SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act
of 1934
Date of Report (Date of earliest event reported) October 17, 1996
--------------
GLENBOROUGH REALTY TRUST INCORPORATED
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 0-14162 94-3211970
- - ---------------- ---------- -------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) I.D. Number)
incorporation)
400 South El Camino Real, Ste. 1100, San Mateo, California 94402
-----------------------------------------------------------------
(Address of principal executive offices)
Registrant's Telephone number, including area code:(415) 343-9300
-------------
1 of 57
<PAGE>
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 17, 1996, the Company's Operating Partnership acquired a portfolio of
twelve properties (the "TRP Properties") located in six states. Included are six
industrial, three office, one retail and two multifamily properties comprising
1,250,000 square feet. The total purchase price was $41,300,000, which was
comprised of the cash payoff of $23,001,000 of mortgage debt, the assumption of
$16,300,000 of mortgage debt, issuance of 52,386 Operating Partnership Units
having an initial redemption value of $760,000 (based on a $14.50 per unit
value) and issuance of 85,448 shares of the Company's common stock having an
initial redemption value of $1,239,000 (based on a $14.50 per share value). The
acquisition was financed in part with proceeds from an October 1996 common stock
offering by the Company. This transaction was structured as a contribution of
the twelve properties and the mortgage debt on such properties by Trust Realty
Partners ("TRP") to the Operating Partnership in exchange for the above noted
Operating Partnership units and Company common stock shares. In addition, Trust
Realty Advisors ("TRA"), the then manager of the TRP Properties, transferred to
the Company all of TRA's rights, title and interest in and to the Management
Agreement and the Leasing Agreement for the TRP Properties in exchange for
96,552 shares of the Company's common stock having an initial redemption value
of $1,400,000 (based on a $14.50 per share value).
2 of 57
<PAGE>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a)&(b) FINANCIAL STATEMENTS
As of the date of filing of this Current Report
on Form 8-K, it is impracticable for the Company
to provide the financial statements required by
Item 7 (a) & (b) of Form 8-K. In accordance with
Item 7(a)(4) of Form 8-K, the Company will by
amendment to this Form 8-K no later than 60 days
after November 1, 1996, file such financial
statements.
(c) EXHIBITS
Contribution agreement related to the
acquisition of the TRP Properties. (*)
Second Amended and Restated Agreement of Limited
Partnership of Glenborough Properties, L.P.
(*) To be filed with amendment to this Form 8-K not later than 60 days after
the date on which this Current Report on Form 8-K is filed herewith.
3 of 57
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
GLENBOROUGH REALTY TRUST INCORPORATED
By: Glenborough Realty Trust Incorporated,
Date:October 31, 1996 /s/ Andrew Batinovich
---------------------
Andrew Batinovich
Director, Executive Vice President,
Chief Operating Officer
and Chief Financial Officer
(Principal Financial Officer)
Date:October 31, 1996 /s/ Terri Garnick
-----------------
Terri Garnick
Senior Vice President,
Chief Accounting Officer,
Treasurer
(Principal Accounting Officer)
4 of 57
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
3.1 Second Amended and Restated Agreement of
Limited Partnership of Glenborough
Properties, L.P.
5 of 57
<PAGE>
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
GLENBOROUGH PROPERTIES, L.P.
THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP,
dated as of October 17, 1996, is entered into by and among Glenborough Realty
Trust Incorporated ("Glenborough"), a Maryland corporation, as the General
Partner, Robert Batinovich, as the initial limited partner in the Partnership
(the "Initial Limited Partner"), and the Persons whose names are set forth on
Exhibit A as attached hereto, as the Limited Partners, together with any other
Persons who become Partners in the Partnership as provided herein.
WHEREAS, the General Partner and the Initial Limited Partner executed
that certain Limited Partnership Agreement of Glenborough Properties, L.P. (the
"Original Agreement"), dated as of August 23, 1995, and the General Partner
caused the Partnership to file a Certificate of Limited Partnership on August
23, 1995, thereby causing the Partnership to be formed for the purposes set
forth in the Prior Agreement; and
WHEREAS, the Original Agreement was (i) amended and restated by that
certain First Amended and Restated Agreement of Limited Partnership of
Glenborough Properties, L.P., dated as of December 31, 1995, and (ii) further
amended by that certain Amendment to First Amended and Restated Agreement of
Limited Partnership of Glenborough Properties, L.P., dated as of July 12, 1996,
and (iii) further amended by that certain Second Amendment to First Amended and
Restated Agreement of Limited Partnership of Glenborough Properties, L.P., dated
as of September 24, 1996, and (iv) further amended by that certain Third
Amendment to First Amended and Restated Agreement of Limited Partnership of
Glenborough Properties, L.P., dated as of October 8, 1996 (as so amended, the
"Prior Agreement"); and
WHEREAS, certain properties have been contributed to the Partnership
pursuant to that certain Contribution Agreement dated as of August 23, 1996 by
and among the Partnership, Trust Realty Partners, a California general
partnership and Trust Realty Advisors, a California corporation, pursuant to
which the Partnership agreed to issue additional Partnership Units in
consideration of the contribution of such properties; and
WHEREAS, the General Partner and the Limited Partners desire to amend
and restate the Prior Agreement to alter, modify, and amend certain provisions
of the Prior Agreement in accordance with the agreement of the General Partner
and the Limited Partners as hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree to
amend and restate the Prior Agreement in its entirety as follows:
ARTICLE 1 DEFINED TERMS
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Acquisition Notes" mean evidences of indebtedness issued by the
Partnership to the REIT in connection with the transfer of property to the
Partnership by the REIT which was acquired by the REIT in
6 of 57
<PAGE>
a transaction which involved the issuance of both REIT Shares and REIT Notes.
The Acquisition Notes issued in connection with any such transfer of property
shall be issued and shall be payable on the same terms and conditions as the
REIT Notes that are issued in connection with the acquisition of the property
that is so transferred.
"Act" means the California Revised Limited Partnership Act, California
Corporations Code Sections 15611-15723, as the same may be amended from time to
time, and any successor to such statute.
"Additional Limited Partner" means a Person admitted to the Partnership
as a Limited Partner pursuant to Section 4.2 hereof and who is shown as such on
the books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for
each Partner as of the end of each Partnership Year (i) increased by any amounts
which such Partner is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to the penultimate
sentences of Regulations Section 1.704-2(g)(1) and 1.704-2(i)(5) and (ii)
decreased by the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4),
1.704-l(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6). The foregoing definition
of Adjusted Capital Account is intended to comply with the provisions of
Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
"Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Adjusted Capital Account as of
the end of the relevant Partnership Year.
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Exhibit B hereof. Once an Adjusted Property is deemed
distributed by, and recontributed to, the Partnership for federal income tax
purposes upon a termination thereof pursuant to Section 708 of the Code, such
property shall thereafter constitute a Contributed Property until the Carrying
Value of such property is further adjusted pursuant to Exhibit B hereof.
"Affiliate" means, with respect to any Person, (i) any Person directly
or indirectly controlling, controlled by or under common control with such
Person, (ii) any Person owning or controlling ten percent (10%) or more of the
outstanding voting interests of such Person, (iii) any Person of which such
Person owns or controls ten percent (10%) or more of the voting interests, or
(iv) any officer, director, general partner or trustee of such Person or of any
Person referred to in clauses (i), (ii), and (iii) above. For the purposes of
this definition, "control" when used with respect to any Person, means the power
to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreed Value" means (i) in the case of any Contributed Property set
forth in Exhibit D and as of the time of its contribution to the Partnership,
the Agreed Value of such property as set forth in Exhibit D; (ii) in the case of
any Contributed Property not set forth in Exhibit D and as of the time of its
contribution to the Partnership, the 704(c) Value of such property, 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 Partnership's Carrying
Value of such property at the time such property is distributed, reduced by any
indebtedness either assumed by such Partner upon such distribution or to which
such property is subject at the time of distribution as determined under Section
752 of the Code and the Regulations thereunder.
7 of 57
<PAGE>
"Agreement" means this First Amended and Restated Agreement of Limited
Partnership, as it may be amended, supplemented or restated from time to time.
"Articles of Incorporation" means the Articles of Incorporation of the
General Partner filed in the State of Maryland on August 26, 1994, as amended or
restated from time to time.
"Asset Management Fee" shall mean 1% of the Fair Market Value of the
assets of the Partnership which shall accrue annually and shall be payable
quarterly for services customarily performed by an asset management firm for an
unrelated property owner.
"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 (without regard to adjustments resulting from allocations described
in Section 1.A through 1.E of Exhibit C);
(b) Depreciation and all other noncash charges deducted in determin-
ing Net Income or Net Loss for such period;
(c) the amount of any reduction in the 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 proceeds from the sale, exchange, disposition, or
refinancing of Partnership property for such period over the gain recognized
from 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 except
Capital Contributions;
(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 made by the Partnership (including loans
made thereto) to the extent that such investments are not otherwise described in
clause (ii)(a) or (ii)(b);
(d) all other expenditures and payments not deducted in determining
Net Income or Net Loss for such period;
(e) any amount included in determining Net Income or Net Loss for such
period that was not received by the Partnership during such period;
8 of 57
<PAGE>
(f) the amount of any increase in reserves during such period which the
General Partner determines to be 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.
"Book-Tax Disparities" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all of
its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Exhibit B and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"Capital Account" means the Capital Account maintained for a Partner
pursuant to Exhibit B hereof.
"Capital Contribution" means, with respect to any Partner, any cash,
cash equivalents or the Agreed Value of Contributed Property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Section
4.1, 4.2, or 4.3 hereof.
"Carrying Value" means (i) with respect to a Contributed Property or
Adjusted Property, the 704(c) Value of such property, reduced (but not below
zero) by all Depreciation with respect to such Property charged to the Partners'
Capital Accounts following the contribution of or adjustment with respect to
such Property, and (ii) with respect to any other Partnership property, the
adjusted basis of such property for federal income tax purposes, all as of the
time of determination. The Carrying Value of any property shall be adjusted from
time to time in accordance with Exhibit B hereof, and to reflect changes,
additions or other adjustments to the Carrying Value for dispositions and
acquisitions of Partnership properties, as deemed appropriate by the General
Partner.
"Cash Amount" means (i) in connection with the redemption of Class A
Partnership Units, an amount of cash per Partnership Unit equal to the Value on
the Valuation Date of the REIT Shares Amount; and (ii) in connection with the
redemption of Class B Partnership Units, an amount of cash per Class B
Partnership Unit equal to the Value on the Valuation Date of one (1) REIT Share,
adjusted for (x) dividends or distributions paid in the form of REIT Shares to
holders of REIT Shares, and (y) any subdivisions, combinations or
reclassifications of Class B Partnership Units or REIT Shares occurring after
the date such Class B Partnership Units were issued.
"Certificate" means the Certificate of Limited Partnership relating to
the Partnership filed in the office of the California Secretary of State, as
amended from time to time in accordance with the terms hereof and the Act.
"Class A Limited Partner" means a Person admitted to the Partnership as
a Limited Partner with respect to a Class A Limited Partner Interest.
9 of 57
<PAGE>
"Class A Limited Partner Interest" means a Limited Partner Interest
that is designated for purposes of this Agreement as a Class A Limited Partner
Interest.
"Class A Partnership Unit" means a Partnership Unit representing the
beneficial ownership of a corresponding Class A Limited Partner Interest.
"Class B Limited Partner" means a Person admitted to the Partnership as
a Limited Partner with respect to a Class B Limited Partner Interest.
"Class B Limited Partner Interest" means a Limited Partner Interest
that is designated for purposes of this Agreement as a Class B Limited Partner
Interest.
"Class B Partnership Unit" means a Partnership Unit representing the
beneficial ownership of a corresponding Class B Limited Partner Interest.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provision of future
law.
"Consent" means the consent or approval of a proposed action by a
Partner given in accordance with Section 14.2 hereof.
"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 (and also excluding deemed contributions to the
Partnership on termination and reconstitution thereof pursuant to Section 708 of
the Code). Once the Carrying Value of a Contributed Property is adjusted
pursuant to Exhibit B hereof, such property shall no longer constitute a
Contributed Property for purposes of Exhibit B hereof, but shall be deemed an
Adjusted Property for such purposes.
"Debt" means, as to any Person, as of any date of determination, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services; (ii) all amounts owed by such Person to banks or
other Persons in respect of reimbursement obligations under letters of credit,
surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person; (iii) all indebtedness for borrowed
money or for the deferred purchase price of property or services secured by any
lien on any property owned by such Person, to the extent attributable to such
Person's interest in such property, even though such Person has not assumed or
become liable for the payment thereof; and (iv) lease obligations of such Person
which, in accordance with generally accepted accounting principles, should be
capitalized.
"Depreciation" means, for each fiscal year, an amount equal to the
federal income tax depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year, except that if the Carrying
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the General Partner.
10 of 57
<PAGE>
"Effective Date" means the date of closing of the initial offering of
shares of the General Partner, as described in that certain Registration
Statement initially filed by the General Partner with the Securities and
Exchange Commission on or about September 1, 1994, as amended, which was
declared effective on October 26, 1995.
