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AGREEMENT OF LIMITED PARTNERSHIP
OF
EOP OPERATING LIMITED PARTNERSHIP
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TABLE OF CONTENTS
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ARTICLE I DEFINED TERMS..............................................................................1
ARTICLE II ORGANIZATIONAL MATTERS....................................................................13
Section 2.1 Organization.......................................................................13
Section 2.2 Name...............................................................................13
Section 2.3 Registered Office and Agent; Principal Office......................................13
Section 2.4 Term...............................................................................14
ARTICLE III PURPOSE..................................................................................14
Section 3.1 Purpose and Business...............................................................14
Section 3.2 Powers.............................................................................14
ARTICLE IV CAPITAL CONTRIBUTIONS AND ISSUANCES OF PARTNERSHIP INTERESTS..............................14
Section 4.1 Capital Contributions of the Partners..............................................14
Section 4.2 Issuances of Partnership Interests.................................................15
Section 4.3 No Preemptive Rights...............................................................16
Section 4.4 Other Contribution Provisions......................................................16
Section 4.5 No Interest on Capital.............................................................17
ARTICLE V DISTRIBUTIONS..............................................................................17
Section 5.1 Requirement and Characterization of Distributions..................................17
Section 5.2 Amounts Withheld...................................................................20
Section 5.3 Distributions Upon Liquidation.....................................................20
Section 5.4 Revisions to Reflect Issuance of Partnership Interests.............................20
ARTICLE VI ALLOCATIONS...............................................................................20
Section 6.1 Allocations For Capital Account Purposes...........................................20
Section 6.2 Revisions to Allocations to Reflect Issuance of Partnership Interests..............21
ARTICLE VII MANAGEMENT AND OPERATIONS OF BUSINESS....................................................22
Section 7.1 Management.........................................................................22
Section 7.2 Certificate of Limited Partnership.................................................26
Section 7.3 Title to Partnership Assets........................................................26
Section 7.4 Reimbursement of the General Partners..............................................26
Section 7.5 Outside Activities of the General Partners; Relationship of Shares to
Partnership Units; Funding Debt.......................................................28
Section 7.6 Transactions with Affiliates.......................................................29
Section 7.7 Indemnification....................................................................30
Section 7.8 Liability of the General Partners..................................................32
Section 7.9 Other Matters Concerning the General Partners......................................32
Section 7.10 Reliance by Third Parties.........................................................34
Section 7.11 Restrictions on General Partners' Authority.......................................34
Section 7.12 Loans by Third Parties............................................................35
Section 7.13 Actions of the General Partners...................................................35
ARTICLE VIII RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS..............................................36
Section 8.1 Limitation of Liability............................................................36
Section 8.2 Management of Business.............................................................36
Section 8.3 Outside Activities of Limited Partners.............................................36
Section 8.4 Return of Capital..................................................................36
Section 8.5 Rights of Limited Partners Relating to the Partnership.............................37
Section 8.6 Redemption Right...................................................................38
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ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS....................................................40
Section 9.1 Records and Accounting.............................................................40
Section 9.2 Fiscal Year........................................................................40
Section 9.3 Reports............................................................................41
ARTICLE X TAX MATTERS................................................................................41
Section 10.1 Preparation of Tax Returns........................................................41
Section 10.2 Tax Elections.....................................................................41
Section 10.3 Tax Matters Partner...............................................................41
Section 10.4 Organizational Expenses...........................................................43
Section 10.5 Withholding.......................................................................43
ARTICLE XI TRANSFERS AND WITHDRAWALS.................................................................44
Section 11.1 Transfer..........................................................................44
Section 11.2 Transfers of Partnership Interests of General Partners............................44
Section 11.3 Limited Partners' Rights to Transfer..............................................45
Section 11.4 Substituted Limited Partners......................................................47
Section 11.5 Assignees.........................................................................47
Section 11.6 General Provisions................................................................48
ARTICLE XII ADMISSION OF PARTNERS....................................................................50
Section 12.1 Admission of a Successor General Partner..........................................50
Section 12.2 Admission of Additional Limited Partners..........................................50
Section 12.3 Amendment of Agreement and Certificate of Limited Partnership.....................51
ARTICLE XIII DISSOLUTION AND LIQUIDATION.............................................................51
Section 13.1 Dissolution.......................................................................51
Section 13.2 Winding Up........................................................................52
Section 13.3 Compliance with Timing Requirements of Regulations................................53
Section 13.4 Deemed Distribution and Recontribution............................................53
Section 13.5 Rights of Limited Partners........................................................53
Section 13.6 Notice of Dissolution.............................................................54
Section 13.7 Cancellation of Certificate of Limited Partnership................................54
Section 13.8 Reasonable Time for Winding Up....................................................54
Section 13.9 Waiver of Partition...............................................................54
Section 13.10 Liability of Liquidator..........................................................54
ARTICLE XIV AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS.............................................54
Section 14.1 Amendments........................................................................54
Section 14.2 Meetings of the Partners..........................................................56
ARTICLE XV GENERAL PROVISIONS........................................................................57
Section 15.1 Addresses and Notice..............................................................57
Section 15.2 Titles and Captions...............................................................57
Section 15.3 Pronouns and Plurals..............................................................57
Section 15.4 Further Action....................................................................57
Section 15.5 Binding Effect....................................................................57
Section 15.6 Creditors.........................................................................57
Section 15.7 Waiver............................................................................57
Section 15.8 Counterparts......................................................................58
Section 15.9 Applicable Law....................................................................58
Section 15.10 Invalidity of Provisions.........................................................58
Section 15.11 Power of Attorney................................................................58
Section 15.12 Entire Agreement.................................................................59
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Section 15.13 No Rights as Shareholders........................................................59
Section 15.14 Limitation to Preserve REIT Status...............................................60
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EXHIBIT A
PARTNERS AND PARTNERSHIP INTERESTS
EXHIBIT B
CAPITAL ACCOUNT MAINTENANCE
EXHIBIT C
SPECIAL ALLOCATION RULES
EXHIBIT D
NOTICE OF REDEMPTION
EXHIBIT E
VALUE OF CONTRIBUTED PROPERTY
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AGREEMENT OF LIMITED PARTNERSHIP
OF
EOP OPERATING LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP, dated as of July 3,
1997, is entered into by and among Zell/Merrill Lynch Real Estate Opportunity
Partners Limited Partnership II, an Illinois limited partnership, and Equity
Office Properties Trust, a Maryland real estate investment trust, as the General
Partners, and the Persons whose names are set forth on Exhibit A hereto as
Limited Partners, together with any other Persons who become Partners in the
Partnership as provided herein.
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
form the Partnership as a limited partnership under the Delaware Revised Uniform
Limited Partnership Act, as amended from time to time, as follows:
ARTICLE I
DEFINED TERMS
The following definitions shall be for all purposes, unless
otherwise clearly indicated to the contrary, applied to the terms used in this
Agreement.
"Act" means the Delaware Revised Uniform Limited Partnership
Act, as it may be amended from time to time, and any successor to such statute.
"Additional Limited Partner" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 12.2 hereof and who is
shown as such on the books and records of the Partnership.
"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 Sections 1.704-2(g)(1) and
1.704-2(i)(5) and (ii) decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Adjusted Capital Account
as of the end of the relevant Partnership Year.
"Adjusted Property" means any property the Carrying Value of
which has been adjusted pursuant to Exhibit B.
"Adjustment Date" has the meaning set forth in Section 4.2.B.
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"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 any
Person referred to in clauses (i), (ii), and (iii) above. For 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 contributed to the Partnership as part of or in connection with the
Consolidation, the amount set forth on Exhibit E as the Agreed Value of such
Property; (ii) in the case of any other Contributed Property, the 704(c) Value
of such property as of the time of its contribution to the Partnership, 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.
"Agreement" means this Agreement of Limited Partnership, as it
may be amended, supplemented or restated from time to time.
"Assignee" means a Person to whom one or more Partnership
Units have been transferred in a manner permitted under this Agreement, but who
has not become a Substituted Limited Partner, and who has the rights set forth
in Section 11.5.
"Available Cash" means, with respect to any period for which
such calculation is being made:
(a) all cash revenues and funds received by the Partnership
from whatever source (excluding the proceeds of any Capital Contribution) plus
the amount of any reduction (including, without limitation, a reduction
resulting because the Managing General Partner determines such amounts are no
longer necessary) in reserves of the Partnership, which reserves are referred to
in clause (b)(iv) below;
(b) less the sum of the following (except to the extent made
with the proceeds of any Capital Contribution):
(i) all interest, principal and other debt payments
made during such period by the Partnership,
(ii) all cash expenditures (including capital
expenditures) made by the Partnership during such period,
(iii) investments in any entity (including loans made
thereto) to the extent that such investments are permitted under this Agreement
and are not otherwise described in clauses (b)(i) or (ii), and
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(iv) the amount of any increase in reserves
established during such period which the Managing General Partner determines is
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 Chicago, Illinois are authorized or
required by law to close.
