
material affecting the Grove Projects and there are no mechanics' liens or
similar Title Defects or claims affecting the Grove Projects which have not been
insured or endorsed over by the Title Company issuing the Title Policies.
P. Insurance. The Grove Projects are covered by insurance of the
type and in the amounts set forth on Schedule J.
Q. Improvements. Except as disclosed in the Surveys or Title
Commitments, all the Partnership Improvements and Burgundy Improvements lie
wholly within the boundary and building restriction lines of the Partnership
Real Estate and the Burgundy Real Estate, respectively, and no improvements on
adjoining properties encroach upon the Partnership Real Estate or the Grove Real
Estate in any respect.
R. Casualty; Condemnation. The Grove Projects are free of material
damage and waste and there is no proceeding pending or, to the best of the Grove
Contributors' knowledge, threatened, for the total or partial taking of any
Grove Project, and there has not occurred with respect to any Grove Project any
(i) damage or destruction which would cost more than $100,000 to repair, (b) any
taking by condemnation or eminent domain or other similar proceeding involving
loss in excess of $100,000 or (c) any taking by condemnation or eminent domain
or other similar proceeding of all or substantially all thereof (other than for
temporary use).
S. Zoning and Other Laws. To the Grove Contributors' knowledge, the
Grove Projects and the use and operation thereof, separate and apart from any
other properties, constitute a legal use under applicable zoning regulations and
comply in all material respects with all applicable requirements of law and all
applicable insurance requirements, and comply in all material respects with the
applicable provisions of the Americans with Disabilities Act and the Fair
Housing Amendments Act of 1988 and all applicable regulations issued thereunder
and each similar applicable state law and regulation.
T. Management Contracts. A correct and complete copy of each
Management Contract (including all amendments thereto) has been provided to the
Operating Partnership. Each Management Contract is unmodified (except for such
amendments) and in full force and effect and neither the Management Company, any
Grove Owner nor, to the Grove Contributors' knowledge, any other party to any
Management Contract is in default thereunder.
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U. Service Contracts. Except as set forth in Schedule K, each
Service Contract relating to any Grove Project may be terminated on thirty days'
or less notice and without any material penalty. Each contract or other
agreement specified on Schedule K is unmodified (except as set forth on Schedule
K) and in full force and effect and neither the Grove Owners nor, to the Grove
Contributors' knowledge, any other party to any thereof is in default
thereunder.
V. Permits. Except for permits relating to Hazardous Materials
(which are provided for in Section 4.1(j)), there have been issued in respect of
the Grove Projects all permits and governmental approvals necessary or required
to own, operate, use and occupy the Grove Projects in the manner currently
operated. Each such permit is in full force and effect and the Grove Owners have
not received any notice of violation or revocation thereof. No other permits are
required from any governmental entity in order to operate the Grove Projects as
they are now operated.
W. Utilities. The Grove Owners have not received any notice of
actual or threatened reduction or curtailment of any utility service now
supplied to any Grove Project.
X. Certificates of Occupancy. The Grove Owners have not received any
notice of actual or threatened cancellation or suspension of the certificate of
occupancy for any portion of any Grove Project and each such certificate of
occupancy is in full force and effect.
Y. Assessments. The Grove Owners have not received any notice of
actual or threatened special assessments or reassessments of any Grove Project.
Z. Condition of Projects. Except as set forth in Schedule L, the
Partnership Improvements and the Burgundy Improvements are structurally sound
and in good repair, and all mechanical, electrical, heating, air conditioning,
drainage, sewer, water and plumbing systems are in proper working order.
AA. Activities of Property Partnerships. The sole activities of each
Property Partnership are (i) the ownership of its Project, (ii) the operation,
leasing, financing and management of its Project and (iii) activities incidental
to such ownership, operation, leasing, financing and management.
BB. Property Partnership Agreements. Schedule M hereto is a true and
correct list of all partnership agreements with respect to the Property
Partnerships, including all modifications, amendments or supplements thereto.
All such partnership agreements are in full force and effect in accordance with
their respective terms and have not been modified or amended (except as
indicated on Schedule M).
CC. Title to Contributed Interests. Subject to the provisions of the
partnership agreement of each Property Partnership, the Grove Contributors are
the owners of the partnership
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interests, capital stock and other assets set forth opposite their respective
names on Schedule A free and clear of all security interests, liens or other
encumbrances.
DD. Accredited Investor; Acquisition for Investment Purposes. Each
Grove Contributor and each direct and indirect owner of such Grove Contributor
is an "accredited investor" as defined in Rule 501 of the General Rules and
Regulations promulgated under the Securities Act of 1933, as amended (the
"Securities Act"). Each of the Grove Contributors is acquiring the Units solely
for its own account for the purpose of investment and not as a nominee or agent
for any other Person and not with a view to, or for offer or sale in connection
with, any distribution of any Units (other than in a transaction which is either
registered under the Securities Act or exempt from such registration, and in
compliance with all applicable Blue Sky or state securities laws or exempt
therefrom). Each Grove Contributor agrees and acknowledges that it will not,
directly or indirectly, offer, transfer, sell, assign, pledge, hypothecate or
otherwise dispose of (hereinafter, "Transfer") any of the Units unless such
Transfer complies with the Operating Partnership Agreement and is either (i)
pursuant to an effective registration statement under the Securities Act and
qualification or other compliance under applicable Blue Sky or state securities
laws, or (ii) exempt from registration under the Securities Act and
qualification or other compliance under applicable Blue Sky or state securities
laws.
4.2 Representations and Warranties of GREAT. To induce the Operating
Partnership to execute, deliver and perform this Agreement, GREAT represents and
warrants, to the Operating Partnership on and as of the date hereof as follows:
A. Existence. GREAT: (i) is duly organized and validly existing
under the laws of the state of its organization; (ii) has all requisite power,
and has all material governmental licenses, authorizations, consents and
approvals necessary to own its assets and carry on its business as now being or
as proposed to be conducted; and (iii) is qualified to do business in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so qualified would not
have a Material Adverse Effect on such Other Contributor.
B. Authorization, Execution, Etc. GREAT has all necessary power and
authority to execute, deliver and perform its obligations under this Agreement;
the execution, delivery and performance by GREAT of this Agreement have been
duly authorized by all necessary action on its part; and this Agreement has been
duly and validly executed and delivered by GREAT and constitutes its legal,
valid and binding obligation, enforceable in accordance with its terms, subject
to bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights in general and to general principles of equity.
C. No Breach. None of the execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby and compliance with the
terms and provisions hereof by GREAT will conflict with or result in a breach
of, or require any consent (except such consents as have been obtained) under
(i) the organizational documents of GREAT, (ii) any material applicable law or
regulation, or any order, writ, injunction or decree of any court
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<PAGE>
or governmental authority or agency, or (iii) any material agreement or
instrument to which GREAT is a party or by which it is bound or to which it is
subject, or constitute a default under any such agreement or instrument, or
result in the creation or imposition of any lien upon any of the revenues or
assets of GREAT, pursuant to the terms of any such agreement or instrument.
D. Approvals. GREAT has obtained all material authorizations,
approvals or consents of, and has made all material filings or registrations
with, any governmental or regulatory authority or agency that are necessary for
the execution, delivery or performance by GREAT of this Agreement or for the
validity or enforceability thereof.
E. Accredited Investor; Acquisition for Investment Purposes. GREAT
is an "accredited investor" as defined in Rule 501 of the General Rules and
Regulations promulgated under the Securities Act. GREAT is acquiring the Units
solely for its own account for the purpose of investment and not as a nominee or
agent for any other Person and not with a view to, or for offer or sale in
connection with, any distribution of any Units (other than in a transaction
which is either registered under the Securities Act or exempt from such
registration, and in compliance with all applicable Blue Sky or state securities
laws or exempt therefrom). GREAT agrees and acknowledges that it will not,
directly or indirectly, Transfer any of the Units unless such Transfer complies
with the Operating Partnership Agreement and is either (i) pursuant to an
effective registration statement under the Securities Act and qualification or
other compliance under applicable Blue Sky or state securities laws, or (ii)
exempt from registration under the Securities Act and qualification or other
compliance under applicable Blue Sky or state securities laws.
F. Rent Roll. Schedule G hereto is a true and correct list of the
rent rolls for the GREAT Projects, copies of which have been delivered to the
Operating Partnership. Each rent roll is a true and correct rent roll for the
applicable GREAT Project, showing, for each apartment unit the following
information: (i) whether the unit is occupied and, if occupied, (ii) the name(s)
of the tenant(s), (iii) the amount of rent, (iv) the amount of any security
deposit, (v) the starting and termination date of the lease term, (vi) whether
there is any delinquency and, if so, how much, (vii) unit type (e.g., 1, 2 or 3
bedroom) and number of baths, (viii) rentable square footage per unit, (ix)
renewal options, if any, and (x) any utilities which are furnished as part of
the rent.
G. Parties In Possession. Except as shown on the rent rolls listed
on Schedule G, no Person is in possession of any GREAT Project or any portion
thereof, and no Person has any interest in any GREAT Project, or any portion
thereof, except for GREAT.
H. Leases. A correct and complete copy of each GREAT Lease
(including all amendments thereto) has been provided to the Operating
Partnership and each GREAT Lease is unmodified (except for such amendments) and
in full force and effect and neither GREAT nor, to GREAT's knowledge, any other
party to any thereof is in default thereunder.
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I. ERISA. GREAT has fulfilled its obligations under the minimum
funding standards of ERISA and the Code with respect to each Plan and is in
compliance in all material respects with the presently applicable provisions of
ERISA and the Code, and have not incurred any liability to the PBGC or any Plan
or Multiemployer Plan (other than to make contributions in the ordinary course
of business).
J. Hazardous Materials. To GREAT's knowledge, except as disclosed in
Schedule H hereto or in any environmental reports or audits furnished to the
Operating Partnership prior to the date hereof, GREAT has obtained all permits,
licenses and other authorizations which it is required to obtain under all
Environmental Laws, and GREAT is in compliance with the terms and conditions of
all such permits, licenses and authorizations, and is also in compliance in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in any applicable Environmental Law or in any regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder.
In addition, to GREAT's knowledge, except as disclosed in Schedule H
hereto or in any environmental reports or audits furnished to the Operating
Partnership prior to the date hereof:
(1) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened, by any governmental or other entity with respect to any alleged
failure by GREAT to have any permit, license or authorization required in
connection with the conduct of its business with respect to any generation,
treatment, storage, recycling, transportation, release or disposal, or any
release as defined in 42 U.S.C. ss. 9601(22), of any substance regulated under
Environmental Laws ("Hazardous Materials") generated by GREAT.
(2) GREAT has not handled any Hazardous Material, other than
as a generator, on any property now or previously owned or leased by it.
(3) No polychlorinated biphenyls are or have been present at
any property now or previously owned or leased by GREAT.
(4) No asbestos is or has been present at any property now or
previously owned or leased by GREAT.
(5) There are no underground storage tanks for Hazardous
Materials, active or abandoned, at any property now or previously owned or
leased by GREAT.
(6) No Hazardous Materials have been released and continue to
affect the subject property, in a reportable quantity, where such a quantity has
been established by
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statute, ordinance, rule, regulation or order, at, on or under any property now
or previously owned or leased by GREAT.
(7) No Hazardous Materials have been otherwise released at, on
or under any property now or previously owned or leased by GREAT.
(8) GREAT has not transported or arranged for the
transportation of any Hazardous Material to any location which is listed on the
National Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), listed for
possible inclusion on the National Priorities List by the Environmental
Protection Agency in CERCLIS or on any similar state list or which is the
subject of federal, state or local enforcement actions or other investigations
which may reasonably be expected to lead to claims against GREAT for clean-up
costs, remedial work, damages to natural resources or for personal injury
claims, including claims under CERCLA.
(9) No notification of a release of a Hazardous Material has
been filed by or on behalf of GREAT and no property now or previously owned or
leased by GREAT is listed or proposed for listing on the National Priority List
promulgated pursuant to CERCLA, on CERCLIS or on any similar state list of sites
requiring investigation or clean-up.
(10) There are no liens arising under or pursuant to any
Environmental Laws on any of the real property or properties owned or leased by
GREAT and no government actions have been taken or are in process which could
subject any of such properties to such liens and GREAT would not be required to
place any notice or restriction relating to the presence of Hazardous Materials
at any property owned or leased by it in any deed to such property.
(11) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by or which are in the
possession of GREAT in relation to any property or facility now or previously
owned or leased by it which have not been made available to the Operating
Partnership.
K. Title. GREAT is the sole beneficial owner of, and has good and
marketable title to, the GREAT Projects, free and clear of all Title Defects.
L. Financing Arrangements. Schedule I hereto is a true and correct
list of all financing agreements to which GREAT is a party (other than those
which are to be repaid or refinanced as part of the Consolidation Transactions),
setting forth with respect to each the names of the parties, the dates thereof
and of any modifications, amendments or supplements thereto, and the principal
amount of the indebtedness evidenced or secured thereby.
M. Employees. GREAT has complied in all material respects with all
laws relating to the employment of labor, including any provisions thereof
relating to wages, hours, collective bargaining and the payment of social
security and similar taxes (in each case except where any statute of limitations
applicable to non-compliance has expired without any claim
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having been made with respect to such non-compliance), and is not liable for any
arrearage of wages, taxes or penalties for failure to comply with any of the
foregoing.
N. Solvency. None of the transactions contemplated by this Agreement
will be or have been made with an actual intent to hinder, delay or defraud any
present or future creditors of GREAT, and GREAT is not and will not be rendered
insolvent by such transactions or will have received fair and reasonably
equivalent value in good faith for the contribution and sale of assets pursuant
to this Agreement. GREAT is able to pay its debts as they become due, including
contingent obligations reasonably likely to become due.
O. Delinquent Property Liens. Except for claims which are not
material in amount or which are expressly permitted to exist under this
Agreement or which otherwise constitute Permitted Exceptions, there is no
delinquent tax, sewer rent, water charge, assessment or other outstanding
charges against any of the GREAT Real Estate. Except as shown in the title
policy, there are no mechanics' liens or similar Title Defects or, to GREAT's
knowledge, claims for overdue payment for work performed by or on behalf of
GREAT, labor or material affecting the GREAT Projects and there are no
mechanics' liens or similar Title Defects or claims affecting the GREAT Projects
which have not been insured or endorsed over by the Title Company issuing the
Title Policies.
P. Insurance. The GREAT Projects are covered by insurance of the
type and in the amounts set forth on Schedule J.
Q. Improvements. Except as disclosed in the Surveys or Title
Commitments, all GREAT Improvements lie wholly within the boundary and building
restriction lines of the GREAT Real Estate and no improvements on adjoining
properties encroach upon the GREAT Real Estate in any respect.
R. Casualty; Condemnation. The GREAT Projects are free of material
damage and waste and there is no proceeding pending or, to the best of GREAT'S
knowledge, threatened, for the total or partial taking of any GREAT Project, and
there has not occurred with respect to any GREAT Project any (i) damage or
destruction which would cost more than $100,000 to repair, (b) any taking by
condemnation or eminent domain or other similar proceeding involving loss in
excess of $100,000 or (c) any taking by condemnation or eminent domain or other
similar proceeding of all or substantially all thereof (other than for temporary
use).
S. Zoning and Other Laws. To GREAT's knowledge, the GREAT Projects
and the use and operation thereof, separate and apart from any other properties,
constitute a legal use under applicable zoning regulations and comply in all
material respects with all applicable requirements of law and all applicable
insurance requirements, and comply in all material respects with the applicable
provisions of the Americans with Disabilities Act and the Fair Housing
Amendments Act of 1988 and all applicable regulations issued thereunder and each
similar applicable state law and regulation.
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T. Management Contracts. A correct and complete copy of each
Management Contract relating to any GREAT Project (including all amendments
thereto) has been provided to the Operating Partnership. Each such Management
Contract is unmodified (except for such amendments) and in full force and effect
and neither GREAT nor, to GREAT's knowledge, any other party to any Management
Contract is in default thereunder.
U. Service Contracts. Except as set forth in Schedule K, each
Service Contract relating to any GREAT Project may be terminated on thirty days'
or less notice and without any material penalty. Each contract or other
agreement specified on Schedule K is unmodified (except as set forth on Schedule
K) and in full force and effect and neither GREAT nor, to GREAT's knowledge, any
other party to any thereof is in default thereunder.
V. Permits. Except for permits relating to Hazardous Materials
(which are provided for in Section 4.1(j)), there have been issued in respect of
the GREAT Projects all permits and governmental approvals necessary or required
to own, operate, use and occupy the GREAT Projects in the manner currently
operated. Each such permit is in full force and effect and GREAT has not
received any notice of violation or revocation thereof. No other permits are
required from any governmental entity in order to operate the GREAT Projects as
they are now operated.
W. Utilities. GREAT has not received any notice of actual or
threatened reduction or curtailment of any utility service now supplied to any
GREAT Project.
X. Certificates of Occupancy. GREAT has not received any notice of
actual or threatened cancellation or suspension of the certificate of occupancy
for any portion of any GREAT Project and each such certificate of occupancy is
in full force and effect.
Y. Assessments. GREAT has not received any notice of actual or
threatened special assessments or reassessments of any GREAT Project.
Z. Condition of Projects. Except as set forth in Schedule L, the
GREAT Improvements are structurally sound and in good repair, and all
mechanical, electrical, heating, air conditioning, drainage, sewer, water and
plumbing systems are in proper working order.
4.3 Representations and Warranties of the Other Contributors. To induce
the Operating Partnership to execute, deliver and perform this Agreement, each
of the Other Contributors represents and warrants, with respect to itself and
not with respect to any Other Contributor, severally (and not jointly), to GREAT
and the Operating Partnership on and as of the date hereof as follows:
A. Existence. Each Other Contributor that is not a natural person:
(i) is duly organized and validly existing under the laws of the state of its
organization; (ii) has all requisite power, and has all material governmental
licenses, authorizations, consents and approvals necessary to own its assets and
carry on its business as now being or as proposed to be
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conducted; and (iii) is qualified to do business in all jurisdictions in which
the nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified would not have a Material Adverse
Effect on such Other Contributor.
B. Authorization, Execution, Etc. Each Other Contributor has, in the
case of any Other Contributor other than an individual, all necessary power and
authority, and in the case of a natural person, the legal capacity to execute,
deliver and perform its obligations under this Agreement; the execution,
delivery and performance by each Other Contributor of this Agreement have been
duly authorized by all necessary action on its part; and this Agreement has been
duly and validly executed and delivered by each Other Contributor and
constitutes its legal, valid and binding obligation, enforceable in accordance
with its terms, subject to bankruptcy, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights in general and to general
principles of equity.
C. No Breach. None of the execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby and compliance with the
terms and provisions hereof by any Other Contributor will conflict with or
result in a breach of, or require any consent (except such consents as have been
obtained) under (i) the organizational documents of such Other Contributor, (ii)
any material applicable law or regulation, or any order, writ, injunction or
decree of any court or governmental authority or agency, or (iii) any material
agreement or instrument to which any such Other Contributor is a party or by
which it is bound or to which it is subject, or constitute a default under any
such agreement or instrument, or result in the creation or imposition of any
lien upon any of the revenues or assets of any such Other Contributor, pursuant
to the terms of any such agreement or instrument.
D. Approvals. Each Other Contributor has obtained all material
authorizations, approvals or consents of, and have made all material filings or
registrations with, any governmental or regulatory authority or agency that are
necessary for the execution, delivery or performance by such Other Contributor
of this Agreement or for the validity or enforceability thereof.
E. Title to Contributed Interests. Subject to the provisions of the
partnership agreement of each Property Partnership, each Other Contributor is
the owner of the partnership interests, capital stock and other assets set forth
opposite its name on Schedule A free and clear of all security interests, liens
or other encumbrances.
F. Accredited Investor; Acquisition for Investment Purposes. Each
Other Contributor and each direct and indirect owner of such Other Contributor
is an "accredited investor" as defined in Rule 501 of the General Rules and
Regulations promulgated under the Securities Act. Each of the Grove Contributors
is acquiring the Units solely for its own account for the purpose of investment
and not as a nominee or agent for any other Person and not with a view to, or
for offer or sale in connection with, any distribution of any Units (other than
in a transaction which is either registered under the Securities Act or exempt
from such registration, and in compliance with all applicable Blue Sky or state
securities laws or exempt therefrom).
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Each Other Contributor agrees and acknowledges that it will not, directly or
indirectly, Transfer any of the Units unless such Transfer complies with the
Operating Partnership Agreement and is either (i) pursuant to an effective
registration statement under the Securities Act and qualification or other
compliance under applicable Blue Sky or state securities laws, or (ii) exempt
from registration under the Securities Act and qualification or other compliance
under applicable Blue Sky or state securities laws.
4.4 Representations and Warranties of the Operating Partnership. To induce
the Contributors to execute, deliver and perform this Agreement, the Operating
Partnership represents and warrants to the Contributors on and as of the date
hereof as follows:
A. Existence. The Operating Partnership: (i) is a limited
partnership duly organized and validly existing under the laws of the State of
Delaware; (ii) has all requisite power, and has all material governmental
licenses, authorizations, consents and approvals necessary to own its assets and
carry on its business as now being or as proposed to be conducted; and (iii) is
qualified to do business in all jurisdictions in which the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified would not have a Material Adverse Effect on the
Operating Partnership.
B. Authorization, Execution, Etc. The Operating Partnership has all
necessary power and authority to execute, deliver and perform its obligations
under this Agreement; the execution, delivery and performance by the Operating
Partnership of this Agreement have been duly authorized by all necessary action
on its part; and this Agreement has been duly and validly executed and delivered
by the Operating Partnership and constitutes its legal, valid and binding
obligation, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, moratorium or other similar laws affecting the enforcement of
creditors' rights in general and to general principles of equity.
C. No Breach. None of the execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby and compliance with the
terms and provisions hereof will conflict with or result in a breach of, or
require any consent (except such consents as have been obtained) under (i) the
organizational documents of the Operating Partnership, (ii) any material
applicable law or regulation, or any order, writ, injunction or decree of any
court or governmental authority or agency, or (iii) any agreement or instrument
to which the Operating Partnership is a party or by which it is bound or to
which it is subject, or constitute a default under any such agreement or
instrument, or result in the creation or imposition of any lien upon any of the
revenues or assets of the Operating Partnership pursuant to the terms of any
such agreement or instrument.
D. Approvals. The Operating Partnership has obtained all material
authorizations, approvals or consents of, and has made all material filings or
registrations with, any governmental or regulatory authority or agency that are
necessary for the execution, delivery or performance by the Operating
Partnership of this Agreement or for the validity or enforceability thereof.
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E. Units; Common Shares. The Units, when issued to the Contributors,
will not be subject to any lien, claim, encumbrance, restriction upon voting
right, preemption right or other claim of any third party, other than pursuant
to federal or state securities laws or the Operating Partnership Agreement. The
Units, when issued to the Contributors, will be duly and validly issued
partnership units in the Operating Partnership. Any Common Shares which may be
issued in redemption of Units will, when issued, be duly and validly issued,
fully paid, non-assessable and shall not be subject to any preemptive or similar
rights.
F. Securities Act Compliance. Assuming the truth and accuracy of the
representations and warranties in Sections 4.1.DD, 4.2.E and 4.3.F hereof, the
issuance of Units to the Contributors pursuant to this Agreement is exempt from
the registration requirements of the Securities Act.
4.5 Survival of Representations and Warranties. The representations and
warranties of the parties contained in this Article 4 shall survive the Closing;
provided, that any claim for breach by the Grove Contributors or GREAT of any
Property-Related Representation and Warranty must be asserted within one (1)
year of discovery by the party asserting same, and in any event within two (2)
years after the Closing Date.
ARTICLE 5
CLOSING MATTERS
5.1 Closing. The closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of the Operating Partnership's
attorneys on the date (the "Closing Date") on which the Consolidation
Transactions are consummated. The Closing shall take place concurrently with the
consummation of the other Consolidation Transactions. As of the Closing Date,
the Title Company shall be willing to approve and insure title to the Real
Estate, subject only to the Permitted Exceptions, at regular premium rates,
under its ALTA Form Owner's Policy.
5.2 New York Style Closing. The transactions contemplated hereby shall be
closed by means of a so-called "New York Style Closing," with the concurrent
delivery of the documents of title, transfers of interests, delivery of the
Title Policies and transfer of the Units and all other consideration to be paid
to the Contributors pursuant to this Agreement. The Contributors shall provide
any undertaking to the Title Company necessary for the New York Style Closing to
occur or for the satisfaction of any other requirement for Closing.
5.3 Surveys, Title Commitments and Searches. At or prior to the Closing,
the Contributors shall deliver to the Operating Partnership the following:
(a) Surveys. A plat of Survey of each Project prepared within _____
months of the date hereof by a surveyor licensed by the state in which such
Project is located in
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conformity with such standards as are required by the Operating Partnership and
the Title Company.
(b) Title Commitments. A Title Commitment for each Project for an
ALTA Form Owner's Policy issued by the Title Company showing title to the Real
Estate in the applicable Owner, subject only to the Permitted Exceptions, which
Title Commitments shall include such endorsements as may be reasonably requested
by the Operating Partnership.
(c) Searches. UCC, judgment and tax lien searches on the names of
the Contributors and the Owners (the "Searches") showing no Title Defect as to
the Projects unless the same is to be paid and released at or prior to Closing.
