EXHIBIT 3.9
SECOND AMENDED AND
RESTATED
AGREEMENT OF LIMITED
PARTNERSHIP
OF
PRIME GROUP REALTY, L.P.
Dated as of July 1, 2005
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TABLE OF CONTENTS
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ARTICLE 1
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DEFINED TERMS
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2
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Section 1.1
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Definitions
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2
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ARTICLE 2
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ORGANIZATIONAL MATTERS
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15
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Section 2.1
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Organization
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14
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Section 2.2
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Name
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14
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Section 2.3
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Resident Agent; Principal
Office
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14
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Section 2.4
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Power of Attorney
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15
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Section 2.5
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Term
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16
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Section 2.6
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Filings
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16
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ARTICLE 3
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PURPOSE
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16
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Section 3.1
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Purpose and Business
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16
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Section 3.2
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Powers
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17
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Section 3.3
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Representations and Warranties by
the Parties
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17
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ARTICLE 4
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CAPITAL CONTRIBUTIONS
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19
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Section 4.1
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Capital Contributions of the
Partners
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19
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Section 4.2
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Loans by Third Parties
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19
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Section 4.3
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Additional Funding and Capital
Contributions
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19
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Section 4.4
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Share Incentive Plan
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21
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Section 4.5
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Other Contribution
Provisions
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21
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Section 4.6
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Purchase of Shares by the General
Partner
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21
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Section 4.7
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No Interest on Capital
Contributions
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21
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Section 4.8
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Redemption of Series B Preferred
Units
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21
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ARTICLE 5
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DISTRIBUTIONS
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22
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Section 5.1
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Requirement and Characterization
of Distributions
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22
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Section 5.2
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Distribution in Kind
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23
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Section 5.3
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Distributions Upon
Liquidation
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23
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Section 5.4
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Distributions to Reflect Issuance
of Additional Partnership Interests
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23
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ARTICLE 6
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ALLOCATIONS
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23
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Section 6.1
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Timing and Amount of Allocations
of Net Income and Net Loss
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23
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Section 6.2
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General Allocations
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23
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Section 6.3
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Allocations to Reflect Issuance
of Additional Partnership Interests
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25
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Section 6.4
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[Intentionally
Omitted.]
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25
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Section 6.5
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Allocations with Respect to
Transferred Interests
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25
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Section 6.6
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Additional Allocation
Provisions
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25
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Section 6.7
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Tax Allocations
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27
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ARTICLE 7
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MANAGEMENT AND OPERATION OF
BUSINESS
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29
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Section 7.1
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Management
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29
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Section 7.2
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Certificate of Limited
Partnership
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33
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Section 7.3
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Restrictions on General
Partner’s Authority
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33
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Section 7.4
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Reimbursement of the General
Partner
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35
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Section 7.5
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Contracts with
Affiliates
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35
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Section 7.6
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Indemnification
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36
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Section 7.7
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Liability of the General
Partner
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38
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Section 7.8
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Other Matters Concerning the
General Partner
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39
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Section 7.9
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Title to Partnership
Assets
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40
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Section 7.10
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Reliance by Third
Parties
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40
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ARTICLE 8
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RIGHTS AND OBLIGATIONS OF LIMITED
PARTNERS AND THE GENERAL PARTNER
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41
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Section 8.1
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Limitation of
Liability
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41
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Section 8.2
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No Participation in Management of
Business
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41
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Section 8.3
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Outside Activities of
Partners
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41
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Section 8.4
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Return of Capital
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41
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Section 8.5
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Rights of Partners Relating to
the Partnership
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41
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ARTICLE 9
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BOOKS, RECORDS, ACCOUNTING AND
REPORTS
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42
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Section 8.1
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Records and Accounting
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42
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Section 8.2
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Fiscal Year
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42
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Section 8.3
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Reports
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42
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ARTICLE 10
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TAX MATTERS
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43
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Section 10.1
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Preparation of Tax
Returns
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43
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Section 10.2
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Tax Elections
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43
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Section 10.3
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Tax Matters
Partner
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43
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Section 10.4
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Withholding
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44
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Section 10.5
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Limitation to Preserve REIT
Status
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45
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ARTICLE 11
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TRANSFERS AND
WITHDRAWALS
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46
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Section 11.1
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Transfer
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46
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Section 11.2
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Transfer of General
Partner’s Partnership Interest
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46
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Section 11.3
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Limited Partners’ Rights to
Transfer
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48
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Section 11.4
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Substituted Limited
Partners
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49
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Section 11.5
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Assignees
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49
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Section 11.6
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General Provisions
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50
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ARTICLE 12
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TRANSFERS AND
WITHDRAWALS
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51
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Section 12.1
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Admission of Successor General
Partner
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51
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Section 12.2
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Admission of Additional Limited
Partners
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52
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Section 12.3
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Amendment of Agreement and
Certificate of Limited Partnership
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52
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ARTICLE 13
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DISSOLUTION AND
LIQUIDATION
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53
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Section 13.1
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Dissolution
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53
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Section 13.2
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Winding Up
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53
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Section 13.3
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Compliance with Timing
Requirement of Regulations; Deficit Capital Account
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53
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Section 13.4
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Deemed Contribution and Interest
Distribution
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54
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Section 13.5
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Rights of Partners
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55
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Section 13.6
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Notice of Dissolution
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55
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Section 13.7
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Cancellation of Certificate of
Limited Partnership
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55
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Section 13.8
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Reasonable Time for
Winding-Up
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56
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Section 13.9
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Waiver of Partition
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56
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ARTICLE 14
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AMENDMENT OF PARTNERSHIP
AGREEMENT; CONSENTS
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56
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Section 14.1
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Amendments
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56
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Section 14.2
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Action by the Partners
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56
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ARTICLE 15
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GENERAL PROVISIONS
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57
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Section 15.1
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Addresses and Notice
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57
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Section 15.2
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Titles and Captions
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57
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Section 15.3
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Pronouns and Plurals
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57
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Section 15.4
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Further Action
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57
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Section 15.5
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Binding Effect
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57
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Section 15.6
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Creditors
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58
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Section 15.7
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Waiver
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58
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Section 15.8
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Counterparts
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58
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Section 15.9
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Applicable Law
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58
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Section 15.7
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Invalidity of
Provisions
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58
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Section 15.8
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Entire Agreement
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58
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Section 15.9
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No Rights as
Shareholders
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58
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Exhibits
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Attachment
A Terms of Series B Preferred
Units
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Exhibit A
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Schedule of Partners, Number of
Units, Capital Contributions and Capital Accounts (Section
1.1)
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Exhibit B
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Form of Common/Preferred Unit
Certificate (Section 1.1)
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Exhibit C
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Schedule of Property Partnerships
(Section 1.1)
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Exhibit D
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Exchange Factor
Provisions
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SECOND AMENDED AND
RESTATED
AGREEMENT OF LIMITED
PARTNERSHIP
OF PRIME GROUP REALTY,
L.P.
THIS SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF PRIME GROUP REALTY, L.P., dated
as of July 1, 2005, is entered into by and between Prime Group
Realty Trust, a Maryland real estate investment trust, as the
General Partner, and Prime Office Company, LLC, a Delaware limited
liability company, as the Limited Partner, together with any other
Persons who become Partners in the Partnership as provided
herein.
WHEREAS, the Partnership was formed
on March 19, 1997 and an original agreement of limited partnership
was entered into with Prime Group Realty Trust as general partner
(the “ Original Partnership Agreement
”);
WHEREAS, in connection with the
General Partner’s November 1997 initial public offering and
related formation transactions, the General Partner and the other
Persons then being admitted to the Partnership as Partners entered
into the Amended and Restated Agreement of Limited Partnership
dated as of November 17, 1997 (the “ First Amended and
Restated Agreement ”);
WHEREAS, pursuant to the First
Amended and Restated Agreement, the General Partner was initially
designated as the “Managing General Partner” and The
Nardi Group, L.L.C., a Delaware limited liability company (“
TNG ”), was admitted to the Partnership as the
Partnership’s other general partner;
WHEREAS, since November 17, 1997,
the General Partner and the other Partners in the Partnership
entered into 43 amendments to the First Amended and Restated
Agreement, effecting (1) the admission of Additional Limited
Partners to the Partnership, (2) the withdrawal of certain Partners
from the Partnership, (3) the issuance of additional Common Units
to the General Partner in connection with its issuance of
additional Common Shares, (4) the issuance of additional Preferred
Units to the General Partner (the “ Series B Preferred
Units ”) in connection with the issuance and sale of its
9% Series B Cumulative Redeemable Preferred Shares of Beneficial
Interest, par value $0.01 per share (the “ Series B
Shares ”), (5) the withdrawal of TNG as a general partner
of the Partnership and the related conversion of TNG’s Common
Units of General Partner Interest into Common Units of Limited
Partner Interest and (6) the Partnership’s distribution to
the General Partner of the Series A Cumulative Redeemable Preferred
Shares of Beneficial Interest, par value $0.01 per share (the
“ Series A Shares ”), of the General Partner
previously held by the Partnership in exchange for the Series A
Cumulative Convertible Preferred Units (the “ Convertible
Preferred Units ”) of the Partnership previously held by
the General Partner, and the related cancellation of the
Convertible Preferred Units (collectively, the “ Prior
Amendments ”);
WHEREAS, in connection with the
merger of Prime Office Merger Sub I, LLC, a Delaware limited
liability company (“ OP Merger Sub ”), with and
into the Partnership (the “ OP Merger ”) as of
the date hereof pursuant to the Agreement and Plan of Merger, dated
as of February 17, 2005 (the “ Merger Agreement
”), by and among the Limited Partner, Prime Office
Merger Sub, LLC, a Maryland limited
liability company, OP Merger Sub, the General Partner and the
Partnership, (i) the common units of general partner interest of
the Partnership held by the General Partner immediately prior to
the OP Merger were converted automatically into the right of the
General Partner to receive an amount of cash and 236,814 Common
Units of General Partner Interest of the Partnership (the “
New GP Common Units ”) and (ii) the equity interests
of OP Merger Sub issued and outstanding immediately prior to the OP
Merger were converted automatically into 26,521,143 Common Units of
Limited Partner Interest of the Partnership (the “ New LP
Common Units ”); and
WHEREAS, in connection with the OP
Merger, the General Partner and the Limited Partner now desire to
amend and restate the First Amended and Restated Agreement to
incorporate the Prior Amendments and to reflect the issuance of the
New GP Common Units and the New LP Common Units, and certain other
matters by entering into this Second Amended and Restated Agreement
of Limited Partnership.
