EIGHTH AMENDED AND RESTATED LTD. PART. AGREE.

 

 

                                                                  EXECUTION COPY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                             FIRST INDUSTRIAL, L.P.

 

                           EIGHTH AMENDED AND RESTATED

 

                          LIMITED PARTNERSHIP AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

        THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND

        RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER

        THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE

        SECURITIES LAWS PURSUANT TO A REGISTRATION OR EXEMPTION THEREFROM.

 

 

 

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                                TABLE OF CONTENTS

 

 

 

ARTICLE I - INTERPRETIVE PROVISIONS

   Section 1.1     Certain Definitions.........................................1

   Section 1.2     Rules of Construction......................................13

 

ARTICLE II - CONTINUATION

   Section 2.1     Continuation...............................................13

   Section 2.2     Name.......................................................13

   Section 2.3     Place Of Business; Registered Agent........................13

 

ARTICLE III - BUSINESS PURPOSE

   Section 3.1     Business...................................................14

   Section 3.2     Authorized Activities......................................14

 

ARTICLE IV - CAPITAL CONTRIBUTIONS

   Section 4.1     Capital Contributions......................................14

   Section 4.2     Additional Partnership Interests...........................14

   Section 4.3     No Third Party Beneficiaries...............................15

   Section 4.4     Capital Accounts...........................................15

   Section 4.5     Return of Capital Account; Interest........................16

   Section 4.6     Preemptive Rights..........................................16

   Section 4.7     REIT Share Purchases.......................................16

 

ARTICLE V - ALLOCATIONS AND DISTRIBUTIONS

   Section 5.1     Limited Liability..........................................17

   Section 5.2     Profits, Losses and Distributive Shares....................17

   Section 5.3     Distributions..............................................22

   Section 5.4     Distribution Upon Redemption...............................24

   Section 5.5     Distributions upon Liquidation.............................24

   Section 5.6     Amounts Withheld...........................................24

 

ARTICLE VI - PARTNERSHIP MANAGEMENT

   Section 6.1     Management and Control of Partnership Business.............24

   Section 6.2     No Management By Limited Partners; Limitation of

                    Liability................................................25

   Section 6.3     Limitations on Partners....................................25

   Section 6.4     Business with Affiliates...................................26

   Section 6.5     Compensation; Reimbursement of Expenses....................26

   Section 6.6     Liability for Acts and Omissions...........................26

   Section 6.7     Indemnification............................................27

 

ARTICLE VII - ADMINISTRATIVE, FINANCIAL AND TAX MATTERS

   Section 7.1     Books and Records..........................................27

   Section 7.2     Annual Audit and Accounting................................27

   Section 7.3     Partnership Funds..........................................27

   Section 7.4     Reports and Notices........................................27

   Section 7.5     Tax Matters................................................28

   Section 7.6     Withholding................................................28

 

ARTICLE VIII - TRANSFER OF PARTNERSHIP INTERESTS; ADMISSIONS OF PARTNERS

   Section 8.1     Transfer By General Partner................................29

   Section 8.2     Obligations of a Prior General Partner.....................29

 

 

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   Section 8.3     Successor General Partner..................................29

   Section 8.4     Restrictions On Transfer And Withdrawal By Limited

                    Partner..................................................29

   Section 8.5     Substituted Limited Partner................................30

   Section 8.6     Timing and Effect of Transfers.............................31

   Section 8.7     Additional Limited Partners................................31

   Section 8.8     Amendment of Agreement and Certificate.....................31

 

ARTICLE IX - REDEMPTION

   Section 9.1     Right of Redemption........................................31

   Section 9.2     Timing of Redemption.......................................33

   Section 9.3     Redemption Price...........................................33

   Section 9.4     Assumption of Redemption Obligation........................33

   Section 9.5     Further Assurances; Certain Representations................33

   Section 9.6     Effect of Redemption.......................................33

   Section 9.7     Registration Rights........................................34

   Section 9.8     Redemption upon REIT Share Repurchases by the General

                    Partner..................................................34

 

ARTICLE X - DISSOLUTION AND LIQUIDATION

   Section 10.1       Term and Dissolution....................................34

   Section 10.2       Liquidation of Partnership Assets.......................34

   Section 10.3       Effect of Treasury Regulations..........................36

   Section 10.4       Time for Winding-Up.....................................36

 

ARTICLE XI - AMENDMENTS AND MEETINGS

   Section 11.1        Amendment Procedure.....................................36

   Section 11.2       Meetings and Voting.....................................37

   Section 11.3       Voting of LB Units......................................37

 

ARTICLE XII - MISCELLANEOUS PROVISIONS

   Section 12.1       Title To Property.......................................37

   Section 12.2       Other Activities of Limited Partners....................38

   Section 12.3       Power of Attorney.......................................38

   Section 12.4       Notices.................................................39

   Section 12.5       Further Assurances......................................39

   Section 12.6       Titles and Captions.....................................39

   Section 12.7       Applicable Law..........................................39

   Section 12.8       Binding Agreement.......................................39

   Section 12.9       Waiver of Partition.....................................39

   Section 12.10      Counterparts and Effectiveness..........................39

   Section 12.11      Survival of Representations.............................39

   Section 12.12      Entire Agreement........................................39

 

 

 

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Exhibit 1A     -    First Highland Partners

Exhibit 1B     -    Schedule of Partners

Exhibit 1C     -    LB Partners

Exhibit 1D     -    Contributor Partners

Exhibit 2      -    Form of Redemption Notice

Exhibit 3      -    Form of Registration Rights Agreement

 

 

 

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<PAGE>

 

 

                             FIRST INDUSTRIAL, L.P.

 

                           EIGHTH AMENDED AND RESTATED

 

                          LIMITED PARTNERSHIP AGREEMENT

 

 

     The undersigned, being the sole general partner of First Industrial, L.P.

(the "Partnership"), a limited partnership formed under the Delaware Revised

Uniform Limited Partnership Act, does hereby amend and restate the Seventh

Amended and Restated Partnership Agreement (as described below) this 2nd day of

June, 2004 as follows:

 

                                R E C I T A L S:

 

 

     A. The Partnership was formed pursuant to a Certificate of Limited

Partnership filed on November 23, 1993 with the Secretary of State of the State

of Delaware under the name "ProVest, L.P." and a Limited Partnership Agreement

dated November 23, 1993 (the "Original Partnership Agreement").

 

     B. The Original Partnership Agreement was amended and restated as of

January 28, 1994 (such amended and restated partnership agreement, the "Prior

Partnership Agreement").

 

     C. A Second Amended and Restated Limited Partnership Agreement was executed

as of June 30, 1994, a Third Amended and Restated Partnership Agreement was

executed as of May 14, 1997, a Fourth Amended and Restated Partnership Agreement

was executed as of June 6, 1997, a Fifth Amended and Restated Partnership

Agreement was executed as of February 4, 1998, a Sixth Amended and Restated

Partnership Agreement was executed as of March 18, 1998 and a Seventh Amended

and Restated Partnership Agreement was executed as of May 26, 2004 (the "Seventh

Partnership Agreement").

 

     D. The General Partner desires to amend and restate the Seventh Partnership

Agreement to (i) reflect the interests granted to the Class H Limited Partner

(as hereinafter defined) and (ii) set forth the understandings and agreements,

including certain rights and obligations, among the Partners (as hereinafter

defined) with respect to the Partnership.

 

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                      ARTICLE I - INTERPRETIVE PROVISIONS

 

--------------------------------------------------------------------------------

 

     Section 1.1 Certain Definitions. The following terms have the definitions

hereinafter indicated whenever used in this Agreement with initial capital

letters:

 

     Act: The Delaware Revised Uniform Limited Partnership Act, Sections 17-101

to 17-1109 of the Delaware Code Annotated, Title 6, as amended from time to

time.

 

     Additional Limited Partner: A Person admitted to the Partnership as a

Limited Partner in accordance with Section 8.7 hereof and who is shown as such

on the books and records of the Partnership.

 

     Adjusted Capital Account: With respect to any Partner, such Partner's

Capital Account maintained in accordance with Section 4.4 hereof, as of the end

of the relevant Fiscal Year of the Partnership, after giving effect to the

following adjustments:

 

     (A) Credit to such Capital Account such Partner's share of Partnership

Minimum Gain determined in accordance with Treasury Regulations Section

1.704-2(g)(1) and such Partner's share of Partner Minimum Gain determined in

accordance with Treasury Regulations Section 1.704-2(i)(5).

 

 

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     (B) Debit to such Capital Account the items described in Treasury

Regulations Section 1.704- 1(b)(2)(ii)(d)(4), (5) and (6).

 

     The foregoing definition of "Adjusted Capital Account" is intended to

comply with the provisions of Treasury Regulations Sections 1.704-1(b)(2)(ii)

and 1.704-2 and shall be interpreted consistently therewith.

 

     Adjusted Capital Account Deficit: With respect to any Partner, the deficit

balance, if any, in that Partner's Adjusted Capital Account as of the end of the

relevant Fiscal Year of the Partnership.

 

     Affiliate: With respect to any referenced Person, (i) a member of such

Person's immediate family; (ii) any Person who directly or indirectly owns,

controls or holds the power to vote ten percent (10%) or more of the outstanding

voting securities of the Person in question; (iii) any Person ten percent (10%)

or more of whose outstanding securities are directly or indirectly owned,

controlled, or held with power to vote by the Person in question; (iv) any

Person directly or indirectly controlling, controlled by, or under direct or

indirect common control with the Person in question; (v) if the Person in

question is a corporation, any executive officer or director of such Person or

of any corporation directly or indirectly controlling such Person; and (vi) if

the Person in question is a partnership, any general partner of the partnership

or any limited partner owning or controlling ten percent (10%) or more of either

the capital or profits interest in such partnership. As used herein, "control"

shall mean the possession, directly or indirectly, 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.

 

     Aggregate Protected Amount: With respect to the Contributor Partners, as a

group, the aggregate balances of the Protected Amounts, if any, of the

Contributor Partners, as determined on the date in question.

