<PAGE>
Exhibit 3.5
AGREEMENT OF LIMITED PARTNERSHIP
OF
SHOPOFF PARTNERS, L.P.
DATED AS OF NOVEMBER 17, 2006
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ARTICLE 1 DEFINED
TERMS................................................
1
ARTICLE 2
ORGANIZATIONAL MATTERS.......................................
13
2.1
Formation.......................................................
13
2.2
Name............................................................
13
2.3
Registered
Office and Agent.....................................
13
2.4
Principal Place
of Business.....................................
14
2.5
Term and
Termination............................................
14
2.6
Power of
Attorney...............................................
14
2.7
Effectiveness of
this Agreement.................................
16
ARTICLE 3 PURPOSE
AND POWERS...........................................
16
3.1
Purpose and
Business............................................
16
3.2
Powers..........................................................
17
ARTICLE 4 CAPITAL
CONTRIBUTIONS; PARTNERSHIP UNITS;
ADDITIONAL FUNDS.............................................
17
4.1
Capital
Contributions of the Partners...........................
17
4.2
Issuance of
Additional Partnership Interests....................
18
4.3
Issuance of
Securities by the Company...........................
19
4.4
Additional
Funds................................................
20
4.5
No Third-Party
Beneficiary......................................
20
4.6
No
Interest.....................................................
20
4.7
No Preemptive
Rights............................................
20
4.8
Capital
Accounts; Adjustments to Carrying Values................
21
ARTICLE 5
DISTRIBUTIONS................................................
21
5.1
Distributions...................................................
21
5.2
Qualification as
a REIT.........................................
22
5.3
Withholding.....................................................
22
5.4
Additional
Partnership Interests................................
22
ARTICLE 6
ALLOCATIONS..................................................
23
6.1
Allocation of
Profits and Net Losses............................
23
6.2
Special
Allocations.............................................
23
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6.3
Tax
Allocations.................................................
25
6.4
Revisions to
Allocations to Reflect Issuance of
Partnership Interests...........................................
25
ARTICLE 7 MANAGEMENT
AND OPERATIONS OF BUSINESS........................
25
7.1
Management......................................................
25
7.2
Certificate of
Limited Partnership..............................
29
7.3 Reimbursement of the General
Partner............................
29
7.4
Acquisition of
Limited Partner Interests by the
Company.........................................................
32
7.5
Transactions
with Affiliates....................................
32
7.6
Indemnification.................................................
32
7.7
Liability of the
General Partner................................
35
7.8
Other Matters
Concerning the General Partner....................
36
7.9
Title to
Partnership Assets.....................................
37
7.10
Reliance by Third
Parties.......................................
37
ARTICLE 8 RIGHTS AND
OBLIGATIONS OF LIMITED PARTNERS................... 38
8.1
Limitation of
Liability.........................................
38
8.2
No Right to
Participate in the Management of Business...........
38
8.3
Return of
Capital...............................................
38
8.4
Rights of
Limited Partners Relating to the Partnership..........
38
8.5
Redemption
Right................................................
39
ARTICLE 9 BOOKS,
RECORDS, ACCOUNTING AND REPORTS.......................
42
9.1
Records and
Accounting..........................................
42
9.2
Reports.........................................................
42
ARTICLE 10 TAX
MATTERS..................................................
42
10.1
Preparation of Tax
Returns......................................
42
10.2
Tax
Elections...................................................
43
10.3
Tax Matters
Partner.............................................
43
10.4
Organizational
Expenses.........................................
44
10.5
Withholding.....................................................
44
ARTICLE 11 TRANSFERS AND
WITHDRAWALS....................................
45
11.1
Transfer........................................................
45
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11.2
Transfer of the
General Partner's General Partner
Interest........................................................
46
11.3
Limited Partners'
Rights to Transfer............................
46
11.4
Substituted Limited
Partners....................................
47
11.5
Assignees.......................................................
48
11.6
General
Provisions..............................................
48
ARTICLE 12 ADMISSION OF
PARTNERS........................................
50
12.1
Admission of Successor
General Partner..........................
50
12.2
Admission of
Additional Limited Partners........................
50
12.3
Amendment of Agreement
and Certificate of Limited
Partnership.....................................................
51
ARTICLE 13 DISSOLUTION,
LIQUIDATION AND TERMINATION.....................
51
13.1
Dissolution.....................................................
51
13.2
Winding Up;
Liquidation.........................................
52
13.3
No Obligation to
Contribute Deficit.............................
53
13.4
Notice of
Dissolution...........................................
53
13.5
Termination of
Partnership and Cancellation of
Certificate of Limited Partnership..............................
53
13.6
Reasonable Time for
Winding-Up..................................
53
13.7
Waiver of
Partition.............................................
54
ARTICLE 14 AMENDMENT OF
PARTNERSHIP AGREEMENT; MEETINGS.................
54
14.1
Amendments......................................................
54
14.2
Meetings of the
Partners........................................
54
ARTICLE 15 GENERAL
PROVISIONS...........................................
55
15.1
Addresses and
Notice............................................
55
15.2
Titles and
Captions.............................................
55
15.3
Pronouns and
Plurals............................................
56
15.4
Further
Action..................................................
56
15.5
Binding
Effect..................................................
56
15.6
Creditors.......................................................
56
15.7
Waiver..........................................................
56
15.8
Counterparts....................................................
56
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15.9
Applicable
Law..................................................
56
15.10
Invalidity of Provisions........................................
57
15.11
Merger..........................................................
57
15.12 No
Rights as Stockholders.......................................
57
15.13
Entire Agreement................................................
57
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EXHIBITS
EXHIBIT A- PARTNER'S CONTRIBUTIONS AND PARTNERSHIP INTERESTS
EXHIBIT B- FORM OF NOTICE OF REDEMPTION REQUEST
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<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
SHOPOFF PARTNERS, L.P.
THIS
AGREEMENT OF LIMITED PARTNERSHIP OF SHOPOFF PARTNERS, L.P.
(this
"Agreement"), dated as of November 17, 2006, is entered into by and
among
SHOPOFF GENERAL PARTNER, L.L.C., a Delaware limited liability
company, as
general partner (the "General Partner"), SHOPOFF PROPERTIES TRUST,
INC., a
Maryland corporation (the "Company"), and SHOPOFF ADVISORS, L.P., a
Delaware
limited partnership, both as initial limited partners (the "Initial
Limited
Partners"), and those Persons who subsequently execute this
Agreement or a
counterpart hereof, and who become parties hereto pursuant to the
terms of this
Agreement.
W I T N E S S E T H
WHEREAS,
the General Partner and the Initial Limited Partners formed
Shopoff Partners, L.P. (the "Partnership") as a limited partnership
pursuant to
the Act by filing a certificate of limited partnership with the
Secretary of
State of the State of Delaware on November 17, 2006;
WHEREAS,
this Agreement shall constitute the "partnership agreement"
(within the meaning of the Act) of the Partnership, and shall be
binding upon
all Persons now or at any time hereafter who are Partners;
NOW,
THEREFORE, in consideration of the mutual covenants and
obligations
set forth in this Agreement, and of other good and valuable
consideration, the
receipt and sufficiency of which is hereby acknowledged, the
parties hereto,
intending legally to be bound, hereby agree as follows:
ARTICLE 1
DEFINED TERMS
Capitalized terms used in this Agreement (including exhibits,
schedules
and amendments) shall have the meanings set forth below, except as
otherwise
expressly indicated or limited by the context in which they appear
in this
Agreement. All terms defined in this Agreement in the singular have
the same
meanings when used in the plural and vice versa. Accounting terms
used but not
otherwise defined shall have the meanings given to them under
GAAP.
