SOUTH BRUNSWICK INVESTORS, L.P.
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
THIS AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT (the "Agreement")
is made this ____ day of October, 1997, by and among FCO Holdings, Inc., a
Delaware corporation and a wholly-owned subsidiary of Royale Investments, Inc.,
as General Partner (the 'General Partner"), and the persons set forth on the
signature page hereof as Limited Partners (the "Limited Partners"). The General
Partner and the Limited Partners are collectively referred to herein as the
"Partners."
RECITALS:
A. South Brunswick Investors, L.P., L.P. (the "Partnership") was originally
formed pursuant to the terms of an Agreement of Limited Partnership dated as of
March 29, 1995, which Agreement was amended and restated on April 21, 1995 and
April 22, 1995 (the "Original Agreement").
B. The Original Agreement has previously been amended to reflect, inter
alia, a refinancing of the Partnership's indebtedness, the admission to the
Partnership of FCO Holdings, Inc. as a General Partner, the conversion of
certain General Partner interests in the Partnership into Limited Partner
interests in the Partnership and the transfer to FCO, L.P. of certain Limited
Partner interests in the Partnership.
C. The General Partner and the Limited Partners desire to amend and restate
the Original Agreement in its entirety as set forth herein.
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto, intending to be legally bound hereby, agree that the
Original Agreement shall be amended and restated in its entirety to provide as
follows:
1. ARTICLE I. INTERPRETIVE PROVISIONS
1.1. Certain Definitions.
The following terms have the definitions hereinafter indicated whenever
used in this Agreement with initial capital letters:
Act: The Delaware Revised Uniform Limited Partnership Act, xx.xx. 17-101 to
17-1109 of the Delaware COde Annotated, Title 6, as amended from time to time.
Additional Limited Partner: A Person admitted to the Partnership as a
Limited Partner in accordance with Section 4.2 hereof and who is shown as such
on the books and records of the Partnership.
Adjusted Capital Account: With respect to any Partner, such Partner's
Capital Account maintained in accordance with Section 4.4 hereof, as of the end
of the relevant Fiscal Year of the Partnership, after giving effect to the
following adjustments:
(a) Credit to such Capital Account such Partner's share of Partnership
Minimum Gain determined in accordance with Treasury Regulations Section
1.704-2(g)(1) and such Partner's share of Partner Minimum Gain determined in
accordance with Treasury Regulations Section 1.704-2(i)(5).
(b) Debit to such Capital Account the items described in Treasury
Regulations Section 1.7041(b)(2)(ii)(d)(4), (5) and U6 .
The foregoing definition of "Adjusted Capital Account" is intended to
comply with the provisions of Treasury Regulations Sections 1.704-1(b)(2)(ii)
and 1.704-2 and shall be interpreted consistently therewith.
Adjusted Capital Account Deficit: With respect to any Partner, the deficit
balance, if any, in that Partner's Adjusted Capital Account as of the end of the
relevant Fiscal Year of the Partnership.
Affiliate: With respect to any referenced Person, (i) a member of such
Person's immediate family; (ii) any Person who directly or indirectly owns,
controls or holds the power to vote ten percent (10%) or more of the outstanding
voting securities of the Person in question; (iii) any Person ten percent (10%)
or more of whose outstanding securities are directly or indirectly owned,
controlled, or held with power to vote by the Person in question; (iv) any
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with the Person in question; (v) if the Person in
question is a corporation, any executive officer or director of such Person or
of any corporation directly or indirectly controlling such Person; and (vi) if
the Person in question is a partnership, any general partner of the partnership
or any limited partner owning or controlling ten percent (10%) or more of either
the capital or profits interest in such partnership. As used herein, 'control'
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract, or otherwise.
Agreed Value: In the case of any (i) Contributed Property, the allocated
value of such property at the time of contribution (exclusive of any related
indebtedness assumed by the Partnership), as determined by the General Partner
using such method of valuation as it may adopt in its reasonable discretion and
(ii) property distributed to a Partner by the Partnership, the Partnership's
Book Value of such property at the time such property is distributed, reduced by
any indebtedness either assumed by such Partner upon such distribution or to
which such property is subject at the time of distribution as determined under
Code Section 752 and the Treasury Regulations thereunder.
Agreement: This Limited Partnership Agreement and the Schedule attached
hereto, as the same may be amended or restated and in effect from time to time.
Bankruptcy: Any of (i) a referenced Person's making an assignment for the
benefit of creditors, (ii) the filing by a referenced Person of a voluntary
petition in bankruptcy, (iii) a referenced Person's being adjudged insolvent or
having entered against him an order for relief in any bankruptcy or insolvency
proceeding, (iv) the filing by a referenced Person of an answer seeking any
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reorganization, composition, readjustment, liquidation, dissolution or similar
relief under any law or regulation, (v) the filing by a referenced Person of an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against him in any proceeding of reorganization,
composition, readjustment, liquidation, dissolution, or for similar relief under
any statute, law or regulation or (vi) a referenced Person's seeking, consenting
to or acquiescing in the appointment of a trustee, receiver or liquidator for
all or substantially all of his property (or court appointment of such trustee,
receiver or liquidator).
Bankruptcy Code: I 1 U. S. C. Sections 10 I - 1330, as amended from time to
time.
Book Tax Disparity: With respect to any item of Contributed Property, or
property the Book Value of which has been adjusted in accordance with Section
4.4(c), as of the date of determination, the difference between the Book Value
of such property and the adjusted basis of such property for federal income tax
purposes.
Book Value: With respect to any Contributed Property, the Agreed Value of
such property reduced (but not below zero) by all Depreciation with respect to
such property properly charged to the Partners' Capital Accounts and with
respect to any other asset, the asset's adjusted basis for federal income tax
purposes; provided, however, (a) the Book Value of all Partnership Assets shall
be adjusted in the event of a revaluation of Partnership Assets in accordance
with Section 4.4(c) hereof, (b) the Book Value of any Partnership Asset
distributed to any Partner shall be the fair market value of such asset on the
date of distribution as determined by the General Partner and (c) such Book
Value shall be adjusted by the Depreciation taken into account with respect to
such asset for purposes of computing Profits and Losses.
Capital Account: The account maintained by the Partnership for each Partner
described in Section 4.4 hereof.
Capital Contribution: The total amount of cash or cash equivalents and the
Agreed Value of Contributed Property which a Partner contributes or is deemed to
contribute to the Partnership pursuant to the terms of this Agreement.
Certificate: The Partnership's Certificate of Limited Partnership filed in
the office of the Secretary of State of the State of Delaware, as amended from
time to time.
Code: The Internal Revenue Code of 1986, as amended from time to time.
Company: Royale Investments, Inc., a Minnesota corporation.
Consent: Either the written consent of a Person or the affirmative vote of
such Person at a meeting duly called and held pursuant to this Agreement, as the
case may be, to do the act or thing for which the consent is required or
solicited, or the act of granting such consent, as the context may require.
Contributed Property: Each property or other asset (excluding cash and cash
equivalents) contributed or deemed contributed to the Partnership (whether as a
result of a Code Section 708 termination or otherwise).
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Depreciation: For each Fiscal Year or other period, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable with
respect to an asset for such year or other period, except that if the Book Value
of an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such year or other period, Depreciation shall be adjusted as
necessary so as to be an amount which bears the same ratio to such beginning
Book Value as the federal income tax depreciation, amortization or other cost
recovery deduction for such year or other period bears to the beginning adjusted
tax basis; provided, however, that if the federal income tax depreciation,
amortization or other cost recovery deduction for such year or other period is
zero, Depreciation for such year or other period shall be determined with
reference to such beginning Book Value using any reasonable method approved by
the General Partner.
Fiscal Year: The calendar year or such other twelve (12) month period
designated by the General Partner.
General Partner: FCO Holdings, Inc., a Delaware corporation, and its
respective successor(s) who or which become Successor General Partner(s) in
accordance with the terms of this Agreement.
General Partner Interest: A Partnership Interest field by the General
Partner that is a general partner interest.
Involuntary Withdrawal: As to any (i) individual shall mean such
individual's death, incapacity or adjudication of incompetence, (ii) corporation
shall mean its dissolution or revocation of its charter (unless such revocation
is promptly corrected upon notice thereof), (iii) partnership shall mean the
dissolution and commencement of winding up of its affairs, (iv) trust shall mean
the termination of the trust (but not the substitution of trustees), (v) estate
shall mean the distribution by the fiduciary of the estate's complete interest
in the Partnership any Partner shall mean the Bankruptcy of such Partner.
IRS: The Internal Revenue Service, which administers the internal revenue
laws of the United States.
Limited Partner: Each of the Persons set forth on the signature page hereof
as a Limited Partner and any Person who becomes an Additional Limited accordance
with the terms of this Agreement.
Limited Partner Interest: A Partnership Interest held by a Limited Partner
that is a limited partner interest.
Nonrecourse Liability: A liability as defined in Treasury Regulations
Section 1.704-2(b)(3).