 

     Agreed Value: In the case of any (i) Contributed Property acquired pursuant

to a Contribution Agreement, the value of such Contributed Property as set forth

in such Contribution Agreement or, if no such value is set forth for such

Contributed Property, the portion of the consideration provided for under such

Contribution Agreement allocable to such Contributed Property, as determined by

the General Partner in its reasonable discretion, (ii) Contributed Property

acquired other than pursuant to a Contribution Agreement, the fair market value

of such property at the time of contribution, as determined by the General

Partner using such method of valuation as it may adopt in its reasonable

discretion and (iii) property distributed to a Partner by the Partnership, the

Partnership's Book Value of such property at the time such property is

distributed without taking into account, in the case of each of (i), (ii) and

(iii), the amount of any related indebtedness assumed by the Partnership (or the

Partner in the case of clause (iii)) or to which the Contributed Property (or

distributed property in the case of clause (iii)) is taken subject.

 

     Agreement: This Eighth Amended and Restated Limited Partnership Agreement

and all Exhibits attached hereto, as the same may be amended or restated and in

effect from time to time.

 

     Assignee: Any Person to whom one or more Partnership Units have been

Transferred as permitted under this Agreement but who has not become a

Substituted Limited Partner in accordance with the provisions hereof.

 

     Bankruptcy: Either (i) a referenced Person's making an assignment for the

benefit of creditors, (ii) the filing by a referenced Person of a voluntary

petition in bankruptcy, (iii) a referenced Person's being adjudged insolvent or

having entered against him an order for relief in any bankruptcy or insolvency

proceeding, (iv) the filing by a referenced Person of an answer seeking any

reorganization, composition, readjustment, liquidation, dissolution, or similar

relief under any law or regulation, (v) the filing by a referenced Person of an

answer or other pleading admitting or failing to contest the material

allegations of a petition filed against him in any proceeding of reorganization,

composition, readjustment, liquidation, dissolution, or for similar relief under

any statute, law or regulation or (vi) a referenced Person's seeking, consenting

to, or acquiescing in the appointment of a trustee, receiver or liquidator for

all or substantially all of his property (or court appointment of such trustee,

receiver or liquidator).

 

 

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     Book-Tax Disparity: With respect to any item of Contributed Property, or

property the Book Value of which has been adjusted in accordance with Section

4.4(D), as of the date of determination, the difference between the Book Value

of such property and the adjusted basis of such property for federal income tax

purposes.

 

     Book Value: With respect to any Contributed Property, the Agreed Value of

such property reduced (but not below zero) by all Depreciation with respect to

such property properly charged to the Partners' Capital Accounts, and with

respect to any other asset, the asset's adjusted basis for federal income tax

purposes; provided, however, (a) the Book Value of all Partnership Assets shall

be adjusted in the event of a revaluation of Partnership Assets in accordance

with Section 4.4(D) hereof, (b) the Book Value of any Partnership Asset

distributed to any Partner shall be the fair market value of such asset on the

date of distribution as determined by the General Partner and (c) such Book

Value shall be adjusted by the Depreciation taken into account with respect to

such asset for purposes of computing Profits and Losses.

 

     Capital Account: The account maintained by the Partnership for each Partner

described in Section 4.4 hereof.

 

     Capital Contribution: The total amount of cash or cash equivalents and the

Agreed Value (reduced to take into account the amount of any related

indebtedness assumed by the Partnership, or to which the Contributed Property is

subject) of Contributed Property which a Partner contributes or is deemed to

contribute to the Partnership pursuant to the terms of this Agreement.

 

     Cash Payment: The payment to a Redeeming Party of a cash amount determined

by multiplying (i) the number of Partnership Units tendered for redemption by

such Redeeming Party pursuant to a validly proffered Redemption Notice by (ii)

the Unit Value on the date the Redemption Notice is received by the General

Partner.

 

     Certificate: The Partnership's Certificate of Limited Partnership filed in

the office of the Secretary of State of the State of Delaware, as amended from

time to time.

 

     Class C Deemed Original Issue Date: (i) in the case of any Class C Unit

which is part of the first issuance of such units or part of a subsequent

issuance of such units prior to October 1, 1997, the date of such first issuance

and (ii) in the case of any such unit which is part of a subsequent issuance of

such units on or after October 1, 1997, the later of (x) October 1, 1997 and (y)

the last Class C Distribution Period Commencement Date which precedes the date

of issuance of such unit and which succeeds the last Class C Distribution Period

for which full cumulative Class C Priority Return Amounts have been paid;

provided, however, that, in the case of any such unit which is part of a

subsequent issuance on or after October 1, 1997, the date of issuance of which

falls between (a) the record date for dividends payable on the Series C

Preferred Shares on the first succeeding dividend payment date on such stock and

(b) such dividend payment date, the "Class C Deemed Original Issue Date" means

the date of the Class C Distribution Period Commencement Date that immediately

follows the date of issuance of such unit.

 

     Class C Distribution Period: The Class C Initial Distribution Period and

each quarterly distribution period thereafter, commencing on January 1, April 1,

July 1 and October 1 of each year and ending on and including the day preceding

the next Class C Distribution Period Commencement Date.

 

     Class C Distribution Period Commencement Date: January 1, April 1, July 1

and October 1 of each year commencing October 1, 1997.

 

     Class C Initial Distribution Period: The period from the Class C Deemed

Original Issue Date for a Class C Unit to, but excluding, October 1, 1997.

 

     Class C Limited Partner: First Industrial Realty Trust, Inc., a Maryland

corporation, in its capacity as a limited partner in the Partnership holding

Class C Units.

 

     Class C Priority Return Amount: With respect to each Class C Unit, (i) for

the Class C Initial Distribution Period, the pro rata portion of the amount

referred to in clause (ii) of this definition, computed in

 

 

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                                       -4-

 

 

accordance with the last sentence of Section 5.3(A) hereof, and (ii) for each

Class C Distribution Period thereafter, an amount equal to 2.15625% of that

portion of the Capital Contribution of the Class C Limited Partner allocable to

each such unit. Class C Priority Return Amounts on each Class C Unit that are

not distributed as provided in Section 5.3(A) shall be cumulative from the Class

C Deemed Original Issue Date of such unit.

 

     Class C Redemption: As defined in Section 9.1(C) hereof.

 

     Class C Redemption Price: As defined in Section 9.1(C) hereof.

 

     Class C Unit: The Partnership Interest held by the Class C Limited Partner,

each full Class C Unit representing a $2,500 Capital Contribution.

 

     Class D Deemed Original Issue Date: (i) in the case of any Class D Unit

which is part of the first issuance of such units or part of a subsequent

issuance of such units prior to April 1, 1998, the date of such first issuance

and (ii) in the case of any such unit which is part of a subsequent issuance of

such units on or after April 1, 1998, the later of (x) April 1, 1998 and (y) the

last Class D Distribution Period Commencement Date which precedes the date of

issuance of such unit and which succeeds the last Class D Distribution Period

for which full cumulative Class D Priority Return Amounts have been paid;

provided, however, that, in the case of any such unit which is part of a

subsequent issuance on or after April 1, 1998, the date of issuance of which

falls between (a) the record date for dividends payable on the Series D

Preferred Shares on the first succeeding dividend payment date on such stock and

(b) such dividend payment date, the "Class D Deemed Original Issue Date" means

the date of the Class D Distribution Period Commencement Date that immediately

follows the date of issuance of such unit.

 

     Class D Distribution Period: The Class D Initial Distribution Period and

each quarterly distribution period thereafter, commencing on January 1, April 1,

July 1 and October 1 of each year and ending on and including the day preceding

the next Class D Distribution Period Commencement Date.

 

     Class D Distribution Period Commencement Date: January 1, April 1, July 1

and October 1 of each year commencing April 1, 1998.

 

     Class D Initial Distribution Period: The period from the Class D Deemed

Original Issue Date for a Class D Unit to, but excluding, April 1, 1998.

 

     Class D Limited Partner: First Industrial Realty Trust, Inc., a Maryland

corporation, in its capacity as a limited partner in the Partnership holding

Class D Units.

 

     Class D Priority Return Amount: With respect to each Class D Unit, (i) for

the Class D Initial Distribution Period, the pro rata portion of the amount

referred to in clause (ii) of this definition, computed in accordance with the

last sentence of Section 5.3(B) hereof, and (ii) for each Class D Distribution

Period thereafter, an amount equal to 1.9875% of that portion of the Capital

Contribution of the Class D Limited Partner allocable to each such unit. Class D

Priority Return Amounts on each Class D Unit that are not distributed as

provided in Section 5.3(B) shall be cumulative from the Class D Deemed Original

Issue Date of such unit.

 

     Class D Redemption: As defined in Section 9.1(D) hereof.

 

      Class D Redemption Price: As defined in Section 9.1(D) hereof.

 

     Class D Unit: The Partnership Interest held by the Class D Limited Partner,

each full Class D Unit representing a $2,500 Capital Contribution.

 

     Class E Deemed Original Issue Date: (i) in the case of any Class E Unit

which is part of the first issuance of such units or part of a subsequent

issuance of such units prior to July 1, 1998, the date of such first issuance

and (ii) in the case of any such unit which is part of a subsequent issuance of

such units on or after July 1, 1998, the later of (x) July 1, 1998 and (y) the

last Class E Distribution Period Commencement Date which precedes the date of

 

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                                      -5-

 

 

issuance of such unit and which succeeds the last Class E Distribution Period

for which full cumulative Class E Priority Return Amounts have been paid;

provided, however, that, in the case of any such unit which is part of a

subsequent issuance on or after July 1, 1998, the date of issuance of which

falls between (a) the record date for dividends payable on the Series E

Preferred Shares on the first succeeding dividend payment date on such stock and

(b) such dividend payment date, the "Class E Deemed Original Issue Date" means

the date of the Class E Distribution Period Commencement Date that immediately

follows the date of issuance of such unit.

 

     Class E Distribution Period: The Class E Initial Distribution Period and

each quarterly distribution period thereafter, commencing on January 1, April 1,

July 1 and October 1 of each year and ending on and including the day preceding

the next Class E Distribution Period Commencement Date.

 

     Class E Distribution Period Commencement Date: January 1, April 1, July 1

and October 1 of each year commencing July 1, 1998.