"Capital Account" means the Capital Account maintained for a
Partner pursuant to Exhibit B.
"Capital Contribution" means, with respect to any Partner, any
cash, cash equivalents or the Agreed Value of Contributed Property which such
Partner contributes or is deemed to contribute to the Partnership pursuant to
Section 4.1 or 4.2.
"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 Contributed Property or
Adjusted Property, as the case may be, charged to the Partners' Capital Accounts
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, and to reflect changes, additions (including
capital improvements thereto) or other adjustments to the Carrying Value for
dispositions and acquisitions of Partnership properties, as deemed appropriate
by the Managing General Partner.
"Cash Amount" means an amount of cash equal to the Value on
the Valuation Date of the Shares Amount.
"Certificate" means the Certificate of Limited Partnership
relating to the Partnership filed in the office of the Delaware Secretary of
State, as amended from time to time in accordance with the terms hereof and the
Act.
"Class A" has the meaning set forth in Section 5.1.C.
"Class A Share" has the meaning set forth in Section 5.1.C.
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"Class A Unit" means any Partnership Unit that is not
specifically designated by the Managing General Partner as being of another
specified class of Partnership Units.
"Class B" has the meaning set forth in Section 5.1.C.
"Class B Share" has the meaning set forth in Section 5.1.C.
"Class B Unit" means a Partnership Unit that is specifically
designated by the Managing General Partner as being a Class B Unit.
"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.
"Consent of the Outside Limited Partners" means the Consent of
Limited Partners (excluding for this purpose any Limited Partnership Interests
held by the Managing General Partner, any of the Opportunity Partnerships, any
other Person of which the Managing General Partner owns or controls more than
fifty percent (50%) of the voting interests and any Person directly or
indirectly owning or controlling more than fifty percent (50%) of the
outstanding voting interests of the Managing General Partner) holding Percentage
Interests that are greater than fifty percent (50%) of the aggregate Percentage
Interest of all Limited Partners who are not excluded for the purposes hereof.
"Consolidation" means (i) the transactions whereby the
Partnership will acquire interests in certain office properties owned by the
Opportunity Partnerships and certain asset management and property management
businesses which provide services to those properties and to other office
properties, in exchange for Partnership Units, and (ii) the merger of the ZML
Investors, Inc., ZML Investors II, Inc., Zell/Merrill Lynch Real Estate
Opportunity Partners III Trust and Zell/Merrill Lynch Real Estate Opportunity
Partners IV Trust with and into Equity Office Holdings Trust, all as described
in a Joint Proxy Statement/Offering Memorandum dated March 25, 1997.
"Contributed Property" means each property or other asset
contributed to the Partnership, in such form as may be permitted by the Act, but
excluding cash contributed or deemed contributed to the Partnership. Once the
Carrying Value of a Contributed Property is adjusted pursuant to Exhibit B, such
property shall no longer constitute a Contributed Property for purposes of
Exhibit B, but shall be deemed an Adjusted Property for such purposes.
"Conversion Factor" means 1.0; provided that, if the General
Partner Entity (i) declares or pays a dividend on its outstanding Shares in
Shares or makes a distribution to all holders of its outstanding Shares in
Shares, (ii) subdivides its outstanding Shares or (iii) combines its outstanding
Shares into a smaller number of Shares, the Conversion Factor shall be adjusted
by multiplying the Conversion Factor by a fraction, the numerator of which shall
be the number of Shares issued and outstanding on the record date for such
dividend, distribution, subdivision or combination (assuming for such purposes
that such dividend, distribution, subdivision or combination has occurred as of
such time) and the denominator of which shall be the actual number of Shares
(determined without the above assumption) issued and outstanding on the record
date for such dividend, distribution, subdivision or
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combination; and provided further that if an entity shall cease to be the
General Partner Entity (the "Predecessor Entity") and another entity shall
become the General Partner Entity (the "Successor Entity"), the Conversion
Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the
numerator of which is the Value of one Share of the Predecessor Entity,
determined as of the date when the Successor Entity becomes the General Partner
Entity, and the denominator of which is the Value of one Share of the Successor
Entity, determined as of that same date. (For purposes of the second proviso in
the preceding sentence, if any shareholders of the Predecessor Entity will
receive consideration in connection with the transaction in which the Successor
Entity becomes the General Partner Entity, the numerator in the fraction
described above for determining the adjustment to the Conversion Factor (that
is, the Value of one Share of the Predecessor Entity) shall be the sum of the
greatest amount of cash and the fair market value (as determined in good faith
by the Managing General Partner) of any securities and other consideration that
the holder of one Share in the Predecessor Entity could have received in such
transaction (determined without regard to any provisions governing fractional
shares).) Any adjustment to the Conversion Factor shall become effective
immediately after the effective date of the event retroactive to the record
date, if any, for the event giving rise thereto, it being intended that (x)
adjustments to the Conversion Factor are to be made to avoid unintended dilution
or anti-dilution as a result of transactions in which Shares are issued,
redeemed or exchanged without a corresponding issuance, redemption or exchange
of Partnership Units and (y) if a Specified Redemption Date shall fall between
the record date and the effective date of any event of the type described above,
that the Conversion Factor applicable to such redemption shall be adjusted to
take into account such event.
"Convertible Funding Debt" has the meaning set forth in
Section 7.5.F.
"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)
obligations of such Person incurred in connection with entering into a lease
which, in accordance with generally accepted accounting principles, should be
capitalized.
"Declaration of Trust" means the Declaration of Trust of
Equity Office Properties Trust filed in the State of Maryland on October 9 1996,
as amended or restated from time to time.
"Deemed Partnership Interest Value" means, as of any date with
respect to any class of Partnership Interests, the Deemed Value of the
Partnership Interest of such class multiplied by the applicable Partner's
Percentage Interest of such class.
"Deemed Value of the Partnership Interest" means, as of any
date with respect to any class of Partnership Interests, (a) if the common
shares of beneficial interest (or other comparable equity interests) of the
General Partner Entity are Publicly Traded (i) the total number of shares of
beneficial interest (or other comparable equity interest) of the General Partner
Entity corresponding to such class of Partnership Interest (as provided for in
Section 4.2.B) issued and outstanding as of the close of business on such date
(excluding any treasury shares) multiplied by the Value of a share of such
beneficial interest (or other comparable equity interest) on such date divided
by (ii) the Percentage Interest of the Managing General Partner in such class of
Partnership Interests on such date, and (b) otherwise, the aggregate
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Value of such class of Partnership Interests determined as set forth in the
fourth and fifth sentences of the definition of Value.
"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 Managing General Partner.
"Distribution Period" has the meaning set forth in Section
5.1.C.
"Effective Date" means the date of the closing of the
Consolidation.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Partner" means either any (a) Limited Partner or (b)
holder of shares of beneficial interest in the Managing General Partner that
received such Shares in the mergers of ZML Investors, Inc., ZML Investors II,
Inc., Zell/Merrill Lynch Real Estate Opportunity Partners III Trust, and
Zell/Merrill Lynch Real Estate Opportunity Partners IV Trust into the Managing
General Partner, and which Limited Partner or shareholder is either (i) an
employee benefit plan subject to Title I of ERISA or section 4975 of the Code,
or (ii) a nominee for or a trust established pursuant to such employee benefit
plan, or (iii) which is an entity whose underlying assets include assets of such
employee benefit plan by reason of such plan's investment in such entity.
"ERISA Plan" means an "employee benefit plan" as that term is
defined in 29 U.S.C. ss. 1002(3), and which is not exempt from regulation under
ERISA by virtue of 29 U.S.C. ss. 1003(b).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Value" shall have the meaning described in Section
7.09E(iv).
"Funding Debt" means the incurrence of any Debt by or on
behalf of the General Partner Entity for the purpose of providing funds to the
Partnership.
"General Partner" means Zell/Merrill Lynch Real Estate
Opportunity Partners Limited Partnership II, or the Managing General Partner or
any of their successors as a general partner of the Partnership, and "General
Partners" means the Zell/Merrill Lynch Real Estate Opportunity Partners Limited
Partnership II, and the Managing General Partner or their successors as general
partners.
