AGREEMENT OF LIMITED PARTNERSHIP OF
BEHRINGER HARVARD MOCKINGBIRD COMMONS LP
THIS AGREEMENT OF LIMITED PARTNERSHIP (this "AGREEMENT") is made and
entered into effective as of the ___ day of November, 2004, by and among
BEHRINGER HARVARD MOCKINGBIRD COMMONS GP, LLC, a Texas limited liability company
(the "GENERAL PARTNER"), BEHRINGER HARVARD MOCKINGBIRD COMMONS INVESTORS LP, a
Texas limited partnership ("BH INVESTORS"), and REALTY AMERICA GROUP
(MOCKINGBIRD COMMONS), LP, a Texas limited partnership ("REALTY America").
ARTICLE I.
FORMATION, NAME, PRINCIPAL PLACE OF BUSINESS - AGENT
PURPOSES, TERM AND DEFINITIONS
1.1 FORMATION. For and in consideration of the mutual covenants
herein contained, the Partners hereby form a limited partnership (hereinafter
the "PARTNERSHIP") under and pursuant to the Texas Revised Limited Partnership
Act, Tex. Rev. Civ. Stat. Xxx., art 6132a-1 (such Act hereinafter referred to as
"TRLPA"). The Partnership shall be governed by TRLPA. The Certificate (as
hereinafter defined) has been or shall promptly be filed and recorded in such
office and places as is required by TRLPA.
1.2 NAME. The business of the Partnership shall be conducted under
the name of "Behringer Harvard Mockingbird Commons LP."
1.3 PARTNERSHIP OFFICE, REGISTERED OFFICE AND REGISTERED AGENT. The
Partnership shall maintain its principal office in the State of Texas at 00000
Xxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000, or at such other place as the
General Partner, subject to Approval by Partnership Vote, may from time to time
designate. The Registered Office in the State of Texas is 00000 Xxxxxx Xxxxxxx,
Xxxxx 000, Xxxxxx, Xxxxx 00000, and the agent for service of process at such
address shall be Xxxxxx X. Xxxxxxx, III. The Partnership may maintain such
different or additional offices as the General Partner may determine.
1.4 PURPOSES. The nature and business of the Partnership and the
purposes to be conducted and promoted by the Partnership are to engage solely in
the following activities:
(a) To acquire, own, develop, maintain, operate, manage,
finance (including pursuant to the Mortgage Loan, as hereinafter defined),
lease, refinance, and sell or exchange the Property (as hereinafter defined);
and
(b) To exercise all powers enumerated in TRLPA or this
Agreement necessary or convenient to the conduct, promotion or attainment of the
business or purposes set forth in Section 1.4(a).
1.5 TERM. The Partnership shall continue until December 31, 2054,
unless the Partnership is terminated sooner pursuant to Article XII.
1.6 DEFINITIONS. As used in this Agreement, unless the context
clearly requires otherwise, the following words and phrases shall have the
following meanings:
"ADDITIONAL CAPITAL CONTRIBUTIONS" means all amounts contributed
(or deemed to be contributed) to the Partnership as additional Capital
Contributions by the Partners under Section 3.2.
"ADDITIONAL CAPITAL CONTRIBUTIONS ACCOUNT" means an account
maintained for the Partners equal to (a) all Additional Capital Contributions to
the Partnership made (or deemed made) by such Partner pursuant to Section 3.2,
less (b) the aggregate distributions made to such Partner pursuant to Section
6.1(a) of this Agreement.
"ADJUSTMENT DATE" means the close of business on the last day of
any fiscal year of the Partnership.
"AFFILIATE" means, with respect to any Person (a) any other
Person, directly or indirectly controlling, controlled by or under common
control with such Person; (b) any Person owning or controlling ten percent (10%)
or more of the outstanding voting securities of such specified Person; (c) any
officer, director, partner, member or trustee of such specified Person; and (d)
if any Person who is an Affiliate is an officer, director, partner, member or
trustee of another Person, such other Person. The term "control" shall mean the
ability, directly or indirectly, to control the management of an entity.
"AGREEMENT" means this Agreement of Limited Partnership.
"APPROVAL BY PARTNERSHIP VOTE" means approval by the General
Partner and a Majority in Interest of the Limited Partners pursuant to a
Partnership Vote.
"ASSET MANAGEMENT FEE" has the meaning set forth in Section
4.9(f).
"ASSETS" means all of the assets of the Partnership (including,
without limitation, the Property).
"BEHRINGER HARVARD AFFILIATE" means the following Persons or any
Affiliate of any of the following Persons: (a) Xxxxxx X. Xxxxxxxxx; (b)
Behringer Harvard Holdings, LLC, a Delaware limited liability company; (c)
Harvard Property Trust, LLC, a Delaware limited liability company; (d) Behringer
Harvard Advisors I LP, a Texas limited partnership; (e) Behringer Harvard
Advisors II LP, a Texas limited partnership; and (f) Behringer Harvard
Short-Term Opportunity Fund I LP, a Texas limited partnership.
"CAPITAL ACCOUNT" means, with respect to each Partner, the
account established and maintained on the books and records of the Partnership
for each Partner pursuant to Section 3.3 below, adjusted as provided for
therein.
"CAPITAL CONTRIBUTION" means the amount of money and the Gross
Asset Value of other property or consideration contributed to the capital of the
Partnership by a Partner.
"CAPITAL CONTRIBUTION BALANCE" means, for each Partner, the
cumulative Capital Contributions of that Partner less the cumulative
distributions to that Partner in return thereof pursuant to Sections 6.1(a) and
(b).
"CASH NEEDS" has the meaning set forth in Section 3.2.
"CERTIFICATE" means the Certificate of Limited Partnership of
the Partnership.
"CODE" means the Internal Revenue Code of 1986 as it may be
amended or revised from time to time, or any provision of succeeding law.
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"DEPRECIATION" means, with regard to any Partnership asset for
any fiscal year or other period, the depreciation, depletion or amortization, as
the case may be, allowed or allowable for federal income tax purposes; provided,
however, that if there is a difference between the Gross Asset Value and the
adjusted tax basis of such asset, Depreciation shall mean "book depreciation,
depletion or amortization" as determined under Section 1.704-1(b)(2)(iv)(g)(3)
of the Regulations.
"DEVELOPER" means Realty America Development LP, a Texas limited
partnership.
"DEVELOPMENT AGREEMENT" means a Development Agreement by and
between the Partnership and Developer providing for the performance by Developer
of development services with respect to the Property and payment by the
Partnership of a development fee to Developer, to be entered into by the General
Partner, on behalf of the Partnership, in accordance with the provisions of
Section 4.9(b) hereof.
"DISTRIBUTABLE CASH" means all cash, revenues, and funds
received by the Partnership, and any amounts released from Reserves to the
extent the General Partner, subject to Approval by Partnership Vote, deems that
the amount released is no longer required to be retained in Reserves, less the
sum of the following to the extent paid or set aside by the Partnership: (a) all
principal and interest payments on indebtedness of the Partnership (including
the Mortgage Loan) and all other sums paid to lenders; (b) all cash expenditures
incurred incident to the normal operation of the Partnership business; (c) such
amounts as may be added to Reserves as the General Partner, subject to Approval
by Partnership Vote, deems reasonably necessary to the proper operation of the
Partnership's business.
"GENERAL PARTNER" means Behringer Harvard Mockingbird Commons
GP, LLC, a Texas limited liability company, and any other Person who has been
admitted as a General Partner in the Partnership pursuant to the provisions of
this Agreement.
"GROSS ASSET VALUE" means, except as set forth below, the
adjusted basis of an asset for federal income tax purposes:
(a) The initial Gross Asset Value of any asset contributed
by a Partner to the Partnership shall be the gross fair market value of such
asset at the time of contribution, as determined by Approval by Partnership
Vote;
(b) The Gross Asset Value of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as determined by
Approval by Partnership Vote, as of the following times: (i) the acquisition of
an additional interest in the Partnership by any new or existing Partners in
exchange for more than a DE MINIMIS Capital Contribution and any such other time
as the General Partner, subject to Approval by Partnership Vote, reasonably
determines that such adjustment is necessary or appropriate to reflect the
relative economic interest of the Partners in the Partnership; (ii) the
distribution by the Partnership to a Partner of more than a DE MINIMIS amount of
Partnership property as consideration for an interest in the Partnership and any
such other time as the General Partner, subject to Approval by Partnership Vote,
reasonably determines that such adjustment is necessary or appropriate to
reflect the relative economic interests of the Partners in the Partnership; and
(iii) the liquidation of the Partnership within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g);
(c) The Gross Asset Value of any Partnership asset
distributed to any Partner shall be the gross fair market value of such asset on
the date of distribution, as determined by the General Partner subject to
Approval by Partnership Vote; and
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(d) The Gross Asset Values of Partnership assets shall be
increased or decreased to reflect any adjustments to the adjusted basis of such
assets pursuant to Code Section 734(b) or Code Section 743(b) as determined by
the General Partner subject to Approval by Partnership Vote, but only to the
extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations; provided,
however, that Gross Asset Values shall not be adjusted pursuant to this
subsection (d) to the extent the General Partner, subject to Approval by
Partnership Vote, determines that an adjustment pursuant to subsection (b)
hereof is necessary or appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant this subsection (d).
(e) After the Gross Asset Value of an asset has been
determined or adjusted pursuant to subsections (a), (b), or (d) hereof, Gross
Asset Value will be adjusted by the Depreciation taken into account with respect
to the asset for purposes of computing Profits or Losses. If the Gross Asset
Value of an asset has been determined or adjusted pursuant to subsections (a),
(b), (c) or (d) of this provision, such Gross Asset Value shall thereafter be
computed in accordance with Section 1.704-1(b)(2)(iv) of the Regulations.
"HPT" means HPT Management Services LP, a Texas limited
partnership.
"IMPROVEMENTS" means any improvements and related amenities now
located or to be constructed on the Property.
"INITIAL CAPITAL CONTRIBUTIONS" means all amounts contributed
(or deemed to be contributed) to the Partnership as a Capital Contribution by
the Partners under Section 3.1.
"INITIAL CAPITAL CONTRIBUTION ACCOUNT" means, for each Partner
(a) the Initial Capital Contribution made by such Partner pursuant to Section
3.1 of this Agreement, less (b) the aggregate distributions made to such Partner
pursuant to Section 6.1(b) of this Agreement.
"LIMITED PARTNERS" means BH Investors and Realty America, and
any other Person who is admitted as a limited partner in the Partnership
pursuant to the provisions of Article VIII.
"MAJOR DECISION" has the meaning set forth in Section 4.3 of
this Agreement.
"MAJORITY IN INTEREST" shall mean Limited Partners owning more
than fifty percent (50%) of the initial Residual Percentages (as set forth in
clause (a) of the definition of Residual Percentages).
"MANAGEMENT AGREEMENT" means that certain Amended and Restated
Property Management and Leasing Agreement, by and between the Partnership and
HPT, in the form attached hereto as EXHIBIT B.
"MORTGAGE LOAN" shall mean a mortgage loan encumbering the
Property to be borrowed by the Partnership in connection with the acquisition or
development of the Property by the Partnership.
"NONRECOURSE DEDUCTIONS" has the meaning set forth in Sections
1.704-2(b)(1) and 1.704-2(c) of the Regulations. Subject to the preceding
sentence, the amount of Nonrecourse Deductions for a Partnership fiscal year
equals the excess, if any, of the net increase, if any, in the amount of
Partnership Minimum Gain during the fiscal year (determined under Section
1.704-2(d) of the Regulations) over the aggregate amount of any distributions
during the fiscal year of proceeds of a Nonrecourse Liability that are allocable
to an increase in Partnership Minimum Gain (determined under Section 1.704-2(h)
of the Regulations).
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"NONRECOURSE LIABILITY" has the meaning set forth in Section
1.704-2(b)(3) of the Regulations.
"OPERATING BUDGET" means the annual budget, prepared by the
General Partner and with respect to which Approval by Partnership Vote has been
obtained, and setting forth the estimated capital and operating expenses of the
Partnership for the then current or immediately succeeding calendar year and for
each month and each calendar quarter of such calendar year, in such detail as
determined by Approval by Partnership Vote.
"OPERATING EXPENSES" means all the cash expenditures made or
required to be made by the Partnership in connection with the operation of the
Partnership in the ordinary course of business, including without limitation,
cash expenditures made or required to be made by the Partnership in connection
with the development, ownership, management, improvement, operation,
maintenance, financing and upkeep of the Property, as well as debt service
(principal and interest) and capital expenditures of the Partnership; provided,
however, Operating Expenses shall not include (a) any overhead or general
administrative costs or expenses of the General Partner or salaries or other
compensation paid to its employees, officers, directors or shareholders (unless
specifically provided for in this Agreement); (b) any expenditures paid or
payable from cash Reserves of the Partnership (provided that to the extent any
capital expenditures are made in excess of any such Reserves established for
such capital expenditures, such excess amounts shall be included as an Operating
Expense); and (c) non-cash items such as depreciation and amortization.