NOW THEREFORE, in consideration of
the mutual covenants set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby amend and restate
the First Amended and Restated Agreement in its entirety and agree
to continue the Partnership as a limited partnership under the
Delaware Revised Uniform Limited Partnership Act, as amended from
time to time, as follows:
ARTICLE 1
DEFINED TERMS
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Section 1.1
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Definitions .
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The following definitions shall be
for all purposes, unless otherwise clearly indicated to the
contrary, applied to the terms used in this Agreement.
“ Act ” means the
Delaware Revised Uniform Limited Partnership Act, as it may be
amended from time to time, and any successor to such
statute.
“ Additional Funds
” shall have the meaning set forth in Section 4.3.A
hereof.
“ Additional Limited
Partner ” means a Person admitted to the Partnership as a
Limited Partner pursuant to Section 12.2 hereof and who is
shown as such on the books and records of the
Partnership.
“ Adjusted Capital Account
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 Partnership taxable year, after giving effect
to the following adjustments:
(a) decrease
such deficit by any amounts which such Partner is obligated to
restore pursuant to this Agreement or is deemed to be obligated to
restore pursuant to Regulations Section 1.704-1(b)(2)(ii)(c) or the
penultimate sentence of each of Regulations Sections 1.704-2(i)(5)
and 1.704-2(g); and
(b) increase such deficit by the
items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5)
and (6).
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The foregoing definition of Adjusted
Capital Account Deficit is intended to comply with the provisions
of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
“ Adjustment Date
” means, with respect to any Capital Contribution, the close
of business on the Business Day last preceding the date of the
Capital Contribution; provided , that if such Capital
Contribution is being made by the General Partner in respect of the
proceeds from the issuance of Shares (or the issuance of the
General Partner’s securities exercisable for, convertible
into or exchangeable for Shares), then the Adjustment Date shall be
as of the close of business on the day of the issuance of such
securities.
“ Administrative
Expenses ” shall mean (i) all administrative and
operating costs and expenses incurred by the Partnership, (ii) all
administrative, operating and other costs and expenses incurred by
the Property Partnerships, which expenses are assumed by the
Partnership pursuant to Section 7.4.B hereof, (iii) those
administrative costs and expenses of the General Partner, including
salaries paid to officers of the General Partner, and accounting
and legal expenses undertaken by the General Partner on behalf or
for the benefit of the Partnership, and (iv) to the extent not
included in clause (iii) above, REIT Expenses.
“ Affiliate ”
means, with respect to any Person, any Person directly or
indirectly controlling, controlled by or under common control with
such Person.
“ Agreement ”
means this Second Amended and Restated Agreement of Limited
Partnership, as it may be amended, modified, supplemented or
restated from time to time.
“ Appraisal ”
means with respect to any assets, the opinion of an independent
third party experienced in the valuation of similar assets,
selected by the General Partner in good faith; such opinion may be
in the form of an opinion by such independent third party that the
value for such asset as set by the General Partner is fair, from a
financial point of view, to the Partnership.
“ Assignee ”
means a Person to whom one or more Units have been transferred in a
manner permitted under this Agreement, but who has not become a
Substituted Limited Partner, and who has the rights set forth in
Section 11.5 hereof.
“ Business Day ”
means any day except a Saturday, Sunday or other day on which
commercial banks in Chicago, Illinois and New York, New York are
authorized or required by law to be closed.
“ Capital Account
” means, with respect to any Partner, the Capital Account
maintained for such Partner in accordance with the following
provisions:
(a) To each Partner’s Capital
Account there shall be added such Partner’s Capital
Contributions, such Partner’s share of Net Income and any
items in the nature of income or gain which are specially allocated
to such Partner pursuant to Section 6.6 hereof, and the
amount of any Partnership liabilities assumed by such Partner or
which are secured by any property distributed to such
Partner.
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(b) From each Partner’s
Capital Account there shall be subtracted the amount of cash and
the Gross Asset Value of any property distributed to such Partner
pursuant to any provision of this Agreement, such Partner’s
distributive share of Net Losses and any items in the nature of
expenses or losses which are specially allocated to
such Partner pursuant to Section 6.6 hereof, and the
amount of any liabilities of such Partner assumed by the
Partnership or which are secured by any property contributed by
such Partner to the Partnership.
(c) In the event any interest in the
Partnership is transferred in accordance with the terms of this
Agreement (which does not result in a termination of the
Partnership for federal income tax purposes), the transferee shall
succeed to the Capital Account of the transferor to the extent it
relates to the transferred interest.
(d) In determining the amount of any
liability for purposes of subsections (a) and (b) hereof, there
shall be taken into account Code section 752(c) and any other
applicable provisions of the Code and Regulations.
The foregoing provisions and the
other provisions of this Agreement relating to the maintenance of
Capital Accounts are intended to comply with Regulations Sections
1.704-1(b) and 1.704-2, and shall be interpreted and applied in a
manner consistent with such Regulations. In the event the General
Partner shall determine that it is prudent to modify the manner in
which the Capital Accounts, or any debits or credits thereto
(including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed
property or which are assumed by the Partnership, the General
Partner, or the Limited Partners) are computed in order to comply
with such Regulations, the General Partner may make such
modification. The General Partner also shall (i) make any
adjustments that are necessary or appropriate to comply with
Regulations Section 1.704-1(b)(2)(iv)(q) and (ii) make any
appropriate modifications in the event unanticipated events might
otherwise cause this Agreement not to comply with Regulations
Sections 1.704-1(b) or 1.704-2 or Section 514(c)(9).
“ Capital Contribution
” means, with respect to any Partner, the amount of money and
the initial Gross Asset Value of any property (other than money),
net of any liability to which such property is subject or which is
secured by such property, contributed to the Partnership by such
Partner.
“ Cash Purchase Price
” shall have the meaning set forth in Paragraph 4 of
Exhibit D attached hereto.
“ Certificate ”
means the Certificate of Limited Partnership relating to the
Partnership filed in the office of the Secretary of State of
Delaware on March 19, 1997, as amended or restated from time to
time in accordance with the terms hereof and the Act.
“ Charter ” means
the Declaration of Trust of the General Partner filed with the
Maryland State Department of Assessments and Taxation on July 21,
1997, as supplemented by Series B Articles Supplementary and as may
be further supplemented, amended or restated from time to
time.
“ Code ” means
the Internal Revenue Code of 1986, as amended from time to time or
any successor statute thereto, as interpreted by the applicable
regulations thereunder. Any reference
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herein to a specific section or
sections of the Code shall be deemed to include a reference to any
corresponding provision of future law.
“ Common Shares ”
means the common shares of beneficial interest, par value $.01 per
share, of the General Partner.
“ Common Unit ”
means, with respect to any class of Partnership Interest, a
fractional, undivided share of such class of Partnership Interest
issued pursuant to Sections 4.1 and 4.3 hereof. The
ownership of Common Units may be evidenced by a certificate for
units substantially in the form of Exhibit B hereof
(including the restricted legends thereon) or as the General
Partner may determine with respect to any class of Common Units
issued from time to time under Sections 4.1 and 4.3
hereof.
“ Consent ” means
the consent to, approval of, or vote on a proposed action by a
Partner given in accordance with Article 14
hereof.
“ Consent of the Limited
Partners ” means the Consent of a Majority in Interest of
the Limited Partners, which Consent shall be obtained prior to the
taking of any action for which it is required by this Agreement and
may be given or withheld by a Majority in Interest of the Limited
Partners, unless otherwise expressly provided herein, in their sole
and absolute discretion.
“ Consent of the
Partners ” means the Consent of Partners holding Units
that in the aggregate are equal to or greater than 50% of the
aggregate Units of all Partners, which Consent shall be obtained
prior to the taking of any action for which it is required by this
Agreement and may be given or withheld by such Partners, in their
sole and absolute discretion.
“ Constructively Own
” means ownership of stock, assets, or net profits by any
Person who would be treated as an owner of such stock, assets, or
net profits either directly or indirectly through the application
of Section 318 of the Code, as modified by Section 856(d)(5) of the
Code.
“ Debt ” means,
as to any Person, as of any date of determination, (a) all
indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services; (b) all amounts owed by
such Person to banks or other Persons in respect of reimbursement
obligations under letters of credit, surety bonds and other similar
instruments guaranteeing payment or other performance of
obligations by such Person; (c) all indebtedness for borrowed money
or for the deferred purchase price of property or services secured
by any lien on any property owned by such Person, to the extent
attributable to such Person’s interest in such property, even
though such Person has not assumed or become liable for the payment
thereof; and (d) lease obligations of such Person which, in
accordance with generally accepted accounting principles, should be
capitalized.
“ Depreciation ”
means, for each Partnership taxable 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
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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.
“ Funding Debt ”
means the incurrence of any Debt by or on behalf of the General
Partner for the purpose of providing funds to the
Partnership.