 

     Class E Initial Distribution Period: The period from the Class E Deemed

Original Issue Date for a Class E Unit to, but excluding, July 1, 1998.

 

     Class E Limited Partner: First Industrial Realty Trust, Inc., a Maryland

corporation, in its capacity as a limited partner in the Partnership holding

Class E Units.

 

     Class E Priority Return Amount: With respect to each Class E Unit, (i) for

the Class E Initial Distribution Period, the pro rata portion of the amount

referred to in clause (ii) of this definition, computed in accordance with the

last sentence of Section 5.3(C) hereof, and (ii) for each Class E Distribution

Period thereafter, an amount equal to 7.90% of that portion of the Capital

Contribution of the Class E Limited Partner allocable to each such unit. Class E

Priority Return Amounts on each Class E Unit that are not distributed as

provided in Section 5.3(C) shall be cumulative from the Class E Deemed Original

Issue Date of such unit.

 

     Class E Redemption: As defined in Section 9.1(E) hereof.

 

     Class E Redemption Price: As defined in Section 9.1(E) hereof.

 

     Class E Unit: The Partnership Interest held by the Class E Limited Partner,

each full Class E Unit representing a $2,500 Capital Contribution.

 

     Class F Distribution Date: Each dividend payment date for the Series F

Preferred Shares.

 

     Class F Limited Partner: First Industrial Realty Trust, Inc., a Maryland

Corporation, in its capacity as a limited partner in the Partnership holding

Class F Units.

 

     Class F Priority Return Amount: With respect to each Class F Unit, that

portion of the Capital Contribution of the Class F Limited Partner, allocable to

each such unit, multiplied by the Dividend Rate in effect for the Series F

Preferred Shares, in each case during the period with respect to which the Class

F Priority Return Amount is to be determined.

 

     Class F Redemption: As defined in Section 9.1(F) hereof.

 

     Class F Redemption Price: As defined in Section 9.1(F) hereof.

 

     Class F Unit: The Partnership Interest held by the Class F Limited Partner,

each full Class F Unit representing a $100,000 Capital Contribution.

 

     Class G Distribution Date: Each dividend payment date for the Series G

Preferred Shares.

 

 

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     Class G Limited Partner: First Industrial Realty Trust, Inc., a Maryland

Corporation, in its capacity as a limited partner in the Partnership holding

Class G Units.

 

     Class G Priority Return Amount: With respect to each Class G Unit, that

portion of the Capital Contribution of the Class G Limited Partner, allocable to

each such unit, multiplied by the Dividend Rate in effect for the Series G

Preferred Shares, in each case during the period with respect to which the Class

G Priority Return Amount is to be determined.

 

     Class G Redemption: As defined in Section 9.1(G) hereof.

 

     Class G Redemption Price: As defined in Section 9.1(G) hereof.

 

     Class G Unit: The Partnership Interest held by the Class G Limited Partner,

each full Class G Unit representing a $100,000 Capital Contribution.

 

     Class H Distribution Date: Each dividend payment date for the Series H

Preferred Shares.

 

     Class H Limited Partner: First Industrial Realty Trust, Inc., a Maryland

Corporation, in its capacity as a limited partner in the Partnership holding

Class H Units.

 

     Class H Priority Return Amount: With respect to each Class H Unit, that

portion of the Capital Contribution of the Class H Limited Partner, allocable to

each such unit, multiplied by the Dividend Rate in effect for the Series H

Preferred Shares, in each case during the period with respect to which the Class

H Priority Return Amount is to be determined.

 

     Class H Redemption: As defined in Section 9.1(H) hereof.

 

      Class H Redemption Price: As defined in Section 9.1(H) hereof.

 

     Class H Unit: The Partnership Interest held by the Class H Limited Partner,

each full Class H Unit representing a $250,000 Capital Contribution.

 

     Code: The Internal Revenue Code of 1986, as amended from time to time.

 

     Consent: Either the written consent of a Person or the affirmative vote of

such Person at a meeting duly called and held pursuant to this Agreement, as the

case may be, to do the act or thing for which the consent is required or

solicited, or the act of granting such consent, as the context may require.

 

     Contributed Property: Each property or other asset (excluding cash and cash

equivalents) contributed or deemed contributed to the Partnership.

 

     Contribution Agreements: Those certain agreements among one or more of the

Initial Limited Partners (or Persons in which such Initial Limited Partners have

direct or indirect interests) and the Partnership pursuant to which, inter alia,

the Initial Limited Partners (or such Persons), directly or indirectly, are

contributing property to the Partnership on the Effective Date in exchange for

Partnership Units.

 

     Contributor Partner(s): That or those Limited Partner(s) listed as

Contributor Partner(s) on Exhibit 1D attached hereto and made a part hereof, as

such Exhibit may be amended from time to time by the General Partner, whether by

express amendment to this Partnership Agreement or by execution of a written

instrument by and between any additional Contributor Partner(s) being affected

thereby and the General Partner, acting on behalf of the Partnership and without

the prior consent of the Limited Partners (whether or not Contributor Partners

other than the Contributor Partner(s) being affected thereby). For purposes

hereof, any successor, assignee, or transferee of the Interest of a Contributor

Partner (other than the Partnership in connection with a redemption pursuant to

Article IX hereof) shall be considered a Contributor Partner for purposes

hereof.

 

 

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                                       -7-

 

 

     Conversion Factor: The factor applied for converting Partnership Units to

REIT Shares, which shall initially be 1.0; provided, however, in the event that

the REIT (i) declares or pays a dividend on its outstanding REIT Shares in REIT

Shares or makes a distribution to all holders of its outstanding REIT Shares in

REIT Shares, (ii) subdivides its outstanding REIT Shares or (iii) combines its

outstanding REIT Shares into a smaller number of REIT Shares, the Conversion

Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the

numerator of which shall be the number of REIT Shares issued and outstanding on

the record date (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 REIT Shares (determined without the above

assumption) issued and outstanding on the record date for such dividend,

distribution, subdivision or combination; provided, further, in the event that

the Partnership (a) declares or pays a distribution on the outstanding

Partnership Units in Partnership Units or makes a distribution to all Partners

in Partnership Units, (b) subdivides the outstanding Partnership Units or (c)

combines the outstanding Partnership Units into a smaller number of Partnership

Units, the Conversion Factor shall be adjusted by multiplying the Conversion

Factor by a fraction, the numerator of which shall be the actual number of

Partnership Units issued and outstanding on the record date (determined without

giving effect to such dividend, distribution, subdivision or combination), and

the denominator of which shall be the actual number of Partnership Units

(determined after giving effect to such dividend, distribution, subdivision or

combination) issued and outstanding on such record date. Any adjustment to the

Conversion Factor shall become effective immediately after the effective date of

such event retroactive to the record date, if any, for such event.

 

     Depreciation: For each Fiscal Year or other period, an amount equal to the

depreciation, amortization or other cost recovery deduction allowable with

respect to an asset for such year or other period, except that if the Book 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 adjusted as

necessary so as to be an amount which bears the same ratio to such beginning

Book Value as the federal income tax depreciation, amortization, or other cost

recovery deduction for such year or other period bears to the beginning adjusted

tax basis; provided, however, that if the federal income tax depreciation,

amortization or other cost recovery deduction for such year or other period is

zero, Depreciation for such year or other period shall be determined with

reference to such beginning Book Value using any reasonable method approved by

the General Partner.

 

     Distributable Cash: with respect to any period, and without duplication:

 

     (i) all cash receipts of the Partnership during such period from all

sources;

 

     (ii) less all cash disbursements of the Partnership during such period,

including, without limitation, disbursements for operating expenses, taxes, debt

service (including, without limitation, the payment of principal, premium and

interest), redemption of Partnership Interests and capital expenditures;

 

     (iii) less amounts added to reserves in the sole discretion of the General

Partner, plus amounts withdrawn from reserves in the reasonable discretion of

the General Partner.

 

     Effective Date: June 30, 1994.

 

     ERISA: The Employee Retirement Income Security Act of 1976, as amended from

time to time.

 

     First Highland Limited Partners: Those Limited Partners identified on

Exhibit 1A hereto.

 

     First Highland Properties: Those certain properties acquired by the

Partnership pursuant to that certain Contribution Agreement, dated as of March

19, 1996.

 

     First Highland Units: The Partnership Units issued to the First Highland

Limited Partners in connection with the acquisition of the First Highland

Properties by the Partnership.

 

     Fiscal Year: The calendar year or in the event of a termination of the

Partnership pursuant to Code Section 708, an appropriate portion of such year.

 

 

<PAGE>

                                      -8-

 

 

     General Partner: First Industrial Realty Trust, Inc., a Maryland

corporation, and its respective successor(s) who or which become Successor

General Partner(s) in accordance with the terms of this Agreement.

 

     General Partner Interest: A Partnership Interest held by the General

Partner including both its General Partner and Limited Partner Interests. A

General Partner Interest may be expressed as a number of Partnership Units.

 

     Involuntary Withdrawal: As to any (i) individual shall mean such

individual's death, incapacity or adjudication of incompetence, (ii) corporation

shall mean its dissolution or revocation of its charter (unless such revocation

is promptly corrected upon notice thereof), (iii) partnership shall mean the

dissolution and commencement of winding up of its affairs, (iv) trust shall mean

the termination of the trust (but not the substitution of trustees), (v) estate

shall mean the distribution by the fiduciary of the estate's complete interest

in the Partnership and (vi) any Partner shall mean the Bankruptcy of such

Partner.

 

     IRS: The Internal Revenue Service, which administers the internal revenue

laws of the United States.

 

     LB Closing Date: January 31, 1997.

 

     LB Partners: The persons identified on Exhibit 1C hereto, following their

admission to the Partnership as Additional Limited Partners.

 

     LB Units: The Partnership Units issued to the LB Partners in connection

with the acquisition by the Partnership of certain properties on the LB Closing

Date.

 

     Limited Partner: Those Persons listed as such on Exhibit 1B attached hereto

and made a part hereof, as such Exhibit may be amended from time to time,

including any Person who becomes a Substituted Limited Partner or an Additional

Limited Partner in accordance with the terms of this Agreement; provided such

term shall not include the Class C Limited Partner, the Class D Limited Partner,

the Class E Limited Partner, the Class F Limited Partner, the Class G Limited

Partner or the Class H Limited Partner.

