Exhibit 10.3
CAREY FINANCIAL, LLC
DEALER MANAGER AGREEMENT
May 7, 2013
Carey Financial, LLC
50 Rockefeller Plaza
New York, New York 10020
RE:
CORPORATE PROPERTY ASSOCIATES 18 - GLOBAL INCORPORATED
Ladies and Gentlemen:
Corporate Property Associates 18 - Global Incorporated (the “Company”) is a Maryland corporation that intends to qualify to be taxed as a real estate investment trust (a “REIT”) for federal income tax purposes beginning with the taxable year ending December 31, 2013, or the first year during which the Company begins material operations. The Company proposes to offer (a) up to one billion dollars of shares of common stock, $0.001 par value per share, in the primary offering (the “Primary Offering”) in any combination of the following two classes of common stock: Classes A and C common stock, which are referred to individually as “Class A Shares” and “Class C Shares,” and collectively as the “Shares,” at an initial price of $10.00 per share and $9.35 per share, respectively, and (b) up to $400 million of Shares for issuance through the Company’s distribution reinvestment program (the “DRIP” and together with the Primary Offering, the “Offering”) at an initial price of $9.60 per Class A Share and $8.98 per Class C Share, all upon the other terms and subject to the conditions set forth in the Prospectus (as defined in Section 1(a)). The Company has reserved the right to reallocate the Shares offered between the DRIP and the Primary Offering.
Upon the terms and subject to the conditions contained in this Dealer Manager Agreement (this “Agreement”), the Company hereby appoints Carey Financial, LLC, a Delaware limited liability company (the “Dealer Manager”), to act as the exclusive dealer manager for the Offering, and the Dealer Manager desires to accept such engagement.
1.
Representations And Warranties Of The Company.
The Company hereby represents, warrants and agrees during the term of this Agreement as follows:
(a)
Registration Statement and Prospectus
. In connection with the Offering, the Company has prepared and filed with the Securities and Exchange Commission (the “Commission”) a registration statement (File No. 333-185111) on Form S-11 for the registration of the Shares under the Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations of the Commission promulgated thereunder (the “Securities Act Rules and Regulations”); and one or more amendments to such registration statement have been or may be so prepared and filed. The registration statement on Form S-11 and the prospectus contained therein, as finally amended at the date the registration statement is declared effective by the Commission (the “Effective Date”) are respectively hereinafter referred to as the “Registration Statement” and the “Prospectus”, except that:
(i)
if the Company files a post-effective amendment to such registration statement, then the term “Registration Statement” shall, from and after the declaration of the effectiveness of such post-effective amendment by the Commission, refer to such registration statement as
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amended by such post-effective amendment, and the term “Prospectus” shall refer to the amended prospectus then on file with the Commission; and
(ii)
if the prospectus filed by the Company pursuant to either Rule 424(b) or 424(c) of the Securities Act Rules and Regulations shall differ from the prospectus on file at the time the Registration Statement or the most recent post-effective amendment thereto, if any, shall have become effective, then the term “Prospectus” shall refer to such prospectus filed pursuant to either Rule 424(b) or 424(c), as the case may be, from and after the date on which it shall have been filed. The term “preliminary Prospectus” as used herein shall mean a preliminary prospectus related to the Shares as contemplated by Rule 430 or Rule 430A of the Securities Act Rules and Regulations included at any time as part of the Registration Statement. As used herein, the terms “Registration Statement”, “preliminary Prospectus” and “Prospectus” shall include the documents, if any, incorporated by reference therein.
As used herein, the term “Effective Date” also shall refer to the effective date of each post-effective amendment to the Registration Statement, unless the context otherwise requires.
Further, if a separate prospectus is filed and becomes effective with respect solely to the DRIP (a “DRIP Prospectus”), the term “Prospectus” shall refer to such DRIP Prospectus from and after the declaration of effectiveness of such DRIP Prospectus.
(b)
Compliance With the Securities Act.
During the term of this Agreement:
(i)
the Registration Statement, the Prospectus and any amendments or supplements thereto have complied, and will comply, in all material respects with the Securities Act, the Securities Act Rules and Regulations, the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the and the rules and regulations promulgated thereunder (the “Exchange Act Rules and Regulations”);
(ii)
the Registration Statement does not, and any amendment thereto will not, in each case as of the applicable Effective Date, include any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and the Prospectus does not, and any amendment or supplement thereto will not, as of the applicable filing date, include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading; provided, however, that the foregoing provisions of this Section 1(b) will not extend to any statements contained in or omitted from the Registration Statement or the Prospectus that are based upon written information furnished to the Company by the Dealer Manager expressly for use in the Registration Statement or Prospectus; and
(iii)
the documents incorporated or deemed to be incorporated by reference in the Prospectus, at the time they are hereafter filed with the Commission, will comply in all material respects with the requirements of the Exchange Act and the Exchange Act Rules and Regulations, and, when read together with the other information in the Prospectus, at the time the Registration Statement became effective and as of the applicable Effective Date of each post-effective amendment to the Registration Statement, did not and will not include an untrue statement of a material fact or omit to state a material fact required to
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be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(c)
Securities Matters.
There has not been:
(i)
any request by the Commission for any further amendment to the Registration Statement or the Prospectus or for any additional information;
(ii)
any issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the institution or, to the Company’s knowledge, threat of any proceeding for that purpose; or
(iii)
any notification with respect to the suspension of the qualification of the Shares for sale in any jurisdiction or any initiation or, to the Company’s knowledge, threat of any proceeding for such purpose.
The Company is in compliance in all material respects with all federal and state securities laws, rules and regulations applicable to it and its activities, including, without limitation, with respect to the Offering and the sale of the Shares.
(d)
Corporate Status and Good Standing
. The Company is a corporation duly organized and validly existing under the laws of the State of Maryland and is in good standing with the State Department of Assessments and Taxation of Maryland, with all requisite power and authority to enter into this Agreement and to carry out its obligations hereunder.
(e)
Authorization of Agreement.
This Agreement is duly and validly authorized, executed and delivered by or on behalf of the Company and constitutes a valid and binding agreement of the Company enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws of the United States, any state or any political subdivision thereof which affect creditors’ rights generally or by equitable principles relating to the availability of remedies or except to the extent that the enforceability of the indemnity and contribution provisions contained in this Agreement may be limited under applicable securities laws.
(f)
Absence of Conflict or Default.
The execution and delivery of this Agreement and the performance of this Agreement, the consummation of the transactions contemplated herein and the fulfillment of the terms hereof, do not and will not conflict with, or result in a breach of any of the terms and provisions of, or constitute a default under:
(i)
the Company’s or any of its subsidiaries’ charter, bylaws, or other organizational documents, as the case may be;
(ii)
any indenture, mortgage, deed of trust, voting trust agreement, note, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or any of their properties is bound except, for purposes of this clause (ii) only, for such conflicts, breaches or defaults that do not result in and could not reasonably be expected to result in, individually or in the aggregate, a Company MAE (as defined below in this Section 1(f)); or
(iii)
any statute, rule or regulation or order of any court or other governmental agency or body having jurisdiction over the Company, any of its subsidiaries or any of their properties.
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No consent, approval, authorization or order of any court or other governmental agency or body has been or is required for the performance of this Agreement or for the consummation by the Company of any of the transactions contemplated hereby (except as have been obtained under the Securities Act, the Exchange Act, from the Financial Industry Regulatory Authority (“FINRA”) or as may be required under state securities or applicable blue sky laws in connection with the offer and sale of the Shares or under the laws of states in which the Company may own real properties in connection with its qualification to transact business in such states or as may be required by subsequent events which may occur). Neither the Company nor any of its subsidiaries is in violation of its charter, bylaws or other organizational documents, as the case may be.
As used in this Agreement, “Company MAE” means any event, circumstance, occurrence, fact, condition, change or effect, individually or in the aggregate, that is, or could reasonably be expected to be, materially adverse to (A) the condition, financial or otherwise, earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, or (B) the ability of the Company to perform its obligations under this Agreement or the validity or enforceability of this Agreement or the Shares.
(g)
Actions or Proceedings.
As of the initial Effective Date, there are no actions, suits or proceedings against, or investigations of, the Company or its subsidiaries pending or, to the knowledge of the Company, threatened, before any court, arbitrator, administrative agency or other tribunal:
(i)
asserting the invalidity of this Agreement;
(ii)
seeking to prevent the issuance of the Shares or the consummation of any of the transactions contemplated by this Agreement;
(iii)
that would reasonably be expected to materially and adversely affect the performance by the Company of its obligations under or the validity or enforceability of, this Agreement or the Shares;
(iv)
that would reasonably be expected to result in a Company MAE, or
(v)
seeking to affect adversely the federal income tax attributes of the Shares except as described in the Prospectus.
The Company promptly will give notice to the Dealer Manager of the occurrence of any action, suit, proceeding or investigation of the type referred to above arising or occurring on or after the initial Effective Date.
(h)
Escrow Agreement.
The Company will enter into an escrow agreement (the “Escrow Agreement”) with the Dealer Manager and UMB Bank, N.A. (the “Escrow Agent”), substantially in the form included as an exhibit to the Registration Statement.
(i)
Sales Literature.
Any supplemental sales literature or advertisement (including, without limitation any “broker-dealer use only” material), regardless of how labeled or described, used in addition to the Prospectus in connection with the Offering which previously has been, or hereafter is, furnished or approved by the Company (collectively, “Approved Sales Literature”), shall, to the extent required, be filed with and approved by the appropriate securities agencies and bodies, provided that the Dealer Manager will make all FINRA filings, to the extent required. Any and all Approved Sales Literature, when used in connection with the Prospectus, did not or will not at the
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time provided for use include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(j)
Authorization of Shares.
The Shares have been duly authorized and, when issued and sold as contemplated by the Prospectus and upon payment therefor as provided in this Agreement and the Prospectus, will be validly issued, fully paid and nonassessable and will conform in all material aspects to the description thereof contained in the Prospectus.
(k)
Taxes.
Any taxes, fees and other governmental charges in connection with the execution and delivery of this Agreement or the execution, delivery and sale of the Shares have been or will be paid when due.
(l)
Investment Company.
The Company is not, and neither the offer or sale of the Shares nor any of the activities of the Company will cause the Company to be, an “investment company” or under the control of an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.
(m)
Tax Returns.
The Company has filed or will file all material federal, state and foreign income tax returns required to be filed by or on behalf of the Company on or before the due dates therefor (taking into account all extensions of time to file) and has paid or provided for the payment of all such material taxes, except those being contested in good faith, indicated by such tax returns and all assessments received by the Company to the extent that such taxes or assessments have become due.
(n)
REIT Qualifications.
The Company will make a timely election to be subject to tax as a REIT pursuant to Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”) for its taxable year ended December 31, 2013, or the first year during which the Company begins material operations. The Company has been organized and operated in conformity with the requirements for qualification and taxation as a REIT. The Company’s current and proposed method of operation as described in the Registration Statement and the Prospectus will enable it to continue to meet the requirements for qualification and taxation as a REIT under the Code.
(o)
Independent Registered Public Accounting Firm.
The accountants who have certified certain financial statements appearing in the Prospectus are an independent registered public accounting firm within the meaning of the Securities Act and the Securities Act Rules and Regulations. Such accountants have not been engaged by the Company to perform any “prohibited activities” (as defined in Section 10A of the Exchange Act).
(p)
Preparation of the Financial Statements.
The financial statements filed with the Commission as a part of the Registration Statement and included in the Prospectus present fairly the consolidated financial position of the Company and its subsidiaries as of and at the dates indicated and the results of their operations and cash flows for the periods specified. Such financial statements have been prepared in conformity with generally accepted accounting principles as applied in the United States applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto. No other financial statements or supporting schedules are required to be included in the Registration Statement or any applicable Prospectus.
(q)
Material Adverse Change.
Since the respective dates as of which information is given in the Registration Statement and the Prospectus, except as may otherwise be stated therein or
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contemplated thereby, there has not occurred a Company MAE, whether or not arising in the ordinary course of business.
(r)
Government Permits.
The Company and its subsidiaries possess such certificates, authorities or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies necessary to conduct the business now operated by them, other than those the failure to possess or own would not have, individually or in the aggregate, a Company MAE. Neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit which, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Company MAE.
(s)
Properties.
Except as otherwise disclosed in the Prospectus and except as would not result in, individually or in the aggregate, a Company MAE:
(i)
all properties and assets described in the Prospectus are owned with good and marketable title by the Company and its subsidiaries; and
(ii)
all liens, charges, encumbrances, claims or restrictions on or affecting any of the properties and assets of any of the Company or its subsidiaries which are required to be disclosed in the Prospectus are disclosed therein.
(t)
Hazardous Materials.
The Company does not have any knowledge of:
(i)
the unlawful presence of any hazardous substances, hazardous materials, toxic substances or waste materials (collectively, “Hazardous Materials”) on any of the properties owned by it or its subsidiaries or subject to mortgage loans owned by the Company or any of its subsidiaries; or
(ii)
any unlawful spills, releases, discharges or disposal of Hazardous Materials that have occurred or are presently occurring off such properties as a result of any construction on or operation and use of such properties, which presence or occurrence in the case of clauses (i) and (ii) would result in, individually or in the aggregate, a Company MAE.
In connection with the properties owned by the Company and its subsidiaries or subject to mortgage loans owned by the Company or any of its subsidiaries, the Company has no knowledge of any material failure to comply with all applicable local, state and federal environmental laws, regulations, ordinances and administrative and judicial orders relating to the generation, recycling, reuse, sale, storage, handling, transport and disposal of any Hazardous Materials.
2.
Representations and Warranties of the Dealer Manager.
The Dealer Manager represents and warrants to the Company during the term of this Agreement that:
(a)
Organization Status.
The Dealer Manager is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, with all requisite power and authority to enter into this Agreement and to carry out its obligations hereunder.
(b)
Authorization of Agreement.
This Agreement has been duly authorized, executed and delivered by the Dealer Manager, and assuming due authorization, execution and delivery of this Agreement by the Company, will constitute a valid and legally binding agreement of the Dealer Manager enforceable against the Dealer Manager in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of
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creditors’ rights generally or by equitable principles relating to enforceability and except that rights to indemnity and contribution hereunder may be limited by applicable law and public policy.
(c)
Absence of Conflict or Default.
The execution and delivery of this Agreement, the consummation of the transactions herein contemplated and compliance with the terms of this Agreement by the Dealer Manager will not conflict with or constitute a default under:
(i)
its organizational documents;
(ii)
any indenture, mortgage, deed of trust or lease to which the Dealer Manager is a party or by which it may be bound, or to which any of the property or assets of the Dealer Manager is subject; or
(iii)
any statute, rule, regulation, writ, injunction or decree of any government, governmental instrumentality or court, domestic or foreign, having jurisdiction over the Dealer Manager or its assets, properties or operations, except in the case of clause (ii) or (iii) for such conflicts or defaults that would not individually or in the aggregate have a material adverse effect on the condition (financial or otherwise), business, properties or results of operations of the Dealer Manager.
(d)
Broker-Dealer Registration; FINRA Membership.
The Dealer Manager is, and during the term of this Agreement will be, duly registered as a broker-dealer pursuant to the provisions of the Exchange Act, a member in good standing of FINRA, and a broker or dealer duly registered as such in those states where the Dealer Manager is required to be registered in order to carry out the Offering as contemplated by this Agreement. Moreover, the Dealer Manager’s employees and representatives have all required licenses and registrations to act under this Agreement. There is no provision in the Dealer Manager’s FINRA membership agreement that would restrict the ability of the Dealer Manager to carry out the Offering as contemplated by this Agreement.
3.
Offering and Sale of the Shares.
Upon the terms and subject to the conditions set forth in this Agreement, the Company hereby appoints the Dealer Manager as its agent and exclusive distributor to solicit and to retain the Selected Dealers (as defined in Section 3(a)) to solicit subscriptions for the Shares at the subscription price to be paid in cash. Upon the terms and subject to the conditions set forth in this Agreement, the Dealer Manager hereby accepts such agency and exclusive distributorship and agrees to use its best efforts to sell or cause to be sold the Shares in such quantities and to such persons in accordance with such terms as are set forth in this Agreement, the Prospectus and the Registration Statement.
The Dealer Manager shall do so during the period commencing on the initial Effective Date and ending on the earliest to occur of the following: (1) the later of (x) two years after the initial Effective Date of the Registration Statement and (y) at the Company’s election, the date on which the Company is permitted to extend the Offering in accordance with the rules of the Commission; (2) the acceptance by the Company of subscriptions for the amount offered in the Primary Offering, which for this section includes any DRIP shares reallocated to the Primary Offering; (3) the termination of the Offering by the Company, which the Company shall have the right to terminate in its sole and absolute discretion at any time; (4) the termination of the effectiveness of the Registration Statement; and (5) the liquidation or dissolution of the Company (such period being the “Offering Period”).
The number of Shares, if any, to be reserved for sale by each Selected Dealer may be determined by mutual agreement, from time to time, by the Dealer Manager and the Company. In the absence of such determination, the Company shall, subject to the provisions of Section 3(b), accept Subscription Agreements based upon a first-come, first accepted reservation or other similar method. Under no
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circumstances will the Dealer Manager be obligated to underwrite or purchase any Shares for its own account and, in soliciting purchases of Shares, the Dealer Manager shall act solely as the Company’s agent and not as an underwriter or principal.
(a)
Selected Dealers.
The Shares offered and sold through the Dealer Manager under this Agreement shall be offered and sold only by the Dealer Manager and other securities dealers the Dealer Manager may retain (collectively the “Selected Dealers”); provided, however, that:
(i)
the Dealer Manager reasonably believes that all Selected Dealers are registered with the Commission, members of FINRA and are duly licensed or registered by the regulatory authorities in the jurisdictions in which they will offer and sell Shares; and
(ii)
all such engagements are evidenced by written agreements, the terms and conditions of which substantially conform to the form of Selected Dealer Agreement substantially in the form of Exhibit A hereto (the “Selected Dealer Agreement”).
(b)
Subscription Documents.
Each person desiring to purchase Shares through the Dealer Manager, or any other Selected Dealer, will be required to complete and execute the subscription documents described in the Prospectus.
Until the minimum offering of $2,000,000 in Shares has been sold, payments for Shares shall be made by checks payable to “UMB Bank, N.A., as Escrow Agent for Corporate Property Associates 18 – Global Incorporated” During such time, a Selected Dealer shall forward original checks together with an original Subscription Agreement, executed and initialed by the subscriber as provided for in the Subscription Agreement, to UMB Bank, N.A. (the “Escrow Agent”) at the address provided in the Subscription Agreement.
When a Selected Dealer’s internal supervisory procedures are conducted at the site at which the Subscription Agreement and check were initially received by the Selected Dealer from the subscriber, the Selected Dealer shall transmit the Subscription Agreement and check to the Escrow Agent by the end of the next business day following receipt of the check and Subscription Agreement. When, pursuant to the Selected Dealer’s internal supervisory procedures, the Selected Dealer’s final internal supervisory procedures are conducted at a different location (the “Final Review Office”), the Selected Dealer shall transmit the check and Subscription Agreement to the Final Review Office by the end of the next business day following the Selected Dealer’s receipt of the Subscription Agreement and check. The Final Review Office will, by the end of the next business day following its receipt of the Subscription Agreement and check, forward both the Subscription Agreement and check to the Escrow Agent. If any Subscription Agreement solicited by the Selected Dealer is rejected by the Dealer Manager or the Company, then the Subscription Agreement and check will be returned to the rejected subscriber within 10 business days from the date of rejection.
Once the minimum offering of $2,000,000 in Shares has been sold, subject to any continuing escrow obligations imposed by certain states as described in the Prospectus, payments for Shares shall be made payable to “Corporate Property Associates 18 - Global Incorporated.” At such time, the Selected Dealer shall forward original checks together with an original Subscription Agreement, executed and initialed by the subscriber as provided for in the Subscription Agreement, to Corporate Property Associates 18 - Global Incorporated, c/o DST Systems, Inc., at the address provided in the Subscription Agreement.
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If the minimum offering of $2,000,000 in Shares has not been obtained within six months from the Effective Date, which the Company may elect to extend to a date no later than one year from the Effective Date (the “Closing Date”), pursuant to the Escrow Agreement, the Escrow Agent shall, promptly following the Closing Date, refund to each investor by check funds deposited in the escrow account or shall return the instruments of payment delivered to the Escrow Agent if such instruments have not been processed for collection prior to such time, directly to each investor at the address provided in the list of investors.
(c)
Completed Sale.
A sale of a Share shall be deemed by the Company to be completed for purposes of Section 3(d) if and only if:
(i)
the Company or an agent of the Company has received a properly completed and executed subscription agreement, together with payment of the full purchase price of each purchased Share, from an investor who satisfies the applicable suitability standards and minimum purchase requirements set forth in the Registration Statement as determined by the Selected Dealer or the Dealer Manager, as applicable, in accordance with the provisions of this Agreement;
(ii)
the Company has accepted such subscription; and
(iii)
such investor has been admitted as a shareholder of the Company.
In addition, no sale of Shares shall be completed until at least five (5) business days after the date on which the subscriber receives a copy of the Prospectus. The Dealer Manager hereby acknowledges and agrees that the Company, in its sole and absolute discretion, may accept or reject any subscription, in whole or in part, for any reason whatsoever or no reason, and no commission or dealer manager fee will be paid to the Dealer Manager with respect to that portion of any subscription which is rejected.
(d)
Dealer-Manager Compensation.
(i)
Subject to the volume discounts and other special circumstances described in or otherwise provided in the “Plan of Distribution” section of the Prospectus or this Section 3(d), the Company agrees to pay the Dealer Manager selling commissions in the amount of seven percent (7.0%) of the selling price of each Class A Share for which a sale is completed from the Class A Shares offered in the Primary Offering and selling commissions in the amount of one and one-half percent (1.5%) of the selling price of each Class C Share for which a sale is completed from the Class C Shares offered in the Primary Offering. The Company will not pay selling commissions for sales of Class A Shares or Class C Shares pursuant to the DRIP. The Company will pay reduced selling commissions or may eliminate commissions on certain sales of Class A Shares, including the reduction or elimination of selling commissions in accordance with, and on the terms set forth in, the Prospectus. The Dealer Manager will re-allow all the selling commissions, subject to federal and state securities laws, to the Selected Dealer who sold the Shares.
An annual distribution and shareholder servicing fee will be paid to the Dealer Manager in connection with purchases of the Class C Shares. The annual distribution and shareholder servicing fee of 1% of the purchase price per share (or, once reported, the amount of the estimated net asset value per share) will accrue daily as provided in the “The Offering/Plan of Distribution” section of the Prospectus. The Dealer Manager may
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reallow the distribution and shareholder servicing fee to the Selected Dealer who sold the Class C Shares giving rise to such distribution and shareholder servicing fees to the extent the Selected Dealer Agreement with such Selected Dealer provides for such a reallowance. Notwithstanding, if the Dealer Manager is notified that the Selected Dealer who sold such Class C Shares is no longer the broker-dealer of record with respect to such Class C Shares, then such Selected Dealer’s entitlement to the distribution and shareholder servicing fee related to such Class C Shares shall cease, and such Selected Dealer shall not receive the distribution and shareholder servicing fee for any portion of the quarter in which such Selected Dealer is not the broker dealer of record on the last day of the quarter. Thereafter, such distribution and shareholder servicing fee may be reallowed by the Dealer Manager to the then-current broker-dealer of record of the Class C Shares, if any, if such broker-dealer of record has entered into a Selected Dealer Agreement with the Dealer Manager that provides for such reallowance. In this regard, all determinations will be made by the Dealer Manager in good faith in its sole discretion. The Company will cease paying the distribution and shareholder servicing fee with respect to the Class C Shares sold in the Primary Offering upon the date on which, in the aggregate, underwriting compensation from all sources, including the distribution and shareholder servicing fee, any organization and offering fee paid for underwriting and underwriting compensation paid by the sponsor and its affiliates, equals 10% of the gross proceeds from the Primary Offering, calculated as of the same date that the Company calculates the aggregate distribution and shareholder servicing fee.
A distribution and shareholder servicing fee will not be paid on Class A Shares or Class C Shares issued under the DRIP.
(ii)
Subject to the special circumstances described in or otherwise provided in the “The Offering/Plan of Distribution” section of the Prospectus or this Section 3(d), as compensation for acting as the dealer manager, the Company will pay the Dealer Manager, a dealer manager fee in the amount of three percent (3.0%) of the selling price of each Class A Share and two and one-fourth percent (2.25%) of the selling price of each Class C Share for which a sale is completed from the Shares offered in the Primary Offering (the “Dealer Manager Fee”). No Dealer Manager Fee will be paid in connection with Shares sold pursuant to the DRIP.
The Dealer Manager may retain or re-allow a portion of the Dealer Manager Fee, subject to federal and state securities laws, to the Selected Dealer who sold the Shares, as described more fully in the Selected Dealer Agreement.
(iii)
All selling commissions and Dealer Manager fees payable to the Dealer Manager will be paid at least within ten (10) business days after the investor subscribing for the Share is admitted as a shareholder of the Company, in an amount equal to the sales commissions payable with respect to such Shares. The Dealer Manager acknowledges that no commissions, payments or amount will be paid to the Dealer Manager unless and until the gross proceeds of the Shares sold are disbursed to the Company in accordance with the terms of the Escrow Agreement.
(iv)
In no event shall the total aggregate underwriting compensation payable to the Dealer Manager and any Selected Dealers participating in the Offering, including, but not limited to, selling commissions, the Dealer Manager Fee and the annual distribution and shareholder servicing fee exceed ten percent (10.0%) of gross offering proceeds from the Primary Offering in the aggregate.
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(v)
Notwithstanding anything to the contrary contained herein, if the Company pays any selling commission to the Dealer Manager for sale by a Selected Dealer of one or more Shares and the subscription is rescinded as to one or more of the Shares covered by such subscription, then the Company shall decrease the next payment of selling commissions or other compensation otherwise payable to the Dealer Manager by the Company under this Agreement by an amount equal to the commission rate established in this Section 3(d), multiplied by the number of Shares as to which the subscription is rescinded. If no payment of selling commissions or other compensation is due to the Dealer Manager after such withdrawal occurs, then the Dealer Manager shall pay the amount specified in the preceding sentence to the Company within a reasonable period of time not to exceed thirty (30) days following receipt of notice by the Dealer Manager from the Company stating the amount owed as a result of rescinded subscriptions.
(e)
Reasonable Bona Fide Due Diligence Expenses.
In addition to any payments to the Dealer Manager pursuant to Section 3(d), the Company shall reimburse the Dealer Manager or any Selected Dealer for reasonable bona fide due diligence expenses incurred by the Dealer Manager or any Selected Dealer to the extent permitted pursuant to the rules and regulations of FINRA, provided, however, that no due diligence expenses shall be reimbursed by the Company pursuant to this Section 3(e) which would cause the aggregate of all of the Company’s expenses described in Section 3(f) and compensation paid to the Dealer Manager and any Selected Dealer pursuant to Section 3(d) to exceed 15% of the gross proceeds from the sale of the Primary Shares. Also, the Company shall only reimburse the Dealer Manager or any Selected Dealer for such approved bona fide due diligence expenses to the extent such expenses have actually been incurred and are supported by detailed and itemized invoice(s) provided to the Company.
(f)
Company Expenses.
Subject to the limitations described above, the Company agrees to pay all costs and expenses incident to the Offering, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, including expenses, fees and taxes in connection with:
(i)
the registration fee, the preparation and filing of the Registration Statement (including without limitation financial statements, exhibits, schedules and consents), the Prospectus, and any amendments or supplements thereto, and the printing and furnishing of copies of each thereof to the Dealer Manager and to Selected Dealers (including costs of mailing and shipment);
(ii)
the preparation, issuance and delivery of certificates, if any, for the Shares, including any stock or other transfer taxes or duties payable upon the sale of the Shares;
(iii)
all fees and expenses of the Company’s legal counsel, independent public or certified public accountants and other advisors;
(iv)
the qualification of the Shares for offering and sale under state laws in the states that the Company shall designate as appropriate and the determination of their eligibility for sale under state law as aforesaid and the printing and furnishing of copies of blue sky surveys;
(v)
the filing fees in connection with filing for review by FINRA of all necessary documents and information relating to the Offering and the Shares;
(vi)
the fees and expenses of any transfer agent or registrar for the Shares and miscellaneous expenses referred to in the Registration Statement;
11
(vii)
all costs and expenses incident to the travel and accommodation of the personnel of Carey Asset Management Corp., advisor to the Company (the “Advisor”), and the personnel of any sub-advisor designated by the Advisor and acting on behalf of the Company, in making road show presentations and presentations to Selected Dealers and other broker-dealers and financial advisors with respect to the offering of the Shares; and
(viii)
the performance of the Company’s other obligations hereunder.
Notwithstanding the foregoing, the Company shall not directly pay, or reimburse the Advisor for, the costs and expenses described in this Section 3(f) if the payment or reimbursement of such expenses would cause the aggregate of the Company’s “organization and offering expenses” as defined by FINRA Rule 2310 (including the Company expenses paid or reimbursed pursuant to this Section 3(f), all items of underwriting compensation including Dealer Manager expenses described in Section 3(d) and due diligence expenses described in Section 3(e)) to exceed 15.0% of the gross proceeds from the sale of the Primary Shares.
4.
Conditions to the Dealer Manager’s Obligations.
The Dealer Manager’s obligations hereunder shall be subject to the following terms and conditions:
(a)
The representations and warranties on the part of the Company contained in this Agreement hereof shall be true and correct in all material respects and the Company shall have complied with its covenants, agreements and obligations contained in this Agreement in all material respects;
(b)
The Registration Statement shall have become effective and no stop order suspending the effectiveness of the Registration Statement shall have been issued by the Commission and, to the best knowledge of the Company, no proceedings for that purpose shall have been instituted, threatened or contemplated by the Commission; and any request by the Commission for additional information (to be included in the Registration Statement or Prospectus or otherwise) shall have been complied with to the reasonable satisfaction of the Dealer Manager.
5.
Covenants of the Company.
The Company covenants and agrees with the Dealer Manager as follows:
(a)
Registration Statement.
The Company will use its best efforts to cause the Registration Statement and any subsequent amendments thereto to become effective as promptly as possible and will furnish a copy of any proposed amendment or supplement of the Registration Statement or the Prospectus to the Dealer Manager. The Company will comply in all material respects with all federal and state securities laws, rules and regulations which are required to be complied with in order to permit the continuance of offers and sales of the Shares in accordance with the provisions hereof and of the Prospectus.
(b)
Commission Orders.
If the Commission shall issue any stop order or any other order preventing or suspending the use of the Prospectus, or shall institute any proceedings for that purpose, then the Company will promptly notify the Dealer Manager and use its best efforts to prevent the issuance of any such order and, if any such order is issued, to use its best efforts to obtain the removal thereof as promptly as possible.
(c)
Blue Sky Qualifications.
The Company will use its best efforts to qualify the Shares for offering and sale under the securities or blue sky laws of such jurisdictions as the Dealer Manager and the Company shall mutually agree upon and to make such applications, file such documents and furnish such information as may be reasonably required for that purpose. The Company will, at the Dealer Manager’s request, furnish the Dealer Manager with a copy of such papers filed by the
12
Company in connection with any such qualification. The Company will promptly advise the Dealer Manager of the issuance by such securities administrators of any stop order preventing or suspending the use of the Prospectus or of the institution of any proceedings for that purpose, and will use its best efforts to prevent the issuance of any such order and if any such order is issued, to use its best efforts to obtain the removal thereof as promptly as possible. The Company will furnish the Dealer Manager with a Blue Sky Survey dated as of the initial Effective Date, which will be supplemented to reflect changes or additions to the information disclosed in such survey.
(d)
Amendments and Supplements.
If, at any time when a Prospectus relating to the Shares is required to be delivered under the Securities Act, any event shall have occurred to the knowledge of the Company, or the Company receives notice from the Dealer Manager that it believes such an event has occurred, as a result of which the Prospectus or any Approved Sales Literature as then amended or supplemented would include any untrue statement of a material fact, or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Registration Statement or supplement the Prospectus relating to the Shares to comply with the Securities Act, then the Company will promptly notify the Dealer Manager thereof (unless the information shall have been received from the Dealer Manager) and will prepare and file with the Commission an amendment or supplement which will correct such statement or effect such compliance to the extent required, and shall make available to the Dealer Manager thereof sufficient copies for its own use and/or distribution to the Selected Dealers.
(e)
Requests from Commission.
The Company will promptly advise the Dealer Manager of any request made by the Commission or a state securities administrator for amending the Registration Statement, supplementing the Prospectus or for additional information.
(f)
Copies of Registration Statement.
The Company will furnish the Dealer Manager with one signed copy of the Registration Statement, including its exhibits, and such additional copies of the Registration Statement, without exhibits, and the Prospectus and all amendments and supplements thereto, which are finally approved by the Commission, as the Dealer Manager may reasonably request for sale of the Shares.
(g)
Qualification to Transact Business.
The Company will take all steps necessary to ensure that at all times the Company will validly exist as a Maryland corporation and will be qualified to do business in all jurisdictions in which the conduct of its business requires such qualification and where such qualification is required under local law.
(h)
Authority to Perform Agreements.
The Company undertakes to obtain all consents, approvals, authorizations or orders of any court or governmental agency or body which are required for the Company’s performance of this Agreement and under the Company’s articles of incorporation (as the same may be amended, supplemented or otherwise modified from time to time, the “Company’s Charter”) and the Company’s by-laws, each in the form included as exhibits to the Registration Statement for the consummation of the transactions contemplated hereby and thereby, respectively, or the conducting by the Company of the business described in the Prospectus.
(i)
Sales Literature.
The Company will furnish to the Dealer Manager as promptly as shall be practicable upon request any Approved Sales Literature (provided that the use of said material has been first approved for use to the extent required by all appropriate regulatory agencies). Any supplemental sales literature or advertisement, regardless of how labeled or described, used in addition to the Prospectus in connection with the Offering which is furnished or approved by the Company (including, without limitation, Approved Sales Literature) shall, to the extent required,
13
be filed with and, to the extent required, approved by the appropriate securities agencies and bodies, provided that the Dealer Manager will make all FINRA filings, to the extent required. The Company will not (and will instruct its affiliates not to): show or give to any investor or prospective investor or reproduce any material or writing that is marked “broker-dealer use only” or otherwise bears a legend denoting that it is not to be used in connection with the sale of Shares to members of the public; or show or give to any investor or prospective investor in a particular jurisdiction any material or writing if such material bears a legend denoting that it is not to be used in connection with the sale of Shares to members of the public in such jurisdiction.
(j)
Use of Proceeds.
The Company will apply the proceeds from the sale of the Shares as set forth in the Prospectus.
(k)
Customer Information.
The Dealer Manager and the Company shall, when applicable:
(i)
abide by and comply with (A) the privacy standards and requirements of the Gramm-Leach-Bliley Act of 1999 (the “GLB Act”) and applicable regulations promulgated thereunder, (B) the privacy standards and requirements of any other applicable federal or state law, including but not limited to, the Fair Credit Reporting Act (“FCRA”), and (C) its own internal privacy policies and procedures, each as may be amended from time to time;
(ii)
refrain from the use or disclosure of nonpublic personal information (as defined under the GLB Act) of all customers who have opted out of such disclosures except as necessary to service the customers or as otherwise necessary or required by applicable law;
(iii)
except as expressly permitted under the FCRA, the Dealer Manager and the Company shall not disclose any information that would be considered a “consumer report” under the FCRA; and
(iv)
determine which customers have opted out of the disclosure of nonpublic personal information by periodically reviewing and, if necessary, retrieving an aggregated list of such customers from the Selected Dealers (the “List”) to identify customers that have exercised their opt-out rights. If either party uses or discloses nonpublic personal information of any customer for purposes other than servicing the customer, or as otherwise required by applicable law, that party will consult the List to determine whether the affected customer has exercised his or her opt-out rights. Each party understands that it is prohibited from using or disclosing any nonpublic personal information of any customer that is identified on the List as having opted out of such disclosures.