“ General Partner
” shall mean Prime Group Realty Trust, a Maryland real estate
investment trust, and its successors or assigns, if any.
“ General Partner
Interest ” means a Partnership Interest held by the
General Partner. A General Partner Interest shall be expressed as a
number of Units.
“ General Partner Loan
” shall have the meaning set forth in Section 4.3.B
hereof.
“ General Partner
Payment ” shall have the meaning set forth in Section
10.5 hereof.
“ Gross Asset Value
” means, with respect to any asset, the asset’s
adjusted basis for federal income tax purposes, except as
follows:
(a) 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
contributing Partner and the General Partner (as set forth on
Exhibit A hereof, as such Exhibit may be amended from time
to time); provided , that if the contributing Partner is the
General Partner then, except with respect to the General
Partner’s Capital Contributions prior to or as of the date
hereof, which shall be determined as set forth on Exhibit A
hereof, or capital contributions of cash, Shares or other shares of
beneficial interest of the General Partner, the determination of
the fair market value of the contributed asset shall be determined
by (i) the price paid by the General Partner if the asset is
acquired by the General Partner contemporaneously with its
contribution to the Partnership or (ii) by Appraisal if otherwise
acquired by the General Partner.
(b) As of the times listed below,
the Gross Asset Values of all Partnership assets shall be adjusted
to equal their respective gross fair market values, as determined
by the General Partner using such reasonable method of valuation as
it may adopt; provided , however , that for such
purpose, the net value of all of the Partnership assets, in the
aggregate, shall be equal to the fair market value of all classes
of Partnership Interests then outstanding, regardless of the method
of valuation adopted by the General Partner:
(i) the acquisition of an additional
interest in the Partnership by a new or existing Partner in
exchange for more than a de minimis Capital Contribution, if the
General Partner reasonably determines that such adjustment is
necessary or appropriate to reflect the relative economic interests
of the Partners in the Partnership;
(ii) the distribution by the
Partnership to a Partner of more than a de minimis amount of
Partnership property as consideration for an interest in the
Partnership if the General
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Partner reasonably determines that
such adjustment is necessary or appropriate to reflect the relative
economic interests of the Partners in the Partnership;
(iii) the liquidation of the
Partnership within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); and
(iv) at such other times as the
General Partner shall reasonably determine necessary or advisable
in order to comply with Regulations Sections 1.704-1(b) and
1.704-2.
(c) The Gross Asset Value of any
Partnership asset distributed to a Partner shall be the gross fair
market value of such asset on the date of distribution as
determined by the distributee and the General Partner or, if the
distributee and the General Partner cannot agree on such a
determination, by Appraisal.
(d) 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 Regulations Section 1.704-1(b)(2)(iv)(m);
provided , however , that Gross Asset Values shall
not be adjusted pursuant to this subparagraph (d) to the
extent that the General Partner reasonably determines that an
adjustment pursuant to subparagraph (b) is necessary or
appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this subparagraph (d)
.
(e) If the Gross Asset Value of a
Partnership asset has been determined or adjusted pursuant to
subparagraph (a) , (b) or (d) above, such
Gross Asset Value shall thereafter be adjusted by the Depreciation
taken into account with respect to such asset for purposes of
computing Net Income and Net Losses.
“ Holder ” means
either the Partner or Assignee owning a Unit.
“ Immediate Family
” means with respect to any natural Person, such natural
Person’s estate or heirs or current spouse or former spouse,
parents, parents-in-law, children, siblings and grandchildren and
any trust or estate, all of the beneficiaries of which consist of
such Person or such Person’s spouse, former spouse, parents,
parents-in-law, children, siblings or grandchildren;
provided , further that “ Immediate
Family ”, means, with respect to a trust, the
trust’s beneficiary’s estate or heirs or current spouse
or former spouse, parents, parents-in-law, children, siblings and
grandchildren.
“ Incapacity ” or
“ Incapacitated ” means, (a) as to any
individual Partner, if any, death, total physical disability or
entry by a court of competent jurisdiction adjudicating him or her
incompetent to manage his or her Person or his or her estate; (b)
as to any corporation or limited liability company, as the case may
be, which is a Partner, the filing of a certificate of dissolution,
or its equivalent, for the corporation or limited liability
company, as the case may be, or the revocation of its charter
unless reinstated; (c) as to any partnership which is a Partner,
the dissolution and commencement of winding up of the partnership;
(d) as to any estate which is a Partner, the distribution by the
fiduciary of the estate’s entire interest in the Partnership;
(e) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new
trustee); or (f) as to any Partner, the bankruptcy of such Partner.
For purposes of this
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definition, bankruptcy of a Partner
shall be deemed to have occurred when (s) the Partner commences a
voluntary proceeding seeking liquidation, reorganization or other
relief under any bankruptcy, insolvency or other similar law now or
hereafter in effect, (t) the Partner is adjudged as bankrupt or
insolvent, or a final and nonappealable order for relief under any
bankruptcy, insolvency or similar law now or hereafter in effect
has been entered against the Partner, (u) the Partner executes and
delivers a general assignment for the benefit of the
Partner’s creditors, (v) the Partner files an answer or other
pleading admitting or failing to contest the material allegations
of a petition filed against the Partner in any proceeding of the
nature described in clause (t) above, (w) the Partner seeks,
consents to or acquiesces in the appointment of a trustee, receiver
or liquidator for the Partner or for all or any substantial part of
the Partner’s properties, (x) any proceeding seeking
liquidation, reorganization or other relief under any bankruptcy,
insolvency or other similar law now or hereafter in effect has not
been dismissed within 120 days after the commencement thereof, (y)
the appointment without the Partner’s consent or acquiescence
of a trustee, receiver or liquidator has not been vacated or stayed
within 90 days of such appointment, or (z) an appointment referred
to in clause (y) above is not vacated within 90 days after
the expiration of any such stay.
“ Indemnitee ”
means (a) any Person subject to a claim or demand or made or
threatened to be made a party to, or involved or threatened to be
involved in, an action, suit or proceeding by reason of his or her
status as (i) the General Partner or (ii) a director, officer,
member, manager, employee or agent of the Partnership or the
General Partner, and (b) such other Persons (including Affiliates
of the General Partner or the Partnership) as the General Partner
may designate from time to time, in its sole and absolute
discretion.
“ IRS ” means the
Internal Revenue Service, which administers the internal revenue
laws of the United States, and any successor agency of the United
States federal government.
“ Limited Partner
” means Prime Office Company, LLC, a Delaware limited
liability company, and any Person that becomes a Substituted
Limited Partner or Additional Limited Partner (Prime Office
Company, LLC and any such other Persons shall be identified as
“Limited Partners” on Exhibit A hereof, as such
Exhibit may be amended from time to time), in such Person’s
capacity as a Limited Partner in the Partnership.
“ Limited Partner
Interest ” means a Partnership Interest of a Limited
Partner representing part of the Partnership Interests of all
Limited Partners and includes any and all benefits to which the
Holder of such a Partnership Interest may be entitled as provided
in this Agreement, together with all obligations of such Person to
comply with the terms and provisions of this Agreement. A Limited
Partner Interest shall be expressed as a number of
Units.
“ Liquidating Events
” shall have the meaning set forth in Section 13.1
hereof.
“ Liquidator ”
shall have the meaning set forth in Section 13.2.A
hereof.
“ Majority in Interest of
the Limited Partners ” means Limited Partners (other than
the General Partner and any Limited Partner 50% or more of whose
equity is owned, directly or indirectly, by the General Partner)
holding Units that in the aggregate are greater than fifty percent
(50%) of the aggregate Units of all Limited Partners (other than
the General Partner and
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any Limited Partner 50% or more of
whose equity is owned, directly or indirectly, by the General
Partner).
“ Minimum Gain Capital
Account ” shall mean, with respect to the General
Partner, the sum of the General Partner’s Capital Account
plus the General Partner’s share of Partner Minimum Gain, as
described in Section 1.704-2(i)(5) of the Regulations, and
Partnership Minimum Gain, as described in Section 1.704-2(g) of the
Regulations. For purposes of determining Minimum Gain Capital
Account, Nonrecourse Deductions and Partner Nonrecourse Deductions
for a Partnership taxable year or other applicable period shall be
allocated in a manner that is consistent with the method of
allocation adopted under Section 6.3 or Section 6.5
(to the extent applicable for such Partnership taxable
year).