Notice: A writing containing the information required by this Agreement to
be communicated and delivered to such Person in accordance with Section 11.4;
provided, however, that any written communication containing such information
actually received by such Person shall constitute Notice for all purposes
Agreement.
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Partner Minimum Gain: The gain (regardless of character) which would be
realized by the if property of the Partnership subject to a partner nonrecourse
debt (as such term is defined in Treasury Section 1.704-2(b)(4)) were disposed
of in full satisfaction of such debt on the relevant date. The adjusted basis of
property subject to more than one partner nonrecourse debt shall be allocated in
a manner consistent with the allocation of basis for purposes of determining
Partnership Minimum Gain hereunder. Partner Minimum Gain shall be computed
hereunder using the Book Value, rather than the adjusted tax basis, of the
Partnership accordance with Treasury Regulations Section 1.704-2(d)(3).
Partner Nonrecourse Deductions: With respect to any partner nonrecourse
debt (as such term in Treasury Regulation Section 1.704-2(b)(4)), the increase
in Partner Minimum Gain during the tax y increase in Partner Minimum Gain for a
prior tax year which has not previously generated a Partner N Deduction
hereunder. The determination of which Partnership items constitute Partner
Nonrecourse shall be made in a manner consistent with the manner in which
Partnership Nonrecourse Deductions are hereunder.
Partners: The General Partner and the Limited Partners as a group. The term
"Partner" means a General Partner or a Limited Partner. Such terms shall be
deemed to include such other Persons who may become Partners pursuant to the
terms of this Agreement.
Partnership: The Delaware limited partnership referred to herein as such
partnership may from time to time be constituted.
Partnership Assets: At any particular time, any assets or property
(tangible or intangible xxxxxx or inchoate, fixed or contingent) owned by the
Partnership.
Partnership Interest or Interest: As to any Partner, such Partner's
ownership interest in the and including such Partner's right to distributions
under this Agreement and any other rights or benefits Partner has in the
Partnership, together with any and all obligations of such Person to comply with
the provisions of this Agreement.
Partnership Minimum Gain: The aggregate gain (regardless of character)
which would be realized by the Partnership if all of the property of the
Partnership subject to nonrecourse debt (other than partner nonrecourse debt as
such term is defined in Treasury Regulations Section 1.704-2(b)(4)) were
disposed of in fall satisfaction of such debt and for no other consideration on
the relevant date. In the case of any Nonrecourse Liability of the Partnership
which is not secured by a mortgage with respect to any specific property of the
Partnership, any and all property of the Partnership to which the holder of said
liability has recourse shall be treated as subject to such Nonrecourse Liability
for purposes of the preceding sentence. Partnership Minimum Gain shall be
computed separately for each Nonrecourse Liability of the partnership. For this
purpose, the adjusted basis of property subject to two or more liabilities of
equal priority shall be allocated among such liabilities in proportion to the
outstanding balance of such liabilities, and the adjusted basis of property
subject to two or more liabilities of unequal priority shall be allocated to the
liability of inferior priority only to the extent of the excess, if any, of the
adjusted basis of such property over the outstanding balance of the liability of
superior priority. Partnership Minimum Gain shall be computed hereunder using
the Book Value, rather than the adjusted tax basis, of the Partnership property
in accordance with Treasury Regulations Section 1.704-2(d)(3).
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Partnership Nonrecourse Deductions: The amount of Partnership deductions
equal to the increase, if any, in the amount of the aggregate Partnership
Minimum Gain during the tax year (plus any increase in Partnership Minimum Gain
for a prior tax year which has not previously generated a Partnership
Nonrecourse Deduction) reduced (but not below zero) by the aggregate
distributions made during the tax year of the proceeds of a Nonrecourse
Liability of the Partnership which are attributable to an increase in
Partnership Minimum Gain within the meaning of Treasury Regulations Section
1.704-2(d). The Partnership Nonrecourse Deductions for a Partnership tax year
shall consist first of depreciation or cost recovery deductions with respect to
each property of the Partnership giving rise to such increase in Partnership
Minimum Gain on a pro rata basis to the extent of each such increase, with any
excess made up pro rata of all items of deduction.
Percentage Interest: As to any Partner, the percentage in the Partnership
as initially shown opposite the name of such Partner on Schedule I attached
hereto, as such percentage interest may be adjusted from time to time in
accordance with the provisions of this Agreement.
Person: Any individual, partnership, corporation, trust or other entity.
Profits and Losses: For each Fiscal Year or other period, an amount equal
to the Partnership's taxable income or loss (as the case may be) 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 or Losses
pursuant to this definition shall be added to such taxable income or loss;
b. Any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant
to Treasury Regulations Section 1.704-1(b)(2)(iv)0i , and not otherwise
taken into account in computing Profits or Losses pursuant to this
definition, shall be subtracted from such taxable income or loss;
c. Gain or loss resulting from any disposition of Partnership property
with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Book Value of the property
disposed of notwithstanding that the adjusted tax basis of such property
differs from such Book Value;
d. 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 for such Fiscal Year or
other period, computed in accordance with the definition of 'Depreciation'
herein; and
e. In the event that any item of income, gain, loss or deduction that
has been included in the initial computation of Profit or Loss is subject
to the special allocation rules of Sections 5.2(C) and 5.2(D), Profit or
Loss shall be recomputed without regard to such item.
REIT: A real estate investment trust, as defined in Code Section 856.
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Subsidiary: With respect to any Person, any corporation or other entity of
which a majority of (i) the voting power of the voting equity securities or (ii)
the outstanding equity interests, is owned, directly or indirectly, by such
Person.
Successor General Partner: Any Person who is admitted to the Partnership as
substitute General Partner pursuant to this Agreement. A Successor General
Partner, upon its admission as such, shall succeed to the rights, privileges and
liabilities of its predecessor in interest as General Partner, in accordance
with the provisions of the Act.
Tax Matters Partner. The General Partner or such other Partner who becomes
Tax Matters Partner pursuant to the terms of this Agreement.
Terminating Capital Transaction: The sale or other disposition of all or
substantially all of the Partnership Assets or a related series of transactions
that, taken together, result in the sale or other disposition of all or
substantially all of the Partnership Assets.
Transfer. A transaction in which a Partner assigns all or a portion of its
Partnership Interest to another Person and includes any sale, assignment, gift,
pledge, mortgage, exchange, hypothecation, encumbrance or other disposition by
law or otherwise.
Treasury Regulations: The Income Tax Regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
1.2. Rules of Construction.
The following rules of construction shall apply to this Agreement:
(a) All section headings in this Agreement are for convenience of reference
only and are not intended to qualify the meaning of any section.
(b) All personal pronouns used in this Agreement, whether used in the
masculine, feminine or neuter gender, shall include all other genders, the
singular shall include the plural, and vice versa, as the context may require.
(c) Each provision of this Agreement shall be considered severable from the
rest, and if any provision of this Agreement or its application to any Person or
circumstances shall be held invalid and contrary to any existing or future law
or unenforceable to any extent, the remainder of this Agreement and the
application of any other provision to any Person or circumstances shall not be
affected thereby and shall be interpreted and enforced to the greatest extent
permitted by law so as to give effect to the original intent of the parties
hereto.
(d) Unless otherwise specifically and expressly limited in the context, any
reference herein to a decision, determination, act, action, exercise of a right,
power or privilege, or other procedure by the General Partner shall mean and
refer to the decision, determination, act, action, exercise or other procedure
by the General Partner in its sole and absolute discretion.
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2. ARTICLE II. FORMATION
2.1. Formation.
The Partners hereby confirm that the Partnership has been formed as a
limited partnership under the Act. The General Partner shall take all action
required by law to perfect and maintain the Partnership as a limited partnership
under the Act and under the laws of all other jurisdictions in which the
Partnership may elect to conduct business, including but not limited to the
filing of amendments to the Certificate with the Delaware Secretary of State,
and qualification of the Partnership as a foreign limited partnership in the
jurisdictions in which such qualification shall be required, as determined by
the General Partner. The General Partner shall also promptly register the
Partnership under applicable assumed or fictitious name statutes or similar
laws.
2.2. Name.
The name of the Partnership is South Brunswick Investors, L.P. The General
Partner may adopt such assumed or fictitious names as it deems appropriate in
connection with the qualifications and registrations referred to in Section 2.1.
2.3. Place of Business; Registered Agent.
The principal office of the Partnership shall be located at such place as
the General Partner may from time to time designate. The Partnership may
establish offices for the Partnership within or without the State of Delaware as
may be determined by the General Partner. The initial registered agent for the
Partnership in the State of Delaware is The Corporation Trust Company, whose
address is c/o Corporation Trust Center, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxx 00000.
