Document:

ex_10-2.htm

    Exhibit
10.2

     

     

    

     

    FIFTEENTH
AMENDMENT TO

    FIRST
AMENDED AND RESTATED

    AGREEMENT
OF LIMITED PARTNERSHIP OF

    ESSEX
PORTFOLIO, L.P.

     

    Dated
as of February 26, 2008

     

    This
Fifteenth Amendment, dated as of the date shown above (the “Amendment”), is
executed by Essex Property Trust, Inc. a Maryland Corporation (the “Company”),
as the General Partner and on behalf of and as attorney in fact for the existing
Limited Partners of Essex Portfolio, L.P., a California limited partnership (the
“Partnership”), for the purpose of amending the First Amended and Restated
Agreement of Limited Partnership of Essex Portfolio, L.P., dated September 30,
1997 (the “Partnership Agreement”).

     

    RECITALS

     

    WHEREAS, the Partners wish to
restate and revise Exhibit E of the Partnership Agreement regarding
ALLOCATIONS;

     

    WHEREAS, Section 13.7(b)(iv)
of the Partnership Agreement allows the General Partner to make any amendment
that does not adversely affect the Limited Partners in any material respect; and
Section 13.7(b)(iii) of the Partnership Agreement allows the General Partner to
make amendments setting forth the rights, powers and duties of holders of
additional Partnership Units;

     

    WHEREAS, the proposed changes
in this Fifteenth Amendment relating to Exhibit E of the Partnership Agreement
do not adversely affect the Limited Partners in any material
respect;

     

    NOW THEREFORE, in
consideration of the mutual covenants and agreements herein contained and other
good and valuable consideration, the receipt, adequacy and sufficiency of which
are hereby acknowledged, the parties hereto, intending legally to be bound,
hereby amend, the Partnership Agreement as follows:

     

    1. Definitions.  Capitalized
terms used herein, unless otherwise defined herein, shall have the same meanings
as set forth in the Partnership Agreement.

     

    2. Amended
Definitions.  Section 1.1 of the Partnership Agreement is
hereby amended to delete the definition of “Adjusted Capital Account Deficit” in
its entirety.

     

    3. Restatement of Exhibit
E.  Exhibit E to the Partnership Agreement is amended and
restated by replacing such Exhibit E with Exhibit E attached to this
Amendment.

     

    4. Continuing Effect of
Partnership Agreement.  Except as modified herein, the
Partnership Agreement is hereby ratified and confirmed in its entirety and shall
remain and continue in full force and effect, provided, however, that to the
extent there shall be a conflict between the provisions of the Partnership
Agreement and this Amendment the provisions in this Amendment will prevail. All
references in any document to the Partnership Agreement shall mean the
Partnership Agreement, as amended hereby.

     

    5. Counterparts.  This
Amendment may be executed in any number of counterparts, each of which shall be
deemed to be an original and all of which shall constitute one and the same
agreement.  Facsimile signatures shall be deemed effective execution
of this Amendment and may be relied upon as such by the other
party.  In the event facsimile signatures are delivered, originals of
such signatures shall be delivered to the other party within three (3) business
days after execution.

     

    

     

    

     

    

     

    

     

    

     

    [Remainder
of Page Left Blank Intentionally]

    
      
        
        

      

      
        
        

        
          

        

      

    

    IN WITNESS WHEREOF, this
Agreement is hereby entered into among the undersigned Partners as of the date
first written above.

     

    

    GENERAL
PARTNER:

    

    ESSEX
PROPERTY TRUST, INC.,

    a
Maryland corporation as General Partner of Essex Portfolio, L.P. and on behalf
of and as attorney-in-fact for the existing Limited Partners

     

    

    By:        
/S/ Michael T.
Dance          

    Name:    Michael T.
Dance

    Title:     
Executive Vice President and Chief
Financial Officer

    
      
        
        

      

      
        
        

        
          

        

      

    

    EXHIBIT
E

    ALLOCATIONS

     

    

     

    1. Allocations of Net Income
and Net Losses.

     

    (a) For each
Fiscal Year of the Partnership, after adjusting each Partner’s Capital Account
for all Capital Contributions and distributions during such Fiscal Year and all
special allocations pursuant to Section 2 with respect to such Fiscal Year, Net
Income and Net Losses for a Fiscal Year shall be allocated to the Partners as
set forth in this Section 1.