"PARTIALLY ADJUSTED CAPITAL ACCOUNTS" means, with respect to any
Partner as of an Adjustment Date, the Capital Account of such Partner as of the
beginning of the fiscal year ending on such Adjustment Date (where such Capital
Account does not reflect such Partner's share of either cumulative Partner
Minimum Gain or cumulative Partnership Minimum Gain), after giving effect to all
allocations of items of income, gain, loss or deduction not included in Profits
and Losses and all Capital Contributions and distributions during such period,
but before giving effect to any allocations of Profits or Losses for such period
pursuant to Section 7.1 hereof, increased by (a) such Partner's share of
Partnership Minimum Gain as of the end of such fiscal year, and (b) such
Partner's share of Partner Minimum Gain as of the end of such fiscal year.
"PARTNER" means each of the General Partner and the Limited
Partners, and "PARTNERS" means collectively all of such Partners.
"PARTNER MINIMUM GAIN" means an amount, with respect to each
Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would
result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability.
"PARTNER NONRECOURSE DEBT" has the meaning set forth in Section
1.704-2(b)(4) of the Regulations.
"PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Section 1.704-2(i) of the Regulations. Subject to the foregoing, the amount of
Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a
Partnership fiscal year equals the excess, if any, of the net increase, if any,
in the amount of Partner Minimum Gain attributable to such Partner Nonrecourse
Debt during that fiscal year over the aggregate amount of any distribution
during that fiscal year to the Partner that bears the economic risk of loss for
such Partner Nonrecourse Debt to the extent such distributions are from the
proceeds of such Partner Nonrecourse Debt and are allocable to an increase in
Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined
in accordance with Section 1.704-2(i) of the Regulations.
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"PARTNERSHIP" means Behringer Harvard Mockingbird Commons LP, a
Texas limited partnership.
"PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Section
1.704-2(d) of the Regulations. Subject to the foregoing, Partnership Minimum
Gain shall equal the amount of gain, if any, which would be recognized by the
Partnership with respect to each nonrecourse liability of the Partnership (or
Property owner) if the Partnership were to Transfer the Partnership property (or
the Property owner were to Transfer the Property owner property) which is
subject to such nonrecourse liability in full satisfaction thereof.
"PARTNERSHIP VOTE" shall mean a vote of the Partners. A
Partnership Vote may be conducted at a meeting of the General Partner and the
Limited Partners, which meeting may take place by means of telephone conference,
video conference or similar communications equipment by means of which all
Persons participating therein can hear each other. Alternatively, a Partnership
Vote may be conducted by notice sent by the General Partner to the Limited
Partners, which notice shall set forth (a) the matter with respect to which the
Partnership Vote is to be made and (b) the time period within which the General
Partner and the Limited Partners must respond to the notice. Such time period
shall not be less than seven (7) business days or more than fourteen (14)
business days. If the General Partner or any Limited Partner does not respond to
the notice within the time period specified in the notice, such Partner shall be
deemed to have given its written consent in favor of the matter set forth in the
notice. If a written consent or consents setting forth the matter to be
determined is signed by the General Partner and a Majority in Interest of the
Limited Partners, Approval by Partnership Vote shall be deemed to have been
obtained with respect to such matter.
"PERSON" means any individual or entity, and the heirs,
executors, administrators, legal representatives, successors and assigns of such
Person where the context so admits, and, unless the context otherwise requires,
the singular shall include the plural, and the masculine gender shall include
the feminine and the neuter and vice versa.
"PROFITS" AND "LOSSES" means, for each fiscal year or other
period, an amount equal to the Partnership's taxable income or loss for such
year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from
federal income tax and not otherwise taken into account in computing Profits and
Losses pursuant to this subsection (a) shall be added to such taxable income or
loss;
(b) Any expenditure of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations Section 1.704(b)(2)(iv)(i), and not otherwise taken into
account in computing Profits or Losses pursuant to this subsection (b) shall be
subtracted from such taxable income or loss;
(c) In the event the Gross Asset Value of any of the
Partnership assets is adjusted pursuant to subsections (b) or (c) of the
definition of Gross Asset Value, the amount of such adjustment shall be taken
into account as gain or loss from the disposition of such asset for purposes of
computing Profits or Losses;
(d) Gain or loss resulting from any disposition of
Partnership assets with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the
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Gross Asset Value of the property disposed of, notwithstanding that the adjusted
tax basis of such property differs from its Gross Asset Value;
(e) In lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account depreciation computed in accordance with
Section 1.704-1(b)(2)(iv)(g) of the Regulations for such fiscal year or other
period; and
(f) Notwithstanding anything contained herein to the
contrary, any items which are specially allocated pursuant to Sections 7.3(a),
7.3(b), 7.3(c), 7.3(d), 7.3(e) and 7.3(f) shall not be taken into account in
computing Profits or Losses.
"PROPERTY" means the tract of land (and all rights and
appurtenances incident thereto) described in EXHIBIT A attached hereto and all
Improvements located, or to be constructed, or developed thereon.
"PURCHASE AGREEMENT" means that certain Contract of Purchase and
Sale by and between Realty America Group, LP, as purchaser, and Maharishi Global
Development Fund, as seller, dated as of June 9, 2004, together with all
amendments thereto, it being agreed that the right, title and interest of Realty
America Group, LP, in and to the Purchase Agreement shall be assigned to the
Partnership concurrently with the execution of this Agreement.
"REGULATIONS" means the federal income tax regulations,
including temporary regulations, promulgated under the Code, as such regulations
may be amended from time to time (including corresponding provisions of
succeeding regulations).
"RESERVES" means funds set aside or amounts allocated to
reserves for working capital, taxes, insurance, debt service or other costs and
expenses incident to the ownership, development and operation of the Property.
The amount of funds to be set aside in Reserves shall be determined by the
General Partner subject to Approval by Partnership Vote.
"RESIDUAL PERCENTAGE" means (a) the following percentages until
such time as the Limited Partners have received the return of all Capital
Contributions made by the Limited Partners to the Partnership: (i) as to the
General Partner, one-tenth of one percent (0.1%); (ii) as to BH Investors, sixty
nine and nine-tenths percent (69.9%); and (iii) as to Realty America, thirty
percent (30%); and (b) the following percentages after the Limited Partners have
received the return of all Capital Contributions made by the Limited Partners to
the Partnership: (i) as to the General Partner, one-tenth of one percent (0.1%);
(ii) as to BH Investors, forty nine and nine-tenths percent (49.9%); and (iii)
as to Realty America, fifty percent (50%).
"TARGET ACCOUNT" means, with respect to any Partner as of any
Adjustment Date, a balance (which may be positive or negative) equal to the
hypothetical amount that such Partner would receive upon the liquidation of the
Partnership, assuming that (a) all assets of the Partnership were sold for an
amount equal to their respective Gross Asset Values, (b) all liabilities of the
Partnership allocable to those properties became due and were satisfied in
accordance with their terms (limited with respect to each non-recourse
liability, to the Gross Asset Value of the asset securing such liability), and
(c) all net assets of the Partnership were distributed pursuant to Section 6.1
hereof, computed after the Capital Contributions have been made for the period
ending on such Adjustment Date. The General Partner shall determine Gross Asset
Value from year to year or at any point in time as needed.
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"TRANSFER" means, with respect to a particular property, right
or interest, the assignment, sale, transfer, pledge, disposition, hypothecation,
mortgage, pledge or the grant of a lien or security interest in such right or
interest (or any part thereof), whether voluntarily, involuntarily or by
operation of law, and whether for consideration or no consideration.
ARTICLE II.
PARTNERS
2.1 GENERAL PARTNER.The name and address of the General Partner is
as follows:
Name Address
---- -------
Behringer Harvard Mockingbird 00000 Xxxxxx Xxxxxxx, Xxxxx 000
Commons GP, LLC Xxxxxxx, Xxxxx 00000
Attn: Chief Legal Officer
2.2 LIMITED PARTNERS. The names and addresses of the Limited
Partners are as follows:
Name Address
---- -------
Behringer Harvard Mockingbird 00000 Xxxxxx Xxxxxxx, Xxxxx 000
Commons Investors LP Xxxxxxx, Xxxxx 00000
Attn: Chief Legal Officer
Realty America Group 0000 Xxxx Xxxxxx, Xxxxx 000
(Mockingbird Commons), LP Xxxxxx, Xxxxx 00000
Attn: Xxxx X. Xxxxxx, III
ARTICLE III.
CAPITAL
3.1 INITIAL CAPITAL CONTRIBUTIONS. The Partners shall make Initial
Capital Contributions to the Partnership of cash in the amounts set forth
opposite their respective names on EXHIBIT C attached hereto and made a part
hereof and in accordance with the schedule set forth in EXHIBIT C (it being
agreed that time is of the essence with respect to the making of such Initial
Capital Contributions). With respect to the Initial Capital Contribution due
upon the closing of the construction loan as set forth in EXHIBIT C, the General
Partner shall give notice of the specific date upon which such Initial Capital
Contribution will be due no less than fifteen (15) days prior to such due date.
In the event that a Partner fails to make an Initial Capital Contribution in
accordance with EXHIBIT C, such Partner shall be a Delinquent Partner (as
hereinafter defined) to which the provisions set forth in Section 3.3 below
shall be applicable.
3.2 ADDITIONAL CAPITAL CONTRIBUTIONS. If at any time the General
Partner determines that the Partnership requires (or will require) additional
funds to pay development expenses in respect of the Property, for Operating
Expenses or for any other purpose (collectively, "CASH NEEDS"), then the General
Partner shall use reasonable efforts to secure third party or Partner loans to
fulfill such Cash Needs. If such efforts to secure third party or Partner loans
are unsuccessful, the General Partner may send the Limited Partners written
notice ("ADDITIONAL CAPITAL NOTICE") requesting that the Limited Partners,
together with the General Partner, contribute in cash such amounts as are
necessary to satisfy such Cash
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Needs and describing the purpose for which the funds are needed. If so
requested, the General Partner and each Limited Partner shall be obligated to
make an Additional Capital Contribution equal to the product of its Residual
Percentage and the amount of the Cash Needs. The time for the payment of any
Additional Capital Contribution to the Partnership shall be determined by the
General Partner, but shall in no event be less than fifteen (15) days after the
delivery of the Additional Capital Notice.
3.3 FAILURE TO MAKE CAPITAL CONTRIBUTION.
(a) If the General Partner or a Limited Partner fails to
timely contribute all or any portion of any Initial Capital Contribution or
Additional Capital Contribution required of such Partner, then such Partner
shall be considered a "DELINQUENT PARTNER." The Partnership may, upon notice to
a Delinquent Partner, exercise either one of the following remedies as its sole
remedy:
(i) permit the non-Delinquent Partner(s) to advance
that portion of the required Capital Contribution that is in default as a loan
(a "DEFAULT LOAN") with the following results: (A) the sum thus advanced shall
constitute a loan to the Delinquent Partner; (B) such loan and all accrued
unpaid interest thereon shall be due on demand, or if no demand is made, twelve
(12) months after such advance is made; (C) the loan shall bear interest at the
lesser of twelve percent (12%) per annum or the highest rate permitted by
applicable law, from the date made until the date fully repaid compounding
monthly; (D) all Partnership distributions and other payments that otherwise
would be made to the Delinquent Partner (whether before or after dissolution of
the Partnership) under this Agreement (including those under Article 6) shall be
paid to the non-Delinquent Partner until the loan and all interest accrued
thereon is paid in full (with all such payments being applied first to accrued
and unpaid interest and then to principal and being deemed to be a distribution
or payment (as may apply) to the Delinquent Partner, and, in turn, a payment by
the Delinquent Partner with respect to the loan from the non-Delinquent
Partner); and (E) the non-Delinquent Partner may, in addition to the other
rights granted herein, take such action as the non-Delinquent Partner may deem
appropriate to obtain payment of the loan at the expense of the Delinquent
Partner; or
(ii) permit the non-Delinquent Partner to contribute
the Capital Contribution not made by the Delinquent Partner as a Capital
Contribution made by the non-Delinquent Partner, in which case the
non-Delinquent Partner shall have its Residual Percentage increased and the
Delinquent Partner shall have its Residual Percentage decreased in the following
manner: (A) if the Capital Contribution not made by the Delinquent Partner and
made by the non-Delinquent Partner is an Initial Capital Contribution, then (1)
the Residual Percentage of the non-Delinquent Partner immediately following such
Capital Contribution shall be increased by an amount equal to 175% x A/B
(expressed as a percentage), where `A' equals the amount the non-Delinquent
Partner contributed in respect of the Delinquent Partner's required Initial
Capital Contribution, and `B' equals the sum of all unreturned Capital
Contributions previously made to the Partnership after giving effect to the
amounts advanced under this Section 3.3(a)(ii) on behalf of the Delinquent
Partner; and (2) the Residual Percentage of the Delinquent Partner shall be
decreased by the increase of the non-Delinquent Partner's Residual Percentage;
and (B) if the Capital Contribution not made by the Delinquent Partner and made
by the non-Delinquent Partner is an Additional Capital Contribution, then (1)
the Residual Percentage of the non-Delinquent Partner immediately following such
Capital Contribution shall be increased by an amount equal to 125% x A/B
(expressed as a percentage), where `A' equals the amount the non-Delinquent
Partner contributed in respect of the Delinquent Partner's required Additional
Capital Contribution, and `B' equals the sum of all unreturned Capital
Contributions previously made to the Partnership after giving effect to the
amounts advanced under this Section 3.3(a)(ii) on behalf of the Delinquent
Partner; and (2) the Residual Percentage of the Delinquent Partner shall be
decreased by the increase of the non-Delinquent Partner's Residual Percentage.