 

     Limited Partner Interest: A Partnership Interest held by a Limited Partner

that is a limited partner interest. A Limited Partner Interest may be expressed

as a number of Partnership Units.

 

     Nonrecourse Liability: A liability as defined in Treasury Regulations

Section 1.704-2(b)(3).

 

     Notice: A writing containing the information required by this Agreement to

be communicated to a Person and delivered to such Person in accordance with

Section 12.4; provided, however, that any written communication containing such

information actually received by such Person shall constitute Notice for all

purposes of this Agreement.

 

     Partner Minimum Gain: The gain (regardless of character) which would be

realized by the Partnership if property of the Partnership subject to a partner

nonrecourse debt (as such term is defined in Treasury Regulations Section

1.704-2(b)(4)) were disposed of in full satisfaction of such debt on the

relevant date. The adjusted basis of property subject to more than one partner

nonrecourse debt shall be allocated in a manner consistent with the allocation

of basis for purposes of determining Partnership Minimum Gain hereunder. Partner

Minimum Gain shall be computed hereunder using the Book Value, rather than the

adjusted tax basis, of the Partnership property in accordance with Treasury

Regulations Section 1.704-2(d)(3).

 

     Partner Nonrecourse Deductions: With respect to any partner nonrecourse

debt (as such term is defined in Treasury Regulations Section 1.704-2(b)(4)),

the increase in Partner Minimum Gain during the tax year plus any increase in

Partner Minimum Gain for a prior tax year which has not previously generated a

Partner Nonrecourse Deduction hereunder. The determination of which Partnership

items constitute Partner Nonrecourse Deductions shall be made in a manner

consistent with the manner in which Partnership Nonrecourse Deductions are

determined hereunder.

 

 

<PAGE>

                                       -9-

 

 

     Partners: The General Partner, the Class C Limited Partner, the Class D

Limited Partner, the Class E Limited Partner, the Class F Limited Partner, the

Class G Limited Partner, the Class H Limited Partner and the Limited Partners as

a group. The term "Partner" shall mean a General Partner, the Class C Limited

Partner, the Class D Limited Partner, the Class E Limited Partner, the Class F

Limited Partner, the Class G Limited Partner, the Class H Limited Partner or a

Limited Partner. Such terms shall be deemed to include such other Persons who

become Partners pursuant to the terms of this Agreement.

 

     Partnership: The Delaware limited partnership referred to herein as First

Industrial, L.P., as such partnership may from time to time be constituted.

 

     Partnership Assets: At any particular time, any assets or property

(tangible or intangible, choate or inchoate, fixed or contingent) owned by the

Partnership.

 

     Partnership Interest or Interest: As to any Partner, such Partner's

ownership interest in the Partnership and including such Partner's right to

distributions under this Agreement and any other rights or benefits which such

Partner has in the Partnership, together with any and 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: The aggregate gain (regardless of character)

which would be realized by the Partnership if all of the property of the

Partnership subject to nonrecourse debt (other than partner nonrecourse debt as

such term is defined in Treasury Regulations Section 1.704-2(b)(4)) were

disposed of in full satisfaction of such debt and for no other consideration on

the relevant date. In the case of any Nonrecourse Liability of the Partnership

which is not secured by a mortgage with respect to any specific property of the

Partnership, any and all property of the Partnership to which the holder of said

liability has recourse shall be treated as subject to such Nonrecourse Liability

for purposes of the preceding sentence. Partnership Minimum Gain shall be

computed separately for each Nonrecourse Liability of the Partnership. For this

purpose, the adjusted basis of property subject to two or more liabilities of

equal priority shall be allocated among such liabilities in proportion to the

outstanding balance of such liabilities, and the adjusted basis of property

subject to two or more liabilities of unequal priority shall be allocated to the

liability of inferior priority only to the extent of the excess, if any, of the

adjusted basis of such property over the outstanding balance of the liability of

superior priority. Partnership Minimum Gain shall be computed hereunder using

the Book Value, rather than the adjusted tax basis, of the Partnership property

in accordance with Treasury Regulations Section 1.704-2(d)(3).

 

     Partnership Nonrecourse Deductions: The amount of Partnership deductions

equal to the increase, if any, in the amount of the aggregate Partnership

Minimum Gain during the tax year (plus any increase in Partnership Minimum Gain

for a prior tax year which has not previously generated a Partnership

Nonrecourse Deduction) reduced (but not below zero) by the aggregate

distributions made during the tax year of the proceeds of a Nonrecourse

Liability of the Partnership which are attributable to an increase in

Partnership Minimum Gain within the meaning of Treasury Regulations Section

1.704-2(d). The Partnership Nonrecourse Deductions for a Partnership tax year

shall consist first of depreciation or cost recovery deductions with respect to

each property of the Partnership giving rise to such increase in Partnership

Minimum Gain on a pro rata basis to the extent of each such increase, with any

excess made up pro rata of all items of deduction.

 

     Partnership Unit: A fractional, undivided share of the Partnership

Interests of all Partners (other than the Class C Limited Partner, the Class D

Limited Partner, the Class E Limited Partner, the Class F Limited Partner, the

Class G Limited Partner and the Class H Limited Partner) issued pursuant to

Section 4.1 hereof.

 

     Percentage Interest: As to any Partner, the percentage in the Partnership,

as determined by dividing the Partnership Units then owned by such Partner by

the total number of Partnership Units then outstanding, as the same may be

automatically adjusted from time to time to reflect the issuance and redemption

of Partnership Units in accordance with this Agreement, without requiring the

amendment of Exhibit 1B to reflect any such issuance or redemption.

 

     Person: Any individual, partnership, corporation, trust or other entity.

 

 

<PAGE>

                                      -10-

 

 

     Profits and Losses: For each Fiscal Year or other period, an amount equal

to the Partnership's taxable income or loss (as the case may be) for such year

or period, determined in accordance with Code Section 703(a) (for this purpose,

all items of income, gain, loss or deduction required to be stated separately

pursuant to Code Section 703(a)(1) shall be included in taxable income or loss),

with the following adjustments:

 

          a. Any income of the Partnership that is exempt from federal income

     tax and not otherwise taken into account in computing Profits or Losses

     pursuant to this definition shall be added to such taxable income or loss;

 

          b. Any expenditures of the Partnership described in Code Section

     705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant

     to Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise

     taken into account in computing Profits or Losses pursuant to this

     definition, shall be subtracted from such taxable income or loss;

 

           c. Gain or loss resulting from any disposition of Partnership property

     with respect to which gain or loss is recognized for federal income tax

     purposes shall be computed by reference to the Book Value of the property

     disposed of notwithstanding that the adjusted tax basis of such property

     differs from such Book Value;

 

          d. 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 in accordance with the definition of "Depreciation"

     herein; and

 

          e. In the event that any item of income, gain, loss or deduction that

     has been included in the initial computation of Profit or Loss is subject

     to the special allocation rules of Sections 5.2(C), 5.2(D) and 5.2(I)

     through 5.2(N), Profit or Loss shall be recomputed without regard to such

     item.

 

     Protected Amount: With respect to any Contributor Partner, the amount set

forth or otherwise described opposite the name of such Contributor Partner on

Exhibit 1D attached hereto and made a part hereof, as such Exhibit may be

modified from time to time by an amendment to the Partnership Agreement or by

execution of a written instrument by and between the Contributor Partner being

affected thereby and the General Partner, acting on behalf of the Partnership

and without the prior written consent of the Limited Partners (whether or not

Contributor Partners other than the Contributor Partner being affected thereby);

provided, however, that no Contributor Partner shall be considered to have a

Protected Amount from and following the first date upon which such Partner is no

longer a Partner of the Partnership.

 

     Record Date: The record date established by the General Partner for

distributions pursuant to Section 5.3 hereof, which record date shall be the

same as the record date established by the General Partner for a distribution to

its stockholders of some or all of its portion of such distribution.

 

     Recourse Liabilities: The amount of liabilities owed by the Partnership

(other than nonrecourse liabilities and liabilities to which Partner Nonrecourse

Deductions are attributable in accordance with Treasury Regulations Section

1.704-2(i)).

 

     Redeeming Party: A Limited Partner or Assignee (other than the General

Partner) who tenders Partnership Units for redemption pursuant to a Redemption

Notice.

 

     Redemption Date: The date for redemption of Partnership Units as set forth

in Section 9.2.

 

     Redemption Effective Date: The first date on which a Redeeming Party may

elect to redeem Partnership Units, which date shall be the later of (i) the

first anniversary of the date such Partnership Units are issued and (ii) the

effective date of any registration statement filed by the Partnership with

respect to the REIT Shares to be issued upon redemption of Partnership Units by

a Redeeming Party.

 

 

<PAGE>

                                       -11-

 

 

     Redemption Notice: A Notice to the General Partner by a Redeeming Party,

substantially in the form attached as Exhibit 2, pursuant to which the Redeeming

Party requests the redemption of Partnership Units in accordance with Article

IX.

 

     Redemption Obligation: The obligation of the Partnership to redeem the

Partnership Units as set forth in Section 9.1(A).

 

     Redemption Period: The 45-day period immediately following the filing with

the SEC by the General Partner of an annual report of the General Partner on

Form 10-K or a quarterly report of the General Partner on Form 10-Q or such

other period or periods as the General Partner may otherwise determine.

 

     Redemption Restriction: A restriction on the ability of the Partnership to

redeem the Partnership Units as set forth in Section 9.1(A).

 

     Registration Rights Agreement: A Registration Rights Agreement,

substantially in the form of Exhibit 3 hereto, pursuant to which First

Industrial will agree to register under the Securities Act of 1933, as amended,

REIT Shares issued in connection with Share Payments made under Article IX

hereof.

 

     REIT: A real estate investment trust, as defined in Code Section 856.

 

     REIT Charter: The Articles of Incorporation of First Industrial filed with

the Department of Assessments and Taxation of the State of Maryland on August

10, 1993, as the same may be amended or restated and in effect from time to

time.