ARTICLE III. BUSINESS PURPOSE
3.1. Business.
The business of the Partnership shall be (i) conducting any business that
may be lawfully conducted by a limited partnership pursuant to the Act
including, without limitation, acquiring, owning, managing, developing, leasing,
marketing, operating and, if and when appropriate, selling, industrial
properties, (ii) entering into any partnership, joint venture or other
relationship to engage in any of the foregoing or the ownership of interests in
any entity engaged in any of the foregoing, (iii) making loans, guarantees,
indemnities or other financial accommodations and borrowing money and pledging
its assets to secure the repayment thereof, (iv) to do any of the foregoing with
respect to any Affiliate or Subsidiary and (v) doing anything necessary or
incidental to the foregoing; provided, however, that business of the Partnership
shall be limited so as to permit the Company to elect and maintain its status as
a REIT (unless the Company determines no longer to qualify as a REIT).
3.2. Authorized Activities.
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In carrying out the purposes of the Partnership, but subject to all other
provisions of this Agreement, the Partnership is authorized to engage in any
kind of lawful activity, and perform and carry out contracts of any kind,
necessary or advisable in connection with the accomplishment of the purposes and
business of the Partnership described herein and for the protection and benefit
of the Partnership; provided that the General Partner shall not be obligated to
cause the Partnership to take, or refraining from taking, any action which, in
the judgment of the General Partner, (i) could adversely affect the ability of
the Company to qualify and continue to qualify as a REIT under the Code, (ii)
could subject the Company to additional taxes under Code Section 857 or 4981 or
(iii) could violate any law or regulation of any governmental body or agency
having jurisdiction over the General Partner or the Company or their securities.
ARTICLE IV. CAPITAL CONTRIBUTIONS
4.1. Capital Contributions.
The Partners have contributed cash and property in the aggregate amounts
set forth on Schedule 1. No Partner shall be required to contribute additional
funds or other property to the Partnership; provided that, upon any future
contribution of capital by any limited partner to the Partnership, the General
Partner will contribute to the Partnership an amount equal to not less than
0.10% thereof. Any additional funds or other property required by the
Partnership, as determined by the General Partner, may, at the option of the
General Partner and without an obligation so to do, be contributed by the
General Partner as additional Capital Contributions. If the General Partner
determines to make any such Capital Contribution, it shall give notice of such
determination to the Limited Partners and permit each Limited Partner to
contribute a portion of such Capital Contribution equal to the product of such
Limited Partner's Percentage Interest and the total amount of such Capital
Contribution. The General Partner shall also have the right (but not the
obligation) to raise additional funds required for the Partnership by lending
the money to the Partnership or by causing the Partnership to borrow the money
needed from third parties, in either case on such terms and conditions as the
General Partner shall deem appropriate.
4.2. Additional Partnership Interests.
The Partnership may issue additional limited partnership interests for any
Partnership purpose at any time or from time to time, to any Partner or other
Person. Any such other Person shall be admitted as an Additional Limited Partner
of the Partnership only upon execution, adoption and acknowledgment of this
Agreement by such Partner or Person, or a counterpart hereto, and such other
documents as may be reasonably requested by the General Partner, including
without limitation, the power of attorney required under Section 11.3. Upon
satisfaction of the foregoing requirements, such Person shall be admitted as an
Additional Limited Partner effective on the date upon which the name of such
Person is recorded on the books of the Partnership.
4.3. No Third Party Beneficiaries.
The foregoing provisions of this Article IV are not intended to be for the
benefit of any creditor of the Partnership or other Person to whom any debts,
liabilities or obligations are owed by (or who otherwise has any claim against)
the Partnership or any of the Partners and no such creditor or otheR
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Person shall obtain any right under any such foregoing provision against the
Partnership or any of the Partners by reason of any debt, liability or
obligation (or otherwise).
4.4. Capital Accounts.
(a) The Partnership shall establish and maintain a separate Capital Account
for each Partner in accordance with Code Section 704 and Treasury Regulations
Section 1.704- 1 (b)(2)(iv). The Capital Account of each Partner shall be
credited with:
(i) the amount of all Capital Contributions made to the Partnership by such
Partner in accordance with this Agreement; plus
(ii) all income and gain of the Partnership computed in accordance with
this Section 4.4 and allocated to such Partner pursuant to Article V (including
for purposes of this Section 4.4(A), income and gain exempt from tax);
and shall be debited with the sum of:
(i) all losses or deductions of the partnership computed in accordance with
this Section 4.4 and allocated to such Partner pursuant to Article V,
(ii) such Partner's distributive share of expenditures of the Partnership
described in Code Section 705(a)(2)(B), and
(iii) all cash and the Agreed Value of any property actually distributed or
deemed distributed by the Partnership to such Partner pursuant to the terms of
this Agreement.
Any reference in any section or subsection of this Agreement to the Capital
Account of a Partner shall be deemed to refer to such Capital Account as the
same may be credited or debited from time to time as set forth above.
(b) For purposes of computing the amount of any item of income, gain,
deduction or loss to be reflected in the Partners' Capital Accounts, the
determination, recognition and classification of each such item shall be the
same as its determination, recognition and classification for federal income tax
purposes, determined in accordance with Code Section 703(a), with the following
adjustments:
(i) any income, gain or loss attributable to the taxable disposition of any
Partnership Asset shall be determined by treating the adjusted basis of such
property as of the date of such disposition as equal to the Book Value of such
property as of such date;
(ii) the computation of all items of income, gain, loss and deduction shall
be made without regard to any Code Section 754 election that may be made by the
Partnership, except to the extent required in accordance with the provisions of
Treasury Regulations Section 1.704-1(b)(2)(iv)(m);
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(iii) in lieu of depreciation, amortization and other cost recovery
deductions taken into account in computing Profit and Loss, there shall be taken
into account Depreciation for such Fiscal Year;
(iv) in the event the Book Value of any Partnership Asset is adjusted
pursuant to Section 4.4(c) below, the amount of such adjustment shall be treated
as gain or loss from the disposition of such asset.
(c) Consistent with the provisions of Treasury Regulations Section
1.704-1(b)(2)(iv)(f), (i) immediately prior to the acquisition of an additional
Partnership Interest by any new or existing Partner in connection with the
contribution of money or other property (other than a de minimis amount) to the
Partnership, (ii) immediately prior to the distribution by the Partnership to a
Partner of Partnership property (other than a de minimis amount) as
consideration for a Partnership Interest and (iii) immediately prior to the
liquidation of the Partnership as defined in Treasury Regulations Section
1.704-1(b)(2)(ii)(g), the Book Value of all Partnership Assets shall be revalued
upward or downward to reflect the fair market value of each such Partnership
Asset as determined by the General Partner using such reasonable method of
valuation as it may adopt.
(d) The foregoing provisions of this Section 4.4 are intended to comply
with Treasury Regulations Section 1.704-1(b) and shall be interpreted and
applied in a manner consistent with such Treasury Regulations. In the event the
General Partner shall determine that it is prudent to modify the manner in which
the Partners' Capital Accounts are computed hereunder in order to comply with
such Treasury Regulations, the General Partner may make such modification if
such modification is not likely to have a material effect on the amount
distributable to any Partner under the terms of this Agreement and the General
Partner notifies the other Partners in writing of such modification prior to
making such modification.
4.5. Return of Capital Account; Interest.
Except as otherwise specifically provided in this Agreement, (i) no Partner
shall have any right to withdraw or reduce its Capital Contributions or Capital
Account, or to demand and receive property other than cash from the Partnership
in return for its Capital Contributions or Capital Account; (ii) no Partner
shall have any priority over any other Partners as to the return of its Capital
Contributions or Capital Account; (iii) any return of Capital Contributions or
Capital Accounts to the Partners shall be solely from the Partnership Assets,
and no Partner shall be personally liable for any such return; and (iv) no
interest shall be paid by the Partnership on Capital Contributions or on
balances in Partners' Capital Accounts.
4.6. Preemptive Rights.
No Person shall have any preemptive or similar rights with respect to the
issuance or sale of additional Partnership Interests.
ARTICLE V. ALLOCATIONS AND DISTRIBUTIONS
5.1. Limited Liability.
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For bookkeeping purposes, the Profits of the Partnership shall be shared,
and the Losses of the Partnership shall be borne, by the Partners as provided in
Section 5.2 below; provided, however, that except as expressly provided in this
Agreement, no Limited Partner (in its capacity as a Limited Partner) shall be
personally liable for losses, costs, expenses, liabilities or obligations of the
Partnership in excess of its Capital Contribution required under Article IV
hereof.
5.2. Profits, Losses and Distributive Shares.
(a) Profits. After giving effect to the special allocations, if any,
provided in Section 5.2(C) and (D), Profits in each Fiscal Year shall be
allocated in the following order:
(i) First, to each Partner in proportion to the cumulative Losses allocated
to such Partner under Section 5.2(b)(2), until the cumulative Profits allocated
to such Partner under this Section 5.2(A)(1) equal the cumulative Losses
allocated to such Partner under Section 5.2(b)(2);
(ii) Second, to each Partner in proportion to the cumulative losses
allocated to such Partner under Section 5.2(b)(1), until the cumulative Profits
allocated to such Partner under this Section 5.2(a)(2) equal the cumulative
Losses allocated to such Partner under Section 5.2(b)(1); and
(iii) Then, the balance, if any, to the Partners in proportion to their
respective Partnership Interests.
