Exhibit 10.2
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LIMITED PARTNERSHIP AGREEMENT
OF
BRANDYWINE INDUSTRIAL PARTNERSHIP, L.P.
LIMITED PARTNERSHIP AGREEMENT OF
BRANDYWINE INDUSTRIAL PARTNERSHIP, L.P.
THIS LIMITED PARTNERSHIP AGREEMENT OF BRANDYWINE INDUSTRIAL
PARTNERSHIP, L.P., (the "Agreement") is made as of the 17th day of June, 1999,
by and among BB&K GP Business Trust, a Pennsylvania business trust as the
general partner (the "General Partner"), BB&K LP Business Trust, a Pennsylvania
business trust as the Class A Limited Partner (the "Class A Limited Partner")
and Brandywine Operating Partnership, L.P., a Delaware limited partnership and
Xxxxxxx Lansdale Limited Partnership, III, a Pennsylvania limited partnership,
as the Class B limited partners (collectively, the "Class B Limited Partner") .
R E C I T A L S
WHEREAS, the parties desire to form a limited partnership with the
General Partner as the general partner and the Class A Limited Partner and the
Class B Limited Partner as limited partners (collectively, the "Limited
Partners") under the provisions of the Delaware Revised Uniform Limited
Partnership Act, as amended from time to time (the "Act");
WHEREAS, the parties hereto desire to set forth herein their respective
rights, duties and responsibilities with respect to such limited partnership;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the mutual
agreements set forth herein, the parties hereto, intending to be legally bound,
do hereby agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Certain Defined Terms. The following terms wherever used in
this Agreement shall have the following meanings:
1.1.1 "Act" shall have the meaning set forth in the Recitals of this
Agreement.
1.1.2 "Additional Capital Contribution" means any contribution to the
capital of the Partnership made by the Class A Limited Partner pursuant to
Section 5.1.4.
1.1.3 "Adjusted Capital Account Deficit" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Capital Account as of
such date, after giving effect to the following adjustments:
1.1.3.1 Such Capital Account shall be increased to reflect any amounts,
if any, which such Partner is obligated to restore to the Partnership or is
deemed to be obligated to restore pursuant to Sections 1.704-2(g)(1) and
1.704-2(i)(5) of the Regulations; and
1.1.3.2 Such Capital Account shall be reduced to reflect any items
described in Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
1.1.3.3 Such Capital Account shall be increased by such Partner's
allocable share (as determined under Section 752 of the Code) of any recourse
indebtedness of the Partnership to the extent that such indebtedness could not
be repaid out of the Partnership's assets if all of the Partnership's assets
were sold at their respective Book Values as of the end of the Fiscal Year or
Adjustment Period and the proceeds from the sales were used to pay the
Partnership's liabilities.
1.1.4 "Adjustment Period" shall mean a period of time as determined in
this Section 1.1.4. The first Adjustment Period shall commence on the Closing
Date. Each succeeding Adjustment Period shall commence on the day immediately
following the last day of the immediately preceding Adjustment Period. Each
Adjustment Period shall end on the earliest to occur after the commencement of
such Adjustment Period of (i) the last day of each Fiscal Year, (ii) a Capital
Date, (iii) the day immediately preceding the date of the "liquidation" of a
Partner's interest in the Partnership (within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations), or (iv) the date on which the
Partnership is terminated under Article 9 hereof.
1.1.5 "Affiliate" shall mean (i) any Person more than ten percent (10%)
of the issued and outstanding stock of which, or more than a ten percent (10%)
interest in which, is owned, directly or indirectly, by any Partner, or (ii) any
Person which owns, directly or indirectly, more than ten percent (10%) of the
issued and outstanding stock of, or more than a ten percent (10%) interest, in
any Partner, or (iii) any Person who is an agent, officer, director, employee,
partner or shareholder (or any member of the family of any agent, officer,
director, employee, partner or shareholder) of any Partner, but only for so long
as such Person serves in such capacity, or (iv) any Person that directly or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, any Partner. As used in this paragraph only, the
term "control" (including the terms "controlled by" and "under common control
with") means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. As used in this
paragraph only, the term "family" means the spouses, children, parents, brothers
and sisters, and the spouse, children, parents, brothers and sisters of such
spouses, children, parents, brothers and sisters.
1.1.6 "Agreement" shall have the meaning set forth in the first
sentence herein.
1.1.7 "Approve" and "Approval" when referring to a Partner shall mean
approval in writing by such Partner within the applicable time period specified
herein, and if any Partner is requested to approve any item or matter pursuant
to this Agreement and such Partner fails to approve such item in writing, such
failure shall constitute and be deemed a rejection of the applicable request.
1.1.8 "Auditor" shall mean the firm of independent certified public
accountants which shall be selected by the General Partner as provided in
Section 4.7 and engaged annually to audit the books and records of the
Partnership and prepare the tax returns of the Partnership.
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1.1.9 "Book Depreciation" for each Adjustment Period shall mean an
amount equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to a Partnership asset for such Adjustment Period, except
that if the Book Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such Adjustment Period, Book
Depreciation with respect to that asset shall be an amount that bears the same
ratio to such beginning Book Value as the federal income tax depreciation,
amortization or other cost recovery deduction with respect to that asset for
such Adjustment Period bears to such beginning adjusted tax basis; provided,
however, that if the federal income tax depreciation, amortization or other cost
recovery deduction with respect to that asset for such Adjustment Period is
zero, Book Depreciation shall be determined with reference to such beginning
Book Value using the traditional method as set forth in Regulation Section
1.704-3.
1.1.10 "Book Gain" and "Book Loss" shall mean the gain or loss
recognized by the Partnership for book purposes in any Adjustment Period by
reason of a sale or other disposition of any Partnership asset. Such Book Gain
and Book Loss shall be computed by reference to the Book Value of such asset as
of the date of such sale or other disposition, rather than by reference to the
tax basis of the asset as of such date. If a Partnership asset is distributed to
a Partner, the difference between the fair market value of such asset and its
Book Value shall be considered a Book Gain or a Book Loss.
1.1.11 "Book Value" of a Partnership asset shall mean, as of any
particular date, the value at which the asset is properly reflected on the books
of the Partnership, as of such date in accordance with the provisions of Section
1.704-1(b) of the Regulations. The initial Book Values of the assets shall be
the gross fair market value of such assets (without reduction for indebtedness
to which such assets may be subject) as determined by the General Partner,
provided that the initial Book Value of assets contributed by a Partner to the
Partnership shall be the fair market value as set forth in the Contribution
Agreement. Such Book Value shall be adjusted for Book Depreciation with respect
to such assets, rather than for the cost recovery deductions to which the
Partnership is entitled for income tax purposes with respect to such assets.
1.1.12 "BRSCO" means Brandywine Realty Services Corporation, a
Pennsylvania corporation.
1.1.13 "Capital Account" shall mean the Capital Account maintained by
the Partnership for each Partner. The balance of each Partner's Capital Account,
as of any particular date, shall be an amount equal to the sum of the following:
1.1.13.1 The cumulative amount of cash that has been contributed to the
capital of the Partnership by such Partner as of such date; plus
1.1.13.2 The agreed upon net fair market value (net of any indebtedness
encumbering any property) as of the date of contribution of any property as set
forth in the Contribution Agreement, other than cash, that has been contributed
to the capital of the Partnership by such Partner as of such date; plus
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1.1.13.3 The cumulative amount of Gross Income, Net Profit and other
items of income and gain for all Adjustment Periods ending prior to such date
that have been, or are required to be, allocated to such Partner under Article 7
hereof; minus
1.1.13.4 The cumulative amount of Net Loss and other items of loss and
deduction for all Adjustment Periods ending prior to such date that have been,
or are required to be, allocated to such Partner under Article 7 hereof; and
minus
1.1.13.5 The cumulative amount of cash and the agreed upon net fair
market value (as of the date of distribution) of all other property that has
been distributed to such Partner by the Partnership as of such date under
Sections 7.2, 7.3, 7.4 and 7.5 hereof.
A Partner's Capital Account shall also be increased or decreased as of such date
to reflect any items described in Section 1.704-1(b)(2)(iv) of the Regulations
that are required to be reflected in such Partner's Capital Account under such
Regulation and which are not otherwise taken into account in computing such
Capital Account under this Section 1.1.12.
1.1.14 "Capital Date", when used with respect to any Book Gain or Book
Loss recognized by the Partnership during any Adjustment Period, shall mean the
date on which such Book Gain or Book Loss is recognized by the Partnership.
1.1.15 "Capital Transaction" shall mean the sale, exchange,
condemnation (or similar eminent domain taking or disposition in lieu thereof),
destruction by casualty, refinancing or disposition of the Project or any
portion thereof.
1.1.16 "Class A Limited Partner Additional Contribution Account" shall
mean an account to be maintained by the Partnership for the Class A Limited
Partner and to which will be credited the amount of all Additional Capital
Contributions made by the Class A Limited Partner pursuant to Section 5.1.4
hereof and from which will be debited the amount of any distributions to the
Class A Limited Partner pursuant to Sections and 7.3.3 and 7.4.3 (to the extent
attributable to Section 7.3.3).
1.1.17 "Class A Limited Partner Equity Contribution" shall mean that
portion of the Contribution Amount allocated to the Class A Limited Partner
under the Contribution Agreement
1.1.18 "Class A Limited Partner Equity Contribution Account" shall mean
an account to be maintained by the Partnership for the Class A Limited Partner
and to which will be credited the amount of the Class A Limited Partner Equity
Contribution and from which will be debited the amount of any distributions to
the Class A Limited Partner pursuant to Sections 7.3.2 and 7.4.3 (to the extent
attributable to Section 7.3.2).
1.1.19 "Class A Limited Partner Preferred Return Account" shall mean an
account to be maintained by the Partnership for the Class A Limited Partner and
to which will be credited an amount calculated like interest at a per annum rate
equal to the Preferred Return Rate on the average daily balance of the Class A
Limited Partner Equity Contribution Account and the Class A Limited Partner
Additional Contribution Account commencing with the Closing Date and from which
will be debited the amount of any distributions to the Class A Limited Partner
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pursuant to Sections 7.2.1, 7.3.1 and 7.4.3 (to the extent attributable to
Section 7.3.1). The amount to be credited to the Class A Limited Partner
Preferred Return Account for any period shall be cumulative, but shall not be
compounded.
1.1.20 "Class B Limited Partner Equity Contribution" shall have the
meaning set forth in the Contribution Agreement.
1.1.21 "Class B Limited Partner Equity Contribution Account" shall mean
an account to be maintained by the Partnership for the Class B Limited Partner
and to which will be credited the amount of the Class B Limited Partner Equity
Contribution and from which will be debited the amount of any distributions to
the Class B Limited Partner pursuant to Sections 5.1.2.3, 7.3.4 (but only to the
extent of the credit balance in such Account), 7.3.5 and 7.4.3 (to the extent
attributable to Sections 7.3.4 and 7.3.5).