“ Net Cash Flow ”
means, with respect to the applicable period of measurement (i.e.,
any period beginning on the first day of the fiscal year, quarter
or other period commencing immediately after the last day of the
fiscal year, quarter or other applicable period for purposes of the
most recent calculation of Net Cash Flow for or with respect to
which a distribution has been made, and ending on the last day of
the fiscal year, quarter or other applicable period immediately
preceding the date of the calculation) the excess, if any, as of
such date, of (a) the gross cash receipts of the Partnership for
such period from all sources whatsoever, including, without
limitation, the following:
(i) all
rents, revenues, income and proceeds derived by the Partnership
from its operations, including, without limitation, distributions
received by the Partnership from any Person in which the
Partnership has an interest; (ii) all proceeds and revenues
received by the Partnership on account of any sales of property of
the Partnership or as a refinancing of or payments of principal,
interest, costs, fees, penalties or otherwise on account of any
borrowings or loans made by the Partnership or financings or
refinancings of any property of the Partnership; (iii) the amount
of any insurance proceeds and condemnation awards received by the
Partnership; (iv) all Capital Contributions or loans received by
the Partnership from its Partners; (v) any reduction in the cash
amounts previously reserved by the Partnership and described in
subsection (b)(ix) below, if the General Partner determines
that such amounts are no longer needed; and (vi) the proceeds of
liquidation of the Partnership’s property in accordance with
this Agreement,
over (b) the sum of:
(i) all operating costs and expenses
of the Partnership and capital expenditures paid during such period
(without deduction, however, for any capital expenditures, charges
for Depreciation or other expenses not paid in cash or expenditures
from reserves described in (ix) below); (ii) to the extent not
included in any other clause of this subparagraph (b) , all
costs and expenses expended or paid during such period in
connection with the sale or other disposition, or financing or
refinancing, of property of the Partnership or the recovery of
insurance or condemnation proceeds; (iii) to the extent not
included in any other clause of this subparagraph (b) , all
fees provided for under this Agreement and paid by the Partnership
during such period (other than fees paid from reserves described in
subsection (b)(iv) below); (iv) to the extent not included
in any other clause of this subparagraph (b) , all debt
service, including principal and interest, paid during such period
on all indebtedness of the Partnership; (v) all capital
contributions, advances, reimbursements or similar payments made to
any Person in which the
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Partnership has an interest; (vi)
all loans made by the Partnership in accordance with the terms of
this Agreement; (vii) to the extent not included in any other
clause of this subparagraph (b) , all reimbursements to the
General Partner or its Affiliates during such period, including
Administrative Expenses (exclusive of REIT Expenses) to the extent
not paid or payable by the General Partner pursuant to the third
sentence of Section 7.4.B ; (viii) any distributions
pursuant to the proviso of the second sentence of Section
5.1 hereof; and (ix) any increases in reserves reasonably
determined by the General Partner to be necessary for working
capital, capital improvements, payments of periodic expenditures,
debt service or other purposes for the Partnership or any Person in
which the Partnership has an interest.
“ Net Income” or
“Net Loss ” shall mean, for each fiscal year or
other applicable period, an amount equal to the Partnership’s
net income or loss for such year or period as determined for
federal income tax purposes by the General Partner, determined in
accordance with Section 703(a) of the Code (for this purpose, all
items of income, gain, loss or deduction required to be stated
separately pursuant to Section 703(a) of the Code shall be included
in taxable income or loss), adjusted as follows: (i) by including
as an item of gross income any tax-exempt income received by the
Partnership and not otherwise taken into account in computing Net
Income or Net Loss; (ii) by treating as a deductible expense any
expenditure of the Partnership described in Section 705(a)(2)(B) of
the Code and not otherwise taken into account in computing Net
Income or Net Loss, including amounts paid or incurred to organize
the Partnership (unless an election is made pursuant to Section
709(b) of the Code) or to promote the sale of interests in the
Partnership; (iii) by treating deductions for any losses incurred
in connection with the sale or exchange of Partnership property
which are disallowed pursuant to Sections 267(a)(1) or 707(b) of
the Code as expenditures described in Section 705(a)(2)(B) of the
Code; (iv) by taking into account Depreciation in lieu of
depreciation, depletion, amortization, and other cost recovery
deductions taken into account in computing taxable income or loss;
(v) by computing gain or loss resulting from any disposition of
Partnership property with respect to which gain or loss is
recognized for federal income tax purposes by reference to the
Gross Asset Value of such property rather than its adjusted tax
basis; (vi) in the event of an adjustment of the Gross Asset Value
of any Partnership asset which requires that the Capital Accounts
of the Partnership be adjusted pursuant to Sections
1.704-1(b)(2)(iv)(e), (f) and (m) of the Regulations, by taking
into account the amount of such adjustment as additional Net Income
or Net Loss pursuant to Article VI; and (vii) subject to the
immediately preceding clause (vi), by excluding the Partnership
items of income, gain, loss or deduction that are specially
allocated pursuant to Section 6.6 .
“ New Securities
” means (a) any rights, options, warrants or convertible or
exchangeable securities having the right to subscribe for or
purchase Common Shares or other shares of beneficial interest of
the General Partner, excluding grants under any Share Incentive
Plan or (b) any Debt issued by the General Partner that provides
any of the rights described in clause (a) hereof.
“ Nonrecourse
Deductions ” shall have the meaning set forth in
Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse
Deductions for a Partnership taxable year shall be determined in
accordance with the rules of Regulations Section
1.704-2(c).
“ Nonrecourse Liability
” shall have the meaning set forth in Regulations Section
1.752-1(a)(2).
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“ Original Partnership
Agreement ” shall have the meaning set forth in the
recitals of this Agreement.
“ Partner ” means
a General Partner or a Limited Partner, and “ Partners
” means the General Partner and the Limited
Partners.
“ Partner Minimum Gain
” means an amount, with respect to each Partner Nonrecourse
Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Regulations Section
1.704-2(i)(3).
“ Partner Nonrecourse
Debt ” shall have the meaning set forth in Regulations
Section 1.704-2(b)(4).
“ Partner Nonrecourse
Deductions ” shall have the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner
Nonrecourse Deductions with respect to a Partner Nonrecourse Debt
for a Partnership taxable year shall be determined in accordance
with the rules of Regulations Section 1.704-2(i)(2).
“ Partnership ”
means the limited partnership formed under the Act and pursuant to
Original Partnership Agreement and continued pursuant to this
Agreement, and any successor to such limited
partnership.
“ Partnership Interest
” means, an ownership interest in the Partnership of either a
Limited Partner or the General Partner and includes any and all
benefits to which the Holder of such a Partnership Interest may be
entitled as provided in this Agreement, together with all
obligations of such Person to comply with the terms and provisions
of this Agreement. There presently are two classes of Partnership
Interests as provided in Section 4.3 hereof. A Partnership
Interest within a class of Partnership Interests shall be expressed
as a number of units of such class. In the event that the
Partnership has more than one class of Partnership Interests, the
Partnership Interest of a Partner with respect to all classes of
Partnership Interests shall be expressed as the sum of each
Partnership Interest owned by such Partner for each class of
Partnership Interests, weighting each such Partnership Interest for
each class based on the relative aggregate fair market value of
each class.
“ Partnership Minimum
Gain ” shall have the meaning set forth in Regulations
Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain,
as well as any net increase or decrease in Partnership Minimum
Gain, for a Partnership taxable year shall be determined in
accordance with the rules of Regulations Section
1.704-2(d).
“ Partnership Payment
Date ” means the payment date established by the General
Partner for the distribution of Net Cash Flow pursuant to
Section 5.1 hereof, which payment date shall be the same as
the payment date established by the General Partner for a
distribution to its shareholders of some or all of its portion of
such distribution.
“ Partnership Year
” means the fiscal year of the Partnership, which shall be
the calendar year.
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“ Permitted Debt Allocation
Method ” shall mean a method of allocating the
Partnership’s excess nonrecourse liabilities for purposes of
Regulations Section 1.752-3(a)(3) in any Partnership taxable year,
as determined by the General Partner in accordance with Regulations
Section 1.752-3 and Revenue Ruling 95-41, 1995-1 C.B.
132.
“ Person ” means
an individual or a corporation, partnership, limited liability
company, trust, unincorporated organization, association or other
entity.
“ Pledge ” shall
have the meaning set forth in Section 11.3.A
hereof.
“ Preferred Unit
” means, with respect to any preferred class of Partnership
Interest, a fractional, undivided share of such class of
Partnership Interest issued pursuant to Section 4.1 and
4.3 hereof. The ownership of Preferred Units may be
evidenced by a certificate for preferred units substantially in the
form of Exhibit B hereof (including the restricted legends
thereon) or as the General Partner may determine with respect to
any class of Preferred Units issued from time to time under
Sections 4.1 and 4.3 hereof.
“ Properties ”
means such interests in real property and personal property
including without limitation, fee interests, interests in ground
leases, interests in joint ventures, interests in mortgages, and
Debt instruments as the Partnership may hold from time to
time.
“ Property Partnerships
” shall mean the partnerships and limited liability companies
identified as such on Exhibit C attached hereto.
“ Qualified Transferee
” means an “Accredited Investor” as defined in
Rule 501 promulgated under the Securities Act.
“ Recapture Gain
” shall have the meaning set forth in Section 6.7.D
hereof.
“ Regulations ”
means the Income Tax Regulations promulgated under the Code, as
such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
“ Regulatory
Allocations ” shall have the meaning set forth in
Section 6.6 hereof.
“ REIT ” means a
real estate investment trust under Sections 856 through 860 of the
Code.
“ REIT Expenses ”
shall mean (i) costs and expenses relating to the continuity of
existence of the General Partner and its subsidiaries, if any
(which subsidiaries shall, for purposes of this definition be
included within the definition of General Partner), including
taxes, fees and assessments associated therewith and any and all
costs, expenses or fees payable to any trustee, director or officer
of the General Partner or such subsidiaries (including, without
limitation, any costs of indemnification), (ii) costs and expenses
relating to any offer or registration of securities by the General
Partner and all statements, reports, fees and expenses incidental
thereto, including, without limitation, underwriting discounts and
selling commissions applicable to any such offer of securities and
any costs and expenses associated with any claims made by any
holder of such securities or any underwriter or placement agent
therefor, (iii) costs and expenses associated with the preparation
and filing of any periodic reports by the General Partner under
federal, state or local laws or regulations, including filings with
the SEC, (iv) costs and expenses
- 12 -
associated with compliance by the
General Partner with laws, rules and regulations promulgated by any
regulatory body, including the SEC, and (v) all other operating or
administrative costs of the General Partner incurred in the
ordinary course of its business.
“ REIT Requirements
” shall have the meaning set forth in Section 5.1
hereof.
“ SEC ” means the
United States Securities and Exchange Commission and any successor
agency of the United States federal government.
“ Securities Act
” means the Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
“ Securities Exchange
Act ” means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated
thereunder.
“ Series B Articles
Supplementary ” means the Articles Supplementary to the
Charter classifying and designating the Series B Shares of the
General Partner filed with the State Department of Assessments and
Taxation of the State of Maryland on June 3, 1998.