(b) Losses. After giving effect to the special allocations, if any,
provided in Section 5.2(c) and (d), Losses in each Fiscal Year shall be
allocated in the following order:
(i) First, to the Partners in proportion to their respective Partnership
Interests, but not in excess of the positive Adjusted Capital Account balance of
any Partner prior to the allocation provided for in this Section 5.2(b)(1);
(ii) Second, to the Partners with positive Adjusted Capital Account
balances prior to the allocation provided for in this Section 5.2(b)(2), in
proportion to the amount of such balances.
(c) Special Allocations. Except as otherwise provided in this Agreement,
the following special allocations will be made in the following order and
priority:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any other
provision of this Article V. If there is a net decrease in Partnership Minimum
Gain during any tax year or other period for which allocations are made, each
Partner will be specially allocated items of Partnership income and gain for
that tax year or other period (and, if necessary, subsequent periods) in an
amount equal to such Partner's share of the net decrease in Partnership Minimum
Gain during such tax year or other period determined in accordance with Treasury
Regulations Section 1.704-2(g). Allocations pursuant to the preceding sentence
shall be made in proportion to the respective amounts required to be allocated
to each Partner pursuant thereto. The items to be so allocated shall be
determined in accordance with Treasury Regulations Sections 1.704-2(f)(6) and
1.704-20)(2). This Section 5.2(c) (1) is intended to comply with the minimum
gain chargeback requirements set forth in Treasury Regulations Section
1.704-2(f) and shall be interpreted consistently therewith, including the
exceptions to the minimum gain chargeback requirement set forth in Treasury
Regulations Section 1.704-2(f)(2) and (3).
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If the General Partner concludes, after consultation with tax counsel, that the
Partnership meets the requirements for a waiver of the minimum gain chargeback
requirement as set forth in Treasury Regulations Section 1.704-2(f)(4), the
General Partner may take steps reasonably necessary or appropriate in order to
obtain such waiver.
(ii) Partner Nonrecourse Debt Minimum Gain Chargeback. Notwithstanding any
other provision of this Section (other than Section 5.2(c)(1) which shall be
applied before this Section 5.2(c(2)), if there is a net decrease in Partner
Minimum Gain during any tax year or other period for which allocations are made,
each Partner with a share of Partner Minimum Gain determined in accordance with
Treasury Regulations Section 1.704-2(i)(5) shall be specially allocated items of
Partnership income and gain for that period (and, if necessary, subsequent
periods) in an amount equal to such Partner's share of the net decrease in
Partner Minimum Gain determined in accordance with Treasury Regulations Section
1.704-2(i)(4). Allocations pursuant to the preceding sentence shall be made in
proportion to the respective amounts required to be allocated to each Partner
thereunder. The items to be so allocated shall be determined in accordance with
Treasury Regulations Sections 1.704-2(i)(4) and 1.70420)(2)(ii). This Section
5.2(c)(2) is intended to comply with the minimum gain chargeback requirements of
Treasury Regulations Section 1.704-2(i)(4) and shall be interpreted consistently
therewith, including the exceptions set forth in Treasury Regulations Section
1.704-2(f)(2) and (3) to the extent such exceptions apply to Treasury
Regulations Sections 1.704-2(i)(4). If the General Partner concludes, after
consultation with tax counsel, that the Partnership meets the requirements for a
waiver of the Partner Minimum Gain chargeback requirement set forth in Treasury
Regulations Section 1.704-2(f)(4), but only to the extent such exception applies
to Treasury Regulations Section 1.704-2(i)(4), the General Partner may take
steps necessary or appropriate to obtain such waiver.
(iii) Qualified Income Offset. A Partner who unexpectedly receives any
adjustment, allocation or distribution described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) will be specially allocated items of
Partnership income and gain in an amount and manner sufficient to eliminate, to
the extent required by Treasury Regulations 1.704-1(b)(2)(ii)(d) , the Adjusted
Capital Account Deficit of the Partner as quickly as possible, provided that an
allocation pursuant to this Section 5.2(c)(3) shall be made if and only to the
extent that such Partner would have an Adjusted Capital Account Deficit after
all other allocations provided for in this Article V have been tentatively made
as if this Section 5.2(c)(3) were not contained in this Agreement.
(iv) Partnership Nonrecourse Deductions. Partnership Nonrecourse Deductions
for any taxable year or other period for which allocations are made will be
allocated among the Partners in proportion to their respective Partnership
Interests in the Partnership.
(v) Partner Nonrecourse Deductions. Notwithstanding anything to the
contrary in this Agreement, any Partner Nonrecourse Deductions for any taxable
year or other period for which allocations are made will be allocated to the
Partner who bears the economic risk of loss with respect to the liability to
which the Partner Nonrecourse Deductions are attributable in accordance with
Treasury Regulations Section 1.704-2(i).
(vi) Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset under Code Section 734(b) or 743(b)
is required to be taken into account in determining Capital Accounts under
Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) or (4), the amount of the
adjustment to the Capital Accounts will be treated as an item
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of gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases the basis of the asset), and the gain or loss will be
specially allocated to the Partners in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted under Treasury
Regulations Section 1.704-1(b)(2)(iv)(m).
(vii) Depreciation Recapture. In the event there is any recapture of
Depreciation or investment tax credit, the allocation thereof shall be made
among the Partners in the same proportion as the deduction for such Depreciation
or investment tax credit was allocated.
(viii) Interest in Partnership. Notwithstanding any other provision of this
Agreement, no allocation of Profit or Loss (or item of Profit or Loss) will be
made to a Partner if the allocation would not have "economic effect' under
Treasury Regulations Section 1.704-1(b)(2)(ii) or otherwise would not be in
accordance with the Partner's interest in the Partnership within the meaning of
Treasury Regulations Section 1.704-1(b)(3).
(d) Curative Allocations. The allocations set forth in Section 5.2(c)(1)
through (8) (the "Regulatory Allocations") are intended to comply with certain
requirements of Treasury Regulations Sections 1.704l(b) and 1.704-2. The
Regulatory Allocations may not be consistent with the manner in which the
Partners intend to divide Partnership distributions. Accordingly, the General
Partner is authorized to further allocate Profits, Losses, and other items among
the Partners in a reasonable manner so as to prevent the Regulatory Allocations
from distorting the manner in which Partnership distributions would be divided
among the Partners under Section 5.3, but for application of the Regulatory
Allocations. In general, the reallocation will be accomplished by specially
allocating other Profits, Losses and items of income, gain, loss and deduction,
to the extent they exist, among the Partners so that the net amount of the
Regulatory Allocations and the special allocations to each Partner is zero. The
General Partner may accomplish this result in any reasonable manner that is
consistent with Code Section 704 and the related Treasury Regulations.
(e) Tax Allocations.
(i) Except as otherwise provided in Section 5.2(e)(2), each item of income,
gain, loss and deduction shall be allocated for federal income tax purposes in
the same manner as each correlative item of income, gain, loss or deduction, is
allocated for book purposes pursuant to the provisions of Section 5.1 hereof.
(ii) Notwithstanding anything to the contrary in this Article V, in an
attempt to eliminate any Book Tax Disparity with respect to a Contributed
Property, items of income, gain, loss or deduction with respect to each such
property shall be allocated for federal income tax purposes among the Partners
as follows:
(A) Depreciation, Amortization and Other Cost Recovery Items. In the case
of each Contributed Property with a Book-Tax Disparity, any item of
depreciation, amortization or other cost recovery allowance attributable to such
property shall be allocated as follows: (x) first, to Partners (the
'Non-Contributing Partners') other than the Partners who contributed such
property to the Partnership (or are deemed to have contributed the property
pursuant to Section 4. I (A) (the 'Contributing Partners') in an amount up to
the book allocation of such items made to the Non-Contributing Partners pursuant
to Section 5.1 hereof, pro rata in proportion to the respective amount of book
items so allocated to the Non-Contributing Partners pursuant to Section 5.1
hereof, and
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(y) any remaining depreciation, amortization or other cost recovery allowance to
the Contributing Partners in proportion to their Percentage Interests. In no
event shall the total depreciation, amortization or other cost recovery
allowance allocated hereunder exceed the amount of the Partnership's
depreciation, amortization or other cost recovery allowance with respect to such
property.
(B) Gain or Loss on Disposition. In the event the Partnership sells or
otherwise disposes of a Contributed Property with a Book-Tax Disparity, any gain
or loss recognized by the Partnership in connection with such sale or other
disposition shall be allocated among the Partners as follows: (x) first, any
gain or loss shall be allocated to the Contributing Partners in proportion to
their Percentage Interests to the extent required to eliminate any Book-Tax
Disparity with respect to such property; and (y) any remaining gain or loss
shall be allocated among the Partners in the same manner that the correlative
items of book gain or loss are allocated among the Partners pursuant to Section
5.1 hereof.