     

    (b) Net
Income and Net Losses shall be allocated to the Partners in such manner that the
Capital Account balance of each Partner shall, to the greatest extent possible,
be equal to the amount that would be distributed to such Partner, if (a) the
Partnership were to sell the assets of the Partnership for their Gross Asset
Values, (b) all Partnership liabilities were satisfied (limited with respect to
each nonrecourse liability to the Gross Asset Values of the assets securing such
liability), and (c) the Partnership were to dissolve pursuant to Article VIII of
the Partnership Agreement (“Dissolution, Liquidation and
Winding-Up”), minus such Partner’s share of Partnership Minimum Gain or
Partner Nonrecourse Debt Minimum Gain, computed immediately prior to the
hypothetical sale of assets.

     

    (c) For
purposes of allocating Net Income under Section 1(b), the LTIP Units (i) shall
not be allocated Net Income due to the gain on a hypothetical sale until a sale
of all or substantially all of the assets occurs and (ii) shall be allocated Net
Income upon such sale so that the Capital Account balance related to each of the
LTIP Units is equal to (x) the number of Common Units into which the LTIP Unit
could be converted if fully vested, multiplied by (y) the value of such Common
Units at the time of conversion.

     

    2. Special Allocation of Net
Income and Net Losses and Items Thereof.

     

    Notwithstanding
Section 1, the following special allocations shall be made for each Fiscal Year
in the following order of priority:

     

    (a) Minimum Gain
Chargeback.  In the event there is a net decrease in
Partnership Minimum Gain during any Fiscal Year, the “minimum gain chargeback”
described in Treasury Regulations Section 1.704-2(f) and Treasury Regulations
Section 1.704-2(g) shall apply.

     

    (b) Partner Minimum Gain
Chargeback.  In the event there is a net decrease in Partner
Minimum Gain during any Fiscal Year, the “partner minimum gain chargeback”
described in Treasury Regulations Section 1.704-2(i)(4) shall
apply.

     

    (c) Qualified Income
Offset.  This Agreement incorporates the “qualified income
offset” set forth in Treasury Regulations Section 1.704-1(b)(2)(ii)(d) as if
those provisions were fully set forth in this Agreement.

    
      
        
        

      

      
        
        

        
          

        

      

    

    (d) Nonrecourse
Deductions.  The Nonrecourse Deductions of the Partnership (as
determined under Treasury Regulation § 1.704-2(c)) for any Fiscal Year or other
applicable period shall be allocated to the Partners in accordance with their
respective Percentage Interests.

     

    (e) Partner Nonrecourse
Deductions.  Any Partner Nonrecourse Deductions for any Fiscal
Year (or any other period in which it is necessary to make allocations of Net
Income or Net Losses) shall be specially allocated to the Partner who bears the
economic risk of losses with respect to the Partner Nonrecourse Debt to which
such Partner Nonrecourse Deductions are attributable in accordance with Treasury
Regulations Section 1.704-2(i)(1).

     

    (f) Code Section 754
Adjustment.  To the extent an adjustment to the adjusted tax
basis of any Partnership asset pursuant to Code Sections 734(b) or 743(b) is
required pursuant to Treasury Regulations Sections 1.704-1(b)(2)(iv)(m)(2) or
1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as a result of a distribution to a Partner in complete liquidation of
its interest in the Partnership, the amount of such adjustment to Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or losses (if the adjustment decreases such basis) and such
gain or losses shall be specifically allocated to the Partners in accordance
with their interests in the Partnership (in the event Treasury Regulations
Section 1.704-1(b)(2)(iv)(m)(2) applies) or to the Partners to whom such
distribution was made (in the event Treasury Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies).

