Exhibit 10.44
LIMITED PARTNERSHIP AGREEMENT
OF
PSAF ACQUISITION PARTNERS, L.P.
BETWEEN
PS TEXAS HOLDINGS, LTD.
AND
[LIMITED PARTNER]
DATED AS OF DECEMBER 18, 2003
Exhibits to this Agreement will be furnished to the
Securities and Exchange Commission upon request.
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TABLE OF CONTENTS
Page
1. Formation; Purposes;
Term.................................................1
1.1
Formation..........................................................1
1.2
Name...............................................................1
1.3 Purposes and
Powers................................................1
1.4 Principal Executive
Office.........................................2
1.5
Term...............................................................2
1.6 Filings; Agent for
Service of Process..............................2
1.7 Other
Activities...................................................2
1.8
Definitions........................................................3
2. Partners; Capital
Contributions...........................................13
2.1
Partners...........................................................13
2.2 Capital
Contributions..............................................13
2.3 Extent of
Liability................................................15
2.4 Other
Matters......................................................16
3.
Allocations...............................................................16
3.1
Profits............................................................16
3.2
Losses.............................................................17
3.3 Certain Special
Allocations........................................17
3.4 Gain from
Sale.....................................................17
3.5 Regulatory Special
Allocations.....................................18
3.6 Other Allocations
Rules............................................20
3.7 Tax Allocations: Code
Section 704(c)...............................21
4.
Distributions.............................................................21
4.1 Operating
Cash.....................................................21
4.2 Capital
Proceeds...................................................22
4.3 Amounts
Withheld...................................................23
5.
Management................................................................23
5.1 Managing Partner;
Standard of Care.................................23
5.2 Authority of Managing
Partner......................................24
5.3 Limitations on Rights
and Powers...................................24
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5.4 Project
Acquisition................................................25
5.5 Compensation and
Reimbursement.....................................28
5.6 Hazardous
Materials................................................29
6. Action by Partners; Investment
Committee..................................30
6.1 Action by
Partners.................................................30
6.2 Investment
Committee...............................................30
7. Books and Records; Fiscal
Matters.........................................32
7.1 Books and
Records..................................................32
7.2
Reports............................................................32
7.3 Tax
Information....................................................33
7.4 Fiscal
Year........................................................33
7.5 Tax Matters
Partner................................................33
7.6 Tax Elections Made by
Managing Partner.............................33
7.7 Taxation as a
Partnership..........................................33
7.8 Avoidance of Unrelated
Business Taxable Income.....................33
8. Transfer of
Interests.....................................................34
8.1 Transfer of Interest
of General Partner............................34
8.2 Transfer of Interest
of Limited Partner............................34
8.3 Prohibited
Transfers...............................................35
8.4 Representations;
Legend............................................35
8.5 Distributions and
Allocations in Respect to Transferred Interests..36
8.6 Right to Transfer to
Affiliates....................................36
9. Options to
Purchase.......................................................37
9.1 General Partner's
Option to Purchase...............................37
9.2
Consideration......................................................37
9.3 Determination of Net
Equity........................................37
9.4 Determination of Fair
Market Value.................................37
9.5
Closing............................................................39
9.6 Limited Partner's
Option to Purchase...............................39
10. Dissolution and Winding
up................................................39
10.1 Liquidating
Events.................................................39
10.2 Winding
Up.........................................................40
10.3
Shortfall..........................................................41
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10.4 Compliance with Timing
Requirements of Regulations.................41
10.5 Rights of
Partners.................................................41
11.
Indemnification...........................................................41
11.1
Indemnification....................................................41
11.2
Expenses...........................................................42
11.3 Indemnification Rights
Nonexclusive................................42
11.4 Errors and Omissions
Insurance.....................................42
11.5 Assets of the
Partnership..........................................42
12. Defaulting Event
Remedies.................................................42
12.1 Election to Purchase
Defaulting Partner's Interest.................42
12.2 Purchase Price of Defaulting
Partner's Interest....................43
12.3 Remedies
Nonexclusive..............................................43
13. Representations and
Warranties............................................44
13.1 Representations and
Warranties of the General Partner..............44
13.2 Representations and
Warranties of the Limited Partner..............45
13.3 Agreements of the General
Partner..................................45
14.
Miscellaneous.............................................................46
14.1
Notices............................................................46
14.2 Binding
Effect.....................................................48
14.3
Construction.......................................................48
14.4
Time...............................................................48
14.5
Headings...........................................................48
14.6
Severability.......................................................48
14.7 Incorporation by
Reference.........................................48
14.8 Further
Action.....................................................48
14.9 Variation of
Pronouns..............................................48
14.10 Governing
Law......................................................49
14.11 Waiver of Action for
Partition.....................................49
14.12
Counterparts.......................................................49
14.13 Sole and Absolute
Discretion.......................................49
14.14 Entire
Agreement...................................................49
14.15 Attorneys'
Fees....................................................49
14.16 Third
Parties......................................................49
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14.17
Waiver.............................................................49
14.18 Amendment and
Modification.........................................49
14.19 Dispute
Resolution.................................................49
14.20
Confidentiality....................................................50
14.21
Guarantees.........................................................51
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LIMITED PARTNERSHIP AGREEMENT
OF
PSAF ACQUISITION PARTNERS, L.P.
This LIMITED PARTNERSHIP AGREEMENT OF PSAF ACQUISITION PARTNERS,
L.P.
is entered into as of December 18, 2003,
and shall be effective as of January 1,
2004 (the "Effective Date"), by and between
PS TEXAS HOLDINGS, Ltd., a Texas
limited partnership, as the General
Partner, and [LIMITED PARTNER], pursuant to
the provisions of the Act.
WHEREAS, the General Partner and the Limited Partner propose to
form a
limited partnership to pursue the
acquisition and ownership of a number of
well-located self-storage facilities in the
United States for income and capital
appreciation;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements
herein contained, the Partners hereby
covenant and agree among themselves as
follows:
1.
FORMATION; PURPOSES; TERM
1.1 Formation. The
Partners hereby form
the Partnership as a
limited
partnership pursuant to the provisions of the Act and upon the terms and
conditions set forth in this Agreement.
1.2 Name. The name of the Partnership shall be PSAF Acquisition
Partners, L.P. and all business of the
Partnership
shall be conducted in
such
name or in the name "Public Storage."
1.3 Purposes and Powers.
(a) The Partnership is formed for the object and purpose of, and
the
nature of the business to be conducted and promoted by the Partnership is,
directly and indirectly, acquiring, owning, renovating, leasing and otherwise
operating and dealing with, and selling or
otherwise disposing
of, the Projects
as self-storage facilities, and conducting any and all activities as may
be
necessary or incidental to the
foregoing.
(b) The Partnership is empowered to do any and all things
necessary,
appropriate or convenient for the furtherance and accomplishment of its
purposes, and for the protection and benefit of the Partnership and its
Property, including but not limited to the
following:
(i) Entering into and performing contracts of any kind;
(ii) Acquiring,
renovating,
operating,
maintaining,
owning,
transferring, renting,
leasing, selling or
otherwise disposing of any
property, real, personal or mixed;
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(iii) Applying for and
obtaining governmental
authorizations
and
approvals; and
(iv) Bringing and defending actions at law or in equity.