5.4 Title Policies. [To come]
ARTICLE 6
CLOSING DELIVERIES
6.1 The Contributors' Deliveries. At the Closing, the Contributors shall
deliver to the Operating Partnership the following, all in form and substance
reasonably satisfactory to the Operating Partnership:
A. deeds for the GREAT Real Estate, which shall be in recordable
form and shall be the form of deed customarily used in Connecticut for
properties similar to the GREAT Projects, duly executed and acknowledged by
GREAT, conveying to the Operating Partnership, good, marketable and indefeasible
fee simple title to the GREAT Real Estate, the GREAT Improvements and any
fixtures located thereon, in proper form for recording and subject only to the
Permitted Exceptions;
B. general warranty bills of sale, duly executed and acknowledged by
GREAT, conveying to the Operating Partnership title to the GREAT Personalty,
free and clear of all liens, encumbrances, claims and security interests, with
express warranties of good title;
C. assignments, duly executed and acknowledged by GREAT, conveying
title to the Operating Partnership, free and clear of all liens, encumbrances,
claims and security interests, to (i) the GREAT Intangible Property; (ii) each
GREAT Lease and each Service Contract relating to any of the GREAT Projects;
(iii) any security deposits, prepaid rents or other monies, if any, held by or
for GREAT with respect to the GREAT Projects, along with an accounting of any
such security deposits, prepaid rents or other monies;
D. an original executed copy of each GREAT Lease and Service
Contract that is assigned to the Operating Partnership;
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E. a certification by GREAT stating GREAT's U.S. Taxpayer
identification number and that GREAT is not a "foreign person" or a "foreign
corporation" (as defined under Internal Revenue Code Section 1445 and Section
7701);
F. any state, county and city documentary stamp declarations or
transfer tax forms required to be signed by GREAT or in connection with the
conveyance of each of the GREAT Projects, duly executed by GREAT, as necessary
or customary in the jurisdiction in which each GREAT Project is located;
G. cash in an amount equal to the New Equity Proceeds, payable by
wire transfer of immediately available funds;
H. documents evidencing the withdrawal by each Withdrawing Partner
as a general partner in the applicable Non-Liquidating Property Partnership, as
set forth on Schedule A;
I. assignments, duly executed and acknowledged by each
Non-Liquidating Partnership Contributor, conveying title to the Operating
Partnership, free and clear of all liens, encumbrances, claims and security
interests, of such Non-Liquidating Partnership Contributor's interests in the
Non-Liquidating Partnerships, as set forth on Schedule A;
J. assignments, duly executed and acknowledged by each Liquidating
Partnership Contributor, conveying to the Operating Partnership, free and clear
of all liens, encumbrances, claims and security interests, of such Liquidating
Partnership Contributor's interests in the Liquidating Partnerships, as set
forth on Schedule A;
K. general warranty bills of sale, duly executed and acknowledged by
the Management Company, conveying to the Operating Partnership the assets
included in the Management Company Assets and Liabilities;
L. deeds for the Burgundy Real Estate, which shall be in recordable
form and shall be the form of deed customarily used in Connecticut for
properties similar to the Burgundy Project, duly executed and acknowledged by
Burgundy, conveying to the Operating Partnership, good, marketable and
indefeasible fee simple title to the Burgundy Real Estate, the Burgundy
Improvements and any fixtures located thereon, in proper form for recording and
subject only to the Permitted Exceptions;
M. general warranty bills of sale, duly executed and acknowledged by
Burgundy, conveying to the Operating Partnership title to the Burgundy
Personalty, free and clear of all liens, encumbrances, claims and security
interests, with express warranties of good title;
N. assignments, duly executed and acknowledged by Burgundy,
conveying title to the Operating Partnership, free and clear of all liens,
encumbrances, claims and security
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interests, to (i) the Burgundy Intangible Property; (ii) each Burgundy Lease and
each Service Contract relating to the Burgundy Project; (iii) any security
deposits, prepaid rents or other monies, if any, held by or for Burgundy with
respect to the Burgundy Project, along with an accounting of any such security
deposits, prepaid rents or other monies;
O. an original executed copy of each Burgundy Lease and Service
Contract that is assigned to the Operating Partnership;
P. a certification by Burgundy stating Burgundy's U.S. Taxpayer
identification number and that Burgundy is not a "foreign person" or a "foreign
corporation" (as defined under Internal Revenue Code Section 1445 and Section
7701);
Q. any state, county and city documentary stamp declarations or
transfer tax forms required to be signed by Burgundy or in connection with the
conveyance of the Burgundy Project, duly executed by Burgundy, as necessary or
customary in the jurisdiction in which the Burgundy Project is located;
R. letters addressed to each and every existing tenant at each of
the Wholly-Owned Projects stating that the Project has been sold to the
Operating Partnership, that all rent is payable to the Operating Partnership,
stating the amount of the security deposit, and that the security deposit has
been transferred to the Operating Partnership;
S. a counterpart of the Operating Partnership Agreement duly
executed by or on behalf of each Contributor; and
T. all such further instruments and documents as may be necessary,
expedient, proper, or appropriate in the reasonable opinion of the Operating
Partnership, in order to complete the transactions contemplated hereby.
6.2 The Operating Partnership's Deliveries. At the Closing, the Operating
Partnership shall deliver to the Contributors the following, all in form and
substance reasonably satisfactory to the Contributors:
A. the Units and cash in accordance with Section 3.1 hereof;
B. cash to the Liquidating Partnerships in accordance with Section
2.4B hereof;
C. a counterpart of the Operating Partnership Agreement duly
executed by GREAT, as general partner, and all other parties thereto (other than
the Contributors);
D. countersigned copies of any documents listed in Section 6.1
hereof which are required to be signed by the Operating Partnership, including,
without limitation, an
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assumption agreement under which the Operating Partnership assumes the
liabilities included in the Management Company Assets and Liabilities; and
E. any state, county and city documentary stamp declarations or
transfer tax forms required to be signed by the Operating Partnership or in
connection with the conveyance of each of the GREAT Projects and the Burgundy
Project, duly executed by the Operating Partnership, as necessary or customary
in the jurisdiction in which each GREAT Project and the Burgundy Project are
located.
6.3 Concurrent Transactions. All documents or other deliveries required to
be made pursuant to this Agreement at or prior to Closing, and the Consolidation
Transactions, shall be deemed to have been delivered and to have been
consummated simultaneously with all other transactions and all other deliveries,
and no delivery shall be deemed to have been made, and no transaction shall be
deemed to have been consummated, until all deliveries required by all the
parties hereto shall have been made and the Consolidation Transactions shall
have been consummated.
6.4 Further Assurances. The parties hereto, at the Closing, or at any time
or from time to time thereafter, upon request of either party, will execute such
additional instruments, documents or certificates as any other party deems
reasonably necessary in order to effect the transactions contemplated hereby.
6.5 Possession. Possession of the Wholly-Owned Projects shall be delivered
to the Operating Partnership at Closing.
ARTICLE 7
APPORTIONMENTS; SECURITY DEPOSITS
7.1 Apportionments for Wholly-Owned Projects. Adjustments in respect of
the Wholly-Owned Projects shall be made between the applicable Contributors and
the Operating Partnership for the following items, pro-rated on a per diem
basis, as of midnight of the day preceding the Closing Date:
A. Rents and other charges paid under each Lease relating to the
Wholly-Owned Projects, or any portion thereof.
B. Real estate, personal property and ad valorem taxes and other
state or city taxes, charges and assessments affecting the Wholly-Owned
Projects, or any portion thereof, not yet due and payable, shall be prorated on
the basis of the most recent fiscal year for which the same are levied or
assessed; provided, that if the amount of any such taxes, charges or assessments
shall not be fixed or ascertainable before the Closing Date, the proration
thereof on the date of the Closing shall be upon the basis of the most recent
ascertainable amount of such
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taxes, charges and assessments in which event, there shall be a re-proration of
such tax, charge or assessment immediately upon receipt of the actual bill
therefor, and, within ten (10) days of the receipt of such bill, the applicable
Contributors shall pay the Operating Partnership or the Operating Partnership
shall pay the applicable Contributors, as the case may be, any amount due the
other party as a result of such re-proration.
C. Charges for water, electricity, sewer rental, gas, telephone and
other utilities for the Wholly-Owned Projects (normally billed to the
Contributors, not to tenants) will be paid by the applicable Contributors on a
per diem basis on the basis of readings or the most recent available bills
(subject to readjustment on receipt of bills covering the period in which the
Closing occurs). To the extent deposits held on behalf of GREAT, the Liquidating
Partnerships or Burgundy by utility companies are transferable to the Operating
Partnership, the applicable Contributors shall receive a credit at Closing in
the amount of such deposits and such deposits shall be transferred and placed in
the name of the Operating Partnership. Otherwise, the applicable Contributors
shall receive a refund of such deposits and the Operating Partnership shall have
no claim with regard to the same.
D. Charges under existing Service Contracts assigned to the
Operating Partnership, if any, and other ordinary costs and expenses for
maintenance and protection of the Wholly-Owned Project for which payment has
been made or is due for the periods prior to and after Closing.
E. Such additional adjustments as are normally made in connection
with the sale of property similar to the Wholly-Owned Projects in the county and
state where the Wholly-Owned Projects are located.
7.2 Apportionments for Non-Liquidating Partnerships. Adjustments in
respect of the partnership interests in the Non-Liquidating Partnerships shall
be made between the applicable Non-Liquidating Partnership Contributors and the
Operating Partnership as follows, as of midnight of the day preceding the
Closing Date:
A. The Non-Liquidating Partnership Contributors and the other
partners in each Non-Liquidating Partnership (collectively, the "Existing
Partners") shall be entitled to all revenues of the Non-Liquidating Partnerships
from all sources, including, without limitation, from the proceeds of
operations, leasing and financing (collectively, "Revenues") payable or accruing
to such Non-Liquidating Partnership through the Closing Date (whether or not
actually received prior to the Closing Date). Each Non-Liquidating Partnership
shall be entitled to all Revenues accruing to such Non-Liquidating Partnership
on and after the Closing Date (whether or not actually received on or after the
Closing Date).
B. The Existing Partners shall bear all expenses, obligations and
liabilities of each Non-Liquidating Partnership accruing through the Closing
Date. Expenses, obligations and liabilities of each Non-Liquidating Partnership
accruing on or after the Closing Date, shall be the responsibility of such
Non-Liquidating Partnership after the Closing Date.
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C. Subject to the contrary provisions of any applicable partnership
agreement, all income, gains, losses, deductions and credits of each
Non-Liquidating Partnership accruing prior to the Closing Date shall be
allocated to its Existing Partners. After the Closing Date, the respective
shares of the partners in each Non-Liquidating Partnership in the revenues,
distributions, expenses, income, gains, losses, deductions and credits of such
Non-Liquidating Partnership shall be in accordance with its partnership
agreement.
7.3 Apportionments for Management Company. Adjustments in respect of the
Management Company Assets and Liabilities shall be made between the applicable
Contributors and the Operating Partnership as follows, as of midnight of the day
preceding the Closing Date:
A. The applicable Contributors shall be entitled to all revenues in
respect of the Management Company Assets and Liabilities from all sources
payable or accruing through the Closing Date (whether or not actually received
prior to the Closing Date). The Operating Partnership shall be entitled to all
revenues in respect of the Management Company Assets and Liabilities from all
sources payable or accruing on or after the Closing Date (whether or not
actually received on or after the Closing Date).
B. The applicable Contributors shall bear all expenses, obligations
and liabilities in respect of the Management Company Assets and Liabilities
accruing through the Closing Date. Expenses, obligations and liabilities in
respect of the Management Company Assets and Liabilities accruing on or after
the Closing Date, shall be the responsibility of the Operating Partnership after
the Closing Date.
7.4 Payment of Apportionments. At the Closing, the number of Contributors'
Units that the Operating Partnership is required to transfer to the Contributors
pursuant to Section 3.1 hereof shall be increased (or decreased) by an amount
equal to the net amount owing to (or owed by) the Contributors under Sections
7.1 through 7.3 hereof divided by the Unit Value.
7.5 Security Deposits. At the Closing, GREAT, the Liquidating Partnerships
and Burgundy shall pay to the Operating Partnership, in cash, the aggregate
amount of any security deposits which the Leases at the Wholly-Owned Projects
provide have been delivered by tenants, together with all interest on such
security deposits which is due to any tenant under the provisions of any lease
or applicable law.
ARTICLE 8
INDEMNITIES
8.1 The Contributors' Indemnity.
A. Grove Contributors. Subject to the limitations on liability set
forth in Sections 8.4.B and 8.5 hereof, the Grove Contributors agree, jointly
and severally, to indemnify,
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defend (with counsel mutually acceptable to the Operating Partnership and the
Grove Contributors) and hold the Operating Partnership harmless from and against
any Damages to the Operating Partnership resulting from any inaccuracy in or
breach of any representation or warranty of the Grove Contributors or resulting
from any breach or default by the Grove Contributors of any Obligation of the
Grove Contributors under this Agreement.
B. GREAT. Subject to the limitations on liability set forth in
Section 8.4.B and 8.5, GREAT agrees to indemnify, defend (with counsel mutually
acceptable to Operating Partnership and GREAT) and hold the Operating
Partnership harmless from and against any Damages to the Operating Partnership
resulting from any inaccuracy in or breach of any representation or warranty of
GREAT or resulting from any breach or default by GREAT of any Obligation of
GREAT under this Agreement.
C. Other Contributors. Subject to the limitations on liability set
forth in Section 8.4.B, each Other Contributor agrees severally (and not
jointly) to indemnify, defend (with counsel mutually acceptable to the Operating
Partnership and such Other Contributor) and hold the Operating Partnership
harmless from and against any Damages to the Operating Partnership resulting
from any inaccuracy in or breach of any representation or warranty of such Other
Contributor or resulting from any breach or default by such Other Contributor of
any Obligation of such Other Contributor under this Agreement.
8.2 The Operating Partnership's Indemnity. Subject to the limitation on
liability set forth in Section 8.4.A hereof, the Operating Partnership agrees to
indemnify, defend (with counsel mutually acceptable to the Operating Partnership
and the applicable Contributors) and hold the Contributors harmless from and
against any Damages to the Contributors resulting from any inaccuracy in or
breach of any representation or warranty of the Operating Partnership or
resulting from any breach or default by the Operating Partnership of any
Obligation of the Operating Partnership under this Agreement.
8.3 Notice of Claims. Each Contributor and the Operating Partnership, as
applicable, shall promptly notify the other in the event any claim is made
against it as to which the other party has agreed to indemnify and the
indemnitor shall thereupon undertake to defend and hold the indemnitee harmless
therefrom.
8.4 Limitation on Liability.
A. The Contributors shall look solely to the assets of the Operating
Partnership for satisfaction of any liability of the Operating Partnership in
respect of this Agreement and all documents, agreements, understandings and
arrangements relating to this transaction and will not seek recourse or commence
any action against any of GREAT or the partners, officers, directors,
shareholders or employees of the Operating Partnership and GREAT.
B. The Operating Partnership shall look solely to the applicable
Contributors' Units issued to such Contributor pursuant to this Agreement,
(together with any securities issuable with respect to such Units) for
satisfaction of any liability of the Contributors in respect of this Agreement
and all
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documents, agreements, understandings and arrangements relating to this
transaction and will not seek recourse or commence any action against any of the
Contributors or the partners, officers, directors, shareholders or employees of
the Contributors and its partners.
8.5 Limitations on Indemnification Obligations.
A. Neither the Grove Contributors nor GREAT shall not have any
liability under this Agreement for Damages resulting from any inaccuracy in or
breach of any Property-Related Representation and Warranty unless the aggregate
of all Damages for which either the Grove Contributors or GREAT, as the case may
be, would, but for this sentence, be liable exceeds $50,000 on a cumulative
basis, and then either the Grove Contributors or GREAT, as the case may be,
shall be liable only for amounts exceeding such amount.
B. Claims for indemnification for any Damages resulting from a
breach of any Property-Related Representation and Warranty shall not be brought
or made after one year from discovery of such breach by GREAT's Board of Trust
Managers, or, in any event, after two years from the date of the consummation of
the Consolidation Transactions; provided that such time limitation shall not
apply to any item as to which the party to be indemnified shall have, before the
expiration of such period, previously made a claim by delivering a notice
(stating, in reasonable detail, the basis of such claim) to the indemnifying
party.
ARTICLE 9
MISCELLANEOUS
9.1 Expenses. The Operating Partnership shall be responsible for all costs
incurred by the Contributors and the Operating Partnership directly or
indirectly relating to the transactions contemplated hereby (collectively, the
"Expenses"), including all sales, use, recording and transfer taxes, all costs
of the Surveys, all title insurance premiums and charges for the issuance of the
Title Policies, including the charges for title endorsements, the charges for
the New York Style Closing, all testing and inspection costs, and all legal,
accounting, consulting and engineering fees. The Operating Partnership shall
reimburse the Contributors for all of the Expenses paid or payable by the
Contributors.
9.2 Brokerage. The Contributors and the Operating Partnership each hereby
represent and warrant to the other that neither has dealt with any broker or
finder in connection with the transactions contemplated hereby, and each hereby
agrees to indemnify, defend and hold the other harmless of and from any and all
manner of claims, liabilities, loss, damage, attorneys' fees and expenses,
incurred by either party and arising out of, or resulting from, any claim by any
such broker or finder in contravention of its representation and warranty herein
contained.
9.3 Survival. Except as expressly provided or limited to the contrary
herein or in any instrument delivered pursuant hereto, the representations,
warranties, obligations, covenants,
34
<PAGE>
agreements, undertakings and indemnifications of the parties contained herein or
in any instrument required to be delivered pursuant hereto shall survive the
Closing.
9.4 Construction. This Agreement shall not be construed more strictly
against one party than against the other merely by virtue of the fact that it
may have been prepared primarily by counsel for one of the parties, it being
recognized that both the Operating Partnership and the Contributors have
contributed substantially and materially to the preparation of this Agreement.
9.5 General. This Agreement may be executed in any number of counterparts,
each of which shall constitute an original but all of which, taken together,
shall constitute but one and the same instrument. This Agreement (including all
Schedules hereto) contains the entire agreement between the parties with respect
to the subject matter hereof, supersedes all prior understandings, if any, with
respect thereto and may not be amended, supplemented or terminated except by
written agreement between the parties hereto, nor shall any Obligation hereunder
or condition hereof be deemed waived, except by a written instrument to such
effect signed by the party to be charged. The warranties, representations,
agreements and undertakings contained herein shall not be deemed to have been
made for the benefit of any Person, other than the parties hereto and their
permitted successors and assigns.
9.6 Headings. The headings preceding the text of the paragraphs and
subparagraphs hereof are inserted solely for convenience of reference and shall
not constitute a part of this Agreement, nor shall they affect its meaning,
construction or effect.
9.7 Governing Law; Parties at Interest. This Agreement will be governed by
the law of the State of New York, and will bind and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators,
successors, assigns and personal representatives.
9.8 Power of Attorney. Each Contributor does hereby make, constitute and
appoint Brian Navarro, Damon Navarro, Edmund Navarro and Joseph LaBrosse, and
each of them, its true and lawful attorney-in-fact, with full power of
substitution and resubstitution, to negotiate, execute and deliver any and all
other documents which such attorney deems necessary or desirable in order to
consummate the transactions contemplated hereby in accordance with this
Agreement. Such attorney (and any substitute named by such attorney) shall have
full power and authority to do and perform in the name and on behalf of such
Contributor in any and all capacities, every act whatsoever necessary or
desirable to be done in connection with the foregoing as such Contributor might
or could do in person. Each Contributor hereby ratifies and approves the acts of
such attorney and any substitute therefor.
35
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed, all as of the day and year first above written.
GROVE REAL ESTATE ASSET TRUST
By: _______________________________
Damon Navarro
President
GROVE OPERATING, L.P.
By: GROVE REAL ESTATE ASSET TRUST,
its general partner
By: _______________________________
Damon Navarro
President
CONTRIBUTORS:
36
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A-1
<PAGE>
Exhibit 10.2
Form of Agreement of Limited Partnership of Grove Operating, L.P.,
among Grove Real Estate Asset Trust and the other partners named therein
<PAGE>
------------------------------------------
FORM OF AGREEMENT OF LIMITED PARTNERSHIP
OF
GROVE OPERATING, L.P.
------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE 1 DEFINED TERMS....................................................1
Section 1.1 DEFINITIONS................................................1
ARTICLE 2 ORGANIZATIONAL MATTERS..........................................16
Section 2.1 ORGANIZATION..............................................16
Section 2.2 NAME......................................................17
Section 2.3 RESIDENT AGENT; PRINCIPAL OFFICE..........................17
Section 2.4 POWER OF ATTORNEY.........................................17
Section 2.5 TERM......................................................18
ARTICLE 3 PURPOSE.........................................................19
Section 3.1 PURPOSE AND BUSINESS......................................19
Section 3.2 POWERS....................................................19
Section 3.3 PARTNERSHIP ONLY FOR PURPOSES SPECIFIED...................19
Section 3.4 REPRESENTATIONS AND WARRANTIES BY THE PARTIES.............20
ARTICLE 4 CAPITAL CONTRIBUTIONS...........................................22
Section 4.1 CAPITAL CONTRIBUTIONS OF THE PARTNERS.....................22
Section 4.2 LOANS BY THIRD PARTIES....................................23
Section 4.3 ADDITIONAL FUNDING AND CAPITAL CONTRIBUTIONS..............23
A. GENERAL...................................................23
B. GENERAL PARTNER LOANS.....................................23
C. ISSUANCE OF ADDITIONAL PARTNERSHIP INTERESTS..............23
D. ISSUANCE OF REIT SHARES OR OTHER SECURITIES BY
THE GENERAL PARTNER.......................................24
E. PERCENTAGE INTEREST ADJUSTMENTS IN THE CASE OF
CAPITAL CONTRIBUTIONS FOR PARTNERSHIP UNITS...............24
Section 4.4 STOCK PLAN................................................25
Section 4.5 NO THIRD PARTY BENEFICIARY................................25
Section 4.6 OTHER CONTRIBUTION PROVISIONS.............................25
ARTICLE 5 DISTRIBUTIONS...................................................26
Section 5.1 REQUIREMENT AND CHARACTERIZATION OF
DISTRIBUTIONS.............................................26
Section 5.2 DISTRIBUTIONS IN KIND.....................................26
Section 5.3 DISTRIBUTIONS UPON LIQUIDATION............................26
Section 5.4 DISTRIBUTIONS TO REFLECT ISSUANCE OF ADDITIONAL
PARTNERSHIP INTERESTS.....................................27
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Page
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ARTICLE 6 ALLOCATIONS.....................................................27
Section 6.1 TIMING AND AMOUNT OF ALLOCATIONS OF NET
INCOME AND NET LOSS.......................................27
Section 6.2 GENERAL ALLOCATIONS.......................................27
A. IN GENERAL................................................27
B. ALLOCATIONS TO REFLECT ISSUANCE OF ADDITIONAL
PARTNERSHIP INTERESTS.....................................27
Section 6.3 ADDITIONAL ALLOCATION PROVISIONS..........................27
A. REGULATORY ALLOCATIONS....................................27
Section 6.4 TAX ALLOCATIONS...........................................30
A. IN GENERAL................................................30
B. ALLOCATIONS RESPECTING Section 704(C) REVALUATIONS........30
ARTICLE 7 MANAGEMENT AND OPERATIONS OF BUSINESS...........................30
Section 7.1 MANAGEMENT................................................30
Section 7.2 CERTIFICATE OF LIMITED PARTNERSHIP........................34
Section 7.3 RESTRICTIONS ON GENERAL PARTNER'S AUTHORITY...............34
Section 7.4 REIMBURSEMENT OF THE GENERAL PARTNER......................37
Section 7.5 CONTRACTS WITH AFFILIATES.................................37
Section 7.6 INDEMNIFICATION...........................................38
Section 7.7 LIABILITY OF THE GENERAL PARTNER..........................40
Section 7.8 OTHER MATTERS CONCERNING THE GENERAL PARTNER..............41
Section 7.9 TITLE TO PARTNERSHIP ASSETS...............................42
Section 7.10RELIANCE BY THIRD PARTIES.................................42
ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS......................43
Section 8.1 LIMITATION OF LIABILITY...................................43
Section 8.2 MANAGEMENT OF BUSINESS....................................43
Section 8.3 OUTSIDE ACTIVITIES OF LIMITED PARTNERS....................43
Section 8.4 RETURN OF CAPITAL.........................................43
Section 8.5 RIGHTS OF LIMITED PARTNERS RELATING TO THE
PARTNERSHIP...............................................44
Section 8.6 REDEMPTION RIGHTS.........................................44
ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS..........................47
Section 9.1 RECORDS AND ACCOUNTING....................................47
Section 9.2 FISCAL YEAR...............................................47
Section 9.3 REPORTS...................................................48
ARTICLE 10 TAX MATTERS.....................................................48
Section 10.1 PREPARATION OF TAX RETURNS...............................48
Section 10.2 TAX ELECTIONS............................................48
Section 10.3 TAX MATTERS PARTNER......................................48
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Page
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Section 10.4 ORGANIZATIONAL EXPENSES..................................50
Section 10.5 WITHHOLDING..............................................50
ARTICLE 11 TRANSFERS AND WITHDRAWALS.......................................51
Section 11.1 TRANSFER.................................................51
Section 11.2 TRANSFER OF GENERAL PARTNER'S PARTNERSHIP
INTEREST.................................................51
Section 11.3 LIMITED PARTNERS' RIGHTS TO TRANSFER.....................53
(a) GENERAL PARTNER RIGHT OF FIRST REFUSAL...................53
(b) QUALIFIED TRANSFEREE.....................................54
Section 11.4 SUBSTITUTED LIMITED PARTNERS.............................55
Section 11.5 ASSIGNEES................................................56
Section 11.6 GENERAL PROVISIONS.......................................56
Section 11.7 TRANSFER OF PLEDGED PARTNERSHIP UNITS....................58
ARTICLE 12 ADMISSION OF PARTNERS..........................................58
Section 12.1 ADMISSION OF SUCCESSOR GENERAL PARTNER...................58
Section 12.2 ADMISSION OF ADDITIONAL LIMITED PARTNERS.................59
Section 12.3 AMENDMENT OF AGREEMENT AND CERTIFICATE
OF LIMITED PARTNERSHIP...................................59
ARTICLE 13 DISSOLUTION AND LIQUIDATION....................................60
Section 13.1 DISSOLUTION..............................................60
Section 13.2 WINDING UP...............................................60
Section 13.3 COMPLIANCE WITH TIMING REQUIREMENTS OF
REGULATIONS..............................................61
Section 13.4 DEEMED DISTRIBUTION AND RECONTRIBUTION...................62
Section 13.5 RIGHTS OF LIMITED PARTNERS...............................62
Section 13.6 NOTICE OF DISSOLUTION....................................63
Section 13.7 CANCELLATION OF CERTIFICATE OF LIMITED
PARTNERSHIP..............................................63
Section 13.8 REASONABLE TIME FOR WINDING UP...........................63
Section 13.9 WAIVER OF PARTITION......................................63
ARTICLE 14 AMENDMENT OF PARTNERSHIP AGREEMENT; CONSENTS...................63
Section 14.1 AMENDMENTS...............................................63
Section 14.2 ACTION BY THE PARTNERS...................................64
ARTICLE 15 GENERAL PROVISIONS.............................................65
Section 15.1 ADDRESSES AND NOTICE.....................................65
Section 15.2 TITLES AND CAPTIONS......................................65
Section 15.3 PRONOUNS AND PLURALS.....................................65
Section 15.4 FURTHER ACTION...........................................65
iii
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Page
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Section 15.5 BINDING EFFECT..........................................65
Section 15.6 CREDITORS...............................................66
Section 15.7 WAIVER..................................................66
Section 15.8 COUNTERPARTS............................................66
Section 15.9 APPLICABLE LAW..........................................66
Section 15.10 INVALIDITY OF PROVISIONS................................66
Section 15.11 LIMITATION TO PRESERVE REIT STATUS......................66
Section 15.12 ENTIRE AGREEMENT........................................67
Section 15.13 NO RIGHTS AS STOCKHOLDERS...............................67
EXHIBITS
Exhibit A - Partners, Contributions and Partnership Interests
Exhibit B - Notice of Redemption
Exhibit C - Constructive Ownership Definition
Exhibit D - Form of Partnership Unit Certificate
Exhibit E - Schedule of Partners' Ownership with Respect to Tenants
Exhibit F - Schedule of REIT Shares Actually or Constructively Owned by
Limited Partners Other Than those Acquired Pursuant to an
Exchange
Exhibit G - Schedule of Certain Property of the Partnership
iv
<PAGE>
FORM OF AGREEMENT OF LIMITED PARTNERSHIP
OF
GROVE OPERATING, L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP, dated as of ___________ __,
1997, is entered into by and among Grove Real Estate Asset Trust, a Maryland
corporation (the "Company"), as the General Partner and the Persons whose names
are set forth on Exhibit A attached hereto, as the Limited Partners, together
with any other Persons who become Partners in the Partnership as provided
herein.