     

    (g) Target Final
Balance.  The allocation provisions of this Agreement are
intended to produce final Capital Account balances that are at levels (“Target Final Balances”) that
permit liquidating distributions that are made in accordance with such final
Capital Account balances to be equal to the distributions that would occur under
Section 8.3 of the Partnership Agreement (“Distribution on Dissolution”),
if such liquidation proceeds were distributed pursuant to Section 6.2 of the
Partnership Agreement (“Distributions”).  To
the extent the allocation provisions of this Agreement would not produce the
Target Final Balances, the Partners agree to take such actions as are necessary
to amend such allocation provisions to produce such Target Final
Balances.  In furtherance of the foregoing, the Manager is expressly
authorized and directed to make such allocations of income, gain, losses and
deduction (including items of gross income, gain, losses and deduction) in the
year of liquidation of the Partnership so as to cause the Capital Accounts of
the Partners that determine the amounts that are distributed to the Partners
under Section 8.3 of the Partnership Agreement to be equal to the Target Final
Balance.

     

    (h) Preferred
Units.  For any Fiscal Year in which distributions are actually
made with respect to the Preferred Units or there are accrued but unpaid
distributions payable with respect to the Preferred Units, before other
allocations have been made pursuant to this Exhibit E, Net Operating Income
shall be allocated first to the holders of Preferred Units to the extent of such
actual or accrued but unpaid distributions. If there are insufficient items of
Net Operating Income to be allocated to the holders of the Preferred Units in an
amount equal to the actual or accrued but unpaid distributions, then and only
then shall Net Property Gain be allocated to such holders.

    
      
        
        

      

      
        
        

        
          

        

      

    

    (i) Certain Depreciation
Adjustments.  For any Fiscal Year in which book depreciation
exceeds tax depreciation with respect to any asset the holders of the Preferred
Units shall be allocated no book depreciation in excess of tax depreciation
allocated to them, and any book depreciation from such assets in excess of tax
depreciation from such asset shall be allocated to holders other than the
holders of Preferred Units.

     

    (j) Capital Accounts of Holders
of Series Z and Series Z-1 Incentive Units.  The Partners
recognize that the Percentage Interests of the Series Z Incentive Units and the
Series Z-1 Incentive Units (collectively, the “Incentive Units”) are likely to
change from year to year as a result of the Distribution Ratchet Percentage
applicable to the Series Z Incentive Units and the Series Z-1 Distribution
Ratchet Percentage applicable to the Series Z-1 Incentive Units (together, the
“Ratchet Changes”).   If there are Ratchet Changes in any taxable
year and, after all allocations have been made under the other subsections of
this Section 2 (other than subsection (i) below) and under Section 1(b) of this
Exhibit E, the Capital Accounts relating to the Incentive Units have not been
changed to reflect any changes in the Ratchet Percentages, then items of income,
gain, loss, or deduction shall be allocated to the holders of the Incentive
Units so as to reflect the Ratchet Changes in the Capital Account relating to
the Incentive Units.

     

    (k) Profits
Interests.  The Incentive Units and the LTIP Units are intended
to constitute “profits interests” within the meaning of Revenue Procedure 93-27,
1993-2 C.B. 343,  and Revenue Procedure 2001-43, 2001-2 C.B.
191.  For any Fiscal Year in which distributions are actually made to
holders of the Incentive Units and the LTIP Units, after all other allocations
have been made pursuant to this Exhibit E, if necessary to cause the Capital
Accounts relating to any Incentive Units or LTIP Units to be equal (immediately
before such distributions and so as to avoid negative Capital Accounts) to the
amounts distributed to the holders of the Incentive Units and the LTIP Units,
items of gross income shall be allocated to the holders of the Incentive Units
and the LTIP Units.  If there are insufficient items of gross income
to be allocated to the holders of the Incentive Units and the LTIP Units, then
such distributions shall, to the extent of such excess, be treated as
“guaranteed payments” within the meaning of Section 707(c) of the
Code.

     

    3. Other Allocation
Rules.

     

    (a) Net
Income, Net Losses and any other items of income, gain, losses or deduction
shall be allocated to the Partners pursuant to this Exhibit E as of the last day
of each Fiscal Year; provided that Net Income, Net Losses and such other items
shall also be allocated at such times as the Gross Asset Values of Partnership
property are adjusted pursuant to subparagraph (2) of the definition of Gross
Asset Value.

     

    (b) Each item
of the Partnership’s income, gain, losses, deduction and credit as determined
for federal income tax purposes shall be allocated among the Partners in the
same manner as such items are allocated for book purposes in accordance with the
provisions of this Exhibit E.