An example of the operation of this Section 3.3(a)(ii) is attached hereto as
EXHIBIT D.
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(b) The exercise by the Partnership of the remedies set
forth in Section 3.3(a) above shall be determined by the non-Delinquent Partners
in their sole discretion and not by the Delinquent Partners.
(c) With respect to any efforts by the General Partner to
obtain loans to the Partnership from a third party or a Partner (including the
General Partner), the financing terms must be substantially similar to (or more
favorable than) loans which the Partnership could obtain on a competitive
arms-length basis. If the General Partner is unable to determine whether the
financing terms are competitive on an arms-length basis, the General Partner may
seek a Partnership Vote on the issue, or may seek and rely upon the advice of an
independent expert in financing. If any Partner makes any loan or loans to the
Partnership or advances money on its behalf, the amount of any loan or advance
shall not be treated as a Capital Contribution but shall be treated as a debt
due from the Partnership to such Partner.
3.4 CAPITAL ACCOUNTS. The Partnership shall establish and maintain
on its books and records for each Partner a capital account (collectively the
"CAPITAL ACCOUNTS") in accordance with Section 1.704-1(b)(2)(iv) of the
Regulations. Subject to the foregoing, each Partner's Capital Account generally
shall be:
(a) increased by (i) the amount of money contributed by such
Partner to the Partnership, including Partnership liabilities assumed by such
Partner; (ii) the fair market value of property (net of liabilities securing
such property that the Partnership has assumed, or taken subject to, under
Section 752 of the Code), or other consideration contributed by such Partner to
the Partnership; and (iii) allocations to such Partner of Net Profits (and items
thereof, including certain tax exempt income) and income and gain described in
Section 1.704-1(b)(2)(iv)(g) of the Regulations; and
(b) decreased by (i) the amount of money distributed to such
Partner by the Partnership, including such Partner's individual liabilities
assumed by the Partnership; (ii) the fair market value of all property
distributed to such Partner by the Partnership (net of liabilities that such
Partner is considered to assume or take subject to under Section 752 of the
Code); and (iii) allocations to such Partner of Net Losses and deductions,
including expenses described in Section 705(a)(2)(B) of the Code which are not
deductible for tax purposes.
3.5 INTEREST ON AND WITHDRAWAL OF CAPITAL CONTRIBUTIONS. Neither the
General Partner nor the Limited Partners shall be entitled to receive any
interest on Capital Contributions, nor shall the General Partner or the Limited
Partners be entitled to withdraw or otherwise receive a return of their Capital
Contributions from the Partnership, except pursuant to the terms and conditions
of this Agreement. No Partner shall be required to contribute or lend any cash
or property to the Partnership to enable the Partnership to return any Partner's
Capital Contributions.
3.6 RESIGNATION; REDEMPTION. Except as otherwise expressly permitted
by this Agreement, no Partner may resign or withdraw from the Partnership
without Approval by Partnership Vote. A Partner's interest in the Partnership
may not be redeemed or purchased by the Partnership without prior Approval by
Partnership Vote.
3.7 TRANSFERS. If any interest in the Partnership is Transferred in
accordance with the terms of this Agreement, the Transferee will succeed to the
Capital Account of the Transferor to the extent it relates to the Transferred
interest.
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ARTICLE IV.
MANAGEMENT
4.1 GENERAL POWERS OF GENERAL PARTNER. Except as provided in Section
4.3 and Section 4.4 hereof, the General Partner, acting alone, shall be
authorized and empowered to make all decisions and to act on behalf of the
Partnership and be solely responsible for the operation and management of the
business of the Partnership, with all rights and powers generally conferred by
applicable law or necessary, advisable or consistent in connection therewith,
including without limitation to cause the Partnership to make all decisions,
take all actions as may be necessary for the Partnership to perform fully, and
promptly satisfy and discharge each and every obligation or responsibility of
the Partnership. The General Partner may take all necessary and appropriate
action to consummate a Major Decision if the Major Decision was approved (or
deemed approved) in advance pursuant to Section 4.3 hereof. For any other action
that does not or would not constitute a Major Decision, the General Partner may
take all necessary and appropriate action without further authorization, except
as otherwise provided in Section 4.4 below.
4.2 SPECIFIC POWERS OF THE GENERAL PARTNER. By way of illustration
of the General Partner's power and authority pursuant to Section 4.1 and not as
a limitation thereon, the General Partner shall have the unilateral right and
power to take any and all of the following actions on behalf of the Partnership
except to the extent any such action requires Approval by Partnership Vote
pursuant to Section 4.3 of this Agreement:
(a) to consummate the transaction contemplated in the
Purchase Agreement and the Mortgage Loan and to execute all documents necessary
or advisable in connection therewith; provided, however, that no material change
in the terms of the Purchase Agreement shall be made without Approval by
Partnership Vote.
(b) to take actions normal or customary for the owner of
businesses similar to that operated by the Partnership;
(c) to perform any and all acts necessary or appropriate in
connection with the business of the Partnership;
(d) to procure and maintain appropriate insurance covering
the property of the Partnership;
(e) to take and hold all property and assets of the
Partnership, real, personal and mixed, in the name of the Partnership;
(f) to coordinate all accounting and clerical functions of
the Partnership and employ and contract such accountants, lawyers, managers,
agents and other management or service personnel as may from time to time be
required to carry on the business of the Partnership;
(g) to negotiate and execute leases of the Property; and
(h) to engage in any kind of activity and to perform and
carry out contracts of any kind necessary to, or in connection with, or
incidental to, the development and operation of the Property as may be lawfully
carried on or performed by a limited partnership under the laws of each state in
which the Partnership is then formed, qualified, or does business.
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4.3 MAJOR DECISIONS. All "Major Decisions" (hereinafter defined)
with respect to the Partnership business shall require Approval by Partnership
Vote. All Major Decisions shall be made by the Partners in a timely manner with
due regard for the necessity of obtaining and evaluating the information
necessary for making such Major Decisions. A "MAJOR DECISION" as used in this
Agreement means any decision with respect to the following matters:
(a) any merger or consolidation of the Partnership with
another entity;
(b) any borrowing by the Partnership secured by a deed of
trust or lien against the Property or any guarantee of debt of any other Person;
(c) except for expenditures made and obligations incurred
pursuant to an Operating Budget, making any expenditure or incurring any
obligation by or for the Partnership, or approving any such expenditure or
obligation to be made or incurred by the Partnership, in excess of 105% of the
amount set forth in an Operating Budget therefor (the "105% LIMITATION");
provided, that the General Partner may (without prior Approval by Partnership
Vote) make expenditures that it reasonably determines are necessary or
appropriate that exceed such 105% Limitation provided that the aggregate amount
of such expenditures do not exceed the lesser of: (i) fifteen percent (15%) of
the Operating Budget, or (ii) Fifty Thousand Dollars ($50,000.00) in any
12-month period; provided, further, that if emergency repairs to the Property
are necessary to avoid imminent danger of injury to the Property or to an
individual, the General Partner may make such expenditures as may be necessary
to alleviate such situation (without regard to the foregoing limitations) and
shall promptly notify the Limited Partners in writing of the event giving rise
to such repairs and the actions taken with respect thereto;
(d) causing the Partnership to file a voluntarily bankruptcy
petition, seeking or consenting to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator, custodian or any similar official for the
Partnership or a substantial portion of its assets, causing the Partnership to
file a petition or answer seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation or similar relief under any statute, law
or regulation, causing the Partnership to file an answer or other pleading
admitting or failing to contest the material allegations of a petition filed
against it in any proceeding of this nature or to take any action in furtherance
of the foregoing;
(e) causing the Partnership to file any lawsuit, other than
lawsuits arising from the normal day-to-day operation of the Property, such as
suits to collect unpaid rent and eviction suits;
(f) any payment by the Partnership of any compensation to a
Partner or an Affiliate of a Partner, or any transaction between the Partnership
and any Partner or Affiliate of a Partner, except to the extent that any payment
to, or transaction with, a Partner is set forth in an approved Operating Budget
or expressly authorized or approved pursuant to the terms of this Agreement;
(g) executing or approving any agreement or contract with
any Person to be an agent for the Partnership or to be other than an independent
contractor, or which permits any such Person to sign any agreement or contract,
including, without limitation, brokerage, listing or commission agreements or
service contracts, on behalf of the Partnership;
(h) the dedication of any portion of the Property to any
federal, state or local government or political subdivision;
(i) approval of a management or leasing agreement related to
the Property;
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(j) executing or approving any agreement, contract, or
arrangement, with a term of more than one year that is not terminable with
thirty (30) days notice without penalty;
(k) assigning the Partnership's rights in specific
Partnership property for other than Partnership purposes;
(l) any act which would make it substantially impractical to
carry on the ordinary business of the Partnership, other than a Transfer of all
or substantially all of the assets of the Partnership with respect to which
Approval by Partnership Vote has been obtained;
(m) any confession of a judgment against the Partnership;
(n) making, executing or delivering any assignment for the
benefit of creditors of the Partnership, or signing any bond, confession of
judgment, indemnity bond or surety bond by or on behalf of the Partnership;
(o) any Transfer (other than leases of the Property executed
in the ordinary course of business) of all or any part of (i) the Property, or
(ii) any other Partnership asset the value of which exceeds $25,000;
(p) any admission of any new Limited Partner to the
Partnership;
(q) the dissolution or termination of the Partnership
(r) the approval of any tax election that adversely affects
a Limited Partner; and
(s) any other decision or action which by the provisions of
this Agreement is required to be authorized by Approval by Partnership Vote.
4.4 ACTIONS REQUIRING UNANIMOUS CONSENT. Notwithstanding anything
contained in this Agreement to the contrary, the following actions by the
Partnership shall require the written consent of all the Partners: (a) any act
that is contrary to the purpose of the Partnership as stated in Section 1.4 of
this Agreement; (b) the admission of any new General Partner to the Partnership
that is not a Behringer Harvard Affiliate; (c) any Transfer by the General
Partner of its interest in the Partnership to any Person that is not a Behringer
Harvard Affiliate; (d) any Transfer by Behringer Harvard Short-Term Opportunity
Fund I LP, a Texas limited partnership ("BH FUND")(the sole member of the
General Partner as of the date of this Agreement) of its interest in the General
Partner to any Person that is not a Behringer Harvard Affiliate; and (e) any act
in contravention of this Agreement (as this Agreement may hereafter be amended
in accordance with the terms hereof).
4.5 OPERATING BUDGETS. The Partnership shall operate under annual
Operating Budgets which shall be prepared in accordance with the Management
Agreement. After an annual Operating Budget has been approved, the General
Partner shall implement it on behalf of the Partnership and may cause the
Partnership to incur the expenditures and obligations therein provided. The
General Partner shall submit (or request the manager of the Property to submit)
to the Limited Partners any proposed Operating Budget for each calendar year by
November 15 of the preceding calendar year. Provided that each of the Limited
Partners receives the proposed Operating Budget for each calendar year by
November 15 of the preceding calendar year, together with all supporting
information necessary for the Limited Partners to review the Operating Budget,
each Limited Partner will approve, reject, or provide changes to the Operating
Budget by December 15 of the year in which the proposed Operating Budget was
submitted to the Limited Partners. If an Operating Budget for any calendar year
has not been approved by a
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Majority in Interest by January 1 of that year, the Partnership shall continue
to operate under the Operating Budget for the previous year with such
adjustments as may be necessary to reflect deletion of non-recurring expense
items set forth on the previous Operating Budget and increased insurance costs,
taxes, utility costs, and debt service payments.
4.6 LIMITED PARTNER PARTICIPATION IN MANAGEMENT. The Limited
Partners, as limited partners, shall not participate in the operation or
management of the business of the Partnership, or transact any business for or
in the name of the Partnership, and the Limited Partners, as the limited
partners, shall not have any right or power to sign for or bind the Partnership
in any manner, except as expressly provided under the provisions of this
Agreement. Any rights of the Limited Partners to consent to and approve of
certain matters under the provisions of this Agreement shall not be deemed a
participation in the operation and management of the business of the Partnership
or the exercise of control of the Partnership business. Except as may be
otherwise expressly provided herein, the Limited Partners shall not have the
right to vote on any matter concerning the management and affairs of the
Partnership.
4.7 PAYMENT OF COSTS AND EXPENSES. The Partnership will be
responsible for paying all costs and expenses of forming and continuing the
Partnership, acquiring the Property, and conducting the business of the
Partnership, including, without limitation, accounting costs, legal expenses and
office supplies. In the event any such costs and expenses are incurred and paid
by the General Partner on behalf of the Partnership, then, except as expressly
provided to the contrary in this Agreement, such Partner shall be entitled to be
reimbursed for such payment so long as such cost or expense was reasonably
necessary and is reasonable in amount. The Partnership may use the proceeds of
any revenues of the Partnership to reimburse a Partner for any such costs and
expenses so paid.