"Fair Market Value" means the value placed on one or more of the assets
of the Partnership by such method as may be approved by a committee of not less
than three members of the board of directors of the General Partner, all of the
members of which committee satisfy the qualifications for an "independent
director" under the rules of the New York Stock Exchange.
"Fair Market Value of a Partnership Unit" means the value of a
Partnership Unit as of the Valuation Date, which value shall be determined as
follows:
(a) Reference shall be made to the balance sheet of the Partnership
included in the consolidating balance sheet for the latest filing by the General
Partner with the Securities and Exchange Commission on Form 10-K or Form 10-Q.
(b) In lieu of the book value for any real property or interest in real
property or any mortgage secured by real property that is reflected on such
balance sheet, there shall be substituted the Fair Market Value.
(c) Using the above criteria and adjustments, the partners' equity of
the Partnership shall be determined.
(d) The partners' equity shall then be divided by the total number of
Partnership Units then outstanding and the quotient shall be the Fair Market
Value of a Partnership Unit.
"General Partner" means Glenborough Realty Trust Incorporated or its
successors as general partner of the Partnership.
"General Partner Interest" means a Partnership Interest held by the
General Partner that is a general partnership interest. A General Partner
Interest may be expressed as a number of Partnership Units.
"IRS" means the Internal Revenue Service, which administers the
internal revenue laws of the United States.
"Immediate Family" means, with respect to any natural Person, such
natural Person's spouse and such natural Person's natural or adoptive parents,
descendants, nephews, nieces, brothers, and sisters.
"Incapacity" or "Incapacitated" means (i) as to any individual Partner,
death, total physical disability or entry by a court of competent jurisdiction
adjudicating him incompetent to manage his Person or his 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
11 of 57
<PAGE>
under any bankruptcy, insolvency or similar lawnow 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 of or against
such Partner under any bankruptcy, insolvency or other similar law now or
hereafter in effect has not been dismissed within one hundred twenty (120) days
after the commencement thereof, (g) the appointment without the Partner's
consent or acquiescence of a trustee, receiver or liquidator has not been
vacated or stayed within ninety (90) days of such appointment, or (h) an
appointment referred to in clause (g) which has been stayed is not vacated
within ninety (90) days after the expiration of any such stay.
"Indemnitee" means (i) any Person made a party to a proceeding by
reason of his status as (A) the General Partner or (B) a director or officer of
the Partnership or the General Partner, or (C) his or its liability, pursuant to
a loan guarantee 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
assets subject to), and (ii) such other Persons (including Affiliates of the
General Partner or the Partnership) as the General Partner may designate from
time to time (whether before or after the event giving rise to potential
liability), in its sole and absolute discretion.
"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 Partner Interest" means a Partnership Interest of a Limited
Partner in the Partnership representing a fractional part of the Partnership
Interests of all Partners and includes any and all benefits to which the holder
of such a Partnership Interest may be entitled as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement. A Limited Partner Interest may be expressed as a
number of Partnership Units.
"Liquidator" has the meaning set forth in Section 13.2.
"Net Income" means, for any taxable period, the excess, if any, of the
Partnership's items of income and gain for such taxable period over the
Partnership's items of loss and deduction for such taxable period. The items
included in the calculation of Net Income shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit B.
"Net Loss" means, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction for such taxable period over the
Partnership's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit B.
"Nonrecourse Built-in Gain" means, with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or negative
pledge securing a Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Partners pursuant to Section 2.B of Exhibit C if such
properties were disposed of in a taxable transaction in full satisfaction of
such liabilities and for no other consideration.
12 of 57
<PAGE>
"Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(b) (1), and the amount of Nonrecourse Deductions for a
Partnership Year shall be determined in accordance with the rules of Regulations
Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations
Section 1.752-l(a) (2).
"Notice of Redemption" means the Notice of Redemption substantially in
the form of Exhibit E 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" has the meaning set forth in Regulations
Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership Year
shall be determined in accordance with the rules of Regulations Section
1.704-2(i)(2).
"Partnership" means the limited partnership formed under the Act and
pursuant to the Prior Agreement as amended and restated pursuant to this
Agreement, and any successor thereto.
"Partnership Interest" means an ownership interest in the Partnership
representing a Capital Contribution by either a Limited Partner or the General
Partner and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement. A Partnership Interest may be expressed as a number of
Partnership Units.
"Partnership Minimum Gain" has the meaning set forth in Regulations
Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as
any net increase or decrease in partnership Minimum Gain, for a Partnership 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 shareholders of some or all of its
portion of such distribution.
"Partnership Unit" means a fractional, undivided share of the
Partnership Interests of all Partners issued pursuant to Section 4.1 or 4.2. The
ownership of Partnership Units may be evidenced by such form of certificate for
units, if any, as the General Partner may adopt from time to time.
"Partnership Year" means the fiscal year of the Partnership, which
shall be the calendar year.
"Percentage Interest" means, as to a Partner, its interest in the
Partnership as determined by dividing the Partnership Units owned by such
Partner by the total number of Partnership Units then outstanding and as
specified in Exhibit A attached hereto, as such Exhibit may be amended from time
to time.
13 of 57
<PAGE>
"Person" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other entity.
"Prior Agreement" means the Limited Partnership Agreement of
Glenborough Properties, L.P. dated as of August 23, 1995, between Glenborough
Realty Trust, Inc., as the sole general partner, and Robert Batinovich, as the
sole limited partner, which Prior Agreement is amended and restated in its
entirety by this Agreement as of the Effective Date.
"Property Management Fee" shall mean the property management fees
payable by the partnerships or other entities which directly or indirectly
contribute properties to the Partnership with respect to properties that are so
contributed immediately prior to the date such properties are so contributed for
services customarily performed by a property management firm for an unrelated
property owner.
"Prospectus" shall mean the Prospectus\Consent Solicitation Statement
included in the Registration Statement, as amended, that was initially filed by
the General Partner with the Securities and Exchange Commission on or about
September 1, 1994, and which was declared effective on October 26, 1995.
"Recapture Income" means any gain recognized by the Partnership upon
the disposition of any property or asset of the Partnership, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
"Redeeming Partner" has the meaning set forth in Section 8.6 hereof.
"Redemption Right" shall have the meaning set forth in Section 8.6
hereof.
"Regulations" means the Income Tax Regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"REIT" means a real estate investment trust under Section 856 of the
Code.
"REIT Notes" shall mean indebtedness of the General Partner issued as
part of the consideration for the acquisition of property that will be
transferred to the Partnership and which will become, in part, Contributed
Property, wherein REIT Shares also represent part of the consideration for such
acquisition.
"REIT Share" shall mean a share of common stock of the General Partner.
"REIT Shares Amount" shall mean (i) in connection with the redemption
of Class A Partnership Units, the whole number of REIT Shares equal to the
quotient obtained by first multiplying the number of Class A Partnership Units
offered for redemption by a Redeeming Partner by the Fair Market Value of a
Partnership Unit and then dividing the resulting product by the Value on the
Valuation Date; and (ii) in connection with the Redemption of Class B
Partnership Units, a number of REIT Shares equal to the number of Class B
Partnership Units offered for redemption by a Redeeming Partner, adjusted for
(x) dividends or distributions paid in the form of REIT Shares to holders of
REIT Shares, and (y) any subdivisions, combinations or reclassifications of
Class B Partnership Units or REIT Shares occurring after the date such Class B
Partnership Units were issued.
"Residual Gain" or "Residual Loss" means any item of gain or loss, as
the case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of Contributed Property or
Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 2.B.l(a) or 2.B.2(a) of Exhibit C to eliminate Book-Tax
Disparities.
14 of 57
<PAGE>
"704(c) Value" of any Contributed Property means the value of such
property as set forth in Exhibit D or if no value is set forth in Exhibit D, the
fair market value of such property or other consideration at the time of
contribution as determined by the General Partner using such reasonable method
of valuation as it may adopt; provided, however, that the 704(c) Value of any
property deemed contributed to the Partnership for federal income tax purposes
upon termination and reconstitution thereof pursuant to Section 708 of the Code
shall be determined in accordance with Exhibit B hereof. Subject to Exhibit B
hereof, the General Partner shall, in its sole and absolute discretion, use such
method as it deems reasonable and appropriate to allocate the aggregate of the
704(c) Values of Contributed Properties in a single or integrated transaction
among the separate properties on a basis proportional to their respective fair
market values.
"Shares-in-Trust" shall have the meaning ascribed thereto in the
Articles of Incorporation.
"Specified Redemption Date" means the tenth (10th) Business Day after
receipt by the General Partner of a Notice of Redemption; provided that no
Specified Redemption Date shall occur before one (1) year from the date of this
Agreement; provided further that if the General Partner combines its outstanding
REIT Shares, no Specified Redemption Date shall occur after the record date and
prior to the effective date of such combination.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, 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.
"Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership Pursuant to Section 11.4.
"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.
"Unrealized Gain" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (i) the fair
market value of such property (as determined under Exhibit B hereof) as of such
date, over (ii) the Carrying Value of such property (prior to any adjustment to
be made pursuant to Exhibit B hereof) as of such date.
"Unrealized Loss" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (i) the Carrying
Value of such property (prior to any adjustment to be made pursuant to Exhibit B
hereof) as of such date, over (ii) the fair market value of such property (as
determined under Exhibit B hereof) as of such date.
"Valuation Date" means the date of receipt by the General Partner of a
Notice of Redemption or, if such date is not a Business Day, the first Business
Day thereafter.
"Value" means, with respect to a REIT Share, the average of the daily
market price for the ten (10) consecutive trading days immediately preceding the
Valuation Date. The market price for each such trading day shall be: (i) if the
REIT Shares are listed or admitted to trading on any securities exchange or the
NASDAQ-National Market System, the closing price, regular way, on such day, or
if no such sale takes place on such day, the average of the closing bid and
asked prices on such day; (ii) if the REIT Shares are not listed or admitted to
trading on any securities exchange or the NASDAQ National Market System, the
last reported sale price on such day or, if no sale takes place on such day, the
average of the closing bid and
15 of 57
<PAGE>
asked prices on such day, as reported by a reliable quotation source designated
by the General Partner; or (iii) if the REIT Shares are not listed or admitted
to trading on any securities exchange or the NASDAQ-National Market System and
no such last reported sale price or closing bid and asked prices are available,
the average of the reported high bid and low asked prices on such day, as
reported by a reliable quotation source designated by the General Partner, or if
there shall be no bid and asked prices on such day, the average of the high bid
and low asked prices, as so reported, on the most recent day (not more than ten
(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 ten (10)
days prior to the date in question, the Value of the REIT 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 includes rights that a holder
of REIT Shares would be entitled to receive, and the General Partner acting in
good faith determines that the value of such rights is not reflected in the
Value of the REIT Shares determined as aforesaid, then the 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.
ARTICLE 2 ORGANIZATIONAL MATTERS
ORGANIZATIONAL MATTERS
Section 2.1 Organization
The Partnership is a limited partnership organized pursuant to the
provisions of the Act and upon the terms and conditions set forth in the Prior
Agreement. The Partners hereby continue the Partnership and amend and restate
the Prior Agreement in its entirety as of the Effective Date. Except as
expressly provided herein to the contrary, the rights and obligations of the
Partners and the administration and termination of the Partnership shall be
governed by the Act. The Partnership Interest of each Partner shall be personal
property for all purposes.
Section 2.2 Name
The name of the Partnership shall be Glenborough Properties, 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 Principal Office and Agent
The principal office of the Partnership shall be 400 South El Camino
Real, 11th Floor, San Mateo, California 94402-1708, or such other place as the
General Partner may from time to time designate by notice to the Limited
Partners. The Partnership may maintain offices at such other place or places
within or outside the State of Delaware as the General Partner deems advisable.
The Partnership hereby appoints Robert Batinovich, whose address is 400 South El
Camino Real, San Mateo, California 94402-1708, as its agent for service of
process. Such agent may be changed from time to time by the General Partner in
its sole discretion by filing an amendment to the Certificate.
16 of 57
<PAGE>
Section 2.4 Power of Attorney
A. Each Limited Partner and each Assignee who accepts Units (or any
rights, benefits or privileges associated therewith) is deemed to irrevocably
constitute and appoint the General Partner, any Liquidator, and authorized
officers and attorneys-in-fact of each, and each of those acting singly, in each
case with full power of substitution, as its true and lawful agent and
attorney-in-fact, with full power and authority in its name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and record in
the appropriate public offices (a) all certificates, documents
and other instruments (including, without limitation, this
Agreement and the Certificate and all amendments or
restatements thereof) that the General Partner or 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 California
and in all other jurisdictions in which the Partnership may or
plans to conduct business or own property; (b) all instruments
that the General Partner or the 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 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 Capital Contribution of any Partner;
and (e) all certificates, documents and other instruments
relating to the determination of the rights, preferences and
privileges of Partnership Interests; and
(2) execute, swear to, seal, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other
instruments appropriate or necessary, in the sole and absolute
discretion of the General Partner or any Liquidator, to make,
evidence, give, confirm or ratify any vote, consent, approval,
agreement or other action which is made or given by the
Partners hereunder or is consistent with the terms of this
Agreement or appropriate or necessary, in the sole discretion
of the General Partner or any Liquidator, to effectuate the
terms or intent of this Agreement.
