EXHIBIT 10.2
THIRD AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
U.S. RESTAURANT PROPERTIES OPERATING L.P.
(FORMERLY BURGER KING OPERATING
LIMITED PARTNERSHIP)
DATED AS OF _________________, 1997
TABLE OF CONTENTS
PAGE
----
ARTICLE I - CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II - FORMATION; NAME; PLACE OF BUSINESS. . . . . . . . . . . . . . . . . 13
2.1. Formation of Partnership; Certificate of Limited Partnership.. . . 13
2.2. Name of Partnership. . . . . . . . . . . . . . . . . . . . . . . . 13
2.3. Place of Business. . . . . . . . . . . . . . . . . . . . . . . . . 14
2.4. Registered Office and Registered Agent . . . . . . . . . . . . . . 14
2.5. Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE III - PURPOSES, NATURE OF BUSINESS,
AND POWERS OF PARTNERSHIP. . . . . . . . . . . . . . . . . . . . . 16
3.1. Purposes and Business. . . . . . . . . . . . . . . . . . . . . . . 16
3.2. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE IV - TERM OF PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . 17
4.1. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE V - CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.1. Capital Contributions of the Partners. . . . . . . . . . . . . . . 17
5.2. Additional Issuances of Partnership Interests and Capital
Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.3. Contribution of Proceeds of Issuance of Common Stock . . . . . . . 19
5.4. Exchange of Units. . . . . . . . . . . . . . . . . . . . . . . . . 19
5.5. Minimum Percentage Interest of General Partner . . . . . . . . . . 20
5.6. No Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . 20
5.7. Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.8. Negative Capital Accounts. . . . . . . . . . . . . . . . . . . . . 23
5.9. No Interest on Amounts in Capital Account. . . . . . . . . . . . . 23
5.10. Advances to Partnership. . . . . . . . . . . . . . . . . . . . . . 24
5.11. Liability of Limited Partner . . . . . . . . . . . . . . . . . . . 24
5.12. Return of Capital. . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VI - ALLOCATION OF PROFITS AND LOSSES;
DISTRIBUTIONS OF CASH FLOW AND CERTAIN PROCEEDS. . . . . . . . . . 24
6.1. Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . 24
6.2. Allocations for Capital Account Purposes . . . . . . . . . . . . . 26
6.3. Allocations for Tax Purposes . . . . . . . . . . . . . . . . . . . 28
6.4. Allocation of Income and Loss With Respect to Interest
Transferred . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.5. Distributions of Cash Flow . . . . . . . . . . . . . . . . . . . . 30
6.6. Distribution of Proceeds from Interim Capital Transactions . . . . 30
6.7. Distribution of Proceeds from Terminating Capital Transactions;
Liquidation Distributions . . . . . . . . . . . . . . . . . . . . 30
6.8. Taxes Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . 31
-i-
TABLE OF CONTENTS
(Continued)
PAGE
----
ARTICLE VII - MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.1. Management and Control of Partnership. . . . . . . . . . . . . . . 32
7.2. Powers of Managing General Partner . . . . . . . . . . . . . . . . 32
7.3. Restrictions on Authority of Managing General Partner. . . . . . . 38
7.4. Title to Partnership Assets. . . . . . . . . . . . . . . . . . . . 39
7.5. Working Capital Reserve. . . . . . . . . . . . . . . . . . . . . . 39
7.6. Other Business Activities of Partners. . . . . . . . . . . . . . . 39
7.7. Transactions with Managing General Partner or Affiliates . . . . . 40
7.8. Net Worth Representation; Independent Judgment . . . . . . . . . . 40
7.9. Liability of General Partners to Partnership and the Limited
Partners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.10. Indemnification of General Partners and Affiliates . . . . . . . . 40
7.11. No Management by Limited Partners. . . . . . . . . . . . . . . . . 42
7.12. Other Matters Concerning General Partners. . . . . . . . . . . . . 42
7.13. Revolving Line of Credit; Other Loans to or from a General
Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.14. Periodic Consideration of Sale or Refinancing. . . . . . . . . . . 44
7.15. Other Limitations. . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE VIII - ACQUISITION, OPERATION, AND DISPOSITION
OF RESTRICTED RESTAURANT PROPERTIES . . . . . . . . . . . . . . . 45
8.1. General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.2. Contribution to Partnership; Acquisition of Restricted
Restaurant Properties . . . . . . . . . . . . . . . . . . . . . . 46
8.3. Use and Other Restrictions . . . . . . . . . . . . . . . . . . . . 46
8.4. Restrictions on Transfer of Restricted Restaurant Properties . . . 51
8.5. Rent Relief. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.6. Successor Policy . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.7. Competitive Facilities . . . . . . . . . . . . . . . . . . . . . . 57
8.8. Acquisition of Restricted Restaurant Properties by General
Partners or Affiliates. . . . . . . . . . . . . . . . . . . . . . 58
8.9. Termination of Lease for Restricted Restaurant Property
Following Termination of BKC Franchise Agreement. . . . . . . . . 59
8.10. Independent Consultant . . . . . . . . . . . . . . . . . . . . . . 60
8.11. Consent to Use of Name and Trademarks. . . . . . . . . . . . . . . 61
8.12. Acquisition of Fee Title to Properties Subject to Primary
Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.13. Location of Other Restaurant Properties. . . . . . . . . . . . . . 62
ARTICLE IX - COMPENSATION OF GENERAL PARTNERS;
PAYMENT OF PARTNERSHIP EXPENSES. . . . . . . . . . . . . . . . . . 62
9.1. Compensation to General Partners . . . . . . . . . . . . . . . . . 62
9.2. Expenses in Connection With Organization of Partnership and
Initial Public Offering . . . . . . . . . . . . . . . . . . . . . 63
9.3. Operational Expenses . . . . . . . . . . . . . . . . . . . . . . . 64
9.4. Reimbursement of the General Partners. . . . . . . . . . . . . . . 67
-ii-
TABLE OF CONTENTS
(Continued)
PAGE
----
ARTICLE X - BANK ACCOUNTS; BOOKS AND RECORDS;
FISCAL YEAR; STATEMENTS; TAX MATTERS . . . . . . . . . . . . . . . 67
10.1. Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . 67
10.2. Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . 68
10.3. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
10.4. Financial Statement and Information. . . . . . . . . . . . . . . . 69
10.5. Accounting Decisions . . . . . . . . . . . . . . . . . . . . . . . 70
10.6. Where Maintained . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.7. Preparation of Tax Returns . . . . . . . . . . . . . . . . . . . . 70
10.8. Tax Elections. . . . . . . . . . . . . . . . . . . . . . . . . . . 71
10.9. Tax Controversies. . . . . . . . . . . . . . . . . . . . . . . . . 71
10.10. Organizational Expenses. . . . . . . . . . . . . . . . . . . . . . 71
10.11. Taxation as a Partnership. . . . . . . . . . . . . . . . . . . . . 71
10.12. Qualification as a REIT. . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE XI - TRANSFER OF INTERESTS . . . . . . . . . . . . . . . . . . . . . . . 72
11.1. Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
11.2. Transfers of Interests of General Partners . . . . . . . . . . . . 72
11.3. Transfer of Interest of Limited Partners . . . . . . . . . . . . . 73
11.4. Substituted Limited Partners . . . . . . . . . . . . . . . . . . . 74
11.5. Assignees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
11.6. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE XII - ADMISSION OF SUCCESSOR GENERAL PARTNERS . . . . . . . . . . . . . . 76
12.1. Admission of Successor General Partners. . . . . . . . . . . . . . 76
12.2. Admission of Additional General Partners . . . . . . . . . . . . . 77
ARTICLE XIII - WITHDRAWAL OR REMOVAL OF GENERAL PARTNERS . . . . . . . . . . . . . 77
13.1. Withdrawal or Removal of General Partners. . . . . . . . . . . . . 77
13.2. Amendment of Agreement and Certificate of Limited Partnership. . . 78
13.3. Interest of Departing Partner and Successor. . . . . . . . . . . .. 78
ARTICLE XIV - DISSOLUTION AND LIQUIDATION . . . . . . . . . . . . . . . . . . . . 80
14.1. No Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . 80
14.2. Events Causing Dissolution . . . . . . . . . . . . . . . . . . . . 80
14.3. Right to Continue Business of Partnership. . . . . . . . . . . . . 81
14.4. Dissolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
14.5. Liquidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
14.6. Reasonable Time for Winding Up . . . . . . . . . . . . . . . . . . 83
14.7. Termination of Partnership . . . . . . . . . . . . . . . . . . . . 83
ARTICLE XV - AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
15.1. Amendments to be Adopted Solely by the Managing General Partner. . 84
-iii-
TABLE OF CONTENTS
(Continued)
PAGE
----
15.2. Amendment Procedures . . . . . . . . . . . . . . . . . . . . . . . 85
15.3. Amendment Restrictions . . . . . . . . . . . . . . . . . . . . . . 86
15.4. Meetings of the Partners . . . . . . . . . . . . . . . . . . . . . 86
ARTICLE XVI - MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 87
16.1. Additional Actions and Documents . . . . . . . . . . . . . . . . . 87
16.2. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
16.3. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
16.4. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
16.5. Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
16.6. Exercise of Rights . . . . . . . . . . . . . . . . . . . . . . . . 89
16.7. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . 89
16.8. Limitation on Benefits of this Agreement . . . . . . . . . . . . . 90
16.9. Limitation to Preserve REIT Status . . . . . . . . . . . . . . . . 90
16.10. Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . . . 91
16.11. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 91
16.12. Pronouns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
16.13. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
16.14. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 92
16.15. Execution in Counterparts. . . . . . . . . . . . . . . . . . . . . 92
ARTICLE XVII - EXECUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
-iv-
THIRD AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
U.S. RESTAURANT PROPERTIES OPERATING L.P.
(FORMERLY BURGER KING OPERATING LIMITED PARTNERSHIP)
This Third Amended and Restated Agreement of Limited Partnership (this
"Agreement") is entered into as of ________________, 1997, by and among QSV
Properties Inc., a Delaware corporation having its principal office at ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ , ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (the "Managing General
Partner") (or any other person or entity who shall in the future execute and
deliver this Agreement as a Substituted General Partner pursuant to the
provisions hereof), as the general partner (the "General Partner"), U.S.
Restaurant Properties Master L.P., a Delaware limited partnership having its
principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ (the "MLP") and U.S. Restaurant Properties, Inc., a Maryland
corporation having its principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (the "REIT" and, together with the MLP, the
"Limited Partners") (the General Partner and the Limited Partners sometimes
hereinafter referred to as a "Partner," individually, and as the "Partners,"
collectively).
WHEREAS, the Managing General Partner, the MLP and Burger King
Corporation, a Florida corporation ("BKC"), as the Special General Partner,
heretofore have entered into an Agreement of Limited Partnership dated as of
December 10, 1985;
WHEREAS, the Managing General Partner, the MLP and BKC amended and
restated such Agreement of Limited Partnership in its entirety as of January
6, 1986 and February 3, 1986, and further amended such Agreement of Limited
Partnership by Amendments No. 1 and 2 thereto through November 30, 1994;
WHEREAS, BKC withdrew as Special General Partner effective as of
November 30, 1994;
WHEREAS, the Managing General Partner and the MLP amended and restated
such Agreement of Limited Partnership in its entirety as of March 17, 1995
(the "Second Amended and Restated Agreement"); and
WHEREAS, the Partners desire to further amend and restate such Second
Amended and Restated Agreement in its entirety, as hereinafter set forth;
NOW THEREFORE, for and in consideration of the foregoing, and of the
covenants and agreements hereinafter set forth, it is hereby agreed as
follows:
ARTICLE I
CERTAIN DEFINITIONS
Unless the context otherwise specifies or requires, the terms defined in
this Article I shall, for the purposes of this Agreement, have the meanings
herein specified. Certain other capitalized terms used in this Agreement are
defined in Articles VI, VIII and XIII. Unless otherwise specified, all
references herein to Articles or Sections are to Articles or Sections of this
Agreement.
ACCOUNTING FIRM: The independent public accountants who are responsible
for assisting in maintaining the Partnership tax accounting and allocation
records and advising the Managing General Partner with respect thereto, as
selected and approved by the Managing General Partner from time to time, in
its sole and absolute discretion. The Accounting Firm and the Auditing Firm
are not required to be the same.
ADDITIONAL LIMITED PARTNER: Any Person who is admitted to the
Partnership as a Limited Partner pursuant to Sections 5.4 and 12.2 and who is
shown as such on the book and records of the Partnership.
ADJUSTED BASIS: The basis for determining gain or loss for federal
income tax purposes from the sale or other disposition of property, as
defined in Section 1011 of the Code.
ADJUSTED PROPERTY: Any property the Carrying Value of which has been
adjusted pursuant to Section 5.5(d)(i) or Section 5.5(d)(ii).
AFFILIATE: (a) Any Person (as hereinafter defined) directly or
indirectly owning, controlling, or holding power to vote ten percent (10%) or
more of the outstanding voting securities of the Person in question; (b) any
Person ten percent (10%) or more of whose outstanding voting securities are
directly or indirectly owned, controlled or held with power to vote by the
Person in question; (c) any Person directly or indirectly controlling,
controlled by, or under common control with the Person in question; (d) if
the Person in question is a corporation, any executive officer or director of
the Person in question or of any corporation directly or indirectly
controlling the Person in question; and (e) if the Person in question is a
partnership, any general partner owning or controlling ten percent (10%) or
more of either the capital or profits interests in such partnership. As used
in this definition of "Affiliate," the term "control" means 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.
AGREEMENT: This Third Amended and Restated Agreement of Limited
Partnership, as it may be further amended or supplemented from time to time.
- 2 -
AMENDED AGREEMENT: The Amended and Restated Agreement of Limited
Partnership of Burger King Operating Limited Partnership, dated as of
February 3, 1986, entered into by and among the Managing General Partner, BKC
and the MLP, as amended by Amendment Nos. 1 and 2 thereto.
ANCILLARY PROPERTY: Personal property (other than personal property
included in the definitions of "Other Restaurant Properties," "Restricted
Restaurant Properties" and "Retail Properties") of whatever kind used in
connection with a Partnership Property, including, without limitation,
supplies, furnishings, equipment, trade dress and franchise, license and
other rights.
APPRAISER: Real Estate Research Corporation or its successor, or in the
event that Real Estate Research Corporation is not available for any reason
to provide an appraisal with respect to any matter hereunder, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ and Company or its successor, or in the event that both Real Estate
Research Corporation or its successor and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and Company or its
successor are not available for any reason to provide an appraisal with
respect to any matter hereunder, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, Incorporated or its
successor, or in the event that all of the foregoing companies are not
available for any reason to provide an appraisal with respect to any matters
hereunder, such other independent, nationally recognized real estate
valuation firm selected by the Managing General Partner in its reasonable
discretion.
ASSIGNEE: A Person to whom one or more Partnership Units have been
transferred in a manner permitted under this Agreement, but who has not
become a Substituted Limited Partner, and who has the rights set forth in
Section 11.5.
AUDITING FIRM: The independent public accountants who are responsible
for auditing the financial statements of the Partnership as set forth in
Section 10.4, as selected and approved by the Managing General Partner from
time to time, in its sole and absolute discretion. The Auditing Firm and the
Accounting Firm are not required to be the same.
BKC: Burger King Corporation and the successors and assigns of Burger
King Corporation.
BKC FRANCHISE AGREEMENT: A franchise agreement, whether now existing or
hereafter entered into, between a BKC Franchisee and BKC authorizing the BKC
Franchisee to operate a BK Restaurant, as the same may be amended, renewed,
or extended by BKC.
BKC FRANCHISEES: Persons who operate BK Restaurants pursuant to BKC
Franchise Agreements.
BK RESTAURANTS: Burger King "fast food" restaurants, whether operated
by BKC, an Affiliate of BKC or a BKC Franchisee. "BK Restaurant" means any
one of the BK Restaurants.
- 3 -
BUSINESS DAY: Monday through Friday of each week, except that a legal
holiday recognized as such by the Government of the United States or the
State of Texas shall not be regarded as a Business Day.
CAPITAL ACCOUNT: The capital account established and maintained for
each Partner pursuant to Section 5.5.
CAPITAL CONTRIBUTION: Any property (including cash) contributed to the
Partnership by or on behalf of a Partner.
CARRYING VALUE: (a) With respect to a property contributed to the
Partnership, the fair market value of such property at the time of
contribution, reduced (but not below zero) by all deductions for
depreciation, amortization, cost recovery and expense in lieu of depreciation
debited to the Capital Accounts of Partners and Assignees pursuant to Section
5.5(a) with respect to such property as of the time of determination, and (b)
with respect to any other property, the Adjusted Basis of such property as of
the time of determination. The Carrying Value of any property shall be
adjusted from time to time in accordance with Sections 5.5(c) and 5.5(d), and
to reflect changes, additions or other adjustments to the Carrying Value for
dispositions, acquisitions or improvements of Partnership properties, as
deemed to be necessary or appropriate by the Managing General Partner.
CERTIFICATE OF LIMITED PARTNERSHIP: The Certificate of Limited
Partnership, and any and all amendments thereto, filed on behalf of the
Partnership with the Recording Office as required under the Delaware RULPA.
CODE: The Internal Revenue Code of 1986, as amended to date and
hereafter amended. Any reference herein to a specific section or sections of
the Code shall be deemed to include a reference to any corresponding
provision of future law.
COMMISSION: The Securities and Exchange Commission.
COMMON STOCK: The common stock, par value $.001 per share, of the REIT.
CONTRIBUTED PROPERTY: Each Contributing Partner's interest in each
property (or interest therein), or other consideration, in such form as may
be permitted by the Delaware RULPA, but excluding cash and cash equivalents,
contributed directly or indirectly to the Partnership by such Contributing
Partner (or deemed contributed to the Partnership upon termination thereof
pursuant to Section 708 of the Code). Once the Carrying Value of a
Contributed Property is adjusted pursuant to Section 5.5(d), such property
shall no longer constitute a Contributed Property for purposes of Section
6.3(b), but shall be deemed an Adjusted Property for such purposes.
CONTRIBUTING PARTNER: Each Partner contributing directly or indirectly
(or deemed to have contributed upon termination of the Partnership pursuant
to Section 708 of the Code) a Contributed Property to the Partnership in
exchange for a Partnership Interest.
- 4 -
CONVERSION FACTOR: 1.0, provided that in the event that the REIT (a)
declares or pays a dividend on its outstanding shares of Common Stock in
shares of Common Stock or makes a distribution to all holders of its
outstanding shares of Common Stock; (b) subdivides its outstanding shares of
Common Stock; or (c) combines its outstanding shares of Common Stock into a
smaller number of shares of Common Stock, the Conversion Factor shall be
adjusted by multiplying the Conversion Factor by a fraction, the numerator of
which shall be the number of shares of Common Stock issued and outstanding on
the record date for such dividend, distribution, subdivision or combination,
assuming for such purpose that such dividend, distribution, subdivision or
combination has occurred as of such time, and the denominator of which shall
be the actual number of shares of Common Stock (determined without the above
assumption) issued and outstanding on the record date for such dividend,
distribution, subdivision or combination. Any adjustment to the Conversion
Factor shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such event.
DELAWARE RULPA: The Delaware Revised Uniform Limited Partnership Act
(Del. Code ▇▇▇. tit. 6 Section 17-101 ET SEQ.), as amended to date and as it
may be amended from time to time hereafter, and any successor to such Act.
DEPARTING PARTNER: A General Partner who has withdrawn (other than by
reason of a transfer pursuant to Section 11.2) or been removed pursuant to
Section 13.1 as of the effective date of the withdrawal or removal of such
General Partner.
EFFECTIVE DATE: The date as of which the Managing General Partner and
the Limited Partners execute this Agreement.
EXCHANGE ACT: Securities Exchange Act of 1934, as amended, and the
regulations of the Commission promulgated thereunder.
FISCAL YEAR: The fiscal year of the Partnership for financial
accounting purposes, and for federal, state, and local income tax purposes,
which shall be the calendar year unless changed by the Managing General
Partner in accordance with Section 10.3.
GENERAL PARTNER INTEREST: A Partnership Interest held by a General
Partner, in its capacity as general partner of the Partnership. A General
Partner Interest may be expressed as a number of Partnership Units.
GENERAL PARTNERS: The Managing General Partner and any Substituted
General Partners. "General Partner" means one of the General Partners.
IMMEDIATE FAMILY: With respect to any natural Person, such natural
Person's spouse and such natural Person's natural or adoptive parents,
descendants (whether natural or adopted), nephews, nieces, brothers, sisters,
sons and daughters-in-law.
- 5 -
INCAPACITY OR INCAPACITATED: (a) As to any individual Partner, death,
total physical disability or entry by a court of competent jurisdiction
adjudicating him or her incompetent to manage his or her Person or his or her
estate; (b) as to any corporation which is a Partner, the filing of a
certificate of dissolution, or its equivalent, for the corporation or the
revocation of its charter; (c) as to any partnership which is a Partner, the
dissolution and commencement of winding up of the partnership; (d) as to any
estate which is a Partner, the distribution by the fiduciary of the estate's
entire interest in the Partnership; (e) as to any trustee of a trust which is
a Partner, the termination of the trust (but not the substitution of a new
trustee); or (f) as to any Partner, the bankruptcy of such Partner. For
purposes of this definition, bankruptcy of a Partner shall be deemed to have
occurred when (i) the Partner commences a voluntary proceeding seeking
liquidation, reorganization or other relief under any bankruptcy, insolvency
or other similar law nor or thereafter in effect, (ii) the Partner is
adjudged as bankrupt or insolvent, or a final and nonappealable order for
relief under any bankruptcy, insolvency or similar law now or thereafter in
effect has been entered against the Partner, (iii) the Partner executes and
delivers a general assignment for the benefit of the Partner's creditors,
(iv) the Partner files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against the Partner in
any proceeding of the nature described in clause (ii) above, (v) the Partner
seeks, consents to or acquiesces in the appointment of a trustee, receiver or
liquidator for the Partner or for all or any substantial part of the
Partner's properties, (vi) any proceeding seeking liquidation, reorganization
or other relief of or against such Partner under any bankruptcy, insolvency
or other similar law now or hereafter in effect has not been dismissed
without one hundred twenty (120) days after the commencement thereof, (vii)
the appointment without the Partner's consent or acquiescence of a trustee,
receiver or liquidator has not been vacated or stayed within ninety (90) days
of such appointment, or (viii) an appointment referred to in clause (g) which
has been stayed is not vacated within ninety (90) days after the expiration
of any such stay.
INDEPENDENT CONSULTANT: Agribusiness Associates, Inc., or in the event
Agribusiness Associates, Inc., is unable or unwilling to advise the Managing
General Partner on a particular matter or informs the Managing General
Partner that it no longer is willing to serve as Independent Consultant, or
in the event Agribusiness Associates, Inc., is terminated as the Independent
Consultant in accordance with Section 8.10(b), any substitute consultant
selected by the Managing General Partner in accordance with Section 8.10(b).