(l)
Dealer Manager’s Review of Proposed Amendments and Supplements.
Prior to amending or supplementing the Registration Statement, any preliminary prospectus or the Prospectus (including any amendment or supplement through incorporation of any report filed under the Exchange Act), the Company shall furnish to the Dealer Manager for review, a reasonable amount of time prior to the proposed time of filing or use thereof, a copy of each such proposed amendment or supplement, and the Company shall not file or use any such proposed amendment or supplement without the Dealer Manager’s consent, which consent shall not be unreasonably withheld or delayed.
6.
Covenants of the Dealer Manager.
The Dealer Manager covenants and agrees with the Company as follows:
14
(a)
Compliance With Laws.
With respect to the Dealer Manager’s participation and the participation by each Selected Dealer in the offer and sale of the Shares (including, without limitation, any resales and transfers of Shares), the Dealer Manager agrees, and each Selected Dealer in its Selected Dealer Agreement will agree, to comply in all material respects with all applicable requirements of the Securities Act, the Securities Act Rules and Regulations, the Exchange Act, the Exchange Act Rules and Regulations and all other federal regulations applicable to the Offering, the sale of Shares and with all applicable state securities or blue sky laws, and the Rules of FINRA applicable to the Offering, from time to time in effect, specifically including, but not in any way limited to, NASD Conduct Rules 2310 (Recommendations to Customers), 2340 (Customer Account Statements), and 2420 (Dealing with Non-Members), and FINRA Rules 2310 (Direct Participation Programs), 5130 (Restrictions on the Purchase and Sale of Initial Equity Public Offerings), and 5141 (Sale of Securities in a Fixed Price Offering) therein. The Dealer Manager will not offer the Shares for sale in any jurisdiction unless and until it has been advised that the Shares are either registered in accordance with, or exempt from, the securities and other laws applicable thereto.
In addition, the Dealer Manager shall, in accordance with applicable law or as prescribed by any state securities administrator, provide, or require in the Selected Dealer Agreement that the Selected Dealer shall provide, to any prospective investor copies of any prescribed document which is part of the Registration Statement and any supplements thereto during the course of the Offering and prior to the sale. The Company may provide the Dealer Manager with certain Approved Sales Literature to be used by the Dealer Manager and the Selected Dealers in connection with the solicitation of purchasers of the Shares. The Dealer Manager agrees not to deliver the Approved Sales Literature to any person prior to the initial Effective Date. If the Dealer Manager elects to use such Approved Sales Literature after the initial Effective Date, then the Dealer Manager agrees that such material shall not be used by it in connection with the solicitation of purchasers of the Shares and that it will direct Selected Dealers not to make such use unless accompanied or preceded by the Prospectus, as then currently in effect, and as it may be amended or supplemented in the future.
The Dealer Manager agrees that it will not use any Approved Sales Literature other than those provided to the Dealer Manager by the Company for use in the Offering. The use of any other sales material is expressly prohibited.
(b)
No Additional Information.
In offering the Shares for sale, the Dealer Manager shall not, and each Selected Dealer shall agree not to, give or provide any information or make any representation other than those contained in the Prospectus or the Approved Sales Literature.
(c)
Sales of Shares.
The Dealer Manager shall, and each Selected Dealer shall agree to, solicit purchases of the Shares only in the jurisdictions in which the Dealer Manager and such Selected Dealer are legally qualified to so act and in which the Dealer Manager and each Selected Dealer have been advised by the Company or counsel to the Company that such solicitations can be made.
(d)
Subscription Agreement.
The Dealer Manager will comply in all material respects with the subscription procedures and “The Offering/Plan of Distribution” set forth in the Prospectus. Subscriptions will be submitted by the Dealer Manager and each Selected Dealer to the Company only on the order form which is included as Annex B to the Prospectus. The Dealer Manager understands and acknowledges, and each Selected Dealer shall acknowledge, that the Subscription Agreement must be executed and initialed by the subscriber as provided for by the Subscription Agreement.
15
(e)
Suitability.
The Dealer Manager will offer Shares, and in its agreement with each Selected Dealer will require that the Selected Dealer offer Shares, only to persons that it has reasonable grounds to believe meet the financial qualifications set forth in the Prospectus or in any suitability letter or memorandum sent to it by the Company and will only make offers to persons in the states in which it is advised in writing by the Company that the Shares are qualified for sale or that such qualification is not required. In offering Shares, the Dealer Manager will comply, and in its agreements with the Selected Dealers, the Dealer Manager will require that the Selected Dealers comply, with the provisions of all applicable rules and regulations relating to suitability of investors, including without limitation the FINRA Rules and the provisions of Article III.C. of the Statement of Policy Regarding Real Estate Investment Trusts of the North American Securities Administrators Association, Inc., as revised and amended on May 7, 2007 and as may be further revised and amended (the “NASAA Guidelines”).
The Dealer Manager agrees that in recommending the purchase of the Shares in the Primary Offering to an investor, the Dealer Manager and each person associated with the Dealer Manager that make such recommendation shall have, and each Selected Dealer in its Selected Dealer Agreement shall agree with respect to investors to which it makes a recommendation shall agree that it shall have, reasonable grounds to believe, on the basis of information obtained from the investor concerning the investor’s investment objectives, other investments, financial situation and needs, and any other information known by the Dealer Manager, the person associated with the Dealer Manager or the Selected Dealer that:
(i)
the investor is or will be in a financial position appropriate to enable the investor to realize to a significant extent the benefits described in the Prospectus, including the tax benefits where they are a significant aspect of the Company;
(ii)
the investor has a fair market net worth sufficient to sustain the risks inherent in the program, including loss of investment and lack of liquidity; and
(iii)
an investment in the Shares offered in the Primary Offering is otherwise suitable for the investor.
The Dealer Manager agrees as to investors to whom it makes a recommendation with respect to the purchase of the Shares in the Primary Offering (and each Selected Dealer in its Selected Dealer Agreement shall agree, with respect to Investors to whom it makes such recommendations) to maintain in the files of the Dealer Manager (or the Selected Dealer, as applicable) documents disclosing the basis upon which the determination of suitability was reached as to each investor.
In making the determinations as to financial qualifications and as to suitability required by the NASAA Guidelines, the Dealer Manager and Selected Dealers may rely on (A) representations from investment advisers who are not affiliated with a Selected Dealer, and banks acting as trustees or fiduciaries, and (B) information it has obtained from a prospective investor, including such information as the investment objectives, other investments, financial situation and needs of the person or any other information known by the Dealer Manager (or Selected Dealer, as applicable), after due inquiry. Notwithstanding the foregoing, the Dealer Manager shall not, and each Selected Dealer shall agree not to, execute any transaction in the Company in a discretionary account without prior written approval of the transaction by the customer.
(f)
Selected Dealer Agreements.
All engagements of the Selected Dealers will be evidenced by a Selected Dealer Agreement.
16
(g)
Electronic Delivery.
If it intends to use electronic delivery to distribute the Prospectus to any person, that it will comply with all applicable requirements of the Commission, the Blue Sky laws and/or FINRA and any other laws or regulations related to the electronic delivery of documents.
(h)
AML Compliance.
The Dealer Manager represents to the Company that it has established and implemented an anti-money laundering compliance program (“AML Program”) in accordance with Section 352 of the USA PATRIOT Act of 2001 (the “PATRIOT Act”) and FINRA Rule 3310, that complies with applicable anti-money laundering laws and regulations, including, but not limited to, the customer identification program requirements of Section 326 of the PATRIOT Act, and the suspicious activity reporting requirements of Section 356 of the PATRIOT Act, and the laws, regulations and Executive Orders administered by the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of Treasury (collectively, “AML/OFAC Laws”). The Dealer Manager hereby covenants to remain in compliance with the AML/OFAC Laws and shall, upon request by the Company, provide a certification to the Company that, as of the date of such certification, its AML Program is compliant with the AML/OFAC Laws.
(i)
Customer Information.
The Dealer Manager will use its best efforts to provide the Company with any and all subscriber information that the Company requests in order for the Company to satisfy its obligations under the AML/OFAC Laws and comply with the requirements under Section 5(k) above.
(j)
Recordkeeping.
The Dealer Manager will comply, and will require each Selected Dealer to comply, with the record keeping requirements of the Exchange Act, including, but not limited to, Rules 17a-3 and 17a-4 promulgated under the Exchange Act, and shall maintain, for at least six years or for a period of time not less than that required in order to comply with all applicable federal, state and other regulatory requirements, whichever is later, such records with respect to each investor who purchases Primary Shares, information used to determine that the investor meets the suitability standards imposed on the offer and sale of the Primary Shares, the amount of Primary Shares sold, and a representation of the investor that the investor is investing for the investor’s own account or, in lieu of such representation, information indicating that the investor for whose account the investment was made met the suitability standards.
(k)
Suspension or Termination of Offering.
The Dealer Manager agrees, and will require that each of the Selected Dealers agree, to suspend or terminate the offering and sale of the Primary Shares upon request of the Company at any time and to resume the offering and sale of the Primary Shares upon subsequent request of the Company.
7.
Indemnification.
(a)
Indemnified Parties Defined.
For the purposes of this Agreement, an “Indemnified Party” shall mean a person or entity entitled to indemnification under Section 7, as well as such person’s or entity’s officers, directors, employees, members, partners, affiliates, agents and representatives, and each person, if any, who controls such person or entity within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act.
(b)
Indemnification of the Dealer Manager and Selected Dealers.
The Company will indemnify, defend and hold harmless the Dealer Manager and the Selected Dealers, and their respective Indemnified Parties, from and against any losses, claims, expenses (including reasonable legal and other expenses incurred in investigating and defending such claims or liabilities), damages or liabilities, joint or several, to which any such Selected Dealers or the Dealer Manager, or their respective Indemnified Parties, may become subject under the Securities Act, the Securities Act
17
Rules and Regulations, the Exchange Act, the Exchange Act Rules and Regulations or otherwise, insofar as such losses, claims, expenses, damages or liabilities (or actions in respect thereof) arise out of or are based upon:
(i)
in whole or in part, any material inaccuracy in a representation or warranty contained herein by the Company, any material breach of a covenant contained herein by the Company, or any material failure by the Company to perform its obligations hereunder or to comply with state or federal securities laws applicable to the Offering;
(ii)
any untrue statement or alleged untrue statement of a material fact contained (A) in any Registration Statement or any post-effective amendment thereto or in the Prospectus or any amendment or supplement to the Prospectus, (B) in any Approved Sales Literature or (C) in any blue sky application or other document executed by the Company or on its behalf specifically for the purpose of qualifying any or all of the Shares for sale under the securities laws of any jurisdiction or based upon written information furnished by the Company under the securities laws thereof (any such application, document or information being hereinafter called a “Blue Sky Application”); or
(iii)
the omission or alleged omission to state a material fact required to be stated in the Registration Statement or any post-effective amendment thereof to make the statements therein not misleading or the omission or alleged omission to state a material fact required to be stated in the Prospectus or any amendment or supplement to the prospectus to make the statements therein, in light of the circumstances under which they were made, not misleading.
The Company will reimburse each Selected Dealer or the Dealer Manager, and their respective Indemnified Parties, for any reasonable legal or other expenses incurred by such Selected Dealer or the Dealer Manager, and their respective Indemnified Parties, in connection with investigating or defending such loss, claim, expense, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, expense, damage or liability arises out of, or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by the Dealer Manager expressly for use in the Registration Statement or any post-effective amendment thereof or the Prospectus or any such amendment thereof or supplement thereto. This indemnity agreement will be in addition to any liability which the Company may otherwise have.
Notwithstanding the foregoing, as required by Section II.G. of the NASAA Guidelines, the indemnification and agreement to hold harmless provided in this Section 7(b) is further limited to the extent that no such indemnification by the Company of a Selected Dealer or the Dealer Manager, or their respective Indemnified Parties, shall be permitted under this Agreement for, or arising out of, an alleged violation of federal or state securities laws, unless one or more of the following conditions are met: (a) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular Indemnified Party; (b) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular Indemnified Party; or (c) a court of competent jurisdiction approves a settlement of the claims against the particular Indemnified Party and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the Commission and of the published position of any state securities regulatory authority in which the securities were offered or sold as to indemnification for violations of securities laws.
18
(c)
Dealer Manager Indemnification of the Company.
The Dealer Manager will indemnify, defend and hold harmless the Company and each of its Indemnified Parties and each person who has signed the Registration Statement, from and against any losses, claims, expenses (including the reasonable legal and other expenses incurred in investigating and defending any such claims or liabilities), damages or liabilities to which any of the aforesaid parties may become subject under the Securities Act, the Securities Act Rules and Regulations, the Exchange Act, the Exchange Act Rules and Regulations or otherwise, insofar as such losses, claims, expenses, damages (or actions in respect thereof) arise out of or are based upon:
(i)
in whole or in part, any material inaccuracy in a representation or warranty contained herein by the Dealer Manager or any material breach of a covenant contained herein by the Dealer Manager;
(ii)
any untrue statement or any alleged untrue statement of a material fact contained (A) in any Registration Statement or any post-effective amendment thereto or in the Prospectus or any amendment or supplement to the Prospectus, (B) in any Approved Sales Literature, or (C) any Blue Sky Application; or
(iii)
the omission or alleged omission to state a material fact required to be stated in the Registration Statement or any post-effective amendment thereof to make the statements therein not misleading, or the omission or alleged omission to state a material fact required to be stated in the Prospectus or any amendment or supplement to the Prospectus to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that in each case described in clauses (ii) and (iii) to the extent, but only to the extent, that such untrue statement or omission was made in reliance upon and in conformity with written information furnished to the Company by the Dealer Manager expressly for use in the Registration Statement or any such post-effective amendments thereof or the Prospectus or any such amendment thereof or supplement thereto;
(iv)
any use of sales literature, including “broker-dealer use only” materials, by the Dealer Manager that is not Approved Sales Literature; or
(v)
any untrue statement made by the Dealer Manager or omission by the Dealer Manager to state a fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading in connection with the Offering provided, however, this clause (v) shall not apply to any statements or omissions made in conformity with the Registration Statement, the Prospectus, any Approved Sales Literature or any other materials or information furnished by or on behalf on the Company.
The Dealer Manager will reimburse the aforesaid parties for any reasonable legal or other expenses incurred in connection with investigation or defense of such loss, claim, expense, damage, liability or action. This indemnity agreement will be in addition to any liability which the Dealer Manager may otherwise have.
(d)
Selected Dealer Indemnification of the Company.
By virtue of entering into the Selected Dealer Agreement, each Selected Dealer severally will agree to indemnify, defend and hold harmless the Company, the Dealer Manager, each of their respective Indemnified Parties, and each person who signs the Registration Statement, from and against any losses, claims, expenses, damages or liabilities to which the Company, the Dealer Manager, or any of their respective
19
Indemnified Parties, or any person who signed the Registration Statement, may become subject, under the Securities Act or otherwise, as more fully described in the Selected Dealer Agreement.
(e)
Action Against Parties; Notification.
Promptly after receipt by any Indemnified Party under this Section 7 of notice of the commencement of any action, such Indemnified Party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 7, promptly notify the indemnifying party of the commencement thereof; provided, however, that the failure to give such notice shall not relieve the indemnifying party of its obligations hereunder except to the extent it shall have been actually prejudiced by such failure. In case any such action is brought against any Indemnified Party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled, to the extent it may wish, jointly with any other indemnifying party similarly notified, to participate in the defense thereof, with separate counsel.
Such participation shall not relieve such indemnifying party of the obligation to reimburse the Indemnified Party for reasonable legal and other expenses incurred by such Indemnified Party in defending itself, except for such expenses incurred after the indemnifying party has deposited funds sufficient to effect the settlement, with prejudice, of, and unconditional release of all liabilities from, the claim in respect of which indemnity is sought. Any such indemnifying party shall not be liable to any such Indemnified Party on account of any settlement of any claim or action effected without the consent of such indemnifying party, such consent not to be unreasonably withheld or delayed.
(f)
Reimbursement of Fees and Expenses.
An indemnifying party under Section 7 of this Agreement shall be obligated to reimburse an Indemnified Party for reasonable legal and other expenses as follows:
(i)
In the case of the Company indemnifying the Dealer Manager, the advancement of funds to the Dealer Manager for legal expenses and other costs incurred as a result of any legal action for which indemnification is being sought shall be permissible (in accordance with Section II.G. of the NASAA Guidelines) only if all of the following conditions are satisfied: (A) the legal action relates to acts or omissions with respect to the performance of duties or services on behalf of the Company; (B) the legal action is initiated by a third party who is not a shareholder of the Company or the legal action is initiated by a shareholder of the Company acting in his or her capacity as such and a court of competent jurisdiction specifically approves such advancement; and (C) the Dealer Manager undertakes to repay the advanced funds to the Company, together with the applicable legal rate of interest thereon, in cases in which the Dealer Manager is found not to be entitled to indemnification.
(ii)
In any case of indemnification other than that described in Section 7(f)(i) above, the indemnifying party shall pay all legal fees and expenses reasonably incurred by the Indemnified Party in the defense of such claims or actions; provided, however, that the indemnifying party shall not be obligated to pay legal expenses and fees to more than one law firm in connection with the defense of similar claims arising out of the same alleged acts or omissions giving rise to such claims notwithstanding that such actions or claims are alleged or brought by one or more parties against more than one Indemnified Party. If such claims or actions are alleged or brought against more than one Indemnified Party, then the indemnifying party shall only be obliged to reimburse the expenses and fees of the one law firm (in addition to local counsel) that has been participating by a majority of the indemnified parties against which such action is finally brought; and if a majority of such indemnified parties is unable to agree on which law firm for which expenses or fees
20
will be reimbursable by the indemnifying party, then payment shall be made to the first law firm of record representing an Indemnified Party against the action or claim. Such law firm shall be paid only to the extent of services performed by such law firm and no reimbursement shall be payable to such law firm on account of legal services performed by another law firm.
8.
Contribution.
(a)
If Indemnification is Unavailable.
If the indemnification provided for in Section 7 is for any reason unavailable to or insufficient to hold harmless an Indemnified Party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such Indemnified Party, as incurred:
(i)
in such proportion as is appropriate to reflect the relative benefits received by the Company, the Dealer Manager and the Selected Dealer, respectively, from the proceeds received in Primary Offering pursuant to this Agreement and the relevant Selected Dealer Agreement; or
(ii)
if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, the Dealer Manager and the Selected Dealer, respectively, in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations.
(b)
Relative Benefits.
The relative benefits received by the Company, the Dealer Manager and the Selected Dealer, respectively, in connection with the proceeds received in the Primary Offering pursuant to this Agreement and the relevant Selected Dealer Agreement shall be deemed to be in the same respective proportion as the total net proceeds from the Primary Offering pursuant to this Agreement and the relevant Selected Dealer Agreement (before deducting expenses), received by the Company, and the total selling commissions and dealer manager fees received by the Dealer Manager and the Selected Dealer, respectively, in each case as set forth on the cover of the Prospectus bear to the aggregate offering price of the Shares sold in the Primary Offering as set forth on such cover.
(c)
Relative Fault.
The relative fault of the Company, the Dealer Manager and the Selected Dealer, respectively, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact related to information supplied by the Company, by the Dealer Manager or by the Selected Dealer, respectively, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
(d)
Pro Rata is Unreasonable.
The Company, the Dealer Manager and the Selected Dealer (by virtue of entering into the Selected Dealer Agreement) agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable contributions referred to above in this Section 8. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an Indemnified Party and referred to above in this Section 8 shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in investigating, preparing or defending against any litigation, or any investigation or proceeding by
21
any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission or alleged omission.
(e)
Limits.
Notwithstanding the provisions of this Section 8, the Dealer Manager and the Selected Dealer shall not be required to contribute any amount by which the total price at which the Shares sold in the Primary Offering to the public by them exceeds the amount of any damages which the Dealer Manager and the Selected Dealer have otherwise been required to pay by reason of any untrue or alleged untrue statement or omission or alleged omission.
(f)
Fraudulent Misrepresentation.
No party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any party who was not guilty of such fraudulent misrepresentation.
(g)
Benefits of Contribution.
For the purposes of this Section 8, the Dealer Manager’s officers, directors, employees, members, partners, agents and representatives, and each person, if any, who controls the Dealer Manager within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution of the Dealer Manager, and each officers, directors, employees, members, partners, agents and representatives of the Company, each officer of the Company who signed the Registration Statement and each person, if any, who controls the Company, within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution of the Company. The Selected Dealers’ respective obligations to contribute pursuant to this Section 8 are several in proportion to the number of Shares sold by each Selected Dealer in the Primary Offering and not joint.
9.
Termination of this Agreement.
(a)
Term; Expiration.
This Agreement shall become effective on the initial Effective Date and the obligations of the parties hereunder shall not commence until the initial Effective Date. This Agreement may be terminated by either party upon 60 calendar days’ written notice to the other party. This Agreement shall automatically expire on the termination date of the Offering as described in the Prospectus.
(b)
Delivery of Records Upon Expiration or Early Termination.
Upon the expiration or early termination of this Agreement for any reason, the Dealer Manager shall:
(i)
promptly forward any and all funds, if any, in its possession which were received from investors for the sale of Shares for deposit;
(ii)
to the extent not previously provided to the Company a list of all investors who have subscribed for or purchased shares and all broker-dealers with whom the Dealer Manager has entered into a Selected Dealer Agreement;
(iii)
notify Selected Dealers of such termination; and
(iv)
promptly deliver to the Company copies of any sales literature designed for use specifically for the Offering that it is then in the process of preparing. Upon expiration or earlier termination of this Agreement, the Company shall pay to the Dealer Manager all compensation to which the Dealer Manager is or becomes entitled under Section 3(d) at such time as such compensation becomes payable.
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10.
Miscellaneous
(a)
Survival.
The following provisions of the Agreement shall survive the expiration or earlier termination of this Agreement: Section 3(d) (Dealer-Manager Compensation); Section 3(e) (Reasonable Bona Fide Due Diligence Expenses); Section 5(l) (Dealer-Manager’s Review of Proposed Amendments and Supplements); Section 6(i) (AML Compliance); Section 7 (Indemnification); Section 8 (Contribution); Section 9 (Termination of This Agreement) and this Section 10 (Miscellaneous). Notwithstanding anything else that may be to the contrary herein, the expiration or earlier termination of this Agreement shall not relieve a party for liability for any breach occurring prior to such expiration or earlier termination. In no event shall the Dealer Manager be entitled to payment of any compensation in connection with the Offering that is not completed according to this Agreement; provided, however, that the reimbursement of out-of-pocket accountable expenses actually incurred by the Dealer Manager or person associated with the Dealer Manager shall not be presumed to be unfair or unreasonable and shall be payable under normal circumstances.
(b)
Notices.
All notices or other communications required or permitted hereunder, except as herein otherwise specifically provided, shall be in writing and shall be deemed given or delivered: (i) when delivered personally or by commercial messenger; (ii) one business day following deposit with a recognized overnight courier service, provided such deposit occurs prior to the deadline imposed by such service for overnight delivery; (iii) when transmitted, if sent by facsimile copy, provided confirmation of receipt is received by sender and such notice is sent by an additional method provided hereunder; in each case above provided such communication is addressed to the intended recipient thereof as set forth below:
If to the Company:
Corporate Property Associates 18 - Global Incorporated
50 Rockefeller Plaza
New York, New York 10020
Facsimile No.: (212) 492-8922
Attention: Mr. Thomas Zacharias
with a copy to:
Clifford Chance US LLP
31 West 52nd Street
New York, New York 10019
Facsimile No.: (212) 878-8375
Attention: Kathleen L. Werner, Esq.
If to the Dealer Manager:
Carey Financial, LLC
50 Rockefeller Plaza
New York, New York 10020
Facsimile No.: (212) 492-8922
Attention: Mr. Richard J. Paley
with a copy to:
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Kunzman & Bollinger, Inc.
5100 N. Brookline Avenue, Suite 600
Oklahoma City, Oklahoma 73112
Facsimile No: (405) 942-3501
Attention: Wallace W. Kunzman, Jr.
Any party may change its address specified above by giving each party notice of such change in accordance with this Section 10(b).
(c)
Successors and Assigns.
No party shall assign (voluntarily, by operation of law or otherwise) this Agreement or any right, interest or benefit under this Agreement without the prior written consent of each other party. Subject to the foregoing, this Agreement shall be fully binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and assigns.
(d)
Invalid Provision.
The invalidity or unenforceability of any provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted.
(e)
Applicable Law.
This Agreement and any disputes relative to the interpretation or enforcement hereto shall be governed by and construed under the internal laws, as opposed to the conflicts of laws provisions, of the State of New York.
(f)
Waiver.
EACH OF THE PARTIES HERETO WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) RELATED TO OR ARISING OUT OF THIS AGREEMENT. The parties hereto each hereby irrevocably submits to the exclusive jurisdiction of the courts of the State of New York and the Federal courts of the United States of America located in the Borough of Manhattan, New York City, in respect of the interpretation and enforcement of the terms of this Agreement, and in respect of the transactions contemplated hereby, and each hereby waives, and agrees not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement may not be enforced in or by such courts, and the parties hereto each hereby irrevocably agrees that all claims with respect to such action or proceeding shall be heard and determined in such a New York State or Federal court.
(g)
Attorneys’ Fees.
If a dispute arises concerning the performance, meaning or interpretation of any provision of this Agreement or any document executed in connection with this Agreement, then the prevailing party in such dispute shall be awarded any and all costs and expenses incurred by the prevailing party in enforcing, defending or establishing its rights hereunder or thereunder, including, without limitation, court costs and attorneys and expert witness fees. In addition to the foregoing award of costs and fees, the prevailing also shall be entitled to recover its attorneys’ fees incurred in any post-judgment proceedings to collect or enforce any judgment.
(h)
No Partnership.
Nothing in this Agreement shall be construed or interpreted to constitute the Dealer Manager or the Selected Dealer as being in association with or in partnership with the Company or one another, and instead, this Agreement only shall constitute the Selected Dealer as a broker authorized by the Company to sell and to manage the sale by others of the Shares according to the terms set forth in the Registration Statement, the Prospectus or this Agreement.
24
Nothing herein contained shall render the Dealer Manager or the Company liable for the obligations of any of the Selected Dealers or one another.
(i)
Third Party Beneficiaries.
Except for the persons and entities referred to in Section 7 (Indemnification) and Section 8 (Contribution), there shall be no third party beneficiaries of this Agreement, and no provision of this Agreement is intended to be for the benefit of any person or entity not a party to this Agreement, and no third party shall be deemed to be a beneficiary of any provision of this Agreement. Except for the persons and entities referred to in Section 7 and Section 8, no third party shall by virtue of any provision of this Agreement have a right of action or an enforceable remedy against any party to this Agreement. Each of the persons and entities referred to in Section 7 and Section 8 shall be a third party beneficiary of this Agreement.
(j)
Entire Agreement.
This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing.
(k)
Nonwaiver.
The failure of any party to insist upon or enforce strict performance by any other party of any provision of this Agreement or to exercise any right under this Agreement shall not be construed as a waiver or relinquishment to any extent of such party’s right to assert or rely upon any such provision or right in that or any other instance; rather, such provision or right shall be and remain in full force and effect.
(l)
Access to Information.
The Company may authorize the Company’s transfer agent to provide information to the Dealer Manager and each Selected Dealer regarding recordholder information about the clients of such Selected Dealer who have invested with the Company on an on-going basis for so long as such Selected Dealer has a relationship with such clients. The Dealer Manager shall require in the Selected Dealer Agreement that Selected Dealers not disclose any password for a restricted website or portion of website provided to such Selected Dealer in connection with the Offering and not disclose to any person, other than an officer, director, employee or agent of such Selected Dealers, any material downloaded from such a restricted website or portion of a restricted website.
(m)
Counterparts.
This Agreement may be executed (including by facsimile transmission) with counterpart signature pages or in counterpart copies, each of which shall be deemed an original but all of which together shall constitute one and the same instrument comprising this Agreement.
(n)
Absence of Fiduciary Relationships.
The parties acknowledge and agree that:
(i)
the Dealer Manager’s responsibility to the Company is solely contractual in nature; and
(ii)
the Dealer Manager does not owe the Company, any of its affiliates or any other person or entity any fiduciary (or other similar) duty as a result of this Agreement or any of the transactions contemplated hereby.
If the foregoing is in accordance with your understanding of our agreement, kindly sign and return it to us, whereupon this instrument will become a binding agreement between you and the Company in accordance with its terms.
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[Signatures on following page]
26
IN WITNESS WHEREOF, the parties hereto have each duly executed this Dealer Manager Agreement as of the day and year set forth above.
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THE COMPANY:
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CORPORATE PROPERTY ASSOCIATES 18 - GLOBAL
INCORPORATED
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By:
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/s/ Thomas E. Zacharias
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Name:
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Thomas E. Zacharias
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Title:
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Chief Operating Officer
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Accepted as of the date first above written:
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THE DEALER MANAGER:
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CAREY FINANCIAL, LLC
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By:
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/s/ Mark Goldberg
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Name:
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Mark Goldberg
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Title:
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President
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[Signature Page to Dealer Manager Agreement]
EXHIBIT A
FORM OF SELECTED DEALER AGREEMENT
Exhibit 10.4
ADVISORY AGREEMENT
THIS ADVISORY AGREEMENT, dated as of May 7, 2013, is among CORPORATE PROPERTY ASSOCIATES 18 — GLOBAL INCORPORATED, a Maryland corporation (“
CPA: 18
”), CPA: 18 Limited Partnership, a Delaware limited partnership of which CPA: 18 is a general partner (the “
Operating Partnership
”), and CAREY ASSET MANAGEMENT CORP., a Delaware corporation and wholly-owned subsidiary of W. P. Carey Inc. (the “
Advisor
”).
W I T N E S S E T H
:
WHEREAS, CPA: 18 through its interest in the Operating Partnership intends to invest primarily in income producing commercial properties and other real estate related assets;
WHEREAS, CPA: 18 intends to qualify as a REIT (as defined below), and the Operating Partnership intends to qualify as a partnership, in each case for U.S. federal income tax purposes;
WHEREAS, CPA: 18 and its subsidiaries, including the Operating Partnership, desire to avail themselves of the experience, sources of information, advice and assistance of, and certain facilities available to, the Advisor and to have the Advisor undertake the duties and responsibilities hereinafter set forth, on behalf of, and subject to the supervision of the Board of Directors (as defined below), all as provided herein; and
WHEREAS, the Advisor is willing to render such services, subject to the supervision of the Board of Directors, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree as follows:
1.
Definitions
. As used in this Agreement, the following terms have the definitions hereinafter indicated:
“
2%/25% Guidelines
.” The requirement, as provided for in Section 13 hereof, that, in the 12-month period ending on the last day of any fiscal quarter, Operating Expenses under this Agreement and the Management Agreement not exceed the greater of two percent of Average Invested Assets during such 12-month period or 25% of CPA: 18’s Adjusted Net Income over the same 12-month period.
“
Acquisition Expenses
.” To the extent not paid or to be paid by the seller, lessee, borrower or any other party involved in the transaction, those expenses, including but not limited to travel and communications expenses, the cost of appraisals, title insurance, nonrefundable option payments on Investments not acquired, legal fees and expenses, accounting fees and expenses and miscellaneous expenses, related to selection, acquisition and origination of Investments, whether or not a particular Investment ultimately is made. Acquisition Expenses shall not include Acquisition Fees.
“
Acquisition Fees
.” The Initial Acquisition Fee and the Subordinated Acquisition Fee.
“
Adjusted Investor Capital
.” As of any date, the Initial Investor Capital reduced by any Redemptions, other than Redemptions intended to qualify as a liquidity event for purposes of this Agreement, and by any other Distributions on or prior to such date determined by the Board to be from Cash from Sales and Financings.
“
Adjusted Net Income
.” For any period, the total consolidated revenues recognized in such period by CPA: 18, less the total consolidated expenses of CPA: 18 recognized in such period, excluding additions to reserves for depreciation and amortization, bad debts or other similar non-cash reserves; provided, however, that Adjusted Net Income for purposes of calculating total allowable Operating Expenses under the 2%/25% Guidelines shall exclude any gains, losses or writedowns from the sale of CPA: 18’s assets.
“
Advisor
.” Carey Asset Management Corp, a corporation organized under the laws of the State of Delaware and wholly-owned by W. P. Carey Inc.
“
Affiliate
.” An Affiliate of another Person shall include any of the following: (i) any Person directly or indirectly owning, controlling, or holding, with power to vote ten percent or more of the outstanding voting securities of such other Person; (ii) any Person ten percent or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held, with power to vote, by such other Person; (iii) any Person directly or indirectly controlling, controlled by, or under common control with such other Person; (iv) any executive officer, director, trustee or general partner of such other Person; or (v) any legal entity for which such Person acts as an executive officer, director, trustee or general partner.
“
Agreement
.” This Advisory Agreement.
“
Appraised Value
.” Value according to an appraisal made by an Independent Appraiser, which may take into consideration any factor deemed appropriate by such Independent Appraiser, including, but not limited to, current market and property conditions, any unique attributes of the Investment operations, current and anticipated income and expense trends, the terms and conditions of any lease of a relevant property, the quality of any lessee’s, borrower’s or other counter-party’s credit and the conditions of the credit markets. The Appraised Value of a Property may be greater than the construction cost or the replacement cost of the Property.
“
Asset Management Fee
.” The Asset Management Fee as defined in Section 9(a) hereof.
“
Average Equity Value
.” The equity portion of the aggregate purchase price paid by CPA: 18 for an Investment,
provided
that, if (1) a later Appraised Value is obtained for the Investment, that later Appraised Value, adjusted for other net assets and liabilities that have economic value and are associated with that Investment, shall become the basis for calculating the Average Equity Value of the Investment, and (2) for Investments in securities that CPA: 18 treats as available for sale under GAAP, the fair value of such securities as determined on a monthly basis as of the last day of each month or, if applicable, on the date such securities are disposed of, shall be the basis for calculating the Average Equity Value of such securities.
“
Average Invested Assets
.” The average during any period of the aggregate book value of CPA: 18’s Investments, before deducting reserves for depreciation, bad debts, impairments, amortization and all other non-cash reserves, computed by taking the average of such values at the end of each month during such period.
“
Average Market Value
.” The aggregate purchase price paid by CPA: 18 for an Investment,
provided
that, if a later Appraised Value is obtained for the Investment, that later Appraised Value, adjusted for other net assets and liabilities that have economic value and are associated with that Investment, shall become the Average Market Value for the Investment.
“
Board or Board of Directors
.” The Board of Directors of CPA: 18.
“
Bylaws
.” The bylaws of CPA: 18, as amended from time to time.
“
Cash from Financings
.” Net cash proceeds realized by CPA: 18 from the financing of Investments or the refinancing of indebtedness from time to time.
“
Cash from Sales
.” Net cash proceeds realized by CPA: 18 from the sale, exchange or other disposition of any of its Investments after deduction of all expenses incurred in connection therewith. Cash from Sales shall not include Cash from Financings.
“
Cash from Sales and Financings
. “ The total sum of Cash from Sales and Cash from Financings.