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. Each Limited Partner or Assignee shall execute and deliver to the
17 of 57
<PAGE>
General Partner or the Liquidator, within fifteen (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 August 23, 1995, the date the
Certificate was filed in the office of the Secretary of State of California in
accordance with the Act and shall continue until December 31, 2095, unless, the
Partnership is dissolved sooner pursuant to the provisions of Article 13 or as
otherwise provided by law.
ARTICLE 3 PURPOSE
PURPOSE
Section 3.1 Purpose and Business
The purpose and nature of the business to be conducted by the
Partnership is (i) to conduct any business that may be lawfully conducted by a
limited partnership organized pursuant to the Act, provided, however, that such
business shall be limited to and conducted in such a manner as to permit the
General Partner at all times to be classified as a REIT, unless the General
Partner ceases to qualify 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 interests in any entity engaged directly
or indirectly in any of the foregoing, and (iii) to do anything necessary or
incidental to the foregoing. In connection with the foregoing, and without
limiting the General Partner's right in its sole discretion to cease qualifying
as a REIT, the Partners acknowledge that the 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, provided that the Partnership
shall not take, or refrain from taking, any action which, in the judgment of the
General Partner, in its sole and absolute discretion, (i) could adversely affect
the ability of the General Partner to continue to qualify as a REIT, (ii) could
subject the General Partner to any additional taxes under Section 857 or Section
4981 of the Code, or (iii) could violate any law or regulation of any
governmental body or agency having jurisdiction over the General Partner or its
securities, unless such action (or inaction) shall have been specifically
consented to by the General Partner in writing.
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners
On the Effective Date, the Partners made Capital Contributions as set
forth in Exhibit A to the Original Agreement. To the extent the Partnership
acquires any property by the merger of any other Person into the Partnership,
Persons who receive Partnership Interests in exchange for their interests in the
Person
18 of 57
<PAGE>
merging into the Partnership shall become Partners, and shall be deemed to have
made Capital Contributions as provided in the applicable merger agreement, and
shall own Partnership Units in the amounts set forth for such Partner in Exhibit
A and shall have a Percentage Interest in the Partnership as set forth 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 redemptions,
the issuance of additional Partnership Units (pursuant to any merger or
otherwise), or similar events having an effect on a Partner's Percentage
Interest. The number of Partnership Units held by the General Partner equal to
one percent (1%) of all outstanding Partnership Units from time to time shall be
deemed to be the general partner Partnership Units and shall be the General
Partnership Interest. Except as provided in Sections 4.2 and 10.6, the Partners
shall have no obligation to make any additional Capital Contributions or loans
to the Partnership.
Section 4.2 Limited Partner Interests
A. Issuances of Additional Partnership Interests. 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 and to admit the Persons acquiring such Partnership
Units as Limited Partners in the Partnership. The General Partner shall have
sole and complete discretion in determining the consideration and terms and
conditions with respect to any future issuance of Partnership Units, including
the determination of any preferences and other rights that are applicable to
such additional Partnership Units in relation to the Partnership Units that may
then be outstanding (including the determination as to whether the holders of
such additional Partnership Units shall be extended the Redemption Right
provided for in Section 8.6.A.), subject to the provisions of California Law;
provided that no such additional Partnership Units shall be issued to the
General Partner unless each Partnership Unit is issued at the Fair Market Value
of the Partnership Unit.
B. Classes of Limited Partner Interests. The Partnership shall have
such classes of Limited Partner Interests as the General Partner may establish
pursuant to this Section 4.2.B and 4.2.C. As of the Date of this Agreement,
there shall be two classes of Limited Partner Interests: the Class A Limited
Partner Interests and the Class B Limited Partner Interests. All Limited Partner
Interests issued and outstanding on the date hereof and held by either GPA, Ltd.
or Robert Batinovich shall be reclassified as Class A Limited Partner Interests.
The General Partner, acting on behalf of the Partnership and subject to the
terms and conditions of this Agreement, may admit other classes of Limited
Partners, issue Limited Partner Interests for Class A and Class B Limited
Partner Interests and such other classes as may be established, and issue, or
cause the issuance of, Units with respect to Class A and Class B Limited Partner
Interests and such other classes. The Class A Limited Partner Interests (and
Class A Partnership Units corresponding thereto) and the Class B Limited Partner
Interests (and Class B Partnership Units corresponding thereto), shall be
identical except for the Redemption Rights that apply thereto, as set forth in
Section 8.6.
C. Issuance of Other Classes of Limited Partner Interests. The General
Partner is authorized to issue, on behalf of the Partnership, in connection with
a public offering, a private placement, or otherwise, such number of additional
Limited Partner Interests and corresponding Partnership Units either for
existing classes of Limited Partner Interests or for such additional classes of
Limited Partner Interests as the General Partner shall establish and to admit
such additional Limited Partners to such classes of Limited Partner, and to
establish such rights and obligations applicable to such Limited Partner
Interests, Partnership Units, and Limited Partners, as the General Partner, in
its reasonable discretion, shall decide; provided, however, that (i) no class of
Limited Partner Interests and corresponding Partnership Units shall be issued
with rights senior to those of either the Class A
19 of 57
<PAGE>
Limited Partner Interests and corresponding Partnership Units or the Class B
Limited Partner Interests and corresponding Partnership Units with respect to
distributions, allocations of profit and loss, liquidation or voting rights
without the vote or consent of the Class A and Class B Limited Partners and
Holders of Class A and Class B Partnership Units representing a majority of the
Class A and Class B Limited Partner Interests and Class A and Class B
Partnership Units then outstanding; and (ii) no such Limited Partner Interests
or Units shall be issued without a determination, in good faith, by the General
Partner that the Partnership is receiving or will receive cash, property and/or
services with a value equal to the fair market value of such Limited Partner
Interests or Units.
Section 4.3 No Preemptive Rights
No Person shall have any preemptive, preferential or other similar
right with respect to (i) additional Capital Contributions or loans to the
Partnership, or (ii) issuance or sale of any Partnership Units or other
Partnership Interests. No Limited Partner shall have any right under this
Agreement to lend funds to the Partnership or to make additional capital
contributions to the Partnership without the consent of the General Partner.
Section 4.4 No Interest; No Return
No Partner shall be entitled to interest on its Capital Contribution or
on such Partner's Capital Account. Except as provided herein or by law, no
Partner shall have any right to demand or receive the return of its Capital
Contribution from the Partnership.
ARTICLE 5
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions
The General Partner shall distribute at least quarterly an amount equal
to 100% of Available Cash generated by the Partnership during such quarter or
shorter period to the Partners who are Partners on the Partnership Record Date
with respect to such quarter or shorter period in accordance with their
respective Percentage Interests on such Partnership Record Date; provided that
in no event may a Partner receive a distribution of Available Cash with respect
to a Partnership Unit if such Partner is entitled to receive a distribution out
of such Available Cash with respect to a REIT Share for which such Partnership
Unit has been redeemed or exchanged. 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 distribute Available Cash to the
Limited Partners so as to preclude any such distribution or portion thereof from
being treated as part of a sale of property to the Partnership by a Limited
Partner under Section 707 of the Code or the Regulations thereunder; provided
that the General Partner and the Partnership shall not have liability to a
Limited Partner under any circumstances as a result of any distribution to a
Limited Partner being so treated.
Section 5.2 Amounts Withheld
All amounts withheld pursuant to the Code or any provisions of any
state or local tax law and Section 10.5 hereof with respect to any allocation,
payment or distribution to the General Partner, the Limited Partners or
Assignees shall be treated as amounts distributed to the General Partner,
Limited Partners, or Assignees pursuant to Section 5.1 for all purposes under
this Agreement.
20 of 57
<PAGE>
Section 5.3 Distributions Upon Liquidation
Proceeds from a Terminating Capital Transaction and any other cash
received or reductions in reserves made after commencement of the liquidation of
the Partnership, shall be distributed to the Partners in accordance with Section
13.2.
ARTICLE 6
ALLOCATIONS
Section 6.1 Allocations For Capital Account Purposes
Purposes
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Exhibit B hereof) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.
A. Net Income. Net Income shall be allocated (i) first, to the General
Partner to the extent that Net Losses previously allocated to the General
Partner pursuant to the last sentence of Section 6.1.B exceed Net Income
previously allocated to the General Partner pursuant to this clause (i) of
Section 6.1.A, and (ii) thereafter, Net Income shall be allocated to the
Partners in accordance with their respective Percentage Interests.
B. Net Losses. After giving effect to the special allocations set forth
in Section 1 of Exhibit C, Net Losses shall be allocated to the Partners in
accordance with their respective Percentage Interests; provided that Net Losses
shall not be allocated to any Limited Partner pursuant to this Section 6.1.B to
the extent that such allocation would cause such Limited Partner to have an
Adjusted Capital Account Deficit at the end of such taxable year (or increase
any existing Adjusted Capital Account Deficit). All Net Losses in excess of the
limitations set forth in this Section 6.1.B shall be allocated to the General
Partner.
C. For purposes of Regulations Section 1.752-3(a), the Partners agree
that Nonrecourse Liabilities of the Partnership in excess of the sum of (i) the
amount of Partnership Minimum Gain and (ii) the total amount of Nonrecourse
Built-in Gain shall be allocated among the Partners in accordance with their
respective Percentage Interests.
D. Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall to the extent possible, after taking
into account other required allocations of gain pursuant to Exhibit C, be
characterized as Recapture Income in the same proportions and to the same extent
as such Partners have been allocated any deductions directly or indirectly
giving rise to the treatment of such gains as Recapture Income.
ARTICLE 7
MANAGEMENT AND OPERATION OF BUSINESS
Section 7.1 Management
A. Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs the Partnership are and shall be
exclusively vested in the General Partner, and no Limited Partner shall have any
right to participate in or exercise control or management power over the
21 of 57
<PAGE>
business and affairs of the Partnership. The General Partner may not be removed
by the Limited Partners with or without cause. In addition to the powers now or
hereafter granted a general partner of a limited partnership under applicable
law or which are granted to the General Partner under any other provision of
this Agreement, the General Partner, subject to Section 7.3 hereof, shall have
full power and authority to do all things deemed necessary or desirable by it to
conduct the business of the Partnership, to exercise all powers set forth in
Section 3.2 hereof and to effectuate the purposes set forth in Section 3.1
hereof, including, without limitation:
(1) the making of any expenditures, the lending or borrowing of
money (including, without limitation, making prepayments on
loans and borrowing money to permit the Partnership to make
distributions to its Partners in such amounts as will permit
the General Partner (so long as the General Partner qualifies
as a REIT) to avoid the payment of any federal income tax
(including, for this purpose, any excise tax pursuant to
Section 4981 of the Code) and to make distributions to its
shareholders sufficient to permit the General Partner to
maintain REIT status), the assumption or guarantee of, or
other contracting for, indebtedness and other liabilities, the
issuance of evidences of indebtedness (including the securing
of same by deed to secure debt, mortgage, deed of trust or
other lien or encumbrance on the Partner ship'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
(including the exercise or grant of any conversion, option,
privilege, or subscription right or other right available in
connection with any assets at any time held by the
Partnership) or the merger or other combination of the
Partnership with or into another entity (all of the foregoing
subject to any prior approval only to the extent required by
Section 7.3 hereof);
(4) the use of the assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent with the
terms of this Agreement and on any terms it sees fit,
including, without limitation, the financing of the conduct of
the operations of the General Partner, the Partnership or any
of the Partnership's Subsidiaries, the lending of funds to
other Persons (including, without limitation, the
Partnership's Subsidiaries) and the repayment of obligations
of the Partnership and its Subsidiaries and any other Person
in which it has an equity investment and the making of capital
contributions to its Subsidiaries;
(5) the management, operation, leasing, landscaping, repair,
alteration, demolition or improvement of any real property
or improvements owned by the Partnership or any Subsidiary of
the Partnership;
(6) the negotiation, execution, and performance of any contracts,
conveyances or other instruments that the General Partner
considers useful or necessary to the conduct of the
Partnership's operations or the implementation of the General
Partner's powers under this Agreement, including contracting
with contractors, developers, consultants, accountants legal
counsel, other professional advisors and other agents and the
payment of their expenses and compensation out of the
Partnership's assets;
22 of 57
<PAGE>
(7) the distribution of Partnership cash or other Partnership
assets in accordance with this Agreement;
(8) holding, managing, investing and reinvesting cash and other
assets of the Partnership;
(9) the collection and receipt of revenues and income of
the Partnership;
(10) the establishment of one or more divisions of the Partnership,
the selection and dismissal of employees of the Partnership,
any division of the Partnership, or the General Partner
(including, without limitation, employees having titles such
as "president," "vice president," "secretary" and "treasurer"
of the Partnership, any division of the Partnership, or the
General Partner), and agents, outside attorneys, accountants,
consultants and contractors of the General Partner, the
Partnership or any division of the Partnership, and the
determination of their compensation and other terms of
employment or hiring;
(11) the maintenance of such insurance for the benefit of the
Partnership and the Partners as it deems necessary or approp-
riate;
(12) 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, its Subsidiaries and any other Person in which it has an
equity investment from time to time);
(13) the control of any matters affecting the rights and
obligations of the Partnership, including the settlement,
compromise, submission to arbitration or any other form of
dispute resolution, or abandonment of any claim, cause of
action, liability, debt or damages due or owing to or from the
Partnership, the commencement or defense of suits, legal
proceedings, administrative proceedings, arbitrations or other
forms of dispute resolution, and the representation of the
Partnership in all suits or legal proceedings, administrative
proceedings, arbitrations or other forms of dispute
resolution, the incurring of legal expense, and the
indemnification of any Person against liabilities and
contingencies to the extent permitted by law.