    
      
        
        

      

      
        
        

        
          

        

      

    

    (c) The
Partners are aware of the federal income tax consequences of the allocations
made by this Exhibit E and hereby agree to be bound by the provisions of this
Exhibit E in reporting their shares of Partnership income and losses for federal
income tax purposes.  Any elections or other decisions relating to
allocations shall be made by the Manager in a manner that reasonably reflects
the purpose and intention of this Agreement.

     

    (d) For
purposes of determining the Net Income, Net Losses, or any other items allocable
to any period, Net Income, Net Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the Manager
using any permissible method under Code Section 706 and the Treasury Regulations
thereunder.

     

    (e) The
Partnership shall allocate all “excess nonrecourse liabilities” within the
meaning of Treasury Regulations Section 1.752-3(a)(3) to the
Partners in accordance with their respective Percentage Interests.

     

    (f) To the
extent permitted by Treasury Regulations Section 1.704-2(h)(3), the Partners
shall endeavor not to treat distributions of cash as having been made from the
proceeds of a Nonrecourse Liability or a Partner Nonrecourse Debt.

     

    (g) Effective
immediately prior to the admission of any new Partners, the capital accounts of
the Partnership shall be adjusted to reflect each Partner’s share of the net
fair market value of the Partnership’s assets (a “book-up”).

     

    4. Code Section
704(c).

     

    (a) In
accordance with Code Section 704(c) and the Treasury Regulations thereunder,
income, gain, losses and deduction with respect to any property contributed to
the capital of the Partnership shall, solely for tax purposes, be allocated
among the Partners so as to take account of any variation between the adjusted
basis of such property to the Partnership for federal income tax purposes and
its initial Gross Asset Value using an allocation method pursuant to the
regulations under Code Section 704(c) as selected by the Manager.  In
the event the Gross Asset Value of any Partnership asset is adjusted pursuant to
the definition of Gross Asset Value, subsequent allocations of income, gain,
losses and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in the same manner as under Code Section
704(c) and the Treasury Regulations thereunder.  Allocations made
under Section 704(c) are solely for purposes of federal, state, and local income
taxes and shall not affect, or in any way be taken into account in computing,
any Partner’s Capital Account or share of Net Income, Net Losses, other items,
or distributions pursuant to any provisions of this
Agreement.ex_10-1.htm

    Exhibit
10.1

    

     

    FIFTEENTH
AMENDMENT TO

    FIRST
AMENDED AND RESTATED

    AGREEMENT
OF LIMITED PARTNERSHIP OF

    ESSEX
PORTFOLIO, L.P.

     

    Dated
as of February 26, 2008

     

    This
Fifteenth Amendment, dated as of the date shown above (the “Amendment”), is
executed by Essex Property Trust, Inc. a Maryland Corporation (the “Company”),
as the General Partner and on behalf of and as attorney in fact for the existing
Limited Partners of Essex Portfolio, L.P., a California limited partnership (the
“Partnership”), for the purpose of amending the First Amended and Restated
Agreement of Limited Partnership of Essex Portfolio, L.P., dated September 30,
1997 (the “Partnership Agreement”).

     

    RECITALS

     

    WHEREAS, the Partners wish to
restate and revise Exhibit E of the Partnership Agreement regarding
ALLOCATIONS;

     

    WHEREAS, Section 13.7(b)(iv)
of the Partnership Agreement allows the General Partner to make any amendment
that does not adversely affect the Limited Partners in any material respect; and
Section 13.7(b)(iii) of the Partnership Agreement allows the General Partner to
make amendments setting forth the rights, powers and duties of holders of
additional Partnership Units;

     

    WHEREAS, the proposed changes
in this Fifteenth Amendment relating to Exhibit E of the Partnership Agreement
do not adversely affect the Limited Partners in any material
respect;

     

    NOW THEREFORE, in
consideration of the mutual covenants and agreements herein contained and other
good and valuable consideration, the receipt, adequacy and sufficiency of which
are hereby acknowledged, the parties hereto, intending legally to be bound,
hereby amend, the Partnership Agreement as follows:

     

    1. Definitions.  Capitalized
terms used herein, unless otherwise defined herein, shall have the same meanings
as set forth in the Partnership Agreement.

     

    2. Amended
Definitions.  Section 1.1 of the Partnership Agreement is
hereby amended to delete the definition of “Adjusted Capital Account Deficit” in
its entirety.