“
Cause
.” With respect to the termination of this Agreement, fraud, criminal conduct, willful misconduct or willful or negligent breach of fiduciary duty by the Advisor that, in each case, is determined by a majority of the Independent Directors to be materially adverse to CPA: 18, or a breach of a material term or condition of this Agreement or the Guidelines by the Advisor and the Advisor has not cured such breach within 30 days of written notice thereof or, in the case of any breach that cannot be cured within 30 days by reasonable effort, has not taken all necessary action within a reasonable time period to cure such breach.
“
Charter
.” The charter of CPA: 18, as amended from time to time, pursuant to which CPA: 18 is organized.
“
Closing Date
.” The first date on which Shares were issued pursuant to an Offering.
“
Code
.” Internal Revenue Code of 1986, as amended.
“
Competitive Real Estate Commission
.” The real estate or brokerage commission paid for the purchase or sale of a Property that is reasonable, customary and competitive in light of the size, type and location of the Property.
“
Construction Fee
.” A fee or other remuneration for acting as general contractor and/or construction manager to construct improvements, supervise and coordinate projects or to provide major repairs or rehabilitation on a Property.
“
Contract Purchase Price
.” The amount actually paid for, or allocated to, the purchase, development, construction or improvement of an Investment or, in the case of an originated Loan, the principal amount of such Loan, exclusive, in each case, of Acquisition Fees and Acquisition Expenses.
“
Contract Sales Price
.” The total consideration received by CPA: 18 for the sale of Investments.
“
CPA: 18
.” Corporate Property Associates 18 — Global Incorporated together with its consolidated subsidiaries, including the Operating Partnership, unless in the context of a particular reference, it is clear that such reference refers to Corporate Property Associates 18 — Global Incorporated excluding its consolidated subsidiaries. Unless the context otherwise requires, any reference to financial measures of CPA: 18 shall be calculated by reference to the consolidated financial statements of CPA: 18 and its subsidiaries, including, without limitation, the Operating Partnership, prepared in accordance with GAAP.
“
Cumulative Return
.” For the period for which the calculation is being made, the percentage resulting from dividing (A) the total Distributions for such period (not including Distributions out of Cash from Sales and Financings), by (B) the product of (i) either (x) until such time as CPA: 18 has invested
90% of the net proceeds of CPA: 18’s initial Offering (excluding net proceeds from the sale of Shares pursuant to CPA: 18’s distribution reinvestment program), the average Adjusted Investor Capital for such period (calculated on a daily basis) or (y) from and after such time as CPA: 18 has invested 90% of the net proceeds of CPA: 18’s initial Offering (excluding net proceeds from the sale of Shares pursuant to CPA: 18’s distribution reinvestment program), the net proceeds from the sale of Shares (excluding net proceeds from the sale of Shares pursuant to CPA: 18’s distribution reinvestment program), as adjusted for Redemptions other than Redemptions intended to qualify as a liquidity event for purposes of this Agreement, and by any other Distributions on or prior to such date determined by the Board to be from Cash from Sales and Financings, and (ii) the number of years (including fractions thereof) elapsed during such period. Notwithstanding the foregoing, neither the Shares received by the Advisor or its Affiliates for any consideration other than cash, nor the Distributions in respect of such Shares, shall be included in the foregoing calculation.
“
Dealer Manager
.” Carey Financial, LLC, a Delaware limited liability company.
“
Development Fee
.” A fee for the packaging of a Property including negotiating and approving plans, and undertaking to assist in obtaining zoning and necessary variances and necessary financing for the specific Property, either initially or at a later date.
“
Directors
.” The persons holding such office, as of any particular time, under the Charter, whether they be the directors named therein or additional or successor directors.
“
Disposition Fee
.” The Disposition Fee as defined in Section 9(f) hereof.
“
Distribution and Shareholder Servicing Fees
.” The distribution and shareholder servicing fees payable to the Dealer Manager as described in the Prospectus.
“
Distributions
.” Distributions declared by the Board.
“
GAAP
.” Generally accepted accounting principles in the United States.
“
Good Reason
.” With respect to the termination of this Agreement, (i) any failure to obtain a satisfactory agreement from any successor to CPA: 18 or the Operating Partnership to assume and agree to perform CPA: 18’s or the Operating Partnership’s, as applicable, obligations under this Agreement; or (ii) any material breach of this Agreement of any nature whatsoever by CPA: 18 or the Operating Partnership;
provided
that (a) such breach is of a material term or condition of this Agreement and (b) CPA: 18 or the Operating Partnership, as applicable, has not cured such breach within 30 days of written notice thereof or, in the case of any breach that cannot be cured within 30 days by reasonable effort, has not taken all necessary action within a reasonable time period to cure such breach.
“
Gross Offering Proceeds
.” The aggregate purchase price of Shares sold in any Offering, without deduction for selling commissions, volume discounts, any marketing support and due diligence expense reimbursement or Organization and Offering Expenses in any Offering.
“
Guidelines
.” The Investment Allocation Guidelines set forth as Schedule A.
“
Independent Appraiser
.” A qualified appraiser of real estate as determined by the Board, who has no material current or prior business or personal relationship with, the Advisor or the Directors and who is engaged to a substantial extent in the business of rendering opinions regarding the value of real estate related investments. Membership in a nationally recognized appraisal society such as the American
Institute of Real Estate Appraisers or the Society of Real Estate Appraisers shall be conclusive evidence of such qualification (but not of independence).
“
Independent Director
.” A Director of CPA: 18 who meets the criteria for an Independent Director specified in the Charter and/or Bylaws.
“
Individual
.” Any natural person and those organizations treated as individuals in Section 542(a) of the Code.
“
Initial Acquisition Fee
.” Any fee or commission (including any interest thereon) paid by the Operating Partnership to the Advisor or, with respect to Section 9(a) or 9(c), by the Operating Partnership to any party, in connection with the making of an Investment or the development or construction of Properties by CPA: 18. A Development Fee or a Construction Fee paid to a Person not affiliated with the Sponsor in connection with the actual development or construction of a project after acquisition of the Property by CPA: 18 shall not be deemed an Initial Acquisition Fee. Initial Acquisition Fees include, but are not limited to, any real estate commission, selection fee, development fee or construction fee (other than as described above), non-recurring management fees, loan fees, points or any fee of a similar nature, however designated. Initial Acquisition Fees include Subordinated Acquisition Fees unless the context otherwise requires. Initial Acquisition Fees shall not include Acquisition Expenses.
“
Initial Investor Capital
.” The total amount of capital invested (excluding investments in money market securities) from time to time by Shareholders (computed at the Original Issue Price per Share), excluding any Shares received by the Advisor or its Affiliates for any consideration other than cash.
“
Investment
.” An investment made by CPA: 18, directly or indirectly, in a Property, Loan or Other Permitted Investment Asset.
“
Investment Entities
.” Has the meaning given to such term in Section 14.
“
Loans
.” The notes and other evidences of indebtedness or obligations acquired, originated or entered into, directly or indirectly, by CPA: 18 as lender, noteholder, participant, note purchaser or other capacity, including but not limited to first or subordinate mortgage loans, construction loans, development loans, loan participations, B notes, loans secured by capital stock or any other assets or form of equity interest and any other type of loan or financial arrangement, such as providing or arranging for letters of credit, providing guarantees of obligations to third parties, or providing commitments for loans. The term “Loans” shall not include leases which are not recognized as leases for Federal income tax reporting purposes.
“
Loan Refinancing Fee
.” A fee payable to the Advisor in respect of the refinancing of a loan secured by an Investment.
“
Manager
.” W. P. Carey & Co., B.V., a Netherlands company.
“
Management Agreement
.” The Asset Management Agreement between CPA: 18 and the Manager, as the same may be amended from time to time.
“
Market Value
.” The value calculated by multiplying the daily weighted average number of outstanding Shares by the average closing price of the Shares, in each case over the 30 trading days beginning 180 calendar days after the Shares are first listed on a national securities exchange or included for quotation in an electronic trading system.
“
Offering
.” The offering of Shares pursuant to a Prospectus.
“
Operating Expenses
.” All consolidated operating, general and administrative expenses paid or incurred by CPA: 18, as determined under GAAP, except the following (insofar as they would otherwise be considered operating, general and administrative expenses under GAAP): (i) interest and discounts and other cost of borrowed money; (ii) taxes (including state, Federal and foreign income tax, property taxes and assessments, franchise taxes and taxes of any other nature); (iii) expenses of raising capital, including Organization and Offering Expenses, printing, engraving, and other expenses, and taxes incurred in connection with the issuance and distribution of CPA: 18’s Shares and Securities; (iv) Acquisition Expenses, real estate commissions on resale of property and other expenses connected with the acquisition, disposition, origination, ownership and operation of Investments, including the costs of foreclosure, insurance premiums, legal services, brokerage and sales commissions, and the maintenance, repair and improvement of property; (v) Acquisition Fees or Disposition Fees payable to the Advisor under this Agreement and the corresponding fees payable to the Manager under the Management Agreement, or any other party; (vi) Distribution and Shareholder Servicing Fees payable to the Dealer Manager; (vii) distributions paid by the Operating Partnership to the Special General Partner under the agreement of limited partnership of the Operating Partnership in respect of gains realized on dispositions of Investments and other capital transactions; (viii) amounts paid to effect a redemption or repurchase of the special general partner interest held by the Special General Partner pursuant to the agreement of limited partnership of the Operating Partnership; and (ix) non-cash items, such as depreciation, amortization, depletion, and additions to reserves for depreciation, amortization, depletion, losses and bad debts. Notwithstanding anything herein to the contrary, Operating Expenses shall include the Asset Management Fee and any Loan Refinancing Fee and, solely for the purposes of determining compliance with the 2%/25% Guidelines, distributions of profits and cash flow made by the Operating Partnership to the Special General Partner pursuant to the agreement of limited partnership of the Operating Partnership, other than distributions described in clauses (vii) and (viii) of this definition.
“
Operating Partnership
.” CPA: 18 Limited Partnership, a Delaware limited partnership, through which CPA: 18 owns Investments.
“
Organization and Offering Expenses
.” Those expenses payable by CPA: 18 and the Operating Partnership in connection with the formation, qualification and registration of CPA: 18 and in marketing and distributing Shares, including, but not limited to: (i) the preparation, printing, filing and delivery of any registration statement or Prospectus (including any amendments thereof or supplements thereto) and the preparing and printing of contractual agreements among CPA: 18, the Operating Partnership, the Dealer Manager and the Selected Dealers (including copies thereof); (ii) the preparing and printing of the Charter and Bylaws, solicitation material and related documents and the filing and/or recording of such documents necessary to comply with the laws of the State of Maryland for the formation of a corporation and thereafter for the continued good standing of a corporation; (iii) the qualification or registration of the Shares under state securities or “Blue Sky” laws; (iv) any escrow arrangements, including any compensation to an escrow agent; (v) the filing fees payable to the SEC and to the Financial Industry Regulatory Authority; (vi) reimbursement for the reasonable and identifiable out-of-pocket expenses of the Dealer Manager and the Selected Dealers, including the cost of their counsel; (vii) the fees of CPA: 18’s counsel and accountants; (viii) all advertising expenses incurred in connection with an Offering, including the cost of all sales literature and the costs related to investor and broker-dealer sales and information meetings and marketing incentive programs; and (ix) selling commissions, dealer manager fees, marketing fees, incentive fees and due diligence fees incurred in connection with the sale of the Shares.
“
Original Issue Price
.” For any Share issued in an Offering, the price at which such Share was initially offered to the public by CPA: 18, regardless of whether selling commissions were paid in connection with the purchase of such Share from CPA: 18.
“
Other Permitted Investment Asset
.” An asset, other than cash, cash equivalents, short term bonds, auction rate securities and similar short term investments, acquired by CPA: 18 for investment purposes that is not a Loan or a Property and is consistent with the investment objectives and policies of CPA: 18.
“
Person
.” An Individual, corporation, partnership, joint venture, association, company, trust, bank, or other entity, or government or any agency or political subdivision of a government.
“
Preferred Return
.” A Cumulative Return of five percent computed from the Closing Date through the date as of which such amount is being calculated.
“
Property or Properties
.” CPA: 18’s partial or entire interest in real property (including leasehold interests) and personal or mixed property connected therewith. An Investment which obligates CPA: 18 to acquire a Property will be treated as a Property for purposes of this Agreement.
“
Property Management Fee
.” A fee for property management services rendered by the Advisor or its Affiliates in connection with Properties acquired directly or through foreclosure.
“
Prospectus
.” Any prospectus pursuant to which CPA: 18 offers Shares in a public offering, as the same may at any time and from time to time be amended or supplemented after the effective date of the registration statement in which it is included.
“
Redemptions
.” An amount determined by multiplying the number of Shares redeemed by the Original Issue Price.
“
REIT
.” A real estate investment trust, as defined in Sections 856-860 of the Code.
“
Securities
.” Any stock, shares (other than currently outstanding Shares and subsequently issued Shares), other equity interests, voting trust certificates, bonds, debentures, notes or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise or in general any instruments commonly known as “securities” or any certificate of interest, shares or participation in temporary or interim certificates for receipts (or, guarantees of, or warrants, options or rights to subscribe to, purchase or acquire any of the foregoing, which subsequently may be issued by CPA: 18).
“
SEC
.” The Securities and Exchange Commission.
“
Selected Dealers
.” Broker-dealers who are members of the Financial Industry Regulatory Authority and who have executed an agreement with the Dealer Manager in which the Selected Dealers agree to participate with the Dealer Manager in the Offering.
“
Shareholders
.” Those Persons who, at the time any calculation hereunder is to be made, are shown as holders of record of Shares on the books and records of CPA: 18.
“
Shares
.” All of the shares of common stock of CPA: 18, $.001 par value, and any other shares of common stock of CPA: 18.
“
Special General Partner
.” WPC-CPA:18 Holdings, LLC and any permitted transferee of the special general partnership interest under the agreement of limited partnership the Operating Partnership.
“
Sponsor
.” W. P. Carey Inc. and any other Person directly or indirectly instrumental in organizing, wholly or in part, CPA: 18 or any person who will control, manage or participate in the management of CPA: 18, and any Affiliate of any such person. Sponsor does not include a person whose only relationship to CPA: 18 is that of an independent property manager and whose only compensation is as such. Sponsor also does not include wholly independent third parties such as attorneys, accountants and underwriters whose only compensation is for professional services.
“
Subordinated Acquisition Fee
.” The Subordinated Acquisition Fee as defined in Section 9(c) hereof.
“
Termination Date
.” The effective date of any termination of this Agreement.
“
Total Investment Cost
.” With regard to any Investment, an amount equal to the sum of the Contract Purchase Price of such Investment plus the Acquisition Fees and Acquisition Expenses paid in connection with such Investment.
“
Triggering Event
.” With regard to any Investment, the occurrence of any of the following during the six months after the closing date of the Investment: (a) the failure by an obligor on an Investment to pay rent, interest or principal, or other material payment, to CPA: 18 when due (after giving effect to all applicable grace periods) or (b) the obligor on an Investment (including a guarantor) (1) commences a voluntary case or proceeding under applicable bankruptcy or reorganization law, (2) consents to the entry of a decree or order for relief in an involuntary proceeding under applicable bankruptcy law, (3) consents to the filing of a petition or the appointment of a custodian, receiver or liquidator, (4) makes an assignment for the benefit of creditors, (5) admits in writing its inability to pay its debts as they come due; or (6) is the subject of a decree or order for relief entered by a court of competent jurisdiction in respect of such obligor in an involuntary bankruptcy case or proceeding, or a decree or order adjudging such obligor bankrupt or insolvent or appointing a custodian, receiver or liquidator for the obligor.
2.
Appointment
. CPA: 18 hereby appoints the Advisor to serve as its advisor on the terms and conditions set forth in this Agreement, and the Advisor hereby accepts such appointment.
3.
Duties of the Advisor
. The Advisor undertakes to use its best efforts to present to CPA: 18 potential investment opportunities and to provide a continuing and suitable investment program consistent with the investment objectives and policies of CPA: 18 as determined and adopted from time to time by the Board. The Advisor will follow the Guidelines when allocating Investment opportunities among CPA: 18, other entities managed by the Advisor and its Affiliates, and the Advisor and its Affiliates for their own account. The Guidelines shall not be amended without the prior approval of at least a majority of the Independent Directors.
In performance of the foregoing undertakings, subject to the supervision of the Board and consistent with the provisions of the Charter and Bylaws of CPA: 18 and any Prospectus pursuant to which Shares are offered, the Advisor shall, either directly or by engaging an Affiliate:
(a) serve as CPA: 18’s investment and financial advisor and provide research and economic and statistical data in connection with CPA: 18’s assets and investment policies;
(b) provide the daily management of CPA: 18 and perform and supervise the various administrative functions reasonably necessary for the management of CPA: 18;
(c) investigate, select, and, on behalf of CPA: 18, engage and conduct business with such Persons as the Advisor deems necessary to the proper performance of its obligations hereunder, including but not limited to consultants, accountants, correspondents, lenders, technical advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers, insurance agents, banks, builders, developers, property owners, mortgagors, and any and all agents for any of the foregoing, including Affiliates of the Advisor, and Persons acting in any other capacity deemed by the Advisor necessary or desirable for the performance of any of the foregoing services, including but not limited to entering into contracts in the name of CPA: 18 with any of the foregoing;
(d) consult with Directors of CPA: 18 and assist the Board in the formulation and implementation of CPA: 18’s policies, and furnish the Board with such information, advice and recommendations as they may request or as otherwise may be necessary to enable them to discharge their fiduciary duties with respect to matters coming before the Board;
(e) subject to the provisions of this Agreement and the Guidelines: (1) locate, analyze and select potential Investments; (2) structure and negotiate the terms and conditions of transactions pursuant to which Investments will be made, purchased or acquired by CPA: 18; (3) make Investments on behalf of CPA: 18; (4) arrange for financing and refinancing of, make other changes in the asset or capital structure of, dispose of, reinvest the proceeds from the sale of, or otherwise deal with the Investments; and (5) enter into leases and service contracts for Properties and, to the extent necessary, perform all other operational functions for the maintenance and administration of such Properties;
(f) provide the Board with periodic reports regarding prospective Investments and with periodic reports, no less than quarterly, of (1) new Investments made during the prior fiscal quarter, which reports shall include information regarding the type of each Investment made (in the categories provided in Section 9); (2) the occurrence of any Triggering Event during the prior fiscal quarter; and (3) the amounts of “dead deal” costs incurred by CPA: 18 during the prior fiscal quarter;
(g) assist the Board in its evaluation of potential liquidity transactions for CPA: 18 and take such actions as may be requested by the Board or as may otherwise be necessary or desirable to execute any liquidity transaction approved by the Board;
(h) obtain the prior approval of the Board (including a majority of the Independent Directors) for any and all investments in Property which do not meet all of the requirements set forth in Section 4(b) hereof;
(i) negotiate on behalf of CPA: 18 with banks or lenders for loans to be made to CPA: 18, and negotiate on behalf of CPA: 18 with investment banking firms and broker-dealers or negotiate private sales of Shares and Securities or obtain loans for CPA: 18, but in no event in such a way so that the Advisor shall be acting as broker-dealer or underwriter; and
provided
,
further
, that any fees and costs payable to third parties incurred by the Advisor in connection with the foregoing shall be the responsibility of CPA: 18;
(j) obtain reports (which may be prepared by the Advisor or its Affiliates), where appropriate, concerning the value of Investments or contemplated Investments;
(k) obtain for, or provide to, CPA: 18 such services as may be required in acquiring, managing and disposing of Investments, including, but not limited to: (i) the negotiation, making and servicing of Investments; (ii) the disbursement and collection of company monies; (iii) the payment of debts of and fulfillment of the obligations of CPA: 18; and (iv) the handling, prosecuting and settling of any claims of or against CPA: 18, including, but not limited to, foreclosing and otherwise enforcing mortgages and other liens securing Loans;
(l) from time to time, or at any time reasonably requested by the Board, make reports to the Board of its performance of services to CPA: 18 under this Agreement;
(m) communicate on behalf of CPA: 18 with Shareholders as required to satisfy the reporting and other requirements of any governmental bodies or agencies to Shareholders and third parties and otherwise as requested by CPA: 18;
(n) provide or arrange for administrative services and items, legal and other services, office space, office furnishings, personnel and other overhead items necessary and incidental to CPA: 18’s business and operations;
(o) provide CPA: 18 with such accounting data and any other information requested by CPA: 18 concerning the investment activities of CPA: 18 as shall be required to prepare and to file all periodic financial reports and returns required to be filed with the Securities and Exchange Commission and any other regulatory agency, including annual financial statements;
(p) maintain the books and records of CPA: 18;
(q) supervise the performance of such ministerial and administrative functions as may be necessary in connection with the daily operations of the Investments;
(r) provide CPA: 18 with all necessary cash management services;
(s) do all things necessary to assure its ability to render the services described in this Agreement;
(t) perform such other services as may be required from time to time for management and other activities relating to the assets of CPA: 18 as the Advisor shall deem advisable under the particular circumstances;
(u) arrange to obtain on behalf of CPA: 18 as requested by the Board, and deliver to or maintain on behalf of CPA: 18 copies of, all appraisals obtained in connection with investments in Properties and Loans;
(v) if a transaction, proposed transaction or other matter requires approval by the Board or by the Independent Directors, deliver to the Board or the Independent Directors, as the case may be, all documentation reasonably requested by them to properly evaluate such transaction, proposed transaction or other matter;
(w) monitor the performance by the Manager of its duties under the Management Agreement; and
(x) on an annual basis, no later than 90 days prior to the end of each term of this Agreement, provide the Independent Directors with a report on (1) the Advisor’s performance
during the past year, (2) the compensation paid to the Advisor during such year and (3) any proposed changes to the compensation to be paid to the Advisor during the upcoming year if the Agreement is renewed. The Advisor’s report shall address, among other things, (a) those matters identified in CPA: 18’s organizational documents as matters which the Independent Directors must review each year with respect to the Advisor’s performance and compensation; (b) whether any Triggering Event occurred with respect to an Investment made during the past year; and (c) the “dead deal” costs incurred by CPA: 18 during the past year. If a Triggering Event has occurred, the Independent Directors may consider whether, after taking account of the overall performance of the Advisor during the past year, they wish to request that the Advisor refund all or a portion of the Initial Acquisition Fee paid by CPA: 18 in respect of such Investment, and if the Independent Directors make that request, the Advisor shall refund such amount to CPA: 18 within 60 days after receipt of such request. In addition, the Independent Directors may request that the Advisor refund certain of the dead deal costs incurred by CPA: 18 if, in light of the circumstances under which such costs were incurred, the Independent Directors determine that CPA: 18 should not bear such costs.
4.
Authority of Advisor
.
(a) Pursuant to the terms of this Agreement (and subject to the restrictions included in Paragraphs (b), (c) and (d) of this Section 4 and in Section 7 hereof and in the Guidelines), and subject to the continuing and exclusive authority of the Board over the management of CPA: 18, the Board hereby delegates to the Advisor the authority to: (1) locate, analyze and select Investment opportunities; (2) structure the terms and conditions of transactions pursuant to which Investments will be made or acquired for CPA: 18; (3) make or acquire Investments in compliance with the investment objectives and policies of CPA: 18; (4) arrange for financing or refinancing, or make changes in the asset or capital structure of, and dispose of or otherwise deal with, Investments; (5) enter into leases and service contracts for Properties, and perform other property level operations; (6) oversee non-affiliated property managers and other non-affiliated Persons who perform services for CPA: 18; and (7) undertake accounting and other record-keeping functions at the Investment level.
(b) The consideration paid for an Investment acquired by CPA: 18 shall ordinarily be based on the fair market value thereof. Consistent with the foregoing provision, the Advisor may, without further approval by the Board (except with respect to transactions subject to paragraphs (c) and (d) of this Section 4) invest on behalf of CPA: 18 in an Investment so long as, in the Advisor’s good faith judgment, (i) the Total Investment Cost of such Investment does not exceed the fair market value thereof, and in the case of an Investment that is a Property, shall in no event exceed the Appraised Value of such Property and (ii) the Investment, in conjunction with CPA: 18’s other Investments and proposed Investments, at the time CPA: 18 is committed to purchase or originate the Investment, is reasonably expected to fulfill CPA: 18’s investment objectives and policies as established by the Board and then in effect. For purposes of the foregoing, Total Investment Cost shall be measured at the date the Investment is made and shall exclude future commitments to fund improvements. Investments not meeting the foregoing criteria must be approved in advance by the Board.
(c) Notwithstanding anything to the contrary contained in this Agreement, the Advisor shall not cause CPA: 18 to make Investments that do not comply with Article IX (Investment Objectives and Limitations) of the Charter and related sections of the Bylaws.
(d) The prior approval of the Board, including a majority of the Independent Directors and a majority of the Directors not interested in the transaction, will be required for:
(i) Investments made through co-investment or joint venture arrangements with the Sponsor, the Advisor or any of their Affiliates; (ii) Investments which are not contemplated by the terms of a Prospectus; (iii) transactions that present issues which involve potential conflicts of interest for the Advisor or an Affiliate (other than potential conflicts involving the payment of fees or the reimbursement of expenses and other than allocations of Investments made in accordance with the Guidelines); (iv) the lease of assets to the Sponsor, any Director, the Advisor or any Affiliate of the Advisor; (v) any purchase or sale of an Investment from or to the Advisor or an Affiliate; and (vi) the retention of any Affiliate of the Advisor to provide services to CPA: 18 not expressly contemplated by this Agreement and the terms of such services by such Affiliate. In addition, the Advisor shall comply with any further approval requirements set forth in the Bylaws.
(e) The Board may, at any time upon the giving of notice to the Advisor, modify or revoke the authority set forth in this Section 4. If and to the extent the Board so modifies or revokes the authority contained herein, the Advisor shall henceforth comply with such modification or revocation,
provided however
, that such modification or revocation shall be effective upon receipt by the Advisor and shall not be applicable to investment transactions to which the Advisor has committed CPA: 18 prior to the date of receipt by the Advisor of such notification.
5.
Bank Accounts
. The Advisor may establish and maintain one or more bank accounts in its own name for the account of CPA: 18 or in the name of CPA: 18 and may collect and deposit into any such account or accounts, and disburse from any such account or accounts, any money on behalf of CPA: 18,
provided
that no funds shall be commingled with the funds of the Advisor; and the Advisor shall from time to time render appropriate accountings of such collections and payments to the Board and to the auditors of CPA: 18.
6.
Records; Access
. The Advisor shall maintain appropriate records of all its activities hereunder and make such records available for inspection by the Board and by counsel, auditors and authorized agents of CPA: 18, at any time or from time to time during normal business hours. The Advisor shall at all reasonable times have access to the books and records of CPA: 18.
7.
Limitations on Activities
. Anything else in this Agreement to the contrary notwithstanding, the Advisor shall refrain from taking any action which, in its sole judgment made in good faith, would adversely affect the status of CPA: 18 as a REIT or of the Operating Partnership as a partnership for Federal income tax purposes, subject CPA: 18 or the Operating Partnership to regulation under the Investment Company Act of 1940, as amended, would violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over CPA: 18, its Shares or its Securities, or otherwise not be permitted by the Charter or Bylaws or agreement of limited partnership of the Operating Partnership, except if such action shall be ordered by the Board, in which case the Advisor shall notify promptly the Board of the Advisor’s judgment of the potential impact of such action and shall refrain from taking such action until it receives further clarification or instructions from the Board. In such event the Advisor shall have no liability for acting in accordance with the specific instructions of the Board so given.
(a) Notwithstanding the foregoing, CPA: 18 shall indemnify and hold harmless the Advisor, its shareholders, directors, officers and employees, and partners, shareholders, directors and officers of the Advisor’s shareholders and Affiliates of any of them, for any loss or liability suffered by them, and none of the foregoing shall be liable to CPA: 18, the Operating Partnership or to the Directors or Shareholders for any act or omission by the Advisor, its shareholders, directors, officers and employees, or partners, shareholders, directors or officers of the Advisor’s shareholders and Affiliates of any of them, in each case if the following conditions are met:
(i) The Advisor, its shareholders, directors, officers and employees, and partners, shareholders, directors and officers of the Advisor’s shareholders and Affiliates of any of them have determined, in good faith, that the course of conduct which caused the loss or liability was in the best interests of CPA: 18;
(ii) The Advisor, its shareholders, directors, officers and employees, and partners, shareholders, directors and officers of the Advisor’s shareholders and Affiliates of any of them were acting on behalf of or performing services for CPA: 18; and
(iii) Such liability or loss was not the result of negligence or misconduct by the Advisor, its shareholders, directors, officers and employees, and partners, shareholders, directors and officers of the Advisor’s shareholders or Affiliates of any of them.
(b) Notwithstanding the foregoing, the Advisor and its Affiliates shall not be indemnified by CPA: 18 or the Operating Partnership for any losses, liabilities or expenses arising from or out of the alleged violation of federal or state securities laws unless one or more of the following conditions are met:
(i) There has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular indemnitee;
(ii) Such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee; or
(iii) A court of competent jurisdiction approves a settlement of the claims against a particular indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the Securities and Exchange Commission and of the published position of any state securities regulatory authority in which securities of CPA: 18 were offered or sold as to indemnification for violation of securities laws.
(c) CPA: 18 and the Operating Partnership shall advance funds to the Advisor or its Affiliates for legal expenses and other costs incurred as a result of any legal action for which indemnification is being sought only if all of the following conditions are satisfied:
(i) The legal action relates to acts or omissions with respect to the performance of duties or services on behalf of CPA: 18;
(ii) The Advisor or the Affiliate has provided CPA: 18 or the Operating Partnership with a written affirmation of his, her or its good faith belief that the standard of conduct necessary for indemnification has been met;
(iii) The legal action is initiated by a third party who is not a Shareholder or the legal action is initiated by a Shareholder acting in his or her capacity as such and a court of competent jurisdiction specifically approves such advancement; and
(iv) The Advisor or the Affiliate undertakes to repay the advanced funds to CPA: 18, together with the applicable legal rate of interest thereon, in cases in which such Advisor or Affiliate is found not to be entitled to indemnification.
(d) Notwithstanding the foregoing, the Advisor shall not be entitled to indemnification or be held harmless pursuant to this Section 7 for any activity which the Advisor shall be required to indemnify or hold harmless CPA: 18 pursuant to Section 22.
(e) Any amounts paid pursuant to this Section 7 shall be recoverable or paid only out the net assets of CPA: 18 and not from Shareholders.
8.
Relationship with Directors
. There shall be no limitation on any shareholder, director, officer, employee or Affiliate of the Advisor serving as a Director or an officer of CPA: 18, except that no employee of the Advisor or its Affiliates who also is a Director or officer of CPA: 18 shall receive any compensation from CPA: 18 for serving as a Director or officer other than for reasonable reimbursement for travel and related expenses incurred in attending meetings of the Board; for the avoidance of doubt, the limitations of this Section 8 shall not apply to any compensation paid by the Advisor or any Affiliate for which CPA: 18 reimbursed the Advisor or Affiliate in accordance with Section 10 hereof.
9.
Fees
.
(a)
Asset Management Fee
. (i) The Operating Partnership shall pay to the Advisor as compensation for the advisory services rendered hereunder an asset management fee (the “
Asset Management Fee
”) in an amount equal to the percentage of the Average Equity Value or the Average Market Value, as applicable, of an Investment as specified in the following table:
|
Type of Investment
|
|
Asset Management Fee
|
|
|
|
|
|
Investments in readily marketable real estate securities purchased on the secondary market
|
|
1.50% of the Average Equity Value
|
|
|
|
|
|
All other Investments not described in the foregoing category
|
|
0.50% of the Average Market Value
|
(ii) The Asset Management Fee with respect to an Investment will be calculated monthly, beginning with the month in which CPA: 18 first makes the Investment, and shall be pro rated for the number of days during a month that CPA: 18 owns the Investment. The aggregate Asset Management Fees calculated with respect to each month shall be payable on the first business day following such month.
(b)
Initial Acquisition Fee
. The Advisor may receive as partial compensation for services rendered in connection with the investigation, selection, acquisition or origination (by purchase, investment or exchange) of any Investment, an initial acquisition fee (an “
Initial Acquisition Fee
”) payable by the Operating Partnership in an amount equal to 2.5% of the aggregate Total Investment Cost of the Investment;
provided however,
that no Initial Acquisition Fee shall be payable on any Investment in readily marketable real estate securities purchased on the secondary market. The Initial Acquisition Fee payable to the Advisor in respect of an Investment shall be payable at the time such Investment is acquired.
(c)
Subordinated Acquisition Fee
. (i) In addition to the Initial Acquisition Fee described in Section 9(b) above, the Advisor may receive additional compensation in connection with the investigation, selection, acquisition or origination (by purchase, investment or exchange) of Investments, payable by the Operating Partnership to the Advisor or its Affiliates, in an amount equal to 2.0% of the aggregate Total Investment Cost of the Investment (the “
Subordinated
Acquisition Fee
”). No Subordinated Acquisition Fee shall be paid in respect of Investments in readily marketable real estate securities purchased on the secondary market.
(ii) Except as may otherwise be approved by the Independent Directors, the Subordinated Acquisition Fee shall be payable in three equal annual installments on the first business day of the fiscal quarter immediately following the fiscal quarter in which the Investment is made and the first business day of the corresponding fiscal quarter in each of the subsequent two fiscal years. It is understood that the Independent Directors may determine that under certain limited circumstances, it will be in CPA: 18’s best interests to pay the Subordinated Acquisition Fee at the time the Investment is made rather than on an installment basis, even if the Preferred Return has not yet been satisfied. Any unpaid portion of the Subordinated Acquisition Fee with respect to an Investment will bear interest at the rate of 2% per annum from the date of acquisition of the Investment until the portion of the Subordinated Acquisition Fee is paid. The accrued interest is payable on the date of each annual installment of the fees. The Subordinated Acquisition Fee payable in any year, and accrued interest thereon, will be subordinated to the Preferred Return and only paid if the Preferred Return has been achieved through the end of the prior fiscal quarter. Any portion of the Subordinated Acquisition Fee, and accrued interest thereon, not paid due to CPA: 18’s failure to meet the Preferred Return through any fiscal quarter end shall be paid by CPA: 18 on the first business day of the fiscal quarter next following the fiscal quarter end through which the Preferred Return has been met.
(d)
Six Percent Limitation
. The total amount of all Initial Acquisition Fees plus Subordinated Acquisition Fees, including interest thereon, whether payable to the Advisor or a third party, and Acquisition Expenses payable by the Operating Partnership may not exceed 6% of the aggregate Contract Purchase Price of all Investments, measured for the period beginning with the initial acquisition of an Investment and ending on each December 31 thereafter, unless a majority of the Directors (including a majority of the Independent Directors) not otherwise interested in any transaction approves the excess as being commercially competitive, fair and reasonable to CPA: 18.
(e)
Property Management Fee; Loan Refinancing Fee
. No Property Management Fee or Loan Refinancing Fee shall be paid unless approved by a majority of the Independent Directors.
(f)
Disposition Fee
. (i) If the Advisor or an Affiliate provides a substantial amount of services in the sale of an Investment, the Advisor or such Affiliate shall be entitled to receive a disposition fee (the “
Disposition Fee
”) at the time of such disposition, in an amount equal to the lesser of (1) 50% of the Competitive Real Estate Commission (if applicable) and (2) 3.0% of the Contract Sales Price of the Investment; provided, however, that no Disposition Fee shall be paid in respect of Investments that are readily marketable securities.
(ii) The real estate commissions and Disposition Fees paid to all Persons by CPA: 18 shall not exceed an amount equal to the lesser of: (i) six percent of the Contract Sales Price of such Property or (ii) the Competitive Real Estate Commission. The Advisor shall present to the Independent Directors such information as they may reasonably request to review the level of services provided by the Advisor in connection with a disposition and the basis for the calculation of the amount of the Disposition Fees on an annual basis, or more frequently if requested by the Independent Directors. The amount of any Disposition Fee shall be deemed conclusively established once it has been approved by the Independent Directors, absent a subsequent finding of error. No payment
of Disposition Fees shall be made prior to review and approval of such information by the Independent Directors.