(14) the undertaking of any action in connection with the
Partnership's direct or indirect investment in its
Subsidiaries or any other Person (including, without
limitation, the contribution or loan of funds by the
Partnership to such Persons);
(15) the determination of the fair market value of any Partnership
property distributed in kind using such reasonable method of
valuation as it may adopt;
(16) the exercise, directly or indirectly through any
attorney-in-fact acting under a general or limited power of
attorney, of any right, including the right to vote,
appurtenant to any 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 other Person in
which the Partnership has a direct or indirect interest, or
jointly with any such Subsidiary or other Person;
23 of 57
<PAGE>
(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;
(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; and
(20) the issuance of REIT Shares to acquire Partnership Units held
by a Limited Partner in connection with a Limited Partner's
exercise of its Redemption Right under Section 8.6.
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 provision of this Agreement
(except as provided in Section 7.3), the Act or any applicable law, rule or
regulation, to the fullest extent permitted under the Act or other applicable
law. The execution, delivery or performance by the General Partner or the
Partnership of any agreement authorized 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 at
the expense of the Partnership, may or may not, 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 at any and all times working
capital accounts and other cash or similar balances in such amounts as the
General Partner, in its sole and absolute discretion, deems appropriate and
reasonable from time to time.
E. In exercising its authority under this Agreement, the General
Partner may, but shall be under no obligation to, take into account the tax
consequences to any Partner of any action taken by it. The General Partner and
the Partnership shall not have liability to a Limited Partner under any
circumstances as a result of an income tax liability incurred by such Limited
Partner as a result of an action (or inaction) by the General Partner pursuant
to its authority under this Agreement.
Section 7.2 Certificate of Limited Partnership
The General Partner has previously filed the Certificate with the
Secretary of State of California as required by the Act. 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 California and any other state, or the District of Columbia, in which the
Partnership may elect to do business or own property. To the extent that such
action is determined by the General Partner to be reasonable and necessary or
appropriate, the General Partner shall file amendments to and restatements of
the Certificate and do all the things to maintain the Partnership as a limited
partnership (or a partnership in which the limited partners have limited
liability) under the laws of the State of California
24 of 57
<PAGE>
and each other state or the District of Columbia, in which the Partnership may
elect to do business or own property. Subject to the terms of Section 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.
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 without the written Consent
of all of the Limited Partners (including Limited Partnership Interests held by
the General Partner) (or such lower percentage of the Limited Partners as may be
specifically provided for under a provision of this Agreement or the Act).
B. Except as provided in Article 13 hereof, the General Partner may not
sell, exchange, transfer or otherwise dispose of all or substantially all of the
Partnership's assets in a single transaction or a series of related transactions
(including by way of merger, consolidation or other combination with any other
Person) without the Consent of holders of a majority of the outstanding Limited
Partnership Units (including Limited Partnership Interests held by the General
Partner).
Section 7.4 Compensation and 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. 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 and operation
of, or for the benefit of, the Partnership; provided that the amount of any such
reimbursement shall be reduced by (i) any interest earned by the General Partner
with respect to bank accounts or other instruments or accounts held by it on
behalf of the Partnership as permitted in Section 7.5.A and (ii) any amount
derived by the General Partner from any Qualified REIT Subsidiaries (as defined
in Section 7.5.A) or Associated Company (as defined in the Prospectus). The
Limited Partners acknowledge that, for purposes of this Section 7.4.B, all of
the General Partner's expenses are deemed incurred for the benefit of the
Partnership. Such reimbursements shall be in addition to any reimbursement to
the General Partner as a result of indemnification pursuant to Section 7.7
hereof.
C. The General Partner shall also be reimbursed for all expenses it
incurs relating to the organization and/or reorganization of the Partnership and
the General Partner, the initial public offering of REIT Shares by the General
Partner, and any other issuance of additional Partnership Interests, REIT Shares
or rights, options, warrants, or convertible or exchangeable securities pursuant
to Section 4.2 hereof (including, without limitation, all costs, expenses,
damages, and other payments resulting from or arising in connection with
litigation related to any of the foregoing).
D. In the event that the General Partner shall elect to purchase from
its shareholders REIT Shares for the purpose of delivering such Shares to
satisfy an obligation under any dividend reinvestment program adopted by the
General Partner, any employee stock purchase plan adopted by the General
Partner, or any similar obligation or arrangement undertaken by the General
Partner in the future, the purchase price paid by the General Partner for such
REIT Shares and any other expenses incurred by the General Partner in connection
with such purchase, may be considered expenses of the Partnership and may be
reimbursed to the General Partner, subject to the condition that: (i) if such
REIT Shares subsequently are to be sold by the General Partner, the General
Partner shall pay to the Partnership any proceeds received by the General
25 of 57
<PAGE>
Partner for such REIT Shares (provided that a transfer of REIT Shares for Units
pursuant to Section 8.6 would not be considered a sale for such purposes); and
(ii) if such REIT Shares are not retransferred by the General Partner within
thirty days after the purchase thereof, the General Partner shall cause the
Partnership to cancel a number of Partnership Units (rounded to the nearest
whole Unit) held by the General Partner equal to the quotient obtained by
dividing the amount reimbursed to the General Partner by the Fair Market Value
of a Partnership Unit.
E. The General Partner shall perform property management and asset
management services for the Partnership and in consideration therefor, the
General Partner shall receive a Property Management Fee and an Asset Management
Fee and reimbursement for the cost of all on-site personnel employed by the
General Partner in the performance of such services, but shall not otherwise be
entitled to reimbursement for any expenses incurred in connection therewith.
Section 7.5 Outside Activities of the General Partner
In the event the General Partner exercises its rights under Article
Ninth of the Articles of Incorporation to redeem or otherwise acquire any
Shares-in-Trust, then the General Partner may cause the Partnership to purchase
from it that number of Partnership Units equal to the quotient obtained by
dividing the purchase price paid by the General Partner to acquire the
Shares-in-Trust by the Fair Market Value of a Partnership Unit.
Section 7.6 Contracts with Affiliates
A. The Partnership may lend or contribute funds or other assets to its
Subsidiaries or other Persons in which it has an equity investment, and such
Persons may borrow funds from the Partnership, on terms and conditions
established in the sole and absolute discretion of the General Partner. The
foregoing authority shall not create any right or benefit in favor of any
Subsidiary or any other Person.
B. Except as provided in Section 7.5.A, the Partnership may transfer
assets to joint ventures, other partnerships, corporations or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions consistent with this Agreement and applicable law as
the General Partner, in its sole and absolute discretion, believes are
advisable.
C. Except as expressly permitted by this Agreement, neither the General
Partner nor any of its Affiliates shall sell, transfer or convey any property
to, or purchase any property from, the Partnership, directly or indirectly,
except pursuant to transactions that are determined by the General Partner in
good faith to be fair and reasonable and no less favorable to the Partnership
than would be obtained from an unaffiliated third party.
D. 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, stock option plans, and similar 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.
E. 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
26 of 57
<PAGE>
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 7.7 Indemnification
A. The Partnership shall indemnify each Indemnitee from and against any
and all losses, claims, damages, liabilities, joint or several, expenses
(including, without limitation, attorneys fees and other legal fees and
expenses), judgments, fines, settlements, and other amounts arising from any and
all claims, demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, that relate to the operations of the
Partnership as set forth in this Agreement in which such Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, 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 (ii) 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 7.7 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 fourth in this
Section 7.7.A. The termination of any proceeding by conviction of an Indemnitee
or upon a plea of nolo contendere or its equivalent by an Indemnitee, or an
entry of an order of probation against an Indemnitee prior to judgment, creates
a rebuttable presumption that such Indemnitee acted in a manner contrary to that
specified in this Section 7.7.A with respect to the subject matter of such
proceeding. Any indemnification pursuant to this Section 7.7 shall be made only
out of the assets of the Partnership, and neither the General Partner nor any
Limited Partner shall have any obligation to contribute to the capital of the
Partnership or otherwise provide funds to enable the Partnership to fund its
obligations under this Section 7.7.
B. Reasonable expenses incurred by an Indemnitee who is a party to a
proceeding may be paid or reimbursed by the Partnership in advance of the final
disposition of the proceeding upon receipt by the Partnership of (i) a written
affirmation by the Indemnitee of the Indemnitee's good faith belief that the
standard of conduct necessary for indemnification by the Partnership as
authorized in this Section 7.7.A has been met, and (ii) a written undertaking by
or on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
C. The indemnification provided by this Section 7.7 shall be in
addition to any other rights to which an Indemnitee or any other Person may be
entitled under any agreement, pursuant to any vote of the Partners, as a matter
of law or otherwise, and shall continue as to an Indemnitee who has ceased to
serve in such capacity unless otherwise provided in a written agreement pursuant
to which such Indemnitee is indemnified.
D. The Partnership may, but shall not be obligated to, 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.
27 of 57
<PAGE>
E. For purposes of this Section 7.7, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership also imposes
duties on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute fines
within the meaning of Section 7.7; 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 any of the Partners to
personal liability by reason of the indemnification provisions set forth in this
Agreement.
G. An Indemnitee shall not be denied indemnification in whole or in
part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons. Any
amendment, modification or repeal of this Section 7.7 or any provision hereof
shall be prospective only and shall not in any way affect the limitations on the
Partnership's liability to any Indemnitee under this Section 7.7 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
Section 7.8 Liability of the General Partner
A. Notwithstanding anything to the contrary set forth in this
Agreement, the General Partner shall not be liable for monetary damages to the
Partnership, any Partners or any Assignees for losses sustained or liabilities
incurred as a result of errors in judgment or of any act or omission if the
General Partner acted in good faith.
B. The Limited Partners expressly acknowledge that the General Partner
is acting on behalf of the Partnership and the General Partner's shareholders
collectively, that the General Partner is under no obligation to consider the
separate interests of the Limited Partners (including, without limitation, the
tax consequences to Limited Partners or Assignees) in deciding whether to cause
the Partnership to take (or decline to take) any actions, and that the General
Partner shall not be liable to the Partnership or to any 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.
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 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the General Partner's liability to the Partnership and the
Limited Partners under this Section 7.8 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in
28 of 57
<PAGE>
whole or in part, prior to such amendment, modification or repeal, regardless of
when such claims may arise or be asserted.
Section 7.9 Other Matters Concerning the General Partner
A. The General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture, or other
paper or document believed by it in good faith to be genuine and to have been
signed or presented by the proper party or parties.
B. `The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, architects, engineers,
environmental consultants and other consultants and advisers selected by it, and
any act taken or omitted to be taken in reliance upon the opinion of such
Persons as to matters which such General Partner reasonably believes to be
within such Person's professional or expert competence shall be conclusively
presumed to have been done or omitted in good faith and in accordance with such
opinion.
C. The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers and a duly appointed attorney or attorneys-in-fact. Each such attorney
shall, to the extent provided by the General Partner in the power of attorney,
have full power and authority to do and perform all and every act and duty which
is permitted or required to be done by the General Partner hereunder.
D. Notwithstanding any other provisions of this Agreement or the Act,
any action of the General Partner on behalf of the Partnership or any decision
of the General Partner to refrain from acting on behalf of the Partnership,
undertaken in the good faith belief that such action or omission is necessary or
advisable in order (i) to protect the ability of the General Partner to continue
to qualify as a REIT or (ii) to allow the General Partner to avoid incurring
liability for 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.
Section 7.10 Title to Partnership Assets
Title to Partnership assets, whether real, personal or mixed and
whether tangible or intangible, shall be deemed to be owned by the Partnership
as an entity, and no Partner, individually or collectively, shall have any
ownership interest in such Partnership assets or any portion thereof. Title to
any or all of the Partnership assets may be held in the name of the Partnership,
the General Partner or one or more nominees, as the General Partner may
determine, including Affiliates of the General Partner. The General Partner
hereby declares and warrants that any Partnership assets for which legal title
is held in the name of the General Partner or any nominee or Affiliate of the
General Partner shall be held by the General Partner for the use and benefit of
the Partnership in accordance with the provisions of this Agreement; provided
however, that the General Partner shall use its 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 7.11 Reliance by Third Parties
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner has full power and authority, without consent
29 of 57
<PAGE>
or approval of any other Partner or Person, 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 take any and all actions on behalf
of the Partnership and such Person shall be entitled to deal with the General
Partner as if the General Partner were the Partnership's sole party in interest,
both legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies which may be available against such Person to
contest, negate or disaffirm any action of the General Partner in connection
with any such dealing. In no event shall any Person dealing with the General
Partner or its representatives be obligated to ascertain that the terms of this
Agreement have been complied with or to inquire into the necessity or expedience
of any act or action of the General Partner or its representatives. Each and
every certificate, document or other instrument executed on behalf of the
Partnership by the General Partner or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (i) at the time of the execution and delivery of such certificate, document
or instrument, this Agreement was in full force and effect, (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership and (iii)
such certificate, document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is binding upon
the Partnership.