"General Partner Entity" means the Managing General Partner;
provided, however, that if (i) the common shares of beneficial interest (or
other comparable equity interests) of the Managing General Partner are at any
time not Publicly Traded and (ii) the common shares of beneficial interest (or
other comparable equity interests) of an entity that owns, directly or
indirectly, fifty percent (50%) or more of the common shares of beneficial
interest (or other comparable equity interests) of the Managing General Partner
are Publicly Traded, the term "General Partner Entity" shall refer to such
entity whose
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common shares of beneficial interest (or other comparable equity securities) are
Publicly Traded. If both requirements set forth in clauses (i) and (ii) above
are not satisfied, then the term "General Partner Entity" shall mean the
Managing General Partner.
"General Partnership Interest" means a Partnership Interest
held by a General Partner that is a general partnership interest. A General
Partnership Interest may be expressed as a number of Partnership Units.
"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, 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 such Partner incompetent to manage his or
her Person or 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 or limited liability
company which is a Partner, the dissolution and commencement of winding up of
the partnership or limited liability company, (iv) as to any estate which is a
Partner, the distribution by the fiduciary of the estate's entire interest in
the Partnership, (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee) or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this definition,
bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner
commences a voluntary proceeding seeking liquidation, reorganization or other
relief under any bankruptcy, insolvency or other similar law now or hereafter in
effect, (b) the Partner is adjudged as bankrupt or insolvent, or a final and
nonappealable order for relief under any bankruptcy, insolvency or similar law
now or hereafter in effect has been entered against the Partner, (c) the Partner
executes and delivers a general assignment for the benefit of the Partner's
creditors, (d) the Partner files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in clause (b) above, (e) the
Partner seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for the Partner or for all or any substantial part of the
Partner's properties, (f) any proceeding seeking liquidation, reorganization or
other relief under any bankruptcy, insolvency or other similar law now or
hereafter in effect has not been dismissed within one hundred twenty (120) days
after the commencement thereof, (g) the appointment without the Partner's
consent or acquiescence of a trustee, receiver of liquidator has not been
vacated or stayed within ninety (90) days of such appointment or (h) an
appointment referred to in clause (g) is not vacated within ninety (90) days
after the expiration of any such stay.
"Indemnitee" means (i) any Person made a party to a proceeding
by reason of its status as (A) a General Partner, (B) a Limited Partner, or (C)
a trustee, director or officer of the Partnership, or any General Partner and
(ii) such other Persons (including Affiliates of any General Partner, a Limited
Partner or the Partnership) as the Managing 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.
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"Limited Partner" means any Person named as a Limited Partner
in Exhibit A, as such Exhibit may be amended from time to time, or any
Substituted Limited Partner or Additional Limited Partner, in such Person's
capacity as a Limited Partner in the Partnership.
"Limited Partnership Interest" means a Partnership Interest of
a Limited Partner in the Partnership representing a fractional part of the
Partnership Interests of all Limited Partners and includes any and all benefits
to which the holder of such a Partnership Interest may be entitled as provided
in this Agreement, together with all obligations of such Person to comply with
the terms and provisions of this Agreement. A Limited Partnership Interest may
be expressed as a number of Partnership Units.
"Liquidating Event" has the meaning set forth in Section 13.1.
"Liquidator" has the meaning set forth in Section 13.2.A.
"Managing General Partner" means Equity Office Properties
Trust, a Maryland real estate investment trust, or its successors, as managing
general partner of the Partnership.
"Managing General Partner Payment" has the meaning set forth
in Section 15.14 hereof.
"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
Exhibit B. If an item of income, gain, loss or deduction that has been included
in the initial computation of Net Income is subjected to the special allocation
rules in Exhibit C, Net Income or the resulting Net Loss, whichever the case may
be, shall be recomputed without regard to such item.
"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
Exhibit B. If an item of income, gain, loss or deduction that has been included
in the initial computation of Net Loss is subjected to the special allocation
rules in Exhibit C, Net Loss or the resulting Net Income, whichever the case may
be, shall be recomputed without regard to such item.
"New Securities" means (i) any rights, options, warrants or
convertible or exchangeable securities having the right to subscribe for or
purchase shares of beneficial interest (or other comparable equity interest) of
the Managing General Partner, excluding grants under any Share Option Plan, or
(ii) any Debt issued by the Managing General Partner that provides any of the
rights described in clause (i).
"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.
"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).
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"Nonrecourse Liability" has the meaning set forth in
Regulations Section 1.752-1(a)(2).
"Notice of Redemption" means a Notice of Redemption
substantially in the form of Exhibit D.
"Opportunity Partnerships" means, Zell/Merrill Lynch Real
Estate Opportunity Partners Limited Partnership, Zell/Merrill Lynch Real Estate
Opportunity Partners Limited Partnership II, Zell/Merrill Lynch Real Estate
Opportunity Partners Limited Partnership III, and Zell/Merrill Lynch Real Estate
Opportunity Partners Limited Partnership IV.
"Partner" means a General Partner or a Limited Partner, and
"Partners" means the General Partners 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 upon the terms and conditions set forth in this Agreement, or any successor
to such limited partnership.
"Partnership Interest" means a Limited Partnership Interest or
a General Partnership Interest 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 Managing General Partner either (i) 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 Entity for a distribution to its
shareholders of some or all of its portion of such distribution, or (ii) if
applicable, for determining the Partners entitled to vote on or consent to any
proposed action for which the consent or approval of the Partners is sought
pursuant to Section 14.2 hereof.
"Partnership Unit" means a fractional, undivided share of the
Partnership Interests of all Partners issued pursuant to Sections 4.1 and 4.2,
and includes Class A Units, Class B Units and any other classes or series of
Partnership Units established after the date hereof. The number of Partnership
Units
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<PAGE> 15
outstanding and the Percentage Interests in the Partnership represented by such
Partnership Units are set forth in Exhibit A, as such Exhibit may be amended
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 holding a class
of Partnership Interests, its interest in such class, determined by dividing the
Partnership Units of such class owned by such Partner by the total number of
Partnership Units of such class then outstanding as specified in Exhibit A, as
such exhibit may be amended from time to time, multiplied by the aggregate
Percentage Interest allocable to such class of Partnership Interests. If the
Partnership shall at any time have outstanding more than one class of
Partnership Interests, the Percentage Interest attributable to each class of
Partnership Interests shall be determined as set forth in Section 4.2.B.
"Person" means a natural person, partnership (whether general
or limited), trust, estate, association, corporation, limited liability company,
unincorporated organization, custodian, nominee or any other individual or
entity in its own or any representative capacity.
"Predecessor Entity" has the meaning set forth in the
definition of "Conversion Factor" herein.
"Publicly Traded" means listed or admitted to trading on the
New York Stock Exchange, the American Stock Exchange or another national
securities exchange or designated for quotation on the NASDAQ National Market,
or any successor to any of the foregoing.
"Qualified REIT Subsidiary" means any Subsidiary of the
Managing General Partner that is a "qualified REIT subsidiary" within the
meaning of Section 856(i) of the Code.
"Qualified Transferee" means an "Accredited Investor" as
defined in Rule 501 promulgated under the Securities Act.
"Recapture Income" means any gain recognized by the
Partnership (computed without regard to any adjustment required by Section 734
or Section 743 of the Code) upon the disposition of any property or asset of the
Partnership, which gain is characterized as ordinary income because it
represents the recapture of deductions previously taken with respect to such
property or asset.
"Redeeming Partner" has the meaning set forth in Section
8.6.A.
"Redemption Amount" means either the Cash Amount or the Shares
Amount, as determined by the Managing General Partner, in its sole and absolute
discretion; provided that if the Shares are not Publicly Traded at the time a
Redeeming Partner exercises its Redemption Right, the Redemption Amount shall be
paid only in the form of the Cash Amount unless the Redeeming Partner, in its
sole and absolute discretion, consents to payment of the Redemption Amount in
the form of the Shares Amount. A Redeeming Partner shall have no right, without
the Managing General Partner's consent, in its sole and absolute discretion, to
receive the Redemption Amount in the form of the Shares Amount.
"Redemption Right" has the meaning set forth in Section 8.6.A.
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"Regulation" or "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 Requirements" has the meaning set forth in Section
5.1.A.
"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.1(a) or 2.B.2(a) of Exhibit C to eliminate
Book-Tax Disparities.
"Safe Harbor" has the meaning set forth in Section 11.6.F.
"Securities Act" means the Securities Act of 1933, as amended.
"704(c) Value" of any Contributed Property means the fair
market value of such property at the time of contribution as determined by the
General Partners using such reasonable method of valuation as they may adopt;
provided, however, subject to Exhibit B, the General Partners shall, in their
sole and absolute discretion, use such method as they deem reasonable and
appropriate to allocate the aggregate of the 704(c) Value of Contributed
Properties in a single or integrated transaction among each separate property on
a basis proportional to its fair market values. The 704(c) Values of the
Contributed Properties contributed to the Partnership as part of or in
connection with the Consolidation are set forth on Exhibit E.