(g)
Loans From Affiliates
. CPA: 18 shall not borrow funds from the Advisor or its Affiliates unless (A) the transaction is approved by a majority of the Independent Directors and a majority of the Directors who are not interested in the transaction as being fair, competitive and commercially reasonable, (B) the interest and other financing charges or fees received by the Advisor or its Affiliates do not exceed the amount which would be charged by non-affiliated lending institutions and (C) the terms are not less favorable than those prevailing for comparable arm’s-length loans for the same purpose. CPA: 18 will not borrow on a long-term basis from the Advisor or its Affiliates unless it is to provide the debt portion of a particular investment and CPA: 18 is unable to obtain a permanent loan at that time or in the judgment of the Board, it is not in CPA: 18’s best interest to obtain a permanent loan at the interest rates then prevailing and the Board has reason to believe that CPA: 18 will be able to obtain a permanent loan on or prior to the end of the loan term provided by the Advisor or its Affiliates.
(h)
Changes To Fee Structure
. In the event the Shares are listed on a national securities exchange, CPA: 18 and the Advisor shall negotiate in good faith to establish a fee structure appropriate for an entity with a perpetual life. A majority of the Independent Directors must approve the new fee structure negotiated with the Advisor. In negotiating a new fee structure, the Independent Directors may consider any of the factors they deem relevant, including but not limited to: (a) the size of the Advisory Fee in relation to the size, composition and profitability of CPA: 18’s portfolio; (b) the success of the Advisor in generating opportunities that meet the investment objectives of CPA: 18; (c) the rates charged to other REITs and to investors other than REITs by Advisors performing similar services; (d) additional revenues realized by the Advisor and its Affiliates through their relationship with CPA: 18, including loan administration, underwriting or broker commissions, servicing, engineering, inspection and other fees, whether paid by CPA: 18 or by others with whom CPA: 18 does business; (e) the quality and extent of service and advice furnished by the Advisor; (f) the performance of the investment portfolio of CPA: 18, including income, conservation or appreciation of capital, frequency of problem investments and competence in dealing with distress situations; and (g) the quality of the portfolio of CPA: 18 in relationship to the investments generated by the Advisor for the account of other clients. The Independent Directors shall not approve any new fee structure that is in their judgment more favorable (taken as a whole) to the Advisor than the current fee structure.
(i)
Payment
. Compensation payable to the Advisor pursuant to this Section 9 shall be paid in cash;
provided
,
however
, that any fee payable pursuant to Section 9 may be paid, at the option of the Advisor, in the form of: (i) cash, (ii) restricted Class A common stock of CPA: 18, or (iii) a combination of cash and restricted Class A common stock. The Advisor shall notify CPA: 18 in writing annually of the form in which the fee shall be paid. Such notice shall be provided no later than January 15 of each year. If no such notice is provided, the fee shall be paid in cash. For purposes of the payment of compensation to the Advisor in the form of stock, the value of each share of restricted Class A common stock shall be: (i) the Net Asset Value per share of Class A common stock as determined based on the most recent appraisal of CPA: 18’s assets performed by an Independent Appraiser, or (ii) if an appraisal has not yet been performed, $10 per share. If shares are being offered to the public at the time a fee is paid with stock, the value shall be the price of the stock without commissions. The Net Asset Value determined on the basis of such appraisal may be adjusted on a quarterly or other basis by the Board to account for significant capital transactions. Stock issued by CPA: 18 to the Advisor in payment of fees hereunder shall be governed by the terms set forth in Schedule B hereto, or such other terms as the Advisor and CPA: 18 may from time to time agree.
(j) During the term of the Management Agreement, no Asset Management Fees shall be paid to the Advisor under Section 9(a) of this Agreement with respect to Properties located outside the United States and Loans secured by collateral outside the United States.
(k) During the term of the Management Agreement, no Disposition Fees shall be paid to the Advisor under Section 9(f) of this Agreement with respect to Properties located outside the United States and Loans secured by collateral outside the United States.
10.
Expenses
.
(a) Subject to the limitations set forth in Section 9(d), to the extent applicable, in addition to the compensation paid to the Advisor pursuant to Section 9 hereof, the Operating Partnership shall pay directly or reimburse the Advisor for the following expenses:
(i) Organization and Offering Expenses;
provided however
, that within 60 days after the end of the quarter in which any Offering terminates, the Advisor shall reimburse the Operating Partnership for any Organization and Offering Expense reimbursements received by the Advisor pursuant to this Section 10 to the extent that such reimbursements, when added to the balance of the Organization and Offering Expenses (excluding selling commissions and the dealer manager fee) paid directly by the Operating Partnership, exceed (A) four percent of the Gross Offering Proceeds if the Gross Offering Proceeds are less than five hundred million dollars ($500,000,000.00), (B) two percent of the Gross Offering Proceeds if the Gross Offering Proceeds are five hundred million dollars ($500,000,000.00) or more, but less than seven hundred and fifty million dollars ($750,000,000.00), or (C) one and a half percent of the Gross Offering Proceeds if the Gross Offering Proceeds are more than seven hundred and fifty million dollars ($750,000,000.00);
provided further
, that the Advisor shall be responsible for the payment of all Organization and Offering Expenses (excluding such commissions and such fees and expense reimbursements) in excess of (A) four percent of the Gross Offering Proceeds if the Gross Offering Proceeds are less than five hundred million dollars ($500,000,000.00), (B) two percent of the Gross Offering Proceeds if the Gross Offering Proceeds are five hundred million dollars ($500,000,000.00) or more, but less than seven hundred and fifty million dollars ($750,000,000.00), or (C) one and a half percent of the Gross Offering Proceeds if the Gross Offering Proceeds are more than seven hundred and fifty million dollars ($750,000,000.00);
(ii) all Acquisition Expenses;
(iii) to the extent not included in Acquisition Expenses, all expenses of whatever nature reasonably incurred and directly connected with the proposed acquisition of any Investment that does not result in the actual acquisition of the Investment, including, without limitation, personnel costs;
(iv) expenses other than Acquisition Expenses incurred in connection with the investment of the funds of CPA: 18, including, without limitation, costs of retaining industry or economic consultants and finder’s fees and similar payments, to the extent not paid by the seller of the Investment or another third party, regardless of whether such expenses were incurred in transactions where a fee is not payable to the Advisor;
(v) interest and other costs for borrowed money, including discounts, points and other similar fees;
(vi) taxes and assessments on income of CPA: 18, to the extent paid or advanced by the Advisor, or on Investments and taxes as an expense of doing business;
(vii) costs associated with insurance required in connection with the business of CPA: 18 or by the Directors;
(viii) expenses of managing and operating Investments owned by CPA: 18, whether payable to an Affiliate of the Advisor or a non-affiliated Person;
(ix) fees and expenses of legal counsel for CPA: 18;
(x) fees and expense of auditors and accountants for CPA: 18;
(xi) all expenses in connection with payments to the Directors and meetings of the Directors and Shareholders;
(xii) expenses associated with listing the Shares and Securities on a securities exchange if requested by the Board;
(xiii) expenses connected with payments of Distributions in cash or otherwise made or caused to be made by the Board to the Shareholders;
(xiv) expenses of organizing, revising, amending, converting, modifying, or terminating CPA: 18, the Operating Partnership or their respective governing instruments;
(xv) expenses of maintaining communications with Shareholders, including the cost of preparation, printing and mailing annual reports and other Shareholder reports, proxy statements and other reports required by governmental entities; and
(xvi) all other expenses the Advisor incurs in connection with providing services to CPA: 18, including reimbursement to the Advisor or its Affiliates for the cost of rent, goods, materials and personnel incurred by them based upon the compensation of the Persons involved and an appropriate share of overhead allocable to those Persons.
(b) Expenses described in clause (xvi) of Section 10(a) and any other expenses described in Section 10(a) that are shared expenses of CPA: 18, other entities managed by the Advisor and its Affiliates and W. P. Carey Inc. and its Affiliates (for their own account) shall be allocated among such entities based upon the percentage that CPA: 18’s total revenues for the most recently completed four fiscal quarters represent of the combined total revenues for such period of CPA: 18, W. P. Carey Inc. and each REIT or other entity managed by the Advisor and its Affiliates (provided that if any such entity has not been in operation for the full four quarter period, the period for which such entity has been in operation shall be annualized), or such other methodology as may be approved by the Board (including a majority of the Independent Directors). No reimbursement shall be made for the cost of personnel to the extent that such personnel are used in transactions for which the Advisor receives a separate fee.
(c) Expenses incurred by the Advisor on behalf of CPA: 18 and payable pursuant to this Section 10 shall be reimbursed quarterly to the Advisor within 60 days after the end of each quarter, subject to the provisions of Section 13 hereof. The Advisor shall prepare a statement documenting the Operating Expenses of CPA: 18 within 45 days after the end of each quarter.
(d) During the term of the Management Agreement, CPA: 18 shall have no obligation to reimburse the Advisor under Section 10 of this Agreement for any expenses related to the management and disposition of Properties located outside the United States and Loans secured by collateral outside the United States.
11.
Other Services
. Should the Board request that the Advisor or any Affiliate, shareholder or employee thereof render services for CPA: 18 other than as set forth in Section 3 hereof, such services shall be separately compensated and shall not be deemed to be services pursuant to the terms of this Agreement.
12.
Fidelity Bond
. The Advisor shall maintain a fidelity bond for the benefit of CPA: 18 which bond shall insure CPA: 18 from losses of up to $5,000,000 and shall be of the type customarily purchased by entities performing services similar to those provided to CPA: 18 by the Advisor.
13.
Limitation on Expenses
.
(a) If Operating Expenses under this Agreement and the Management Agreement during the 12-month period ending on the last day of any fiscal quarter of CPA: 18 exceed the greater of (i) two percent of the Average Invested Assets during the same 12-month period or (ii) 25% of the Adjusted Net Income of CPA: 18 during the same 12-month period, then subject to paragraph (b) of this Section 13, such excess amount shall be the sole responsibility of the Advisor and neither the Operating Partnership nor CPA: 18 shall be liable for payment therefor. CPA: 18 may defer the payment or distribution to the Advisor and the Special General Partner of fees, expenses and distributions that would, if paid or distributed, cause Operating Expenses during such 12-month period to exceed the foregoing limitations; provided, however, that in determining which items shall be paid and which may be deferred, priority will be given to the payment of distributions to the Special General Partner over the payment to the Advisor of amounts due under this Agreement.
(b) Notwithstanding the foregoing, to the extent that the Advisor becomes responsible for any excess amount as provided in paragraph (a), if a majority of the Independent Directors finds such excess amount or a portion thereof justified based on such unusual and non-recurring factors as they deem sufficient, the Operating Partnership shall reimburse the Advisor in future quarters for the full amount of such excess, or any portion thereof, but only to the extent such reimbursement would not cause the Operating Expenses to exceed the 2%/25% Guidelines in the 12-month period ending on the last day of such quarter. In no event shall the Operating Expenses payable by the Operating Partnership in any 12-month period ending at the end of a fiscal quarter exceed the 2%/25% Guidelines.
(c) Within 60 days after the end of any twelve-month period referred to in paragraph (a), the Advisor shall reimburse CPA: 18 for any amounts expended by CPA: 18 in such 12-month period that exceeds the limitations provided in paragraph (a) unless the Independent Directors determine that such excess expenses are justified, as provided in paragraph (b), and provided the Operating Expenses under this Agreement and the Management Agreement for such later quarter would not thereby exceed the 2%/25% Guidelines.
(d) All computations made under paragraphs (a) and (b) of this Section 13 shall be determined in accordance with generally accepted accounting principles applied on a consistent basis.
(e) If the Special General Partner receives distributions pursuant to the agreement of limited partnership of the Operating Partnership in respect of realized gains on the disposition of an Investment, Adjusted Net Income, for purposes of calculating the Operating Expenses, shall exclude the gain from the disposition of such Investment.
14.
Investment Allocation and Other Activities of the Advisor
. Except as provided in the Guidelines, nothing herein contained shall prevent the Advisor from engaging in other activities, including without limitation direct investment by the Advisor and its Affiliates in assets that would be suitable for CPA: 18, the rendering of advice to other investors (including other REITs) and the management of other programs advised, sponsored or organized by the Advisor or its Affiliates; nor shall this Agreement limit or restrict the right of the Advisor or any of its Affiliates or of any director, officer, employee or shareholder of the Advisor or its Affiliates to engage in any other business or to render services of any kind to any other partnership, corporation, firm, individual, trust or association. The Advisor may, with respect to any investment in which CPA: 18 is a participant, also render advice and service to each other participant therein. Without limiting the generality of the foregoing, CPA: 18 acknowledges that the Advisor provides or will provide services to other CPA REIT funds and other entities, whether now in existence or formed hereafter, and that the Advisor and its Affiliates will invest for their own account. If the Sponsor, Advisor, Director or Affiliates thereof has or have sponsored, or will sponsor in the future, other investment programs with similar investment objectives which have investment funds available at the same time as CPA: 18, or if the Advisor and its Affiliates intend to make investments for their own account that fit CPA: 18’s investment objectives, it shall be the duty of the Advisor to allocate Investments among the competing investment entities and the Advisor and its Affiliates in a fair and equitable manner and in accordance with the Guidelines.
The Advisor shall be required to use its best efforts to present a continuing and suitable investment program to CPA: 18 that is consistent with the investment policies and objectives of CPA: 18, but subject to the last sentence of the preceding paragraph, neither the Advisor nor any Affiliate of the Advisor shall be obligated generally to present any particular investment opportunity to CPA: 18 even if the opportunity is of character which, if presented to CPA: 18, could be taken by CPA: 18.
Once each quarter, senior representatives of the Advisor will meet with at least a majority of the Independent Directors for the purpose of reviewing the Advisor’s compliance with the Guidelines with respect to all Investments allocated among W. P. Carey Inc., CPA: 18 and each other REIT and investment program managed by an Affiliate of W. P. Carey Inc. (each, together with its Affiliates, an “
Investment Entity
,” and collectively, the “
Investment Entities
”) during the most recently completed fiscal quarter. The quarterly review will take place at the regularly scheduled quarterly meeting of the Board of Directors, or at another time and place that are mutually determined by the Advisor and the Independent Directors, and may include representatives of other Investment Entities. The Advisor will use its best efforts to distribute a report reasonably in advance of each quarterly review meeting containing a list of all Investments allocated to the Investment Entities, the particular Investment Entity to which each Investment was allocated, a brief description of the Investment, the purchase price of each Investment and acquisition fees (if any) paid to the Advisor and its Affiliates in connection with each Investment. Representatives of the Advisor shall be prepared to discuss each Investment and the reasons for its allocation to particular Investment Entities at the quarterly review meeting.
15.
Relationship of Advisor and CPA: 18
. CPA: 18 and the Advisor agree that they have not created and do not intend to create by this Agreement a joint venture or partnership relationship between them and nothing in this Agreement shall be construed to make them partners or joint venturers or impose any liability as partners or joint venturers on either of them.
16.
Term; Termination of Agreement
. This Agreement shall continue in force until May [7], 2014 or until 60 days after the date on which the Independent Directors shall have notified the Advisor of their determination either to renew this Agreement for an additional one-year period or terminate this Agreement, as required by CPA: 18’s Charter.
17.
Termination by CPA: 18
. At the sole option of the Board (including a majority of the Independent Directors), this Agreement may be terminated immediately by written notice of termination from CPA: 18 to the Advisor upon the occurrence of events which would constitute Cause or if any of the following events occur:
(a) If the Advisor shall breach this Agreement;
provided
that such breach (i) is of a material term or condition of this Agreement and (ii) the Advisor has not cured such breach within 30 days of written notice thereof or, in the case of any breach that cannot be cured within 30 days by reasonable effort, has not taken all necessary action within a reasonable time period to cure such breach;
(b) If the Advisor shall be adjudged bankrupt or insolvent by a court of competent jurisdiction, or an order shall be made by a court of competent jurisdiction for the appointment of a receiver, liquidator, or trustee of the Advisor, for all or substantially all of its property by reason of the foregoing, or if a court of competent jurisdiction approves any petition filed against the Advisor for reorganization, and such adjudication or order shall remain in force or unstayed for a period of 30 days; or
(c) If the Advisor shall institute proceedings for voluntary bankruptcy or shall file a petition seeking reorganization under the federal bankruptcy laws, or for relief under any law for relief of debtors, or shall consent to the appointment of a receiver for itself or for all or substantially all of its property, or shall make a general assignment for the benefit of its creditors, or shall admit in writing its inability to pay its debts, generally, as they become due.
Any notice of termination under Section 16 or 17 shall be effective on the date specified in such notice, which may be the day on which such notice is given or any date thereafter. The Advisor agrees that if any of the events specified in Section 17(b) or (c) shall occur, it shall give written notice thereof to the Board within 15 days after the occurrence of such event.
18.
Termination by Either Party
. This Agreement may be terminated immediately without penalty (but subject to the requirements of Section 20 hereof) by the Advisor by written notice of termination to CPA: 18 upon the occurrence of events which would constitute Good Reason or by CPA: 18 without cause or penalty (but subject to the requirements of Section 20 hereof) by action of the Directors, a majority of the Independent Directors or by action of a majority of the Shareholders, in each case upon 60 days’ written notice.
19.
Assignment Prohibition
. This Agreement may not be assigned by the Advisor without the approval of the Board (including a majority of the Independent Directors);
provided
,
however
, that such approval shall not be required in the case of an assignment to a corporation, partnership, association, trust or organization which may take over the assets and carry on the affairs of the Advisor,
provided
: (i) that at the time of such assignment, such successor organization shall be owned substantially by an entity directly or indirectly controlled by the Sponsor and only if such entity has a net worth of at least $5,000,000, and (ii) that the board of directors of the Advisor shall deliver to the Board a statement in writing indicating the ownership structure and net worth of the successor organization and a certification from the new Advisor as to its net worth. Such an assignment shall bind the assignees hereunder in the same manner as the Advisor is bound by this Agreement. The Advisor may assign any rights to receive
fees or other payments under this Agreement without obtaining the approval of the Board. This Agreement shall not be assigned by CPA: 18 or the Operating Partnership without the consent of the Advisor, except in the case of an assignment by CPA: 18 or the Operating Partnership to a corporation or other organization which is a successor to CPA: 18 or the Operating Partnership, in which case such successor organization shall be bound hereunder and by the terms of said assignment in the same manner as CPA: 18 or the Operating Partnership is bound by this Agreement.
20.
Payments to and Duties of Advisor Upon Termination
.
(a) After the Termination Date, the Advisor shall not be entitled to compensation for further services hereunder but shall be entitled to receive from CPA: 18 the following:
(i) all unpaid reimbursements of Organization and Offering Expenses and of Operating Expenses payable to the Advisor;
(ii) all earned but unpaid Asset Management Fees payable to the Advisor prior to the Termination Date;
(iii) all earned but unpaid Acquisition Fees and interest thereon, in each case payable to the Advisor relating to the acquisition of any Property prior to the Termination Date;
(iv) all earned but unpaid Disposition Fees and interest thereon, payable to the Advisor relating to the sale of any Investment prior to the Termination Date; and
(v) all earned but unpaid Property Management Fees and Loan Refinancing Fees, if any, payable to the Advisor or its Affiliates relating to the management of any property prior to the termination of this Agreement.
(b) Notwithstanding the foregoing, if this Agreement is terminated by CPA: 18 for Cause, or by the Advisor for other than Good Reason, the Advisor will not be entitled to receive the sums in Section 20(a) (ii) through (v).
(c) Any and all amounts payable to the Advisor pursuant to Section 20(a) that, irrespective of the termination, were payable on a current basis prior to the Termination Date either because they were not subordinated or all conditions to their payment had been satisfied, shall be paid within 90 days after the Termination Date. All other amounts shall be paid in a manner determined by the Board, but in no event on terms less favorable to the Advisor than those represented by a note (i) maturing upon the liquidation of CPA: 18 or the Operating Partnership or three years from the Termination Date, whichever is earlier, (ii) with no less than twelve equal quarterly installments and (iii) bearing a fair, competitive and commercially reasonable interest rate (the “
Note
”). The Note, if any, may be prepaid by the Operating Partnership at any time prior to maturity with accrued interest to the date of payment but without premium or penalty. Notwithstanding the foregoing, any amounts that relate to Investments (i) shall be an amount which provides compensation to the Advisor only for that portion of the holding period for the respective Investments during which the Advisor provided services to CPA: 18, (ii) shall not be due and payable until the Investment to which such amount relates is sold or refinanced, and (iii) shall not bear interest until the Investment to which such amount relates is sold or refinanced. A portion of the amount shall be paid as each Investment owned by CPA: 18 on the Termination Date is sold. The portion of such amount payable upon each such sale shall be equal to (i) such amount multiplied by (ii) the percentage calculated by dividing the
fair value (at the Termination Date) of the Investment sold by CPA: 18 divided by the total fair value (at the Termination Date) of all Investments owned by CPA: 18 on the Termination Date.
(d) The Advisor shall promptly upon termination.
(i) pay over to the Operating Partnership all money collected and held for the account of CPA: 18 pursuant to this Agreement, after deducting any accrued compensation and reimbursement for its expenses to which it is then entitled;
(ii) deliver to the Board a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Board;
(iii) deliver to the Board all assets, including Properties and Loans, and documents of CPA: 18 then in the custody of the Advisor; and
(iv) cooperate with CPA: 18 to provide an orderly management transition.
21.
Indemnification by CPA: 18 and the Operating Partnership
. Neither CPA: 18 nor the Operating Partnership shall indemnify the Advisor or any of its Affiliates for any loss or liability suffered by the Advisor or the Affiliate, or hold the Advisor or the Affiliate harmless for any loss or liability suffered by CPA: 18 or the Operating Partnership, except as permitted under Section 7.
22.
Indemnification by Advisor
. The Advisor shall indemnify and hold harmless CPA: 18 and the Operating Partnership from liability, claims, damages, taxes or losses and related expenses including attorneys’ fees, to the extent that such liability, claims, damages, taxes or losses and related expenses are not fully reimbursed by insurance and are incurred by reason of the Advisor’s bad faith, fraud, willful misfeasance, misconduct, negligence or reckless disregard of its duties.
23.
Joint and Several Obligations
. Any obligations of CPA: 18 shall be construed as the joint and several obligations of CPA: 18 and the Operating Partnership, unless otherwise specifically provided in this Agreement.
24.
Notices
. Any notice, report or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report or other communication is accepted by the party to whom it is given, and shall be given by being delivered by hand or by overnight mail or other overnight delivery service to the addresses set forth herein:
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To the Board and to CPA: 18:
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Corporate Property Associates 18 — Global Incorporated
50 Rockefeller Plaza
New York, NY 10020
Attention: Chairman of the Audit Committee of the Board of Directors
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To the Operating Partnership:
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CPA: 18 Limited Partnership
c/o Corporate Property Associates 18 — Global Incorporated
50 Rockefeller Plaza
New York, NY 10020
Attention: Chairman of the Audit Committee of the Board of Directors
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To the Advisor:
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Carey Asset Management Corp.
50 Rockefeller Plaza
New York, NY 10020
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Either party may at any time give notice in writing to the other party of a change in its address for the purposes of this Section 24.
25.
Modification
. This Agreement shall not be changed, modified, terminated, or discharged, in whole or in part, except by an instrument in writing signed by both parties hereto, or their respective successors or assignees.
26.
Severability
. The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.
27.
Construction
. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of New York.
28.
Entire Agreement
. This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing.
29.
Indulgences, Not Waivers
. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.
30.
Gender
. Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.
31.
Titles Not to Affect Interpretation
. The titles of Sections and subsections contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof.
32.
Execution in Counterparts
. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.
33.
Name
. W. P. Carey Inc. has a proprietary interest in the name “Corporate Property Associates” and “CPA®.” Accordingly, and in recognition of this right, if at any time CPA: 18 ceases to retain Carey Asset Management Corp., or an Affiliate thereof to perform the services of Advisor, CPA: 18 will, promptly after receipt of written request from Carey Asset Management Corp., cease to conduct business under or use the name “Corporate Property Associates” or “CPA®” or any diminutive thereof and CPA: 18 shall use its best efforts to change the name of CPA: 18 to a name that does not contain the name “Corporate Property Associates” or “CPA®” or any other word or words that might, in the sole discretion of the Advisor, be susceptible of indication of some form of relationship between CPA: 18 and the Advisor or any Affiliate thereof. Consistent with the foregoing, it is specifically recognized that the Advisor or one or more of its Affiliates has in the past and may in the future organize, sponsor or otherwise permit to exist other investment vehicles (including vehicles for investment in real estate) and financial and service organizations having “Corporate Property Associates” or “CPA®” as a part of their name, all without the need for any consent (and without the right to object thereto) by CPA: 18 or its Directors.
34.
Initial Investment
. The Advisor has contributed to CPA: 18 $209,000 in exchange for 23,222 shares of Class A common stock of CPA: 18 (the “
Initial Investment
”). The Advisor or its Affiliates may not sell any of the shares of Class A common stock purchased with the Initial Investment during the term of this Agreement. The restrictions included above shall not continue to apply to any shares of Class A common stock other than the shares acquired through the Initial Investment acquired by the Advisor or its Affiliates. The Advisor shall not vote any Shares it now owns or hereafter acquires in any vote for the election of Directors or any vote regarding the approval or termination of any contract with the Advisor or any of its Affiliates.
IN WITNESS WHEREOF, the parties hereto have executed this Advisory Agreement as of the day and year first above written.
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CORPORATE PROPERTY ASSOCIATES 18 —GLOBAL INCORPORATED
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By:
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/s/ Trevor P. Bond
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Name: Trevor P. Bond
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Title: Chief Executive Officer
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CAREY ASSET MANAGEMENT CORP.
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By:
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/s/ Catherine D. Rice
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Name: Catherine D. Rice
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Title: Chief Financial Officer
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CPA: 18 LIMITED PARTNERSHIP
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By:
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CORPORATE PROPERTY ASSOCIATES 18 —GLOBAL INCORPORATED, its general partner
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By:
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/s/ Trevor P. Bond
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Name: Trevor P. Bond
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Title: Chief Executive Officer
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Signature Page to Advisory Agreement
SCHEDULE A
Investment Allocation Guidelines
CPA: 18 invests primarily in income-producing commercial properties and other real estate related assets, primarily consisting of properties that are leased to single tenants on a triple net basis. CPA: 18’s investment objectives and investment strategy are set forth in its public filings with the Securities and Exchange Commission and are subject to change from time to time with the approval of the Board.
The Advisor is a fiduciary to CPA: 18 and has agreed to allocate Investments among CPA: 18 and other Investment Entities in a fair manner and in accordance with these Guidelines. In order to provide for a fair allocation of Investment opportunities among Investment Entities, the Advisor agrees that if the Advisor or any of its Affiliates is presented with a potential Investment which falls within the investment objectives of one or more of the Investment Entities (including CPA: 18), the Advisor shall consider the following factors, together with such other factors as it deems relevant in the exercise of its reasonable judgment, when deciding how to allocate such Investment among one or more Investment Entities in a fair and equitable manner
·
whether an Investment Entity is still in its fundraising and acquisition stage, or has substantially invested the proceeds from its fundraising stage;
·
the amount of funds available for investment by an Investment Entity and the length of time that such funds have been available for investment;
·
the effect of the Investment on the diversification of an Investment Entity’s portfolio;
·
the effect of the Investment on the profile of an Investment Entity’s mortgage maturity profile;
·
the ability of an Investment Entity to service any debt associated with the Investment;
·
the effect of the Investment on the ability of the Investment Entity to comply with any restrictions on investments and indebtedness contained in the Investment Entity’s governing documents and public SEC filings, in any contract or in any law or regulation applicable to the Investment Entity;
·
whether an Investment Entity was formed for the purpose of making a particular type of investment;
·
the financial attributes of the Investment;
·
the effect of the Investment on the Investment Entity’s intention to qualify as a REIT, partnership or other type of entity for tax purposes; and
·
the effect of the Investment on an Investment Entity’s intention not to be subject to regulation under the Investment Company Act of 1940, as amended.
The Advisor agrees to make investment allocation decisions without regard to the relative fees or other compensation that would be paid to the Advisor and its Affiliates in connection with the applicable Investments.
A - 1
SCHEDULE B
This Schedule sets forth the terms governing any shares of Class A common stock of CPA: 18 (the “
Shares
”) issued by CPA: 18 to the Advisor in payment of advisory fees set forth in the Agreement.
1.
Restrictions
. The Shares are subject to vesting over a five-year period. The Shares shall vest ratably over a five-year period with 20% of the Shares paid in each payment vesting on each of the first through fifth anniversary of the date hereof. Prior to the vesting of the ownership of the Shares in the Advisor, the Shares may not be transferred by the Advisor.
2.
Immediate Vesting
. Upon the expiration of the Agreement for any reason other than a termination for Cause under paragraph 16 or upon a “Change of Control” of CPA®:18 (as defined below), all Shares granted to the Advisor hereunder shall vest immediately and all restrictions shall lapse. For purposes of this Schedule B, a “Change of Control” of CPA: 18 shall be deemed to have occurred if there has been a change in the ownership of CPA: 18 of a nature that would be required to be reported in response to the disclosure requirements of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”), as enacted and in force on the date hereof, whether or not CPA: 18 is then subject to such reporting requirements;
provided
,
however
, that, without limitation, a Change of Control shall be deemed to have occurred if:
(i) any “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than CPA: 18, any of its subsidiaries, any trustee, fiduciary or other person or entity holding securities under any employee benefit plan of CPA: 18 or any of its subsidiaries), together with all “affiliates” and “associates” (as such terms are defined in Rule 14b-2 under the Exchange Act) of such person, shall become the “beneficial owner” (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of CPA: 18 representing 25% or more of either (A) the combined voting power of CPA: 18’s then outstanding securities having the right to vote in an election of the Board (“
Voting Securities
”) or (B) the then outstanding common stock of CPA: 18 (in either such case other than as a result of acquisition of securities directly from CPA: 18);
(ii) persons who, as of the date hereof, constitute the Board (the “
Incumbent Directors
”) cease for any reason, including without limitation, as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority of the Board,
provided
that any person becoming a director of CPA: 18 subsequent to the date hereof whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors shall be considered an Incumbent Director; or
(iii) the stockholders of CPA: 18 shall approve (A) any consolidation or merger of CPA: 18 or any subsidiary where the stockholders of CPA: 18, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, shares representing in the aggregate 50% or more of the voting equity of the entity issuing cash or securities in the consolidation or merger (or of its ultimate parent entity, if any), (B) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of CPA: 18 or (C) any plan or proposal for the liquidation or dissolution of CPA: 18.
B - 1
Notwithstanding the foregoing, a “
Change of Control
” shall not be deemed to have occurred for purposes of the foregoing clause (i) solely as the result of an acquisition of securities by CPA: 18 which, by reducing the number of Shares of Common Stock outstanding, increases (A) the proportionate number of Shares beneficially owned by any person to 25% or more of the Shares then outstanding, or (B) the proportionate voting power represented by the Shares beneficially owned by any person to 25% or more of the combined voting power of all then outstanding voting Securities;
provided
,
however
, that if any person referred to in clause (A) or (B) of this sentence shall thereafter become the beneficial owner of any additional Shares or other Voting Securities (other than pursuant to a Share split, Share dividend, or similar transaction), then a “Change of Control” shall be deemed to have occurred for purposes of the foregoing clause (i).
3.
Exception.
Notwithstanding anything else in this Agreement to the contrary, the Shares shall continue to vest according to the vesting schedule in Section 1 regardless of: (a) the expiration of the Advisory Agreement for any reason other than a termination by CPA: 18 for Cause or a resignation by the Advisor for other than Good Reason, (b) the merger of CPA: 18 and an Affiliate of CPA: 18 or (c) any “Change of Control” of CPA: 18 in connection with a merger with an Affiliate of CPA: 18.
B - 2
Exhibit 10.5
AGREEMENT OF LIMITED PARTNERSHIP
OF CPA:18 LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP OF CPA:18 LIMITED PARTNERSHIP, a Delaware limited partnership (the “Partnership”), dated as of May 7, 2013 (the “Effective Date”), is entered into by and among Corporate Property Associates 18 - Global Incorporated, a Maryland corporation holding both general partner and limited partner interests in the Partnership (the “General Partner”), and WPC-CPA:18 Holdings, LLC, a Delaware limited liability company holding a special general partner interest in the Partnership (the “Special General Partner”), together with any other Persons who become Partners in the Partnership as provided herein.
WHEREAS, the Partnership was formed when a Certificate of Limited Partnership was filed and accepted by the Secretary of State of the State of Delaware; and
WHEREAS, the General Partner proposes to effect an initial offering of its common stock and to contribute the net proceeds of the offering to the Partnership to cause the Partnership to fund (i) certain acquisitions and investments, (ii) working capital requirements, (iii) redemptions of interests in the Partnership, and (iv) repayment of indebtedness incurred under various financing instruments;
NOW, THEREFORE, BE IT RESOLVED, that for good and adequate consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINED TERMS
Section 1.1
Definitions.
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 (6 Del. C. Section 17-101 et seq.), 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 4.4.A.
“Additional Limited Partner” means a Person admitted to the Partnership as a Limited Partner pursuant to Section 12.2 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 fiscal year, after giving effect to the following adjustments:
(i)
such deficit shall be decreased 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)(1); and
(ii)
such deficit shall be increased by the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
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. A positive balance in a Partner’s Capital Account, after giving effect to the adjustments described above in clauses (i) and (ii), is referred to in this Agreement as an “Adjusted Capital Account Balance.”
“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 REIT Shares (or the issuance of the General Partner’s securities exercisable for, convertible into or exchangeable for REIT Shares), then the Adjustment Date shall be as of the close of business on the Business Day last preceding the date of the issuance of such securities.
“Advisor” means Carey Asset Management Corp., a Delaware corporation.
“Advisory Agreement” means that certain Advisory Agreement between the Advisor and the General Partner entered into contemporaneously with this Agreement.
“Affiliate” means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with such Person. Control of any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“Agreed Value” means (i) in the case of any Contributed Property set forth in Exhibit A and as of the time of its contribution to the Partnership, the Agreed Value of such property as set forth in Exhibit A; (ii) in the case of any Contributed Property not set forth in Exhibit A and as of the time of its contribution to the Partnership, the fair market value of such property or other consideration as determined by the General Partner, reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed; and (iii) in the case of any property distributed to a Partner by the Partnership, the fair market value of such property as determined by the General Partner at the time such property is distributed, reduced by any liabilities either assumed by such Partner upon such distribution or to which such property is subject at the time of the distribution as determined under Section 752 of the Code and the Regulations thereunder.
“Agreement” means this Agreement of Limited Partnership, as it may be amended, 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 and the Special 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 property or 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 OP Units have been transferred in a manner permitted under this Agreement, but who has not become a Substituted Limited Partner, and who has the rights set forth in Section 11.5.
“Available Cash” means, with respect to any period for which such calculation is being made, the cash flow generated by Partnership operations and investments as determined in the reasonable discretion of the General Partner, taking into account all cash available for distribution from all sources excluding Capital Proceeds, after the payment of regular debt payments (including, without limitation, regularly
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scheduled payments of interest and amortization, but excluding balloon payments and early prepayment of debt principal) and Operating Expenses of the Partnership (as defined in the Advisory Agreement) but before the payment of distributions to Partners. Notwithstanding the foregoing, the operating cash flow of any entity in which the Partnership owns, directly or indirectly, less than a 100% interest shall be multiplied by the percentage ownership of such entity held, directly or indirectly, by the Partnership.