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, including Section 10.5 hereof,
or under the Act. Notwithstanding anything contained herein to the contrary, the
liability of Limited Partners shall be limited to the aggregate amount of any
capital contributions made by the Limited Partners pursuant to this Agreement.
Except to the extent that additional capital contributions are unanimously
approved by the Partners, the Limited Partners shall have no personal liability
to contribute or lend money to, or in respect of, the liabilities and the
obligations of the Partnership.
Section 8.2 Management of Business
No Limited Partner or Assignee (other than the General Partner, any of
its Affiliates or any officer, director, employee, partner, agent or trustee of
the General Partner, the Partnership or any of their Affiliates, in their
capacity as such) shall take part in the operation, management or control
(within the meaning of the Act) of the Partnership's business, transact any
business in the Partnership's name or have the power to sign documents for or
otherwise bind the Partnership. The transaction of any such business by the
General Partner, any of its Affiliates or any officer, director, employee,
partner, agent or trustee of the General Partner, the Partnership or any of
their Affiliates, in their capacity as such, shall not affect, impair or
eliminate the limitations on the liability of the Limited Partners or Assignees
under this Agreement.
Section 8.3 Outside Activities of Limited Partners
Subject to any agreements entered into pursuant to Section 7.6.E hereof
and any other agreements entered into by a Limited Partner or its Affiliates
with the Partnership or a Subsidiary, any Limited Partner (other than the
General Partner) and any officer, director, employee, agent, trustee, Affiliate
or shareholder of any Limited Partner shall be entitled to and may have business
interests and engage in business activities in addition to those relating to the
Partnership, including business interests and activities that are in direct
competition with the Partnership or that are enhanced by the activities of the
Partnership. Neither the
30 of 57
<PAGE>
Partnership nor any Partners shall have any rights by virtue of this Agreement
in any business ventures of any Limited Partner or Assignee. None of the Limited
Partners (other than the General Partner) 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 General
Partner to the extent expressly provided herein) 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 Person.
Section 8.4 Return of Capital
Except pursuant to the right of redemption set forth in Section 8.6, no
Limited Partner shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent of distributions made pursuant to this
Agreement or upon termination of the Partnership as provided herein. Except to
the extent provided by Exhibit C hereof or as permitted by Section 4.2.B, or
otherwise expressly provided in this Agreement, no Limited Partner or Assignee
shall have priority over any other Limited Partner or Assignee either as to the
return of Capital Contributions or as to profits, losses or distributions.
Section 8.5 Rights of Limited Partners Relating to the Partnership
A. In addition to other rights provided by this Agreement or by the
Act, and except as limited by Section 8.5.C hereof, each Limited Partner shall
have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon written demand with a
statement of the purpose of such demand and at such Limited Partner's own
expense (including such copying and administrative charges as the General
Partner may establish from time to time):
(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 of
1934;
(2) to obtain a copy of the Partnership's federal, state and local
income tax returns for each Partnership Year;
(3) to obtain a current list of the name and last known business,
residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the Certificate and all
amendments thereto, together with executed copies of all
powers of attorney pursuant to which this Agreement, the
Certificate and all amendments thereto have been executed; and
(5) to obtain true and full information regarding the amount of
cash and a description and statement of any other property or
services contributed by each Partner and which each Partner
has agreed to contribute in the future, and the date on which
each became a Partner.
B. [Intentionally Omitted]
C. Notwithstanding any other provision of this Section 8.5, the General
Partner may keep confidential from the Limited Partners, for such period of time
as the General Partner determines in its sole and absolute discretion to be
reasonable, any information that (i) the General Partner reasonably believes to
be in the nature of trade secrets or other information the disclosure of which
the General Partner in good
31 of 57
<PAGE>
faith believes is not in the best interests of the Partnership or could damage
the Partnership or its business or (ii) the Partnership is required by law or by
agreements with an unaffiliated third party to keep confidential.
Section 8.6 Redemption Right
A. Subject to Section 8.6.C, on or after the date one (1) year after
the closing of the initial public offering of REIT Shares by the General
Partner, each Limited Partner, other than the General Partner, shall have the
right (the "Redemption Right") to require the Partnership to redeem on a
Specified Redemption Date all or a portion of the Partnership Units held by such
Limited Partner at a redemption price equal to and in the form of the Cash
Amount to be paid by the Partnership. The Redemption Right shall be exercised
pursuant to a Notice of Redemption delivered to the Partnership (with a copy to
the General Partner) by the Limited Partner who is exercising the redemption
right (the "Redeeming Partner"). A Limited Partner may not exercise the
Redemption Right for less than one thousand (1,000) Partnership Units or, if
such Limited Partner holds less than one thousand (1,000) Partnership Units, all
of the Partnership Units held by such Partner. Neither the Redeeming Partner nor
any Assignee of any Limited Partner shall have any right with respect to any
Partnership Units so redeemed to receive any distributions paid after the
Specified Redemption Date. The Assignee of any Limited Partner may exercise the
rights of such Limited Partner pursuant to this Section 8.6, and such Limited
Partner shall be deemed to have assigned such rights to such Assignee and shall
be bound by the exercise of such rights by such Limited Partner's Assignee. In
connection with any exercise of such rights by such Assignee on behalf of such
Limited Partner, the Cash Amount shall be paid by the Partnership directly to
such Assignee and not to such Limited Partner. Neither the Redeeming Partner nor
any Assignee of any Limited Partner shall have any right, with respect to any
Partnership Units so redeemed, to receive any distributions paid after the
Specified Redemption Date.
B. Notwithstanding the provisions of Section 8.6.A, in the event a
Limited Partner elects to exercise the Redemption Right, the General Partner
may, in its sole and absolute discretion, elect to assume directly and satisfy a
Redemption Right by paying to the Redeeming Partner either the Cash Amount or
the REIT Shares Amount, as elected by the General Partner (in its sole and
absolute discretion) on the Specified Redemption Date, whereupon the General
Partner shall acquire the Partnership Units offered for redemption by the
Redeeming Partner and shall be treated for all purposes of this Agreement as the
owner of such Partnership Units. Unless the General Partner (in its sole and
absolute discretion) shall exercise its right to assume directly and satisfy the
Redemption Right, the General Partner itself shall have no obligation to the
Redeeming Partner or to the Partnership with respect to the Redeeming Partner's
exercise of the Redemption Right. In the event the General Partner shall
exercise its right to satisfy the Redemption Right in the manner described in
the first sentence of this Section 8.6.B, the Partnership shall have no
obligation to pay any amount to the Redeeming Partner with respect to such
Redeeming Partner's exercise of the Redemption Right, and each of the Redeeming
Partner, the Partnership, and the General Partner shall treat the transaction
between the General Partner and the Redeeming Partner for federal income tax
purposes as a sale of the Redeeming Partner's Partnership Units to the General
Partner. Each Redeeming Partner agrees to execute such documents as the General
Partner may reasonably require in connection with the issuance of REIT Shares
upon exercise of the Redemption Right. If the Redemption Right is satisfied by
the delivery of REIT Shares, the Redeeming Partner shall be deemed to become a
holder of REIT Shares as of the close of business in Specified Redemption Date.
C. Notwithstanding the provisions of Section 8.6.A and Section 8.6.B, a
Partner shall not be entitled to exercise the Redemption Right pursuant to
Section 8.6.A if the delivery of REIT Shares to such Partner on the Specified
Redemption Date by the General Partner pursuant to Section 8.6.B (regardless of
whether or not the General Partner would in fact exercise its rights under
Section 8.6.B) would be prohibited under the Articles of Incorporation,
including, but not being limited to, the provisions applicable to the
32 of 57
<PAGE>
Existing Holder Limit applicable to Existing Holders and the Ownership Limit
applicable to all other holders of REIT Shares, as such terms are defined herein
or in the Articles of Incorporation.
D. Each Limited Partner covenants and agrees with the General Partner
that all Partnership Units delivered for redemption shall be delivered to the
Partnership or the General Partner, as the case may be, free and clear of all
Liens and, notwithstanding anything herein contained to the contrary, neither
the General Partner nor the Partnership shall be under any obligation to acquire
Partnership Units which are or may be subject to any Liens. 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 Partnership Units to the Partnership
or the General Partner, such Limited Partner shall assume and pay such transfer
tax.
E. Notwithstanding the provisions of Sections 8.6.A and 8.6.B above, a
Class A Limited Partner shall not be entitled to exercise the Redemption Rights
pursuant to this Section 8.6 with respect to Class A Partnership Units until on
or after January 1, 1997.
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 those records and documents required to be maintained
by the Act and other books and records deemed by the General Partner to be
appropriate with respect to the Partnership's business, including, without
limitation, all books and records necessary to provide to the Limited Partners
any information, lists and copies of documents required to be provided pursuant
to Section 9.3 hereof. Any records maintained by or on behalf of the Partnership
in the regular course of its business may be kept on, or be in the form of,
punch cards, magnetic tape, photographs, micrographics or any other information
storage device, provided that the records so maintained are convertible into
clearly legible written form within a reasonable period of time. The books of
the Partnership shall be maintained, for financial and tax reporting purposes,
on an accrual basis in accordance with generally accepted accounting principles,
or other such basis as the General Partner determines to be necessary or
appropriate.
Section 9.2 Fiscal Year
The fiscal year of the Partnership shall be the calendar year.
Section 9.3 Reports
A. As soon as practicable, but in no event later than one hundred five
(105) days after the close of each Partnership Year, the General Partner shall
cause to be mailed to each Limited Partner as of the close of the Partnership
Year, an annual report containing financial statements of the Partnership, or of
the General Partner if such statements are prepared solely on a consolidated
basis with the General Partner, for such Partnership Year, presented in
accordance with generally accepted accounting principles.
B. Limited Partners representing at least five percent (5%) of the
Percentage Interest of Limited Partners may make a written request to the
General Partner for an income statement of the Limited Partnership for the
initial three-month, six-month or nine-month period of the current fiscal year
ended more than thirty (30) days before to the date of the request, and a
balance sheet of the Partnership as of the end of
33 of 57
<PAGE>
that period. The statement shall be delivered or mailed to the Limited Partners
within thirty (30) days after the request.
C. The financial statements referred to in this Section 9.3 shall be
accompanied by a report, if any, from the independent accountant engaged by the
Partnership. If there is no report, the financial statements shall be
accompanied by the certificate of the General Partner stating that the financial
statements were prepared without audit from the books and records of the
Partnership.
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 Partnership income, gains, deductions, losses and other items
required of the Partnership for federal and state income tax purposes and shall
use all reasonable efforts to furnish, within ninety (90) days of the close of
each taxable year, the tax information reasonably required by Limited Partners
for federal and state income tax reporting purposes.
Section 10.2 Tax Elections
Except as otherwise provided herein, the General Partner shall, in its
sole and absolute discretion, determine whether to make any available election
pursuant to the Code; provided, however, that the General Partner shall make the
election under Section 754 of the Code in accordance with applicable regulations
thereunder effective for the first calendar year following the Effective Date.
The General Partner shall have the right to seek to revoke any such election
(including, without limitation, the 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 6230(e) of the
Code, upon receipt of notice from the IRS of the beginning of an administrative
proceeding with respect to the Partnership, the tax matters partner shall
furnish the IRS with the name, address, taxpayer identification number, and
profit interest of each of the Limited Partners and the Assignees; provided,
however, that such information is provided to the Partnership by the Limited
Partners and the Assignees.
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with respect to any
administrative or judicial proceedings for the adjustment of
Partnership items required to be taken into account by a
Partner for income tax purposes (such administrative
proceedings being referred to as a "tax audit" and such
judicial proceedings being referred to as "judicial review"),
and in the settlement agreement the tax matters partner may
expressly state that such agreement shall bind all Partners,
except that such settlement agreement shall not bind any
Partner (i) who (within the time prescribed pursuant to the
Code and Regulations) files a statement with the IRS providing
that the tax matters partner shall not have the authority to
enter into a settlement agreement on behalf of such Partner or
(ii) who is a "notice partner" (as defined
34 of 57
<PAGE>
in Section 6231(a)(8) of the Code) or a member of a "notice
group" (as defined in Section 6223(b)(2) of the Code);
(2) in the event that a notice of a final administrative
adjustment at the Partnership level of any item required to be
taken into account by a Partner for tax purposes (a "final
adjustment") is mailed to the tax matters partner, to seek
judicial review of such final adjustment, including the filing
of a petition for readjustment with the Tax Court or the
filing of a complaint for refund with the United States Claims
Court or the District Court of the United States for the
district in which the Partnership's principal place of
business is located;
(3) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the
IRS 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 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 and
expenses) shall be borne by the Partnership. Nothing herein shall be construed
to restrict the Partnership from engaging an accounting firm to assist the tax
matters partner in discharging its duties hereunder, so long as the compensation
paid by the Partnership for such services is reasonable.