 

     REIT Share: A share of common stock representing an ownership interest in

the General Partner.

 

     REIT Share Rights: Rights to acquire additional REIT Shares issued to all

holders of REIT Shares, whether in the form of rights, options, warrants or

convertible or exchangeable securities, to the extent the same have been issued

without additional consideration after the initial acquisition of such REIT

Shares.

 

     SEC: The Securities and Exchange Commission.

 

     Series C Preferred Shares: 8 5/8% Series C Cumulative Preferred Stock of

First Industrial Realty Trust, Inc.

 

      Series D Preferred Shares: 7.95% Series D Cumulative Preferred Stock of

First Industrial Realty Trust, Inc.

 

     Series E Preferred Shares: 7.90% Series E Cumulative Preferred Stock of

First Industrial Realty Trust, Inc.

 

     Series F Preferred Shares: Series F Flexible Cumulative Redeemable

Preferred Stock of First Industrial Realty Trust, Inc.

 

     Series G Preferred Shares: Series G Flexible Cumulative Redeemable

Preferred Stock of First Industrial Realty Trust, Inc.

 

     Series H Preferred Shares: Series H Flexible Cumulative Redeemable

Preferred Stock of First Industrial Realty Trust, Inc.

 

     Share Payment: The payment to a Redeeming Party of a number of REIT Shares

determined by multiplying (i) the number of Partnership Units tendered for

redemption by such Redeeming Party pursuant to a validly proffered Redemption

Notice by (ii) the Conversion Factor. In the event the General Partner grants

any REIT

 

 

<PAGE>

                                      -12-

 

 

Share Rights prior to such payment, any Share Payment shall include for the

Redeeming Party his ratable share of such REIT Share Rights other than REIT

Share Rights which have expired.

 

     Subsidiary: With respect to any Person, any corporation or other entity of

which a majority of (i) the voting power of the voting equity securities or (ii)

the outstanding equity interests is owned, directly or indirectly, by such

Person.

 

     Substituted Limited Partner: That Person or those Persons admitted to the

Partnership as substitute Limited Partner(s), in accordance with the provisions

of this Agreement. A Substituted Limited Partner, upon his admission as such,

shall succeed to the rights, privileges and liabilities of his predecessor in

interest as a Limited Partner.

 

     Successor General Partner: Any Person who is admitted to the Partnership as

substitute General Partner pursuant to this Agreement. A Successor General

Partner, upon its admission as such, shall succeed to the rights, privileges and

liabilities of its predecessor in interest as General Partner, in accordance

with the provisions of the Act.

 

     Tax Matters Partner: The General Partner or such other Partner who becomes

Tax Matters Partner pursuant to the terms of this Agreement.

 

     Terminating Capital Transaction: The sale or other disposition of all or

substantially all of the Partnership Assets or a related series of transactions

that, taken together, result in the sale or other disposition of all or

substantially all of the Partnership Assets.

 

     Threshold Percentage: A percentage equal to 85% on the LB Closing Date and

thereafter adjusted upwards (but not downwards) immediately prior to each

solicitation of any vote of, or the seeking of any consent, approval or waiver

from, the Limited Partners generally, to the sum of (i) 85% and (ii) the number

of percentage points equal to the positive difference, if any, between (a) the

aggregate Percentage Interest represented by the LB Units immediately following

the LB Closing Date and (b) the aggregate Percentage Interest represented by the

LP Units immediately prior to any such solicitation. For example, if on the LB

Closing Date the LB Units represent a 10% aggregate Percentage Interest, and if

immediately prior to a solicitation the Threshold Percentage is 85% and the

aggregate Percentage Interest represented by the LB Units is 8%, the Threshold

Percentage would be increased to 87% (85% + (10% - 8%)).

 

     Transfer: With respect to any Partnership Unit shall mean a transaction in

which a Partner assigns his Partnership Interest to another Person and includes

any sale, assignment, gift, pledge, mortgage, exchange, hypothecation,

encumbrance or other disposition by law or otherwise; provided, however, the

redemption of any Partnership Interest pursuant to Article IX hereof shall not

constitute a "Transfer" for purposes hereof.

 

     Transfer Restriction Date: June 23, 1995.

 

     Treasury Regulations: The Income Tax Regulations promulgated under the

Code, as such regulations may be amended from time to time (including

corresponding provisions of succeeding regulations).

 

     Unit Value: With respect to any Partnership Unit, the average of the daily

market price for a REIT Share for the ten (10) consecutive trading days

immediately preceding the date of receipt of a Redemption Notice by the General

Partner multiplied by the Conversion Factor. If the REIT Shares are traded on a

securities exchange or the NASDAQ-National Market System, the market price for

each such trading day shall be the reported last sale price on such day or, if

no sales take place on such day, the average of the closing bid and asked prices

on such day. If the REIT Shares are not traded on a securities exchange or the

NASDAQ-National Market System, the market price for each such trading day shall

be determined by the General Partner using any reasonable method of valuation.

If a Share Payment would include any REIT Share Rights, the value of such REIT

Share Rights shall be determined by the General Partner using any reasonable

method of valuation, taking into account the Unit Value determined

 

 

<PAGE>

                                      -13-

 

 

hereunder and the factors used to make such determination and the value of such

REIT Share Rights shall be included in the Unit Value.

 

     Voting Termination Date: The first date after the LB Closing Date on which

either (i) the General Partner holds 90% or more of all Partnership Units or

(ii) the aggregate number of Partnership Units held by the General Partner and

the LB Partners is less than the product of the Threshold Percentage and the

total number of Partnership Units then outstanding.

 

     Section 1.2 Rules of Construction. The following rules of construction

shall apply to this Agreement:

 

          (A) All section headings in this Agreement are for convenience of

      reference only and are not intended to qualify the meaning of any section.

 

          (B) All personal pronouns used in this Agreement, whether used in the

     masculine, feminine or neuter gender, shall include all other genders, the

     singular shall include the plural, and vice versa, as the context may

     require.

 

          (C) Each provision of this Agreement shall be considered severable

     from the rest, and if any provision of this Agreement or its application to

     any Person or circumstances shall be held invalid and contrary to any

     existing or future law or unenforceable to any extent, the remainder of

     this Agreement and the application of any other provision to any Person or

     circumstances shall not be affected thereby and shall be interpreted and

     enforced to the greatest extent permitted by law so as to give effect to

     the original intent of the parties hereto.

 

          (D) Unless otherwise specifically and expressly limited in the

     context, any reference herein to a decision, determination, act, action,

     exercise of a right, power or privilege, or other procedure by the General

     Partner shall mean and refer to the decision, determination, act, action,

     exercise or other procedure by the General Partner in its sole and absolute

     discretion.

 

--------------------------------------------------------------------------------

 

                           ARTICLE II - CONTINUATION

 

--------------------------------------------------------------------------------

 

     Section 2.1 Continuation. The Partners hereby continue the Partnership as a

limited partnership under the Act. The General Partner shall take all action

required by law to perfect and maintain the Partnership as a limited partnership

under the Act and under the laws of all other jurisdictions in which the

Partnership may elect to conduct business, including but not limited to the

filing of amendments to the Certificate with the Delaware Secretary of State,

and qualification of the Partnership as a foreign limited partnership in the

jurisdictions in which such qualification shall be required, as determined by

the General Partner. The General Partner shall also promptly register the

Partnership under applicable assumed or fictitious name statutes or similar

laws.

 

     Section 2.2 Name. The name of the Partnership is First Industrial, L.P. The

General Partner may adopt such assumed or fictitious names as it deems

appropriate in connection with the qualifications and registrations referred to

in Section 2.1.

 

     Section 2.3 Place Of Business; Registered Agent. The principal office of

the Partnership is located at 311 S. Wacker Drive, Suite 4000, Chicago, Illinois

60606, which office may be changed to such other place as the General Partner

may from time to time designate. The Partnership may establish offices for the

Partnership within or without the State of Delaware as may be determined by the

General Partner. The initial registered agent for the Partnership in the State

of Delaware is The Corporation Trust Company, whose address is c/o Corporation

Trust Center, 1209 Orange Street, Wilmington, Delaware 19801.

 

--------------------------------------------------------------------------------

<PAGE>

                                      -14-

 

 

                         ARTICLE III - BUSINESS PURPOSE

 

--------------------------------------------------------------------------------

 

     Section 3.1 Business. The business of the Partnership shall be (i)

conducting any business that may be lawfully conducted by a limited partnership

pursuant to the Act including, without limitation, acquiring, owning, managing,

developing, leasing, marketing, operating and, if and when appropriate, selling,

industrial properties, (ii) entering into any partnership, joint venture or

other relationship to engage in any of the foregoing or the ownership of

interests in any entity engaged in any of the foregoing, (iii) making loans,

guarantees, indemnities or other financial accommodations and borrowing money

and pledging its assets to secure the repayment thereof, (iv) to do any of the

foregoing with respect to any Affiliate or Subsidiary and (v) doing anything

necessary or incidental to the foregoing; provided, however, that business of

the Partnership shall be limited so as to permit the General Partner to elect

and maintain its status as a REIT (unless the General Partner determines no

longer to qualify as a REIT).

 

     Section 3.2 Authorized Activities. In carrying out the purposes of the

Partnership, but subject to all other provisions of this Agreement, the

Partnership is authorized to engage in any kind of lawful activity, and perform

and carry out contracts of any kind, necessary or advisable in connection with

the accomplishment of the purposes and business of the Partnership described

herein and for the protection and benefit of the Partnership; provided that the

General Partner shall not be obligated to cause the Partnership to take, or

refraining from taking, any action which, in the judgment of the General

Partner, (i) could adversely affect the ability of the General Partner to

qualify and continue to qualify as a REIT, (ii) could subject the General

Partner to additional taxes under Code Section 857 or 4981 or (iii) could

violate any law or regulation of any governmental body or agency having

jurisdiction over the General Partner or its securities.

 

--------------------------------------------------------------------------------

 

                       ARTICLE IV - CAPITAL CONTRIBUTIONS

 

--------------------------------------------------------------------------------

 

     Section 4.1 Capital Contributions.