WHEREAS, the limited partnership was formed pursuant to the Revised
Uniform Limited Partnership Act of the State of Delaware by filing a certificate
of limited partnership on November 1, 1996;
WHEREAS, the Company proposes to effect a private placement of its Common
Shares, to acquire and cause the Partnership to acquire direct and indirect
interests in 23 multi-family residential projects and a neighborhood shopping
center and other assets, to enter into and to cause the Partnership to enter
into certain financing transactions and to contribute the gross proceeds of the
private placement to the Partnership, all as described in the Company's Proxy
Statement relating to such transactions mailed to the Company's shareholders on
February __, 1997 (the "Consolidation Transactions");
WHEREAS, the Partnership will issue Partnership Interests to the Company
and other persons in accordance with the foregoing transactions;
NOW, THEREFORE, BE IT RESOLVED, that for good and adequate consideration,
the receipt of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
DEFINED TERMS
Section 1.1 DEFINITIONS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement:
"ACT" means the Delaware Revised Uniform Limited Partnership Act, as it
may be amended from time to time, and any successor to such statute.
"ADDITIONAL FUNDS" shall have the meaning set forth in Section 4.3.A.
"ADDITIONAL LIMITED PARTNER" means a Person admitted to the Partnership as
a Limited Partner pursuant to Section 12.2 hereof and who is shown as such on
the books and records of the Partnership.
<PAGE>
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Partner, the
deficit balance, if any, in such Partner's Capital Account as of the end of the
relevant fiscal year, after giving effect to the following adjustments:
(i) decrease such deficit by any amounts which such Partner is
obligated, or is treated as obligated, to restore pursuant to this
Agreement or is deemed to be obligated to restore pursuant to
Regulations Section 1.704-1(b)(2)(ii)(c) or the penultimate sentence
of each of Regulations Sections 1.704-2(i)(5) and 1.704-2(g); and
(ii) increase such deficit by the items described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended
to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and
shall be interpreted consistently therewith.
"ADJUSTMENT DATE" means, with respect to any Capital Contribution, the
close of business on the Business Day last preceding the date of the Capital
Contribution, PROVIDED THAT, if such Capital Contribution is being made by the
General Partner in respect of the proceeds from the issuance of REIT Shares (or
the issuance of the General Partner's securities exercisable for, convertible
into or exchangeable for REIT Shares), then the Adjustment Date shall be as of
the close of business on the Business Day last preceding the date of the
issuance of such securities.
"AFFILIATE" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by or under common control with such Person.
"AGENT" shall have the meaning set forth in Section 7.8.A.
"AGREED VALUE" means (i) in the case of any Contributed Property set forth
in Exhibit A and as of the time of its contribution to the Partnership, the
Agreed Value of such property as set forth in Exhibit A; (ii) in the case of any
Contributed Property not set forth in Exhibit A and as of the time of its
contribution to the Partnership, the fair market value of such property or other
consideration as determined by the General Partner, reduced by any liabilities
either assumed by the Partnership upon such contribution or to which such
property is subject when contributed; and (iii) in the case of any property
distributed to a Partner by the Partnership, the fair market value of such
property as determined by the General Partner at the time such property is
distributed, reduced by any liabilities either assumed by such Partner upon such
distribution or to which such property is subject at the time of the
distribution as determined under Section 752 of the Code and the Regulations
thereunder.
"AGREEMENT" means this Agreement of Limited Partnership, as it may be
amended, supplemented or restated from time to time.
2
<PAGE>
"APPRAISAL" means, with respect to any assets, the opinion of an
independent third party experienced in the valuation of similar assets, selected
by the General Partner in good faith; such opinion may be in the form of an
opinion by such independent third party that the value for such property or
asset as set by the General Partner is fair, from a financial point of view, to
the Partnership.
"ASSIGNEE" means a Person to whom one or more Partnership Units have been
transferred in a manner permitted under this Agreement, but who has not become a
Substituted Limited Partner, and who has the rights set forth in Section 11.5.
"AVAILABLE CASH" means, with respect to any period for which such
calculation is being made, (i) the sum of:
a. the Partnership's Net Income or Net Loss (as the case may be) for
such period,
b. Depreciation and all other noncash charges deducted in
determining Net Income or Net Loss for such period,
c. the amount of any reduction in reserves of the Partnership
referred to in clause (ii)(f) below (including, without limitation,
reductions resulting because the General Partner determines such amounts
are no longer necessary),
d. the excess of the net proceeds from the sale, exchange,
disposition, or refinancing of Partnership property for such period over
the gain (or loss, as the case may be) recognized from any such sale,
exchange, disposition, or refinancing during such period (excluding
Terminating Capital Transactions), and
e. all other cash received by the Partnership for such period that
was not included in determining Net Income or Net Loss for such period;
(ii) less the sum of:
a. all principal debt payments made during such period by the
Partnership,
b. capital expenditures made by the Partnership during such period,
c. investments in any entity (including loans made thereto) to the
extent that such investments are not otherwise described in clause (ii)(a)
or (b),
d. all other expenditures and payments not deducted in determining
Net Income or Net Loss for such period,
3
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e. any amount included in determining Net Income or Net Loss for
such period that was not received by the Partnership during such period,
f. the amount of any increase in reserves established during such
period which the General Partner determines are necessary or appropriate
in its sole and absolute discretion, and
g. the amount of any working capital accounts and other cash or
similar balances which the General Partner determines to be necessary or
appropriate in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include any cash
received or reductions in reserves, or take into account any disbursements made
or reserves, established, after commencement of the dissolution and liquidation
of the Partnership.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to be closed.
"CAPITAL ACCOUNT" means, with respect to any Partner, the Capital Account
maintained for such Partner in accordance with the following provisions:
(a) To each Partner's Capital Account there shall be added such Partner's
Capital Contributions, such Partner's share of Net Income and any items in the
nature of income or gain which are specially allocated pursuant to Section 6.3
hereof, and the amount of any Partnership liabilities assumed by such Partner or
which are secured by any property distributed to such Partner.
(b) From each Partner's Capital Account there shall be subtracted the
amount of cash and the Gross Asset Value of any property distributed to such
Partner pursuant to any provision of this Agreement, such Partner's distributive
share of Net Losses and any items in the nature of expenses or losses which are
specially allocated pursuant to Section 6.3 hereof, and the amount of any
liabilities of such Partner assumed by the Partnership or which are secured by
any property contributed by such Partner to the Partnership.
(c) In the event any interest in the Partnership is transferred in
accordance with the terms of this Agreement (which does not result in a
termination of the Partnership for federal income tax purposes), the transferee
shall succeed to the Capital Account of the transferor to the extent it relates
to the transferred interest.
(d) In determining the amount of any liability for purposes of subsections
(a) and (b) hereof, there shall be taken into account Code section 752(c) and
any other applicable provisions of the Code and Regulations.
4
<PAGE>
(e) The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Sections 1.704-1(b) and 1.704-2, and shall be interpreted and
applied in a manner consistent with such Regulations. In the event the General
Partner shall determine that it is prudent to modify the manner in which the
Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed property or which are assumed by the Partnership, the
General Partner, or the Limited Partners) are computed in order to comply with
such Regulations, the General Partner may make such modification, PROVIDED THAT
it is not likely to have a material effect on the amounts distributable to any
Person pursuant to Article 13 of the Agreement upon the dissolution of the
Partnership. The General Partner also shall (i) make any adjustments that are
necessary or appropriate to maintain equality between the Capital Accounts of
the Partners and the amount of Partnership capital reflected on the
Partnership's balance sheet, as computed for book purposes, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulations Section 1.704-1(b) or Section 1.704-2.
"CAPITAL CONTRIBUTION" means, with respect to any Partner, the amount of
money and the initial Gross Asset Value of any property (other than money)
contributed to the Partnership by such Partner.
"CASH AMOUNT" means, with respect to any Partnership Units subject to a
Redemption, an amount of cash equal to the Deemed Partnership Interest Value
attributable to such Partnership Units.
"CERTIFICATE" means the Certificate of Limited Partnership relating to the
Partnership filed in the office of the Secretary of State of Delaware, as
amended from time to time in accordance with the terms hereof and the Act.
"CHARTER" means the Articles of Incorporation of the General Partner filed
with the Maryland State Department of Assessments and Taxation on April 4, 1994,
as amended or restated from time to time.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time or any successor statute thereto, as interpreted by the applicable
regulations thereunder. Any reference herein to a specific section or sections
of the Code shall be deemed to include a reference to any corresponding
provision of future law.
"CONSENT" means the consent to, approval of, or vote on a proposed action
by a Partner given in accordance with Article 14 hereof.
"CONSENT OF THE LIMITED PARTNERS" means the Consent of a Majority In
Interest of the Limited Partners, which Consent shall be obtained prior to the
taking of any action for which it is required by this Agreement and may be given
or withheld by a Majority in Interest
5
<PAGE>
of the Limited Partners, unless otherwise expressly provided herein, in their
sole and absolute discretion.
"CONSENT OF THE PARTNERS" means the Consent of Partners holding Percentage
Interests that, in the aggregate are equal to or greater than 66 2/3% of the
aggregate Percentage Interests of all Partners, which Consent shall be obtained
prior to the taking of any action for which it is required by this Agreement and
may be given or withheld by such Partners, in their sole and absolute
discretion.
"CONSENT OF THE SUPER MAJORITY LIMITED PARTNERS" means the consent of
Limited Partners (other than the General Partner and any Limited Partner 50% or
more of whose equity is owned, directly or indirectly, by the General Partner)
holding Percentage Interests that, in the aggregate are equal to or greater than
66 2/3% of the aggregate Percentage Interests of all Limited Partners (other
than the General Partner and any Limited Partner 50% or more of whose equity is
owned, directly or indirectly, by the General Partner), which Consent shall be
obtained prior to the taking of any action for which it is required by this
Agreement and may be given or withheld by such Limited Partners, in their sole
and absolute discretion.
"CONSOLIDATION TRANSACTIONS" shall have the meaning set forth in the
Recitals to this Agreement.
"CONSTRUCTIVELY OWN" means ownership under the constructive ownership
rules described in Exhibit C.
"CONTRIBUTED PROPERTY" means each property or other asset, in such form as
may be permitted by the Act, but excluding cash, contributed or deemed
contributed to the Partnership (or, to the extent provided in applicable
regulations, deemed contributed to the Partnership on termination and
reconstitution thereof pursuant to Section 708 of the Code).
"CONTRIBUTION AGREEMENT" shall mean that certain Contribution Agreement
among GIG, certain of its Affiliates and the Partnership pursuant to which GIG
and such Affiliates shall contribute certain assets to the Partnership, as such
agreement may be modified from time to time.
"DEBT" means, as to any Person, as of any date of determination, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services; (ii) all amounts owed by such Person to banks or
other Persons in respect to reimbursement obligations under letters of credit,
surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person; (iii) all indebtedness for borrowed
money or for the deferred purchase price of property or services secured by any
lien on any property owned by such Person, to the extent attributable to such
Person's interest in such property, even though such Person has not assumed or
become liable for the payment thereof; and (iv) lease obligations of such Person
which, in accordance with generally accepted accounting principles, should be
capitalized.
6
<PAGE>
"DEEMED PARTNERSHIP INTEREST VALUE" means, as of any date with respect to
any class of Partnership Interests, the Deemed Value of the Partnership
Interests of such class multiplied by the applicable Partner's Percentage
Interest of such class.
"DEEMED VALUE OF THE PARTNERSHIP INTERESTS" means, as of any date with
respect to any class of Partnership Interests, (i) the total number of shares of
capital stock of the General Partner corresponding to the Percentage Interest of
the General Partner in such class of Partnership Interests (as provided for in
Sections 4.1 and 4.3.C) issued and outstanding as of the close of business on
such date (excluding any treasury shares) multiplied by the Fair Market Value of
a share of such capital stock on such date; (ii) DIVIDED BY the Percentage
Interest of the General Partner in such class of Partnership Interests on such
date.
"DEPRECIATION" means, for each fiscal year or other period, an amount
equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such year or other period, except that if
the Gross Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such year or other period, Depreciation
shall be an amount which bears the same ratio to such beginning Gross Asset
Value as the federal income tax depreciation, amortization or other cost
recovery deduction for such year or other period bears to such beginning
adjusted tax basis; PROVIDED, HOWEVER, that if the federal income tax
depreciation, amortization or other cost recovery deduction for such year is
zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the General Partner.
"EFFECTIVE DATE" means the date of consummation of the Consolidation
Transactions, upon which contributions set forth on Exhibit A shall become
effective.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"EXCHANGE OFFER" means the Offer to Exchange, dated December 2, 1996, by
the Operating Partnership to the limited partners of certain limited
partnerships, pursuant to which certain such limited partners can exchange the
interests held by them in such limited partnerships for Partnership Units or,
under certain circumstances, cash, as such Offer to Exchange may be
supplemented, amended or modified from time to time.
"FAIR MARKET VALUE" means, with respect to any share of capital stock of
the General Partner, the average of the daily market price for the ten (10)
consecutive trading days immediately preceding the date with respect to which
"Fair Market Value" must be determined hereunder or, if such date is not a
Business Day, the immediately preceding Business Day. The market price for each
such trading day shall be: (i) if such shares are listed or admitted to trading
on any securities exchange or the Nasdaq National Market, the closing price,
regular way, on such day, or if no such sale takes place on such day, the
average of the closing bid and asked prices on such day, (ii) if such shares are
not listed or admitted to trading on any securities exchange or the Nasdaq
National Market, the last reported sale price on such day or, if no sale
7
<PAGE>
takes place on such day, the average of the closing bid and asked prices on such
day, as reported by a reliable quotation source designated by the General
Partner, or (iii) if such shares are not listed or admitted to trading on any
securities exchange or the Nasdaq National Market and no such last reported sale
price or closing bid and asked prices are available, the average of the reported
high bid and low asked prices on such day, as reported by a reliable quotation
source designated by the General Partner, or if there shall be no bid and asked
prices on such day, the average of the high bid and low asked prices, as so
reported, on the most recent day (not more than 10 days prior to the date in
question) for which prices have been so reported; PROVIDED THAT, if there are no
bid and asked prices reported during the 10 days prior to the date in question,
the Fair Market Value of such shares shall be determined by the General Partner
acting in good faith on the basis of such quotations and other information as it
considers, in its reasonable judgment, appropriate. In the event the REIT Shares
Amount for such shares includes rights that a holder of such shares would be
entitled to receive, then the Fair Market Value of such rights shall be
determined by the General Partner acting in good faith on the basis of such
quotations and other information as it considers, in its reasonable judgment,
appropriate; and PROVIDED FURTHER THAT, in connection with determining the
Deemed Value of the Partnership Interests for purposes of determining the number
of additional Partnership Units issuable upon a Capital Contribution funded by
an underwritten public offering of shares of capital stock of the General
Partner, the Fair Market Value of such shares shall be the public offering price
per share of such class of capital stock sold.
"FUNDING DEBT" means the incurrence of any Debt by or on behalf of the
General Partner for the purpose of providing funds to the Partnership.
"GENERAL PARTNER" means the Company or its successors as general partner
of the Partnership.
"GENERAL PARTNER INTEREST" means a Partnership Interest held by the
General Partner. A General Partner Interest may be expressed as a number of
Partnership Units.
"GENERAL PARTNER LOAN" shall have the meaning set forth in Section 4.3.B.
"GENERAL PARTNER PAYMENT" shall have the meaning set forth in Section
15.11.
"GIG" shall mean Grove Investment Group, Inc., a Connecticut corporation.
"GROSS ASSET VALUE" means, with respect to any asset, the asset's adjusted
basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a Partner to
the Partnership shall be the gross fair market value of such asset, as
determined by the contributing Partner and the General Partner (as set forth on
Exhibit A attached hereto, as such Exhibit may be amended from time to time);
PROVIDED THAT, if the contributing Partner is the General Partner then, except
with respect to the General Partner's initial Capital Contribution which shall
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be determined as set forth on Exhibit A, or capital contributions of cash, REIT
Shares or other shares of capital stock of the General Partner, the
determination of the fair market value of the contributed asset shall be
determined by the price paid by the General Partner if the asset is acquired by
the General Partner contemporaneously with its contribution to the Partnership.
(b) As of the times listed below, 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 using such reasonable method of
valuation as it may adopt, PROVIDED, HOWEVER, that for such purpose, the net
value of all of the Partnership assets, in the aggregate, shall be equal to the
Deemed Value of the Partnership Interests of all classes of Partnership
Interests then outstanding, regardless of the method of valuation adopted by the
General Partner:
(i) the acquisition of an additional interest in the Partnership
by a new or existing Partner in exchange for more than a de
minimis Capital Contribution, if the General Partner
reasonably determines that such adjustment is necessary or
appropriate to reflect the relative economic interests of the
Partners in the Partnership;
(ii) the distribution by the Partnership to a Partner of more than
a de minimis amount of Partnership property as consideration
for an interest in the Partnership if the General Partner
reasonably determines that such adjustment is necessary or
appropriate to reflect the relative economic interests of the
Partners in the Partnership;
(iii) the liquidation of the Partnership within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g); and
(iv) at such other times as the General Partner shall reasonably
determine necessary or advisable in order to comply with
Regulations Sections 1.704-1(b) and 1.704-2.
(c) The Gross Asset Value of any Partnership asset distributed to a
Partner shall be the gross fair market value of such asset (taking Section
7701(g) of the Code into account), without reduction for liabilities, on the
date of distribution as determined by the distributee and the General Partner,
or if the distributee and the General Partner cannot agree on such a
determination, by Appraisal.
(d) The Gross Asset Values of Partnership assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); PROVIDED, HOWEVER, that
Gross Asset Values shall not be adjusted pursuant to this subparagraph (d) to
the extent that the General Partner reasonably determines that an adjustment
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pursuant to subparagraph (b) is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to this
subparagraph (d).
(e) If the Gross Asset Value of a Partnership asset has been determined or
adjusted pursuant to subparagraph (a), (b) or (d), such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset for purposes of computing Net Income and Net Losses.
"HOLDER" means either the Partner or Assignee owning a Partnership Unit.
"IMMEDIATE FAMILY" means, with respect to any natural Person, such natural
Person's estate or heirs or current spouse, parents, parents-in-law, children,
siblings and grandchildren and any trust or estate, all of the beneficiaries of
which consist of such Person or such Person's current spouse, parents,
parents-in-law, children, siblings or grandchildren.
"INCAPACITY" or "INCAPACITATED" means, (i) as to any individual Partner,
death, total physical disability or entry by a court of competent jurisdiction
adjudicating him or her incompetent to manage his or her Person or his or her
estate; (ii) as to any corporation which is a Partner, the filing of a
certificate of dissolution, or its equivalent, for the corporation or the
revocation of its charter; (iii) as to any partnership which is a Partner, the
dissolution and commencement of winding up of the partnership; (iv) as to any
estate which is a Partner, the distribution by the fiduciary of the estate's
entire interest in the Partnership; (v) as to any trustee of a trust which is a
Partner, the termination of the trust (but not the substitution of a new
trustee); or (vi) as to any Partner, the bankruptcy of such Partner. For
purposes of this definition, bankruptcy of a Partner shall be deemed to have
occurred when (a) the Partner commences a voluntary proceeding seeking
liquidation, reorganization or other relief under any bankruptcy, insolvency or
other similar law now or hereafter in effect, (b) the Partner is adjudged as
bankrupt or insolvent, or a final and nonappealable order for relief under any
bankruptcy, insolvency or similar law now or hereafter in effect has been
entered against the Partner, (c) the Partner executes and delivers a general
assignment for the benefit of the Partner's creditors, (d) the Partner files an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the Partner in any proceeding of the
nature described in clause (b) above, (e) the Partner seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator for the
Partner or for all or any substantial part of the Partner's properties, (f) any
proceeding seeking liquidation, reorganization or other relief under any
bankruptcy, insolvency or other similar law now or hereafter in effect has not
been dismissed within 120 days after the commencement thereof, (g) the
appointment without the Partner's consent or acquiescence of a trustee, receiver
or liquidator has not been vacated or stayed within 90 days of such appointment,
or (h) an appointment referred to in clause (g) is not vacated within 90 days
after the expiration of any such stay.
"INDEMNITEE" means (i) any Person subject to a claim or demand or made or
threatened to be made a party to, or involved or threatened to be involved in, a
proceeding by reason of his or her status as (A) the General Partner or (B) a
director or officer of the Partnership
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or the General Partner, and (ii) such other Persons (including Affiliates of the
General Partner or the Partnership) as the General Partner may designate from
time to time, in its sole and absolute discretion.
"INDEPENDENT TRUST MANAGER" means a member of the General Partner's Board
of Trust Managers who is not an officer of the General Partner or an officer or
an Affiliate of GIG.
"IRS" means the Internal Revenue Service, which administers the internal
revenue laws of the United States.
"LIMITED PARTNER" means any Person named as a Limited Partner in Exhibit A
attached hereto, as such Exhibit may be amended from time to time, or any
Substituted Limited Partner or Additional Limited Partner, in such Person's
capacity as a Limited Partner in the Partnership.
"LIMITED PARTNERSHIP INTEREST" means a Partnership Interest of a Limited
Partner representing a fractional part of the Partnership Interests of all
Limited Partners and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement. A Limited Partnership Interest may be expressed as a number of
Partnership Units.
"LIQUIDATING EVENTS" shall have the meaning set forth in Section 13.1.
"LIQUIDATOR" shall have the meaning set forth in Section 13.2.A.
"MAJORITY IN INTEREST OF THE LIMITED PARTNERS" means Limited Partners
(other than the General Partner and any Limited Partner 50% or more of whose
equity is owned, directly or indirectly, by the General Partner) holding
Percentage Interests that in the aggregate are greater than fifty percent (50%)
of the aggregate Percentage Interests of all Limited Partners (other than the
General Partner and any Limited Partner 50% or more of whose equity is owned,
directly or indirectly, by the General Partner).
"MAJORITY OF REMAINING PARTNERS" means Partners other than the General
Partner owning (i) greater than fifty percent (50%) of the profits interests in
the Partnership held by all Partners other than the General Partner, determined
and allocated based on any reasonable estimate of profits from the relevant date
to the projected termination of the Partnership and taking into account present
and future allocations of profits under this Agreement as it is in effect on the
relevant date, and (ii) greater than fifty percent (50%) of the capital
interests in the Partnership, determined as of the relevant date under this
Agreement, owned by all the Partners other than the General Partner.
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"NET INCOME" or "NET LOSS" means, for each fiscal year of the Partnership,
an amount equal to the Partnership's taxable income or loss for such 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:
(a) Any income of the Partnership that is exempt from federal income tax
and not otherwise taken into account in computing Net Income or Net Loss
pursuant to this definition of Net Income or Net Loss shall be added to such
taxable income or loss;
(b) 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
Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into account
in computing Net Income or Net Loss pursuant to this definition of Net Income or
Net Loss shall be subtracted from such taxable income or loss;
(c) In the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to subparagraph (b) or subparagraph (c) of the definition of
Gross Asset Value, the amount of such adjustment shall be taken into account as
gain or loss from the disposition of such asset for purposes of computing Net
Income or Net Loss;
(d) Gain or loss resulting from any disposition of property with respect
to which gain or loss is recognized for federal income tax purposes shall be
computed by reference to the Gross Asset Value of the property disposed of,
notwithstanding that the adjusted tax basis of such property differs from its
Gross Asset Value;
(e) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such fiscal year;
(f) To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken
into account in determining Capital Accounts as a result of a distribution other
than in liquidation of a Partner's interest in the Partnership, the amount of
such adjustment shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases the basis of the
asset) from the disposition of the asset and shall be taken into account for
purposes of computing Net Income or Net Loss; and
(g) Notwithstanding any other provision of this definition of Net Income
or Net Loss, any items which are specially allocated pursuant to Section 6.3
hereof shall not be taken into account in computing Net Income or Net Loss. The
amounts of the items of Partnership income, gain, loss, or deduction available
to be specially allocated pursuant to Section 6.3 hereof shall be determined by
applying rules analogous to those set forth in this definition of Net Income or
Net Loss.