Section 10.4 Organizational Expenses
The Partnership shall elect to deduct expenses, if any, incurred by it
in organizing the Partnership ratably over a sixty (60) month period as provided
in Section 709 of the Code.
Section 10.5 Withholding
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 fifteen (15)
35 of 57
<PAGE>
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. Without limitation, in such event the General Partner shall have the
right to receive distributions that would otherwise be distributable to such
defaulting Limited Partner until such time as such loan, together with all
interest thereon, has been paid in full, and any such distributions so received
by the General Partner shall be treated as having been distributed to the
defaulting Limited Partner and immediately paid by the defaulting Limited
Partner to the General Partner in repayment of such loan. Any amounts payable by
a Limited Partner hereunder shall bear interest at the lesser of (A) the base
rate on corporate loans at large United States money center commercial banks, as
published from time to time in the Wall Street Journal, plus four (4) percentage
points, or (B) the maximum lawful rate of interest on such obligation, such
interest to accrue from the date such amount is due (i.e., fifteen (15) days
after demand) until such amount is paid in full. Each Limited Partner shall take
such actions as the Partnership or the General Partner shall request in order to
perfect or enforce the security interest created hereunder.
ARTICLE 11
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer
A. The term "transfer, " when used in this Article 11 with respect to a
Partnership Unit, shall be deemed to refer to a transaction by which the General
Partner purports to assign all or any part of its General Partner Interest to
another Person or by which a Limited Partner purports to assign all or any part
of its Limited Partner Interest to another Person, and includes a sale,
assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any
other disposition by law or otherwise. The term "transfer" when used in this
Article 11 does not include any redemption of Partnership Units by a Limited
Partner or acquisition of Partnership Units from a Limited Partner by the
General Partner pursuant to Section 8.6.
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 may not transfer any of its General Partner
Interest or Limited Partner Interests or withdraw as General Partner except in
connection with a transaction permitted under this Section 11.2.
36 of 57
<PAGE>
B. Notwithstanding Section 11.2.D, the General Partner may effectuate a
recapitalization, reclassification or change of outstanding REIT Shares in the
form of (i) a change in par value, or (ii) a change from par value to no par
value, or (iii) as a result of a subdivision or combination of REIT Shares
resulting from (a) the declaration or payment of a dividend on outstanding REIT
Shares in REIT Shares; (b) a distribution to all holders of outstanding REIT
Shares in REIT Shares; (c) a subdivision of outstanding REIT Shares; or (d) the
combination of outstanding REIT Shares into a smaller number of REIT Shares).
C. Notwithstanding Section 11.2.D, the General Partner may merge with
another entity if immediately after such merger substantially all of the assets
of the surviving entity, other than Partnership Units held by the General
Partner (whether such Partnership Units constitute the General Partnership
Interest or a Limited Partnership Interest), are contributed to the Partnership
as a Capital Contribution in exchange for Partnership Units with a fair market
value, as reasonably determined by the General Partner, equal to the 704(c)
Value of the assets so contributed.
D. Except as otherwise permitted under Section 11.2.B or Section
11.2.C, the General Partner shall not engage in any merger, consolidation or
other combination with or into another Person or sale of all or substantially
all of its assets, or any reclassification, or recapitalization or change of
outstanding REIT Shares ("Transaction"), unless:
(i) the Transaction also includes a merger of the Partnership
or sale of substantially all of the assets of the Partnership which has been
approved by the requisite Consent of the Partners pursuant to Section 7.3 and as
a result of which all Limited Partners will receive for each Partnership Unit an
amount of cash, securities, or other property equal to the Fair Market Value of
a Partnership Unit (assuming that the Valuation Date was the date as of which
the exchange ratio or consideration was established in connection with such
merger or sale of assets); provided that if, in connection with the Transaction,
a purchase, tender or exchange offer shall have been made to and accepted by the
holders of more than fifty percent (50%) of the outstanding REIT Shares, each
holder of Partnership Units shall receive the greatest amount of cash,
securities, or other property which such holder would have received had it
exercised the Redemption Right 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; and
(ii) no more than forty-nine percent (49%) of the equity
securities of the acquiring Person in such transaction shall be owned, after
consummation of such Transaction, by the General Partner or Persons who are
Affiliates of the Partnership or the General Partner immediately prior to the
date on which the Transaction is consummated.
Section 11.3 Limited Partners' Rights to Transfer
A. Subject to the provisions of Section 11.3.F, no Limited Partner
shall have the right to transfer all or any portion of his Partnership Interest,
or any of such Limited Partner's rights as a Limited Partner, without the prior
written consent of the General Partner, which consent may be given or withheld
by the General Partner in its sole and absolute discretion. Any purported
transfer of a Partnership Interest by a Limited Partner in violation of this
Section 11.3.A shall be void ab initio and shall not be given effect for any
purpose by the Partnership.
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
37 of 57
<PAGE>
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 by a Limited Partner
of his Partnership Units otherwise permitted under Section 11.3.F if, in the
opinion of legal counsel to the Partnership, such transfer would require filing
of a registration statement under the Securities Act of 1933 or would otherwise
violate any federal, state or foreign securities laws or regulations applicable
to the Partnership or the Partnership Unit.
D. No transfer by a Limited Partner of his Partnership Units 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.
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 exchange or redeem 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 the purposes of allocating liabilities to such lender under Section 752 of
the Code.
F. Notwithstanding the provisions of Section 11.3.A (but subject to the
provisions of Section 11.3.C, 11.3.D, and 11.3.E), a Limited Partner may
transfer with or without the consent of the General Partner all or a portion of
his Partnership Unit to a member of his Immediate Family, any trust set up for
the benefit of members of his Immediate Family, or any partnership composed only
of members of his Immediate Family.
Section 11.4 Substituted Limited Partners
A. No Limited Partner shall have the right to substitute a transferee
as a Limited Partner in his place. The General Partner shall, however, have the
right to consent to the admission of a transferee of the interest of a Limited
Partner pursuant to this Section 11.4 as a Substituted Limited Partner, which
consent may be given or withheld by the General Partner in its sole and absolute
discretion. 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.
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 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.
38 of 57
<PAGE>
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
deemed to have had assigned to it, and shall be entitled to receive
distributions from the Partnership and the share of Net Income, Net Losses,
Recapture Income, and any other items of gain, loss, deduction and credit of the
Partnership attributable to the Partnership Units assigned to such transferee,
but shall not be deemed to be a holder of Partnership Units for any other
purpose under this Agreement, and shall not be entitled to vote such Partnership
Units in any matter presented to the Limited Partners for a vote (such
Partnership Units being deemed to have been voted on such matter in the same
proportion as all other Partnership Units held by Limited Partners are voted).
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 a permitted transfer of all of such Limited Partner's Partnership
Units in accordance with this Article 11 or pursuant to redemption of all of its
Partnership Units under Section 8.6.
B. Any Limited Partner who shall transfer all of his Partnership Units
in a transfer permitted pursuant to this Article 11 shall cease to be a Limited
Partner upon the admission of all Assignees of such Partnership Units as
Substitute Limited Partners. Similarly, any Limited Partner who shall transfer
all of his Partnership Units pursuant to a redemption of all of his 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 in compliance
with the provisions of this Article 11 or redeemed or transferred 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
interest for such Partnership 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 interim closing of the books method (unless the General
Partner, in its sole and absolute discretion, elects to adopt a daily, weekly or
monthly proration method, in which event Net Income, Net Losses and each item
thereof for such Partnership Year shall be prorated based upon the applicable
period selected by the General Partner). Solely for purposes of making such
allocations, each of such items for the calendar month in which the transfer or
assignment occurs shall be allocated to the transferee Partner, and none of such
items for the calendar month in which a redemption occurs shall be allocated to
the Redeeming Partner. All distributions of Available Cash attributable to such
Partnership Unit with respect to which the Partnership Record Date is before the
date of such transfer, assignment or redemption shall be made to the transferor
Partner or the Redeeming Partner, as the case may be, and, in the case of a
transfer or assignment other than a redemption, all distributions of Available
Cash thereafter attributable to such Partnership Unit shall be made to the
transferee Partner.
39 of 57
<PAGE>
ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner
A successor to all of the General Partner Interest pursuant to in a
transaction permitted under 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
Interest for such Partnership Year shall be allocated between the transferring
General Partner and such successor as provided in Section 11.6.D. hereof.
Section 12.2 Admission of Additional Limited Partners
A. After the admission to the Partnership of the initial Limited
Partners on the Effective Date, a Person who makes a Capital Contribution to the
Partnership in accordance with this Agreement or who exercises an option to
receive Partnership Units shall be admitted to the Partnership as an Additional
Limited Partner only upon furnishing to the General Partner (i) evidence of
acceptance in form satisfactory to the General Partner of all of the terms and
conditions of this Agreement, including, without limitation, the power of
attorney granted in 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 consent of the General Partner to such admission.
C. If any Additional Limited Partner is admitted to the Partnership on
any day other than the first day of a 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. Solely for
purposes of making such allocations, each of such items for the calendar month
in which an admission of any Additional Limited Partner occurs shall be
allocated among all 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, and
all distributions of Available Cash thereafter shall be made to all the 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
40 of 57
<PAGE>
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.
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1 Dissolution
Except as set forth in this Article 13, no Partner shall have the right
to dissolve the Partnership. The Partnership shall not be dissolved by the
admission of Substituted Limited Partners or Additional Limited Partners or by
the admission of a successor General Partner in accordance with the terms of
this Agreement. Upon the withdrawal of the General Partner, any successor
General Partner shall continue the business of the Partnership. The Partnership
shall dissolve, and its affairs shall be wound up, upon the first to occur of
any of the following ("Liquidating Events"):
A. the expiration of its term as provided in Section 2.5 hereof;
B. the election to dissolve the Partnership made in writing by the
General Partner with the Consent of holders of a majority of the outstanding
Limited Partnership Units (including Limited Partnership Interests held by the
General Partner).
C. the dissolution, termination, retirement or entry of a final and
non-appealable judgment by a court of competent jurisdiction that the General
Partner is bankrupt or insolvent, unless the holders of a majority of the
Limited Partner Units agree in writing to continue the business of the
Partnership and to admit one or more General Partners.
D. entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Act; or
E. the sale of all or substantially all of the assets and properties of
the Partnership.
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 General
Partner or such other Person being referred to herein as the "Liquidator") shall
be responsible for overseeing the winding up and dissolution of the Partnership
and shall take full account of the Partnership's liabilities and property and
the Partnership property shall be liquidated as promptly as is consistent with
obtaining the fair value thereof, and the proceeds therefrom (which may, to the
extent determined by the General Partner, include shares of stock in the General
Partner) shall be applied and distributed in the following order:
(1) First, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors other than
the Partners;
41 of 57
<PAGE>
(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 Capital Accounts, after
giving effect to all contributions, distributions, and
allocations for all periods.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2.A hereof which
require liquidation of the assets of the Partnership, but subject to the order
of priorities set forth therein, if prior to or upon dissolution of the
Partnership the Liquidator determines that an immediate sale of part or all of
the Partnership's assets would be impractical or would cause undue loss to the
Partners the Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any assets except those necessary to satisfy
liabilities of the Partnership (including to those Partners as creditors) 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.
C. In the discretion of the Liquidator, a pro rata portion of the
distributions that would otherwise be made to the General Partner and Limited
Partners pursuant to this Article 13 may be:
1. distributed to a trust established for the benefit of the General
Partner and Limited Partners for the purposes of liquidating Partnership assets,
collecting amounts owed to the Partnership, and paying any contingent or
unforeseen liabilities or obligations of the Partnership or of the General
Partner arising out of or in connection with the Partnership. The assets of any
such trust shall be distributed to the General Partner and Limited Partners from
time to time, in the reasonable discretion of Liquidator, in the same
proportions as the amount distributed to such trust by the Partnership would
otherwise have been distributed to the General Partner and Limited Partners
pursuant to this Agreement; or
2. withheld or escrowed to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the unrealized portion of
any installment obligations owed to the Partnership, provided that such withheld
or escrowed amounts shall be distributed to the General Partner and Limited
Partners in the manner and order of priority set forth in Section 13.2.A as soon
as practicable.
Section 13.3 Compliance with Timing Requirements of Regulations
In the event the Partnership is "liquidated" within the meaning of
Regulations Section 1.704-l(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 Regulations Section 1.704-1(b)(2)(ii)(b)(2).