"Share" means a share of beneficial interest (or other
comparable equity interest) of the General Partner Entity. Shares may be issued
in one or more classes or series in accordance with the terms of the Declaration
of Trust (or, if the Managing General Partner is not the General Partner Entity,
the organizational documents of the General Partner Entity). If there is more
than one class or series of Shares, the term "Shares" shall, as the context
requires, be deemed to refer to the class or series of Shares that correspond to
the class or series of Partnership Interests for which the reference to Shares
is made. When used with reference to Class A Units, the term "Shares" refers to
common shares of beneficial interest (or other comparable equity interest) of
the General Partner Entity.
"Shares Amount" means a number of Shares equal to the product
of the number of Partnership Units offered for redemption by a Redeeming Partner
times the Conversion Factor; provided that, if the General Partner Entity issues
to all holders of Shares rights, options, warrants or convertible or
exchangeable securities entitling such holders to subscribe for or purchase
Shares or any other securities or property (collectively, the "rights"), then
the Shares Amount shall also include such rights that a holder of that number of
Shares would be entitled to receive.
"Share Option Plan" means any equity incentive plan of the
Managing General Partner, the Partnership and/or any Affiliate of the
Partnership.
"Specified Redemption Date" means the tenth Business Day after
receipt by the Managing General Partner of a Notice of Redemption; provided
that, if the Shares are not Publicly Traded, the Specified Redemption Date means
the thirtieth Business Day after receipt by the Managing General Partner of a
Notice of Redemption.
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<PAGE> 17
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, trust, partnership or joint venture, 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.
"Successor Entity" has the meaning set forth in the definition
of "Conversion Factor" herein.
"Terminating Capital Transaction" means any sale or other
disposition of all or substantially all of the assets of the Partnership for
cash 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 for cash.
"Termination Transaction" has the meaning set forth in Section
11.2.B.
"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) as of such
date, over (ii) the Carrying Value of such property (prior to any adjustment to
be made pursuant to Exhibit B) 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) as of such date, over (ii) the fair market value of such property (as
determined under Exhibit B) as of such date.
"Valuation Date" means the date of receipt by the Managing
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 any outstanding Shares of the
General Partner Entity that are Publicly Traded, the average of the daily market
price for the ten consecutive trading days immediately preceding the date with
respect to which value must be determined. The market price for each such
trading day shall be 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. If the outstanding Shares of the General Partner Entity are Publicly
Traded and the Shares Amount includes rights that a holder of Shares would be
entitled to receive, then the Value of such rights shall be determined by the
Managing General Partner acting in good faith on the basis of such quotations
and other information as it considers, in its reasonable judgment, appropriate.
If the Shares of the General Partner Entity are not Publicly Traded, the Value
of the Shares Amount per Partnership Unit offered for redemption (which will be
the Cash Amount per Partnership Unit offered for redemption payable pursuant to
Section 8.6.A) means the amount that a holder of one Partnership Unit would
receive if each of the assets of the Partnership were to be sold for its fair
market value on the Specified Redemption Date, the Partnership were to pay all
of its outstanding liabilities, and the remaining proceeds were to be
distributed to the Partners in accordance with the terms of this Agreement. Such
Value shall be determined by the Managing General Partner, acting in good faith
and based upon a commercially reasonable estimate of the amount that would be
realized by the Partnership if each asset of the Partnership (and each asset of
each partnership, limited liability company, trust, joint venture or other
entity in which the Partnership owns a direct or indirect
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<PAGE> 18
interest) were sold to an unrelated purchaser in an arms' length transaction
where neither the purchaser nor the seller were under economic compulsion to
enter into the transaction (without regard to any discount in value as a result
of the Partnership's minority interest in any property or any illiquidity of the
Partnership's interest in any property). In connection with determining the
Deemed Value of the Partnership Interest for purposes of determining the number
of additional Partnership Units issuable upon a Capital Contribution funded by
an underwritten public offering or an arm's length private placement of shares
of beneficial interest (or other comparable equity interest) of the Managing
General Partner, the Value of such shares shall be the public offering or arm's
length private placement price per share of such class of beneficial interest
(or other comparable equity interest) sold.
ARTICLE II
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 this
Agreement. Except as expressly provided herein to the contrary, the rights and
obligations of the Partners and the administration and termination of the
Partnership shall be governed by the Act. The Partnership Interest of each
Partner shall be personal property for all purposes.
SECTION 2.2 NAME
The name of the Partnership is EOP Operating Limited
Partnership. The Partnership's business may be conducted under any other name or
names deemed advisable by the General Partners, including the name of any of the
General Partners 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 Partners in their 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 REGISTERED OFFICE AND AGENT; PRINCIPAL OFFICE
The address of the registered office of the Partnership in the
State of Delaware shall be located at Corporation Trust Center, 1209 Orange
Street, Wilmington, County of New Castle, Delaware 19801, and the registered
agent for service of process on the Partnership in the State of Delaware at such
registered office shall be Corporation Trust Company. The principal office of
the Partnership shall be Two North Riverside Plaza, Suite 2200, Chicago,
Illinois 60606, or such other place as the General Partners 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 Partners deem advisable.
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<PAGE> 19
SECTION 2.4 TERM
The term of the Partnership shall commence on November 1,
1996, and shall continue until December 31, 2095, unless it is dissolved sooner
pursuant to the provisions of Article XIII or as otherwise provided by law.
ARTICLE III
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 Entity at all times to be classified as a REIT, unless the
General Partner Entity ceases to qualify or is not qualified as a REIT for any
reason or reasons not related to the business conducted by the Partnership, (ii)
to enter into any corporation, partnership, joint venture, trust, limited
liability company or other similar arrangement to engage in any of the foregoing
or the ownership of 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, the Partners acknowledge that the
status of the General Partner Entity as a REIT inures to the benefit of all the
Partners and not solely to the General Partner Entity or its Affiliates.
SECTION 3.2 POWERS
The Partnership is empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described herein and
for the protection and benefit of the Partnership, including, without
limitation, full power and authority, directly or through its ownership interest
in other entities, to enter into, perform and carry out contracts of any kind,
borrow money and issue evidences of indebtedness, whether or not secured by
mortgage, deed of trust, pledge or other lien, acquire, own, manage, improve and
develop real property, and lease, sell, transfer and dispose of real property;
provided, however, that the Partnership shall not take, or refrain from taking,
any action which, in the judgment of the Managing General Partner, in its sole
and absolute discretion, (i) could adversely affect the ability of the General
Partner Entity to continue to qualify as a REIT, (ii) could subject the General
Partner Entity 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 any General Partner or its securities, unless
such action (or inaction) shall have been specifically consented to by the
General Partner in writing.
ARTICLE IV
CAPITAL CONTRIBUTIONS AND ISSUANCES
OF PARTNERSHIP INTERESTS
SECTION 4.1 CAPITAL CONTRIBUTIONS OF THE PARTNERS
At the time of the execution of this Agreement, the Partners
shall make or shall have made the Capital Contributions as set forth in Exhibit
A. The Partners shall own Partnership Units in the
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amounts set forth in Exhibit A and shall have a Percentage Interest in the
Partnership as set forth in Exhibit A, which Percentage Interest shall be
adjusted in Exhibit A from time to time by the Managing General Partner to the
extent necessary to reflect accurately redemptions, Capital Contributions, the
issuance of additional Partnership Units or similar events having an effect on a
Partner's Percentage Interest. To the extent the Partnership is acquiring 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
merging into the Partnership shall become Partners and shall be deemed to have
made Capital Contributions as provided in the applicable merger agreement and as
set forth in Exhibit A. A number of Partnership Units held by each of the
General Partners equal to one percent (1%) of all outstanding Partnership Units
(as of the closing date of the Consolidation) shall be deemed to be the General
Partner Partnership Units and shall be the General Partnership Interest of such
General Partner. All other Partnership Units held by the General Partners shall
be deemed to be Limited Partnership Interests and shall be held by the General
Partners in their capacity as Limited Partners in the Partnership. Except as
provided in Sections 7.5 and 10.5 hereof, the Partners shall have no obligation
to make any additional Capital Contributions or provide any additional funding
to the Partnership (whether in the form of loans, repayments of loans or
otherwise). No Partner shall have any obligation to restore any deficit that may
exist in its Capital Account, either upon a liquidation of the Partnership or
otherwise.
