EFTA Document EFTA01384999

contribution of additional assets to the partnership in exchange for a new partnership interest or the issuance of partnership interests for services. Under the above rules, if we acquire assets in exchange for interests in our operating partnership in a carry-over basis transaction (i.e., a transaction in which the contributing partner defers its gain for U.S. federal income tax purposes), we may be allocated lower amounts of depreciation and other deductions for tax purposes, and possibly greater amounts of taxable income in the event of a disposition of the contributed properties, as compared to our share of such items for economic or book purposes. Thus, these rules may cause us to recognize taxable income in MISS of cash proceeds, which might adversely affect our ability to comply with the REIT distribution requirements. See "—Annual Distribution Requirements Applicable to REIM." Because a taxable disposition of the contributed properties generally also accelerates recognition of the contributing partner's deferred tax gain, as part of a tax-deferred acquisition of farms for interests in our operating partnership we may agree to compensate the contributing partner for the accelerated tax, which would further increase the costs to us for taxable disposition of contributed properties. Withholding Obligations with Respect to Non-U.S. Partners. With respect to each non-U.S. limited partner, our operating partnership generally will be required to withhold at rates of 20%-35% with respect to the non-U.S. limited partner's share of our operating partnership income (with the rate varying based on the character of the items comprising the income and the status of the limited partner for U.S. federal income tax purposes), regardless of the amounts distributed to such non-U.S. limited partner. We will be liable for any under withholdings (including interest and penalties). Given our status as a REIT and our need to distribute income currently, we generally expect our operating partnership to make distributions on Common Units sufficient to cover a non-U.S. limited partner's withholding obligations. It is also possible that we might be obligated to withhold with respect to a non-U.S. limited partner's share of gain on a disposition generally qualifying for nonrecognition and with respect to which our operating partnership is not making distributions. Our operating partnership will have to make the withholding payments in any event even if the withholding obligation exceeds a limited partner's share of distributions. Unless it can recover the excess withholdings from the limited partner, our operating partnership will have to find other sources of cash to fund excess withholdings. Failure to Qualify as a REIT In the event we violate a provision of the Code that would result in our failure to qualify as a REIT, specified relief provisions will be available to us to avoid such disqualification if (1) the violation is due to reasonable cause and not willful neglect. (2) we pay a penalty of $50,000 for each failure to satisfy the provision and (3) the violation does not include a violation under the gross income or asset tests or distribution requirements described above (for which other specified relief provisions are available). This cure provision reduces the instances that could lead to our disqualification as a REIT for violations due to reasonable cause. It is not possible to state whether, in all circumstances, we will be entitled to this statutory relief. If we fail to qualify as a REIT in any taxable year, and the relief provisions of the Code do not apply, we will be subject to tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates. Distributions to our stockholders in any year in which we are not a REIT will not be deductible by us, nor will they be required to be made. In this situation, to the extent of current and accumulated earnings and profits, and. subject to limitations of the Code, distributions to our stockholders will generally be taxable to stockholders who are individual U.S. stockholders at a maximum rate of 20%, and dividends received by our corporate U.S. stockholders may be eligible for a dividends received deduction. Unless we are entitled to relief under specific statutory provisions, we will also be disqualified from re-electing REIT status for the four taxable years following a year during which qualification was lost. 226 CONFIDENTIAL - PURSUANT TO FED. R. CRIM P 6(e) DB-SDNY-0085789 CONFIDENTIAL SDNY_GM_00231973 EFTA01384999