1.1.22 "Closing Date" shall mean the date on which the Partnership
acquires the Projects pursuant to the Contribution Agreement.
1.1.23 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
1.1.24 "Competitor" means a real estate operating company whose primary
business is the ownership and management of office or industrial buildings and
thirty-five percent (35%) or more of the assets of which, in the aggregate, are
located in metropolitan areas where Brandywine Realty Trust, directly or through
subsidiaries, also own real estate assets, but shall not include any pension
fund advisor or other entity that manages real estate for plans that meet the
requirements of Section 401(a) of the Code, governmental plans (within the
meaning of Section 414(d) of the Code) or life insurance companies (as defined
in Section 816(a) of the Code).
1.1.25 "Contribution Agreement" shall mean the Contribution Agreement
dated as of June 8, 1999 by and among the General Partner, the Class A Limited
Partner, Brandywine Operating Partnership, L.P., a Delaware limited partnership,
and Xxxxxxx Lansdale Limited Partnership, III, a Pennsylvania limited
partnership, which provides, among other things, for the conveyance of the
Projects to the Partnership.
1.1.26 Intentionally omitted.
1.1.27 "Execution Date" shall mean the date this Agreement is executed
by all of the parties hereto.
1.1.28 "Extraordinary Cash Flow" shall have the meaning assigned to it
in Section 7.1.2 below.
1.1.29 "Fiscal Year" shall mean the fiscal year of the Partnership, as
set forth in Section 4.6.
1.1.30 "General Partner" shall have the meaning set forth in the first
paragraph of this Agreement.
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1.1.31 "General Partner Equity Contribution" shall mean that portion of
the Contribution Amount that is allocated to the General Partner under the
Contribution Agreement.
1.1.32 "General Partner Equity Contribution Account" shall mean an
account to be maintained by the Partnership for the General Partner and to which
will be credited the amount of the General Partner Equity Contribution and from
which will be debited the amount of any distributions to the General Partner
pursuant to Sections 7.3.2 and 7.4.3 (to the extent attributable to Section
7.3.2).
1.1.33 "General Partner Preferred Return Account" shall mean an account
to be maintained by the Partnership for the General Partner and to which will be
credited an amount calculated like interest at a per annum rate equal to the
Preferred Return Rate on the average daily balance of the General Partner Equity
Contribution Account commencing with the Closing Date and from which will be
debited the amount of any distributions to the General Partner pursuant to
Sections 7.2.1, 7.3.1 and 7.4.3 (to the extent attributable to Section 7.3.1).
The amount to be credited to the General Partner Preferred Return Account for
any period shall be cumulative, but shall not be compounded
1.1.34 "Gross Income" shall mean, for each Adjustment Period, an amount
equal to the Partnership's gross income as determined for federal income tax
purposes for such Adjustment Period but computed with the adjustments specified
in Section 1.1.41.1 and 1.1.41.4.
1.1.35 "IRR" means the annual discount rate that results in a
difference of zero (0), when subtracting the sum of the present values of all
amounts contributed to the Partnership by the General Partner and the Class A
Limited Partner pursuant to Sections 5.1.2.1, 5.1.2.2, and 5.1.4 using such rate
from the sum of the present values of all amounts distributed to such Partner
pursuant to Sections 7.2., 7.3.1, 7.3.2, 7.3.3, 7.3.4, 7.3.6 and 7.4.3 and 7.4.4
(but, as to Sections 7.4.3 and 7.4.4, only to the extent attributable to
Sections 7.3.1, 7.3.2, 7.3.3, 7.3.4 and 7.3.6) using such rate.
1.1.36 "Initial Capital Contributions" means the capital contributions
made by the Partners to the Partnership pursuant to Section 5.1.1 hereof.
1.1.37 "Limited Partners" shall have the meaning set forth in the
Recitals provision of this Agreement.
1.1.38 "Loan" means (i) the loan to be obtained by the Partnership in
the principal amount of not less than fifty-five percent (55%) of the Title
Policy Amount or more than seventy percent (70%) of the Title Policy Amount,
with interest at a rate of not more than seven and forty five one hundredths
percent (7.45%) per annum, and (ii) until such loan is obtained, the Bridge Loan
(as defined in the Contribution Agreement).
1.1.39 "Management Agreement" means the Management and Leasing
Agreement between the Partnership and BRSCO.
1.1.40 "Manager" means BRSCO or any successor thereto under the
Management Agreement.
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1.1.41 "Net Profit" or "Net Loss" shall mean, for each Adjustment
Period, the Partnership's taxable income or taxable loss for such Adjustment
Period, as determined under Section 703(a) of the Code, and Section 1.703-1 of
the Regulations (and for this purpose all items of income, gain, loss, or
deduction required to be stated separately pursuant to Section 703(a)(1) of the
Code shall be included in taxable income or taxable loss), but with the
following adjustments:
1.1.41.1 Any tax-exempt income, as described in Section 705(a)(l)(B) of
the Code, realized by the Partnership during such Adjustment Period shall be
taken into account in computing such taxable income or taxable loss as if it
were taxable income.
1.1.41.2 Any expenditures of the Partnership described in Section
705(a)(2)(B) of the Code for such Adjustment Period, including any items treated
under Section 1.704-1(b)(2)(iv)(i) of the Regulations as items described in
Section 705(a)(2)(B) of the Code, shall be taken into account in computing such
taxable income or taxable loss as if they were deductible items.
1.1.41.3 Book Depreciation for such Adjustment Period shall be taken
into account in computing such taxable income or taxable loss in lieu of any
amortization, depreciation or cost recovery deduction to which the Partnership
is entitled for such Adjustment Period with respect to Partnership assets.
1.1.41.4 Any Book Loss or Book Gain recognized by the Partnership
during such Adjustment Period by reason of a sale or other disposition of all or
part of the Property shall be taken into account in computing such taxable
income or taxable loss in lieu of any tax gain or tax loss recognized by the
Partnership during any Adjustment Period by reason of such sale or other
disposition.
1.1.41.5 Any Gross Income and item of income, gain, loss or deduction
required to be allocated to the Partners under Sections 6.4 and 6.5 shall not be
taken into account in computing such taxable income or taxable loss.
If the Partnership's taxable income or taxable loss for such Adjustment Period,
as adjusted in the manner provided in Sections 1.1.41.1 through 1.1.41.4 above,
is a positive amount, such amount shall be the Partnership's Net Profit for such
Adjustment Period; and if negative, such amount shall be the Partnership's Net
Loss for such Adjustment Period.
1.1.42 "Net Profit from Capital Transactions" or "Net Loss from Capital
Transactions" means for each Adjustment Period, the Net Profit or Net Loss for
such Adjustment Period calculated solely by reference to gains and losses from
Capital Transactions.
1.1.43 "Net Profit from Operations" or "Net Loss from Operations" means
for each Adjustment Period, the Net Profit or Net Loss for such Adjustment
Period calculated without regard to Net Profit from Capital Transactions and Net
Loss from Capital Transactions.
1.1.44 "Operating Cash Flow" has the meaning assigned to it in Section
7.1.1 below.
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1.1.45 "Partner" or "Partners"" means the General Partner, the Class A
Limited Partner, the Class B Limited Partner, and such successors, assigns or
additional partners as may be admitted to the Partnership pursuant to the terms
of this Agreement.
1.1.46 "Partner Nonrecourse Debt" means any nonrecourse debt of the
Partnership for which any Partner bears the economic risk of loss as determined
pursuant to Regulations Sections 1.704-2(b)(4) and 1.752-2.
1.1.47 "Partner Nonrecourse Debt Minimum Gain" means the minimum gain
attributable to Partner Nonrecourse Debt as determined under Regulations Section
1.704-2(i)(3).
1.1.48 "Partner Nonrecourse Deductions" means any loss, deduction, or
Code Section 705(a)(2)(B) expenditure, or item thereof, that is attributable to
a Partner Nonrecourse Debt as determined under Regulations Section
1.704-2(i)(2).
1.1.49 "Partnership" means Brandywine Industrial Partnership, L.P., the
Delaware limited partnership created pursuant to this Agreement.
1.1.50 "Partnership Interest" means a Partner's interest in the
Partnership that entitles the Partner to allocations of Net Profit, Net Loss,
and distributions from the Partnership, together with the rights and obligations
of a Partner under the Act and this Agreement.
1.1.51 "Partnership Minimum Gain" means the amount computed under
Regulations Section 1.704-2(d).
1.1.52 "Partnership Nonrecourse Deductions" means any loss, deduction,
or Code Section 705(a)(2)(B) expenditure, or item thereof, that is attributable
to nonrecourse liabilities of the Partnership as defined in Regulations Section
1.752-1(a)(2).
1.1.53 "Partnership Obligations" shall mean any and all obligations,
expenses and losses incurred by the Partnership which are obligations of the
Partnership and any and all obligations, expenses and losses assumed by the
Partnership.
1.1.54 "Person" shall mean any corporation, partnership, limited
liability company, joint venture, individual, trust, real estate investment
trust, banking association, federal or state savings and loan institution and
any other legal entity, whether or not a party hereto.
1.1.55 "Preferred Return" shall mean an amount calculated like interest
at a per annum rate equal to the Preferred Return Rate on the average daily
balance of the General Partner Equity Contribution Account, the Class A Limited
Partner Equity Contribution Account, and the Class A Limited Partner Additional
Contribution Account.
1.1.56 "Preferred Return Rate" means an annual rate of eleven and
one-half percent (11.50%).
1.1.57 "Primary Sharing Ratios" means one percent (1%) in the case of
the General Partner, sixty-four percent (64%) in the case of the Class A Limited
Partner and thirty-five percent (35%) in the case of the Class B Limited
Partner.
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1.1.58 "Projects" means the properties described in Exhibits A and B to
the Contribution Agreement, and "Project" means any of the Projects.
1.1.59 "Qualified Organizations" shall mean an entity described in
Section 514(c)(9)(C) of the Code.
1.1.60 "Residual Sharing Ratios" means one percent (1%) in the case of
the General Partner, fifty-nine percent (59%) in the case of the Class A Limited
Partner and forty percent (40%) in the case of the Class B Limited Partner.
1.1.61 "Secondary Sharing Ratios" means one percent (1%) in the case of
the General Partner, thirty-nine percent (39%) in the case of the Class A
Limited Partner and sixty percent (60%) in the case of the Class B Limited
Partner.
1.1.62 "Title Policy Amount" shall have the meaning set forth in the
Contribution Agreement.
Section 1.2 Other Terms. All terms used in this Agreement which are not
defined in this Article 1 shall have the meanings set forth elsewhere in this
Agreement or as defined in the Contribution Agreement. To the extent there is a
conflict between the definition of terms defined in this Agreement and those
defined in the Contribution Agreement, the definitions contained herein shall
control.
