Exhibit 10.1
SECOND AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
RW HOLDINGS NNN OPERATING PARTNERSHIP, LP
Rich Uncles NNN Operating Partnership, LP, was formed as a limited partnership under the laws of the State of Delaware, pursuant to a Certificate of Limited Partnership filed with the Office of the Secretary of State of
the State of Delaware on January 28, 2016. This Second Amended and Restated Limited Partnership Agreement (“Agreement”) is entered into effective as of December 31, 2019, among RW Holdings NNN REIT, Inc., a
Maryland corporation (the “General Partner”) and the Limited Partners party hereto from time to time. Capitalized terms used herein but not otherwise defined shall have the meanings given them in Article 1.
WHEREAS, the General Partner and Rich Uncles NNN LP, LLC (the “Original Limited Partner”) entered into that certain Agreement of Limited Partnership of Rich Uncles NNN Operating
Partnership, LP, dated as of May 24, 2016, pursuant to which the Partnership was formed (the “Original Agreement”);
WHEREAS, the General Partner and the Original Limited Partner entered into an Amended and Restated Limited Partnership Agreement of the Partnership, dated as of August 11, 2017
(the “First Amended and Restated Agreement”), to amend and restate the Original Agreement;
WHEREAS, pursuant to that certain Agreement and Plan of Merger by and among the General Partner, Rich Uncles Real Estate Investment Trust I (“REIT I”), and Katana Merger Sub, LP, a
subsidiary of the General Partner (“Merger Sub”), and the Partnership, on December 31, 2019, REIT I merged with and into Merger Sub (the “REIT Merger”), with Merger Sub continuing as the surviving entity;
WHEREAS, pursuant to that certain Contribution Agreement by and among the Partnership, the General Partner, BrixInvest, LLC (“BrixInvest”), and Daisho OP Holdings, LLC (“Daisho”),
BrixInvest and Daisho contributed certain assets to the Partnership (the “Contribution Transaction”), including all of Daisho’s right, title, and interest in all of the membership interests in modiv LLC;
WHEREAS, on December 31, 2019, a certificate of amendment was filed with the Delaware Secretary of State, changing the name of the Partnership from “Rich Uncles NNN REIT Operating
Partnership” to “RW Holdings NNN REIT Operating Partnership;” and
WHEREAS, the General Partner and the Limited Partners now desire to amend and restate the First Amended and Restated Agreement in order to, among other things, reflect the name
change of the Partnership to “RW Holdings NNN REIT Operating Partnership,” reclassify the existing Partnership Interests into “Partnership Units” of corresponding Classes, to set forth the terms of the Class M Units (as defined herein) issued to
Daisho in the Contribution Transaction and the Class P Units (as defined herein) issued to the Key Employees (as defined herein), (or their Affiliates, as applicable), to admit Daisho as a Limited Partner, to admit the Key Employees (or their
Affiliates, as applicable) as holders of “profits interests” in the Partnership, to make other updates to reflect the effects of the Merger and the Contribution Transaction, and make other conforming changes.
NOW, THEREFORE, in consideration of the foregoing, of mutual covenants between the parties hereto, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree to amend and restate the First Amended and Restated Agreement in its entirety and continue the Partnership as a limited partnership under the Delaware Revised Uniform Limited
Partnership Act, as amended from time to time, as follows:
ARTICLE 1
DEFINED TERMS
The following defined terms used in this Agreement shall have the meanings specified below:
Act means the Delaware Revised Uniform Limited Partnership Act, as it may be amended from time to time.
Additional Funds has the meaning set forth in Section 4.3.
Additional Securities means any additional REIT Shares (other than REIT Shares issued in connection with an exchange pursuant to Section 8.4 hereof) or rights,
options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase REIT Shares, as set forth in Section 4.2(a)(ii).
Adjusted Capital Account means the Capital Account maintained for each Partner as of the end of each Partnership Year (i) increased by any amounts which such
Partner is obligated to restore pursuant to any provision of this Agreement or is deemed to be obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) and (ii) decreased by the items
described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.701-4(b)(2)(ii)(d)(6). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
Administrative Expenses means (i) all administrative and operating costs and expenses incurred by the Partnership, (ii) those administrative costs and expenses of
the General Partner, including any salaries or other payments to directors, officers or employees of the General Partner, and any accounting and legal expenses of the General Partner, which expenses, the Partners have agreed, are expenses of the
Partnership and not the General Partner, and (iii) to the extent not included in clause (ii) above, REIT Expenses; provided, however, that
Administrative Expenses shall not include any administrative costs and expenses incurred by the General Partner that are attributable to Properties or partnership interests in a Subsidiary Partnership (other than this Partnership) that are owned by
the General Partner directly.
Affiliate or Affiliated means, as to any other Person, any of the following:
(a) any Person directly or indirectly owning, controlling or holding, with power to vote, ten percent (10%) or more of the outstanding voting securities of such other Person;
(b) any Person ten percent (10%) or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with power to vote, by such other Person;
(c) any Person directly or indirectly controlling, controlled by or under common control with such other Person;
(d) any executive officer, director, trustee or general partner of such other Person; and
(e) any legal entity for which such Person acts as an executive officer, director, trustee or general partner.
Agreed Value means the fair market value of a Partner’s non-cash Capital Contribution as of the date of contribution as
agreed to by such Partner and the General Partner. The names and addresses of the General Partner and Limited Partners, number of Partnership Units issued to each of them, and their respective Capital Contributions as of the date of contribution is
set forth on Exhibit A.
Agreement means this Second Amended and Restated Limited Partnership Agreement, as amended, modified supplemented or restated from time to time, as the context
requires.
Articles of Incorporation means the General Partner’s Articles of Incorporation filed with the Maryland State Department
of Assessments and Taxation, as amended or restated from time to time.
Capital Account has the meaning provided in Section 4.4 hereof.
Capital Contribution means the total amount of cash, cash equivalents, and the Agreed Value of any Property or other asset (other than cash) contributed or agreed
to be contributed, as the context requires, to the Partnership by each Partner pursuant to the terms of this Agreement. Any reference to the Capital Contribution of a Partner shall include the Capital Contribution made by a predecessor holder of the
Partnership Interest of such Partner.
Cash Amount means an amount of cash equal to the product of the Value of one REIT Share and the REIT Shares Amount on the date of receipt by the General Partner of
a Notice of Exchange.
Certificate means any instrument or document that is required under the laws of the State of Delaware, or any other jurisdiction in which the Partnership conducts
business, to be signed and sworn to by the Partners of the Partnership (either by themselves or pursuant to the power-of-attorney granted to the General Partner in Section 8.2 hereof) and filed for recording in the appropriate public offices within
the State of Delaware or such other jurisdiction to perfect or maintain the Partnership as a limited partnership, to effect the admission, withdrawal, or substitution of any Partner of the Partnership, or to protect the limited liability of the
Limited Partners as limited partners under the laws of the State of Delaware or such other jurisdiction.
Class C REIT Shares means the REIT Shares classified as Class C common stock in the Articles of Incorporation.
Class C Unit means a Partnership Unit entitling the holder thereof to the rights of a holder of a Class C Unit as provided in this Agreement.
Class M Unit means a Partnership Unit representing a Limited Partnership Interest issued to Daisho OP Holdings, LLC pursuant to
the
Contribution Agreement and having the
rights, privileges, limitations, and restrictions described on
Exhibit C.
Class P Unit means a Partnership Unit representing a Limited Partnership Interest issued to Key Employees (or an Affiliate of a Key Employee) pursuant to the terms
of each Key Employee’s (or such Affiliate’s, as the case may be) restricted unit award agreement and having the rights, privileges, limitations, and restrictions described on Exhibit D.
Class S Offering Expenses means any commissions and fees payable to brokers or other persons that are related, directly or indirectly, to a Class S Unit.
Class S REIT Shares means the REIT Shares classified as Class S common stock in the Articles of Incorporation.
Class S Unit means a Partnership Unit entitling the holder thereof to the rights of a holder of a Class S Unit as provided in this Agreement.
Code means the Internal Revenue Code of 1986, as amended, and as hereafter amended from time to time. Reference to any particular provision of the Code shall mean
that provision in the Code at the date hereof and any successor provision of the Code.
Common Stockholders means holders of REIT Shares.
Common Unit means a Partnership Unit that is a Class C Unit, Class M Unit, Class S Unit, or such additional class of units as may be created and designated as
“common units” pursuant to the terms hereof.
Contribution Agreement means that certain Contribution Agreement by and among the Partnership, Daisho OP Holdings, LLC, and various
other parties dated September 19, 2019.
Conversion Factor means 1.0, provided that in the event that the General Partner (i) declares or pays a dividend on its outstanding REIT Shares in REIT Shares or
makes a Distribution to all holders of its outstanding REIT Shares in REIT Shares, (ii) subdivides its outstanding REIT Shares, or (iii) combines its outstanding REIT Shares into a smaller number of REIT Shares, the Conversion Factor shall be
adjusted by multiplying the Conversion Factor by a fraction, the numerator of which shall be the number of REIT Shares issued and outstanding on the record date for such dividend, distribution, subdivision or combination (assuming for such purposes
that such dividend, distribution, subdivision or combination has occurred as of such time), and the denominator of which shall be the actual number of REIT Shares (determined without the above assumption) issued and outstanding on such date and,
provided further, that in the event that an entity other than an Affiliate of the General Partner shall become General Partner pursuant to any merger, consolidation or combination of the General Partner with or into another entity (the “Successor
Entity”), the Conversion Factor shall be adjusted by multiplying the Conversion Factor by the number of shares of the Successor Entity into which one REIT Share is converted pursuant to such merger, consolidation or combination, determined as of the
date of such merger, consolidation or combination. Any adjustment to the Conversion Factor shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event; provided, however, that if
the General Partner receives a Notice of Exchange after the record date, but prior to the effective date of such dividend, distribution, subdivision or combination, the Conversion Factor shall be determined as if the General Partner had received the
Notice of Exchange immediately prior to the record date for such dividend, distribution, subdivision or combination. A separate Conversion Factor shall be determined for each class of Partnership Units by taking into account only the outstanding REIT
Shares having the same class designation as the applicable class of Partnership Units.
Designated Individual has the meaning set forth in Section 10.5(a) hereof.
Distributions means any dividends or other distributions of money or other property paid by the General Partner to the holders of its REIT Shares, including
dividends that may constitute a return of capital for federal income tax purposes.
Event of Bankruptcy as to any Person means the filing of a petition for relief as to such Person as debtor or bankrupt under the Bankruptcy Code of 1978 or similar
provision of law of any jurisdiction (except if such petition is contested by such Person and has been dismissed within 90 days); insolvency or bankruptcy of such Person as finally determined by a court proceeding; filing by such Person of a petition
or application to accomplish the same or for the appointment of a receiver or a trustee for such Person or a substantial part of his assets; commencement of any proceedings relating to such Person as a debtor under any other reorganization,
arrangement, insolvency, adjustment of debt or liquidation law of any jurisdiction, whether now in existence or hereinafter in effect, either by such Person or by another, provided that if such proceeding is commenced by another, such Person
indicates his approval of such proceeding, consents thereto or acquiesces therein, or such proceeding is contested by such Person and has not been finally dismissed within 90 days.
Exchanged REIT Shares has the meaning set forth in Section 7.1(e) hereof.
Exchange Right has the meaning provided in Section 8.4(a) hereof.
Exchanging Partner has the meaning provided in Section 8.4(a) hereof.
GAAP means generally accepted accounting principles consistently applied as used in the United States.
General Partner means RW Holdings NNN REIT, Inc., a Maryland corporation, and any Person who becomes a substitute or additional General Partner as provided herein,
and any of their successors as General Partner.
General Partnership Interest means a Partnership Interest held by the General Partner that is a general partnership interest. The number of Common Units held by
the General Partner equal to one percent (1%) of all outstanding Common Units from time to time is hereby designated as the General Partnership Interest.
Indemnitee means (i) the General Partner or a director, officer or employee of the General Partner or Partnership, and (ii) such other Persons (including
Affiliates of the General Partner or the Partnership) as the General Partner may designate from time to time, in its sole and absolute discretion.
Independent Director means a director of the General Partner who is not an officer or employee of the General Partner and meets the requirements for independence
as defined by the General Partner’s Articles of Incorporation.
IRS means the Internal Revenue Service.
Joint Venture or Joint Ventures means those joint venture or general partnership arrangements in
which the General Partner or the Partnership is a co-venturer or general partner which are established to acquire Properties.
Key Employee means each of Aaron S. Halfacre and Raymond J. Pacini, collectively, the “Key Employees”.
Limited Partner means any Person named as a Limited Partner on Exhibit A attached hereto, and any Person who
becomes a Substitute Limited Partner, in such Person’s capacity as a Limited Partner in the Partnership.
Limited Partnership Interest means the ownership interest of a Limited Partner in the Partnership at any particular time, including the right of such Limited
Partner to any and all benefits to which such Limited Partner may be entitled as provided in this Agreement and in the Act, together with the obligations of such Limited Partner to comply with all the provisions of this Agreement and of such Act. A
Limited Partnership Interest may be (but is not required to be) expressed as a number of Partnership Units.
Listing means the approval of the REIT Shares, issued by the General Partner pursuant to an effective registration statement, on a National Securities Exchange.
Upon Listing, the shares shall be deemed Listed.
Loss has the meaning provided in Section 5.1(f) hereof.
National Securities Exchange means any securities exchange registered with the SEC pursuant to Section 6 of the Securities Exchange Act of 1934, as amended.
Net Sale Proceeds means in the case of a transaction described in clause (a) of the definition of Sale, the net proceeds of any such transaction less the amount of
all real estate commissions and closing costs paid by the Partnership. In the case of a transaction described in clause (b) of such definition, Net Sale Proceeds means the net proceeds of any such transaction less the amount of any legal and other
selling expenses incurred by the Partnership in connection with such transaction. In the case of a transaction described in clause (c) of such definition, Net Sale Proceeds means the net proceeds of any such transaction actually distributed to the
Partnership from the Joint Venture less any expenses incurred by the Partnership in connection with such transaction. In the case of a transaction or series of transactions described in clause (d) of the definition of Sale, Net Sale Proceeds means
the net proceeds of any such transaction less the amount of all commissions and closing costs paid by the Partnership. In the case of a transaction described in clause (e) of such definition, Net Sale Proceeds means the net proceeds of any such
transaction less the amount of all selling costs and other expenses incurred by the Partnership in connection with such transaction. Net Sale Proceeds shall also include, in the case of any lease of a Property consisting of a building only, any
amounts from tenants, borrowers or lessees that the General Partner, in its capacity as general partner of the Partnership determines, in its discretion, to be economically equivalent to the proceeds of a Sale. Net Sale Proceeds shall be calculated
after repayment of any outstanding indebtedness secured by the asset disposed of in the sale.
Notice of Conversion means the Notice of Exercise of conversion right substantially in the form attached as Exhibit E hereto.
Notice of Exchange means the Notice of Exercise of Exchange Right substantially in the form attached as Exhibit B
hereto.
Offer has the meaning set forth in Section 7.1(b)(ii) hereof.
Offering means an offering of Stock that is either (a) registered with the SEC, or (b) exempt from such registration, excluding Stock offered under any employee
benefit plan.
Opt-out Election has the meaning set forth in Section 10.5(c) hereof.
Partner means any General Partner or Limited Partner.
Partner Nonrecourse Debt Minimum Gain has the meaning set forth in Regulations Section 1.704-2(i). A Partner’s share of
Partner Nonrecourse Debt Minimum Gain shall be determined in accordance with Regulations Section 1.704-2(i)(5).
Partnership means RW Holdings NNN Operating Partnership, LP, a Delaware limited partnership.
Partnership Interest means an ownership interest in the Partnership held by either a Limited Partner or the General Partner and includes any and all benefits to
which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement.
Partnership Minimum Gain has the meaning set forth in Regulations Section 1.704-2(d). In accordance with Regulations Section
1.704-2(d), the amount of Partnership Minimum Gain is determined by first computing, for each Partnership nonrecourse liability, any gain the Partnership would realize if it disposed of the property subject to that liability for no consideration
other than full satisfaction of the liability, and then aggregating the separately computed gains. A Partner’s share of Partnership Minimum Gain shall be determined in accordance with Regulations Section
1.704-2(g)(1).
Partnership Record Date means the record date established by the General Partner for the distribution of cash pursuant to Section 5.2 hereof, which record date
shall be the same as the record date established by the General Partner for a Distribution to the Stockholders of some or all of its portion of such distribution.
Partnership Representative has the meaning set forth in Section 10.5(a) hereof.
Partnership Unit means a fractional, undivided share of the Partnership Interests of all Partners issued hereunder, including Class C Units, Class M Units, Class
P Units and Class S Units. Without limitation on the authority of the General Partner as set forth in Section 4.2 hereof, the General Partner may, without notification to or consent of the Limited Partners, designate any Partnership Units, when
issued, as Common Units, may establish any other class of Partnership Units, and may designate one or more series of any class of Partnership Units. The allocation of Partnership 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.
Partnership Year means the fiscal year of the Partnership, which shall be the calendar year.
Percentage Interest means as to a Partner, with respect to any class or series of Partnership Units held by such Partner, its interest in such class or series of
Partnership Units as determined by dividing the number of Partnership Units in such class or series owned by such Partner by the total number of Partnership Units in such class or series then outstanding.
Person means any individual, partnership, limited liability company, corporation, joint venture, trust or other entity.
Profit has the meaning provided in Section 5.1(f) hereof.