(c) Except as otherwise provided in this Agreement, the Partnership
shall not engage in any other activity or business. No Partner shall have any
authority to hold itself out as a general
agent of another
Partner in any other
business or activity.
1.4 Principal
Executive Office. The
principal executive
office of the
Partnership shall be at 701 Western Avenue,
Glendale, California 91201-2349. The
principal executive office may be changed from time to time by the
General
Partner.
1.5 Term. The term of
the existence of the
Partnership shall
commence
on the Effective Date and shall continue
until the winding up and liquidation of
the Partnership and its business is
completed following a
Liquidating Event, as
provided in Section 10.
1.6 Filings; Agent for Service of Process.
(a) The General Partner has caused a Certificate of Limited
Partnership on Form LP-1 to be filed with
the California
Secretary of State
in
accordance with the Act. The Partnership shall take any and all actions
reasonably necessary to perfect and maintain
the status of the Partnership as a
limited partnership under the laws of the
State of California and under the laws
of any other states or jurisdictions in which the Partnership engages in
business.
(b) To the extent
required pursuant
to the Act or the
applicable
laws of any other state or jurisdiction, the name and address of the agent
for
service of process shall be Harvey Lenkin, 701 Western Avenue, Glendale,
California 91201-2349, or any successor as
appointed by the General Partner.
(c) Upon the dissolution of the Partnership, the Partnership shall
promptly execute and cause to be filed any
necessary certificates of dissolution
and cancellation in accordance with the Act
and the applicable laws of any other
state or jurisdiction in which the
Partnership has engaged in business.
1.7 Other Activities.
(a) The Limited
Partner acknowledges
that the PSA
Affiliates are
engaged in the business, directly and indirectly, of acquiring, owning,
renovating, developing, leasing, managing
and operating self-storage facilities.
The Limited Partner understands that the PSA Affiliates may be involved,
directly or indirectly, in various other
projects and businesses not included in
the Partnership. The Partners hereby agree that the
creation of the Partnership
and involvement herein by each of the Partners
shall not prejudice their rights
(or the rights of their Affiliates) to have such other
interests and activities
and to enjoy profits or other benefits therefrom, and each Partner waives any
rights it might otherwise have to share or
participate in such other interests
or activities of the other Partners or their Affiliates. Except as otherwise
provided in this Agreement, the Partners and their
Affiliates may engage
in or
possess any interest in any
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other business venture of any nature or description, independently or with
others, including without limitation, the
acquisition,
ownership,
development,
leasing, managing and operation of self-storage facilities or other real
property, and neither the Partnership nor any Partner shall have any
right by
virtue of this Agreement in and to such
venture or the income or profits derived
therefrom.
(b) Notwithstanding
the provisions of Section 1.7(a) above, so long
as the General Partner is required to afford the
Partnership the first right to
acquire and own a Qualifying Project pursuant to Section 6.2, no PSA
Affiliate
(other than a Hughes Affiliate) shall acquire a Qualifying Project without
complying with the provisions of Section
6.2.
1.8 Definitions.
Capitalized words and
phrases used in this Agreement
have the meanings set forth in this Section
1.8 or elsewhere in this Agreement:
(a) "Act" means the California Revised Limited Partnership Act as
set forth in Title 2 (commencing with
Section 15611) of the Corporations Code of
the State of California, as amended from time to time (or any
corresponding
provisions of succeeding law), provided that the substantive rights of the
Partners under this Agreement shall not be adversely affected by any such
amendment.
(b) "Acquisition
Costs" means the third party costs incurred by the
Partnership or any PSA Affiliate to acquire
a Qualifying Project
which has been
approved for acquisition by the Investment
Committee in
accordance with Section
5.4 (regardless of whether such Qualifying
Project is actually
acquired by the
Partnership), including any and all third party costs of closing such
acquisition (e.g., transfer tax, title insurance, escrow charges, recording
fees, legal fees, commissions, brokerage, finders' or similar fees and
other
charges of third party vendors incurred in connection with the evaluation,
negotiation and closing of a Project) and any
and all rebranding
costs (e.g.,
changing signs, painting); provided, however that such costs shall not
exceed
the amounts set forth on the Acquisition
Pro-Forma Budget; and
provided further
that, such costs shall not include costs
attributable to
properties
considered
for acquisition by the Partnership but not approved for acquisition by the
Investment Committee in accordance
with Section 5.4.
Acquisition
Costs shall
include a reserve established by the General Partner, as set forth in the
Acquisition Pro-Forma Budget, to pay for
the (1) deferred
maintenance, if
any,
of a Project and (2) costs, if any, of initial operations and lease up until
a
Project has achieved three consecutive
months of positive Net Operating Income.
(c) "Acquisition
Period"
means the period commencing on the
Effective Date and continuing until the earlier to occur of (i)
the date which
is nine months after the Effective Date or (ii) the date on which the
Partnership has acquired or committed to
acquire Projects that
require or would
require total Capital Contributions from
Partners in excess of $125,000,000.
(d) "Acquisition Pro-Forma Budget" means the pro-forma budget in
the
form attached as Exhibit F, prepared by the
General Partner and
approved by the
Investment Committee as set forth in Section
5.4(a). The Acquisition Pro-Forma
Budget shall identify with specificity the nature, amount and payee of all
payments proposed to be made to PSA
Affiliates for Acquisition Costs.
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(e) "Adjusted Capital
Account Deficit"
means, with respect to
any
Partner, the deficit balance, if any, in such Partner's
Capital Account as
of
the end of the relevant Fiscal Year, after giving effect to the following
adjustments:
(i) Credit to such Capital Account any amounts which such Partner
is
obligated to restore
pursuant to any provision of this Agreement or is
deemed to be obligated to restore pursuant to the penultimate
sentences
of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
The foregoing definition of Adjusted
Capital Account Deficit is intended to
comply with the provisions of Section
1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently
therewith.
(f) "Adjusted
Capital Contributions" means, as of any day with
respect to a Partner, such Person's Capital
Contributions, adjusted as follows:
(i) Increased by the amount of any Partnership liabilities which,
in
connection with
distributions to such Person pursuant to Sections 4.1,
4.2, and 10.2(c), are assumed by such Person or are secured by any
Property distributed to such Person; and
(ii) Reduced by the
amount of cash and the Gross Asset Value of any
Property distributed
to such Person pursuant to Sections 2.2(d),
4.2(b), 4.2(d) and
10.2(c) and the amount of any liabilities of such
Person assumed by the
Partnership or which are secured by any Property
contributed by such Person to the Partnership.
In the event such Person Transfers all or
any portion of its Interest in
accordance with the terms of this
Agreement, its transferee shall succeed to its
Adjusted Capital Contribution to the extent
it relates to the transferred
Interest.