SECTION 4.2 ISSUANCES OF PARTNERSHIP INTERESTS
A. General. The Managing General Partner is hereby authorized
to cause the Partnership from time to time to issue to Partners (including the
Managing General Partner and its Affiliates) or other Persons (including,
without limitation, in connection with the contribution of property to the
Partnership) Partnership Units or other Partnership Interests in one or more
classes, or in one or more series of any of such classes, with such
designations, preferences and relative, participating, optional or other special
rights, powers and duties, including rights, powers and duties senior to Limited
Partnership Interests, all as shall be determined, subject to applicable
Delaware law, by the Managing General Partner in its sole and absolute
discretion, including, without limitation, (i) the allocations of items of
Partnership income, gain, loss, deduction and credit to each such class or
series of Partnership Interests, (ii) the right of each such class or series of
Partnership Interests to share in Partnership distributions and (iii) the rights
of each such class or series of Partnership Interests upon dissolution and
liquidation of the Partnership; provided that, no such Partnership Units or
other Partnership Interests shall be issued to the Managing General Partner
unless either (a) the Partnership Interests are issued in connection with the
grant, award or issuance of Shares or other equity interests in the Managing
General Partner having designations, preferences and other rights such that the
economic interests attributable to such Shares or other equity interests are
substantially similar to the designations, preferences and other rights (except
voting rights) of the Partnership Interests issued to the Managing General
Partner in accordance with this Section 4.2.A or (b) the additional Partnership
Interests are issued to all Partners holding Partnership Interests in the same
class in proportion to their respective Percentage Interests in such class. If
the Partnership issues Partnership Interests pursuant to this Section 4.2.A, the
Managing General Partner shall make such revisions to this Agreement (including
but not limited to the revisions described in Section 5.4, Section 6.2 and
Section 8.6) as it deems necessary to reflect the issuance of such Partnership
Interests.
B. Percentage Interest Adjustments in the Case of Capital
Contributions for Partnership Units. Upon the acceptance of additional Capital
Contributions in exchange for Partnership Units and if the Partnership shall
have outstanding more than one class of Partnership Interests, the Percentage
Interest related thereto shall be equal to a fraction, the numerator of which is
equal to the
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<PAGE> 21
amount of cash, if any, plus the Agreed Value of Contributed Property, if any,
contributed with respect to such additional Partnership Units and the
denominator of which is equal to the sum of (i) the Deemed Value of the
Partnership Interests for all outstanding classes (computed as of the Business
Day immediately preceding the date on which the additional Capital Contributions
are made (an "Adjustment Date")) plus (ii) the aggregate amount of additional
Capital Contributions contributed to the Partnership on such Adjustment Date in
respect of such additional Partnership Units. The Percentage Interest of each
other Partner holding Partnership Interests not making a full pro rata Capital
Contribution shall be adjusted to a fraction the numerator of which is equal to
the sum of (i) the Deemed Partnership Interest Value of such Limited Partner
(computed as of the Business Day immediately preceding the Adjustment Date) plus
(ii) the amount of additional Capital Contributions (such amount being equal to
the amount of cash, if any, plus the Agreed Value of Contributed Property, if
any, so contributed), if any, made by such Partner to the Partnership in respect
of such Partnership Interest as of such Adjustment Date and the denominator of
which is equal to the sum of (i) the Deemed Value of the Partnership Interests
of all outstanding classes (computed as of the Business Day immediately
preceding such Adjustment Date) plus (ii) the aggregate amount of the additional
Capital Contributions contributed to the Partnership on such Adjustment Date in
respect of such additional Partnership Interests. For purposes of calculating a
Partner's Percentage Interest pursuant to this Section 4.2.B, cash Capital
Contributions by a General Partner will be deemed to equal the cash contributed
by such General Partner plus (a) in the case of cash contributions funded by an
offering of any equity interests in or other securities of the Managing General
Partner, the offering costs attributable to the cash contributed to the
Partnership, and (b) in the case of Partnership Units issued pursuant to Section
7.5.E, an amount equal to the difference between the Value of the Shares sold
pursuant to any Share Option Plan and the net proceeds of such sale.
C. Classes of Partnership Units. From and after the Effective
Date, subject to Section 4.2.A above, the Partnership shall have two classes of
Partnership Units entitled "Class A Units" and "Class B Units." Either Class A
Units or Class B Units, at the election of the Managing General Partner, in its
sole and absolute discretion, may be issued to newly admitted Partners in
exchange for the contribution by such Partners of cash, real estate partnership
interests, stock, notes or other assets or consideration; provided, that all
Partnership Units issued to Partners in connection with the Consolidation shall
be Class A Units; and, provided further, that any Partnership Unit that is not
specifically designated by the General Partner as being of a particular class
shall be deemed to be a Class A Unit. Each Class B Unit shall be converted
automatically into a Class A Unit on the day immediately following the
Partnership Record Date for the Distribution Period (as defined in Section
5.1.C) in which such Class B Unit was issued, without the requirement for any
action by either the Partnership or the Partner holding the Class B Unit.
SECTION 4.3 NO PREEMPTIVE RIGHTS
Except to the extent expressly granted by the Partnership
pursuant to another agreement, 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.
SECTION 4.4 OTHER CONTRIBUTION PROVISIONS
If any Partner is admitted to the Partnership and is given a
Capital Account in exchange for services rendered to the Partnership, such
transaction shall be treated by the Partnership and the
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affected Partner as if the Partnership had compensated such Partner in cash, and
the Partner had contributed such cash to the capital of the Partnership.
SECTION 4.5 NO INTEREST ON CAPITAL
No Partner shall be entitled to interest on its Capital
Contributions or its Capital Account.
ARTICLE V
DISTRIBUTIONS
SECTION 5.1 REQUIREMENT AND CHARACTERIZATION OF DISTRIBUTIONS
A. General. The General Partners shall distribute at least
quarterly an amount equal to one hundred percent (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 as provided in Sections 5.1.B, 5.1.C and 5.1.D.
Notwithstanding anything to the contrary contained herein, in no event may a
Partner receive a distribution of Available Cash with respect to a Partnership
Unit for a quarter or shorter period if such Partner is entitled to receive a
distribution with respect to a Share for which such Partnership Unit has been
redeemed or exchanged. Unless otherwise expressly provided for herein or in an
agreement at the time a new class of Partnership Interests is created in
accordance with Article IV hereof, no Partnership Interest shall be entitled to
a distribution in preference to any other Partnership Interest. The General
Partners shall make such reasonable efforts, as determined by them in their sole
and absolute discretion and consistent with the qualification of the General
Partner Entity as a REIT, to distribute Available Cash (a) to Limited Partners
so as to preclude any such distribution or portion thereof from being treated as
part of a sale of property of the Partnership by a Limited Partner under Section
707 of the Code or the Regulations thereunder; provided that, the General
Partners 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, and (b) to the General Partners in an amount sufficient to enable the
General Partner Entity to pay shareholder dividends that will (1) satisfy the
requirements for qualification as a REIT under the Code and the Regulations (the
"REIT Requirements") of, and (2) avoid any federal income or excise tax
liability for, the General Partner Entity.
B. Method. (i) Each holder of Partnership Interests that is
entitled to any preference in distribution shall be entitled to a distribution
in accordance with the rights of any such class of Partnership Interests (and,
within such class, pro rata in proportion to the respective Percentage Interests
on such Partnership Record Date); and
(ii) To the extent there is Available Cash remaining after the
payment of any preference in distribution in accordance with the foregoing
clause (i), with respect to Partnership Interests that are not entitled to any
preference in distribution, pro rata to each such class in accordance with the
terms of such class (and, within each such class, pro rata in proportion to the
respective Percentage Interests on such Partnership Record Date).
C. Distributions When Class B Units Are Outstanding. If for
any quarter or shorter period with respect to which a distribution is to be made
(a "Distribution Period") Class B Units are outstanding on the Partnership
Record Date for such Distribution Period, the General Partners shall
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allocate the Available Cash with respect to such Distribution Period available
for distribution with respect to the Class A Units and Class B Units
collectively between the Partners who are holders of Class A Units ("Class A")
and the Partners who are holders of Class B Units ("Class B") as follows:
(1) Class A shall receive that
portion of the Available Cash (the "Class A Share")
determined by multiplying the amount of Available
Cash by the following fraction:
A x Y
--------------------------
(A x Y)+(B x X)
(2) Class B shall receive that
portion of the Available Cash (the "Class B Share")
determined by multiplying the amount of Available
Cash by the following fraction:
B x X
--------------------------
(A x Y)+(B x X)
(3) For purposes of the foregoing
formulas, (i) "A" equals the number of Class A Units
outstanding on the Partnership Record Date for such
Distribution Period; (ii) "B" equals the number of
Class B Units outstanding on the Partnership Record
Date for such Distribution Period; (iii) "Y" equals
the number of days in the Distribution Period; and
(iv) "X" equals the number of days in the
Distribution Period for which the Class B Units were
issued and outstanding.