ARTICLE 2
FORMATION AND PURPOSE
Section 2.1 Formation. The parties hereto hereby form the Partnership
as a limited partnership pursuant to the Act. The General Partner shall file or
cause to be filed the Certificate of Limited Partnership (the "Certificate of
Limited Partnership") with the Delaware Secretary of State and shall execute
such other documents and perform such other acts as shall constitute compliance
with all requirements for the operation of the Partnership pursuant to the Act
and otherwise under the laws of the State of Delaware and any other jurisdiction
in which the Partnership conducts business.
Section 2.2 Name. The name of the Partnership shall be Brandywine
Industrial Partnership, L.P. and all business of the Partnership shall be
conducted in such name.
Section 2.3 Place of Business, Registered Agent and Registered Office.
The business office of the Partnership shall be located at Invesco Realty
Advisors, One Lincoln Centre, Suite 700, 0000 XXX Xxxxxxx, XX-0, Xxxxxx, Xxxxx
00000 Attention: Xxx Xxxxxxxx or at such other place as may be designated from
time to time by the General Partner. The name of the registered agent of the
Partnership and the address of the registered office of the Partnership shall be
as set forth in the Certificate of Limited Partnership.
Section 2.4 Purpose.
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2.4.1 The sole purpose of the Partnership shall be to acquire, own and
hold for production of income, improve, operate, lease and manage the Projects
and to sell and otherwise deal in and with each and all of the Projects and to
undertake any and all actions necessary or incidental to any of the foregoing
activities, and to take or cause to be taken all actions and to perform or cause
to be performed all functions necessary or appropriate to promote the business
of the Partnership and to realize and carry out its purposes.
2.4.2 The Partnership shall be a partnership only for the purposes
specified hereinabove and this Agreement shall not be deemed to create a
partnership or other business arrangement between the Partners with respect to
any activities whatsoever other than the activities within the purposes of the
Partnership as specified above.
2.4.3 No Partner shall have the power to bind, to act for or to assume
any obligation or responsibility on behalf of the other Partners or the
Partnership, except as specifically authorized by this Agreement.
2.4.4 The credit and assets of the Partnership shall be used solely for
the benefit of the Partnership and shall not be used to further the personal
gain of any Partner unless specifically provided for under the terms of this
Agreement. No asset of the Partnership shall be transferred or encumbered for or
in payment of any individual obligation of a Partner unless specifically
provided for under the terms of this Agreement.
Section 2.5 General Partner. The General Partner shall be the sole
general partner of the Partnership. No other Person may become a general partner
of the Partnership except by way of a transfer, removal or resignation permitted
under and effected in compliance with this Agreement. Subject to the provisions
of this Agreement and the Act, the General Partner shall have the sole and
exclusive right to manage, supervise, operate and control the Partnership's
properties and business.
Section 2.6 Limited Partner. The Class A Limited Partner and the Class
B Limited Partner shall be the only limited partners of the Partnership. No
other Person may become a limited partner of the Partnership except by way of a
transfer permitted under and effected in compliance with this Agreement.
Section 2.7 Duration. The term of the Partnership shall commence upon
the filing for record of a Certificate of Limited Partnership for and on behalf
of the Partnership in the office of the Secretary of State of Delaware and
continue until the first to occur of the following events:
2.7.1 December 31, 2049.
2.7.2 At such time as there is only one Partner.
2.7.3 The termination of this Partnership in accordance with the terms
hereof or by the agreement of the General Partner and the Limited Partners.
2.7.4 The sale, exchange or other disposition of all or substantially
all of the Project, unless such sale or other disposition involves the
acquisition of any additional property or any deferred payment of the
consideration for such sale or disposition, in which latter event this
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Agreement shall terminate on the last day of the month during which the
balance of such deferred payment is received by the Partnership.
2.7.5 Entry of a final and nonappealable decree of judicial dissolution
under the Act.
Section 2.8 Disclosure; Conflicts Waiver.
2.8.1 Except as otherwise expressly provided elsewhere in this
Agreement, nothing in this Agreement shall be deemed to restrict in any way the
rights of any Partner, or of any Affiliate of any Partner, to conduct any
business or activity whatsoever (including the acquisition, development, sale,
and operation of real property, whether for operation as an office building
development or other purposes) without any accountability to the Partnership or
to any Partner even if such business or activity competes with the business of
the Partnership, it being understood by each Partner that the other Partners and
their Affiliates may be interested, directly or indirectly, in various other
businesses and undertakings not included in the Partnership.
2.8.2 Each Partner understands and acknowledges that the conduct of the
business of the Partnership may involve business dealings with other businesses
or undertakings of a Partner or its Affiliates, including the entering into of
contracts or other agreements with such businesses or undertakings. The creation
of the Partnership and the assumption by each of the Partners of its duties
hereunder shall be without prejudice to their respective rights (or the rights
of their respective Affiliates) to maintain such other interests and activities
and to receive and enjoy profits or compensation therefrom, and of the
Partnership to enter into contracts or agreements with such businesses or
undertakings, and each Partner waives any rights it might otherwise have to
share or participate in such other interests or activities of any other Partner
or its Affiliates.
Section 2.9 Statutory Compliance. The Partnership shall exist under and
be governed by and this Agreement shall be construed in accordance with the
applicable laws of the State of Delaware. The Partnership shall make all filings
and disclosures required by, and shall otherwise comply with, all such laws. All
real or personal property owned by the Partnership shall be deemed owned by the
Partnership as an entity, in its name, and no Partner shall have any ownership
interest in such property in its individual name or right.
Section 2.10 General Representations and Warranties of the General
Partner. As an inducement to the Limited Partners to enter into this Agreement,
the General Partner represents and warrants that as of the date hereof, it is a
duly organized and legally existing limited liability company under the laws of
the State of Delaware, qualified to do business in the States of Maryland, New
Jersey and Pennsylvania and has the requisite power and authority to enter into
and carry out the terms of this Agreement.
Section 2.11 Type of Income. The General Partner hereby acknowledges
that (i) Brandywine Realty Trust, the general partner of one of the limited
partnerships that comprises the Class B Limited Partner, is a real estate
investment trust as defined in Section 856 of the Code, and (ii) as long as the
Class B Limited Partner is a partner of the Partnership, the Partnership shall
manage its affairs in a manner such that the Partnership does not intentionally
11
earn any income for tax purposes or acquire any assets which would cause, or
could reasonably be expected to cause, Brandywine Realty Trust to violate any of
the provisions of Section 856 of the Code or cease to remain qualified as a real
estate investment trust.
ARTICLE 3
CONTROL AND MANAGEMENT
Section 3.1 General Partner.
3.1.1 Subject to the terms of this Agreement, the General Partner shall
have full and exclusive discretionary right, power and authority in the
management and control of the affairs of the Partnership and shall make all
decisions affecting the Partnership. The General Partner shall have all of the
rights, powers and authorization of a general partner as provided in the Act
and, in addition, shall have the right, power and authority to do, on behalf of
the Partnership, all things which, in its reasonable judgment, are necessary or
desirable to carry out its duties and responsibilities, including, but not
limited to, the following:
(1) Arrange for the Loan and all other loans (including refinancing) as
it deems necessary or desirable for the Partnership, upon such terms and
conditions as it determines are appropriate, provided that such terms shall be
in accordance with the limitations set forth in Section 1.1.38 hereof, and, in
connection therewith, to mortgage or pledge any or all of the assets of the
Partnership as security for the Partnership's indebtedness;
(2) Negotiate leases of portions of the Partnership property upon such
terms and conditions as it may, in the exercise of reasonable business judgment,
determine to be appropriate from time to time;
(3) Coordinate all management and operational functions relating to the
Partnership property;
(4) Execute any documents, agreements or other instruments in any way
related to the Partnership's business; and
(5) Except as provided in Section 8.5, sell, exchange or otherwise
dispose of all or any part of the assets of the Partnership, at such price, and
upon such terms and conditions, as the General Partner, in its sole discretion,
determines.
In furtherance thereof, the Partnership shall enter into the Management
Agreement with the Manager substantially in the form of Exhibit A attached
hereto (the "Management Agreement").
3.1.2 The Limited Partners are investors only and shall have no right,
power or authority over the control or management of the Partnership's affairs.
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Section 3.2 Tax Matters Partner. The General Partner is hereby
designated as the Tax Matters Partner, within the meaning of Section 6231(a)(7)
of the Code. The Tax Matters Partner shall generally serve as the liaison
between the Partnership and the Internal Revenue Service in the event of an
audit of the Partnership, and as the primary coordinator of Partnership actions
in connection with such audit. The Tax Matters Partner has full authority to
bind the Limited Partners to a settlement of the tax audit, provided that any
adjustment is allocated among the Partners in proportion to their Primary,
Residuary or Secondary Sharing Ratios, as may be appropriate. The Tax Matters
Partner shall provide to the Limited Partners copies of all notices sent to the
Partnership by the Internal Revenue Service and shall keep the Limited Partners
informed of the progress of any tax audit provided that it shall have full
authority to settle or compromise any audit without the Approval of the Limited
Partners.
Section 3.3 Authority of Partner.
3.3.1 No Partner shall, without the approval of the other Partners,
take any action on behalf of or in the name of the Partnership, or enter into
any contract, lease, commitment or other obligation binding upon the
Partnership, except for (i) actions expressly provided for in this Agreement,
and (ii) actions by the General Partner within the scope of its authority
granted hereunder.
3.3.2 No Partner shall have the power to bind, to act for or to assume
any obligation or responsibility on behalf of the other Partners or the
Partnership, except as specifically provided in this Agreement.
3.3.3 The General Partner shall not contract with or employ on behalf
of the Partnership any Affiliate of the General Partner or the Class A Limited
Partner except arms-length, reasonably competitive terms and on the basis of
actual need and demonstrated ability to perform.
Section 3.4 Indemnification of the General Partner. The Partnership
shall indemnify, hold harmless and pay all judgments and claims against the
General Partner arising from any actions or decisions performed or made by it in
connection with the business of the Partnership; provided, however, such actions
or decisions were taken or made with a good faith belief that they were within
the scope of the purposes of the Partnership and the authority granted to the
General Partner, and such actions or decisions do not constitute gross
negligence or willful misconduct in connection with the business and affairs of
the Partnership, fraud or a breach of the representations and warranties set
forth in Article 2. This indemnification shall include, without limitation,
payment of reasonable attorneys' fees and other expenses incurred in connection
with the defense of any claim or proceeding based on any such action or
decision, which attorneys' fees and expenses shall be paid as incurred.
ARTICLE 4
ACCOUNTING
Section 4.1 Partnership Books. Proper books of account shall be kept
for the Partnership on an accrual basis for federal income tax purposes and
financial accounting purposes. Entries shall be made therein of all monies
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expended and received by the Partnership as well as all other matters relating
to the Partnership usually or properly entered in books of account. Such books
and all papers, correspondence and other instruments relating or belonging to
the Partnership, shall be kept at the business office of the Partnership, and
each Partner shall have the full right and power to examine and inspect the
books, records, accounts and other papers of the Partnership at all times during
normal business hours.