Property or Properties means the real properties or real estate investments which are acquired by
the General Partner either directly or through the Partnership, Joint Ventures, partnerships or other entities.
Push-out Election has the meaning set forth in Section 10.5(c) hereof.
Received REIT Shares has the meaning set forth in Section 7.1(e) hereof.
Regulations means the federal income tax regulations promulgated under the Code, as amended and as hereafter amended from time to time. Reference to any particular
provision of the Regulations shall mean that provision of the Regulations on the date hereof and any successor provision of the Regulations.
Regulatory Allocations has the meaning set forth in Section 5.1(i) hereof.
REIT means a real estate investment trust under Sections 856 through 860 of the Code.
REIT Expenses means (i) costs and expenses relating to the formation and continuity of existence and operation of the General Partner and any Subsidiaries thereof
(which Subsidiaries shall, for purposes hereof, be included within the definition of General Partner), including taxes, fees and assessments associated therewith, any and all costs, expenses or fees payable to any director, officer, or employee of
the General Partner, (ii) costs and expenses relating to any Offering and registration of securities or exemption from registration by the General Partner and all statements, reports, fees and expenses incidental thereto, including, without
limitation, underwriting discounts and sales commissions applicable to any such Offering of securities, and any costs and expenses associated with any claims made by any holders of such securities or any underwriters or placement agents thereof,
(iii) costs and expenses associated with any repurchase of any securities by the General Partner, (iv) costs and expenses associated with the preparation and filing of any periodic or other reports and communications by the General Partner under
federal, state or local laws or regulations, including filings with the SEC, (v) costs and expenses associated with compliance by the General Partner with laws, rules and regulations promulgated by any regulatory body, including the SEC and any
National Securities Exchange, (vi) costs and expenses associated with any 401(k) plan, incentive plan, bonus plan or other plan providing for compensation for the employees of the General Partner, (vii) costs and expenses incurred by the General
Partner relating to any issuance or redemption of Partnership Interests, and (viii) all other operating or administrative costs of the General Partner incurred in the ordinary course of its business on behalf of or in connection with the Partnership.
REIT Share means a share of common stock, par value $0.001 per share, in the General Partner (or successor entity, as the case may be), including Class C REIT
Shares and Class S REIT Shares, the terms and conditions of which are set forth in the Articles of Incorporation.
REIT Shares Amount means a number of REIT Shares equal to the product of the number of Partnership Units offered for exchange by an Exchanging Partner, multiplied
by the Conversion Factor as adjusted to and including the Specified Exchange Date; provided that in the event the General Partner issues to all holders of REIT Shares rights, options, warrants or convertible or exchangeable securities entitling the
stockholders to subscribe for or purchase REIT Shares, or any other securities or property (collectively, the “rights”),
and the rights have not expired at the Specified Exchange Date, then the REIT Shares Amount shall also include the rights issuable to a holder of the REIT Shares Amount of REIT Shares on the record date fixed for purposes of determining the holders
of REIT Shares entitled to rights.
Sale or Sales means any transaction or series of transactions whereby: (a) the Partnership sells,
grants, transfers, conveys or relinquishes its ownership of any Property or portion thereof, including the lease of any Property consisting of the building only, and including any event with respect to any Property which gives rise to a significant
amount of insurance proceeds or condemnation awards; (b) the Partnership sells, grants, transfers, conveys or relinquishes its ownership of all or substantially all of the interest of the Partnership in any Joint Venture in which it is a co-venturer
or partner; (c) any Joint Venture in which the Partnership is a co-venturer or partner sells, grants, transfers, conveys or relinquishes its ownership of any Property or portion thereof, including any event with respect to any Property which gives
rise to insurance claims or condemnation awards; (d) the Partnership sells, grants, conveys, or relinquishes its interest in any asset, or portion thereof, including any event with respect to any asset which gives rise to a significant amount of
insurance proceeds or similar awards; or (e) the Partnership sells or otherwise disposes of or distributes all of its assets in liquidation of the Partnership.
SEC means the Securities and Exchange Commission.
Securities Act means the Securities Act of 1933, as amended.
Specified Exchange Date means the first business day of the month that is at least 60 business days after the receipt by the General Partner of a Notice of
Exchange or a Notice of Conversion.
Stock means shares of stock of the General Partner of any class or series, including REIT Shares, preferred stock or shares-in-trust.
Stockholders means the registered holders of the General Partner’s Stock.
Subsidiary means, with respect to any Person, any corporation or other entity of which a majority of (i) the voting power of the voting equity securities or (ii)
the outstanding equity interests is owned, directly or indirectly, by such Person.
Subsidiary Partnership means any partnership of which the partnership interests therein are owned by the General Partner or a direct or indirect Subsidiary of the
General Partner.
Substitute Limited Partner means any Person admitted to the Partnership as a Limited Partner pursuant to Section 9.3 hereof.
Successor Entity has the meaning provided in the definition of “Conversion Factor”
contained herein.
Surviving General Partner has the meaning set forth in Section 7.1(c) hereof.
Transaction has the meaning set forth in Section 7.1(b) hereof.
Transfer has the meaning set forth in Section 9.2(a) hereof.
Value means, with respect to REIT Shares, the average of the daily market price of such REIT Share for the ten (10) consecutive trading days immediately preceding
the date of such valuation. The market price for each such trading day shall be: (i) if the REIT Shares are Listed, the sale 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,
regular way, on such day; (ii) if the REIT Shares are not Listed, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source
designated by the General Partner; or (iii) if the REIT Shares are not Listed and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a
reliable quotation source designated by the General Partner, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than ten (10) days prior to the
date in question) for which prices have been so reported; provided that if there are no bid and asked prices reported during the ten (10) days prior to the date in question, the value of the REIT
Shares 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. In the event the REIT Shares Amount includes rights that a holder
of REIT Shares would be entitled to receive, then the 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.
ARTICLE 2
PARTNERSHIP FORMATION AND IDENTIFICATION
2.1. Formation. The Partnership was formed as a limited partnership pursuant to the Act for the purposes and upon the terms and conditions set forth in this
Agreement.
2.2. Name, Office and Registered Agent. The name of the Partnership is RW Holdings NNN Operating Partnership, LP. The specified office and place of business of the
Partnership shall be 3080 Bristol Avenue, Suite 550, Costa Mesa, California 92626. The General Partner may at any time change the location of such office, provided the General Partner gives notice to the Partners of any such change. The name and
address of the Partnership’s registered agent is Corp2000, 838 Walker Road, Suite 21-2, Dover, Kent County, Delaware 19904. The sole duty of the registered agent as such is to forward to the Partnership any
notice that is served on him as registered agent.
2.3. Partners
(a) The General Partner of the Partnership is RW Holdings NNN REIT, Inc., a Maryland corporation. Its principal place of business is the same as that of the Partnership.
(b) The Limited Partners are those Persons identified as Limited Partners on Exhibit A hereto, as amended from time to time.
2.4. Term and Dissolution
(a) The Partnership shall have perpetual duration, except that the Partnership shall be dissolved upon the first to occur of any of the following events:
(i) The occurrence of an Event of Bankruptcy as to a General Partner or the dissolution, death, removal or withdrawal of a General Partner unless the business of the Partnership is continued pursuant to
Section 7.3(b) hereof; provided that if a General Partner is on the date of such occurrence a partnership, the dissolution of such General Partner as a result of the dissolution, death, withdrawal, removal or Event of Bankruptcy of a partner in such
partnership shall not be an event of dissolution of the Partnership if the business of such General Partner is continued by the remaining partner or partners, either alone or with additional partners, and such General Partner and such partners comply
with any other applicable requirements of this Agreement;
(ii) The passage of ninety (90) days after the sale or other disposition of all or substantially all of the assets of the Partnership (provided that if the Partnership receives an installment obligation as
consideration for such sale or other disposition, the Partnership shall continue, unless sooner dissolved under the provisions of this Agreement, until such time as such note or notes are paid in full);
(iii) The exchange of all Limited Partnership Interests (other than any of such interests held by the General Partner or Affiliates of the General Partner) for REIT Shares or the securities of any other entity;
or
(iv) The election by the General Partner that the Partnership should be dissolved.
(b) Upon dissolution of the Partnership (unless the business of the Partnership is continued pursuant to Section 7.3(b) hereof), the General Partner (or its trustee, receiver, successor or legal representative)
shall amend or cancel the Certificate and liquidate the Partnership’s assets and apply and distribute the proceeds thereof in accordance with Section 5.6 hereof. Notwithstanding the foregoing, the liquidating
General Partner may either (i) defer liquidation of, or withhold from distribution for a reasonable time, any assets of the Partnership (including those necessary to satisfy the Partnership’s debts and
obligations), or (ii) distribute the assets to the Partners in kind.
2.5. Filing of Certificate and Perfection of Limited Partnership. The General Partner shall execute, acknowledge, record and file at the expense of the
Partnership, the Certificate any and all amendments thereto and all requisite fictitious name statements and notices in such places and jurisdictions as may be necessary to cause the Partnership to be treated as a limited partnership under, and
otherwise to comply with, the laws of each state or other jurisdiction in which the Partnership conducts business.
2.6. Certificates Describing Partnership Units. At the request of a Limited Partner, the General Partner, at its option, may issue a certificate summarizing the
terms of such Limited Partner’s interest in the Partnership, including the number of Partnership Units owned and the Percentage Interest represented by such Partnership Units as of the date of such
certificate. Any such certificate (i) shall be in form and substance as approved by the General Partner, (ii) shall not be negotiable and (iii) shall bear a legend to the following effect:
This certificate is not negotiable. The Partnership Units represented by this certificate are governed by and transferable only in accordance with the provisions of the Second Amended and Restated
Limited Partnership Agreement of RW Holdings NNN Operating Partnership, LP, as amended from time to time.
2.7. REIT Compliance. The Partners acknowledge that the General Partner intends to continue to qualify at
all times as a REIT, and that the ability of the General Partner to qualify as a REIT will depend upon the nature of the Partnership’s operations. Accordingly, and notwithstanding anything to the contrary otherwise contained in this Agreement, the
business and activities of the Partnership (including the business and activities of any subsidiary) are intended to be conducted as if the Partnership were itself a REIT, and in a manner that will permit the General Partner to maintain its
qualification as a REIT. To this end, the Partnership and its subsidiaries will operate in such a manner such that the Partnership, assuming it were a REIT, (i) would satisfy the requirements for an entity to be qualified and taxed as a REIT
pursuant to Sections 856 through 860 of the Code and applicable Regulations related thereto, and (ii) avoid incurring any taxes under Section 857 or Section 4981.
2.8. REIT Merger. Notwithstanding any other provision to the contrary in this Agreement, in no event shall the
Partnership take any action that could in the opinion of the legal counsel of the Partnership cause the REIT Merger to not qualify as a “reorganization” within the meaning of Section 368(a) of the Code.
ARTICLE 3
BUSINESS OF THE PARTNERSHIP
The purpose and nature of the business to be conducted by the Partnership is (i) to conduct any business that may be lawfully conducted by a limited partnership organized pursuant to the Act; 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 qualify as a REIT, unless the General
Partner otherwise ceases to qualify as a REIT, (ii) to enter into any partnership, joint venture or other similar arrangement to engage in any of the foregoing or the ownership of interests in any entity engaged in any of the foregoing and (iii) to
do anything necessary or incidental to the foregoing. In connection with the foregoing, and without limiting the General Partner’s right in its sole and absolute discretion to cease qualifying as a REIT, the
Partners acknowledge that the General Partner’s current status as a REIT and the avoidance of income and excise taxes on the General Partner inures to the benefit of all the Partners and not solely to the
General Partner. Notwithstanding the foregoing, the Limited Partners agree that the General Partner may terminate its status as a REIT under the Code at any time to the full extent permitted under the Articles of Incorporation. The General Partner
shall also be empowered to do any and all acts and things necessary or prudent to ensure that the Partnership will not be classified as a “publicly traded partnership”
for purposes of Section 7704 of the Code.
ARTICLE 4
CAPITAL CONTRIBUTIONS AND ACCOUNTS
4.1. Capital Contributions. The General Partner and Limited Partners have made Capital Contributions to the Partnership in exchange for the Partnership Interests
set forth opposite their names on Exhibit A, as amended from time to time.
4.2. Additional Capital Contributions and Issuances of Additional Partnership Interests. Except as provided in this Section 4.2 or in Section 4.3, the Partners
shall have no right or obligation to make any additional Capital Contributions or loans to the Partnership. The General Partner may contribute additional capital to the Partnership, from time to time, and receive additional Partnership Interests in
respect thereof, in the manner contemplated in this Section 4.2.
(a) Issuances of Additional Partnership Interests.
(i) General. The General Partner is hereby authorized to cause the Partnership to authorize, create, designate and issue such additional Partnership Interests
in the form of Partnership Units for any Partnership purpose at any time or from time to time, to the Partners (including the General Partner) or to other Persons for such consideration and on such terms and conditions as shall be established by the
General Partner in its sole and absolute discretion, all without notification to or the approval of any Limited Partner. Any additional Partnership Interests issued thereby may be issued in one or more classes, or one or more series of any of such
classes, with such designations, preferences and relative, participating, optional or other special rights, powers and duties, including rights, powers and duties senior to any Common Units, all as shall be determined by the General Partner in its
sole and absolute discretion and without notification to or the approval of any Limited Partner, subject to Delaware law, including, without limitation: (i) the allocations of items of Partnership income, gain, loss, deduction and credit to each such
class or series of Partnership Interests; (ii) the right of each such class or series of Partnership Interests to share in Partnership distributions; and (iii) the rights of each such class or series of Partnership Interests upon dissolution and
liquidation of the Partnership; provided, however, that no additional Partnership Interests shall be issued to the General Partner unless:
(1) (A) the additional Partnership Interests are issued in connection with an issuance of REIT Shares or other interests in the General Partner, which shares or interests have designations,
preferences and other rights, all such that the economic interests are substantially similar to the designations, preferences and other rights, all such that the economic interests are substantially similar to the designations, preferences and other
rights of the additional Partnership Interests issued to the General Partner by the partnership in accordance with this Section 4.2 (without limiting the foregoing, for example, the Partnership shall issue Partnership Interests consisting of Class C
Units to the General Partner in connection with the issuance of Class C REIT Shares and shall issue Partnership Interests consisting of Class S Units to the General Partner in connection with the issuance of Class S REIT Shares) and (B) the General
Partner shall make a Capital Contribution to the Partnership in an amount equal to the proceeds raised in connection with the issuance of such shares of stock of or other interests in the General Partner.
(2) the additional Partnership Interests are issued in exchange for property owned by the General Partner with a fair market value, as determined by the General Partner, in good faith, equal
to the value of the Partnership Interests; or
(3) additional Partnership Interests are issued to all Partners holding Partnership Units in proportion to their respective Percentage Interests.
In addition, the General Partner may acquire Partnership Interests from other Partners pursuant to this Agreement. In the event that the Partnership issues Partnership Interests pursuant to this Section 4.2(a), the
General Partner shall make such revisions to this Agreement (without any requirement of receiving approval of the Limited Partners) as it deems necessary to reflect the issuance of such additional Partnership Interests and any special rights, powers,
and duties associated therewith.
Without limiting the foregoing, the General Partner is expressly authorized to cause the Partnership to issue Partnership Units for less than fair market value, so long as the General Partner concludes in good faith that
such issuance is in the best interests of the General Partner and the Partnership.
(ii) Upon Issuance of Additional Securities. The General Partner shall not issue any Additional Securities other than to all holders of REIT Shares, unless (A)
the General Partner shall cause the Partnership to issue to the General Partner, as the General Partner may designate, 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 are substantially similar to those of the Additional Securities, and (B) the General Partner contributes the net proceeds from the issuance of such Additional Securities
and from any exercise of rights contained in such Additional Securities, directly through the General Partner, to the Partnership (without limiting the foregoing, for example, the Partnership shall issue Limited Partnership Interests consisting of
Class C Units to the General Partner in connection with the issuance of Class C REIT Shares and shall issue Limited Partnership Interests consisting of Class S Units to the General Partner in connection with the issuance of Class S REIT Shares);
provided, however, that the General Partner is allowed to issue Additional Securities in connection with an acquisition of a property to be held directly by the General Partner, but if and only if, such direct acquisition and issuance of Additional
Securities have been approved and determined to be in the best interests of the General Partner and the Partnership by a majority of the Independent Directors (as defined in the General Partner’s Articles of Incorporation). Without limiting the
foregoing, the General Partner is expressly authorized to issue Additional Securities for less than fair market value, and to cause the Partnership to issue to the General Partner corresponding Partnership Interests, so long as (x) the General
Partner concludes in good faith that such issuance is in the best interests of the General Partner and the Partnership, including without limitation, the issuance of REIT Shares and corresponding Partnership Units pursuant to an employee share
purchase plan providing for employee purchases of REIT Shares at a discount from fair market value or employee stock options that have an exercise price that is less than the fair market value of the REIT Shares, either at the time of issuance or at
the time of exercise, and (y) the General Partner contributes all proceeds from such issuance to the Partnership. For example, in the event the General Partner issues REIT Shares of any class for a cash purchase price and contributes all of the
proceeds of such issuance to the Partnership, the General Partner shall be issued a number of additional Partnership Units having the same class designation as the issued REIT Shares equal to the product of (A) the number of such REIT Shares of that
class issued by the General Partner, the proceeds of which were so contributed, multiplied by (B) a fraction, the numerator of which is 100%, and the denominator of which is the Conversion Factor for that class of Partnership Units in effect on the
date of such contribution.