(g) "Affiliate" means,
with respect to any
Person, (i) any
Person
directly or indirectly controlling, controlled by or under common
control with
such Person, (ii) any Person owning or controlling 10% or more of the
outstanding voting interests of such Person, (iii) any officer, director or
general partner of such Person, or (iv) any
Person who is an officer, director,
general partner, trustee or holder of 10%
or more of the voting interests of any
Person described in clauses (i) through
(iii) of this sentence.
(h) "Agreement"
means this Limited
Partnership
Agreement of PSAF
Acquisition Partners, L.P. and the exhibits hereto, as amended from time to
time. Words such as "herein," "hereinafter," "hereof," "hereto"
and "hereunder"
refer to this Agreement as a whole, unless
the context otherwise requires.
(i) "Appraiser" means a disinterested entity that is experienced in
valuing real estate portfolios and (a) is a
M.A.I. appraiser that is a member of
the American Institute of Real Estate
Appraisers, any organization successor
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thereto, or other nationally recognized
organization of real
estate appraisers,
with at least five years' experience in the case of the First and Second
Appraisers and ten years' experience in the case of the Third
Appraiser in
conducting appraisals in the commercial real
estate industry, and
is qualified
and experienced in appraising self-storage facilities similar to the
Property,
or (b) that works in conjunction with another disinterested entity with the
qualifications described in (a) and both such
entities sign the report. "First
Appraiser," "Second Appraiser" and "Third
Appraiser" shall have the meanings set
forth in Section 9.4.
(j) "Appraised
Value" means the amount that a third party buyer
would reasonably be expected to pay for all of the
Property, on a portfolio
basis, in a cash purchase, taking into account the current
condition,
use and
zoning of the Property, net of a provision for all normal costs of sale,
including a real estate commission at
prevailing rates.
(k) "Business Day" means Monday through Friday of each week,
except
that a legal holiday recognized as such by the United
States Government
shall
not be regarded as a Business Day.
(l) "Business
Plans" means the
"Initial Business
Plan" attached
hereto as Exhibit G and "Annual
Business Plans" in the form attached hereto
as
Exhibit H.
(m) "Capital
Account" means, with respect to any Partner, the
Capital Account maintained for such Person in accordance with the following
provisions:
(i) To each Person's
Capital Account there shall be credited
such
Person's Capital
Contributions, such
Person's distributive
share of
Profits under Section 3.1 and any items in the nature of income or
gain
that are specially
allocated pursuant to
Sections 3.4 or 3.5, and the
amount of any
Partnership
liabilities assumed by
such Person or that
are secured by any Property distributed to such Person.
(ii) To each Person's
Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any Property
distributed to
such Person pursuant to Sections 2.2(d), 4.1, 4.2, 4.3 and 10.2, such
Person's distributive
share of Losses under
Section 3.2 and any items
in the nature of
expenses or losses that are specially allocated
pursuant to Sections 3.3 or 3.5, and the amount of any liabilities of
such Person
assumed by the Partnership or that are secured by any
property contributed by such Person to the Partnership.
(iii) In the event any Interest is transferred in accordance with
the terms of this
Agreement,
the transferee shall succeed to the
Capital Account
of the transferor to the extent it relates to the
transferred Interest.
(iv) In determining
the amount of any
liabilities for
purposes of
the definitions
of "Adjusted Capital Contributions" and "Capital
Accounts," there shall
be taken into account
Code Section 752(c)
and
any other applicable provisions of the Code and Regulations.
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The foregoing provisions and the other
provisions of this Agreement relating to
the maintenance of Capital Accounts are
intended to comply with Regulations
Section 1.704-1(b), and shall be
interpreted and applied in a manner consistent
with such Regulations. In the event the
General Partner shall determine that it
is prudent to modify the manner in which
the Capital Accounts, or any debits or
credits thereto (including, without
limitation, debits or credits relating to
liabilities that are secured by contributed
or distributed property or that are
assumed by the Partnership or the
Partners), are computed in order to comply
with such Regulations, the General Partner
may make such modification, provided
that it is not likely to have a material
effect on the amounts distributable to
any Partner pursuant to Section 10 upon the
dissolution of the Partnership. The
General Partner also shall (i) make any
adjustments that are necessary or
appropriate to maintain equality between
the Capital Accounts of the Partners
and the amount of Partnership capital
reflected on the Partnership's balance
sheet, as computed for book purposes, in
accordance with Regulations Section
1.704-1(b)(2)(iv)(g), and (ii) make any
appropriate modifications in the event
unanticipated events might otherwise cause
this Agreement not to comply with
Regulations Section 1.704-1(b).
(n) "Capital
Contributions" means, with respect to any Partner, the
amount of money and the Gross Asset Value at the time of contribution of any
property (other than money) contributed to the Partnership
with respect to
the
interest in the Partnership held by such
Partner.
(o) "Capital Proceeds"
means the gross cash
proceeds of sales
and
financings of the Partnership's Properties,
less the portion thereof used to pay
or establish reserves for all Partnership
expenses, any debt
payments, capital
improvements and other costs of
renovations, replacements and contingencies, all
as determined in accordance with the terms
hereof.
(p) "Capital Reserve"
means a reserve for capital expenditures of
2.3% of annual gross revenue.
(q) "Code" means the Internal Revenue Code of 1986, as amended
from
time to time (or any corresponding
provisions of succeeding law).
(r) "Defaulting Event" means (i) a Partner's withdrawal as a
Partner
from the Partnership in breach of Section
2.4(a), (ii) the Transfer by a Partner
of all or any part of its Interest in the
Partnership
(or such Partner's
right
to receive distributions) in breach of Section 8, (iii) a
Partner's failure to
make one or more capital contributions pursuant to Section 2.2 which in the
aggregate exceed $100,000, which failure continues ten Business Days after
written demand by the General Partner or any Partner;
(iv) the General
Partner
taking any unilateral action which requires the unanimous consent of the
Partners without first securing such
consent in accordance with the terms hereof
and (v) a violation of Section 1.7(b) or Section 13.3 (to the extent the
circumstances giving rise to such violation are within the control of the
General Partner or a PSA Affiliate),
provided, however, that in the case of (iv)
or (v) the action taken would prejudice the Limited Partner in a materially
adverse manner and such default or
prejudice is not cured or eliminated or in
the process of being cured or eliminated in good faith within ten days after
giving of notice by the Limited
Partner to the General
Partner specifying the
nature of such default.
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(s) "Defaulting
Partner" means a Partner with respect to which a
Defaulting Event occurs.
(t) "Depreciation"
means, for each Fiscal
Year or other period, an
amount equal to the depreciation,
amortization or other
cost recovery deduction
allowable with respect to an asset for such
year or other period, except that if
the Gross Asset Value of an asset
differs from its
adjusted basis for federal
income tax purposes at the beginning of
such year or other period, Depreciation
shall be an amount which bears the same ratio to such
beginning Gross Asset
Value as the federal income tax depreciation, amortization or other cost
recovery deduction for such year or other period bears to such beginning
adjusted tax basis; provided, however, that if the federal income tax
depreciation, amortization, or other cost recovery
deduction for such
year is
zero, Depreciation shall be determined with reference to such beginning
Gross
Asset Value using any reasonable method
selected by the General Partner.