The Class A Share shall be distributed among Partners holding
Class A Units on the Partnership Record Date for the Distribution Period in
accordance with the number of Class A Units held by each Partner on such
Partnership Record Date; provided that, in no event may a Partner receive a
distribution of Available Cash with respect to a Class A Unit if a Partner is
entitled to receive a distribution out of such Available Cash with respect to a
Share for which such Class A Unit has been redeemed or exchanged. The Class B
Shares shall be distributed among the Partners holding Class B Units on the
Partnership Record Date for the Distribution Period in accordance with the
number of Class B Units held by each Partner on such Partnership Record Date. In
no event shall any Class B Units
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be entitled to receive any distribution of Available Cash for any Distribution
Period ending prior to the date on which such Class B Units are issued.
D. Distributions When Class B Units Have Been Issued on
Different Dates. If Class B Units which have been issued on different dates are
outstanding on the Partnership Record Date for any Distribution Period, then the
Class B Units issued on each particular date shall be treated as a separate
series of Partnership Units for purposes of making the allocation of Available
Cash for such Distribution Period among the holders of Partnership Units (and
the formula for making such allocation, and the definitions of variables used
therein, shall be modified accordingly). Thus, for example, if two series of
Class B Units are outstanding on the Partnership Record Date for any
Distribution Period, the allocation formula for each series, "Series B(1)" and
"Series B(2)" would be as follows:
(1) Series B(1) shall receive that
portion of the Available Cash determined by
multiplying the amount of Available Cash by the
following fraction:
B(1) x X(1)
--------------------------------------
(A x Y)+(B(1) x X(1))+(B(2) x X(2))
(2) Series B(2) shall receive that
portion of the Available Cash determined by
multiplying the amount of Available Cash by the
following fraction:
B(2) x X(2)
--------------------------------------
(A x Y)+(B(1) x X(1))+(B(2) x X(2))
(3) For purposes of the foregoing
formulas the definitions set forth in Section 5.1.C.3
remain the same except that (i) "B(1)" equals the
number of Partnership Units in Series B(1)
outstanding on the Partnership Record Date for such
Distribution Period; (ii) "B(2)" equals the number of
Partnership Units in Series B(2) outstanding on the
Partnership Record Date for such Distribution Period;
(iii) "X(1)" equals the number of days in the
Distribution Period for which the Partnership Units
in Series B(1) were issued and outstanding; and (iv)
"X(2)" equals the number of days in
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the Distribution Period for which the Partnership
Units in Series B(2) were issued and outstanding.
E. Minimum Distributions if Shares Not Publicly Traded. In
addition (and without regard to the amount of Available Cash), if the Shares of
the General Partner Entity are not Publicly Traded, the Managing General Partner
shall make cash distributions with respect to the Class A Units at least
annually for each taxable year of the Partnership beginning prior to the
fifteenth (15th) anniversary of the Effective Date in an aggregate amount with
respect to each such taxable year at least equal to 95% of the Partnership's
taxable income for such year allocable to the Class A Units, with such
distributions to be made not later than 60 days after the end of such year.
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 with respect to any allocation,
payment or distribution to the General Partners, the Limited Partners or
Assignees shall be treated as amounts distributed to the General Partners,
Limited Partners or Assignees pursuant to Section 5.1 for all purposes under
this Agreement.
SECTION 5.3 DISTRIBUTIONS UPON LIQUIDATION
Proceeds from a Terminating Capital Transaction shall be
distributed to the Partners in accordance with Section 13.2.
SECTION 5.4 REVISIONS TO REFLECT ISSUANCE OF PARTNERSHIP INTERESTS
If the Partnership issues Partnership Interests to the General
Partners or any Additional Limited Partner pursuant to Article IV hereof, the
Managing General Partner shall make such revisions to this Article V and Exhibit
A as it deems necessary to reflect the issuance of such additional Partnership
Interests without the requirements for any other consents or approvals.
ARTICLE VI
ALLOCATIONS
SECTION 6.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES
For purposes of maintaining the Capital Accounts and in
determining the rights of the Partners among themselves, the Partnership's items
of income, gain, loss and deduction (computed in accordance with Exhibit B)
shall be allocated among the Partners in each taxable year (or portion thereof)
as provided herein below.
A. Net Income. After giving effect to the special allocations
set forth in Section 1 of Exhibit C, Net Income shall be allocated (i) first, to
the General Partners to the extent that Net Losses previously allocated to the
General Partners pursuant to the last sentence of Section 6.1.B exceed Net
Income previously allocated to the General Partners pursuant to this clause (i)
of Section 6.1.A, (ii) second, to the holders of any Partnership Interests that
are entitled to any preference in distribution in accordance with the rights of
any such class of Partnership Interests until each such Partnership Interest has
been allocated, on a cumulative basis pursuant to this clause (ii), Net Income
equal to the amount of
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distributions received which are attributable to the preference of such class of
Partnership Interests (and, within such class, pro rata in proportion to the
respective Percentage Interests as of the last day of the period for which such
allocation is being made) and (iii) third, with respect to Partnership Interests
that are not entitled to any preference in the allocation of Net Income, pro
rata to each such class in accordance with the terms of such class (and, within
such class, pro rata in proportion to the respective Percentage Interests as of
the last day of the period for which such allocation is being made).
B. Net Losses. After giving effect to the special allocations
set forth in Section 1 of Exhibit C, Net Losses shall be allocated (i) first, to
the holders of any Partnership Interests that are entitled to any preference in
distribution in accordance with the rights of any such class of Partnership
Interests to the extent that any prior allocations of Net Income to such class
of Partnership Interests pursuant to Section 6.1.A(ii) exceed, on a cumulative
basis, distributions with respect to such Partnership Interests pursuant to
clause (i) of Section 5.1.B (and, within such class, pro rata in proportion to
the respective Percentage Interests as of the last day of the period for which
such allocation is being made) and (ii) second, with respect to classes of
Partnership Interests that are not entitled to any preference in distribution,
pro rata to each such class in accordance with the terms of such class (and,
within such class, pro rata in proportion to the respective Percentage Interests
as of the last day of the period for which such allocation is being made);
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 (or increase any
existing Adjusted Capital Account Deficit) at the end of such taxable year (or
portion thereof). All Net Losses in excess of the limitations set forth in this
Section 6.1.B shall be allocated to the General Partners.
C. Allocation of Nonrecourse Debt. For purposes of Regulation
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. Recapture Income. 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.
SECTION 6.2 REVISIONS TO ALLOCATIONS TO REFLECT ISSUANCE OF
PARTNERSHIP INTERESTS
If the Partnership issues Partnership Interests to the General
Partners or any Additional Limited Partner pursuant to Article IV hereof, the
Managing General Partner shall make such revisions to this Article VI and
Exhibit A as it deems necessary to reflect the terms of the issuance of such
Partnership Interests, including making preferential allocations to classes of
Partnership Interests that are entitled thereto. Such revisions shall not
require the consent or approval of any other Partner.
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ARTICLE VII
MANAGEMENT AND OPERATIONS OF BUSINESS
SECTION 7.1 MANAGEMENT
A. Powers of General Partners. Except as otherwise expressly
provided in this Agreement, all management powers over the business and affairs
of the Partnership are and shall be exclusively vested in the General Partners,
and no Limited Partner shall have any right to participate in or exercise
control or management power over the business and affairs of the Partnership.