     

    3. Restatement of Exhibit
E.  Exhibit E to the Partnership Agreement is amended and
restated by replacing such Exhibit E with Exhibit E attached to this
Amendment.

     

    4. Continuing Effect of
Partnership Agreement.  Except as modified herein, the
Partnership Agreement is hereby ratified and confirmed in its entirety and shall
remain and continue in full force and effect, provided, however, that to the
extent there shall be a conflict between the provisions of the Partnership
Agreement and this Amendment the provisions in this Amendment will prevail. All
references in any document to the Partnership Agreement shall mean the
Partnership Agreement, as amended hereby.

     

    5. Counterparts.  This
Amendment may be executed in any number of counterparts, each of which shall be
deemed to be an original and all of which shall constitute one and the same
agreement.  Facsimile signatures shall be deemed effective execution
of this Amendment and may be relied upon as such by the other
party.  In the event facsimile signatures are delivered, originals of
such signatures shall be delivered to the other party within three (3) business
days after execution.

    

     

    

     

    

     

    

     

    

     

    [Remainder
of Page Left Blank Intentionally]

    
      
         

      

      
         

        
          

        

      

    

    IN WITNESS WHEREOF, this
Agreement is hereby entered into among the undersigned Partners as of the date
first written above.

     

    

    GENERAL
PARTNER:

    

    ESSEX
PROPERTY TRUST, INC.,

    a
Maryland corporation as General Partner of Essex Portfolio, L.P. and on behalf
of and as attorney-in-fact for the existing Limited Partners

     

    

    By:         /S/ Michael T.
Dance           

    Name:                    Michael
T. Dance

    Title:                      Executive
Vice President and Chief
Financial Officer

    
      
         

      

      
         

        
          

        

      

    

    EXHIBIT
E

    ALLOCATIONS

     

    1. Allocations of Net Income
and Net Losses.

     

    (a) For each
Fiscal Year of the Partnership, after adjusting each Partner’s Capital Account
for all Capital Contributions and distributions during such Fiscal Year and all
special allocations pursuant to Section 2 with respect to such Fiscal Year, Net
Income and Net Losses for a Fiscal Year shall be allocated to the Partners as
set forth in this Section 1.

     

    (b) Net
Income and Net Losses shall be allocated to the Partners in such manner that the
Capital Account balance of each Partner shall, to the greatest extent possible,
be equal to the amount that would be distributed to such Partner, if (a) the
Partnership were to sell the assets of the Partnership for their Gross Asset
Values, (b) all Partnership liabilities were satisfied (limited with respect to
each nonrecourse liability to the Gross Asset Values of the assets securing such
liability), and (c) the Partnership were to dissolve pursuant to Article VIII of
the Partnership Agreement (“Dissolution, Liquidation and
Winding-Up”), minus such Partner’s share of Partnership Minimum Gain or
Partner Nonrecourse Debt Minimum Gain, computed immediately prior to the
hypothetical sale of assets.

     

    (c) For
purposes of allocating Net Income under Section 1(b), the LTIP Units (i) shall
not be allocated Net Income due to the gain on a hypothetical sale until a sale
of all or substantially all of the assets occurs and (ii) shall be allocated Net
Income upon such sale so that the Capital Account balance related to each of the
LTIP Units is equal to (x) the number of Common Units into which the LTIP Unit
could be converted if fully vested, multiplied by (y) the value of such Common
Units at the time of conversion.

     

    2. Special Allocation of Net
Income and Net Losses and Items Thereof.

     

    Notwithstanding
Section 1, the following special allocations shall be made for each Fiscal Year
in the following order of priority:

     

    (a) Minimum Gain
Chargeback.  In the event there is a net decrease in
Partnership Minimum Gain during any Fiscal Year, the “minimum gain chargeback”
described in Treasury Regulations Section 1.704-2(f) and Treasury Regulations
Section 1.704-2(g) shall apply.

     

    (b) Partner Minimum Gain
Chargeback.  In the event there is a net decrease in Partner
Minimum Gain during any Fiscal Year, the “partner minimum gain chargeback”
described in Treasury Regulations Section 1.704-2(i)(4) shall
apply.

     

    (c) Qualified Income
Offset.  This Agreement incorporates the “qualified income
offset” set forth in Treasury Regulations Section 1.704-1(b)(2)(ii)(d) as if
those provisions were fully set forth in this Agreement.