(u) "Fair Market
Value" shall have the meaning set forth in Section
9.4.
(v) "Fiscal Year" shall have the meaning set forth in Section
7.4.
(w) "Gain from Sale"
shall mean any gain
recognized
for federal
income tax purposes from the sale or other
disposition
of the Partnership's
assets computed by reference to the Gross
Asset Value of the Property disposed
of, notwithstanding that the adjusted tax basis of
such Property differs
from
its Gross Asset Value.
(x) "Gross Asset
Value" means, with respect to any asset, the
asset's adjusted basis for federal income
tax purposes, except as follows:
(i) The initial
Gross Asset
Value of any asset
contributed
by a
Partner to the Partnership shall be the gross fair market value of
such
asset, as determined
by the Partners (as described below the Partners
have agreed that the gross fair market value of Projects
contributed by
the General Partner to the Partnership at the time of contribution
will
be based on the cost of those Projects as set forth in Section
2.2);
(ii) The Gross Asset
Values of all Partnership assets shall be
adjusted to equal
their respective gross fair market values, as
determined by
the Partners, as of the following times: (A) the
acquisition of an additional Interest by any new or existing
Partner in
exchange for more
than a de minimis Capital Contribution; (B) the
distribution by the
Partnership to a Partner of more than a de minimis
amount of Property as consideration for an Interest; and (C) the
liquidation of the
Partnership
within the meaning of Regulations
Section
1.704-1(b)(2)(ii)(g);
provided, however that
the adjustments
pursuant to
clauses (A) and (B) above shall be made only if the
Partners reasonably
determine that such
adjustments are
necessary or
appropriate to reflect the relative economic interests of the Partners
in the Partnership;
(iii) The Gross Asset Value of any Partnership asset distributed to
any Partner shall be
the gross fair market
value of such asset on the
date of distribution; and
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(iv) The Gross Asset Values of Partnership assets shall be
increased
(or decreased) to reflect any adjustments to the adjusted basis of
such
assets pursuant to Code Section 734(b) or Code Section 743(b), but
only
to the extent that such adjustments are taken into account in
determining
Capital Accounts
pursuant
to Regulation Section
1.704-1(b)(2)(iv)(m) and Sections 1.8(uu) and 3.5(g); provided,
however, that Gross Asset Values shall not be adjusted pursuant to
this
Section 1.8(x)(iv)
to the extent the Partners determine that an
adjustment pursuant to
Section 1.8(x)(ii) is
necessary or appropriate
in connection with a
transaction
that would
otherwise result in an
adjustment pursuant to this Section 1.8(x)(iv).
If the Gross Asset Value of an asset has
been determined or adjusted pursuant to
Section 1.8(x)(i), 1.8(x)(ii) or
1.8(x)(iv), such Gross Asset Value shall
thereafter be adjusted by Depreciation
taken into account with respect to such
asset for purposes of computing Profits and
Losses.
(y) "Hazardous
Materials"
means any toxic,
reactive, corrosive,
ignitable or flammable chemical compound or hazardous substance, material or
waste, whether solid, liquid or gas, that is regulated
by any federal or state
law or regulation.
(z) "Hazardous Materials Claims" shall have the meaning set forth
in
Section 5.6.
(aa) "Hazardous
Materials Laws" means
all federal, state or
local
laws or regulations which regulate or relate to the
use, treatment,
storage,
transportation, generation, handling or disposal of, or
emission, discharge or
other release or threatened release of, any
Hazardous Materials.
(bb) "Hughes
Affiliate"
shall mean: (x) B. Wayne Hughes or (y)
members of his immediate family or (z) any
of their Affiliates,
other than PSA
and other PSA Affiliates.
(cc) "Indemnitee" shall have the meaning set forth in Section
11.1.
(dd) "Interest" means
an interest, whether
as a general partner or
limited partner, in the Partnership representing the rights and obligations
under the Agreement of the Partner who
holds such Interest.
(ee) "Investment
Committee"
shall have the
meaning set forth in
Section 6.2(a).
(ff) "Liquidating Event" shall have the meaning set forth in
Section
10.1.
(gg) "Minimum
Gain" has the meaning set forth in Regulations
Sections 1.704-2(b)(2) and 1.704-2(d).
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<PAGE>
(hh) "Net
Equity" of a Partner's
Interest as of a specified date
means the amount that would be distributed
to such Partner in liquidation of the
Partnership pursuant to Sections 10.2 and
10.3 as of that date if (1) all of the
Partnership's Property were sold for its Fair
Market Value, (2) the Partnership
paid its accrued, but unpaid, liabilities,
and established
reserves pursuant to
this Agreement for the payment of
reasonably anticipated
contingent or
unknown
liabilities, and (3) the Partnership
distributed the
remaining proceeds to the
Partners in liquidation.
(ii) "Net Operating
Income" means all income from a Project or
Projects, as the case may be, less the costs
of operations,
including property
management fees and a Capital Reserve. Net
Operating Income shall be computed on
an accrual basis consistent with PSA
Affiliates' prior
practice. Net
Operating
Income will not be reduced by depreciation, amortization, cost recovery
deductions or similar non-cash
allowances.
(jj) "Nonrecourse
Deductions"
shall have the meaning
set forth in
Section 1.704-2(b)(1) of the
Regulations.
(kk) "Nonrecourse
Liability"
shall have the
meaning set forth
in
Section 1.704-2(b)(3) of the
Regulations.
(ll) "Operating
Cash"
means the gross cash proceeds of the
Partnership from all operating sources (not
including amounts taken into account
in determining Capital Proceeds) less the portion thereof used to establish
reserves for, or pay (except to the extent paid from reserves previously
deducted from Operating Cash), any debt payments, all Partnership expenses,
capital improvements and other costs of renovations, replacements and
contingencies, all as determined by the Partners.
"Operating Cash" shall not be
reduced by depreciation, amortization, cost recovery deductions or similar
allowances, but shall be increased
by any reductions of reserves previously
established.
(mm) "Partner
Nonrecourse Debt" shall have the meaning set forth in
Section 1.704-2(b)(4) of the
Regulations.
(nn) "Partner
Nonrecourse Debt Minimum Gain" means an amount, with
respect to each Partner Nonrecourse Debt, equal to the
Partnership Minimum Gain
that would result if such Partner
Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Section 1.704-2(i)(3) of the
Regulations.
(oo) "Partner
Nonrecourse
Deductions" has the meaning set forth in
Sections 1.704-2(i)(1) and 1.704-2(i)(2) of
the Regulations.
(pp) "Partners" means
the General Partner and the Limited Partner,
collectively, and reference to a "Partner" shall
be to any one of the Partners.
The "General Partner" and "Limited Partner"
are as set forth in Section 2.1.
(qq) "Partnership"
means the limited partnership formed pursuant to
this Agreement.
9
<PAGE>
(rr) "Person" means any individual, partnership, corporation, trust
or other entity.
