Agreement Of Ltd Partnership

AGREEMENT OF LIMITED PARTNERSHIP


OF


EOP OPERATING LIMITED PARTNERSHIP


_________________________________________


Dated as of _________, 1997


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TABLE OF CONTENTS


ARTICLE I DEFINED TERMS ................................................ 1 ARTICLE II ORGANIZATIONAL MATTERS ...................................... 14
Section 2.1 Organization ............................................ 14
Section 2.2 Name .................................................... 14
Section 2.3 Registered Office and Agent; Principal Office ........... 15
Section 2.4 Term .................................................... 15 ARTICLE III PURPOSE .................................................... 15
Section 3.1 Purpose and Business .................................... 15
Section 3.2 Powers .................................................. 15 ARTICLE IV CAPITAL CONTRIBUTIONS AND ISSUANCES OF PARTNERSHIP INTERESTS 16
Section 4.1 Capital Contributions of the Partners ................... 16
Section 4.2 Issuances of Partnership Interests ...................... 16
Section 4.3 No Preemptive Rights .................................... 18
Section 4.4 Other Contribution Provisions ........................... 18
Section 4.5 No Interest on Capital .................................. 18 ARTICLE V DISTRIBUTIONS ................................................ 19
Section 5.1 Requirement and Characterization of Distributions ....... 19
Section 5.2 Amounts Withheld ........................................ 22
Section 5.3 Distributions Upon Liquidation .......................... 22
Section 5.4 Revisions to Reflect Issuance of Partnership Interests .. 22 ARTICLE VI ALLOCATIONS ................................................. 22
Section 6.1 Allocations For Capital Account Purposes ................ 22
Section 6.2 Revisions to Allocations to Reflect Issuance of Partnership
Interests.................................................... 24 ARTICLE VII MANAGEMENT AND OPERATIONS OF BUSINESS ...................... 24
Section 7.1 Management .............................................. 24
Section 7.2 Certificate of Limited Partnership ...................... 28
Section 7.3 Title to Partnership Assets ............................. 29
Section 7.4 Reimbursement of the General Partners ................... 29
Section 7.5 Outside Activities of the General Partners; Relationship of
Shares to Partnership Units; Funding Debt..................... 31
Section 7.6 Transactions with Affiliates ............................. 33
Section 7.7 Indemnification .......................................... 33
Section 7.8 Liability of the General Partners ........................ 35
Section 7.9 Other Matters Concerning the General Partners ............ 36
Section 7.10 Reliance by Third Parties ............................... 38
Section 7.11 Restrictions on General Partners' Authority ............. 38
Section 7.12 Loans by Third Parties .................................. 39
Section 7.13 Actions of the General Partners ......................... 40 ARTICLE VIII RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS ................. 40
Section 8.1 Limitation of Liability .................................. 40
Section 8.2 Management of Business ................................... 40
Section 8.3 Outside Activities of Limited Partners ................... 40
Section 8.4 Return of Capital ........................................ 41