(b) Certain Deemed Contributions of Proceeds of Issuance of REIT Shares. In connection with any and all issuances of REIT Shares, the General Partner shall make
Capital Contributions to the Partnership of the proceeds therefrom, provided that if the proceeds actually received and contributed by the General Partner are less than the gross proceeds of such
issuance as a result of any underwriter’s discount or other expenses paid or incurred in connection with such issuance, then the General Partner shall be deemed to have made Capital Contributions to the
Partnership in the aggregate amount of the gross proceeds of such issuance and the Partnership shall be deemed simultaneously to have paid such offering expenses in accordance with Section 6.5 hereof and in connection with the required issuance of
additional Partnership Units to the General Partner for such Capital Contributions pursuant to Section 4.2(a) hereof, and any such expenses shall be allocable solely to the class of Partnership Units issued to the General Partner at such time.
4.3. Additional Funding. If the General Partner determines that it is in the best interests of the Partnership to provide for additional Partnership funds (“Additional Funds”) for any Partnership purpose, the General Partner may (i) cause the Partnership to obtain such funds from outside borrowings, or (ii) elect to have the
General Partner or any of its Affiliates provide such Additional Funds to the Partnership through loans or otherwise.
4.4. Capital Accounts. A separate capital account (a “Capital Account”) shall be established and maintained for each
Partner in accordance with Regulations Section 1.704-1(b)(2)(iv). If (i) a new or existing Partner acquires an additional Partnership Interest in exchange for more than a de minimis Capital Contribution, (ii) the Partnership distributes to a Partner
more than a de minimis amount of Partnership property as consideration for a Partnership Interest, (iii) the Partnership is liquidated within the meaning of Regulation Section 1.704-1(b)(2)(ii)(g) or (iv) a Partnership Interest (other than a de
minimis interest) is granted 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 in anticipation of being a
Partner, the General Partner shall revalue the property of the Partnership to its fair market value (as determined by the General Partner, in its sole and absolute discretion, and taking into account Section 7701(g) of the Code) in accordance with
Regulations Section 1.704-1(b)(2)(iv)(f). When the Partnership’s property is revalued by the General Partner, the Capital Accounts of the Partners shall be adjusted in accordance with Regulations Sections
1.704-1(b)(2)(iv)(f) and (g), which generally require such Capital Accounts to be adjusted to reflect the manner in which the unrealized gain or loss inherent in such property (that has not been reflected in the Capital Accounts previously) would be
allocated among the Partners pursuant to Section 5.1 if there were a taxable disposition of such property for its fair market value (as determined by the General Partner, in its sole and absolute discretion, and taking into account Section 7701(g) of
the Code) on the date of the revaluation.
4.5. Percentage Interests. If the number of outstanding Partnership Units increases or decreases during a taxable year, each Partner’s Percentage Interest shall be adjusted by the General Partner effective as of the effective date of each such increase or decrease to a percentage equal to the number of Partnership Units held by such Partner divided by the aggregate
number of Partnership Units outstanding after giving effect to such increase or decrease. If the Partners’ Percentage Interests are adjusted pursuant to this Section 4.5, the Profits and Losses for the
taxable year in which the adjustment occurs shall be allocated between the part of the year ending on the day when the Partnership’s property is revalued by the General Partner and the part of the year
beginning on the following day either (i) as if the taxable year had ended on the date of the adjustment or (ii) based on the number of days in each part. The General Partner, in its sole and absolute discretion, shall determine which method shall be
used to allocate Profits and Losses for the taxable year in which the adjustment occurs. The allocation of Profits and Losses for the earlier part of the year shall be based on the Percentage Interests before adjustment, and the allocation of Profits
and Losses for the later part of the year shall be based on the adjusted Percentage Interests.
4.6. No Interest on Contributions. No Partner shall be entitled to interest on its Capital Contribution.
4.7. Return of Capital Contributions. No Partner shall be entitled to withdraw any part of its Capital Contribution or its Capital Account or to receive any
distribution from the Partnership, except as specifically provided in this Agreement. Except as otherwise provided herein, there shall be no obligation to return to any Partner or withdrawn Partner any part of such Partner’s Capital Contribution for so long as the Partnership continues in existence.
4.8. No Third Party Beneficiary. No creditor or other third party having dealings with the Partnership shall have the right to enforce the right or obligation of
any Partner to make Capital Contributions or loans or to pursue any other right or remedy hereunder or at law or in equity, it being understood and agreed that the provisions of this Agreement shall be solely for the benefit of, and may be enforced
solely by, the parties hereto and their respective successors and assigns. None of the rights or obligations of the Partners herein set forth to make Capital Contributions or loans to the Partnership shall be deemed an asset of the Partnership for
any purpose by any creditor or other third party, nor may such rights or obligations be sold, transferred or assigned by the Partnership or pledged or encumbered by the Partnership to secure any debt or other obligation of the Partnership or of any
of the Partners. In addition, it is the intent of the parties hereto that no distribution to any Limited Partner shall be deemed a return of money or other property in violation of the Act. However, if any court of competent jurisdiction holds that,
notwithstanding the provisions of this Agreement, any Limited Partner is obligated to return such money or property, such obligation shall be the obligation of such Limited Partner and not of the General Partner. Without limiting the generality of
the foregoing, a deficit Capital Account of a Partner shall not be deemed to be a liability of such Partner nor an asset or property of the Partnership and upon a liquidation within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), if any
Partner has a deficit Capital Account (after giving effect to all contributions, distributions, allocations and other Capital Account adjustments for all taxable years, including the year during which such liquidation occurs), such Partner shall have
no obligation to make any Capital Contribution to reduce or eliminate the negative balance of such Partner’s Capital Account.
ARTICLE 5
PROFITS AND LOSSES; DISTRIBUTIONS
5.1. Allocation of Profit and Loss.
(a) General. After giving effect to the special allocations set forth in Sections 5.1(b) and 5.1(c), the Partnership’s
Profits and Losses shall be allocated among the Partners in each taxable year (or portion thereof) as provided below.
(i) Profits. Profits shall be allocated:
(A) First, to the General Partner to the extent that Losses previously allocated to the General Partner pursuant to Section 5.1(a)(ii)(C) below exceed Profits previously allocated to the
General Partner pursuant to this Section 5.1(a)(i)(B);
(B) second, to those Partners, including the General Partner, holding Common Units who have been allocated Losses pursuant to Section 5.1(a)(ii)(A) below in excess of Profits previously
allocated to such Partners pursuant to this Section 5.1(a)(i)(C) (and as among such Partners, in proportion to their respective excess amounts); and
(C) third, to the Partners in accordance with their respective Percentage Interests.
(ii) Losses. Losses shall be allocated:
(A) First, to the Partners, including the General Partner, in accordance with their respective Percentage Interests, until the Adjusted Capital Account (ignoring for this purpose any amounts a
Partner is obligated to contribute to the capital of the Partnership or is deemed obligated to contribute pursuant to Regulations Section 1.704-1(b)(2)(ii)(c)(2)) of each Partner is reduced to zero; and
(B) second, to the General Partner.
(b) Minimum Gain Chargeback. Notwithstanding any provision to the contrary, (i) any expense of the Partnership that is a “nonrecourse
deduction” within the meaning of Regulations Section 1.704-2(b)(1) shall be allocated in accordance with the Partners’ respective Percentage Interests, (ii) any
expense of the Partnership that is a “partner nonrecourse deduction” within the meaning of Regulations Section 1.704-2(i)(2) shall be allocated to the Partner that
bears the “economic risk of loss” with respect to the “partner nonrecourse debt”
within the meaning of Regulations Section 1.704-2(b)(4) to which such partner nonrecourse deduction is attributable in accordance with Regulations Section 1.704-2(i)(1), (iii) if there is a net decrease in Partnership Minimum Gain within the meaning
of Regulations Section 1.704-2(f)(1) for any Partnership taxable year, then, subject to the exceptions set forth in Regulations Section 1.704-2(f)(2),(3), (4) and (5), items of gain and income shall be allocated among the Partners in accordance with
Regulations Section 1.704-2(f) and the ordering rules contained in Regulations Section 1.704-2(j), and (iv) if there is a net decrease in Partner Nonrecourse Debt Minimum Gain within the meaning of Regulations Section 1.704-2(i)(4) for any
Partnership taxable year, then, subject to the exceptions set forth in Regulations Section 1.704-(2)(g), items of gain and income shall be allocated among the Partners in accordance with Regulations Section 1.704-2(i)(4) and the ordering rules
contained in Regulations Section 1.704-2(j). A Partner’s “interest in partnership profits” for purposes of determining its
share of the nonrecourse liabilities of the Partnership within the meaning of Regulations Section 1.752-3(a)(3) shall be such Partner’s Percentage Interest.
(c) Qualified Income Offset. If a Partner unexpectedly receives in any taxable year an adjustment, allocation, or distribution described in subparagraphs (4),
(5), or (6) of Regulations Section 1.704-1(b)(2)(ii)(d) that causes or increases a deficit balance in such Partner’s Capital Account that exceeds the sum of such Partner’s
shares of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, as determined in accordance with Regulations Sections 1.704-2(g) and 1.704-2(i), such Partner shall be allocated specially for such taxable year (and, if necessary, later
taxable years) items of income and gain in an amount and manner sufficient to eliminate such deficit Capital Account balance as quickly as possible as provided in Regulations Section 1.704-1(b)(2)(ii)(d); provided,
that an allocation pursuant to this Section 5.1(c) shall be made only if and to the extent that such Partner would have a deficit Capital Account balance after all other allocations provided for in Article 5 have been tentatively made as if this
Section 5.1(c) were not in this Agreement. This Section 5.1(c) is intended to constitute a “qualified income offset” under Section 1.704-1(b)(2)(ii)(d) of the
Regulations and shall be interpreted consistently therewith.
(d) Reserved.
(e) Allocations Between Transferor and Transferee. If a Partner transfers any part or all of its Partnership Interest, the distributive shares of the various
items of Profit and Loss allocable among the Partners during such fiscal year of the Partnership shall be allocated between the transferor and the transferee Partner either (i) as if the Partnership’s fiscal
year had ended on the date of the transfer, or (ii) based on the number of days of such fiscal year that each was a Partner without regard to the results of Partnership activities in the respective portions of such fiscal year in which the transferor
and the transferee were Partners. The General Partner, in its sole and absolute discretion, shall determine which method shall be used to allocate the distributive shares of the various items of Profit and Loss between the transferor and the
transferee Partner.
(f) Definition of Profit and Loss. “Profit” and “Loss” and any items of income, gain, expense, or loss referred to in this Agreement shall be determined in accordance with federal income tax accounting principles, as modified by
Regulations Section 1.704-1(b)(2)(iv), except that Profit and Loss shall not include items of income, gain and expense that are specially allocated pursuant to Sections 5.1(b), 5.1(c) or 5.1(d). All allocations of income, Profit, gain, Loss and
expense (and all items contained therein) for federal income tax purposes shall be identical to all allocations of such items set forth in this Section 5.1, except as otherwise required by Section 704(c) of the Code and Regulations Section
1.704-1(b)(4). The General Partner, in its sole and absolute discretion, shall have the authority to elect the method to be used by the Partnership for allocating items of income, gain, and expense as required by Section 704(c) of the Code including
a method that may result in a Partner receiving a disproportionately larger share of the Partnership tax depreciation deductions, and such election shall be binding on all Partners.
(g) Curative Allocations. The allocations set forth in Section 5.1(b) and (c) of this Agreement (the “Regulatory
Allocations”) are intended to comply with certain requirements of the Regulations. The General Partner is authorized to offset all Regulatory Allocations either with other Regulatory Allocations or with
special allocations of other items of Partnership income, gain, loss or deduction pursuant to this Section 5.1(g). Therefore, notwithstanding any other provision of this Section 5.1 (other than the Regulatory Allocations), the General Partner shall
make such offsetting special allocations of Partnership income, gain, loss or deduction in whatever manner it deems appropriate so that, after such offsetting allocations are made, each Partner’s Capital
Account is, to the extent possible, equal to the Capital Account balance such Partner would have had if the Regulatory Allocations were not part of this Agreement and all Partnership items were allocated pursuant to Section 5.1(a) and 5.1(e).
(h) Special Allocations of Class-Specific Items. To the extent that any items of income, gain, loss or deduction of the General Partner are allocable to a specific class or classes of REIT Shares as
provided in the General Partner’s prospectus, such items, or an amount equal thereto, shall be specially allocated to the class or classes of Partnership Units corresponding to such class or classes of REIT Shares. To the extent the Partnership pays
any Class S Offering expenses on behalf of or with respect to any Partner, the amount of such payments shall constitute an advance by the Partnership to such Partner and shall be repaid to the Partnership by reducing the amount of the current or next
succeeding distribution or distributions which would otherwise have been made to such Partner. Alternatively, the General Partner may, in its sole discretion, treat such advance as a return of capital.
(i) Allocation of Excess Nonrecourse Liabilities. All excess nonrecourse liabilities of the Partnership shall be allocated in accordance with such Partner’s “interests in Partnership profits” as defined
in Regulations Section 1.752-3(a)(3).
(j) Allocations to Ensure Intended Results. Recognizing the complexity of the allocations pursuant to this Article V, the General Partner is authorized to modify these allocations (including by making
allocations of gross items of income, gain, loss or deduction rather than allocations of net items) to ensure that they achieve the intended results, to the extent permitted by Section 704(b) of the Code and the Regulations thereunder.
5.2. Distributions.
(a) Cash Available for Distribution. The Partnership shall distribute cash (other than Net Sale Proceeds) on a quarterly (or, at the election of the General
Partner, more frequent) basis, in an amount determined by the General Partner in its sole and absolute discretion, to the holders of the Common Units (other than the Class M Units and the Class P Units) who are Partners on the Partnership Record Date
with respect to such quarter (or other distribution period), including the General Partner, in proportion to their respective Percentage Interests (such calculation to exclude any Percentage Interest held by the Class M Units and the Class P Units)
in the Common Units on the Partnership Record Date; provided, however, that if a new or existing Partner acquires an additional Partnership Interest in exchange for a Capital Contribution on any date other than the next day after a Partnership Record
Date, the cash distribution attributable to such additional Partnership Interest relating to the Partnership Record Date next following the issuance of such additional Partnership Interest (or relating to the Partnership Record Date if such
Partnership Interest was acquired on a Partnership Record Date) shall be reduced in the proportion to (i) the number of days that such additional Partnership Interest is held by such Partner bears to (ii) the number of days between such Partnership
Record Date (including such Partnership Record Date) and the immediately preceding Partnership Record Date.
(b) Net Sale Proceeds. Net Sale Proceeds shall be distributed 100% to the Partners who are Partners on the Partnership Record Date in accordance with their
respective Percentage Interests on the Partnership Record Date.
(c) Tax Distributions. At the election of the General Partner, the General Partner may, in its sole and absolute discretion, cause the Partnership to distribute to the Partners with
respect to each fiscal period of the Partnership an amount of cash (a “Tax Distribution”) which in the good faith judgment of the General Partner equals (i) the amount of taxable income, if any, allocable to the Partners in respect of such fiscal
period, multiplied by (ii) the combined maximum federal, state and local income tax rate (such rates being calculated at the highest rates without regard to such Partner being an individual or corporate Partner) to be applied with respect to such
taxable income for any Partner (or, if any Partner is a pass-through entity for federal income tax purposes, any Person owning an equity interest in such Partner) (“Applicable Tax Rate”), with such distribution to be made to the Partners in the same
proportions that taxable income shall be allocable to the Partners during such fiscal period. Tax Distributions, if any, shall be made prior to the Company making any Distributions pursuant to Section 5.2(a).
(d) Withholding; Partnership Loans. 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 law including, without limitation, pursuant to
Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that the Partnership is required to withhold and pay over to any taxing authority any amount resulting from the allocation or distribution of income to any Partner or assignee (including
by reason of Section 1446 of the Code), either (i) if the actual amount to be distributed to the Partner equals or exceeds the amount required to be withheld by the Partnership, the amount withheld shall be treated as a distribution of cash in the
amount of such withholding to such Partner, or (ii) if the actual amount to be distributed to the Partner is less than the amount required to be withheld by the Partnership, the excess of the amount required to be withheld over the actual amount to
be distributed shall be treated as a loan (a “Partnership Loan”) from the Partnership to the Partner on the day the Partnership pays over such amount to a taxing authority. A Partnership Loan shall be repaid
through withholding by the Partnership with respect to subsequent distributions to the applicable Partner or assignee. In the event that a Limited Partner (a “Defaulting Limited Partner”) fails to pay any
amount owed to the Partnership with respect to the Partnership Loan within fifteen (15) days after demand for payment thereof is made by the Partnership on the Limited Partner, the General Partner, in its sole and absolute discretion, may elect to
make the payment to the Partnership on behalf of such Defaulting Limited Partner. In such event, on the date of payment, the General Partner shall be deemed to have extended a loan (a “General Partner Loan”)
to the Defaulting Limited Partner in the amount of the payment made by the General Partner and shall succeed to all rights and remedies of the Partnership against the Defaulting Limited Partner as to that amount. Without limitation, the General
Partner shall have the right to receive any distributions that otherwise would be made by the Partnership to the Defaulting Limited Partner until such time as the General Partner Loan has been paid in full, and any such distributions so received by
the General Partner shall be treated as having been received by the Defaulting Limited Partner and immediately paid to the General Partner.
Any amounts treated as a Partnership Loan or a General Partner Loan pursuant to this Section 5.2(b) shall bear interest at the lesser of (i) 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, or (ii) the maximum lawful rate of interest on such obligation, such interest to accrue from the date the Partnership or the General Partner, as applicable, is deemed to extend the
loan until such loan is repaid in full.