“Available Cash from Investments” means that portion of Available Cash attributable to Investments (other than Available Cash from Real Estate Securities), as determined by the General Partner in its reasonable discretion.
“Available Cash from Real Estate Securities” means that portion of Available Cash attributable to the Partnership’s investments in readily marketable real estate securities, as determined by the General Partner in its reasonable discretion.
“Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in 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 pursuant to Section 6.3, and the amount of any Partnership liabilities assumed by such Partner or which are secured by any property distributed to such Partner.
(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 Loss and any items in the nature of expenses or losses which are specially allocated pursuant to Section 6.3, 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 (except to the extent already reflected in the amount of such Partner’s Capital Contribution).
(c)
In the event any interest in the Partnership is transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred interest.
(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.
(e)
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, provided that it is not likely to have a material effect on the amounts distributable to any Person pursuant to Article 13 of this Agreement upon the dissolution of the Partnership. The General Partner also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Partners and the amount of Partnership capital
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reflected on the Partnership’s balance sheet, as computed for book purposes, in accordance 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 Section 1.704-1(b) or Section 1.704-2.
“Capital Contribution” means, with respect to any Partner, the amount of money and the initial Gross Asset Value of any property (other than money) contributed to the Partnership by such Partner (net of any liabilities assumed by the Partnership relating to such property and any liability to which such property is subject).
“Capital Proceeds” means the gross receipts received by the Partnership from a Capital Transaction, Change of Control Event or a Listing Event (including any borrowing or other transaction entered into in connection with, or as part of, a Capital Transaction, Change of Control Event or a Listing Event), less any expenses related to the Capital Transaction, Change of Control Event or a Listing Event.
“Capital Transaction” means any transaction outside the ordinary course of the Partnership’s business involving the sale, exchange, other disposition, or refinancing of any Partnership asset.
“Cash Amount” means, with respect to any OP Units subject to a Redemption, an amount of cash equal to the Deemed Partnership Interest Value attributable to such OP Units.
“Certificate” means the Certificate of Limited Partnership relating to the Partnership filed in the office of the Secretary of the State of the State of Delaware, as amended from time to time in accordance with the terms hereof and the Act.
“Change of Control” shall be deemed to have occurred at such time as (i) the date a “person” or “group” (within the meaning of Sections 13(d) and 14(d) of the Exchange Act) becomes the ultimate “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person or group shall be deemed to have beneficial ownership of all shares of voting stock that such person or group has the right to acquire regardless of when such right is first exercisable), directly or indirectly, of voting stock representing more than 50% of the total voting power of the total voting stock of the General Partner; (ii) the date the General Partner sells, transfers or otherwise disposes of all or substantially all of its assets; or (iii) the date of the consummation of a merger or share exchange of the General Partner with another entity where the General Partner’s stockholders immediately prior to the merger or share exchange would not beneficially own, immediately after the merger or share exchange, shares representing 50% or more of all votes (without consideration of the rights of any class of stock to elect directors by a separate group vote) to which all stockholders of the corporation issuing cash or securities in the merger or share exchange would be entitled in the election of directors, or where members of the board of directors of the General Partner immediately prior to the merger or share exchange would not immediately after the merger or share exchange constitute a majority of the board of directors of the corporation issuing cash or securities in the merger or share exchange.
“Change of Control Event” means (i) the date on which another Person acquires more than fifty percent (50%) of the aggregate ordinary voting power represented by the equity securities of the General Partner by purchase or by merger provided that the indirect ownership of the General Partner immediately after the acquisition differs from the direct ownership of the General Partner immediately before the acquisition by more than a
de minimis
amount; or (ii) the date on which the General Partner merges with another Person provided that the ownership of the entity surviving the merger immediately after the merger differs from the ownership of the General Partner immediately before the merger by more than a
de minimis
amount.
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“Charter” means the Articles of Incorporation of the General Partner filed with the State Department of Assessments and Taxation of Maryland on September 7, 2012, as amended or restated from time to time.
“Class” means a class of REIT Shares or OP Units, as the context may require.
“Class A REIT Shares” means the REIT Shares classified as “Class A” shares in the Charter.
“Class A OP Unit” means an OP Unit entitling the holder thereof to the rights of a holder of a Class A OP Unit as provided in this Agreement.
“Class C REIT Shares” means the REIT Shares classified as “Class C” shares in the Charter.
“Class C OP Unit” means an OP Unit entitling the holder thereof to the rights of a holder of a Class C OP Unit as provided in this Agreement.
“Code” means the Internal Revenue Code of 1986, as amended from time to time or any successor statute thereto. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law.
“Consent” means the consent to, approval of, or vote on a proposed action by a Partner given in accordance with Article 14.
“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 Percentage Interests that in the aggregate are equal to or greater than fifty percent (50%) of the aggregate Percentage Interests 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 under the constructive ownership rules described in the Charter.
“Contributed Property” means each property or other asset, in such form as may be permitted by the Act, but excluding cash, contributed or deemed contributed to the Partnership.
“Debt” means, as to any Person, as of any date of determination, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services; (ii) all amounts owed by such Person to banks or other Persons in respect of reimbursement obligations under letters of credit, surety bonds, guarantees and other similar instruments guaranteeing payment or other performance of obligations by such Person; (iii) all indebtedness for borrowed money or for the deferred purchase price of property or services secured by any lien on any property owned by such Person, to the extent attributable to such Person’s interest in such property, even though such Person has not assumed or become liable for the payment thereof; and (iv) lease obligations of such Person which, in accordance with generally accepted accounting principles, should be capitalized.
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“Deemed Partnership Interest Value” means, as of any date with respect to any class of Partnership Interests, the Deemed Value of the Partnership Interests of such class multiplied by the Partner’s relative Percentage Interest of such class.
“Deemed Value of the Partnership Interests” means, as of any date with respect to any class or series of Partnership Interests, (i) the total number of OP Units of the General Partner issued and outstanding as of the close of business on such date multiplied by the Fair Market Value determined as of such date of a share of common stock of the General Partner which corresponds to such Partnership Interest, as adjusted (x) pursuant to Section 7.5 (in the event the General Partner acquires material assets, other than on behalf of the Partnership) and (y) for stock dividends and distributions, stock splits and subdivisions, reverse stock splits and combinations, distribution of warrants or options and distributions of evidences of indebtedness or assets not received by the General Partner pursuant to a pro rata distribution by the Partnership; (ii) divided by the Percentage Interest of the General Partner on such date;
provided
, that if no outstanding shares of capital stock of the General Partner correspond to a class or series of Partnership Interests, the Deemed Value of the Partnership Interests with respect to such class or series shall be equal to an amount reasonably determined by the General Partner.
“Depreciation” means, for each fiscal year or other period, an amount equal to the depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such year or other period, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis;
provided, however
, that if the federal income tax depreciation, amortization or other cost recovery deduction for such year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the General Partner.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder and any successor statute thereto.
“Fair Market Value” means, with respect to any share of capital stock of the General Partner, (i) if such shares are listed or admitted to trading on any securities exchange or automated quotation system, the average of the daily market price for the ten (10) consecutive trading days immediately preceding the date with respect to which “Fair Market Value” must be determined hereunder or, if such date is not a Business Day, the immediately preceding Business Day, using as the market price for each such trading day the closing price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices on such day, or (ii) if such shares are not listed or admitted to trading on any securities exchange or automated quotation system, the price at which such shares are then being offered to the public pursuant to any public offering of the General Partner or pursuant to its distribution reinvestment plan (before giving effect to any discounts in effect and made available to participants in such plan);
provided
that, if there is no ongoing public offering or if the General Partner is not then offering its shares pursuant to a distribution reinvestment plan, the Fair Market Value of such shares shall be determined by the General Partner acting in good faith on the basis of the most recent, publicly reported net asset value of the General Partner and other information as it considers, in its reasonable judgment, appropriate. In the event the REIT Shares Amount for such shares includes rights that a holder of such shares would be entitled to receive, then the Fair Market Value of such rights shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate; and provided, further that, in connection with
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determining the Deemed Value of the Partnership Interests for purposes of determining the number of additional OP Units issuable upon a Capital Contribution funded by an underwritten public offering of shares of capital stock of the General Partner, the Fair Market Value of such shares shall be the public offering price per share of such class of capital stock sold. Notwithstanding the foregoing, the General Partner in its reasonable discretion may use a different “Fair Market Value” for purposes of making the determinations under subparagraph (b) of the definition of “Gross Asset Value” and Section 4.4.D in connection with the contribution of Property or cash to the Partnership by a third party, provided such value shall be based upon the value per REIT Share (or per OP Unit) agreed upon by the General Partner and such third party for purposes of such contribution.
“General Partner Interest” means a Partnership Interest held by the General Partner. A General Partner Interest may be expressed as a number of OP Units.
“General Partner Net Current Investment” means the General Partner’s total Capital Contributions then paid to the Partnership, plus the amount of any Partnership liabilities assumed by the General Partner (or which are secured by Partnership property distributed to the General Partner), less (i) the amount of any liabilities of the General Partner assumed by the Partnership (or which are secured by property contributed by the General Partner to the Partnership), (ii) all amounts actually distributed to the General Partner pursuant to Section 5.1.B(2), and (iii) all amounts representing a return of capital to the General Partner, including, but not limited to, the portion of any redemption proceeds distributed to the General Partner pursuant to Section 11.8 which represents a return of capital to the General Partner.
“General Partner Priority Return” means an amount equal to six percent (6%) per annum of the Weighted Average General Partner Net Current Investment, payable to the General Partner annually on a cumulative basis.
“General Partner Unpaid Priority Return” means the excess, if any, of the General Partner Priority Return over all amounts previously paid to the General Partner under Section 5.1.A, or paid in respect of the General Partner Priority Return under Section 5.1.B(1) as of the time in question.
“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 attached hereto, 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 initial Capital Contribution which shall be determined as set forth on Exhibit A, the determination of the fair market value of the contributed asset shall be determined (i) by the price paid by the General Partner if the asset is acquired by the General Partner contemporaneously with its contribution to the Partnership, (ii) by Appraisal, if otherwise acquired by the General Partner, (iii) by the amount of cash if the asset is cash, and (iv) as reasonably determined by the General Partner if the asset is REIT Shares or other shares of capital stock of the General Partner.
(b)
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 Deemed Value of the Partnership Interests of all classes of Partnership Interests then outstanding, regardless of the method of valuation adopted by the General Partner, immediately prior to the times listed below:
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(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 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);
(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; and
(v)
in connection with the grant of an interest in the Partnership (other than a
de minimis
interest) as consideration for the provision of services to or for the benefit of the Partnership by an existing Partner acting in a partner capacity or by a new Partner acting in a partner capacity or in anticipation of becoming a Partner.
(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), 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 Loss.
“Immediate Family Member” 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 (whether natural, adopted or by marriage), siblings and grandchildren and any trust or estate, all of the beneficiaries of which consist of such Person or such Person’s spouse or former spouse, parents, parents-in-law, children, siblings or grandchildren.
“Incapacity” or “Incapacitated” means, (i) as to any individual Partner, death, total physical disability or entry by a court of competent jurisdiction adjudicating him or her incompetent to manage his or her Person or his or her estate; (ii) as to any corporation which is a Partner, the filing of a certificate of dissolution, or its equivalent, for the corporation or the revocation of its charter; (iii) as to any partnership which is a Partner, the dissolution and commencement of winding up of the partnership; (iv) as to any estate which is a Partner, the distribution by the fiduciary of the estate’s entire interest in the Partnership; (v) as to any trustee of a trust which is a Partner, the termination of the trust (but not the substitution of a
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new trustee); or (vi) as to any Partner, the bankruptcy of such Partner. For purposes of this definition, bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner commences a voluntary proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect, (b) the Partner is adjudged as bankrupt or insolvent, or a final and nonappealable order for relief under any bankruptcy, insolvency or similar law now or hereafter in effect has been entered against the Partner, (c) the Partner executes and delivers a general assignment for the benefit of the Partner’s creditors, (d) the Partner files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Partner in any proceeding of the nature described in clause (b) above, (e) the Partner seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator for the Partner or for all or any substantial part of the Partner’s properties, (f) any proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect has not been dismissed within 120 days after the commencement thereof, (g) 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 (h) an appointment referred to in clause (g) is not vacated within 90 days after the expiration of any such stay.
“Indemnitee” means (i) 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 (A) the General Partner or (B) a director, officer or employee of the Partnership or the General Partner, and (ii) such other Persons (including Affiliates of the General Partner or the Partnership) as the General Partner may designate from time to time (whether before or after the event giving rise to potential liability), in its sole and absolute discretion.
“Investments” means investments made by the Partnership, directly or indirectly, in a Property, Loan or Other Permitted Investment Asset.
“IRS” means the United States Internal Revenue Service.
“Limited Partner” means any Person named as a Limited Partner in Exhibit A attached hereto, as such Exhibit may be amended from time to time, or any Substituted Limited Partner or Additional Limited Partner, in such Person’s capacity as a Limited Partner in the Partnership.
“Limited Partner Interest” means a Partnership Interest of a Limited Partner representing a fractional part of the Partnership Interests of all Limited Partners and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. A Limited Partner Interest may be expressed as a number of OP Units.
“Liquidating Event” shall have the meaning set forth in Section 13.1.
“Liquidator” shall have the meaning set forth in Section 13.2.A.
“Listing Event” means the date on which the REIT Shares are first listed on a national securities exchange or admitted for trading in an automated quotation system.
“Listed Market Value” means the average closing price of the REIT Shares as reported by the primary securities exchange or automated quotations system in which such securities are then listed or admitted to trading for the thirty (30) trading days beginning with the first trading day after the one hundred and eightieth (180
th
) day after such securities are first listed or admitted to trading;
provided, however
, that if no sales take place on any of such thirty (30) days, the average of the closing bid and asked prices on such day shall be used.
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“Loans” means notes and other evidences of indebtedness or obligations acquired, originated or entered into, directly or indirectly, by the Partnership as lender, noteholder, participant, note purchaser or other capacity, including but not limited to first or subordinate mortgage loans, construction loans, development loans, loan participations, loans secured by capital stock or any other assets or form of equity interest and any other type of loan or financial arrangement, such as providing or arranging for letters of credit, providing guarantees of obligations to third parties, or providing commitments for loans. Loans shall not include leases which are not recognized as leases for federal income tax reporting purposes.
“Majority in Interest of the Limited Partners” means Limited Partners holding in the aggregate Percentage Interests that are greater than fifty percent (50%) of the aggregate Percentage Interests of all Limited Partners.
“Net Income” or “Net Loss” means for each fiscal year of the Partnership, an amount equal to the Partnership’s taxable income or loss for such fiscal year, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:
(a)
Any income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Net Income or Net Loss pursuant to this definition of Net Income or Net Loss shall be added to such taxable income or loss;
(b)
Any expenditures of the Partnership described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net Income or Net Loss pursuant to this definition of Net Income or Net Loss shall be subtracted from such taxable income or loss;
(c)
In the event the Gross Asset Value of any Partnership asset is adjusted pursuant to subparagraph (b) or subparagraph (c) of the definition of Gross Asset Value, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Net Income or Net Loss;
(d)
Gain or loss resulting from any disposition of property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value;
(e)
In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such fiscal year;
(f)
To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Partner’s interest in the Partnership, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Net Income or Net Loss; and
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(g) Notwithstanding any other provision of this definition of Net Income or Net Loss, any items which are specially allocated pursuant to Section 6.3 shall not be taken into account in computing Net Income or Net Loss. The amounts of the items of Partnership income, gain, loss, or deduction available to be specially allocated pursuant to Section 6.3 shall be determined by applying rules analogous to those set forth in this definition of Net Income or Net Loss.
“Net Income from a Capital Transaction” means that portion of Net Income attributable to a Capital Transaction.
“Net Income from Investments” means that portion of Net Income attributable to Investments (other than Net Income from Real Estate Securities), as determined by the General Partner in its reasonable discretion.
“Net Income from Real Estate Securities” means that portion of Net Income attributable to the Partnership’s investments in readily marketable real estate securities, as determined by the General Partner in its reasonable discretion.
“Net Loss from a Capital Transaction” means that portion of Net Loss attributable to a Capital Transaction.
“New Securities” means (i) any rights, options, warrants or convertible or exchangeable securities having the right to subscribe for or purchase REIT Shares or other shares of common stock of the General Partner, or (ii) any Debt issued by the General Partner that provides any of the rights described in clause (i).
“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 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).
“Notice of Redemption” means the Notice of Redemption substantially in the form of Exhibit B to this Agreement.
“OP Unit” means a fractional share of the Partnership Interests of all Partners issued pursuant to Article 4, including Class A OP Units and Class C OP Units. The allocation of OP Units of each Class among the Partners shall be as set forth on Exhibit A, as such Exhibit may be amended from time to time.
“Other Permitted Investment Asset” means assets, other than cash, cash equivalents, short term bonds, auction rate securities and similar short term investments, acquired by the Partnership for investment purposes that is not a Loan or a Property and is consistent with the investment objectives and policies of the Partnership.
“Partner” means a General Partner, a Special General Partner, or a Limited Partner, and “Partners” means the General Partner, the Special 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).
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“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 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 this Agreement, and any successor thereto.
“Partnership Interest” means, an ownership interest in the Partnership of either a Limited Partner, the Special General 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 may be one or more classes or series of Partnership Interests as provided in Section 4.4. Except as otherwise provided for in this Agreement, a Partnership Interest may be expressed as a number of OP Units.
“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 Year shall be determined in accordance with the rules of Regulations Section 1.704-2(d).
“Partnership Record Date” means the record date established by the General Partner for the distribution of Available Cash pursuant to Section 5.1 which record date shall be the same as the record date established by the General Partner for a distribution to its stockholders of some or all of its portion of such distribution.
“Partnership Year” means the fiscal year of the Partnership, which shall be the calendar year.
“Percentage Interest” means, as to a Partner holding a class or series of Partnership Interests, its interest as determined, as of the first day of each Partnership Year, by dividing such Partner’s Adjusted Capital Account Balance by aggregate Adjusted Capital Account Balances of all Partners. For purposes of the preceding sentence, the Adjusted Capital Account Balances of the Partners shall be determined after giving effect to all allocations of Net Income and Net Loss for all preceding Partnership Years, including allocations of Net Income and Net Loss resulting from adjustments to the Gross Asset Value of the Partnership’s assets pursuant to the definition of Gross Asset Value.
“Person” means an individual, corporation, partnership, limited liability company, trust, unincorporated organization, association or other entity.
“Plan Asset Regulation” means the regulations promulgated by the United States Department of Labor in Title 29, Code of Federal Regulations, Part 2510, Section 101.3, and any successor regulations thereto.
“Pledge” shall have the meaning set forth in Section 11.3.A.
“Property” or “Properties” means a partial or entire interest in real property (including leasehold interests) and personal or mixed property connected therewith. An Investment which obligates the Partnership to acquire a Property will be treated as a Property for purposes of this Agreement.
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“Qualifying Party” means (a) an Additional Limited Partner; (b) an Immediate Family Member, or a lending institution as the pledgee of a Pledge, who is the transferee in a permitted transfer pursuant to Section 11.3; or (c) a Substituted Limited Partner succeeding to all or part of the Limited Partner Interest of (i) an Additional Limited Partner or (ii) an Immediate Family Member, or a lending institution who is the pledgee of a Pledge, who is the transferee in a permitted transfer pursuant to Section 11.3.
“Qualified REIT Subsidiary” means any Subsidiary of the General Partner that is a “qualified REIT subsidiary” within the meaning of Section 856(i) of the Code.
“Qualified Transferee” means an “Accredited Investor” as such term is defined in Rule 501 promulgated under the Securities Act.
“Redemption” shall have the meaning set forth in Section 8.6.A.
“Regulations” means the Treasury 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 6.3.
“REIT” means a real estate investment trust, as defined under Sections 856 through 860 of the Code.
“REIT Requirements” shall have the meaning set forth in Section 5.1.
“REIT Share” means a share of common stock, par value $0.001 per share, of the General Partner, including Class A REIT Shares and Class C REIT Shares.
“REIT Shares Amount” means, with respect to Tendered Units of a Class, as of any date, an aggregate number of the corresponding Class of REIT Shares equal to the number of Tendered Units of such Class, as adjusted (x) pursuant to Section 7.5 (in the event the General Partner acquires material assets, other than on behalf of the Partnership) and (y) for stock dividends and distributions, stock splits and subdivisions, reverse stock splits and combinations, distributions of rights, warrants or options, and distributions of evidences of indebtedness or assets relating to assets not received by the General Partner pursuant to a pro rata distribution by the Partnership.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder and any successor statute thereto.
“Special Fees” means fees or expenses that are required or intended to be borne entirely or disproportionately by one or more particular Classes of OP Units, including but not limited to, selling commissions, dealer manager fees and distribution and shareholder servicing fees.
“Special General Partner Interest” means a Partnership Interest held by the Special General Partner. A Special General Partner Interest may be expressed as a number of OP Units, but only to the extent that the Special General Partner makes Capital Contributions to the Partnership.
“Specified Redemption Date” means the day of receipt by the General Partner of a Notice of Redemption.
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“Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, joint venture or other entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests is owned, directly or indirectly, by such Person.
“Subsidiary Partnership” means any partnership or limited liability company that is a Subsidiary of the Partnership.
“Substituted Limited Partner” means a Person who is admitted as a Limited Partner to the Partnership pursuant to Section 11.4.
“Tax Items” shall have the meaning set forth in Section 6.4.A.
“Tenant” means any tenant from which the General Partner derives rent either directly or indirectly through partnerships, including the Partnership, or Qualified REIT Subsidiaries.
“Tendered Units” shall have the meaning set forth in Section 8.6.A.
“Tendering Partner” shall have the meaning set forth in Section 8.6.A.
“Weighted Average General Partner Net Current Investment” means the annual average balance of the General Partner Net Current Investment computed on a daily basis.
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 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 CPA:18 Limited Partnership. 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 Registered Office and Agent; Principal Office.
The name and address of the registered office and registered agent of the Partnership is Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, DE 19808. The principal office of the Partnership is located at 50 Rockefeller Plaza, New York, New York 10020, or such other place as the General Partner may from time to time designate by notice to the other Partners. The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the General Partner deems advisable.
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Section 2.4 Power of Attorney.
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 Limited 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 or 13 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 or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, in recognition of the fact that each of the Partners will be relying upon the power of the General Partner and any Liquidator to act as contemplated by this Agreement in any filing or other action by it on behalf of the Partnership, and it shall survive and not be affected by the subsequent Incapacity of any Limited Partner or Assignee and the transfer of all or any portion of such Limited Partner’s or Assignee’s OP Units and shall extend to such Limited Partner’s or Assignee’s heirs, successors, assigns and personal representatives. Each such Limited Partner or Assignee hereby agrees to be bound by any representation made by the General Partner or any Liquidator, acting in good faith pursuant to such power of attorney; and each such Limited Partner or Assignee hereby waives any and all defenses which may be available to contest, negate or disaffirm the action of the General Partner or any Liquidator, taken in good faith under such power of attorney. Each Limited 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 the case may be, deems necessary to effectuate this Agreement and the purposes of the Partnership.
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Section 2.5 Term.
The term of the Partnership commenced on the date of its formation and the Partnership shall have a perpetual existence unless it is dissolved pursuant to the provisions of Article 13 or as otherwise provided by law.
ARTICLE 3
PURPOSE
Section 3.1 Purpose and Business.
The purpose and nature of the business to be conducted by the Partnership is to (i) conduct any business that may be lawfully conducted by a limited partnership organized pursuant to the Act, (ii) enter into any partnership, joint venture or other similar arrangement to engage in any business described in the foregoing clause (i) or to own interests in any entity engaged, directly or indirectly, in any such business and (iii) do anything necessary or incidental to the foregoing, provided, however, that such business shall be limited to and conducted in such a manner as to permit the General Partner at all times to be classified as a REIT for federal income tax purposes, unless the General Partner ceases to qualify as a REIT for reasons other than the conduct of the business of the Partnership. In connection with the foregoing, and without limiting the General Partner’s right in its sole discretion to cease qualifying as a REIT, the Limited Partners acknowledge that the General Partner’s current status as a REIT inures to the benefit of all the Limited Partners and not solely the General Partner.
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, grant guarantees and/or indemnities, acquire, own, manage, improve and develop real property, and lease, sell, transfer and dispose of real property;
provided, however
, notwithstanding anything to the contrary in this Agreement, the Partnership shall not take, or 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) absent the consent of the General Partner, which may be given or withheld in its sole and absolute discretion, could subject the General Partner to any taxes under Section 857 or Section 4981 of the Code, or (iii) could violate any law or regulation of any governmental body or agency having jurisdiction over the General Partner or its securities, unless any such action (or inaction) under the foregoing clauses (i), (ii) or (iii) shall have been specifically consented to by the General Partner in writing.
Section 3.3 Partnership only for Purposes Specified.
The Partnership shall be a partnership only for the purposes specified in Section 3.1, and this Agreement shall not be deemed to create a partnership among the Partners with respect to any activities whatsoever other than the activities within the purposes of the Partnership as specified in Section 3.1. Except as otherwise provided in this Agreement, no Partner shall have any authority to act for, bind, commit or assume any obligation or responsibility on behalf of the Partnership, its properties or any other Partner. No Partner, in its capacity as a Partner under this Agreement, shall be responsible or liable for any indebtedness or obligation of another Partner, nor shall the Partnership be responsible or liable for
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any indebtedness or obligation of any Partner, incurred either before or after the execution and delivery of this Agreement by such Partner, except as to those responsibilities, liabilities, indebtedness or obligations incurred pursuant to and as limited by the terms of this Agreement and the Act.
Section 3.4 Representations and Warranties by the Parties.
A. Each Partner that is an individual represents and warrants to each other Partner that (i) such Partner has the legal capacity to enter into this Agreement and perform such Partner’s obligations hereunder, (ii) the consummation of the transactions contemplated by this Agreement to be performed by such Partner will not result in a breach or violation of, or a default under, any agreement by which such Partner or any of such Partner’s property is or are bound, or any statute, regulation, order or other law to which such Partner is subject, (iii) such Partner is a “United States person” within the meaning of Section 7701(a)(30) of the Code, and (iv) this Agreement is binding upon, and enforceable against, such Partner in accordance with its terms.
B. Each Partner that is not an individual represents and warrants to each other Partner that (i) its execution and delivery of this Agreement and all transactions contemplated by this Agreement to be performed by it have been duly authorized by all necessary action, including without limitation, that of its general partner(s), committee(s), trustee(s), beneficiaries, directors and/or stockholder(s), as the case may be, as required, (ii) 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 or bylaws, as the case may be, any agreement by which such Partner or any of such Partner’s properties or any of its partners, beneficiaries, trustees or stockholders, as the case may be, is or are bound, or any statute, regulation, order or other law to which such Partner or any of such Partner’s properties or any of its partners, trustees, beneficiaries or stockholders, as the case may be, is or are subject, (iii) such Partner is a “United States person” within the meaning of Section 7701(a)(30) of the Code and (iv) this Agreement is binding upon, and enforceable against, such Partner in accordance with its terms.
C. 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 to be a highly speculative and illiquid investment. Each Partner represents, warrants and agrees that such Partner is an “accredited investor” (as such term is defined in Rule 501(a) of Regulation D under the Securities Act).
D. Each Partner acknowledges that (i) the OP Units (and any REIT Shares that might be exchanged therefor) have not been registered under the Securities Act and may not be transferred unless they are subsequently registered under the Securities Act or an exemption from such registration is available (it being understood that the Partnership has no intention of so registering the OP Units), (ii) a restrictive legend in the form set forth in Exhibit C shall be placed on the certificates representing the OP Units, and (iii) a notation shall be made in the appropriate records of the Partnership indicating that the OP Units are subject to restrictions on transfer.
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E. Each Limited Partner further represents, warrants, covenants and agrees as follows:
(1) Except as provided in Exhibit D, at any time such Partner actually or Constructively Owns a 25% or greater capital interest or profits interest in the Partnership, 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.
(2) Except as provided in Exhibit E, at any time such Partner actually or Constructively Owns a 25% or greater capital interest or profits interest in the Partnership, it does not, and agrees that it will not without the prior written consent of the General Partner, actually own or Constructively Own, any stock in the General Partner, other than any REIT Shares or other shares of capital stock of the General Partner such Partner may acquire as a result of an exchange of Tendered Units pursuant to Section 8.6, subject to the ownership limitations set forth in the General Partner’s Charter.
(3) Upon request of the General Partner, it will disclose to the General Partner the amount of REIT Shares or other shares of capital stock 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 E(1) or (2) above are violated, or (b) the Partnership’s actual or Constructive Ownership of REIT Shares or other shares of capital stock of the General Partner violates the limitations set forth in the Charter, then (x) some or all of the Redemption rights of the Partners may become non-exercisable, and (y) some or all of the REIT Shares owned by the Partners may be automatically transferred to a trust for the benefit of a charitable beneficiary, as provided in the Charter.
(5) Without the consent of the General Partner, which may be given or withheld in its sole discretion, no Partner shall take any action that would cause the Partnership at any time to have more than 100 partners (including as partners those persons indirectly owning an interest in the Partnership through a partnership, limited liability company, S corporation or grantor trust (such entity, a “flow through entity”), but only if substantially all of the value of such person’s interest in the flow through entity is attributable to the flow through entity’s interest (direct or indirect) in the Partnership).
F. The representations and warranties contained in Section 3.4 shall survive the execution and delivery of this Agreement by each Partner and the dissolution and winding-up of the Partnership.
G. 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.
Section 3.5 Certain ERISA Matters.
Each Partner acknowledges that the Partnership is intended to qualify as a “real estate operating company” (as such term is defined in the Plan Asset Regulation). The General Partner may structure
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investments in, relationships with and conduct with respect to Investments and any other assets of the Partnership so that the Partnership will be a “real estate operating company” (as such term is defined in the Plan Asset Regulation).
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners.
At the time of their respective execution of this Agreement, the Partners shall make or shall have made Capital Contributions as set forth in Exhibit A to this Agreement. The Partners shall own OP Units of the class or series and in the amounts set forth in Exhibit A and shall have a Percentage Interest in the Partnership as set forth in Exhibit A, which Percentage Interest shall be adjusted in Exhibit A from time to time by the General Partner to the extent necessary to reflect accurately exchanges, redemptions, Capital Contributions, the issuance of additional OP Units or similar events having an effect on a Partner’s Percentage Interest. Except as required by law, as otherwise provided in Sections 4.4, 4.5 and 10.5, or as otherwise agreed to by a Partner and the Partnership, no Partner shall be required or permitted to make any additional Capital Contributions or loans to the Partnership.
Section 4.2 Classes of OP Units.
The General Partner is hereby authorized to cause the Partnership to issue OP Units designated as Class A OP Units and Class C OP Units. Each such Class shall have the rights and obligations attributed to that Class under this Agreement.
Section 4.3 Loans by Third Parties.
Subject to Section 4.4, 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 Investments) with any Person that is not the General Partner upon such terms as the General Partner determines 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 its sole discretion.
Section 4.4 Additional Funding and Capital Contributions.
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 Investments 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 Section 4.4. 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 4.4.
B.
Issuance of Additional Partnership Interests
. The General Partner, in its sole and absolute discretion, may raise all or any portion of the Additional Funds by accepting additional Capital Contributions of cash. The General Partner may also accept additional Capital Contributions of real property or any other non-cash assets. 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 OP 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
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rights, powers, and duties senior to then existing Limited Partner Interests, all as shall be determined by the General Partner in its sole and absolute discretion subject to Delaware law, and as set forth by amendment to this Agreement, including without limitation, (i) the allocations of items of Partnership income, gain, loss, deduction, and credit to such class or series of Partnership Interests; (ii) the right of each such class or series of Partnership Interests to share in Partnership distributions; (iii) the rights of each such class or series of Partnership Interests upon dissolution and liquidation of the Partnership; and (iv) the right to vote, including, without limitation, the Limited Partner approval rights set forth in Section 11.2.A;
provided
, that no such additional OP Units or other Partnership Interests shall be issued to the General Partner unless either (a)(1) the additional Partnership Interests are issued in connection with the grant, award, or issuance of shares of the General Partner pursuant to Section 4.4.C 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 4.4.B, and (2) the General Partner shall make a Capital Contribution to the Partnership in an amount equal to the net proceeds raised in connection with such issuance, or (b) the additional Partnership Interests are issued to all Partners holding Partnership Interests in the same class in proportion to their respective Percentage Interests in such class. The General Partner’s determination that consideration is adequate shall be conclusive insofar as the adequacy of consideration relates to whether the Partnership Interests are validly issued and paid. In the event that the Partnership issues additional Partnership Interests pursuant to this Section 4.4.B, the General Partner shall make such revisions to this Agreement (including but not limited to the revisions described in Section 5.4 and Section 8.6) as it determines are necessary to reflect the issuance of such additional Partnership Interests. Without limiting the foregoing, the General Partner is expressly authorized to cause the Partnership to issue OP Units for less than fair market value, so long as the General Partner concludes in good faith that such issuance of Partnership Interests is in the best interests of the Partnership.
C.
Issuance of REIT Shares or Other Securities by the General Partner
. The General Partner shall not issue any additional REIT Shares, other shares of capital stock of the General Partner or New Securities (other than REIT Shares issued pursuant to Section 8.6 or such shares, stock or securities pursuant to a dividend or distribution (including any stock split) to all of its stockholders or all of its stockholders who hold a particular class of stock of the General Partner) unless (i) the General Partner shall cause the Partnership to issue to the General Partner, Partnership Interests or rights, options, warrants or convertible or exchangeable securities of the Partnership having designations, preferences and other rights, all such that the economic interests thereof are substantially similar to those of the REIT Shares, other shares of capital stock of the General Partner or New Securities issued by the General Partner and (ii) the General Partner shall make a Capital Contribution of the net proceeds from the issuance of such additional REIT Shares, other shares of capital stock 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. Without limiting the foregoing, the General Partner is expressly authorized to issue REIT Shares of any Class (or combination of any Class), other shares of capital stock of the General Partner or New Securities for no tangible value or for less than fair market value, and the General Partner is expressly authorized to cause the Partnership to issue to the General Partner Partnership Interests of the corresponding Class, so long as (x) the General Partner concludes in good faith that such issuance of Partnership Interests is in the interests of the Partnership; and (y) the General Partner contributes all proceeds, if any, from such issuance and exercise to the Partnership. In connection with the General Partner’s initial offering of REIT Shares, any other issuance of REIT Shares, other capital stock of the General Partner or New Securities, the General Partner shall contribute to the Partnership, any net proceeds raised in connection with such issuance;
provided
, that the General Partner may use a portion of the net proceeds from any offering to acquire OP Units or other assets (provided such other assets are contributed to the Partnership pursuant to the terms of this Agreement; and provided further that if the net proceeds actually received by the General Partner are less than the gross proceeds of such issuance as a result of any underwriter’s discount or other
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expenses paid or incurred in connection with such issuance then, except to the extent such net proceeds are used to acquire OP Units, the General Partner shall be deemed to have made a Capital Contribution to the Partnership in the amount equal to the sum of the net proceeds of such issuance plus the amount of such underwriter’s discount and other expenses paid by the General Partner (which discount and expense shall be treated as an expense for the benefit of the Partnership for purposes of Section 7.4)).
D.