“ Series B Preferred
Distribution ” means an amount equal to the quarterly
dividend payable in respect of the Series B Shares of the General
Partner pursuant to Section 3 of the Series B Articles
Supplementary.
“ Series B Preferred
Distribution Shortfall ” shall have the meaning set forth
in Section 5.1(i) .
“ Series B Preferred Unit
Redemption Amount ” means, with respect to any Series B
Preferred Unit, the amount payable by the General Partner on
account of the redemption of one Series B Preferred Share pursuant
to Section 5 of the Series B Articles Supplementary, using the
amount, if any, of Series B Preferred Distribution Shortfall as the
amount of accrued and unpaid dividends thereon.
“ Series B Preferred
Units ” shall mean the Units designated as Series B
Redeemable Preferred Units under this Agreement, previously
received by the General Partner in exchange for a portion of its
capital contribution, having the designations, preferences and
other rights set forth in Attachment A hereto and in this
Agreement. The number of Series B Preferred Units outstanding as of
the date of this Agreement is as set forth on Exhibit A
.
“ Share ” means
either a Common Share or a Preferred Share, as the case may
be.
“ Share Incentive Plan
” means any share incentive plan of the General
Partner.
“ Subsidiary ”
means, with respect to any Person, any corporation or other entity
of which a majority of (a) the voting power of the voting equity
securities or (b) the outstanding equity interests is owned,
directly or indirectly, by such Person.
“ Substituted Limited
Partner ” means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 11.4
hereof.
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“ Surviving Partnership
” shall have the meaning set forth in Section 11.2.C
hereof.
“ Tax Items ”
shall have the meaning set forth in Section 6.7.A
hereof.
“ Tenant ” means
any tenant from which the General Partner derives rent either
directly or indirectly through partnerships, including the
Partnership.
“ Terminating Capital
Transaction ” means any sale or other disposition of all
or substantially all of the assets of the Partnership or a related
series of transactions that, taken together, result in the sale or
other disposition of all or substantially all of the assets of the
Partnership.
“ Unit ” means
either a Common Unit or a Preferred Unit, as the case may
be.
ARTICLE 2
ORGANIZATIONAL MATTERS
Section
2.1 Organization .
The Partnership is a limited partnership formed pursuant to the
provisions of the Act and upon the terms and conditions set forth
in the Original Partnership Agreement, as amended by the First
Amended and Restated Agreement, the Prior Amendments and this
Agreement. The Partners hereby agree to continue the business of
the Partnership on the terms set forth in this Agreement. Except as
expressly provided herein, the rights and obligations of the
Partners and the administration and termination of the Partnership
shall be governed by the Act. The Partnership Interest of each
Partner shall be personal property for all purposes.
Section
2.2 Name . The
name of the Partnership is Prime Group Realty, L.P. The
Partnership’s business may be conducted under any other name
or names deemed advisable by the General Partner, including the
name of the General Partner or any Affiliate thereof. The words
“Limited Partnership,” “L.P.,”
“Ltd.” or similar words or letters shall be included in
the Partnership’s name where necessary for the purposes of
complying with the laws of any jurisdiction that so requires. The
General Partner in its sole and absolute discretion may change the
name of the Partnership at any time and from time to time and shall
notify the Limited Partners of such change in the next regular
communication to the Limited Partners.
Section
2.3 Resident Agent;
Principal Office . The name and address of the resident agent
of the Partnership in the State of Delaware is The Corporation
Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801. The address of the principal office of
the Partnership in the State of Delaware is Prime Group Realty,
L.P., c/o The Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, Wilmington, Delaware 19801. The principal
office of the Partnership is located at 77 West Wacker Drive, Suite
3900, Chicago, Illinois 60601, or such other place as the General
Partner may from time to time designate by notice to the Limited
Partners. The General Partner, in its sole and absolute discretion,
may change the resident agent and appoint successor resident
agents. The Partnership may maintain offices at such other place or
places within or outside the State of Delaware as the General
Partner deems advisable.
|
Section 2.4
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Power of Attorney .
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A. Each
Limited Partner and each Assignee constitutes and appoints the
General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each
case with full power of substitution, as its true and lawful agent
and attorney-in-fact, with full power and authority in its name,
place and stead to:
(1) execute, swear to, acknowledge,
deliver, file and record in the appropriate public offices (a) all
certificates, documents and other instruments (including, without
limitation, this Agreement and the Certificate and all amendments
or restatements thereof) that the General Partner or the Liquidator
deems appropriate or necessary to form, qualify or continue the
existence or qualification of the Partnership as a limited
partnership (or a partnership in which the Partners have limited
liability) in the State of Delaware and in all other jurisdictions
in which the Partnership may conduct business or own property; (b)
all instruments that the General Partner or any Liquidator deems
appropriate or necessary to reflect any amendment, change,
modification or restatement of this Agreement in accordance with
its terms; (c) all conveyances and other instruments or documents
that the General Partner or any Liquidator deems appropriate or
necessary to reflect the dissolution and liquidation of the
Partnership pursuant to the terms of this Agreement, including,
without limitation, a certificate of cancellation; (d) all
instruments relating to the admission, withdrawal, removal or
substitution of any Partner pursuant to, or other events described
in, Articles 11 , 12 and 13 hereof or the
Capital Contribution of any Partner; and (e) all certificates,
documents and other instruments relating to the determination of
the rights, preferences and privileges of Partnership Interests;
and
(2) execute, swear to, acknowledge
and file all ballots, consents, approvals, waivers, certificates
and other instruments appropriate or necessary, in the sole and
absolute discretion of the General Partner or any Liquidator, to
make, evidence, give, confirm or ratify any vote, consent,
approval, agreement or other action which is made or given by the
Partners hereunder or is consistent with the terms of this
Agreement or appropriate or necessary, in the sole discretion of
the General Partner or any Liquidator, to effectuate the terms or
intent of this Agreement.
Nothing contained herein shall be
construed as authorizing the General Partner or any Liquidator to
amend this Agreement except in accordance with Article 14
hereof or as may be otherwise expressly provided for in this
Agreement.
B. The
foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, in recognition of the fact
that each of the Partners will be relying upon the power of the
General Partner and any Liquidator to act as contemplated by this
Agreement in any filing or other action by it on behalf of the
Partnership, and it shall survive and not be affected by the
subsequent Incapacity of any Partner or Assignee and the transfer
of all or any portion of such Partner’s or Assignee’s
Units and shall extend to such Partner’s or Assignee’s
heirs, successors, assigns and personal representatives. Each such
Partner or Assignee hereby agrees to be bound by any representation
made by the General Partner or any Liquidator, acting in good faith
pursuant to such power of attorney; and each such Partner or
Assignee hereby waives any and all defenses which may be available
to contest, negate or disaffirm the action of the General Partner
or any Liquidator, taken in good faith under such power of
attorney. Each Partner or Assignee shall execute and deliver to the
General Partner or any Liquidator, within 15 days after receipt of
the General Partner’s or Liquidator’s request therefor,
such further designation, powers of attorney and other instruments
as the General Partner or the Liquidator, as
- 15 -
the case may be, deems necessary to
effectuate this Agreement and the purposes of the
Partnership.
Section
2.5 Term . The
term of the Partnership commenced on March 19, 1997 upon the filing
of the Certificate in accordance with the Act and shall continue
until it is dissolved pursuant to the provisions of Article
13 hereof or as otherwise provided by law.
Section
2.6 Filings . A.
The General Partner shall take any and all other actions reasonably
necessary to perfect and maintain the status of the Partnership as
a limited partnership under the laws of the State of Delaware. The
General Partner shall cause amendments to the Certificate to be
filed whenever required by the Act. Such amendments may be executed
by the General Partner only.
B. The
General Partner shall execute and cause to be filed original or
amended Certificates and shall take any and all other actions as
may be reasonably necessary to perfect and maintain the status of
the Partnership as a limited partnership or similar type of entity
under the laws of any other states or jurisdictions in which the
Partnership engages in business.
C. Upon
the dissolution of the Partnership, the General Partner (or, in the
event there is no remaining General Partner, the Person responsible
for winding up and dissolution of the Partnership pursuant to
Article 13 hereof) shall promptly execute and cause to be
filed certificates of dissolution in accordance with the Act and
the laws of any other states or jurisdictions in which the
Partnership has filed certificates.
ARTICLE 3
PURPOSE
Section
3.1 Purpose and
Business . The purpose and nature of the business to be
conducted by the Partnership is (A) to acquire and own real
property, to acquire, lease, own, mortgage or otherwise encumber
personal property, fixtures and real property, to operate, manage,
lease (or, to the extent determined by the General Partner to be
appropriate, cause the operation, management and leasing by
independent contractors including a Partner or its Affiliates) any
Property owned by the Partnership, (B) to develop real property and
to construct improvements on real property, (C) to enter into any
partnership, joint venture or other similar arrangement to engage
in any of the foregoing or to own interests in any entity engaged,
directly or indirectly, in any of the foregoing, (D) to conduct any
business that may be lawfully conducted by a limited partnership
organized pursuant to the Act and (E) otherwise deal in and with
the business and assets of the Partnership, and to do anything
necessary or incidental to the foregoing; provided ,
however , that such business shall be limited to and
conducted in such manner to permit the General Partner at all times
to be classified as a REIT for federal income tax purposes, unless
the General Partner has determined to cease to qualify as a REIT.
In connection with the foregoing, and without limiting the General
Partner’s right in its sole discretion to cease qualifying as
a REIT, the Partners acknowledge that the General Partner’s
status as a REIT inures to the benefit of all the Partners and not
solely to the General Partner. The General Partner shall also be
empowered to do any and all acts and things necessary or prudent to
ensure that the Partnership will not be classified as a
“publicly traded partnership” for purposes of Section
7704 of the Code, including but not limited to, imposing
restrictions on transfers and restrictions on
redemptions.