4.8 TRANSACTIONS WITH AFFILIATES. Any agreement whereby any service
or activity to be performed for the Partnership is to be performed by an
Affiliate of a Partner shall require Approval by a Partnership Vote. The
Partners hereby acknowledge and agree that Approval by Partnership Vote has been
obtained with respect to the Management Agreement and the Development Agreement.
4.9 FEES PAYABLE BY THE PARTNERSHIP.
(a) Upon the acquisition of the Property, the Partnership
shall pay to Realty America Group LP a brokerage commission equal to one percent
(1%) of the purchase price for the Property (as defined in the Purchase
Agreement).
(b) The Partnership shall enter into the Development
Agreement with Developer to perform development services in respect of the
Property, pursuant to which the Developer will receive a development fee from
the Partnership of up to four percent (4%) of the costs of developing the
Property.
(c) If a guaranty by BH Investors or any affiliated entity
(a "BH GUARANTOR") is required in order to obtain a Mortgage Loan, and if the BH
Guarantor elects to execute such a guaranty (which election shall be made in the
sole discretion of the BH Guarantor), then, upon the closing of such Mortgage
Loan, Realty America shall pay to the BH Guarantor a guaranty fee equal to the
product obtained by multiplying the original principal amount of the Mortgage
Loan by one-half of one percent (.05%). The Partnership hereby agrees to
indemnify any BH Guarantor against any losses, judgments, liabilities, expenses
and amounts paid in settlement of any claims sustained by it in connection with
any such guaranty, and any such amounts paid by a BH Guarantor shall be included
in calculating whether the Maximum BH Investors Contribution Amount has been
attained.
(d) The Partnership shall contract with HPT for HPT to
perform management services in respect of the Property in accordance with the
Management Agreement, pursuant to which
14
HPT will receive the management fee and other fees from the Partnership as set
forth in the Management Agreement.
(e) The Partners acknowledge and agree that HPT will
subcontract with an Affiliate of Realty America to perform certain management
services in respect of the Property. Furthermore, the Partners acknowledge that
HPT may subcontract (or the Partnership may contract directly) with an Affiliate
of Realty America to perform leasing services in respect of the Project.
(f) Subject to the final sentence of this Section 4.9(f),
the Partnership shall pay to Behringer Harvard Advisors II LP, an affiliate of
the General Partner, an annual asset management fee (the "ASSET MANAGEMENT FEE")
equal to one-half of one percent (0.5%) of the aggregate book value of the
assets of the Partnership (other than investments in bank accounts, money market
funds and other current assets) at the time of measurement before deducting
depreciation, bad debts, other similar non-cash reserves and without reduction
for any debt secured by or relating to such assets. The Asset Management Fee
will be payable on the tenth (10th) day of each month in an amount equal to
one-twelfth of one-half percent (1/12 of .5%) of the value of the Partnership's
assets (calculated pursuant to the preceding sentence) as of the last day of the
immediately preceding month. Notwithstanding the foregoing provisions, in no
event shall the Asset Management Fee paid to Behringer Harvard Advisors II LP
exceed an amount equal to one percent (1%) of the costs of developing the
Property.
(g) The Partnership shall pay to Realty America and
Behringer Harvard Advisors II LP (or its designated Affiliate) a market rate
sales commission upon the sale of the Property, payable if and when the closing
of the sale of the Property occurs, with eighty percent (80%) of such fee being
paid to Realty America and twenty percent (20%) of such fee being paid to
Behringer Harvard Advisors II LP (or its designated Affiliate).
4.10 OTHER COMPENSATION. Except as provided in this Agreement, no
Partner or its Affiliate shall be entitled to any compensation unless Approval
by Partnership Vote is obtained with respect thereto.
4.11 CONSTRUCTION REQUIREMENTS. The completion of improvements which
are to be constructed on the Property shall be guaranteed at the price
contracted either by an adequate completion bond or by other assurances
satisfactory to the General Partner, which assurances shall include one or more
(at the discretion of the General Partner) of the following: (a) a written
personal guarantee of one or more of the general contractor's principals
accompanied by the financial statements of such guarantor indicating a
substantial net worth; (b) a written fixed price contract with a general
contractor that has a substantial net worth; (c) a retention of a reasonable
portion of construction costs as a potential offset to such construction costs
in the event the general contractor does not perform in accordance with the
construction contract; or (d) a program of disbursements control which provides
for direct payments to subcontractors and suppliers. The Partnership shall make
no periodic progress or other advance payments to the general contractor or any
subcontractor unless the Partnership has first received an architect's
certification as to the percentage of the improvements which has been completed
and as to the dollar amount of the construction then completed.
4.12 PROJECT MANAGERS. The Partnership shall have no employees. Each
of BH Fund and Realty America shall hire, at its own expense, a person to serve
as its project manager during the initial construction of improvements on the
Property. Each project manager shall act on behalf of the Partner that appointed
such project manager and shall work together to coordinate the development of
the Property.
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ARTICLE V.
RIGHTS AND POWERS OF PARTNERS
5.1 LIMITATION OF LIABILITY.
(a) LIMITATION ON LIABILITY OF LIMITED PARTNERS. The Limited
Partners shall not be bound by, or personally liable for, obligations or
liabilities of the Partnership to outside third parties beyond the amount of
their Capital Contributions to the Partnership, and the Limited Partners shall
not be required to contribute any capital to the Partnership for any obligations
to third parties in excess of the Capital Contributions actually made under
Sections 3.1 and 3.2 hereof.
(b) LIMITATION ON LIABILITY OF GENERAL PARTNER. The General
Partner (including its members, officers, directors, agents, employees and
representatives) shall not be liable or responsible in damages or otherwise to
the Partnership or any Partner for any liability or loss relating to the
performance or nonperformance of any act concerning the business of the
Partnership, provided the General Partner was not guilty of gross negligence or
willful misconduct.
5.2 INDEMNIFICATION.
(a) The General Partner (including its members, partners,
officers, directors, agents, employees and representatives) shall be indemnified
by the Partnership to the fullest extent permitted by law, against any losses,
judgments, liabilities, expenses and amounts paid in settlement of any claims
sustained by it or any of them in connection with the Partnership, provided that
the General Partner has determined in good faith that such course of conduct was
in, and not opposed to, the best interests of the Partnership and such liability
or loss was not the result of gross negligence or willful misconduct, or a
material breach of this Agreement on the part of the General Partner or such
person, and (2) any such indemnification will only be recoverable from the
assets of the Partnership and the Limited Partners shall not have any liability
on account thereof. All rights to indemnification permitted herein and payment
of associated expenses shall not be affected by the dissolution or other
cessation of the existence of the General Partner, or the withdrawal,
adjudication of bankruptcy or insolvency of the General Partner.
(b) Expenses incurred in defending a threatened or pending
civil, administrative or criminal action, suit or proceeding against any person
who may be entitled to indemnification pursuant to this Section 5.2 may be paid
by the Partnership in advance of the final disposition of such action, suit or
proceeding, if (i) the legal action relates to the performance of duties or
services by such person on behalf of the Partnership, (ii) the legal action is
initiated by a third party who is not a Limited Partner, and (iii) such person
undertakes to repay the advanced funds to the Partnership in cases in which it
is not entitled to indemnification under this Section 5.2.
(c) The term "General Partner" as used in this Section 5.2
shall include any additional or substitute general partner and any Affiliate of
a General Partner performing services on behalf of the Partnership.
5.3 OTHER BUSINESS ACTIVITIES. Subject to the other express
provisions of this Agreement, each Partner and any Affiliate thereof may engage
in and possess interests in other business ventures of any and every type and
description, independently or with others, including ones in direct or indirect
competition with the Partnership, with no obligation to offer to the Partnership
or any other Partner the right to participate therein or to account therefor.
16
5.4 INFORMATION. In addition to the other rights specifically set
forth in this Agreement, each Partner is entitled to the following information:
(a) true and full information regarding the status of the business and financial
condition of the Partnership; (b) promptly after becoming available, a copy of
the Partnership's federal, state and local income tax returns for each year; (c)
a current list of the name and last known business, residence or mailing address
of each Partner; (d) a copy of this Agreement, the Certificate, and all
amendments to such documents; and (e) other information regarding the affairs of
the Partnership to which that Partner is entitled pursuant to the TRLPA.
5.5 PRESS RELEASES. No public announcement, press release or other
similar public disclosure of the terms of this Agreement, the activities of the
Partnership, or the plans of the Partnership will be made unless same is
proposed by the General Partner and authorized by Approval by Partnership Vote.
However, notwithstanding the preceding sentence, any Partner shall have the
right, without obtaining the consent of any other Partner, to make such
disclosures as may, in the reasonable judgment of such Partner's counsel, be
required by applicable law. Furthermore, it is agreed that the foregoing
provisions of this Section 5.5 shall not prohibit a Partner from disclosing such
information to the accountants, attorneys, consultants, lenders and vendors of
the Partnership as is necessary to allow such parties to provide services, funds
or goods to the Partnership. The Partners have agreed that if a Partner breaches
the obligation set forth in the first sentence of this Section 5.5 (the
"NON-DISCLOSURE OBLIGATION"), the actual damages that will be incurred by the
other Partners as a result of such breach would be extremely difficult or
impracticable to determine. Therefore, the Partners agree that if a Partner or
any Affiliate of a Partner breaches the Non-Disclosure Obligation, such Partner
shall pay to each of the other Partners liquidated damages (the "LIQUIDATED
DAMAGES") in the amount of Fifty Thousand Dollars ($50,000) for each such
breach, such amount having been agreed upon, after negotiation, as the Partners'
reasonable estimate of the damages that will be suffered by reason of a breach
of the Non-Disclosure Obligation. Any Liquidated Damages becoming payable
pursuant to this Section 5.5 shall be paid within ten (10) days after the breach
of the Non-Disclosure Obligation giving rise to the Liquidated Damages. If not
paid within such ten (10) day period, the Liquidated Damages shall thereafter
bear interest at the lesser of twelve percent (12%) per annum or the highest
rate permitted by applicable law. All Partnership distributions and other
payments that otherwise would be made to the Partner that is liable for
Liquidated Damages shall be paid to the other Partners until the Liquidated
Damages and all interest accrued thereon are paid in full (with all such
payments being applied first to accrued and unpaid interest and then to the
Liquidated Damages).
ARTICLE VI.
DISTRIBUTIONS/ALLOCATIONS OF PROFITS AND LOSSES
6.1 DISTRIBUTIONS OF DISTRIBUTABLE CASH. Within twenty (20) days
following the end of each month (unless Approval by Partnership Vote is
otherwise obtained), the Partnership shall distribute Distributable Cash in the
following order of priority:
(a) First, to the Partners in proportion to their respective
Additional Capital Contribution Account balances until their respective
Additional Capital Contribution Account balances are reduced to zero;
(b) Next, to the Partners in proportion to their respective
Initial Capital Contribution Account balances until their respective Initial
Capital Contribution Account balances are reduced to zero; and
(c) Next, to the Partners, pro rata in accordance with their
Residual Percentages (as calculated pursuant to clause (b) of the definition of
such term).
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ARTICLE VII.
ALLOCATION OF PROFITS AND LOSSES
7.1 ALLOCATION OF PROFITS AND LOSSES. After application of Section
7.3 hereof, Profits and Losses for each fiscal year shall be allocated among the
Partners so as to reduce, proportionately, in the case of any Profits, the
difference between their respective Target Accounts and Partially Adjusted
Capital Accounts for such fiscal year and, in the case of Losses, the difference
between their respective Partially Adjusted Capital Accounts and Target Accounts
for such fiscal year. To the extent that, in the fiscal year in which all or
substantially all of the Partnership's assets are disposed of, or in the fiscal
year in which the Partnership is liquidated, the allocation of Profit or Loss
set forth in the preceding sentence does not cause each Partner's Partially
Adjusted Capital Account balance to equal the balance of its Target Account,
items of income or gain will be reallocated to any Partner with a Partially
Adjusted Capital Account which is less than its Target Account, and items of
loss, deduction or expense will be reallocated to any Partner with a Partially
Adjusted Capital Account that is greater than its Target Account in such manner
as to reduce, to the greatest extent possible, the difference between each
Partner's respective balance in its Target Account and its Partially Adjusted
Capital Account balance.
7.2 LIMITATION ON LOSS ALLOCATIONS. Notwithstanding anything in this
Agreement to the contrary, no Losses or item of deduction shall be allocated to
a Partner if such allocation would cause the Capital Account of such Partner to
have a deficit in excess of the sum of (a) the amount of additional capital such
Partner would be required to contribute to the Partnership if the Partnership
were to dissolve on the last day of the accounting period to which such
allocation relates plus (b) such Partner's distributive share of Partnership
Minimum Gain as of the last day of such accounting period, determined pursuant
to Regulations Section 1.704-2(g)(1), plus (c) such Partner's share of Partner
Minimum Gain as of the last day of such year, determined pursuant to Regulation
Section 1.704-2(i)(5). Any amounts not allocated to a Partner pursuant to the
limitations set forth in this paragraph shall be allocated to the other Partners
to the extent possible without violating the limitations set forth in this
paragraph. For purposes of the foregoing provisions, the balance of a Partner's
Capital Account shall be determined after reducing such Capital Account by (i)
all anticipated allocations of loss or deduction pursuant to Sections 704(e)(2)
and 706(d) of the Code, and Section 1.751-1(b)(2)(ii) of the Regulations, and
(ii) anticipated distributions to such Partner to the extent such anticipated
distributions exceed anticipated increases to such Partner's Capital Account
during or prior to the year of distribution (other than increases which may not
be taken into account pursuant to Section 1.704-1(b)(2)(ii)(d)(6) of the
Regulations).