1.1 "ACT"
means the Delaware Revised Uniform Limited Partnership Act, as
amended from time to time, and any successor to such statute.
1.2
"ADDITIONAL LIMITED PARTNER" means a Person that has executed
and
delivered an additional limited partner signature page in the form
attached
hereto and has been admitted to the Partnership as a Limited
Partner pursuant to
Section 12.2.
<PAGE>
1.3
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means with respect to any
Partner,
the negative balance, if any, in such Partner's Capital Account as
of the end of
any relevant Fiscal Year, determined after giving effect to the
following
adjustments:
(a) credit to such Capital Account any portion of such negative
balance which such Partner (i) is treated as obligated to restore
to the
Partnership pursuant to the provisions of Section
1.704-1(b)(2)(ii)(c) of the
Treasury Regulations, or (ii) is deemed to be obligated to restore
to the
Partnership pursuant to the penultimate sentences of Sections
1.704-2(g)(1) and
1.704-2(i)(5) of the Treasury Regulations; and
(b) debit to such Capital Account the items described in
Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Treasury
Regulations.
This definition of Adjusted Capital Account Deficit is intended to
comply with
the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d)
and shall be
interpreted consistently therewith.
1.4
"ADVISOR" means
Shopoff Advisors, L.P., the advisor to the
Company and the Partnership pursuant to the Advisory Agreement.
1.5
"ADVISORY AGREEMENT" means that certain Advisory Agreement by
and
among the Advisor, the Partnership and the Company dated as of ,
2007.
1.6
"AFFILIATE" means, with respect to any Person, (a) any Person
that,
directly or indirectly through one or more intermediaries,
controls, is
controlled by or is under common control with such Person, (b) any
Person owning
or controlling ten percent (10%) or more of the outstanding voting
interests of
such Person, (c) any Person of which such Person owns or controls
ten percent
(10%) or more of the voting interests or (d) any officer, director,
general
partner or trustee of such Person or any Person referred to in (a),
(b) and (c)
above. For this purpose, the term "control" (including the terms
"controlling,"
"controlled by" and "under common control with") means the
possession, direct or
indirect, of the power to direct or cause the direction of the
management and
policies of a Person, whether through the ownership of voting
securities, by
contract or otherwise.
1.7
"AGREED VALUE" means (a) in the case of any Contributed Property,
the
fair market value of such Contributed Property at the time such
property is
contributed as determined by the General Partner and agreed to by
the
contributing party, reduced by any liabilities either assumed by
the Partnership
upon such contribution or to which such property is subject when
contributed,
and (b) 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.
1.8
"AGREEMENT" means this Agreement of Limited Partnership of
Shopoff
Partners, L.P., as originally executed and as amended, modified,
supplemented or
restated from time to time, as the context requires.
1.9
"APPRAISED VALUE" means the value of the Partnership Assets as
determined by an appraisal made by an Independent Appraiser.
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1.10
"ARTICLES OF INCORPORATION" means the Company's Articles of
Incorporation, filed with the Maryland State Department of
Assessments and
Taxation, or other organizational documents governing the Company,
as amended,
modified, supplemented or restated from time to time.
1.11
"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.
1.12 "BOOK
GAIN" or "BOOK LOSS" means the gain or loss recognized by the
Partnership for purposes of Section 704(b) of the Code in any
Fiscal Year by
reason of any sale or disposition with respect to any of the
property or assets
of the Partnership. Such Book Gain or Book Loss shall be computed
by reference
to the Carrying Value of such property or assets as of the date of
such sale or
disposition, rather than by reference to the tax basis of such
property or
assets as of such date, and each and every reference herein to
"gain" or "loss"
shall be deemed to refer to Book Gain or Book Loss, rather than to
tax gain or
tax loss, unless the context manifestly otherwise requires.
1.13
"BUSINESS DAY" means any day except a Saturday, Sunday or other
day
on which commercial banks in Los Angeles, California are authorized
or required
by law to close.
1.14
"CAPITAL ACCOUNT" has
the meaning set forth in Section 4.8.
1.15
"CAPITAL CONTRIBUTION" means, with respect to any Partner, any
cash,
cash equivalents or the Agreed Value of Contributed Property that
such Partner
contributes or is deemed to contribute to the Partnership pursuant
to Article 4
hereof.
1.16
"CAPITAL TRANSACTION" means (a) any sale, exchange, taking by
eminent
domain, damage, destruction or other disposition of all or any part
of the
assets of the Partnership, any Subsidiary or any other Person in
which the
Partnership holds a direct or indirect interest, other than
tangible personal
property disposed of in the ordinary course of business; or (b) any
financing or
refinancing of any indebtedness of the Partnership, any Subsidiary
or any other
Person in which the Partnership holds a direct or indirect
interest; provided,
that the receipt by the Partnership of Capital Contributions shall
not
constitute a Capital Transaction; and provided further that no
Terminating
Capital Transaction shall constitute a Capital Transaction.
1.17
"CARRYING VALUE" means, except as otherwise provided herein, (a)
with
respect to a Contributed Property, the fair market value of such
Contributed
Property at the time such property is contributed, as determined by
the Company
and agreed to by the contributing partner, without reduction for
any liabilities
either assumed by the Partnership upon such contribution or to
which such
property was subject when contributed, reduced (but not below zero)
by all
Depreciation with respect to such property charged to the Partners'
Capital
Accounts, and (b) with respect to any other Partnership Asset, the
adjusted
basis of such Partnership Asset for federal income tax purposes,
all as of the
time of determination. The Carrying Value of any property shall be
adjusted in
accordance with Section 4.8(b) from time to time to reflect
changes, additions
or other adjustments to the Carrying Value, as deemed appropriate
by the
Company.
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1.18 "CASH
AMOUNT" means an amount of cash equal to the Value of the REIT
Stock Amount on the Valuation Date.
1.19
"CERTIFICATE" means the Certificate of Limited Partnership of
the
Partnership, filed on November 17, 2006, as amended, restated,
supplemented or
otherwise modified from time to time as herein provided in
accordance with the
Act.
1.20
"CODE" means the Internal Revenue Code of 1986, as amended from
time
to time, and any subsequent federal law of similar import, and, to
the extent
applicable, any Treasury Regulations promulgated thereunder.
1.21
"COMMON STOCK" means a share of the common stock of the
Company.
Common Stock may be issued in one or more classes or series in
accordance with
the terms of the Articles of Incorporation. If there is more than
one class or
series of Common Stock, the term "Common Stock" shall, as the
context requires,
be deemed to refer to the class or series of Common Stock that
correspond to the
class or series of Partnership Units for which the reference to
Common Stock is
made.
1.22
"COMPANY INTEREST" means a Partnership Interest held by the
Company,
in its capacity as limited partner. A Company Interest may be
expressed as a
number of Partnership Units.
1.23
"CONSENT" means the consent or approval of a proposed action by
a
Partner given in accordance with Section 14.2 hereof.
1.24
"CONSENT OF THE OUTSIDE LIMITED PARTNERS" means the Consent of
the
Outside Limited Partners holding a number of Partnership Units
greater than
fifty percent (50%) of the aggregate Partnership Units held by all
Outside
Limited Partners.
1.25
"CONTRIBUTED PROPERTY" means each property or other asset (but
excluding cash and cash equivalents), in such form as may be
contributed by a
Partner to the Partnership as permitted by the Act.