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Section 8.5 Rights of Limited Partners Relating to the Partnership ... 41
Section 8.6 Redemption Right ......................................... 42 ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS ....................... 45
Section 9.1 Records and Accounting ................................... 45
Section 9.2 Fiscal Year .............................................. 45
Section 9.3 Reports .................................................. 46 ARTICLE X TAX MATTERS ................................................... 46
Section 10.1 Preparation of Tax Returns .............................. 46
Section 10.2 Tax Elections ........................................... 46
Section 10.3 Tax Matters Partner ..................................... 47
Section 10.4 Organizational Expenses ................................. 48
Section 10.5 Withholding ............................................. 48 ARTICLE XI TRANSFERS AND WITHDRAWALS .................................... 49
Section 11.1 Transfer ................................................ 49
Section 11.2 Transfers of Partnership Interests of General Partners .. 49
Section 11.3 Limited Partners' Rights to Transfer .................... 50
Section 11.4 Substituted Limited Partners ............................ 53
Section 11.5 Assignees ............................................... 53
Section 11.6 General Provisions ...................................... 54 ARTICLE XII ADMISSION OF PARTNERS ....................................... 56
Section 12.1 Admission of a Successor General Partner ................ 56
Section 12.2 Admission of Additional Limited Partners ................ 56
Section 12.3 Amendment of Agreement and Certificate of Limited
Partnership.................................................. 57 ARTICLE XIII DISSOLUTION AND LIQUIDATION ................................ 57
Section 13.1 Dissolution ............................................. 57
Section 13.2 Winding Up .............................................. 58
Section 13.3 Compliance with Timing Requirements of Regulations ...... 59
Section 13.4 Deemed Distribution and Recontribution .................. 60
Section 13.5 Rights of Limited Partners .............................. 60
Section 13.6 Notice of Dissolution ................................... 60
Section 13.7 Cancellation of Certificate of Limited Partnership ...... 61
Section 13.8 Reasonable Time for Winding Up .......................... 61
Section 13.9 Waiver of Partition ..................................... 61
Section 13.10 Liability of Liquidator ................................ 61 ARTICLE XIV AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS ................ 61
Section 14.1 Amendments .............................................. 61
Section 14.2 Meetings of the Partners ................................ 63 ARTICLE XV GENERAL PROVISIONS ........................................... 64
Section 15.1 Addresses and Notice .................................... 64
Section 15.2 Titles and Captions ..................................... 64
Section 15.3 Pronouns and Plurals .................................... 64
Section 15.4 Further Action .......................................... 64
Section 15.5 Binding Effect .......................................... 64
Section 15.6 Creditors ............................................... 65
Section 15.7 Waiver .................................................. 65


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Section 15.8 Counterparts ............................................ 65
Section 15.9 Applicable Law .......................................... 65
Section 15.10 Invalidity of Provisions ............................... 65
Section 15.11 Power of Attorney ...................................... 65
Section 15.12 Entire Agreement ....................................... 67
Section 15.13 No Rights as Shareholders .............................. 67
Section 15.14 Limitation to Preserve REIT Status ..................... 67


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EXHIBIT A
PARTNERS AND PARTNERSHIP INTERESTS


EXHIBIT B
CAPITAL ACCOUNT MAINTENANCE


EXHIBIT C
SPECIAL ALLOCATION RULES


EXHIBIT D
NOTICE OF REDEMPTION


EXHIBIT E
VALUE OF CONTRIBUTED PROPERTY


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AGREEMENT OF LIMITED PARTNERSHIP
OF
EOP OPERATING LIMITED PARTNERSHIP


THIS AGREEMENT OF LIMITED PARTNERSHIP, dated as of _______________, 1997, is entered into by and among Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership and Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership II, each an Illinois limited partnership, and Equity Office Properties Trust, a Maryland real estate investment trust, as the General Partners, and the Persons whose names are set forth on Exhibit A hereto as Limited Partners, together with any other Persons who become Partners in the Partnership as provided herein.


NOW, THEREFORE, in consideration of the mutual covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree to form the Partnership as a limited partnership under the Delaware Revised Uniform Limited Partnership Act, as amended from time to time, as follows:


ARTICLE I


DEFINED TERMS


The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.


"Act" means the Delaware Revised Uniform Limited Partnership Act, as it may be amended from time to time, and any successor to such statute.


"Additional Limited Partner" means a Person admitted to the Partnership as a Limited Partner pursuant to Section 12.2 hereof and who is shown as such on the books and records of the Partnership.


"Adjusted Capital Account" 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 1.704-1(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.


"Adjusted Capital Account Deficit" means, with respect to any Partner, the deficit balance, if any, in such Partner's Adjusted Capital Account as of the end of the relevant Partnership Year.


"Adjusted Property" means any property the Carrying Value of which has been adjusted pursuant to Exhibit B.