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"NEW SECURITIES" means (i) any rights, options, warrants or convertible or
exchangeable securities having the right to subscribe for or purchase REIT
Shares or other shares of capital stock of the General Partner, excluding grants
under any Stock Plan, or (ii) any Debt issued by the General Partner that
provides any of the rights described in clause (i).
"NONRECOURSE DEDUCTIONS" shall have the meaning set forth in Regulations
Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a
Partnership Year shall be determined in accordance with the rules of Regulations
Section 1.704-2(c).
"NONRECOURSE LIABILITY" shall have the meaning set forth in Regulations
Section 1.752-1(a)(2).
"NOTICE OF REDEMPTION" means the Notice of Redemption substantially in the
form of Exhibit B to this Agreement.
"PARTNER" means a General Partner or a Limited Partner, and "PARTNERS"
means the General Partner and the Limited Partners.
"PARTNER MINIMUM GAIN" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"PARTNER NONRECOURSE DEBT" shall have the meaning set forth in Regulations
Section 1.704-2(b)(4).
"PARTNER NONRECOURSE DEDUCTIONS" shall have the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership Year
shall be determined in accordance with the rules of Regulations Section
1.704-2(i)(2).
"PARTNERSHIP" means the limited partnership formed under the Act and
pursuant to this Agreement, and any successor thereto.
"PARTNERSHIP INTEREST" means an ownership interest in the Partnership of
either a Limited Partner or the General Partner and includes any and all
benefits to which the holder of such a Partnership Interest may be entitled as
provided in this Agreement, together with all obligations of such Person to
comply with the terms and provisions of this Agreement. There may be one or more
classes of Partnership Interests as provided in Section 4.3. A Partnership
Interest may be expressed as a number of Partnership Units. Unless otherwise
expressly provided for by the General Partner at the time of the original
issuance of any Partnership Interests, all Partnership Interests (whether of a
Limited Partner or a General Partner) shall be of the same class.
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"PARTNERSHIP MINIMUM GAIN" shall have the meaning set forth in Regulations
Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as
any net increase or decrease in Partnership Minimum Gain, for a Partnership Year
shall be determined in accordance with the rules of Regulations Section
1.704-2(d).
"PARTNERSHIP RECORD DATE" means the record date established by the General
Partner for the distribution of Available Cash pursuant to Section 5.1 hereof
which record date shall be the same as the record date established by the
General Partner for a distribution to its stockholders of some or all of its
portion of such distribution.
"PARTNERSHIP UNIT" means, with respect to any class of Partnership
Interest, a fractional, undivided share of such class of Partnership Interest
issued pursuant to Sections 4.1 and 4.3. The ownership of Partnership Units may
be evidenced by a certificate for units substantially in the form of Exhibit D
hereto or as the General Partner may determine with respect to any class of
Partnership Units issued from time to time under Sections 4.1 and 4.3.
"PARTNERSHIP YEAR" means the fiscal year of the Partnership, which shall
be the calendar year.
"PERCENTAGE INTEREST" means, as to a Partner holding a class of
Partnership Interests, its interest in the Partnership as determined by dividing
the Partnership Units of such class owned by such Partner by the total number of
Partnership Units of such class then outstanding as specified in Exhibit A
attached hereto, as such Exhibit may be amended from time to time. If the
Partnership issues more than one class of Partnership Interest, the interest in
the Partnership among the classes of Partnership Interests shall be determined
as set forth in the amendment to the Partnership Agreement setting forth the
rights and privileges of such additional classes of Partnership Interest, if
any, as contemplated by Section 4.3.C hereof.
"PERSON" means an individual or a corporation, partnership, limited
liability company, trust, unincorporated organization, association or other
entity.
"PLEDGE" shall have the meaning set forth in Section 11.3.A.
"PLEDGE AGREEMENT" means the Pledge Agreement dated as of ____________,
1997 among the Company, as agent, and the Pledgors, as the same may be amended,
modified or supplemented from time to time in accordance with its terms.
"PLEDGORS" means ___________________.
"PROPERTIES" means such interests in real property and personal property
including, without limitation, fee interests, interests in ground leases,
interests in joint ventures, interests in mortgages, and Debt instruments, as
the Partnership may hold from time to time.
"PRO RATA CONTRIBUTION" shall have the meaning set forth in Section 4.3.F.
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"PRO RATA PARTICIPATION" shall have the meaning set forth in Section
4.3.F.
"QUALIFIED REIT SUBSIDIARY" means any Subsidiary of the General Partner
that is a "qualified REIT subsidiary" within the meaning of Section 856(i) of
the Code.
"QUALIFIED TRANSFEREE" means an "Accredited Investor" as defined in Rule
501 promulgated under the Securities Act.
"REDEMPTION" shall have the meaning set forth in Section 8.6.A.
"REGULATIONS" means the Income Tax Regulations promulgated under the Code,
as such regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).
"REGULATORY ALLOCATIONS" shall have the meaning set forth in
Section 6.3.A(viii) of this Agreement.
"REIT" means a real estate investment trust under Section 856 of the Code.
"REIT REQUIREMENTS" shall have the meaning set forth in Section 5.1.
"REIT SHARE" means a share of common stock of the General Partner.
"REIT SHARES AMOUNT" means, as of any date, (i) with respect to Tendered
Units, an aggregate number of REIT Shares equal to the number of such Tendered
Units, as adjusted pursuant to Section 8.6.G (in the event the General Partner
acquires material assets, other than on behalf of the Partnership) and for stock
dividends and distributions, stock splits and subdivisions, reverse stock splits
and combinations, distributions of rights, warrants or options, and
distributions of evidences of indebtedness or assets received by the General
Partner pursuant to a distribution by the Partnership other than a pro rata
distribution to all Partners based on their respective Percentage Interests, and
(ii) with respect to Partnership Units in any other context, the amount of REIT
Shares determined in accordance with clause (i) assuming for such purpose that
all such Partnership Units are Tendered Units.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder.
"SECURITIES EXCHANGE ACT" means the Securities Act of 1934, as amended,
and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
"SPECIFIED REDEMPTION DATE" means the day of receipt by the General
Partner of a Notice of Redemption.
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"STOCK PLAN" means any stock incentive, stock option, stock ownership or
employee benefits plan of the General Partner.
"SUBSIDIARY" means, with respect to any Person, any corporation or other
entity of which a majority of (i) the voting power of the voting equity
securities or (ii) the outstanding equity interests is owned, directly or
indirectly, by such Person.
"SUBSIDIARY PARTNERSHIP" means any partnership that is a Subsidiary of the
Partnership.
"SUBSTITUTE GENERAL PARTNER" means a Person who is admitted as a successor
General Partner to the Partnership pursuant to Section 11.2.A.
"SUBSTITUTED LIMITED PARTNER" means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 11.4.
"TAX ITEMS" shall have the meaning set forth in Section 6.4.A.
"TENANT" means any tenant from which the General Partner derives rent
either directly or indirectly through partnerships, including the Partnership.
"TENDERED UNITS" shall have the meaning set forth in Section 8.6.A.
"TENDERING PARTNER" shall have the meaning set forth in Section 8.6.A.
"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.
ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1 ORGANIZATION
The Partnership is a limited partnership formed pursuant to the provisions
of the Act and upon the terms and conditions set forth in this Agreement. Except
as expressly provided herein, the rights and obligations of the Partners and the
administration and termination of the Partnership shall be governed by the Act.
The Partnership Interest of each Partner shall be personal property for all
purposes.
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Section 2.2 NAME
The name of the Partnership is Grove Operating, L.P. The Partnership's
business may be conducted under any other name or names deemed advisable by the
General Partner, including the name of the General Partner or any Affiliate
thereof. The words "Limited Partnership," "L.P.," "Ltd." or similar words or
letters shall be included in the Partnership's name where necessary for the
purposes of complying with the laws of any jurisdiction that so requires. The
General Partner in its sole and absolute discretion may change the name of the
Partnership at any time and from time to time and shall notify the Limited
Partners of such change in the next regular communication to the Limited
Partners.
Section 2.3 RESIDENT AGENT; PRINCIPAL OFFICE
The name and address of the resident agent of the Partnership in the State
of Delaware shall be United Corporate Services, Inc., 15 East North Street,
Dover, Delaware 19901 or such other person as the General Partner may select in
its sole discretion. The registered office of the Partnership in the State of
Delaware shall be United Corporate Services, Inc. at such address or such other
location as the General Partner may select in its sole discretion. The
Partnership may maintain offices at such other place or places within or outside
the State of Delaware as the General Partner deems advisable.
Section 2.4 POWER OF ATTORNEY
A. Each Limited Partner and each Assignee constitutes and appoints the
General Partner, any Liquidator, and authorized officers and attorneys-in-fact
of each, and each of those acting singly, in each case with full power of
substitution, as its true and lawful agent and attorney-in-fact, with full power
and authority in its name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (a) all certificates, documents and other
instruments (including, without limitation, this Agreement and the
Certificate and all amendments or restatements thereof) that the
General Partner or the Liquidator deems appropriate or necessary to
form, qualify or continue the existence or qualification of the
Partnership as a limited partnership (or a partnership in which the
Limited Partners have limited liability) in the State of Delaware
and in all other jurisdictions in which the Partnership may conduct
business or own property; (b) all instruments that the General
Partner or any Liquidator deems appropriate or necessary to reflect
any amendment, change, modification or restatement of this Agreement
in accordance with its terms; (c) all conveyances and other
instruments or documents that the General Partner or any Liquidator
deems appropriate or necessary to reflect the dissolution and
liquidation of the Partnership pursuant to the terms of this
Agreement, including, without limitation, a certificate of
cancellation; (d) all instruments relating to the admission,
withdrawal, removal or substitution of any Partner pursuant to, or
other events described in, Article 11, 12 or 13 hereof or the
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Capital Contribution of any Partner; and (e) all certificates,
documents and other instruments relating to the determination of the
rights, preferences and privileges of Partnership Interests; and
(2) execute, swear to, acknowledge and file all ballots, consents,
approvals, waivers, certificates and other instruments appropriate
or necessary, in the sole and absolute discretion of the General
Partner or any Liquidator, to make, evidence, give, confirm or
ratify any vote, consent, approval, agreement or other action which
is made or given by the Partners hereunder or is consistent with the
terms of this Agreement or appropriate or necessary, in the sole
discretion of the General Partner or any Liquidator, to effectuate
the terms or intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General Partner
or any Liquidator to amend this Agreement except in accordance with Article 14
hereof or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, in recognition of the fact that each of
the Partners will be relying upon the power of the General Partner and any
Liquidator to act as contemplated by this Agreement in any filing or other
action by it on behalf of the Partnership, and it shall survive and not be
affected by the subsequent Incapacity of any Limited Partner or Assignee and the
transfer of all or any portion of such Limited Partner's or Assignee's
Partnership Units and shall extend to such Limited Partner's or Assignee's
heirs, successors, assigns and personal representatives. Each such Limited
Partner or Assignee hereby agrees to be bound by any representation made by the
General Partner or any Liquidator, acting in good faith pursuant to such power
of attorney; and each such Limited Partner or Assignee hereby waives any and all
defenses which may be available to contest, negate or disaffirm the action of
the General Partner or any Liquidator, taken in good faith under such power of
attorney and in accordance with the provisions of this Agreement. Each Limited
Partner or Assignee shall execute and deliver to the General Partner or any
Liquidator, within 15 days after receipt of the General Partner's or
Liquidator's request therefor, such further designation, powers of attorney and
other instruments as the General Partner or the Liquidator, as the case may be,
deems necessary to effectuate this Agreement and the purposes of the
Partnership.
Section 2.5 TERM
The term of the Partnership commenced on November 1, 1996 and shall
continue until December 31, 2056 unless it is dissolved sooner pursuant to the
provisions of Article 13 or as otherwise provided by law.
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ARTICLE 3
PURPOSE
Section 3.1 PURPOSE AND BUSINESS
The purpose and nature of the business to be conducted by the Partnership
is (i) to conduct any business that may be lawfully conducted by a limited
partnership organized pursuant to the Act, PROVIDED, HOWEVER, that such business
shall be limited to and conducted in such a manner as to permit the General
Partner at all times to be classified as a REIT for federal income tax purposes,
unless the General Partner ceases to qualify as a REIT for reasons other than
the conduct of the business of the Partnership, (ii) to enter into any
partnership, joint venture or other similar arrangement to engage in any
business described in the foregoing clause (i) or to own interests in any entity
engaged, directly or indirectly, in any such business and (iii) to do anything
necessary or incidental to the foregoing. In connection with the foregoing, and
without limiting the General Partner's right in its sole discretion to cease
qualifying as a REIT, the Partners acknowledge that the General Partner's
current status as a REIT inures to the benefit of all the Partners and not
solely the General Partner.
Section 3.2 POWERS
The Partnership is empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for the furtherance
and accomplishment of the purposes and business described herein and for the
protection and benefit of the Partnership, including, without limitation, full
power and authority, directly or through its ownership interest in other
entities, to enter into, perform and carry out contracts of any kind, borrow
money and issue evidences of indebtedness, whether or not secured by mortgage,
deed of trust, pledge or other lien, acquire and develop real property, and
manage, lease, sell, transfer and dispose of real property; PROVIDED, HOWEVER,
that the Partnership shall not take, or refrain from taking, any action which,
in the judgment of the General Partner, in its sole and absolute discretion, (i)
could adversely affect the ability of the General Partner to continue to qualify
as a REIT, (ii) could subject the General Partner to any taxes under Section 857
or Section 4981 of the Code, or (iii) could violate any law or regulation of any
governmental body or agency having jurisdiction over the General Partner or its
securities, unless any such action (or inaction) under (i), (ii) or (iii) shall
have been specifically consented to by the General Partner in writing.
Section 3.3 PARTNERSHIP ONLY FOR PURPOSES SPECIFIED
The Partnership shall be a partnership only for the purposes specified in
Section 3.1 hereof, and this Agreement shall not be deemed to create a
partnership among the Partners with respect to any activities whatsoever other
than the activities within the purposes of the Partnership as specified in
Section 3.1 hereof. Except as otherwise provided in this Agreement, no Partner
shall have any authority to act for, bind, commit or assume any obligation or
responsibility on behalf of the Partnership, its properties or any other
Partner. No Partner, in its capacity as a Partner under this Agreement, shall be
responsible or liable for any indebtedness or
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obligation of another Partner, nor shall the Partnership be responsible or
liable for any indebtedness or obligation of any Partner, incurred either before
or after the execution and delivery of this Agreement by such Partner, except as
to those responsibilities, liabilities, indebtedness or obligations incurred
pursuant to and as limited by the terms of this Agreement and the Act.
Section 3.4 REPRESENTATIONS AND WARRANTIES BY THE PARTIES
A. Each Partner that is an individual represents and warrants to each
other Partner that (i) such Partner has, in the case of any Person other than an
individual, the power and authority, and in the case of an individual, the legal
capacity to enter into this Agreement and perform such Partner's obligations
hereunder, (ii) the consummation of the transactions contemplated by this
Agreement to be performed by such Partner will not result in a breach or
violation of, or a default under, any agreement by which such Partner or any of
such Partner's property is or are bound, or any statute, regulation, order or
other law to which such Partner is subject, (iii) such Partner is neither a
"foreign person" within the meaning of Section 1445(f) of the Code nor a
"foreign partner" within the meaning of Section 1446(e) of the Code, and (iv)
this Agreement has been duly executed and delivered by such Partner and is
binding upon, and enforceable against, such Partner in accordance with its
terms.
B. Each Partner that is not an individual represents and warrants to each
other Partner that (i) it has the requisite corporate or other power and
authority to enter into this Agreement, (ii) its execution and delivery of this
Agreement, and performance of all transactions contemplated by this Agreement to
be performed by it, have been duly authorized by all necessary action,
including, without limitation, that of its general partner(s), committee(s),
trustee(s), beneficiaries, directors and/or stockholder(s), as the case may be,
as required, (iii) the consummation of such transactions shall not result in a
breach or violation of, or a default under, its certificate of limited
partnership, partnership agreement, trust agreement, limited liability company
operating agreement, charter, by-laws or other organizational documents, as the
case may be, any agreement by which such Partner or any of such Partner's
properties or any of its partners, beneficiaries, trustees or stockholders, as
the case may be, is or are bound, or any statute, regulation, order or other law
to which such Partner or any of its partners, trustees, beneficiaries or
stockholders, as the case may be, is or are subject, (iv) such Partner is
neither a "foreign person" within the meaning of Section 1445(f) of the Code nor
a "foreign partner" within the meaning of Section 1446(e) of the Code, and (v)
this Agreement has been duly executed and delivered by such Partner and is
binding upon, and enforceable against, such Partner in accordance with its
terms.
C. Each Partner represents, warrants and agrees that it has acquired and
continues to hold its interest in the Partnership for its own account for
investment only and not for the purpose of, or with a view toward, the resale or
distribution of all or any part thereof, nor with a view toward selling or
otherwise distributing such interest or any part thereof at any particular time
or under any predetermined circumstances. Each Partner further represents and
warrants that it is a sophisticated investor, able and accustomed to handling
sophisticated financial matters for itself,
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particularly real estate investments, and that it has a sufficiently high net
worth that it does not anticipate a need for the funds it has invested in the
Partnership in what it understands to be a highly speculative and illiquid
investment.
D. Each Partner further represents, warrants and agrees as follows:
(i) Except as provided in Exhibit E, it does not and will not, without the
prior written consent of the General Partner, actually own or Constructively Own
(a) with respect to any Tenant that is a corporation, any stock of such Tenant,
and (b) with respect to any Tenant that is not a corporation, any interests in
either the assets or net profits of such Tenant; PROVIDED, HOWEVER, that so long
as there are fewer than 20 Partners, each partner may own or Constructively Own
(x) with respect to any Tenant that is a corporation, stock of such Tenant
possessing up to, but not more than, one-half of one percent (0.5%) of the total
combined voting power of all classes of stock entitled to vote and one-half of
one percent (0.5%) of the total number of shares of all classes of stock of such
Tenant and (y) with respect to any Tenant that is not a corporation, interests
in such Tenant representing up to, but not more than, one-half of one percent
(0.5%) of the assets and one-half of one percent (0.5%) of the net profits of
such Tenant, so long as such actual or Constructive Ownership otherwise
permitted under clause (x) or (y) would not cause the General Partner to receive
amounts described in Section 856(d)(2)(B)of the Code.
(ii) Except as provided in Exhibit F, it does not, and agrees that it will
not without the prior written consent of the General Partner, actually own or
Constructively Own, any stock in the General Partner, other than any REIT Shares
or other shares of capital stock of the General Partner such Partner may acquire
(a) as a result of an exchange of Tendered Units pursuant to Section 8.6 or (b)
upon the exercise of options granted or delivery of REIT Shares pursuant to any
Stock Plan, or (c) in open market transactions, in each case subject to the
ownership limitations set forth in the Charter.
(iii) Upon request of the General Partner, it will disclose to the General
Partner the amount of REIT Shares or other shares of capital stock of the
General Partner that it actually owns or Constructively Owns.
(iv) It understands that if, for any reason, (a) the representations,
warranties or agreements set forth in D(i) or (ii) above are violated, or (b)
the Partner's actual or Constructive ownership of REIT Shares or other shares of
capital stock of the Company violates the limitations set forth in the Charter,
then (1) some or all of the Redemption rights of the Partners may become
non-exercisable, and (2) some or all of the REIT Shares owned by the Partners
may be automatically transferred to a trust for the benefit of a charitable
beneficiary, as provided in the Charter.
E. Each Limited Partner which is a party to the Contribution Agreement (i)
hereby makes to the Partnership and the General Partner the same representations
and warranties made by it in the Contribution Agreement as if such
representations and warranties were made and set
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forth in their entirety herein and (ii) hereby also represents and warrants to
the Partnership and the General Partner that none of the representations and
warranties made by it in the Contribution Agreement (as such representations and
warranties have been updated or revised by it in writing on or prior to the
closing of the transactions contemplated by the Contribution Agreement) contains
any untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading.
F. Each Limited Partner which acquired Partnership Units pursuant to the
Exchange Offer (i) hereby makes to the Partnership and the General Partner the
same representations and warranties made by it in the letter of transmittal
executed in connection with the Exchange Offer as if such representations and
warranties were made and set forth in their entity herein and (ii) hereby also
represents and warrants to the Partnership and the General Partner that none of
the representations and warranties made by it in such transmittal letter (as
such representations and warranties have been updated or revised by it in
writing on or prior to the closing of the Consolidation Transactions) contains
any untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading.
G. The representations and warranties contained in Sections 3.4.A - 3.4.F
hereof shall survive the execution and delivery of this Agreement by each
Partner and the dissolution and windup of the Partnership.
H. Each Partner hereby acknowledges that no representations as to
potential profit, cash flows, funds from operations or yield, if any, in respect
of the Partnership or the General Partner have been made by any Partner or any
employee or representative or Affiliate of any Partner, and that projections and
any other information, including, without limitation, financial and descriptive
information and documentation, which may have been in any manner submitted to
such Partner shall not constitute any representation or warranty of any kind or
nature, express or implied.
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1 CAPITAL CONTRIBUTIONS OF THE PARTNERS
At the time of their respective execution of this Agreement, the Partners
shall make Capital Contributions as set forth in Exhibit A to this Agreement.
The Partners shall own Partnership Units of the class in the amounts set forth
in Exhibit A and shall have a Percentage Interest in the Partnership as set
forth in Exhibit A, which Percentage Interest shall be adjusted in Exhibit A
from time to time by the General Partner to the extent necessary to reflect
accurately exchanges, redemptions, Capital Contributions, the issuance of
additional Partnership Units or similar events having an effect on a Partner's
Percentage Interest. Except as required by law or as otherwise provided in
Sections 4.3, 4.4 and 10.5, no Partner shall be required or permitted to
make any additional Capital Contributions or loans to the Partnership. Unless
otherwise
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specified by the General Partner at the time of the creation of any class of
Partnership Interests, the corresponding class of capital stock for any
Partnership Units issued shall be REIT Shares.
Section 4.2 LOANS BY THIRD PARTIES
Subject to Section 4.3, the Partnership may incur Debt, or enter into
other similar credit, guarantee, financing or refinancing arrangements for any
purpose (including, without limitation, in connection with any further
acquisition of Properties) with any Person that is not the General Partner upon
such terms as the General Partner determines appropriate.
Section 4.3 ADDITIONAL FUNDING AND CAPITAL CONTRIBUTIONS
A. GENERAL. The General Partner may, at any time and from time to time,
determine that the Partnership requires additional funds ("Additional Funds")
for the acquisition of additional Properties or for such other Partnership
purposes as the General Partner may determine. Additional Funds may be raised by
the Partnership, at the election of the General Partner, in any manner provided
in, and in accordance with, the terms of this Section 4.3. No Person shall have
any preemptive, preferential or similar right or rights to subscribe for or
acquire any Partnership Interest.
B. GENERAL PARTNER LOANS. The General Partner may enter into a Funding
Debt, including, without limitation, a Funding Debt that is convertible into
REIT shares, and lend the Additional Funds to the Partnership (a "General
Partner Loan"); PROVIDED, HOWEVER, that the General Partner shall not be
obligated to lend the net proceeds of any Funding Debt to the Partnership in a
manner that would be inconsistent with the General Partner's ability to remain
qualified as a REIT. If the General Partner enters into such a Funding Debt, the
General Partner Loan will consist of the net proceeds from such Funding Debt and
will be on comparable terms and conditions, including principal amount, interest
rate, repayment schedule and costs and expenses, as shall be applicable with
respect to or incurred in connection with such Funding Debt.
C. ISSUANCE OF ADDITIONAL PARTNERSHIP INTERESTS. The General Partner, in
its sole and absolute discretion, may raise all or any portion of the Additional
Funds by accepting additional Capital Contributions, including, without
limitation, the issuance of Partnership Units for interests in real property. In
connection with any such additional Capital Contributions (of cash or property),
the General Partner is hereby authorized to cause the Partnership from time to
time to issue to Partners (including the General Partner) or other persons
(including, without limitation, in connection with the contribution of property
to the Partnership) additional Partnership Units or other Partnership Interests
in one or more classes, or one or more series of any of such classes, with such
designations, preferences and relative, participating, optional or other special
rights, powers, and duties, including rights, powers, and duties senior to then
existing Limited Partnership Interests, all as shall be determined by the
General Partner in its sole and absolute discretion subject to Delaware law, and
as set forth in an amendment to this Agreement, including, without limitation,
(i) the allocations of items of
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Partnership income, gain, loss, deduction, and credit to such class or series of
Partnership Interests; (ii) the right of each such class or series of
Partnership Interests to share in Partnership distributions; (iii) the rights of
each such class or series of Partnership Interests upon dissolution and
liquidation of the Partnership; and (iv) the right to vote; PROVIDED THAT no
such additional Partnership Units or other Partnership Interests shall be issued
to the General Partner unless either (a) the additional Partnership Interests
are issued in connection with the grant, award, or issuance of shares of the
General Partner pursuant to Section 4.3.D below, which shares have designations,
preferences, and other rights (except voting rights) such that the economic
interests attributable to such shares are substantially similar to the
designations, preferences and other rights of the additional Partnership
Interests issued to the General Partner in accordance with this Section 4.3.C,
(b) the additional Partnership Interests are issued to all Partners holding
Partnership Interests in the same class in proportion to their respective
Percentage Interests in such class or (c) pursuant to Section 4.4; PROVIDED
FURTHER, that no such additional Partnership Units or Partnership Interests
shall be issued if such issuance would cause, or in the opinion of counsel
selected by the General Partner, could cause (i) the Partnership to become, with
respect to any employee benefit plan subject to Title I of ERISA or Section 4975
of the Code, a "party in interest" (as defined in Section 3(14) of ERISA) or a
"disqualified person" (as defined in Section 4975(e) of the Code); and (ii) any
portion of the assets of the Partnership to constitute assets of any employee
benefit plan pursuant to Section 2510.3-101 of the regulations of the United
States Department of Labor. In the event that the Partnership issues additional
Partnership Units or Partnership Interests pursuant to this Section 4.3.C, the
General Partner shall make such revisions to this Agreement (including but not
limited to the revisions described in Section 5.5, Section 6.2.B, and Section
8.6) as it determines are necessary to reflect the issuance of such additional
Partnership Interests.