Percentage Interest Adjustments in the Case of Capital Contributions for OP Units
. Upon the acceptance of additional Capital Contributions in exchange for OP Units, the Percentage Interest in such OP Units shall be equal to a fraction, the numerator of which is equal to the amount of cash and the Agreed Value of the Property contributed as of the time such additional Capital Contributions are made (i.e., the Adjustment Date) and the denominator of which is equal to the sum of (i) the Deemed Value of the Partnership Interests of such class or series (computed as of the Business Day immediately preceding the Adjustment Date) and (ii) the aggregate Agreed Value of additional Capital Contributions contributed by all Partners and/or third parties to the Partnership on such Adjustment Date in such class or series of Partnership Interests. The Percentage Interest of each other Partner holding Partnership Interests of such class or series not making a full pro rata Capital Contribution shall be adjusted to equal a fraction, the numerator of which is equal to the sum of (i) the Deemed Partnership Interest Value of such Limited Partner in respect of such class or series (computed as of the Business Day immediately preceding the Adjustment Date) and (ii) the Agreed Value of additional Capital Contributions, if any, made by such Partner to the Partnership in such class or series of Partnership Interests as of such Adjustment Date, and the denominator of which is equal to the sum of (i) the Deemed Value of the Partnership Interests of such class or series (computed as of the Business Day immediately preceding the Adjustment Date), plus (ii) the aggregate Agreed Value of additional Capital Contributions contributed by all Partners and/or third parties to the Partnership on such Adjustment Date in such class or series. Provided, however, solely for purposes of calculating a Partner’s Percentage Interest pursuant to this Section 4.4.D, (i) in the case of cash Capital Contributions by the General Partner funded by an offering of REIT Shares or other shares of capital stock of the General Partner and (ii) in the case of the contribution of properties by the General Partner which were acquired by the General Partner in exchange for REIT Shares or other shares of capital stock of the General Partner immediately prior to such contribution, the General Partner shall be issued a number of OP Units equal and corresponding to the number of such shares issued by the General Partner in exchange for such cash or Investments, the OP Units held by the other Partners shall not be adjusted, and the Partners’ Percentage Interests shall be adjusted accordingly. The General Partner shall promptly give each Partner written notice of its Percentage Interest, as adjusted.
E.
Reinvestment of Special General Partner Distributions
. The Special General Partner, in its sole and absolute discretion, may elect, on an annual basis, to reinvest all, or any portion, of the distributions of Available Cash and Capital Proceeds it receives under Section 5.1 in the Partnership in exchange for the issuance of OP Units. If the Special General Partner elects to reinvest any portion of Available Cash and Capital Proceeds distributed to the Special General Partner under this Agreement, the Special General Partner shall be treated no differently than any Limited Partner making a Capital Contribution to the Partnership under Section 4.4.
Section 4.5 Other Contribution Provisions.
With the consent of the General Partner, in its sole discretion, one or more Limited Partners may enter into agreements with the Partnership, in the form of a guarantee or contribution agreement, which have the effect of providing a guarantee of certain obligations of the Partnership.
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Section 4.6
No Preemptive Rights.
Except to the extent expressly granted by the Partnership pursuant to another agreement, no Person shall have any preemptive, preferential or other similar right with respect to (i) providing funds to the Partnership or (ii) issuance or sale of any OP Units or other Partnership Interests.
Section 4.7
No Interest; No Return.
No Partner shall be entitled to interest on its Capital Contribution or on such Partner’s Capital Account. Except as provided herein or by law, no Partner shall have any right to demand or receive the return of its Capital Contribution from the Partnership.
Section 4.8
Profits Interest of Special General Partner.
To the extent that the Special General Partner receives a Partnership Interest with a disproportionate interest in Partnership Net Income or Net Loss, such Partnership Interest shall be treated as a “profits interest” received for services rendered, or to be rendered, within the meaning of IRS Rev. Proc. 93-27, 1993-2 C.B. 343.
Section 4.9
Special Fees.
The Partners acknowledge and agree that the following Special Fees shall be borne by the Classes of OP Units as follows:
7.00% selling commission for each Class A OP Unit
1.50% selling commission for each Class C OP Unit
3.00% dealer manager fee for each Class A OP Unit
2.25% dealer manager fee for each Class C OP Unit
1.00% annual distribution and shareholder servicing fee for each Class C OP Unit (other than Class C OP Units issued in connection with Class C REIT Shares purchased through the General Partner’s distribution and reinvestment plan)
ARTICLE 5
DISTRIBUTIONS
Section 5.1
Requirement and Characterization of Distributions.
The General Partner shall cause the Partnership to distribute at least quarterly all, or such portion as the General Partner may in its discretion determine, Available Cash and Capital Proceeds generated by the Partnership to the Partners who are Partners on the applicable Partnership Record Date with respect to such distribution, in the following order and priority:
A.
Available Cash
.
(1)
First, Available Cash from Investments shall be distributed ten percent (10%) to the Special General Partner, and ninety percent (90%) to the Partners in proportion to their respective Percentage Interests; and
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(2)
Second, Available Cash from Real Estate Securities shall be distributed one hundred percent (100%) to the Partners in proportion to their respective Percentage Interests.
B.
Distribution of Capital Proceeds
. Subject to Section 5.1.C, Section 5.1.D and Section 13.2, distributions of Capital Proceeds shall be made as follows:
(1)
First, Capital Proceeds shall be distributed one hundred percent (100%) to the General Partner until the General Partner has received distributions under this Section 5.1.B(1) equal to the General Partner Unpaid Priority Return;
(2)
Second, Capital Proceeds shall be distributed one hundred percent (100%) to the General Partner until the General Partner Net Current Investment has been reduced to zero; and
(3)
Third, any remaining Capital Proceeds shall be distributed fifteen percent (15%) to the Special General Partner and eighty-five percent (85%) to the Partners in proportion to their respective Percentage Interests.
Notwithstanding any other provision of this Article 5 to the contrary, 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, for so long as the General Partner has determined to qualify as a REIT, to pay stockholder dividends that will (a) satisfy the requirements for qualifying as a REIT under the Code and Regulations (“REIT Requirements”), and (b) except to the extent otherwise determined by the General Partner, avoid the imposition of any federal income or excise tax liability on the General Partner.
C.
Distribution of Capital Proceeds – Listing Event
. As soon as possible following the determination of the Listed Market Value following a Listing Event, the General Partner shall cause the Partnership to make a special distribution of Capital Proceeds to the Special General Partner in an amount equal to the Capital Proceeds distributable solely to the Special General Partner under Section 5.1.B if the Partnership sold all of its assets on the date of the Listing Event for its Listed Market Value and distributed the net proceeds from such sale to the Partners pursuant to Section 5.1.B. To avoid duplicating distributions to the Special General Partner, the General Partner shall take into account distributions made to the Special General Partner pursuant to this Section 5.1.C in determining the appropriate amount of any subsequent distributions of Capital Proceeds to the Special General Partner under Section 5.1.B(3) and Section 5.1.D.
D.
Distribution of Capital Proceeds – Change of Control Event
. As soon as possible following the occurrence of a Change of Control Event, the General Partner, or its successor in interest, shall cause the Partnership, or its successor in interest, to make a special distribution of Capital Proceeds to the Special General Partner in an amount equal to the Capital Proceeds distributable solely to the Special General Partner under Section 5.1.B if the Partnership sold all of its assets for their fair value (less the amount of all indebtedness secured by such assets and less any fees payable to the Advisor under the Advisory Agreement) immediately prior to the Change of Control Event and distributed the net proceeds from such sale to the Partners pursuant to Section 5.1.B. The fair value of any Property shall be its value as determined by an Appraisal. To avoid duplicating distributions made to the Special General Partner, the General Partner shall take into account distributions made to the Special General Partner pursuant to this Section 5.1.D in determining the appropriate amount of any subsequent distributions of Capital Proceeds to the Special General Partner under Section 5.1.B(3) and Section 5.1.C.
E.
Special Fees
. Consistent with Section 4.9, if the Partnership directly or indirectly incurs Special Fees, (i) Available Cash or Capital Proceeds, as the case may be, available for distribution
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under this Section 5.1 shall be increased by the Special Fees to the extent that Available Cash or Capital Proceeds have been previously reduced by such fees; and (ii) the amounts otherwise distributable among the Classes of OP Units shall then be reduced to reflect their appropriate shares of the Special Fees. For example, if the Partnership has Available Cash of $1,000 after taking into account a distribution and shareholder servicing fee of $200 that is required to be borne entirely by the Partners holding Class C OP Units, Available Cash shall be increased to $1,200 for purposes of this Section 5.1 and the amounts otherwise distributable to the Class C OP Units under this Section 5.1 shall be reduced by $200.
Section 5.2
Distributions in Kind.
Except as expressly provided herein, no right is given to any Partner to demand and receive property other than 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 the fair market value is distributed and allocated in accordance with Articles 5, 6 and 10.
Section 5.3
Distributions upon Liquidation.
Notwithstanding Section 5.1, proceeds from a Liquidating Event shall be distributed to the Partners in accordance with Section 13.2.
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, the Special General Partner, or any Additional Limited Partner pursuant to Section 4.4.B, 4.4.C, or 4.4.E, 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. In the absence of any agreement to the contrary, an Additional Limited Partner shall be entitled to the distributions set forth in Section 5.1 (without regard to this Section 5.4) with respect to the period during which the closing of its contribution to the Partnership occurs, multiplied by a fraction the numerator of which is the number of days from and after the date of such closing through the end of the applicable period, and the denominator of which is the total number of days in such period.
Section 5.5
Distribution Limitation.
Notwithstanding any other provision in this Article 5, the General Partner shall have the power, in its reasonable discretion, to adjust the distributions to the Special General Partner to the extent necessary to avoid violations of the “2%/25% Guidelines” as described in the Advisory Agreement.
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 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.
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Section 6.2
General Allocations.
A.
Allocation of Net Income and Net Loss Other Than From a Capital Transaction
.
(1)
Net Income other than from a Capital Transaction
. Except as otherwise provided in Section 6.3, Net Income other than from a Capital Transaction for any Partnership Year shall be allocated to the Partners in the following manner and order of priority:
(a)
First, Net Income from Investments shall be allocated ten percent (10%) to the Special General Partner, and ninety percent (90%) to the Partners in proportion to their respective Percentage Interests; and
(b)
Second, Net Income from Real Estate Securities shall be allocated one hundred percent (100%) to the Partners in proportion to their respective Percentage Interests.
(2)
Net Loss other than from a Capital Transaction
. Except as otherwise provided in Section 6.3, Net Loss other than from a Capital Transaction for any Partnership Year shall be allocated to the Partners in the following manner and order of priority:
(a)
First, to the Partners, in proportion to their relative allocations of Net Income other than from a Capital Transaction pursuant to Section 6.2.A(1) until the aggregate allocations of Net Loss other than from a Capital Transaction pursuant to this Section 6.2.A(2) for all Partnership Years equal the aggregate allocations of Net Income other than from a Capital Transaction pursuant to Section 6.2.A(1) for all prior Partnership Years;
(b)
Second, to the Partners in proportion to their respective Adjusted Capital Account Balances until the Adjusted Capital Account Balance of each such Partner is zero; and
(c)
Third, to each of the Partners in proportion to their respective Percentage Interests.
B.
Allocation of Net Income and Net Loss From a Capital Transaction
.
(1)
Net Income from a Capital Transaction
. Except as otherwise provided in Section 6.2.D and Section 6.3, Net Income from a Capital Transaction for any Partnership Year shall be allocated to the Partners in the following manner and order of priority:
(a)
First, to the Partners, in proportion to their relative allocations of Net Loss from a Capital Transaction pursuant to Section 6.2.B(2)(b) and (c) until the aggregate allocations of Net Income from a Capital Transaction pursuant to this Section 6.2.B(1)(a) for all Partnership Years equal the aggregate allocations of Net Loss from a Capital Transaction pursuant to Section 6.2.B(2)(b) and (c) for all prior Partnership Years;
(b)
Second, one hundred percent (100%) to the General Partner until the Adjusted Capital Account Balance of the General Partner equals the sum of the General Partner Net Current Investment and the General Partner Unpaid Priority Return; and
(c)
Third, fifteen percent (15%) to the Special General Partner, and eighty-five percent (85%) to the Partners in proportion to their respective Percentage Interests.
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(2)
Net Loss from a Capital Transaction
. Except as otherwise provided in Section 6.3, Net Loss from a Capital Transaction for any Partnership Year shall be allocated to the Partners in the following manner and order of priority:
(a)
First, to the Partners, in proportion to their relative allocations of Net Income from a Capital Transaction pursuant to Section 6.2.B(1)(c) until the aggregate allocations of Net Loss from a Capital Transaction pursuant to this Section 6.2.B(2)(a) for all Partnership Years equal the aggregate allocations of Net Income from a Capital Transaction pursuant to Section 6.2.B(1)(c) for all prior Partnership Years;
(b)
Second, to the Partners in proportion to their respective Adjusted Capital Account Balances until the Adjusted Capital Account Balance of each such Partner is zero; and
(c)
Third, to the Partners in proportion to their respective Percentage Interests.
C.
Allocations to Reflect Issuance of Additional Partnership Interests
. In the event that the Partnership issues additional Partnership Interests to the General Partner, the Special General Partner, a Limited Partner or any Additional Limited Partner pursuant to Section 4.4, the General Partner shall make such revisions to this Section 6.2 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, in accordance with any method selected by the General Partner.
D.
Allocations Related to a Listing Event
. If a Listing Event occurs, the Partnership shall allocate Net Income from a Capital Transaction first to the Special General Partner in an amount equal to the Net Income from a Capital Transaction allocable to the Special General Partner under Section 6.2.B(1) if the Partnership sold all of its assets on the date of the Listing Event for its Listed Market Value and allocated the gain from such sale to the Partners pursuant to Section 6.2.B(1). To avoid duplicating allocations to the Special General Partner, the General Partner shall take into account allocations made to the Special General Partner pursuant to this Section 6.2.D in determining the appropriate amount of any subsequent allocations of Net Income from a Capital Transaction to the Special General Partner under Section 6.2.B(1) and Section 6.2.E.
E.
Allocations Related to a Change of Control Event
. If a Change of Control Event occurs, the Partnership shall allocate Net Income from a Capital Transaction first to the Special General Partner in an amount equal to the Net Income from a Capital Transaction allocable to the Special General Partner under Section 6.2.B(1) if the Partnership sold all of its assets on the date of the Change of Control Event for their fair value (less the amount of all indebtedness secured by such assets and less any fees payable to the Advisor under the Advisory Agreement) immediately prior to the Change of Control Event and allocated the gain from such sale to the Partners pursuant to Section 6.2.B(1). To avoid duplicating allocations to the Special General Partner, the General Partner shall take into account allocations made to the Special General Partner pursuant to this Section 6.2.E in determining the appropriate amount of any subsequent allocations of Net Income from a Capital Transaction to the Special General Partner under Section 6.2.B(1) and Section 6.2.D.
Section 6.3
Regulatory Allocations.
Notwithstanding the foregoing provisions of this Article 6:
(i)
Minimum Gain Chargeback
. Except as otherwise provided in Regulations Section 1.704-2(f), notwithstanding the provisions of Section 6.2, or any other provision of this Article 6, if there is a net
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decrease in Partnership Minimum Gain during any Partnership Year, each Partner shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to 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 6.3(i) 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 6.3(i).
(ii)
Partner Minimum Gain Chargeback
. Except as otherwise provided in Regulations Section 1.704-2(i)(4), and notwithstanding the provisions of Section 6.2, or any other provision of this Article 6 (except Section 6.3(i)), if there is a net decrease in Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any Partnership 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 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 each 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 6.3(ii) 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 6.3(ii).
(iii)
Nonrecourse Deductions and Partner Nonrecourse Deductions
. Any Nonrecourse Deductions for any Partnership Year shall be specially allocated to the Partners in accordance with their respective Percentage Interests. Any Partner Nonrecourse Deductions for any Partnership Year shall be specially allocated to the Partner(s) who bears the economic risk of loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable, in accordance with Regulations Sections 1.704-2(b)(4) and 1.704-2(i).
(iv)
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 6.3(iv) 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 6.3(iv) were not in this Agreement. It is intended that this Section 6.3(iv) 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 6.3(iv).
(v)
Gross Income Allocation
. In the event any Partner has a deficit Capital Account at the end of any Partnership Year which is in excess of the sum of (1) the amount (if any) such Partner is obligated to restore to the Partnership, and (2) 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 in the amount of such excess as quickly as possible, provided, that an allocation pursuant to this Section 6.3(v) shall be made if and only to the extent that such Partner would
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have a deficit Capital Account in excess of such sum after all other allocations provided in this Article 6 have been tentatively made as if this Section 6.3(v) and Section 6.3(iv) were not in this Agreement.
(vi)
Limitation on Allocation of Net Loss
. To the extent any allocation of Net Loss would cause or increase an Adjusted Capital Account Deficit as to any Partner, such allocation of Net Loss shall be reallocated among the other Partners in accordance with their respective Percentage Interests, subject to the limitations of this Section 6.3(vi).
(vii)
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 shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Partners in accordance with their interests in the Partnership in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Partners to whom such distribution was made in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
(viii)
Curative Allocation
. The allocations set forth in Sections 6.3(i), (ii), (iii), (iv), (v), (vi), and (vii) (the “Regulatory Allocations”) are intended to comply with certain regulatory requirements, including the requirements of Regulations Sections 1.704-1(b) and 1.704-2. Notwithstanding the provisions of Sections 6.1 and 6.2, the Regulatory Allocations shall be taken into account in allocating other items of income, gain, loss and deduction among the Partners so that, to the extent possible, the net amount of such allocations of other items and the Regulatory Allocations to each Partner shall be equal to the net amount that would have been allocated to each such Partner if the Regulatory Allocations had not occurred. For purposes of determining a Partner’s proportional share of the “excess nonrecourse liabilities” of the Partnership within the meaning of Regulations Section 1.752-3(a)(3), each Partner’s interest in Partnership profits shall be such Partner’s Percentage Interest.
(ix)
Special Allocation of Special Fees
. Consistent with Section 4.9, if the Partnership directly or indirectly incurs Special Fees, such Special Fees shall be specially allocated among the Classes of OP Units to correspond with their appropriate shares of such fees and then proportionately allocated among the Units within each burdened Class. For example, if the Partnership incurs a distribution and shareholder servicing fee of $200 that is required to be borne entirely by the Partners holding Class C OP Units, the $200 servicing fee shall be specially allocated to the holders of Class C OP Units in proportion to their Class C OP Units. To the extent that an allocation of Special Fees under this Section 6.3(ix) would create or increase an Adjusted Capital Account Deficit for a Partner, such allocation instead shall be made proportionately to the other Partners within the burdened Class who do not have Adjusted Capital Account Deficits.
Section 6.4
Tax Allocations.
A.
In General
. Except as otherwise provided in this Section 6.4, for income tax purposes each item of income, gain, loss and deduction (collectively, “Tax Items”) shall be allocated among the Partners in the same manner as its correlative item of “book” income, gain, loss or deduction is allocated pursuant to Sections 6.2 and 6.3.
B.
Allocations Respecting Section 704(c) Revaluations
. Notwithstanding Section 6.4.A, Tax Items with respect to Partnership property that is contributed to the Partnership by a Partner with a Gross Asset Value that differs from its adjusted tax basis in the hands of the Contributing
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Partner immediately preceding the date of contribution shall be allocated among the Partners for income tax purposes pursuant to Regulations promulgated under Section 704(c) of the Code, so as to take into account the variation between book Capital Accounts and tax capital accounts. The Partnership shall account for such variation under the “traditional method” under Regulations Section 1.704-3(b) with respect to Partnership property that is contributed to the Partnership in connection with the General Partner’s initial offering. With respect to other properties contributed to the Partnership, the Partnership shall account for such variation under any reasonable method consistent with Section 704(c) of the Code and the applicable regulations as chosen by the General Partner. In the event the Gross Asset Value of any Partnership asset is adjusted pursuant to subparagraph (b) of the definition of Gross Asset Value (provided in Article 1), subsequent allocations of Tax Items with respect to such asset shall take account of the variation, if any, between the adjusted basis of such asset and its Gross Asset Value in the same manner as under Section 704(c) of the Code and the applicable regulations consistent with the requirements of Regulations Section 1.704-1(b)(2)(iv)(g) using any method approved under Section 704(c) of the Code and the applicable regulations as chosen by the General Partner.
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1
Management.
A.
Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership are and shall be exclusively vested in the General Partner, and no Limited Partner shall have any right to participate in or exercise control or management power over the business and affairs of the Partnership. The General Partner may not be removed by the Limited Partners with or without cause, except with the consent of the General Partner. In addition to the powers now or hereafter granted a general partner of a limited partnership under applicable law or which are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to the other provisions hereof including Sections 7.3 and 11.2, shall have full power and authority to do all things deemed necessary or desirable by it to conduct the business of the Partnership (including, without limitation, all actions consistent with allowing the General Partner at all times to qualify as a REIT unless the General Partner voluntarily terminates its REIT status), to exercise all powers set forth in Section 3.2 and to effectuate the purposes set forth in Section 3.1, including, without limitation:
(1)
the making of any expenditures, the lending or borrowing of money (including, without limitation, making prepayments on loans and borrowing money to permit the Partnership to make distributions to its Partners in such amounts as will permit the General Partner (so long as the General Partner has determined to qualify as a REIT) to avoid the payment of any federal income tax (including, for this purpose, any excise tax pursuant to Section 4981 of the Code) and to make distributions to its stockholders sufficient to permit the General Partner to maintain REIT status), the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness (including the securing of same by mortgage, deed of trust or other lien or encumbrance on all or any of the Partnership’s assets) and the incurring of any obligations it deems necessary for the conduct of the activities of the Partnership;
(2)
the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Partnership, the registration of any class of securities of the Partnership under the Exchange Act, and the listing of any debt securities of the Partnership on any exchange;
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(3)
subject to the provisions of Section 11.2, the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any assets of the Partnership or the merger or other combination of the Partnership with or into another entity;
(4)
the acquisition, disposition, mortgage, pledge, encumbrance or hypothecation of all or any assets of the Partnership, and the use of the assets of the Partnership (including, without limitation, cash on hand) for any purpose consistent with the terms of this Agreement and on any terms it sees fit, including, without limitation, the financing of the conduct or the operations of the General Partner or the Partnership, the lending of funds to other Persons (including, without limitation, the General Partner or any Subsidiaries of the Partnership) and the repayment of obligations of the Partnership, any of its Subsidiaries and any other Person in which it has an equity investment, and the making of capital contributions to its Subsidiaries;
(5)
the management, operation, leasing, landscaping, repair, alteration, demolition or improvement of any real property or improvements owned by the Partnership or any Subsidiary of the Partnership;
(6)
the negotiation, execution, and performance of any contracts, leases, conveyances or other instruments that the General Partner considers useful or necessary to the conduct of the Partnership’s operations or the implementation of the General Partner’s powers under this Agreement, including contracting with contractors, developers, consultants, accountants, legal counsel, other professional advisors and other agents and the payment of their expenses and compensation out of the Partnership’s assets;
(7)
the distribution of Partnership cash or other Partnership assets in accordance with this Agreement;
(8)
the establishment of one or more divisions of the Partnership, the selection and dismissal of employees of the Partnership (including, without limitation, employees having titles such as “president,” “vice president,” “secretary” and “treasurer”), and agents, outside attorneys, accountants, consultants and contractors of the Partnership, the determination of their compensation and other terms of employment or hiring, including waivers of conflicts of interest and the payment of their expenses and compensation out of the Partnership’s assets;
(9)
the maintenance of such insurance for the benefit of the Partnership and the Partners and directors and officers of the Partnership or the General Partner as it deems necessary or appropriate;
(10)
the formation of, or acquisition of an interest in, and the contribution of property to, any further limited or general partnerships, limited liability companies, joint ventures, corporations or other relationships that it deems desirable (including, without limitation, the acquisition of interests in, and the contributions of property to any Subsidiary and any other Person in which it has an equity investment from time to time);
provided
, that, as long as the General Partner has determined to continue to qualify as a REIT, the Partnership may not engage in any such formation, acquisition or contribution that could cause the General Partner to fail to qualify as a REIT;
(11)
the control of any matters affecting the rights and obligations of the Partnership, including the settlement, compromise, submission to arbitration or any other form of dispute resolution, or abandonment of, any claim, cause of action, liability, debt or damages, due or owing to or from the Partnership, the commencement or defense of suits, legal proceedings, administrative proceedings, arbitration or other forms of dispute resolution, and the representation of the Partnership in
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all suits or legal proceedings, administrative proceedings, arbitrations or other forms of dispute resolution, the incurring of legal expense, and the indemnification of any Person against liabilities and contingencies to the extent permitted by law;
(12)
the undertaking of any action in connection with the Partnership’s direct or indirect investment in any Person (including, without limitation, contributing or loaning Partnership funds to, incurring indebtedness on behalf of, or guarantying the obligations of any such Persons);
(13)
subject to the other provisions in this Agreement, the determination of the fair market value of any Partnership property distributed in kind using such reasonable method of valuation as it may adopt, provided, that such methods are otherwise consistent with requirements of this Agreement;
(14)
the management, operation, leasing, landscaping, repair, alteration, demolition or improvement of any real property or improvements owned by the Partnership or any Subsidiary of the Partnership or any Person in which the Partnership has made a direct or indirect equity investment;
(15)
holding, managing, investing and reinvesting cash and other assets of the Partnership;
(16)
the collection and receipt of revenues and income of the Partnership;
(17)
the exercise, directly or indirectly through any attorney-in-fact acting under a general or limited power of attorney, of any right, including the right to vote, appurtenant to any asset or investment held by the Partnership;
(18)
the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of or in connection with any Subsidiary of the Partnership or any other Person in which the Partnership has a direct or indirect interest, or jointly with any such Subsidiary or other Person;
(19)
the exercise of any of the powers of the General Partner enumerated in this Agreement on behalf of any Person in which the Partnership does not have an interest pursuant to contractual or other arrangements with such Person;
(20)
the making, execution and delivery of any and all deeds, leases, notes, deeds to secure debt, mortgages, deeds of trust, security agreements, conveyances, contracts, guarantees, warranties, indemnities, waivers, releases or legal instruments or agreements in writing necessary or appropriate in the judgment of the General Partner for the accomplishment of any of the powers of the General Partner enumerated in this Agreement;
(21)
the issuance of additional Partnership Interests, as appropriate, in connection with the contribution of Additional Funds pursuant to Section 4.4;
(22)
the distribution of cash to acquire OP Units held by a Limited Partner in connection with a Limited Partner’s exercise of its Redemption Right under Section 8.6 hereof;
(23)
the amendment and restatement of Exhibit A hereto to reflect accurately at all times the Capital Contributions and Percentage Interests of the Partners as the same are adjusted from time to time to the extent necessary to reflect redemptions, Capital Contributions, the issuance of OP
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Units, the admission of any Additional Limited Partner or any Substituted Limited Partner or otherwise, which amendment and restatement, notwithstanding anything in this Agreement to the contrary, shall not be deemed an amendment to this Agreement, as long as the matter or event being reflected in Exhibit A hereto otherwise is authorized by this Agreement;
(24)
the taking of any and all acts and things necessary or prudent to ensure that the Partnership will not be classified as a “publicly traded partnership” under Section 7704 of the Code; and
(25)
the delegation to another Person of any powers now or hereafter granted to the General Partner.
B.
Each of the Limited Partners agrees that the General Partner is authorized to execute, deliver and perform the above-mentioned agreements and transactions on behalf of the Partnership without any further act, approval or vote of the Partners, notwithstanding any other provisions of this Agreement (except as provided in Section 7.3 or 11.2), the Act or any applicable law, rule or regulation to the fullest extent permitted under the Act or other applicable law, rule or regulation. The execution, delivery or performance by the General Partner or the Partnership of any agreement authorized or permitted under this Agreement shall not constitute a breach by the General Partner of any duty that the General Partner may owe the Partnership or the Limited Partners or any other Persons under this Agreement or of any duty stated or implied by law or equity.
C.
At all times from and after the date hereof, the General Partner may cause the Partnership to obtain and maintain (i) casualty, liability and other insurance on the Investments and (ii) liability insurance for the Indemnities hereunder.
D.
At all times from and after the date hereof, the General Partner may cause the Partnership to establish and maintain working capital and other reserves in such amounts as the General Partner, in its sole and absolute discretion, deems appropriate and reasonable from time to time.
E.
Each of the Limited Partners acknowledges that, in exercising its authority under this Agreement, the General Partner may, but shall be under no obligation to, take into account the tax consequences to any Partner (including the General Partner) of any action taken (or not taken) by the General Partner. The General Partner and the Partnership shall not have liability to a Partner under this Agreement as a result of any income tax liability incurred by a Limited Partner as a result of an action (or inaction) by the General Partner pursuant to its authority under this Agreement. There may be circumstances in which the fiduciary duties that the General Partner owes to the Limited Partners conflicts with any duties that the officers and directors of General Partner owe to its stockholders. For so long as the General Partner owns a controlling interest in the Partnership, any such conflict that cannot be resolved in a manner not adverse to either the stockholders or the Limited Partners shall be resolved in favor of the General Partner’s stockholders.
F.
Except as otherwise provided herein, to the extent the duties of the General Partner require expenditures of funds to be paid to third parties, the General Partner shall not have any obligations hereunder except to the extent that Partnership funds are reasonably available to it for the performance of such duties, and nothing herein contained shall be deemed to authorize or require the General Partner, in its capacity as such, to expend its individual funds for payment to third parties or to undertake any individual liability or obligation on behalf of the Partnership.
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Section 7.2 Certificate of Limited Partnership.
To the extent that such action is determined by the General Partner to be reasonable and necessary or appropriate, the General Partner shall file amendments to and restatements of the Certificate and do all the things to maintain the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) under the laws of the State of Delaware and to maintain the Partnership’s qualification to do business as a foreign limited partnership in each other state, the District of Columbia or other jurisdiction, in which the Partnership may elect to do business or own property. Subject to the terms of Section 8.5.A(4), the General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate or any amendment thereto to any Limited Partner. The General Partner shall use all reasonable efforts to cause to be filed such other certificates or documents as may be reasonable and necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware, any other state, or the District of Columbia or other jurisdiction, in which the Partnership may elect to do business or own property.
Section 7.3 Restrictions on General Partner’s Authority.
A. The General Partner may not take any action in contravention of an express prohibition or limitation of this Agreement without the written Consent of the Limited Partners and the Special General Partner, and may not (i) perform any act that would subject a Limited Partner to liability as a general partner in any jurisdiction or any other liability except as provided herein or under the Act; or (ii) enter into any contract, mortgage, loan or other agreement that prohibits or restricts, or has the effect of prohibiting or restricting, the ability of a Limited Partner to exercise its rights to a Redemption in full, except in each case with the written consent of such Limited Partner.
B. The General Partner shall not, without the prior Consent of the Partners (in addition to any Consent of the Limited Partners required by any other provision hereof), or except as provided in Section 7.3.D, amend, modify or terminate this Agreement.
C. The General Partner may not cause the Partnership to take any action which the General Partner would be prohibited from taking directly under the General Partner’s bylaws as in effect from time to time.
D. Notwithstanding Section 7.3.B, the General Partner shall have the exclusive power to amend this Agreement as may be required to facilitate or implement any of the following purposes:
(1) to add to the obligations of the General Partner or surrender any right or power granted to the General Partner or any Affiliate of the General Partner for the benefit of the Limited Partners;
(2) to reflect the issuance of additional Partnership Interests pursuant to Sections 4.4.B, 5.4 and 6.2.B. or the admission, substitution, termination, or withdrawal of Partners in accordance with this Agreement (which may be effected through the replacement of Exhibit A with an amended Exhibit A);
(3) to set forth or amend the designations, rights, powers, duties and preferences of the holders of any additional Partnership Interests issued pursuant to Article 4;
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(4) to reflect a change that is of an inconsequential nature and does not adversely affect the Limited Partners in any material respect, or to cure any ambiguity, correct or supplement any provision in this Agreement not inconsistent with law or with other provisions, or make other changes with respect to matters arising under this Agreement that will not be inconsistent with law or with the provisions of this Agreement;
(5) to satisfy any requirements, conditions, or guidelines contained in any order, directive, opinion, ruling or regulation of a federal or state agency or contained in federal or state law;
(6) to reflect such changes as are reasonably necessary for the General Partner to maintain its status as a REIT, including changes which may be necessitated due to a change in applicable law (or an authoritative interpretation thereof) or a ruling of the IRS;
(7) to modify, as set forth in the definition of “Capital Account,” the manner in which Capital Accounts are computed; and
(8) to amend or modify any provision of this Agreement to reflect a statutory or regulatory change regarding the federal income tax treatment of the “profits interest” of the Special General Partner or to ensure that the receipt of the Special General Partner’s profits interest will not result in taxation to the Special General Partner.
The General Partner will provide notice to the Limited Partners when any action under this Section 7.3.D is taken.
E. Notwithstanding Sections 7.3.B and 7.3.D, this Agreement shall not be amended with respect to any Partner adversely affected, and no action may be taken by the General Partner, without the Consent of such Partner adversely affected if such amendment or action would (i) convert a Limited Partner’s interest in the Partnership into a general partner’s interest (except as the result of the General Partner acquiring such interest), (ii) modify the limited liability of a Limited Partner, (iii) alter rights of the Partner to receive distributions pursuant to Article 5 or Section 13.2.A(4), or the allocations specified in Article 6 (except as permitted pursuant to Sections 4.4, 5.4, 6.2.C and Section 7.3.D(2)), (iv) materially alter or modify the rights to a Redemption or the REIT Shares Amount as set forth in Section 8.6, and related definitions hereof, or (v) amend this Section 7.3.E. Further, no amendment may alter the restrictions on the General Partner’s authority set forth elsewhere in this Section 7.3 or in Section 11.2.A without the Consent specified in such section. This Section 7.3.E does not require unanimous consent of all Partners adversely affected unless the amendment is to be effective against all partners adversely affected.
Section 7.4 Reimbursement of the General Partner.
A. Except as provided in this Section 7.4 and elsewhere in this Agreement (including the provisions of Articles 5 and 6 regarding distributions, payments and allocations to which it may be entitled), the General Partner shall not be compensated for its services as general partner of the Partnership.
B. The Partnership shall be responsible for and shall pay all expenses relating to the Partnership’s and the General Partner’s organization, the ownership of its assets and its operations. The General Partner is hereby authorized to pay compensation for accounting, administrative, legal, technical, management and other services rendered to the Partnership. Except to the extent provided in this Agreement, the General Partner and its Affiliates shall be reimbursed on a monthly basis, or such other
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basis as the General Partner may determine in its sole and absolute discretion, for all expenses that the General Partner and its Affiliates incur relating to the ownership and operation of, or for the benefit of, the Partnership (including, without limitation, administrative expenses);
provided
, that the amount of any such reimbursement shall be reduced by any interest earned by the General Partner with respect to bank accounts or other instruments or accounts held by it on behalf of the Partnership. The Partners acknowledge that all such expenses of the General Partner are deemed to be for the benefit of the Partnership. Such reimbursement shall be in addition to any reimbursement made as a result of indemnification pursuant to Section 7.7 hereof. In the event that certain expenses are incurred for the benefit of the Partnership and other entities (including the General Partner), such expenses will be allocated to the Partnership and such other entities in such a manner as the General Partner in its sole and absolute discretion deems fair and reasonable. All payments and reimbursements hereunder shall be characterized for federal income tax purposes as expenses of the Partnership incurred on its behalf, and not as expenses of the General Partner.