INITIAL PUBLIC OFFERING: The initial public offering of Units by the
MLP, completed on ________________.
INVESTORS PARTNERSHIP AGREEMENT: The third amended and restated limited
partnership agreement, dated concurrently herewith, pursuant to which the MLP
was organized and is existing, as it may be further amended or supplemented
from time to time.
LIMITED PARTNER INTEREST: A Partnership Interest of a Limited Partner
in the Partnership representing a fractional part of the Partnership
Interests of all Partners and includes any and all benefits to which the
holder of such a Partnership Interest may be entitled, as provided in this
- 6 -
Agreement, together with all obligations of such Persons to comply with the
terms and provisions of this Agreement. A Limited Partner Interest may be
expressed as a number of Partnership Units.
LIMITED PARTNERS: The MLP, the REIT and any Additional Limited
Partners. "Limited Partner" means any one of the Limited Partners.
LIQUIDATING TRUSTEE: The Managing General Partner, unless the
dissolution of the Partnership is caused by the withdrawal, bankruptcy,
removal or dissolution of the Managing General Partner, in which event the
Liquidating Trustee shall be the Person or Persons selected pursuant to
Section 14.5.
MAJORITY VOTE OF THE LIMITED PARTNERS: The written consent of, or an
affirmative vote by, in accordance with the provisions of Section 15.2,
Limited Partners (including the REIT) of record who are Limited Partners (and
not Assignees) with respect to more than fifty percent (50%) of the total
number of all outstanding Partnership Units held by all Limited Partners of
record, as Limited Partners (rather than as Assignees).
MANAGING GENERAL PARTNER: QSV, or any successor appointed pursuant to
Section 11.2, 13.1 or 14.3, as the case may be.
MLP: U.S. Restaurant Properties Master L.P., a Delaware limited
partnership (formerly Burger King Investors Master L.P.).
NASDAQ: The National Association of Securities Dealers Automated
Quotations System.
NATIONAL SECURITIES EXCHANGE: An exchange registered with the
Commission under Section 6(a) of the Exchange Act.
NONRECOURSE DEDUCTIONS: The meaning ascribed to it in Treasury
Regulations Section 1.704-2(b)(1).
NOTICE OF EXCHANGE: The Notice of Exchange substantially in the form of
EXHIBIT B to this Agreement.
OPINION OF INDEPENDENT COUNSEL: A written opinion of the law firm of
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C. or other counsel designated by or acceptable
to the Managing General Partner, in its sole and absolute discretion.
ORIGINAL AGREEMENT: The Agreement of Limited Partnership of Burger King
Operating Limited Partnership, dated as of December 10, 1985, entered into by
and among the Managing General Partner, BKC and the MLP.
- 7 -
OTHER RESTAURANT PROPERTIES: Those certain properties for which food
sales account for 10% or more of the gross revenues generated by the
improvements on such properties and (a) properties (regardless of use)
acquired adjacent to such properties or acquired in conjunction with the use
or ownership of such properties, (b) properties that were formerly such type
of properties which are not currently being used for any purpose, and (c) any
unimproved land which is adjacent to such a property or on which such a
property is reasonably expected to be constructed within one (1) year
following the date of acquisition of such land, in any case in which the
Partnership, the REIT or any Affiliate or either of them has acquired or
acquires an interest, whether consisting of land to be held in fee simple or
as a leasehold and any improvements thereon (including all real property and
certain personal property associated therewith), together with (i) any other
properties acquired pursuant to Section 7.2(v) with respect to such
properties, (ii) any properties adjacent to such properties, (iii) any
buildings, improvements or other structures situated on such properties, and
(iv) any further right, title or interest acquired in such properties.
"Other Restaurant Property" means any one of the Other Restaurant Properties.
PARTNER: A General Partner or Limited Partner. "Partners" means the
General Partners and the Limited Partners.
PARTNER MINIMUM GAIN: The meaning ascribed to it in Treasury
Regulations Section 1.704-2(i)(2).
PARTNER NONRECOURSE DEBT: The meaning ascribed to it in Treasury
Regulations Section 1.704-2(b)(4).
PARTNER NONRECOURSE DEDUCTIONS: The meaning ascribed to it in Treasury
Regulations Section 1.704-2(i)(2).
PARTNERSHIP: The limited partnership created by this Agreement and any
successor partnership thereto continuing the business of the Partnership
which is a reformation or reconstitution of the partnership governed by this
Agreement.
PARTNERSHIP ASSETS: All assets and property, whether tangible or
intangible and whether real, personal or mixed, at any time owned by the
Partnership.
PARTNERSHIP INTEREST: As to any Partner, all of the interests of that
Partner in the Partnership, including, without limitation, such Partner's (a)
right to a distributive share of the profits and losses of the Partnership,
(b) right to a distributive share of Partnership Assets, and (c) right, if a
General Partner, to participate in the management of the business and affairs
of the Partnership.
PARTNERSHIP MINIMUM GAIN: The meaning ascribed to it in Treasury
Regulations Section 1.704-2(b)(2).
- 8 -
PARTNERSHIP PROPERTIES: The Other Restaurant Properties, the Restricted
Restaurant Properties and the Retail Properties. "Partnership Property"
means any one of the Partnership Properties.
PARTNERSHIP UNITS: Fractional shares of the Partnership Interests of
all Partners issued pursuant to Sections 5.1, 5.2 and 5.3. "Partnership
Unit" means any one of the Partnership Units.
PERCENTAGE INTEREST: As to a Partner, its interest in the Partnership
as determined by dividing the Partnership Units owned by such Partner by the
total number of Partnership Units then outstanding and as specified in
EXHIBIT A attached hereto, as such EXHIBIT A may be amended from time to
time.
PERSON: Any individual, corporation, association, partnership, joint
venture, trust, estate, or other entity or organization.
PRICE INDEX: The Consumer Price Index for Urban Wage Earners and
Clerical Workers, all items, All Urban, Base 1967 = 100, issued by the Bureau
of Labor Statistics of the U.S. Department of Labor; provided, however, that
if such Consumer Price Index shall be discontinued with no successor or
comparable consumer price index, the Managing General Partner, in its sole
and absolute discretion, shall designate a substitute formula.
PRIMARY LEASE: A lease, whether now existing or hereafter entered into,
pursuant to which the Partnership, as the lessee (either in its own name or
as an assignee of BKC pursuant to the Real Estate Purchase Agreement or
otherwise), holds the right to occupy and use a Partnership Property or any
portion thereof.
QSV: QSV Properties Inc., a Delaware corporation.
REAL ESTATE PURCHASE AGREEMENT: The amended and restated Purchase and
Sale Agreement entered into concurrently with the execution of the Amended
Agreement by and between the Partnership, as purchaser, and BKC, as seller,
pursuant to which the Partnership purchased from BKC, and BKC sold to the
Partnership, certain of the Partnership Properties.
RECAPTURE INCOME: Any gain recognized by the Partnership (but computed
without regard to any adjustment required by Section 734 or 743 of the Code)
upon the disposition of any property or asset of the Partnership that does
not constitute capital gain for federal income tax purposes because such gain
represents the recapture of deductions previously taken with respect to such
property or assets (determined without regard to Section 291(a)(1)) of the
Code.
RECORDING OFFICE: The Secretary of State of the State of Delaware.
REIT: U.S. Restaurant Properties, Inc., a Maryland corporation.
- 9 -
REIT PARTNER: (a) A Partner that is, or has made an election to qualify
as, a real estate investment trust under the Code, (b) any "qualified REIT
subsidiary" (within the meaning of Section 856(i)(2) of the Code) of any
Partner that is, or has made an election to qualify as, a real estate
investment trust under the Code and (c) any Partner that is a "qualified REIT
subsidiary" (within the meaning of Section 856(i)(2) of the Code) of a real
estate investment trust.
REIT STOCK AMOUNT: A number of shares of Common Stock equal to the
product of the number of Partnership Units offered for exchange by a Partner,
multiplied by the Conversion Factor, provided that in the event the REIT
issues to all holders of Common Stock rights, options, warrants or
convertible or exchangeable securities entitling the stockholders to
subscribe for or purchase shares of Common Stock, or any other securities or
property (collectively, the "rights"), then the REIT Stock Amount shall also
include such rights that a holder of that number of shares of Common Stock
would be entitled to receive.
RESTRICTED RESTAURANT PROPERTIES: Those certain restaurant properties,
consisting of the land in which the Partnership holds fee simple title or a
leasehold interest and the improvements thereon (including all real property
and certain personal property associated therewith), (a) held as of the
Effective Date or (b) if (and so long as) a BK Restaurant is located thereon,
acquired after the Effective Date, together with (i) any other properties
acquired pursuant to Section 7.2(v) with respect to such properties after the
Effective Date, (ii) any properties adjacent to such properties that are
acquired by the Partnership after the Effective Date, (iii) any buildings,
improvements or other structures situated on such properties after the
Effective Date, and (iv) any further right, title or interest acquired in
such properties after the Effective Date (including, without limitation, fee
title acquired pursuant to Section 8.12). "Restricted Restaurant Property"
means any one of the Restricted Restaurant Properties.
RETAIL PROPERTIES: Those certain properties, other than Other
Restaurant Properties and Restricted Restaurant Properties, for which the
sales of goods or services to the public account for substantially all of the
gross revenues generated by the improvements on such properties and (a)
properties (regardless of use) acquired adjacent to such properties or
acquired in conjunction with the use or ownership of such properties, (b)
properties that were formerly such type of properties which are not currently
being used for any purpose, and (c) any unimproved land which is adjacent to
such a property or on which such a property is reasonably expected to be
constructed within one (1) year following the date of acquisition of such
land, in any case in which the Partnership, the REIT or any Affiliate of
either of them has acquired or acquires an interest, whether consisting of
land to be held in fee simple or as a leasehold and any improvements thereon
(including all real property and certain personal property associated
therewith), together with (i) any other properties acquired pursuant to
Section 7.2(v) with respect to such properties, (ii) any properties adjacent
to such properties, (iii) any buildings, improvements or other structures
situated on such properties, and (iv) any further right, title or interest
acquired in such properties. "Retail Property" means any one of the Retail
Properties.
- 10 -
SECOND AMENDED AND RESTATED AGREEMENT: The Second Amended and Restated
Agreement of Limited Partnership of U.S. Restaurant Properties Operating
L.P., dated as of March 17, 1995, by and between QSV Properties, Inc. and
U.S. Restaurant Properties Master L.P.
SECOND PUBLIC OFFERING: The public offering of Units by the MLP
completed in __________________, 1995.
SECTION 754 ELECTION: An election under Section 754 of the Code
relating to the adjustment of Adjusted Basis of Partnership Assets, as
provided in Sections 734 and 743 of the Code.
SECURITIES ACT: Securities Act of 1933, as amended, and the regulations
of the Commission promulgated thereunder.
SHARE PRICE: As of any date of determination: (a) if the shares of
Common Stock are listed or admitted to trading on one or more National
Securities Exchanges, the average of the last reported sale prices per share
regular way or, in case no such reported sale takes place on any such day,
the average of the last reported bid and asked prices per share regular way,
in either case on the principal National Securities Exchange on which the
shares of Common Stock are listed or admitted to trading, for the five (5)
trading days immediately preceding the date of determination; (b) if the
shares of Common Stock are not listed or admitted to trading on a National
Securities Exchange but are quoted by Nasdaq, the average of the last
reported sales prices per share regular way or, in case no reported sale
takes place on any such day or the last reported sales prices are not then
quoted, the average of the closing bid prices per share, for the five (5)
trading days immediately preceding such date of determination, as furnished
by the National Quotation Bureau Incorporated or such other nationally
recognized quotation service as may be selected by the Managing General
Partner for such purpose, if such Bureau is not at the time furnishing
quotations; or (c) if the shares of Common Stock are not listed or admitted
to trading on a National Securities Exchange or quoted by Nasdaq, an amount
equal to the fair market value of a share as of such date of determination,
as determined by the Managing General Partner using any reasonable method of
valuation.
SPECIAL ALLOCATIONS: The special allocations of items of income, gain,
deduction and loss pursuant to Sections 6.2(c) and (d).
SUBSTITUTED GENERAL PARTNER: A Person who is admitted to the
Partnership as an additional or successor General Partner in accordance with
Section 12.1.
SUBSTITUTED LIMITED PARTNER: A Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 11.4.
SUCCESSOR POLICY: The "successor policy" of BKC relating to the
extension and/or renewal of BKC Franchise Agreements with BKC Franchisees,
which policy, in connection with such extensions and/or renewals, makes
provision for replacing, reconstructing, expanding and/or
- 11 -
otherwise improving BK Restaurants. All references are to the "Successor
Policy" as in effect on the date hereof, as the same may be modified,
amended, supplemented, superseded or replaced by BKC from time to time in its
sole and absolute discretion.
TERMINATION DATE: December 31, 2035.
THIRD PUBLIC OFFERING: The public offering of Units by the MLP
completed in June 1996.
TPC: The Pillsbury Company, a Delaware corporation and the owner on the
date of the Amended Agreement of all of the issued and outstanding stock of
BKC.
TREASURY REGULATIONS: The Income Tax Regulations promulgated under the
Code, as hereafter amended. Any reference herein to a specific section or
sections of specific Treasury Regulations shall be deemed to include a
reference to any corresponding provision of future Treasury Regulations.
UNIT: A unit representing an equal undivided interest in an interest in
the MLP.
UNIT PRICE: As of any date of determination: (a) if the Units are
listed or admitted to trading on one or more National Securities Exchanges,
the average of the last reported sale prices per Unit regular way or, in case
no such reported sale takes place on any such day, the average of the last
reported bid and asked prices per Unit regular way, in either case on the
principal National Securities Exchange on which the Units are listed or
admitted to trading, for the five (5) trading days immediately preceding the
date of determination; (b) if the Units are not listed or admitted to trading
on a National Securities Exchange but are quoted by Nasdaq, the average of
the last reported sales prices per Unit regular way or, in case no reported
sale takes place on any such day or the last reported sales prices are not
then quoted, the average of the closing bid prices per Unit, for the five (5)
trading days immediately preceding such date of determination, as furnished
by the National Quotation Bureau Incorporated or such other nationally
recognized quotation service as may be selected by the Managing General
Partner for such purpose, if such Bureau is not at the time furnishing
quotations; or (c) if the Units are not listed or admitted to trading on a
National Securities Exchange or quoted by Nasdaq, an amount equal to the fair
market value of a Unit as of such date of determination, as determined by the
Managing General Partner using any reasonable method of valuation.
UNREALIZED GAIN: The excess, if any, of the fair market value of a
Partnership Asset as of the date of determination over the Carrying Value of
the Partnership Asset as of such date of determination.
UNREALIZED LOSS: The excess, if any, of the Adjusted Basis of a
Partnership Asset as of the date of determination over the fair market value
of such Partnership Asset as of the date of determination.
- 12 -
WORKING CAPITAL RESERVE: The reserve for working capital established by
the Managing General Partner pursuant to Section 7.5.
ARTICLE II
FORMATION; NAME; PLACE OF BUSINESS
2.1. FORMATION OF PARTNERSHIP; CERTIFICATE OF LIMITED PARTNERSHIP.
The General Partner and the Limited Partners agreed to continue the limited
partnership formed as of December 10, 1985, pursuant to the provisions of the
Delaware RULPA and the terms and conditions of the Original Agreement, the
Amended Agreement and the Second Amended and Restated Agreement. Promptly after
the execution of the Original Agreement, the Managing General Partner, in
accordance with the Delaware RULPA, filed with the Recording Office the
Certificate of Limited Partnership. Subsequently, the Managing General Partner,
in accordance with the Delaware RULPA, filed with the Recording Office an
amendment to the Certificate of Limited Partnership regarding the withdrawal of
BKC as the Special General Partner and the change in name of the Partnership.
If the laws of any jurisdiction in which the Partnership transacts business so
require, the Managing General Partner also shall file with the appropriate
office in that jurisdiction a copy of the Certificate of Limited Partnership and
any other documents necessary for the Partnership to qualify to transact
business in such jurisdiction and shall use its best efforts to file with the
appropriate office in that jurisdiction a copy of the Certificate of Limited
Partnership and any other documents necessary to establish and maintain the
Limited Partner's limited liability in such jurisdiction. The Partners further
agree and obligate themselves to execute, acknowledge and cause to be filed for
record, in the place or places and manner prescribed by law, any amendments to
the Certificate of Limited Partnership as may be required, either by the
Delaware RULPA, by the laws of a jurisdiction in which the Partnership transacts
business, or by this Agreement, to reflect changes in the information contained
therein or otherwise to comply with the requirements of law for the
continuation, preservation and operation of the Partnership as a limited
partnership under the Delaware RULPA.
2.2. NAME OF PARTNERSHIP.
The name under which the Partnership shall conduct its business is U.S.
Restaurant Properties Operating L.P. The business of the Partnership may be
conducted under any other name deemed necessary or desirable by the Managing
General Partner, in its sole and absolute discretion, except that such other
name may not include the surname of any Limited Partner unless such surname is
also the name or surname of the Managing General Partner. The words "Limited
Partnership" shall be included in the name of the Partnership where necessary
for complying with the laws of any jurisdiction that so requires. The Managing
General Partner (and, if necessary, all other General Partners) promptly shall
execute, file and record any assumed or fictitious name certificates required by
the laws of Delaware or any other state in which the Partnership transacts
business, and shall publish such certificates or other statements or
- 13 -
certificates as are required by the laws of Delaware or any other state in which
the Partnership transacts business.
2.3. PLACE OF BUSINESS.
The principal place of business of the Partnership on the date hereof is
located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. The Managing
General Partner may hereafter change the principal place of business of the
Partnership to such other place or places within the United States as the
Managing General Partner may determine from time to time, in its sole and
absolute discretion, provided that the Managing General Partner shall, if
necessary, amend the Certificate of Limited Partnership in accordance with
applicable requirements of the Delaware RULPA. The Managing General Partner
may, in its sole and absolute discretion, establish and maintain such other
offices and additional places of business of the Partnership, either within or
without the State of Delaware, as it deems appropriate.
2.4. REGISTERED OFFICE AND REGISTERED AGENT.
The street address of the registered office of the Partnership shall
be at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the Partnership's
registered agent at such address shall be The Corporation Trust Company.
2.5. POWER OF ATTORNEY.
Each Limited Partner (including any additional or Substituted Limited
Partner) and each Assignee who accepts Partnership Units is deemed to
irrevocably constitute, appoint and empower the Managing General Partner (and
any successor by merger, transfer, election or otherwise), and each of the
Managing General Partner's authorized officers and attorneys-in-fact, with full
power of substitution, as the true and lawful agent and attorney-in-fact of such
Limited Partner or Assignee, with full power and authority in such Limited
Partner's or Assignee's name, place and stead and for such Limited Partner's or
Assignee's use of benefit to make, execute, verify, consent to, swear to,
acknowledge, make oath as to, publish, deliver, file and/or record in the
appropriate public offices (a) all certificates and other instruments,
including, at the option of the Managing General Partner, this Agreement and the
Certificate of Limited Partnership and all amendments and restatements thereof,
that the Managing General Partner deems appropriate or necessary to qualify, or
continue the qualification of, the Partnership as a limited partnership (or a
partnership in which the Limited Partners have limited liability) in the State
of Delaware and all jurisdictions in which the Partnership may or may intend to
conduct business or own property; (b) all other certificates, instruments and
documents as may be required by, or may be appropriate under, the laws of any
state or other jurisdiction in which the Partnership may or may intend to
conduct business or own property; (c) all instruments that the Managing General
Partner deems appropriate or necessary to reflect any amendment, change or
modification of this Agreement in accordance with the terms hereof; (d) all
conveyances and other instruments or documents that the Managing General Partner
deems appropriate or necessary to effectuate or reflect the dissolution,
termination, and liquidation of the Partnership pursuant to the terms of this
- 14 -
Agreement; (e) any and all financing statements, continuation statements,
mortgages or other documents necessary to grant to or perfect for secured
creditors of the Partnership, including the General Partners and Affiliates, a
security interest, mortgage, pledge or lien on all or any of the Partnership
Assets; (f) all instrument or papers required to continue the business of the
Partnership pursuant to Article XIV; (g) all instruments (including this
Agreement and the Certificate of Limited Partnership and amendments and
restatements thereof) relating to the admission of any Partner pursuant to
Article XI; and (h) all other instruments as the attorneys-in-fact or any one of
them may deem necessary or advisable to carry out fully the provisions of this
Agreement in accordance with its terms. The execution and delivery by any of
said attorneys-in-fact of any such agreements, amendments, consents,
certificates or other instruments shall be conclusive evidence that such
execution and delivery was authorized hereby.
Nothing herein contained shall be construed as authorizing any Person
acting as attorney-in-fact pursuant to this Section 2.5 to take action as a
attorney-in-fact for any Limited Partner or Assignee to increase in any way the
liability of such Limited Partner or Assignee beyond the liability expressly set
forth in this Agreement, or to amend this Agreement except in accordance with
Article XV.
The appointment by each Limited Partner and Assignee of the Persons
designated in this Section 2.5 as attorneys-in-fact shall be deemed to be a
power of attorney coupled with an interest in recognition of the fact that each
of the Limited Partners and Assignees under this Agreement will be relying upon
the power of such Persons to act pursuant to this power of attorney for the
orderly administration of the affairs of the Partnership. The foregoing power
of attorney is hereby declared to be irrevocable, and it shall survive, and
shall not be affected by, the subsequent Incapacity or termination of any
Limited Partner or Assignee and it shall extend to such Limited Partner's or
Assignee's heirs, successors and assigns. Each Limited Partner and Assignee
hereby agrees to be bound by any representations made by any Person acting as
attorney-in-fact pursuant to this power of attorney in accordance with this
Agreement. Each Limited Partner and Assignee hereby waives any and all defenses
that may be available to contest, negate or disaffirm the action of any Person
taken as attorney-in-fact under this power of attorney in accordance with this
Agreement. Each Limited Partner and Assignee shall execute and deliver to the
Managing General Partner, within fifteen (15) days after receipt of the Managing
General Partner's request therefor, all such further designations, powers of
attorney and other instruments as the Managing General Partner deems necessary
to effectuate this Agreement and the purposes of the Partnership.