D. ISSUANCE OF REIT SHARES OR OTHER SECURITIES BY THE GENERAL PARTNER.
Except as contemplated by Section 4.4, the General Partner shall not issue any
additional REIT Shares (other than REIT Shares issued pursuant to Section 8.6
hereof or pursuant to a dividend or distribution (including any stock split) of
REIT Shares to all of its stockholders), other shares of capital stock of the
General Partner or New Securities unless the General Partner shall make a
Capital Contribution of the net proceeds from the issuance of such additional
REIT Shares, other shares of capital stock or New Securities, as the case may
be, and from the exercise of the rights contained in such additional New
Securities, as the case may be. The General Partner's Capital Account shall be
increased by the amount of cash so contributed.
E. PERCENTAGE INTEREST ADJUSTMENTS IN THE CASE OF CAPITAL CONTRIBUTIONS
FOR PARTNERSHIP UNITS. Upon the acceptance of additional Capital Contributions
in exchange for Partnership Units, the Percentage Interest related to such
Partnership Units shall be equal to a fraction, the numerator of which is equal
to the amount of cash and the Agreed Value of the Property contributed as of the
Business Day immediately preceding the date on which the additional Capital
Contributions are made (an "Adjustment Date") and the denominator of which is
equal to the sum of (i) the Deemed Value of the Partnership Interests of such
class (computed as of the Business Day immediately preceding the Adjustment
Date) and (ii) the aggregate amount of additional Capital Contributions
contributed
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to the Partnership on such Adjustment Date in respect of such class of
Partnership Interests. The Percentage Interest of each other Partner holding
Partnership Interests of such class not making a full pro rata Capital
Contribution shall be adjusted to equal a fraction, the numerator of which is
equal to the sum of (i) the Deemed Partnership Interest Value of such Limited
Partner of such class (computed as of the Business Day immediately preceding the
Adjustment Date) and (ii) the amount of additional Capital Contributions made by
such Partner to the Partnership in respect of such class of Partnership
Interests as of such Adjustment Date, and the denominator of which is equal to
the sum of (i) the Deemed Value of the Partnership Interests of such class
(computed as of the Business Day immediately preceding the Adjustment Date), and
(ii) the aggregate amount of additional Capital Contributions contributed to the
Partnership on such Adjustment Date in respect of such class. Notwithstanding
the foregoing, solely for purposes of calculating a Partner's Percentage
Interest pursuant to this Section 4.3.F, cash Capital Contributions by the
General Partner will be deemed to equal the cash contributed by the General
Partner plus, in the case of cash contributions funded by an offering of any
capital stock of the General Partner, the offering costs attributable to the
cash contributed to the Partnership.
Section 4.4 STOCK PLAN
If at any time or from time to time the General Partner sells or issues
REIT Shares pursuant to any Stock Plan, the General Partner shall contribute any
proceeds therefrom to the Partnership as an additional Capital Contribution and
shall receive an amount of additional Partnership Units equal to the number of
REIT Shares so sold or issued. The General Partner's Capital Account shall be
increased by the amount of cash so contributed.
Section 4.5 NO THIRD PARTY BENEFICIARY
No creditor or other third party having dealings with the Partnership
shall have the right to enforce the right or obligation of any Partner to make
Capital Contributions or loans or to pursue any other right or remedy hereunder
or at law or in equity, it being understood and agreed that the provisions of
this Agreement shall be solely for the benefit of, and may be enforced solely
by, the parties hereto and their respective successors and assigns. None of the
rights or obligations of the Partners herein set forth to make Capital
Contributions or loans to the Partnership shall be deemed an asset of the
Partnership for any purpose by any creditor or other third party, nor may such
rights or obligations be sold, transferred or assigned by the Partnership or
pledged or encumbered by the Partnership to secure any debt or other obligation
of the Partnership or of any of the Partners.
Section 4.6 OTHER CONTRIBUTION PROVISIONS
In the event that any Partner is admitted to the Partnership and is given
a Capital Account in exchange for services rendered to the Partnership, such
transaction shall be treated by the Partnership and the affected Partner as if
the Partnership had compensated such Partner in cash, and the Partner had
contributed such cash to the capital of the Partnership. In addition, with the
consent of the General Partner, one or more Limited Partners may enter into
contribution
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agreements with the Partnership which have the effect of providing a guarantee
of certain obligations of the Partnership.
ARTICLE 5
DISTRIBUTIONS
Section 5.1 REQUIREMENT AND CHARACTERIZATION OF DISTRIBUTIONS
The General Partner shall cause the Partnership to distribute quarterly
all, or such portion as the General Partner may in its discretion determine, of
Available Cash generated by the Partnership during such quarter to the Partners
who are Partners on the Partnership Record Date with respect to such quarter,
(1) first, with respect to any Partnership Interests that are entitled to any
preference in distribution, in accordance with the rights of such class of
Partnership Interests (and within such class, pro rata in proportion to the
respective Percentage Interests on such Partnership Record Date), and, (2)
second, with respect to Partnership Interests that are not entitled to any
preference in distribution, pro rata to each such class in accordance with the
terms of such class (and within each such class, pro rata in proportion with the
respective Percentage Interests on such Partnership Record Date). Unless
otherwise expressly provided for herein or in an agreement at the time a new
class of Partnership Interests is created in accordance with Article 4 hereof,
no Partnership Interest shall be entitled to a distribution in preference to any
other Partnership Interest. The General Partner shall take such reasonable
efforts, as determined by it in its sole and absolute discretion and consistent
with its qualification as a REIT, to cause the Partnership to distribute
sufficient amounts to enable the General Partner to pay stockholder dividends
that will (a) satisfy the requirements for qualifying as a REIT under the Code
and Regulations ("REIT Requirements"), and (b) avoid any federal income or
excise tax liability of the General Partner.
Section 5.2 DISTRIBUTIONS IN KIND
No right is given to any Partner to demand and receive property other than
cash. The General Partner may determine, in its sole and absolute discretion, to
make a distribution in kind to the Partners of Partnership assets, and such
assets shall be distributed in such a fashion as to ensure that the fair market
value is distributed and allocated in accordance with Articles 5, 6 and 10.
Section 5.3 DISTRIBUTIONS UPON LIQUIDATION
Proceeds from a Terminating Capital Transaction shall be distributed to
the Partners in accordance with Section 13.2.
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Section 5.4 DISTRIBUTIONS TO REFLECT ISSUANCE OF ADDITIONAL
PARTNERSHIP INTERESTS
In the event that the Partnership issues additional Partnership Interests
to the General Partner or any Additional Limited Partner pursuant to Section
4.3.C or 4.4 hereof, the General Partner shall make such revisions to this
Article 5 as it determines are necessary to reflect the issuance of such
additional Partnership Interests.
ARTICLE 6
ALLOCATIONS
Section 6.1 TIMING AND AMOUNT OF ALLOCATIONS OF NET INCOME AND
NET LOSS
Net Income and Net Loss of the Partnership shall be determined and
allocated with respect to each fiscal year of the Partnership as of the end of
each such year. Subject to the other provisions of this Article 6, an allocation
to a Partner of a share of Net Income or Net Loss shall be treated as an
allocation of the same share of each item of income, gain, loss or deduction
that is taken into account in computing Net Income or Net Loss.
Section 6.2 GENERAL ALLOCATIONS
A. IN GENERAL. Except as otherwise provided in this Article 6, Net Income
and Net Loss shall be allocated to each of the Partners holding the same class
of Partnership Interests in accordance with their respective Percentage Interest
of such class.
B. ALLOCATIONS TO REFLECT ISSUANCE OF ADDITIONAL PARTNERSHIP INTERESTS. In
the event that the Partnership issues additional Partnership Interests to the
General Partner or any Additional Limited Partner pursuant to Section 4.3 or 4.4
hereof, the General Partner shall make such revisions to this Section 6.2 as it
determines are necessary to reflect the terms of the issuance of such additional
Partnership Interests, including making preferential allocations to certain
classes of Partnership Interests.
Section 6.3 ADDITIONAL ALLOCATION PROVISIONS
Notwithstanding the foregoing provisions of this Article 6:
A. REGULATORY ALLOCATIONS.
(i) MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Regulations Section 1.704-2(f), notwithstanding the provisions of Section
6.2 of the Agreement, or any other provision of this Article 6, if there
is a net decrease in Partnership Minimum Gain during any fiscal year, each
Partner shall be specially allocated items of Partnership income and gain
for such year (and, if necessary,
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subsequent years) in an amount equal to such Partner's share of the net
decrease in Partnership Minimum Gain, as determined under Regulations
Section 1.704-2(g). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated to
each Partner pursuant thereto. The items to be allocated shall be
determined in accordance with Regulations Sections 1.704-2(f)(6) and
1.704-2(j)(2). This Section 6.3.A(i) is intended to qualify as a "minimum
gain chargeback" within the meaning of Regulation Section 1.704-2(f) which
shall be controlling in the event of a conflict between such Regulation
and this Section 6.3.A(i).
(ii) PARTNER MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Regulations Section 1.704-2(i)(4), and notwithstanding the
provisions of Section 6.2 of the Agreement, or any other provision of
this Article 6 (except Section 6.3.A(i)), if there is a net decrease in
Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any
fiscal year, each Partner who has a share of the Partner Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance
with Regulations Section 1.704-2(i)(5), shall be specially allocated items
of Partnership income and gain for such year (and, if necessary,
subsequent years) in an amount equal to such Partner's share of the net
decrease in Partner Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with Regulations Section 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in proportion
to the respective amounts required to be allocated to each General Partner
and Limited Partner pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Sections 1.704-2(i)(4) and
1.704-2(j)(2). This Sec tion 6.3.A(ii) is intended to qualify as a
"chargeback of partner nonrecourse debt minimum gain" within the meaning
of Regulation Section 1.704-2(i) which shall be controlling in the event
of a conflict between such Regulation and this Section 6.3.A(ii).
(iii) NONRECOURSE DEDUCTIONS AND PARTNER NONRECOURSE DEDUCTIONS. Any
Nonrecourse Deductions for any fiscal year shall be specially allocated to
the Partners in accordance with their Percentage Interests. Any Partner
Nonrecourse Deductions for any fiscal year shall be specially allocated to
the Partner(s) who bears the economic risk of loss with respect to the
Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are
attributable, in accordance with Regulations Sections 1.704-2(b)(4) and
1.704-2(i).
(iv) QUALIFIED INCOME OFFSET. If any Partner unexpectedly receives
an adjustment, allocation or distribution described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Partnership income
and gain shall be allocated, in accordance with Regulations Section
1.704-1(b)(2)(ii)(d), to the Partner in an amount and manner sufficient to
eliminate, to the extent required by such Regulations, the Adjusted
Capital Account Deficit of the Partner as quickly as possible provided
that an allocation pursuant to this Section 6.3.A(iv) shall be made if and
only to the extent that such Partner would have an Adjusted Capital
Account Deficit after all other allocations provided in this Article 6
have been tentatively made as if this Section 6.3.A(iv) were not
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in the Agreement. It is intended that this Section 6.3.A(iv) qualify and
be construed as a "qualified income offset" within the meaning of
Regulations 1.704-1(b)(2)(ii)(d), which shall be controlling in the event
of a conflict between such Regulations and this Section 6.3.A(iv).
(v) GROSS INCOME ALLOCATION. In the event any Partner has a deficit
Capital Account at the end of any fiscal year which is in excess of the
sum of (1) the amount (if any) such Partner is obligated to restore to the
Partnership, and (2) the amount such Partner is deemed to be obligated to
restore pursuant to Regulations Sec tion 1.704-1(b)(2)(ii)(c) or the
penultimate sentences of Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5), each such Partner shall be specially allocated items of
Partnership income and gain in the amount of such excess as quickly as
possible, PROVIDED THAT an allocation pursuant to this Section 6.3.A(v)
shall be made if and only to the extent that such Partner would have a
deficit Capital Account in excess of such sum after all other allocations
provided in this Article 6 have been tentatively made as if this Section
6.3.A(v) and Section 6.3.A(iv) were not in the Agreement.
(vi) LIMITATION ON ALLOCATION OF NET LOSS. To the extent any
allocation of Net Loss would cause or increase an Adjusted Capital Account
Deficit as to any Partner, such allocation of Net Loss shall be
reallocated among the other Partners in accordance with their respective
Percentage Interests, subject to the limitations of this Section
6.3.A(vi).
(vii) SECTION 754 ADJUSTMENT. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Code Section
734(b) or Code Section 743(b) is required, pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m)(2) or Regulations Section
1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as the result of a distribution to a Partner in complete
liquidation of his interest in the Partnership, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Partners in accordance with their interests in the
Partnership in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(2)
applies, or to the Partners to whom such distribution was made in the
event that Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
(viii)CURATIVE ALLOCATION. The allocations set forth in Sec-
tions 6.3.A(i), (ii), (iii), (iv), (v), (vi), and (vii) (the "Regulatory
Allocations") are intended to comply with certain regulatory requirements,
including the requirements of Regulations Sections 1.704-1(b) and 1.704-2.
Notwithstanding the provisions of Sections 6.1 and 6.2, the Regulatory
Allocations shall be taken into account in allocating other items of
income, gain, loss and deduction among the Partners so that, to the extent
possible, the net amount of such allocations of other items and the
Regulatory Allocations to each Partner shall be equal to the net amount
that would have been allocated to each such Partner if the Regulatory
Allocations had not occurred.
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Section 6.4 TAX ALLOCATIONS
A. IN GENERAL. Except as otherwise provided in this Section 6.4, for
income tax purposes each item of income, gain, loss and deduction (collectively,
"Tax Items") shall be allocated among the Partners in the same manner as its
correlative item of "book" income, gain, loss or deduction is allocated pursuant
to Sections 6.2 and 6.3.
B. ALLOCATIONS RESPECTING Section 704(C) REVALUATIONS. Notwithstanding
Section 6.4.A, Tax Items with respect to Partnership property that is
contributed to the Partnership by a Partner shall be shared among the Partners
for income tax purposes pursuant to Regulations promulgated under Section 704(c)
of the Code, so as to take into account the variation, if any, between the basis
of the property to the Partnership and its initial Gross Asset Value. With
respect to Partnership property that is initially contributed to the Partnership
upon its formation pursuant to Section 4.1, such variation between basis and
initial Gross Asset Value shall be taken into account under the "traditional
without curative allocations method" as described in Regulations Section
1.704-3. With respect to properties subsequently contributed to the Partnership,
the Partnership shall account for such variation under any method approved under
Section 704(c) of the Code and the applicable regulations as chosen by the
General Partner. In the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to subparagraph (b) of the definition of Gross Asset Value
(provided in Article 1 of this Agreement), subsequent allocations of Tax Items
with respect to such asset shall take account of the variation, if any, between
the adjusted basis of such asset and its Gross Asset Value in the same manner as
under Section 704(c) of the Code and the applicable regulations consistent with
the requirements of Regulations Section 1.704-1(b)(2)(iv)(g) using any method
approved under 704(c) of the Code and the applicable regulations as chosen by
the General Partner.
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 MANAGEMENT
A. Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs of the Partnership are
exclusively vested in the General Partner, and no Limited Partner shall have any
right to participate in or exercise control or management power over the
business and affairs of the Partnership. The General Partner may not be removed
by the Limited Partners with or without cause, except with the consent of the
General Partner. In addition to the powers now or hereafter granted a General
Partner of a limited partnership under applicable law or which are granted to
the General Partner under any other provision of this Agreement, the General
Partner, subject to the other provisions hereof including Section 7.3, shall
have full power and authority to do all things deemed necessary or desirable by
it to conduct the business of the Partnership, to exercise all powers set forth
in Section 3.2 hereof and to effectuate the purposes set forth in Section 3.1
hereof, including, without limitation:
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(1) the making of any expenditures, the lending or borrowing of
money (including, without limitation, making prepayments on loans and
borrowing money to permit the Partnership to make distributions to its
Partners in such amounts as will permit the General Partner (so long as
the General Partner has determined to qualify as a REIT) to avoid the
payment of any federal income tax (including, for this purpose, any excise
tax pursuant to Section 4981 of the Code) and to make distributions to its
stockholders sufficient to permit the General Partner to maintain REIT
status), the assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the issuance of evidences of
indebtedness (including the securing of same by mortgage, deed of trust or
other lien or encumbrance on all or any of the Partnership's assets) and
the incurring of any obligations it deems necessary for the conduct of the
activities of the Partnership;
(2) the making of tax, regulatory and other filings, or rendering of
periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership;
(3) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any assets of the Partnership or the merger
or other combination of the Partnership with or into another entity;
(4) the mortgage, pledge, encumbrance or hypothecation of all or any
assets of the Partnership, and the use of the assets of the Partnership
(including, without limitation, cash on hand) for any purpose consistent
with the terms of this Agreement and on any terms it sees fit, including,
without limitation, the financing of the conduct or the operations of the
General Partner or the Partnership, the lending of funds to other Persons
(including, without limitation, the General Partner (if necessary to
permit the financing or capitalization of a subsidiary of the General
Partner or the Partnership) or any Subsidiaries of the Partnership) and
the repayment of obligations of the Partnership, any of its Subsidiaries
and any other Person in which it has an equity investment;
(5) the negotiation, execution, and performance of any contracts,
leases, conveyances or other instruments that the General Partner
considers useful or necessary to the conduct of the Partnership's
operations or the implementation of the General Partner's powers under
this Agreement;
(6) the distribution of Partnership cash or other Partnership assets
in accordance with this Agreement;
(7) the selection and dismissal of employees of the Partnership
(including, without limitation, employees having titles such as
"president," "vice president," "secretary" and "treasurer"), and agents,
outside attorneys, accountants, consultants and contractors of the
Partnership, the determination of their compensation and other terms of
employment or hiring, including waivers of conflicts of interest and the
payment of their expenses and compensation out of the Partnership's
assets;
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(8) the maintenance of such insurance for the benefit of the
Partnership and the Partners as it deems necessary or appropriate;
(9) the formation of, or acquisition of an interest in, and the
contribution of property to, any further limited or general partnerships,
joint ventures or other relationships that it deems desirable (including,
without limitation, the acquisition of interests in, and the contributions
of property to any Subsidiary and any other Person in which it has an
equity investment from time to time); PROVIDED THAT, as long as the
General Partner has determined to continue to qualify as a REIT, the
Partnership may not engage in any such formation, acquisition or
contribution that would cause the General Partner to fail to qualify as a
REIT;
(10) the control of any matters affecting the rights and obligations
of the Partnership, including the conduct of litigation and the incurring
of legal expense and the settlement of claims and litigation, and the
indemnification of any Person against liabilities and contingencies to the
extent permitted by law;
(11) the undertaking of any action in connection with the
Partnership's direct or indirect investment in any Person (including,
without limitation, contributing or loaning Partnership funds to,
incurring indebtedness on behalf of, or guarantying the obligations of any
such Persons);
(12) subject to the other provisions in this Agreement, the
determination of the fair market value of any Partnership property
distributed in kind using such reasonable method of valuation as it may
adopt, PROVIDED THAT such methods are otherwise consistent with
requirements of this Agreement;
(13) the management, operation, leasing, landscaping, repair,
alteration, demolition or improvement of any real property or improvements
owned by the Partnership or any Subsidiary of the Partnership or any
Person in which the Partnership has made a direct or indirect equity
investment;
(14) holding, managing, investing and reinvesting cash and other
assets of the Partnership;
(15) the collection and receipt of revenues and income of the
Partnership;
(16) the exercise, directly or indirectly through any
attorney-in-fact acting under a general or limited power of attorney, of
any right, including the right to vote, appurtenant to any asset or
investment held by the Partnership;
(17) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of or in connection with any
Subsidiary of the Partnership or any
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other Person in which the Partnership has a direct or indirect interest,
or jointly with any such Subsidiary or other Person;
(18) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of any Person in which the
Partnership does not have an interest pursuant to contractual or other
arrangements with such Person; and
(19) 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.
B. Each of the Limited Partners agrees that the General Partner is
authorized to execute, deliver and perform the above-mentioned agreements and
transactions on behalf of the Partnership without any further act, approval or
vote of the partners, notwithstanding any other provisions of this Agreement
(except as provided in Section 7.3), the Act or any applicable law, rule or
regulation. The execution, delivery or performance by the General Partner or the
Partnership of any agreement authorized or permitted under this Agreement shall
not constitute a breach by the General Partner of any duty that the General
Partner may owe the Partnership or the Limited Partners or any other Persons
under this Agreement or of any duty stated or implied by law or equity.
C. At all times from and after the date hereof, the General Partner may
cause the Partnership to obtain and maintain (i) casualty, liability and other
insurance on the properties of the Partnership and (ii) liability insurance for
the Indemnitees hereunder.
D. At all times from and after the date hereof, the General Partner may
cause the Partnership to establish and maintain working capital and other
reserves in such amounts as the General Partner, in it sole and absolute
discretion, deems appropriate and reasonable from time to time.
E. Other than as set forth in the following sentence, and subject to
Section 11.2.D, 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 (including the General Partner) of any action taken
by it. The General Partner, on behalf of the Partnership, shall use commercially
reasonable efforts to cooperate with the Limited Partners to minimize any taxes
payable in connection with any repayment, refinancing, replacement or
restructuring of Debt, or any sale, exchange or any other disposition of assets,
of the Partnership, including, without limitation, amending this Agreement to
provide obligations on the part of any affected Partner to restore deficit
balances in their Capital Accounts as of the time of liquidation of the
Partnership and to maintain a corresponding level of recourse debt to match such
obligations or maintaining a level of non-recourse debt that can be allocated
to, and included in the Partnership tax basis of,
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such Partners, pursuant to the regulations under Section 752 of the Code. 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.
F. Except as otherwise provided herein, to the extent the duties of the
General Partner require expenditures of funds to be paid to third parties, the
General Partner shall not have any obligations hereunder except to the extent
that Partnership funds are reasonably available to it for the performance of
such duties, and nothing herein contained shall be deemed to authorize or
require the General Partner, in its capacity as such, to expend its individual
funds for payment to third parties or to undertake any individual liability or
obligation on behalf of the Partnership.
Section 7.2 CERTIFICATE OF LIMITED PARTNERSHIP
To the extent that such action is determined by the General Partner to be
reasonable and necessary or appropriate, the General Partner shall file
amendments to and restatements of the Certificate and do all the things to
maintain the Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) under the laws of the State of Delaware
and each other state, the District of Columbia or other jurisdiction, in which
the Partnership may elect to do business or own property. Subject to the terms
of Section 8.5.A(4) hereof, the General Partner shall not be required, before or
after filing, to deliver or mail a copy of the Certificate or any amendment
thereto to any Limited Partner. The General Partner shall use all reasonable
efforts to cause to be filed such other certificates or documents as may be
reasonable and necessary or appropriate for the formation, continuation,
qualification and operation of a limited partnership (or a partnership in which
the limited partners have limited liability) in the State of Delaware, any other
state, the District of Columbia or other jurisdiction, in which the Partnership
may elect to do business or own property.
Section 7.3 RESTRICTIONS ON GENERAL PARTNER'S AUTHORITY
A. The General Partner may not take any action in contravention of an
express prohibition or limitation of this Agreement, including, without
limitation:
(1) take any action that would make it impossible to carry on the
ordinary business of the Partnership, except as otherwise provided in this
Agreement;
(2) possess Partnership property, or assign any rights in specific
Partnership property, for other than a Partnership purpose except as
otherwise provided in this Agreement;
(3) admit a Person as a Partner, except as otherwise provided in
this Agreement;
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(4) perform any act that would subject a Limited Partner to
liability as a general partner in any jurisdiction or any other liability
except as provided herein or under the Act; or
(5) enter into any contract, mortgage, loan or other agreement that
expressly prohibits or restricts, or has the effect of limiting or
restricting, the ability of a Limited Partner to exercise its rights to a
Redemption in full, except with the written consent of such Limited
Partner.
B. The General Partner shall not, without the prior Consent of the
Partners, undertake, on behalf of the Partnership, any of the following actions
or enter into any transaction which would have the effect of such actions:
(1) except as provided in Section 7.3.E, amend, modify or terminate
this Agreement other than to reflect the admission, substitution,
termination or withdrawal of partners pursuant to Article 12 hereof;
(2) make a general assignment for the benefit of creditors or
appoint or acquiesce in the appointment of a custodian, receiver or
trustee for all or substantially all of the assets of the Partnership;
(3) institute any proceeding for bankruptcy on behalf of the
Partnership; or
(4) confess a judgment against the Partnership.
C. The General Partner shall not, without the prior Consent of the Super
Majority Limited Partners, undertake, on behalf of the Partnership, any of the
following actions or enter into any transaction which would have the effect of
such actions:
(1) approve or acquiesce to the transfer of the Partnership Interest
of the General Partner to any Person other than the Partnership; or
(2) admit into the Partnership any Additional or Substitute General
Partners.
D. If the aggregate Limited Partnership Interests of all Limited Partners
represents 5.0% or more of the aggregate Partnership Interests, the General
Partner shall not, without the prior Consent of the Limited Partners, undertake,
on behalf of the Partnership, any of the following actions or enter into any
transaction which would have the effect of such actions:
(1) dissolve the Partnership, or
(2) prior to the fifth (5th) anniversary of the date of this
Agreement, sell any of the property listed on Exhibit G,
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in each case other than incident to a transaction pursuant to Section 11.2.B or
Section 11.2.C.
