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2nd Amended & Restated Agreement Of Partnership

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SECOND AMENDED AND RESTATED


AGREEMENT OF LIMITED PARTNERSHIP


OF


AMB PROPERTY, L.P.


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2
TABLE OF CONTENTS


PAGE
---- ARTICLE 1. DEFINED TERMS AND RULES OF CONSTRUCTION............................... 2
Section 1.1. Definitions............................................ 2
Section 1.2. Rules of Construction..................................17


ARTICLE 2. ORGANIZATIONAL MATTERS................................................18
Section 2.1. Organization...........................................18
Section 2.2. Name...................................................18
Section 2.3. Resident Agent; Principal Office.......................18
Section 2.4. Power of Attorney......................................18
Section 2.5. Term...................................................20
Section 2.6. Number of Partners.....................................20


ARTICLE 3. PURPOSE...............................................................20
Section 3.1. Purpose and Business...................................20
Section 3.2. Powers.................................................20
Section 3.3. Partnership Only for Purposes Specified................21
Section 3.4. Representations and Warranties by the Parties..........21
Section 3.5. Certain ERISA Matters..................................23


ARTICLE 4. CAPITAL CONTRIBUTIONS.................................................23
Section 4.1. Capital Contributions of the Partners..................23
Section 4.2. Loans by Third Parties.................................23
Section 4.3. Additional Funding and Capital Contributions...........23
Section 4.4. Stock Incentive Plan...................................26
Section 4.5. No Preemptive Rights...................................26
Section 4.6. Other Contribution Provisions..........................26


ARTICLE 5. DISTRIBUTIONS.........................................................27
Section 5.1. Requirement and Characterization of Distributions......27
Section 5.2. Distributions in Kind..................................27
Section 5.3. Distributions Upon Liquidation.........................27
Section 5.4. Distributions to Reflect Issuance of Additional
Partnership Interests................................28
Section 5.5 Character of PLP Distributions.........................28


ARTICLE 6. ALLOCATIONS...........................................................28
Section 6.1. Timing and Amount of Allocations of Net Income and
Net Loss.............................................28
Section 6.2. General Allocations....................................28
Section 6.3. Additional Allocation Provisions.......................30
Section 6.4. Tax Allocations........................................33


ARTICLE 7. MANAGEMENT AND OPERATIONS OF BUSINESS.................................33
Section 7.1. Management.............................................33
Section 7.2. Certificate of Limited Partnership.....................37
Section 7.3. Restrictions on General Partner's Authority............37


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Section 7.4. Reimbursement of the General Partner..................40
Section 7.5. Outside Activities of the General Partner.............40
Section 7.6. Contracts with Affiliates.............................41
Section 7.7. Indemnification.......................................42
Section 7.8. Liability of the General Partner......................44
Section 7.9. Other Matters Concerning the General Partner..........44
Section 7.10. Title to Partnership Assets..........................45
Section 7.11. Reliance by Third Parties............................45


ARTICLE 8. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS............................46
Section 8.1. Limitation of Liability...............................46
Section 8.2. Management of Business................................46
Section 8.3. Outside Activities of Limited Partners................46
Section 8.4. Return of Capital.....................................47
Section 8.5. Rights of Limited Partners Relating to the
Partnership.........................................47
Section 8.6. Limited Partner Redemption Rights.....................48


ARTICLE 9. BOOKS, RECORDS, ACCOUNTING AND REPORTS................................50
Section 9.1. Records and Accounting................................50
Section 9.2. Fiscal Year...........................................50
Section 9.3. Reports...............................................50
Section 9.4. Nondisclosure of Certain Information..................51


ARTICLE 10. TAX MATTERS..........................................................51
Section 10.1. Preparation of Tax Returns...........................51
Section 10.2. Tax Elections........................................51
Section 10.3. Tax Matters Partner..................................51
Section 10.4. Organizational Expenses..............................53
Section 10.5. Withholding..........................................53