(e) Limitation on Distributions. In no event may a Partner receive a distribution of cash with respect to a Partnership Unit if such Partner is entitled to
receive a cash distribution as the holder of record of a REIT Share for which all or part of such Partnership Unit has been or will be exchanged.
5.3. REIT Distribution Requirements. The General Partner shall use its commercially reasonable efforts to cause the Partnership to distribute amounts sufficient to
enable the General Partner to pay stockholder dividends that will allow the General Partner to (i) meet its distribution requirement for qualification as a REIT as set forth in Section 857 of the Code and (ii) avoid any federal income or excise tax
liability imposed by the Code.
5.4. No Right to Distributions in Kind. No Partner shall be entitled to demand property other than cash in connection with any distributions by the Partnership.
5.5. Limitations of Return of Capital Contributions. Notwithstanding any of the provisions of this Article 5, no Partner shall have the right to receive and the
General Partner shall not have the right to make, a distribution that includes a return of all or part of a Partner’s Capital Contributions, unless after giving effect to the return of a Capital Contribution,
the sum of all Partnership liabilities, other than the liabilities to a Partner for the return of his Capital Contribution, does not exceed the fair market value of the Partnership’s assets.
5.6. Distributions Upon Liquidation. Upon liquidation of the Partnership, after payment of, or adequate provision for, debts and obligations of the Partnership,
including any Partner loans, any remaining assets of the Partnership shall be distributed to all Partners with positive Capital Accounts in accordance with their respective positive Capital Account balances. For purposes of the preceding sentence,
the Capital Account of each Partner shall be determined after all adjustments have been made in accordance with Sections 4.4, 5.1 and 5.2 resulting from Partnership operations and from all sales and dispositions of all or any part of the Partnership’s assets. To the extent deemed advisable by the General Partner, appropriate arrangements (including the use of a liquidating trust) may be made to assure that adequate funds are available to pay any contingent
debts or obligations.
5.7. Substantial Economic Effect. It is the intent of the Partners that the allocations of Profit and Loss under this Agreement have substantial economic effect
(or be consistent with the Partners’ interests in the Partnership in the case of the allocation of losses attributable to nonrecourse debt) within the meaning of Section 704(b) of the Code as interpreted by
the Regulations promulgated pursuant thereto. Article 5 and other relevant provisions of this Agreement shall be interpreted in a manner consistent with such intent.
ARTICLE 6
RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER
6.1. Management of the Partnership.
(a) Except as otherwise expressly provided in this Agreement, the General Partner shall have full, complete and exclusive discretion to manage and control the business of the Partnership for the purposes herein
stated and shall make all decisions affecting the business and assets of the Partnership. Subject to the restrictions specifically contained in this Agreement, the powers of the General Partner shall include, without limitation, the authority to take
the following actions on behalf of the Partnership or any Subsidiary:
(i) to acquire, purchase, own, operate, lease and dispose of (other than in a “prohibited transaction” within the meaning of
Section 857(b)(6)(B)(iii) of the Code) any real property and any other property or assets including, but not limited to notes and mortgages, that the General Partner determines are necessary or appropriate or in the best interests of the business of
the Partnership;
(ii) to develop land, construct buildings and make other improvements on the properties owned or leased by the Partnership;
(iii) to authorize, issue, sell, redeem or otherwise purchase any Partnership Interests or any securities (including secured and unsecured debt obligations of the Partnership, debt obligations of the Partnership
convertible into any class or series of Partnership Interests, or options, rights, warrants or appreciation rights relating to any Partnership Interests) of the Partnership;
(iv) to borrow or lend money for the Partnership, issue or receive evidences of indebtedness in connection therewith, refinance, increase the amount of, modify, amend or change the terms of, or extend the time
for the payment of, any such indebtedness, and secure such indebtedness by mortgage, deed of trust, pledge or other lien on the Partnership’s assets;
(v) to pay, either directly or by reimbursement, for all Administrative Expenses to third parties or to the General Partner or its Affiliates as set forth in this Agreement;
(vi) to guarantee or become a co-maker of indebtedness of the General Partner or any Subsidiary thereof, refinance, increase the amount of, modify, amend or change the terms of, or extend the time for the
payment of, any such guarantee or indebtedness, and secure such guarantee or indebtedness by mortgage, deed of trust, pledge or other lien on the Partnership’s assets;
(vii) to use assets of the Partnership (including, without limitation, cash on hand) for any purpose consistent with this Agreement, including, without limitation, payment, either directly or by reimbursement, of
all Administrative Expenses of the General Partner, the Partnership or any Subsidiary of either, to third parties or to the General Partner as set forth in this Agreement;
(viii) to lease all or any portion of any of the Partnership’s assets, whether or not the terms of such leases extend beyond the termination date of the Partnership and
whether or not any portion of the Partnership’s assets so leased are to be occupied by the lessee, or, in turn, subleased in whole or in part to others, for such consideration and on such terms as the General
Partner may determine;
(ix) to prosecute, defend, arbitrate, or compromise any and all claims or liabilities in favor of or against the Partnership, on such terms and in such manner as the General Partner may reasonably determine, and
similarly to prosecute, settle or defend litigation with respect to the Partners, the Partnership, or the Partnership’s assets;
(x) to file applications, communicate, and otherwise deal with any and all governmental agencies having jurisdiction over, or in any way affecting, the Partnership’s
assets or any other aspect of the Partnership business;
(xi) to make or revoke any available elections for federal, state, or local income tax purposes, including an election pursuant to Section 754 of the Code relating to certain adjustments to the basis of the
Partnership’s assets;
(xii) to maintain such insurance coverage for public liability, fire and casualty, and any and all other insurance for the protection of the Partnership, for the conservation of Partnership assets, or for any
other purpose convenient or beneficial to the Partnership, in such amounts and such types, as it shall determine from time to time;
(xiii) to determine whether or not to apply any insurance proceeds for any property to the restoration of such property or to distribute the same;
(xiv) to establish one or more divisions of the Partnership, to hire and dismiss employees of the Partnership or any division of the Partnership, and to retain legal counsel, accountants, consultants, real estate
brokers, and such other persons, as the General Partner may deem necessary or appropriate in connection with the Partnership business and to pay therefor such reasonable remuneration as the General Partner may deem reasonable and proper;
(xv) to retain other services of any kind or nature in connection with the Partnership business, and to pay therefor such remuneration as the General Partner may deem reasonable and proper;
(xvi) to negotiate and conclude agreements on behalf of the Partnership with respect to any of the rights, powers and authority conferred upon the General Partner;
(xvii) to maintain accurate accounting records and to file promptly all federal, state and local income tax returns on behalf of the Partnership;
(xviii) to distribute Partnership cash or other Partnership assets in accordance with this Agreement;
(xix) to form or acquire an interest in, and contribute property to, any further limited or general partnerships, limited liability companies, joint ventures or other relationships that it deems desirable
(including, without limitation, the acquisition of interests in, and the contributions of property to, its Subsidiaries and any other Person in which it has an equity interest from time to time);
(xx) to establish Partnership reserves for working capital, capital expenditures, contingent liabilities, or any other valid Partnership purpose;
(xxi) to merge, consolidate or combine the Partnership with or into another Person;
(xxii) to do any and all acts and things necessary or prudent to ensure that the Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Code; and
(xxiii) to take such other action, execute, acknowledge, swear to or deliver such other documents and instruments, and perform any and all other acts that the General Partner deems necessary or appropriate for the
formation, continuation and conduct of the business and affairs 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) and to possess and enjoy all of the rights and powers of a general partner as provided by the Act.
(b) 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.
6.2. Delegation of Authority. The General Partner may delegate any or all of its powers, rights and obligations hereunder, and may appoint, employ, contract or
otherwise deal with any Person for the transaction of the business of the Partnership, which Person may, under supervision of the General Partner, perform any acts or services for the Partnership as the General Partner may approve.
6.3. Indemnification and Exculpation of Indemnitees.
(a) The Partnership shall indemnify an Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including reasonable 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.
Notwithstanding the foregoing, the Partnership shall not provide for indemnification for an Indemnitee for any liability or loss suffered by any of them in contravention of Delaware law and unless all of the following
conditions are met:
(i) The Indemnitee determined, in good faith, that the course of conduct that caused the loss or liability was in the best interests of the Partnership.
(ii) The Indemnitee was acting on behalf of or performing services for the Partnership.
(iii) Such liability or loss was not the result of:
(A) In the case of an Indemnitee who is not an Independent Director, negligence or misconduct by the Indemnitee; or
(B) In the case of an Independent Director, the gross negligence or willful misconduct by the Independent Director.
Any indemnification pursuant to this Section 6.3 shall be made only out of the assets of the Partnership.
(b) Notwithstanding the foregoing, the Partnership shall not indemnify an Indemnitee or any Person acting as a broker-dealer for any loss, liability or expense arising from or out of an alleged violation of
federal or state securities laws by such party 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 material 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 were offered or sold as to indemnification for violations of securities laws.
(c) The Partnership shall pay or reimburse reasonable legal expenses and other costs incurred by the Indemnitee in advance of the final disposition of a proceeding only if (in addition to the procedures required
by the Act) all of the following are satisfied: (a) the proceeding relates to acts or omissions with respect to the performance of duties or services on behalf of the Partnership, (b) the legal proceeding was initiated by a third party who is not a
Limited Partner or, if by a Limited Partner acting in his or her capacity as such, a court of competent jurisdiction approves such advancement, and (c) the Indemnitee undertakes to repay the amount paid or reimbursed by the Partnership, together with
the applicable legal rate of interest thereon, if it is ultimately determined that the Indemnitee is not entitled to indemnification.
(d) The indemnification provided by this Section 6.3 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.
(e) The Partnership may 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.
(f) For purposes of this Section 6.3, 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 this Section 6.3; 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.
(g) In no event may an Indemnitee subject the Limited Partners to personal liability by reason of the indemnification provisions set forth in this Agreement.
(h) An Indemnitee shall not be denied indemnification in whole or in part under this Section 6.3 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.
(i) The provisions of this Section 6.3 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.
(j) Neither the amendment nor repeal of this Section 6.3, nor the adoption or amendment of any other provision of the Agreement inconsistent with Section 6.3, shall apply to or affect in any respect the
applicability with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption.
6.4. Liability of the General Partner.
(a) Notwithstanding anything to the contrary set forth in this Agreement, the General Partner shall not be liable for monetary damages to the Partnership or any Partners for losses sustained or liabilities
incurred as a result of errors in judgment or of any act or omission if the General Partner acted in good faith. The General Partner shall not be in breach of any duty that the General Partner may owe to the Limited Partners or the Partnership or any
other Persons under this Agreement or of any duty stated or implied by law or equity provided the General Partner, acting in good faith, abides by the terms of this Agreement.
(b) The Limited Partners expressly acknowledge that the General Partner is acting on behalf of the Partnership, itself and its stockholders collectively, that the General Partner is under no obligation to
consider the separate interests of the Limited Partners (including, without limitation, the tax consequences to Limited Partners or the tax consequences of some, but not all, of the Limited Partners) in deciding whether to cause the Partnership to
take (or decline to take) any actions. In the event of a conflict between the interests of its stockholders 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 its stockholders or the Limited Partners; provided, however, that for so long as the General Partner directly owns a controlling
interest in the Partnership, any such conflict that the General Partner, in its sole and absolute discretion, determines cannot be resolved in a manner not adverse to either its stockholders or the Limited Partner shall be resolved in favor of the
stockholders. The General Partner shall not be liable 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 6.1 hereof, the General Partner may exercise any of the powers granted to it under 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) Notwithstanding any other provisions of this Agreement or 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 (i) to protect the ability of the General Partner to continue to qualify as a REIT or (ii) to prevent the General Partner from
incurring any taxes under Section 857, Section 4981, or any other provision of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners.
(e) Any amendment, modification or repeal of this Section 6.4 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the General Partner’s liability to the Partnership and the Limited Partners under this Section 6.4 as in effect immediately prior to such amendment, modification or repeal with respect to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when claims relating to such matters may arise or be asserted.
6.5. Reimbursement of General Partner.
(a) Except as provided in this Section 6.5 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 General Partner shall be reimbursed on a monthly basis, or such other basis as the General Partner may determine in its sole and absolute discretion, for all Administrative Expenses, provided, however,
that any such reimbursement shall not exceed five percent (5%) of the gross income of the General Partner to the extent that all or any portion of the reimbursement is treated as a gross income to the REIT.
6.6. Outside Activities. Subject to the Articles of Incorporation and any agreements entered into by the General Partner or its Affiliates with the Partnership or
a Subsidiary, any officer, director, employee, agent, trustee, Affiliate or stockholder of the General 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 substantially similar or identical to those of the Partnership. Neither the Partnership nor any of the Limited Partners shall have any rights by virtue of this Agreement in any such business ventures,
interest or activities. 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 such business ventures, interests or activities, and the General
Partner shall have no obligation pursuant to this Agreement to offer any interest in any such business ventures, interests and activities to the Partnership or any Limited Partner, even if such opportunity is of a character which, if presented to the
Partnership or any Limited Partner, could be taken by such Person.
6.7. Employment or Retention of Affiliates.
(a) Any Affiliate of the General Partner may be employed or retained by the Partnership and may otherwise deal with the Partnership (whether as a buyer, lessor, lessee, manager, furnisher of goods or services,
broker, agent, lender or otherwise) and may receive from the Partnership any compensation, price, or other payment therefor which the General Partner determines to be fair and reasonable.
(b) The Partnership may lend or contribute to its Subsidiaries or other Persons in which it has an equity investment, and such Persons may borrow funds from the Partnership, on terms and conditions 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 Subsidiary or any other Person.
(c) 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 as the General Partner deems are consistent with this Agreement and applicable law.
(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 on terms that are fair and reasonable to the Partnership.
6.8. General Partner Participation. The General Partner agrees that all business activities of the General Partner, including activities pertaining to the
acquisition, development or ownership of properties, shall be conducted through the Partnership or one or more Subsidiary Partnerships; provided, however,
that the General Partner is allowed to make a direct acquisition, but if and only if, such acquisition is made in connection with the issuance of Additional Securities, which direct acquisition and issuance have been approved and determined to be in
the best interests of the General Partner and the Partnership by a majority of the Independent Directors.
6.9. 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 Partner, 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 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 commercially reasonable efforts to cause beneficial and record title to such assets to be vested in the Partnership 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.
6.10.
Miscellaneous. In the event the General Partner redeems any REIT Shares (other than REIT Shares redeemed in accordance with the share redemption program of
the General Partner through proceeds received from the General Partner’s distribution reinvestment plan), then the General Partner shall cause the Partnership to purchase from the General Partner a number of Partnership Units as determined based on
the application of the Conversion Factor on the same terms that the General Partner exchanged such REIT Shares (without limiting the foregoing, for example, the Partnership shall purchase from the General Partner Partnership Interests consisting of
Class C Units in connection with the exchange of Class C REIT Shares and shall purchase from the General Partner Partnership Interests consisting of Class S Units in connection with the exchange of Class S REIT Shares). Moreover, if the General
Partner makes a cash tender offer or other offer to acquire REIT Shares, then the General Partner shall cause the Partnership to make a corresponding offer to the General Partner to acquire an equal number of Partnership Units held by the General
Partner. In the event any REIT Shares are exchanged by the General Partner pursuant to such offer, the Partnership shall redeem an equivalent number of the General Partner’s Partnership Units for an equivalent purchase price based on the application
of the Conversion Factor (
without limiting the foregoing, for example, the Partnership shall redeem from the General Partner Partnership Interests consisting of Class C Units in connection with the exchange of Class C REIT
Shares and shall redeem from the General Partner Partnership Interests consisting of Class S Units in connection with the exchange of Class S REIT Shares).
ARTICLE 7
CHANGES IN GENERAL PARTNER
7.1. Transfer of the General Partner’s Partnership Interest.
(a) The General Partner shall not transfer all or any portion of its General Partnership Interest or withdraw as General Partner except as provided in or in connection with a transaction contemplated by Section
7.1(b), (c) or (d).
(b) Except as otherwise provided in Section 7.1(c) or (d) hereof or with respect to the REIT Merger, the General Partner shall not engage in any merger, consolidation or other combination with or into another
Person or sale of all or substantially all of its assets, (other than in connection with a change in the General Partner’s state of incorporation or organizational form) in each case which results in a change
of control of the General Partner (a “Transaction”), unless:
(i) the approval of the holders of a majority of the Common Units (excluding the Class M Units and the Class P Units) is obtained;
(ii) as a result of such Transaction all Limited Partners will receive for each Common Unit an amount of cash, securities, or other property equal to the product of the Conversion Factor and the greatest amount
of cash, securities or other property paid in the Transaction to a holder of one REIT Share in consideration of one REIT Share, provided that if, in connection with the Transaction, a purchase, tender or exchange offer (“Offer”) shall have been made to and accepted by the holders of more than fifty percent (50%) of the outstanding REIT Shares, each holder of
Common Units shall be given the option to exchange its Common Units for the greatest amount of cash, securities, or other property which a Limited Partner would have received had it (A) exercised its Exchange Right and (B) sold, tendered or exchanged
pursuant to the Offer the REIT Shares received upon exercise of the Exchange Right immediately prior to the expiration of the Offer; or
(iii) the General Partner is the surviving entity in the Transaction and either (A) the holders of REIT Shares do not receive cash, securities, or other property in the Transaction or (B) all Limited Partners
(other than the General Partner or any Subsidiary) receive an amount of cash, securities, or other property (expressed as an amount per REIT Share) that is no less than the product of the Conversion Factor and the greatest amount of cash, securities,
or other property (expressed as an amount per REIT Share) received in the Transaction by any holder of REIT Shares.