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Section
3.2 Powers . The
Partnership is empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or
convenient for the furtherance and accomplishment of the purposes
and business described herein and for the protection and benefit of
the Partnership, including, without limitation, full power and
authority, directly or through its ownership interest in other
entities, to enter into, perform and carry out contracts of any
kind, borrow money and issue evidences of indebtedness, whether or
not secured by mortgage, deed of trust, pledge or other lien,
acquire and develop real property, and manage, lease, sell,
transfer and dispose of real property; provided , that the
Partnership shall not take, or shall refrain from taking, any
action which, in the judgment of the General Partner, in its sole
and absolute discretion, (i) could adversely affect the ability of
the General Partner to continue to qualify as a REIT, (ii) could
subject the General Partner to any additional taxes under Section
857 or Section 4981 of the Code or any successor or newly enacted
provisions of the Code imposing other additional taxes or enacted
provisions of the Code imposing other additional taxes or penalties
on the General Partner or (iii) could violate any law or regulation
of any governmental body or agency having jurisdiction over the
General Partner or its securities, unless any such action (or
inaction) under clauses (i), (ii) or (iii) of this proviso shall
have been specifically consented to by the General Partner in
writing.
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Section 3.3
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Representations and Warranties by the
Parties .
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In addition to the representations
and warranties included elsewhere in this Agreement:
A. Each
Partner represents and warrants to each other Partner that (1) such
Partner has the power and authority to enter into this Agreement
and perform such Partner’s obligations hereunder, (2) the
execution and delivery of this Agreement by such Partner and the
performance by such Partner of all transactions contemplated by
this Agreement to be performed by such Partner have been duly
authorized by all necessary action, including without limitation,
that of its general partner(s), committee(s), trustee(s),
member(s), beneficiaries, directors and/or shareholder(s), as the
case may be, as required, (3) the consummation of such transactions
shall not result in a breach or violation of, or a default under,
its certificate of limited partnership, partnership agreement,
trust agreement, limited liability company operating agreement,
charter, certificate or articles of incorporation or by-laws, as
the case may be, any agreement by which such Partner or any of such
Partner’s properties or any of its partners, beneficiaries,
members, trustees or shareholders, as the case may be, is or are
bound, or any statute, regulation, order or other law to which such
Partner or any of its partners, trustees, beneficiaries or
shareholders, as the case may be, is or are subject, (4) such
Partner is neither a “foreign person” within the
meaning of Section 1445(f) of the Code nor a “foreign
partner” within the meaning of Section 1446(e) of the Code,
and (5) this Agreement has been duly executed and delivered by such
Partner and is binding upon, and enforceable against, such Partner
in accordance with its terms.
B. Each
Partner represents, warrants and agrees that it has acquired and
continues to hold its interest in the Partnership for its own
account for investment only and not for the purpose of, or with a
view toward, the resale or distribution of all or any part thereof,
nor with a view toward selling or otherwise distributing such
interest or any part thereof at any particular time or under any
predetermined circumstances. Each Partner further represents and
warrants that it is a sophisticated investor, able and accustomed
to handling sophisticated financial matters for itself,
particularly real estate investments, and that it has a
sufficiently high net worth that it does not anticipate a need for
the funds it has invested in the Partnership in what it
understands
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to be a highly speculative and
illiquid investment.
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C.
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Each Partner further represents, warrants and
agrees as follows:
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(1) It does not and will not,
without the prior written consent of the General Partner, actually
own or Constructively Own (a) with respect to any Tenant that is a
corporation, any stock of such Tenant and (b) with respect to any
Tenant that is not a corporation, any interests in either the
assets or net profits of such Tenant; provided ,
however , that each Partner may own or Constructively Own
with one or more other Partners (x) with respect to any Tenant that
is a corporation, stock of such Tenant possessing less than ten
percent (10%) of the total combined voting power of all classes of
stock entitled to vote and less than ten percent (10%) of the
total value of shares of all classes of stock of such Tenant and
(y) with respect to any Tenant that is not a corporation, interests
in such Tenant representing less than ten percent (10%) of the
assets and ten percent (10%) of the net profits of such Tenant, so
long as such actual or Constructive Ownership otherwise permitted
under clause (x) or (y) above would not cause the
General Partner to receive amounts described in Section
856(d)(2)(B) of the Code.
(2) It does not, and agrees that it
will not without the prior written consent of the General Partner,
actually own or Constructively Own, any shares in the General
Partner.
(3) Upon request of the General
Partner, it will disclose to the General Partner the amount of
Common Shares or other shares of beneficial interest of the General
Partner that it actually owns or Constructively Owns.
(4) It understands that if, for any
reason, (a) the representations, warranties or agreements set forth
in subparagraph C(1) or (2) of this Section
3.3 are violated or (b) the Partnership’s actual or
Constructive Ownership of the Common Shares or other shares of
beneficial interest of the General Partner violates the limitations
set forth in the Charter, then some or all of the Shares owned by
the Partners may be automatically transferred to a trust for the
benefit of the General Partner, as provided in the
Charter.
D. The
representations and warranties contained in Sections 3.3.A ,
3.3.B and 3.3.C hereof shall survive the execution
and delivery of this Agreement by each Partner and the dissolution
and winding up of the Partnership.
E. Each
Partner hereby acknowledges that no representations as to potential
profit, cash flows, funds from operations or yield, if any, in
respect of the Partnership or the General Partner have been made by
any Partner or any employee or representative or Affiliate of any
Partner, and that projections and any other information, including,
without limitation, financial and descriptive information and
documentation, which may have been in any manner submitted to such
Partner shall not constitute any representation or warranty of any
kind or nature, express or implied.
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section
4.1 Capital
Contributions of the Partners . Prior to the execution of this
Agreement, the Partners have made the Capital Contributions as set
forth in Exhibit A hereof.
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The Partners own the Units of the
class and in the amounts set forth in Exhibit A hereof,
which shall be adjusted from time to time by the General Partner to
the extent necessary to accurately reflect redemptions, Capital
Contributions, the issuance of additional Units or similar events
having an effect on a Partner’s number of Units occurring
after the date hereof. Except as required by law or as otherwise
provided in Sections 4.3 , 4.4 and 10.4
hereof, no Partner shall be required or permitted to make any
additional Capital Contributions or loans to the
Partnership.
Section
4.2 Loans by Third
Parties . Subject to Section 4.3 hereof, the Partnership
may incur Debt, or enter into other similar credit, guarantee,
financing or refinancing arrangements for any purpose (including,
without limitation, in connection with any further acquisition of
Properties) with any Person that is not the General Partner upon
such terms as the General Partner determines to be appropriate;
provided , that the Partnership shall not incur any Debt
that is recourse to the General Partner, except to the extent
otherwise agreed to by the General Partner in the sole discretion
of the General Partner, or to any Limited Partner, except to the
extent otherwise agreed to by such Limited Partner in the sole
discretion of such Limited Partner.
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Section 4.3
|
Additional Funding and Capital
Contributions .
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A.
General . The General Partner may, at any time and from time
to time, determine that the Partnership requires additional funds
(“ Additional Funds ”) for the acquisition of
additional Properties or for such other Partnership purposes as the
General Partner may determine. Additional Funds may be raised by
the Partnership, at the election of the General Partner, in any
manner provided in, and in accordance with, the terms of this
Article 4 . No Person shall have any preemptive,
preferential or similar right or rights to subscribe for or acquire
any Partnership Interest, except as set forth in this Section
4.3 .
B.
General Partner Loans . The General Partner may enter into a
Funding Debt, and lend to the Partnership the net proceeds received
by the Partnership from such Funding Debt (a “ General
Partner Loan ”); provided , however , that
the General Partner shall not be obligated to lend the net proceeds
of any Funding Debt to the Partnership in a manner that would be
inconsistent with the General Partner’s ability to remain
qualified as a REIT or would trigger any indemnity obligation on
the part of the General Partner or the Partnership. If the General
Partner enters into such a Funding Debt, the General Partner Loan
will consist of the net proceeds from such Funding Debt and will be
on comparable terms and conditions, including interest rate,
repayment schedule and costs and expenses, as shall be applicable
with respect to or incurred in connection with such Funding
Debt.
C.
Issuance of Additional Partnership Interests . The General
Partner may raise all or any portion of the Additional Funds by
accepting additional Capital Contributions, including, without
limitation, the issuance of Units for property or interests in
property. In connection with any such additional Capital
Contributions (of cash or property), the General Partner is hereby
authorized to cause the Partnership from time to time to issue to
Partners (including the General Partner) or other Persons
(including, without limitation, in connection with the contribution
of property to the Partnership) additional Units or other
Partnership Interests in one or more classes, or one or more series
of any of such classes, with such designations, preferences and
relative participating, optional or other special rights, powers,
and duties, including rights, powers, and duties senior to then
existing Partnership Interests, all as shall be determined by the
General Partner in its sole and absolute discretion subject to
Delaware law, and as may be set forth by
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amendment to this Agreement to
reflect the foregoing, including without limitation, (1) the
allocations of items of Partnership income, gain, loss, deduction,
and credit to such class or series of Partnership Interests; (2)
the right of each such class or series of Partnership Interests to
share in Partnership distributions; (3) the rights of each such
class or series of Partnership Interests upon dissolution and
liquidation of the Partnership; and (4) the right to vote,
including, without limitation, the approval rights set forth in
Section 11.2.A hereof; provided , that no such
additional Units or other Partnership Interests shall be issued to
the General Partner unless either (a) the additional Partnership
Interests are issued in connection with the grant, award, or
issuance of shares of the General Partner pursuant to Section
4.3.D below, which shares have designations, preferences, and
other rights (except voting rights) such that the economic
interests attributable to such shares are substantially similar to
the designations, preferences and other rights of the additional
Partnership Interests issued to the General Partner in accordance
with this Section 4.3.C , or (b) the additional Partnership
Interests are issued to all Partners holding Partnership Interests
in the same class in proportion to their respective Partnership
Interests in such class; provided , however , that
any Limited Partner Interests acquired by the General Partner shall
be automatically converted into a General Partner Interest
comprised of an identical number of Units of the same class. In the
event that the Partnership issues additional Partnership Interests
pursuant to this Section 4.3.C , the General Partner shall
make such revisions to this Agreement (including but not limited to
the revisions described in Section 5.4 and Section
6.2.B , hereof) as it determines are necessary to reflect the
issuance of such additional Partnership Interests.