7.3 SPECIAL ALLOCATIONS. The following special allocations shall be
made in the following order:
(a) MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Section 1.704-2(f) of the Regulations, in the event there is a net decrease in
Partnership Minimum Gain during a Partnership taxable year, each Partner shall
be allocated (before any other allocation is made pursuant to this Section 7.3)
items of income and gain for such year (and, if necessary, for subsequent years)
equal to that Partner's share of the net decrease in Partnership Minimum Gain.
The determination of a Partner's share of the net decrease in Partnership
Minimum Gain shall be determined in accordance with Regulations Section
1.704-2(g). The items to be specially allocated to the Partners in accordance
with this Section 7.3(a) shall be determined in accordance with Regulation
Section 1.704-2(f)(6). This Section 7.3(a) is intended to comply with the
Minimum Gain chargeback requirement set forth in Section 1.704-2(f) of the
Regulations and shall be interpreted consistently therewith.
(b) PARTNER MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Section 1.704-2(i)(4), in the event there is a net decrease in
Partner Minimum Gain during a Partnership
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taxable year, each Partner who has a share of that Partner Minimum Gain as of
the beginning of the year, to the extent required by Regulation Section
1.704-2(i)(4), shall be specially allocated items of Partnership income and gain
for such year (and, if necessary, subsequent years) equal to that Partner's
share of the net decrease in Partner Minimum Gain. Allocations pursuant to this
subparagraph (b) shall be made in accordance with Regulation Section
1.704-2(i)(4). This Section 7.3(b) is intended to comply with the requirement
set forth in Regulation Section 1.704-2(i)(4) and shall be interpreted
consistently therewith.
(c) QUALIFIED INCOME OFFSET ALLOCATION. In the event any
Partner unexpectedly receives any adjustments, allocations or distributions
described in Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6) or which would cause the
negative balance in such Partner's Capital Account to exceed the sum of (i) his
obligation to restore a Capital Account deficit upon liquidation of the
Partnership, plus (ii) his share of Partnership Minimum Gain determined pursuant
to Regulation Section 1.704-2(g)(1), plus (iii) such Partner's share of Partner
Minimum Gain determined pursuant to Regulation Section 1.704-2(i)(5), items of
Partnership income and gain shall be specially allocated to such Partner in an
amount and manner sufficient to eliminate such excess negative balance in his
Capital Account as quickly as possible. This Section 7.3(c) is intended to
comply with the alternative test for economic effect set forth in Regulation
Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
(d) GROSS INCOME ALLOCATION. In the event any Partner has a
deficit Capital Account at the end of any Partnership fiscal year which is in
excess of the sum of (i) any amounts such Partner is obligated to restore
pursuant to this Agreement, plus (ii) such Partner's distributive share of
Minimum Gain as of such date, plus such Partner's share of Partner Minimum Gain
determined pursuant to Regulation Section 1.704-2(i)(5), each such Partner shall
be specially allocated items of Partnership income and gain in the amount of
such excess as quickly as possible, provided that an allocation pursuant to this
Section 7.3(d) shall be made only if and to the extent that such Partner would
have a deficit Capital Account in excess of such sum after all other allocations
provided for in this Section 7.3 have been made, except assuming that Section
7.3(c) above and this Section 7.3(d) were not contained in this Agreement.
(e) ALLOCATION OF NONRECOURSE DEDUCTIONS. Nonrecourse
Deductions shall be allocated to the Partners in accordance with their
respective Residual Percentages.
(f) ALLOCATION OF PARTNER NONRECOURSE DEDUCTIONS. Partner
Nonrecourse Deductions shall be allocated as prescribed by the Regulations.
(g) BASIS ADJUSTMENT UNDER SECTION 754. To the extent an
adjustment to the adjusted tax basis of any Partnership assets pursuant to Code
Section 734(b) or Code Section 743(b) is required, pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be treated
as an item of gain, if the adjustment increases the basis of the asset, or loss,
if the adjustment decreases such basis, and such gain or loss shall be specially
allocated to the Partners in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Section of the
Regulations.
7.4 BUILT-IN GAIN OR LOSS/SECTION 704(C) TAX ALLOCATIONS. In the
event that the Capital Accounts of the Partners are credited with or adjusted to
reflect the Gross Asset Value of the Partnership's property and assets, the
Partners' distributive shares of depreciation, depletion, amortization, and gain
or loss, as computed for tax purposes, with respect to such property, shall be
determined pursuant to Section 704(c) of the Code and the Regulations
thereunder, so as to take account of the variation between the adjusted tax
basis and Gross Asset Value of such property in a manner determined by Approval
by Partnership Vote. Any deductions, income, gain or loss specially allocated
19
pursuant to this Section 7.4 shall not be taken into account for purposes of
determining Profits or Losses or for purposes of adjusting a Partner's Capital
Account.
7.5 RECAPTURE. Ordinary income arising from the recapture of
depreciation and unrecaptured Section 1250 gain shall be allocated to the
Partners in the manner that is prescribed by the Regulations, or if the
Regulations do not prescribe a manner in which depreciation is to be recaptured,
then depreciation shall be recaptured in the same manner as such depreciation
was allocated to the Partners.
7.6 RETENTION OF SECTION 751 ASSETS. Upon the occurrence of an event
which would otherwise cause a reduction in a Partner's respective interest in
the Partnership's Section 751 assets ("substantially appreciated inventory" and
"unrealized receivables" as defined in Section 751 of the Code), such as the
admission of new Partners or otherwise, no such reduction shall occur with
respect to Partners who were Partners immediately preceding such event and who
continue to be Partners after the occurrence of such event but, rather, each
such Partner shall retain his respective interest in the Partnership's Section
751 assets existing immediately prior to such event.
7.7 PROHIBITION AGAINST RETROACTIVE ALLOCATIONS. Notwithstanding
anything in this Agreement to the contrary, no Partner shall be allocated any
loss, credit or income attributable to a period prior to his admission to the
Partnership. In the event that a Partner Transfers all or a portion of his
Partnership interest, or if there is a reduction in a Partner's Residual
Percentage due to the admission of new Partners or otherwise, each Partner's
distributive share of Partnership items of income, loss, credit, etc., shall be
determined by taking into account each Partner's varying interests in the
Partnership during the Partnership's taxable year. For this purpose, each
Partner's distributive share shall be estimated by taking the pro rata portion
of the distributive share such Partner would have included in his taxable income
had he maintained his Residual Percentage throughout the Partnership year. Such
proration shall be based upon the portion of the year during which such Partner
held the Residual Percentage, except that extraordinary, nonrecurring items
shall be allocated to the persons holding Partnership interests at the time such
extraordinary items occur.
7.8 ALLOCATION OF NONRECOURSE LIABILITIES. The "excess nonrecourse
liabilities" of the Partnership (within the meaning of Section 1.752-3(a)(3) of
the Regulations) shall be allocated to the Partners in accordance with their
respective Residual Percentages.
ARTICLE VIII.
TRANSFER OF PARTNERSHIP INTEREST
8.1 PROHIBITION ON DISPOSITION OF GENERAL PARTNER'S INTEREST. Unless
Approval by Partnership Vote is otherwise obtained, or except as otherwise
permitted in this Agreement, the General Partner may not, directly or
indirectly, by operation of law or otherwise (a) withdraw or resign from the
Partnership, or (b) Transfer any or all of its interest in the Partnership. In
addition, the General Partner shall not permit the Transfer of any interest in
the General Partner unless Approval by Partnership Vote is obtained with respect
to such Transfer. Any act in violation of this Section 8.1 shall be null and
void as against the Partnership and the Limited Partners, except as otherwise
required by law.
8.2 GENERAL PARTNER CEASING TO BE A GENERAL PARTNER. Unless Approval
by Partnership Vote is otherwise obtained, a General Partner shall cease to be a
General Partner of the Partnership upon the happening of any of the following
events (hereinafter each referred to as an "EVENT OF WITHDRAWAL"):
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(a) such General Partner makes an assignment for the benefit
of creditors; files a voluntary petition of bankruptcy; is adjudicated as
bankrupt or insolvent or is the subject of an order for relief under the
bankruptcy laws; files a petition or answer seeking for itself any
reorganization, arrangement or similar relief under any statute, law or
regulation; files an answer or other pleading admitting or failing to contest
the material allegations of a petition filed against it in any proceeding of
this nature; or seeks, consents to or acquiesces in the appointment of a
trustee, receiver or liquidator of all or any substantial part of its
properties;
(b) such General Partner fails to dismiss within one hundred
twenty (120) days after the commencement of any proceeding which attempts to
attach or charge the General Partner's Partnership interest or which seeks
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief against the General Partner under any statute, law or
regulation, or if within ninety (90) days after a court order attaching or
charging its Partnership interest or the appointment without its consent or
acquiescence of a trustee, receiver or liquidator of such General Partner or all
or any substantial part of its properties, the order or appointment is not
vacated or stayed, or within ninety (90) days after the expiration of any such
stay, the order or appointment is not vacated;
(c) In the case of any General Partner which is a
corporation, limited partnership or limited liability company, the filing of a
certificate of dissolution or its equivalent for the corporation, limited
partnership or limited liability company, or the revocation of its charter or
authority to do business in the jurisdiction of its formation;
(d) The withdrawal of a General Partner from the Partnership
as provided in Section 8.1 above; or
(e) The Transfer by a General Partner of all or any part of
its interest in the Partnership except as approved by Partnership Vote pursuant
to Section 8.1.
Any person ceasing to be a General Partner (other than as a
result of paragraph (d) and (e) of this Section 8.2) shall automatically become
a limited partner of the Partnership having the same percentage interest in the
profits, losses and distributions of the Partnership that it had while it was a
general partner, and provided further that in the event that the Partners elect
to continue the Partnership pursuant to Section 12.1(b) below, and a new General
Partner is admitted to the Partnership to enable the Partnership to continue,
then the General Partner being converted to a limited partner shall Transfer a
..005% Residual Percentage to the newly admitted general partner. Such Transfer
shall not reduce the interest in the Partnership of any Partner other than the
General Partner which is being converted to a limited partner.
8.3 GENERAL PROHIBITION AGAINST TRANSFERS OF LIMITED PARTNER'S
INTEREST. A Limited Partner may not Transfer any or all of such Partner's
interest in the Partnership except as permitted in Section 8.4. Any act in
violation of this Article shall be null and void as against the Partnership and
the Partners, except as otherwise provided by law.
8.4 CONDITIONS UPON TRANSFERS BY A LIMITED PARTNER. A Limited
Partner may Transfer all or any part of such Partner's interest in the
Partnership only with the written consent of the General Partner and Approval by
Partnership Vote; provided, however, that the General Partner's written consent
shall not be given unless:
(i) the General Partner is satisfied that the
proposed Transfer will not have any adverse effect upon the Partnership or the
Partners under federal income tax laws then in effect or cause any default in
any loan documents of the Partnership or the Property owner;
21
(ii) the General Partner has received, if requested,
an opinion from counsel for the Partnership to the effect that such Transfer
will not violate federal or state securities laws or regulations; and
(iii) the person, firm or entity to acquire such
interest agrees to comply with all terms of this Agreement, including without
limitation Section 8.5 below.
8.5 SUBSTITUTION OF ASSIGNEE. No Transferee of the whole or any
portion of a Limited Partner's interest in the Partnership shall have the right
to be admitted to the Partnership and become a Limited Partner unless and until
all of the Partners in their absolute discretion consent and all of the
following conditions are satisfied:
(a) the Transferor and Transferee execute and acknowledge a
written instrument of assignment, together with such other instruments as the
General Partner may deem necessary or desirable to effect the admission of the
Transferee as a substitute Limited Partner; and
(b) an instrument specifically Transferring such interest,
signed by both assignor and assignee, shall be filed with the General Partner,
and until such instrument is so filed, the Partnership shall not recognize any
Transfer of interest for the purposes of making payments of profits, income or
any other distribution with respect to such interest.