(c) Notwithstanding Section 7.1(b), the General Partner may merge with or into or consolidate with another entity if immediately after such merger or consolidation (i) substantially all of the assets of the
successor or surviving entity (the “Surviving General Partner”), other than Partnership Units held by the General Partner, are contributed, directly or indirectly, to the Partnership as a Capital
Contribution in exchange for Partnership Units with a fair market value equal to the value of the assets so contributed as determined by the Surviving General Partner in good faith and (ii) the Surviving General Partner expressly agrees to assume all
obligations of the General Partner, as appropriate, hereunder. Upon such contribution and assumption, the Surviving General Partner shall have the right and duty to amend this Agreement as set forth in this Section 7.1(c). The Surviving General
Partner shall in good faith arrive at a new method for the calculation of the Cash Amount, the REIT Shares Amount and Conversion Factor for a Partnership Unit after any such merger or consolidation so as to approximate the existing method for such
calculation as closely as reasonably possible. Such calculation shall take into account, among other things, the kind and amount of securities, cash and other property that was receivable upon such merger or consolidation by a holder of REIT Shares
or options, warrants or other rights relating thereto, and to which a holder of Partnership Units could have acquired had such Partnership Units been exchanged immediately prior to such merger or consolidation. Such amendment to this Agreement shall
provide for adjustment to such method of calculation, which shall be as nearly equivalent as may be practicable to the adjustments provided for with respect to the Conversion Factor. The Surviving General Partner also shall in good faith modify the
definition of REIT Shares and make such amendments to Section 8.4 hereof so as to approximate the existing rights and obligations set forth in Section 8.4 as closely as reasonably possible. The above provisions of this Section 7.1(c) shall similarly
apply to successive mergers or consolidations permitted hereunder.
In respect of any transaction described in the preceding paragraph, the General Partner shall use commercially reasonable efforts to structure such transaction to avoid causing the Limited Partners to recognize gain for federal income tax purposes by virtue of the occurrence of or their
participation in such transaction, provided such efforts are consistent with the exercise of the General Partner’s board of directors’ fiduciary duties to the stockholders of
the General Partner under applicable law. Notwithstanding anything herein to the contrary, if after using such commercially reasonable efforts to avoid causing the Limited
Partners to recognize gain for federal income tax purposes the General Partner determines, in its sole and absolute discretion, that it (i) is not possible to structure such transaction to avoid causing the Limited Partners to recognize gain for federal income tax purposes or (ii) that the structure required to avoid causing the Limited Partners to recognize gain for federal income tax purposes would be unduly burdensome to the
General Partner, nothing in this provision shall be construed so as to preclude the General Partner from proceeding with and consummating such transaction.
(d) Notwithstanding Section 7.1(b),
(i) a General Partner may transfer all or any portion of its General Partnership Interest to (A) a wholly-owned Subsidiary of such General Partner or (B) the owner of all of the ownership interests of such
General Partner, and following a transfer of all of its General Partnership Interest, may withdraw as General Partner; and
(ii) the General Partner may engage in Transactions not required by law or by the rules of any National Securities Exchange on which the REIT Shares are listed to be submitted to the vote of the holders of the
REIT Shares.
(e) If the General Partner exchanges any REIT Shares of any class (“Exchanged REIT Shares”) for REIT Shares of a different class (“Received REIT Shares”), then the General Partner shall, and shall cause the
Partnership to, exchange a number of Partnership Units having the same class designation as the Exchanged REIT Shares, as determined based on the application of the Conversion Factor, for Partnership Units having the same class designation as the
Received REIT Shares on the same terms that the General Partner exchanged the Exchanged REIT Shares. The exchange of Units shall occur automatically after the close of business on the applicable date of the exchange of REIT Shares, as of which time
the holder of class of Units having the same designation as the Exchanged REIT Shares shall be credited on the books and records of the Partnership with the issuance, as of the opening of business on the next day, of the applicable number of Units
having the same designation as the Received REIT Shares.
7.2. Admission of a Substitute or Additional General Partner. A Person shall be admitted as a substitute or additional General Partner of the Partnership only if
the following terms and conditions are satisfied:
(a) the Person to be admitted as a substitute or additional General Partner shall have accepted and agreed to be bound by all the terms and provisions of this Agreement by executing a counterpart thereof and
such other documents or instruments as may be required or appropriate in order to effect the admission of such Person as a General Partner, and a certificate evidencing the admission of such Person as a General Partner shall have been filed for
recordation and all other actions required by Section 2.5 hereof in connection with such admission shall have been performed;
(b) if the Person to be admitted as a substitute or additional General Partner is a corporation or a partnership it shall have provided the Partnership with evidence satisfactory to counsel for the Partnership
of such Person’s authority to become a General Partner and to be bound by the terms and provisions of this Agreement; and
(c) counsel for the Partnership shall have rendered an opinion (relying on such opinions from other counsel and the state or any other jurisdiction as may be necessary) that the admission of the person to be
admitted as a substitute or additional General Partner is in conformity with the Act, that none of the actions taken in connection with the admission of such Person as a substitute or additional General Partner will cause (i) the Partnership to be
classified other than as a partnership for federal income tax purposes, or (ii) the loss of any Limited Partner’s limited liability.
7.3. Effect of Bankruptcy, Withdrawal, Death or Dissolution of a General Partner.
(a) Upon the occurrence of an Event of Bankruptcy as to a General Partner (and its removal pursuant to Section 7.4(a) hereof) or the death, withdrawal, removal or dissolution of a General Partner (except that,
if a General Partner is on the date of such occurrence a partnership, the withdrawal, death, dissolution, Event of Bankruptcy as to, or removal of a partner in, such partnership shall be deemed not to be a dissolution of such General Partner if the
business of such General Partner is continued by the remaining partner or partners), the Partnership shall be dissolved and terminated unless the Partnership is continued pursuant to Section 7.3(b) hereof. The merger of the General Partner with or
into any entity that is admitted as a substitute or successor General Partner pursuant to Section 7.2 hereof shall not be deemed to be the withdrawal, dissolution or removal of the General Partner.
(b) Following the occurrence of an Event of Bankruptcy as to a General Partner (and its removal pursuant to Section 7.4(a) hereof) or the death, withdrawal, removal or dissolution of a General Partner (except
that, if a General Partner is on the date of such occurrence a partnership, the withdrawal, death, dissolution, Event of Bankruptcy as to, or removal of a partner in, such partnership shall be deemed not to be a dissolution of such General Partner if
the business of such General Partner is continued by the remaining partner or partners), the Limited Partners, within ninety (90) days after such occurrence, may elect to continue the business of the Partnership for the balance of the term specified
in Section 2.4 hereof by selecting, subject to Section 7.2 hereof and any other provisions of this Agreement, a substitute General Partner by consent of a majority in interest of the Limited Partners. If the Limited Partners elect to continue the
business of the Partnership and admit a substitute General Partner, the relationship with the Partners and of any Person who has acquired an interest of a Partner in the Partnership shall be governed by this Agreement.
7.4. Removal of a General Partner.
(a) Upon the occurrence of an Event of Bankruptcy as to, or the dissolution of, a General Partner, such General Partner shall be deemed to be removed automatically; provided,
however, that if a General Partner is on the date of such occurrence a partnership, the withdrawal, death, dissolution, Event of Bankruptcy as to or removal of a partner in such partnership shall be
deemed not to be a dissolution of the General Partner if the business of such General Partner is continued by the remaining partner or partners. The Limited Partners may not remove the General Partner, with or without cause.
(b) If a General Partner has been removed pursuant to this Section 7.4 and the Partnership is continued pursuant to Section 7.3 hereof, such General Partner shall promptly transfer and assign its General
Partnership Interest in the Partnership to the substitute General Partner approved by a majority in interest of the Limited Partners in accordance with Section 7.3(b) hereof and otherwise admitted to the Partnership in accordance with Section 7.2
hereof. At the time of assignment, the removed General Partner shall be entitled to receive from the substitute General Partner the fair market value of the General Partnership Interest of such removed General Partner as reduced by any damages caused
to the Partnership by such General Partner. Such fair market value shall be determined by an appraiser mutually agreed upon by the General Partner and a majority in interest of the Limited Partners within ten (10) days following the removal of the
General Partner. In the event that the parties are unable to agree upon an appraiser, the removed General Partner and a majority in interest of the Limited Partners each shall select an appraiser. Each such appraiser shall complete an appraisal of
the fair market value of the removed General Partner’s General Partnership Interest within thirty (30) days of the General Partner’s removal, and the fair market
value of the removed General Partner’s General Partnership Interest shall be the average of the two appraisals; provided, however,
that if the higher appraisal exceeds the lower appraisal by more than twenty percent (20%) of the amount of the lower appraisal, the two (2) appraisers, no later than forty (40) days after the removal of the General Partner, shall select a third
(3rd) appraiser who shall complete an appraisal of the fair market value of the removed General Partner’s General Partnership Interest no later than sixty (60) days after the removal of the General Partner.
In such case, the fair market value of the removed General Partner’s General Partnership Interest shall be the average of the two appraisals closest in value.
(c) The General Partnership Interest of a removed General Partner, during the time after default until transfer under Section 7.4(b), shall be converted to that of a special Limited Partner; provided, however, such removed General Partner shall not have any rights to participate in the management and affairs of the Partnership, and shall not be entitled to
any portion of the income, expense, profit, gain or loss allocations or cash distributions allocable or payable, as the case may be, to the Limited Partners. Instead, such removed General Partner shall receive and be entitled only to retain
distributions or allocations of such items that it would have been entitled to receive in its capacity as General Partner, until the transfer is effective pursuant to Section 7.4(b).
(d) All Partners shall have given and hereby do give such consents, shall take such actions and shall execute such documents as shall be legally necessary and sufficient to effect all the foregoing provisions of
this Section.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS
8.1. Management of the Partnership. The Limited Partners shall not participate in the management or control of Partnership business nor shall they transact any
business for the Partnership, nor shall they have the power to sign for or bind the Partnership, such powers being vested solely and exclusively in the General Partner.
8.2. Power of Attorney. Each Limited Partner hereby irrevocably appoints the General Partner its true and lawful attorney-in-fact, who may act for each Limited
Partner and in its name, place and stead, and for its use and benefit, to sign, acknowledge, swear to, deliver, file or record, at the appropriate public offices, any and all documents, certificates, and instruments as may be deemed necessary or
desirable by the General Partner to carry out fully the provisions of this Agreement and the Act in accordance with their terms, which power of attorney is coupled with an interest and shall survive the death, dissolution or legal incapacity of the
Limited Partner, or the transfer by the Limited Partner of any part or all of its Partnership Interest.
8.3. Limitation on Liability of Limited Partners. No Limited Partner shall be liable for any debts, liabilities, contracts or obligations of the Partnership. A
Limited Partner shall be liable to the Partnership only to make payments of its Capital Contribution, if any, as and when due hereunder. After its Capital Contribution is fully paid, no Limited Partner shall, except as otherwise required by the Act,
be required to make any further Capital Contributions or other payments or lend any funds to the Partnership.
8.4. Exchange Right.
(a) Subject to Sections 8.4(b), 8.4(c), 8.4(d), and 8.4(e) and the provisions of any agreements between the Partnership and one or more holders of Common Units with respect to Common Units held by them
(including, without limitation, Exhibit C and Exhibit D), each holder of Common Units shall have the right (the “Exchange Right”) to require the Partnership to redeem on a Specified Exchange Date all or a
portion of the Common Units held by such Limited Partner at an exchange price equal to and in the form of the Cash Amount to be paid by the Partnership, provided that such Common Units shall have been outstanding for at least one year (inclusive of
any Partner’s holding period for any Class M Units or Class P Units converted into Class C Units). The Exchange Right shall be exercised pursuant to a Notice of Exchange delivered to the Partnership (with a copy to the General Partner) by the Limited
Partner who is exercising the Exchange Right (the “Exchanging Partner”); provided, however, that the
Partnership shall not be obligated to satisfy such Exchange Right if the General Partner elects to purchase the Common Units subject to the Notice of Exchange pursuant to Section 8.4(b); and provided,
further, that no holder of Common Units may deliver more than two (2) Notices of Exchange during each calendar year. A Limited Partner may not exercise the Exchange Right for less than 1,000 Common
Units or, if such Limited Partner holds less than 1,000 Common Units, all of the Common Units held by such Partner. The Exchanging Partner shall have no right, with respect to any Common Units so exchanged, to receive any distribution paid with
respect to Common Units if the record date for such distribution is on or after the Specified Exchange Date. For the avoidance of doubt, the Exchange Right shall not apply to Class M Units or Class P Units, it being understood that the Class M Units
and the Class P Units must convert to Class C Units in accordance with the terms of Exhibit C and Exhibit D (as applicable) prior to exercising the Exchange Right.
(b) Notwithstanding the provisions of Section 8.4(a), a Limited Partner that exercises the Exchange Right shall be deemed to have offered to sell the Common Units described in the Notice of Exchange to the
General Partner, and the General Partner may, in its sole and absolute discretion, elect to purchase directly and acquire such Common Units by paying to the Exchanging Partner either the Cash Amount or the REIT Shares Amount, as elected by the
General Partner (in its sole and absolute discretion), on the Specified Exchange Date, whereupon the General Partner shall acquire the Common Units offered for exchange by the Exchanging Partner and shall be treated for all purposes of this Agreement
as the owner of such Common Units. Without limiting the foregoing, if the General Partner elects to purchase such Common Units by paying the REIT Shares Amount to the Exchanging Partner, the General Partner shall purchase either (i) Limited
Partnership Interests consisting of Class C Units, Class M Units or Class P Units (in each case, if eligible) which shall be exchanged for Class C REIT Shares and/or (ii) Limited Partnership Interests consisting of Class S Units which shall be
exchanged for Class S REIT Shares, as applicable. The class of the shares purchased by the General Partner and exchanged by the Exchanging Partner shall be designated on the Notice of Exchange. If the General Partner shall elect to exercise its
right to purchase Common Units under this Section 8.4(b) with respect to a Notice of Exchange, it shall so notify the Exchanging Partner within five (5) Business Days after the receipt by the General Partner of such Notice of Exchange. Unless the
General Partner (in its sole and absolute discretion) shall exercise its right to purchase Common Units from the Exchanging Partner pursuant to this Section 8.4(b), the General Partner shall have no obligation to the Exchanging Partner or the
Partnership with respect to the Exchanging Partner’s exercise of the Exchange Right. In the event the General Partner shall exercise its right to purchase Common Units with respect to the exercise of an
Exchange Right in the manner described in the first sentence of this Section 8.4(b), the Partnership shall have no obligation to pay any amount to the Exchanging Partner with respect to such Exchanging Partner’s
exercise of such Exchange Right, and each of the Exchanging Partner, the Partnership, and the General Partner, as the case may be, shall treat the transaction between the General Partner, as the case may be, and the Exchanging Partner for federal
income tax purposes as a sale of the Exchanging Partner’s Common Units to the General Partner, as the case may be. Each Exchanging Partner agrees to execute such documents as the General Partner may
reasonably require in connection with the issuance of REIT Shares upon exercise of the Exchange Right.
(c) Notwithstanding the provisions of Section 8.4(a) and 8.4(b), a Limited Partner shall not be entitled to exercise the Exchange Right if the delivery of REIT Shares to such Partner on the Specified Exchange
Date by the General Partner pursuant to Section 8.4(b) (regardless of whether or not the General Partner would in fact exercise its rights under Section 8.4(b)) would (i) result in such Partner or any other person owning, directly or indirectly, REIT
Shares in excess of the Ownership Limit (as defined in the Articles of Incorporation and calculated in accordance therewith), except as provided in the Articles of Incorporation, (ii) result in REIT Shares being owned by fewer than 100 persons
(determined without reference to any rules of attribution), except as provided in the Articles of Incorporation, (iii) result in the General Partner being “closely held”
within the meaning of Section 856(h) of the Code, (iv) cause the General Partner to own, directly or constructively, nine and nine-tenths percent (9.9%) or more of the ownership interests in a tenant within the meaning of Section 856(d)(2)(B) of the
Code (v) cause the General Partner to be treated as a “successor corporation” to Rich Uncles Real Estate Investment Trust I, an unincorporated California association, within the meaning of Section 856(g)(3) of the Code, or (vi) adversely affect the
ability of the General Partner to continue to qualify as a REIT or subject the General Partner to any additional taxes under Section 857 or Section 4981 of the Code. The General Partner, in its sole and absolute discretion, may waive the restriction
on exchange set forth in this Section 8.4(c).
(d) Any Cash Amount to be paid to an Exchanging Partner pursuant to this Section 8.4 shall be paid on the Specified Exchange Date; provided, however, that the General Partner may elect to cause the Specified Exchange Date to be delayed for up to an additional one hundred eighty (180) days to the extent required for the General Partner to cause additional
REIT Shares to be issued to provide financing to be used to make such payment of the Cash Amount. Notwithstanding the foregoing, the General Partner agrees to use commercially reasonable efforts to cause the closing of the acquisition of exchanged
Common Units hereunder to occur as quickly as reasonably possible.