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"Adjustment Date" has the meaning set forth in Section 4.2.B.


"Affiliate" means, with respect to any Person, (i) any Person directly or indirectly controlling, controlled by or under common control with such Person, (ii) any Person owning or controlling ten percent (10%) or more of the outstanding voting interests of such Person, (iii) any Person of which such Person owns or controls ten percent (10%) or more of the voting interests or (iv) any officer, director, general partner or trustee of such Person or any Person referred to in clauses (i), (ii), and (iii) above. For purposes of this definition, "control," when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing.

"Agreed Value" means (i) in the case of any Contributed Property contributed to the Partnership as part of or in connection with the Consolidation, the amount set forth on Exhibit E as the Agreed Value of such Property; (ii) in the case of any other Contributed Property, the 704(c) Value of such property as of the time of its contribution to the Partnership, reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed; and (iii) in the case of any property distributed to a Partner by the Partnership, the Partnership's Carrying Value of such property at the time such property is distributed, reduced by any indebtedness either assumed by such Partner upon such distribution or to which such property is subject at the time of distribution as determined under Section 752 of the Code and the regulations thereunder.


"Agreement" means this Agreement of Limited Partnership, as it may be amended, supplemented or restated from time to time.


"Assignee" means a Person to whom one or more Partnership Units have been transferred in a manner permitted under this Agreement, but who has not become a Substituted Limited Partner, and who has the rights set forth in Section 11.5.


"Available Cash" means, with respect to any period for which such calculation is being made:


(a) all cash revenues and funds received by the Partnership from whatever source (excluding the proceeds of any Capital Contribution) plus the amount of any reduction (including, without limitation, a reduction resulting because the Managing General Partner determines such amounts are no longer necessary) in reserves of the Partnership, which reserves are referred to in clause (b)(iv) below;


(b) less the sum of the following (except to the extent made with the proceeds of any Capital Contribution):


(i) all interest, principal and other debt payments made during such period by the Partnership,


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(ii) all cash expenditures (including capital expenditures) made by the Partnership during such period,


(iii) investments in any entity (including loans made thereto) to the extent that such investments are permitted under this Agreement and are not otherwise described in clauses (b)(i) or (ii), and


(iv) the amount of any increase in reserves established during such period which the Managing General Partner determines is necessary or appropriate in its sole and absolute discretion.


Notwithstanding the foregoing, Available Cash shall not include any cash received or reductions in reserves, or take into account any disbursements made or reserves established, after commencement of the dissolution and liquidation of the Partnership.


"Book-Tax Disparities" means, with respect to any item of Contributed Property or Adjusted Property, as of the date of any determination, the difference between the Carrying Value of such Contributed Property or Adjusted Property and the adjusted basis thereof for federal income tax purposes as of such date. A Partner's share of the Partnership's Book-Tax Disparities in all of its Contributed Property and Adjusted Property will be reflected by the difference between such Partner's Capital Account balance as maintained pursuant to Exhibit B and the hypothetical balance of such Partner's Capital Account computed as if it had been maintained strictly in accordance with federal income tax accounting principles.


"Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in Chicago, Illinois are authorized or required by law to close.


"Capital Account" means the Capital Account maintained for a Partner pursuant to Exhibit B.


"Capital Contribution" means, with respect to any Partner, any cash, cash equivalents or the Agreed Value of Contributed Property which such Partner contributes or is deemed to contribute to the Partnership pursuant to Section 4.1 or 4.2.


"Carrying Value" means (i) with respect to a Contributed Property or Adjusted Property, the 704(c) Value of such property reduced (but not below zero) by all Depreciation with respect to such Contributed Property or Adjusted Property, as the case may be, charged to the Partners' Capital Accounts and (ii) with respect to any other Partnership property, the adjusted basis of such property for federal income tax purposes, all as of the time of determination. The Carrying Value of any property shall be adjusted from time to time in accordance with Exhibit B, and to reflect changes, additions (including capital improvements thereto) or other adjustments to the Carrying Value for dispositions and acquisitions of Partnership properties, as deemed appropriate by the Managing General Partner.