If any Partner has a deficit balance in his Capital Account (after giving effect
to all contributions,
42 of 57
<PAGE>
distributions and allocations for all taxable years, including the year during
which such liquidation occurs), such Partner shall have no obligation to make
any contribution to the capital of the Partnership with respect to such deficit,
and such deficit shall not be considered a debt owed to the Partnership or to
any other Person for any purpose whatsoever.
Section 13.4 Deemed Distribution and Recontribution
Notwithstanding any other provision of this Article 13, in the event
the Partnership is considered liquidated within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g) but no Liquidating Event has occurred, the
Partnership's property shall not be liquidated, the Partnership's liabilities
shall not be paid or discharged, and the Partnership's affairs shall not be
wound up. Instead, for federal income tax purposes and purposes of maintaining
Capital Accounts pursuant to Exhibit B hereto, the Partnership shall be deemed
to have distributed the property in kind to the General Partner and Limited
Partners, who shall be deemed to have assumed and taken such property subject to
all Partnership liabilities, all in accordance with their respective Capital
Accounts. Immediately thereafter, the General Partner and Limited Partners shall
be deemed to have recontributed the Partnership property in kind to the
Partnership, which shall be deemed to have assumed and taken such property
subject to all such liabilities.
Section 13.5 Rights of Limited Partners
Except as otherwise provided in this Agreement, each Limited Partner
shall look solely to the assets of the Partnership for the return of its Capital
Contributions and shall have no right or power to demand or receive property
other than cash from the Partnership. Except as otherwise provided in this
Agreement, no Limited Partner shall have priority over any other Partner as to
the return of its Capital Contributions, distributions, or allocations.
Section 13.6 Notice of Dissolution
In the event a Liquidating Event occurs or an event occurs that would,
but provisions of an election or objection by one or more Partners pursuant to
Section 13.1, result in a dissolution of the Partnership, the General Partner
shall, within thirty (30) days thereafter, provide written notice thereof to
each of the Partners.
Section 13.7 Termination of Partnership and Cancellation of
Certificate of Limited Partnership
Upon the completion of the liquidation of the Partnership cash and
property as provided in Section 13.2 hereof, the Partnership shall be
terminated, a certificate of cancellation shall be filed, and all qualifications
of the Partnership as a foreign limited partnership in jurisdictions other than
the State of California 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.
43 of 57
<PAGE>
Section 13.9 Waiver of Partition
Each Partner hereby waives any right to partition of the Partnership
property.
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 Amendments
A. Amendments to this Agreement may be proposed by the General Partner
or by any Limited Partners holding ten percent (10%) or more of the Partnership
Interests. Following such proposal, the General Partner shall submit any
proposed amendment to the Limited Partners. The General Partner shall seek the
written vote of the Partners on the proposed amendment or shall call a meeting
to vote thereon and to transact any other business that it may deem appropriate.
For purposes of obtaining a written vote, the General Partner may require a
response within a reasonable specified time, but not less than fifteen (15)
days, and failure to respond in such time period shall constitute a vote which
is consistent with the General Partner's recommendation with respect to the
proposal. Except as provided in Section 14.1.B, 14.1.C or 14.1.D, a proposed
amendment shall be adopted and be effective as an amendment hereto if it is
approved by the General Partner and it receives the Consent of Partners holding
a majority of the Percentage Interests of the Limited Partners (including
Limited Partner Interests held by the General Partner).
B. Notwithstanding Section 14.1.A, the General Partner shall have the
power, without the consent of the Limited Partners, to amend this Agreement as
may be required to facilitate or implement any of the following purposes:
(1) to add to the obligations of the General Partner or surrender
any right or power granted to the General Partner or any
Affiliate of the General Partner for the benefit of the
Limited Partners;
(2) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement;
(3) to set forth the designations, rights, powers, duties, and
preferences of the holders of any additional Partnership
Interests issued pursuant to Section 4.2.A hereof;
(4) to reflect a change that does not adversely affect any of the
Limited Partners in any material respect, or to cure any
ambiguity, correct or supplement any provision in this
Agreement not inconsistent with law or with other provisions,
or make other changes with respect to matters arising under
this Agreement that will not be inconsistent with law or with
the provisions of this Agreement; and
(5) 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. The General Partner shall provide notice
to the Limited Partners when any action under this Section
14.1.B is taken.
C. Notwithstanding Section 14.1.A and 14.1.B hereof, this Agreement
shall not be amended without the Consent of each Partner adversely affected if
such amendment would (i) convert a Limited Partner's interest in the Partnership
into a General Partner interest, (ii) modify the limited liability of a
44 of 57
<PAGE>
Limited Partner in a manner adverse to such Limited Partner, (iii) alter rights
of the Partner to receive distributions pursuant to Article 5, or the
allocations specified in Article 6 (except as permitted pursuant to Section 4.2
and Section 14.1.B(3) hereof) in a manner adverse to such Partner, (iv) alter or
modify the Redemption Right and REIT Shares Amount as set forth in Section 8.6,
and related definitions thereof, (v) cause the termination of the Partnership
prior to the time set forth in Section 2.5 or 13.1, or (vi) amend this Section
14.1.C. Further, no amendment may alter the restrictions on the General
Partner's authority set forth in Section 7.3 without the Consent specified in
that section.
D. Notwithstanding Section 14.1.A or Section 14.1.B hereof, the General
Partner shall not amend Section 4.2.A, 7.5, 7.6, 11.2 or 14.2 without the
Consent of a majority of the Percentage Interests of the Limited Partners
excluding Limited Partnership Interests held by the General Partner.
Section 14.2 Meetings of the Partners
A. Meetings of the Partners may be called by the General Partner and
shall be called upon the receipt by the General Partner of a written request by
Limited Partners holding ten percent (10%) or more of the Partnership Interests.
The call shall state the nature of the business to be transacted. Notice of any
such meeting shall be given to all Partners not less than seven (7) days nor
more than thirty (30) days prior to the date of such meeting Partners may vote
in person or by proxy at such meeting. Whenever the vote or Consent of the
Partners is permitted or required under this Agreement, such vote or Consent may
be given at a meeting of the Partners or may be given in accordance with the
procedure prescribed in Section 14.1.A hereof. Except as otherwise expressly
provided in this Agreement, the Consent of holders of a majority of the
Percentage Interests held by Limited Partners (including Limited Partnership
Interests held by the General Partner) shall control.
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 a majority of the Percentage Interests of the
Partners (or such other percentage as is expressly required by this agreement).
Such consent may be in one instrument or in several instruments, and shall have
the same force and effect as a vote of a majority of the Percentage Interests of
the Partners (or such other percentage as is expressly required by this
Agreement). Such consent shall be filed with the General Partner. An action so
taken shall be deemed to have been taken at a meeting held on the effective date
so certified.
C. Each Limited Partner may authorize any Person or Persons to act for
him by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting, or voting or participating
at a meeting. Every proxy must be signed by the Limited Partner or his
attorney-in-fact. No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the Limited Partner executing it, such
revocation to be effective upon the Partnership's receipt of or written notice
such revocation from the Limited Partner executing such proxy.
D. Each meeting of Partners shall be conducted by the General Partner
or such other Person as the General Partner may appoint pursuant to such rules
for the conduct of the meeting as the General Partner or such other Person deems
appropriate in its sole discretion. Without limitation, meetings of Partners may
be conducted in the same manner as meetings of the shareholders of the General
Partner and may be held at the same time as, and as part of, meetings of the
shareholders of the General Partner.
45 of 57
<PAGE>
ARTICLE 15
GENERAL PROVISIONS
Section 15.1 Addresses and Notice
Any notice, demand, request or report required or permitted to be given
or made to a Partner or Assignee under this Agreement shall be in writing and
shall be deemed given or made when delivered in person or when sent by first
class United States mail or by other means of written communication to the
Partner or Assignee at the address set forth in Exhibit A or such other address
of which the Partner 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 Section 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.
Section 15.6 Creditors
Other than as expressly set forth herein with respect to the
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 by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
Section 15.8 Counterparts
This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the
46 of 57
<PAGE>
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 and enforced 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 Entire Agreement
This Agreement contains the entire understanding and agreement among
the Partners with respect to the subject matter hereof and supersedes the Prior
Agreement and any other prior written or oral understandings or agreements among
them with respect thereto.
Section 15.12 No Rights as Shareholders
Nothing contained in this Agreement shall be construed as conferring
upon the holders of the Partnership Units any rights whatsoever as shareholders
of the General Partner, including without limitation any right to receive
dividends or other distributions made to shareholders of the General Partner or
to vote or to consent or to receive notice as shareholders in respect of any
meeting of shareholders for the election of directors of the General Partner or
any other matter.
47 of 57
<PAGE>
IN WITNESS WHEREOF, the General Partner has executed this Agreement
pursuant to the authority contained in Section 14.1 B. of the Original
Agreement, as of the date first written above.
GLENBOROUGH REALTY TRUST
INCORPORATED, a Maryland corporation
By: /s/ Robert Batinovich
Title: President
48 of 57
<PAGE>
<TABLE>
EXHIBIT A
to
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
of
GLENBOROUGH PROPERTIES, L.P.
<CAPTION>
Name and Address Class of Percentage
Partnership
Limited
of Partner Partner Interest
Units
Interest
- - -------------------------------- ------------------ -------------------
- - -------------------
<S> <C> <C>
<C>
General Partner
Glenborough Realty NA 1.00000%
70,026
Trust Incorporated
400 South El Camino Real
San Mateo, CA 94402-1708
Limited Partners
Glenborough Realty A 89.80172%
6,288,458
Trust Incorporated
400 South El Camino Real
San Mateo, CA 94402-1708
GPA, Ltd. A 8.26843%
579,006
c/o Glenborough Realty Corp.
400 South El Camino Real
San Mateo, CA 94402-1708
Robert Batinovich A 0.18175%
12,727
400 South El Camino Real
San Mateo, CA 94402-1708
Realty Advisors, LLC B 0.36750%
25,735
2361 Campus Drive, Suite 204
Irvine, CA 92715
Trust Realty Advisors B 0.19357%
13,555
2361 Campus Drive, Suite 204
Irvine, CA 92715
TRP-LLC B 0.18702%
13,097
2800 28th Street, Suite 222
Santa Monica, CA 90405
-------------------
- - -------------------
Total 100.00000%
7,002,603
</TABLE>
49 of 57
<PAGE>
EXHIBIT B
CAPITAL ACCOUNT MAINTENANCE
1. Capital Accounts of the Partners
A. The Partnership shall maintain for each Partner a separate Capital
Account in accordance with the rules of Regulations Section 1.704-l(b)(2)(iv).
Such Capital Account shall be increased by (i) the amount of all Capital
Contributions and any other deemed contributions made by such Partner to the
Partnership pursuant to this Agreement and (ii) all items of Partnership income
and gain (including income and gain exempt from tax) computed in accordance with
Section 1.B hereof and allocated to such Partner pursuant to Section 6.1.A of
the Agreement and Exhibit C hereof, and decreased by (x) the amount of cash or
Agreed Value of all actual and deemed distributions of cash or property made to
such Partner pursuant to this Agreement and (y) all items of Partnership
deduction and loss computed in accordance with Section 1.B hereof and allocated
to such Partner pursuant to Section 6.1.B of the Agreement and Exhibit C hereof.
B. For purposes of computing the amount of any item of income, gain,
deduction or loss to be reflected in the Partners' Capital Accounts, unless
otherwise specified in this Agreement, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes determined in
accordance with Section 703(a) of the Code (for this purpose all items of
income, gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in taxable income or loss), with
the following adjustments:
(1) Except as otherwise provided in Regulations Section
1.704-1(b)(2)(iv)(m), the computation of all items of income,
gain, loss and deduction shall be made without regard to any
election under Section 754 of the Code which may be made by
the Partnership, provided that the amounts of any adjustments
to the adjusted bases of the assets of the Partnership made
pursuant to Section 734 of the Code as a result of the
distribution of property by the Partnership to a Partner (to
the extent that such adjustments have not previously been
reflected in the Partners' Capital Accounts) shall be
reflected in the Capital Accounts of the Partners in the
manner and subject to the limitations prescribed in
Regulations Section 1.704- 1 (b)(2) (iv)(m)(4) .
(2) The computation of all items of income, gain, and deduction
shall be made without regard to the fact that items described
in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code are not
includable gross income or are neither currently deductible
nor capitalized for federal income tax purposes.
(3) Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be determined as
if the adjusted basis of such property as of such date of
disposition were equal in amount to the Partnership's Carrying
Value with respect to such property as of such date.
(4) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such
taxable income or loss, there shall be taken into account
Depreciation for such fiscal year.
50 of 57
<PAGE>
(5) In the event the Carrying Value of any Partnership Asset is
adjusted pursuant to Section 1.D hereof, the amount of any
such adjustment shall be taken into account as gain or loss
from the disposition of such asset.
(6) Any items specially allocated under Section 2 of Exhibit C
hereof shall not be taken into account.