The General Partners 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
Partners under any other provision of this Agreement, the Managing General
Partner, subject to Section 7.11, 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 and to effectuate
the purposes set forth in Section 3.1, 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 are required under Section 5.1.E
or will permit the General Partner Entity
(so long as the General Partner Entity
qualifies as 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 Entity to maintain REIT
status), the assumption or guarantee of, or
other contracting for, indebtedness and
other liabilities, the issuance of evidences
of indebtedness (including the securing of
same by mortgage, deed of trust or other
lien or encumbrance on the Partnership's
assets) and the incurring of any obligations
the General Partner Entity 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 or all of the 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 on such terms as the
Managing General Partner deems proper;
(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 Partners, the
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Partnership or any of the Partnership's
Subsidiaries, the lending of funds to other
Persons (including, without limitation, the
Managing General Partner, its Subsidiaries
and the Partnership's Subsidiaries) and the
repayment of obligations of the Partnership
and its Subsidiaries and any other Person in
which the Partnership 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 or any Person
in which the Partnership has made a direct
or indirect equity investment;
(6) the negotiation, execution, and performance
of any contracts, conveyances or other
instruments that the Managing General
Partner considers useful or necessary to the
conduct of the Partnership's operations or
the implementation of the Managing 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;
(7) the mortgage, pledge, encumbrance or
hypothecation of any assets of the
Partnership, and the use of the assets of
the Partnership (including, without
limitation, cash on hand) for any purpose
consistent with the terms of this Agreement
and on any terms it sees fit, including,
without limitation, the financing of the
conduct or the operations of the General
Partners or the Partnership, the lending of
funds to other Persons (including, without
limitation, any Subsidiaries of the
Partnership) and the repayment of
obligations of the Partnership, any of its
Subsidiaries and any other Person in which
it has an equity investment;
(8) the distribution of Partnership cash or
other Partnership assets in accordance with
this Agreement;
(9) the holding, managing, investing and
reinvesting of cash and other assets of the
Partnership;
(10) the collection and receipt of revenues and
income of the Partnership;
(11) the selection, designation of powers,
authority and duties and the dismal of
employees of the Partnership (including,
without limitation, employees having titles
such as "president," "vice president,"
"secretary" and "treasurer") and agents,
outside attorneys, accountants, consultants
and contractors of the Partnership and the
determination of their compensation and
other terms of employment or hiring;
(12) the maintenance of such insurance for the
benefit of the Partnership and the Partners
as it deems necessary or appropriate;
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(13) the formation of, or acquisition of an
interest (including non-voting interests in
entities controlled by Affiliates of the
Partnership or third parties) in, and the
contribution of property to, any further
limited or general partnerships, joint
ventures, limited liability companies or
other relationships that it deems desirable
(including, without limitation, the
acquisition of interests in, and the
contributions of funds or property to, or
making of loans to, its Subsidiaries and any
other Person in which it has an equity
investment from time to time, or the
incurrence of indebtedness on behalf of such
Persons or the guarantee of the obligations
of such Persons); provided that, as long as
the Managing General Partner has determined
to continue to qualify as a REIT, the
Partnership may not engage in any such
formation, acquisition or contribution that
would cause the Managing General Partner to
fail to qualify as a REIT;
(14) 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, 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;
(15) the determination of the fair market value
of any Partnership property distributed in
kind, using such reasonable method of
valuation as the Managing General Partner
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 assets or investment held
by the Partnership;
(17) the exercise of any of the powers of the
General Partners 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, individually or
jointly with any such Subsidiary or other
Person;
(18) the exercise of any of the powers of the
General Partners enumerated in this
Agreement on behalf of any Person in which
the Partnership does not have any interest
pursuant to contractual or other
arrangements with such Person;
(19) the making, executing and delivering of any
and all deeds, leases, notes, deeds to
secure debt, mortgages, deeds of trust,
security agreements,
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conveyances, contracts, guarantees,
warranties, indemnities, waivers, releases
or other legal instruments or agreements in
writing necessary or appropriate in the
judgment of the Managing General Partner for
the accomplishment of any of the powers of
the General Partners enumerated in this
Agreement; and
(20) the distribution of cash 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; and
(21) the amendment and restatement of Exhibit A
to reflect accurately at all times the
Capital Contributions and Percentage
Interests of the Partners as the same are
adjusted from time to time to the extent
necessary to reflect redemptions, Capital
Contributions, the issuance of Partnership
Units, the admission of any Additional
Limited Partner or any Substituted Limited
Partner or otherwise, which amendment and
restatement, notwithstanding anything in
this Agreement to the contrary, shall not be
deemed an amendment of this Agreement, as
long as the matter or event being reflected
in Exhibit A otherwise is authorized by this
Agreement.
B. No Approval by Limited Partners. Except as provided in
Section 7.11, each of the Limited Partners and the other General Partners agrees
that the Managing 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, the Act or any applicable law, rule or
regulation, to the full extent permitted under the Act or other applicable law.
The execution, delivery or performance by the Managing General Partner or the
Partnership of any agreement authorized or permitted under this Agreement shall
not constitute a breach by the Managing General Partner of any duty that the
Managing General Partner may owe the Partnership or the Limited Partners or any
other Persons under this Agreement or of any duty stated or implied by law or
equity.
C. Insurance. At all times from and after the date hereof, the
Managing General Partner may cause the Partnership to obtain and maintain (i)
casualty, liability and other insurance on the properties of the Partnership and
(ii) liability insurance for the Indemnitees hereunder and (iii) such other
insurance as the Managing General Partner, in its sole and absolute discretion,
determines to be necessary.
D. Working Capital and Other Reserves. At all times from and
after the date hereof, the Managing General Partner may cause the Partnership to
establish and maintain working capital reserves in such amounts as the Managing
General Partner, in its sole and absolute discretion, deems appropriate and
reasonable from time to time, including upon liquidation of the Partnership
under Section 13.
E. No Obligations to Consider Tax Consequences of Limited
Partners. In exercising their authority under this Agreement, the General
Partners may, but shall be under no obligation to, take into account the tax
consequences to any Partner (including the General Partners) of any action taken
(or not taken) by any of them. The General Partners and the Partnership shall
not have liability to a Limited Partner for monetary damages or otherwise for
losses sustained, liabilities incurred
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or benefits not derived by such Limited Partner in connection with such
decisions, provided that the General Partners have acted in good faith and
pursuant to their authority under this Agreement.
SECTION 7.2 CERTIFICATE OF LIMITED PARTNERSHIP
The General Partners have previously filed the Certificate
with the Secretary of State of Delaware. To the extent that such action is
determined by the General Partners to be reasonable and necessary or
appropriate, the General Partners shall file amendments to and restatements of
the Certificate and do all the things to maintain the Partnership as a limited
partnership (or a partnership in which the limited partners have limited
liability) under the laws of the State of Delaware and each other state, the
District of Columbia or other jurisdiction in which the Partnership may elect to
do business or own property. Subject to the terms of Section 8.5.A(4), the
General Partners shall not be required, before or after filing, to deliver or
mail a copy of the Certificate or any amendment thereto to any Limited Partner.
The Managing General Partner shall use all reasonable efforts to cause to be
filed such other certificates or documents as may be reasonable and necessary or
appropriate for the formation, continuation, qualification and operation of a
limited partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware and any other state, the District of
Columbia or other jurisdiction in which the Partnership may elect to do business
or own property.
SECTION 7.3 TITLE TO PARTNERSHIP ASSETS
Title to Partnership assets, whether real, personal or mixed
and whether tangible or intangible, shall be deemed to be owned by the
Partnership as an entity, and no Partners, individually or collectively, shall
have any ownership interest in such Partnership assets or any portion thereof.
Title to any or all of the Partnership assets may be held in the name of the
Partnership, any General Partner or one or more nominees, as the Managing
General Partner may determine, including Affiliates of the General Partners. The
General Partners hereby declare and warrant that any Partnership assets for
which legal title is held in the name of any General Partner or any nominee or
Affiliate of the General Partners shall be held by that General Partner for the
use and benefit of the Partnership in accordance with the provisions of this
Agreement. 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 7.4 REIMBURSEMENT OF THE GENERAL PARTNERS
A. No Compensation. Except as provided in this Section 7.4 and
elsewhere in this Agreement (including the provisions of Articles V and VI
regarding distributions, payments and allocations to which it may be entitled),
the General Partners shall not be compensated for their services as general
partners of the Partnership.
B. Responsibility for Partnership Expenses. The Partnership
shall be responsible for and shall pay all expenses relating to the
Partnership's organization, the ownership of its assets and its operations. The
Managing General Partner shall be reimbursed on a monthly basis, or such other
basis as the Managing 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 (including, without limitation,
expenses related to the operations of the General Partners and to the management
and administration of any Subsidiaries of the Managing General Partner or the
Partnership or Affiliates of the Partnership, such as auditing expenses and
filing fees); provided that, the amount of any such
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reimbursement shall be reduced by (i) any interest earned by the Managing
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 (which
interest is considered to belong to the Partnership and shall be paid over to
the Partnership to the extent not applied to reimburse the Managing General
Partner for expenses hereunder); and (ii) any amount derived by the Managing
General Partner from any investments permitted in Section 7.5.A. The Managing
General Partner shall determine in good faith the amount of expenses incurred by
it related to the ownership and operation of, or for the benefit of, the
Partnership. If certain expenses are incurred for the benefit of the Partnership
and other entities (including the Managing General Partner), such expenses will
be allocated to the Partnership and such other entities in such a manner as the
Managing General Partner in its sole and absolute discretion deems fair and
reasonable. Such reimbursements shall be in addition to any reimbursement to the
Managing General Partner pursuant to Section 10.3.C and as a result of
indemnification pursuant to Section 7.7. All payments and reimbursements
hereunder shall be characterized for federal income tax purposes as expenses of
the Partnership incurred on its behalf, and not as expenses of the Managing
General Partner.