1.26
"DEPRECIATION" means, for each Fiscal Year, an amount equal to
the
depreciation, amortization or other cost recovery deduction
allowable with
respect to an asset for such year or other period for federal
income tax
purposes; provided, that if the Carrying Value of an asset differs
from its
adjusted basis for federal income tax purposes at the beginning of
any such year
or other period, Depreciation shall be determined in the manner
described in
Treasury Regulations Section 1.704-1(b)(2)(iv)(g)(3) or Section
1.704-3(d)(2),
whichever is applicable, and if such asset has a zero adjusted tax
basis,
Depreciation shall be an amount determined under any reasonable
method selected
by the Company.
1.27
"DISPOSITION PROCEEDS" means (i) the net cash funds or proceeds
(including unused property reserves held at time of disposition)
resulting from
the sale or other disposition of the Partnership's assets, after
deduction of
payment of all expenses incurred in connection therewith; plus,
(ii) all net
cash proceeds subsequently received on any installment payments or
promissory
notes and/or installment contracts held by the Partnership in
connection with
the sale or other disposition of Partnership's assets after payment
of any
underlying indebtedness related
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to the assets sold; less (iii) such amounts for reserves as the
Company deems
reasonably necessary for the future operations of the
Partnership.
1.28
"DISTRIBUTABLE CASH" means the sum of Disposition Proceeds,
Distributable Cash From Operations, and to the extent that the
Company's Board
of Directors so determines, Refinancing Proceeds.
1.29
"DISTRIBUTABLE CASH FROM OPERATIONS" means the funds provided
from
the Partnership's operations, rent payments, interest on the
Partnership's cash
and short-term investments and excess operation reserves, without
deduction for
non-cash expenses (such as cost recovery and amortization of
imputed interest),
but after deducting cash funds used to pay all other expenses
(including asset
management fees), debt payments, replacements, and capital
improvements,
together with a reasonable allowance for contingencies and reserves
during the
same period of time.
1.30
"EFFECTIVE DATE" means the date of first closing of the offering
of
Common Stock pursuant to the Registration Statement.
1.31 "10%
RETURN" means, with respect to the Company, an amount
calculated
like simple interest at the rate of ten percent (10%) per annum
calculated on
the varying daily balances of Invested Capital of the Company
during the period
to which the 10% Return relates, and determined on the basis of a
360-day
year/30-day month, cumulative for the period for which such 10%
Return is being
determined.
1.32
"ENTITY" means any general partnership, limited liability
company,
proprietorship, corporation, joint venture, joint-stock company,
limited
partnership, limited liability partnership, business trust, firm,
trust, estate,
governmental entity, cooperative, association or other foreign or
domestic
enterprise.
1.33
"FISCAL YEAR" means the fiscal year of the Partnership and shall
be
the same as its taxable year, which shall be the calendar year
unless otherwise
determined by the General Partner in accordance with the Code.
1.34
"GAAP" means United States generally accepted accounting
principles,
as in effect from time to time.
1.35
"GENERAL PARTNER"
means Shopoff General Partner, L.L.C., a
Delaware limited liability company, and any successor as general
partner of
the Partnership. The
interest in the Partnership held by the General Partner
is referred to herein as the "General Partner Interest."
1.36
"INCAPACITY" or
"INCAPACITATED" means:
(a) as to any individual Partner, death, total physical
disability
or entry by a court of competent jurisdiction adjudicating him or
her
incompetent to manage his or her person or his or her estate;
(b) as to any
corporation that is a Partner, the filing of a
certificate of dissolution, or its equivalent, for the corporation
or the
revocation of its charter;
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(c) as to any
partnership that is a Partner, the dissolution
and commencement of winding up of the partnership;
(d) as to any
estate that is a Partner, the distribution by the
fiduciary of the estate's entire interest in the Partnership;
(e) as to any
trustee of a trust that is a Partner, the
termination of the trust (but not the substitution of a new
trustee); or
(f) as to any Partner, the bankruptcy of such Partner, which
shall
be deemed to have occurred when:
(i) the Partner commences a voluntary proceeding seeking
liquidation, reorganization or other relief under any bankruptcy,
insolvency or
other similar law now or hereafter in effect;
(ii) the Partner is adjudged as bankrupt or insolvent, or a
final and nonappealable order for relief under any bankruptcy,
insolvency or
similar law now or hereafter in effect has been entered against the
Partner;
(iii) the Partner executes and delivers a general
assignment for the benefit of the Partner's creditors;
(iv) the
Partner files an answer or other pleading admitting
or failing to contest the material allegations of a petition filed
against the
Partner in any proceeding of the nature described in clause (ii)
above;
(v) the Partner
seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator for the Partner or
for all
or any substantial part of the Partner's assets;
(vi) any proceeding seeking liquidation, reorganization or
other relief of or against such Partner under any bankruptcy,
insolvency or
other similar law now or hereafter in effect has not been dismissed
within one
hundred twenty (120) days after the commencement thereof;
(vii) the appointment without the Partner's consent or
acquiescence of a trustee, receiver or liquidator has not been
vacated or stayed
within ninety (90) days of such appointment; or
(viii) an appointment referred to in clause (vii) which has
been stayed is not vacated within ninety (90) days after the
expiration of any
such stay.
1.37
"INDEMNITEE" means
(a) any Person
made a party to a proceeding by reason of its
status as:
(i) the General
Partner,
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(ii) a Limited
Partner,
(iii) the Advisor,
(iv) a director,
trustee, manager, member or officer of
the Partnership, the General Partner, the Company or the Advisor,
or
(v)
a director, trustee, manager, member or officer of any
other Entity, serving in such capacity at the request of the
Partnership, the
General Partner, the Company or the Advisor, acting on behalf of
the
Partnership, the General Partner, the Advisor or the Company,
or
(b) such other Persons (including Affiliates of the Company) as
the
General Partner may designate from time to time (whether before or
after the
event giving rise to potential liability), in its sole and absolute
discretion.
1.38
"INDEPENDENT APPRAISER" means an appraiser of real estate with
no
material current or prior business or personal relationship with
the Advisor,
the Partnership, the General Partner, the Company or the directors
of the
Company, that, in the determination of the General Partner, is
qualified to
appraise real estate by virtue of being engaged to a substantial
extent in the
business of rendering opinions regarding the value of assets of the
type held by
the Partnership. Membership in a nationally recognized appraisal
society such as
the American Institute of Real Estate Appraisers or the Society of
Real Estate
Appraisers shall be conclusive evidence of such qualification.
1.39
"INITIAL LIMITED
PARTNERS" means Shopoff Properties Trust, Inc.
and Shopoff Advisors, L.P.
1.40
"INVESTED CAPITAL" means, with respect to the Company, as of
any
relevant date, an amount equal to the excess of (i) the aggregate
amount of cash
contributed or deemed contributed by the Company to the Partnership
from the
gross proceeds of the issuance by the Company of REIT Stock or
other equity
Securities pursuant to Article IV hereof, over (ii) the sum of (A)
the
cumulative distributions of Distributable Cash made to the Company
pursuant to
Section 5.1(b) as of such date, and (B) the cumulative amounts paid
to the
Company in redemption of its Partnership Units pursuant to Section
8.5(g) as of
such date; provided, however, that for purposes of computing the
return of
Invested Capital in Section 5.1(b) and the 10% Return, all funds
invested in the
Company by the Company stockholders shall be deemed contributed by
the Company
to the Partnership.
1.41
"IRS" shall mean the
Internal Revenue Service of the United
States.
1.42
"LIEN" means any lien, security interest, mortgage, deed of
trust,
charge, claim, encumbrance, pledge, option, right of first offer or
first
refusal and any other right or interest of others of any kind or
nature, actual
or contingent, or other similar encumbrance of any nature
whatsoever.