Section 4.2 Audit. A general accounting and audit shall be taken by the
Auditor for each Fiscal Year, at the expense of the Partnership. The audit shall
be conducted in accordance with generally accepted auditing standards, and shall
cover all of the assets, properties, liabilities and net worth of the
Partnership as well as its dealings, transactions and operations during such
Fiscal Year, together with all other matters customarily included in such
accountings and audits.
Section 4.3 Financial Statements. The General Partner shall cause the
Partnership to deliver the following to the Limited Partners:
4.3.1 On an annual basis within forty-five (45) days after the close of
each Fiscal Year:
4.3.1.1 Annual audited statements of the operation of the Partnership
including the following:
4.3.1.2 Statement of Assets, Liabilities and Partners' Equity (Balance
Sheet);
4.3.1.3 Statement of Revenues and Expenses;
4.3.1.4 Statement of Cash Flows;
4.3.1.5 Statement of Changes in Partners' Equity; and
4.3.1.6 Computation of the Preferred Return for the General and Class A
Limited Partners;
with the opinion of the Auditor that (A) such annual statements fairly represent
the financial condition of the Partnership, (B) such statements have been
prepared in accordance with generally accepted accounting principles
consistently applied and (C) an examination has been made by such accounting
firm in accordance with generally accepted auditing standards and includes such
tests of the accounting records and such other auditing procedures as were
considered necessary in the circumstances, with a detailed explanation of any
qualifications contained in such opinion, and
4.3.1.7 Such additional financial statements, reports and other
information as the Class B Limited Partner may reasonably request.
4.3.2 On a monthly basis, by the twenty-fifth (25th) day of each
calendar month, for the prior monthly period beginning on the first day of the
preceding calendar month and ending on the last day of such calendar month, the
following, unaudited but all in reasonable detail:
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4.3.2.1 A current rent roll in form reasonably satisfactory to the
Class B Limited Partner;
4.3.2.2 Statement of Assets, Liabilities and Partners' Equity (Balance
Sheet);
4.3.2.3 Statement of Revenues and Expenses;
4.3.2.4 Computation of the Preferred Return for the General and Class A
Limited Partners;
all certified to be correct by the Manager; and
4.3.2.5 Such additional financial statements, reports and other
information as the Class B Limited Partner may reasonably request.
Section 4.4 Tax Elections. Except as otherwise provided in this
Agreement, all elections required or permitted to be made by the Partnership
under the Code, including the election of methods of depreciation, shall be
timely determined by the General Partner, and shall be made by the Partnership
in accordance with said timely determination. The Partnership shall make an
election pursuant to Section 709 of the Code for the amortization of its
organizational expenses. The General Partner may, in its sole discretion, cause
the Partnership to make an election under Section 754 of the Code.
Section 4.5 Tax Returns. Each return and other statement to be filed by
the Partnership with the Internal Revenue Service or any other taxing authority
shall be prepared by or at the direction of the General Partner. If applicable,
each of the Partners shall, in its respective income tax return and other
statements filed with the Internal Revenue Service, report taxable income or
loss in accordance with the Partnership returns and statements.
Section 4.6 Fiscal Year. The Fiscal Year of the Partnership shall be
the year ending December 31 or such other taxable year as shall be required
under Section 706 of the Code as may be determined by the Auditor.
Section 4.7 Accountants. The initial Auditor shall be Pricewaterhouse
Coopers LLP. The General Partner shall have the right to change the Auditor to
any other so-called "Big Six Accounting Firm" or, with the Approval of the Class
B Limited Partner, to any other firm of independent certified public
accountants.
Section 4.8 Partnership Funds. The funds of the Partnership will be
kept in such banking and other accounts as Approved by the Limited Partner and
withdrawals shall be made only in the regular course of Partnership business and
as otherwise authorized in this Agreement. Withdrawals from any account will be
made on the manual or facsimile signature of one or more individuals designated
by the General Partner. There shall be no commingling of the assets of the
Partnership with the assets of any other person or entity, and the General
Partner shall not employ, or permit any other person to employ, such funds in
any manner except for the benefit of the Partnership.
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ARTICLE 5
CAPITAL
Section 5.1 Capital Contributions.
5.1.1 Initial Capital Contributions. On the Execution Date the General
Partner shall make a contribution in the amount of Ten Dollars ($10) to the
Partnership, the Class A Limited Partner shall make a contribution in the amount
of Five Hundred and Ninety Dollars ($590) to the Partnership and the Class B
Limited Partner shall make a contribution in the amount of Four Hundred Dollars
($400) to the Partnership. The Capital Accounts of the General Partner and the
Limited Partner shall be credited with the amount of such contributions. The
Initial Capital Contributions shall be returned to the Partners when each
Partner has made its Equity Contribution pursuant to Section 5.1.2, and their
Capital Accounts shall be debited with the amount so returned.
5.1.2 General Partner Equity Contribution and Limited Partners Equity
Contributions.
5.1.2.1 General Partner Contribution. On the Closing Date, the General
Partner shall make the General Partner Equity Contribution to the Partnership
and the General Partner's Equity Contribution Account shall be credited with the
amount of such Contribution.
5.1.2.2 Class A Limited Partner Equity Contribution. On the Closing
Date, the Class A Limited Partner shall make the Class A Partner Equity
Contribution to the Partnership and the Class A Limited Partner Equity
Contribution Account shall be credited with the amount of such Contribution.
5.1.2.3 Class B Limited Partner Equity Contribution. On the Closing
Date, the Class B Limited Partner shall cause the conveyance of the Projects to
the Partnership pursuant to the Contribution Agreement and the Partnership shall
distribute to the Class B Limited Partner the amount due it pursuant to Section
2.1(d) of the Contribution Agreement. The General Partner and the Class B
Limited Partner acknowledge that the net fair market value of the Projects is
equal to the amount to be distributed to the Class B Limited Partner by the
Partnership and, accordingly, that after giving effect to the conveyance of the
Projects to the Partnership by the Class B Limited Partner and the distribution
to the Class B Limited Partner by the Partnership, the balance in the Class B
Limited Partner Equity Contribution Account and in the Class B Limited Partner's
Capital Account will be zero (0).
5.1.3 Loan. The Class B Limited Partner acknowledges that as an
accommodation to the General Partner and the Class A Limited Partner, a portion
of the funds necessary to pay the Class B Limited Partner as provided in Section
5.1.2.3 will be the net proceeds of the Loan, and that the mortgage securing
repayment of the Loan will encumber the entire interest of the Partnership in
the Projects. Notwithstanding any provision in this Agreement to the contrary,
no modification shall be made in the terms of the Loan or any replacement or
refinancing thereof without the Approval of the Class B Limited Partner, and any
payment made by the Partnership with respect to the Loan, other than a repayment
16
of principal or a payment of interest at a rate not in excess of the maximum
rate permissible for the Loan, shall be treated as a distribution to the General
Partner and the Class A Limited Partner pursuant to Section 7.3.2.
5.1.4 Additional Capital Contributions. The Class A Limited Partner
shall make Additional Capital Contributions to the Partnership from time to time
as may be required to meet the demands of the business of the Partnership and to
operate and maintain the Projects in a commercially reasonable manner consistent
with industry standards for tenant improvements, leasing commissions, working
capital needs, pro-forma short-falls and budgeted capital improvements, after
giving due consideration to the cash reserves of the Partnership and the cash
expected to be available from operations. The Class A Limited Partner shall
contribute in cash such Additional Capital Contribution to the Partnership
within thirty (30) days after the General Partner's call therefor.
5.1.5 Benefit of Obligations. Any obligation of the Partners to make
capital contributions hereunder shall not inure to the benefit of, or be
enforceable by, any Person other than the Partnership and the Partners.
5.1.6 Partnership Borrowings. If the Partnership incurs any costs,
expenses or charges which it does not have sufficient funds to satisfy, the
General Partner may seek to borrow the amount necessary to pay the same on
acceptable terms; provided, however, that the Partnership may not borrow any
funds if such borrowing would cause any income allocated to the Class A Limited
Partner hereunder to be considered unrelated business taxable income within the
meaning of Sections 512 through 514 of the Code.
5.1.7 Interest on Capital Contributions. No interest shall be paid on
any capital contribution to the Partnership by any Partner; provided, however,
that this provision shall not prevent the payment of the Preferred Return.
Section 5.2 No Further Capital Contributions. The Partners shall not be
required to contribute additional capital to the Partnership, except as
expressly provided herein, and no individual shall have any personal liability
for any failure by a Partner to make a requested capital contribution.
Section 5.3 Deficit Capital Accounts. If, upon distribution of
liquidation proceeds, any Partner has a deficit in its Capital Account, such
Partner shall not be required to restore such deficit amount to the Partnership,
and no Partner shall have any liability to make any contribution to any Partner
or the Partnership for any deficit balance which may exist in such Partner's
Capital Account at any time.
ARTICLE 6
ALLOCATIONS
Section 6.1 Allocation of Net Profit and Net Loss.
6.1.1 Intentionally omitted.
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6.1.2 Allocation of Net Profit From Operations. Net Profit From
Operations for any Adjustment Period shall be allocated in the following order
and priority:
6.1.2.1 first, if any Net Loss from Operations previously has been
allocated to any Partner, then to such Partner, or among such Partners, so as to
reverse the effect of the prior allocation of Net Loss from Operations in the
following order of priority:
6.1.2.1.1 first, to the extent the General Partner was allocated Net
Loss from Operations pursuant to Section 6.1.3.5 for any prior Adjustment
Period, Net Profit from Operations shall be allocated to the General Partner to
offset such previously allocated Net Loss from Operations;
6.1.2.1.2 second, to the extent the Partners were allocated Net Loss
from Operations pursuant to Section 6.1.3.4 for any prior Adjustment Period, Net
Profit from Operations shall be allocated to them to offset such previously
allocated Net Loss from Operations (in proportion to their respective shares of
the Net Loss from Operations being offset);
6.1.2.1.3 third, to the extent the Class A Limited Partner was
allocated Net Loss from Operations pursuant to Section 6.1.3.3 for any prior
Adjustment Period, Net Profit from Operations shall be allocated to the Class A
Limited Partner to offset such previously allocated Net Loss from Operations;
6.1.2.1.4 fourth, to the extent the General Partner and the Class A
Limited Partner were allocated Net Loss from Operations pursuant to Section
6.1.3.2 for any prior Adjustment Period, Net Profit from Operations shall be
allocated to them to offset such previously allocated Net Loss from Operations
(in proportion to their respective shares of Net Loss from Operations being
offset); and
6.1.2.1.5 fifth, to the extent that the Partners were allocated Net
Loss from Operations pursuant to Section 6.1.3.1 for any prior Adjustment
Period, Net Profit from Operations shall be allocated to them to offset such
previously allocated Net Loss from Operations in proportion to their respective
shares of the Net Loss from Operations being offset;
6.1.2.2 second, to the General Partner and the Class A Limited Partner
in proportion to their Preferred Returns for such Adjustment Period and all
previous Adjustment Periods until the aggregate amount allocated to each such
Partner pursuant to this Section 6.1.2.2 and Sections 6.1.2.1.4, 6.1.4.1 (but
only to the extent attributable to Section 6.1.3.2) 6.1.4.3 and 6.1.4.4, net of
any Net Loss from Operations and any Net Loss from Capital Transactions
previously allocated to such Partner pursuant to Sections 6.1.3 and 6.1.5 and
not offset by previous allocations of Net Profit from Operations and Net Profit
from Capital Transactions pursuant to Sections 6.1.2 and 6.1.4, is equal to such
Partner's cumulative Preferred Return since the inception of the Partnership;
and then
6.1.2.3 third, the balance, if any, to the Partners in accordance with
their Primary Sharing Ratios.