(ss) "Percentage
Interest" means,
subject to the provisions of the
next sentence, with respect to the Limited
Partner, 70%, and with respect to the
General Partner, 30%. In the event any Interest is
transferred
in accordance
with the provisions of this Agreement, the transferee of such Interest
shall
succeed to the Percentage Interest of its
transferor to the extent it relates to
the transferred Interest.
(tt) "Priority
Return" means, as to each Partner, a cumulative
return on (i) that Partner's Adjusted
Capital Contributions and (ii) accrued and
unpaid Priority Returns, computed using
monthly compounding at a monthly rate of
one twelfth of 8%, provided that, in the case of the General Partner, any
Capital Contribution made pursuant to
Sections 2.2(a)(v) and
10.3 shall not be
taken into account in computing the General
Partner's Priority Return.
(uu) "Profits"
and "Losses"
means, for each Fiscal Year or other
period, an amount equal to the
Partnership's
taxable income or loss 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:
(i) 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 Section 1.8(uu) shall be added to such
taxable income
or loss;
(ii) Any expenditures
of the Partnership
described in Code Section
705(a)(2)(B) or
treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not
otherwise
taken into account in
computing Profits or Losses pursuant to this
Section 1.8(uu) shall be subtracted from such taxable income or
loss;
(iii) In the event the Gross Asset Value of any Partnership asset
is
adjusted pursuant to
Section 1.8(x)(ii) or
Section 1.8(x)(iii),
the
amount of such
adjustment shall be
taken into account as gain or loss
from the disposition of such asset for purposes of computing
Profits or
Losses;
(iv) Gain or loss
resulting from any
disposition of
Property with
respect to which gain
or loss is recognized
for federal income tax
purposes shall be computed by reference to the Gross Asset Value of
the
Property disposed of,
notwithstanding
that the adjusted tax
basis of
such Property differs from its Gross Asset Value;
(v) 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 Section
1.8(t);
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<PAGE>
(vi) To the extent an
adjustment to the
adjusted tax basis of
any
Partnership asset
pursuant to Code Section 734(b) or Code Section
743(b) is
required
pursuant
to
Regulations Section
1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining
Capital
Accounts as a result of a distribution other than in liquidation of a
Partner's interest in
the Partnership,
the amount of such
adjustment
shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases the basis of
the asset) from the
disposition
of the asset and shall
be taken into
account for purposes of computing Profits or Losses; and
(vii) Notwithstanding
any other provision of
this Section 1.8(uu),
any items which are specially allocated pursuant to Sections 3.3, 3.4
or 3.5 (including Depreciation, deductions attributable to
"guaranteed
payments" and Gain
from Sale)
shall not be taken into account in
computing Profits or Losses.
The amounts of the items of Partnership
income, gain, loss or deduction
available to be specifically allocated
pursuant to Sections 3.3, 3.4 and 3.5
shall be determined by applying rules
analogous to those set forth in Sections
1.8(x)(i) through 1.8(x)(vi) above.
(vv) "Projects"
means the Qualifying Projects which have been
acquired by the Partnership pursuant to
Section 5.4.
(ww) "Property"
means all real,
personal and other property or
assets acquired by the Partnership, and shall include the Projects and both
tangible and intangible property.
(xx) "PSA" means Public Storage, Inc., a California
corporation.
(yy) "PSA Affiliate"
means PSA and/or any
Affiliate of PSA
(other
than the Partnership). The General Partner shall be responsible for all
activities performed hereunder by PSA
Affiliates.
(zz) "PSA Affiliates
Operating Costs" means that portion of (i)
compensation and other personnel costs incurred by PSA Affiliates in the
employment of their employees and (ii) all other overhead and general and
administrative costs of all PSA Affiliates,
which, in either case, is reasonably
allocable to the performance of services
referred to in Section 5.4 with respect
to Qualifying Projects; provided, however, that with respect to any
Qualifying
Project, such costs shall not exceed the
amounts set forth on
the Acquisition
Pro-Forma Budget for such Qualifying
Project. "PSA
Affiliates Operating
Costs"
shall include any costs which are
reasonably
allocable to
Qualifying
Projects
which are approved for acquisition by the Partnership, but not actually
acquired; provided, however, that "PSA Affiliates Operating Costs" shall not
include, and the Partnership shall not,
under any circumstances, be responsible
for, any costs attributable to properties considered for acquisition by the
Partnership but not approved for
acquisition.
(aaa) "Purchase
Notice" shall have the meaning set forth in Section
9.1 with respect to the "General
Partner Purchase Notice" and Section 9.6
with
respect to the "Limited Partner Purchase
Notice."
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<PAGE>
(bbb) "Purchase
Notice Date" shall have the meaning set forth
in
Section 9.1.
(ccc) "Qualifying Project" means any real estate acquisition
project
located in the United States of which 90% or more of the
net rentable
square
footage will consist of self-storage
facilities and no part of the project would
generate for the Limited Partner more than a de minimis
amount of unrelated
business taxable income under Section 511
of the Code (the Partners acknowledge
that the latter requirement will exclude projects involving containerized,
portable self-storage activities). A Qualifying Project shall not
include (1)
the acquisition of a self-storage facility owned by a PSA Affiliate on the
Effective Date, or the renovation,
expansion or
replacement (i.e. tear-down and
rebuild) of a self-storage facility owned
by a PSA Affiliate,
(2) a real estate
development project, including the conversion of other types of
improvements
into self-storage, (3) a real estate
project that requires significant expansion
or renovation, the costs of which are estimated
by the General Partner to be in
excess of 10% of the Acquisition Costs of
the Project, (4) a real estate project
proposed to be acquired by any PSA
Affiliate in a merger or similar transaction
or in a transaction in which the prospective seller will not accept all
cash,
(5) the acquisition of less than 100% of the ownership interests in a
partnership or other entity that owns
self-storage
facilities, (6) a
portfolio
of self-storage facilities with a purchase price
that exceeds (A)
$125,000,000
less (B) the aggregate amount of Capital
Contributions
contributed or committed
to the Partnership for other Qualifying
Projects, (7) a real estate project that
is encumbered by debt that cannot be
prepaid or that may only be prepaid with a
prepayment penalty that, if paid, would cause the Yield of the
project to be
less than 8% or (8) a real estate project the acquisition of which is under
consideration by [XYZ Company] or any of its
controlled
Affiliates or any
of
their respective clients or funds (solely to the
extent such client or fund is
being advised with respect to the
acquisition
of such real estate
project by
[XYZ Company] or its controlled Affiliates; the Limited Partner will use its
reasonable best efforts to cause [XYZ
Company] to notify the General Partner of
its involvement with any such project at
the time at which a project is formally
submitted to [XYZ Company] by or on behalf
of such a client or fund).
(ddd) "Regulations"
means the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such
Regulations may be
amended from time to time (or any corresponding provisions of succeeding
regulations).
(eee) "Regulatory
Allocations" shall
have the meaning set forth in
Section 3.5(h).
(fff) "Securities Act"
means the Securities Act of 1933, as amended
(or any corresponding provisions of
succeeding law).