1.43
"LIMITED PARTNER" means, prior to the admission of the first
Additional Limited Partner to the Partnership, the Initial Limited
Partners, and
thereafter any Person named as a
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limited partner of the Partnership in Exhibit A, as such Exhibit
may be amended
from time to time, upon the execution and delivery by such Person
of an
additional limited partner signature page, including any Additional
Limited
Partner or Substituted Limited Partner in each case, in such
Person's capacity
as a limited partner of the Partnership.
1.44
"LIMITED PARTNER INTEREST" means a Partnership Interest of a
Limited
Partner in the Partnership representing a fractional part of the
Partnership
Interests of all Partners and includes any and all benefits to
which the holder
of such Partnership Interest may be entitled as provided in this
Agreement,
together with all obligations of such Person to comply with the
terms and
provisions of this Agreement. A Limited Partner Interest may be
expressed as a
number of Partnership Units.
1.45
"LIQUIDATING EVENT"
has the meaning set forth in Section 13.1
hereof.
1.46
"LIQUIDATOR" has the
meaning set forth in Section 13.2 hereof.
1.47
"LISTING EVENT" means
the listing of the REIT Stock on a national
securities exchange or quotation of the REIT Stock on the National
Market System
of the Nasdaq Stock Market.
1.48
"LISTING DATE" means
the date on which a Listing Event occurs.
1.49
"MARKET VALUE" means the market value of the REIT Stock as of
the
date of a Listing Event, which shall be equal to the product of (a)
the number
of shares of REIT Stock issued and outstanding at the time of the
Listing Event,
multiplied by (b) the average Listed Market Price (as defined
below) of a share
of REIT Stock for the 30 trading days beginning on the 180th day
after the
Listing Date. The "Listed Market Price" of a share of REIT Stock
for each such
trading day shall be the last reported sale price on such day or,
if no sale
takes place on such day, the average of the closing bid and asked
prices on such
day, as reported on the national securities exchange on which the
REIT Stock is
listed for trading, or, if the REIT Stock is not listed for trading
on a
national securities exchange, as reported by the Nasdaq Stock
Market.
1.50
"NASDAQ STOCK MARKET"
means the National Market of the National
Association of Securities Dealers, Inc. Automated Quotation
System.
1.51
"NASAA GUIDELINES"
means the North American Securities
Administrators Association, Inc. Statement of Policy Regarding Real
Estate
Investment Trusts.
1.52
"NONRECOURSE DEDUCTIONS" has the meaning set forth in Sections
1.704-2(b)(1) and 1.704-2(c) of the Treasury Regulations.
1.53
"NONRECOURSE
LIABILITIES" has the meaning set forth in Section
1.704-2(b)(3) of the Treasury Regulations.
1.54
"NOTICE OF REDEMPTION REQUEST" means a notice of redemption
request
substantially in the form of Exhibit B attached hereto.
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1.55
"OUTSIDE LIMITED PARTNERS" means the Limited Partners, excluding
the
Initial Limited Partners and any Limited Partner that is an
Affiliate of the
Company or the Advisor.
1.56
"PARTNER" means a General Partner or a Limited Partner, and
"Partners" means the General Partner and the Limited Partners,
collectively.
1.57
"PARTNER MINIMUM GAIN" means an amount, with respect to each
Partner's share of 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 Treasury
Regulations
Section 1.704-2(i)(3).
1.58
"PARTNER NONRECOURSE DEBT" has the meaning set forth in
Treasury
Regulations Section 1.704-2(b)(4).
1.59
"PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Treasury Regulations Section 1.704-2(i)(2), and the amount of
Partner
Nonrecourse Deductions with respect to a Partner Nonrecourse Debt
for a
Partnership taxable year shall be determined in accordance with the
rules of
Treasury Regulations Section 1.704-2(i)(2).
1.60
"PARTNERSHIP" means
Shopoff Partners, L.P., and any successor
thereto.
1.61
"PARTNERSHIP ASSET" means the interest of the Partnership in
any
Entity or security (whether in corporate securities, equity, debt
or hybrid
securities, partnership or joint venture interests, other
contractual rights or
otherwise), or any other Real Estate Assets or other assets owned,
directly or
indirectly, by the Partnership, as determined by the General
Partner.
1.62
"PARTNERSHIP INTEREST" means the entire ownership interest of a
Partner in the Partnership at any particular time which represents
a Capital
Contribution by such Partner and which includes the right of such
Partner to any
and all benefits to which such Partner may be entitled as provided
in this
Agreement, together with the obligations of such Partner to comply
with all
terms and provisions of this Agreement. A Partnership Interest may
be expressed
as a number of Partnership Units.
1.63
"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 a Partnership Minimum Gain, for a
Partnership
taxable year shall be determined in accordance with the rules of
Treasury
Regulations Section 1.704-2(d).
1.64
"PARTNERSHIP RECORD DATE" means the record date established by
the
Company for the distribution by the Partnership of Distributable
Cash or other
Partnership Assets pursuant to Section 5.1 hereof, which record
date shall be
the same as the record date established by the Company for a
distribution to its
stockholders of some or all of its portion of such distribution by
the
Partnership.
1.65
"PARTNERSHIP UNIT" means a unit of Partnership Interest with
the
rights, powers and duties set forth herein, designated as such on
Exhibit A and
expressed in the number set forth on Exhibit A, as such exhibit may
be amended
from time to time.
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1.66
"PERCENTAGE INTEREST" means, as to each Partner, the percentage
determined by dividing the total number of Partnership Units owned
by such
Partner by the aggregate number of Partnership Units then issued
and
outstanding, as set forth on Exhibit A, as such exhibit may be
amended from time
to time.
1.67
"PERMITTED TRANSFEREE" means with respect to a Person, (a) any
Affiliate of such Person, (b) the spouse of such Person or any
ancestor,
descendent or sibling of such Person or of the spouse of such
Person, or (c) any
trust for the benefit of such Person or any other person described
in clause (b)
of this Section 1.67.
1.68
"PERSON" means any individual or Entity, and the heirs,
executors,
administrators, legal representatives, successors and assigns of
such individual
or Entity where the context so permits.
1.69
"PROFITS" and "LOSSES" means, for each Fiscal Year or other
period
for which allocations to Partners are made, an amount equal to the
Partnership's
taxable income or loss for such period determined in accordance
with federal
income tax principles, with the following adjustments:
(a) any income of the Partnership that is exempt from federal
income
tax and not otherwise taken into account in computing Profits or
Losses pursuant
to this provision shall be added to such taxable income or
loss;
(b) any expenditure of the Partnership described in Section
705(a)(2)(B) of the Code or treated as Code Section 705(a)(2)(B)
expenditures
pursuant to Section 1.704-1(b)(2)(iv)(i) of the Treasury
Regulations, and not
otherwise taken into account in computing Profits or Losses
pursuant to this
provision, shall be subtracted from such taxable income or
loss;
(c) in the event the Carrying Value of any Partnership asset is
adjusted pursuant to this Agreement, the amount of such adjustment
shall be
taken into account as gain or loss from the disposition of such
asset for
purposes of computing Profits or Losses, and shall be allocated in
accordance
with the provisions of Article 6;
(d) Book Gain or Book Loss from a Capital Transaction shall be
taken
into account in lieu of any tax gain or tax loss recognized by the
Partnership
by reason of such Capital Transaction;
(e) in lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable
income or loss,
there shall be taken into account Depreciation for such Fiscal Year
or other
period, computed as provided in this Agreement;
(f) to the extent an adjustment to the adjusted tax basis of
any
Partnership asset pursuant to Section 734(b) or Section 743(b) of
the Code is
required pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(m) to be
taken into account in determining Capital Accounts as a result of a
distribution
other than in liquidation of a Partner's interest in the
Partnership, the amount
of such adjustment shall be treated as an item of gain (if the
adjustment
increases the basis of the Partnership asset) or loss (if the
adjustment
decreases the basis of the
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Partnership asset) from the disposition of the Partnership asset
and shall be
taken into account for purposes of computing Profits or Losses;
and
(g) any items which are specially allocated pursuant to Section
6.2
shall not be taken into account in computing Profits or Losses.