(e) Notwithstanding any other provision of this Agreement, the General Partner shall place appropriate restrictions on the ability of the Limited Partners to exercise their Exchange Rights as and if deemed
necessary to ensure that the Partnership does not constitute a “publicly traded partnership” under section 7704 of the Code. If and when the General Partner
determines that imposing such restrictions is necessary, the General Partner shall give prompt written notice thereof to each of the Limited Partners, which notice shall be accompanied by a copy of an opinion of counsel to the Partnership which
states that, in the opinion of such counsel, restrictions are necessary in order to avoid the Partnership being treated as a “publicly traded partnership” under
section 7704 of the Code.
(f) Each Limited Partner covenants and agrees with the General Partner that all Common Units delivered for exchange shall be delivered to the Partnership or the General Partner, as the case may be, free and
clear of all liens; and, notwithstanding anything contained herein to the contrary, neither the General Partner nor the Partnership shall be under any obligation to acquire Common Units which are or may be subject to any liens. Each Limited Partner
further agrees that, if any state or local property transfer tax is payable as a result of the transfer of its Common Units to the Partnership or the General Partner, such Limited Partner shall assume and pay such transfer tax.
ARTICLE 9
TRANSFERS OF LIMITED PARTNERSHIP INTERESTS
9.1. Purchase for Investment.
(a) Each Limited Partner hereby represents and warrants to the General Partner and to the Partnership that the acquisition of its Partnership Interests is made as a principal for its account for investment
purposes only and not with a view to the resale or distribution of such Partnership Interest.
(b) Each Limited Partner agrees that it will not sell, assign or otherwise transfer its Partnership Interest or any fraction thereof, whether voluntarily or by operation of law or at judicial sale or otherwise,
to any Person who does not make the representations and warranties to the General Partner set forth in Section 9.1(a) above and similarly agree not to sell, assign or transfer such Partnership Interest or fraction thereof to any Person who does not
similarly represent, warrant and agree.
9.2. Restrictions on Transfer of Limited Partnership Interests.
(a) Subject to the provisions of 9.2(b), (c) and (d), no Limited Partner may offer, sell, assign, hypothecate, pledge or otherwise transfer all or any portion of its Limited Partnership Interest, or any of such
Limited Partner’s economic rights as a Limited Partner, whether voluntarily or by operation of law or at judicial sale or otherwise (collectively, a “Transfer”)
without the consent of the General Partner, which consent may be granted or withheld in its sole and absolute discretion. Any such purported transfer undertaken without such consent shall be considered to be null and void ab initio and shall not be
given effect. The General Partner may require, as a condition of any Transfer to which it consents, that the transferor assume all costs incurred by the Partnership in connection therewith.
(b) No Limited Partner may withdraw from the Partnership other than as a result of a permitted Transfer (i.e., a Transfer consented to as contemplated by clause (a) above or clause (c) below or a Transfer
pursuant to Section 9.5 below) of all of its Partnership Units pursuant to this Article 9 or pursuant to an exchange of all of its Common Units pursuant to Section 8.4. Upon the permitted Transfer or redemption of all of a Limited Partner’s Partnership Interest, such Limited Partner shall cease to be a Limited Partner.
(c) Subject to 9.2(d), (e) and (f) below, a Limited Partner may Transfer, with the consent of the General Partner, all or a portion of its Partnership Units to (i) a parent or parent’s spouse, natural or adopted descendant or descendants, spouse of such descendant, or brother or sister, or a trust created by such Limited Partner for the benefit of such Limited Partner and/or any such Person(s), of which trust such
Limited Partner or any such Person(s) is a trustee, (ii) a corporation controlled by a Person or Persons named in (i) above, or (iii) if the Limited Partner is an entity, its beneficial owners.
(d) No Limited Partner may effect a Transfer of its Limited Partnership Interest, in whole or in part, if, in the opinion of legal counsel for the Partnership, such proposed Transfer would otherwise violate any
applicable federal or state securities or blue sky law (including investment suitability standards).
(e) No Transfer by a Limited Partner of its Partnership Units, in whole or in part, may be made to any Person if (i) in the opinion of legal counsel for the Partnership, the transfer would result in the
Partnership’s being treated as an association taxable as a corporation (other than a qualified REIT subsidiary within the meaning of Section 856(i) of the Code), (ii) in the opinion of legal counsel for the
Partnership, it would adversely affect the ability of the General Partner to continue to qualify as a REIT or subject the General Partner to any additional taxes under Section 857 or Section 4981 of the Code, (iii) in the opinion of legal counsel for
the Partnership, the transfer would cause the General Partner to be treated as a “successor corporation” to Rich Uncles Real Estate Investment Trust I, an unincorporated California association, within the meaning of Section 856(g)(3) of the Code or
(iv) such transfer is effectuated through an “established securities market” or a “secondary market (or the substantial
equivalent thereof)” within the meaning of Section 7704 of the Code.
(f) No transfer of any Partnership Units may be made to a lender to the Partnership or any Person who is related (within the meaning of Regulations Section 1.752-4(b)) to any lender to the Partnership whose loan
constitutes a nonrecourse liability (within the meaning of Regulations Section 1.752-1(a)(2)), without the consent of the General Partner, which may be withheld in its sole and absolute discretion, provided that as a condition to such consent the
lender will be required to enter into an arrangement with the Partnership and the General Partner to exchange or redeem for the Cash Amount any Partnership 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.
(g) Any Transfer in contravention of any of the provisions of this Article 9 shall be void and ineffectual and shall not be binding upon, or recognized by, the Partnership.
(h) Prior to the consummation of any Transfer under this Article 9, the transferor and/or the transferee shall deliver to the General Partner such opinions, certificates and other documents as the General
Partner shall request in connection with such Transfer.
9.3. Admission of Substitute Limited Partner.
(a) Subject to the other provisions of this Article 9, an assignee of the Limited Partnership Interest of a Limited Partner (which shall be understood to include any purchaser, transferee, donee, or other
recipient of any disposition of such Limited Partnership Interest) shall be deemed admitted as a Limited Partner of the Partnership only with the consent of the General Partner and upon the satisfactory completion of the following:
(i) The assignee shall have accepted and agreed to be bound by the terms and provisions of this Agreement by executing a counterpart or an amendment thereof, including a revised Exhibit A, and such other documents or instruments as the General Partner may require in order to effect the admission of such Person as a Limited Partner.
(ii) To the extent required, an amended Certificate evidencing the admission of such Person as a Limited Partner shall have been signed, acknowledged and filed for record in accordance with the Act.
(iii) The assignee shall have delivered a letter containing the representation set forth in Section 9.1(a) hereof and the agreement set forth in Section 9.1(b) hereof.
(iv) If the assignee is a corporation, partnership or trust, the assignee shall have provided the General Partner with evidence satisfactory to counsel for the Partnership of the assignee’s authority to become a Limited Partner under the terms and provisions of this Agreement.
(v) The assignee shall have executed a power of attorney containing the terms and provisions set forth in Section 8.2 hereof.
(vi) The assignee shall have paid all legal fees and other expenses of the Partnership and the General Partner and filing and publication costs in connection with its substitution as a Limited Partner.
(vii) The assignee has obtained the prior written consent of the General Partner to its admission as a Substitute Limited Partner, which consent may be given or denied in the exercise of the General Partner’s sole and absolute discretion.
(b) For the purpose of allocating Profits and Losses and distributing cash received by the Partnership, a Substitute Limited Partner shall be treated as having become, and appearing in the records of the
Partnership as, a Partner upon the filing of the Certificate described in Section 9.3(a)(ii) hereof or, if no such filing is required, the later of the date specified in the transfer documents or the date on which the General Partner has received all
necessary instruments of transfer and substitution.
(c) The General Partner shall cooperate with the Person seeking to become a Substitute Limited Partner by preparing the documentation required by this Section and making all official filings and publications.
The Partnership shall take all such action as promptly as practicable after the satisfaction of the conditions in this Article 9 to the admission of such Person as a Limited Partner of the Partnership.
9.4. Rights of Assignees of Partnership Interests.
(a) Subject to the provisions of Sections 9.1 and 9.2 hereof, except as required by operation of law, the Partnership shall not be obligated for any purposes whatsoever to recognize the assignment by any Limited
Partner of its Partnership Interest until the Partnership has received notice thereof.
(b) Any Person who is the assignee of all or any portion of a Limited Partner’s Limited Partnership Interest but does not become a Substitute Limited Partner and desires
to make a further assignment of such Limited Partnership Interest, shall be subject to all the provisions of this Article 9 to the same extent and in the same manner as any Limited Partner desiring to make an assignment of its Limited Partnership
Interest.
9.5. Effect of Bankruptcy, Death, Incompetence or Termination of a Limited Partner. The occurrence of an Event of Bankruptcy as to a Limited Partner, the death of
a Limited Partner or a final adjudication that a Limited Partner is incompetent (which term shall include, but not be limited to, insanity) shall not cause the termination or dissolution of the Partnership, and the business of the Partnership shall
continue if an order for relief in a bankruptcy proceeding is entered against a Limited Partner, the trustee or receiver of his estate or, if he dies, his executor, administrator or trustee, or, if he is finally adjudicated incompetent, his
committee, guardian or conservator, shall have the rights of such Limited Partner for the purpose of settling or managing his estate property and such power as the bankrupt, deceased or incompetent Limited Partner possessed to assign all or any part
of his Partnership Interest and to join with the assignee in satisfying conditions precedent to the admission of the assignee as a Substitute Limited Partner.
9.6. Joint Ownership of Interests. A Partnership Interest may be acquired by two individuals as joint tenants with right of survivorship, provided that such
individuals either are married or are related and share the same home as tenants in common. The written consent or vote of both owners of any such jointly held Partnership Interest shall be required to constitute the action of the owners of such
Partnership Interest; provided, however, that the written consent of only one joint owner will be required if the Partnership has been provided with
evidence satisfactory to the counsel for the Partnership that the actions of a single joint owner can bind both owners under the applicable laws of the state of residence of such joint owners. Upon the death of one owner of a Partnership Interest
held in a joint tenancy with a right of survivorship, the Partnership Interest shall become owned solely by the survivor as a Limited Partner and not as an assignee. The Partnership need not recognize the death of one of the owners of a jointly-held
Partnership Interest until it shall have received notice of such death. Upon notice to the General Partner from either owner, the General Partner shall cause the Partnership Interest to be divided into two equal Partnership Interests, which shall
thereafter be owned separately by each of the former owners.
9.7. Redemption of Partnership Units. The General Partner will cause the Partnership to redeem Partnership Units, to the extent it shall have legally available
funds therefor, at any time the General Partner redeems shares of capital stock in itself. The number and class or series of Partnership Units redeemed and the redemption price shall equal the number (multiplied by the Conversion Factor) of shares of
capital stock the General Partner redeems and the redemption price at which the General Partner redeems such shares, respectively.
ARTICLE 10
BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS
10.1. Books and Records. At all times during the continuance of the Partnership, the Partners shall keep or cause to be kept at the Partnership’s specified office true and complete books of account in accordance with generally accepted accounting principles, including: (a) a current list of the full name and last known business address of each Partner, (b) a copy of
the Certificate of Limited Partnership and all certificates of amendment thereto, (c) copies of the Partnership’s federal, state and local income tax returns and reports, (d) copies of this Agreement and
amendments thereto and any financial statements of the Partnership for the three most recent years and (e) all documents and information required under the Act. Any Partner or its duly authorized representative, upon paying the costs of collection,
duplication and mailing, shall be entitled to inspect or copy such records during ordinary business hours.
10.2. Custody of Partnership Funds; Bank Accounts.
(a) All funds of the Partnership not otherwise invested shall be deposited in one or more accounts maintained in such banking or brokerage institutions as the General Partner shall determine, and withdrawals
shall be made only on such signature or signatures as the General Partner may, from time to time, determine.
(b) All deposits and other funds not needed in the operation of the business of the Partnership may be invested by the General Partner in investment grade instruments (or investment companies whose portfolio
consists primarily thereof), government obligations, certificates of deposit, bankers’ acceptances and municipal notes and bonds. The funds of the Partnership shall not be commingled with the funds of any
other Person except for such commingling as may necessarily result from an investment in those investment companies permitted by this Section 10.2(b).
10.3. Fiscal and Taxable Year. The fiscal and taxable year of the Partnership shall be the calendar year.
10.4. Annual Tax Information and Report. The General Partner shall furnish to each person who was a Limited Partner at any time during such year the tax information
necessary to file such Limited Partner’s individual tax returns as shall be reasonably required by law.
10.5. Partnership Representative; Tax Elections; Special Basis Adjustments.
(a) The General Partner is hereby designated as the “partnership representative” of the Partnership within the meaning of Section 6223(a) of the Code. If any state or local tax law provides for a partnership
representative or person having similar rights, powers, authority or obligations, the person designated above shall also serve in such capacity (in any such federal, state or local capacity, the “Partnership Representative”). The General Partner may
name a replacement Partnership Representative at any time; provided, however, that the designated Partnership Representative shall serve as the Partnership Representative until resignation, death, incapacity, or removal. In such capacity, the
Partnership Representative shall have all of the rights, authority and power, and shall be subject to all of the obligations, of a partnership representative to the extent provided in the Code and the Regulations, and the Partners hereby agree to be
bound by any actions taken by the Partnership Representative in such capacity. The Partnership Representative shall represent the Partnership in all tax matters to the extent allowed by law. Without limiting the foregoing, the Partnership
Representative is authorized and required to represent the Partnership (at the Partnership’s expense) in connection with all examinations of the Partnership’s affairs by tax authorities, including administrative and judicial proceedings, and to
expend Partnership funds for professional services and costs associated therewith. Any decisions made by the Partnership Representative, including, without limitation, whether or not to settle or contest any tax matter, and the choice of forum for
any such contest, and whether or not to extend the period of limitations for the assessment or collection of any tax, shall be made in the Partnership Representative’s sole discretion. The Partnership Representative (i) shall have the sole authority
to make any elections on behalf of the Partnership permitted to be made pursuant to the Code or the Regulations promulgated thereunder and (ii) may, in its sole discretion, make an election on behalf of the Partnership under Sections 6221(b) or 6226
of the Code as in effect for the first fiscal year beginning on or after January 1, 2019 and thereafter, (iii) may request a modification to any assessment of an imputed underpayment, including a modification for any Partner who is a real estate
investment trust or regulated investment company as defined in Sections 586 and 851, respectively, based on such Partner making a deficiency dividend pursuant to Section 860 and a modification based on the tax-exempt status of a reviewed year
Partner, and (iv) may take all actions the Partnership Representative deems necessary or appropriate in connection with the foregoing. The Partnership Representative and any individual who has been appointed as a designated individual with respect
to the Partnership Representative in accordance with Treasury Regulations Section 301.6223-1(b)(3)(ii) (“Designated Individual”) shall be reimbursed and indemnified by the Partnership for all claims, liabilities, losses, costs, damages and expenses,
and for reasonable legal and accounting fees, incurred in connection with the performance of its duties as Partnership Representative or Designated Individual, as applicable, in accordance with the terms hereof, unless the actions of the Partnership
Representative or the Designated Individual, as applicable constitute gross negligence or intentional misconduct.
(b) Each Partner hereby covenants to cooperate with the Partnership Representative and to do or refrain from doing any or all things reasonably
requested by the Partnership Representative with respect to examinations of the Partnership’s affairs by tax authorities (including, without limitation, promptly filing amended tax returns and promptly paying any related taxes, including penalties
and interest) and shall provide promptly and update as necessary at any times requested by the Partnership Representative, all information, documents, self-certifications, tax identification numbers, tax forms, and verifications thereof, that the
Partnership Representative deems necessary in connection with (1) any information required for the Partnership to determine the application of Sections 6221-6235 of the Code to the Partnership; (2) an election by the Partnership under Section 6221(b)
or 6226 of the Code, and (3) an audit or a final adjustment of the Partnership by a tax authority. The Partnership and the Partners hereby agree and acknowledge that (i) the actions of the Partnership Representative in connection with examinations
of the Partnership’s affairs by tax authorities shall be binding on the Partnership and the Partners; and (ii) neither the Partnership nor the Partners have any right to contact the IRS with respect to an examination of the Partnership or participate
in an audit of the Partnership or proceedings under Sections 6221-6235 of the Code.
(c) The Partners acknowledge that the Partnership intends to elect the application of Section 6221(b) of the Code (the “Opt-out Election”) for
its first taxable year beginning on or after January 1, 2019 and for each Fiscal Year thereafter. If the Partnership is not eligible to make such election, the Partners acknowledge that the Partnership intends to elect the application of Section
6226 of the Code (the “Push-out Election”) for its first taxable year beginning on or after January 1, 2019 and for each Fiscal Year thereafter. This acknowledgement applies to each Partner whether or not the Partner owns a Partnership Interest in
both the reviewed year and the year of the tax adjustment. If the Partnership elects the application of Section 6226 of the Code, the Partners shall take into account and report to the IRS (or any other applicable tax authority) any adjustment to
their tax items for the reviewed year of which they are notified by the Partnership in a written statement, in the manner provided in Section 6226(b), whether or not the Partner owns a Partnership Interest at such time. Any Partner that fails to
report its share of such adjustments on its tax return, shall indemnify and hold harmless the Partnership, the General Partner, the Partnership Representative, and each of their Affiliates from and against any and all liabilities related to taxes
(including penalties and interest) imposed on the Partnership as a result of the Partner’s failure. In addition, each Partner shall indemnify and hold the Partnership, the General Partner, the Partnership Representative, and each of their Affiliates
harmless from and against any and all liabilities related to taxes (including penalties and interest) imposed on the Partnership (i) pursuant to Section 6221 of the Code, which liabilities relate to adjustments that would have been made to the tax
items allocated to such Partner had such adjustments been made for a tax year beginning prior to January 1, 2019 (and assuming that the Partnership had not made an election to have Section 6221 of the Code apply for such earlier tax years) and (ii)
resulting from or attributable to such Partner’s failure to comply with the preceding subsection (b) or this subsection (c). Each Partner acknowledges and agrees that no Partner shall have any claim against the Partnership, the General Partner, the
Partnership Representative, or any of their Affiliates for any tax, penalties or interest resulting from the Partnership’s election under Section 6226 of the Code.