(ggg) "Shortfall"
shall be determined
upon the liquidation
of the
Partnership or upon an election by the
General Partner to exercise its option to
purchase all of the Interest of the Limited
Partner pursuant to
Section 9.1, by
first calculating the monthly internal rate of return, using monthly
compounding, earned with respect to the Limited
Partner's
contributions to the
Partnership, taking into account all
distributions previously received, or to be
received in the liquidation or sale pursuant to
the option, including
amounts
received as guaranteed payments, without regard to whether a
Shortfall exists
(that rate of return shall be the "Realized
Rate of Return").
12
<PAGE>
If the Realized Rate of Return is equal to or in
excess of one twelfth of 8.5%,
the Shortfall shall be zero. If the Realized Rate of Return is less than
one
twelfth of 8.5%, but more than or equal to one
twelfth of 6.5%, the
Shortfall
shall be the amount that, when added to the
distribution of
Capital Proceeds or
to the Net Equity, would increase the Realized Rate of Return to equal one
twelfth of 8.5%. If the Realized Rate of Return is less than one
twelfth of
6.5%, the Shortfall shall be the amount
that, when added to the distribution of
Capital Proceeds or to the Net Equity,
would increase the
calculated
Realized
Rate of Return by one twelfth of 2.0%. The
calculations
set forth in Exhibit
I
illustrate how the Shortfall is to be
calculated.
(hhh) "Transfer"
means, as a noun, any voluntary or involuntary
transfer, sale, assignment, pledge,
hypothecation or other disposition and, as a
verb, voluntarily or involuntarily to transfer, sell, assign, pledge,
hypothecate or otherwise dispose of.
(iii) "Working
Capital" means the sum of the initial contributions
made under Sections 2.2(a)(i) and
2.2(b)(i), as may be
increased, reduced,
or
replenished from time to time, the outstanding balance of which shall at all
times be invested in instruments backed by
the United States Government.
(jjj) "Yield" means the Net Operating Income of a Qualifying
Project
or Qualifying Projects for the most recently
available twelve-month
period (or
in the case of a Qualifying Project which has not yet obtained
stabilization,
the reasonably projected annual income for
the one-year period commencing on the
first anniversary of the acquisition of such Qualifying Project by the
Partnership) divided by its or their total
cost, as determined in accordance
with the financial criteria and employing
the same underwriting criteria and
methodology used in generating the yields as pursuant to Exhibit
F (Pro Forma
Acquisition Budgets).
2.
PARTNERS; CAPITAL CONTRIBUTIONS
2.1 Partners.
The names and initial
addresses of the
Partners are as
follows:
General Partner:
PS Texas Holdings, Ltd.
c/o Public Storage, Inc.
701 Western Avenue
Glendale, CA 91201
Limited Partner:
[LIMITED PARTNER]
address of Limited Partner
2.2
Capital Contributions.
The Capital
Contributions of the
Partners
shall be as follows:
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<PAGE>
(a) Subject to Section
2.2(f), the Capital Contributions of the
General Partner shall be as follows:
(i) On the Effective Date, the General Partner shall make an
initial
cash Capital Contribution of $300.
(ii) From time to time, the General Partner shall contribute or
cause to be contributed to the Partnership additional cash equal to
30%
of the sum of the Acquisition Costs and PSA Affiliates Operating Costs
(but only to the
extent such PSA
Affiliates
Operating Costs do not
exceed 1% of the
cumulative sum of the
Acquisition Costs
incurred to
that date) incurred by or on behalf of the Partnership related to each
acquired Project.
(iii) From time to time, the General Partner shall contribute or
cause to be contributed to the Partnership Qualifying Projects and the
General Partner's
Capital Account shall be credited with the amount of
the expenditures made
with respect to such Qualifying Projects by PSA
Affiliates (to the
extent not previously reimbursed from Working
Capital) for Acquisition Costs and PSA Affiliates Operating Costs (but
only to the extent such PSA Affiliates Operating Costs do not
exceed 1%
of the cumulative sum of the Acquisition Costs incurred to that date).
The parties agree that any such Capital Account credits represent the
agreed fair market value of those contributed assets.
(iv) The General
Partner may, but shall
not be obligated to,
make
Capital Contributions from time to time in order to pay any accrued
but
unpaid Priority Returns to the Limited Partner hereunder, which
amounts
will be distributed to the Limited Partner pursuant to Section 2.2(e)
below.
(v) In the
circumstances
described in Section 10.3 below, the
General Partner shall make a contribution as set forth in Section
10.3.
(b) Subject to Section
2.2(f), the Capital Contributions of the
Limited Partner shall be as follows:
(i) On the Effective Date, the Limited Partner shall make an
initial
cash Capital Contribution of $700.
(ii) From time to time, the Limited Partner shall make additional
Capital Contributions
in cash equal to two and one third (2 1/3) times
the amount of the Capital Contributions made by the General Partner
from time to time pursuant to Section 2.2(a)(ii) above.
(iii) The Limited Partner shall make additional Capital
Contributions in
cash equal to 70% of the amount of the General
Partner's Capital
Contributions from
time to time pursuant to Section
2.2(a)(iii) above,
which amounts will be
distributed
to the General
Partner pursuant to Section 2.2(d) below.
14
(c) Any Capital
Contributions
required of Partners pursuant to
Sections 2.2(a)(ii), 2.2(b)(ii) and 2.2(b)(iii) above shall be set forth in
written notices from the General Partner to
the Partners in the form attached as
Exhibit K hereto. Such notices shall
contain a breakdown and supporting evidence
of Acquisition Costs and PSA Affiliates Operating Costs, and a breakdown by
Project (with such supporting evidence as requested by the
Limited Partner).
Such notices shall be delivered not less than ten (10)
Business Days prior
to
the date such Capital Contribution is required to be made. Notwithstanding
anything herein to the contrary,
(i) the Limited
Partner's obligation to make
Capital Contributions shall be limited to 70% of the aggregate amount of
Acquisition Costs and PSA Affiliates
Operating Costs contained in the applicable
Acquisition Pro-Forma Budget and (ii) the
General Partner's
obligation to make
Capital Contributions in respect of Acquisition Costs and PSA Affiliates
Operating Costs shall be limited to 30% of
the aggregate amount
of Acquisition
Costs and PSA Affiliates Operating Costs
contained in the applicable Acquisition
Pro-Forma Budget; provided, however, that clause (ii) above is
not intended to
(x) modify any legal requirement that the General Partner may be generally
liable for recourse obligations of the Partnership to the extent such
obligations are not otherwise able to be
satisfied out of the assets (including
commitments that are considered assets) of
the Partnership or (y) imply that the
Limited Partner is obligated to reimburse
or indemnify the General Partner if,
notwithstanding clause (ii) above, the General Partner is obligated to make a
Capital Contribution in order for the Partnership to satisfy the claims of
Partnership's creditors.
(d) Promptly
following the Capital Contributions by the Limited
Partner pursuant to Section 2.2(b)(iii) above, the General Partner shall
cause
an amount equal to such Capital Contributions to be distributed by the
Partnership to the General Partner as a
reduction in its Capital Contributions.