ARTICLE 11. TRANSFERS AND WITHDRAWALS............................................54
Section 11.1. Transfer.............................................54
Section 11.2. Transfer of General Partner's Partnership Interest...54
Section 11.3. Limited Partners' Rights to Transfer.................56
Section 11.4. Substituted Limited Partners.........................58
Section 11.5. Assignees............................................58
Section 11.6. General Provisions...................................59


ARTICLE 12. ADMISSION OF PARTNERS................................................61
Section 12.1. Admission of Successor General Partner...............61
Section 12.2. Admission of Additional Limited Partners.............61
Section 12.3. Amendment of Agreement and Certificate of Limited
Partnership........................................62


ARTICLE 13. DISSOLUTION AND LIQUIDATION..........................................62
Section 13.1. Dissolution..........................................62
Section 13.2. Winding Up...........................................63
Section 13.3. Compliance with Timing Requirements of Regulations...64


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Section 13.4. Deemed Distribution and Recontribution...............64
Section 13.5. Rights of Limited Partners...........................65
Section 13.6. Notice of Dissolution................................65
Section 13.7. Cancellation of Certificate of Limited Partnership...65
Section 13.8. Reasonable Time for Winding-Up.......................65
Section 13.9. Waiver of Partition..................................65


ARTICLE 14. AMENDMENT OF PARTNERSHIP AGREEMENT; CONSENTS.........................66
Section 14.1. Amendments...........................................66
Section 14.2. Action by the Partners...............................66


ARTICLE 15. GENERAL PROVISIONS...................................................67
Section 15.1. Addresses and Notice.................................67
Section 15.2. Titles and Captions..................................67
Section 15.3. Pronouns and Plurals.................................67
Section 15.4. Further Action.......................................67
Section 15.5. Binding Effect.......................................67
Section 15.6. Creditors............................................68
Section 15.7. Waiver...............................................68
Section 15.8. Counterparts.........................................68
Section 15.9. Applicable Law.......................................68
Section 15.10. Invalidity of Provisions............................68
Section 15.11. Limitation to Preserve REIT Status..................68
Section 15.12. Entire Agreement....................................69
Section 15.13. No Rights as Stockholders...........................69


ARTICLE 16. SERIES A PREFERRED UNITS.............................................69
Section 16.1. Designation and Number...............................69
Section 16.2. Distributions........................................70
Section 16.3. Liquidation Proceeds.................................71
Section 16.4. Redemption...........................................71
Section 16.5. Voting Rights........................................73
Section 16.6. Transfer Restrictions................................73
Section 16.7. No Conversion Rights.................................73
Section 16.8. No Sinking Fund......................................73


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SECOND AMENDED AND RESTATED


AGREEMENT OF LIMITED PARTNERSHIP


OF


AMB PROPERTY, L.P.


THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as of July __, 1998, is entered into by and among AMB Property Corporation, a Maryland corporation (the "Company"), as the General Partner, and the Persons whose names are set forth on Exhibit A attached hereto, as the Limited Partners (the "Existing Limited Partners"), together with any other Persons who become Partners in the Partnership as provided herein.


WHEREAS, the General Partner and the Existing Limited Partners are parties to that certain Amended and Restated Agreement of Limited Partnership, dated November 21, 1997, as amended;


WHEREAS, in connection with the public offering and sale of Series A Cumulative Redeemable Preferred Stock, par value $.01 per share (the "Series A Preferred Shares") of the General Partner, the General Partner deems it to be in the best interest of the Partnership to authorize for issuance Series A Cumulative Redeemable Preferred Units of the Partnership (the "Series A Preferred Units");


WHEREAS, pursuant to Section 4.3.C of the Partnership Agreement, the General Partner may, in its sole and absolute discretion subject to Delaware law, in connection with any Capital Contribution, issue additional Partnership Interests in one or more classes, or one or more series of any such classes, with such designations, preferences and relative, participating, optional or other special rights, powers, and duties, including rights, powers, and duties senior to then existing Limited Partnership Interests; and


WHEREAS, on the date hereof, the General Partner, in connection with the public offering of its Series A Preferred Stock, has made a Capital Contribution of cash to the Partnership in exchange for which the General Partner shall receive Series A Preferred Units in the Partnership, in each case in the amounts set forth in Exhibit A, with the rights, preferences, exchange and other rights, voting powers and restrictions, limitations as to distributions, qualifications and terms and conditions as set forth herein.