If the Partnership's taxable income or loss for such Fiscal Year or
other
period, as adjusted in the manner provided above, is a positive
amount, such
amount shall be the Partnership's Profits for such Fiscal Year or
other period;
and if a negative amount, such amount shall be the Partnership's
Losses for such
Fiscal Year or other period.
1.70 "REAL
ESTATE ASSETS" means assets described in Code Section
856(c)(5)(B), unimproved and improved real property, real
estate-related assets
and any direct or indirect interest therein (including, without
limitation, fee
or leasehold interests, options, leases, partnership and joint
venture
interests, equity and debt securities of entities that own real
estate, first or
second mortgages on real property, mezzanine loans secured by
junior liens on
real property, preferred equity interests secured by a property
owner's interest
in real property and other contractual rights in real estate).
1.71
"REDEEMING PARTNER"
has the meaning set forth in Section 8.5.
1.72
"REDEMPTION AMOUNT" means either the Cash Amount or the REIT
Stock
Amount, as determined by the Company in its sole and absolute
discretion.
1.73
"REDEMPTION RIGHT" has
the meaning set forth in Section 8.5.
1.74
"REFINANCING PROCEEDS" means (i) the net cash funds or proceeds
resulting from the financing or refinancing of, or any other
borrowing secured
by, the Partnership's assets, after deduction of the payment of all
expenses
incurred in connection therewith; less (ii) such amounts for
reserves as the
Company deems reasonably necessary for the future operations of the
Partnership.
1.75
"REGISTRATION STATEMENT" means the Registration Statement on
Form
S-11 to be filed by the Company with the Securities and Exchange
Commission, and
any amendments thereto made at any time.
1.76
"REIT" means a "real estate investment trust" as defined under
Section 856 of the Code.
1.77
"REIT NOTICE" has the
meaning set forth in Section 8.5.
1.78
"REIT REQUIREMENTS"
has the meaning set forth in Section 5.2.
1.79 "REIT
STOCK" means the Common Stock and all other shares of capital
stock of the Company.
1.80 "REIT
STOCK AMOUNT" means a number of shares of REIT Stock equal to
the number of Partnership Units offered by redemption by a
Redeeming Partner;
provided that in the
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event that the Company issues to all holders of REIT Stock rights,
options,
warrants, or convertible or exchangeable securities entitling
stockholders of
the Company to acquire REIT Stock, or any other securities or
property
(collectively, the "rights"), then the REIT Stock Amount shall also
include such
rights that a holder of that number of shares of REIT Stock would
be entitled to
receive.
1.81
"SECURITIES ACT" means
the Securities Act of 1933, as amended.
1.82
"SPECIAL LIMITED
PARTNER" means Shopoff Advisors L.P., a Delaware
limited partnership
1.83
"SPECIFIED REDEMPTION DATE" means the tenth (10th) Business Day
after
receipt by the General Partner of a Notice of Redemption
Request.
1.84
"STOCK OPTION PLANS" means, collectively, any and all plans
adopted
from time to time by the Company pursuant to which REIT Stock is
issued, or
options to acquire REIT Stock are granted, to employees or
directors of the
Company, employees of the Partnership or employees of their
respective
Affiliates in consideration for services or future services.
1.85
"SUBSIDIARY" means, with respect to any Person, any Entity of which
a
majority of the voting power or the voting equity securities,
and/or the
outstanding equity interests (whether or not voting), is owned,
directly or
indirectly, by such Person.
1.86
"SUBSTITUTED LIMITED PARTNER" means a Person who is admitted as
a
Limited Partner to the Partnership pursuant to Section 11.4
hereof.
1.87
"TERMINATING CAPITAL TRANSACTION" means any sale or other
disposition
(other than a deemed disposition pursuant to Code Section
708(b)(1)(B) and the
Treasury Regulations thereunder) of all or substantially all of the
assets of
the Partnership or a related series of transactions that, taken
together, result
in the sale or other disposition of all or substantially all of the
assets of
the Partnership.
1.88
"TERMINATION EVENT" means any termination of the Advisor as
advisor
to the Partnership and the Company under the terms of the Advisory
Agreement,
other than any termination for "Cause" (as defined in the Advisory
Agreement)
and other than any termination of the Advisory Agreement due to the
occurrence
of a Listing Event.
1.89
"TRANSFER" means to give, sell, assign, pledge, hypothecate,
devise,
bequeath, or otherwise dispose of, transfer, or permit to be
transferred, during
life or at death. The word "Transfer," when used as a noun, shall
mean any
Transfer transaction.
1.90
"TREASURY REGULATIONS" means the federal income tax
regulations,
including any temporary or proposed regulations, promulgated under
the Code, as
such Treasury Regulations may be amended from time to time (it
being understood
that all references herein to specific sections of the Treasury
Regulations
shall be deemed also to refer to any corresponding provisions of
succeeding
Treasury Regulations).
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1.91
"VALUATION DATE" means the date of receipt by the General Partner
of
a Notice of Redemption Request or, if such date is not a Business
Day, the first
Business Day thereafter.
1.92
"VALUE" means, with respect to a share of REIT Stock, (a) if
REIT
Stock is traded on a national securities exchange, reported through
the Nasdaq
Stock Market or otherwise traded over-the-counter, the average of
the daily
Market Price (as defined below) for shares of REIT Stock for the
ten (10)
consecutive trading days immediately preceding the Valuation Date,
or (b) if
REIT Stock is not traded in a manner described in clause (a), the
value of a
share of REIT Stock as determined by the Company acting in good
faith on the
basis of such quotations and other information as it considers, in
its
reasonable judgment, appropriate. The "Market Price" for each such
trading day
shall be (i) the last reported sale price on such day or, if no
sale takes place
on such day, the average of the closing bid and asked prices on
such day, as
reported by a reliable quotation source designated by the Company;
or (ii) if no
such last reported sale price or closing bid and asked prices are
available, the
average of the reported high bid and low asked prices on such day,
as reported
by a reliable quotation source designated by the Company, or (iii)
if there
shall be no bid and asked prices on such day, the average of the
high bid and
low asked prices, as so reported, on the most recent day (not more
than ten (10)
days prior to the date in question) for which prices have been so
reported. In
the event the REIT Stock Amount includes rights that a holder of
REIT Stock
would be entitled to receive, then the Value of such rights shall
be determined
by the Company acting in good faith on the basis of such quotations
and other
information as it considers, in its reasonable judgment,
appropriate.
ARTICLE 2
ORGANIZATIONAL MATTERS
2.1
FORMATION
The Partnership is a limited partnership organized pursuant to
the
provision 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.
2.2
NAME
The name of the Partnership is Shopoff Partners, L.P. The
Partnership's business may be conducted under such name or under
any other name
or names deemed advisable by the General Partner, including the
name of the
General Partner, the Company or any Affiliate thereof. The words
"Limited
Partnership," "L.P.," "Ltd." or similar words or letters shall be
included in
the Partnership's name where necessary for the purposes of
complying with the
laws of any jurisdiction that so requires. The General Partner,
acting in its
sole and absolute discretion without the Consent of any Limited
Partner, may
change the name of the Partnership. The General Partner shall
notify the Limited
Partners of any such name change in the next regular communication
to the
Limited Partners.