Pursuant to this Section 4.3.C, the
Partnership has heretofore established and issued the Series B
Preferred Units. The terms and conditions of the Series B Preferred
Units are set forth in Attachment A , attached hereto and
made part hereof.
D.
Issuance of Shares or Other Securities by the General
Partner . The General Partner shall not grant, award or issue
any additional Shares (other than Shares issued pursuant to a
dividend or distribution (including any share split) of Shares to
all of its shareholders), other shares of beneficial interest of
the General Partner or New Securities unless (i) the General
Partner shall make a Capital Contribution of the net proceeds from
the grant, award or issuance of such additional Shares, other
shares of beneficial interest or New Securities, as the case may
be, and from the exercise of the rights contained in such
additional New Securities, as the case may be and (ii) the General
Partner shall cause the Partnership to issue to the General Partner
Units with rights, preferences and terms all such that the economic
terms are substantially the same as those of such Shares, other
shares of beneficial interest or New Securities, as the case may
be; provided further , that in the case of securities
senior or junior to the Common Shares and the Series B Shares as to
dividends and distributions on liquidation, the General Partner
shall contribute to the Partnership the proceeds or consideration
(including any property or other non-cash assets) received for such
securities and from any subsequent exercise, exchange or conversion
thereof (if applicable), and receive from the Partnership interests
in the Partnership in consideration therefor with the same terms
and conditions, including dividend, dividend priority and
liquidation preference, as are applicable to such
securities.
Section
4.4 Share Incentive
Plan . If at any time or from time to time the General Partner
sells or issues Shares pursuant to any Share Incentive Plan, the
General Partner shall contribute the net proceeds therefrom to the
Partnership as an additional Capital Contribution and shall receive
the number of Common Units corresponding to the number of Shares
delivered
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by the General Partner to such
exercising party multiplied by a fraction the numerator of which is
one and the denominator of which is the Exchange Factor (as defined
in Exhibit D hereto) in effect on the date of such
contribution.
Section
4.5 Other Contribution
Provisions . In the event that any Partner is admitted to the
Partnership and is given a Capital Account in exchange for services
rendered to the Partnership, such transaction shall be treated by
the Partnership and the affected Partner as if the Partnership had
compensated such Partner in cash, and the Partner had contributed
such cash to the capital of the Partnership. In addition, with the
written consent of the General Partner (which may be granted or
denied in its sole discretion), one or more Partners may enter into
agreements or other instruments with the Partnership which have the
effect of providing a guarantee of certain obligations of the
Partnership or one or more of its Subsidiaries.
Section
4.6 Purchase of Shares
by the General Partner . In the event the General Partner
exercises its rights under the Charter to purchase Shares, then the
General Partner shall cause the Partnership to purchase from the
General Partner a number of Units of the appropriate class equal to
the number of Shares so purchased multiplied by a fraction the
numerator of which is one and the denominator of which is the
Exchange Factor (as defined in Exhibit D hereto) in effect
on the date of such contribution, on the same terms that the
General Partner purchased such Shares.
Section
4.7 No Interest on
Capital Contributions . No interest or additional share of Net
Income shall be paid or credited to the Partners on their Capital
Accounts, or on any undistributed Net Income of funds left on
deposit with the Partnership; provided , however ,
that nothing contained herein shall be construed to prevent or
prohibit the payment of interest on account of loans made by the
Partners to the Partnership. Any loans made to the Partnership by a
Partner shall not increase its Capital Contribution or interest in
the Net Income, Net Loss or Net Cash Flow of the Partnership, but
shall be a debt due from the Partnership and repaid
accordingly.
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Section 4.8
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Redemption of Series B Preferred
Units .
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A. If
at any time Series B Shares are to be redeemed pursuant to the
Series B Articles Supplementary or purchased by the General
Partner, the Partnership shall redeem an equal number of Preferred
Units by payment of the Series B Preferred Unit Redemption Amount
therefor or purchase price paid by the General Partner immediately
prior to or concurrently with such redemption or
purchase.
B. The
General Partner shall amend Exhibit A as applicable to
reflect any redemption of Series B Preferred Units.
ARTICLE 5
DISTRIBUTIONS
Section
5.1 Requirement and
Characterization of Distributions . Except as set forth in
Section 13.2 hereof, the General Partner shall cause the
Partnership to distribute from time to time, but not less
frequently than quarterly, all, or such portion as the General
Partner may in its discretion determine, of Net Cash Flow generated
by the Partnership during such quarter to the
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Partners who are Partners on the
Partnership Payment Date with respect to such quarter, and in the
following priority:
(i) First,
to the extent that the amount of cash already distributed to the
General Partner for all prior quarters pursuant to clause (ii)
below (other than the immediately preceding quarter) was less than
the Series B Preferred Distribution for each of the outstanding
Series B Preferred Units for all such quarters, and such deficiency
was not previously distributed pursuant to this subsection (i) or
paid as part of a Series B Preferred Unit Redemption Amount (a
“ Series B Preferred Distribution Shortfall ”),
Net Cash Flow shall be distributed to the General Partner in an
amount equal to such Series B Preferred Distribution Shortfall for
all such prior quarters.
(ii) Second,
Net Cash Flow shall be distributed to the General Partner in an
amount equal to the Series B Preferred Distribution for the
immediately preceding quarter for each outstanding Series B
Preferred Unit then held by the General Partner.
(iii) Third,
Net Cash Flow shall be distributed to the Holders of Common Units,
pro rata in accordance with their respective Common
Units.
Unless otherwise expressly provided
for herein or in an agreement at the time a new class of
Partnership Interests is created in accordance with Article
4 hereof, no Partnership Interest shall be entitled to a
distribution in preference to any other Partnership Interest;
provided , however , that notwithstanding any other
provision in this Agreement, from time to time and at such times as
the General Partner shall determine, and prior to any determination
or distribution of Net Cash Flow pursuant to this Section
5.1 , there shall be distributed to the General Partner from
the revenues, proceeds or other funds of the Partnership, an amount
equal to any REIT Expenses (other than those described in clause
(ii) of the definition of REIT Expenses), to the extent not paid or
payable by the General Partner from cash distributions which it
receives directly from any Property Partnerships on account of any
interest in the Property Partnership which it holds directly (as
opposed to through the Partnership). The General Partner shall take
such reasonable efforts, as determined by it in its sole and
absolute discretion and consistent with its qualification as a
REIT, to cause the Partnership to distribute sufficient amounts to
enable the General Partner to pay shareholder dividends that will
(X) satisfy the requirements for qualifying as a REIT under the
Code and Regulations (“ REIT Requirements ”) and
(Y) avoid any federal income or excise tax liability of the General
Partner.
Section
5.2 Distributions in
Kind . No right is given to any Partner to demand and receive
property or cash. The General Partner may determine, in its sole
and absolute discretion, to make a distribution in kind to the
Partners of Partnership assets, and such assets shall be
distributed in such a fashion as to ensure that such assets are
distributed and allocated in accordance with Articles 5 ,
6 and 10 hereof based on the fair market value of
such assets on the date of such distribution.
Section
5.3 Distributions Upon
Liquidation . Proceeds from a Terminating Capital Transaction
shall be distributed to the Partners in accordance with Section
13.2 hereof.
Section
5.4 Distributions to
Reflect Issuance of Additional Partnership Interests . In the
event that the Partnership issues additional Partnership Interests
to the General Partner or any
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Additional Limited Partner pursuant
to Section 4.3 or 4.4 hereof, the General Partner
shall make such revisions to this Article 5 as it determines
are necessary to reflect the issuance of such additional
Partnership Interests, including making preferential distributions
to certain classes of Partnership Interests.
ARTICLE 6
ALLOCATIONS
Section
6.1 Timing and Amount
of Allocations of Net Income and Net Loss . Net Income and Net
Loss of the Partnership shall be determined and allocated with
respect to each Partnership taxable year of the Partnership as of
the end of each such year. Subject to the other provisions of this
Article 6 , an allocation to a Partner of a share of Net
Income or Net Loss shall be treated as an allocation of the same
share of each item of income, gain, loss or deduction that is taken
into account in computing Net Income or Net Loss.
Section
6.2 General Allocations
. Except as otherwise provided herein, Net Income and Net Loss for
any Partnership taxable year or other applicable period of the
Partnership shall be allocated in the following order and
priority:
A. First,
subject to Section 6.2.D , Net Income (or, if necessary,
Partnership items of income and gain) shall be allocated to the
General Partner in an amount equal to the excess of (1) the amount
of Net Cash Flow distributed to the General Partner pursuant to
subsections (i) and (ii) of Section 5.1 for the current and
all prior Partnership taxable years over (2) the amount of Net
Income (or Partnership items of income and gain) previously
allocated to the General Partner pursuant to this Section
6.2.A (and Section 6.2.D to the extent that Section
6.2.D operates to allocate an amount to the General Partner in
respect of an increase in the liquidation preference for the Series
B Shares under the General Partner’s Charter due to accrued
but unpaid dividends on the Series B Shares).