- 15 -
ARTICLE III
PURPOSES, NATURE OF BUSINESS,
AND POWERS OF PARTNERSHIP
3.1. PURPOSES AND BUSINESS.
The purposes of the Partnership shall be (a) to invest in, acquire, own,
hold a leasehold interest in, manage, maintain, operate, lease, sublease,
improve, finance, reconstruct, sell, exchange, franchise and otherwise dispose
of Partnership Properties and Ancillary Property, whether itself, through other
Persons or otherwise; (b) to originate loans secured by liens on real estate;
and (c) to enter into any lawful transaction and engage in any lawful activities
in furtherance of the foregoing purposes; provided, however, that such business
arrangements and interests may be limited to and conducted in such a manner so
as to permit any REIT Partner at all times to be classified as a real estate
investment trust under the Code.
3.2. POWERS.
The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described herein and
for the protection and benefit of the Partnership, including, without
limitation, the following:
(a) To borrow money and issue evidences of indebtedness, and to secure
the same by mortgages, deeds of trust, security interests, pledges or other
liens on all or any part of the Partnership Assets;
(b) To secure and maintain insurance against liability or other loss
with respect to the activities and assets of the Partnership (including, without
limitation, insurance against liabilities under Section 7.10);
(c) To employ or retain such persons as may be necessary or appropriate
for the conduct of the Partnership's business, including permanent, temporary or
part-time employees and independent attorneys, accountants, consultants and
contractors;
(d) To acquire, own, hold a leasehold interest in, maintain, use,
lease, sublease, manage, operate, sell, exchange, transfer or otherwise deal in
assets and property as may be necessary or convenient for the purposes and
business of the Partnership;
(e) To incur expenses and to enter into, guarantee, perform and carry
out contracts or commitments of any kind, to assume obligations and to execute,
deliver, acknowledge and file documents in furtherance of the purposes and
business of the Partnership;
- 16 -
(f) To pay, collect, compromise, arbitrate, litigate or otherwise
adjust, contest or settle any and all claims or demands of or against the
Partnership;
(g) To invest in interest-bearing accounts and short-term investments,
including, without limitation, obligations of Federal, state and local
governments and their agencies, mutual funds (including money market funds),
commercial paper, time deposits and certificates of deposit of commercial banks,
savings banks or savings and loan associations;
(h) To originate loans secured by liens on real estate; and
(i) To engage in any kind of activity and to enter into and perform
obligations of any kind necessary to or in connection with, or incidental to,
the accomplishment of the purposes and business of the Partnership, so long as
said activities and obligations may be lawfully engaged in or performed by a
limited partnership under the Delaware RULPA.
ARTICLE IV
TERM OF PARTNERSHIP
4.1. TERM.
The Partnership commenced on the date upon which the Certificate of
Limited Partnership was duly filed with the Recording Office pursuant to
Section 2.1 and shall continue until the Termination Date unless dissolved
and liquidated before the Termination Date in accordance with the provisions
of Article XIV.
ARTICLE V
CAPITAL
5.1. CAPITAL CONTRIBUTIONS OF THE PARTNERS.
The Partners have made the Capital Contributions as set forth in
EXHIBIT A attached to this Agreement. Each Partner shall own Partnership
Units in the amount set forth for such Partner in EXHIBIT A, as the same may
be amended from time to time, and shall have a Percentage Interest in the
Partnership as set forth in EXHIBIT A, as the same may be amended from time
to time, which Percentage Interest shall be adjusted in EXHIBIT A from time
to time by the General Partner to the extent necessary to reflect accurately
sales, exchanges or other transfers, redemptions, Capital Contributions, the
issuance of additional Partnership Units, or similar events having an effect
on a Partner's Percentage Interest. Except as provided by law, Sections 5.2
and 10.10, the Partners shall have no obligation or right to make any
additional Capital Contributions or loans to the Partnership. To the extent
the Partnership acquires any property by the merger of any other Person into
the Partnership, Persons who receive Partnership Interests in exchange for
their interests in the Person merging into the Partnership shall become
- 17 -
Partners and shall be deemed to have made Capital Contributions as provided
in the applicable merger agreement and as set forth in EXHIBIT A, as amended
to reflect such Capital Contributions. The number of Partnership Units held
by the General Partner, in its capacity as general partner (equal to one
percent (1%) of all outstanding Partnership Units from time to time), shall
be deemed to be the General Partner Interest.
5.2. ADDITIONAL ISSUANCES OF PARTNERSHIP INTERESTS AND CAPITAL
CONTRIBUTIONS.
(a) The Managing General Partner is hereby authorized to cause the
Partnership from time to time to issue to Partners (including the Managing
General Partner) or other persons (including, without limitation, in connection
with the contribution of property to the Partnership) additional Partnership
Interests in one or more classes, or one or more series of any of such classes,
with such designations, preferences and relative, participating, optional or
other special rights, powers and duties, including rights, powers and duties
senior to Limited Partner Partnership Interests, all as shall be determined by
the Managing General Partner in its sole and absolute discretion subject to
Delaware law, including, without limitation, (i) the allocations of items of
Partnership income, gain, loss, deduction and credit to each such class or
series of Partnership Interests; (ii) the right of each such class or series of
Partnership Interests to share in Partnership distributions; and (iii) the
rights of each such class or series of Partnership Interests upon dissolution
and liquidation of the Partnership; provided that no such additional Partnership
Interests shall be issued to the MLP or the REIT unless either (A)(1) the
additional Partnership Interests are issued in connection with the grant, award
or issuance of Units or shares of capital stock of the REIT, which Units or
shares have designations, preferences and other rights such that the economic
interests attributable to such Units or shares are substantially similar to the
designations, preferences and other rights of the additional Partnership
Interests issued to the MLP or the REIT in accordance with this Section 5.4(a)
and (2) the MLP or the REIT shall make a Capital Contribution to the Partnership
in an amount equal to the proceeds, if any, raised in connection with the
issuance of such Units or shares of capital stock, or (B) the additional
Partnership Interests are issued to all Partners in proportion to their
respective Percentage Interests (as defined in Article VI).
(b) After the Effective Date, neither the MLP nor the REIT shall grant,
award or issue any additional Units or shares of capital stock, or rights,
options, warrants or convertible or exchangeable securities containing the right
to subscribe for or purchase such Units or shares of capital stock (collectively
"New Securities"), other than to all holders of such Units or shares of capital
stock unless (i) the Managing General Partner shall cause the Partnership to
issue to the MLP or the REIT Partnership Interests or rights, options, warrants
or convertible or exchangeable securities of the Partnership having
designations, preferences and other rights, all such that the economic interests
are substantially the same as those of the New Securities, and (ii) the MLP or
the REIT makes a Capital Contribution to the Partnership of the proceeds from
the grant, award or issuance of such New Securities and from the exercise of
rights contained in such New Securities. Without limiting the foregoing, the
MLP and the REIT are expressly authorized to issue New Securities for less than
fair market value, and the Managing General Partner is expressly authorized to
cause the Partnership to issue to the MLP and the REIT corresponding
- 18 -
Partnership Interests, so long as (A) the Managing General Partner concludes
in good faith that such issuance is in the interests of the Managing General
Partner and the Partnership (for example, and not by way of limitation, the
issuance of shares of Common Stock and corresponding Partnership Units
pursuant to an employee stock purchase plan providing for employee purchases
of shares of Common Stock at a discount from fair market value or employee
stock options that have an exercise price that is less than the fair market
value of the Common Stock, either at the time of issuance or at the time of
exercise), and (B) the MLP and the REIT makes a Capital Contribution to the
Partnership of all proceeds from such issuance and exercise.
5.3. CONTRIBUTION OF PROCEEDS OF ISSUANCE OF COMMON STOCK.
In connection with the initial public offering of Common Stock by the
REIT and any other issuance of Common Stock or New Securities pursuant to
Section 5.2, the REIT shall contribute to the Partnership any proceeds (or a
portion thereof) raised in connection with such issuance; provided that if
the proceeds actually received by the REIT are less than the gross proceeds
of such issuance as a result of any underwriter's discount or other expenses
paid or incurred in connection with such issuance, then the REIT shall be
deemed to have made a Capital Contribution to the Partnership in the amount
equal to the sum of the net proceeds of such issuance plus the amount of such
underwriter's discount and other expenses paid by the Company (which discount
and expense shall be treated as an expense for the benefit of the Partnership
for purposes of Section 9.4). In the case of employee purchases of New
Securities at a discount from fair market value, the amount of such discount
representing compensation to the employee, as determined by the Managing
General Partner, shall be treated as an expense of the issuance of such New
Securities.
5.4. EXCHANGE OF UNITS.
(a) Subject to Section 5.4(b), on or after the date hereof, each
Limited Partner (other than the REIT) shall have the right (the "Exchange
Right") to require the REIT to acquire all or a portion of the Partnership
Units held by such Limited Partner in exchange for the REIT Stock Amount.
The Exchange Right shall be exercised pursuant to a Notice of Exchange
delivered to the REIT (with a copy to the Partnership) by the Limited Partner
who is exercising the Exchange Right (the "Exchanging Partner"). A Limited
Partner may not exercise the Exchange Right for fewer than one thousand
(1,000) Partnership Units or, if such Limited Partner holds fewer than one
thousand (1,000) Partnership Units, all of the Partnership Units held by such
Partner. The Exchanging Partner shall have no right, with respect to any
Partnership Units so exchanged, to receive any distributions paid with
respect to the Partnership Units on or after the date of the Notice of
Exchange. The Assignee of any Limited Partner may exercise the rights of
such Limited Partner pursuant to this Section 5.4(a), and such Limited
Partner shall be deemed to have assigned such rights to such Assignee and
shall be bound by the exercise of such rights by such Assignee. In
connection with any exercise of such rights by an Assignee on behalf of a
Limited Partner, the REIT Stock Amount shall be paid by the REIT directly to
such Assignee and not to such Limited Partner.
- 19 -
(b) Notwithstanding the provisions of Section 5.4(a), a Partner
shall not be entitled to exercise the Exchange Right pursuant to Section
5.4(a) if the delivery of shares of Common Stock to such Partner by the REIT
pursuant to Section 5.4(a) would be prohibited under the Amended Articles of
Incorporation of the REIT.
5.5. MINIMUM PERCENTAGE INTEREST OF GENERAL PARTNER.
The provisions of Sections 5.2 and 5.3 shall be applied so that in
all events the Percentage Interest of the General Partners shall be equal to
at least 1.00%. In the event the issuance of additional Partnership
Interests pursuant to Section 5.2 would (but for this Section 5.5) have the
effect of reducing the Percentage Interest of the General Partners to less
than 1.00%, the REIT shall transfer Partnership Units to the General Partners
(and, as of the effective date of such issuance, the REIT shall be deemed to
hold Partnership Units for the benefit of the General Partners) to the extent
necessary to cause the General Partners' Percentage Interest, after giving
effect to such issuance, to be equal to at least 1.00%. In the event any
additional Capital Contributions are to be made or deemed made to the
Partnership by the General Partner and the REIT pursuant to Section 5.2 or
5.3, such additional Capital Contributions or deemed Capital Contributions
shall be allocated between the General Partner and the REIT in the amounts
necessary to cause the General Partners' Percentage Interest, after giving
effect to such Capital Contributions, to be equal to at least 1.00%.
5.6. NO PREEMPTIVE RIGHTS.
No Person shall have any preemptive, preferential or other similar
right with respect to (a) additional Capital Contributions or loans to the
Partnership; or (b) issuance or sale of any Partnership Units or other
Partnership Interests.
5.7. CAPITAL ACCOUNTS.
(a) A separate Capital Account shall be established and maintained
for each Partner. The Capital Account of each Partner and Assignee shall be
(i) credited with (A) the cash and the initial Carrying Value of any property
(net of liabilities secured by such Contributed Property that the Partnership
is considered to assume or take subject to under Section 752 of the Code)
contributed to the Partnership by such Partner or Assignee, and (B) all items
of Partnership income or gain (including income or gain exempt from tax)
computed in accordance with Section 5.7(b) and allocated to such Partner
pursuant to Article VI, and shall be (ii) debited with (A) all items of
Partnership deduction and loss computed in accordance with Section 5.7(b) and
allocated to such Partner pursuant to Article VI, and (B) all cash and the
fair market value of any property (net of liabilities secured by such
distributed property that such Partner is considered to assume or take
subject to under Section 752 of the Code) distributed by the Partnership to
such Partner or Assignee pursuant to Article VI. Notwithstanding anything to
the contrary contained herein, the Capital Account of a Partner or Assignee
shall be determined in all events solely in accordance with the rules set
forth in Treasury Regulations Section 1.704-1(b)(2)(iv), as the same may be
amended or revised from time to time. Any references in this Agreement to
the Capital
- 20 -
Account of a Partner or Assignee 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 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 (including any method of depreciation, cost recovery or
amortization used for this purpose), provided that:
(i) In accordance with the requirements of Treasury Regulations
Section 1.704-1(b)(2)(iv)(g), any deductions for depreciation, cost
recovery or amortization, attributable to a Partnership Asset
contributed to the Partnership, shall be determined as if the Adjusted
Basis of such Partnership Asset on the date it was acquired by the
Partnership were equal to the Carrying Value of such Partnership Asset
as of such date. Upon an adjustment pursuant to Section 5.7(d) to the
Carrying Value of any Partnership property subject to depreciation, cost
recovery or amortization, any further deductions for such depreciation,
cost recovery or amortization attributable to such property shall be
determined (A) as if the Adjusted Basis of such property were equal to
the Carrying Value of such property immediately following such
adjustment and (B) using a predetermined rate of depreciation, cost
recovery or amortization derived from the same method for useful life
as is applied for federal income tax purposes. As a result, the amount
of depreciation, cost recovery or amortization deductions computed for
purposes of this Section 5.7(b) with respect to any Adjusted Property
shall bear the same relationship to the Carrying Value of such property
as the depreciation, cost recovery or amortization computed for federal
income tax purposes with respect to such property bears to the Adjusted
Basis of such property. Solely for the purposes of this Section 5.7(b),
depreciation, cost recovery or amortization deductions with respect to
property with an Adjusted Basis of zero shall. be at the rate which
would apply for tax purposes if (1) in the case of Contributed Property,
such property were placed in service on the date contributed, and (2) in
the case of Adjusted Property, such property were placed in service on
the date of adjustment required pursuant to Section 5.7(d)(i) or
5.7(d)(ii), provided that if such Adjusted Property was Contributed
Property, which was contributed with the tax basis of zero and such
property is not fully depreciated for Capital Account purposes at the
day of the adjustment, all deductions for depreciation, cost recovery
or amortization of such property shall be derived from the method and
useful life theretofore determined pursuant to clause (1) above;
(ii) Any income, gain or loss attributable to the taxable
disposition of any Partnership Asset shall be determined by the
Partnership as if the Adjusted Basis of such Partnership Asset as of
such date of disposition were equal in amount to the Partnership's
Carrying Value with respect to such Partnership Asset as of such date;
(iii) If the Partnership's Adjusted Basis in any depreciable
property is reduced pursuant to Section 48(q) of the Code, then the
amount of such reduction shall be treated
- 21 -
as an expense for the year in which such reduction occurs and allocated
to the Partners in the ratio in which depreciation with respect to such
property is allocable. Any restoration of any such reduction in
Adjusted Basis shall be allocated to the Partners to whom the expense
was chargeable;
(iv) Immediately prior to the distribution of any Partnership
Asset, any Unrealized Gain or Unrealized Loss attributable to such
Partnership Asset shall, for purposes hereof, be deemed to be gain or
loss recognized by the Partnership and shall be allocated among the
Partners in accordance with Article VI. In determining such Unrealized
Gain or Unrealized Loss, the fair market value of such Partnership Asset
shall be determined pursuant to Section 8.8;
(v) All fees and other expenses incurred (or treated as
incurred) by the Partnership to promote the sale of (or to sell)
interests in the Partnership that can neither be deducted nor amortized
under Section 709 of the Code shall, for purposes of Capital Account
maintenance, be treated as an item of deduction and shall be allocated
among the Partners pursuant to Article VI; and
(vi) Except as otherwise provided in Treasury Regulations
Section 1.707-1(b)(2)(iv)(m), the computation of all items of income,
gain, loss, and deduction shall be made without regard to any Section
754 Election that may be made by the Partnership, and as to those items
described in Section 705(a)(1)(A) or 705(a)(2)(B) of the Code, without
regard to the fact that such items are not included in gross income or
are neither currently deductible nor capitalized for federal income tax
purposes.
(c) Generally, a transferee (including any Assignee) of a Partnership
Interest will succeed to the Capital Account relating to the Partnership
Interest transferred. However, if the transfer causes a termination of the
Partnership under Section 708(b)(1)(B) of the Code, the Partnership properties
shall be deemed to have been distributed in liquidation of the Partnership to
the Partners and Assignees and deemed recontributed by such Partners and
Assignees in reconstitution of the Partnership. In such event, the Carrying
Values of the Partnership properties shall be adjusted immediately prior to such
deemed distribution pursuant to Section 5.7(d)(ii). The Capital Accounts of such
reconstituted Partnership shall be maintained in accordance with the principles
of this Section 5.7.
(d) (i) Consistent with the provisions of Treasury Regulations Section
1.704-1(b)(2)(iv)(f), upon an issuance of additional Partnership
Interests for cash or Contributed Property, the Capital Accounts of
all Partners and Assignees shall, immediately prior to such issuance,
be adjusted (consistent with the provisions hereof) upwards or downwards
to reflect any Unrealized Gain or Unrealized Loss attributable to each
Partnership property (as if such Unrealized Gain or Unrealized Loss had
been recognized upon an actual sale of each such property, immediately
prior to such issuance, and had been allocated to the Partners, at such
time, pursuant to Section 6.2). In determining such Unrealized Gain or
Unrealized Loss, the aggregate fair market value of
- 22 -
Partnership properties as of any date of determination shall be
determined in the discretion of the Managing General Partner. The
Carrying Values of all Partnership properties shall be adjusted to
reflect their relative fair market values, as determined hereunder by
the Managing General Partner in its sole and absolute discretion. Once
the aggregate fair market value has been determined, the Managing
General Partner shall allocate such aggregate value among the properties
of the Partnership, in a manner it deems reasonable, to determine a fair
market value for individual properties.
(ii) In accordance with Treasury Regulations Section
1.704-1(b)(2)(iv)(f), immediately prior to the actual or deemed
distribution of any Partnership property, the Capital Accounts of all
Partners and Assignees shall, immediately prior to any such
distribution, be adjusted (consistent with the provisions hereof)
upwards or downwards to reflect any Unrealized Gain or Unrealized Loss
attributable to each Partnership property, as if such Unrealized Gain
or Unrealized Loss had been recognized upon an actual sale of each
property, immediately prior to such distribution, and had been allocated
to the Partners and Assignees, at such time, pursuant to Section 6.2. In
determining such Unrealized Gain or Unrealized Loss, the aggregate fair
market value of Partnership properties as of any date of determination
shall be determined in the discretion of the Managing General Partner.
The Managing General Partner shall allocate such aggregate market value
among the properties of the Partnership, in a manner it deems
reasonable, to determine a fair market value for individual properties.
5.8. NEGATIVE CAPITAL ACCOUNTS.
(a) Except to the extent provided in Section 5.8(b), and except to the
extent that the Partners are required to make Capital Contributions under
Section 5.3, no Partner shall be required to pay to the Partnership or any other
Partner any deficit balance which may exist from time to time in such Partner's
or Assignee's Capital Account.
(b) Notwithstanding the foregoing, if any General Partner has a deficit
balance in its Capital Account following the liquidation of its Partnership
Interest, as determined after taking into account all Capital Account
adjustments for the Partnership Fiscal Year during which such liquidation
occurs, it is unconditionally obligated to restore the amount of such deficit or
negative balance to the Partnership by the end of such Fiscal Year (or, if
later, within 90 days after the date of such liquidation), which such amount
shall, upon liquidation of the Partnership, be paid to creditors of the
Partnership or distributed to other Partners in accordance with their positive
Capital Account balances.
5.9. NO INTEREST ON AMOUNTS IN CAPITAL ACCOUNT.
No Partner or Assignee shall be entitled to receive any interest on its
outstanding Capital Account balance.
- 23 -
5.10. ADVANCES TO PARTNERSHIP.
If any Partner or Assignee shall advance funds to the Partnership in
excess of the amounts required hereunder to be contributed by it to the
capital of the Partnership, the making of such advances shall not result in
any increase in the amount of the Capital Account of such Partner or Assignee
or entitle such Partner or Assignee to any increase in its Percentage
Interest (as defined in Article VI). The amounts of any such advances shall
be a debt of the Partnership to such Partner or Assignee and shall be payable
or collectible only out of the Partnership Assets in accordance with the
terms and conditions upon which such advances are made.
5.11. LIABILITY OF LIMITED PARTNER.
Except as provided in the Delaware RULPA and Section 6.8 and Section
7.10(e), (a) the Limited Partners or Assignees shall not be personally liable
for any debts, liabilities, contracts or obligations of the Partnership; (b)
the Limited Partners shall be liable only to make payments of such Limited
Partners' Capital Contributions pursuant to Section 5.4; and (c) after the
Limited Partners' Capital Contributions shall be fully paid, the Limited
Partners shall not be required to make any further Capital Contributions or
to lend any funds to the Partnership.
5.12. RETURN OF CAPITAL.
Except upon the dissolution of the Partnership or as otherwise
specifically provided in this Agreement, no Partner or Assignee shall have
the right to demand or to receive the return of all or any part of the
Capital Account or Capital Contributions of such Partner or Assignee.
ARTICLE VI
ALLOCATION OF PROFITS AND LOSSES;
DISTRIBUTIONS OF CASH FLOW AND CERTAIN PROCEEDS
6.1. CERTAIN DEFINITIONS.
(a) "CASH FLOW" shall mean and refer to the sum of the following:
(i) the taxable income (or loss) of the Partnership for federal
income tax purposes as shown on the books of the Partnership for the
period for which such determination is being made, excluding taxable
income or gain or loss for Capital Transactions (as defined in Section
6.1(b)); increased by (A) the amount of cost recovery or depreciation
deductions or amortization or similar deductions in lieu thereof
deductible by the Partnership in computing such taxable income and any
other non-cash accruals deductible in determining federal taxable income
or loss for such period, and (B) any non-taxable income or receipts of
the Partnership for such period (including, without limitation, any
amounts received during such period that were included in taxable income
in a prior period) except (1) Capital Contributions to the Partnership
pursuant to Article
- 24 -
V and (2) the proceeds of any loans to the Partnership, and reduced by
(w) payments from the sum of the foregoing upon the principal of any
loans to the Partnership, (x) expenditures from the sum of the foregoing
for the acquisition, improvement or replacement of property (including,
without limitation, expenditures in connection with the Successor Policy
pursuant to Section 8.6), the financing of tenants or other reinvestment
or use in the business of the Partnership (all as determined by the
Managing General Partner in its sole and absolute discretion) not
financed through Capital Contributions to the Partnership, loans to the
Partnership or any reserves previously set aside by the Partnership for
such purposes, and for the payment of items attributable to the
acquisition, improvement or replacement of property which are not
deductible in determining federal taxable income when paid, (y) any
amounts including gross income for such period that were not received by
the Partnership during such period, and (z) transfers from the sum of
the foregoing to reserves for the acquisition, improvement, or
replacement of property, for the repayment of loans and other
indebtedness, for security deposits or other necessary escrows or
deposits, to meet anticipated expenses and/or for other reinvestment or
use as the Managing General Partner shall deem to be necessary or
advisable in its sole and absolute discretion (including, without
limitation, expenditures to purchase or otherwise acquire Partnership
Units and the creation of or additions to the Working Capital Reserve
established pursuant to Section 7.5 and any reserves established by the
Managing General Partner either to implement the Successor Policy
pursuant to Section 8.6, to acquire title to any Restaurant Property
subject to a Primary Lease pursuant to Section 8.12, or to set aside
cash for the purpose of making future distributions of Cash Flow to the
Partners and Assignees consistent with a policy of avoiding fluctuations
in the amount of quarterly distributions of Cash Flow to the extent
practicable); plus
(ii) any other funds (including amounts previously set aside as
reserves by the Managing General Partner if and to the extent the
Managing General Partner no longer regards such reserves as reasonably
necessary in the efficient conduct of the business of the Partnership)
deemed available for distribution and designated as Cash Flow by the
Managing General Partner.