E. Notwithstanding Sections 7.3.B, 7.3.C and 7.3.D hereof, the General
Partner shall have the exclusive power to amend this Agreement as may be
required to facilitate or implement any of the following purposes:
(1) to add to the obligations of the General Partner or surrender
any right or power granted to the General Partner or any Affiliate of the
General Partner for the benefit of the Limited Partners;
(2) to reflect the issuance of additional Partnership Interests
pursuant to Section 4.3.C or 4.4 or the admission, substitution,
termination, or withdrawal of Partners in accordance with this Agreement;
(3) to reflect a change that is of an inconsequential nature and
does not adversely affect the Limited Partners in any material respect, 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;
(4) to satisfy any requirements, conditions, or guidelines contained
in any order, directive, opinion, ruling or regulation of a federal or
state agency or contained in federal or state law;
(5) to reflect such changes as are reasonably necessary for the
General Partner to maintain status as a REIT, including changes which may
be necessitated due to a change in applicable law (or an authoritative
interpretation thereof) or a ruling of the IRS; and
(6) to modify, as set forth in the definition of "Capital Account,"
the manner in which Capital Accounts are computed.
The General Partner will provide notice to the Limited Partners when any action
under this Section 7.3.E is taken.
F. Notwithstanding Sections 7.3.B, 7.3.C, 7.3.D and 7.3.E hereof, this
Agreement shall not be amended with respect to any Partner adversely affected,
and no action may be taken by the General Partner, without the Consent of such
Partner adversely affected if such amendment or action would (i) convert a
Limited Partner's interest in the Partnership into a general partner's interest
(except as the result of the General Partner acquiring such interest), (ii)
modify the limited liability of a Limited Partner, (iii) alter rights of the
Partner to receive distributions pursuant to Article 5 or Section 13.2.A(4), or
the allocations specified in Article 6 (except as permitted pursuant to Section
4.3 and Section 7.3.E(3) hereof), (iv) materially alter or
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modify the rights to a Redemption or the REIT Shares Amount as set forth in
Section 8.6, and related definitions hereof or (v) amend this Section 7.3.F.
Further, no amendment may alter the restrictions on the General Partner's
authority set forth elsewhere in this Section 7.3 without the Consent specified
in such section. In addition, notwithstanding Sections 7.3.B, 7.3.C, 7.3.D and
7.3.E hereof, Section 11.2 of this Agreement shall not be amended, and no action
in contravention of Section 11.2 hereof shall be taken, without the Consent of
the Limited Partners. This Section 7.3.F does not require unanimous consent of
all Partners adversely affected unless the amendment is to be effective against
all partners adversely affected.
Section 7.4 REIMBURSEMENT OF THE GENERAL PARTNER
A. Except as provided in this Section 7.4 and elsewhere in this Agreement
(including the provisions of Articles 5 and 6 regarding distributions, payments
and allocations to which it may be entitled), the General Partner shall not be
compensated for its services as general partner of the Partnership.
B. Subject to Section 15.11, the General Partner shall be reimbursed on a
monthly basis, or such other basis as the General Partner may determine in its
sole and absolute discretion, for all expenses it incurs relating to the
ownership of interests in and operation of, or for the benefit of, the
Partnership. The General Partner shall not, however, be reimbursed for expenses
it incurs relating to the organization of the Partnership or any public
offerings of REIT Shares, other shares of capital stock or Funding Debt by the
General Partner, but shall be reimbursed for expenses it incurs with respect to
any other issuance of additional Partnership Interests pursuant to the
provisions hereof. Such reimbursements shall be in addition to any reimbursement
to the General Partner as a result of indemnification pursuant to Section 7.7
hereof.
C. If and to the extent any reimbursements to the General Partner pursuant
to this Section 7.4 constitute gross income of the General Partner (as opposed
to the repayment of advances made by the General Partner on behalf of the
Partnership), such amounts shall constitute guaranteed payments within the
meaning of Section 707(c) of the Code, shall be treated consistently therewith
by the Partnership and all Partners, and shall not be treated as distributions
for purposes of computing the Partners' Capital Accounts.
Section 7.5 CONTRACTS WITH AFFILIATES
A. The Partnership may lend or contribute to 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
or favor of any Person.
B. Except as provided in Section 7.5.A, the Partnership may transfer
assets to joint ventures, other partnerships, corporations, limited liability
companies or other business entities in
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which it is or thereby becomes a participant upon such terms and subject to such
conditions consistent with this Agreement and applicable law.
C. The General Partner, in its sole and absolute discretion and without
the approval of the Limited Partners, may propose and adopt on behalf of the
Partnership employee benefit plans funded by the Partnership for the benefit of
employees of the General Partner, the Partnership, Subsidiaries of the
Partnership or any Affiliate of any of them in respect of services performed,
directly or indirectly, for the benefit of the Partnership, the General Partner,
or any of the Partnership's Subsidiaries. The General Partner also is expressly
authorized to cause the Partnership to issue to it Partnership Units
corresponding to REIT Shares issued by the General Partner pursuant to any Stock
Plan or any similar or successor plan and to repurchase such Partnership Units
from the General Partner to the extent necessary to permit the General Partner
to repurchase such REIT Shares in accordance with such plan.
D. The General Partner is expressly authorized to enter into, in the name
and on behalf of the Partnership, a right of first opportunity arrangement and
other conflict avoidance agreements with various Affiliates of the Partnership
and the General Partner, on such terms as the General Partner, in its sole and
absolute discretion, believes are advisable.
Section 7.6 INDEMNIFICATION
A. The Partnership shall indemnify an Indemnitee from and against any and
all losses, claims, damages, liabilities, joint or several, expenses (including
legal fees and expenses), judgments, fines, settlements, and other amounts
arising from any and all claims, demands, actions, suits or proceedings, civil,
criminal, administrative or investigative, including, without limitation,
reasonable attorneys' fees and expenses, that relate to the operations of the
Partnership as set forth in this Agreement in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, unless it is
established that: (i) the act or omission of the Indemnitee was material to the
matter giving rise to the proceeding and either was committed in bad faith or
was the result of active and deliberate dishonesty; (ii) the Indemnitee actually
received an improper personal benefit in money, property or services; or (iii)
in the case of any criminal proceeding, the Indemnitee had reasonable cause to
believe that the act or omission was unlawful. Without limitation, the foregoing
indemnity shall extend to any liability of any Indemnitee, pursuant to a loan
guaranty or otherwise, for any indebtedness of the Partnership or any Subsidiary
of the Partnership (including, without limitation, any indebtedness which the
Partnership or any Subsidiary of the Partnership has assumed or taken subject
to), and the General Partner is hereby authorized and empowered, on behalf of
the Partnership, to enter into one or more indemnity agreements consistent with
the provisions of this Section 7.6 in favor of any Indemnitee having or
potentially having liability for any such indebtedness. The termination of any
proceeding by judgment, order or settlement does not create a presumption that
the Indemnitee did not meet the requisite standard of conduct set forth in this
Section 7.6.A. The termination of any proceeding by conviction or upon a plea of
nolo contendere or its equivalent, or any entry of an order of probation prior
to judgment, creates a rebuttable presumption that the Indemnitee acted in a
manner contrary to that specified in this Section 7.6.A with respect to
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subject matter of such proceeding. Any indemnification pursuant to this Section
7.6 shall be made only out of the assets of the Partnership.
B. Reasonable expenses incurred by an Indemnitee in connection with any
proceeding which are otherwise indemnifiable under this Section 7.6 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
7.6.A has been met, and (ii) a written undertaking by or on behalf of the
Indemnitee to repay the amount if it shall ultimately be determined that the
standard of conduct has not been met.
C. The indemnification provided by this Section 7.6 shall be in addition
to any other rights to which an Indemnitee or any other Person may be entitled
under any agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, and shall continue as to an Indemnitee who has ceased to serve in
such capacity.
D. The Partnership may purchase and maintain insurance, on behalf of the
Indemnitees and such other Persons as the General Partner shall determine,
against any liability that may be asserted against or expenses that may be
incurred by such Person in connection with the Partnership's activities,
regardless of whether the Partnership would have the power to indemnify such
Person against such liability under the provisions of this Agreement.
E. For purposes of this Section 7.6, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership also imposes
duties on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute fines
within the meaning of Section 7.6; and actions taken or omitted by the
Indemnitee with respect to an employee benefit plan in the performance of its
duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject the Limited Partners to personal
liability by reason of the indemnification provisions set forth in this
Agreement.
G. An Indemnitee shall not be denied indemnification in whole or in part
under this Section 7.6 because the Indemnitee had an interest in the transaction
with respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.7 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 7.6 or any
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provision hereof shall be prospective only and shall not in any way affect the
limitations on the Partnership's liability to any Indemnitee under this Section
7.6 as in effect immediately prior to such amendment, modification or repeal
with respect to claims arising from or relating to matters occurring, in whole
or in part, prior to such amendment, modification or repeal, regardless of when
such claims may arise or be asserted.
I. If and to the extent any reimbursements to the General Partner pursuant
to this Section 7.7 constitute gross income of the General Partner (as opposed
to the repayment of advances made by the General Partner on behalf of the
Partnership) such amounts shall constitute guaranteed payments within the
meaning of Section 707(c) of the Code, shall be treated consistently therewith
by the Partnership and all Partners, and shall not be treated as distributions
for purposes of computing the Partners' Capital Accounts.
J. Any indemnification hereunder is subject to, and limited by, the
provisions of Section 17-108 of the Act.
K. In the event the Partnership is made a party to any litigation or
otherwise incurs any loss or expenses as a result of or in connection with any
Partner's personal obligations or liabilities unrelated to Partnership business,
such Partner shall indemnify and reimburse the Partnership for all such loss and
expense incurred, including legal fees, and the Partnership Interest of such
Partner may be charged therefor. The liability of a Partner under this Section
7.6.K shall not be limited to such Partner's Partnership Interest, but shall be
enforceable against such Partner personally.
Section 7.7 LIABILITY OF THE GENERAL PARTNER
A. Notwithstanding anything to the contrary set forth in this Agreement,
neither the General Partner nor any director, officer, employee or agent of the
Partnership or the General Partner (each, an "Agent") shall be liable or
accountable in damages or otherwise to the Partnership, any Partners or any
Assignees for losses sustained, liabilities incurred or benefits not derived as
a result of errors in judgment or mistakes of fact or law or any act or omission
if such Person acted in good faith.
B. The Limited Partners expressly acknowledge that the General Partner is
acting for the benefit of the Partnership, the Limited Partners and the General
Partner's stockholders collectively, that the General Partner is under no
obligation to give priority to the separate interests of the Limited Partners or
the General Partner's stockholders (including, without limitation, the tax
consequences to Limited Partners or Assignees or to stockholders) in deciding
whether to cause the Partnership to take (or decline to take) any actions and
that the General Partner shall not be liable to the Partnership or to any
Limited Partner for monetary damages for losses sustained, liabilities incurred,
or benefits not derived by Limited Partners in connection with such decisions,
PROVIDED THAT the General Partner has acted in good faith.
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C. Subject to its obligations and duties as General Partner set forth in
Section 7.1.A hereof, the General Partner may exercise any of the powers granted
to it by this Agreement and perform any of the duties imposed upon it hereunder
either directly or by or through its agents. The General Partner shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by it in good faith.
D. Any amendment, modification or repeal of this Section 7.7 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the General Partner's or any Agent's liability to the Partnership
and the Limited Partners under this Section 7.7 as in effect immediately prior
to such amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.
Section 7.8 OTHER MATTERS CONCERNING THE GENERAL PARTNER
A. The General Partner and any Agent may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture,
or other paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties.
B. The General Partner and any Agent may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisers selected by it, and any act taken or omitted to be
taken in reliance upon the opinion of such Persons as to matters which such
General Partner or Agent reasonably believes to be within such Person's
professional or expert competence shall be conclusively presumed to have been
done or omitted in good faith and in accordance with such opinion.
C. The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers and 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 any
non-mandatory provision of the Act, any action of the General Partner on behalf
of the Partnership or any decision of the General Partner to refrain from acting
on behalf of the Partnership, undertaken in the good faith belief that such
action or omission is necessary or advisable in order (i) to protect the ability
of the General Partner to continue to qualify as a REIT or (ii) to avoid the
General Partner incurring any taxes under Section 857 or Section 4981 of the
Code, is expressly authorized under this Agreement and is deemed approved by all
of the Limited Partners.
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Section 7.9 TITLE TO PARTNERSHIP ASSETS
Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partners, individually or collectively, shall have any ownership
interest in such Partnership assets or any portion thereof. Title to any or all
of the Partnership assets may be held in the name of the Partnership, the
General Partner or one or more nominees, as the General Partner may determine,
including Affiliates of the General Partner. The General Partner hereby declares
and warrants that any Partnership assets for which legal title is held in the
name of the General Partner or any nominee or Affiliate of the General Partner
shall be deemed held by the General Partner or such nominee or Affiliate for the
use and benefit of the Partnership in accordance with the provisions of this
Agreement; PROVIDED, HOWEVER, that the General Partner shall use its best
efforts to cause beneficial and record title to such assets to be vested in the
Partnership as soon as reasonably practicable. All Partnership assets shall be
recorded as the property of the Partnership in its books and records,
irrespective of the name in which legal title to such Partnership assets is
held.
Section 7.10 RELIANCE BY THIRD PARTIES
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner has full power and authority to encumber, sell or otherwise use in any
manner any and all assets of the Partnership and to enter into any contracts on
behalf of the Partnership, and such Person shall be entitled to deal with the
General Partner as if it were the Partnership's sole party in interest, both
legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies which may be available against such Person to
contest, negate or disaffirm any action of the General Partner in connection
with any such dealing. In no event shall any Person dealing with the General
Partner or its representatives be obligated to ascertain that the terms of this
Agreement have been complied with or to inquire into the necessity or expedience
of any act or action of the General Partner or its representatives. Each and
every certificate, document or other instrument executed on behalf of the
Partnership by the General Partner or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (i) at the time of the execution and delivery of such certificate, document
or instrument, this Agreement was in full force and effect, (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership and (iii)
such certificate, document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is binding upon
the Partnership.
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ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 LIMITATION OF LIABILITY
The Limited Partners shall have no liability under this Agreement except
as expressly provided in this Agreement or under the Act.
Section 8.2 MANAGEMENT OF BUSINESS
No Limited Partner or Assignee(other than the General Partner, any of its
Affiliates or any officer, director, employee, partner (other than a Limited
Partner), agent or trustee of the General Partner, the Partnership or any of
their Affiliates, in their capacity as such) shall take part in the operations,
management or control (within the meaning of the Act) of the Partnership's
business, transact any business in the Partnership's name or have the power to
sign documents for or otherwise bind the Partnership. The transaction of any
such business by the General Partner, any of its Affiliates or any officer,
director, employee, partner (other than a Limited Partner), agent or trustee of
the General Partner, the Partnership or any of their Affiliates, in their
capacity as such, shall not affect, impair or eliminate the limitations on the
liability of the Limited Partners or Assignees under this Agreement.
Section 8.3 OUTSIDE ACTIVITIES OF LIMITED PARTNERS
Subject to any agreements entered into by a Limited Partner or its
Affiliates with the General Partner, Partnership or a Subsidiary thereof, any
Limited Partner and any officer, director, employee, agent, trustee, Affiliate
or stockholder of any Limited Partner shall be entitled to and may have business
interests and engage in business activities in addition to those relating to the
Partnership, including business interests and activities in direct competition
with the Partnership 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, or the income or profits derived therefrom,
of any Limited Partner or Assignee. Subject to such agreements, 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, other than the Limited Partners benefitting from
the business conducted by the General Partner, and such Person shall have no
obligation pursuant to this Agreement to offer any interest in any such business
ventures to the Partnership, any Limited Partner or any such other Person, even
if such opportunity is of a character which, if presented to the Partnership,
any Limited Partner or such other Person, could be taken by such other Person.
Section 8.4 RETURN OF CAPITAL
Except pursuant to the rights of Redemption set forth in Section 8.6, no
Limited Partner shall be entitled to the withdrawal or return of his or her
Capital Contribution, except to the extent of distributions made pursuant to
this Agreement or upon termination of the Partnership as
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provided herein. Except as otherwise expressly set forth in this Agreement, no
Limited Partner or Assignee shall have priority over any other Limited Partner
or Assignee either as to the return of Capital Contributions or as to profits,
losses, distributions or credits.
Section 8.5 RIGHTS OF LIMITED PARTNERS RELATING TO THE
PARTNERSHIP
A. In addition to other rights provided by this Agreement or by the Act,
and except as limited by Section 8.5.C hereof, each Limited Partner shall have
the right, for a purpose reasonably related to such Limited Partner's interest
as a limited partner in the Partnership, upon written demand with a statement of
the purpose of such demand and at the Partnership's expense:
(1) to obtain a copy of the most recent annual and quarterly reports
filed with the Securities and Exchange Commission by the General Partner
pursuant to the Securities Exchange Act, and each communication sent to
the stockholders of the General Partner;
(2) to obtain a copy of the Partnership's federal, state and local
income tax returns for each Partnership Year;
(3) to obtain a copy of this Agreement and the Certificate and all
amendments thereto, together with executed copies of all powers of
attorney pursuant to which this Agreement, the Certificate and all
amendments thereto have been executed; and
(4) to obtain true and full information regarding the amount of cash
and a description and statement of any other property or services
contributed by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a Partner.
B. Notwithstanding any other provision of this Section 8.5, the General
Partner may keep confidential from the Limited Partners, for such period of time
as the General Partner determines in its sole and absolute discretion to be
reasonable, any information that (i) the General Partner believes to be in the
nature of trade secrets or other information the disclosure of which the General
Partner in good faith believes is not in the best interests of the Partnership
or (ii) the Partnership or the General Partner is required by law or by
agreements with unaffiliated third parties to keep confidential.
Section 8.6 REDEMPTION RIGHTS
A. On or after the date one year after the Effective Date, each Limited
Partner shall have the right (subject to the terms and conditions set forth
herein), but not the obligation, to require the Partnership to redeem all or a
portion of the Partnership Units held by such Limited Partner (such Partnership
Units being hereafter referred to as "Tendered Units") in exchange for the Cash
Amount (a "Redemption"); provided that the terms of such Partnership Units do
not
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provide that such Partnership Units are not entitled to a right of Redemption;
PROVIDED, THAT Partnership Units subject to the Pledge Agreement shall, to the
extent the pledgee thereunder is entitled to exercise remedies thereunder, be
subject to Redemption prior to the date one year after the Effective Date.
Unless otherwise expressly provided in this Agreement or in a separate agreement
entered into between the Partnership and the holders of such Partnership Units,
all Partnership Units shall be entitled to a right of Redemption hereunder. Any
Redemption shall be exercised pursuant to a Notice of Redemption delivered to
the General Partner by the Limited Partner who is exercising the right (the
"Tendering Partner"). The Cash Amount shall be delivered as a certified check
payable to the Tendering Partner within ten (10) days of the Specified
Redemption Date in accordance with the instructions set forth in the Notice of
Redemption.
B. Notwithstanding Section 8.6.A above, if a Limited Partner has delivered
to the General Partner a Notice of Redemption, then the General Partner may, in
its sole and absolute discretion (subject to the limitations on ownership and
transfer of REIT Shares set forth in the Charter), elect to acquire some or all
of the Tendered Units from the Tendering Partner in exchange for the REIT Shares
Amount (as of the Specified Redemption Date) and, if the General Partner so
elects, the Tendering Partner shall sell the Tendered Units to the General
Partner in exchange for the REIT Shares Amount. In such event, the Tendering
Partner shall have no right to cause the Partnership to redeem such Tendered
Units. The General Partner shall promptly give such Tendering Partner written
notice of its election, and the Tendering Partner may elect by written notice to
the Partnership to withdraw its redemption request at any time prior to the
acceptance of the Cash Amount or REIT Shares Amount by such Tendering Partner.
C. The REIT Shares Amount, if applicable, shall be delivered as duly
authorized, validly issued, fully paid and nonassessable REIT Shares and, if
applicable, free of any pledge, lien, encumbrance or restriction, other than
those provided in the Charter, the Bylaws of the General Partner, the Securities
Act, relevant state securities or blue sky laws and any applicable registration
rights agreement with respect to such REIT Shares entered into by the Tendering
Partner. The REIT Shares Amount shall be registered in the name and otherwise
delivered as set forth in the Notice of Redemption. Notwithstanding any delay in
such delivery (but subject to Section 8.6.E), the Tendering Partner shall be
deemed the owner of such REIT Shares for all purposes, including without
limitation, rights to vote or consent, and receive dividends, as of the
Specified Redemption Date. Each Limited Partner covenants and agrees with the
General Partner that all Tendered Units shall be delivered to the General
Partner free and clear of all liens, claims and encumbrances whatsoever and
should any such liens, claims and/or encumbrances exist or arise with respect to
such Tendered Units, the General Partner shall be under no obligation to acquire
the same. Each Limited Partner further agrees that, in the event any state or
local property transfer tax is payable as a result of the transfer of its
Tendered Units to the General Partner, such Limited Partner shall assume and pay
such transfer tax. Each Limited Partner further agrees that it shall enter into
such documentation with respect to a Redemption for cash or an exchange for REIT
Shares as the Partnership or the General Partner shall reasonably request.
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D. Each Limited Partner covenants and agrees with the General Partner that
all Tendered Units shall be delivered to the General Partner free and clear of
all liens, claims and encumbrances whatsoever and should any such liens, claims
and/or encumbrances exist or arise with respect to such Tendered Units, the
General Partner shall be under no obligation to acquire the same. Each Limited
Partner further agrees that, in the event any state or local property transfer
tax is payable as a result of the transfer of its Tendered Units to the General
Partner (or its designee), such Limited Partner shall assume and pay such
transfer tax.
E. Notwithstanding the provisions of Section 8.6.A, 8.6.B, 8.6.C or any
other provision of this Agreement, a Limited Partner (i) shall not be entitled
to effect a Redemption for cash or an exchange for REIT Shares to the extent the
ownership or right to acquire REIT Shares pursuant to such exchange by such
Partner on the Specified Redemption Date would cause such Partner or another
Person, or, in the opinion of counsel selected by the General Partner, may cause
such Partner or any other Person, to violate the restrictions on ownership and
transfer of REIT Shares set forth in the Charter and (ii) shall have no rights
under this Agreement to acquire REIT Shares which would otherwise be prohibited
under the Charter. To the extent any attempted Redemption or exchange for REIT
Shares would be in violation of this Section 8.6.E, it shall be null and void AB
INITIO and such Limited Partner shall not acquire any rights or economic
interest in the cash otherwise payable upon such Redemption or the REIT Shares
otherwise issuable upon such exchange.
F. Notwithstanding anything herein to the contrary (but subject to Section
8.6.E), with respect to any Redemption or exchange for REIT Shares pursuant to
this Section 8.6:
(1) All Partnership Units acquired by the General Partner pursuant
thereto shall automatically, and without further action required, be
converted into and deemed to be General Partner Interests comprised of the
same number and class of Partnership Units.
(2) Without the consent of the General Partner, each Limited Partner
may not effect a Redemption for less than 500 Partnership Units or, if the
Limited Partner holds less than 500 Partnership Units, all of the
Partnership Units held by such Limited Partner.
(3) Without the consent of the General Partner, each Limited Partner
may not effect a Redemption during the period after the Partnership Record
Date with respect to a distribution and before the record date established
by the General Partner for a distribution to its stockholders of some or
all of its portion of such distribution.
(4) The consummation of any Redemption or exchange for REIT Shares
shall be subject to the expiration or termination of the applicable
waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
(5) Each Tendering Partner shall continue to own all Partnership
Units subject to any Redemption or exchange for REIT Shares, and be
treated as a Limited Partner with
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respect to such Partnership Units for all purposes of this Agreement,
until such Partnership Units are transferred to the General Partner and
paid for or exchanged on the Specified Redemption Date. Until a Specified
Redemption Date, the Tendering Partner shall have no rights as a
stockholder of the General Partner with respect to such Tendering
Partner's Partnership Units.
G. In the event that the Partnership issues additional Partnership
Interests to any Additional Limited Partner pursuant to Section 4.3.C hereof,
the General Partner shall make such revisions to this Section 8.6 as it
determines are necessary to reflect the issuance of such additional Partnership
Interests.
H. If, at any time, the General Partner acquires material assets (other
than on behalf of the Partnership) the definition of "REIT Shares Amount" shall
be adjusted, as reasonably agreed to by the General Partner and the Limited
Partners, to reflect the relative Fair Market Value of a share of capital stock
of the General Partner relative to the Deemed Partnership Interest Value of the
related Partnership Unit.
I. The Partnership shall notify each Limited Partner in writing of any
adjustment made in the calculation of the REIT Shares Amount within 10 Business
Days of the date such change becomes effective.
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 RECORDS AND ACCOUNTING
The General Partner shall keep or cause to be kept at the principal office
of the Partnership appropriate books and records with respect to the
Partnership's business, including without limitation, all books and records
necessary to provide to the Limited Partners any information, lists and copies
of documents required to be provided pursuant to Section 9.3 or 8.5.A hereof.
Any records maintained by or on behalf of the Partnership in the regular course
of its business may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, micrographics or any other information storage device,
PROVIDED THAT the records so maintained are convertible into clearly legible
written form within a reasonable period of time. The books of the Partnership
shall be maintained, for financial and tax reporting purposes, on an accrual
basis in accordance with generally accepted accounting principles.
Section 9.2 FISCAL YEAR
The fiscal year of the Partnership shall be the calendar year.
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Section 9.3 REPORTS
As soon as practicable, but in no event later than 105 days after the
close of each Partnership Year, or such earlier date as they are filed with the
Securities and Exchange Commission, the General Partner shall cause to be mailed
to each Limited Partner as of the close of the Partnership Year, an annual
report containing financial statements of the Partnership, or of the General
Partner if such statements are prepared solely on a consolidated basis with the
General Partner, for such Partnership Year, presented in accordance with
generally accepted accounting principles, such statements to be audited by a
nationally recognized firm of independent public accountants selected by the
General Partner.