    
      
         

      

      
         

        
          

        

      

    

    (d) Nonrecourse
Deductions.  The Nonrecourse Deductions of the Partnership (as
determined under Treasury Regulation § 1.704-2(c)) for any Fiscal Year or other
applicable period shall be allocated to the Partners in accordance with their
respective Percentage Interests.

     

    (e) Partner Nonrecourse
Deductions.  Any Partner Nonrecourse Deductions for any Fiscal
Year (or any other period in which it is necessary to make allocations of Net
Income or Net Losses) shall be specially allocated to the Partner who bears the
economic risk of losses with respect to the Partner Nonrecourse Debt to which
such Partner Nonrecourse Deductions are attributable in accordance with Treasury
Regulations Section 1.704-2(i)(1).

     

    (f) Code Section 754
Adjustment.  To the extent an adjustment to the adjusted tax
basis of any Partnership asset pursuant to Code Sections 734(b) or 743(b) is
required pursuant to Treasury Regulations Sections 1.704-1(b)(2)(iv)(m)(2) or
1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as a result of a distribution to a Partner in complete liquidation of
its interest in the Partnership, the amount of such adjustment to Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or losses (if the adjustment decreases such basis) and such
gain or losses shall be specifically allocated to the Partners in accordance
with their interests in the Partnership (in the event Treasury Regulations
Section 1.704-1(b)(2)(iv)(m)(2) applies) or to the Partners to whom such
distribution was made (in the event Treasury Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies).

     

    (g) Target Final
Balance.  The allocation provisions of this Agreement are
intended to produce final Capital Account balances that are at levels (“Target Final Balances”) that
permit liquidating distributions that are made in accordance with such final
Capital Account balances to be equal to the distributions that would occur under
Section 8.3 of the Partnership Agreement (“Distribution on Dissolution”),
if such liquidation proceeds were distributed pursuant to Section 6.2 of the
Partnership Agreement (“Distributions”).  To
the extent the allocation provisions of this Agreement would not produce the
Target Final Balances, the Partners agree to take such actions as are necessary
to amend such allocation provisions to produce such Target Final
Balances.  In furtherance of the foregoing, the Manager is expressly
authorized and directed to make such allocations of income, gain, losses and
deduction (including items of gross income, gain, losses and deduction) in the
year of liquidation of the Partnership so as to cause the Capital Accounts of
the Partners that determine the amounts that are distributed to the Partners
under Section 8.3 of the Partnership Agreement to be equal to the Target Final
Balance.

     

    (h) Preferred
Units.  For any Fiscal Year in which distributions are actually
made with respect to the Preferred Units or there are accrued but unpaid
distributions payable with respect to the Preferred Units, before other
allocations have been made pursuant to this Exhibit E, Net Operating Income
shall be allocated first to the holders of Preferred Units to the extent of such
actual or accrued but unpaid distributions. If there are insufficient items of
Net Operating Income to be allocated to the holders of the Preferred Units in an
amount equal to the actual or accrued but unpaid distributions, then and only
then shall Net Property Gain be allocated to such holders.

    
      
         

      

      
         

        
          

        

      

    

    (i) Certain Depreciation
Adjustments.  For any Fiscal Year in which book depreciation
exceeds tax depreciation with respect to any asset the holders of the Preferred
Units shall be allocated no book depreciation in excess of tax depreciation
allocated to them, and any book depreciation from such assets in excess of tax
depreciation from such asset shall be allocated to holders other than the
holders of Preferred Units.

     

    (j) Capital Accounts of Holders
of Series Z and Series Z-1 Incentive Units.  The Partners
recognize that the Percentage Interests of the Series Z Incentive Units and the
Series Z-1 Incentive Units (collectively, the “Incentive Units”) are likely to
change from year to year as a result of the Distribution Ratchet Percentage
applicable to the Series Z Incentive Units and the Series Z-1 Distribution
Ratchet Percentage applicable to the Series Z-1 Incentive Units (together, the
“Ratchet Changes”).   If there are Ratchet Changes in any taxable
year and, after all allocations have been made under the other subsections of
this Section 2 (other than subsection (i) below) and under Section 1(b) of this
Exhibit E, the Capital Accounts relating to the Incentive Units have not been
changed to reflect any changes in the Ratchet Percentages, then items of income,
gain, loss, or deduction shall be allocated to the holders of the Incentive
Units so as to reflect the Ratchet Changes in the Capital Account relating to
the Incentive Units.