(iii) In the event the Book Value of a Partnership Asset (including a
Contributed Property) is adjusted pursuant to Section 4.4(C) hereof, and such
asset has not been deemed distributed by, and recontributed to the Partnership
pursuant to Code Section 708 subsequent thereto, all items of income, gain, loss
or deduction in respect of such property shall be allocated for federal income
tax purposes among the Partners in the same manner as provided in Section
5.2(E)(2) hereof to take into account any variation between the fair market
value of the property, as determined by the General Partner using such
reasonable method of valuation as it may adopt, and the Book Value of such
property, both determined as of the date of such adjustment.
(iv) The General Partner shall have the authority to elect alternative
methods to eliminate the Book Tax Disparity with respect to one or more
Contributed Properties, as permitted by Treasury Regulations Sections 1.704-3
and 1.704-3T, and such election shall be binding on all of the Partners.
(v) The Partners hereby intend that the allocation of tax items pursuant to
this Section 5.2(e) comply with the requirements of Code Section 704(c) and
Treasury Regulations Section 1.704-3.
(vi) The allocation of items of income, gain, loss or deduction pursuant to
this Section 5.2(E) are solely for federal, state and local income tax purposes,
and the Capital Account balances of the Partners shall be adjusted solely for
allocations of 'book' items in respect of Partnership Assets pursuant to Section
S. I hereof.
(f) Other Allocation Rules. The following rules will apply to the
calculation and allocation of Profits. Losses and other items:
(i) Except as otherwise provided in the Agreement, all Profits, Losses and
other items allocated to the Partners will be allocated among them in proportion
to their Percentage Interests.
(ii) For purposes of determining the Profits, Losses or any other item
allocable to any period, Profits, Losses and other items will be determined on a
daily, monthly or other basis, as determined by the General Partner using any
permissible method under Code Section 706 and the related Treasury Regulations.
15
(iii) Except as otherwise provided in this Agreement, all items of
Partnership income, gain, loss and deduction, and other allocations not provided
for in this Agreement will be divided among the Partners in the same proportions
as they share Profits and Losses, provided that any credits shall be allocated
in accordance with Treasury Regulations Section 1.704-1(b)(4)(ii).
(iv) For purposes of Treasury Regulations Section 1.752-3(a), the Partners
hereby agree that any nonrecourse liabilities of the Partnership in excess of
the sum of (i) the Partnership Minimum Gain and (ii) the aggregate amount of
taxable gain that would be allocated to the Partners under Section 704(c) (or in
the same manner as Section 704(c) in connection with a revaluation of
Partnership property) if the Partnership disposed of (in a taxable transaction)
all Partnership property subject to one or more nonrecourse liabilities of the
Partnership in full satisfaction of such liabilities and for no other
consideration, shall be allocated among the Partners in accordance with their
respective shares of Profits. The General Partner shall have discretion in any
Fiscal Year to allocate such excess nonrecourse liabilities among the Partners
(a) in a manner reasonably consistent with allocations (that have substantial
economic effect) of some other significant item of Partnership income or gain or
(b) in accordance with the manner in which it is reasonably expected that the
deductions attributable to the excess nonrecourse liabilities will be allocated.
(g) Partner Acknowledgment. The Partners agree to be bound by the
provisions of this Section 5.2 in reporting their shares of Partnership income,
gain, loss, deduction and credit for income tax purposes.
(h) Regulatory Compliance. The foregoing provisions of this Section 5.2
relating to the allocation of Profits, Losses and other items for federal income
tax purposes are intended to comply with Treasury Regulations Sections
1.704-1(b), 1.704-2 and 1.704-3 and shall be interpreted and applied in a manner
consistent with such Treasury Regulations.
5.3. Distributions.
(a) The General Partner shall cause the Partnership to make distributions
from time to time to the Partners pro rata in accordance with their respective
Percentage Interests.
(b) The General Partner shall use its reasonable efforts to make
distributions to the Partners so as to preclude any distribution or portion
thereof from being treated as part of a sale of property to the Partnership by a
Partner under Section 707 of the Code or the Treasury Regulations thereunder;
provided that the General Partner and the Partnership shall not have liability
to a Limited Partner under any circumstances as a result of any distribution to
a Partner being so treated.
5.4. Distributions upon Liquidation.
Notwithstanding any other provision hereof, proceeds of a Terminating
Capital Transaction shall be distributed to the Partners in accordance with
Section 9.2.
5.5. Amounts Withheld.
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All amounts withheld pursuant to the Code or any provision of state or
local tax law and Section 7.6 of this Agreement with respect to any allocation,
payment or distribution to the General Partner or the Limited Partner shall be
treated as amounts distributed to the General Partner or the Limited Partner, as
applicable, pursuant to Section 5.3 of this Agreement.
ARTICLE VI. PARTNERSHIP MANAGEMENT
6.1. Management and Control of Partnership Business.
(a) The General Partner shall have full, exclusive and complete discretion
to manage the business and affairs of the Partnership, to make all decisions
affecting the business and affairs of the Partnership and to take all such
action as it deems necessary or appropriate to accomplish the purposes of the
Partnership as set forth herein. The Limited Partners shall not have any
authority, right, or power to bind the Partnership, or to manage, or to
participate in the management of the business and affairs of the Partnership in
any manner whatsoever. Such management shall in every respect be the full and
complete responsibility of the General Partner alone as herein provided.
(b) In carrying out the purposes of the Partnership, the General Partner
shall be authorized to take all actions it deems necessary and appropriate to
carry on the business of the Partnership. The Limited Partners, by execution
hereof, agree that the General Partner is authorized to execute, deliver and
perform any agreement and/or transaction on behalf of the Partnership.
6.2. No Management by Limited Partner; Limitation of Liability.
(a) No Limited Partner, in its capacity as a limited partner, shall take
part in the day-to-day management, operation or control of the business and
affairs of the Partnership or have any right, power, or authority to act for or
on behalf of or to bind the Partnership or transact any business in the name of
the Partnership. The Limited Partners shall have no rights other than those
specifically provided herein or granted by law where consistent with a valid
provision hereof. Any approvals rendered or withheld by the Limited Partners
pursuant to this Agreement shall be deemed as consultation with or advice to the
General Partner in connection with the business of the Partnership and, in
accordance with the Act, shall not be deemed as participation by the Limited
Partners in the business of the Partnership and are not intended to create any
inference that a Limited Partner should be classified as a general partner under
the Act.
(b) No Limited Partner shall have any liability under this Agreement except
with respect to withholding under Section 7.6, in connection with a violation of
any provision of this Agreement by such Limited Partner or as provided in the
Act.
(c) The General Partner shall not take any action which would subject a
Limited Partner (in its capacity as Limited Partner) to liability as a general
partner.
6.3. Limitations on Partners.
(a) No Partner shall have any authority to perform (i) any act in violation
of any applicable law or regulation thereunder, (ii) any act prohibited by
Section 6.2(C), or (iii) any act which
17
is required to be Consented to or ratified pursuant to this Agreement without
such Consent or ratification.
(b) No action shall be taken by a Partner if it would cause the Partnership
to be treated as al association taxable as a corporation for federal income tax
purposes or, without the consent of the General Partner, as a publicly-traded
partnership within the meaning of Section 7704 of the Code. A determination of
whether such action will have the above described effect shall be based upon a
declaratory judgment or similar relief obtained from a court of competent
jurisdiction, a favorable ruling from the IRS or the receipt of an opinion of
counsel.
6.4. Business with Affiliates.
The General Partner, in its discretion, may cause the Partnership to
transact business with any Partner or its Affiliates for goods or services
reasonably required in the conduct of the Partnership's business; provided that
any such transaction shall be effected only on terms competitive with those that
may be obtained in the marketplace from unaffiliated Persons. The foregoing
proviso shall not apply to transactions between the Partnership and any
Subsidiaries of the Partnership. In addition, neither the General Partner nor
any Affiliate of the General Partner may sell, transfer or otherwise convey any
property to, or purchase any property from, the Partnership, except (i) on terms
competitive with those that may be obtained in the marketplace from unaffiliated
Persons, or (ii) where the General Partner determines, in its sole judgment,
that such sale, transfer or conveyance confers benefits on the General Partner
in respect of matters of tax or corporate or financial structure and where the
Partnership obtains or retains at least a majority interest in the Person to
whom such sale, transfer or conveyance is made; provided, in the case of this
clause (ii), such sale, transfer or conveyance is not being effected for the
primary purpose of materially disadvantaging the Limited Partners.
6.5. Reimbursement of Expenses.
The General Partner shall be fully and entirely reimbursed by the
Partnership for any and all direct and indirect costs and expenses incurred in
connection with the organization and continuation of the Partnership pursuant to
this Agreement. In addition, the General Partner shall be reimbursed for all
expenses incurred by the General Partner in connection with any issuance of
additional Partnership Interests.