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6.1.3 Allocation of Net Loss from Operations. Net Loss from Operations
for any Adjustment Period shall be allocated in the following order and
priority:
6.1.3.1 first, to the extent Net Profit from Operations has been
allocated pursuant to Section 6.1.2.3 for prior Adjustment Periods, Net Loss
from Operations shall be allocated among the Partners to offset such previously
allocated Net Profit from Operations in proportion to their respective shares of
Net Profit from Operations being offset;
6.1.3.2 second, to the General Partner and the Class A Limited Partner
in proportion to and to the extent of their respective Preferred Return
Accounts;
6.1.3.3 third, to the Class A Limited Partner to the extent of the
Class A Limited Partner Additional Contribution Account;
6.1.3.4 fourth, to the Partners in proportion to and to the extent of
their respective Equity Contribution Accounts; and then
6.1.3.5 fifth, the balance, if any, to the General Partner.
6.1.4 Allocation of Net Profit from Capital Transactions. Net Profit
From Capital Transactions for any Adjustment Period shall be allocated in the
following order and priority:
6.1.4.1 first, to the extent that (i) the amount of Net Loss from
Operations previously allocated to any Partner pursuant to Section 6.1.3 and
(ii) the aggregate amount distributed, in the case of the General Partner and
the Class A Limited Partner, to such Partner pursuant to Sections 7.3.2, 7.3.3
and, in the case of the Class B Limited Partner, to such Partner pursuant to
Sections 7.3.4 (but only to the extent that the amount so distributed does not
exceed the Class B Limited Partner Equity Contribution) and 7.3.5, exceeds the
amount of Net Profit from Operations previously allocated to such Partner (for
the current and all previous Adjustment Periods) pursuant to Section 6.1.2, Net
Profit from Capital Transactions shall be allocated to such Partner (pro rata in
proportion to and to the extent of such excess if such allocations were made to
more than one Partner);.
6.1.4.2 second, to the extent that any Net Loss from Capital
Transactions has been allocated to the Partners pursuant to Sections 6.1.5.5,
6.1.5.6 and 6.1.5.7, for prior Adjustment Periods, Net Profit from Capital
Transactions shall be allocated to them to offset such previously allocated Net
Loss from Capital Transactions in the inverse order in which such Net Loss was
so allocated;
6.1.4.3 third, to the extent that any Net Loss from Capital
Transactions has been allocated to the General Partner and the Class A Limited
Partner pursuant to Section 6.1.5.4 for prior Adjustment Periods, Net Profit
from Capital Transactions shall be allocated to them to offset such previously
allocated Net Loss from Capital Transactions (in proportion to their respective
shares of Net Loss from Capital Transactions being offset);
6.1.4.4 fourth, to the General Partner and the Class A Limited Partner
in proportion to their Preferred Returns for such Adjustment Period and all
19
previous Adjustment Periods until the aggregate amount allocated to each such
Partner pursuant to this Section 6.1.4.4 and Sections 6.1.2.1.4, 6.1.2.2,
6.1.4.1 (but only to the extent attributable to Section 6.1.3.2) and 6.1.4.3,
net of any Net Loss from Operations and any Net Loss from Capital Transactions
previously allocated to such Partner pursuant to Sections 6.1.3 and 6.1.5 and
not offset by previous allocations of Net Profit from Operations and Net Profit
from Capital Transactions pursuant to Sections 6.1.2 and 6.1.4, is equal to such
Partner's cumulative Preferred Return since the inception of the Partnership;
6.1.4.5 fifth, to the Partners in accordance with their Residual
Sharing Ratios until the Partners have been allocated Net Profit from Capital
Transactions pursuant to this Section 6.1.4.5 equal to the amount distributed
(or that would be distributed, if cash equal to the amount to be allocated
pursuant to this Section 6.1.4.5 were available for distribution) in accordance
with their Residual Sharing Ratios pursuant to Section 7.3.4 (but, in the case
of the Class B Limited Partner, only to the extent that such distributions
exceed the Class B Limited Partner Equity Contribution); and then
6.1.4.6 sixth, to the Partners in accordance with their Secondary
Sharing Ratios.
6.1.5 Allocation of Net Loss from Capital Transactions. Net Loss from
Capital Transactions for any Adjustment Period shall be allocated in the
following order and priority:
6.1.5.1 first, to the extent that the amount of Net Profit from
Operations previously allocated to any Partner pursuant to Section 6.1.2 exceeds
(i) the amount of Net Loss from Operations previously allocated to such Partner
pursuant to Section 6.1.3 and (ii) the aggregate amount distributed, in the case
of the General Partner and the Class A Limited Partner, to such Partner pursuant
to Sections 7.3.2 and 7.3.3 and, in the case of the Class B Limited Partner, to
such Partner pursuant to Sections 7.3.4 (but only to the extent that the amount
so distributed does not exceed the Class B Limited Partner Equity Contribution)
and 7.3.5, Net Loss from Capital Transactions shall be allocated to such Partner
(pro rata in proportion to and to the extent of such excess if such allocations
were made to more than one Partner);
6.1.5.2 second, to the extent Net Profit from Capital Transactions has
been allocated to the Partners pursuant to Section 6.1.4.6 for prior Adjustment
Periods, Net Loss from Capital Transactions shall be allocated to them to offset
such previously allocated Net Profit from Capital Transactions in proportion to
their respective shares of Net Profit from Capital Transactions being offset;
6.1.5.3 third, to the extent Net Profits from Capital Transactions has
been allocated to the Partners pursuant to Section 6.1.4.5 for prior Adjustment
Periods, Net Loss from Capital Transactions shall be allocated to them to offset
such previously allocated Net Profit from Capital Transactions in proportion to
their respective shares of Net Profit from Capital Transactions being offset;
6.1.5.4 fourth, to the General Partner and the Class A Limited Partner
in proportion to and to the extent of their respective Preferred Return
Accounts;
20
6.1.5.5 fifth, to the Class A Limited Partner to the extent of the
Class A Limited Partner Additional Contribution Account;
6.1.5.6 sixth, to the Partners in proportion to and to the extent of
their respective Equity Contribution Accounts; and then
6.1.5.7 seventh, the balance, if any, to the General Partner.
Section 6.2 Allocations of Profits or Losses for the Taxable Year of
Liquidation of the Partnership. Notwithstanding the other provisions of this
Article 6 (other than Section 6.7), the Net Profits or Net Losses of the
Partnership for the taxable year of liquidation of the Partnership shall be
allocated (and such allocations shall be taken into account in determining the
final liquidating distributions of the Partnership), to the extent possible, in
a manner such that the Capital Account of each Partner immediately prior to the
final liquidating distribution is equal to the amount which would have been
distributable to such Partner under Article 7 hereof (if Article 7 applied to
such final liquidating distribution without regard to Section 7.4), so that the
distribution of positive Capital Account balances pursuant to Section 7.4 will,
to the maximum extent possible, be in the same amounts if the distribution had
been made under Article 8 without regard to Section 7.4; provided, however, that
the allocation of any Net Losses to the Class B Limited Partner hereunder shall
be made only to the extent permitted by the requirements of Section 514(c)(9)(E)
of the Code.
Section 6.3 Limitation on Allocation of Net Losses. Notwithstanding the
provisions of Sections 6.1.3 or 6.1.5 hereof, (A) if the amount of Net Loss for
any Adjustment Period that would otherwise be allocated to the Limited Partner
under Section 6.1.3 or 6.1.5 hereof would cause or increase an Adjusted Capital
Account Deficit of the Limited Partner as of the last day of such Adjustment
Period, then an amount of such Net Loss equal to the amount which would cause or
increase such Adjusted Capital Account Deficit shall be allocated to the General
Partner, and the remainder of such Net Loss, if any, shall be allocated to the
Limited Partners; provided that whenever a Qualified Organization is a Limited
Partner this limitation on the Net Losses which may be allocated to the Limited
Partners is intended to comply with Section 1.514(c)-2(h) of the Regulations
(regarding provisions preventing deficit capital account balances), or any
similar successor provision, and shall be applied consistently therewith and in
accordance with Section 6.8 hereof; and (B) pursuant to Section 6.8, Net Loss
shall be allocated to the General Partner only to the extent permitted by
Sections 1.514(c)-2(e), (f) and (g) of the Regulations.
Section 6.4 Special Allocations. The following special allocations
shall be made in the following order before allocations of Net Profit or Net
Loss are made:
6.4.1 Minimum Gain Chargeback. Notwithstanding any other provision of
this Agreement to the contrary, if in any Adjustment Period there is a net
decrease in Partnership Minimum Gain, then each Partner shall first be allocated
items of Gross Income for such Adjustment Period (and, if necessary, subsequent
Adjustment Periods) in an amount equal to the portion of such Partner's share of
the net decrease in Partnership Minimum Gain, determined in accordance with
Regulations Section 1.704-2(g), that is attributable to the disposition of
Partnership property subject to one or more nonrecourse liabilities of the
21
Partnership that are not Partner Nonrecourse Debts; provided, however, if there
is insufficient Gross Income in an Adjustment Period to make the above
allocation for all Partners for such Adjustment Period, the Gross Income shall
be allocated among the Partners in proportion to the respective amounts they
would have been allocated had there been an unlimited amount of Gross Income for
such Adjustment Period.
6.4.2 Minimum Gain Chargeback for Partner Nonrecourse Debt.
Notwithstanding any other provision of this Agreement to the contrary other than
Section 6.4.1, if in any Adjustment Period there is a net decrease in Partner
Nonrecourse Debt Minimum Gain, then each Partner shall first be allocated items
of Gross Income for such Adjustment Period (and, if necessary, subsequent
Adjustment Periods) in an amount equal to the portion of such Partner's share of
the net decrease in such Minimum Gain during such Adjustment Period (as
determined in accordance with Regulations Section 1.704-2(i)) attributable to
the disposition of Partnership property subject to one or more Partner
Nonrecourse Debts; provided, however, if there is insufficient Gross Income in
an Adjustment Period to make the above allocation for all Partners for such
year, the Gross Income shall be allocated among the Partners in proportion to
the respective amounts they would have been allocated had there been an
unlimited amount of Gross Income for such Adjustment Period.