8.6 BUY-SELL IN EVENT OF OFFER TO PURCHASE ASSETS.
(a) If a BONA FIDE offer (an "OFFER TO PURCHASE") is made to
the Partnership for the purchase of the then-remaining portion of the Property
still owned by the Partnership, the General Partner shall notify the Partners of
such offer. Within five (5) business days after all the Partners have been
notified of such the Offer to Purchase, each Partner shall send to the other
Partners written notice (the "RESPONSE NOTICE") whether such offer is
acceptable. If one or more Partners desires to accept the Offer to Purchase and
the other Partners do not, then any Partner that wants to accept the Offer to
Purchase (whether one or more, the "SELLING PARTNER") shall have the right,
within five (5) business days after the latest of the Response Notices is
received, to request in writing that the Partners that do not want to accept the
Offer to Purchase (whether one or more, the "PURCHASING PARTNER") purchase the
interest in the Partnership owned by the Selling Partner. In such event, the
Purchasing Partner shall have five (5) business days after receipt of such
notice from the Selling Partner to elect by written notice to the Selling
Partner either (i) to purchase the interest of the Selling Partner, or (ii) to
accept the Offer to Purchase. The failure of a Purchasing Partner to respond to
such notice from the Selling Partner within such five (5) business day period
shall be deemed an election by the Purchasing Partner to purchase the interest
of the Selling Partner as set forth in clause (i) of the preceding sentence. In
the event that the Purchasing Partner elects (or is deemed to have elected) to
purchase the interest of the Selling Partner, the purchase price payable by the
Purchasing Partner to the Selling Partner shall be an amount equal to the amount
which the Selling Partner would have received had the Property been sold by the
Partnership pursuant to the terms of the Offer to Purchase that the Selling
Partner wished to accept. Closing shall occur at the offices of the Partnership
no later than sixty (60) days following the date the Purchasing Partner elects
(or is deemed to have elected) to purchase the Selling Partner's interest in the
Partnership. It is understood and agreed that if a portion of the Assets are
sold between the time that the Purchasing Partner elects (or is deemed to have
elected) to purchase the Selling Partner's interest and such closing, the
proceeds of such sale shall be retained by the Partnership and not distributed
to the Partners.
(b) At the closing, the applicable interests in the
Partnership shall be duly conveyed, free of all liens and encumbrances. The
purchase price shall be paid by wire transfer of immediately available federal
funds, unless a different manner of payment was set forth in the offer or is
otherwise
22
agreed to by the Partnership. At the election of the Purchasing Partner, the
applicable interests in the Partnership to be purchased may be acquired in the
name of a nominee (whether or not such nominee is an Affiliate of the Purchasing
Partner), provided, that the Purchasing Partner shall have designated such
nominee by written notice prior to the date of purchase. It shall be a condition
of the Selling Partner's obligation to proceed with any such purchase that the
Purchasing Partner shall have obtained releases of any guaranties of
indebtedness of the Partnership executed by the Selling Partner or any
Affiliates of (or principals in) the Selling Partner. The Purchasing Partner, in
addition to paying at the closing the purchase price, shall be obligated to loan
to the Partnership an amount sufficient to discharge at the closing all
outstanding and unpaid obligations of the Partnership to the Selling Partner as
of such time.
(c) Upon receipt of the purchase price, the Selling Partner
shall execute and deliver all documents reasonably required to transfer the
interest in the Partnership being sold. The Selling Partner shall also execute
such resignations and other documents as may be reasonably required by counsel
for the Partnership to accomplish the withdrawal of the Selling Partner as a
Partner of the Partnership and the Purchasing Partner shall assume all of the
Selling Partner's obligations to the Partnership and any of its creditors under
any loans to the Partnership permitted by this Agreement, such assumptions to be
in form reasonably satisfactory to counsel for the Selling Partner.
(d) It is expressly agreed that the remedy at law for breach
of any of the obligations set forth in this Section 8.6 is inadequate in view of
(i) the complexities and uncertainties in measuring the actual damages that
would be sustained by reason of the failure of a Partner to comply fully with
each of said obligations, and (ii) the uniqueness of the Partnership business
and Partners' relationship. Accordingly, each of the aforesaid obligations shall
be, and is hereby expressly made, enforceable by specific performance.
8.7 BUY-SELL AGREEMENT.
(a) Any Partner (the "OFFEROR") may make an offer in writing
to the other Partners (the "OFFEREE"), which shall state an amount (the
"BUY-SELL VALUE") determined in the sole and absolute discretion of the Offeror.
The Buy-Sell Value shall be the amount that the Offeror chooses to be the value
of the Assets. An offer made pursuant to this Section 8.7 shall constitute an
irrevocable offer by the Offeror to the Offeree either (i) to sell all, but not
less than all, of the Offeror's interests in the Partnership (including any
interests held by, or Transferred to, its Affiliates), or (ii) to purchase all,
but not less than all, of the Offeree's interests in the Partnership (including
any interests held by or Transferred to its Affiliates). The Offeree shall have
sixty (60) days after receipt of an offer made pursuant to this Section 8.7 to
elect either (A) to sell its interests in the Partnership at a price equal to
the amount the Offeree would have received pursuant to a liquidation of the
Partnership if the Assets had been sold to a third party for the Buy-Sell Value
and the proceeds therefrom had been applied and distributed in accordance with
Section 12.2 (assuming that all allocations resulting from the sale had been
made and no reserves are established); or (B) to buy the Offeror's interest in
the Partnership at a price equal to the amount the Offeror would have received
pursuant to a liquidation of the Partnership if the Assets had been sold to a
third party for the Buy-Sell Value and the proceeds therefrom had been applied
and distributed in accordance with Section 12.2 (assuming that all allocations
resulting from the sale had been made and no reserves are established). If the
Offeree fails to make such an election within sixty (60) days after receipt of
an offer under this Section 8.7(a), the Offeree shall be deemed to have elected
to sell its interests in the Partnership. In any case in which there is more
than one purchasing Partner, the purchasing Partners shall determine the
proportions of the interests in the Partnership to be purchased by each such
Partner.
(b) Closing shall occur at the offices of the Partnership no
later than ninety (90) days following the date after the election to purchase
has been made or deemed made. It is understood and agreed that if a portion of
the Assets are sold between the time that the Offeror initiates the procedure
set
23
forth Section 8.7(a) above and closing, the proceeds of such sale shall be
retained by the Partnership and not distributed to the Partners. At the closing,
the applicable interests in the Partnership shall be duly conveyed, free of all
liens and encumbrances, and the purchase price shall be paid by wire transfer of
immediately available federal funds. At the election of the purchasing Partner,
the applicable interests in the Partnership to be purchased may be acquired in
the name of a nominee (whether or not such nominee is an Affiliate of the
Purchasing Partner), provided, that the Purchasing Partner shall have designated
such nominee by written notice prior to the date of purchase. It shall be a
condition of the selling Partner's obligation to proceed with any such purchase
that the purchasing Partner shall have obtained releases of any guaranties of
indebtedness of the Partnership executed by the selling Partner or any
Affiliates of (or principals in) such selling Partner. The purchasing Partner,
in addition to paying at the closing the purchase price, shall be obligated to
loan to the Partnership an amount sufficient to discharge at the closing all
outstanding and unpaid obligations of the Partnership to the selling Partner as
of such time.
(c) Upon receipt of the purchase price, the selling Partner
shall execute and deliver all documents reasonably required to transfer the
interest in the Partnership being sold. The selling Partner shall also execute
such resignations and other documents as may be reasonably required by counsel
for the Partnership to accomplish the withdrawal of the selling Partner as a
Partner of the Partnership and the purchasing Partner shall assume all of the
selling Partner's obligations to the Partnership and any of its creditors under
any loans to the Partnership permitted by this Agreement, such assumptions to be
in form reasonably satisfactory to counsel for the selling Partner.
(d) It is expressly agreed that the remedy at law for breach
of any of the obligations set forth in this Section 8.7 is inadequate in view of
(i) the complexities and uncertainties in measuring the actual damages that
would be sustained by reason of the failure of a Partner to comply fully with
each of said obligations, and (ii) the uniqueness of the Partnership business
and Partners' relationship. Accordingly, each of the aforesaid obligations shall
be, and is hereby expressly made, enforceable by specific performance.
8.8 AUTHORITY OF GENERAL PARTNER. For purposes of Section 8.6 and
Section 8.7 above, the General Partner and BH Investors shall be treated as one
Partner, and the General Partner shall make all decisions on behalf of the
General Partner and BH Investors regarding the initiation of the buy/sell
procedure or any other decision to be made pursuant to Section 8.6 or Section
8.7. BH Investors hereby irrevocably constitutes and appoints the General
Partner as its attorney-in-fact with full power to bind BH Investors hereunder
and execute documents of transfer on its behalf.
8.9 COST AND EXPENSE OF TRANSFER; ALLOCATION OF PROFITS AND LOSSES.
All costs and expenses incurred by the Partnership in connection with any
disposition of a Partner's interest, including any filing, recording and
publishing costs and the fees and disbursements of counsel, shall be paid by the
Partner disposing of such interest. If an interest in the Partnership is
disposed of pursuant to this Article VIII, the selling Partner shall
nevertheless be entitled to a portion of the profits and be charged with a
portion of the losses allocated to such interest or part thereof for the fiscal
year of the Partnership in which such disposition occurs, consistent with
Section 7.7 above.
ARTICLE IX.
OWNERSHIP OF PARTNERSHIP PROPERTY
All real or personal property, including all improvements placed or
located thereon, acquired by the Partnership shall be owned by and in the name
of the Partnership, such ownership being subject to the other terms and
provisions of this Agreement.
24
ARTICLE X.
FISCAL MATTERS
10.1 FISCAL YEAR. The fiscal year of the Partnership shall be the
calendar year.
10.2 RECORDS; FINANCIAL STATEMENTS.
(a) Proper books and records shall be kept with reference to
all Partnership transactions at the principal place of business of the
Partnership, and each Partner shall at all reasonable times during business
hours have access thereto. The books shall be kept in such manner of accounting
as shall properly reflect the actions of the Partnership in accordance with
accounting principles generally accepted within the industry and consistently
applied on such basis as will, in the opinion of the Partnership's accountants,
be most advantageous to the Partnership. The books and records shall include the
designation and identification of any property in which the Partnership owns a
beneficial interest. The books and records of the Partnership shall be reviewed
annually at the expense of the Partnership by an independent certified public
accountant selected by the General Partner, who shall prepare and deliver to the
Partnership, for filing, the appropriate federal Partnership income tax
return(s) before March 31 of each year. The General Partner shall provide each
Limited Partner with a copy of the Partnership income tax return at least ten
(10) business days prior to filing such return. The Partnership shall report its
operations for tax purposes on the accrual basis.
(b) The General Partner shall, at Partnership expense,
furnish (or request the manager of the Property to furnish) to the Partners (i)
on or before the twentieth (20th) day of each calendar quarter, an unaudited
statement setting forth and describing in reasonable detail the receipts and
expenditures of the Partnership during the preceding calendar quarter and
comparing the results of operations of the Partnership for such calendar quarter
and for the year to date to the appropriate Operating Budget, (ii) on or before
one hundred twenty (120) days after the end of each fiscal year, a balance sheet
of the Partnership dated as of the end of such fiscal year, a statement of the
Partners' Capital Accounts and Capital Contribution Balances, a statement of
Distributable Cash, and a statement setting forth the Profits and Losses for
such fiscal year, audited by an independent firm of certified public accountants
as determined by Approval by Partnership Vote, and (iii) from time to time, all
other information relating to the Partnership and the business and its affairs
reasonably requested by any Partner.
10.3 ACCOUNTS. All funds of the Partnership shall be deposited in its
name in an account or accounts maintained at a bank designated by the General
Partner or with an agent designated by the General Partner. Checks shall be
drawn upon the Partnership account or accounts only for purposes of the
Partnership and shall be signed by the General Partner.
10.4 FEDERAL TAX ELECTIONS. All elections for federal tax purposes,
including but not limited to an election to adjust the basis of the assets of
the Partnership pursuant to Section 754 of the Code, and the adoption of
accelerated depreciation or cost recovery methods required or permitted to be
made by the Partnership under the Code shall be determined by Approval by
Partnership Vote.
10.5 TAX AUDITS. The General Partner shall be designated as the "tax
matters partner" of the Partnership as defined in Sections 6221 ET SEQ, of the
Code and, in the event of an audit of the Partnership by the Internal Revenue
Service ("IRS"), the General Partner, at Partnership expense, shall have the
exclusive right to conduct all negotiations with the Internal Revenue Service on
behalf of the Partnership, and the attorneys and accountants selected by the
Partners to conduct such negotiations are hereby specifically authorized by the
Partners to act on behalf of the Partnership in such negotiations, and each
25
Partner will execute such further authority as the IRS may require to permit the
General Partner and its selected attorneys and accountants to so represent the
Partners; provided the General Partner shall not take any action take any action
contemplated by Sections 6222 through 6232 of the Code without prior Approval by
Partnership Vote. This provision is not intended to authorize the General
Partner to take any action left to the determination of an individual Partner
under Sections 6222 through 6232 of the Code.
ARTICLE XI.
AMENDMENT
11.1 AUTHORITY TO AMEND. This Agreement may be altered or amended by
a written instrument signed by the General Partner and Limited Partners holding
a Majority in Interest of the Residual Percentages; provided, however, that (a)
any amendment that constitutes an action described in Section 4.4 of this
Agreement shall require execution by all the Partners; (b) the General Partner
shall have the right to amend this Agreement as set forth in Section 11.2 below
without any approval of the Limited Partners; and (c) any amendment that reduces
a Partner's economic interest in the Partnership or increases a Partner's
liabilities or obligations under this Agreement shall require such Partner's
written consent.