The Managing General Partner shall determine, in its sole and absolute
discretion, whether funds are derived from or financed through a particular
source or used for a particular purpose for purposes of determining Partnership
Cash Flow for any period. In determining the Cash Flow for any quarterly period
within a Fiscal Year, the Managing General Partner shall have the authority to
apportion expenses and revenues of the Partnership among quarterly periods
within the Fiscal Year in any reasonable manner consistent with the principles
applied in determination of the Partnership's taxable income or loss, as the
case may be, for such Fiscal Year.
(b) "CAPITAL TRANSACTION" means an "Interim Capital Transaction" or
a "Terminating Capital Transaction," as the case may be. An "Interim Capital
Transaction" shall refer to (i) a transaction pursuant to which the
Partnership borrows funds, (ii) a sale, condemnation, exchange, abandonment,
casualty not followed by reconstruction, or other disposition, whether by
- 25 -
foreclosure or otherwise, of a portion (but less than substantially all) of
the Partnership Assets, or (iii) an insurance recovery or any other
transaction which, in accordance with generally accepted accounting
principles, is considered capital in nature, but which is not a Terminating
Capital Transaction. Notwithstanding the foregoing, no transaction shall be
considered to be an Interim Capital Transaction for purposes of this
Agreement if the "net proceeds" thereof ("net proceeds" shall mean the
proceeds received by the Partnership after the payment of all costs and
expenses of any kind or nature incurred by the Partnership in connection with
such transaction) are not material in amount and, in such instance, any
proceeds attributable to such transaction shall be included in computing Cash
Flow. A "Terminating Capital Transaction" shall refer to any sale,
condemnation, exchange, abandonment or other disposition, whether by
foreclosure or otherwise, of all or substantially all of the then remaining
Partnership Assets and/or any other transaction which will result in a
dissolution and liquidation of the Partnership. Any sale or other disposition
of any Partnership Assets in connection with the dissolution and liquidation
of the Partnership pursuant to Article XIV shall be considered a "Terminating
Capital Transaction" for purposes of this Article VI.
(c) "NET PROCEEDS OF A CAPITAL TRANSACTION" means the proceeds
received by the Partnership in connection with a Capital Transaction, after
(i) the payment of all costs and expenses of any kind or nature incurred by
the Partnership in connection with such Capital Transaction, (ii) the
utilization of any such proceeds in connection with the discharge of debts
and other obligations of the Partnership required or intended (as determined
by the Managing General Partner, in its sole and absolute discretion) to be
discharged with the proceeds of such Capital Transaction, (iii) the retention
of such proceeds or a portion thereof in connection with creation of or
addition to the Working Capital Reserve established pursuant to Section 7.5
or the acquisition, improvement or replacement of property, the financing of
tenants or reinvestment or other use in the business of the Partnership (all
as determined by the Managing General Partner, in its sole and absolute
discretion), or (iv) the retention of such proceeds or a portion thereof in
connection with the creation of or addition to any reserves established by
the to provide for any amounts required to be paid by the Partnership either
pursuant to Section 8.06 in connection with the Successor Policy, pursuant to
Section 8.12 pursuant to the purchase of title to any Restricted Restaurant
Property subject to a Primary Lease or for other reinvestment or use, all as
the Managing General Partner shall deem necessary or advisable in its sole
and absolute discretion. In the event the proceeds of any Interim Capital
Transactions are to be paid in more than one installment, then each such
installment shall be treated as a separate Interim Capital Transaction for
purposes of this Article VI.
6.2. ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES.
For purposes of maintaining the Capital Accounts and in determining
the rights of the Partners and Assignees among themselves, the following
allocations shall be made:
(a) Each item of income, gain, loss and deduction of the Partnership
for any taxable period during the term of this Agreement shall be allocated
among the Partners and Assignees, pro rata, in accordance with their
respective Percentage Interests.
- 26 -
(b) Notwithstanding the provisions of Section 6.2(a), in the event
that any fees, interest or other amounts paid to any of the General Partners
pursuant to this Agreement, or any agreement between the Partnership and any
General Partner providing for the payment of such amount, and deducted by the
Partnership in reliance on Sections 701(a) and/or 707(c) of the Code, are
disallowed as deductions to the Partnership on its federal income tax return
and are treated as Partnership distributions, then there shall be allocated
to the General Partner to which such fees, interest or other amounts were
paid, prior to the allocations pursuant to Section 6.2(a), an amount of
Partnership income for the year in which such fees, interest or other amounts
were paid, equal to the amount of such fees, interest or other amounts that
are treated as Partnership distributions.
(c) SPECIAL ALLOCATIONS. Except as otherwise provided in this
Agreement, the following special allocations will be made in the following
order and priority:
(i) Notwithstanding any other provision of this Section 6.2, if
there is a net decrease in Partner Minimum Gain during any taxable year
or other period for which allocations are made, each Partner or Assignee
will be specially allocated items of Partnership income and gain for
that period (and, if necessary, subsequent periods) in accordance with
the requirements of Treasury Regulations Section 1.704-2(i)(4). This
Section 6.2(c)(i) is intended to comply with the minimum gain charge-
back requirements of Treasury Regulations Section 1.704-2(i)(4).
(ii) Notwithstanding any other provision of this Section 6.2,
if there is a net decrease in Partnership Minimum Gain during any
taxable year or other period for which allocations are made, each
Partner or Assignee will be specially allocated items of Partnership
income and gain for that period (and, if necessary, subsequent periods)
in accordance with the requirements of Treasury Regulations Section
1.704-2(f). This Section 6.2(c)(ii) is intended to comply with the
minimum gain charge-back requirements of Treasury Regulations Section
1.704-2(f).
(iii) Nonrecourse Deductions for any taxable year or other
period for which allocations are made will be allocated among the
Partners or Assignees in proportion to their respective Percentage
Interests.
(iv) Any Partner Nonrecourse Deductions for any taxable year
or other period for which allocations are made will be allocated to the
Partner or Assignee who bears the economic risk of loss with respect to
the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Treasury Regulations
Section 1.704-2(i)(1).
(v) To the extent an adjustment to the adjusted tax basis of
any Partnership asset under Section 734(b) or 743(b) of the Code is
required to be taken into account in determining Capital Accounts under
Treasury Regulations Section 1.704-1(b)(2)(iv)(m), the amount of the
adjustment to the Capital Accounts will be treated as an item of gain
- 27 -
(if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases the basis), and the gain or loss will be specially
allocated to the Partners or Assignees 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).
(vi) Notwithstanding any other provision of this Agreement, no
allocation of any item of income, gain, loss or deduction will be made
to a Partner or Assignee 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 or Assignee's
interest in the Partnership within the meaning of Treasury Regulations
Section 1.704-1(b)(3). The Managing General Partner will have the
authority to reallocate any item in accordance with this Section
6.2(c)(vi).
(d) CURATIVE ALLOCATIONS. The allocations set forth in Section 6.2(c)
(the "Regulatory Allocations") are intended to comply with certain requirements
of Treasury Regulations Section 1.704-2. The Regulatory Allocations may not be
consistent with the manner in which the Partners and Assignees intend to divide
Partnership distributions. Accordingly, the Managing General Partner is
authorized to divide other allocations of items of income, gain, deduction and
loss among the Partners and Assignees so as to prevent the Regulatory
Allocations from distorting the manner in which Partnership distributions would
be divided among the Partners but for application of the Regulatory Allocations.
In general, the reallocation will be accomplished by specially allocating other
items of income, gain, deduction and loss, to the extent they exist, among the
Partners and Assignees so that the net amount of the Regulatory Allocations and
the special allocations to each Partner is zero. However, the Managing General
Partner will have discretion to accomplish this result in any reasonable manner
that is consistent with Section 704 of the Code and the related Treasury
Regulations.
(e) MINIMUM ALLOCATIONS TO MANAGING GENERAL PARTNER. Notwithstanding
anything in this Agreement (other than allocations contained in Section 6.2(d)
required by Sections 704(b) and 704(c) of the Code) to the contrary, the
interest of the Managing General Partner in each material item of Partnership
income, gain, deduction and loss shall equal at least .99% of each such item at
all times during the existence of the Partnership.
6.3. ALLOCATIONS FOR TAX PURPOSES.
(a) Except as otherwise provided in this Section 6.3, for federal
income tax purposes, each item of income, gain, loss and deduction shall be
allocated among the Partners and Assignees in the same manner as its
correlative item of "book" income, gain, loss or deduction has been allocated
pursuant to Section 6.2.
(b) In an attempt to eliminate any disparities between the Carrying
Value and the Adjusted Basis of Contributed Property or Adjusted Property,
items of income, gain, loss, depreciation and cost recovery deductions shall
be allocated for federal income tax purposes among the Partners and Assignees
as follows:
- 28 -
(i) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners and
Assignees in the manner provided under Section 704(c)(1) of the
Code that takes into account the variation between the Carrying
Value of such property and its Adjusted Basis at the time of
contribution.
(ii) In the case of an Adjusted Property, such items
attributable thereto shall (A) first, be allocated among the
Partners and Assignees in a manner consistent with the principles
of Section 704(c)(1) of the Code to take into account the Unrealized
Gain or Unrealized Loss attributable to such property and the
allocations thereof pursuant to Section 5.6(d), and (B) second, in
the event such property was originally a Contributed Property, be
allocated among the Partners and Assignees in a manner consistent
with Section 6.3(b)(i).
(iii) Except as otherwise provided in Section 6.3(b)(iv), in
the case of all other properties, items of income, gain, loss and
deduction attributable to such property shall be allocated among the
Partners and Assignees in accordance with Section 6.3(a).
(iv) Any items of income, gain, loss or deduction otherwise
allocable under Section 6.3(a) or 6.3(b)(iii) shall be subject to
allocation by the Managing General Partner in any reasonable manner
designed to eliminate, to the maximum extent possible, any disparities
between the Carrying Value and the Adjusted Basis in a Contributed
Property or an Adjusted Property otherwise resulting from the
application of the ceiling limitation (under Section 704(c)(1) of the
Code or its principles) to the allocations provided under Section
6.3(b)(i) or 6.3(b)(ii).
(c) To the extent of any Recapture Income resulting from the sale or
other taxable disposition of Partnership Assets, the amount of any gain from
such disposition allocated to (or recognized by) a Partner or Assignee for
federal income tax purposes pursuant to the above provisions shall be deemed
to be Recapture Income to the extent such Partner or Assignee (or its
predecessors in interest) has been allocated or has claimed any deduction
directly or indirectly giving rise to the treatment of such gain as Recapture
Income.
(d) All items of income, gain, loss and deduction recognized by the
Partnership for federal income tax purposes and allocated to the Partners and
Assignees in accordance with the provisions hereof and all basis allocations
shall be determined without regard to any election under Section 754 of the
Code which may be made by the Partnership.
6.4. ALLOCATION OF INCOME AND LOSS WITH RESPECT TO INTEREST TRANSFERRED.
If any Partnership Interest is transferred during any taxable period,
the share of Partnership items of income, gain, deduction or loss
attributable to such interest for such taxable period shall be divided and
allocated proportionately between the transferor and the transferee based
upon the number of days during such taxable period for which each party was
the holder of the Partnership Interest transferred.
- 29 -
6.5. DISTRIBUTIONS OF CASH FLOW.
(a) ALLOCATION AND DISTRIBUTION. Cash Flow of the Partnership shall
be determined for each calendar quarter of each Fiscal Year. Cash Flow as so
determined shall be distributed in cash to the Partners and Assignees, pro
rata, in accordance with their respective Percentage Interests. The General
Partners shall take such reasonable efforts, as determined by them in their
sole and absolute discretion, to cause the Partnership to distribute
sufficient amounts to enable any REIT Partner to pay stockholder dividends
that will satisfy the requirements for qualifying as a real estate investment
trust under the Code.
(b) TIMING OF DISTRIBUTIONS. Cash Flow shall be distributed
quarterly, within seventy-five (75) days after the end of each calendar
quarter of a Fiscal Year, commencing with the calendar quarter ended March
31, 1986. The Partners and Assignees agree that, within thirty (30) days
after determination by the Partnership that an overpayment was made to any
Partner or Assignee for any Fiscal Year pursuant to this Section 6.5, such
Partner or Assignee shall repay, allow as a credit against future
distributions or make such other adjustments as may be appropriate to remedy
such overpayment. Likewise, appropriate adjustment shall be made to remedy
any underpayment.
6.6. DISTRIBUTION OF PROCEEDS FROM INTERIM CAPITAL TRANSACTIONS.
The Net Proceeds of an Interim Capital Transaction shall be
distributed to the Partners and Assignees, pro rata, in accordance with their
respective Percentage Interests. Distributions pursuant to this Section 6.6
shall be made within seventy-five (75) days of the receipt of proceeds with
respect to an Interim Capital Transaction.
6.7. DISTRIBUTION OF PROCEEDS FROM TERMINATING CAPITAL TRANSACTIONS;
LIQUIDATION DISTRIBUTIONS.
(a) The Net Proceeds of a Terminating Capital Transaction and any
other remaining assets of the Partnership to be distributed to the Partners
and Assignees in connection with liquidation and dissolution of the
Partnership pursuant to Article XIV, after the payment of all debts,
liabilities and obligations of the Partnership in the manner provided in
Section 14.5 (including, without limitation, all amounts owing to the General
Partners under this Agreement (other than this Article VI) or under any
agreement between the Partnership and the General Partners entered into by
the General Partners other than in their capacity as Partners in the
Partnership), including, without limitation, the payment of expenses of
liquidation of the Partnership, and the establishment of a reasonable reserve
(including an amount estimated by the Managing General Partner to be
sufficient to pay any amount reasonably anticipated to be required to be paid
pursuant to Section 7.10), shall be distributed to the Partners and
Assignees, pro rata, in proportion to the positive balances, if any, in their
respective Capital Accounts.
(b) Notwithstanding any provision in this Section 6.7 to the contrary,
in the event that the Net Proceeds of the Terminating Capital Transaction are
to be paid to the Partnership in more
- 30 -
than one installment, each such installment (including any interest thereon)
shall be allocated among the Partners and Assignees in accordance with their
respective "Installment Percentages." The "Installment Percentage" of each
Partner and Assignee shall be equal to (i) the aggregate amount of cash that
would have been distributed to that Partner or Assignee under Sections 6.7(a)
and (b) had the Net Proceeds of the Terminating Capital Transaction been paid
in one lump sum, divided by (ii) the total Net Proceeds that would have been
distributed to all of the Partners and Assignees under those Sections.
6.8. TAXES WITHHELD.
Each Limited Partner hereby authorizes the Partnership to withhold
from, or pay on behalf of or with respect to, such Limited Partner any amount
of federal, state, local or foreign taxes that the General Partners determine
that the Partnership is required to withhold or pay with respect to any
amount distributable or allocable to such Limited Partner pursuant to this
Agreement, including, without limitation, any taxes required to be withheld
or paid by the Partnership pursuant to Section 1441, 1442, 1445 or 1446 of
the Code. Any amount paid on behalf of or with respect to a Limited Partner
shall constitute a loan by the Partnership to such Limited Partner, which
loan shall be repaid by such Limited Partner within fifteen (15) days after
notice from the General Partners that such payment must be made unless (a)
the Partnership withholds such payment from a distribution which would
otherwise be made to the Limited Partner; or (b) the General Partners
determine, in their sole and absolute discretion, that such payment may be
satisfied out of the available funds of the Partnership which would, but for
such payment, be distributed to the Limited Partner. Any amounts withheld
pursuant to the foregoing clauses (a) and (b) shall be treated as having been
distributed to such Limited Partner. Each Limited Partner hereby
unconditionally and irrevocably grants to the Partnership a security interest
in such Limited Partner's Partnership Interest to secure such Limited
Partner's obligation to pay to the Partnership any amounts required to be
paid pursuant to this Section 6.8. In the event that a Limited Partner fails
to pay any amounts owed to the Partnership pursuant to this Section 6.8 when
due, the General Partners may, in their sole and absolute discretion, elect
to make the payment to the Partnership on behalf of such defaulting Limited
Partner, and in such event shall be deemed to have loaned such amount to such
defaulting Limited Partner and shall succeed to all rights and remedies of
the Partnership as against such defaulting Limited Partner. Without
limitation, in such event the General Partners shall have the right to
receive distributions that would otherwise be distributable to such
defaulting Limited Partner until such time as such loan, together with all
interest thereon, has been paid in full, and any such distributions so
received by the General Partners shall be treated as having been distributed
to the defaulting Limited Partner and immediately paid by the defaulting
Limited Partner to the General Partners in repayment of such loan. Any
amounts as payable by a Limited Partner hereunder shall bear interest at the
lesser of (i) the base rate on corporate loans at large United States money
center commercial banks, as published from time to time in The Wall Street
Journal, plus four (4) percentage points, or (ii) the maximum lawful rate of
interest on such obligation, such interest to accrue from the date such
amount is due (I.E., fifteen (15) days after demand) until such amount is
paid in full. Each Limited Partner shall take such actions as the Partnership
or the
- 31 -
General Partners shall request in order to perfect or enforce the security
interest created hereunder.
ARTICLE VII
MANAGEMENT
7.1. MANAGEMENT AND CONTROL OF PARTNERSHIP.
Except as otherwise expressly provided or limited by the provisions
of this Agreement (including, without limitation, the provisions of Article
VIII), the Managing General Partner shall have full, exclusive and complete
discretion to manage and control the business and affairs of the Partnership,
to make all decisions affecting the business and affairs of the Partnership
and to take all such actions as it deems necessary or appropriate to
accomplish the purposes of the Partnership as set forth herein. The Managing
General Partner shall use reasonable efforts to carry out the purposes of the
Partnership and shall devote to the management of the business and affairs of
the Partnership such time as the Managing General Partner, in its reasonable
discretion, shall deem to be reasonably required for the operation thereof.
The Limited Partners shall have no authority, right or power to bind the
Partnership, or to manage or control, or to participate in the management or
control of, the business and affairs of the Partnership in any manner
whatsoever.
7.2. POWERS OF MANAGING GENERAL PARTNER.
Subject to the limitation of Section 7.3, which vests certain approval
rights in the Limited Partners, and to the limitations and restrictions set
forth in Article VIII, the Managing General Partner (acting on behalf of the
Partnership) shall have the right, power and authority, in the management of the
business and affairs of the Partnership, to do or cause to be done any and all
acts, at the expense of the Partnership, deemed by the Managing General Partner
to be necessary or appropriate to effectuate the business, purposes and
objectives of the Partnership. The power and authority of the Managing General
Partner pursuant to this Agreement shall be liberally construed to encompass all
acts and activities in which a partnership may engage under the Delaware RULPA.