2.3
REGISTERED OFFICE AND AGENT
The address of the registered office of the Partnership in the
State
of Delaware shall be 615 South DuPont Highway, in the City of
Dover, County of
Kent, Delaware 19901, or
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such other place as may be designated from time to time by the
General Partner.
The name of the registered agent for service of process on the
Partnership in
the State of Delaware at such address shall be National Corporate
Research, Ltd.
2.4
PRINCIPAL PLACE OF BUSINESS
The Partnership may maintain offices at such other place or
places
within or outside the State of Delaware as the General Partner
deems advisable.
The principal office of the Partnership shall be 8951 Research
Drive, Irvine,
California, 92618, or such other place as the General Partner may
from time to
time designate by notice to the Limited Partners.
2.5 TERM
AND TERMINATION
The term of the Partnership shall commence on the date hereof
and
shall continue until November 17, 2017, unless the Partnership is
dissolved
sooner pursuant to the provisions of Article 13 or as otherwise
provided by law.
2.6 POWER
OF ATTORNEY
(a) Each Limited Partner and each Assignee who accepts
Partnership
Units (or any other Partnership Interest or any rights, benefits or
privileges
associated therewith) is deemed to irrevocably constitute and
appoint the
General Partner, any Liquidator and authorized officers and
attorneys-in-fact of
each, and each such Person acting singly, in each case with full
power of
substitution, as its true and lawful agent and attorney-in-fact,
with full power
and authority in its name, place and stead to:
(i) execute, swear to, acknowledge, deliver, file and record
in the appropriate public offices:
(A) all certificates, documents and other instruments
(including, without limitation, this Agreement and the
Certificate and all amendments or restatements thereof) that
the General Partner or the Liquidator deems appropriate or
necessary to form, qualify or continue the existence or
qualification of the Partnership as a limited partnership (or
a partnership in which the Limited Partners have limited
liability) in the State of Delaware and in all other
jurisdictions in which the Partnership may or plans to conduct
business or own property, including, without limitation, any
documents necessary or advisable to convey any Contributed
Property to the Partnership;
(B) all instruments that the General Partner or any
Liquidator deems appropriate or necessary to reflect any
amendment, change, modification or restatement of this
Agreement in accordance with its terms;
(C) all conveyances and other instruments or documents
that the General Partner or any Liquidator deems appropriate
or necessary to reflect the dissolution and liquidation of the
Partnership pursuant
to the
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terms of this Agreement, including, without limitation, a
certificate of cancellation;
(D) all instruments relating to the admission,
withdrawal, removal or substitution of any Partner pursuant
to, or other events described in, Article 11, 12 or 13 hereof
or any Capital Contribution of any Partner;
(E) all certificates, documents and other instruments
relating to the determination of the rights, preferences and
privileges of Partnership Interests;
(F) all amendments to this Agreement as provided in
Article 14 hereof; and
(G) all other instruments that may be required by law to
be filed on behalf of or relating to the Partnership and that
are not inconsistent with this Agreement; and
(ii) execute, swear to, seal, acknowledge and file all
ballots, consents, approvals, waivers, certificates and other
instruments
appropriate or necessary, in the sole and absolute discretion of
the General
Partner or any Liquidator, to make, evidence, give, confirm or
ratify any vote,
consent, approval, agreement or other action which is made or given
by the
Partners hereunder or is consistent with the terms of this
Agreement or
appropriate or necessary, in the sole discretion of the General
Partner or any
Liquidator, to effectuate the terms or intent of this
Agreement.
Nothing contained herein shall be construed as authorizing the
General Partner
or any Liquidator to amend this Agreement except in accordance with
Article 14
hereof or as may be otherwise expressly provided for in this
Agreement.
(b) The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, in recognition of
the fact
that each of the Partners will be relying upon the power of the
General Partner
and any Liquidator to act as contemplated by this Agreement in any
filing or
other action by it on behalf of the Partnership, and it shall
survive and not be
affected by the subsequent Incapacity of any Limited Partner or
Assignee and/or
the Transfer of all or any portion of such Limited Partner's or
Assignee's
Partnership Units and shall extend to such Limited Partner's or
Assignee's
heirs, successors, assigns and personal representatives.
(c) Each such Limited Partner or Assignee hereby agrees to be
bound
by any representation made by the General Partner or any
Liquidator, acting in
good faith pursuant to such power of attorney, and each such
Limited Partner or
Assignee hereby waives any and all defenses which may be available
to contest,
negate or disaffirm the action of the General Partner or any
Liquidator, taken
in good faith under such power of attorney.
(d) Each Limited Partner or Assignee shall execute and deliver
to
the General Partner or the Liquidator, within fifteen (15) days
after receipt of
the General Partner's or
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Liquidator's request therefor, such further designation, powers of
attorney and
other instruments as the General Partner or the Liquidator, as the
case may be,
deems necessary to effectuate this Agreement and the purposes of
the
Partnership.
(e) Any Person dealing with the Partnership may conclusively
presume
and rely upon the fact that any instrument referred to in this
Section 2.6,
executed by the General Partner or the Liquidator acting as
attorney-in-fact, is
authorized by and binding on the Partnership, without further
inquiry.
2.7
EFFECTIVENESS OF THIS AGREEMENT
This
Agreement shall govern the operations of the Partnership and
the rights and restrictions applicable to the Partners, to the
extent permitted
by law. Pursuant to Section 17-101(12) of the Act, all Persons who
become
holders of Partnership Interests shall be bound by the provisions
of this
Agreement. The execution by a Person of this Agreement and
acceptance thereof by
the General Partner in accordance with the terms of this Agreement
or the
receipt of Partnership Interests by a Person as a successor or
assign of an
existing Partner and the consent of the General Partner to the
admission of such
Person as a Substituted Limited Partner in accordance with the
terms of this
Agreement shall be deemed to constitute a request that the records
of the
Partnership reflect such admission, and shall be deemed to be a
sufficient act
to comply with the requirements of Section 17-101(12) of the Act
and to so cause
that Person to become a Partner as of the date of acceptance of its
Capital
Contribution by the Partnership and to bind that Person to the
terms and
conditions of this Agreement (and to entitle that Person to the
rights of a
Partner hereunder).
ARTICLE 3
PURPOSE AND POWERS
3.1
PURPOSE AND BUSINESS
The purpose and nature of the business to be conducted by the
Partnership is to conduct any business that may be lawfully
conducted by a
limited partnership organized pursuant to the Act including,
without limitation,
to engage in the following activities:
(a) to acquire, hold, own, develop, construct, improve,
maintain,
operate, sell, lease, transfer, encumber, convey, exchange and
otherwise dispose
of or deal with Real Estate Assets;
(b) to acquire, hold, own, develop, construct, maintain,
operate,
sell, lease, transfer, encumber, convey, exchange and otherwise
dispose of or
deal with other real and personal property of all kinds;
(c) acquire own, hold for investment and ultimately dispose of
general and limited partner interests, and stock, warrants, options
or other
equity and debt interests in Entities, and exercise all rights and
powers
granted to the owner of any such interests;
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(d) make any type of investment and engage in any other lawful
act
or activity for which limited partnerships may be formed under the
Act, and by
such statement all lawful acts and activities shall be within the
purposes of
the Partnership;
(e) to undertake such other activities as may be necessary,
advisable, desirable or convenient to the business of the
Partnership; and
(f) to engage in such other ancillary activities as shall be
necessary or desirable to effectuate the foregoing purposes;
provided, however,
that such business shall be limited to and conducted in such a
manner as to
permit the Company at all times to be classified as a REIT, unless
the Company
determines not to qualify as a REIT or ceases to qualify as a REIT
for reasons
other than the conduct of the business of the Partnership.