ARTICLE 10
TAX MATTERS
Section 10.1 PREPARATION OF TAX RETURNS
The General Partner shall arrange for the preparation and timely filing of
all returns of the Partnership and, to the extent applicable, Subsidiary
Partnership income, gains, deductions, losses and other items required of the
Partnership for federal and state income tax purposes and shall use all
reasonable efforts to furnish, within 90 days of the close of each taxable
year, the tax information reasonably required by Limited Partners for federal
and state income tax reporting purposes.
Section 10.2 TAX ELECTIONS
Except as otherwise provided herein, the General Partner shall, in its
sole and absolute discretion, determine whether to make any available election
pursuant to the Code, including the election under Section 754 of the Code. The
General Partner shall have the right to seek to revoke any such election
(including without limitation, any election under Section 754 of the Code) upon
the General Partner's determination in its sole and absolute discretion that
such revocation is in the best interests of the Partners.
Section 10.3 TAX MATTERS PARTNER
A. The General Partner shall be the "tax matters partner" of the
Partnership for federal income tax purposes. Pursuant to Section 6223(c) of the
Code, upon receipt of notice from the IRS of the beginning of an administrative
proceeding with respect to the Partnership, the tax matters partner shall
furnish the IRS with the name, address and profit interest of each of the
Limited Partners and Assignees; PROVIDED, HOWEVER, that such information is
provided to the Partnership by the Limited Partners and Assignees.
B. The tax matters partner is authorized, but not required:
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(1) to enter into any settlement with the IRS with respect to any
administrative or judicial proceedings for the adjustment of Partnership
items required to be taken into account by a Partner for income tax
purposes (such administrative proceedings being referred to as a "tax
audit" and such judicial proceedings being referred to as "judicial
review"), and in the settlement agreement the tax matters partner may
expressly state that such agreement shall bind all Partners, except that
such settlement agreement shall not bind any Partner (i) who (within the
time prescribed pursuant to the Code and Regulations) files a statement
with the IRS providing that the tax matters partner shall not have the
authority to enter into a settlement agreement on behalf of such Partner
or (ii) who is a "notice partner" (as defined in Section 6231 of the Code)
or a member of a "notice group" (as defined in Section 6223(b)(2) of the
Code);
(2) in the event that a notice of a final administrative adjustment
at the Partnership level of any item required to be taken into account by
a Partner for tax purposes (a "final adjustment") is mailed to the tax
matters partner, to seek judicial review of such final adjustment,
including the filing of a petition for readjustment with the Tax Court or
the United States Claims Court, or the filing of a complaint for refund
with the District Court of the United States for the district in which the
Partnership's principal place of business is located;
(3) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the IRS
at any time and, if any part of such request is not allowed by the IRS, to
file an appropriate pleading (petition or complaint) for judicial review
with respect to such request;
(5) to enter into an agreement with the IRS to extend the period for
assessing any tax which is attributable to any item required to be taken
into account by a Partner for tax purposes, or an item affected by such
item; and
(6) to take any other action on behalf of the Partners of the
Partnership in connection with any tax audit or judicial review proceeding
to the extent permitted by applicable law or regulations.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole and absolute discretion of the tax
matters partner and the provisions relating to indemnification of the General
Partner set forth in Section 7.7 of this Agreement shall be fully applicable to
the tax matters partner in its capacity as such.
C. The tax matters partner shall receive no compensation for its services.
All third party costs and expenses incurred by the tax matters partner in
performing its duties as such (including legal and accounting fees) shall be
borne by the Partnership. Nothing herein shall be
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construed to restrict the Partnership from engaging an accounting firm to assist
the tax matters partner in discharging its duties hereunder, so long as the
compensation paid by the Partnership for such services is reasonable.
Section 10.4 ORGANIZATIONAL EXPENSES
The Partnership shall elect to deduct expenses, if any, incurred by it in
organizing the Partnership ratably over a 60-month period as provided in Section
709 of the Code.
Section 10.5 WITHHOLDING
Each Limited Partner hereby authorizes the Partnership to withhold from or
pay on behalf of or with respect to such Limited Partner any amount of federal,
state, local, or foreign taxes that the General Partner determines that the
Partnership is required to withhold or pay with respect to any amount
distributable or allocable to such Limited Partner pursuant to this Agreement,
including, without limitation, any taxes required to be withheld or paid by the
Partnership pursuant to Section 1441, 1442, 1445 or 1446 of the Code. Any amount
paid on behalf of or with respect to a Limited Partner shall constitute a loan
by the Partnership to such Limited Partner, which loan shall be repaid by such
Limited Partner within 15 days after notice from the General Partner that such
payment must be made unless (i) the Partnership withholds such payment from a
distribution which would otherwise be made to the Limited Partner or (ii) the
General Partner determines, in its sole and absolute discretion, that such
payment may be satisfied out of the available funds of the Partnership which
would, but for such payment, be distributed to the Limited Partner. Any amounts
withheld pursuant to the foregoing clauses (i) or (ii) shall be treated as
having been distributed to such Limited Partner. Each Limited Partner hereby
unconditionally and irrevocably grants to the Partnership a security interest in
such Limited Partner's Partnership Interest to secure such Limited Partner's
obligation to pay to the Partnership any amounts required to be paid pursuant to
this Section 10.5. In the event that a Limited Partner fails to pay any amounts
owed to the Partnership pursuant to this Section 10.5 when due, the General
Partner may, in its sole and absolute discretion, elect to make the payment to
the Partnership on behalf of such defaulting Limited Partner, and in such event
shall be deemed to have loaned such amount to such defaulting Limited Partner
and shall succeed to all rights and remedies of the Partnership as against such
defaulting Limited Partner (including, without limitation, the right to receive
distributions and the holding of a security interest in such Limited Partner's
Partnership Interest). Any amounts payable by a Limited Partner hereunder shall
bear interest at the base rate on corporate loans at large United States money
center commercial banks, as published from time to time in the WALL STREET
JOURNAL, plus two percentage points (but not higher than the maximum lawful
rate) from the date such amount is due (i.e., 15 days after demand) until such
amount is paid in full. Each Limited Partner shall take such actions as the
Partnership or the General Partner shall request in order to perfect or enforce
the security interest created hereunder.
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ARTICLE 11
TRANSFERS AND WITHDRAWALS
Section 11.1 TRANSFER
A. The term "transfer," when used in this Article 11 with respect to a
Partnership Interest, shall be deemed to refer to a transaction by which the
General Partner purports to assign all or any portion of its General Partner
Interest to another person or by which a Limited Partner purports to assign all
or any portion of its Limited Partnership Interest to another Person, and
includes a sale, assignment, gift (outright or in trust), pledge, encumbrance,
hypothecation, mortgage, exchange or any other disposition by law or otherwise.
The term "transfer" when used in this Article 11 does not include any Redemption
or exchange for REIT Shares pursuant to Section 8.6. No part of the interest of
a Limited Partner shall be subject to the claims of any creditor, any spouse for
alimony or support, or to legal process, and may not be voluntarily or
involuntarily alienated or encumbered except as may be specifically provided for
in this Agreement.
B. No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article 11.
Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article 11 shall be null and void.
Section 11.2 TRANSFER OF GENERAL PARTNER'S PARTNERSHIP INTEREST
A. The General Partner shall not withdraw from the Partnership and shall
not transfer all or any portion of its interest in the Partnership (whether
by sale, statutory merger or consolidation, liquidation or otherwise) without
the consent of all of the Limited Partners, which may be given or withheld by
each Limited Partner in its sole and absolute discretion, and only, in the
case of a purported transfer of all of the General Partner's General Partner
Interest, upon the appointment and admission of a successor General Partner
pursuant to Section 12.1 and 13.1.B. Upon any transfer of all of the General
Partner's General Partner Interest in accordance with the provisions of this
Section 11.2, the transferee shall become a substitute General Partner for
all purposes herein, and shall be vested with the powers and rights of the
transferor General Partner, and shall be liable for all obligations and
responsible for all duties of the General Partner, once such transferee has
executed such instruments as may be necessary to effectuate such admission
and to confirm the agreement of such transferee to be bound by all the terms
and provisions of this Agreement with respect to the Partnership Interest so
acquired. It is a condition to any transfer otherwise permitted hereunder
that the transferee assumes, by operation of law or express agreement, all of
the obligations of the transferor General Partner under this Agreement with
respect to such transferred Partnership Interest, and no such transfer (other
than pursuant to a statutory merger or consolidation wherein all obligations
and liabilities of the transferor General Partner are assumed by a successor
corporation by operation of law) shall relieve the transferor General Partner
of its obligations under this Agreement without the Consent of the Super
Majority Limited Partners, in their reasonable discretion. Subject to Section
7.3.C, in the
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event the General Partner withdraws from the Partnership, in violation of this
Agreement or otherwise, or otherwise dissolves or terminates, or upon the
Incapacity of the General Partner, all of the remaining Partners may elect to
continue the Partnership business by selecting a Substitute General Partner in
accordance with the Act.
B. Except as otherwise provided in Section 11.2.C, the General Partner
shall not engage in any merger, consolidation or other combination with or into
another person, sale of all or substantially all of its assets or any
reclassification, recapitalization or change of its outstanding equity interests
(each, a "Termination Transaction"), unless the Termination Transaction has been
approved by a Consent of the Partners and in connection with which all Limited
Partners either will receive, or will have the right to elect to receive, for
each Partnership Unit an amount of cash, securities, or other property equal to
the product of the REIT Shares Amount and the greatest amount of cash,
securities or other property paid to a holder of one REIT Share in consideration
of one REIT Share pursuant to the terms of the Termination Transaction; PROVIDED
THAT, if, in connection with the Termination Transaction, a purchase, tender or
exchange offer shall have been made to and accepted by the holders of more than
thirty-three and one-third percent (33 1/3%) of the outstanding REIT Shares,
each holder of Partnership Units shall receive, or shall have the right to elect
to receive, the greatest amount of cash, securities, or other property which
such holder would have received had it exercised its right to Redemption (as set
forth in Section 8.6) and received REIT Shares in exchange for its Partnership
Units immediately prior to the expiration of such purchase, tender or exchange
offer and had thereupon accepted such purchase, tender or exchange offer.
C. Notwithstanding Section 11.2.B, the General Partner may merge, or
otherwise combine its assets, with another entity if: (i) immediately after such
merger or other combination, substantially all of the assets directly or
indirectly owned by the surviving entity, other than Partnership Units held by
such General Partner, are owned directly or indirectly by the Partnership or
another limited partnership or limited liability company which is the survivor
of a merger, consolidation or combination of assets with the Partnership (in
each case, the "Surviving Partnership"); (ii) the Limited Partners own a
percentage interest of the Surviving Partnership based on the relative fair
market value of the net assets of the Partnership (as determined pursuant to
Section 11.2(E) and the other net assets of the Surviving Partnership (as
determined pursuant to Section 11.2.E) immediately prior to the consummation of
such transaction; (iii) the rights, preferences and privileges of the Limited
Partners in the Surviving Partnership are at least as favorable as those in
effect immediately prior to the consummation of such transaction and as those
applicable to any other limited partners or non-managing members of the
Surviving Partnership; and (iv) such rights of the Limited Partners include the
right to exchange their interests in the Surviving Partnership for at least one
of: (a) the consideration available to such Limited Partners pursuant to Section
11.2.B or (b) if the ultimate controlling person of the Surviving Partnership
has publicly traded common equity securities, such common equity securities,
with an exchange ratio based on the relative fair market value of such
securities (as determined pursuant to Section 11.2.E) and the REIT Shares.
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D. In connection with any transaction permitted by Section 11.2.B or
Section 11.2.C hereof, the General Partner shall use its commercially reasonable
efforts to structure such Termination Transaction to avoid causing the Limited
Partners to recognize gain for federal income tax purposes by virtue of the
occurrence of or their participation in such Termination Transaction. The sole
remedy for a breach by the General Partner of this Section 11.2.D shall be a
claim for damages.
E. In connection with any transaction permitted by Section 11.2.B or
11.2.C, the relative fair market values shall be reasonably determined by the
General Partner as of the time of such transaction and, to the extent
applicable, shall be no less favorable to the Limited Partners than the relative
values reflected in the terms of such transaction.
Section 11.3 LIMITED PARTNERS' RIGHTS TO TRANSFER
A. Prior to the first anniversary of the Effective Date, no Limited
Partner shall transfer all or any portion of its Partnership Interest to any
transferee without the consent of the General Partner, which consent is to be
exercised by its Independent Trust Managers and may be withheld in its sole and
absolute discretion; PROVIDED, HOWEVER, that any Limited Partner may, at any
time (whether prior to or after such first anniversary), without the consent of
the General Partner, (i) transfer all or any portion of its Partnership Interest
to the General Partner, (ii) transfer all or any portion of its Partnership
Interest to an Affiliate of such Limited Partner, another original Limited
Partner or to an Immediate Family member, subject to the provisions of Section
11.6, (iii) transfer all or any portion of its Partnership Interest to a trust
for the benefit of a charitable beneficiary or to a charitable foundation,
subject to the provisions of Section 11.6, (iv) subject to the provisions of
Section 11.6, pledge (a "Pledge") all or any portion of its Partnership Interest
to a lending institution, which is not an Affiliate of such Limited Partner, as
collateral or security for a bona fide loan or other extension of credit, and
transfer such pledged Partnership Interest to such lending institution in
connection with the exercise of remedies under such loan or extension or credit,
and the transfer of such pledged Partnership Interest by the lender to any
transferee and (v) subject to the provisions of Section 11.6, pledge all or any
portion of its Partnership Interest to the Company pursuant to the Pledge
Agreement, as agent for the pledgees named therein. Each Limited Partner or
Assignee (resulting from a transfer made pursuant to clauses (i)-(iv) of the
proviso of the preceding sentence) shall have the right to transfer all or any
portion of its Partnership Interest, subject to the provisions of Section 11.6
and the satisfaction of each of the following conditions (in addition to the
right of each such Limited Partner or Assignee to continue to make any such
transfer permitted by clauses (i)-(iv) of such proviso without satisfying either
of the following conditions):
(a) GENERAL PARTNER RIGHT OF FIRST REFUSAL. The transferring Partner
shall give written notice of the proposed transfer to the General Partner,
which notice shall state (i) the identity of the proposed transferee, and
(ii) the amount and type of consideration proposed to be received for the
transferred Partnership Units. The General Partner shall have ten (10)
days upon which to give the transferring Partner notice of its election to
acquire the Partnership Units on the proposed terms. If it so
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elects, it shall purchase the Partnership Units on such terms within ten
(10) days after giving notice of such election. If it does not so elect,
the transferring Partner may transfer such Partnership Units to such third
party, on economic terms no more favorable to the transferee than the
proposed terms, subject to the other conditions of this Section 11.3, for
a period of ninety (90) days, after which such transfer shall again be
subject to compliance herewith.
(b) QUALIFIED TRANSFEREE. Any transfer of a Partnership Interest
shall be made only to Qualified Transferees. It is a condition to any
transfer otherwise permitted hereunder that the transferee assumes by
operation of law or express agreement all of the obligations of the
transferor Limited Partner under this Agreement with respect to such
transferred Partnership Interest and no such transfer (other than pursuant
to a statutory merger or consolidation wherein all obligations and
liabilities of the transferor Partner are assumed by a successor
corporation by operation of law) shall relieve the transferor Partner of
its obligations under this Agreement without the approval of the General
Partner, in its reasonable discretion. Notwithstanding the foregoing, any
transferee of any transferred Partnership Interest shall be subject to any
and all ownership limitations contained in the Charter and the
representations in Section 3.4.D. Any transferee, whether or not admitted
as a Substituted Limited Partner, shall take subject to the obligations of
the transferor hereunder. Unless admitted as a substitute Limited Partner,
no transferee, whether by a voluntary transfer, by operation of law or
otherwise, shall have rights hereunder, other than the rights of an
Assignee as provided in Section 11.5.
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 not
more rights than those enjoyed by other Limited Partners, for the purpose of
settling or managing the estate, and such power as the Incapacitated Limited
Partner possessed to transfer all or any part of his or its interest in the
Partnership. The Incapacity of a Limited Partner, in and of itself, shall not
dissolve or terminate the Partnership.
C. The General Partner may prohibit any transfer otherwise permitted under
Section 11.3 by a Limited Partner of such Limited Partner's Partnership Units
if, in the opinion of legal counsel to the Partnership, such transfer would
require the filing of a registration statement under the Securities Act by the
Partnership or would otherwise violate any federal or state securities laws or
regulations applicable to the Partnership or the Partnership Units.
D. No transfer by a Limited Partner of such Limited Partner's Partnership
Units (including any Redemption or exchange for REIT Shares pursuant to Section
8.6) may be made to any person if (i) in the opinion of legal counsel for the
Partnership, it would result in the Partnership being treated as an association
taxable as a corporation, or (ii) such transfer is effectuated through an
"established securities market" or a "secondary market (or the substantial
equivalent thereof)" within the meaning of Section 7704 of the Code.
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E. No transfer of any Partnership Units may be made to a lender to the
Partnership or any Person who is related (within the meaning of Section
1.752-4(b) of the Regulations) to any lender to the Partnership whose loan
constitutes a Nonrecourse Liability, without the consent of the General Partner,
in its sole and absolute discretion; PROVIDED THAT, as a condition to such
consent, the lender will be required to enter into an arrangement with the
Partnership and the General Partner to redeem or exchange for the REIT Shares
Amount any Partnership Units in which a security interest is held simultaneously
with the time at which such lender would be deemed to be a partner in the
Partnership for purposes of allocating liabilities to such lender under Section
752 of the Code.
F. In addition to any other restrictions on transfer contained in this
Agreement, in no event may any transfer of any Partnership Units by any Partner
be made if such transfer would cause, or in the opinion of counsel selected by
the General Partner, could cause (i) the Partnership to become, with respect to
any employee benefit plan subject to Title I of ERISA or Section 4975 of the
Code, a "party-in-interest" (as defined in Section 3(14) of ERISA) or a
"disqualified person" (as defined in Section 4975(c) of the Code); or (ii) any
portion of the assets of the Partnership to constitute assets of any employee
benefit plan pursuant to Department of Labor Section 2510.3-101 of the
Regulations.
Section 11.4 SUBSTITUTED LIMITED PARTNERS
A. No Limited Partner shall have the right to substitute a transferee as a
Limited Partner in such Limited Partner's place (including any transferee
permitted by Section 11.3). The General Partner shall, however, have the right
to consent to the admission of a transferee permitted under Section 11.3 of the
interest of a Limited Partner as a Substituted Limited Partner pursuant to this
Section 11.4, which consent may be given or withheld by the General Partner in
its sole and absolute discretion. The General Partner's failure or refusal to
permit a transferee of any such interests to become a Substituted Limited
Partner shall not give rise to any cause of action against the Partnership or
any Partner.
B. A transferee who has been admitted as a Substituted Limited Partner in
accordance with this Article 11 shall have all the rights and powers and be
subject to all the restrictions and liabilities of a Limited Partner under this
Agreement. The admission of any transferee as a Substituted Limited Partner
shall be subject to the transferee executing and delivering to the Partnership
an acceptance of all of the terms and conditions of this Agreement (including,
without limitation, the provisions of Section 2.4 and such other documents or
instruments as may be required in the discretion of the General Partner to
effect the admission, each in form and substance satisfactory to the General
Partner) and the acknowledgment by such transferee that each of the
representations and warranties set forth in Section 3.4 hereof are true and
correct with respect to such transferee as of the date of the transfer of the
Partnership Interest to such transferee.
C. Upon the admission of a Substituted Limited Partner, the General
Partner shall amend Exhibit A to reflect the name, address, number of
Partnership Units, and Percentage
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Interest of such Substituted Limited Partner and to eliminate or adjust, if
necessary, the name, address and interest of the predecessor of such Substituted
Limited Partner.
Section 11.5 ASSIGNEES
If the General Partner, in its sole and absolute discretion, does not
consent to the admission of any permitted transferee under Section 11.3 as a
Substituted Limited Partner, as described in Section 11.4, such transferee shall
be considered an Assignee for purposes of this Agreement. An Assignee shall be
entitled to all the rights of an assignee of a limited partnership interest
under the Act, including the right to receive distributions from the Partnership
and the share of Net Income, Net Losses, gain and loss attributable to the
Partnership Units assigned to such transferee, the rights to transfer the
Partnership Units provided in this Article 11, and the right of Redemption
provided in Section 8.6, but shall not be deemed to be a holder of Partnership
Units for any other purpose under this Agreement, and shall not be entitled to
effect a Consent with respect to such Partnership Units on any matter presented
to the Limited Partners for approval (such Consent remaining with the transferor
Limited Partner). In the event any such transferee desires to make a further
assignment of any such Partnership Units, such transferee shall be subject to
all the provisions of this Article 11 to the same extent and in the same manner
as any Limited Partner desiring to make an assignment of Partnership Units.
Section 11.6 GENERAL PROVISIONS
A. No Limited Partner may withdraw from the Partnership other than as a
result of (i) a permitted transfer of all of such Limited Partner's Partnership
Units in accordance with this Article 11 and the transferee(s) of such Units
being admitted to the Partnership as a Substituted Limited Partner or (ii)
pursuant to a Redemption or exchange for REIT Shares of all of such Limited
Partner's Partnership Units under Section 8.6.
B. Any Limited Partner who shall transfer all of such Limited Partner's
Partnership Units in a transfer permitted pursuant to this Article 11 where such
transferee was admitted as a Substituted Limited Partner or pursuant to a
Redemption or exchange for REIT Shares of all of such Limited Partner's
Partnership Units under Section 8.6 shall cease to be a Limited Partner.
C. Transfers pursuant to this Article 11 may only be made on the first day
of a fiscal quarter of the Partnership, unless the General Partner otherwise
agrees.
D. If any Partnership Interest is transferred or assigned during any
quarterly segment of the Partnership's fiscal year in compliance with the
provisions of this Article 11 or transferred or redeemed pursuant to Section
8.6, on any day other than the first day of a Partnership Year, then Net Income,
Net Losses, each item thereof and all other items attributable to such
Partnership Interest for such fiscal year shall be divided and allocated between
the transferor Partner and the transferee Partner by taking into account their
varying interests during the fiscal year in accordance with Section 706(d) of
the Code, using the pro-ration of items method. Except as otherwise required by
Section 706(d) of the Code, solely for purposes of making such
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allocations, each of such items for the calendar quarter in which the transfer,
assignment or redemption occurs shall be allocated to the Person who is a
Partner as of midnight on the Partnership Record Date and none of such items for
the calendar quarter in which a redemption occurs will be allocated to the
redeeming Partner. All distributions of Available Cash with respect to which the
Partnership Record Date is before the date of such transfer, assignment or
redemption shall be made to the transferor Partner, and all distributions of
Available Cash thereafter, in the case of a transfer or assignment other than a
redemption, shall be made to the transferee Partner.
E. In addition to any other restrictions on transfer herein contained,
including without limitation the provisions of this Article 11 and Section 2.6,
in no event may any transfer or assignment of a Partnership Interest by any
Partner (including by way of a Redemption) be made (i) to any person or entity
who lacks the legal right, power or capacity to own a Partnership Interest; (ii)
in violation of applicable law; (iii) of any component portion of a Partnership
Interest, such as the Capital Account, or rights to distributions, separate and
apart from all other components of a Partnership Interest; (iv) if in the
opinion of legal counsel to the Partnership such transfer would cause a
termination of the Partnership for federal or state income tax purposes (except
as a result of the Redemption or exchange for REIT Shares of all Partnership
Units held by all Limited Partners or pursuant to a Termination Transaction
expressly permitted under Section 11.2); (v) if in the opinion of counsel to the
Partnership such transfer would cause the Partnership to cease to be classified
as a partnership for federal or state income tax purposes (except as a result of
the Redemption or exchange for REIT Shares of all Partnership Units held by all
Limited Partners); (vi) if such transfer requires the registration of such
Partnership Interest pursuant to any applicable federal or state securities
laws; (vii) if such transfer is effectuated through an "established securities
market" or a "secondary market" (or the substantial equivalent thereof) within
the meaning of Section 7704 of the Code or such transfer causes the Partnership
to become a "Publicly Traded Partnership," as such term is defined in Sections
469(k)(2) or 7704(b) of the Code; (viii) if such transfer subjects the
Partnership to be regulated under the Investment Company Act of 1940, the
Investment Advisors Act of 1940 or the Employee Retirement Income Security Act
of 1974, each as amended; (ix) if the transferee or assignee of such Partnership
Interest is unable to make the representations set forth in Section 3.4.D or
such transfer could otherwise adversely affect the ability of the General
Partner to remain qualified as a REIT; or (x) if in the opinion of legal counsel
for the Partnership such transfer would adversely affect the ability of the
General Partner to continue to qualify as a REIT or subject the General Partner
to any additional taxes under Section 857 or Section 4981 of the Code.
F. The General Partner shall monitor the transfers of interests in the
Partnership to determine (i) if such interests are being traded on an
"established securities market" or a "secondary market (or the substantial
equivalent thereof)" within the meaning of Section 7704 of the Code, and (ii)
whether additional transfers of interests would result in the Partnership being
unable to qualify for at least one of the "safe harbors" set forth in
regulations Section 1.7704-1 (or such other guidance subsequently published by
the IRS setting forth safe harbors under which interests will not be treated as
"readily tradable on a secondary market (or the substantial equivalent thereof)"
within the meaning of Section 7704 of the Code) (the "Safe Harbors"). The
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General Partner shall take all steps reasonably necessary or appropriate to
prevent any trading of interests or any recognition by the Partnership of
transfers made on such markets and, except as otherwise provided herein, to
insure that at least one of the Safe Harbors is met.
Section 11.7 TRANSFER OF PLEDGED PARTNERSHIP UNITS
A. Notwithstanding anything to the contrary in this Agreement but subject
to Section 11.6 hereof, any or all of the Limited Partnership Interests pledged
to the Company, as agent on behalf of the pledgees, pursuant to the Pledge
Agreement may be transferred, without the consent of any other Partner, to any
Person designated by the Company in its sole and absolute discretion in
connection with the exercise by the Company of its rights and remedies under the
Pledge Agreement. Any such transferee shall be admitted as a Substituted Limited
Partner, subject to the provisions of Section 11.4 hereof.