C. If the General Partner shall elect to purchase from its stockholders REIT Shares for the purpose of delivering such REIT Shares to satisfy an obligation under any dividend reinvestment program adopted by the General Partner, any employee stock purchase plan adopted by the General Partner, or any similar obligation or arrangement undertaken by the General Partner in the future or for the purpose of retiring such REIT Shares, the purchase price paid by the General Partner for such REIT Shares and any other expenses incurred by the General Partner in connection with such purchase shall be considered expenses of the Partnership and shall be advanced to the General Partner or reimbursed to the General Partner, subject to the condition that: (i) if such REIT Shares subsequently are sold by the General Partner, the General Partner shall pay to the Partnership any proceeds received by the General Partner for such REIT Shares (which sales proceeds shall include the amount of dividends reinvested under any dividend reinvestment or similar program;
provided
, that a transfer of REIT Shares for OP Units pursuant to Section 8.6 would not be considered a sale for such purposes); and (ii) if such REIT Shares are not retransferred by the General Partner within thirty (30) days after the purchase thereof, or the General Partner otherwise determines not to retransfer such REIT Shares, the General Partner, shall cause the Partnership to redeem a number of OP Units held by the General Partner equal to the number of such REIT Shares, as adjusted (x) pursuant to Section 7.5 (in the event the General Partner acquires material assets, other than on behalf of the Partnership) and (y) for stock dividends and distributions, stock splits and subdivisions, reverse stock splits and combinations, distributions of rights, warrants or options, and distributions of evidences of indebtedness or assets relating to assets not received by the General Partner pursuant to a pro rata distribution by the Partnership (in which case such advancement or reimbursement of expenses shall be treated as having been made as a distribution in redemption of such number of OP Units held by the General Partner).
D. As set forth in Section 4.4, the General Partner shall be treated as having made a Capital Contribution in the amount of all expenses that it incurs relating to the General Partner’s offering of REIT Shares, other shares of capital stock of the General Partner or New Securities.
E. If and to the extent any reimbursements to the General Partner pursuant to this Section 7.4 constitute gross income of the General Partner (as opposed to the repayment of advances made by the General Partner on behalf of the Partnership), such amounts shall constitute guaranteed payments within the meaning of Section 707(c) of the Code, shall be treated consistently therewith by the Partnership and all Partners, and shall not be treated as distributions for purposes of computing the Partners’ Capital Accounts.
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Section 7.5 Outside Activities of the General Partner.
A. Except in connection with a transaction authorized in Section 11.2, without the Consent of the Limited Partners, the General Partner shall not, directly or indirectly, enter into or conduct any business, other than in connection with the ownership, acquisition and disposition of Partnership Interests as a General Partner and the management of the business of the Partnership, its operation as a public reporting company with a class (or classes) of securities registered under the Exchange Act, its operation as a REIT and such activities as are incidental to the same. Without the Consent of the Limited Partners, the General Partner shall not, directly or indirectly, participate in or otherwise acquire any interest in any real or personal property, except its General Partner Interest, its minority interest in any Subsidiary Partnership(s) that the General Partner holds in order to maintain such Subsidiary Partnership’s status as a partnership, and such bank accounts, similar instruments or other short term investments as it deems necessary to carry out its responsibilities contemplated under this Agreement and the Charter. In the event the General Partner desires to contribute cash to any Subsidiary Partnership to acquire or maintain an interest of 1% or less in the capital of such partnership, the General Partner may acquire or maintain an interest of 1% or less in the capital of such partnership, and the General Partner may acquire such cash from the Partnership as a loan or in exchange for a reduction in the General Partner’s OP Units, in an amount equal to the amount of such cash divided by the Fair Market Value of a REIT Share on the day such cash is received by the General Partner. Notwithstanding the foregoing, the General Partner may acquire Investments or other assets in exchange for REIT Shares or cash, to the extent such Investments or other assets are immediately contributed by the General Partner to the Partnership, pursuant to the terms described in Section 4.4.D. Any Limited Partner Interests acquired by the General Partner, whether pursuant to exercise by a Limited Partner of its right of Redemption, or otherwise, shall be automatically converted into a General Partner Interest comprised of an identical number of OP Units with the same rights, priorities and preferences as the class or series so acquired. The General Partner may also own one hundred percent (100%) of the stock or interests of one or more Qualified REIT Subsidiaries or limited liability companies, respectively, provided that any such entity shall be subject to the limitations of this Section 7.5.A. If, at any time, the General Partner acquires material assets (other than Partnership Interests or other assets on behalf of the Partnership) the definition of “REIT Shares Amount” and the definition of “Deemed Value of Partnership Interests” shall be adjusted, as reasonably determined by the General Partner, to reflect the relative Fair Market Value of a share of capital stock of the General Partner relative to the Deemed Partnership Interest Value of the related Partnership Unit. The General Partner’s General Partner Interest in the Partnership, its minority interest in any Subsidiary Partnership(s) (held directly or indirectly through a Qualified REIT Subsidiary) that the General Partner holds in order to maintain such Subsidiary Partnership’s status as a partnership, and interests in such short-term liquid investments, bank accounts or similar instruments as the General Partner deems necessary to carry out its responsibilities contemplated under this Agreement and the Charter are interests which the General Partner is permitted to acquire and hold for purposes of this Section 7.5.A.
B. In the event the General Partner exercises its rights under the Charter to purchase REIT Shares, other common stock of the General Partner or New Securities, as the case may be, then the General Partner shall cause the Partnership to purchase from it a number of OP Units equal to the number of REIT Shares, other capital stock of the General Partner or New Securities, as the case may be, so purchased on the same terms that the General Partner purchased such REIT Shares, other capital stock of the General Partner or New Securities, as the case may be.
Section 7.6 Contracts with Affiliates.
A. The Partnership may lend or contribute to Persons in which it has an equity investment, and such Persons may borrow funds from the Partnership, on terms and conditions
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established in the sole and absolute discretion of the General Partner. The foregoing authority shall not create any right or benefit in favor of any Person.
B. Except as provided in Section 7.5.A, the Partnership may transfer assets to joint ventures, other partnerships, corporations or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions consistent with this Agreement and applicable law as the General Partner in its sole discretion deems advisable.
C. The General Partner, in its sole and absolute discretion and without the approval of the Limited Partners, may propose and adopt on behalf of the Partnership employee benefit plans funded by the Partnership for the benefit of employees of the General Partner, the Partnership, Subsidiaries of the Partnership or any Affiliate of any of them in respect of services performed, directly or indirectly, for the benefit of the Partnership, the General Partner, or any of the Partnership’s Subsidiaries.
D. Except as expressly permitted by this Agreement, neither the General Partner nor any of its Affiliates shall sell, transfer or convey any property to, or purchase any property from, the Partnership, directly or indirectly, except pursuant to transactions that are determined by the General Partner in good faith to be fair and reasonable.
E. The General Partner is expressly authorized to enter into, in the name and on behalf of the Partnership, a right of first opportunity arrangement and other conflict avoidance agreements with various Affiliates of the Partnership and the General Partner, on such terms as the General Partner, in its sole and absolute discretion, believes are advisable.
Section 7.7 Indemnification.
A. To the fullest extent permitted by law, the Partnership shall indemnify an Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Partnership as set forth in this Agreement in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, unless (1) Section 12.2.2 of the Charter of the General Partner prohibits the corporation from indemnifying the Indemnitee for a tax matter, in which case the Partnership shall likewise be prohibited from indemnifying the Indemnitee for the matter, or (2) it is established that: (i) the act or omission of the Indemnitee was material to the matter giving rise to the proceeding and either was committed in bad faith, fraud or was the result of active and deliberate dishonesty; (ii) the Indemnitee actually received an improper personal benefit in money, property or services; or (iii) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful. Without limitation, the foregoing indemnity shall extend to any liability of any Indemnitee, pursuant to a loan guaranty or otherwise, for any indebtedness of the Partnership or any Subsidiary of the Partnership (including, without limitation, any indebtedness which the Partnership or any Subsidiary of the Partnership has assumed or taken subject to), and the General Partner is hereby authorized and empowered, on behalf of the Partnership, to enter into one or more indemnity agreements consistent with the provisions of this Section 7.7 in favor of any Indemnitee having or potentially having liability for any such indebtedness. The termination of any proceeding by judgment, order, settlement, conviction or upon a plea of
nolo contendere
or its equivalent, or any entry of an order of probation prior to judgment, does not create a presumption that the Indemnitee did not meet the requisite standard of conduct set forth in this Section 7.7.A. Any indemnification pursuant to this Section 7.7 shall be made only out of the assets of the Partnership, and any insurance proceeds from the liability policy covering the General Partner and any Indemnitee, and neither the General Partner nor any Limited Partner shall have any obligation to contribute to the capital of the Partnership or otherwise
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provide funds to enable the Partnership to fund its obligations under this Section 7.7, except to the extent otherwise expressly agreed to by such Partner and the Partnership.
B. Reasonable expenses incurred by an Indemnitee who is a party to a proceeding may be paid or reimbursed by the Partnership in advance of the final disposition of the proceeding upon receipt by the Partnership of (i) a written affirmation by the Indemnitee of the Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Partnership as authorized in this Section 7.7 has been met, and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amount if it shall ultimately be determined that the standard of conduct has not been met.
C. The indemnification provided by this Section 7.7 shall be in addition to any other rights to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity unless otherwise provided in a written agreement pursuant to which such Indemnitee is indemnified.
D. The Partnership may, but shall not be obligated to, purchase and maintain insurance, on behalf of the Indemnitees and such other Persons as the General Partner shall determine, against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Partnership’s activities, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement.
E. For purposes of this Section 7.7, the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute fines within the meaning of Section 7.7; and actions taken or omitted by the Indemnitee with respect to an employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject the Limited Partners to personal liability by reason of the indemnification provisions set forth in this Agreement.
G. An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.7 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons. Any amendment, modification or repeal of this Section 7.7 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the Partnership’s liability to any Indemnitee under this Section 7.7 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.
I. If and to the extent any reimbursements to the General Partner pursuant to this Section 7.7 constitute gross income of the General Partner (as opposed to the repayment of advances made by the General Partner on behalf of the Partnership) such amounts shall constitute guaranteed payments within the meaning of Section 707(c) of the Code, shall be treated consistently therewith by the
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Partnership and all Partners, and shall not be treated as distributions for purposes of computing the Partners’ Capital Accounts.
J. Any indemnification hereunder is subject to, and limited by, the provisions of Section 17-108 of the Act and Section 12.2.2 of the Charter.
K. In the event the Partnership is made a party to any litigation or otherwise incurs any loss or expense as a result of or in connection with any Partner’s personal obligations or liabilities unrelated to Partnership business, such Partner shall indemnify and reimburse the Partnership for all such loss and expense incurred, including legal fees, and the Partnership interest of such Partner may be charged therefor. The liability of a Partner under this Section 7.7.K shall not be limited to such Partner’s Partnership Interest, but shall be enforceable against such Partner personally.
Section 7.8 Liability of the General Partner.
A. Notwithstanding anything to the contrary set forth in this Agreement, none of the General Partner nor any of its officers, directors, agents or employees shall be liable or accountable in damages or otherwise to the Partnership, any Partners or any Assignees, or their successors or assigns, for losses sustained, liabilities incurred or benefits not derived as a result of errors in judgment or mistakes of fact or law or any act or omission if the General Partner acted in good faith.
B. The Limited Partners expressly acknowledge that the General Partner is acting for the benefit of the Partnership, the Limited Partners and the General Partner’s stockholders collectively. The General Partner is under no obligation to give priority to the separate interests of the Limited Partners or the General Partner’s stockholders (including, without limitation, the tax consequences to Limited Partners or Assignees or to stockholders) in deciding whether to cause the Partnership to take (or decline to take) any actions. If there is a conflict between the interests of the stockholders of the General Partner on one hand and the Limited Partners on the other, the General Partner shall endeavor in good faith to resolve the conflict in a manner not adverse to either the stockholders of the General Partner or the Limited Partners;
provided, however
, that for so long as the General Partner, owns a controlling interest in the Partnership, any such conflict that cannot be resolved in a manner not adverse to either the stockholders of the General Partner or the Limited Partners shall be resolved in favor of the stockholders. The General Partner shall not be liable under this Agreement to the Partnership or to any Partner for monetary damages for losses sustained, liabilities incurred, or benefits not derived by Limited Partners in connection with such decisions; provided, that the General Partner has acted in good faith.
C. Subject to its obligations and duties as General Partner set forth in Section 7.1.A, the General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents. The General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by it in good faith.
D. Any amendment, modification or repeal of this Section 7.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the liability of the General Partner and any of its officers, directors, agents and employee’s liability to the Partnership and the Limited Partners under this Section 7.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.
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Section 7.9 Other Matters Concerning the General Partner.
A. The General Partner may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.
B. The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion of such Persons as to matters which such General Partner reasonably believes to be within such Person’s professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion.
C. The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers and a duly appointed attorney or attorneys-in-fact. Each such attorney shall, to the extent provided by the General Partner in the power of attorney, have full power and authority to do and perform all and every act and duty which is permitted or required to be done by the General Partner hereunder.
D. Notwithstanding any other provisions of this Agreement or any non-mandatory provision of the Act, any action of the General Partner on behalf of the Partnership or any decision of the General Partner to refrain from acting on behalf of the Partnership, undertaken in the good faith belief that such action or omission is necessary or advisable in order to protect the ability of the General Partner, for so long as the General Partner has determined to qualify as a REIT, to (i) continue to qualify as a REIT or (ii) avoid the General Partner incurring any taxes under Section 857 or Section 4981 of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners.
Section 7.10 Title to Partnership Assets
.
Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partners, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner or one or more subsidiaries or nominees, as the General Partner may determine, including Affiliates of the General Partner. The General Partner hereby declares and warrants that any Partnership assets for which legal title is held in the name of the General Partner or any nominee or Affiliate of the General Partner shall be held by the General Partner for the use and benefit of the Partnership in accordance with the provisions of this Agreement;
provided, however
, that the General Partner shall use its best efforts to cause beneficial and record title to such assets to be vested in the Partnership, a subsidiary or a nominee thereof, as soon as reasonably practicable. All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which legal title to such Partnership assets is held.
Section 7.11 Reliance by Third Parties.
Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner has full power and authority to encumber, sell or otherwise use in any manner any and all assets of the Partnership and to enter into any contracts on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner as if it were the Partnership’s sole party in interest, both legally and beneficially. Each Limited Partner hereby waives any and all defenses or other remedies which may be available against such Person to contest, negate or disaffirm any action of the General Partner in connection with any such dealing. In no event shall any
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Person dealing with the General Partner or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (i) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (ii) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership and (iii) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership.
Section 7.12 Management Assistance Provided by Special General Partner.
In addition to the requirement to obtain the Consent of the Special General Partner with respect to certain matters as provided for in this Agreement, the Special General Partner shall provide consulting services and assistance to the Partnership at various times, in conjunction with the Advisor, for no additional consideration, on matters relating to the following:
(1) the strategic planning of the Partnership;
(2) the creation of business plans of the Partnership;
(3) the sale, merger, or the sale of substantially all of the assets, of the Partnership; and
(4) any other matters concerning the Partnership as determined appropriate by the General Partner and the Special General Partner.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability.
The Limited Partners shall have no liability under this Agreement except as expressly provided in this Agreement or under the Act.
Section 8.2 Management of Business.
No Limited Partner or Assignee (other than the General Partner, any of its Affiliates or any officer, director, employee, partner, agent or trustee of the General Partner, the Partnership or any of their Affiliates, in their capacity as such) shall take part in the operations, management or control (within the meaning of the Act) of the Partnership’s business, transact any business in the Partnership’s name or have the power to sign documents for or otherwise bind the Partnership. The transaction of any such business by the General Partner, any of its Affiliates or any officer, director, employee, partner, agent or trustee of the General Partner, the Partnership or any of their Affiliates, in their capacity as such, shall not affect, impair or eliminate the limitations on the liability of the Limited Partners or Assignees under this Agreement.
Section 8.3 Outside Activities of Limited Partners.
Subject to any agreements entered into by a Limited Partner or its Affiliates with the General Partner, Partnership or a Subsidiary, any Limited Partner and any officer, director, employee, agent,
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trustee, Affiliate or stockholder of any Limited Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities in direct competition with the Partnership or that are enhanced by the activities of the Partnership. Neither the Partnership nor any Partners shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner or Assignee. Subject to such agreements, none of the Limited Partners nor any other Person shall have any rights by virtue of this Agreement or the partnership relationship established hereby in any business ventures of any other Person, other than the Limited Partners benefiting from the business conducted by the General Partner, and such Person shall have no obligation pursuant to this Agreement to offer any interest in any such business ventures to the Partnership, any Limited Partner or any such other Person, even if such opportunity is of a character which, if presented to the Partnership, any Limited Partner or such other Person, could be taken by such Person.
Section 8.4 Return of Capital.
Except pursuant to the rights of Redemption set forth in Section 8.6, no Limited Partner shall be entitled to the withdrawal or return of his or her Capital Contribution, except to the extent of distributions made pursuant to this Agreement or upon termination of the Partnership as provided herein. No Limited Partner or Assignee shall have priority over any other Limited Partner or Assignee either as to the return of Capital Contributions, or as otherwise expressly provided in this Agreement, or as to profits, losses, distributions or credits.
Section 8.5 Rights of Limited Partners Relating to the Partnership.
A. In addition to other rights provided by this Agreement or by the Act, and except as limited by Section 8.5.C, each Limited Partner shall have the right, for a purpose reasonably related to such Limited Partner’s interest as a limited partner in the Partnership, upon written demand with a statement of the purpose of such demand and at such Limited Partner’s expense:
(1) to obtain a copy of the most recent annual and quarterly reports filed with the Securities and Exchange Commission by the General Partner pursuant to the Exchange Act, and each communication sent to the stockholders of the General Partner;
(2) to obtain a copy of the Partnership’s federal, state and local income tax returns for each Partnership Year;
(3) to obtain a current list of the name and last known business, residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the Certificate and all amendments thereto, together with executed copies of all powers of attorney pursuant to which this Agreement, the Certificate and all amendments thereto have been executed; and
(5) to obtain true and full information regarding the amount of cash and a description and statement of any other property or services contributed by each Partner and which each Partner has agreed to contribute in the future, and the date on which each became a Partner.
B. The Partnership shall notify each Limited Partner in writing of any adjustment made in the calculation of the REIT Shares Amount within a reasonable time after the date such change becomes effective.
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C. Notwithstanding any other provision of this Section 8.5, the General Partner may keep confidential from the Limited Partners, for such period of time as the General Partner determines in its sole and absolute discretion to be reasonable, any information that (i) the General Partner believes to be in the nature of trade secrets or other information the disclosure of which the General Partner in good faith believes is not in the best interests of the Partnership or (ii) the Partnership or the General Partner is required by law or by agreements with unaffiliated third parties to keep confidential.
Section 8.6 Redemption Rights.
A. At any time after one year following the date of issuance of any OP Units to a Limited Partner or a Special General Partner, such Partner shall have the right (subject to the terms and conditions set forth herein and in any other such agreement, as applicable) to require the Partnership to redeem all or a portion of the OP Units held by such Partner (such OP Units being hereafter referred to as “Tendered Units”) in exchange for the Cash Amount (a “Redemption”);
provided
that the terms of such OP Units do not provide that such OP Units are not entitled to a right of Redemption. Unless otherwise expressly provided in this Agreement or in a separate agreement entered into between the Partnership and the holders of such OP Units, all OP Units, including Class A OP Units and Class C OP Units, shall be entitled to a right of Redemption hereunder. The Tendering Partner shall have no right, with respect to any OP Units so redeemed, to receive any distributions paid on or after the Specified Redemption Date. Any Redemption shall be exercised pursuant to a Notice of Redemption delivered to the General Partner by the Special General Partner or Limited Partner who is exercising the right (the “Tendering Partner”). The Cash Amount shall be payable to the Tendering Partner within ten (10) days of the Specified Redemption Date in accordance with the instructions set forth in the Notice of Redemption.
B. Notwithstanding Section 8.6.A above, if the Special General Partner or a Limited Partner has delivered to the General Partner a Notice of Redemption then the General Partner may, in its sole and absolute discretion (subject to the limitations on ownership and transfer of REIT Shares set forth in the Charter), elect to acquire some or all of the Tendered Units from the Tendering Partner in exchange for the REIT Shares Amount (as of the Specified Redemption Date) and, if the General Partner so elects, the Tendering Partner shall sell the Tendered Units to the General Partner in exchange for the REIT Shares Amount. In such event, the Tendering Partner shall have no right to cause the Partnership to redeem such Tendered Units. The General Partner shall promptly give such Tendering Partner written notice of its election, and the Tendering Partner may elect to withdraw its redemption request at any time prior to the acceptance of the cash or REIT Shares Amount by such Tendering Partner.
C. The REIT Shares Amount, if applicable, shall be delivered as duly authorized, validly issued, fully paid and nonassessable REIT Shares and, if applicable, free of any pledge, lien, encumbrance or restriction, other than those provided in the Charter, the Bylaws of the General Partner, the Securities Act, relevant state securities or blue sky laws and any applicable registration rights agreement with respect to such REIT Shares entered into by the Tendering Partner. Notwithstanding any delay in such delivery (but subject to Section 8.6.E), the Tendering Partner shall be deemed the owner of such REIT Shares for all purposes, including without limitation, rights to vote or consent, and receive dividends, as of the Specified Redemption Date.
D. The Special General Partner and each Limited Partner covenants and agrees with the General Partner that all Tendered Units shall be delivered to the General Partner free and clear of all liens, claims and encumbrances whatsoever and should any such liens, claims and/or encumbrances exist or arise with respect to such Tendered Units, the General Partner shall be under no obligation to acquire the same. The Special General Partner and each Limited Partner further agrees that, in the event any state or local property transfer tax is payable as a result of the transfer of its Tendered Units to the General Partner (or its designee), such Partner shall assume and pay such transfer tax.
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E. Notwithstanding the provisions of Section 8.6.A, 8.6.B, 8.6.C or any other provision of this Agreement, the Special General Partner or a Limited Partner (i) shall not be entitled to effect a Redemption for cash or an exchange for REIT Shares to the extent the ownership or right to acquire REIT Shares pursuant to such exchange by such Partner on the Specified Redemption Date could cause such Partner or any other Person, or, in the opinion of counsel selected by the General Partner, may cause such Partner or any other Person, to violate the restrictions on ownership and transfer of REIT Shares set forth in the Charter and (ii) shall have no rights under this Agreement to acquire REIT Shares which would otherwise be prohibited under the Charter. To the extent any attempted Redemption or exchange for REIT Shares would be in violation of this Section 8.6.E, it shall be null and void ab initio and such Partner shall not acquire any rights or economic interest in the cash otherwise payable upon such Redemption or the REIT Shares otherwise issuable upon such exchange.
F. Notwithstanding anything herein to the contrary (but subject to Section 8.6.E), with respect to any Redemption or exchange for REIT Shares pursuant to this Section 8.6:
(1) All OP Units acquired by the General Partner pursuant thereto shall automatically, and without further action required, be converted into and deemed to be Limited Partner Interests comprised of the same number and class of OP Units.
(2) The Special General Partner and each Limited Partner may not effect a Redemption for less than one thousand (1,000) OP Units or, if such Partner holds less than one thousand (1,000) OP Units, such Partner may effect a Redemption only with respect to all OP Units held by such Partner.
(3) A Tendering Partner may not effect more than two (2) Redemptions in a single calendar year.
(4) Without the consent of the General Partner, the Special General Partner and each Limited Partner may not effect a Redemption during the period after the Partnership Record Date with respect to a distribution and before the record date established by the General Partner for a distribution to its stockholders of some or all of its portion of such distribution.
(5) The consummation of any Redemption or exchange for REIT Shares shall be subject to the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
(6) Each Tendering Partner shall continue to own all OP Units subject to any Redemption or exchange for REIT Shares, and be treated as a Partner with respect to such OP Units for all purposes of this Agreement, until such OP Units are transferred to the General Partner and paid for or exchanged on the Specified Redemption Date. Until a Specified Redemption Date, the Tendering Partner shall have no rights as a stockholder of the General Partner with respect to such Tendering Partner’s OP Units.
G. In the event that the Partnership issues additional Partnership Interests to any Additional Limited Partner pursuant to Section 4.4.B, the General Partner shall make such revisions to this Section 8.6 as it determines are necessary to reflect the issuance of such additional Partnership Interests.
H. Notwithstanding any other provision of this Agreement, the General Partner is authorized to take any action that it determines to be necessary or appropriate to cause the partnership to comply with any withholding requirements established under the Code or any other federal, state or local
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law that apply upon a Redemption or exchange of Tendered Units. If a Tendering Partner believes that it is exempt from withholding upon a Redemption or exchange of Tendered Units, such Partner must furnish the General Partner a FIRPTA certificate or other documentation requested by the General Partner is a form acceptable to the General Partner. If the Partnership or the General Partner is required to withhold and pay over to any taxing authority any amount upon a Redemption or exchange of Tendered Units and the Cash Amount or the REIT Shares Amount, as the case may be, equals or exceeds the amount of tax required to be withheld, the amount withheld shall be treated as an amount received by such Partner in redemption of its Tendered Units. If the Cash Amount or the REIT Shares Amount, as the case may be, is less than the amount of tax required to be withheld, the Tendering Partner shall not receive any Cash Amount or REIT Shares Amount, and the Tendering Partner shall contribute the excess of the amount of tax required to be withheld over the Cash Amount or REIT Shares Amount before such excess taxes are required to be paid to the taxing authority.
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting.
The General Partner shall keep, or cause to be kept, at the principal office of the Partnership appropriate books and records with respect to the Partnership’s business, including without limitation, all books and records necessary to provide to the Special General Partner and the Limited Partners any information, lists and copies of documents required to be provided pursuant to Section 9.3. Any records maintained by or on behalf of the Partnership in the regular course of its business may be kept on, or be in the form of any information storage device, provided, that the records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Partnership shall be maintained, for financial and tax reporting purposes, on an accrual basis in accordance with generally accepted accounting principles.
Section 9.2 Fiscal Year.
The fiscal year of the Partnership shall be the calendar year.
Section 9.3 Reports.
A. As soon as practicable, but in no event later than 105 days after the close of each Partnership Year, or such earlier date as they are filed with the Securities and Exchange Commission, the General Partner shall cause to be delivered to the Special General Partner and each Limited Partner as of the close of the Partnership Year, an annual report containing financial statements of the Partnership, or of the General Partner if such statements are prepared solely on a consolidated basis with the General Partner, for such Partnership Year, presented in accordance with generally accepted accounting principles, such statements to be audited by a nationally recognized firm of independent public accountants selected by the General Partner.
B. As soon as practicable, but in no event later than 45 days after the close of each calendar quarter (except the last calendar quarter of each year), or such earlier date as they are filed with the Securities and Exchange Commission, the General Partner shall cause to be delivered to the Special General Partner and each Limited Partner as of the last day of the calendar quarter, a report containing unaudited financial statements of the Partnership, or of the General Partner, if such statements are prepared solely on a consolidated basis with the applicable law or regulation, or as the General Partner determines to be appropriate.
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Section 9.4 Nondisclosure of Certain Information.
Notwithstanding the provisions of Sections 9.1 and 9.3, the General Partner may keep confidential from the Special General Partner and the Limited Partners any information that the General Partner believes to be in the nature of trade secrets or other information the disclosure of which the General Partner in good faith believes is not in the best interest of the Partnership or which the Partnership is required by law or by agreements with unaffiliated third parties to keep confidential.
ARTICLE 10
TAX MATTERS
Section 10.1 Preparation of Tax Returns.
The General Partner shall arrange for the preparation and timely filing of all returns of Partnership income, gains, deductions, losses and other items required of the Partnership for federal and applicable state income tax purposes and shall use all reasonable efforts to furnish, within 90 days of the close of each taxable year, the tax information reasonably required by the Special General Partner and the Limited Partners for federal and applicable state income tax reporting purposes. The Special General Partner and each Limited Partner shall promptly provide the General Partner with any information reasonably requested by the General Partner relating to any Contributed Property contributed (directly or indirectly) by such Partner to the Partnership.
Section 10.2 Tax Elections.
Except as otherwise provided herein, the General Partner shall, in its sole and absolute discretion, determine whether to make any available election pursuant to the Code, including the election under Section 754 of the Code. The General Partner shall have the right to seek to revoke any such election (including without limitation, any election under Section 754 of the Code) upon the General Partner’s determination in its sole and absolute discretion that such revocation is the best interests of the Partners.
Section 10.3 Tax Matters Partner.
A. The General Partner shall be the “tax matters partner” of the Partnership for federal income tax purposes. Pursuant to Section 6230(e) of the Code, upon receipt of notice from the IRS of the beginning of an administrative proceeding with respect to the Partnership, the tax matters partner shall furnish the IRS with the name, address and profit interest of the Special General Partner and each of the Limited Partners and Assignees;
provided, however
, that such information is provided to the Partnership by the Partners and Assignees.
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with respect to any administrative or judicial proceedings for the adjustment of Partnership items required to be taken into account by a Partner for income tax purposes (such administrative proceedings being referred to as a “tax audit” and such judicial proceedings being referred to as “judicial review”), and in the settlement agreement the tax matters partner may expressly state that such agreement shall bind all Partners, except that such settlement agreement shall not bind any Partner (i) who (within the time prescribed pursuant to the Code and Regulations) files a statement with the IRS providing that the tax matters partner shall not have the authority to enter into a settlement agreement on behalf of such Partner or (ii) who is a “notice partner” (as defined in Section 6231 of the Code) or a member of a “notice group” (as defined in Section 6223(b)(2) of the Code);
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(2) in the event that a notice of a final administrative adjustment at the Partnership level of any item required to be taken into account by a Partner for tax purposes (a “final adjustment”) is mailed to the tax matters partner, to seek judicial review of such final adjustment, including the filing of a petition for readjustment with the Tax Court or the United States Claims Court, or the filing of a complaint for refund with the District Court of the United States for the district in which the Partnership’s principal place of business is located;
(3) to intervene in any action brought by any other Partner for judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the IRS at any time and, if any part of such request is not allowed by the IRS, to file an appropriate pleading (petition or complaint) for judicial review with respect to such request;
(5) to enter into an agreement with the IRS to extend the period for assessing any tax which is attributable to any item required to be taken into account by a Partner for tax purposes, or an item affected by such item; and
(6) to take any other action on behalf of the Partners of the Partnership in connection with any tax audit or judicial review proceeding to the extent permitted by applicable law or regulations.
The taking of any action and the incurring of any expense by the tax matters partner in connection with any such proceeding, except to the extent required by law, is a matter in the sole and absolute discretion of the tax matters partner and the provisions relating to indemnification of the General Partner set forth in Section 7.7 shall be fully applicable to the tax matters partner in its capacity as such.
C. The tax matters partner shall receive no compensation for its services. All third party costs and expenses incurred by the tax matters partner in performing its duties as such (including legal and accounting fees) shall be borne by the Partnership. Nothing herein shall be construed to restrict the Partnership from engaging an accounting firm to assist the tax matters partner in discharging its duties hereunder, so long as the compensation paid by the Partnership for such services is reasonable.
Section 10.4 Organizational Expenses.
The Partnership shall elect to deduct expenses, if any, incurred by it in organizing the Partnership as provided in Section 709 of the Code.
Section 10.5 Withholding.
The Special General Partner and each Limited Partner hereby authorize the Partnership to withhold from or pay on behalf of or with respect to such Partner any amount of federal, state, local, or foreign taxes that the General Partner determines that the Partnership is required to withhold or pay with respect to any amount distributable or allocable to such Partner pursuant to this Agreement, including, without limitation, any taxes required to be withheld or paid by the Partnership pursuant to Sections 1441, 1442, 1445 or 1446 of the Code. Any amount paid on behalf of or with respect to the Special General Partner or a Limited Partner shall constitute a receivable of the Partnership from such Partner, which receivable shall be paid by such Partner within 15 days after notice from the General Partner that such payment must be made unless (i) the Partnership withholds such payment from a distribution which would otherwise be made to the Partner or (ii) the General Partner determines, in its sole and absolute discretion, that such payment may be satisfied out of the available funds of the Partnership which would,
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but for such payment, be distributed to the Partner. Any amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be treated as having been distributed to such Partner. The Special General Partner and each Limited Partner hereby unconditionally and irrevocably grants to the Partnership a security interest in such Partner’s Partnership Interest to secure such Partner’s obligation to pay to the Partnership any amounts required to be paid pursuant to this Section 10.5. Any amounts payable by the Special General Partner or a Limited Partner hereunder shall bear interest at the base rate on corporate loans at large United States money center commercial banks, as published from time to time in the Wall Street Journal, plus two percentage points (but not higher than the maximum lawful rate) from the date such amount is due (i.e., 15 days after demand) until such amount is paid in full. The Special General Partner and each Limited Partner shall take such actions as the Partnership or the General Partner shall request in order to perfect or enforce the security interest created hereunder.
ARTICLE 11
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer.
A. The term “transfer,” when used in this Article 11 with respect to a Partnership Interest, shall be deemed to refer to a transaction by which a Partner purports to assign its Partnership Interest to another Person and includes a sale, assignment, gift (outright or in trust), pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by law or otherwise. The term “transfer” when used in this Article 11 does not include any Redemption or exchange for REIT Shares pursuant to Section 8.6, except as otherwise provided herein. No part of the interest of a Limited Partner shall be subject to the claims of any creditor, any spouse for alimony or support, or to legal process, and may not be voluntarily or involuntarily alienated or encumbered except as may be specifically provided for in this Agreement or consented to by the General Partner and the Special General Partner.
B. No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article 11. Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article 11 shall be null and void ab initio unless otherwise consented to by the General Partner and the Special General Partner in their sole and absolute discretion.
Section 11.2 Transfer of the Partnership Interest of the General Partner and the Special General Partner.
A. The General Partner shall not (i) voluntarily withdraw from the Partnership, (ii) directly or indirectly transfer all or any portion of its interest in the Partnership (except to an entity wholly owned by the General Partner), or (iii) engage in any merger, consolidation, or other combination with or into another Person, sale of all or substantially all of its assets or any reclassification or recapitalization of its outstanding equity interests or undertake a Listing Event (an “Extraordinary Transaction”), without the Consent of the Partners, which may be given or withheld by each Partner in his, her or its sole and absolute discretion. In addition, if an Extraordinary Transaction would result in the termination of the Advisory Agreement, the Partnership must either (i) purchase the Special General Partner Interest as provided under Section 11.7, or (ii) obtain the Consent of the Special General Partner. Upon any transfer of a Partnership Interest in accordance with the provisions of this Section 11.2, the transferee shall become a Substitute General Partner for all purposes herein, and shall be vested with the powers and rights of the transferor General Partner, and shall be liable for all obligations and responsible for all duties of the General Partner, once such transferee has executed such instruments as may be necessary to effectuate such admission and to confirm the agreement of such transferee to be bound by all the terms and provisions of this Agreement with respect to the Partnership Interest so acquired. It is a
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condition to any transfer otherwise permitted hereunder that the transferee assumes, by operation of law or express agreement, all of the obligations of the transferor General Partner under this Agreement with respect to such transferred Partnership Interest, and no such transfer (other than pursuant to a statutory merger or consolidation wherein all obligations and liabilities of the transferor General Partner are assumed by a successor corporation by operation of law) shall relieve the transferor General Partner of its obligations under this Agreement without the Consent of the Limited Partners, in their reasonable discretion. In the event the General Partner withdraws from the Partnership in violation of this Agreement or otherwise, or otherwise dissolves or terminates, or upon the Incapacity of the General Partner, all of the remaining Partners may elect to continue the Partnership business by selecting a Substitute General Partner in accordance with the Act.