6.4.3 Qualified Income Offset. After application of Sections 6.4.1 and
6.4.2, if in any taxable year the Limited Partner unexpectedly receives any
adjustment, allocation or distribution described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, and if the Limited
Partner has an Adjusted Capital Account Deficit, items of Gross Income shall be
allocated to the Limited Partner in the amount and in the manner sufficient to
eliminate such Adjusted Capital Account Deficit as quickly as possible;
provided, however, that an allocation pursuant to this Section 6.4.3 shall be
made only if and to the extent that the Limited Partner would have an Adjusted
Capital Account Deficit after all other allocations provided for in this Article
6 have been tentatively made as if this Section 6.4.3 were not in this
Agreement.
6.4.4 Partnership Nonrecourse Deductions. Partnership Nonrecourse
Deductions for any Adjustment Period shall be allocated among the Partners in
proportion to their respective Primary Sharing Ratios.
6.4.5 Partner Nonrecourse Deductions. Partner Nonrecourse Deductions
for any Adjustment Period or other period shall be allocated to the Partner who
bears the economic risk of loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable.
Section 6.5 Curative Allocations. In the event that any Gross Income,
Net Profit (or items thereof), Net Loss (or items thereof) are allocated
pursuant to Sections 6.3 or 6.4 subsequent Gross Income, Net Profit (or items
thereof), or Net Loss (or items thereof) will first be allocated (subject to
Sections 6.3 and 6.4) to the Partners in a manner that will result in each
Partner having a Capital Account balance equal to that which would have resulted
if the original allocation of Gross Income, Net Profit (or items thereof), Net
Loss (or items thereof) or deductions pursuant to Sections 6.3 or 6.4 had not
occurred; provided, however, no allocations pursuant to this Section 6.5 that
are intended to offset allocations pursuant to Sections 6.4.1 or 6.4.2 shall be
22
made prior to the taxable year during which there is a net decrease in Partner
Nonrecourse Debt Minimum Gain or Partnership Minimum Gain, and then only to the
extent necessary to avoid any potential economic distortions caused by such net
decrease in Partner Nonrecourse Debt Minimum Gain or Partnership Minimum Gain,
and no such allocation pursuant to this Section 6.5 shall be made to the extent
that the General Partner reasonably determines that it is likely to duplicate a
subsequent mandatory allocation pursuant to Section 6.4.1 or 6.4.2.
Section 6.6 Tax Allocations - Code Section 704(c). In accordance with
Code Section 704(c) and the related Regulations, income, gain, loss and
deduction with respect to any property contributed to the capital of the
Partnership will be allocated, solely for tax purposes, among the Partners so as
to take account of any variation between the adjusted basis to the Partnership
of the property for federal income tax purposes and the Book Value of the
property. Any elections or other decisions relating to allocations under this
Section 6.6 will be made in any manner that the General Partner with the
Approval of the Limited Partner determines reasonably reflects the purpose and
intention of this Agreement. Allocations under this Section 6.6 are solely for
purposes of federal, state and local taxes and will not affect, or in any way be
taken into account in computing, any Partner's Capital Account or share of Net
Profit, Net Loss or other items or distributions under any provision of this
Agreement.
Section 6.7 Other Allocation Rules. For purposes of determining the Net
Profit, Net Loss, or any other item allocable to any period, Net Profit, Net
Loss, and any such other item shall be determined on a daily, monthly, or other
basis, as determined by the General Partner with the Approval of the Limited
Partner using any permissible method under Section 706 of the Code and the
Regulations thereunder.
Section 6.8 Compliance with Section 514 of the Code. It is the intent
of the Partners that the tax allocations of the Partnership will meet the
requirements for "substantial economic effect" of Section 704 of the Code and
the Treasury Regulations or similar authority promulgated thereunder, and
further that whenever a Qualified Organization is a Partner the allocations will
satisfy the provisions of Section 514(c)(9)(E) of the Code, or any similar
successor provision. The allocations set forth herein shall be interpreted
consistently with the foregoing intent, and shall be amended, if necessary, in
order to accomplish this purpose; provided, however, that if the Partnership
does not have a Qualified Organization as a Partner or does not incur
"acquisition indebtedness" within the meaning of Section 514(c) of the Code,
then the allocations of Profits and Losses shall not be affected by any
provision in this Article 6 which, if applicable, would alter the otherwise
applicable allocation of Profits and Losses to comply with Section 514(c)(9)(E)
of the Code.
ARTICLE 7
DISTRIBUTIONS
Section 7.1 Definitions.
7.1.1 Operating Cash Flow Defined. For the purposes of this Article 7,
the cash flow available for distribution by the Partnership with respect to
operations ("Operating Cash Flow") for any Fiscal Year shall be deemed to mean
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the amount by which gross cash receipts from operations (excluding cash proceeds
from Capital Transactions and any security or lease deposits until forfeited or
otherwise applied to rent due under the Leases, but including excess reserves,
if any, carried over from the prior Fiscal Year to the extent hereinafter
provided) of the Partnership during such Fiscal Year exceed the aggregate of (i)
all operating costs and expenses (not including interest on borrowed money) of
the Partnership paid in cash during such Fiscal Year (without deduction for any
charge for cost recovery, depreciation or other expenses not paid in cash), (ii)
the cost of debt service, including both principal and interest and any
applicable fees and penalties under any indebtedness permitted herein, paid
during such Fiscal Year, (iii) any reasonable amounts that are customary in the
location in which the Project are located and which the Partnership requires for
working capital, and (iv) the amount of any reserves that are customary in the
locations in which the Project is located as determined by the General Partner
based upon the reasonably foreseeable cash needs of the Partnership. Any amounts
previously set aside as reserves shall be additions to Operating Cash Flow when
such reserves are no longer necessary to the proper conduct of the affairs of
the Partnership.
7.1.2 Extraordinary Cash Flow Defined. The cash proceeds (including any
applicable condemnation, insurance and refinancing proceeds) realized by the
Partnership as a result of a Capital Transaction, increased by the cash interest
payments received on such proceeds, decreased by the sum of the following: (i)
the amount of such proceeds used, set aside or committed by the Partnership for
immediate restoration and repair of any of the Projects; (ii) any additions to
the reserve for taxes and insurance premiums that are customary in the location
in which the Project is located; and (iii) any expenses, costs or liabilities
incurred by the Partnership in effecting or obtaining any such Capital
Transaction or the proceeds thereof (including, without limitation, reasonable
attorneys' and accountants' fees, court costs, brokerage fees, commissions,
recording fees, and transfer taxes), all of which expenses, costs and
liabilities shall be paid from the gross amount of such cash proceeds to the
extent thereof.
Section 7.2 Distribution of Operating Cash Flow. Except as provided in
Section 7.4, Operating Cash Flow shall be distributed by the Partnership in the
following order of priority:
7.2.1 To the General Partner and the Class A Limited Partner pro rata
to the extent of the outstanding balance in the General Partner Preferred Return
Account and the Class A Limited Partner Preferred Return Account, respectively;
and then
7.2.2 To the Partners pro rata in accordance with their Primary Sharing
Ratios.
Not later than sixty (60) days following the end of each Fiscal Year, the
General Partner shall prepare an accounting of the respective amounts
distributed and distributable to the Partners for such Fiscal Year pursuant to
this Section 7.2. Any Partner who has received, in respect of such Fiscal Year,
an aggregate amount pursuant to this Section 7.2 in excess of the amount to
which it is entitled under such accounting shall forthwith return such excess to
the Partnership. If the Partnership has, in respect of such Fiscal Year,
distributed to any Partner pursuant to this Section 7.2 an aggregate amount
which is less than the amount distributable to such Partner pursuant to such
accounting, the Partnership shall forthwith distribute the amount of such
shortfall to such Partner.
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Section 7.3 Distributions of Extraordinary Cash Flow. Except as
provided in Section 7.4, Extraordinary Cash Flow shall be distributed by the
Partnership in the following order of priority:
7.3.1 To the General Partner and the Class A Limited Partner pro rata
to the extent of the outstanding balance in the General Partner Preferred Return
Account and the Class A Limited Partner Preferred Return Account, respectively;
7.3.2 To the General Partner and the Class A Limited Partner pro rata
to the extent of the outstanding balance in the General Partner Equity
Contribution Account and the Class A Limited Partner Equity Contribution
Account, respectively;
7.3.3 To the Class A Limited Partner to the extent of the balance in
the Class A Limited Partner Additional Contribution Account;
7.3.4 To the Partners pro rata in accordance with their Residual
Sharing Ratios until the General Partner and the Class A Limited Partner have
each received an eighteen percent (18%) IRR;
7.3.5 To the Class B Limited Partner to the extent of the outstanding
balance in the Class B Limited Partner Equity Contribution Account; and then
7.3.6 To the Partners pro rata in accordance with their Secondary
Sharing Ratios.
Distributions pursuant to this Section 7.3 shall be paid by the Partnership to
the Partners within thirty (30) days following the event giving rise to
Extraordinary Cash Flow.
Section 7.4 Distributions in Liquidation. Distributions in connection
with the liquidation and winding up of the Partnership shall be made in the
following order or priority:
7.4.1 To the reasonable expenses incurred in dissolution and
termination;
7.4.2 To the payment of creditors of the Partnership (excluding the
lender under the Loan and Partners) but excluding secured creditors whose
obligations will be assumed or otherwise transferred on a liquidation of the
Partnership property or assets;
7.4.3 In accordance with the provisions of Sections 7.3.1 through 7.3.6
(provided that the amounts to be distributed pursuant to this Section 7.4.3 to a
Partner shall not exceed the positive Capital Account balance of such Partner as
determined for the purposes of Section 7.4.4); and
7.4.4 To the Partners in proportion to the positive balances of their
Capital Accounts after Capital Accounts have been adjusted for the allocation of
Gross Income, Net Profit and Net Loss (and items thereof), and for the amount of
any prior distributions, for the Fiscal Year during which such liquidation
occurs.
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Section 7.5 In-Kind Distribution. Except as otherwise provided herein,
assets of the Partnership (other than cash) shall not be distributed in kind to
the Partners unless Approved by all Partners. If any assets of the Partnership
are distributed to the Partners in kind, such assets shall be valued on the
basis of the fair market value thereof on the date of distribution, and any
Partner entitled to any interest in such assets shall receive such interest as a
tenant-in-common with the other Partner. The fair market value of such assets
shall be determined by an independent appraiser Approved by all Partners.
ARTICLE 8
TRANSFER OF PARTNERSHIP INTERESTS; SALE OF
PROJECTS WITHIN FOUR YEARS
Section 8.1 Restrictions on Transfer of Partnership Interests.