(d) If the Partnership does not make an election under Section 6226 of the Code, the amount of any imputed underpayment assessed upon the
Partnership, pursuant to Code Section 6232, attributable to a Partner (or former Partner), as reasonably determined by the Partnership Representative, shall be treated as a withholding tax with respect to such Partner. To the extent any portion of
such imputed underpayment cannot be withheld from a current distribution, any such Partner (or former Partner) shall be liable to the Partnership for the amount that cannot be withheld and agrees to pay such amount to the Partnership. Any such amount
withheld, or any such payment shall not be treated as a Capital Contribution for purposes of any provision herein that affects distributions to the Partners and any amount not paid by any such Partner (or former Partner) at the time reasonably
requested by the Partnership Representative shall accrue interest at the rate set by the IRS for the underpayment of federal taxes, compounded quarterly, until paid.
(e) The provisions of this Section 10 shall survive the termination of the Partnership, the termination of this Agreement and, with respect to
any Partner, the transfer or assignment of any portion of such Partner’s Partnership Interest.
(f) The Partnership Representative shall use commercially reasonable efforts to keep the Partners reasonably informed as to the status of any tax
investigations, audits, lawsuits or other judicial or administrative tax proceedings and shall promptly copy all other Partners on any correspondence to or from the IRS or applicable state, local or foreign tax authority relating to such
proceedings. The Partnership Representative shall inform the IRS, as promptly as possible upon the commencement of any examination or proceeding, of the tax-exempt status of any Partners and shall take any actions or refrain from taking any action
to the extent necessary to preserve the tax-exempt status of such Partners and shall afford such Partners tax-free treatment, to the extent permissible under the Code. The Partnership Representative has an obligation to perform its duties as the
Partnership Representative in good faith and in such manner as will serve the best interests of the Partnership and all of the Partners.
(g) The Partnership shall elect to deduct expenses, if any, incurred by it in organizing the Partnership as provided in Section 709 of the Code.
10.6. Reports Made Available to Limited Partners.
(a) As soon as practicable after the close of each fiscal quarter (other than the last quarter of the fiscal year), upon written request by a Limited Partner to the General Partner, the General Partner will make
available, without cost, to each Limited Partner a quarterly 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 fiscal
quarter, presented in accordance with generally accepted accounting principles. As soon as practicable after the close of each fiscal year, upon written request by a Limited Partner to the General Partner, the General Partner will make available,
without cost, to each Limited Partner 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 fiscal year,
presented in accordance with generally accepted accounting principles.
(b) Any Partner shall further have the right to a private audit of the books and records of the Partnership at the expense of such Partner, provided such audit is made for Partnership purposes and is made during
normal business hours.
10.7 Safe Harbor Election and Forfeiture Allocations.
(a) The Partners agree that the General Partner is authorized to make an election, on behalf of itself and of all Partners, to have the “Safe Harbor” of Section 3.03 of IRS Notice 2005-43 (or the corresponding provision
in any Revenue Procedure or regulation issued pursuant to such Notice) (the “
Safe Harbor”) apply irrevocably with respect to all Partnership Units transferred in connection with the
performance of services by a Partner in a partner capacity or in anticipation of becoming a Partner (such election, the “
Safe Harbor Election”). The Safe Harbor Election shall
be effective as of the date hereof. The Partnership and each Partner agree to comply with all requirements of the Safe Harbor with respect to all interests in the Partnership transferred in connection with the performance of services by a Partner in
a partner capacity or in anticipation of becoming a Partner, whether such Partner was admitted as a Partner or as a transferee of a previous Partner. The General Partner shall cause the Partnership to comply with all record keeping requirements and
other administrative requirements with respect to the Safe Harbor as shall be required by proposed or final regulations relating thereto, to the extent the General Partner so determines in its sole and absolute discretion.
(b) In connection with the Safe Harbor Election, the Partners agree that (i) the Class P Units are a “Safe Harbor Partnership Interest” within the meaning of section 3.02 of IRS Notice 2005-43 (or the corresponding
provision in any Revenue Procedure or Treasury Regulation issued pursuant to such Notice) representing a profits interest received for services rendered or to be rendered to or for the benefit of the Partnership by the Key Employees (in their (or
their Affiliate’s, as applicable) capacity as Partners for federal income tax purposes or in anticipation of becoming Partners for federal income tax purposes), and (ii) the fair market value of the Safe Harbor Partnership Interest upon receipt by
the Key Employees (or their Affiliates, as applicable) as of the date of issuance is zero, representing the liquidation value of such interest upon receipt (with such valuation being consented to and approved by all Partners).
(c) Each Partner, by signing this Agreement (or an admission amendment with respect hereto) or by accepting a Transfer of a Partnership Unit, hereby agrees (i) to comply with all requirements of the Safe Harbor Election
with respect to any Safe Harbor Partnership Interest while the Safe Harbor Election remains effective, and (ii) that to the extent that such profits interest is forfeited after the date hereof and to the extent that allocations of income have been
made to the Key Employees (or their Affiliates, as applicable) with respect thereto and have not been matched with corresponding allocations of loss or deduction with respect thereto, or distributions with respect thereto that may be retained by the
Key Employees (or their Affiliates, as applicable), the Partnership shall make special forfeiture allocations of gross items of deduction or loss (including, as may be permitted by or under Treasury Regulations to be adopted, notional items of
deduction or loss) in accordance with IRS Notice 2005-43 and the Treasury Regulations adopted under Sections 704(b) and 83 of the Code.
(d) The General Partner shall file or cause the Partnership to file all returns, reports and other documentation as may be required, as determined by the General Partner, to perfect and maintain the Safe Harbor Election
with respect to Transfers of any Safe Harbor Partnership Interest without further vote or action of any other Person.
(e) The General Partner hereby is authorized, directed and empowered, without further vote or action of the Partners or any other Person, to amend the Agreement as necessary to comply with the Safe Harbor requirements,
to the extent the Safe Harbor Election is utilized, in order to provide for a Safe Harbor Election and the ability to maintain the same, and shall have the authority to execute any such amendment by and on behalf of each Partner pursuant to the power
of attorney granted by this Agreement. Any undertaking by the Partners necessary to enable or preserve a Safe Harbor Election may be reflected in such amendments and, to the extent so reflected, shall be binding on each Partner.
(f) Each Partner agrees to cooperate with the General Partner to perfect and maintain any Safe Harbor Election, and to timely execute and deliver any documentation with respect thereto reasonably requested by the General
Partner at the expense of the Partnership.
(g) No Transfer of any Partnership Units by a Partner shall be effective unless prior to such Transfer, the assignee or intended recipient of such Partnership Units shall have agreed in writing to be bound by the
provisions of this Section 10.7, in a form satisfactory to the General Partner.
ARTICLE 11
AMENDMENT OF AGREEMENT; MERGER
The General Partner’s consent shall be required for any amendment to this Agreement. The General Partner, without the consent of the Limited Partners, may amend this Agreement in
any respect (including, without limitation, in connection with the adoption of one more equity compensation arrangements or plans and the authorization, creation, designation and issuance of one or more classes or series of equity securities in
connection therewith or otherwise) or merge or consolidate the Partnership with or into any other partnership or business entity (as defined in Section 17-211 of the Act) in a transaction pursuant to Section 7.1(b), (c) or (d) hereof; provided, however, that the following amendments and any other merger or consolidation of the Partnership shall require the consent of the General Partner
and holders of a majority of the Common Units (other than the Class M Units and the Class P Units, except as otherwise provided in Exhibit C or Exhibit D, as applicable):
(a) any amendment affecting the operation of the Conversion Factor or the Exchange Right or the terms of Exhibit C (except as provided in Section 8.4(d) or 7.1(c) or Exhibit C hereof) in a manner adverse to the
Limited Partners;
(b) any amendment that would adversely affect the rights of the Limited Partners to receive the distributions payable to them hereunder, other than with respect to the issuance of additional Partnership
Interests pursuant to Section 4.2 hereof;
(c) any amendment that would alter the Partnership’s allocations of Profit and Loss to the Limited Partners, other than with respect to the issuance of additional
Partnership Interests pursuant to Section 4.2 hereof; or
(d) any amendment that would impose on the Limited Partners any obligation to make additional Capital Contributions to the Partnership.
ARTICLE 12
GENERAL PROVISIONS
12.1. Notices. All communications required or permitted under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or
upon deposit in the United States mail, registered, postage prepaid return receipt requested, to the Partners at the addresses set forth in Exhibit A attached hereto; provided, however, that any Partner may specify a different address by notifying
the General Partner in writing of such different address. Notices to the Partnership shall be delivered at or mailed to its specified office.
12.2. Survival of Rights. Subject to the provisions hereof limiting transfers, this Agreement shall be binding upon and inure to the benefit of the Partners and the
Partnership and their respective legal representatives, successors, transferees and assigns.
12.3. Additional Documents. Each Partner agrees to perform all further acts and execute, swear to, acknowledge and deliver all further documents which may be
reasonable, necessary, appropriate or desirable to carry out the provisions of this Agreement or the Act.
12.4. Severability. If any provision of this Agreement shall be declared illegal, invalid, or unenforceable in any jurisdiction, then such provision shall be deemed
to be severable from this Agreement (to the extent permitted by law) and in any event such illegality, invalidity or unenforceability shall not affect the remainder hereof.
12.5. Entire Agreement. This Agreement and exhibits attached hereto constitute the entire Agreement of the Partners and supersede all prior written agreements and
prior and contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof.
12.6. Pronouns and Plurals. When the context in which words are used in the Agreement indicates that such is the intent, words in the singular number shall include
the plural and the masculine gender shall include the neuter or female gender as the context may require.
12.7. Headings. The Article headings or sections in this Agreement are for convenience only and shall not be used in construing the scope of this Agreement or any
particular Article.
12.8. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original copy and all of which together shall
constitute one and the same instrument binding on all parties hereto, notwithstanding that all parties shall not have signed the same counterpart.
12.9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware; provided,
however, that causes of action for violations of federal or state securities laws shall not be governed by this Section 12.9.
[Signatures appear on next page.]
IN WITNESS WHEREOF, the parties hereto have hereunder affixed their signatures to this Second Amended and Restated Limited Partnership Agreement, all as of the 31st day of December, 2019.
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GENERAL PARTNER:
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RW HOLDINGS NNN REIT, INC.
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By:
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/s/ Aaron S. Halfacre
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Name:
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Aaron S. Halfacre
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Title:
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Chief Executive Officer
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CLASS M LIMITED PARTNER:
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DAISHO OP HOLDINGS, LLC
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By:
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BrixInvest, LLC
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Its:
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Manager
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By:
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/s/ Aaron S. Halfacre
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Name:
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Aaron S. Halfacre
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Title:
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Chief Executive Officer
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OTHER LIMITED PARTNERS:
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RICH UNCLES NNN LP, LLC
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By:
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RW Holdings NNN REIT, Inc.
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Its:
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Sole Member
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By:
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/s/ Aaron S. Halfacre
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Name:
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Aaron S. Halfacre
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Title:
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Chief Executive Officer
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/s/ Aaron S. Halfacre
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Aaron S. Halfacre, in his individual capacity
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/s/ Raymond J. Pacini
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The Raymond J. Pacini Trust u/a/d 5/3/01,
Raymond J. Pacini, Trustee
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Signature Page to Second Amended and Restated Limited Partnership Agreement of RW Holdings NNN Operating Partnership, LP
EXHIBIT A
GENERAL PARTNER AND LIMITED PARTNER,
CAPITAL CONTRIBUTIONS AND PERCENTAGE INTERESTS
AS OF DECEMBER 31, 2019
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Percentage Partner Interest
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Agreed Value of
Capital
Contribution
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Number of
Partnership
Units(1)
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Class of
Partnership Units
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GENERAL PARTNER:
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RW Holdings NNN REIT, Inc.
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$
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242,263,280
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23,844,811
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Class C units
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LIMITED PARTNERS:
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Rich Uncles NNN LP, LLC
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$
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0
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0
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N/A
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Daisho OP Holdings, LLC
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$
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33,423,835
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3,289,748
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Class M units
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KEY EMPLOYEES:
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Aaron S. Halfacre
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$
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200,000
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Class P units
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The Raymond J. Pacini Trust u/a/d 5/3/01
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$
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80,145
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Class P units
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Totals
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$
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275,687,115
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27,414,704
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(1)
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Assumes units are fully converted at the initial conversion ratio, pursuant to the terms of the Agreement.
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EXHIBIT B
NOTICE OF EXERCISE OF EXCHANGE RIGHT
In accordance with Section 8.4 of the Second Amended and Restated Limited Partnership Agreement (the “Agreement”) of RW Holdings NNN Operating Partnership, LP, the undersigned hereby irrevocably (i) presents for exchange _____Class _____ Common Units in RW Holdings NNN Operating Partnership, LP, in accordance with the
terms of the Agreement and the Exchange Right referred to in Section 8.4 thereof, (ii) surrenders such Common Units and all right, title and interest therein, and (iii) directs that the Cash Amount or REIT Shares Amount (each as defined in the
Agreement) as determined by the General Partner, deliverable upon exercise of the Exchange Right be delivered to the address specified below, and if REIT Shares (as defined in the Agreement) are to be delivered, such REIT Shares be registered or
placed in the name(s) and at the address(es) specified below.
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(Name of Limited Partner)
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(Signature of Limited Partner)
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(Mailing Address)
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(City) (State) (Zip Code)
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Signature Guaranteed by:
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If REIT Shares are to be issued, issue to:
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Name:
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Social Security or Tax I.D. Number:
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EXHIBIT C
DESCRIPTION OF CLASS M UNITS
In accordance with Section 4.2(a)(i) of the Agreement, the Partnership has issued the Class M Units as consideration for the Contributed Assets (as defined in the Contribution Agreement), contributed
by Daisho OP Holdings, LLC (“Daisho”) to the Partnership. The initial number of Class M Units shall be 657,949.5.
The Class M Units shall have the following terms, rights and restrictions:
1. Limits on Transfer and Exchange. Notwithstanding anything to the contrary contained in this Agreement (including but not limited to Section 6 of this Exhibit C), neither Daisho,
the Partnership nor the General Partner shall be permitted to transfer, convert or exchange the Class M Units until December 31, 2020 (the “Lock Up Period”) or later.
2. No Distribution Rights and No Profit or Loss Allocations. The Class M Units are Partnership Units having all of the rights, title and interests granted to Partnership Units in
the Agreement (as modified by this Exhibit C), provided, however, that the Class M Units are not entitled to (i) the distributions set forth in Article 5 of the Agreement (excluding any tax distributions made
pursuant to Article 5); (ii) the allocation of any Profit or Loss of the Partnership (iii) any Exchange Right set forth in Section 8.4 of the Agreement or (iv) voting rights other than as expressly provided for in this Exhibit C. The Class C Units
issued in connection with any voluntary or mandatory conversion of the Class M Units into Class C Units will have all of the rights, title and interests granted to the Class C Units as set forth in the Agreement, including the right to cash
distributions, the allocation of Profit or Loss, an Exchange Right and voting rights as set forth in the Agreement. Prior to the expiration of the Lock Up Period and at all times thereafter, all of the General Partner’s real estate assets will be
owned, directly or indirectly, by the Partnership such that cash distributions will be based on the entire portfolio.
3. No Voting Rights. The Class M Units shall have no voting or consent rights. Notwithstanding the foregoing, the approval of the holders of
Class M Units shall be required for any amendment that adversely impacts the terms, rights and obligations of the Class M Units as set forth herein.
4. Voluntary Conversion of Class M Units. Subject to the provisions of this Exhibit C, each Class M Unit shall be convertible, at the option of the holder thereof, at any time
following the Lock Up Period, and without the payment of additional consideration by the holder thereof, into Class C Units of the Partnership initially on a 1:5 basis (the “Class M Conversion Ratio”) on the Specified Exchange Date; provided,
however, that the Class M Conversion Ratio shall be subject to adjustment as provided in Section 6 and Section 7 of this Exhibit C. The conversion right shall be exercised pursuant to a Notice of Conversion delivered to the Partnership (with a copy
to the General Partner) by the Limited Partner who is exercising the conversion right (the “Converting Partner”); provided, further, that no holder of Class M Units may deliver more than two (2) Notices of Conversion during each calendar year. A Limited Partner may not exercise the conversion right for less than 1,000 Class M Units or, if such Limited
Partner holds less than 1,000 Class M Units, all of the Class M Units held by such Partner. The Converting Partner shall have no right, with respect to any Class M Units so exchanged, to receive any distribution paid with respect to the Class C Units
into which such Class M Units convert if the record date for such distribution is prior to the Specified Exchange Date.
Upon any such conversion, the Class M Units surrendered for conversion shall no longer be entitled to any adjustment to the Class M Conversion Ratio as provided in Section 7 of this Exhibit C.