6.6. Liability for Acts and Omissions.
(a) The General Partner shall not be liable, responsible or accountable in
damages or otherwise to the Partnership or any of the other Partners for any act
or emission performed or omitted in good faith on behalf of the Partnership and
in a manner reasonably believed to be (i) within the scope of the authority
granted by this Agreement and (ii) in the best interests of the partnership. In
exercising its authority hereunder, the General Partner may, but shall not be
under any obligation to, take into account the tax consequences to any Partner
of any action it undertakes on behalf of the Partnership. Neither the General
Partner nor the Partnership shall have any liability as a result of any income
tax liability incurred by a Partner as a result of any action or inaction of the
General Partner hem-under and, by its execution of this Agreement, the Limited
Partner acknowledges the foregoing.
(b) Unless otherwise prohibited hereunder, the General Partner shall be
entitled to exercise any of the powers granted to it and perform any of the
duties required of it under this
18
Agreement directly or through any agent. The General Partner shall not be
responsible for any misconduct or negligence on the part of any agent; provided
that the General Partner selected or appointed such agent in good faith.
6.7. Indemnification.
(a) The Partnership shall indemnify the General Partner and each director,
officer and stockholder of the General Partner and each Person (including any
Affiliate) designated as agent by a General Partner in its reasonable discretion
(each, an 'Indemnified Party") to the fullest extent permitted under the Act
(including any procedures set forth therein regarding advancement of expenses to
such Indemnified Party) from and against any and all losses, claims, damages,
liabilities, expenses (including reasonable attorneys' fees), judgments, fines,
settlements and any other amounts arising out of or in connection with any
claims, demands, actions, suits or proceedings (civil, criminal or
administrative) relating to or resulting (directly or indirectly) from the
operations of the Partnership, in which such Indemnified Party becomes involved,
or reasonably believes it may become involved, as a result of the capacity
referred to above.
(b) The Partnership shall have the authority to purchase and maintain such
insurance policies on behalf of the Indemnified Parties as the General Partner
shall determine, which policies may cover those liabilities the General Partner
reasonably believes may be incurred by an Indemnified Party in connection with
the operation of the business of the Partnership. The right to procure such
insurance on behalf of the Indemnified Parties shall in no way mitigate or
otherwise affect the right of any such Indemnified Party to indemnification
pursuant to Section 6.7(a) hereof.
(c) The provisions of this Section 6.7 are for the benefit of the
Indemnified Parties, their heirs, successors, assigns and administrators and
shall not be deemed to create any rights in or benefit to any other Person.
ARTICLE VII. ADMINISTRATIVE, FINANCIAL AND TAX MATTERS
7.1. Books and Records.
The General Partner shall maintain at the office of the Partnership full
and accurate books of the Partnership showing all receipts and expenditures,
assets and liabilities, profits and losses, names and current addresses of
Partners, and all other records necessary for recording the Partnership's
business and affairs. Each Limited Partner shall have, upon written demand and
at such Limited Partner's expense, the right to receive true and complete
information regarding Partnership matters to the extent required (and subject to
the limitations) under Delaware law.
7.2. Annual Audit and Accounting.
The books and records of the Partnership shall be kept for financial and
tax reporting purposes on the accrual basis of accounting in accordance with
generally accepted accounting principles ("GAAP"). The accounts of the
Partnership shall be audited annually by a nationally recognized accounting firm
of independent public accountants selected by the General Partner (the
'Independent Accountants').
19
7.3. Partnership Funds.
The General Partner shall have responsibility for the safekeeping and use
of all funds and assets of the Partnership, whether or not in its direct or
indirect possession or control. All funds of the Partnership not otherwise
invested shall be deposited in one or more accounts maintained in the name of
the Partnership in such banking institutions as the General Partner shall
determine, and withdrawals shall be made only in the regular course of
Partnership business on such signatures as the General Partner may from time to
time, determine.
7.4. Reports and Notices.
The General Partner shall provide all Partners with the following reports
no later than the dates indicated or as soon thereafter as circumstances permit:
(a) By March 31 of each year, IRS Form 1065 and Schedule K-1, or similar
forms as may be required by the IRS, stating each Partner's allocable share of
income, gain, loss, deduction or credit for the prior Fiscal Year.
(b) Within ninety (90) days after the end of each of the first three (3)
fiscal quarters, as of the last day of the fiscal quarter, a report containing
unaudited financial statements of the Partnership, or of the General Partner if
such statements are prepared on a consolidated basis with the General Partner,
and such other information as may be legally required or determined to be
appropriate by the General Partner; and
(c) Within one hundred twenty (120) days after the end of each Fiscal Year,
as of the close of the Fiscal Year, an annual report containing audited
financial statements of the Partnership, or of the General Partner if such
statements are prepared on a consolidated basis with the General Partner,
presented in accordance with GAAP and certified by the Independent Accountants.
7.5. Tax Matters.
(a) The General Partner shall be the Tax Matters Partner of the Partnership
for federal income tax matters pursuant to Code Section 6231(a)(7)(a). The Tax
Matters Partner is authorized and required to represent the Partnership (at the
expense of the Partnership) in connection with all examinations of the affairs
of the Partnership by any federal, state, or local tax authorities, including
any resulting administrative and judicial proceedings, and to expend funds of
the Partnership for professional services and costs associated therewith. The
Tax Matters Partner shall deliver to each Limited Partner within ten (10)
business days of the receipt thereof a copy of any notice or other communication
with respect to the Partnership received from the IRS (or other governmental tax
authority), or any court, ' in each case with respect to any administrative or
judicial proceeding involving the Partnership. The Partners agree to cooperate
with each other in connection with the conduct of all proceedings pursuant to
this Section 7.5(a).
(b) The Tax Matters Partner shall receive no compensation for its services
in such capacity. If the Tax Matters Partner incurs any costs related to any tax
audit, declaration of any tax deficiency or any administrative proceeding or
litigation involving any Partnership tax matter, such amount shall be an expense
of the Partnership and the Tax Matters Partner shall be entitled to full
reimbursement therefor.
20
(c) The General Partner shall cause to be prepared all federal, state and
local income tax returns required of the Partnership at the Partnership's
expense.
(d) Except as set forth herein, the General Partner shall determine whether
to make (and, if necessary, revoke) any tax election available to the
Partnership under the Code or any state tax law. The Partnership shall elect to
deduct expenses, if any, incurred by it in organizing the Partnership in
accordance with the provisions of Code Section 709.
7.6. Withholding.
Each Partner hereby authorizes the Partnership to withhold from or pay to
any taxing authority on behalf of such Partner any tax that the General Partner
determines the Partnership is required to withhold or pay with respect to any
amount distributable or allocable to such Partner.
ARTICLE VIII. TRANSFER OF PARTNERSHIP INTERESTS
8.1. Transfers Prohibited.
No Partner may voluntarily withdraw or Transfer all or any portion of its
Partnership Interest. Any such purported withdrawal or Transfer shall be void ab
initio and shall not be given effect. Notwithstanding the foregoing, any Partner
may pledge its Partnership Interest as collateral for or otherwise in connection
with a loan agreement under which the Partnership or an Affiliate of the
Partnership is a borrower.
8.2. Obligations of a Prior General Partner.
Upon an Involuntary Withdrawal of the General Partner and the subsequent
Transfer of the General Partner's Interest, such General Partner shall (i)
remain liable for all obligations and liabilities (other than Partnership
liabilities payable solely from Partnership Assets) incurred by it as General
Partner before the effective date of such event and (h) pay all costs associated
with the admission of its Successor General Partner. However, such General
Partner shall be free of and held harmless by the Partnership against any
obligation or liability incurred on account of the activities of the Partnership
from and after the effective date of such event, except as provided in this
Agreement.
8.3. Successor General Partner.
A successor to all of a General Partner's General Partner Interest who is
proposed to be admitted to the Partnership as a Successor General Partner shall
be admitted as the General Partner, effective upon the Transfer. Any such
transferee shall carry on the business of the Partnership without dissolution.
In addition, the following conditions must be satisfied:
(a) The Person shall have accepted and agreed to be bound by all the terms
and provisions of this Agreement by executing a counterpart thereof and such
other documents or instruments as may be required or appropriate in order to
effect the admission of such Person as a General Partner;
21
(b) An amendment to this Agreement evidencing the admission of such Person
as a General Partner shall have been executed by all General Partners and an
amendment to the Certificate shall have been filed for recordation as required
by the Act; and
(c) Any consent required under Section 10. I (a) shall have been obtained.
ARTICLE IX. DISSOLUTION AND LIQUIDATION
9.1. Term and Dissolution.
The Partnership shall continue until December 31, 2047 at which time the
Partnership shall dissolve or until dissolution occurs prior to that date for
any one of the following reasons:
(a) An Involuntary Withdrawal or a voluntary withdrawal, even though in
violation of this Agreement, of the General Partner;
(b) Entry of a decree of judicial dissolution of the Partnership under the
Act; or
(c) The sale, exchange or other disposition of all or substantially all of
the Partnership Assets.
If an event of the type described in clause (a) shall occur, the
Partnership shall not dissolve unless, by the ninetieth (90th) day following
such event, the Limited Partner shall not have elected to continue the
Partnership. if the Limited Partner shall, during such time, elect to continue
the Partnership, it may also determine to admit a Successor General Partner.