B. Second,
subject to Section 6.2.D (and to the extent not already
allocated pursuant to Section 6.2.D in respect of an
increase in the Series B Preferred Units Redemption Amount due to
accrued but unpaid dividends on the Series B Shares), for any
Partnership taxable year ending on or after a date in which Series
B Preferred Units are redeemed, Net Income (or Net Loss), or, if
necessary, Partnership items of income, gain, loss and deduction
thereof, shall be allocated to the General Partner in an amount
equal to the excess (or deficit) of (1) the sum of the Series B
Preferred Unit Redemption Amount for Series B Preferred Units that
have been or are being redeemed during the Partnership taxable year
over (2) the product of $25.00 times the number of such Series B
Preferred Units.
C. Third,
subject to Sections 6.2.D and 6.2.E , the remaining
Net Income or Net Loss, if any, shall be allocated to each of the
Partners in the following order and priority:
(i)
The remaining Net
Income, if any, shall be allocated among the Partners holding
Common Units in proportion to, and to the extent of, the aggregate
amounts of Net Cash Flow distributed in respect of the
Partners’ Common Units pursuant to subsection (iii) of
Section 5.1 .
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(ii) Upon
a Liquidating Event, any remaining Net Income or Net Loss (or
remaining Partnership items of income, gain, loss and deduction
thereof), computed by including the Net Income or Net Loss
resulting from such Liquidating Event, shall be allocated among the
Partners holding Common Units to the extent possible, until each
Limited Partner has a Capital Account balance equal to (and the
General Partner has a Capital Account balance equal to the sum of
the Preferred Sum (defined in Section 6.2.D ) plus an
additional amount equal to) the pro rata portion, based on the
number of Common Units held by each Partner, of the net positive
sum of the Capital Account balances for all Partners (determined
after taking into account the allocations required under Section
6.6 ) less the Preferred Sum (as defined in Section 6.2D
).
(iii) Any remaining Net Income or
Net Loss shall be allocated to the Partners holding Common Units
pro rata in accordance with their respective Common
Units.
D. Notwithstanding
Sections 6.2.A , B and C the General Partner
shall allocate Net Income or Net Loss (or Partnership items of
income, gain, loss and deduction thereof) among the Partners to the
extent possible such that the Minimum Gain Capital Account balance,
as of the end of the Partnership taxable year or other applicable
period for which such allocations are made, is not less than the
sum (the “ Preferred Sum ”) of the product of
the number of Series B Preferred Units held by the General Partner
multiplied by the liquidation preference for a Series B Share
pursuant to the Series B Articles Supplementary.
E. In
the event allocations are made pursuant to Section 6.2.D
(“ Reallocated Income ” and “
Reallocated Loss ”) in prior Partnership taxable years
or other applicable periods, any Net Income or Net Loss (or
Partnership items of income, gain, loss and deduction thereof) that
would otherwise have been allocated pursuant to subsection (iii) of
Section 6.2.C shall be allocated among the Partners so that,
to the extent possible, the net amount of such allocations of Net
Income or Net Loss (or Partnership items of income, gain, loss or
deduction thereof) under subsection (iii) of Section 6.2.C
and the allocations of Reallocated Income and Reallocated Loss to
each Partner shall be equal to the net amount that would have been
allocated to each such Partner if the allocations of Reallocated
Income and Reallocated Loss had not occurred; provided ,
however , that allocations under this Section 6.2.E
shall not be made to the extent such allocations would cause the
Minimum Gain Capital Account balance to be less than the Preferred
Sum.
Section
6.3 Allocations to
Reflect Issuance of Additional Partnership Interests . In the
event that the Partnership issues additional Partnership Interests
to the General Partner or any Additional Limited Partner pursuant
to Section 4.3 or 4.4 hereof, the General Partner
shall make such revisions to this Article 6 as it determines
are necessary to reflect the terms of the issuance of such
additional Partnership Interests, including making preferential
allocations to certain classes of Partnership Interests.
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Section 6.4
|
[Intentionally Omitted .]
|
Section
6.5 Allocations with
Respect to Transferred Interests . Unless otherwise required by
the Code and/or the Regulations or as agreed to and by the General
Partner, in its sole and absolute discretion, any Net Income or Net
Loss allocable to a Partnership Interest which has been transferred
during any year shall be allocated among the Persons who
were
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Holders of such Partnership Interest
during such year in the manner described in Section 11.6
below.
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Section 6.6
|
Additional Allocation Provisions
.
|
Notwithstanding the foregoing
provisions of this Article 6 the following special
allocations shall be made in the following order and
priority:
|
A.
|
Regulatory Allocations.
|
(1) Minimum Gain Chargeback .
Except as otherwise provided in Regulations Section 1.704-2(f),
notwithstanding the provisions of Section 6.2 hereof, or any
other provision of this Article 6 , if there is a net
decrease in Partnership Minimum Gain during any Partnership taxable
year, each Partner shall be specially allocated items of
Partnership income and gain for such year (and, if necessary,
subsequent Partnership taxable years) in an amount equal to such
Partner’s share of the net decrease in Partnership Minimum
Gain, as determined under Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to
each Partner pursuant thereto. The items to be allocated shall be
determined in accordance with Regulations Sections 1.704-2(f)(6)
and 1.704-2(j)(2). This Section 6.6.A(1) is intended to
qualify as a “minimum gain chargeback” within the
meaning of Regulation Section 1.704-2(f) which shall be controlling
in the event of a conflict between such Regulation and this
Section 6.6.A(1) .
(2) Partner Minimum Gain
Chargeback . Except as otherwise provided in Regulations
Section 1.704-2(i)(4), and notwithstanding the provisions of
Section 6.2 hereof, or any other provision of this
Article 6 (except Section 6.6.A(1) hereof), if there
is a net decrease in Partner Minimum Gain attributable to a Partner
Nonrecourse Debt during any Partnership taxable year, each Partner
who has a share of the Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations
Section 1.704-2(i)(5), shall be specially allocated items of
Partnership income and gain for such year (and, if necessary,
subsequent Partnership taxable years) in an amount equal to such
Partner’s share of the net decrease in Partner Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to
the respective amounts required to be allocated to the General
Partner and Limited Partner pursuant thereto. The items to be so
allocated shall be determined in accordance with Regulations
Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section
6.6.A(2) is intended to qualify as a “chargeback of
partner nonrecourse debt minimum gain” within the meaning of
Regulation Section 1.704-2(i) which shall be controlling in the
event of a conflict between such Regulation and this Section
6.6.A(2) .
(3) Nonrecourse Deductions and
Partner Nonrecourse Deductions . Any Nonrecourse Deductions for
any Partnership taxable year generally shall be allocated to the
Partners in accordance with their Partnership Interests;
provided , however , that the General Partner may
allocate Nonrecourse Deductions in a different manner so long as
such allocation is reasonably consistent with allocations of some
other significant Partnership item attributable to the Property
securing the relevant Nonrecourse Liability that have substantial
economic effect in accordance with Regulations Section
1.702-2(e)(2). Any Partner Nonrecourse Deductions for any
Partnership taxable year shall be specially allocated to the
Partner(s) who bears the economic
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risk of loss with respect to the
Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable, in accordance with Regulations
Sections 1.704-2(b)(4) and 1.704-2(i).
(4) Qualified Income Offset .
If any Partner unexpectedly receives an adjustment, allocation or
distribution described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Partnership income
and gain shall be allocated, in accordance with Regulations Section
1.704-1(b)(2)(ii)(d), to the Partner in an amount and manner
sufficient to eliminate, to the extent required by such
Regulations, the Adjusted Capital Account Deficit of the Partner as
quickly as possible; provided , that an allocation pursuant
to this Section 6.6.A(4) shall be made if and only to the
extent that such Partner would have an Adjusted Capital Account
Deficit after all other allocations provided in this Article
6 have been tentatively made as if this Section 6.6.A(4)
were not in the Agreement. It is intended that this Section
6.6.A(4) qualify and be construed as a “qualified income
offset” within the meaning of Regulations
1.704-1(b)(2)(ii)(d), which shall be controlling in the event of a
conflict between such Regulations and this Section 6.6.A(4)
.
(5) Gross Income Allocation .
In the event any Partner has a deficit Capital Account at the end
of any Partnership taxable year which is in excess of the sum of
(a) the amount (if any) such Partner is obligated to restore to the
Partnership, and (b) the amount such Partner is deemed to be
obligated to restore pursuant to Regulations Section
1.704-1(b)(2)(ii)(c) or 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, pro
rata, in proportion to the amount of such excess Capital Account
deficit, as quickly as possible until no Partner has such an excess
Capital Account deficit; provided , that an allocation
pursuant to this Section 6.6.A(5) shall be made if and only
to the extent that such Partner would have an excess Capital
Account deficit after all other allocations provided in this
Article 6 have been tentatively made as if this Section
6.6.A(5) and Section 6.6.A(4) hereof were not in the
Agreement.
(6) Limitation on Allocation of
Loss . No items of loss or deduction will be allocated to any
Partner to the extent that any such allocation would cause the
Partner to have an, or increase the amount of an existing, Adjusted
Capital Account Deficit at the end of any Partnership taxable year.
All items of loss or deduction in excess of the limitation set
forth in this Section 6.6.A(6) will be allocated among such
other Partners, which do not have Adjusted Capital Account Deficit
balances, pro rata, in proportion to their Partnership Interests,
until no Partner may be allocated any such items of loss or
deduction without having or increasing an Adjusted Capital Account
Deficit. Thereafter, any remaining items of loss or deduction will
be allocated to the General Partner.
(7) 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 his interest in the Partnership, the amount
of such adjustment to the Capital Accounts sha