 

     (A) Upon the contribution to the Partnership of property in accordance with

a Contribution Agreement, Partnership Units shall be issued in accordance with,

and as contemplated by, such Contribution Agreement, and the Persons receiving

such Partnership Units shall become Partners and shall be deemed to have made a

Capital Contribution as set forth on Exhibit 1. Exhibit 1 also sets forth the

initial number of Partnership Units owned by each Partner and the Percentage

Interest of each Partner, which Percentage Interest shall be adjusted from time

to time by the General Partner to reflect the issuance of additional Partnership

Units, the redemption of Partnership Units, additional Capital Contributions and

similar events having an effect on a Partner's Percentage Interest. Except as

set forth in Section 4.2 (regarding issuance of additional Partnership Units) or

Section 7.6 (regarding withholding obligations), no Partner shall be required

under any circumstances to contribute to the capital of the Partnership any

amount beyond that sum required pursuant to this Article IV.

 

     (B) Anything in the foregoing Section 4.1(A) or elsewhere in this Agreement

notwithstanding, the Partnership Units held by the General Partner shall, at all

times, be deemed to be General Partner units and shall constitute the General

Partner Interest.

 

     Section 4.2 Additional Partnership Interests.

 

     (A) The Partnership may issue additional limited partnership interests in

the form of Partnership Units for any Partnership purpose at any time or from

time to time, to any Partner or other Person (other than the General Partner,

except in accordance with Section 4.2(B) below).

 

      (B) The Partnership also may from time to time issue to the General Partner

additional Partnership Units or other Partnership Interests in such classes and

having such designations, preferences and relative rights (including preferences

and rights senior to the existing Limited Partner Interests) as shall be

 

<PAGE>

                                      -15-

 

 

determined by the General Partner in accordance with the Act and governing law.

Except as provided in Article IX, any such issuance of Partnership Units or

Partnership Interests to the General Partner shall be conditioned upon (i) the

undertaking by the General Partner of a related issuance of its capital stock

(with such shares having designations, rights and preferences such that the

economic rights of the holders of such capital stock are substantially similar

to the rights of the additional Partnership Interests issued to the General

Partner) and the General Partner making a Capital Contribution (a) in an amount

equal to the net proceeds raised in the issuance of such capital stock, in the

event such capital stock is sold for cash or cash equivalents or (b) the

property received in consideration for such capital stock, in the event such

capital stock is issued in consideration for other property or (ii) the issuance

by the General Partner of capital stock under any stock option or bonus plan and

the General Partner making a Capital Contribution in an amount equal to the

exercise price of the option exercised pursuant to such stock option or other

bonus plan.

 

     (C) Except as contemplated by Article IX (regarding redemptions) or Section

4.2(B), the General Partner shall not issue any (i) additional REIT Shares, (ii)

rights, options or warrants containing the right to subscribe for or purchase

REIT Shares or (iii) securities convertible or exchangeable into REIT Shares

(collectively, "Additional REIT Securities") other than to all holders of REIT

Shares, pro rata, unless (x) the Partnership issues to the General Partner (i)

Partnership Interests, (ii) rights, options or warrants containing the right to

subscribe for or purchase Partnership Interests or (iii) securities convertible

or exchangeable into Partnership Interests such that the General Partner

receives an economic interest in the Partnership substantially similar to the

economic interest in the General Partner represented by the Additional REIT

Securities and (y) the General Partner contributes to the Partnership the net

proceeds from, or the property received in consideration for, the issuance of

the Additional REIT Securities and the exercise of any rights contained in any

Additional REIT Securities.

 

     Section 4.3 No Third Party Beneficiaries. The foregoing provisions of this

Article IV are not intended to be for the benefit of any creditor of the

Partnership or other Person to whom any debts, liabilities or obligations are

owed by (or who otherwise has any claim against) the Partnership or any of the

Partners and no such creditor or other Person shall obtain any right under any

such foregoing provision against the Partnership or any of the Partners by

reason of any debt, liability or obligation (or otherwise).

 

     Section 4.4 Capital Accounts.

 

     (A) The Partnership shall establish and maintain a separate Capital Account

for each Partner in accordance with Code Section 704 and Treasury Regulations

Section 1.704-1(b)(2)(iv). The Capital Account of each Partner shall be credited

with:

 

     (1) the amount of all Capital Contributions made to the Partnership by such

Partner in accordance with this Agreement; plus

 

     (2) all income and gain of the Partnership computed in accordance with this

Section 4.4 and allocated to such Partner pursuant to Article V (including for

purposes of this Section 4.4(A), income and gain exempt from tax);

 

and shall be debited with the sum of:

 

     (1) all losses or deductions of the Partnership computed in accordance with

this Section 4.4 and allocated to such Partner pursuant to Article V,

 

     (2) such Partner's distributive share of expenditures of the Partnership

described in Code Section 705(a)(2)(B), and

 

     (3) all cash and the Agreed Value (reduced to take into account the amount

of any related indebtedness assumed by the Partner, or to which the distributed

property is subject) of any property actually distributed or deemed distributed

by the Partnership to such Partner pursuant to the terms of this Agreement.

 

 

<PAGE>

                                      -16-

 

 

     Any reference in any section or subsection of this Agreement to the Capital

Account of a Partner shall be deemed to refer to such Capital Account as the

same may be credited or debited from time to time as set forth above.

 

     (B) For purposes of computing the amount of any item of income, gain,

deduction or loss to be reflected in the Partners' Capital Accounts, the

determination, recognition and classification of each such item shall be the

same as its determination, recognition and classification for federal income tax

purposes, determined in accordance with Code Section 703(a) and accounting for

those adjustments set forth in the definition of Profits and Losses, with the

following additional adjustments:

 

     (1) the computation of all items of income, gain, loss and deduction shall

be made without regard to any Code Section 754 election that may be made by the

Partnership, except to the extent required in accordance with the provisions of

Treasury Regulations Section 1.704-1(b)(2)(iv)(m); and

 

     (2) in the event the Book Value of any Partnership Asset is adjusted

pursuant to Section 4.4(D) below, the amount of such adjustment shall be treated

as gain or loss from the disposition of such asset.

 

     (C) Any transferee of a Partnership Interest shall succeed to a pro rata

portion of the transferor's Capital Account transferred.

 

     (D) Consistent with the provisions of Treasury Regulations Section

1.704-1(b)(2)(iv)(f), (i) immediately prior to the acquisition of an additional

Partnership Interest by any new or existing Partner in connection with the

contribution of money or other property (other than a de minimis amount) to the

Partnership, (ii) immediately prior to the distribution by the Partnership to a

Partner of Partnership property (other than a de minimis amount) as

consideration for a Partnership Interest, (iii) immediately prior to the

liquidation of the Partnership as defined in Treasury Regulations Section

1.704-1(b)(2)(ii)(g) and (iv) immediately prior to any other event for which the

Treasury Regulation Section 1.704-1(b)(2)(iv)(f) permits an adjustment to book

value, the Book Value of all Partnership Assets shall be revalued upward or

downward to reflect the fair market value of each such Partnership Asset as

determined by the General Partner using such reasonable method of valuation as

it may adopt.

 

     (E) The foregoing provisions of this Section 4.4 are intended to comply

with Treasury Regulations Section 1.704-1(b) and shall be interpreted and

applied in a manner consistent with such Treasury Regulations. In the event the

General Partner shall determine that it is prudent to modify the manner in which

the Partners' Capital Accounts are computed hereunder in order to comply with

such Treasury Regulations, the General Partner may make such modification if

such modification is not likely to have a material effect on the amount

distributable to any Partner under the terms of this Agreement and the General

Partner notifies the other Partners in writing of such modification prior to

making such modification.

 

     Section 4.5 Return of Capital Account; Interest. Except as otherwise

specifically provided in this Agreement, (i) no Partner shall have any right to

withdraw or reduce its Capital Contributions or Capital Account, or to demand

and receive property other than cash from the Partnership in return for its

Capital Contributions or Capital Account; (ii) no Partner shall have any

priority over any other Partners as to the return of its Capital Contributions

or Capital Account; (iii) any return of Capital Contributions or Capital

Accounts to the Partners shall be solely from the Partnership Assets, and no

Partner shall be personally liable for any such return; and (iv) no interest

shall be paid by the Partnership on Capital Contributions or on balances in

Partners' Capital Accounts.

 

     Section 4.6 Preemptive Rights. No Person shall have any preemptive or

similar rights with respect to the issuance or sale of additional Partnership

Units.

 

     Section 4.7 REIT Share Purchases. If the General Partner acquires

additional REIT Shares pursuant to Article IX of the REIT Charter, the

Partnership shall purchase from the General Partner that number of Partnership

Units determined by applying the Conversion Multiple to the number of REIT

Shares purchased by the

 

 

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                                      -17-

 

 

General Partner at the same price and on the same terms as those upon which the

General Partner purchased such REIT Shares.

 

--------------------------------------------------------------------------------

 

                   ARTICLE V - ALLOCATIONS AND DISTRIBUTIONS

 

--------------------------------------------------------------------------------

 

     Section 5.1 Limited Liability. For bookkeeping purposes, the Profits of the

Partnership shall be shared, and the Losses of the Partnership shall be borne,

by the Partners as provided in Section 5.2 below; provided, however, that except

as expressly provided in this Agreement, neither any Limited Partner (in its

capacity as a Limited Partner), the Class C Limited Partner (in its capacity as

Class C Limited Partner), the Class D Limited Partner (in its capacity as Class

D Limited Partner), the Class E Limited Partner (in its capacity as Class E

Limited Partner), the Class F Limited Partner (in its capacity as Class F

Limited Partner), the Class G Limited Partner (in its capacity as Class G

Limited Partner) nor the Class H Limited Partner (in its capacity as Class H

Limited Partner) shall be personally liable for losses, costs, expenses,

liabilities or obligations of the Partnership in excess of its Capital

Contribution required under Article IV hereof.

 

     Section 5.2 Profits, Losses and Distributive Shares.