11.2 AMENDMENTS BY GENERAL PARTNER WHICH REQUIRE NO APPROVAL.
Notwithstanding Section 11.1 hereof, the following amendments to this Agreement
may be made by the General Partner, without approval of the Limited Partners:
(a) a clarification which does not change the substance
hereof;
(b) a change in the name of the Partnership;
(c) a change in the name and address of a Partner designated
in Article II pursuant to a request from that Partner;
(d) a modification which is necessary or appropriate, in the
opinion of counsel for the Partnership, to satisfy the requirements of the Code
with respect to partnerships or of any federal or state securities laws or
regulations, provided such amendment does not adversely affect the economic
interests of any Limited Partner without that Limited Partner's consent.
ARTICLE XII.
DISSOLUTION OF THE PARTNERSHIP
12.1 DISSOLUTION.
(a) It is the intention of the Partners that the Partnership
shall be continued by the Partners, or those remaining, pursuant to the
provisions of this Agreement, notwithstanding the occurrence of any event which
would otherwise result in a dissolution of the Partnership pursuant to the law
of the State of Texas, and no Partner shall be released or relieved of any duty
or obligation hereunder by reason of any such dissolution; provided, however,
that the Partnership shall be terminated, its affairs wound up and its property
and assets distributed on the earlier of:
(i) expiration of the Partnership term as provided
in Section 1.5 hereof;
26
(ii) the written consent of the General Partner and
the Limited Partners holding a Majority in Interest of the Residual Percentages;
(iii) an Event of Withdrawal of a General Partner (as
defined in Article VIII hereof) unless at the time of the Event of Withdrawal,
there is at least one (1) other General Partner or the provisions of Section
12.1(b) below are satisfied;
(iv) the disposition (including condemnation or
casualty loss) of all or substantially all of the property and assets of the
Partnership and receipt of the proceeds from such sale of other disposition
(except under circumstances where (x) all or a portion of the purchase price is
payable after the closing of the sale or other disposition, or (y) the
Partnership retains a material economic or ownership interest in the entity to
which all or substantially all of its assets are Transferred); or
(v) dissolution by law or appropriate judicial
decree.
(b) Upon the occurrence of any Event of Withdrawal of a
General Partner at a time when there is no other General Partner, the
Partnership shall be continued if, within a period of ninety (90) days from the
date of such occurrence, all other Partners agree in writing that the
Partnership shall be continued and designate one or more individuals or legal
entities to be admitted to the Partnership as a General Partner, which agreement
shall be effective as of the date of the occurrence of the applicable Event of
Withdrawal. Any such individual or legal entity shall, upon admission to the
Partnership, succeed to all of the rights and powers of a General Partner
hereunder.
(c) Dissolution of the Partnership shall be effective on
December 31, 2053 or the day on which the event occurs giving rise to the
dissolution, but the Partnership shall not terminate until the Certificate shall
have been canceled and the assets of the Partnership shall have been distributed
as provided below. Notwithstanding the dissolution of the Partnership, prior to
the termination of the Partnership as aforesaid, the business of the Partnership
and the affairs of the Partners shall continue to be governed by this Agreement.
(d) The bankruptcy, insolvency, dissolution, or adjudication
of incompetency of a Limited Partner shall not cause the dissolution of the
Partnership. In the event of the bankruptcy, or incompetency of a Limited
Partner, its administrators or representatives ("Successor") shall have the same
rights that such Limited Partner would have had if it had not become bankrupt,
except that, in the event of bankruptcy, such Successor shall have no right to
participate in the management of the Partnership or vote on any Partnership
matter unless such Successor is admitted to the Partnership as a Limited Partner
pursuant to Section 8.5, and the interest of such Limited Partner in the
Partnership shall, until the termination of the Partnership, otherwise be
subject to the terms, provisions and conditions of this Agreement as if such
Limited Partner had not become bankrupt. In the event of any other withdrawal of
a Limited Partner, the Limited Partner shall only be entitled to Partnership
distributions distributable to it but not actually paid to it prior to such
withdrawal and shall not have any right to have its interest in the Partnership
purchased or paid for.
(e) Notwithstanding anything in this Agreement to the
contrary, upon a sale of all or substantially all of the assets of the
Partnership in a single transaction (a "SINGLE SALE TRANSACTION") where all or
any portion of the consideration payable to the Partnership is to be received by
the Partnership more than ninety (90) days after the date on which such Single
Sale Transaction occurs, the Partnership shall continue for purposes of
collecting the deferred payments and making distributions to the Partners. In
such event (i) gain recognized and cash distributed in any year as a result of
such Single Sale Transaction
27
shall be allocated and distributed among the Partners in the same proportion as
such gain and cash would have been allocated and distributed were the entire
gain resulting from such Single Sale Transaction required to be recognized for
Federal income tax purposes in the year in which such Single Sale Transaction
occurred; and (ii) income attributable to interest on deferred payments shall be
allocated among, and such interest shall be distributed to, the Partners as if
the deferred payment obligations received by the Partnership had been
distributed to the Partners pursuant to Section 6.1.
12.2 WIND-UP OF AFFAIRS. As expeditiously as possible following the
occurrence of an event giving rise to a termination of the Partnership pursuant
to Section 12.1 above, the General Partner(s) or, if none, all of the Limited
Partners or a liquidator appointed by all of the Limited Partners (the General
Partner, Limited Partners or such liquidator, as the case may be, is referred to
here as the "LIQUIDATOR") shall liquidate the assets of the Partnership, apply
and distribute the proceeds thereof as contemplated by this Agreement and cause
the cancellation of the Certificate. As soon as possible after the dissolution
of the Partnership, a full account of the assets and liabilities of the
Partnership shall be taken, and a statement shall be prepared by the independent
accountants then acting for the Partnership setting forth the assets and
liabilities of the Partnership. A copy of such statement shall be furnished to
each of the Partners within ninety (90) days after such dissolution. Thereafter,
the Liquidator shall wind up the affairs of the Partnership and distribute the
Partnership assets in the following order of priority:
(a) to creditors (including Partners who are creditors) in
satisfaction of the liabilities of the Partnership, other than liabilities to
existing and former Partners for distributions from the Partnership;
(b) to the establishment of any reserves which the
Liquidator deems reasonably necessary for any contingencies or unforeseen
liabilities or obligations of the Partnership. Such reserves shall be paid over
by the Liquidator to an escrow agent or shall be held by the Liquidator for the
purpose of disbursing such reserves in payment of any of such contingencies. At
the expiration of such period as the Liquidator deems advisable, the balance
thereof shall be distributed in the manner and order provided in this Section;
(c) to existing and former Partners in satisfaction of any
liabilities to them, if any, for distributions from the Partnership;
(d) to Partners in accordance with Section 6.1 above.
Notwithstanding anything to the contrary, in the event the Partnership
is "liquidated" within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g)
and an event described in Section 12.1(a) shall have occurred, liquidating
distributions shall be made pursuant to this Section 12.2 by the end of the
taxable year in which the Partnership is liquidated, or, if later, within ninety
(90) days after the date of such liquidation. Distributions pursuant to the
preceding sentence may be made to a trust for the purpose of an orderly
liquidation of the Partnership by the trust in accordance with the Act.
12.3 COMPLIANCE WITH TREASURY REGULATIONS. It is the intent of the
Partners that the allocations provided in Section 7.1 result in distributions
required pursuant to Section 12.2(d) being in accordance with positive Capital
Accounts as provided for in the Treasury Regulations under Code Section 704(b).
However, if after giving hypothetical effect to the allocations required by
Section 7.1, the Capital Accounts of the Partners are in such ratios or balances
that distributions pursuant to Section 12.2(d) would not be in accordance with
the positive Capital Accounts of the Partners as required by the Treasury
Regulations under Code Section 704(b), such failure shall not affect or alter
the distributions required by Section 12.2(d). Rather, the liquidator will have
the authority to make other allocations of Profits and Losses (or items thereof)
among the Partners which, to the extent possible, will result in the Capital
Accounts of each Partners having a balance prior to distribution equal to the
amount of distributions to be received by such Partners pursuant to Section
12.2(d).
28
12.4 NO DEFICIT CAPITAL ACCOUNT OBLIGATION. Notwithstanding anything
else to the contrary in this Agreement, upon a liquidation within the meaning of
Section 1.704-1(b)(2)(ii)(g) of the Regulations, if any Partner has a deficit
Capital Account (after giving effect to all contributions, distributions,
allocations and other Capital Account adjustments for all taxable years,
including the year during which such liquidation occurs), such Partner shall
have no obligation to make any Capital Contribution, and the negative balance of
such Partner's Capital Account shall not be considered a debt owed by such
Partner to the Partnership or to any other Person for any purpose whatsoever.
12.5 DISTRIBUTION IN KIND. If any assets of the Partnership are to be
distributed in kind, the net fair market value of such assets as of the date of
dissolution shall be determined by independent appraisal or by agreement of the
Partners. Prior to distribution, such assets shall be deemed to have been sold
for their fair market values and the Capital Accounts of the Partners shall be
adjusted pursuant to the terms of this Agreement to reflect the allocation of
gain or loss which would have resulted from such deemed sale.
12.6 CANCELLATION OF CERTIFICATE. Upon the dissolution and the final
liquidation of the Partnership, there shall be filed for record as provided by
Texas law a Certificate of Cancellation executed by the General Partner.
12.7 RETURN OF CONTRIBUTION NONRECOURSE TO OTHER PARTNERS. Except as
provided by law or as expressly provided in this Agreement, upon dissolution
each Partner shall look solely to the assets of the Partnership for the return
of its Capital Contribution. If the Partnership property remaining after the
payment or discharge of the debts and liabilities of the Partnership is
insufficient to return the cash contribution of one or more Partners, such
Partner or Partners shall have no recourse against any other Partner.
ARTICLE XIII.
MISCELLANEOUS PROVISIONS
13.1 NOTICES. Except as may be otherwise specifically provided in
this Agreement, all notices required or permitted hereunder shall be in writing
and shall be deemed to be delivered on the earlier of (i) when delivered in
person, or (ii) when delivered by commercial courier such as Federal Express,
Express Mail or other overnight delivery service where delivery is evidenced by
written receipt, addressed to the appropriate party at the addresses set forth
in Article II, or such other address of the party as may have been changed as
provided herein. Any party may change the address to which notices will be given
by giving notice of such change to the other parties, in accordance with the
provisions of this Section 14.1.
13.2 GOVERNING LAW. This Agreement shall be construed under and in
accordance with the laws of the State of Texas, excluding any conflicts of law
rule or principle which might refer such construction to the laws of another
state or country.
13.3 EXECUTION OF OTHER AGREEMENTS. The parties hereto covenant and
agree that they will execute such other further instruments and documents as are
or may become necessary or convenient to effectuate and carry out the
Partnership created by this Agreement.
13.4 NO ACTION FOR PARTITION. No Partner shall be entitled to bring
an action for partition against the Partnership, and each Partner hereby
irrevocably waives, during the term of the Partnership and during the period of
its liquidation following any dissolution, any right to maintain an action for
partition with respect to any of the assets of the Partnership.
29
13.5 PARAGRAPH HEADINGS. The headings used in this Agreement are used
for administrative purposes only and do not constitute substantive matter to be
considered in construing the terms of this Agreement.
13.6 BINDING EFFECT AND BENEFIT. This Agreement is binding on, and
shall inure to the benefit of, all of the parties hereto and to their respective
heirs, executors, administrators, legal representatives, and successors and
assigns where permitted by this Agreement.
13.7 SEVERABILITY. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
13.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which together shall constitute a single contract, and each
of such counterparts shall for all purposes be deemed to be an original. This
Agreement may be executed and delivered by fax (telecopier); any original
signatures that are initially delivered by fax shall be physically delivered
with reasonable promptness thereafter. This Agreement shall become binding when
one or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the signatories.
13.9 GENDER. Wherever the context so requires, all words herein in
the neuter gender shall be deemed to include the feminine or masculine genders,
and vice versa, all singular words shall include the plural, and all plural
words shall include the singular.
13.10 ENTIRE AGREEMENT. This Agreement, together with all Exhibits
hereto and all other documents referred to herein, constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof,
and supersedes all prior and contemporaneous agreements, understanding,
inducements or conditions, express or implied, oral or written.
13.11 VALIDITY. In the event that all or any portion of any provision
of this Agreement shall be held to be invalid, the same shall not affect in any
respect whatsoever the validity of the remainder of this Agreement.
13.12 INDULGENCES, ETC. Neither the failure nor any delay on the part
of any party hereto to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or any other right, remedy, power or privilege; nor shall
any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and signed by the party asserted to have granted such waiver.
13.13 REMEDIES. In the event of any breach of this Agreement by any
Partner or default by any Partner in connection with performing any obligation
of such Partner under this Agreement, the Partnership's and the non-defaulting
Partner's rights and remedies contained herein or in any other agreement shall
be cumulative and shall not be exclusive of any other rights or remedies which
the Partnership or the non-defaulting Partner may have at law or in equity.
13.14 INTERPRETATION. No provision of this Agreement is to be
interpreted for or against either party because that party or that party's legal
representative drafted such provision.
30
13.15 TIME OF ESSENCE. TIME IS OF THE ESSENCE in connection with this
Agreement.