B. Each of the Pledgors hereby constitutes and appoints the Company and
authorized officers and attorneys-in-fact of the Company, 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 effect any transfer of Partnership interests pursuant to the
Pledge Agreement referred to in Subparagraph A of this Section 11.7. The
foregoing power of attorney is hereby declared to be irrevocable and a power
coupled with an interest, and it shall survive and not be affected by the
subsequent Incapacity of any Pledgor and shall extend to such Pledgor's heirs,
successors, assigns and personal representatives. Each such Pledgor hereby
waives any and all defenses which may be available to contest, negate or
disaffirm the action of the Company taken in good faith under such power of
attorney.
ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 ADMISSION OF SUCCESSOR GENERAL PARTNER
A successor to all of the General Partner's General Partner Interest
pursuant to Section 11.2 hereof who is proposed to be admitted as a successor
General Partner shall be admitted to the Partnership as the General Partner,
effective upon such transfer. Any such transferee shall carry on the business of
the Partnership without dissolution. In each case, the admission shall be
subject to the successor General Partner executing and delivering to the
Partnership an acceptance of all of the terms and conditions of this Agreement
and such other documents or instruments as may be required to effect the
admission. In the case of such admission on any day other than the first day of
a Partnership Year, all items attributable to the General Partner's Partnership
Interest for such Partnership Year shall be allocated between the transferring
General Partner and such successor as provided in Article 11 hereof.
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Section 12.2 ADMISSION OF ADDITIONAL LIMITED PARTNERS
A. After the admission to the Partnership of the initial Limited Partners
on the date hereof, 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)
evidence of acceptance in form satisfactory to the General Partner of all of the
terms and conditions of this Agreement, including, without limitation, the power
of attorney granted in Section 2.4 hereof and (ii) such other documents or
instruments as may be required in the discretion of the General Partner in order
to effect such Person's admission as an Additional Limited Partner.
B. Notwithstanding anything to the contrary in this Section 12.2, no
Person shall be admitted as an Additional Limited Partner without the consent of
the General Partner, which consent may be given or withheld in the General
Partner's sole and absolute discretion. The admission of any Person as an
Additional Limited Partner shall become effective on the date upon which the
name of such Person is recorded on the books and records of the Partnership,
following the receipt of the Capital Contribution in respect of such Limited
Partner, the documents and instruments described in Section 12.2A and the
consent of the General Partner to such admission. If any Additional Limited
Partner is admitted to the Partnership on any day other than the first day of a
Partnership Year, then Net Income, Net Losses, each item thereof and all other
items allocable among Partners and Assignees for such Partnership Year shall be
allocated among such Additional Limited Partner and all other Partners and
Assignees by taking into account their varying interests during the Partnership
Year in accordance with Section 706(d) of the Code, using the interim closing
of the books method unless the General Partner, in its sole and absolute
discretion, elects to adopt another reasonable method permitted by law. Solely
for purposes of making such allocations, each of such items for the calendar
month in which an admission of an Additional Limited Partner occurs shall be
allocated among all the Partners and Assignees including such Additional Limited
Partner. All distributions of Available Cash with respect to which the
Partnership Record Date is before the date of such admission shall be made
solely to Partners and Assignees other than the Additional Limited Partner
(other than in its capacity as an Assignee) and, except as otherwise agreed to
by the Additional Limited Partners and the General Partner, all distributions of
Available Cash thereafter shall be made to all Partners and Assignees including
such Additional Limited Partner.
Section 12.3 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP
For the admission to the Partnership of any Partner, the General Partner
shall take all steps necessary and appropriate under the Act to amend the
records of the Partnership and, if necessary, to prepare as soon as practical an
amendment of this Agreement (including an amendment of Exhibit A) and, if
required by law, shall prepare and file an amendment to the Certificate and may
for this purpose exercise the power of attorney granted pursuant to Section 2.4
hereof.
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ARTICLE 13
DISSOLUTION AND LIQUIDATION
Section 13.1 DISSOLUTION
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the withdrawal of the General Partner, any successor General Partner (selected
as described in Section 13.1.B below) shall continue the business of the
Partnership. The Partnership shall dissolve, and its affairs shall be wound up,
upon the first to occur of any of the following ("Liquidating Events"):
A. the expiration of its term as provided in Section 2.5 hereof;
B. an event of withdrawal of the General Partner, as defined in the Act,
unless, within 90 days after the withdrawal, all of the remaining Partners agree
in writing, in their sole and absolute discretion, to continue the business of
the Partnership and to the appointment, effective as of the date of withdrawal,
of a successor General Partner;
C. subject to compliance with Section 7.3.D(1), an election to dissolve
the Partnership made by the General Partner;
D. entry of a decree of judicial dissolution of the Partnership pursuant
to the provisions of the Act;
E. the sale of all or substantially all of the assets and properties of
the Partnership for cash or marketable securities;
F. the Incapacity of the General Partner, unless all of the remaining
Partners in their sole and absolute discretion agree in writing to continue the
business of the Partnership and to the appointment, effective as of a date prior
to the date of such Incapacity, of a substitute General Partner; or
G. the Redemption or exchange for REIT Shares of all Partnership Units
(other than those of the General Partner).
Section 13.2 WINDING UP
A. Upon the occurrence of a Liquidating Event, the Partnership shall
continue solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors and Partners.
No Partner shall take any action that is inconsistent with, or not necessary to
or appropriate for, the winding up of the Partnership's business and affairs.
The General Partner (or, in the event there is no remaining General Partner, any
Person elected by a Majority in Interest of the Limited Partners) (the
"Liquidator") shall be
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responsible for overseeing the winding up and dissolution of the Partnership and
shall take full account of the Partnership's liabilities and assets and the
Partnership property shall be liquidated as promptly as is consistent with
obtaining the fair value thereof, and the proceeds therefrom (which may, to the
extent determined by the General Partner, include shares of stock of the General
Partner) shall be applied and distributed in the following order:
(1) First, to the payment and discharge of all of the Partnership's
debts and liabilities to creditors other than the Partners;
(2) Second, to the payment and discharge of all of the Partnership's
debts and liabilities to the General Partner;
(3) Third, to the payment and discharge of all of the Partnership's
debts and liabilities to the other Partners; and
(4) The balance, if any, to the General Partner and Limited Partners
in accordance with their positive Capital Account balances, determined
after taking into account all Capital Account adjustments for the
Partnership taxable year during which the liquidation occurs (other than
those made as a result of the liquidating distribution set forth in this
Section 13.2.A(4)).
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13 other than reimbursement of its
expenses as provided in Section 7.4.
B. Notwithstanding the provisions of Section 13.2.A hereof, 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 distribute to the Partners, in lieu of cash, as tenants in
common and in accordance with the provisions of Section 13.2.A hereof,
undivided interests in such Partnership assets as the Liquidator deems not
suitable for liquidation. Any such distributions in kind shall be made only if,
in the good faith judgment of the Liquidator, such distributions in kind are in
the best interest of the Partners, and shall be subject to such conditions
relating to the disposition and management of such properties as the Liquidator
deems reasonable and equitable and to any agreements governing the operation of
such properties at such time. The Liquidator shall determine the fair market
value of any property distributed in kind using such reasonable method of
valuation as it may adopt.
Section 13.3 COMPLIANCE WITH TIMING REQUIREMENTS OF REGULATIONS
In the event the Partnership is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant
to this Article 13 to the General Partner and Limited Partners who have positive
Capital Accounts in compliance with
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Regulations Section 1.704-1(b)(2)(ii)(b)(2). If any Partner has a deficit
balance in his or her Capital Account (after giving effect to all contributions,
distributions and allocations for the taxable years, including the year during
which such liquidation occurs), such Partner shall have no obligation to make
any contribution to the capital of the Partnership with respect to such deficit,
and such deficit shall not be considered a debt owed to the Partnership or to
any other Person for any purpose whatsoever. In the discretion of the
Liquidator, a pro rata portion of the distributions that would otherwise be made
to the General Partner and Limited Partners pursuant to this Article 13 may be:
A. 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 of the General Partner arising out of or in connection
with the Partnership. The assets of any such trust shall be distributed to the
Partners from time to time, in the reasonable discretion of the Liquidator, in
the same proportions and the amount distributed to such trust by the Partnership
would otherwise have been distributed to the General Partner and Limited
Partners pursuant to this Agreement; or
B. withheld to provide a reasonable reserve for Partnership liabilities
(contingent or otherwise) and to reflect the unrealized portion of any
installment obligations owed to the Partnership, PROVIDED THAT when the
Liquidator determines that the withheld amounts are no longer appropriate such
withheld amounts shall be distributed to the Partners as soon as practicable in
the manner and order of priority set forth in Section 13.2.
Section 13.4 DEEMED DISTRIBUTION AND RECONTRIBUTION
Notwithstanding any other provision of this Article 13, in the event the
Partnership is liquidated within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g) but no Liquidating Event has occurred, the 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, the Partnership shall be deemed to have distributed the Partnership
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, PROVIDED THAT the proposed amendment to Regulations Section
1.708-1(b)(1)(iv) is not adopted.
Section 13.5 RIGHTS OF LIMITED PARTNERS
Except as otherwise provided in this Agreement, each Limited Partner shall
look solely to the assets of the Partnership for the return of such Limited
Partner's Capital Contribution and shall have no right or power to demand or
receive property from the General Partner. Except as otherwise provided in this
Agreement, no Limited Partner shall have priority over any other Limited Partner
as to the return of his Capital Contributions, distributions or allocations.
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Section 13.6 NOTICE OF DISSOLUTION
In the event a Liquidating Event occurs or an event occurs that would, but
for provisions of Section 13.1, result in a dissolution of the Partnership, the
General Partner shall, within 30 days thereafter, provide written notice thereof
to each of the Partners and to all other parties with whom the Partnership
regularly conducts business (as determined in the discretion of the General
Partner) and shall publish notice thereof in a newspaper of general circulation
in each place in which the Partnership regularly conducts business (as
determined in the discretion of the General Partner).
Section 13.7 CANCELLATION OF CERTIFICATE OF LIMITED PARTNERSHIP
Upon the completion of the liquidation of the Partnership cash and
property as provided in Section 13.2 hereof, the Partnership shall be terminated
and the Certificate and all qualifications of the Partnership as a foreign
limited partnership in jurisdictions other than the State of Delaware shall be
canceled and such other actions as may be necessary to terminate the Partnership
shall be taken.
Section 13.8 REASONABLE TIME FOR WINDING UP
A reasonable time shall be allowed for the orderly winding up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2 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.
Section 13.9 WAIVER OF PARTITION
Each Partner hereby waives any right to partition of the Partnership
property.
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; CONSENTS
Section 14.1 AMENDMENTS
A. The actions requiring consent or approval of the Partners or of the
Limited Partners pursuant to this Agreement, including Section 7.3, or otherwise
pursuant to applicable law, are subject to the procedures in this Article 14.
B. Amendments to this Agreement requiring the consent or approval of
Limited Partners may be proposed by the General Partner or by any Limited
Partner. Following such proposal, the General Partner shall submit any proposed
amendment to the Partners or the Limited Partners, as applicable. The General
Partner shall seek the written consent or approval of the Partners or Limited
Partners on the proposed amendment or shall call a meeting to vote thereon and
to transact any other business that it may deem appropriate. For purposes of
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obtaining a written consent, the General Partner may require a response within a
reasonable specified time, but not less than 15 days, and failure to respond in
such time period shall constitute a consent which is consistent with the General
Partner's recommendation (if so recommended) with respect to the proposal;
PROVIDED THAT, an action shall become effective at such time as requisite
consents are received even if prior to such specified time.
Section 14.2 ACTION BY THE PARTNERS
A. Meetings of the Partners may be called by the General Partner and shall
be called upon the receipt by the General Partner of a written request by
Limited Partners holding twenty-five percent (25%) or more of the Partnership
Interests held by Limited Partners. The call shall state the nature of the
business to be transacted. Notice of any such meeting shall be given to all
Partners not less than seven days nor more than 30 days prior to the date of
such meeting. Partners may vote in person or by proxy at such meeting. Whenever
the vote or consent of the Limited Partners or of the Partners is permitted or
required under this Agreement, such vote or Consent may be given at a meeting of
Partners or may be given in accordance with the procedure prescribed in Section
14.1 hereof.
B. Any action required or permitted to be taken at a meeting of the
Partners may be taken without a meeting if a written consent setting forth the
action so taken is signed by the percentage as is expressly required by this
Agreement for the action in question. Such consent may be in one instrument or
in several instruments, and shall have the same force and effect as a vote of
the Percentage Interests of the Partners (expressly required by this Agreement).
Such consent shall be filed with the General Partner. An action so taken shall
be deemed to have been taken at a meeting held on the effective date so
certified.
C. Each Limited Partner may authorize any Person or Persons to act for him
by proxy on all matters in which a Limited Partner is entitled to participate,
including waiving notice of any meeting, or voting or participating at a
meeting. Every proxy must be signed by the Limited Partner or his
attorney-in-fact. No proxy shall be valid after the expiration of 11 months from
the date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the Limited Partner executing it.
D. To the extent the Company is entitled to exercise its rights and
remedies under the Pledge Agreement, the Company is hereby authorized to act for
each Pledgor by proxy on all matters in which such Pledgor is now or hereafter
entitled to participate under this Agreement by reason of such Pledgor's
Partnership Interest (whether now owned or hereafter acquired), including
waiving notice of any meeting, or voting or participating at a meeting.
Notwithstanding anything to the contrary in Subparagraph C of this Section 14.2,
the foregoing proxy is irrevocable and coupled with an interest, shall survive
and not be affected by the subsequent Incapacity of any Pledgor and shall extend
to such Pledgor's heirs, successors, assigns and personal representatives and
shall be valid until such time as all collateral subject to the Pledge
Agreement, if any, is returned to the Pledgors pursuant to the terms of the
Pledge Agreement.
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E. Each meeting of Partners shall be conducted by the General Partner or
such other Person as the General Partner may appoint pursuant to such rules for
the conduct of the meeting as the General Partner or such other Person deems
appropriate.
ARTICLE 15
GENERAL PROVISIONS
Section 15.1 ADDRESSES AND NOTICE
Any notice, demand, request or report required or permitted to be given or
made to a Partner or Assignee under this Agreement shall be in writing and shall
be deemed given or made when delivered in person or when sent by certified
first-class United States mail, nationally recognized overnight delivery service
or facsimile transmission to the Partner or Assignee at the address set forth in
Exhibit A or such other address as the Partners shall notify the General Partner
in writing.
Section 15.2 TITLES AND CAPTIONS
All article or Section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
Section 15.3 PRONOUNS AND PLURALS
Whenever the context may require, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa.
Section 15.4 FURTHER ACTION
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 15.5 BINDING EFFECT
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
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Section 15.6 CREDITORS
Other than as expressly set forth herein with respect to Indemnitees, none
of the provisions of this Agreement shall be for the benefit of, or shall be
enforceable by, any creditor of the Partnership.
Section 15.7 WAIVER
No failure or delay by any party to insist upon the strict performance of
any covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon any breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or condition.
Section 15.8 COUNTERPARTS
This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart. Each party shall become bound by this Agreement immediately
upon affixing its signature hereto.
Section 15.9 APPLICABLE LAW
This Agreement shall be construed in accordance with and governed by the
laws of the State of Delaware, without regard to the principles of conflicts of
law.
Section 15.10 INVALIDITY OF PROVISIONS
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
Section 15.11 LIMITATION TO PRESERVE REIT STATUS
To the extent that any amount paid or credited to the General Partner or
its officers, directors, employees or agents pursuant to Section 7.4 or Section
7.7 would constitute gross income to the General Partner for purposes of
Sections 856(c)(2) or 856(c)(3) of the Code (a "General Partner Payment") then,
notwithstanding any other provision of this Agreement, the amount of such
General Partner Payments for any fiscal year shall not exceed the lesser of:
(i) an amount equal to the excess, if any, of (a) 4.17% of the
General Partner's total gross income (but not including the amount of any
General Partner Payments) for the fiscal year which is described in
subsections (A) through (H) of Section 856(c)(2) of the Code over (b) the
amount of gross income (within the meaning of Section 856(c)(2) of the
Code) derived by the General Partner from sources other than those
described in
66
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subsections (A) through (H) of Section 856(c)(2) of the Code (but not
including the amount of any General Partner Payments); or
(ii) an amount equal to the excess, if any, of (a) 25% of the
General Partner's total gross income (but not including the amount of any
General Partner Payments) for the fiscal year which is described in
subsections (A) through (I) of Section 856(c)(3) of the Code over (b) the
amount of gross income (within the meaning of Section 856(c)(3) of the
Code) derived by the General Partner from sources other than those
described in subsections (A) through (I) of Section 856(c)(3) of the Code
(but not including the amount of any General Partner Payments);
PROVIDED, HOWEVER, that General Partner Payments in excess of the amounts set
forth in subparagraphs (i) and (ii) above may be made if the General Partner, as
a condition precedent, obtains an opinion of tax counsel that the receipt of
such excess amounts would not adversely affect the General Partner's ability to
qualify as a REIT. To the extent General Partner Payments may not be made in a
year due to the foregoing limitations, such General Partner Payments shall carry
over and be treated as arising in the following year, PROVIDED, HOWEVER, that
such amounts shall not carry over for more than five years, and if not paid
within such five-year period, shall expire; PROVIDED FURTHER, that (i) as
General Partner Payments are made, such payments shall be applied first to
carryover amounts outstanding, if any, and (ii) with respect to carryover
amounts for more than one Partnership Year, such payments shall be applied to
the earliest Partnership Year first.
Section 15.12 ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement among the
Partners with respect to the subject matter hereof and supersedes any other
prior written or oral understandings or agreements among them with respect
thereto.
Section 15.13 NO RIGHTS AS STOCKHOLDERS
Nothing contained in this Agreement shall be construed as conferring upon
the holders of Partnership Units any rights whatsoever as stockholders of the
General Partner, including without limitation any right to receive dividends or
other distributions made to stockholders of the General Partner or to vote or to
consent or to receive notice as stockholders in respect of any meeting of
stockholders for the election of directors of the General Partner or any other
matter.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GROVE OPERATING, L.P.
By: Grove Real Estate Asset Trust,
a Maryland corporation, Its General Partner
By:________________________________________
Title:
LIMITED PARTNERS:
By:________________________________________
Name:
Title: Authorized Signatory
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EXHIBIT A
PARTNERS, CONTRIBUTIONS AND PARTNERSHIP INTERESTS
- --------------------------------------------------------------------------------
I. Initial Contributions
- --------------------------------------------------------------------------------
Agreed Value of Percentage
- --------------------------------------------------------------------------------
Name and
Address of Cash Interest Contributed Gross Asset Total Partnership
Partner Contributions Property* Value Contributions Units
- --------------------------------------------------------------------------------
GENERAL
PARTNER
- --------------------------------------------------------------------------------
Grove Real
Estate Asset
Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LIMITED
PARTNERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ----------
* Net of Debt (if any).
A-1
<PAGE>
- --------------------------------------------------------------------------------
II. Contributions To Be Made On Effective Date
- --------------------------------------------------------------------------------
Name and
Address of Cash Interest Contributed Gross Asset Total Partnership
Partner Contributions Property* Value Contributions Units
- --------------------------------------------------------------------------------
GENERAL
PARTNER
- --------------------------------------------------------------------------------
Grove Real
Estate Asset
Trust
- --------------------------------------------------------------------------------
LIMITED
PARTNERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ----------
* Net of Debt (if any)
A-2
<PAGE>
EXHIBIT B
NOTICE OF REDEMPTION
The undersigned hereby [irrevocably] (i) transfers ____________ Limited
Partnership Units in Grove Operating, L.P. in accordance with the terms of the
Agreement of Limited Partnership of Grove Operating, L.P., dated as of
__________, 1997, as it may be amended, supplemented or restated from time to
time, and the rights of Redemption referred to therein, (ii) surrenders such
Limited Partnership Units and all right, title and interest therein, and (iii)
directs that the cash (or, if applicable, REIT Shares) deliverable upon
redemption or exchange be delivered to the address specified below, and if
applicable, that such REIT Shares be registered or placed in the name(s) and at
the address(es) specified below.
Dated:
______________________________________
Name of Limited Partner:
______________________________________
(Signature of Limited Partner)
______________________________________
(Street Address)
______________________________________
(City) (State) (Zip Code)
Signature Guaranteed by:
______________________________________
Issue REIT Shares in the name of:
Please insert social security or identifying number:
Address (if different than above):
B-1
<PAGE>
EXHIBIT C
CONSTRUCTIVE OWNERSHIP DEFINITION
The term "Constructively Owns" means ownership determined through the
application of the constructive ownership rules of Section 318 of the Code, as
modified by Section 856(d)(5) of the Code. Generally, these rules provide the
following:
a. an individual is considered as owning the Ownership Interest that is
owned, actually or constructively, by or for his spouse, his children, his
grandchildren, and his parents;
b. an Ownership Interest that is owned, actually or constructively, by or
for a partnership or estate is considered as owned proportionately by its
partners or beneficiaries;
c. an Ownership Interest that is owned, actually or constructively, by or
for a trust is considered as owned by its beneficiaries in proportion to the
actuarial interest of such beneficiaries (provided, however, that in the case of
a "grantor trust" the Ownership Interest will be considered as owned by the
grantors);
d. if 10 percent or more in value of the stock in a corporation is owned,
actually or constructively, by or for any person, such person shall be
considered as owning the Ownership Interest that is owned, actually or
constructively, by or for such corporation in that proportion which the value of
the stock which such person so owns bears to the value of all the stock in such
corporation;
e. an Ownership Interest that is owned, actually or constructively, by or
for a partner of a partnership or a beneficiary of an estate or trust shall be
considered as owned by the partnership, estate, or trust (or, in the case of a
grantor trust, the grantors);
f. if 10 percent or more in value of the stock in a corporation is owned,
actually or constructively, by or for any person, such corporation shall be
considered as owning the Ownership Interest that is owned, actually or
constructively, by or for such person;
g. if any person has an option to acquire an Ownership Interest (including
an option to acquire an option or any one of a series of such options), such
Ownership Interest shall be considered as owned by such person;
h. an Ownership Interest that is constructively owned by a person by
reason of the application of the rules described in paragraphs (a) through (g)
above shall, for purposes of applying paragraphs (a) through (g), be considered
as actually owned by such person provided, however, that (i) an Ownership
Interest constructively owned by an individual by reason of paragraph (a) shall
not be considered as owned by him for purposes of again applying paragraph (a)
in order to make another the constructive owner of such Ownership Interest, (ii)
an Ownership Interest constructively owned by a partnership, estate, trust, or
corporation by reason of the application of paragraph (e) or (f) shall not be
considered as owned by it for purposes of
C-1
<PAGE>
applying paragraph (b), (c), or (d) in order to make another the constructive
owner of such Ownership Interest, (iii) if an Ownership Interest may be
considered as owned by an individual under paragraph (a) or (g), it shall be
considered as owned by him under paragraph (g), and (iv) for purposes of the
above-described rules, an S corporation shall be treated as a partnership and
any stockholder of the S corporation shall be treated as a partner of such
partnership except that this rule shall not apply for purposes of determining
whether stock in the S corporation is constructively owned by any person.
i. For purposes of the above summary of the constructive ownership rules,
the term "Ownership Interest" means the ownership of stock with respect to a
corporation and, with respect to any other type of entity, the ownership of an
interest in either its assets or net profits.
C-2
<PAGE>
EXHIBIT D
FORM OF PARTNERSHIP UNIT CERTIFICATE
CERTIFICATE FOR PARTNERSHIP UNITS OF
GROVE OPERATING LIMITED PARTNERSHIP
No._____________________ COMMON UNITS_________________________
Grove Real Estate Asset Trust, as the General Partner of Grove Operating,
L.P., a Delaware limited partnership (the "Operating Partnership"), hereby
certifies that ________ is a Limited Partner of the Operating Partnership whose
Partnership Interests therein, as set forth in the Agreement of Limited
Partnership of Grove Operating, L.P., dated as of ___________, 1997, as it may
be amended, supplemented or restated from time to time in accordance with its
terms (the "Partnership Agreement"), under which the Operating partnership is
existing (copies of which are on file at the Operating Partnership's office at
598 Asylum Avenue, Hartford, Connecticut 06105), represent _____ units of
limited partnership interest ("Partnership Units") in the Operating Partnership.
THE PARTNERSHIP UNITS REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY
NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION COMPLIES WITH THE PROVISIONS OF THE PARTNERSHIP AGREEMENT. THE
PARTNERSHIP UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). EXCEPT AS OTHERWISE PROVIDED
IN THE PARTNERSHIP AGREEMENT, NO TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION OF THE PARTNERSHIP UNITS REPRESENTED BY THIS
CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, OR (B) IF THE OPERATING PARTNERSHIP HAS BEEN FURNISHED
WITH A SATISFACTORY OPINION OF COUNSEL FOR THE HOLDER OF THE PARTNERSHIP UNITS
REPRESENTED BY THIS CERTIFICATE THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF
THE ACT AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER.
DATED:____________, 1996
GROVE REAL ESTATE ASSET TRUST,
General Partner of Grove Operating, L.P.
ATTEST:
By:__________________________ By:____________________________
D-1
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EXHIBIT E
SCHEDULE OF PARTNERS' OWNERSHIP
WITH RESPECT TO TENANTS
E-1
<PAGE>
EXHIBIT F
SCHEDULE OF REIT SHARES
ACTUALLY OR CONSTRUCTIVELY OWNED BY LIMITED PARTNERS
OTHER THAN THOSE ACQUIRED PURSUANT TO AN EXCHANGE
F-1
<PAGE>
EXHIBIT G
SCHEDULE OF CERTAIN PROPERTY OF THE PARTNERSHIP
Woodbridge Apartments
Fox Hill Commons
Colonial Village Apartments
G-1