     

    (k) Profits
Interests.  The Incentive Units and the LTIP Units are intended
to constitute “profits interests” within the meaning of Revenue Procedure 93-27,
1993-2 C.B. 343,  and Revenue Procedure 2001-43, 2001-2 C.B.
191.  For any Fiscal Year in which distributions are actually made to
holders of the Incentive Units and the LTIP Units, after all other allocations
have been made pursuant to this Exhibit E, if necessary to cause the Capital
Accounts relating to any Incentive Units or LTIP Units to be equal (immediately
before such distributions and so as to avoid negative Capital Accounts) to the
amounts distributed to the holders of the Incentive Units and the LTIP Units,
items of gross income shall be allocated to the holders of the Incentive Units
and the LTIP Units.  If there are insufficient items of gross income
to be allocated to the holders of the Incentive Units and the LTIP Units, then
such distributions shall, to the extent of such excess, be treated as
“guaranteed payments” within the meaning of Section 707(c) of the
Code.

    
      
         

      

      
         

        
          

        

      

    

    3. Other Allocation
Rules.

     

    (a) Net
Income, Net Losses and any other items of income, gain, losses or deduction
shall be allocated to the Partners pursuant to this Exhibit E as of the last day
of each Fiscal Year; provided that Net Income, Net Losses and such other items
shall also be allocated at such times as the Gross Asset Values of Partnership
property are adjusted pursuant to subparagraph (2) of the definition of Gross
Asset Value.

     

    (b) Each item
of the Partnership’s income, gain, losses, deduction and credit as determined
for federal income tax purposes shall be allocated among the Partners in the
same manner as such items are allocated for book purposes in accordance with the
provisions of this Exhibit E.

    
      
         

      

      
         

        
          

        

      

    

    (c) The
Partners are aware of the federal income tax consequences of the allocations
made by this Exhibit E and hereby agree to be bound by the provisions of this
Exhibit E in reporting their shares of Partnership income and losses for federal
income tax purposes.  Any elections or other decisions relating to
allocations shall be made by the Manager in a manner that reasonably reflects
the purpose and intention of this Agreement.

     

    (d) For
purposes of determining the Net Income, Net Losses, or any other items allocable
to any period, Net Income, Net Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the Manager
using any permissible method under Code Section 706 and the Treasury Regulations
thereunder.

     

    (e) The
Partnership shall allocate all “excess nonrecourse liabilities” within the
meaning of Treasury Regulations Section 1.752-3(a)(3) to the
Partners in accordance with their respective Percentage Interests.

     

    (f) To the
extent permitted by Treasury Regulations Section 1.704-2(h)(3), the Partners
shall endeavor not to treat distributions of cash as having been made from the
proceeds of a Nonrecourse Liability or a Partner Nonrecourse Debt.

     

    (g) Effective
immediately prior to the admission of any new Partners, the capital accounts of
the Partnership shall be adjusted to reflect each Partner’s share of the net
fair market value of the Partnership’s assets (a “book-up”).

     

    4. Code Section
704(c).

     

    (a) In
accordance with Code Section 704(c) and the Treasury Regulations thereunder,
income, gain, losses and deduction with respect to any property contributed to
the capital of the Partnership shall, solely for tax purposes, be allocated
among the Partners so as to take account of any variation between the adjusted
basis of such property to the Partnership for federal income tax purposes and
its initial Gross Asset Value using an allocation method pursuant to the
regulations under Code Section 704(c) as selected by the Manager.  In
the event the Gross Asset Value of any Partnership asset is adjusted pursuant to
the definition of Gross Asset Value, subsequent allocations of income, gain,
losses and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in the same manner as under Code Section
704(c) and the Treasury Regulations thereunder.  Allocations made
under Section 704(c) are solely for purposes of federal, state, and local income
taxes and shall not affect, or in any way be taken into account in computing,
any Partner’s Capital Account or share of Net Income, Net Losses, other items,
or distributions pursuant to any provisions of this
Agreement.

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