3.2
POWERS
(a) 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 in Section
3.1 and for the protection and benefit of the Partnership
including, without
limitation, full power and authority to enter into, perform, and
carry out
contracts of any kind, to borrow money and to issue evidences of
indebtedness,
whether or not secured by mortgage, trust deed, pledge or other
Lien, and,
directly or indirectly, to acquire, hold, own, develop, construct,
improve,
maintain and operate Real Estate Assets, and to sell, lease,
transfer, encumber,
convey, exchange and otherwise dispose of Real Estate Assets.
(b) The General Partner also is empowered to do any and all acts
and
things necessary, appropriate or advisable to ensure that the
Partnership will
not be classified as a "publicly traded partnership" within the
meaning of
Section 7704 of the Code, including, but not limited to, imposing
restrictions
on Transfers of Partnership Units.
ARTICLE 4
CAPITAL CONTRIBUTIONS; PARTNERSHIP UNITS;
ADDITIONAL FUNDS
4.1
CAPITAL CONTRIBUTIONS OF THE PARTNERS
(a) Initial Capital Contributions. The General Partner and the
Initial Limited Partners have made or shall make on the Effective
Date, the
Capital Contributions as set forth on Exhibit A to this Agreement
in exchange
for the number of Partnership Units set forth opposite their names
on Exhibit A.
At such time as Additional Limited Partners are admitted to the
Partnership,
each such Additional Limited Partner shall make Capital
Contributions in the
amount set forth opposite such Limited Partner's name on Exhibit A,
as it shall
be amended at the time of such contribution.
(b) Deemed Capital Contributions. To the extent the Partnership
acquires any property by the merger of any other Person into the
Partnership or
the contribution of assets by any other Person to the Partnership,
Persons who
receive Partnership Interests in exchange for their interests in
the Person
merging into or contributing assets to the Partnership shall
become
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Partners and shall be deemed to have made Capital Contributions as
provided in
the applicable merger agreement or contribution agreement and as
set forth in
Exhibit A, as it shall be amended to reflect such deemed Capital
Contributions.
(c) Partnership Units. Each Partner shall own Partnership Units
in
the amounts set forth for such Partner in Exhibit A and shall have
a Percentage
Interest in the Partnership as set forth in Exhibit A, which
Percentage Interest
shall be adjusted in Exhibit A from time to time by the General
Partner to the
extent necessary to reflect accurately redemptions, additional
Capital
Contributions, the issuance of additional Partnership Units or
similar events
having an effect on the number of Partnership Units held by, and
the Percentage
Interest of, any Partner. Each Partnership Unit shall entitle the
holder thereof
to one vote on all matters on which the Partners (or any portion of
the
Partners) are entitled to vote under this Agreement.
(d) No Additional Capital Contributions. Except as provided in
Sections 4.3(a) and 10.5, 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 or otherwise) and 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.
4.2
ISSUANCE OF ADDITIONAL PARTNERSHIP INTERESTS
(a) The General Partner is authorized to cause the Partnership
to
issue additional Partnership Interests (or options or warrants to
acquire
Partnership Interests) in the form of Partnership Units or other
Partnership
Interests in one or more series or classes to any Persons at any
time or from
time to time, on such terms and conditions as the General Partner
shall
establish in each case in its sole and absolute discretion subject
to Delaware
law, including, without limitation, (i) the allocations of items of
Partnership
income, gain, loss, deduction and credit to each class or series of
Partnership
Interests, (ii) the right of each class or series of Partnership
Interests to
share in Partnership distributions, and (iii) the rights of each
class or series
of Partnership Interest upon dissolution and liquidation of the
Partnership;
provided, that, no such Partnership Interests shall be issued to
the Company
unless either (A) the Partnership Interests are issued pursuant to
Section 4.3,
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.
(b) Subject to the limitations set forth in Sections 4.2(a) and
4.3(a), the General Partner may take such steps as it, in its sole
and absolute
discretion, deems necessary or appropriate to admit any Person as a
Limited
Partner of the Partnership in accordance with Section 12.2 or to
issue any
Partnership Interests, including, without limitation, amending the
Certificate,
Exhibit A or any other provision of this Agreement.
(c) Without limiting the foregoing, the General Partner is
expressly
authorized to cause the Partnership to issue Partnership Interests
(or options
to acquire Partnership Interests) for less than fair market value,
so long as
the General Partner concludes in good faith that such issuance is
in the
interest of the Partnership and the Partners
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4.3
ISSUANCE OF SECURITIES BY THE COMPANY
(a) General. The Company shall not issue any debt securities,
preferred stock, Common Stock, any other class of REIT Stock or
rights, options,
warrants or other securities convertible into or exchangeable for
preferred
stock, Common Stock or any other class of REIT Stock
(collectively,
"Securities"), other than (1) as payment of the REIT Stock Amount
in connection
with a redemption of Partnership Units pursuant to Section 8.6, (2)
upon the
conversion, exchange or exercise of other outstanding securities of
the Company
in accordance with the terms of such securities, or (3) to all
holders of REIT
Stock on a pro rata basis, unless the Company shall:
(i) in the case of REIT Stock or other equity Securities other
than Securities described in clause (ii) below, (A) contribute to
the
Partnership the proceeds of or consideration (including any
property or other
non-cash assets) received upon the issuance of such Securities, and
(B) receive
from the Partnership in consideration for such contributions
Partnership
Interests with the same terms and conditions, including dividend,
dividend
priority and liquidation preference, as are applicable to such
Securities
(including, for purposes of clarification, Partnership Units in the
case of any
issuance of Common Stock by the Company);
(ii) in the case of options, warrants or other rights to
purchase REIT Stock, or other equity securities convertible into or
exchangeable
for REIT Stock, (A) contribute to the Partnership the proceeds of
or
consideration (including any property or other non-cash assets)
received upon
the issuance of such equity Securities, and (B) receive from the
Partnership in
consideration for such contributions a number of options, warrants
or other
rights to purchase Partnership Interests equal to the number of
such Securities
issued by the Company, with equivalent rights, preferences and
limitations to
the terms of such equity Securities; and
(iii) in the case of debt securities, lend to the Partnership
the proceeds of or consideration received for such Securities on
the same terms
and conditions, including interest rate and repayment schedule, as
shall be
applicable with respect to or incurred in connection with the
issuance of such
Securities and the proceeds of, or consideration received from, any
subsequent
exercise, exchange or conversion thereof (if applicable).
(b) Splits. The Partnership shall (i) make a distribution in
Partnership Units, (ii) subdivide its outstanding Partnership
Units, or (iii)
combine its outstanding Partnership Units into a smaller number of
Partnership
Units, in the event the Company takes an analogous action with
respect to the
Common Stock. The intent of the previous sentence is that one
Partnership Unit
remains the economic equivalent of one share of Common Stock
without dilution.
If the Company determines that it is necessary or desirable to make
any filings
under the Act or otherwise in order to reference the existence of
such action,
the Company may cause such filings to be made, which filings might
take the form
of amendments to the Certificate; provided, however, that, unless
specifically
required by this Agreement or the Act after giving effect to the
terms of this
Agreement, no approval or consent of any Partners shall be required
in
connection with the making of any such filing.
(c) Treatment of Proceeds. If the proceeds actually received by
the
Company in connection with an issuance of Securities by the Company
are less
than the gross proceeds of
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such offering, grant, award or issuance as a result of any
underwriter's
discounts, commissions or other fees or expenses paid or incurred
in connection
with such offering, grant, award or issuance, then the Company
shall be deemed
to have made a Capital Contribution to the Partnership in the
amount of the
gross proceeds of such offering, grant, award or issuance and the
Partnership
shall be deemed simultaneously to have paid pursuant to Section
7.3(c) for the
amount of such expenses.