 

     (A) Profits. After giving effect to the special allocations, if any,

provided in Section 5.2(C), (D), (I), (J), (K), (L), (M), and (N), Profits in

each Fiscal Year shall be allocated in the following order:

 

     (1) First, to the General Partner until the cumulative Profits allocated to

the General Partner under this Section 5.2(A)(1), whether in the current or in

any prior Fiscal Year equal the cumulative Losses allocated to such Partner

under Section 5.2(B)(6), whether in the current or in any prior Fiscal Year;

 

     (2) Second, to, Class C Limited Partner, Class D Limited Partner, Class E

Limited Partner, Class F Limited Partner, Class G Limited Partner and Class H

Limited Partner, in proportion to the cumulative Losses allocated to each such

Partner under Section 5.2(B)(5), whether in the current or in any prior Fiscal

Year until the cumulative Profits allocated to each such Partner under this

Section 5.2(A)(2) equal the cumulative Losses allocated to each such Partner

under Section 5.2(B)(5), whether in the current or in any prior Fiscal Year;

 

     (3) Third, to each Partner in proportion to the cumulative Losses allocated

to such Partner under Section 5.2(B)(4), whether in the current or in any prior

Fiscal Year, until the cumulative Profits allocated to such Partner under this

Section 5.2(A)(3) equal the cumulative Losses allocated to such Partner under

Section 5.2(B)(4), whether in the current or in any prior Fiscal Year;

 

     (4) Fourth, to the General Partner until the cumulative Profits allocated

to the General Partner under this Section 5.2(A)(4), whether in the current or

in any prior Fiscal Year equal the cumulative Losses allocated to such Partner

under Section 5.2(B)(3), whether in the current or in any prior Fiscal Year;

 

     (5) Fifth, to each Partner in proportion to the cumulative Losses allocated

to such Partner under Section 5.2(B)(2), whether in the current or in any prior

Fiscal Year, until the cumulative Profits allocated to such Partner under this

Section 5.2(A)(5) equal the cumulative Losses allocated to such Partner under

Section 5.2(B)(2), whether in the current or in any prior Fiscal Year;

 

     (6) Sixth, to each Partner in proportion to the cumulative Losses allocated

to such Partner under Section 5.2(B)(1), whether in the current or in any prior

Fiscal Year, until the cumulative Profits allocated to such Partner under this

Section 5.2(A)(6) equal the cumulative Losses allocated to such Partner under

Section 5.2(B)(1), whether in the current or in any prior Fiscal Year; and

 

     (7) Then, the balance, if any, to the Partners in proportion to their

respective Percentage Interests.

 

 

<PAGE>

                                      -18-

 

 

      (B) Losses. After giving effect to the special allocations, if any,

provided in Section 5.2(C), (D), (I), (J), (K), (L), (M) and (N), Losses in each

Fiscal Year shall be allocated in the following order of priority:

 

     (1) First, to the Partners (other than the Class C Limited Partner, the

Class D Limited Partner, the Class E Limited Partner, the Class F Limited

Partner, the Class G Limited Partner and the Class H Limited Partner), in

proportion to their respective Percentage Interests, but not in excess of the

positive Adjusted Capital Account balance of any Partner prior to the allocation

provided for in this Section 5.2(B)(1);

 

     (2) Second, to the Partners (other than the Class C Limited Partner, the

Class D Limited Partner, the Class E Limited Partner, the Class F Limited

Partner, the Class G Limited Partner and the Class H Limited Partner) with

positive Adjusted Capital Account balances prior to the allocation provided for

in this Section 5.2(B)(2), in proportion to the amount of such balances until

all such balances are reduced to zero;

 

     (3) Third, to the General Partner until (i) the excess of (a) the

cumulative Losses allocated under this Section 5.2(B)(3), whether in the current

or in any prior Fiscal Year, over (b) the cumulative Profits allocated under

Section 5.2(A)(4), whether in the current or in any prior Fiscal Year, equals

(ii) the excess of (a) the amount of Recourse Liabilities over (b) the Aggregate

Protected Amount;

 

     (4) Fourth, to and among the Contributor Partners, in accordance with their

respective Protected Amounts, until the excess of (a) the cumulative Losses

allocated under this Section 5.2(B)(4), whether in the current or in any prior

Fiscal Year, over (b) the cumulative Profits allocated under 5.2(A)(3), whether

in the current or in any prior Fiscal Year, equals the Aggregate Protected

Amount (as of the close of the Fiscal Year to which such allocation relates);

 

     (5) Fifth, to the Class C Limited Partner, the Class D Limited Partner, the

Class E Limited Partner, the Class F Limited Partner, the Class G Limited

Partner and the Class H Limited Partner, in accordance with their respective

Adjusted Capital Accounts, until their Adjusted Capital Accounts are reduced to

zero; and

 

     (6) Thereafter, to the General Partner;

 

provided, however, (i) that, from and following the first Fiscal Year upon which

a Contributor Partner is no longer a Partner of the Partnership, the provisions

of this Section 5.2(B) shall be null, void and without further force and effect

with respect to such Contributor Partner; (ii) that, this Section 5.2(B) shall

control, notwithstanding any reallocation or adjustment of taxable income, loss

or other items by the Internal Revenue Service or any other taxing authority;

provided, however, that neither the Partnership nor the General Partner (nor any

of their respective affiliates) is required to indemnify any Contributor Partner

(or its affiliates) for the loss of any tax benefit resulting from any

reallocation or adjustment of taxable income, loss or other items by the

Internal Revenue Service or other taxing authority; and (iii) that, during such

period as there are Contributor Partners in the Partnership, the provisions of

Section 5.2(B)(4) shall not be amended in a manner which adversely affects the

Contributor Partners (without the consent of each Contributor Partner so

affected).

 

     (C) Special Allocations. Except as otherwise provided in this Agreement,

the following special allocations will be made in the following order and

priority:

 

     (1) Partnership Minimum Gain Chargeback. Notwithstanding any other

provision of this Article V, if there is a net decrease in Partnership Minimum

Gain during any tax year or other period for which allocations are made, each

Partner will be specially allocated items of Partnership income and gain for

that tax year or other period (and, if necessary, subsequent periods) in an

amount equal to such Partner's share of the net decrease in Partnership Minimum

Gain during such tax year or other period determined in accordance with Treasury

Regulations Section 1.704-2(g). Allocations pursuant to the preceding sentence

shall be made in proportion to the respective amounts required to be allocated

to each Partner pursuant thereto. The items to be so allocated shall be

determined in accordance with Treasury Regulations Sections 1.704-2(f)(6) and

1.704-2(j)(2). This Section

 

 

<PAGE>

                                      -19-

 

 

5.2(C)(1) is intended to comply with the minimum gain chargeback requirements

set forth in Treasury Regulations Section 1.704-2(f) and shall be interpreted

consistently therewith, including the exceptions to the minimum gain chargeback

requirement set forth in Treasury Regulations Section 1.704-2(f) and (3). If the

General Partner concludes, after consultation with tax counsel, that the

Partnership meets the requirements for a waiver of the minimum gain chargeback

requirement as set forth in Treasury Regulations Section 1.704-2(f)(4), the

General Partner may take steps reasonably necessary or appropriate in order to

obtain such waiver.

 

     (2) Partner Nonrecourse Debt Minimum Gain Chargeback. Notwithstanding any

other provision of this Section (other than Section 5.2(C)(1) which shall be

applied before this Section 5.2(C)(2)), if there is a net decrease in Partner

Minimum Gain during any tax year or other period for which allocations are made,

each Partner with a share of Partner Minimum Gain determined in accordance with

Treasury Regulations Section 1.704-2(i)(5) shall be specially allocated items of

Partnership income and gain for that period (and, if necessary, subsequent

periods) in an amount equal to such Partner's share of the net decrease in

Partner Minimum Gain determined in accordance with Treasury Regulations Section

1.704-2(i)(4). The items to be so allocated shall be determined in accordance

with Treasury Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii). This

Section 5.2(C)(2) is intended to comply with the minimum gain chargeback

requirements of Treasury Regulations Section and shall be interpreted

consistently therewith, including the exceptions set forth in Treasury

Regulations Section 1.704-2(f)(2) and (3) to the extent such exceptions apply to

Treasury Regulations Sections 1.704-2(i)(4). If the General Partner concludes,

after consultation with tax counsel, that the Partnership meets the requirements

for a waiver of the Partner Minimum Gain chargeback requirement set forth in

Treasury Regulation 1.704-2(f), but only to the extent such exception applies to

Treasury Regulations Section 1.704-2(i)(4), the General Partner may take steps

necessary or appropriate to obtain such waiver.

 

     (3) Qualified Income Offset. A Partner who unexpectedly receives any

adjustment, allocation or distribution described in Treasury Regulations Section

1.704-1(b)(2)(ii)(d)(4), (5) or (6) will be specially allocated items of

Partnership income and gain in an amount and manner sufficient to eliminate, to

the extent required by Treasury Regulations 1.704-1(b)(2)(ii)(d), the Adjusted

Capital Account Deficit of the Partner as quickly as possible, provided that an

allocation pursuant to this Section 5.2(C)(3) shall be made if and only to the

extent that such Partner would have an Adjusted Capital Account Deficit after

all other allocations provided for in this Article V have been tentatively made

as if this Section 5.2(C)(3) were not contained in this Agreement.

 

     (4) Partnership Nonrecourse Deductions. Partnership Nonrecourse Deductions

for any taxable year or other period for which allocations are made will be

allocated among the Partners in proportion to their respective Percentage

Interests.

 

     (5) Partner Nonrecourse Deductions. Notwithstanding anything to the

contrary in this Agreement, any Partner Nonrecourse Deductions for any taxable

year or other period for which allocations are made will be allocated to the

Partner who bears the economic risk of loss with respect to the liability to

which the Partner Nonrecourse Deductions are attributable in accordance with

Treasury Regulations Section 1.704-2(i).

 

     (6) Code Section 754 Adjustments. To the extent an adjustment to the

adjusted tax basis of any Partnership asset under Code Section 734(b) or 743(b)

is required to be taken into account in determining Capital Accounts under

Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) or (4), the amount of the

adjustment to the Capital Accounts will be treated as an item of gain (if the

adjustment increases the basis of the asset) or loss (if the adjustment

decreases the basis of the asset), and the gain or loss will be specially

allocated to the Partners in a manner consistent with the manner in which their

Capital Accounts are required to be adjusted under Treasury Regulations Section

1.704-1(b)(2)(iv)(m).