If at any time or from time to time after the date of this Agreement, the Class C Units issuable upon the conversion of the Class M Units are changed into the same or a different number of units of
any class or classes of units, whether by recapitalization, reclassification, merger, consolidation or otherwise, then following such recapitalization, reclassification, merger, consolidation or other change, each Class M Unit shall thereafter be
convertible in lieu of the Class C Units into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the units of that number of Class C Units issuable upon conversion of such
Class M Units immediately prior to such recapitalization, reclassification, merger, consolidation or other change would have been entitled to receive pursuant to such event, subject to further adjustment as provided herein or with respect to such
other securities or property by the terms thereof. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4 and Section 6 and 7, below, with respect to the rights of the holders of Class M Units
after the capital reorganization to the end that the provisions of this Section 4 (including the number of Class C Units issuable upon conversion of the Class M Units) shall be applicable after that event and be as nearly equivalent as practicable.
5. Mandatory Conversion of Class M Units. The Class M Units shall be automatically and mandatorily converted into Class C Units on March 31,
2024 (the “Mandatory Conversion Date”) at the then-applicable Class M Conversion Ratio.
6. Conversion Prior to Mandatory Conversion Date. In the event of a conversion of Class M Units for Class C Units prior to the Mandatory Conversion Date, such Class M Units shall
be exchanged at the rate indicated below, depending upon the amount of time elapsed:
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Date of Exchange
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Early Conversion Ratio
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Between December 31, 2020 and
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December 30, 2021
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50% of the Class M Conversion Ratio
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Between December 31, 2021 and
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December 30, 2022
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60% of the Class M Conversion Ratio
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Between December 31, 2022 and
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December 30, 2023
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70% of the Class M Conversion Ratio
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Further, and for the avoidance of doubt, Class M Units exchanged prior to the Mandatory Conversion Date will not be entitled to future adjustments in the Class M Conversion Ratio as provided in
Section 7 of this Exhibit C.
7. Adjustments Based on Achievement of Earn-Out Hurdles. The Class M Conversion Ratio may be adjusted as follows upon the achievement of the
AUM and AFFO Per Share hurdles set forth below:
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Hurdles
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AUM
($ in billions)
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AFFO Per Share
($)
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Class M
Conversion
Ratio
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Initial Conversion Ratio
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1:5.00
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Fiscal Year 2021
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$
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0.860
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$
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0.59
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1:5.75
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Fiscal Year 2022
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$
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1.175
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$
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0.65
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1:7.50
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Fiscal Year 2023
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$
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1.551
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$
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0.70
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1:9.00
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The Class M Conversion Ratio will be adjusted as set forth above only if both the AUM and AFFO Per Share hurdles are met in a given year, which shall be
determined by the General Partner in good faith within the first quarter following each fiscal year end, and will only be adjusted once in a given year. The total amount of Class C Units issued in connection herewith shall not exceed the initial
number of Class M Units issued multiplied by 9.
8. Additional Definitions.
“AFFO Per Share” means Adjusted Funds From Operations which shall be computed based on the Company’s Consolidated Statements of Cash Flows,
contained in its Annual Report on Form 10-K filed with the SEC, as follows:
Net income (loss) from continuing operations, as adjusted for:
Plus: Depreciation and amortization
Plus: Provision for doubtful accounts
Plus: Stock compensation expense
Plus (less): Amortization of deferred rents
Plus: Amortization of deferred lease incentives
Plus: Amortization of deferred financing costs
Plus: Amortization of above-market lease intangibles
Less: Amortization of below-market lease intangibles
Plus: Unrealized loss (gain) on interest rate swap valuation
Plus: Amortization of premium (discount) on debt valuation
Less: Actual losses from uncollectible accounts, previously reserved
Less: (Gains) losses from sales of real estate or other investments
Plus: Acquisition fees and due diligence expenses, including abandoned pursuit costs
Plus: Merger and acquisition expenses
Plus: Non-recurring impairments of real estate investments
Plus: Non-recurring impairments of platform investments
Plus: Non-recurring (gains) losses from extinguishment or sale of debt or hedges
Plus: Other non-cash charges
Plus: Tax expense (benefits) related to excluded gains (losses)
Plus: AFFO for platform/investment management business calculated in the same manner as set forth above
Plus: Adjustments for investments in unconsolidated entities and joint ventures1
“AUM” shall include real estate AUM and AUM of sponsored and managed products. Real estate AUM shall equal the asset value of all real
estate properties included in the Company’s annual determination of Net Asset Value (“NAV”).
1 It is agreed that the adjustments for investments in unconsolidated entities are similar to the various adjustments to net income that are set forth above.
“Liquidating Gain” means any capital gain realized in connection with the actual or hypothetical sale of all or substantially all of the assets of the
Partnership, including but not limited to capital gain realized in connection with an adjustment of Section 704(b) basis of Partnership assets.
9. Capital Account. Each Partner holding Class M Units shall have an initial Capital Account.
10. Special Allocation. Notwithstanding the provisions of Article 5 of the Agreement, Liquidating Gain first shall be allocated to the Partners holding
Class M Units and Class P Units with respect to their converted Class M Units or Class P Units to the extent attributable to the appreciation in the value of the Partnership assets after the date of issuance of such units. As a result of the special
allocation, it is intended that the Section 704(b) capital account attributable to the converted Class M Units shall be equal to the Section 704(b) capital account for each Class C Unit issued and outstanding as of the date of the conversion on a pro
rata basis.
11. Conduct of Business. Subject to the terms of this Agreement, subsequent to the Closing of the Transaction, the Partnership and its Affiliates shall
have sole discretion with regard to all matters relating to the operation of the Partnership and its Affiliates. Notwithstanding the foregoing, neither the Partnership nor any of its Affiliates shall intentionally take any action, or refrain from
taking any action, in bad faith for the specific intent to circumvent the potential adjustments to the Class M Conversion Ratio as set forth in Section 7 of this Exhibit C.
12. Survival and Waiver of Conversion Discount. Notwithstanding any provision to the contrary contained in this Agreement, the rights and privileges of
each Partner holding Class M Units shall survive any “Change of Control” of the Partnership or the General Partner. For purposes of this Agreement, a “Change of Control” of the Partnership or the General Partner, as the case may be (the “Relevant
Entity”), shall mean and include any of the following:
(i) a merger or consolidation of the Relevant Entity with or into any other business entity (except one in which the holders of capital stock or other equity
interests of the Relevant Entity immediately prior to such merger or consolidation continue to hold at least a majority of the outstanding securities having the right to vote of the surviving entity); or
(ii) the acquisition by any person or any group of persons (other than the Relevant Entity or any of its direct or indirect subsidiaries) acting together in any
transaction or related series of transactions, of such number of shares/units of the Relevant Entity’s equity interests as causes such person, or group of persons, to own beneficially, directly or indirectly, as of the time immediately after such
transaction or series of transactions, 50% or more of the combined voting power of the shares/units of the Relevant Entity.
Upon (i) Change of Control, or a sale, lease, exchange or other transfer of all or substantially all of the Partnership’s assets, or (ii) any liquidation, dissolution or winding up of the Partnership (whether voluntary
or involuntary) after the Lock-Up Period and before the Mandatory Conversion Date, the mandatory conversion of the Class M Units pursuant to Section 5 of this Exhibit C at the then-applicable Class M Conversion Ratio but without taking into account
the Early Conversion Ratio, shall be accelerated and the Mandatory Conversion Date shall be treated as the date that is one business day prior to the closing (or the effectuation) of the relevant transaction.
Notwithstanding any provision to the contrary contained in this Agreement, upon the occurrence of any transaction contemplated by this Section 11, the General Partner hereby agrees to use its commercially reasonable
efforts to consult with the Partners holding Class M Units (with the Chief Executive Officer of Daisho as a representative thereof) regarding any change in the conversion ratio applicable to the relevant transaction, subject to preservation of
attorney-client privilege held by the Partnership and compliance with all third party confidentiality obligations, in each case as determined by the General Partner in the exercise of sound business judgment.
13. Amendment. Notwithstanding the provisions in Article 11 of this Agreement or any other provision of this Agreement to the contrary, no change,
modification, extension, termination, notice of termination, discharge, abandonment or waiver of this Exhibit C or any of its provisions, nor any representation, promise or condition herein, in each case that adversely impacts the rights, privileges
and preferences of the Class M Units, will be binding upon any party unless made in writing and signed by a majority of the Partners holding Class M Units.
14. Applicability of the Agreement. To the extent not inconsistent with the terms set forth in this Exhibit C, the Class M Units are subject to the terms
of this Agreement which apply to Limited Partnership Interests and Partnership Units generally. All defined terms not otherwise defined herein shall have the definitions set forth in this Agreement.
EXHIBIT D
DESCRIPTION OF CLASS P UNITS
In accordance with Section 4.2(a)(i) of the Agreement, the Partnership has issued the Class P Units as consideration for services provided by the Key Employees to the Partnership. The initial number
of Class P Units shall be 56,029.
The Class P Units shall have the following terms, rights and restrictions:
1. Limits on Transfer and Exchange. Notwithstanding anything to the contrary contained in this Agreement, no Key Employee, Limited Partner, the General Partner nor the Partnership
shall be permitted to transfer, convert or exchange the Class P Units until (i) March 31, 2024 or (ii) the date of such employee’s involuntary termination “without cause” (as such term is defined in the relevant Key Employee’s (or his or her
Affiliate’s, as applicable) restricted unit award agreement) (clauses (i) and (ii) collectively, the “Class P Lock Up Period”), or later.
2. No Distribution Rights and No Profit or Loss Allocations. The Class P Units are Partnership Units having all of the rights, title and interests granted to Partnership Units in
the Agreement (as modified by this Exhibit D), provided, however, that the Class P Units are not entitled to (i) the distributions set forth in Article 5 of the Agreement (excluding any tax distributions made
pursuant to Article 5); (ii) the allocation of any Profit or Loss of the Partnership, (iii) any Exchange Right set forth in Section 8.4 of the Agreement or (iv) voting rights other than as expressly provided for in this Exhibit D. The Class C Units
issued in connection with any voluntary, involuntary or mandatory conversion of the Class P Units into Class C Units will have all of the rights, title and interests granted to the Class C Units as set forth in the Agreement, including the right to
cash distributions, the allocation of Profit or Loss, an Exchange Right and voting rights as set forth in the Agreement.
3. No Voting Rights. The Class P Units shall have no voting or consent rights. Notwithstanding anything to the contrary contained in this
Agreement, the approval of the holders of Class P Units shall be required for any amendment to the Agreement that adversely impacts the terms, rights and obligations of the Class P Units as set forth herein.
4. Voluntary Conversion of Class P Units. Subject to the provisions of this Exhibit D, each Class P Unit shall be convertible, at the option of the holder thereof, at any time
following the Class P Lock Up Period, and without the payment of additional consideration by the holder thereof, into Class C Units of the Partnership initially on a 1:5 basis (the “Class P Conversion Ratio”) on the Specified Exchange Date; provided,
however, that the Class P Conversion Ratio shall be subject to adjustment on the same terms and conditions as set forth in Section 6 and Section 7 of Exhibit C with respect to the Class M Units. The conversion right shall be exercised pursuant to a
Notice of Conversion delivered to the Partnership (with a copy to the General Partner) by the Limited Partner who is exercising the conversion right (the “Converting Partner”); provided, further, that no holder of Class P Units may deliver more than two (2) Notices of Conversion during each calendar year. A Limited Partner may not exercise the conversion
right for less than 1,000 Class P Units or, if such Limited Partner holds less than 1,000 Class P Units, all of the Class P Units held by such Partner. The Converting Partner shall have no right, with respect to any Class P Units so exchanged, to
receive any distribution paid with respect to the Class C Units into which such Class P Units convert if the record date for such distribution is prior to the Specified Exchange Date.
Upon any such conversion, the Class P Units surrendered for conversion shall no longer be entitled to any adjustment to the Class P Conversion Ratio as referenced in Section 7 of Exhibit C.
If at any time or from time to time after the date of this Agreement, the Class C Units issuable upon the conversion of the Class P Units are changed into the same or a different number of units
of any class or classes of units, whether by recapitalization, reclassification, merger, consolidation or otherwise, then following such recapitalization, reclassification, merger, consolidation or other change, each Class P Unit shall thereafter be
convertible in lieu of the Class C Units into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the units of that number of Class C Units issuable upon conversion of such
Class P Units immediately prior to such recapitalization, reclassification, merger, consolidation or other change would have been entitled to receive pursuant to such event, subject to further adjustment as provided herein or with respect to such
other securities or property by the terms thereof. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4 and Sections 6 and 7 of Exhibit C, with respect to the rights of the holders of Class P
Units after the capital reorganization to the end that the provisions of this Section 4 (including the number of Class C Units issuable upon conversion of the Class P Units) shall be applicable after that event and be as nearly equivalent as
practicable.
5. Mandatory Conversion of Class P Units. The Class P Units shall be automatically and mandatorily converted into Class C Units on March 31,
2024 (the “Mandatory Conversion Date”) at the then-applicable Class P Conversion Ratio.
6. Capital Account. Each Partner holding Class P Units shall have an initial Capital Account.
7. Profits Interest. Absent a contrary determination (i) by a court or other final tax authority or (ii) by the General Partner following the
date hereof based on a change in law governing the taxation of any interest in the Partnership issued in connection with the performance of services for or for the benefit of the Partnership, (A) the Partnership and each Partner shall treat each
Class P Unit as a ‘‘profits interest’’ within the meaning of Rev. Proc. 93-27, 1993-2 C.B. 343, as clarified by Rev. Proc. 2001-43, 2001-34 IRB 191; (B) the Partnership and each Partner shall treat each Partner holding Class P Units as the owner of
such Units from the date such Class P Units are granted until such Class P Units are forfeited or otherwise disposed of; (iii) the Partnership and each Partner agree not to claim a deduction (as wages, compensation or otherwise) for any value
attributable to any Class P Units either upon grant or vesting of the Class P Units; and (iv) the holder of Class P Units agrees not to transfer or otherwise dispose of such Units within two (2) years of the date such Units are granted (for avoidance
of doubt, a conversion of the Class P Units into Class C Units shall not be considered a transfer or disposition for purposes of this Section 7).
8. Special Allocation. Notwithstanding the provisions of Article 5 of the Agreement, Liquidating Gain first shall be allocated to the Partners holding Class M Units
and Class P Units with respect to their converted Class M Units or Class P Units to the extent attributable to the appreciation in the value of the Partnership assets after the date of issuance of such units. As a result of the special allocation,
it is intended that the Section 704(b) capital account attributable to the converted Class P Units shall be equal to the Section 704(b) capital account for each Class C Unit issued and outstanding as of the date of the conversion on a pro rata basis.
9. Rights upon Liquidation. Notwithstanding any provision of this Agreement to the contrary, if, after the
conversion of any Class P Unit into a Class C Unit, the Liquidating Gain from a sale, exchange, merger, liquidation or other transaction (each a “Capital Event”) is insufficient to cause the converted Class P Unit to receive an amount of cash or
property (at minimum) equal to the liquidation right for Class C Unit on a unit by unit basis, the parties hereby acknowledge and agree that each such unit shall nevertheless receive an amount equal to the liquidation right for Class C Unit on a unit
by unit basis, for each converted Class P Unit (the “Class P Unit Liquidation Amount”). Upon the actual liquidation of the Partnership, the cash payment of the Class P Unit Liquidation Amount shall be treated as (1) a liquidation distribution from
the Partnership to the extent of the section 704(b) capital account attributable to the converted Class P Units and (2) a guaranteed payment for U.S. federal income tax purposes for the excess of the Class P Unit Liquidation Amount in cash over the
Section 704(b) capital account balance for each Partner holding such converted Class P Unit. For avoidance of doubt, the Class P Units are subject to all of the terms and conditions set forth in this Exhibit D prior to conversion and are not
entitled to any liquidation right until conversion.
10. Survival and Waiver of Conversion Discount. Notwithstanding any provision to the contrary contained in this Agreement, the rights and
privileges of each Partner holding Class P Units shall survive on the same terms and conditions as the rights and privileges of each Partner holding Class M Units in accordance with Section 12 of Exhibit C of this Agreement.
11. Amendment. Notwithstanding the provisions in Article 11 of this Agreement or any other provision of this Agreement to the contrary, no
change, modification, extension, termination, notice of termination, discharge, abandonment or waiver of this Exhibit D or any of its provisions, nor any representation, promise or condition herein, in each case that adversely impacts the rights,
privileges and preferences of the Class P Units, will be binding upon any party unless made in writing and signed by a majority of the Partners holding Class P Units.
12. Applicability of the Agreement. To the extent not inconsistent with the terms set forth in this Exhibit D, the Class P Units are subject to the
terms of this Agreement which apply to Limited Partnership Interests and Partnership Units generally. All defined terms not otherwise defined herein shall have the definitions set forth in this Agreement.
EXHIBIT E
NOTICE OF EXERCISE OF CONVERSION RIGHT
In accordance with ___Exhibit C or ____ Exhibit D of the Second Amended and Restated Limited Partnership Agreement (the “Agreement”) of RW Holdings NNN Operating Partnership, LP, the undersigned hereby irrevocably (i) presents for conversion _____ Class ____ Units in RW Holdings NNN Operating Partnership, LP, in accordance with the terms of
the Agreement and the conversion right referred to in Exhibit C/Exhibit D thereof, (ii) surrenders such Common Units and all right, title and interest therein, and (iii) directs that the number of Class C Units as calculated pursuant to such Exhibit
C/Exhibit D be delivered to the address specified below, and be registered or placed in the name(s) and at the address(es) specified below.
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(Name of Limited Partner)
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(Signature of Limited Partner)
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(Mailing Address)
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(City) (State) (Zip Code)
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Signature Guaranteed by:
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Class C Units are to be issued to:
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Name:
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Social Security or Tax I.D. Number:
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