The power and authority of the Managing General Partner shall include, without
limitation, the power and authority on behalf of the Partnership:
(a) To acquire, own, lease, sublease, manage, hold, deal in, control or
dispose of any interests or rights in personal property or real property,
including interests in any Partnership Property, whether realty or personalty,
including, without limitation, the powers to sell, exchange, lease, sublease,
mortgage, pledge, convey in trust, enter into joint ventures or partnerships
respecting or otherwise hypothecate or dispose of all or any portion of any
Partnership Property or any other Partnership Asset or any interest therein;
provided, however, that the use of any Restricted Restaurant Property and any
sale or other disposition of any Restricted Restaurant Property shall be subject
to the restrictions and limitations set forth in Sections 8.3 and 8.4;
- 32 -
(b) Subject to the restrictions and limitations set forth in Section
8.3 but without limiting the generality of Section 7.2(a), to negotiate,
enter into, renegotiate, extend, renew, terminate, modify, amend, waive,
execute, acknowledge or take any other action on behalf of the Partnership
with respect to any Primary Lease (including, without limitation, to exercise
any right of the Partnership under any Primary Lease to acquire title to a
Partnership Property pursuant to a right of first refusal) or any lease or
sublease of a Partnership Property whether to a BKC Franchisee or otherwise,
or any provision thereof;
(c) Subject to the restrictions and limitations set forth in
Sections 8.3 and 8.4, to create, by grant or otherwise, easements,
servitudes, rights-of-way, and other rights in and to any Partnership
Property;
(d) To alter, improve, expand, repair, raze, replace or reconstruct
a Partnership Property; provided, however, that any improvement, expansion,
replacement, or reconstruction of a Partnership Property pursuant to the
Successor Policy (as further described in Section 8.6) shall be subject to
the terms and conditions of Section 8.6;
(e) Subject to the restrictions and limitations set forth in
Sections 8.3 and 8.4, to let or lease, or sublet or sublease, any Partnership
Property for any period, and for any purpose;
(f) To apply proceeds of any sale, exchange, mortgage, pledge or
other disposition of any Partnership Property or any other Partnership Asset
to payment of liabilities of the Partnership and to pay, collect, compromise,
arbitrate or otherwise adjust any and all other claims or demands of or
against the Partnership or to hold such proceeds against the payment of
contingent liabilities, known or unknown;
(g) To maintain or cause to be maintained records of all rights and
interests acquired or disposed of by the Partnership, all correspondence
relating to the business of the Partnership, and the original records (or
copies on such media as the Managing General Partner may deem appropriate) of
all statements, bills and other instruments furnished the Partnership in
connection with its business;
(h) To maintain records and accounts of all operations and
expenditures, make all filings and reports required under applicable rules
and regulations of any governmental department, bureau or agency, any
securities exchange and any automated quotation system of a registered
securities association, and furnish the Partners with all necessary United
States federal, state or local income tax reporting information or such
information with respect to any other jurisdiction;
(i) To purchase and maintain (either directly or through
participation under insurance contracts purchased and maintained by any
Affiliate), in its sole and absolute discretion and at the expense of the
Partnership, liability, indemnity and any other insurance (including, without
limitation, errors and omissions insurance and insurance to cover the
obligations of the Partnership under Section 7.10), sufficient to protect the
Partnership, the General Partners, their
- 33 -
officers, directors, employers, agents and Affiliates or any other Person
from those liabilities and hazards which may be insured against in the
conduct of the business and in the management of the business and affairs of
the Partnership;
(j) To make, execute, assign, acknowledge and file on behalf of the
Partnership any and all documents or instruments of any kind which the
Managing General Partner may deem necessary or appropriate in carrying out
the purposes and business of the Partnership, including, without limitation,
powers of attorney, agreements of indemnification, sales contracts, deeds,
options, loan obligations, mortgages, deeds of trust, notes, documents or
instruments of any kind or character, and amendments thereto. Any person,
firm or corporation dealing with the Managing General Partner shall not be
required to determine or inquire into the authority or power of the Managing
General Partner to bind the Partnership or to execute, acknowledge or deliver
any and all documents in connection therewith;
(k) To borrow money or to obtain credit in such amounts, on such
terms and conditions and at such rates of interest and upon such other terms
and conditions as the Managing General Partner deems appropriate, from banks,
other lending institutions or any other Person, including the Partners, for
any purpose of the Partnership, including, without limitation, any loan
incurred for the purpose of making one or more distributions to any or all
Partners, including any distributions which are, in whole or in part, a
return of Capital Contributions; and subject to the restrictions and
limitations set forth in Section 8.4, in connection with such loans to
mortgage, pledge, assign or otherwise encumber or alienate any or all of the
Partnership Properties or other Partnership Assets, including any income
therefrom, to secure or provide for the repayment thereof. As between any
lender and the Partnership, it shall be conclusively presumed that the
proceeds of such loans are to be and will be used for the purposes authorized
herein and that the Managing General Partner has the full power and authority
to borrow such money and to obtain such credit;
(l) To originate loans or otherwise provide financing, whether
through guarantees, letters of credit or otherwise, secured by liens on real
estate to borrowers who meet the Partnership's underwriting criteria, which
shall be established by the Managing General Partner;
(m) To assume obligations, enter into contracts, including contracts
of guaranty or suretyship, incur liabilities, lend money and otherwise use
the credit of the Partnership, and, subject to the restrictions and
limitations set forth in Sections 8.3 and 8.4, to secure any of the
obligations, contracts or liabilities of the Partnership by mortgage, pledge
or other encumbrance of all or any part of the property, franchises and
income of the Partnership;
(n) To invest funds of the Partnership in interest-bearing accounts
and short-term investments, including, without limitation, obligations of the
federal, state and local governments and their agencies, mutual funds
(including money market funds), time deposits, commercial paper and
certificates of deposit of commercial banks, savings banks or savings and
loan associations; provided that the Managing General Partner shall not
invest Partnership funds in such a manner that the Partnership will be
considered to be holding itself out as being engaged
- 34 -
primarily in the business of investing, reinvesting or trading in securities
or otherwise will be deemed to be an investment company under the Investment
Company Act of 1940, as amended;
(o) To make any election on behalf of the Partnership as is or may
be permitted under the Code or under the taxing statute or rule of any state,
local, foreign or other jurisdiction, and to supervise the preparation and
filing of all tax and information returns which the Partnership may be
required to file;
(p) To maintain the buildings, appurtenances and grounds of the
Partnership Properties in accordance with acceptable standards, including
within such maintenance, without limitation thereof, interior and exterior
cleaning, painting and decorating, plumbing, carpentry and such other normal
maintenance and repair work as may be appropriate;
(q) To collect all rents and other charges from lessees of the
Partnership Properties due the Partnership. The Managing General Partner
shall have full power and authority to request, demand, collect, receive and
receipt for all such rents and other charges, to institute legal proceedings
in the name of the Partnership for the collection thereof and for the
dispossession of any Person from a Partnership Property, to settle or
compromise all such legal proceedings and any other disputes with respect to
such rents and other charges and to incur such expenses in connection
therewith as the Managing General Partner shall determine to be necessary or
appropriate, which expenses may include the costs of counsel for any such
matter;
(r) To cause to be disbursed (i) the aggregate amount required to be
paid pursuant to any indebtedness of the Partnership, including therein
amounts due under any mortgages or deeds of trust for interest, amortization
of principal and for allocation to reserve or escrow funds; (ii) the amount
of rent payable by the terms of any Primary Lease; (iii) the amount of all
real estate taxes and other impositions levied by appropriate authorities
(including, without limitation, amounts required to be paid by any BKC
Franchisee pursuant to any lease with respect to a Restricted Restaurant
Property); and (iv) amounts otherwise due and payable as expenses of the
Partnership incurred in furtherance of the purposes of this Agreement
(including, without limitation, amounts payable to the General Partners);
(s) To employ and engage suitable agents, employees, advisers,
consultants and counsel (including any custodian, investment adviser,
accountant, attorney, corporate fiduciary, bank or other reputable financial
institution, or any other agents, employees or Persons who may serve in such
capacity for the Managing General Partner or any Affiliate of the Managing
General Partner) to carry out any activities which the Managing General
Partner is authorized or required to carry out or conduct under this
Agreement, including, without limitation, a Person who may be engaged to
undertake some or all of the general management, property management,
financial accounting and record keeping or other duties of the Managing
General Partner, to indemnify such Persons against liabilities incurred by
them in acting in such capacities on behalf of the Partnership and to rely on
the advice given by such Persons, it being agreed and understood that the
Managing General Partner shall not be responsible for any acts or omissions
- 35 -
of any such Persons and shall assume no obligations in connection therewith
other than the obligation to use due care in the selection thereof;
(t) To enter into an agreement or agreements with real estate
brokers or agents, investment banking firms, appraisers or others providing
for the engagement of such Persons on an exclusive or non-exclusive basis to
advise or represent the Partnership in the valuation, sale, transfer,
assignment, lease, sublease, mortgaging or other encumbering of, or other
dealings in, the Partnership Properties, it being understood that the
Managing General Partner shall not be responsible for any acts or omissions
of any such Person and shall assume no obligations in connection therewith
other than the obligation to use due care in the selection thereof; provided,
however, that no commission in connection with any sale or other disposition
of a Partnership Property shall exceed six percent (6%) of the gross proceeds
from such sale or disposition, and that no commission in connection with any
such sale or other disposition shall be payable to a General Partner or any
of its Affiliates;
(u) To consult with the Independent Consultant pursuant to the
provisions of Section 8.10 with respect to any matter related to the business
and affairs of the Partnership;
(v) To take such actions and make such decisions as may be necessary
or appropriate, in the reasonable judgment of the Managing General Partner,
to resolve or avoid any actual or potential conflict of interest between the
Partnership and any General Partners or any Affiliates thereof, including,
without limitation, subject to Section 8.8, to cause the Partnership to
accept from BKC or a third party, in exchange or substitution for one or more
Restricted Restaurant Properties, one or more other properties on which a BK
Restaurant leased to a BKC Franchisee is located; provided, however, that, so
long as Section 1031 of the Code or any similar provision shall remain in
effect, any such substitution or exchange must qualify as an exchange of
property of a like-kind in which no gain or loss is recognized to the
Partnership except to the extent of any cash received in connection therewith;
(w) To hold Partnership Properties or other Partnership Assets in
the name of one or more nominees, with or without disclosure of the fiduciary
relationship;
(x) To pay, extend, renew, modify, adjust, submit to arbitration,
prosecute, defend or compromise, upon such terms as it may determine and upon
such evidence as it may deem sufficient, any obligation, suit, liability,
cause of action or claim, including taxes, either in favor of or against the
Partnership;
(y) To qualify the Partnership to do business in any state,
territory, dependency or foreign country;
(z) To purchase any Partnership Property subject to a Primary Lease
whether pursuant to a first right of refusal under such Primary Lease or
otherwise;
- 36 -
(aa) To enter into a property management agreement with BKC pursuant
to which BKC agrees on behalf of the Managing General Partner, at no
additional expense to the Partnership, to exercise certain day-to-day
management responsibilities with respect to the Partnership Properties and to
perform related administrative services upon the terms and conditions set
forth therein, to extend, renew, terminate, modify, amend or waive such
agreement or any provision thereof and to take such action pursuant to or in
connection with such agreement as the Managing General Partner shall
determine appropriate; provided, however, that the Managing General Partner
shall have no obligation to enter into any such agreement;
(bb) To distribute money or Partnership Assets to Partners and
Assignees in accordance with Article VI, regardless of the source of such
money or Partnership Assets, including, without limitation, money borrowed by
the Partnership or by the Managing General Partner on behalf of the
Partnership;
(cc) To acquire fee simple title or a leasehold interest in any
Partnership Property and Ancillary Property related thereto and to provide
for the purchase price for such property from funds otherwise constituting
Cash Flow or the Net Proceeds of a Capital Transaction, whether at the time
of acquisition or thereafter to pay principal, interest or other amounts
payable in respect of any financing related to such acquisition;
(dd) To lease, sell or otherwise transfer Ancillary Property to any
tenant of a Partnership Property, to provide financing, whether through
loans, guarantees or otherwise, for any tenant of a Partnership Property and
to provide the funds for such transactions from funds otherwise constituting
Cash Flow or the Net Proceeds of a Capital Transaction, whether at the time
of such transaction or thereafter to pay principal, interest or other amounts
payable in respect of any financing undertaken for such purpose;
(ee) To mortgage, lien or otherwise encumber or restrict any
Restricted Restaurant Property and use the proceeds thereof in respect of
Other Restaurant Properties, Retail Properties or for any other Partnership
purpose; and to mortgage, lien or otherwise encumber or restrict any Other
Restaurant Property or Retail Property and use the proceeds thereof in
respect of Restricted Restaurant Properties or for any other Partnership
purpose;
(ff) To operate or franchise any Partnership Property, whether
directly or through any Affiliates or other Persons;
(gg) To reinvest or otherwise use funds otherwise constituting Cash
Flow or the Net Proceeds of a Capital Transaction in or for Partnership
Properties, Ancillary Property or other Partnership Assets or for any other
Partnership purpose;
(hh) To form or acquire an interest in, and to contribute any
property to, any further limited or general partnerships, limited liability
companies, joint ventures or other relationships that it deems desirable
(including, without limitation, the acquisition of interests in, and the
contributions of property to, any subsidiary and other Person in which it has
an equity investment
- 37 -
from time to time); provided, however, that, as long as any Partner has
determined to continue to qualify as a real estate investment trust under the
Code, the General Partners may not engage in any such formation, acquisition
or contribution that would cause such Partner to fail to qualify as a real
estate investment trust under the Code or fail to qualify as a "qualified
REIT subsidiary" within the meaning of Section 856(i)(2) of the Code;
(ii) To possess and exercise any additional rights and powers of a
general partner under the partnership laws of Delaware (including, without
limitation, the Delaware RULPA) and any other applicable laws, to the extent
not inconsistent with this Agreement; and
(jj) In general, to exercise in full all of the powers of the
Partnership as set forth in Section 3.2 and to do any and all acts and
conduct all proceedings and execute all rights and privileges, contracts and
agreements of any kind whatsoever, although not specifically mentioned in
this Agreement, that the Managing General Partner in its sole and absolute
discretion may deem necessary or appropriate to the conduct of the business
and affairs of the Partnership or to carry out the purposes of the
Partnership. The expression of any power or authority of the Managing
General Partner in this Agreement shall not in any way limit or exclude any
other power or authority which is not specifically or expressly set forth in
this Agreement.
7.3. RESTRICTIONS ON AUTHORITY OF MANAGING GENERAL PARTNER.
(a) Anything in this Agreement to the contrary notwithstanding, the
Managing General Partner shall have no authority to:
(i) pay for any services performed by a General Partner or an
Affiliate of a General Partner, except as otherwise expressly permitted
in this Agreement; or
(ii) take any action on any matter with respect to which the prior
approval of the Limited Partners is specifically required under this
Agreement without having received such prior approval.
(b) Notwithstanding any other provision of this Agreement, the
Managing General Partner shall not, unless approved by a Majority Vote of the
Limited Partners:
(i) except upon dissolution and liquidation of the Partnership
pursuant to Article XIV, cause the Partnership to sell, exchange,
assign, lease, sublease or otherwise dispose of all or substantially
all of the Partnership Assets (including by way of merger, consolidation
or other combination with any other Person) other than in ordinary
course of business of the Partnership; provided, however, that this
provision shall not be interpreted to preclude or limit the mortgage,
pledge, hypothecation or grant of a security interest in all or
substantially all of the Partnership Assets, and shall not apply to any
forced sale of any or all of the Partnership Assets pursuant to the
foreclosure of, or other realization upon, any such encumbrance; or
- 38 -
(ii) cause the Partnership to merge or consolidate with any other
partnership or other entity (other than a Limited Partner).
7.4. TITLE TO PARTNERSHIP ASSETS.
Title to Partnership Assets, whether real, personal or mixed, or
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner, individually or collectively, shall have any
ownership interest in such Partnership Assets or any portion thereof. Title
to any or all of the Partnership Assets may be held in the name of the
Partnership, of the Managing General Partner or of one or more nominees, as
the Managing General Partner may determine. The Managing General Partner
hereby declares and warrants that any Partnership Assets for which legal
title is held in the name of the Managing General Partner shall be held in
trust by the Managing General Partner for the use and benefit of the
Partnership in accordance with the terms or provisions of this Agreement.
All Partnership Assets shall be recorded as the property of the Partnership
on its books and records, irrespective of the name in which legal title to
such Partnership Assets is held.
7.5. WORKING CAPITAL RESERVE.
The Managing General Partner shall have the right to cause the
Partnership to set up a Working Capital Reserve and to set aside therein such
funds as the Managing General Partner, in its sole and absolute discretion,
shall determine to be reasonable in connection with the operation of the
business of the Partnership. Any funds set aside for such Working Capital
Reserve may be invested by the Managing General Partner with a view to the
appropriate degree of safety of and return on such invested funds, and such
funds shall not be available for current distribution under Section 6.5;
provided, however, that some or all of such funds may subsequently be made
available for distribution pursuant to Section 6.5 should the Managing
General Partner, in its sole and absolute discretion, so elect. The Working
Capital Reserve established and maintained pursuant to this Section 7.5 shall
be in addition to any reserves established and maintained by the Managing
General Partner to implement the Successor Policy pursuant to Section 8.6.
7.6. OTHER BUSINESS ACTIVITIES OF PARTNERS.
Any Partner or Affiliate (including, without limitation, the Managing
General Partner and any Affiliate thereof) may have other business interests
or may engage in other business ventures of any nature or description
whatsoever, whether presently existing or hereafter created, including,
without limitation, the ownership, leasing, management, operation,
franchising, syndication and/or development of commercial real estate and/or
restaurants, and may compete, directly or indirectly, with the business of
the Partnership. No Partner or Affiliate thereof shall incur any liability
to the Partnership as the result of such Partner's or Affiliate's pursuit of
such other business interests and ventures and competitive activity, and
neither the Partnership nor any of the other Partners shall have any right to
participate in such other business interests or ventures or to receive or
share in any income or profits derived therefrom.
- 39 -
7.7. TRANSACTIONS WITH MANAGING GENERAL PARTNER OR AFFILIATES.
In addition to transactions specifically contemplated by the terms
and provisions of this Agreement, including, without limitation, Articles
VIII and IX, the Partnership is expressly permitted to enter into other
transactions (including, without limitation, the acquisition of goods or
services) with the Managing General Partner, or any Affiliates thereof,
provided that the price and other terms of such other transactions are fair
to the Partnership and that the price and other terms of such transactions
are not less favorable to the Partnership than those generally prevailing
with respect to comparable transactions between unrelated parties.
7.8. NET WORTH REPRESENTATION; INDEPENDENT JUDGMENT.
In addition to their other duties and obligations, the General
Partners further agree as follows:
(a) The General Partners shall use their best efforts to maintain a
combined net worth equal to the total amount, if any, that could reasonably
be expected to be required in order for the Partnership to be treated as a
partnership for federal income tax purposes; and
(b) In acting on behalf of the Partnership, the Managing General
Partner will not act under the direction of or as an agent of or "dummy" for
the Limited Partners.
7.9. LIABILITY OF GENERAL PARTNERS TO PARTNERSHIP AND THE LIMITED PARTNERS.
The General Partners, their Affiliates and all officers, directors,
employees and agents of the General Partners and their Affiliates shall not
be liable to the Partnership or to the Limited Partners for any losses
sustained or liabilities incurred as a result of any act or omission of the
General Partners or their Affiliates if (a) the General Partner or Affiliate
acted (or failed to act) in good faith and in a manner it believed to be in,
or not opposed to, the interests of the Partnership, and (b) the conduct of
the General Partner or Affiliate did not constitute actual fraud, gross
negligence or willful or wanton misconduct.
7.10. INDEMNIFICATION OF GENERAL PARTNERS AND AFFILIATES.
(a) The Partnership shall indemnify and hold harmless the General
Partners, their Affiliates and all officers, directors, employees and agents
of the General Partners and their Affiliates (individually, an "Indemnitee")
from and against any and all losses, claims, demands, costs, damages,
liabilities, joint and several, expenses of any nature (including attorneys'
fees and disbursements), judgments, fines, settlements and other amounts
arising from any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative, in which the Indemnitee may
be involved, or threatened to be involved, as a party or otherwise, arising
out of or incidental to the Initial Public Offering, the Second Public
Offering or the Third Public Offering or the business of the Partnership or
the Limited Partners, including, without limitation, liabilities under the
federal and state securities laws, regardless of whether the Indemnitee
- 40 -
continues to be a General Partner, an Affiliate or an officer, director,
employee or agent of a General Partner or of an Affiliate at the time any
such liability or expense is paid or incurred, if (i) the Indemnitee acted in
good faith and in a manner it believed to be in, or not opposed to, the
interests of the Partnership, and, with respect to any criminal proceeding,
had no reasonable cause to believe its conduct was unlawful, and (ii) the
Indemnitee's conduct did not constitute actual fraud, gross negligence or
willful or wanton misconduct. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere, or its equivalent, shall not, in and of itself, create a
presumption or otherwise constitute evidence that the Indemnitee acted in a
manner contrary to that specified in (i) or (ii) above.
(b) Expenses incurred by an Indemnitee in defending any claim,
demand, action, suit or proceeding subject to this Section 7.10 shall, from
time to time, be advanced by the Partnership prior to the final disposition
of such claim, demand, action, suit or proceeding upon receipt by the
Partnership of an undertaking by or on behalf of the Indemnitee to repay such
amount unless it shall be determined that such Person is entitled to be
indemnified as authorized in this Section 7.10.
(c) The indemnification provided by this Section 7.10 shall be in
addition to any other rights to which those indemnified may be entitled under
any agreement, with the approval of the Limited Partners, as a matter of law
or equity or otherwise, both as to an action in the Indemnitee's capacity as
a General Partner, an Affiliate or as an officer, director, employee or agent
of a General Partner or an Affiliate, and as to an action in another
capacity, and shall continue as to an Indemnitee who has ceased to serve in
such capacity and shall inure to the benefit of the heirs, successors,
assigns and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain insurance (either
directly or through participation under insurance contracts purchased and
maintained by any Affiliate) on behalf of the General Partners and such other
Persons as the Managing General Partner shall determine against any liability
that may be asserted against or expense that may be incurred by such Person
in connection with the Initial Public Offering, the Second Public Offering or
the Third Public Offering and the activities of the Partnership or the
Limited Partners, regardless of whether the Partnership or the Limited
Partners would have the power to indemnify such Person against such liability
under the provisions of this Agreement.
(e) Except as set forth in the next sentence below, any
indemnification hereunder shall be satisfied solely out of the assets of the
Partnership and the Limited Partners. The limited partners or stockholders
of the Limited Partners shall not be subject to personal liability by reason
of these indemnification provisions; provided, however, that to the extent
that a limited partner of the Limited Partners shall recover from any
Indemnitee any amount that is subject to indemnification hereunder, the
limited partner or stockholders of the Limited Partners shall have personal
liability to the Partnership, the Limited Partners and the Indemnitee under
this Section 7.10 for and to the extent of such amount.
- 41 -
(f) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 7.10 by reason of the fact that the Indemnitee had an
interest in the transaction with respect to which the indemnification applies
if the transaction was otherwise permitted by the terms of this Agreement.
(g) The provisions of this Section 7.10 are for the benefit of the
Indemnitees and shall not be deemed to create any rights for the benefit of
any other Persons.
7.11. NO MANAGEMENT BY LIMITED PARTNERS.
The Limited Partners shall not take part in the day-to-day management,
operation or control of the business and affairs of the Partnership. The
Limited Partners shall not have any right, power or authority to transact any
business in the name of the Partnership or to act for or on behalf of or to bind
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. In the event any laws, rules or regulations applicable to the
Partnership, or to the sale or issuance of securities by a Limited Partner,
require the Limited Partners to have certain rights, options, privileges or
consents not granted by the terms of this Agreement, then the Limited Partner
shall have and enjoy such rights, options, privileges and consents so long as
(but only so long as) the existence thereof does not result in a loss of the
limitation on liability enjoyed by the Limited Partners under the Delaware RULPA
or the applicable laws of any other jurisdiction.
7.12. OTHER MATTERS CONCERNING GENERAL PARTNERS.
(a) The General Partners may rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture
or other paper or document believed by them to be genuine and to have been
signed or presented by the proper party or parties.
(b) The General Partners may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisers selected by them and any opinion of any such Person
as to matters that the General Partners reasonably believe to be within its
professional or expert competence (including, without limitation, any opinion
of legal counsel to the effect that the Partnership would "more likely than
not" prevail with respect to any matter) shall be full and complete
authorization and protection in respect of any action taken or suffered or
omitted by a General Partner hereunder in good faith and in accordance with
such opinion.
(c) The General Partners shall have the right, in respect of any of
their powers or obligations hereunder, to act through a duly appointed
attorney or attorneys-in-fact. Each such attorney or attorney-in-fact shall,
to the extent provided by the General Partner in the power of attorney, have
full power and authority to do and perform all and every act and duty which
is permitted or required to be done by the General Partner hereunder. Each
such appointment shall
- 42 -
be evidenced by a duly executed power of attorney giving and granting to each
such attorney or attorney-in-fact full power and authority to do and perform
all and every act and thing requisite and necessary to be done by the General
Partner in connection with the Partnership.