C. Generally, a transferee (including any Assignee) of a Partnership
Unit shall succeed to a pro rata portion of the Capital Account of the
transferor; provided, however, that, if the transfer causes a termination of the
Partnership under Section 708(b)(1)(B) of the Code, the Partnership's properties
shall be deemed, solely for federal income tax purposes, to have been
distributed in liquidation of the Partnership to the holders of the Partnership
units (including transferee) and recontributed by such Persons in reconstitution
of the Partnership. In such event, the Carrying Values of the Partnership
properties shall be adjusted immediately prior to such deemed distribution
pursuant to Section 1.D (2) hereof. The Capital Accounts of such reconstituted
Partnership shall be maintained in accordance with the principles of this
Exhibit B.
D. (1) Consistent with the provisions of Regulations Section
1.704-1(b)(2)(iv)(f), and as provided in Section 1.D (2), the
Carrying Values of all Partnership assets shall be adjusted
upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership property, as
of the times of the adjustments provided in Section 1.D (2)
hereof, as if such Unrealized Gain or Unrealized Loss had been
recognized on an actual sale of each such property and
allocated pursuant to Section 6.1 of the Agreement.
(2) Such adjustments shall be made as of the following times: (a)
immediately prior to the acquisition of an additional interest
in the Partnership by any new or existing Partner in exchange
for more than a de minimis Capital Contribution; (b)
immediately prior to the distribution by the Partnership to a
Partner of more than a de minimis amount of property as
consideration for an interest in the Partnership; and (c)
immediately prior to the liquidation of the Partnership within
the meaning of Regulations Section 1.704-l(b)(2)(ii)(g),
provided however that adjustments pursuant to clauses (a) and
(b) above shall be made only if the General Partner determines
that such adjustments are necessary or appropriate to reflect
the relative economic interests of the Partners in the
Partnership.
(3) In accordance with Regulations Section 1.704- l(b)(2)(iv)(e),
the Carrying Value of Partnership assets distributed in kind
shall be adjusted upward or downward to reflect any Unrealized
Gain or Unrealized Loss attributable to such Partnership
property, as of the time any such asset is distributed.
(4) In determining Unrealized Gain or Unrealized Loss for purposes
of this Exhibit B, the aggregate cash amount and fair market
value of all Partnership assets (including cash or cash
equivalents) shall be determined by the General Partner using
such reasonable method of valuation as it may adopt, or in the
case of a liquidating distribution pursuant to Article 13 of
the Agreement, shall be determined and allocated by the
Liquidator using such reasonable methods of valuation as it
may adopt. The General Partner, or the Liquidator, as the case
may be, shall allocate such aggregate fair market value among
the assets of the Partnership (in such manner as it determines
in its sole and absolute discretion to arrive at a fair market
value for individual properties).
51 of 57
<PAGE>
E. The provisions of this Agreement (including this Exhibit B and the
other Exhibits to this Agreement) relating to the maintenance of Capital
Accounts are intended to comply with Regulations Section 1.704-1(b), and shall
be interpreted and applied in a manner consistent with such Regulations. In the
event the General Partner shall determine that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits thereto
(including, without limitation, debits or credits relating to liabilities which
are secured by contributed or distributed property or which are assumed by the
Partnership, the General Partner, or the Limited Partners) are computed in order
to comply with such Regulations, the General Partner may make such modification
without regard to Article 14 of the Agreement, 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-l(b)(2)(iv)(q),
and (ii) make any appropriate modifications in the event unanticipated events
might otherwise cause this Agreement not to comply with Regulations Section
1.704-l(b).
2. No Interest2. No Interest
No interest shall be paid by the Partnership on Capital Contributions
or on balances in Partners' Capital Accounts.
3. No Withdrawal3. No Withdrawal
No Partner shall be entitled to withdraw any part of his Capital
Contribution or his Capital Account or to receive any distribution from the
Partnership, except as provided in Articles 4, 5, 7 and 13 of the Agreement.
52 of 57
<PAGE>
EXHIBIT C
SPECIAL ALLOCATION RULES
1. Special Allocation Rules.
Notwithstanding any other provision of the Agreement or this Exhibit C,
the following special allocations shall be made in the following order:
A. Minimum Gain Chargeback. Notwithstanding the provisions of Section
6.1 of the Agreement or any other provisions of this Exhibit C, if there is a
net decrease in Partnership Minimum Gain during any Partnership Year, each
Partner shall be specially allocated items of Partnership income and gain for
such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partnership Minimum Gain, as determined
under Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Section 1.704-2(f)(6). This Section
1.A is intended to comply with the minimum gain chargeback requirements in
Regulations Section 1.704-2(f) and for purposes of this Section 1.A only, each
Partner's Adjusted Capital Account Deficit shall be determined prior to any
other allocations pursuant to Section 6.1 of this Agreement with respect to such
Partnership Year and without regard to any decrease in Partner Minimum Gain
during such Partnership Year.
B. Partner Minimum Gain Chargeback. Notwithstanding any other provision
of Section 6.1 of this Agreement or any other provisions of this Exhibit C
(except Section 1.A hereof ), if there is a net decrease in Partner Minimum Gain
attributable to a Partner Nonrecourse Debt during any Partnership Year, each
Partner who has a share of the Partner Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5), shall be specially allocated items of Partnership income and gain
for such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each General
Partner and Limited Partner pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Section 1.704-2(i)(4). This Section
1.B is intended to comply with the minimum gain chargeback requirement in such
Section of the Regulations and shall be interpreted consistently therewith.
Solely for purposes of this Section 1.B, each Partner's Adjusted Capital Account
Deficit shall be determined prior to any other allocations pursuant to Section
6.1 of the Agreement or this Exhibit with respect to such Partnership Year,
other than allocations pursuant to Section 1.A hereof.
C. Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), and after giving effect to the allocations required
under Sections 1.A and 1.B hereof, such Partner has an Adjusted Capital Account
Deficit, items of Partnership income and gain (consisting of a pro rata portion
of each item of Partnership income, including gross income and gain for the
Partnership Year) and shall be specifically allocated to such Partner in an
amount and manner sufficient to eliminate, to the extent required by the
Regulations, its Adjusted Capital Account Deficit created by such adjustments,
allocations or distributions as quickly as possible.
D. Nonrecourse Deductions. Nonrecourse Deductions for any Partnership
Year shall be allocated to the Partners in accordance with their respective
Percentage Interests. If the General Partner
53 of 57
<PAGE>
determines in its good faith discretion that the Partnership's Nonrecourse
Deductions must be allocated in a different ratio to satisfy the safe harbor
requirements of the Regulations promulgated under Section 704(b) of the Code,
the General Partner is authorized, upon notice to the Limited Partners, to
revise the prescribed ratio for such Partnership Year to the numerically closest
ratio which would satisfy such requirements.
E. Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions
for any Partnership Year shall be specially allocated to the Partner who bears
the economic risk of loss with respect to the Partner Nonrecourse Debt to which
such Partner Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i).
F. Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b)
of the Code is required, pursuant to Regulations Section 1.704-l(b)(2)(iv)(m),
to be taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such item of gain or loss shall be specially
allocated to the Partners in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Section of the
Regulations.
2. Allocations for Tax Purposes
A. Except as otherwise provided in this Section 2, for federal income
tax purposes, each item of income, gain, loss and deduction shall be allocated
among the Partners in the same manner as its correlative item of "book" income,
gain, loss or deduction is allocated pursuant to Section 6.1 of the Agreement
and Section 1 of this Exhibit C.
B. In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss, and
deduction shall be allocated for federal income tax purposes among the Partners
as follows:
(1) (a) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners
consistent with the principles of Section 704(c) of the Code
to take into account the variation between the 704(c) Value of
such property and its adjusted basis at the time of
contribution (taking into account Section 2.C of this Exhibit
C); and
(b) any item of Residual Gain or Residual Loss attributable to
a Contributed Property shall be allocated among the Partners
in the same manner as its correlative item of "book" gain or
loss is allocated pursuant to Section 6.1 of the Agreement and
Section 1 of this Exhibit C.
(2) (a) In the case of an Adjusted Property, such items shall
(1) first, be allocated among the Partners in a
manner consistent with the principles of Section
704(c) of the Code to take into account the
Unrealized Gain or Unrealized Loss attributable to
such property and the allocations thereof pursuant to
Exhibit B, and
(2) second, in the event such property was originally
a Contributed Property, be allocated among the
Partners in a manner consistent with Section 2.B (1)
of this Exhibit C; and
54 of 57
<PAGE>
(b) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be
allocated among the Partners in the same manner its
correlative item of "book" gain or loss is allocated
pursuant to Section 6.1 of the Agreement and Section
1 of this Exhibit C.
(3) all other items of income, gain, loss and deduction shall be
allocated among the Partners the same manner as their
correlative item of "book" gain or loss is allocated pursuant
to Section 6.1 of the Agreement and Section 1 of Exhibit C.
C. To the extent Treasury Regulations promulgated pursuant to Section
704(c) of the Code permit a Partnership to utilize alternative methods to
eliminate the disparities between the Carrying Value of property and its
adjusted basis, the General Partner shall, subject to the following, have the
authority to elect the method to be used by the Partnership and such election
shall be binding on all Partners. With respect to the Contributed Property
transferred to the Partnership on or about the Effective Date, the Partnership
shall elect to use the "remedial method" set forth in Treasury Regulation
Section 1.704-3. When using the "remedial method" with respect to the
Contributed Property transferred to the Partnerships on or about the Effective
Date, the Partnership shall recover the excess of the Carrying Value of such
property on the Effective Date over its adjusted basis on the Effective Date
using the "Alternative Depreciation System" set forth in Section 168(g) of the
Code.
55 of 57
<PAGE>
EXHIBIT D
VALUE OF CERTAIN CONTRIBUTED PROPERTY
704(c) Agreed
Underlying Property Value Value
- - ---------------------------------------------- ------------- -----------
Country Suites Tucson, AZ 8,200,000 8,200,000
Country Suites Ontario, CA 2,600,000 2,600,000
Summer Breeze N Hollywood, CA 4,500,000 500,000
Benicia Benicia, CA 3,400,000 3,400,000
Westwood Plaza Tampa, FL 3,700,000 3,700,000
QuikTrip #712 Atlanta, GA 1,050,000 1,050,000
QuikTrip #711 Fulton, GA 1,260,000 1,260,000
Shannon Crossing Atlanta, GA 2,600,000 2,600,000
QuikTrip #718 Norcross, GA 860,000 860,000
QuikTrip #738 Mableton, GA 770,000 770,000
QuikTrip #722 Lithonia, GA 1,030,000 1,030,000
Navistar W Chicago, IL 10,800,000 4,508,867
Navistar Baltimore, MD 4,600,000 1,920,443
J. I. Case Kansas City, KS 3,000,000 1,252,463
J. I. Case Memphis, TN 1,900,000 793,227
QuikTrip #691 Madison, IL 790,000 790,000
QuikTrip #698 Godfrey, IL 1,090,000 1,090,000
QuikTrip #688 Granite City, IL 1,080,000 1,080,000
Park 100 - #42 Indianapolis, IN 1,750,000 1,750,000
Park 100 - #46 Indianapolis, IN 1,750,000 1,750,000
All American New Hope, MN 1,500,000 1,500,000
All American Eagan, MN 750,000 750,000
QuikTrip #609 St. Louis, MO 1,090,000 1,090,000
Regency Westpointe Omaha, NB 2,100,000 2,100,000
QuikTrip #75R Tulsa, OK 630,000 630,000
Country Suites Arlington, TX 4,100,000 4,100,000
4500 Plaza Salt Lake, UT 3,600,000 2,564,768
Atlanta Auto Center Snellville, GA 740,000 740,000
Atlanta Auto Center Roswell, GA 380,000 380,000
Atlanta Auto Center College Park, GA 570,000 570,000
Atlanta Auto Center Smyrna, GA 620,000 620,000
Atlanta Auto Center Norcross, GA 660,000 660,000
Atlanta Auto Center Marietta, GA 830,000 830,000
56 of 57
<PAGE>
EXHIBIT E NOTICE OF REDEMPTION
NOTICE OF REDEMPTION
The undersigned hereby irrevocably (i) redeems Partnership Units in
Glenborough Properties, L.P. in accordance with the terms of the Limited
Partnership Agreement of Glenborough Properties, L.P. and the Redemption Right
referred to therein, (ii) surrenders such Limited Partnership Units and all
right, title and interest therein, and (iii) directs that the Cash Amount or
REIT Shares Amount (as determined by the General Partner) deliverable upon
exercise of the Redemption Right be delivered to the address specified below,
and if REIT Shares are to be delivered, such REIT Shares be registered or placed
in the name(s) and at the address(es) specified below. The undersigned hereby
represents, warrants, and certifies, that the undersigned (a) has marketable,
and unencumbered title to such Partnership Units, free and clear of the rights
of or interests of any other person or entity; (b) has the full right, power and
authority to redeem and surrender such Partnership Units as provided herein; and
(c) has obtained the consent or approval of all persons or entities, if any,
having the right to consult or approve such redemption and surrender.
Dated:
Name of Limited Partner:
(Signature of Limited Partner)
(Street Address)
(City) (State) (Zip Code)
Signature Guaranteed by:
If REIT Shares are to be issued, issue to:
Name:
Please insert social security or identifying number:
57 of 57
<PAGE>