NOW, THEREFORE, for good and adequate consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:


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ARTICLE 1.
DEFINED TERMS AND RULES OF CONSTRUCTION


Section 1.1. Definitions


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


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


"Additional Funds" shall have the meaning set forth in Section 4.3.A.


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


"Adjusted Capital Account Deficit" means, with respect to any Partner, the deficit balance, if any, in such Partner's Capital Account as of the end of the relevant fiscal year, after giving effect to the following adjustments:


(i) decrease such deficit by any amounts which such
Partner is obligated to restore pursuant to this
Agreement or is deemed to be obligated to restore
pursuant to Regulations Section 1.704-1(b)(2)(ii)(c)
or the penultimate sentence of each of Regulations
Sections 1.704-2(i)(5) and 1.704-2(g); and


(ii) increase such deficit by the items described in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and
(6).


The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.


"Adjustment Date" shall have the meaning set forth in Section 4.3.E.


"Affiliate" means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with such Person.


"Agreed Value" means (i) in the case of any Contributed Property set forth in Exhibit A and as of the time of its contribution to the Partnership, the Agreed Value of such property as set forth in Exhibit A; (ii) in the case of any Contributed Property not set forth in Exhibit A and as of the time of its contribution to the Partnership, the fair market value of such property or other consideration as determined by the General Partner, reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed; and (iii) in the case of any property distributed to a Partner by the Partnership, the fair market value of such property as determined by the General Partner at the time such property is distributed, reduced by any indebtedness either assumed by such Partner upon such


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distribution or to which such property is subject at the time of the distribution as determined under Section 752 of the Code and the Regulations thereunder.


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


"Appraisal" means with respect to any assets, the opinion of an independent third party experienced in the valuation of similar assets, selected by the General Partner in good faith; such opinion may be in the form of an opinion by such independent third party that the value for such asset as set by the General Partner is fair, from a financial point of view, to the Partnership.


"Assignee" means a Person to whom one or more 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, (i) the sum of:


(a) the Partnership's Net Income or Net Loss (as the
case may be) for such period,


(b) Depreciation and all other noncash charges
deducted in determining Net Income or Net Loss for such
period,


(c) the amount of any reduction in reserves of the
Partnership referred to in clause (ii)(f) below (including,
without limitation, reductions resulting because the General
Partner determines such amounts are no longer necessary),


(d) the excess of the net proceeds from the sale,
exchange, disposition, or refinancing of Partnership property
for such period over the gain (or loss, as the case may be)
recognized from any such sale, exchange, disposition, or
refinancing during such period (excluding Terminating Capital
Transactions), and


(e) all other cash received by the Partnership for
such period that was not included in determining Net Income or
Net Loss for such period;


(ii) less the sum of:


(a) all principal debt payments made during such
period by the Partnership,


(b) capital expenditures made by the Partnership
during such period,


(c) investments in any entity (including loans made
thereto) to the extent that such investments are not otherwise
described in clauses (ii)(a) or (b),


(d) all other expenditures and payments not deducted
in determining Net Income or Net Loss for such period,


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(e) any amount included in determining Net Income or
Net Loss for such period that was not received by the
Partnership during such period,


(f) the amount of any increase in reserves
established during such period which the General Partner
determines are necessary or appropriate in its sole and
absolute discretion, and


(g) the amount of any working capital accounts and
other cash or similar balances which the General Partner
determines to be 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.