(d) Notwithstanding any other provision of this Agreement or the
Delaware RULPA, any action of the General Partners on behalf of the
Partnership or any decision of the General Partners to refrain from acting on
behalf of the Partnership, undertaken in the good faith belief that such
action or omission is necessary or advisable in order (i) to protect the
ability of any REIT Partner to continue to qualify as a real estate
investment trust under the Code, (ii) to avoid any REIT Partner incurring any
taxes under the Section 857 or 4981 of the Code or (iii) for any REIT Partner
to continue to qualify as a "qualified REIT subsidiary" (within the meaning
of Section 856(i)(2)) of the Code), is expressly authorized under this
Agreement and is deemed approved by all of the Limited Partners.
7.13. REVOLVING LINE OF CREDIT; OTHER LOANS TO OR FROM A GENERAL PARTNER.
(a) Pursuant to this Section 7.13(a) and Section 7.13(a) of the
Investors Partnership Agreement, the Managing General Partner shall make
available to the Partnership and the Limited Partners, jointly, on an "as
needed" basis an unsecured, interest-free, revolving line of credit in the
aggregate principal amount of Five Hundred Thousand Dollars ($500,000). The
proceeds of the revolving line of credit may be used by the Partnership
and/or the Limited Partners solely for purposes of providing to the
Partnership and/or the Limited Partners funds determined by the Managing
General Partner to be necessary for purposes of (i) maintaining sufficient
working capital and/or (ii) maintaining level quarterly distributions of Net
Cash Flow. The Partnership and the Limited Partners may borrow, repay and
reborrow under the revolving line of credit from time to time (subject to the
maximum aggregate principal amount limitation). Nothing herein shall be
construed to require the Managing General Partner to cause the Partnership or
the Limited Partners to retain cash (or to cause the Partnership or the
Limited Partners to borrow under the revolving line of credit in order to
retain cash) in excess of the immediate working capital needs of the
Partnership or the Limited Partners as the case may be. In addition, nothing
shall be construed to require the Partnership to use or exhaust the financing
available under the revolving line of credit, before obtaining other
financing permitted by this Agreement, whether for acquisitions,
reinvestment, working capital or otherwise. The revolving line of credit
shall terminate upon removal or withdrawal of the Managing General Partner.
(b) In addition to the revolving line of credit described in Section
7.13(a), any of the General Partners or any of their Affiliates may lend to
the Partnership funds needed by the Partnership for such periods of time as
the Managing General Partner may determine; provided, however, that (i)
interest payable on such indebtedness shall be calculated at a rate not to
exceed the rate announced by ▇▇▇▇▇▇ Guaranty Trust Company from time to time
as its "prime rate" plus one percent (1%) (as in effect on the first day of
each calendar quarter, as adjusted as of the first day of each succeeding
calendar quarter to reflect such rate in effect on such date) or the highest
lawful rate, whichever is less, and (ii) in no event shall such indebtedness
be on terms and conditions less favorable to the Partnership than the
Partnership could obtain from
- 43 -
unaffiliated third parties or banks for the same purpose (without reference
to the General Partners' financial abilities or guarantees). In the event
that ▇▇▇▇▇▇ Guaranty Trust Company should during the term of this Agreement
abandon or abolish the practice of announcing an established "prime rate,"
the "prime rate" used during the remainder of said term for purposes of this
Agreement shall be the rate from time to time charged by ▇▇▇▇▇▇ Guaranty
Trust Company to its preferred commercial customers for unsecured short-term
loans. A certificate signed by an officer of ▇▇▇▇▇▇ Guaranty Trust Company
shall be binding and conclusive evidence of the "prime rate" in effect from
time to time.
(c) No loans shall be made by the Partnership to a General Partner
or any of its Affiliates.
7.14. PERIODIC CONSIDERATION OF SALE OR REFINANCING.
Commencing with the year 2000 and continuing once every five (5)
years thereafter, the Managing General Partner may consider whether or not,
in the reasonable judgment of the Managing General Partner, it would be in
the interest of the Partnership to effectuate a sale or refinancing of all or
a portion of the Restricted Restaurant Properties held as of the Effective
Date, with the proceeds of any such sale or financing to be distributed to
the Partners in accordance with Article VI. If the Managing General Partner,
in its reasonable judgment, determines that such a sale or financing would be
in the interest of the Partnership, then the Managing General Partner intends
to use reasonable efforts to cause the Partnership to effectuate such a sale
or financing; provided, however, that any such sale or other disposition of
part or all of such Restricted Restaurant Properties shall be subject to
Sections 7.3 and 8.4. This Section 7.14 does not constitute an obligation of
the Managing General Partner, but merely represents an expression of intent
by the Managing General Partner, as of the time of the Amended Agreement, as
to the manner in which it expected to manage the Partnership. In no event
shall any sale or financing transaction in connection with this Section 7.14
involve or require any direct or indirect financial obligation or other
financial support on the part of the Managing General Partner, BKC, TPC or
any Affiliate of the foregoing.
7.15. OTHER LIMITATIONS.
The following additional limitations shall apply to the operation and
management of the Partnership:
(a) No General Partner shall receive for its account any kickbacks
or rebates with respect to expenditures made by or on behalf of the
Partnership, nor shall any General Partner enter into any reciprocal
arrangement that has the effect of circumventing this Section 7.15(a) or
Section 9.1;
(b) The Partnership shall not grant any General Partner an exclusive
right, as agent, to sell any Partnership Property or other Partnership Asset;
and
- 44 -
(c) No commission or other fee shall be payable to a General
Partner, directly or indirectly, in connection with the distribution or
reinvestment of any Net Proceeds of a Capital Transaction, except as provided
in Section 9.3.
ARTICLE VIII
ACQUISITION, OPERATION, AND DISPOSITION
OF RESTRICTED RESTAURANT PROPERTIES
8.1. GENERAL.
(a) The Partners hereby expressly agree that, in addition to any
other provisions of this Agreement, the acquisition, ownership, operation and
disposition of the Partnership Properties by the Partnership shall be in
accordance with, and shall be subject to, the provisions, restrictions and
limitations set forth in this Article VIII; provided that, except for Section
8.13, this Article VIII shall not apply to any of the Other Restaurant
Properties or the Retail Properties. The Partners further expressly agree
that any action taken by a General Partner or Affiliate thereof in accordance
with, or pursuant to, the provisions of this Article VIII conclusively shall
be deemed to be fair to and in the best interests of the Partnership, the
Limited Partners and the General Partners, and the fact that an action of a
General Partner or an Affiliate is undertaken in accordance with, or pursuant
to, this Article VIII shall be a complete and absolute defense to any claim
or action asserting the invalidity of such action or any claim or action for
damages or other relief based upon an assertion that such action resulted in
a breach by a General Partner or an Affiliate of this Agreement or any duty,
fiduciary or otherwise, owed by the General Partners and their affiliates to
the Partnership or the Limited Partners.
(b) The Partners expressly acknowledge and agree that the
provisions, restrictions and limitations set forth in this Article VIII are
reasonable in all respects, are pursuant to and consistent with the purposes
of the Partnership, are necessary to induce BKC to enter into the Real Estate
Purchase Agreement and to otherwise deal with Restricted Restaurant
Properties, and are necessary to protect the business and interests of BKC
and the Partnership. In the event that the Partnership shall breach or
violate or fail to perform any of its obligations set forth in this Article
VIII, then, at the option of BKC, BKC shall be entitled to proceed to enforce
the obligations of the Partnership hereunder by any action at law, suit in
equity, or other appropriate proceeding, whether for damages, for special
performance of an obligation contained herein or for an injunction or other
equitable remedy against any violation of the provisions hereof. The
Partnership hereby agrees to indemnify and hold harmless BKC from and against
any assessment, payment, damage, expense, loss, cost, liability or deficiency
(including, without limitation, interest, penalties and reasonable attorneys'
fees and disbursements) incurred by BKC in enforcing or sustaining the
provisions hereof or resulting from or in connection with any such breach,
violation, or failure.
- 45 -
8.2. CONTRIBUTION TO PARTNERSHIP; ACQUISITION OF RESTRICTED RESTAURANT
PROPERTIES.
The Managing General Partner has previously caused the Partnership to
acquire certain Restricted Restaurant Properties from BKC in accordance with
and subject to the terms and conditions set forth in the Real Estate Purchase
Agreement, including the exhibits thereto, and caused the Partnership to pay
to BKC the purchase price for such Restricted Restaurant Properties specified
in the Real Estate Purchase Agreement.
8.3. USE AND OTHER RESTRICTIONS.
(a) Except as otherwise expressly provided in this Section 8.3, the
Partnership shall not, without the prior written consent of BKC, in its sole
and absolute discretion, use any Restricted Restaurant Property or permit any
Restricted Restaurant Property to be used for any purpose other than the
operation thereon of a BK Restaurant and other uses related thereto.
(b) (i) In furtherance of the provisions of Section 8.3(a), in the event
that BKC renews or extends a BKC Franchise Agreement with respect to a
Restricted Restaurant Property at any time at or prior to the expiration
of such BKC Franchise Agreement, then, regardless of the duration of
such renewal or extension the Partnership promptly shall, without
additional charge, renew or extend the lease of the Restricted
Restaurant Property to such BKC Franchisee for a period coterminous with
the period of such renewal or extension and for and upon substantially
the same rental and other terms and conditions as and upon which BKC is
then renewing or extending leases with BKC Franchisees for properties
owned or leased (as the case may be) by BKC, or in the event BKC at such
time is no longer renewing or extending leases with BKC Franchisees for
properties owned or leased (as the case may be) by BKC, then upon
substantially the same rental and other terms and conditions as and upon
which BKC most recently was renewing or extending such leases with BKC
Franchisees (except that, for purposes of determining the guaranteed
minimum rental thereunder, the lessor's "investment" in Restricted
Restaurant Properties held as of the Effective Date shall be deemed to
be equal to the sum of the investment of BKC with respect to such
Restricted Restaurant Property prior to the date of its acquisition by
the Partnership plus any investment by the Partnership with respect to
such Restricted Restaurant Property after such date (and in no event
shall such "investment" include the purchase price paid by the
Partnership to BKC for such Restricted Restaurant Property pursuant to
the Real Estate Purchase Agreement)); provided that the rental for such
lease may be greater than the rental upon which BKC is then (or, if
applicable, was) so renewing or extending such leases. Notwithstanding
anything to the contrary contained herein, any extension or renewal of a
lease of a Restricted Restaurant Property pursuant to the Successor
Policy shall be in accordance with the Successor Policy as then in
effect and Section 8.6 (including, without limitation, the provisions of
Section 8.6(b) relating to determination of the annual minimum rental
under a lease extended or renewed in accordance with the Successor
Policy). Without limiting the foregoing, the Managing General Partner,
in its sole and absolute discretion, at the request of BKC or a BKC
Franchisee, shall be permitted to consent to a renewal
- 46 -
or extension of a lease of a Restricted Restaurant Property for a rental
less favorable to the Partnership than the rental upon which BKC is then
renewing or extending leases with BKC Franchisees for properties owned
or leased (as the case may be) by BKC (or, if applicable, the rental
upon which BKC most recently was renewing or extending such leases with
BKC Franchisees) if BKC agrees to treat the excess of the rental at
which BKC is then renewing or extending such leases (or, if applicable,
the rental at which BKC most recently was renewing or extending such
leases) over the rental payable to the Partnership in connection with
such renewal or extension as "rent relief" subject to the provisions of
Section 8.5.
(ii) In the event that (A) either (1) a BKC Franchise Agreement
authorizing the operation of a BK Restaurant on a Restricted Restaurant
Property is terminated automatically, is terminated by BKC or is
terminated by the mutual agreement of the parties thereto prior to the
expiration of the stated term thereof, or (2) a BKC Franchise Agreement
expires according to the terms thereof and is not renewed or extended
by BKC at or prior to the expiration of such BKC Franchise Agreement,
and (B) during the six (6) month period commencing on the date of such
termination or expiration either (1) BKC and a Person that meets BKC's
then existing franchisee financial capability requirements enter into a
BKC Franchise Agreement authorizing such Person to operate a BK
Restaurant on the Restaurant Property, and BKC notifies the Partnership
thereof, or (2) BKC notifies the Partnership that BKC desires to operate
a BK Restaurant on the Restaurant Property, then the Partnership
promptly shall terminate any lease of the Restaurant Property with the
terminated BKC Franchisee (if such lease then has not terminated or
expired) and enter into a new lease of the Restaurant Property with the
new BKC Franchisee or with BKC, as the case may be. The rental, duration
and other terms and conditions of any such new lease shall be
substantially the same as the rental, duration and other terms and
conditions as and upon which BKC is then entering into new leases with
BKC Franchisees for properties owned or leased (as the case may be) by
BKC, or in the event BKC at such time is no longer entering into new
leases with BKC Franchisees for properties owned or leased, as the case
may be, by BKC, then substantially the same rental duration and other
terms and conditions as and upon which BKC most recently was entering
such leases with BKC Franchisees (except that, for purposes of
determining the guaranteed annual minimum rental thereunder, the
lessor's "investment" in Restricted Restaurant Properties held as of
the Effective Date shall be deemed to be equal to the sum of the
investment of BKC with respect to such Restaurant Property prior to the
date of its acquisition by the Partnership plus any investment of the
Partnership with respect to such Restaurant Property after such date
(and in no event shall such "investment" include the purchase price paid
by the Partnership to BKC for such Restricted Restaurant Property
pursuant to the Real Estate Purchase Agreement)). Without limiting the
foregoing, the Managing General Partner, in its sole and absolute
discretion, at the request of BKC or a BKC Franchisee, shall be
permitted to enter into a new lease of a Restricted Restaurant Property
for a rental less favorable to the Partnership than the rental upon
which BKC is then entering into leases with BKC Franchisees for
properties owned or leased (as the case may be) by BKC (or, if
- 47 -
applicable, the rental upon which BKC most recently was entering into
such leases with BKC Franchisees) if BKC agrees to treat the excess of
the rental at which BKC is then entering into such leases (or, if
applicable, the rental at which BKC most recently was entering into
such leases) over the rental payable to the Partnership in connection
with such new lease as "rent relief" subject to the provisions of
Section 8.5. During the period (the "Determination Period") that BKC
is considering whether to enter into a new BKC Franchise Agreement with
respect to the Restricted Restaurant Property or operate itself a BK
Restaurant on the Restricted Restaurant Property (but in no event after
the expiration of the six (6) month period described in clause (B)
above), BKC shall pay to the Partnership an amount equal to the excess
of the guaranteed amount rental payable to the Partnership under the
terminated BKC Franchisee's lease for the Determination Period (computed
without regard to any termination or expiration of such lease) over the
amount of rent, if any, actually collected by the Partnership thereunder
for the Determination Period. The Partnership shall, at the expense of
BKC, take all such actions as BKC reasonably may request to enforce the
provisions of the terminated BKC Franchisee's lease applicable during
the Determination Period. If BKC does not, prior to the end of the
Determination Period, enter into a new BKC Franchise Agreement with
respect to the Restricted Restaurant Property or elect to operate itself
a BK Restaurant on the Restricted Restaurant Property, then subject to
Section 8.9 hereof, the Partnership shall be free to take such actions
with respect to the terminated BKC Franchisee's lease as the Partnership
may deem appropriate. Notwithstanding anything to the contrary
contained herein, BKC shall have the right at any time, upon written
notice to the Partnership, to terminate the Determination Period with
respect to any Restricted Restaurant Property, in which event all rights
and obligations of BKC in connection with such terminated Determination
Period shall terminate, effective as of the date on which the
Partnership receives such notice and as of the payment by BKC of all
amounts payable hereunder with respect to the Determination Period.
(iii) In the event that BKC approves the assignment by a BKC
Franchisee of a BKC Franchise Agreement with respect to a Restricted
Restaurant Property to another person or entity that meets BKC's then
existing franchisee financial capability requirements or to BKC, then,
subject to the assumption by such new BKC Franchisee or BKC, as the case
may be, of all of the former BKC Franchisee's obligations and
liabilities thereafter accruing under the former BKC Franchisee's lease
of the Restricted Restaurant Property, the Partnership promptly shall,
without additional charge, approve and permit the assignment of such
lease with respect to such Restricted Restaurant Property to the new
BKC Franchisee or to BKC, as the case may be. Upon such assignment and
assumption, the former BKC Franchisee, at the request of BKC, shall be
released from all obligations and liabilities thereafter accruing under
such lease; provided, however, that a release in connection with an
assignment or assumption shall be required pursuant hereto only if BKC,
as a matter of policy, is then granting such releases in connection with
the assignment or assumption of leases with BKC Franchisees for
properties owned or leased, as the case may be, by BKC. In addition to
the foregoing, in the event that BKC consents to the assignment by a BKC
Franchisee of a Franchise
- 48 -
Agreement with respect to a Restricted Restaurant Property to a
corporation in which such BKC Franchisee has a financial interest,
then, upon the request of such BKC Franchisee, the Partnership shall
approve the assignment of the BKC Franchisee's lease of such Restricted
Restaurant Property to such corporation upon the condition that such
BKC Franchisee shall remain fully responsible for all liabilities and
obligations accruing under such lease subsequent to such assignment.
(iv) The Partnership shall give BKC prompt written notice of the
occurrence of any default by a BKC Franchisee under any lease of a
Restricted Restaurant Property. BKC shall have the right (but not the
obligation), within the longer of thirty (30) days after the receipt by
BKC of such written notice of such default or any applicable grace
period provided to the lessee under such lease, to cure any default by
the lessee under such lease, and the Partnership shall not terminate
such lease unless such default is not cured within such applicable
period. The Partnership also shall give BKC prompt written notice of
the occurrence of any event which results automatically in the
termination of any such lease. BKC shall have the right (but not the
obligation), within thirty (30) days after receipt of such notice, to
assume all obligations and liabilities of the lessee under such lease
accruing from the date of such automatic termination. If BKC exercises
such right, then, as between BKC and the Partnership, such termination
shall be of no force or effect and shall be deemed not to have occurred.
(v) In furtherance of the provisions of Section 8.3(a), in the
event the Partnership acquires any Restricted Restaurant Property after
the Effective Date, the rental, duration and other terms and conditions
in the lease for the BKC Franchisee for such property shall be
substantially the same as the rental, duration and other terms and
conditions as and upon which BKC is then entering into new leases with
BKC Franchisees for properties owned or leased, as the case may be, by
BKC, or in the event BKC at such time is no longer entering into new
leases with BKC Franchisees for properties owned or leased, as the case
may be, by BKC, then upon substantially the same rental, duration and
other terms and conditions as upon which BKC most recently was entering
into such leases with BKC Franchisees. Notwithstanding the foregoing,
the rental for such leases may be greater than that which BKC is then
setting (or, if appropriate, was setting) for BKC Franchisees.
(c) Notwithstanding anything to the contrary contained in any lease
of a Restricted Restaurant Property to which a BKC Franchisee is a party, (i)
BKC shall have the right at any time, without obtaining the consent of the
Partnership, to assume the obligations and liabilities of the lessee
thereafter accruing under such lease, and thereupon, at the request of BKC,
such lessee shall be released from all obligations and liabilities thereafter
accruing thereunder; provided, however, that a release in connection with
such an assumption shall be required pursuant to this Section 8.3 only if
BKC, as a matter of policy, is then granting such releases in connection with
the assumption by BKC of leases with BKC Franchisees for properties owned or
leased, as the case may be, by BKC; and (ii) at any time after any such
assumption by BKC, BKC shall have the right, without obtaining the consent of
the Partnership, to assign such lease
- 49 -
to a Person that meets BKC's then existing franchisee financial capability
requirements, and upon such assignment and the assumption by such Person of
all obligations and liabilities of BKC thereafter accruing under such lease,
BKC shall be released from all obligations and liabilities thereafter
accruing thereunder.
(d) (i) In the event that BKC notifies the Partnership that BKC has
extended or renewed a BKC Franchise Agreement with respect to a Restricted
Restaurant Property that is subject to a Primary Lease for a term coterminous
with one or more permitted renewal terms available under such Primary Lease, or
(ii) in the event that BKC notifies the Partnership that either (A) BKC has
entered into a new BKC Franchise Agreement with a Person that meets BKC's then
existing financial capabilities requirements authorizing such Person to operate
a BK Restaurant on a Restricted Restaurant Property that is subject to Primary
Lease for a term coterminous with one or more permitted renewal terms available
under such Primary Lease, or (B) BKC has decided to operate a BK Restaurant on a
Restricted Restaurant Property that is subject to a Primary Lease for a term
coterminous with one or more permitted renewal terms available under such
Primary Lease, then in any such event, in addition to any other requirements of
this Section 8.3, the Partnership promptly shall renew the applicable Primary
Lease for a term no shorter than the term of the extended, renewed or new BKC
Franchise Agreement, as the case may be, or in the case of BKC's election to
operate a BK Restaurant at such Restricted Restaurant Property, for a term no
shorter than the term of BKC's lease with the Partnership with respect to such
Restricted Restaurant Property.
(e) Unless otherwise expressly waived by BKC in writing, the
restrictions and other provisions of this Section 8.3 shall remain in effect
and shall be enforceable with respect to each Restricted Restaurant Property
by BKC during the period commencing on the date of the Amended Agreement and
ending on the earliest of (i) a transfer by the Partnership of all of its
right, title and interest in and to all of such Restricted Restaurant
Property pursuant to Section 8.4(f) following the failure of BKC to elect to
acquire all of the Restricted Restaurant Property pursuant to an offer
thereof to BKC under Section 8.4(d) or the failure of BKC to close the
acquisition thereof on the date required by Section 8.4(e); (ii) a BKC
Franchise Agreement is terminated by BKC or by the mutual agreement of the
parties thereto prior to the expiration of the stated term thereof and BKC
does not, prior to the end of the Determination Period, enter into a new BKC
Franchise Agreement with respect to the Restricted Restaurant Property or
elect to operate itself a BK Restaurant on the Restricted Restaurant
Property; or (iii) a BKC Franchise Agreement with respect to a Restricted
Restaurant Property expires according to the terms thereof and BKC does not
either (A) renew or extend the same at or prior to the expiration thereof or
(B) prior to the end of the Determination Period, enter into a new BKC
Franchise Agreement with respect to the Restricted Restaurant Property or
elect to operate itself a BK Restaurant on the Restricted Restaurant
Property; provided, however, if the duration of such period would render the
restrictions or other provisions of this Section 8.3 invalid or unenforceable
under any law of the jurisdiction in which a Restricted Restaurant Property
is located limiting the period during which such restrictions or other
provisions may endure, then such period shall continue with respect to such
Restricted Restaurant Property only for such term as may be prescribed by the
laws of such jurisdiction. It is the express intent of BKC, the Partnership,
and the Partners
-50-
that such restrictions and other provisions shall be valid and enforceable to
the fullest extent permitted by the laws of such jurisdiction.