13.16 ALTERNATIVE DISPUTE RESOLUTION. If a dispute, controversy or
claim (whether based upon contract, tort, statute, common law or otherwise)
(collectively a "DISPUTE") arises from or relates directly or indirectly to the
subject matter hereof, and if the Dispute cannot be settled through direct
discussions, the parties hereto shall first endeavor to resolve the Dispute by
participating in a mediation administered by the American Arbitration
Association (the "AAA") under its Commercial Mediation Rules before resorting to
arbitration. Thereafter, any unresolved Dispute shall be resolved among the
parties by binding arbitration administered by the AAA in accordance with its
Commercial Arbitration Rules and judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction. The arbitration
proceedings shall be conducted in Dallas, Texas on an expedited basis before a
single neutral arbitrator (or multiple arbitrators if called for by the
Commercial Arbitration Rules, with all references herein to the arbitrator to
include multiple arbitrators). Each arbitrator shall be an attorney with
excellent academic and professional credentials, who (a) is a member of the Bar
of the State of Texas, (b) has been actively engaged in the practice of law for
at least fifteen (15) years, and (c) specializes in commercial transactions,
with substantial experience with limited partnerships that own and operate
significant commercial real estate. Attorneys selected as arbitrators need not
have any special experience or training in arbitration proceedings. Any attorney
who serves as an arbitrator shall be compensated at a rate equal to his or her
current regular hourly billing rate. Upon the request of either party, the
arbitrator's award shall include findings of fact and conclusions of law
provided that such findings may be in summary form and the arbitrator shall
render his or her decision based on applicable law. The prevailing party in the
arbitration proceeding shall be entitled to an award of all reasonable
out-of-pocket costs and expenses (including attorneys' and arbitrators' fees)
related to the entire arbitration proceeding. Upon request of either party, the
arbitrator may require that the subject arbitration proceedings be kept
confidential and no party shall disclose or permit the disclosure of any
information produced or disclosed in the arbitration proceedings until the award
is final. A party shall not be prevented from seeking temporary injunctive
relief before a court of competent jurisdiction in an emergency situation, but
responsibility for resolution of the Dispute shall be appropriately transferred
to the arbitrator upon appointment in accordance with the provisions hereof.
13.17 NOTICE OF INDEMNIFICATION. THE PARTIES TO THIS AGREEMENT HEREBY
ACKNOWLEDGE AND AGREE THAT THIS AGREEMENT CONTAINS CERTAIN INDEMNIFICATION
PROVISIONS PURSUANT TO SECTION 5.2.
ARTICLE XIV.
SECURITIES LAW CONSIDERATIONS
14.1 NO REGISTRATION/RESTRICTION ON SALE. THE PARTNERSHIP INTERESTS
HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, NOR HAVE THEY BEEN REGISTERED WITH
THE SECURITIES COMMISSION OF ANY OTHER APPLICABLE STATE, INCLUDING WITHOUT
LIMITATION THE STATE OF TEXAS. THE PARTNERSHIP INTERESTS MAY BE ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND MAY NOT BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED,
SOLD OR TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF THIS
AGREEMENT AND IN A TRANSACTION WHICH IS EITHER EXEMPT FROM REGISTRATION UNDER
SUCH ACTS OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS.
14.2 COMPLIANCE WITH SECURITIES LAWS. The Limited Partners
acknowledge and confirm that their Limited Partnership interests have not been
registered under any federal or state securities laws by
31
virtue of exemptions from the registration provisions thereof and consequently
cannot be sold except pursuant to appropriate registration or exemption from
registration as applicable. No Transfer of all or any part of a Limited
Partnership interest (except a Transfer upon the death, incapacity or bankruptcy
of a Limited Partner to his personal representative and beneficiaries),
including, without limitation, any Transfer of a right to distributions, profits
and/or losses to a person who does not become a Partner, may be made unless the
Partnership is provided with an opinion of counsel acceptable to the General
Partner (both as to the identity of the counsel and the substance of the
opinion) to the effect that such offer or assignment (a) may be effected without
registration under the Securities Act of 1933, as amended, or the Investment
Company Act of 1940, as amended, and (b) does not violate any applicable federal
or state securities laws (including any investment suitability standards)
applicable to the Partnership or the General Partner.
14.3 ACCESS TO INFORMATION. Each of the Limited Partners represents
to the General Partner and the Partnership that before determining to enter into
this Agreement and to invest in the Partnership, each Limited Partner made an
independent investigation into the Partnership and the General Partner and that
it received whatever information it deemed necessary or relevant in order to
decide whether to enter into this Agreement or invest in the Partnership. Each
Limited Partner acknowledges that the financial materials provided to the
Limited Partners are only estimates of expected future operations based on
assumptions about future markets and there is no assurance that such projections
will be realized.
14.4 LIMITATIONS OF FEES. Reference is made to that certain Amended
and Restated Agreement of Limited Partnership of Behringer Harvard Short-Term
Opportunity Fund I LP dated as of September 15, 2003 (together with all
amendments thereto, the "BH FUND AGREEMENT") in respect of BH Fund. BH Fund owns
interests in the General Partner and BH Investors. Notwithstanding anything
contained in this Agreement to the contrary, if any fee paid by the Partnership
to any general partner in BH Fund or any Affiliate of any such general partner
(each a "BH FUND GENERAL PARTNER PARTY") results in BH Fund paying, through its
interest in the Partnership, fees in excess of those fees permitted to be paid
to such BH Fund General Partner Party under the terms of the BH Fund Agreement,
then such BH Fund General Partner Party shall reimburse directly to BH Fund its
allocable share of such fee to the extent necessary to comply with the terms of
the BH Fund Agreement. In the event that a BH Fund General Partner Party
receives from the Partnership a fee whose retention by such BH Fund General
Partner Party is, under the terms of the BH Fund Agreement, contingent upon the
happening of future events, such BH Fund General Partner Party shall hold BH
Fund's allocable share of such fee until the applicable contingencies are
resolved, and shall thereafter dispose of BH Fund's allocable share of such fee
in accordance with the BH Fund Agreement. It is understood and agreed that the
limitations and provisions set forth in this Section 14.4 are for the sole
benefit of BH Fund, and, accordingly, no other party shall be entitled to a
refund of fees paid by the Partnership under this Agreement or any other benefit
set forth in this Section 14.4. Furthermore, it is understood and agreed that
the limitations and other provisions set forth in this Section 14.4 shall not be
applicable at such time as BH Fund no longer owns a direct or indirect interest
in the Partnership.
14.5 AMENDMENTS TO AGREEMENT. Notwithstanding anything contained
herein to the contrary, in the event that legal counsel for BH Fund reasonably
determines that an amendment to this Agreement is necessary or advisable in
order for this Agreement to comply with applicable securities laws, the BH Fund
Agreement, or NASAA Guidelines (as such term is defined in the BH Fund
Agreement), then each Partner shall, within ten (10) days after request from BH
Fund, execute such an amendment; provided, however, that no such amendment may
reduce a Partner's economic interest in the Partnership or increase a Partner's
liabilities or obligations under this Agreement without such Partner's prior
written consent.
32
[SIGNATURE PAGES FOLLOW]
33
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
Limited Partnership as of the date first above written.
GENERAL PARTNER:
---------------
BEHRINGER HARVARD MOCKINGBIRD COMMONS GP, LLC,
a Texas limited liability company
By:______________________________________
Name:____________________________________
Its:_____________________________________
[This space intentionally left blank]
34
LIMITED PARTNERS:
----------------
BEHRINGER HARVARD MOCKINGBIRD COMMONS INVESTORS LP,
a Texas limited partnership
By: Behringer Harvard Mockingbird Commons Investors
GP, LLC, its General Partner
By:______________________________________
Name:____________________________________
Its:_____________________________________
[This space intentionally left blank]
35
REALTY AMERICA GROUP (MOCKINGBIRD COMMONS), LP,
a Texas limited partnership
By: Realty America Group Investments, LLC,
a Texas limited liability company
Its General Partner
By:_____________________________________
Name: Xxxx X. Xxxxxx, III
Title: Member
[This space intentionally left blank]
36
Exhibit A
---------
Legal Description of Property
BEING a tract of land situated in the XXXX X. XXXXX SURVEY, Abstract No. 1334
and being a portion of BLOCK 2939 to the City of Dallas and being a portion of
the some previously described as 5.388 acres by Substitute Trustee's Deed
recorded in Volume 90235, Page 2636 of the Deed Records of Dallas County, Texas
(DRDCT) and being more particularly described as follows:
BEGINNING at a 1/2 inch iron rod set at the Intersection of the southerly
Right-of-Way line of MOCKINGBIRD LANE (variable width Right-of-Way) and the
westerly Right-of-Way line of the M.K.&T. RAILROAD (60' Right-of-Way);
THENCE departing the southerly Right-of-Way line of sold MOCKINGBIRD LANE and
along the westerly Right-of-Way line of said M.K.&T. XXXXXXXX Xxxxx 00'00'00"
Xxxx a distance of 1216.77 feet to a point for corner in the easterly
Right-of-Way line of U.S. HIGHWAY NO. 75 - NORTH CENTRAL EXPRESSWAY (variable
width Right-of-Way);
THENCE departing the westerly Right-of-Way line of said M.K.&T. RAILROAD and
along the easterly Right-of-Way line of said U.S. HIGHWAY NO. 75 - NORTH CENTRAL
EXPRESSWAY as follows:
Xxxxx 00x00'00" Xxxx a distance of 336.00 feet to a point for corner;
North 23o54'11" East a distance of 15.53 feet to a point for corner;
Xxxxx 00x00'00" Xxxx a distance of 588.43 feet to a point for corner;
North 63o45'59" East a distance of 32.01 feet to a point for corner in
the southerly Right-of-Way line sold MOCKINGBIRD LANE;
THENCE departing the easterly Right-of-Way line of said U.S. HIGHWAY NO. 75 -
NORTH CENTRAL EXPRESSWAY and along the southerly Right-of-Way line of sole
XXXXXXXXXXX XXXX Xxxxx 00x00'00" Xxxx a distance of 451.21 feet to the
POINT OF BEGINNING.
CONTAINING within these metes and bounds 5.364 acres or 233,673 square feet of
lane more or less.
37
Exhibit B
---------
Amended and Restated Property Management and Leasing Agreement
[See Attached]
38
Exhibit C
---------
Initial Capital Contributions
---------------------------- ---------------- ------------------ ------------------------------ ---------------------------
CLOSING UNDER CLOSING OF
9/07/04 9/27/04 PURCHASE AGREEMENT CONSTRUCTION LOAN
---------------------------- ---------------- ------------------ ------------------------------ ---------------------------
---------------------------- ---------------- ------------------ ------------------------------ ---------------------------
General Partner $100 $-0- $-0- $0
---------------------------- ---------------- ------------------ ------------------------------ ---------------------------
---------------------------- ---------------- ------------------ ------------------------------ ---------------------------
BH Investors $174,900 $87,500 $2,541,000 $7,444,063
---------------------------- ---------------- ------------------ ------------------------------ ---------------------------
---------------------------- ---------------- ------------------ ------------------------------ ---------------------------
Realty America $75,000 $37,500 $1,089,000 $3,190,313
---------------------------- ---------------- ------------------ ------------------------------ ---------------------------
---------------------------- ---------------- ------------------ ------------------------------ ---------------------------
---------------------------- ---------------- ------------------ ------------------------------ ---------------------------
39
Exhibit D
---------
Dilution Example
For purposes of example, assume that the Capital Contributions made to the
Partnership total $2,000,000. General Partner (owning a residual percentage of
..1%) has contributed $2,000; Limited Partner A (owning a residual percentage of
69.9%) has contributed $1,398,000; and Limited Partner B (owning a residual
percentage of 30%) has contributed $600,000. Assume that the General Partner
sends an Additional Capital Notice for $400,000 to the Partners, and that in
response thereto the General Partner makes an Additional Capital Contribution of
$400, Limited Partner A makes an Additional Capital Contribution of $279,600,
and Limited Partner B fails to make its Additional Capital Contribution of
$120,000. If Limited Partner A contributes said $120,000 as an Additional
Capital Contribution (thus making the total Capital Contributions equal
$2,400,000), then the following adjustments to the Residual Percentages would be
made:
(1) The Residual Percentage of Limited Partner A would be increased
by 6.25% (being 125% of 5%, which is $120,000 divided by $2,400,000, expressed
as a percentage). The Residual Percentage of Limited Partner A would thus be
adjusted to 76.15%.
(2) The Residual Percentage of Limited Partner B would be decreased
by 6.25%, and thus would be adjusted to 23.75%.
(3) The increase in the Residual Percentage of Limited Partner A and
the decrease in the Residual Percentage of Limited Partner B would remain
applicable after any scheduled adjustment in the Residual Percentages of such
Partners. For example, if it was originally contemplated that Limited Partner A
and Limited Partner B would have their Residual Percentages adjusted to 49.9%
and 50%, respectively, at such time as the Partners had received the return of
their Capital Contributions, then, based upon the adjustments set forth in
clauses (1) and (2) above, upon the return of such Capital Contributions the
Residual Percentage of Limited Partner A would be 56.15% and the Residual
Percentage of Limited Partner B would be 43.75%.
40