The Partners acknowledge that these amounts will be treated
as contributed to
the Partnership and then distributed by the Partnership for purposes of
this
Agreement, notwithstanding that for federal income tax purposes the amounts
perhaps could be recharacterized as if paid by the Limited Partner to the
General Partner for an interest in the
Properties which the Limited Partner then
would be treated as contributing to the
Partnership. Such a
recharacterization,
in the Partnership's circumstances, is not expected to produce materially
differing consequences. (e) Promptly following any Capital
Contributions by the
General Partner pursuant to Sections 2.2(a)(iv) and (v) above, the General
Partner shall cause an amount equal to such Capital Contributions to be
distributed by the Partnership to the Limited
Partner and such
distributions
shall be treated as deductible "guaranteed payments" for the use
of capital for
income tax purposes.
(f) Notwithstanding
anything herein to the contrary, except (i) to
the extent set forth in the Acquisition Pro-Forma Budgets, (ii) as otherwise
approved by the Investment Committee or (iii) as set forth in Sections
2.2(a)(iv) and (v), under no circumstances
will the Partners be required to make
any Capital Contributions after the
expiration of the Acquisition Period.
2.3 Extent of Liability. Except as otherwise provided by this
Agreement
or as required by applicable law:
15
<PAGE>
(a) A Partner
shall not be liable for the debts, liabilities,
contracts or any other obligations of the
Partnership; and
(b) A Partner shall be liable only to make the Capital
Contributions
provided in Section 2.2 for Qualifying Projects approved under Section 6.2(b)
and shall not be required to lend any funds
to the Partnership.
Performance of any one or more of the acts
specifically authorized for
performance by the Limited Partner under
this Agreement shall not in any way
constitute the Limited Partner a general
partner or impose any personal
liability on the Limited Partner. The
General Partner shall have no personal
liability for the repayment of any Capital
Contributions of the Limited Partner.
2.4 Other Matters.
(a) Except as otherwise provided in this Agreement, no Partner
shall
demand or receive a return of its Capital
Contributions or withdraw as a Partner
from the Partnership without the consent of the General Partner and the
Partners. Under circumstances requiring a return of any Capital
Contributions,
no Partner shall have the right to receive
property other than cash except as
may be specifically provided herein.
(b) No Partner
shall receive any interest, salary or draw with
respect to its Capital Contributions or its Capital Account or for services
rendered on behalf of the Partnership or
otherwise in its capacity as a Partner,
except as otherwise provided in this
Agreement.
3.
ALLOCATIONS
3.1 Profits. After
giving effect to the special allocations set forth
in Sections 3.3, 3.4 and 3.5, Profits for any Fiscal Year or
other period shall
be allocated to the Partners in the
following order and priority:
(a) First, to the
Limited Partner until the cumulative Profits
allocated pursuant to this Section 3.1(a)
and Gain from Sale allocated pursuant
to Section 3.4(a) for the current and all
prior Fiscal Years or
other periods
are equal to the cumulative Priority Return
accrued for the Limited Partner from
the Effective Date to the end of such
Fiscal Year or other period less the
amount of any guaranteed payments made
pursuant to Section 2.2(e);
(b) Second, to the
Limited Partner
until the cumulative Profits
allocated pursuant to this Section 3.1(b)
and Gain from Sale allocated pursuant
to Section 3.4(b) for the current and all
prior Fiscal Years or
other periods
are equal to the cumulative Losses allocated to the Limited
Partner pursuant to
Section 3.2 for all prior Fiscal Years or
other periods;
(c) Third, to the
General Partner until the cumulative Profits
allocated pursuant to this Section 3.1(c)
and Gain from Sale allocated pursuant
to Section 3.4(c) for the current and all
prior Fiscal Years or
other periods
are equal to the cumulative Losses allocated to the General
Partner pursuant to
Section 3.2 for all prior Fiscal Years or
other periods;
16
<PAGE>
(d) Fourth, to the
General Partner
until the cumulative Profits
allocated pursuant to this Section
3.1(d) for the current
and all prior Fiscal
Years or other periods are equal to the
cumulative distributions received by the
General Partner pursuant to Section 4.1(b)
from the Effective Date to the end of
such Fiscal Year or other period; and
(e) Fifth, the remaining balance, if any, shall be allocated
among
the Partners in proportion to their
Percentage Interests.
3.2 Losses. After giving effect to the special allocations set
forth in
Sections 3.3, 3.4 and 3.5, Losses for any Fiscal Year or
other period shall be
allocated in the following order and
priority:
(a) First, to the
General Partner until
any additional
allocation
would cause the General Partner to have an Adjusted
Capital Account
Deficit at
the end of any Fiscal Year;
(b) Second, to the
Limited Partner until any additional allocation
would cause the Limited Partner to have an Adjusted
Capital Account
Deficit at
the end of any Fiscal Year; and
(c) Third, any remaining Losses to the General Partner.
3.3 Certain Special
Allocations.
The following
special allocations
shall be made:
(a) All Depreciation
shall be specially allocated to the General
Partner, except to the extent that the General Partner elects not to be
allocated all or any portion of the
Depreciation for any particular period, in
which case the designated portion of the Depreciation
will be allocated to
the
Limited Partner; provided, however, that the Limited Partner shall not be
allocated more than 70% of the total
Depreciation for any Fiscal Year.
(b) All deductions for
any guaranteed
payments made to the Limited
Partner pursuant to Section 2.2(e) shall
be specially allocated
to the General
Partner.
3.4 Gain from
Sale. All Gain from Sale shall be allocated in the
following order:
(a) First, to the
Limited Partner until
the cumulative
Gain from
Sale allocated pursuant to this Section
3.4(a) and Profits allocated pursuant to
Section 3.1(a) for the current and all
prior Fiscal Years or other periods are
equal to the cumulative Priority Return
accrued for the Limited Partner from the
Effective Date to the end of such Fiscal
Year or other period less the amount of
any guaranteed payments made pursuant to
Section 2.2(e);
(b) Second, to the
Limited Partner until
the cumulative Gain
from
Sale allocated pursuant to this Section
3.4(b) and Profits allocated pursuant to
Section 3.1(b) for the current and all
prior Fiscal Years or other periods are
equal to the cumulative Losses allocated to the Limited
Partner pursuant to
Section 3.2 for all prior Fiscal Years or
other periods;
17
<PAGE>
(c) Third, to the
Limited Partner until
the cumulative
Gain from
Sale allocated pursuant to this Section 3.4(c) for the current and all
prior
Fiscal Years or other periods is equal to
the cumulative
Depreciation allocated
to the Limited Partner pursuant to Section 3.3(a) for all
prior Fiscal Years or
other periods;
(d) Fourth, to the
General Partner until
the cumulative Gain
from
Sale allocated pursuant to this Section
3.4(d) and Profits allocated pursuant to
Section 3.1(c) for the current and all
prior Fiscal Years or other periods are
equal to the cumulative Losses allocated to the General
Partner pursuant to
Section 3.2 for all prior Fiscal Years or
other periods;
(e) Fifth, to the
General Partner until
the cumulative
Gain from
Sale allocated pursuant to this Section 3.4(e) is equal to the cumulative
allocations of Depreciation and deductions
for guaranteed payments made pursuant
to Section 3.3(a) and (b), excluding any guaranteed payments deductions
attributable to Capital Contributions made
pursuant to Section 2.2(a)(v);
(f) Sixth, to the
General Partner until
the cumulative
Gain from
Sale allocated pursuant to this Section
3.4(f) and Profits allocated pursuant to
Section 3.1(d) for the current and all
prior Fiscal Years or other periods are
equal to the cumulative Priority Return
accrued for the General Partner from the
Effective Date to the end of such Fiscal
Year or other period;
(g) Seventh,
70% to the
Limited Partner and 30% to the General
Partner until the cumulative Gain from Sale allocated to the Limited
Partner
pursuant to this Section 3.4(g) for the current and all
prior Fiscal Years
or
other periods is equal to the cumulative
distributions made (or
expected by the
Partners to be made) to the Limited Partner
pursuant to Section 4.2(e);
(h) Eighth,
40% to the
Limited Partner and 60% to the General
Partner until the cumulative Gain from Sale allocated to the Limited
Partner
pursuant to this Section 3.4(h) for the current and all
prior Fiscal Years
or
other periods is equal to the cumulative
distributions made (or
expected by the
Partners to be made) to the Limited Partner
pursuant to Section 4.2(f);
(i) Ninth, 10% to the Limited Partner and 90% to the General
Partner
until the cumulative Gain from Sale
allocated to the Limited Partner pursuant to
this Section 3.4(i) for the current and all
prior Fiscal Years or other periods
is equal to the cumulative distributions
made (or expected by the Partners to be
made) to the Limited Partner pursuant to
Section 4.2(g); and
(j) Finally, 100% to the General Partner.