(f) Notwithstanding anything to the contrary in this Section 8.3 or
elsewhere in this Agreement, nothing contained herein or elsewhere shall affect
the right of BKC, in its sole and absolute discretion, to terminate a BKC
Franchise Agreement, to renew or extend or fail to renew or extend a BKC
Franchise Agreement, to approve or disapprove any assignment of a BKC Franchise
Agreement, to elect to enter into a new BKC Franchise Agreement with respect to
a Restricted Restaurant Property or to operate itself a BK Restaurant on the
Restricted Restaurant Property, to amend or modify a BKC Franchise Agreement or
to take or fail to take any other action in connection with a BKC Franchise
Agreement.
(g) Notwithstanding any other provision of this Agreement, the
Partners hereby expressly agree that the Managing General Partner shall have
no duty, under any circumstances whatsoever, to seek to sell, or to consider
any offer to purchase, any Restricted Restaurant Property so long as such
Restricted Restaurant Property is subject to the restrictions and other
provisions of this Section 8.3, and the fact that a Restricted Restaurant
Property is subject to the restrictions and provisions of this Section 8.3
shall be a complete and absolute defense to any claim or action for damages
or other relief based upon a claim or action for damages or other relief
based upon a failure of the Managing General Partner to solicit or consider
offers to purchase such Restricted Restaurant Property, irrespective of the
terms of any such offer that may be received by the Managing General Partner.
8.4. RESTRICTIONS ON TRANSFER OF RESTRICTED RESTAURANT PROPERTIES.
(a) For purposes of this Section 8.4, the term "transfer," with
respect to a Restricted Restaurant Property, shall include a sale, lease,
sublease, gift, mortgage, deed of trust, exchange, assignment or other
disposition, including a disposition under judicial order, legal process,
execution, attachment or enforcement or foreclosure of an encumbrance, but
shall not include the following: (i) a mortgage, deed of trust, grant of
security interest or other encumbrance effected in a bona fide transaction
with an unrelated and unaffiliated secured party, or with BKC, the Managing
General Partner or any Affiliate thereof, to secure indebtedness of the
Partnership for money borrowed from such secured party, which mortgage, deed
of trust, grant of security interest or other encumbrance is made pursuant to
a written security agreement, mortgage, deed of trust or other agreement that
assures that, before any foreclosure may be had thereon or other transfer may
occur thereunder or in connection therewith, the secured party shall first
notify BKC in writing of its intent to foreclose or effect another transfer
and shall first offer the Restricted Restaurant Property to BKC at the price
and on the other terms and conditions specified in a written offer from a
prospective purchaser (which may be the secured party) in connection with
such foreclosure or other transfer; (ii) a lease or sublease to BKC or a BKC
Franchisee in order to permit the operation of a BK Restaurant on a
Restricted Restaurant Property; (iii) a grant of easement, right-of-way or
other right with respect to a Restricted Restaurant Property to any public
utility or other governmental authority in connection with the provision of
utility or other public service (but such grant shall comply with the
provisions of Section 8.4(b)); or (iv) a
-51-
transfer to a governmental authority pursuant to or in connection with a
condemnation or other exercise of the power of eminent domain.
(b) The Partnership shall not, without the prior written consent
of BKC, in BKC's sole and absolute discretion: (i) at any time that a
Restricted Restaurant Property is being leased to BKC or a BKC Franchisee in
order to permit BKC or such BKC Franchisee to operate a BK Restaurant on the
Restricted Restaurant Property or during any applicable Determination Period,
lease or sublease all or any part of a Restricted Restaurant Property to any
other Person, whether or not such other lease would be subject or subordinate
to the lease to BKC or the BKC Franchisee; or (ii) grant or convey any
easement, right-of-way or other right with respect to such Restricted
Restaurant Property if the grant or use thereof would have a material adverse
effect upon the operation of a BK Restaurant on the Restricted Restaurant
Property.
(c) Except as provided in Section 8.4(b), the Partnership shall
not transfer (as defined in Section 8.4(a)) any right, title or interest in
or to any Restricted Restaurant Property, or any part thereof, to any person
or entity without first offering it to BKC in accordance with the provisions
of this Section 8.4(c). Subject to the provisions of Section 8.4(b), if the
Partnership receives a bona fide written offer from an independent third
party to acquire in a transfer all or any part of any Restricted Restaurant
Property that the Partnership intends to accept, subject to this Section
8.4(c), then the Partnership shall offer such Restricted Restaurant Property
to BKC at the price and on the terms and conditions (including timing and
manner of payment) contained in such bona fide written offer. The offer of
such Restricted Restaurant Property to BKC (the "Offer") shall be made in
writing and shall be accompanied by a true and correct copy of the bona fide
written offer. The Partnership promptly shall provide or cause to be
provided to BKC such information relating to the Offer or the third-party
offeror as BKC reasonably may request.
(d) In order to accept the Offer, BKC shall, within thirty (30)
days after receipt of the Offer (or, if later, within five (5) business days
after receipt of all additional information reasonably requested by BKC
pursuant to Section 8.4(c) (such 30-day period and any extension under this
Section 8.4(d) to be referred to as the "Election Period")), notify the
Partnership in writing of its election to acquire such Restricted Restaurant
Property; provided, however, that BKC shall not be required to acquire such
Restricted Restaurant Property upon the terms and conditions of any
third-party offer the consideration for which is not practicably obtainable
by BKC (such as, by way of example and not of limitation, specific land,
stock in a closely held corporation or stock in a publicly held corporation
that cannot be acquired by BKC without an increase in the trading price
thereof or without registration or filing under any federal or state
securities law), but BKC shall have the right to acquire such Restricted
Restaurant Property upon terms and conditions (including consideration)
reasonably equivalent to those contained in such offer; and provided further,
that the failure of BKC to acquire such Restricted Restaurant Property upon
any such reasonably equivalent terms or conditions shall not permit the
Partnership to transfer such Restricted Restaurant Property pursuit to
Section 8.4(f). Failure of BKC to provide such written notice within the
Election Period shall constitute a refusal by BKC to purchase such Restricted
Restaurant Property pursuant to the Offer.
-52-
(e) The closing date of any acquisition of such Restricted Restaurant
Property by BKC hereunder shall be on the date fixed in the third-party offer
unless such closing date would occur prior to the expiration of twenty (20)
business days after the last day of the Election Period, in which event the
closing date shall occur on such twentieth (20th) business day or on such other
date to which BKC and the Partnership may agree.
(f) If BKC shall fail to elect to acquire such Restricted Restaurant
Property pursuant to Section 8.4(d), or shall fail to close the acquisition on
the date required by Section 8.4(e), then the Partnership shall be free, for a
period of sixty (60) days after either such failure, to transfer such Restricted
Restaurant Property to the bona fide third-party offeror for a price and on
other terms and conditions contained in such third-party offer. If such
Restricted Restaurant Property is not so transferred by the Partnership within
such sixty (60) day period, all rights of the Partnership to transfer such
Restricted Restaurant Property free of the foregoing restrictions shall
terminate and such Restricted Restaurant Property again shall be subject to the
provisions of this Section 8.4.
(g) Unless otherwise expressly waived by BKC in writing, the
provisions of this Section 8.4 shall remain in effect and the rights granted
hereunder shall be exercisable and enforceable by BKC with respect to each
Restricted Restaurant Property during the period commencing on the date of
the Amended Agreement and ending on the earlier of (i) the date that the
Partnership first ceases to hold any right, title or interest (including an
interest as a creditor) in or to such Restricted Restaurant Property or (ii)
the date that the use restrictions set forth in Section 8.3 terminate or
would have terminated but for an early termination pursuant to the provisions
contained in Section 8.3(e); provided, however, that if the duration of such
period would render the provisions of this Section 8.4 or the rights of BKC
hereunder invalid or unenforceable under the rule against perpetuities as
applied in the jurisdiction in which a Restricted Restaurant Property is
located, then such period shall continue with respect to such Restricted
Restaurant Property only until the expiration of the longest of the following
periods which shall be valid under the rule against perpetuities as applied
in such jurisdiction: (i) the period ending twenty-one (21) years after the
death of the survivor of the legitimate natural or adopted children and
grandchildren of U.S. Presidents Kennedy, Johnson, Nixon, Ford, ▇▇▇▇▇▇ and
▇▇▇▇▇▇ alive on the date of the Amended Agreement; (ii) twenty-one (21) years
after the date of the Amended Agreement; or (iii) such other term as may be
statutorily prescribed in such jurisdiction. It is the express intent of
BKC, the Partnership and the Partners that the provisions hereof and rights
of BKC hereunder shall be exercisable and enforceable by BKC to the fullest
extent permitted by the laws of such jurisdiction.
8.5. RENT RELIEF.
(a) The Managing General Partner, in its sole and absolute
discretion, at the request of BKC or a BKC Franchisee, shall be permitted to
cause the Partnership to grant "rent relief" (as defined in Section 8.5(b))
to a BKC Franchisee with respect to any Restricted Restaurant Property upon
the condition that BKC agree to make a quarterly payment to the Partnership
for each fiscal quarter (with such payment to be due and payable thirty (30)
days after the end of
-53-
each such fiscal quarter) during which such "rent relief" is in effect,
irrespective of whether or not the Partnership subsequently sells or
otherwise disposes of such Restricted Restaurant Property while such "rent
relief" is in effect in an amount equal to the product of (i) the total
dollar amount of the rent reduction with respect to such Restricted
Restaurant Property effective for such fiscal quarter pursuit to such "rent
relief" multiplied by (ii) a fraction, (A) the numerator of which is the
dollar amount of the franchise royalty fee payable to BKC with respect to
such Restricted Restaurant Property for such fiscal quarter (exclusive of any
amount required under the applicable BKC Franchise Agreement to be expended
by BKC for advertising and any other income to BKC) (the "Franchise Royalty
Fee") and (B) the denominator of which is the sum of the Franchise Royalty
Fee and the dollar amount of rent payable with respect to such Restricted
Restaurant Property for such fiscal quarter (determined without regard to any
"rent relief" applicable with respect to such Restricted Restaurant Property)
(the "Rental Amount"). By way of illustration, if the applicable Franchise
Royalty Fee for a Restricted Restaurant Property for a particular fiscal
quarter were $35,000 and the applicable Rental Amount for such Restricted
Restaurant Property for such fiscal quarter were $100,000, and if the
Partnership, at the request of BKC or at the request of a BKC Franchisee and
with the consent of BKC, were to grant "rent relief" with respect to such
Restricted Restaurant Property for such fiscal quarter in the amount of
$20,000, then BKC would be obligated to pay to the Partnership $5,185 (the
product of $35,000/$135,000 multiplied by $20,000) within thirty (30) days
after the end of such fiscal quarter. The obligation of BKC to make payments
to the Partnership in connection with "rent relief" granted hereunder shall
continue until the "rent relief" terminates (or, if sooner, the lease with
respect to which the "rent relief" is granted terminates or expires),
notwithstanding any intervening sale or other disposition by the Partnership
of the Restricted Restaurant Property with respect to which such "rent
relief" is granted.
(b) As used here the term "rent relief" shall mean (i) any permanent
reduction in rent payable with respect to a Restricted Restaurant Property, (ii)
any temporary reduction in rent payable with respect to a Restricted Restaurant
Property (A) if such temporary reduction is for a period in excess of either
ninety (90) consecutive days or ninety (90) days, whether or not consecutive, in
any Fiscal Year, or (B) if such temporary reduction is granted while a BK
Restaurant is being replaced, reconstructed, expanded, or otherwise improved
under the Successor Policy to take into account the fact that such BK Restaurant
is not operating or is operating on a limited basis during such period, or (C)
if such temporary reduction is for a period of ninety (90) consecutive days or
less and the Managing General Partner specifically designates such reduction as
"rent relief" subject to this Section 8.5; provided, however, that in no event
shall the term "rent relief" include any reduction in rent payable with respect
to a Restricted Restaurant Property granted in connection with the Successor
Policy if such reduction in rent payable is subject to Section 8.6(b).
Notwithstanding anything to the contrary herein, the Managing General Partner
shall not be considered to have caused the Partnership to grant "rent relief"
hereunder, and no payment from BKC to the Partnership shall be due hereunder, as
the result of or in connection with any failure of a BKC Franchisee, without the
express written consent of the Managing General Partner, to make any payment of
rent due the Partnership with respect to a Restricted Restaurant Property (1) if
such failure does not continue for a period in excess of ninety (90) consecutive
days, or (2) if either the lease with such BKC Franchisee shall have
-54-
automatically terminated or the Managing General Partner shall have caused the
Partnership to seek to terminate the Partnership's lease with such BKC
Franchisee with respect to such Restricted Restaurant Property and in either
event, the Managing General Partner shall have caused the Partnership to
initiate and pursue such action (including litigation, if appropriate) against
such defaulting BKC Franchisee as the Managing General Partner, in its sole and
absolute discretion, shall determine to be appropriate under the circumstances
in order to obtain payment of rents (including lost rent) due the Partnership
under its lease with the defaulting BKC Franchisee. In the event that BKC makes
any payment to the Partnership pursuant to this Section 8.5 in connection with
"rent relief" deemed granted hereunder and the Partnership subsequently shall
collect such "rent relief" from the BKC Franchisee, then the Partnership shall
refund to BKC the amount paid by BKC in connection with such "rent relief."
8.6. SUCCESSOR POLICY.
BKC maintains the Successor Policy relating to the extension and/or
renewal of BKC Franchise Agreements with BKC Franchisees. In connection with
such extensions and/or renewals, the Successor Policy, in order to help
ensure that the BK Restaurant system remains competitive, makes provision for
the replacement, reconstruction, expansion and/or other improvement
(collectively, "rebuilding") of existing BK Restaurants owned or leased by
BKC and leased or subleased to BKC Franchisees if such BK Restaurants meet
certain criteria established by BKC. Under the Successor Policy as currently
in effect, BKC must determine whether or not a BK Restaurant should be
rebuilt. If BKC determines that a BK Restaurant should be rebuilt under the
Successor Policy and BKC elects to pay the cost of rebuilding, then the terms
of the lease with respect to such BK Restaurant is extended and the BKC
Franchisee's guaranteed "minimum rental" payable under such lease is
adjusted. In the event BKC does not elect to pay the cost of rebuilding a BK
Restaurant designated by BKC to be rebuilt under the Successor Policy, then,
with the consent of BKC, the BKC Franchisee can elect to pay such cost, in
which event the percentage rent payable with respect to such BK Restaurant is
reduced from 8.5 percent (8.5%) to 5.5 percent (5.5%) of annual gross sales
at such BK Restaurant, the term of the lease with respect to such BK
Restaurant is extended and the guaranteed minimum rent payable under such
lease is adjusted. The Managing General Partner shall cause the Partnership
to implement, with respect to the Restricted Restaurant Properties, those
aspects of the Successor Policy related to the rebuilding of BK Restaurants,
as such policy is currently in effect and as such policy may be modified,
amended, supplemented, superseded or replaced by BKC from time to time in its
sole and absolute discretion, in order to cause those Restricted Restaurant
Properties designated by BKC, in its sole and absolute discretion, to be
rebuilt under such Successor Policy to be rebuilt, subject to satisfaction by
BKC of the following conditions:
(a) In the event that the BKC Franchisee for a Restricted Restaurant
Property that is designated by BKC to be rebuilt under the Successor Policy does
not pay the cost of such rebuilding, then the Managing General Partner shall
cause the Partnership to rebuild such Restricted Restaurant Property upon the
condition that BKC pay to the Partnership, at the time such rebuilding is
commenced, an amount equal to the product of (i) the total dollar amount of
funds to be expended by the Partnership for purposes of rebuilding such
Restricted Restaurant
-55-
Property multiplied by (ii) a fraction, (A) the numerator of which is the
weighted annual average of the percentage rates applicable for determining
the franchise royalty fees payable to BKC with respect to such Restricted
Restaurant Property over the remaining term of the lease under the BKC
Franchise Agreement in effect with respect to such Restricted Restaurant
Property (exclusive of any amounts required under the applicable BKC
Franchise Agreement to be expended by BKC for advertising and other income to
BKC) (the "Average Franchise Royalty Rate") and (B) the denominator of which
is the sum of the Average Franchise Royalty Rate and the weighted annual
average of the percentage rates applicable for determining the percentage
rent payable to the Partnership with respect to such Restricted Restaurant
Property on the basis of sales over the remaining term of the lease with the
BKC Franchisee in effect with respect to such Restricted Restaurant Property
(the "Average Percentage Rent Rate"). By way of illustration, if the
applicable Average Percentage Rent Rate for a particular Restricted
Restaurant Property were 8.5 percent (8.5%) and the applicable Average
Franchise Royalty Rate for such Restricted Restaurant Property were 3.5
percent (3.5%), and if the total cost to rebuild such Restricted Restaurant
Property pursuant to the "Successor Policy" were $500,000, then BKC would be
obligated to pay to the Partnership, at the time the rebuilding of such
Restricted Restaurant Property commenced, $145,833 (the product of 3.5/12
multiplied by $500,000). The Managing General Partner shall cause the
Partnership to pay the Partnership's share of the cost of rebuilding a
Restricted Restaurant Property to rebuilt under the Successor Policy, in its
sole and absolute discretion, (1) from current operating cash flow of the
Partnership or otherwise to the extent available or (2) with funds borrowed
from a lender (including, subject to Section 7.13, BKC or any Affiliate of
BKC) on such terms and conditions as the Managing General Partner shall, in
its sole and absolute discretion, determine advisable, with the payments of
principal and interest required with respect to any such loan to be paid from
operating cash flow to the extent available; and
(b) In the event that the BKC Franchisee for a Restricted Restaurant
Property that is designated by BKC to be rebuilt under the Successor Policy pays
the cost of such rebuilding and thus would be entitled to a reduction in rent
payable with respect to such Restricted Restaurant Property, then BKC would make
a quarterly payment to the Partnership for each fiscal quarter during the period
during which such rent reduction is in effect, irrespective of whether or not
the Partnership subsequently sells or otherwise disposes of such Restricted
Restaurant Property while such rent reduction is in effect (with such payment to
be due and payable thirty (30) days after the end of each such fiscal quarter)
in an amount equal to the product of (i) the total dollar amount of the rent
reduction effective with respect to such fiscal quarter pursuant to the
"Successor Policy" multiplied by (ii) a fraction, (A) the numerator of which is
the percentage rate for determining the franchise royalty fee payable to BKC
with respect to such Restricted Restaurant Property for such fiscal quarter
(exclusive of any amount required under the applicable BKC Franchise Agreement
to be expended by BKC for advertising and other income to BKC) (the "Franchise
Royalty Rate"), and (B) the denominator of which is the sum of the Franchise
Royalty Rate and the percentage rate for determining the rent payable to the
Partnership with respect to such Restricted Restaurant Property on the basis of
sales for such fiscal quarter (the "Percentage Rent Rate"). By way of
illustration, if the applicable Percentage Rent Rate for a Restricted Restaurant
Property for a particular fiscal quarter were 8.5 percent (8.5%) and the
-56-
applicable Franchise Royalty Rate for such Restricted Restaurant Property for
such fiscal quarter were 3.5 percent (3.5%), and if the BKC Franchisee for such
Restricted Restaurant Property were to be entitled under the Successor Policy to
a reduction in the applicable Percentage Rent Rate to 5.5 percent (5.5%) if such
BKC Franchisee were to rebuild such Restricted Restaurant Property pursuant to
the Successor Policy, then, assuming that such BKC Franchisee's rent payable
following such rent reduction exceeds the minimum base rent payable to the
Partnership with respect to such fiscal quarter, BKC would be obligated to pay
to the Partnership an amount equal to the product of (i) 3.5/12 multiplied by
(ii) the product of (A) 3 percent (3%) multiplied by (B) the gross sales at such
Restricted Restaurant Property for such fiscal quarter. The obligation of BKC
to make payments to the Partnership under this Section 8.6(b) in connection with
a rent reduction granted hereunder shall continue until the lease under which
such rent reduction is granted terminates or expires, notwithstanding any
intervening sale or other disposition by the Partnership of the Restricted
Restaurant Property with respect to which such rent reduction is granted.
In the event the guaranteed minimum rent payable pursuant to any
lease with respect to a Restricted Restaurant Property is adjusted in
connection with the rebuilding of a BK Restaurant pursuant to the Successor
Policy, then notwithstanding any other provision of the Agreement or of the
Successor Policy, the "fair market value of the original property" for
purposes of determining the amount of such adjustment shall be equal to the
replacement cost of such property, as determined by the Appraiser.
Notwithstanding anything to the contrary herein, BKC, in its sole and
absolute discretion, may elect not to designate a particular Restricted
Restaurant Property to be rebuilt under the Successor Policy, in which event
the BKC Franchisee for such Restricted Restaurant Property shall be solely
responsible for the cost of rebuilding and shall not be entitled to any
reduction in rent payable with respect to such Restricted Restaurant
Property. BKC in no event shall be entitled to any fee or other payment from
the Partnership in connection with the rebuilding of a Restricted Restaurant
Property under the Successor Policy.
In addition to the foregoing, BKC, separate and apart from
implementation of the Successor Policy, from time to time may request that
the Partnership acquire property adjacent to a Restricted Restaurant Property
for purposes of permitting expansion of the BK Restaurant or related
facilities (such as parking) located on such Restricted Restaurant Property.
The Managing General Partner shall cause the Partnership to acquire any such
adjacent property upon the request of BKC upon the condition that BKC pay to
the Partnership, at the time such acquisition occurs an amount determined in
accordance with the formula set forth in Section 8.6(a).
8.7. COMPETITIVE FACILITIES.
Without in any way limiting the generality of Section 7.6, the Limited
Partner recognizes that BKC, TPC and Affiliates thereof are in the business of
establishing, own, leasing, operating, managing and franchising restaurants,
including, without limitation, BK Restaurants, and that in connection with such
businesses, BKC, TPC and/or Affiliates thereof may from time to time establish,
own, lease, operate, manage and/or franchise new restaurants, including, without
-57-
limitation, BK Restaurants. Both such existing restaurants and any such new
restaurants may be competitive with one or more of the Partnership Properties
and may adversely affect the revenues of the Partnership with respect to one or
more of the Partnership Properties. The Limited Partners expressly consent to
all actions of BKC, TPC and any Affiliate of either in connection both with
existing restaurants and with any new restaurants and agrees that neither BKC,
TPC and the Managing General Partner, nor any Affiliate of any of them shall
incur any liability to the Partnership or the Limited Partners as the result of
or in connection with any such action.
8.8. ACQUISITION OF RESTRICTED RESTAURANT PROPERTIES BY GENERAL PARTNERS OR
AFFILIATES.