B. Notwithstanding any other provision of this Agreement, the Special General Partner shall not transfer all or any portion of its Partnership Interest to any transferee without the consent of the General Partner, which consent may be withheld in the sole and absolute discretion of the General Partner. Notwithstanding the preceding sentence, however, the Special General Partner shall have the right, at any time, to transfer its Partnership Interest to the General Partner, an Affiliate of the General Partner, W. P. Carey Inc. or an Affiliate of W. P. Carey Inc.
Section 11.3 Limited Partners’ Rights to Transfer.
A. Prior to the first anniversary of the Effective Date, no Limited Partner shall transfer all or any portion of its Partnership Interest to any transferee without the consent of the General Partner and the Special General Partner, which consent may be withheld in their sole and absolute discretion;
provided, however
, that any Limited Partner may, at any time, without the consent of the General Partner and the Special General Partner, (i) transfer all or any portion of its Partnership Interest to the General Partner, (ii) transfer all or any portion of its Partnership Interest to an Affiliate, another original Limited Partner or to an Immediate Family Member, subject to the provisions of Section 11.6, (iii) transfer all or any portion of its Partnership Interest to a trust for the benefit of a charitable beneficiary or to a charitable foundation, subject to the provisions of Section 11.6, and (iv) subject to the provisions of Section 11.6, pledge (a “Pledge”) all or any portion of its Partnership Interest to a lending institution, which is not an Affiliate of such Limited Partner, as collateral or security for a bona fide loan or other extension of credit, and transfer such pledged Partnership Interest to such lending institution in connection with the exercise of remedies under such loan or extension or credit, and the transfer of such pledged Partnership Interest by the lender to any transferee. Each Limited Partner or Assignee (resulting from a transfer made pursuant to clauses (i)-(iv) of the proviso of the preceding sentence) shall have the right to transfer all or any portion of its Partnership Interest, subject to the provisions of Section 11.6 and the satisfaction of each of the following conditions (in addition to the right of each such Limited Partner or Assignee to continue to make any such transfer permitted by clauses (i)-(iv) of such proviso without satisfying either of the following conditions):
(1) General Partner Right of First Refusal. The transferring Partner shall give written notice of the proposed transfer to the General Partner, which notice shall state (i) the identity of the proposed transferee, and (ii) the amount and type of consideration proposed to be received for the transferred OP Units. The General Partner shall have ten (10) business days upon which to give the transferring Partner notice of its election to acquire the OP Units on the proposed terms. If it so elects, it shall purchase the OP Units on such terms within ten (10) business days after giving notice of such election. If it does not so elect, the transferring Partner may transfer such OP Units to a third party, on economic terms no more favorable to the transferee than the proposed terms, subject to the other conditions of this Section 11.3.
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(2) Qualified Transferee. Any transfer of a Partnership Interest shall be made only to Qualified Transferees. It is a condition to any transfer otherwise permitted hereunder that the transferee assumes by operation of law or express agreement all of the obligations of the transferor Limited Partner under this Agreement with respect to such transferred Partnership Interest and no such transfer (other than pursuant to a statutory merger or consolidation wherein all obligations and liabilities of the transferor Partner are assumed by a successor corporation by operation of law) shall relieve the transferor Partner of its obligations under this Agreement without the approval of the General Partner, in its reasonable discretion. Notwithstanding the foregoing, any transferee of any transferred Partnership Interest shall be subject to any and all ownership limitations contained in the Charter, which may limit or restrict such transferee’s ability to exercise its Redemption rights, and to the representations in Section 3.4.D. Any transferee, whether or not admitted as a Substituted Limited Partner, shall take subject to the obligations of the transferor hereunder. Unless admitted as a Substituted Limited Partner, no transferee, whether by a voluntary transfer, by operation of law or otherwise, shall have any rights hereunder, other than the rights of an Assignee as provided in Section 11.5.
B. If a Limited Partner is subject to Incapacity, the executor, administrator, trustee, committee, guardian, conservator, or receiver of such Limited Partner’s estate shall have all the rights of a Limited Partner, but not more rights than those enjoyed by other Limited Partners, for the purpose of settling or managing the estate, and such power as the Incapacitated Limited Partner possessed to transfer all or any part of his or its interest in the Partnership. The Incapacity of a Limited Partner, in and of itself, shall not dissolve or terminate the Partnership.
C. The General Partner may prohibit any transfer otherwise permitted under Section 11.3 by a Limited Partner of his or her OP Units if, in the opinion of legal counsel to the Partnership, such transfer would require the filing of a registration statement under the Securities Act by the Partnership or would otherwise violate any federal or state securities laws or regulations applicable to the Partnership or the Partnership Unit.
Section 11.4 Substituted Limited Partners.
A. No Limited Partner shall have the right to substitute a transferee as a Limited Partner in his or her place (including any transferee permitted by Section 11.3). The General Partner shall, however, have the right to consent to the admission of a transferee of the interest of a Limited Partner pursuant to this Section 11.4 as a Substituted Limited Partner, which consent may be given or withheld by the General Partner in its sole and absolute discretion. The General Partner’s failure or refusal to permit a transferee of any such interests to become a Substituted Limited Partner shall not give rise to any cause of action, whether at law or in equity, against the Partnership or any Partner.
B. A transferee who has been admitted as a Substituted Limited Partner in accordance with this Article 11 shall have all the rights and powers and be subject to all the restrictions and liabilities of a Limited Partner under this Agreement. The admission of any transferee as a Substituted Limited Partner shall be subject to the transferee executing and delivering to the General Partner an acceptance of all of the terms and conditions of this Agreement (including without limitation, the provisions of Section 2.4 and such other documents or instruments as may be required to effect the admission), each in form and substance satisfactory to the General Partner) and the acknowledgment by such transferee that each of the representations and warranties set forth in Section 3.4 are true and correct with respect to such transferee as of the date of the transfer of the Partnership Interest to such transferee and will continue to be true to the extent required by such representations and warranties.
C. Upon the admission of a Substituted Limited Partner, the General Partner shall amend Exhibit A to reflect the name, address, number of OP Units, and Percentage Interest of such
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Substituted Limited Partner and to eliminate or adjust, if necessary, the name, address and interest of the predecessor of such Substituted Limited Partner.
Section 11.5 Assignees.
If the General Partner, in its sole and absolute discretion, does not consent to the admission of any permitted transferee under Section 11.3 as a Substituted Limited Partner, as described in Section 11.4, such transferee shall be considered an Assignee for purposes of this Agreement. An Assignee shall be entitled to all the rights of an assignee of a limited partnership interest under the Act, including the right to receive distributions from the Partnership and the share of Net Income, Net Loss, gain and loss attributable to the OP Units assigned to such transferee, the rights to transfer the OP Units provided in this Article 11, the right of Redemption provided in Section 8.6, but shall not be deemed to be a holder of OP Units for any other purpose under this Agreement, and shall not be entitled to effect a Consent with respect to such OP Units on any matter presented to the Limited Partners for approval (such Consent remaining with the transferor Limited Partner). In the event any such transferee desires to make a further assignment of any such Partnership Units, such transferee shall be subject to all the provisions of this Article 11 to the same extent and in the same manner as any Limited Partner desiring to make an assignment of OP Units. Notwithstanding anything contained in this Agreement to the contrary, as a condition to becoming an Assignee, any prospective Assignee must first execute and deliver to the Partnership an acknowledgment that each of the representations and warranties set forth in Section 3.4 are true and correct with respect to such prospective Assignee as of the date of the prospective assignment of the Partnership Interest to such prospective Assignee and will continue to be true to the extent required by such representations or warranties.
Section 11.6 General Provisions.
A. No Limited Partner may withdraw from the Partnership other than as a result of (i) a permitted transfer of all of such Limited Partner’s OP Units in accordance with this Article 11 and the transferee(s) of such Partnership Units being admitted to the Partnership as a Substituted Limited Partner or (ii) pursuant to the exercise of its right of Redemption of all of such Limited Partner’s OP Units under Section 8.6;
provided
that after such transfer, exchange or redemption such Limited Partner owns no Partnership Interest.
B. Any Limited Partner who shall transfer all of such Limited Partner’s OP Units in a transfer permitted pursuant to this Article 11 where such transferee was admitted as a Substituted Limited Partner or pursuant to the exercise of its rights of Redemption of all of such Limited Partner’s OP Units under Section 8.6 shall cease to be a Limited Partner;
provided
that after such transfer, exchange or redemption such Limited Partner owns no Partnership Interest.
C. Transfers pursuant to this Article 11 may only be made on the first day of a fiscal quarter of the Partnership, unless the General Partner otherwise agrees.
D. If any Partnership Interest is transferred, assigned or redeemed during any quarterly segment of the Partnership’s Partnership Year in compliance with the provisions of this Article 11 or transferred or redeemed pursuant to Section 8.6, on any day other than the first day of a Partnership Year, then Net Income, Net Loss, each item thereof and all other items attributable to such Partnership Interest for such Partnership Year shall be divided and allocated between the transferor Partner and the transferee Partner by taking into account their varying interests during the Partnership Year using a method selected by the General Partner that is in accordance with Section 706(d) of the Code. Except as otherwise agreed by the General Partner, all distributions of Available Cash with respect to which the Partnership Record Date is before the date of such transfer, assignment, exchange or
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redemption shall be made to the transferor Partner, and all distributions of Available Cash thereafter, in the case of a transfer or assignment other than a redemption, shall be made to the transferee Partner.
E. In addition to any other restrictions on transfer herein contained, including without limitation the provisions of this Article 11, in no event may any transfer or assignment of a Partnership Interest by any Partner (including pursuant to a Redemption or exchange for REIT Shares by the Partnership or the General Partner) be made (i) to any person or entity who lacks the legal right, power or capacity to own a Partnership Interest; (ii) in violation of applicable law; (iii) except with the consent of the General Partner, which may be given or withheld in its sole and absolute discretion, of any component portion of a Partnership Interest, such as the Capital Account, or rights to distributions, separate and apart from all other components of a Partnership Interest; (iv) except with the consent of the General Partner, which may be given or withheld in its sole and absolute discretion, if in the opinion of legal counsel to the Partnership such transfer could cause a termination of the Partnership for federal or state income tax purposes (except as a result of the Redemption or exchange for REIT Shares of all Partnership Interests held by all Limited Partners or pursuant to a transaction expressly permitted under Section 11.2); (v) if in the opinion of counsel to the Partnership such transfer could cause the Partnership to cease to be classified as a partnership for federal income tax purposes (except as a result of the Redemption or exchange for REIT Shares of all Partnership Interests held by all Limited Partners); (vi) if such transfer could, in the opinion of counsel to the Partnership, cause the Partnership to become, with respect to any employee benefit plan subject to Title I of ERISA, a “party-in-interest” (as defined in Section 3(14) of ERISA) or a “disqualified person” (as defined in Section 4975(c) of the Code); (vii) if such transfer could, in the opinion of counsel to the Partnership, cause any portion of the assets of the Partnership to constitute assets of any employee benefit plan pursuant to Department of Labor Regulations Section 2510.2-101; (viii) if such transfer requires the registration of such Partnership Interest pursuant to any applicable federal or state securities laws; (ix) except with the consent of the General Partner, which may be given or withheld in its sole and absolute discretion, if such transfer (1) could be treated as effectuated through an “established securities market” or a “secondary market” (or the substantial equivalent thereof) within the meaning of Section 7704 of the Code, (2) could cause the Partnership to become a “publicly traded partnership,” as such term is defined in Sections 469(k)(2) or 7704(b) of the Code, (3) could be in violation of Section 3.4.E(5), or (4) could cause the Partnership to fail one or more of the Safe Harbors (as defined below); (x) if such transfer subjects the Partnership to be regulated under the Investment Company Act of 1940, the Investment Advisors Act of 1940 or the Employee Retirement Income Security Act of 1974, each as amended; (xi) except with the consent of the General Partner, which may be given or withheld in its sole discretion, if the transferee or assignee of such Partnership Interest is unable to make the representations set forth in Section 3.4.C; (xii) if such transfer is made to a lender to the Partnership or any Person who is related (within the meaning of Section 1.752-4(b) of the Regulations) to any lender to the Partnership whose loan constitutes a Nonrecourse Liability, except with the consent of the General Partner, which may be given or withheld in its sole and absolute discretion; and provided, that, as a condition to granting such consent the lender may be required to enter into an arrangement with the Partnership and the General Partner to redeem or exchange for the REIT Shares Amount any OP Units in which a security interest is held simultaneously with the time at which such lender would be deemed to be a partner in the Partnership for purposes of allocating liabilities to such lender under Section 752 of the Code; or (xiii) if in the opinion of legal counsel for the Partnership such transfer could adversely affect the ability of the General Partner to continue to qualify as a REIT or, except with the consent of the General Partner, which may be given or withheld in its sole and absolute discretion, subject the General Partner to any additional taxes under Section 857 or Section 4981 of the Code.
F. The General Partner shall monitor the transfers of interests in the Partnership (including any acquisition of OP Units by the Partnership or the General Partner) to determine (i) if such interests could be treated as being traded on an “established securities market” or a “secondary market (or
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the substantial equivalent thereof)” within the meaning of Section 7704 of the Code and (ii) whether such transfers of interests could result in the Partnership being unable to qualify for the “safe harbors” set forth in Regulations Section 1.7704-1 (or such other guidance subsequently published by the IRS setting forth safe harbors under which interests will not be treated as “readily tradable on a secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704 of the Code) (the “Safe Harbors”). The General Partner shall have the authority (but shall not be required) to take any steps it determines are necessary or appropriate in its sole and absolute discretion to prevent any trading of interests which could cause the Partnership to become a “publicly traded partnership” within the meaning of Code Section 7704, or any recognition by the Partnership of such transfers, or to ensure that one or more of the Safe Harbors is met.
Section 11.7 Call Right Attributable to the Special General Partner Interest.
A. In the event of a “Trigger Event” (as defined in Section 11.7.B hereof), the Partnership shall have the right (the “Call Right”) to redeem all, or any portion, of the Special General Partner Interest. The Partnership shall exercise the Call Right by providing the Special General Partner with written notice of its desire to exercise the Call Right within sixty (60) days of the occurrence of a Trigger Event. The purchase price to be paid by the Partnership for the portion of the Special General Partner Interest that is subject to the Call Right shall equal the fair market value of such Interest as determined by Appraisal, and, subject to Section 11.C below, shall be paid in cash or in REIT Shares (at the option of the Special General Partner) within one hundred twenty (120) days after the Partnership provides the written notice required under this Section 11.7.A.
B. For purposes of this Section 11.7, a Trigger Event means at any time after the second anniversary of the Effective Date, the:
(1) non-renewal of the Advisory Agreement upon the expiration of its then current term;
(2) termination of the Advisory Agreement for any reason under circumstances where an Affiliate of the Advisor does not serve as the advisor under any replacement advisory agreement; or
(3) resignation of the Advisor under the Advisory Agreement.
C. In the event that the Partnership exercises the Call Right as a result of a termination of the Advisory Agreement for “Cause” (as defined in the Advisory Agreement), the Partnership shall have the option to redeem all or a portion of the Special General Partner Interest by issuing its promissory note with (i) a term of five (5) years; (ii) annual installments of principal payable ratably over the term of the note; and (iii) a market rate of interest.
Section 11.8 Put Right of General Partner.
The General Partner shall have the right at any time (the “GP Put Right”) to require the Partnership to redeem any portion of the General Partner Interest for the purpose of providing the General Partner with sufficient funds to enable it to make redemptions of its stock. The General Partner shall exercise the GP Put Right at any time by providing the Partnership with written notice of its desire to exercise the GP Put Right. The purchase price to be paid by the Partnership for the portion of the General Partner Interest that the General Partner desires to be redeemed shall equal the fair market value of such portion as determined by Appraisal, and shall be paid in cash within one hundred twenty (120) days after the General Partner provides the written notice required under this Section 11.8. In the event that the
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General Partner exercises the GP Put Right, the OP Units held by the General Partner shall be reduced as appropriate.
ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner.
A successor to all of the General Partner’s General Partner Interest pursuant to Section 11.2 who is proposed to be admitted as a successor General Partner shall be admitted to the Partnership as the General Partner, effective upon such transfer. Any such transferee shall carry on the business of the Partnership without dissolution. In each case, the admission shall be subject to the successor General Partner executing and delivering to the Partnership an acceptance of all of the terms and conditions of this Agreement and such other documents or instruments as may be required to effect the admission. In the case of such admission on any day other than the first day of a Partnership Year, all items attributable to the General Partner Interest for such Partnership Year shall be allocated between the transferring General Partner and such successor as provided in Article 11.
Section 12.2 Admission of Additional Limited Partners.
A. After the admission to the Partnership of the initial Limited Partners on the date hereof, a Person who makes a Capital Contribution to the Partnership in accordance with this Agreement shall be admitted to the Partnership as an Additional Limited Partner only upon furnishing to the General Partner (i) evidence of acceptance in form satisfactory to the General Partner of all of the terms and conditions of this Agreement, including, without limitation, the power of attorney granted in Section 2.4 and (ii) such other documents or instruments as may be required in the discretion of the General Partner in order to effect such Person’s admission as an Additional Limited Partner.
B. Notwithstanding anything to the contrary in this Section 12.2, no Person shall be admitted as an Additional Limited Partner without the consent of the General Partner, which consent may be given or withheld in the General Partner’s sole and absolute discretion. The admission of any Person as an Additional Limited Partner shall become effective on the date upon which the name of such Person is recorded on the books and records of the Partnership, following the receipt of the Capital Contribution in respect of such Limited Partner and the consent of the General Partner to such admission. If any Additional Limited Partner is admitted to the Partnership on any day other than the first day of a Partnership Year, then Net Income, Net Loss, each item thereof and all other items allocable among Partners and Assignees for such Partnership Year shall be allocated among such Limited Partner and all other Partners and Assignees by taking into account their varying interests during the Partnership Year using a method selected by the General Partner that is in accordance with Section 706(d) of the Code. All distributions of Available Cash with respect to which the Partnership Record Date is before the date of such admission shall be made solely to Partners and Assignees other than the Additional Limited Partner (other than in its capacity as an Assignee) and, except as otherwise agreed to by the Additional Limited Partners and the General Partner, all distributions of Available Cash thereafter shall be made to all Partners and Assignees including such Additional Limited Partner.
Section 12.3 Amendment of Agreement and Certificate of Limited Partnership.
For the admission to the Partnership of any Partner, the General Partner shall take all steps necessary and appropriate under the Act to amend the records of the Partnership and, if necessary, to prepare as soon as practical an amendment of this Agreement (including an amendment of Exhibit A)
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and, if required by law, shall prepare and file an amendment to the Certificate and may for this purpose exercise the power of attorney granted pursuant to Section 2.4.
ARTICLE 13
DISSOLUTION AND LIQUIDATION
Section 13.1 Dissolution.
The Partnership shall not be dissolved by the admission of Substituted Limited Partners or Additional Limited Partners or by the admission of a successor General Partner in accordance with the terms of this Agreement. Upon the withdrawal of the General Partner, any successor General Partner (selected as described in Section 13.1.B below) shall continue the business of the Partnership. The Partnership shall dissolve, and its affairs shall be wound up, upon the first to occur of any of the following (each a “Liquidating Event”):
A. the expiration of its term as provided in Section 2.5;
B. an event of withdrawal of the General Partner, as defined in the Act, unless, within 90 days after the withdrawal, all of the remaining Partners agree in writing, in their sole and absolute discretion, to continue the business of the Partnership and to the appointment, effective as of the date of withdrawal, of a substitute General Partner;
C. subject to compliance with Section 11.2 an election to dissolve the Partnership made by the General Partner, in its sole and absolute discretion;
D. entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of the Act;
E. 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;
F. the Incapacity of the General Partner, unless all of the remaining Partners in their sole and absolute discretion agree in writing to continue the business of the Partnership and to the appointment, effective as of a date prior to the date of such Incapacity, of a substitute General Partner;
G. the redemption or exchange for REIT Shares of all Partnership Interests (other than those of the General Partner) pursuant to this Agreement; or
H. a final and non-appealable judgment is entered by a court of competent jurisdiction ruling that the General Partner is bankrupt or insolvent, or a final and non-appealable order for relief is entered by a court with appropriate jurisdiction against the General Partner, in each case under any federal or state bankruptcy or insolvency laws as now or hereafter in effect, unless prior to the entry of such order or judgment all of the remaining Partners agree in writing to continue the business of the Partnership and to the appointment, effective as of a date prior to the date of such order or judgment, of a substitute General Partner.
Section 13.2 Winding Up.
A. Upon the occurrence of a Liquidating Event, the Partnership shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the
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claims of its creditors and Partners. No Partner shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Partnership’s business and affairs. The General Partner (or, in the event there is no remaining General Partner, any Person elected by a Majority in Interest of the Limited Partners (the “Liquidator”)) shall be responsible for overseeing the winding up and dissolution of the Partnership and shall take full account of the Partnership’s liabilities and property and the Partnership property shall be liquidated as promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom (which may, to the extent determined by the General Partner, include shares of stock in the General Partner) shall be applied and distributed in the following order:
(1) First, to the payment and discharge of all of the Partnership’s debts and liabilities to creditors other than the Partners;
(2) Second, to the payment and discharge of all of the Partnership’s debts and liabilities to the General Partner;
(3) Third, to the payment and discharge of all of the Partnership’s debts and liabilities to the other Partners; and
(4) The balance, if any, to the General Partner, the Special General Partner and the Limited Partners in proportion to their positive Capital Account balances, determined after taking into account all Capital Account adjustments for all prior periods and the Partnership taxable year during which the liquidation occurs (other than those made as a result of the liquidating distribution set forth in this Section 13.2.A(4)).
B. Notwithstanding the provisions of Section 13.2.A which require liquidation of the assets of the Partnership, but subject to the order of priorities set forth therein, if prior to or upon dissolution of the Partnership the Liquidator determines that an immediate sale of part or all of the Partnership’s assets would be impractical or would cause undue loss to the Partners, the Liquidator may, in its sole and absolute discretion, defer for a reasonable time the liquidation of any assets except those necessary to satisfy liabilities of the Partnership (including to those Partners as creditors) and/or distribute to the Partners, in lieu of cash, as tenants in common and in accordance with the provisions of Section 13.2.A, undivided interests in such Partnership assets as the Liquidator deems not suitable for liquidation. Any such distributions in-kind shall be made only if, in the good faith judgment of the Liquidator, such distributions in-kind are in the best interest of the Partners, and shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operation of such properties at such time. The Liquidator shall determine the fair market value of any property distributed in kind using such reasonable method of valuation as it may adopt.
Section 13.3 Capital Contribution Obligation.
A. If any Partner has a deficit balance in its Capital Account (after giving effect to all contributions, distributions and allocations for the taxable years, including the year during which such liquidation occurs), such Partner shall have no obligation to make any contribution to the capital of the Partnership with respect to such deficit, and such deficit at any time shall not be considered a debt owed to the Partnership or to any other Person for any purpose whatsoever, except to the extent otherwise expressly agreed to by such Partner and the Partnership.
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Section 13.4
Compliance with Timing Requirements of Regulations.
In the discretion of the Liquidator or the General Partner, a pro rata portion of the distributions that would otherwise be made to the General Partner and Limited Partners pursuant to this Article 13 may be:
(1)
distributed to a trust established for the benefit of the General Partner and Limited Partners for the purposes of liquidating Partnership assets, collecting amounts owed to the Partnership, and paying any contingent or unforeseen liabilities or obligations of the Partnership or of the General Partner arising out of or in connection with the Partnership. The assets of any such trust shall be distributed to the General Partner and Limited Partners from time to time, in the reasonable discretion of the Liquidator or the General Partner, in the same proportions and the amount distributed to such trust by the Partnership would otherwise have been distributed to the General Partner and Limited Partners pursuant to this Agreement; or
(2)
withheld or escrowed to provide a reasonable reserve for Partnership liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Partnership, provided, that such withheld or escrowed amounts shall be distributed to the General Partner and Limited Partners in the manner and priority set forth in Section 13.2.A as soon as practicable.
Section 13.5
Deemed Distribution and Recontribution.
Notwithstanding any other provision of this Article 13, in the event the Partnership is liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Liquidating Event has occurred, the Partnership’s property shall not be liquidated, the Partnership’s liabilities shall not be paid or discharged, and the Partnership’s affairs shall not be wound up. Instead, the Partnership shall be deemed to have contributed all of its assets and liabilities to a new partnership in exchange for an interest in the new partnership. Immediately thereafter, the Partnership shall be deemed to distribute interests in the new partnership to the General Partner and Limited Partners in proportion to their respective interests in the Partnership in liquidation of the Partnership.
Section 13.6
Rights of Limited Partners.
Except as otherwise provided in this Agreement, each Limited Partner shall look solely to the assets of the Partnership for the return of his Capital Contribution and shall have no right or power to demand or receive property from the General Partner. No Limited Partner shall have priority over any other Limited Partner as to the return of his Capital Contributions, distributions or allocations.
Section 13.7
Notice of Dissolution.
In the event a Liquidating Event occurs or an event occurs that would, but for provisions of Section 13.1, result in a dissolution of the Partnership, the General Partner shall, within 30 days thereafter, provide written notice thereof to each of the Partners and to all other parties with whom the Partnership regularly conducts business (as determined in the discretion of the General Partner) and shall publish notice thereof in a newspaper of general circulation in each place in which the Partnership regularly conducts business (as determined in the discretion of the General Partner).
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Section 13.8
Cancellation of Certificate of Limited Partnership.
Upon the completion of the liquidation of the Partnership cash and property as provided in Section 13.2, the Partnership shall be terminated and the Certificate and all qualifications of the Partnership as a foreign limited partnership in jurisdictions shall be cancelled and such other actions as may be necessary to terminate the Partnership shall be taken.
Section 13.9
Reasonable Time for Winding-Up.
A reasonable time shall be allowed for the orderly winding-up of the business and affairs of the Partnership and the liquidation of its assets pursuant to Section 13.2, in order to minimize any losses otherwise attendant upon such winding-up, and the provisions of this Agreement shall remain in effect between the Partners during the period of liquidation.
Section 13.10
Waiver of Partition.
Each Partner hereby waives any right to partition of the Partnership property.
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; CONSENTS
Section 14.1
Amendments.
A.
The actions requiring consent or approval of the Partners or of the Limited Partners pursuant to this Agreement, including Section 7.3, or otherwise pursuant to applicable law, are subject to the procedures in this Article 14.
B.
Amendments to this Agreement requiring the consent or approval of Limited Partners may be proposed by the General Partner or by Limited Partners holding twenty-five percent (25%) or more of the Partnership Interests held by Limited Partners. Following such proposal, the General Partner shall submit any proposed amendment to the Partners or to the Limited Partners, as applicable. The General Partner shall seek the written consent of the Limited Partners on the proposed amendment or shall call a meeting to vote thereon and to transact any other business that it may deem appropriate. For purposes of obtaining a written consent, the General Partner may require a response within a reasonable specified time, but not less than 15 days, and failure to respond in such time period shall constitute a consent which is consistent with the General Partner’s recommendation (if so recommended) with respect to the proposal;
provided
, that, an action shall become effective at such time as requisite consents are received even if prior to such specified time.
C.
No amendment to this Agreement that would adversely affect the rights and interests of the Special General Partner may be made without the prior written consent of the Special General Partner.
Section 14.2
Action by the Partners.
A.
Meetings of the Partners may be called by the General Partner and shall be called upon the receipt by the General Partner of a written request by Limited Partners holding twenty-five percent (25%) or more of the Partnership Interests held by Limited Partners. The notice shall state the nature of the business to be transacted. Notice of any such meeting shall be given to all Partners not less than seven days nor more than 30 days prior to the date of such meeting. Partners may vote in person or by proxy at such meeting. Whenever the vote or Consent of the Limited Partners or of the Partners is
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permitted or required under this Agreement, such vote or Consent may be given at a meeting of Partners or may be given in accordance with the procedure prescribed in Section 14.1.
B.
Any action required or permitted to be taken at a meeting of the Partners may be taken without a meeting if a written consent setting forth the action so taken is signed by the percentage as is expressly required by this Agreement for the action in question. Such consent may be in one instrument or in several instruments, and shall have the same force and effect as a vote of the Percentage Interests of the Partners (expressly required by this Agreement). Such consent shall be filed with the General Partner. An action so taken shall be deemed to have been taken at a meeting held on the effective date so certified.
C.
Each Limited Partner may authorize any Person or Persons to act for him by proxy on all matters in which a Limited Partner is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Limited Partner or his attorney-in-fact. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Limited Partner executing it.
D.
Each meeting of Partners shall be conducted by the General Partner or such other Person as the General Partner may appoint pursuant to such rules for the conduct of the meeting as the General Partner or such other Person deems appropriate.
E.
On matters on which Limited Partners are entitled to vote, each Limited Partner shall have a vote equal to the number of OP Units held.
ARTICLE 15
GENERAL PROVISIONS
Section 15.1
Addresses and Notice.
Any notice, demand, request or report required or permitted to be given or made to a Partner or Assignee under this Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first class United States mail or by other means of written communication to the Partner or Assignee at the address set forth in Exhibit A or such other address as the Partners shall notify the General Partner in writing.
Section 15.2
Titles and Captions.
All article or section titles or captions in this Agreement are for convenience only. They shall not be deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof. Except as specifically provided otherwise, references to “Articles” and “Sections” are to Articles and Sections of this Agreement.
Section 15.3
Pronouns and Plurals.
Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.
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Section 15.4
Further Action.
The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.
Section 15.5
Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.
Section 15.6
Creditors.
Other than as expressly set forth herein with respect to Indemnitees, none of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Partnership.
Section 15.7
Waiver.
No failure or delay by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon any breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition.
Section 15.8
Counterparts.
This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto.
Section 15.9
Applicable Law.
This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law.
Section 15.10
Invalidity of Provisions.
If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.
Section 15.11
Entire Agreement.
This Agreement contains the entire understanding and agreement among the Partners with respect to the subject matter hereof and supersedes any other prior written or oral understandings or agreements among them with respect thereto.
Section 15.12
No Rights as Stockholders.
Nothing contained in this Agreement shall be construed as conferring upon the holders of OP Units any rights whatsoever as stockholders of the General Partner, including without limitation any right to receive dividends or other distributions made to stockholders of the General Partner or to vote or to consent or to receive notice as stockholders in respect of any meeting of stockholders for the election of directors of the General Partner or any other matter.
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[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement of Limited Partnership as of the date first written above.
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General Partner:
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CORPORATE PROPERTY ASSOCIATES 18-GLOBAL INCORPORATED, a Maryland corporation
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By:
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/s/ Trevor P. Bond
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Name:
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Trevor P. Bond
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Title:
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Authorized Officer
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Special General Partner:
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WPC-CPA:18 HOLDINGS, LLC, a Delaware limited liability company
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By:
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WPC HOLDCO LLC, as the sole member
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By:
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W. P. Carey INC., as its managing member
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By:
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/s/ Catherine D. Rice
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Name:
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Catherine D. Rice
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Title:
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Chief Financial Officer
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Signature Page to Agreement of
Limited Partnership
CPA:18 LIMITED PARTNERSHIP
EXHIBIT A
PARTNERS, CAPITAL CONTRIBUTIONS, PERCENTAGE INTERESTS
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Names and Addresses
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Agreed Value of
Capital
Contribution
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Class A
OP Units
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Class C
OP Units
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Percentage
Interest
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General Partner
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Corporate Property Associates 18 - Global Incorporated
50 Rockefeller Plaza
New York, New York 10020
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a
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b
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[1]%
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Special General Partner
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CPA®:18 Holdings, LLC
1
207 E. Westminster
50 Rockefeller Plaza
New York, New York 10020
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$209,000
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23,222
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[0.015%]
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Limited Partners
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Corporate Property Associates 18 - Global Incorporated
50 Rockefeller Plaza
New York, New York 10020
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a
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b
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[99.985]%
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a.
Corporate Property Associates 18 - Global Incorporated
will be deemed to have contributed the entire proceeds generated by the initial offering of the REIT Shares. Of the proceeds,
Corporate Property Associates 18 - Global Incorporated
shall contribute a sufficient amount as a general partner to result in an initial one percent (1%) Percentage Interest. The remainder shall be contributed by
Corporate Property Associates 18 - Global Incorporated
in its capacity as a limited partner. Consistent with the documents underlying the initial offering of the REIT Shares, the Partnership will be deemed to have paid all costs associated with the offering.
b.
The number of OP Units to be issued shall be equal to One (1) for each $10.00 of Capital Contributions of the Partner. Fractional OP Units shall be permitted.
c.
The Percentage Interests of the Partners shall be determined in accordance with the definition of Percentage Interest set forth in Article 1.
1
NTD: Carey REIT II was the entity that contributed the capital.
CPA:18 LIMITED PARTNERSHIP
EXHIBIT B
NOTICE OF REDEMPTION
The undersigned hereby irrevocably (i) transfers ____________ [Class A][Class C] OP Units in CPA:18 Limited Partnership in accordance with the terms of the Agreement of Limited Partnership of CPA:18 Limited Partnership and the rights of Redemption referred to therein, (ii) surrenders such [Class A][Class C] OP Units and all right, title and interest therein, and (iii) directs that the cash (or, if applicable, REIT Shares of the corresponding Class of OP Units being redeemed) deliverable upon Redemption or exchange be delivered to the address specified below within ten (10) days of the receipt of this Notice of Redemption, and if applicable, that such REIT Shares of the corresponding Class of OP Units being redeemed be registered or placed in the name(s) and at the address(es) specified below.
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Dated:
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Name of Partner:
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(Signature of Partner)
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Issue REIT Shares of the corresponding Class of OP Units being redeemed to:
Please insert social security or identifying number:
Name:
CPA:18 LIMITED PARTNERSHIP
EXHIBIT C
FORM OF [CLASS A][CLASS C] OP UNIT CERTIFICATE
CERTIFICATE FOR OP UNITS OF
CPA:18 LIMITED PARTNERSHIP
Corporate Property Associates 18 - Global Incorporated
, as the General Partner of CPA:18 Limited Partnership, a Delaware limited partnership (the “
Operating Partnership
”), hereby certifies that ____________________ is a Limited Partner of the Operating Partnership whose Partnership Interests therein, as set forth in the Agreement of Limited Partnership of the Operating Partnership dated [____], 2013, as amended (the “
Partnership Agreement
”), under which the Operating Partnership is existing (copies of which are on file at the Operating Partnership’s principal office at 50 Rockefeller Plaza, New York, New York 10020), represent _______ [Class A][Class C] OP Units in the Operating Partnership.
THE UNITS REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THE PARTNERSHIP AGREEMENT, AS IT MAY BE AMENDED FROM TIME TO TIME (A COPY OF WHICH IS ON FILE WITH THE OPERATING PARTNERSHIP). EXCEPT AS OTHERWISE PROVIDED IN THE PARTNERSHIP AGREEMENT, THE UNITS EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE GENERAL PARTNER AN OPINION OF COUNSEL SATISFACTORY TO THE GENERAL PARTNER, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS. THIS CERTIFICATE EVIDENCES AN INTEREST IN THE OPERATING PARTNERSHIP AND SHALL BE A SECURITY GOVERNED BY ARTICLE 8 OF THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN THE STATE OF NEW YORK AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OTHER APPLICABLE JURISDICTION.
CPA:18 LIMITED PARTNERSHIP
EXHIBIT D
SCHEDULE OF LIMITED PARTNERS’ OWNERSHIP WITH RESPECT TO TENANTS
None.
CPA:18 LIMITED PARTNERSHIP
EXHIBIT E
SCHEDULE OF REIT SHARES ACTUALLY OR CONSTRUCTIVELY OWNED BY LIMITED PARTNER’S OTHER THAN THOSE ACQUIRED PURSUANT TO AN EXCHANGE
None.