4.4
ADDITIONAL FUNDS
(a) The sums of money required to finance the business and
affairs
of the Partnership shall be derived from the initial Capital
Contributions made
to the Partnership by the Partners as set forth in Section 4.1 and
from funds
generated from the operation and business of the Partnership.
(b) If the Partnership requires additional funds at any time or
from
time to time in excess of funds available to the Partnership from
borrowing or
capital contributions, the Company may borrow such funds from a
financial
institution or other lender and lend such funds to the Partnership
on the same
terms and conditions as are applicable to the Company's borrowing
of such funds.
The Company shall be obligated to contribute the proceeds of a
securities
offering as additional capital to the Partnership.
(c) If the Company contributes additional capital to the
Partnership, the General Partner shall revalue the assets of the
Partnership to
their fair market values, as determined by the General Partner, and
the capital
accounts of the General Partner and Limited Partners will be
adjusted to reflect
the manner in which the unrealized gain or loss inherent in such
assets that has
not been reflected in the capital accounts previously would be
allocated among
the General Partner and Limited Partners under the terms of this as
if there was
a taxable disposition of such property for such estimated fair
market value on
the date of the revaluation.
4.5 NO
THIRD-PARTY BENEFICIARY
No creditor or other third party having dealings with the
Partnership shall have the right to enforce the right or
obligations of any
Partner to make Capital Contributions or loans or to pursue any
other right or
remedy hereunder or at law or in equity, it being understood and
agreed that the
provisions of this Agreement shall be solely for the benefit of,
and may be
enforced solely by, the parties hereto and their respective
successors and
assigns.
4.6 NO
INTEREST
No Partner shall be entitled to interest on any Capital
Contribution
or on such Partner's Capital Account.
4.7 NO
PREEMPTIVE RIGHTS
Subject to any preemptive rights that may be granted in
connection
with the issuance of Partnership Interests under Section 4.3(a), no
Person shall
have any preemptive or other similar right with respect to any:
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(a) additional Capital Contributions or loans to the Partnership;
or
(b) issuance or sale of any Partnership Units or other
Partnership
Interests.
4.8
CAPITAL ACCOUNTS; ADJUSTMENTS TO CARRYING VALUES
(a) Capital Accounts. The Partnership shall establish and
maintain
throughout the life of the Partnership for each Partner a separate
"Capital
Account" in accordance with Treasury Regulations Section
1.704-1(b). Such
Capital Account shall be increased by (i) the amount of all
Capital
Contributions made by such Partner to the Partnership pursuant to
this Agreement
and (ii) all Profits and other items of income and gain allocated
to such
Partner pursuant to Section 6.2, and decreased by (1) the amount of
cash or
Agreed Value of all actual and deemed distributions of cash or
property made to
such Partner pursuant to this Agreement and (2) all Losses and
other items of
loss and deduction allocated to such Partner pursuant to Section
6.2 of this
Agreement. Any other Partnership item which is required or
authorized under
Treasury Regulation Section 1.704-1(b) to be reflected in Capital
Accounts shall
be so reflected.
(b)
Adjustments to Carrying Values. Consistent with the provisions
of Treasury Regulations Section 1.704-1(b)(2)(iv)(f), and as
provided in this
Section 4.8(b), the Carrying Values of all Partnership Assets shall
be adjusted
upward or downward to reflect any Book Gains or Book Losses
attributable to such
Partnership Asset, as of the times of the adjustments provided in
this Section
4.8(b), as if such Book Gain or Book Loss had been recognized on an
actual sale
of each such Partnership Asset and allocated pursuant to Section
6.1. Such
adjustments shall be made as of the following times: (i) as of the
end of the
calendar quarter immediately prior to the acquisition of an
additional interest
in the Partnership by any new or existing Partner in exchange for
more than a de
minimis Capital Contribution; (ii) as of the end of the calendar
quarter
immediately prior to the distribution by the Partnership to a
Partner of more
than a de minimis amount of property as consideration for an
interest in the
Partnership; (iii) upon the occurrence of a Listing Event or a
Termination
Event, and (iv) at such other times as the General Partner may
determine so long
as such adjustment is made under generally accepted industry
accounting
practices within the meaning of Treasury Regulations Section
1.704-1(b)(2)(iv)(f)(5). In accordance with Treasury Regulations
Section
1.704-1(b)(2)(iv)(e), the Carrying Values of Partnership assets
distributed in
kind shall be adjusted upward or downward to reflect any Book Gain
or Book Loss
attributable to such Partnership Asset, as of the time any such
asset is
distributed. If the Carrying Values of the Partnership Assets are
adjusted as a
result of a Listing Event, the total Carrying Value of all
Partnership Assets
shall be deemed to equal the Market Value plus the total amount of
liabilities
of the Partnership as of the date of the Listing Event. If the
Carrying Values
of the Partnership Assets are adjusted as a result of a Termination
Event, the
total Carrying Value of all Partnership Assets shall be deemed to
equal the
Appraised Value as of the Termination Date.
ARTICLE 5
DISTRIBUTIONS
5.1
DISTRIBUTIONS
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(a) General.
Subject to the provisions of Sections 5.3, 5.4, 8.5(b),
11.6(d) and 13.2, the General Partner shall cause the Partnership
to distribute
to the Partners as of the applicable Partnership Record Date, at
such times as
the General Partner shall determine, amounts of Distributable Cash
in accordance
with the percentage interests of the Partners and the entitlement
of Shopoff
Advisors as set forth in (b) below. In its sole discretion, General
Partner will
determine the amounts of such distributions.
(b) Ratio of Distributions. Distributable Cash shall be
distributed
in the following order: first, 100% to Shopoff Properties Trust,
Inc. (directly
as a limited partner and indirectly through Shopoff General Partner
in the ratio
of their respective Percentage Interests) until Shopoff Properties
Trust, Inc.,
has received an amount equal to the sum of (1) its shareholders'
Invested
Capital, and (2) the 10% Return. Thereafter, 50% of the remaining
amount of
Distributable Cash shall be distributed to Shopoff Properties
Trust, Inc. and
50% shall be distributed as an incentive distribution to Shopoff
Advisors. Until
such time as Shopoff Properties Trust, Inc. has received an amount
equal to its
shareholders' Invested Capital plus the 10% Return, Shopoff
Advisors will not
receive any incentive distributions.
(c) Tax Advances. The General Partner is authorized to make
distributions to Advisor in the event Advisor is allocated Profits,
income or
gain but has not yet become entitled to incentive distributions
under Section
5.1(b) above. Any such distributions shall be in the amount of the
General
Partner's estimate of the income taxes resulting from such
allocations and shall
be treated as an advance against distributions that would be made
subsequently
to Advisor as incentive distributions under Section 5.1(b).
5.2
QUALIFICATION AS A REIT
The General Partner shall take such action as it deems necessary
or
advisable to cause the Partnership to distribute sufficient amounts
under this
Article 5 to enable the Company to pay stockholder dividends that
will enable
the Company to (a) satisfy the requirements for qualification as a
REIT under
the Code and the Treasury Regulations (the "REIT Requirements"),
and (b) avoid
any federal income or excise tax liability; provided, however, the
General
Partner shall not be bound to comply with this covenant to the
extent such
distributions would violate applicable Delaware law.
5.3
WITHHOLDING
With respect to any withholding tax or other similar tax
liability
or obligation to which the Partnership may be subject as a result
of any act by
or status of any Partner or to which the Partnership becomes
subject with
respect to any Partnership Interest, the Partnership shall have the
right to
withhold amounts of Distributa