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"Cash Amount" means an amount of cash equal to the Value on the Valuation Date of the Shares Amount.


"Certificate" means the Certificate of Limited Partnership relating to the Partnership filed in the office of the Delaware Secretary of State, as amended from time to time in accordance with the terms hereof and the Act.


"Class A" has the meaning set forth in Section 5.1.C.


"Class A Share" has the meaning set forth in Section 5.1.C.


"Class A Unit" means any Partnership Unit that is not specifically designated by the Managing General Partner as being of another specified class of Partnership Units.


"Class B" has the meaning set forth in Section 5.1.C.


"Class B Share" has the meaning set forth in Section 5.1.C.


"Class B Unit" means a Partnership Unit that is specifically designated by the Managing General Partner as being a Class B Unit.


"Code" means the Internal Revenue Code of 1986, as amended and in effect from time to time, as interpreted by the applicable regulations thereunder. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law.


"Consent" means the consent or approval of a proposed action by a Partner given in accordance with Section 14.2.


"Consent of the Outside Limited Partners" means the Consent of Limited Partners (excluding for this purpose any Limited Partnership Interests held by the Managing General Partner, any of the Opportunity Partnerships, any other Person of which the Managing General Partner owns or controls more than fifty percent (50%) of the voting interests and any Person directly or indirectly owning or controlling more than fifty percent (50%) of the outstanding voting interests of the Managing General Partner) holding Percentage Interests that are greater than fifty percent (50%) of the aggregate Percentage Interest of all Limited Partners who are not excluded for the purposes hereof.


"Consolidation" means (i) the transactions whereby the Partnership will acquire interests in certain office properties owned by the Opportunity Partnerships and certain asset management and property management businesses which provide services to those properties and to other office properties, in exchange for Partnership Units, and (ii) the merger of the ZML Investors, Inc., ZML Investors II, Inc., Zell/Merrill Lynch Real Estate Opportunity Partners III Trust and Zell/Merrill Lynch Real Estate Opportunity Partners IV Trust with and into Equity Office Holdings Trust, all as described in a Joint Proxy Statement/Offering Memorandum dated March __, 1997.


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"Contributed Property" means each property or other asset contributed to the Partnership, in such form as may be permitted by the Act, but excluding cash contributed or deemed contributed to the Partnership. Once the Carrying Value of a Contributed Property is adjusted pursuant to Exhibit B, such property shall no longer constitute a Contributed Property for purposes of Exhibit B, but shall be deemed an Adjusted Property for such purposes.


"Conversion Factor" means 1.0; provided that, if the General Partner Entity (i) declares or pays a dividend on its outstanding Shares in Shares or makes a distribution to all holders of its outstanding Shares in Shares, (ii) subdivides its outstanding Shares or (iii) combines its outstanding Shares into a smaller number of Shares, the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the numerator of which shall be the number of 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 Shares (determined without the above assumption) issued and outstanding on the record date for such dividend, distribution, subdivision or combination; and provided further that if an entity shall cease to be the General Partner Entity (the "Predecessor Entity") and another entity shall become the General Partner Entity (the "Successor Entity"), the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the numerator of which is the Value of one Share of the Predecessor Entity, determined as of the date when the Successor Entity becomes the General Partner Entity, and the denominator of which is the Value of one Share of the Successor Entity, determined as of that same date. (For purposes of the second proviso in the preceding sentence, if any shareholders of the Predecessor Entity will receive consideration in connection with the transaction in which the Successor Entity becomes the General Partner Entity, the numerator in the fraction described above for determining the adjustment to the Conversion Factor (that is, the Value of one Share of the Predecessor Entity) shall be the sum of the greatest amount of cash and the fair market value (as determined in good faith by the Managing General Partner) of any securities and other consideration that the holder of one Share in the Predecessor Entity could have received in such transaction (determined without regard to any provisions governing fractional shares).) Any adjustment to the Conversion Factor shall become effective immediately after the effective date of the event retroactive to the record date, if any, for the event giving rise thereto, it being intended that (x) adjustments to the Conversion Factor are to be made to avoid unintended dilution or anti-dilution as a result of transactions in which Shares are issued, redeemed or exchanged without a corresponding issuance, redemption or exchange of Partnership Units and (y) if a Specified Redemption Date shall fall between the record date and the effective date of any event of the type described above, that the Conversion Factor applicable to such redemption shall be adjusted to take into account such event.