8.1.1 Consent Required. Except as provided in this Article 8, no
Partner may, without the consent of the other Partners (which consent may be
withheld in the sole discretion of any of the other Partners), sell, convey,
transfer, assign, mortgage, pledge, hypothecate or otherwise encumber in any way
(hereinafter referred to as a "Transfer") all or any portion of its Partnership
Interest or any interest it may have in any property of the Partnership or
withdraw or retire from the Partnership. Any such attempted transfer, withdrawal
or retirement not permitted hereunder shall be null and void.
8.1.2 No Defaults. Notwithstanding anything to the contrary in this
Agreement, at law or in equity, no Partner shall transfer or otherwise deal with
any Partnership Interest in a way that would cause a default under any agreement
to which the Partnership is a party or by which it is bound, provided that such
Partner consented to such agreement prior to its execution.
8.1.3 Permitted Transfers by the Limited Partner. Without the consent
of the General Partner, any Limited Partner may transfer all or any portion of
its Partnership Interest to any Affiliate of such Limited Partner; provided,
however, that any such transfer shall be reported to the General Partner at
least ten (10) days prior to the transfer.
Section 8.2 Right of First Refusal. For purposes of this Section 8.2,
except as provided in Sections 8.2.5 and 8.2.6 the General Partner and the Class
A Limited Partner shall be treated as one Partner.
8.2.1 Offering Notice. If any Partner desires to transfer all (but not
less than all) of its Partnership Interest, then except as provided in Section
8.2.7, such Partner (the "Selling Partner") shall notify ("Offering Notice") the
other Partner ("Non-selling Partner") of its intention to do so. The Offering
Notice shall specify the nature of the transfer, the consideration to be
received therefor, the identity of the proposed purchaser (or lender, as the
case may be), the terms upon which it intends to undertake such transfer, and
shall include a photocopy of the agreement or commitment letter, if any,
relating to such transfer.
8.2.2 Non-selling Partner's Response. The Non-selling Partner shall
have the right to elect to purchase from the Selling Partner all (but not less
than all) of the Partnership Interest referred to in the Offering Notice at the
same price on the same terms as specified in the Offering Notice for a period of
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thirty (30) days after the giving of the Offering Notice (or make the loan, if
the same involves an encumbrance, hypothecation or mortgage, upon the same terms
on which said loan was to be made therefor) by delivering in writing to the
Selling Partner an offer to purchase (or loan) that portion of the Partnership
Interest of the Selling Partner covered by the Offering Notice. To the extent
that the consideration to be received by the Selling Partner consists of
anything other than cash, the Auditor shall determine the fair market value
thereof and the price payable by the Non-selling Partner shall include cash
equal to such fair market value rather than the non-cash consideration.
8.2.3 Non-selling Partner's Failure to Respond; Rejection. If within
such thirty (30) day period, the Non-selling Partner does not make such
election, then the Selling Partner, within sixty (60) days after the expiration
of said thirty (30) day period, may undertake and complete the transfer to any
Person the identity of which was disclosed in the Offering Notice but only on
the terms disclosed in the Offering Notice. If the Selling Partner does not then
consummate the original proposed transfer within ninety (90) days after the date
of the Offering Notice, or within the time scheduled for closing by the
purchasing Person, whichever is earlier, then all restrictions of this Section
8.2 shall apply as though no Offering Notice had been given.
8.2.4 Non-selling Partner's Acceptance. If the Non-selling Partner
elects within such thirty (30) day period to purchase the interest of the
Selling Partner on the terms outlined in the Offering Notice, the parties shall
consummate the purchase by the Non-selling Partner of said Partnership Interest,
on the terms and conditions set forth in the Offering Notice of the Selling
Partner (or if the same involves a mortgage, encumbrance or other hypothecation,
the loan shall be consummated upon the terms and conditions of the loan set
forth in the Offering Notice) within forty-five (45) days after such election.
8.2.5 Effect of Transfer of the Partnership Interest of General
Partner. The transferee of the Partnership Interest of the General Partner shall
be admitted as the general partner under this Agreement, and thereafter all
references under this Agreement to the General Partner shall refer to such
transferee.
8.2.6 Restriction on Transfer of Partnership Interest of a Limited
Partner Notwithstanding any provision of Section 8.2 or 8.3 to the contrary, no
transferee of all or any portion of the Partnership Interest of a Limited
Partner shall be admitted as a substituted limited partner under this Agreement
without the consent of the General Partner which consent may not be unreasonably
withheld. Any transferee which is not admitted as a substituted limited partner
shall have no voting rights or other approval rights hereunder and shall be
treated as an assignee under the Act but shall have the right to such
distributions and allocations to which the holder of the transferred interest is
entitled. If at the time of the transfer the General Partner has the right to
call for Additional Capital Contributions for which such Limited Partner may be
liable hereunder, such Limited Partner shall remain liable for such Contribution
unless the transferee posts sufficient security to cover such calls or the
General Partner and the Class B Limited Partner waive security based on the
financial condition of the transferee, such waiver not to be unreasonably
withheld.
8.2.7 Offer From a Competitor. If at any time the General Partner and
the Class A Limited Partner desire to sell all (and they shall not have the
right to sell less than all without the consent of the Class B Limited Partner,
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which consent may be withheld in the sole discretion of the Class B Limited
Partner) of their Partnership Interests to a Competitor, they shall cause such
Competitor to specify the amount that it would be willing to pay for the
Partnership Interests of all of the Partners, including the Class B Limited
Partner (the "Aggregate Purchase Price"). Thereupon, the General Partner shall
determine the amount that each Partner would receive if the Partnership were to
liquidate and sell all of its assets, pay all of its liabilities, and distribute
the Aggregate Purchase Price to the Partners pursuant to Sections 7.4.3 and
7.4.4, and any offer from such Competitor to purchase the Partnership Interests
of the General Partner and the Class A Limited Partner shall also include an
offer to purchase the Partnership Interest of the Class B Limited Partner, in
each case for a price equal to the amount such Partner would receive upon such
liquidating distribution. The receipt of such offer by the Class B Limited
Partner shall constitute the Offering Notice referred to in Section 8.2.1, and
the Class B Limited Partner shall have the right to (i) elect to purchase the
Partnership Interests of the General Partner and the Class A Limited Partner
pursuant to Sections 8.2.2 and 8.2.4, (ii) accept the offer to sell its
Partnership Interest to such Competitor in accordance with the terms of such
offer, or (iii) continue as a Partner with the same Partnership Interest that it
had before such offer.
Section 8.3 General Transfer Provisions. All transfers shall be by
instruments in form and substance satisfactory to counsel for the Partnership
containing an obligation by the assignee to accept and assume all of the terms
and provisions of this Agreement, as the same may have been amended, and shall
provide for the payment by assignor of all reasonable expenses incurred by the
Partnership in connection with such assignment, including but not limited to the
necessary amendments to this Agreement to reflect such transfer. The transferor
shall execute and acknowledge all such instruments, in form and substance
reasonably satisfactory to the Partnership's counsel, as may be deemed necessary
or desirable to effectuate such transfer. In no event shall the Partnership
dissolve or terminate upon the admission of any Partner to the Partnership or
upon any permitted assignment of a Partnership Interest by any Partner provided
such assignment or transfer is made in accordance with the provisions of this
Agreement. Each Partner hereby waives its right to dissolve, liquidate or
terminate the Partnership in such event. In the event of any transfer pursuant
to this Article 8, the Partnership Interest so transferred shall remain subject
to all restrictions and rights contained in this Article 8.
Section 8.4 Tax Allocations and Cash Distributions. If a Partnership
Interest is transferred, the Gross Income, Net Profit or Net Loss (not arising
as a result of a Capital Transaction) allocable to the holder of such
Partnership Interest for the then Fiscal Year shall be allocated proportionately
between the transferor and the transferee based upon the number of days during
such Fiscal Year for which each party was the owner of the transferred
Partnership Interest. However, if either the transferor or the transferee
requests that such Gross Income, Net Profit or Net Loss be allocated based upon
an interim closing of the Partnership's books and agrees to pay all expenses
incurred by the Partnership in connection therewith and so notify the
non-transferring Partner, then all such Gross Income, Net Profit or Net Loss
(not arising as a result of a Capital Transaction) shall be allocated between
the transferor and transferee based upon an interim closing of the Partnership's
books and records. Gross Income, Net Profit or Net Loss arising as a result of a
Capital Transaction shall be allocated between the transferor and transferee
based upon an interim closing of the Partnership's books and records. The
transferor shall be entitled to all cash distributed by the Partnership on or
prior to the date of transfer, and the transferee shall be entitled to all cash
distributed by the Partnership after the date of transfer.
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Section 8.5 Sale of Project.
8.5.1 Offer to Sell. If at any time the General Partner desires that
any one or more Projects (collectively, the "Offered Project") be sold, it shall
so notify the Class B Limited Partner, setting forth the price, and the other
terms and conditions, upon which it desires that the Offered Project be listed
for sale (the "Listing Notice"). The Class B Limited Partner shall have the
option, to be exercised by written notice to the General Partner within sixty
(60) days after receipt of the Listing Notice (the "Class B Limited Partner
Option Period"), (i) to purchase (or cause one or more of its Affiliates to
purchase or designate a title holder at closing), the Offered Project at the
price, and upon the other terms and conditions, set forth in the Listing Notice,
or (ii) to submit a written offer to purchase the Offered Project at such price,
and upon such other terms and conditions, as it determines (the "Class B Limited
Partner Offer"). The General Partner shall have thirty (30) days within which to
accept the Class B Limited Partner Offer, if any.
8.5.2 Listing of Offered Project. If the Class B Limited Partner (i)
does not exercise its option to purchase (or cause one or more of its Affiliates
to purchase) the Offered Project or submit the Class B Limited Partner Offer
pursuant to Section 8.5.1 or (ii) if the General Partner does not accept the
Class B Limited Partner Offer as provided in Section 8.5.1, then the General
Partner shall list the Offered Project for sale, and shall use its best efforts
to sell the Offered Project, at a price which is at least equal to, and upon
other terms and conditions which are at least as favorable to the Partnership
as, the price and other terms and conditions set forth in the Listing Notice.
The Class B Limited Partner shall not disclose to any other Person the reason
why it did not exercise its option to purchase the Offered Project or any of the
terms of the Class B Limited Partner Offer if there was such an offer. If the
General Partner fails to enter into a contract for the sale of the Offered
Project within six (6) months after the expiration of the Class B Limited
Partner Option Period, the General Partner shall reissue the Listing Notice to
the Class B Limited Partner and the provisions of Section 8.5.1 shall apply
thereto.