C. Partnership Interest Issuance Expenses. The Managing
General Partner shall also be reimbursed for all expenses it incurs relating to
any issuance of Partnership Interests, Shares, Debt of the Partnership or the
Managing General Partner or rights, options, warrants or convertible or
exchangeable securities pursuant to Article IV (including, without limitation,
all costs, expenses, damages and other payments resulting from or arising in
connection with litigation related to any of the foregoing), all of which
expenses are considered by the Partners to constitute expenses of, and for the
benefit of, the Partnership.
D. Purchases of Shares by the Managing General Partner. If the
Managing General Partner exercises its rights under the Declaration of Trust to
purchase Shares or otherwise elects to purchase from its shareholders Shares in
connection with a share repurchase or similar program or for the purpose of
delivering such Shares to satisfy an obligation under any dividend reinvestment
or equity purchase program adopted by the Managing General Partner, any employee
equity purchase plan adopted by the Managing General Partner or any similar
obligation or arrangement undertaken by the Managing General Partner in the
future, the purchase price paid by the Managing General Partner for those Shares
and any other expenses incurred by the Managing General Partner in connection
with such purchase shall be considered expenses of the Partnership and shall be
reimbursable to the Managing General Partner, subject to the conditions that:
(i) if those Shares subsequently are to be sold by the Managing General Partner,
the Managing General Partner shall pay to the Partnership any proceeds received
by the Managing General Partner for those Shares (provided that a transfer of
Shares for Partnership Units pursuant to Section 8.6 would not be considered a
sale for such purposes); and (ii) if such Shares are not retransferred by the
Managing General Partner within thirty (30) days after the purchase thereof, the
Managing General Partner shall cause the Partnership to cancel a number of
Partnership Units (rounded to the nearest whole Partnership Unit) held by the
Managing General Partner equal to the product attained by multiplying the number
of those Shares by a fraction, the numerator of which is one and the denominator
of which is the Conversion Factor.
E. Reimbursement not a Distribution. If and to the extent any
reimbursement made pursuant to this Section 7.4 is determined for federal income
tax purposes not to constitute a payment of expenses of the Partnership, the
amount so determined shall constitute a guaranteed payment with respect to
capital within the meaning of Section 707(c) of the Code, shall be treated
consistently therewith by the Partnership and all Partners and shall not be
treated as a distribution for purposes of computing the Partners' Capital
Accounts.
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SECTION 7.5 OUTSIDE ACTIVITIES OF THE GENERAL PARTNERS; RELATIONSHIP
OF SHARES TO PARTNERSHIP UNITS; FUNDING DEBT
A. General. Without the Consent of the Outside Limited
Partners, the General Partners shall not, directly or indirectly, enter into or
conduct any business other than in connection with the ownership, acquisition
and disposition of Partnership Interests as a General Partner or Limited Partner
and the management of the business of the Partnership and such activities as are
incidental thereto. Without the Consent of the Outside Limited Partners, the
assets of the Managing General Partner shall be limited to Partnership Interests
and permitted debt obligations of the Partnership (as contemplated by Section
7.5.F), so that Shares and Partnership Units are completely fungible except as
otherwise specifically provided herein; provided, that the Managing General
Partner shall be permitted to hold such bank accounts or similar instruments or
accounts in its name as it deems necessary to carry out its responsibilities and
purposes as contemplated under this Agreement and its organizational documents
(provided that accounts held on behalf of the Partnership to permit the Managing
General Partner to carry out its responsibilities under this Agreement shall be
considered to belong to the Partnership and the interest earned thereon shall,
subject to Section 7.4.B, be applied for the benefit of the Partnership); and,
provided further, that the General Partners shall be permitted to acquire,
directly or through a Qualified REIT Subsidiary or limited liability company, up
to a one percent (1%) interest in any partnership or limited liability company
at least ninety-nine percent (99%) of the equity of which is owned, directly or
indirectly, by the Partnership. The Managing General Partner and any of its
Affiliates may acquire Limited Partnership Interests and shall be entitled to
exercise all rights of a Limited Partner relating to such Limited Partnership
Interests.
B. Repurchase of Shares. If the Managing General Partner
exercises its rights under the Declaration of Trust to purchase Shares or
otherwise elects to purchase from its shareholders Shares in connection with a
share repurchase or similar program or for the purpose of delivering such shares
to satisfy an obligation under any dividend reinvestment or share purchase
program adopted by the Managing General Partner, any employee share purchase
plan adopted by the Managing General Partner or any similar obligation or
arrangement undertaken by the Managing General Partner in the future, then the
Managing General Partner shall cause the Partnership to purchase from the
Managing General Partner that number of Partnership Units of the appropriate
class equal to the product obtained by multiplying the number of Shares
purchased by the Managing General Partner times a fraction, the numerator of
which is one and the denominator of which is the Conversion Factor, on the same
terms and for the same aggregate price that the Managing General Partner
purchased such Shares.
C. Forfeiture of Shares. If the Partnership or the Managing
General Partner acquires Shares as a result of the forfeiture of such Shares
under a restricted or similar share plan, then the Managing General Partner
shall cause the Partnership to cancel that number of Partnership Units equal to
the number of Shares so acquired, and, if the Partnership acquired such Shares,
it shall transfer such Shares to the Managing General Partner for cancellation.
D. Issuances of Shares. After the Effective Date, the Managing
General Partner shall not grant, award, or issue any additional Shares (other
than Shares issued pursuant to Section 8.6 hereof, pursuant to a dividend or
distribution (including any share split) of Shares to all of its shareholders,
or in connection with any acquisition permitted by Section 7.5.A hereof of up to
a one percent (1%) interest in any partnership or limited liability company at
least ninety-nine percent (99%) of the equity of which is owned, directly or
indirectly, by the Partnership), other equity securities of the Managing General
Partner, New Securities or Convertible Funding Debt unless (i) the Managing
General Partner shall cause, pursuant to Section 4.2.A hereof, the Partnership
to issue to the Managing General Partner Partnership Interests or rights,
options, warrants or convertible or exchangeable securities of the
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Partnership having designations, preferences and other rights, all such that the
economic interests are substantially the same as those of such additional
Shares, other equity securities, New Securities or Convertible Funding Debt, as
the case may be, and (ii) the Managing General Partner transfers to the
Partnership, as an additional Capital Contribution, the proceeds from the grant,
award, or issuance of such additional Shares, other equity securities, New
Securities or Convertible Funding Debt, as the case may be, or from the exercise
of rights contained in such additional Shares, other equity securities, New
Securities or Convertible Funding Debt, as the case may be. Without limiting the
foregoing, the Managing General Partner is expressly authorized to issue
additional Shares, other equity securities, New Securities or Convertible
Funding Debt, as the case may be, for less than fair market value, and the
Managing General Partner is expressly authorized, pursuant to Section 4.2.A
hereof, to cause the Partnership to issue to the Managing General Partner
corresponding Partnership Interests, as long as (a) the Managing General Partner
concludes in good faith that such issuance is in the interests of the Managing
General Partner and the Partnership (for example, and not by way of limitation,
the issuance of Shares and corresponding Partnership Units pursuant to a share
purchase plan providing for purchases of Shares, either by employees or
shareholders, at a discount from fair market value or pursuant to employee share
options that have an exercise price that is less than the fair market value of
the Shares, either at the time of issuance or at the time of exercise) and (b)
the Managing General Partner transfers all proceeds from any such issuance or
exercise to the Partnership as an additional Capital Contribution.
E. Share Option Plan. If at any time or from time to time, the
Managing General Partner sells Shares pursuant to any Share Option Plan, the
Managing General Partner shall transfer the net proceeds of the sale of such
Shares to the Partnership as an additional Capital Contribution in exchange for
an amount of additional Partnership Units equal to the number of Shares so sold
divided by the Conversion Factor.
F. Funding Debt. The Managing General Partner may incur a
Funding Debt, including, without limitation, a Funding Debt that is convertible
into Shares or otherwise constitutes a class of New Securities ("Convertible
Funding Debt"), subject to the condition that the Managing General Partner lend
to the Partnership the net proceeds of such Funding Debt; provided, that
Convertible Funding Debt shall be issued pursuant to Section 7.5.D above; and,
provided further, that the Managing General Partner shall not be obligated to
lend the net proceeds of any Funding Debt to the Partnership in a manner that
would be inconsistent with the Managing General Partner's ability to remain
qualified as a REIT. If the Managing General Partner enters into any Funding
Debt, the loan to the Partnership shall be on comparable terms and conditions,
including interest rate, repa