9.2. Liquidation of Partnership Assets.
(a) Subject to Section 9.2(e), in the event of dissolution pursuant to
Section 9. 1, the Partnership shall continue solely for purposes of winding up
the affairs of, achieving a final termination of, and satisfaction of the
creditors of, the Partnership. The General Partner (or, if there is no General
Partner remaining, any Person elected by a majority in interest of the Limited
Partners (the 'Liquidator')) shall be responsible for oversight of the winding
up and dissolution of the Partnership. The Liquidator shall obtain a full
accounting of the assets and liabilities of the Partnership and such Partnership
Assets shall be liquidated as promptly as the Liquidator is able to do so
without any undue loss in value, with the proceeds therefrom applied and
distributed in the following order:
(i) First, to the discharge of Partnership debts and liabilities to
creditors other than Partners;
(ii) Second, to the discharge of Partnership debts and liabilities to the
Partners;
(iii) The balance, if any, to the Partners in accordance with their
positive Capital Accounts after giving effect to all contributions,
distributions and allocations for all periods.
22
(b) In accordance with Section 9.2(a), the Liquidator shall proceed without
any unnecessary delay to sell and otherwise liquidate the Partnership Assets;
provided, however, that if the Liquidator shall determine that an immediate sale
of part or all of the Partnership Assets would cause undue loss to the Partners,
the Liquidator may defer the liquidation except (i) to the extent provided by
the Act or (ii) as may be necessary to satisfy the debts and liabilities of the
Partnership to Persons other than the Partners.
(c) If, in the sole and absolute discretion of the Liquidator, there are
Partnership Assets that the Liquidator will not be able to liquidate, or if the
liquidation of such assets would result in undue loss to the Partners, the
Liquidator may distribute such Partnership Assets to the Partners in-kind, in
lieu of cash, as tenants-in-common in accordance with the provisions of Section
9.2(a). The foregoing notwithstanding, such in-kind distributions shall only be
made if in the Liquidator's good faith judgment that is in the best interest of
the Partners.
(d) Upon the complete liquidation and distribution of the Partnership
Assets, the Partners shall cease to be Partners of the Partnership, and the
Liquidator shall execute, acknowledge and cause to be filed all certificates and
notices required by law to terminate the Partnership. Upon the dissolution of
the Partnership pursuant to Section 9.1, the Liquidator shall cause to be
prepared, and shall furnish to each Partner, a statement setting forth the
assets and liabilities of the Partnership. Promptly following the complete
liquidation and distribution of the Partnership Assets, the Liquidator shall
furnish to each Partner a statement showing the manner in which the Partnership
Assets were liquidated and distributed.
(e) In the event that the Partnership shall dissolve as a result of the
expiration of the term provided for herein or as a result of the occurrence of
an event of the type described in Section 9. 1 (B) or (C), the General Partner
shall have the option of either (i) delivering to the Limited Partner,
Partnership property approximately equal in value to the value of such Limited
Partner's Partnership Interest upon the assumption by such Limited Partner of
such Limited Partner's proportionate share of the Partnership's liabilities and
payment by such Limited Partner (or the Partnership) of any excess (or
deficiency) of the value of the property so delivered over the value of such
Limited Partner's Partnership Interest or (ii) in lieu of requiring such Limited
Partner to assume its proportionate share of Partnership liabilities, delivering
to such Limited Partner unencumbered Partnership property approximately equal in
value to the net value of such Limited Partner's Partnership Interest.
9.3. Effect of Treasury Regulations.
(a) In the event the Partnership is "liquidated" within the meaning of
Treasury Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made
pursuant to this Article IX to the General Partner and the Limited Partners who
have positive Capital Accounts in compliance with Treasury Regulations Section
1.704-1(b)(2)(ii)(b)(2). If any Partner has a deficit balance in its Capital
Account (after giving effect to all contributions, distributions and
allocations), such Partner shall have no obligation to make any contribution to
the capital of the Partnership.
(b) In the event the Partnership is "liquidated' within the meaning of
Treasury Regulations Section 1.704-1(b)(2)(ii)(g) but there has been no
dissolution of the Partnership under Section 9.1 hereof, then the Partnership
Assets shall not be liquidated, the Partnership's liabilities shall not be paid
or discharged and the Partnership's affairs shall not be wound up. In the event
of such a
23
liquidation there shall be deemed to have been a distribution of Partnership
Assets in kind to the Partners in accordance with their respective Capital
Accounts followed by a recontribution of the Partnership Assets by the Partners
also in accordance with their respective Capital Accounts.
9.4. Time for Winding-Up.
Anything in this Article IX notwithstanding, a reasonable time shall be
allowed for the orderly winding-up of the business and affairs of the
Partnership and the liquidation of the Partnership Assets in order to minimize
any potential for losses as a result of such process. During the period of
winding-up, this Agreement shall remain in full force and effect and shall
govern the rights and relationships of the Partners inter se.
ARTICLE X. AMENDMENTS AND MEETINGS
10.1. Amendment Procedure.
(a) Amendments to this Agreement may be made only with the Consent of
Partners owning Percentage Interests of no less than eighty eight percent (88%)
of all Percentage Interests. In connection with any proposed amendment of this
Agreement requiring Consent, the General Partner shall either call a meeting to
solicit the vote of the Partners or seek the written vote of the Partners to
such amendment. In the case of a request for a written vote, the General Partner
shall be authorized to impose such reasonable time limitations for response, but
in no event less than ten (10) days, with the failure to respond being deemed a
vote consistent with the vote of the General Partner.
(b) Notwithstanding the foregoing, amendments may be made to this Agreement
by the General Partner, without the Consent of any Limited Partner, to (i) add
to the representations, duties or obligations of the General Partner or
surrender any right or power granted to the General Partner herein; (ii) cure
any ambiguity, correct or supplement any provision herein which may be
inconsistent with any other provision herein or make any other provisions with
respect to matters or questions arising hereunder which will not be inconsistent
with any other provision hereof; (iii) reflect the admission, substitution,
termination or withdrawal of Partners in accordance with this Agreement; or (iv)
satisfy any requirements, conditions or guidelines contained in any order,
directive, opinion, ruling or regulation of a federal or state agency or
contained in federal or state law. The General Partner shall reasonably promptly
notify each Limited Partner whenever it exercises its authority pursuant to this
Section 10. l(b).
10.2. Meetings and Voting.
(a) Meetings of Partners may be called by the General Partner. The General
Partner shall give all Partners Notice of the purpose of such proposed meeting
not less than seven (7) days nor more than thirty (30) days prior to the date of
the meeting. Meetings shall be held at a reasonable time and place selected by
the General Partner. Whenever the vote or Consent of Partners is permitted or
required hereunder, such vote or Consent shall be requested by the General
Partner and may be given by the Partners in the same manner as set forth for a
vote with respect to an amendment to this Agreement in Section 10. I (a).
24
(b) Any action required or permitted to be taken at a meeting of the
Partners may be taken without a meeting if a written consent setting forth the
action to be taken is signed by the Partners owning Percentage Interests
required to vote in favor of such action, which consent may be evidenced in one
or more instruments. Consents need not be solicited from any other Partner if
the written consent of a sufficient number of Partners has been obtained to take
the action for which such solicitation was required.
(c) Each Limited Partner may authorize any Person or Persons, including
without limitation the General Partner, to act for him by proxy on all matters
on which a Limited Partner may participate. Every Proxy (i) must be signed by
the Limited Partner or his attorney-in-fact, (ii) shall expire eleven (11)
months from the date thereof unless the proxy provides otherwise and (iii) shall
be revocable at the discretion of the Limited Partner granting such proxy.
ARTICLE XI. MISCELLANEOUS PROVISIONS
11.1. Title to Property.
All property owned by the Partnership, whether real or personal, tangible
or intangible, shall be deemed to be owned by the Partnership as an entity, and
no Partner, individually, shall have any ownership of such property. The
Partnership shall hold its assets in its own name.
11.2. Other Activities of Limited Partners.
Except as expressly provided otherwise in this Agreement or in any other
agreement entered into by a Limited Partner or any Affiliate of a Limited
Partner and the Partnership, the General Partner or any Subsidiary of the
Partnership or the General Partner, any Limited Partner or any Affiliate of any
Limited Partner may engage in, or possess an interest in, other business
ventures of every nature and description, independently or with others,
including, without limitations real estate business ventures, whether or not
such other enterprises shall be in competition with-any activities of the
Partnership, the General Partner or any Subsidiary of the Partnership or the
General Partner; and neither the Partnership, the General Partner, any such
Subsidiary nor the other Partners shall have any right by virtue of this
Agreement in and to such independent ventures or to the income or profits
derived therefrom.