8.5.3 Offer for Offered Project. If the Partnership receives an offer
to purchase the Offered Project which is acceptable to the General Partner (the
"Third Party Offer"), then the following shall apply:
8.5.3.1 If either (i) the Class B Limited Partner has submitted the
Class B Limited Partner Offer and the Third Party Offer is for a price which is
greater than the price contained in the Class B Limited Partner Offer and the
other terms and conditions of the Third Party Offer are not materially less
favorable to the Partnership than those set forth in the Class B Limited Partner
Offer, or (ii) the Class B Limited Partner has not submitted the Class B Limited
Partner Offer and the Third Party Offer is at a price which is not less than
ninety-five percent (95%) of the price set forth in the Listing Notice or upon
other terms and conditions which are not materially less favorable to the
Partnership than the terms and conditions set forth in the Listing Notice, then
the Offered Project may be sold pursuant to the Third Party Offer;
8.5.3.2 If either (i) the Class B Limited Partner has submitted the
Class B Limited Partner Offer and the price contained in the Third Party Offer
is not greater than, or the other terms and conditions of the Third Party Offer
are materially less favorable to the Partnership than, the price or other terms
29
and conditions set forth in the Class B Limited Partner Offer, or (ii) the Class
B Limited Partner has not submitted the Class B Limited Partner Offer and the
Third Party Offer is at a price which is less than ninety-five percent (95%) of
the price set forth in the Listing Notice or upon other terms and conditions
which are materially less favorable to the Partnership than the other terms and
conditions set forth in the Listing Notice, then the General Partner shall be
deemed to have submitted a new Listing Notice to the Class B Limited Partner at
such price, and upon such other terms and conditions, and the provisions of
Section 8.5.1 shall apply thereto, except that the Class B Limited Partner
Option Period shall be ten (10) days rather than sixty (60) days, and if the
Class B Limited Partner does not exercise its option within such ten (10) day
period, the Partnership may sell such Project pursuant to the Third Party Offer.
8.5.3.3 If a contract for the sale of the Offered Project is entered
into pursuant to a Third Party Offer and thereafter a reduction in price, or
change in other terms and conditions, is agreed to in good faith by the General
Partner (the "Revised Third Party Offer") and such reduction or change, if part
of the Third Party Offer originally, would have triggered the application of
Section 8.5.3.2, then Section 8.5.3.2 shall apply to the Revised Third Party
Offer except that (i) the Class B Limited Partner Option Period shall be five
(5) days rather than ten (10) days, (ii) any exercise by the Class B Limited
Partner of its option to purchase the Offered Project shall be accompanied by an
xxxxxxx money deposit equal to the xxxxxxx money deposit previously made
pursuant to the Third Party Offer plus any additional amount required to be
deposited pursuant thereto at the end of the due diligence period, and (iii)
regardless of any provision in the Revised Third Party Offer that might permit
the prospective purchaser to cancel the contract for the purchase of the Offered
Project and receive a refund of all xxxxxxx money deposited, the exercise of
such option shall constitute a binding obligation of the Class B Limited Partner
cancelable only in the event of a default by the Partnership.
8.5.4 Closing of Sale. If the Class B Limited Partner exercises its
option to purchase the Offered Project, the purchase shall be consummated at the
office of the Partnership in accordance with the terms and conditions set forth
in the Listing Notice, the Third Party Offer or the Revised Third Party Offer,
as the case may be, but in no event less than ninety (90) days after the date
the option is exercised unless the parties agree to an earlier closing.
8.5.5 Sale Without Approval. If the Class B Limited Partner exercises
its option pursuant to Section 8.5.1, 8.5.3.2 or 8.5.3.3, but the sale of the
Offered Project is not consummated as provided in Section 8.5.4 for any reason
other than the Partnership's default, then the Offered Project may be sold to
any third party, other than an Affiliate of the General Partner, at any price,
and upon any other terms and conditions, that are acceptable to the General
Partner without any need to comply with the provisions of Sections 8.5.1 through
8.5.4.
8.5.6 Partial Sale. Anything herein to the contrary notwithstanding, if
the Offered Project consists of more than one Project, then unless the General
Partner agrees, the Class B Limited Partner shall exercise its option under
8.5.1, if at all, as to all (but not less than all) of such Projects.
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ARTICLE 9
TERMINATION OF THE PARTNERSHIP
Section 9.1 Events of Dissolution. The Partnership shall dissolve upon
the first to occur of the following events:
9.1.1 The expiration of the term of the Partnership as provided in
Section 2.7; or
9.1.2 Any other event of dissolution specified in the Act.
Section 9.2 Effect of Dissolution. Upon dissolution of the Partnership
pursuant to Section 9.1, the Partnership shall not terminate but shall continue
solely for the purposes of liquidating all of the assets owned by the
Partnership (until all such assets have been sold or liquidated) and collecting
the proceeds from such sales and all receivables of the Partnership until the
same have been collected or written off as uncollectible. Upon dissolution, the
Partnership shall engage in no further business thereafter other than that
necessary to cause the Project to be operated on an interim basis and for the
Partnership to collect its receivables, liquidate its assets and pay or
discharge its liabilities.
Section 9.3 Sale of Assets by Liquidating Trustee. Upon dissolution of
the Partnership, the General Partner shall, as "Liquidating Trustee", proceed
diligently to wind up the affairs of the Partnership and distribute its assets
in accordance with the Act and this Agreement
Section 9.4 Compliance with Timing Requirements of Regulations.
Notwithstanding anything in this Article 9 to the contrary, in the event the
Partnership is "liquidated" within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), distributions will be made to the Partners who have
positive Capital Account balances pursuant to Section 7.4 in a manner that
complies with Regulations Section 1.704-1(b)(2)(ii)(b)(2). However, a
liquidation occurring as a result of a Partnership termination, as defined in
Section 708(b)(1)(B) of the Code, will not require an actual distribution of
Partnership assets, but will instead be treated as a constructive liquidation
and reformation in the manner described in Regulations Section
1.708-1(b)(1)(iv).
ARTICLE 10
MISCELLANEOUS
Section 10.1 Notices. All notices required or permitted by this
Agreement shall be in writing and may be delivered in person or by facsimile to
any party or may be sent by registered or certified mail, with postage prepaid,
return receipt requested, or may be sent by Federal Express or other commercial,
overnight carrier, and addressed as follows:
If to the Partnership, Invesco Realty Advisors
the General Partner or One Lincoln Centre, Suite 700
the Class A Limited Partner: 0000 XXX Xxxxxxx, XX-0
Xxxxxx, Xxxxx 00000
Attention: Xxx Xxxxxxxx
Fax: 972/000-0000
with copies to: X'Xxxxxx & Xxxxxx LLC
000 X. Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxx
Fax: 312/000-0000
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If to the Class B Limited Partner: Brandywine Operating Partnership, L.P.
00 Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx Xxxxxx, Xxxxxxxxxxxx 00000
Attention: President and Chief Executive
Officer and General Counsel
Fax: 000-000-0000
or to such other address as shall, from time to time be supplied in writing by
any party to the others. Notice sent by registered or certified mail, postage
paid, with return receipt requested, addressed as above provided, shall be
deemed given when received, or delivery has been attempted and refused by the
addressee. If any notice is sent by Federal Express or other commercial,
overnight carrier, the same shall be deemed given on the day following the day
on which such notice is deposited with such carrier. Any notice or other
document sent or delivered in any other manner shall be effective only if and
when received.
Section 10.2 Successors and Assigns. Subject to the restrictions on
transfer set forth herein, this Agreement shall bind and inure to the benefit of
the parties hereto and their respective legal representatives, permitted
successors and assigns.
Section 10.3 Waiver of Partition. Unless otherwise expressly authorized
in this Agreement, neither Partner will, either directly or indirectly, take any
action to require partition or appraisement of the Partnership or of any of its
assets or properties or cause the sale of any Partnership property, and
notwithstanding any provisions of applicable law to the contrary, each Partner
(and its legal representative, successor or assign) hereby irrevocably waives
any and all right to maintain any action for partition or to compel any sale
with respect to his interest in, or with respect to any assets or properties of
the Partnership, except as expressly provided in this Agreement.
Section 10.4 No Oral Modifications; Amendments. No oral amendment of
this Agreement shall be binding on the Partners. Any modification or amendment
of this Agreement must be in writing signed by all the Partners.
Section 10.5 Captions. Any article, section, paragraph titles or
captions contained in this Agreement and the table of contents are for
convenience of reference only and shall not be deemed a part of this Agreement.
Section 10.6 Terms. Common nouns and pronouns shall be deemed to refer
to the masculine, feminine, neuter, singular and plural as the identity of the
person or persons, firm or corporation may in the context require. Any reference
to the Internal Revenue Code or other statutes or laws shall include all
amendments, modifications or replacements of the specific sections and
provisions concerned. Unless otherwise specified, all references to "Section" or
"Article" contained in this Agreement shall be deemed to refer to sections or
articles of this Agreement.
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Section 10.7 Invalidity. If any provision of this Agreement shall be
held invalid, the same shall not affect in any respect whatsoever the validity
of the remainder of this Agreement.
Section 10.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute one and the same instrument, binding on the
Partners, and the signature of any party to any counterpart shall be deemed a
signature to, and may be appended to, any other counterpart.
Section 10.9 Further Assurances. The parties hereto agree that they
will cooperate with each other and will execute and deliver, or cause to be
delivered, all such other instruments, and will take all such other actions, as
either party hereto may reasonably request from time to time in order to
effectuate the provisions and purposes hereof.
Section 10.10 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware and the United States of
America. This choice of governing law shall not be determinative of the site of
venue for any litigation between the Partners arising out of or connected with
this Agreement.
Section 10.11 Complete Agreement. This Agreement constitutes the
complete and exclusive statement of the agreement between the Partners. It
supersedes all prior written and oral statements and no representation,
statement, condition or warranty not contained in this Agreement shall be
binding on the Partners or have any force or effect whatsoever.
Section 10.12 Attorneys' Fees. If any litigation is initiated by any
Partner against another Partner relating to this Agreement or the subject matter
hereof, the Partner prevailing in such litigation shall be entitled to recover,
in addition to all damages allowed by law and other relief, all court costs,
reasonable attorneys' fees and all litigation expenses incurred in connection
therewith.
Section 10.13 Creditors Not Benefited. Nothing in this Agreement is
intended to benefit any creditor of the Partnership or a Partner. No creditor of
the Partnership or a Partner will be entitled to require the General Partner to
solicit or accept any loan or additional capital contribution for the
Partnership or to enforce any right which the Partnership or any Partner may
have against a Partner, whether arising under this Agreement or otherwise.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
GENERAL PARTNER:
BB&K GP BUSINESS TRUST
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxx
--------------------------------------
Title: President
--------------------------------------
CLASS A LIMITED PARTNER:
BB&K LP BUSINESS TRUST
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxx
--------------------------------------
Title: President
--------------------------------------
CLASS B LIMITED PARTNER:
BRANDYWINE OPERATING PARTNERSHIP, L.P.
By: Brandywine Realty Trust, its general partner
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxxxx
---------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
XXXXXXX LANSDALE LIMITED PARTNERSHIP, III
By: Xxxxxx Operating Partnership I, L.P.,
its general partner
By: Brandywine Xxxxxx, L.L.C., its general partner
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------------
Title: President and Chief Executive Officer
----------------------------------------
34