 

     (7) Depreciation Recapture. In the event there is any recapture of

Depreciation or investment tax credit, the allocation thereof shall be made

among the Partners in the same proportion as the deduction for such Depreciation

or investment tax credit was allocated.

 

     (8) Interest in Partnership. Notwithstanding any other provision of this

Agreement, no allocation

 

 

<PAGE>

                                      -20-

 

 

of Profit or Loss (or item of Profit or Loss) will be made to a Partner if the

allocation would not have "economic effect" under Treasury Regulations Section

1.704-1(b)(2)(ii)(a) or otherwise would not be in accordance with the Partner's

interest in the Partnership within the meaning of Treasury Regulations Section

1.704-1(b)(3).

 

     (D) Curative Allocations. The allocations set forth in Section 5.2(C)(1)

through (8) (the "Regulatory Allocations") are intended to comply with certain

requirements of Treasury Regulations Sections 1.704-1(b) and 1.704-2. The

Regulatory Allocations may not be consistent with the manner in which the

Partners intend to divide Partnership distributions. Accordingly, the General

Partner is authorized to further allocate Profits, Losses, and other items among

the Partners in a reasonable manner so as to prevent the Regulatory Allocations

from distorting the manner in which Partnership distributions would be divided

among the Partners under Section 5.3, but for application of the Regulatory

Allocations. In general, the reallocation will be accomplished by specially

allocating other Profits, Losses and items of income, gain, loss and deduction,

to the extent they exist, among the Partners so that the net amount of the

Regulatory Allocations and the special allocations to each Partner is zero. The

General Partner may accomplish this result in any reasonable manner that is

consistent with Code Section 704 and the related Treasury Regulations.

 

     (E) Tax Allocations.

 

     (1) Except as otherwise provided in Section 5.2(E)(2), each item of income,

gain, loss and deduction shall be allocated for federal income tax purposes in

the same manner as each correlative item of income, gain, loss or deduction, is

allocated for book purposes pursuant to the provisions of Section 5.1 hereof.

 

     (2) Notwithstanding anything to the contrary in this Article V, in an

attempt to eliminate any Book-Tax Disparity with respect to a Contributed

Property, items of income, gain, loss or deduction with respect to each such

property shall be allocated for federal income tax purposes among the Partners

as follows:

 

          (a) Depreciation, Amortization and Other Cost Recovery Items. In the

     case of each Contributed Property with a Book-Tax Disparity, any item of

     depreciation, amortization or other cost recovery allowance attributable to

     such property shall be allocated as follows: (x) first, to Partners (the

     "Non-Contributing Partners") other than the Partners who contributed such

     property to the Partnership (or are deemed to have contributed the property

     pursuant to Section 4.1(A)) (the "Contributing Partners") in an amount up

     to the book allocation of such items made to the Non-Contributing Partners

     pursuant to Section 5.1 hereof, pro rata in proportion to the respective

     amount of book items so allocated to the Non-Contributing Partners pursuant

     to Section 5.1 hereof; and (y) any remaining depreciation, amortization or

     other cost recovery allowance to the Contributing Partners in proportion to

     their Percentage Interests. In no event shall the total depreciation,

     amortization or other cost recovery allowance allocated hereunder exceed

     the amount of the Partnership's depreciation, amortization or other cost

     recovery allowance with respect to such property.

 

          (b) Gain or Loss on Disposition. In the event the Partnership sells or

     otherwise disposes of a Contributed Property with a Book-Tax Disparity, any

     gain or loss recognized by the Partnership in connection with such sale or

     other disposition shall be allocated among the Partners as follows: (x)

     first, any gain or loss shall be allocated to the Contributing Partners in

     proportion to their Percentage Interests to the extent required to

     eliminate any Book-Tax Disparity with respect to such property; and (y) any

     remaining gain or loss shall be allocated among the Partners in the same

     manner that the correlative items of book gain or loss are allocated among

     the Partners pursuant to Section 5.1 hereof.

 

     (3) In the event the Book Value of a Partnership Asset (including a

Contributed Property) is adjusted pursuant to Section 4.4(D) hereof, all items

of income, gain, loss or deduction in respect of such property shall be

allocated for federal income tax purposes among the Partners in the same manner

as provided in Section 5.2(E)(2) hereof to take into account any variation

between the fair market value of the property, as

 

 

<PAGE>

                                      -21-

 

 

determined by the General Partner using such reasonable method of valuation as

it may adopt, and the Book Value of such property, both determined as of the

date of such adjustment.

 

     (4) The General Partner shall have the authority to elect alternative

methods to eliminate the Book-Tax Disparity with respect to one or more

Contributed Properties, as permitted by Treasury Regulations Sections 1.704-3

and 1.704-3T, and such election shall be binding on all of the Partners.

 

     (5) The Partners hereby intend that the allocation of tax items pursuant to

this Section 5.2(E) comply with the requirements of Code Section 704(c) and

Treasury Regulations Sections 1.704-3 and 1.704-3T.

 

     (6) The allocation of items of income, gain, loss or deduction pursuant to

this Section 5.2(E) are solely for federal, state and local income tax purposes,

and the Capital Account balances of the Partners shall be adjusted solely for

allocations of "book" items in respect of Partnership Assets pursuant to Section

5.1 hereof.

 

     (F) Other Allocation Rules. The following rules will apply to the

calculation and allocation of Profits, Losses and other items:

 

     (1) Except as otherwise provided in this Agreement, all Profits, Losses and

other items allocated to the Partners will be allocated among them in proportion

to their Percentage Interests.

 

     (2) For purposes of determining the Profits, Losses or any other item

allocable to any period, Profits, Losses and other items will be determined on a

daily, monthly or other basis, as determined by the General Partner using any

permissible method under Code Section 706 and the related Treasury Regulations.

 

     (3) Except as otherwise provided in this Agreement, all items of

Partnership income, gain, loss and deduction, and other allocations not provided

for in this Agreement will be divided among the Partners in the same proportions

as they share Profits and Losses, provided that any credits shall be allocated

in accordance with Treasury Regulations Section 1.704-1(b)(4)(ii).

 

     (4) For purposes of Treasury Regulations Section 1.752-3(a), the Partners

hereby agree that any Nonrecourse Liabilities of the Partnership in excess of

the sum of (i) the Partnership Minimum Gain and (ii) the aggregate amount of

taxable gain that would be allocated to the Partners under Section 704(c) (or in

the same manner as Section 704(c) in connection with a revaluation of

Partnership property) if the Partnership disposed of (in a taxable transaction)

all Partnership property subject to one or more Nonrecourse Liabilities of the

Partnership in full satisfaction of such Liabilities and for no other

consideration, shall be allocated among the Partners in accordance with their

respective Partnership Interests; provided that the General Partner shall have

discretion in any Fiscal Year to allocate such excess Nonrecourse Liabilities

among the Partners (a) in a manner reasonably consistent with allocations (that

have substantial economic effect) of some other significant item of Partnership

income or gain or (b) in accordance with the manner in which it is reasonably

expected that the deductions attributable to the excess Nonrecourse Liabilities

will be allocated.

 

     (G) Partner Acknowledgment. The Partners agree to be bound by the

provisions of this Section 5.2 in reporting their shares of Partnership income,

gain, loss, deduction and credit for income tax purposes.

 

     (H) Regulatory Compliance. The foregoing provisions of this Section 5.2

relating to the allocation of Profits, Losses and other items for federal income

tax purposes are intended to comply with Treasury Regulations Sections

1.704-1(b), 1.704-2, 1.704-3 and 1.704-3T and shall be interpreted and applied

in a manner consistent with such Treasury Regulations.

 

     (I) Class C Priority Allocation. The holders of the Class C Units shall be

allocated gross income such that, from the inception of the partnership through

the end of the Fiscal Year to which

 

 

<PAGE>

                                      -22-

 

 

the allocation relates, including the year of liquidation of the Partnership in

accordance with Article X, the sum of all priority allocations pursuant to this

Section 5.2(I) equals (or approaches as nearly as possible) the sum of all Class

C Priority Return Amounts accrued through the end of the fiscal year to which

the allocation relates.

 

     (J) Class D Priority Allocation. The holders of Class D Units shall be

allocated gross income such that, from the inception of the partnership through

the end of the fiscal year to which the allocation relates, including the year

of liquidation of the Partnership in accordance with Article X, the sum of all

priority allocations pursuant to this Section 5.2(J) equals (or approaches as

nearly as possible) the sum of all Class D Priority Return Amounts accrued

through the end of the fiscal year to which the allocation relates.

 

     (K) Class E Priority Allocation. The holders of Class E Units shall be

allocated gross income such that, from the inception of the partnership through

the end of the fiscal year to which the allocation relates, including the year

of liquidation of the Partnership in accordance with Article X, the sum of all

priority allocations pursuant to this Section 5.2(K) equals (or approaches as

nearly as possible) the sum of all Class E Priority Return Amounts accrued

through the end of the fiscal year to which the allocation relates.

 

     (L) Class F Priority Allocation. The holders of Class F Units shall be

allocated gross income such that, from the inception of the partnership through

the end of the fiscal year to which the allocation relates, including the year

of liquidation of the Partnership in accordance with Article X, the sum of all

priority allocations pursuant to this Section 5.2(L) equals (or approaches as

nearly as possible) the sum of all Class F Priority Return Amounts accrued

through the end of the fiscal year to which the allocation relates.

 

     (M) Class G Priority Allocation. The holders of Class G Units shall be

allocated gross income such that, from the inception of the partnership through

the end of the fiscal year to which the allocation relates, including the year

of liquidation of the Partnership in accordance with Article X, the sum of all

priority allocations pursuant to this Section 5.2(M) equals (or approaches as

nearly as possible) the sum of all Class G Priority Return Amounts accrued

through the end of the fiscal year to which the allocation relates.

 

     (N) Class H Priority Allocation. The holders of Class H Units shall be

allocated gross income such that, from the inception of the partnership through

the end of the fiscal year to which the allocation