11.3. Power of Attorney.
(a) Each Partner hereby irrevocably appoints and empowers the General
Partner (which term shall include the Liquidator, in the event of a liquidation,
for purposes of this Section 1 1.3) and each of their authorized officers and
attorneys-in-fact with full power of substitution as his true and lawful agent
and attorney-in-fact, with full power and authority in his name, place and xxxxx
to make, execute, acknowledge, publish and file in the appropriate public
offices (a) any duly approved amendments to the Certificate pursuant to the Act
and to the laws of any state in which such documents are required to be filed;
(b) any certificates, instruments or documents as may be required by, or may be
appropriate under, the laws of any state or other jurisdiction in which the
Partnership is doing or intends to do business; (c) any other instrument which
may be required to be filed by the Partnership under the laws of any state or by
any governmental agency, or which the General Partner deems advisable to file;
(d) any documents which may be required to effect the continuation of the
Partnership, the admission, withdrawal or substitution of any Partner pursuant
to Article VIII,
25
dissolution and termination of the Partnership pursuant to Article IX, or the
surrender of any rights or the assumption of any additional responsibilities by
the General Partner; and (e) any document which may be required to effect an
amendment to this Agreement to correct -any mistake, omission or inconsistency,
or to cure any ambiguity herein, to the extent such amendment is permitted by
Section 10.1(B).
(b) Nothing herein contained shall be construed as authorizing the General
Partner to amend this Agreement except in accordance with Article X or as may be
otherwise expressly provided for in this Agreement.
(c) The foregoing grant of authority (i) is a special power of attorney,
coupled with an interest, and it shall survive the Involuntary Withdrawal of any
Partner and shall extend to such Partner's heirs, successors, assigns and
personal representatives; (ii) may be exercised by the General Partner for each
and every Partner acting as attorney-in-fact for each and every Partner; and
(iii) shall survive the Involuntary Withdrawal by a Limited Partner. Each
Partner hereby agrees to be bound by any representations made by the General
Partner, acting in good faith pursuant to such power of attorney. Each Partner
shall execute and deliver to the General Partner, within fifteen (15) days after
receipt of the General Partner's request therefor, such further designations,
powers of attorney and other instruments as the General Partner deems necessary
to effectuate this Agreement and the purposes of the Partnership.
11.4. Notices.
All notices and other communications provided for or permitted hereunder
shall be made in writing by hand delivery, registered first-class mail, telex,
telecopier, or any courier guaranteeing overnight delivery, (i) if to a Limited
Partner, to the address set forth on Schedule I hereto, or (ii) if to the
General Partner, Xxx Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxxxx, XX 00000, Attn:
President.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if hand delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; when answered
back, if telexed; or when receipt is acknowledged, if telecopied.
11.5. Further Assurances.
The parties agree to execute and deliver all such documents, provide all
such information and take or refrain from taking any action as may be necessary
or desirable to achieve the purposes of this Agreement and the Partnership.
26
11.6. Titles and Captions.
All article or section titles or captions in this Agreement are solely for
convenience and shall not be deemed to be part of this Agreement or otherwise
define, limit or extend the scope or intent of any provision hereof.
11.7. Applicable Law.
This Agreement, and the application or interpretation thereof, shall be
governed exclusively by its terms and by the law of the State of Delaware,
without regard to its principles of conflicts of laws.
11.8. Binding Agreement.
This Agreement shall be binding upon the parties hereto, their heirs,
executors, personal representatives, successors and assigns.
11.9. Waiver of Partition.
Each of the parties hereto irrevocably waives during the term of the
Partnership any right that it may have to maintain any action for partition with
respect to any property of the Partnership.
11.10. Counterparts and Effectiveness.
This Agreement may be executed in several counterparts, which shall be
treated as originals for all purposes, and all so executed shall constitute one
agreement, binding on all of the parties hereto, notwithstanding that all the
parties are not signatory to the original or the same counterpart. Any such
counterpart shall be admissible into evidence as an original hereof against each
Person who executed it. The execution of this Agreement and delivery thereof by
facsimile shall be sufficient for all purposes, and shall be binding upon any
party who so executes.
11.11. Survival of Representations.
All representations and warranties herein shall survive the dissolution and
final liquidation of the Partnership.
27
11.12. Entire Agreement.
This Agreement (and all Exhibits hereto) contains the entire understanding
among the parties hereto and supersedes all prior written or oral agreements
among them respecting the within subject matter, unless otherwise provided
herein. There are no representations, agreements, arrangements or
understandings, oral or written, among the Partners hereto relating to the
subject matter of this Agreement which are not fully expressed herein and in
said Exhibits.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties hereto as of the day and year first above written.
General Partner FCO HOLDINGS, INC.
By: ________________________________
Limited Partners: FCO, L.P.
By: ROYALE INVESTMENTS, INC.
its General Partner
By: ________________________________
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SCHEDULE I
SCHEDULE OF PARTNERS
===============================================================================
NAME INTEREST IN THE CAPITAL PERCENTAGE
PARTNERSHIP CONTRIBUTION INTEREST
FCO Holdings, Inc. General Partner 00.10 Percent
FC, L.P. Limited Partner 99.90 Percent
29
TABLE OF CONTENTS
1. INTERPRETIVE PROVISIONS...................................................1
1.1. CERTAIN DEFINITIONS.....................................................1
1.2. RULES OF CONSTRUCTION...................................................7
2. FORMATION.................................................................8
2.1. FORMATION...............................................................8
2.2. NAME....................................................................8
2.3. PLACE OF BUSINESS; REGISTERED AGENT.....................................8
3. BUSINESS PURPOSE..........................................................8
3.1. BUSINESS................................................................8
3.2. AUTHORIZED ACTIVITIES...................................................8
4. CAPITAL CONTRIBUTIONS.....................................................9
4.1. CAPITAL CONTRIBUTIONS...................................................9
4.2. ADDITIONAL PARTNERSHIP INTERESTS........................................9
4.3. NO THIRD PARTY BENEFICIARIES............................................9
4.4. CAPITAL ACCOUNTS.......................................................10
4.5. RETURN OF CAPITAL ACCOUNT; INTEREST....................................11
4.6. PREEMPTIVE RIGHTS......................................................11
5. ALLOCATIONS AND DISTRIBUTIONS............................................12
5.1. LIMITED LIABILITY......................................................11
5.2. PROFITS, LOSSES AND DISTRIBUTIVE SHARES................................12
5.3. DISTRIBUTIONS..........................................................16
5.4. DISTRIBUTIONS UPON LIQUIDATION.........................................16
5.5. AMOUNTS WITHHELD.......................................................16
6. PARTNERSHIP MANAGEMENT...................................................17
6.1. MANAGEMENT AND CONTROL OF PARTNERSHIP BUSINESS.........................17
6.2. NO MANAGEMENT BY LIMITED PARTNER; LIMITATION OF LIABILITY..............17
6.3. LIMITATIONS ON PARTNERS................................................17
6.4. BUSINESS WITH AFFILIATES...............................................18
6.5. REIMBURSEMENT OF EXPENSES..............................................18
6.6. LIABILITY FOR ACTS AND OMISSIONS.......................................18
6.7. INDEMNIFICATION........................................................19
7. ADMINISTRATIVE, FINANCIAL AND TAX MATTERS..................................
7.1. BOOKS AND RECORDS......................................................19
7.2. ANNUAL AUDIT AND ACCOUNTING............................................19
7.3. PARTNERSHIP FUNDS......................................................20
7.4. REPORTS AND NOTICES....................................................20
7.5. TAX MATTERS............................................................20
7.6. WITHHOLDING............................................................21
8. TRANSFER OF PARTNERSHIP INTERESTS........................................21
8.1. TRANSFERS PROHIBITED...................................................21
8.2. OBLIGATIONS OF A PRIOR GENERAL PARTNER.................................21
8.3. SUCCESSOR GENERAL PARTNER..............................................21
9. DISSOLUTION AND LIQUIDATION..............................................22
9.1. TERM AND DISSOLUTION...................................................22
9.2. LIQUIDATION OF PARTNERSHIP ASSETS......................................22
9.3. EFFECT OF TREASURY REGULATIONS.........................................23
9.4. TIME FOR WINDING-UP....................................................24
10. AMENDMENTS AND MEETINGS.................................................25
10.1. AMENDMENT PROCEDURE...................................................24
10.2. MEETINGS AND VOTING...................................................24
11. MISCELLANEOUS PROVISIONS................................................26
11.1. TITLE TO PROPERTY.....................................................25
11.2. OTHER ACTIVITIES OF LIMITED PARTNERS..................................25
11.3. POWER OF ATTORNEY.....................................................25
11.4. NOTICES...............................................................26
11.5. FURTHER ASSURANCES....................................................26
11.6. TITLES AND CAPTIONS...................................................27
11.7. APPLICABLE LAW........................................................27
11.8. BINDING AGREEMENT.....................................................27
11.9. WAIVER OF PARTITION...................................................27
11.10. COUNTERPARTS AND EFFECTIVENESS.......................................27
11.11. SURVIVAL OF REPRESENTATIONS..........................................27
11.12. ENTIRE AGREEMENT.....................................................28
2