"Board of Directors" means the Board of Directors of the General Partner.


"Business Day" means each day, other than a Saturday or a Sunday, which is not a day on which banking institutions in Los Angeles, California or New York, New York are authorized or required by law, regulation or executive order to close.


"Capital Account" means, with respect to any Partner, the Capital Account maintained for such Partner in accordance with the following provisions:


(i) To each Partner's Capital Account there shall be added such Partner's Capital Contributions, such Partner's share of Net Income and any items in the nature of income or gain which are specially allocated pursuant to Section 6.3, and the amount of any Partnership liabilities assumed by such Partner or which are secured by any property distributed to such Partner.


(ii) From each Partner's Capital Account there shall be subtracted the amount of cash and the Gross Asset Value of any property distributed to such Partner pursuant to any provision of this Agreement, such Partner's distributive share of Net Losses and any items in the nature of expenses or losses which are specially allocated pursuant to Section 6.3 hereof, and the amount of any liabilities of such Partner assumed by the Partnership or which are secured by any property contributed by such Partner to the Partnership.


(iii) In the event any interest in the Partnership is transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred interest.


(iv) In determining the amount of any liability for purposes of subsections (i) and (ii) hereof, there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and Regulations.


(v) The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Sections 1.704-1(b) and 1.704-2, and shall be interpreted and applied in a manner consistent with


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such Regulations. In the event the General Partner shall determine that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities which are secured by contributed or distributed property or which are assumed by the Partnership, the General Partner, or the Limited Partners) are computed in order to comply with such Regulations, the General Partner may make such modification; provided that, it is not likely to have a material effect on the amounts distributable to any Person pursuant to Article 13 of this Agreement upon the dissolution of the Partnership. The General Partner also shall (a) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Partners and the amount of Partnership capital reflected on the Partnership's balance sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q) and (b) make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b) or Section 1.704-2.


"Capital Contribution" means, with respect to any Partner, the amount of money and the initial Gross Asset Value of any property (other than money) contributed to the Partnership by such Partner.


"Cash Amount" means, with respect to any Partnership Units subject to a Redemption, an amount of cash equal to the Deemed Partnership Interest Value attributable to such Partnership Units.


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


"Charter" means the Company's Articles of Incorporation as of November 24, 1997, as amended by the Articles Supplementary filed with the Maryland Department of Assessments and Taxation on July __, 1998, and as further amended or restated from time to time.


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


"Common Unit" means each Partnership Unit that is not entitled to any preference with respect to any other Partnership Unit as to distribution or voluntary or involuntary liquidation, dissolution or winding up of the Partnership.


"Consent" means the consent to, approval of, or vote on a proposed action by a Partner given in accordance with Article 14 hereof.


"Consent of the Limited Partners" means the Consent of a Majority in Interest of the Limited Partners which Consent shall be obtained prior to the taking of any action for which it is required by this Agreement and may be given or withheld by a Majority in Interest of the Limited Partners, unless otherwise expressly provided herein, in their sole and absolute discretion.


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"Consent of the Partners" means the Consent of Partners holding Percentage Interests that in the aggregate are equal to or greater than a majority of the aggregate Percentage Interests of all Partners which Consent shall be obtained prior to the taking of any action for which it is required by this Agreement and may be given or withheld by such Partners, in their sole and absolute discretion.


"Constructively Own" means ownership under the constructive ownership rules described in Exhibit C.


"Contributed Property" means each property or other asset, in such form as may be permitted by the Act, but excluding cash, contributed or deemed contributed to the Partnership (or, to the extent provided in applicable regulations, deemed contributed by the Partnership on termination and reconstitution thereof pursuant to Section 708 of the Code).


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


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


"Deemed Value of the Partnership Interests" means, as of any date with respect to any class or series of Partnership Interests, (i) the total number of Partnership
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