Sections 3.4(g) - (i) shall be applied
based on the assumption that all Capital
Proceeds will be distributed pursuant to
Section 4.2, rather than Section
10.2(c).
3.5 Regulatory Special
Allocations. The
following special allocations
shall be made in the following order:
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(a) Minimum
Gain Chargeback. Except as provided in Section
1.704-2(f) of the Regulations, notwithstanding any other provision of this
Section 3, if there is a net decrease in Minimum Gain during any Fiscal
Year,
each Partner shall be specially
allocated items of
Partnership income and
gain
for such year (and, if necessary, subsequent years) in an amount equal to
the
portion of such Partner's share of the net
decrease in Minimum Gain, determined
in accordance with Regulations Section
1.704-2(g).
Allocations pursuant
to the
previous sentence shall be made in
proportion to the respective amounts required
to be allocated to each Partner pursuant
thereto. The items to be so allocated
shall be determined in accordance with
Sections 1.704-2(f)(6)
and 1.704-2(j)(2)
of the Regulations. This Section 3.5(a) is intended to
comply with the minimum
gain chargeback requirement in Section
1.704-2(f) of the
Regulations and shall
be interpreted consistently therewith.
(b) Partner
Nonrecourse Debt
Minimum Gain
Chargeback.
Except as
otherwise provided in Section 1.704-2(i)(4)
of the Regulations,
notwithstanding
any other provision of this Section 3
except Section 3.5(a),
if there is a net
decrease in Partner Nonrecourse Debt Minimum Gain attributable to a Partner
Nonrecourse Debt during any Fiscal
Year, each Partner who has a share of the
Partner Nonrecourse Debt Minimum Gain
attributable to such Partner Nonrecourse
Debt, determined in accordance with
Regulations Section 1.704-2(i)(5), shall be
specially allocated items of Partnership
income and gain for such year (and, if
necessary, subsequent years) in an amount equal to such
Partner's share of the
net decrease in Partner Nonrecourse Debt Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with
Regulations
Section
1.704-2(i)(4). Allocations pursuant to the previous
sentence shall be made
in
proportion to the respective amounts required to be allocated to each
Partner
pursuant thereto. The items to be so
allocated shall be determined in accordance
with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of
the Regulations. This
Section
3.5(b) is intended to comply with the
minimum gain
chargeback
requirement
in
Section 1.704-2(i)(4) of the Regulations
and shall be interpreted consistently
therewith.
(c) Qualified Income Offset. In the event any Partner
unexpectedly
receives any adjustments, allocations or distributions described in Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, items of Partnership
income and gain shall be specially allocated to each such Partner in
an amount
and manner sufficient to eliminate,
to the extent required
by the Regulations,
the Adjusted Capital Account Deficit of such Partner as quickly
as possible,
provided that an allocation pursuant to this Section
3.5(c) shall be made
only
if and to the extent that such Partner
would have an Adjusted
Capital Account
Deficit after all other allocations provided for in this Section 3 have
been
tentatively made as if this Section 3.5(c)
were not in this Agreement.
(d) Gross Income Allocation. In the event any Partner has a
deficit
Capital Account at the end of any
Partnership Fiscal
Year which is in excess of
the sum of (i) the amount such Partner is
obligated to restore
pursuant to any
provision of this Agreement, and (ii) the amount such Partner
is deemed to be
obligated to restore pursuant to the penultimate sentences of Regulations
Sections 1.704-2(g)(1) and 1.704-2(i)(5),
each such Partner
shall be specially
allocated items of Partnership income and gain in the amount of
such excess as
quickly as possible, provided that an
allocation pursuant to this Section 3.5(d)
shall be made if and only to the extent
that such Partner
would have a
deficit
Capital Account in excess of such sum after
all other allocations provided for
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<PAGE>
in this Section 3 have been tentatively made as if Section 3.5(c) and this
Section 3.5(d) were not in the
Agreement.
(e) Nonrecourse
Deductions.
Nonrecourse Deductions
for any Fiscal
Year or other period shall be specially
allocated to the General Partner.
(f) Partner
Nonrecourse
Deductions.
Any Partner Nonrecourse
Deductions for any Fiscal Year or other
period shall be specially allocated to
the Partner who bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner
Nonrecourse
Deductions are
attributable
in accordance with Regulations Section
1.704-2(i)(1).
(g) Section
754 Adjustment. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Code Section
734(b) or
Code Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Regulations Section
1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining Capital Accounts as the result of a
distribution to a Partner in complete liquidation of its interest in the
Partnership, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the
adjustment increases
the basis of the asset)
or loss (if the adjustment decreases such basis) and such
gain or loss shall be
specially allocated to the Partners in
accordance with their
interests in the
Partnership in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(2)
applies, or to the Partners to whom such
distribution was made in the event that
Regulations Section 1.704-1(b)(2)(iv)(m)(4)
applies.
(h) Curative
Allocations.
The allocations set forth in Sections
3.5(a) through (g) (the "Regulatory Allocations") are intended to comply with
certain requirements of the Regulations.
It is the intent of
the Partners that,
to the extent possible, all Regulatory Allocations shall be offset either
with
other Regulatory Allocations or with special allocations of other items of
Partnership income, gain, loss or deduction pursuant to this Section
3.5(h).
Therefore, notwithstanding any other
provision of this Section 3 (other than the
Regulatory Allocations), the General Partner shall make
such offsetting special
alloc