"Convertible Funding Debt" has the meaning set forth in Section 7.5.F.


"Debt" means, as to any Person, as of any date of determination, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, (ii) all amounts owed by such Person to banks or other Persons in respect of reimbursement obligations under letters of credit, surety bonds and other


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similar instruments guaranteeing payment or other performance of obligations by such Person, (iii) all indebtedness for borrowed money or for the deferred purchase price of property or services secured by any lien on any property owned by such Person, to the extent attributable to such Person's interest in such property, even though such Person has not assumed or become liable for the payment thereof, and (iv) obligations of such Person incurred in connection with entering into a lease which, in accordance with generally accepted accounting principles, should be capitalized.

"Declaration of Trust" means the Declaration of Trust of Equity Office Properties Trust filed in the State of Maryland on October __1996, as amended or restated from time to time.


"Deemed Partnership Interest Value" means, as of any date with respect to any class of Partnership Interests, the Deemed Value of the Partnership Interest of such class multiplied by the applicable Partner's Percentage Interest of such class.


"Deemed Value of the Partnership Interest" means, as of any date with respect to any class of Partnership Interests, (a) if the common shares of beneficial interest (or other comparable equity interests) of the General Partner Entity are Publicly Traded (i) the total number of shares of beneficial interest (or other comparable equity interest) of the General Partner Entity corresponding to such class of Partnership Interest (as provided for in Section 4.2.B) issued and outstanding as of the close of business on such date (excluding any treasury shares) multiplied by the Value of a share of such beneficial interest (or other comparable equity interest) on such date divided by (ii) the Percentage Interest of the Managing General Partner in such class of Partnership Interests on such date, and (b) otherwise, the aggregate Value of such class of Partnership Interests determined as set forth in the fourth and fifth sentences of the definition of Value.


"Depreciation" means, for each fiscal year, an amount equal to the federal income tax depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such year, except that if the Carrying Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Carrying Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such year bears to such beginning adjusted tax basis; provided, however, that if the federal income tax depreciation, amortization, or other cost recovery deduction for such year is zero, Depreciation shall be determined with reference to such beginning Carrying Value using any reasonable method selected by the Managing General Partner.


"Distribution Period" has the meaning set forth in Section 5.1.C.


"Effective Date" means the date of the closing of the Consolidation.


"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.


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"ERISA Plan" means an "employee benefit plan" as that term is defined in 29 U.S.C. Section 1002(3), and which is not exempt from regulation under ERISA by virtue of 29 U.S.C. Section 1003(b).


"Exchange Act" means the Securities Exchange Act of 1934, as amended.


"Funding Debt" means the incurrence of any Debt by or on behalf of the General Partner Entity for the purpose of providing funds to the Partnership.


"General Partner" means Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership, Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership II, or the Managing General Partner or any of their successors as a general partner of the Partnership, and "General Partners" means the Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership, Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership II, and the Managing General Partner or their successors as general partners.


"General Partner Entity" means the Managing General Partner; provided, however, that if (i) the common shares of beneficial interest (or other comparable equity interests) of the Managing General Partner are at any time not Publicly Traded and (ii) the common shares of beneficial interest (or other comparable equity interests) of an entity that owns, directly or indirectly, fifty percent (50%) or more of the common shares of beneficial interest (or other compa ...