Notwithstanding any other provision of this Agreement, including,
without limitation, Sections 7.2(v) and 8.4(d), (e) and (f), no Person that
is a General Partner or an Affiliate of a General Partner shall acquire any
Restricted Restaurant Property from the Partnership, whether by purchase,
exchange, or substitution, unless (a) the consideration received by the
Partnership for such Restricted Restaurant Property is at least equal to the
"fair market value" (as hereinafter defined) of such Restricted Restaurant
Property, as determined by the Appraiser and (b) such acquisition would not
result in the REIT failing to qualify as a "real estate investment trust"
under Section 856 of the Code; provided, however, that this Section 8.8 shall
have no application to any acquisition of a Restricted Restaurant Property by
BKC pursuant to Section 8.4 if, at the time of such acquisition, neither BKC
nor any Affiliate of BKC is a General Partner. Any acquisition of a
Restricted Restaurant Property, whether by purchase, exchange or
substitution, by a Person who is a General Partner or an Affiliate of a
General Partner for consideration that is at least equal to the "fair market
value" (as hereinafter defined) of such Restricted Restaurant Property, as
determined by the Appraiser, conclusively shall be deemed to be fair and in
the best interests of the Partnership. As used herein, the term "fair market
value" shall mean the value that would be obtained in an arm's-length
transaction between an informed and willing purchaser under no compulsion to
buy and an informed and willing seller under no compulsion to sell, as
determined by the Appraiser, using such method or methods of valuation as the
Appraiser determines most accurately reflect the value of the particular
Restricted Restaurant Property in question under the circumstances, provided
that for a period of five (5) years from _______________, 199___, the
Appraiser shall use the "capitalization of income" method (applying such
capitalization rate and other assumptions and adjustments as the Appraiser
determines appropriate under the circumstances) unless the Appraiser
determines that the use of such method would result in an understatement of
the value of the Restricted Restaurant Property with respect to which such
appraisal is being performed. For purposes of this Section 8.8, in the event
that any consideration to be received by the Partnership in exchange or
substitution for any Restricted Restaurant Property is in any form other than
money, then the "fair market value" of such consideration, as determined by
the Appraiser (or if such other consideration is in the form of property
other than real estate, by an appraiser experienced in valuing such other
property designated by the Appraiser), shall be required to be at least equal
to the "fair market value" of the Restricted Restaurant Property or
Properties to be transferred.
-58-
8.9. TERMINATION OF LEASE FOR RESTRICTED RESTAURANT PROPERTY FOLLOWING
TERMINATION OF BKC FRANCHISE AGREEMENT.
(a) In the event that (i) either (A) a BKC Franchise Agreement
authorizing the operation of a BK Restaurant is terminated by BKC or by the
mutual agreement of the parties thereto prior to the expiration of the stated
term thereof, or (B) a BKC Franchise Agreement expires according to the terms
thereof and is not renewed by BKC at or prior to the expiration of such BKC
Franchise Agreement, and (ii) BKC does not, prior to the end of the
Determination Period (as defined in Section 8.3), enter into a new BKC
Franchise Agreement with respect to the Restricted Restaurant Property or
elect to operate a BK Restaurant on the Restricted Restaurant Property, as
provided for in Section 8.3(b)(ii), then the Managing General Partner, in its
sole and absolute discretion, shall be permitted to cause the Partnership to
terminate any lease with a BKC Franchisee with respect to such Restricted
Restaurant Property if a default has occurred under such lease and either (1)
the Managing General Partner shall have caused the Partnership to initiate
and pursue such action (including, if appropriate, litigation) against such
defaulting lessee as the Managing General Partner, in its sole and absolute
discretion, shall determine to be reasonable under the circumstances in order
to obtain payment of amounts (including lost rent) due the Partnership under
such lease, or (2) the Managing General Partner or the defaulting lessee
shall have located a new lessee for the Restricted Restaurant Property for a
term at least as long as the remaining unexpired term under the lease to be
terminated and for a rent not lower than the minimum base rent payable under
such lease (or if the rent is lower than the minimum base rent payable under
the lease to be terminated, the defaulting lessee shall have agreed to be
contractually obligated to continue to pay to the Partnership an amount equal
to the difference between the rent payable under the new lease and the
minimum base rent payable under the lease to be terminated and shall have
provided adequate security, as determined by the Managing General Partner to
be reasonable under the circumstances, for such obligation).
(b) In addition to any termination in accordance with Section
8.9(a) and any termination in accordance with Section 8.3(b)(ii), the
Managing General Partner, in its sole and absolute discretion, shall be
permitted, without limitation, to cause the Partnership to terminate a lease
with a BKC Franchisee with respect to a Restricted Restaurant Property if the
BKC Franchise Agreement with respect to such Restricted Restaurant Property
is terminated in connection with or as a result of a condemnation involving
all or substantially all of a Restricted Restaurant Property or a casualty
materially adversely affecting the use of such Restricted Restaurant Property
for the purpose of operating a BK Restaurant for a period in excess of six
(6) months.
(c) The provisions of this Section 8.9 shall not limit or affect
in any way the termination of a lease with respect to a Restricted Restaurant
Property with a Person that is not and was not a BKC Franchisee. The
provisions of this Section 8.9 are for the benefit of the Partnership, the
Limited Partners, and the limited partners and stockholders of the Limited
Partners and their assignees, and shall not be deemed to create any rights
for the benefit of any other Persons, including, without limitation, any
lessees under leases with the Partnership.
-59-
8.10. INDEPENDENT CONSULTANT.
(a) The Managing General Partner, in its sole and absolute discretion,
shall be entitled but not required, to consult with the Independent Consultant
with respect to any action or proposed action affecting or relating to the
Partnership or the Limited Partners or their business. In the event that the
Managing General Partner shall elect to consult with the Independent Consultant
with respect to any such action or proposed action, then the Independent
Consultant shall advise the Managing General Partner whether such action or
proposed action is contrary to the interests of the Partnership or the Limited
Partner, as the case may be, taking into account, with respect to the Restricted
Restaurant Properties, that the original purpose of the Partnership and the MLP
was to acquire and hold real estate that is leased to BKC Franchisees for the
purpose of operating BK Restaurants and to derive revenues therefrom. The
Limited Partners expressly agree that any actions taken by the Managing General
Partner in accordance with the advice of the Independent Consultant conclusively
shall be deemed to be fair to and in the best interests of the Partnership, the
Limited Partners and the limited partners and stockholders of the Limited
Partners and their assignees, and the fact that an action of the Managing
General Partner is undertaken in accordance with the advice of the Independent
Consultant shall be a complete and absolute defense to any claim or action
asserting the invalidity of such action or any claim or action for damages or
other relief based upon an assertion that such action resulted in a breach by
the Managing General Partner or any of its Affiliates of this Agreement or any
duty, fiduciary or otherwise, owed by the Managing General Partner or any
Affiliate to the Partnership, the Limited Partners or the limited partners or
stockholders of the Limited Partners or their assignees. The Limited Partners
further acknowledge that the purpose of this Section 8.10 is to provide an
arrangement to facilitate outside consultation by the Managing General Partner
with respect to potential problems arising in connection with the management of
the Partnership and the Limited Partners and expressly agree that, in order to
induce the Managing General Partner to consent to this Section 8.10 and to
undertake such consultation from time to time as it determines appropriate,
neither the failure of the Managing General Partner to consult with the
Independent Consultant on any particular action or proposed action, nor the
failure of the Managing General Partner to act in accordance with the advice of
the Independent Consultant on any action or proposed action with respect to
which the Managing General Partner shall elect to consult with the Independent
Consultant, shall create any inference or presumption or otherwise constitute
evidence with respect to the fairness of such action or proposed action to the
Partnership, the Limited Partners or the limited partners or stockholders of the
Limited Partners or their assignees, as the case may be.
(b) In the event that the Independent Consultant designated in this
Agreement at any time is unable or unwilling to advise the Managing General
Partner on a particular matter or should inform the Managing General Partner
that it no longer is willing to serve as Independent Consultant, then the
Managing General Partner shall designate a substitute Independent Consultant, as
provided for below. The Managing General Partner shall have the right at any
time, in its sole and absolute discretion, to terminate the Independent
Consultant and to designate a substitute Independent Consultant, as provided for
below; provided, however, that the Managing General Partner shall have no
obligation to the Partnership or the Limited Partners, as the case
-60-
may be, to terminate the Independent Consultant under any circumstances, and
provided further that any termination of the Independent Consultant pursuant
to this Section 8.10(b) conclusively shall be deemed to be fair to and in the
best interests of the Partnership and the Limited Partners. Any substitute
Independent Consultant designated by the Managing General Partner pursuant to
this Section 8.10(b) shall have experience in advising or consulting about the
"fast food" business and shall be "financially independent" (as hereinafter
defined) of the Managing General Partner. A Person shall be deemed
"financially independent" of the Managing General Partner for purposes of this
Section 8.10 if such Person is not, and during the preceding four (4) years
has not been, a BKC Franchisee or Affiliate of the Managing General Partner,
of BKC, of TPC or of a BKC Franchisee; and (ii) such Person has not derived
more than fifteen percent (15%) of such Person's average annual gross revenues
over the preceding four (4) years from the Managing General Partner, BKC, TPC,
any BKC Franchisee and any Affiliate of any of the foregoing.
(c) The Managing General Partner, in its sole and absolute discretion,
either (i) may cause the Partnership to indemnify and hold harmless the
Independent Consultant upon such terms and conditions as the Managing General
Partner shall determine appropriate or (ii) may indemnify and hold harmless the
Independent Consultant upon such terms and conditions as the Managing General
Partner shall determine appropriate, in which event the Partnership shall
indemnify the Managing General Partner for any amounts required to be paid under
such indemnification; provided, however, that in either case, the terms and
conditions of such indemnification shall be no more favorable to the Independent
Consultant than the terms and conditions pursuant to which the General Partners,
their Affiliates and officers, directors, employees and agents of the General
Partners and their Affiliates are indemnified and held harmless pursuant to
Section 7.10.
8.11. CONSENT TO USE OF NAME AND TRADEMARKS.
BKC consents to the Partnership's use of the words "Burger King" in the
name of the Partnership and to the Partnership's use of the registered
trademarks and service marks Burger King-Registered Trademark-, Whopper-
Registered Trademark-, Whopper Junior-Registered Trademark- and the Burger King
bun halves logo in any registration statement filed by any Partner or any
Affiliate thereof, all sales materials and other documents prepared for use in
connection with any public offering by any Limited Partners, any reports to or
written communications with the Limited Partners and any reports filed by the
Partnership with any federal, state or local regulatory agency terminated upon
the withdrawal of BKC as the special general partner.
8.12. ACQUISITION OF FEE TITLE TO PROPERTIES SUBJECT TO PRIMARY LEASES.
The Managing General Partner shall have the right, in its sole and
absolute discretion, to cause the Partnership to acquire fee title to any
Restricted Restaurant Property that is subject to a Primary Lease, either
pursuant to a right of first refusal on behalf of the Partnership set forth in
such Primary Lease or otherwise. BKC shall have no obligation to the
Partnership in connection with any such acquisition.
-61-
8.13. LOCATION OF OTHER RESTAURANT PROPERTIES.
The Partnership shall not acquire any Other Restaurant Properties
within a two-mile radius of any Restricted Restaurant Property held as of
March 17, 1995.
ARTICLE IX
COMPENSATION OF GENERAL PARTNERS;
PAYMENT OF PARTNERSHIP EXPENSES
9.1. COMPENSATION TO GENERAL PARTNERS.
Except as expressly provided in Section 9.3 or 9.4, no General Partner
shall receive any compensation from the Partnership for services rendered in its
capacity as a general partner of the Partnership or the MLP. Notwithstanding
anything herein to the contrary, at such time as QSV ceases to be the Managing
General Partner or the managing general partner of the MLP, whether as a result
of the transfer of QSV's Partnership Interest pursuant to Section 11.2 (or
Section 12.2 of the Investors Partnership Agreement) or the withdrawal or
removal of QSV pursuant to Section 13.1 (or Section 14.1 or 14.2 of the
Investors Partnership Agreement) (other than removal for "cause," as defined in
the Investors Partnership Agreement), then QSV shall have the option, in its
sole discretion, to convert its Partnership Interest and its partnership
interest in the MLP and to either assign to the MLP or convert its rights (the
"Rights") under the provisions of Section 9.3 (and Section 9.3 of the Investors
Partnership Agreement) (collectively, the "Conversion") for the Acquisition
Price (as defined below), effective as of the date of such transfer, withdrawal
or removal, and upon such Conversion the successor Managing General Partner
shall cause the Partnership to issue to QSV Partnership Units in the amounts
provided for below.
In exchange for the Conversion of the Rights, as provided for above, and
the conversion of the QSV's Partnership Interest, in the event QSV elects to
effect the Conversion, QSV will receive the "Acquisition Price," consisting of
(a) the Initial Unit Consideration and (b) the Contingent Unit Consideration.
The Initial Unit Consideration consists of 850,000 Partnership Units (which
number or classification shall be adjusted to give effect to any
reclassification or change of the shares of Common Stock or Units, including,
without limitation, a split, or any merger or consolidation of the REIT or the
MLP, except the merger of the MLP with the REIT or a subsidiary thereof, or sale
of assets to another entity, occurring after March 31, 1997), with the number of
Partnership Units issuable hereunder being reduced (on a one-for-one basis) by
the number of Units or shares of Common Stock otherwise received by QSV in
connection with the Conversion. The portion of the Initial Unit Consideration
consisting of Partnership Units shall be issued by the Partnership as soon as
practicable following the date of the Conversion, but in no event later than 30
days thereafter.
The Contingent Share Consideration consists of up to a maximum number of
550,000 Partnership Units (which number or classification shall be adjusted to
give effect to any
-62-
reclassification or change of the Common Stock or Units, including, without
limitation, a split, or any merger or consolidation of the REIT or the MLP,
except the merger of the MLP with the REIT or any subsidiary thereof, or sale
of assets to another entity, occurring after March 31, 1997). The type and
number of securities issuable as the Contingent Share Consideration (subject
to the next sentence) shall be at the sole discretion of QSV. The exact
number of Partnership Units to be issued (which number shall be reduced on a
one-for-one basis by the number of Units otherwise received by QSV as part of
the Contingent Share Consideration) will be determined by dividing the (i)
amount by which the MGP Net Income (as defined below) for the 2000 Fiscal Year
exceeds $3,612,500 by (ii) $4.25, and rounding the resulting number up to the
nearest whole number. "MGP Net Income" means the dollar amount of fees and
distributions which would have been payable to QSV, as Managing General
Partner, by the Partnership for the 2000 Fiscal Year, pursuant to the
provisions of Section 9.3, had QSV operated the Partnership on a continuous
basis from the date of the Conversion through December 31, 2000 plus the
amounts that would have been payable to QSV pursuant to its aggregate 1.98%
general partnership interests in the Partnership and the MLP, less $775,000.
For example, if the MGP Net Income for the 2000 Fiscal Year would have
been $5,100,000 ($5,875,000 revenues less $775,000) then the Contingent Unit
Consideration would be an additional 350,000 Partnership Units.
The Contingent Unit Consideration, if any, shall be issued by the
Partnership as soon as practicable following the end of the 2000 Fiscal Year,
but in no event later than March 31, 2001.
9.2. EXPENSES IN CONNECTION WITH ORGANIZATION OF PARTNERSHIP AND INITIAL
PUBLIC OFFERING.
As set forth in the Real Estate Purchase Agreement, BKC as the then
special general partner of the Partnership at such time reimbursed the
Partnership for all fees, costs, and expenses actually incurred by the General
Partners and their Affiliates in connection with the organization of the
Partnership, the MLP and the Managing General Partner; the qualification of
the Partnership, the MLP and the Managing General Partner to do business in
any state in which the Managing General Partner determined that such
qualification was advisable; the registration of the Units under applicable
federal and state securities laws in connection with the Initial Public
Offering; the offering, sale, and distribution of the Units pursuant to the
Initial Public Offering; the listing of the Units evidenced by depositary
receipts on a National Securities Exchange; the purchase of certain
Partnership Properties by the Partnership; and planning and preparing for the
operation and management of the Partnership and the MLP following the Initial
Public Offering, including, without limitation, (i) printing, mailing, filing
and recordation expenses; (ii) charges of agents, depositories, appraisers and
the underwriters of the Initial Public Offering; (iii) expenses of
registration and qualification of the Units under applicable federal and state
securities laws; (iv) legal (including tax advice) and accounting fees and
disbursements; (v) remuneration paid to officers or employees of any General
Partner or any Affiliate that is allocable to time spent on such activities;
and (vi) other expenses of a similar nature incurred by any General Partner or
any Affiliate in connection with such activities.
-63-
9.3. OPERATIONAL EXPENSES.
In addition to any reimbursement pursuant to the indemnification set
forth in Section 7.10, the Partnership, pursuant to this Section 9.3 and
Section 9.3 of the Investors Partnership Agreement, shall:
(a) With respect to (i) the Partnership Properties held as of March 17,
1995 and (ii) the Partnership Properties and Ancillary Property related thereto
acquired thereafter with respect to the Partnership Properties referred to in
clause (i) above whether pursuant to Section 8.12 or otherwise, the Partnership
shall cause to be paid to the Managing General Partner with respect to each
Fiscal Year an aggregate amount equal to Four Hundred Thousand Dollars
($400,000) adjusted annually as set forth in Section 9.3(c), which amount shall
be in lieu of any reimbursement for expenses related to the management of the
business affairs of the Partnership and the Limited Partner (other than expenses
described in Section 9.3 (c)) that are incurred by the Managing General Partner
or its Affiliates with respect to such Partnership Properties, which amount
shall be payable in equal quarterly installments within sixty (60) days after
the end of each fiscal quarter.
(b) With respect to any Partnership Property and Ancillary Property
related thereto acquired after March 17, 1995 (other than those referred to in
Section 9.3 (a)) and mortgage loans, if any, originated by the Partnership or
the MLP, (i) the Partnership shall pay to the Managing General Partner (A) an
acquisition fee equal to 1% of the purchase price paid by the Partnership or the
Limited Partner for such Partnership Property and Ancillary Property related
thereto, payable on the date of acquisition or origination, as applicable, and
(B) with respect to each Fiscal Year, an amount, adjusted annually as set forth
in Section 9.3(c), accruing while such property is held at the rate of 1% per
annum (applied using the simple interest method on the basis of a 365/366-day
year and the actual number of days elapsed) on the purchase price paid by the
Partnership or any of the Limited Partners for such Partnership Property and
Ancillary Property related thereto, and (ii) if the Rate of Return attributable
to all Partnership Properties and Ancillary Property related thereto acquired
after March 17, 1995 (other than those referred to in Section 9.3(a)) in respect
of any Fiscal Year shall exceed 12% per annum, the Partnership shall pay to the
Managing General Partner an amount equal to 25% of the amount of cash received
by the Partnership representing such excess, which amounts shall be in lieu of
any reimbursement of expenses related to the management of the business affairs
of the Partnership and the Limited Partners (other than expenses described in
Section 9.3(c)) that are incurred by the Managing General Partner or its
Affiliates with respect to such Partnership Properties and (except as provided
in clause (i)(A) of this Section 9.3(b)) shall be payable in quarterly
installments within sixty (60) days after the end of each fiscal quarter (which
may be estimated in the case of the first three fiscal quarters); provided that
there shall be credited against the amounts, if any, payable pursuant to clause
(ii) of this Section 9.3(b) in respect of any Fiscal Year amounts payable to the
Managing General Partner in respect of its First-Tier Residual Interest or
Second-Tier Residual Interest pursuant to Sections 6.5 and 6.6 of the Investors
Partnership Agreement in respect of such Fiscal Year. For purposes of the
calculations provided for in this Section 9.3 in the event of a mortgage loan
origination, the term "Partnership
-64-
Properties" shall be deemed to include any originated mortgage loans and the
"purchase price" of such mortgage loans will be the principal balances thereof
at the beginning of any Fiscal Year.
(c) The Partnership shall either pay, or reimburse the Managing General
Partner on a monthly basis for the payment of, all amounts payable to any Person
for providing goods or performing services (including, without limitation,
legal, accounting, auditing, recordkeeping, reporting, depositary, transfer
agent, printing, appraisal, servicing and consulting services) for or on behalf
of the Partnership or the Limited Partners; provided, however, that the
Partnership shall not pay, or reimburse the Managing General Partner for, the
payment of any amount to an Affiliate or an officer, director or employee of an
Affiliate for legal, accounting, managerial or consulting services; and provided
further, that the Partnership shall pay, or shall reimburse the Managing General
Partner for, a payment to an Affiliate or an officer, director or employee of an
Affiliate for goods or other services only if the price and the terms upon which
such goods or services are provided to the Partnership or the Limited Partners
are fair to the Partnership or the Limited Partners, as the case may be, and are
not less favorable to the Partnership or the Limited Partners, as the case may
be, than would be incurred if the Partnership or the Limited Partners were to
obtain such goods or services from an unrelated third party or were to engage
employees to provide such goods or services directly.
For 1987 and for each Fiscal Year thereafter, the amount payable
pursuant to Section 9.3(a) shall be increased by an amount equal to the
product of Four Hundred Thousand Dollars ($400,000) multiplied by the
percentage increase in the Price Index from January 1, 1986, through the last
day of the immediately preceding Fiscal Year. For each year after the year in
which a Partnership Property is acquired, the amount otherwise payable
pursuant to Section 9.3 (b)(i)(B) (the "Section 9.3(b)(i)(B) Amount") shall be
increased by an amount equal to the product of the Section 9.3(b)(i)(B) Amount
multiplied by the percentage increase in the Price Index from the first day of
the immediately preceding Fiscal Year or, in the case of the first year after
the year in which the Partnership Property is acquired, the first day of the
month in which the acquisition occurred through the last day of the Fiscal
Year immediately preceding such year or, if earlier, the last day of the month
in which such Partnership Property was disposed of. The percentage increase
in the Price Index through the last day of a particular period shall be
determined by calculating the increase, if any, in the Price Index for the
last time period during such period (the "Price Index Determination Period")
with respect to which the Price Index is published (currently a monthly
period) over the Price Index for the time period immediately preceding the
first day of the Price Index Determination Period, and expressing the amount
of such increase as a percentage of the Price Index for said time period
immediately preceding the first day of the Price Index Determination Period.
"RATE OF RETURN" in respect of any period shall mean and refer to the
quotient obtained by dividing (1) the aggregate revenues (calculated in
accordance with generally accepted accounting principles and before amortization
of unearned income on direct financing leases) received by the Partnership or
the Limited Partners from the Partnership Properties and Ancillary Property
referred to in Section 9.3(b) for such period, whether through operations, sale
or other disposition, less (without duplication) (i) the aggregate fees payable
pursuant to Section
-65-
9.3(b)(i)(B) for such period in respect of such properties, (ii) the aggregate
expenses of the Partnership (other than interest expense, depreciation,
amortization and other non-cash expenses and charges and expenses described in
Sections 9.3(b) and (c)) directly attributable to such property and interest
expense on any debt or distributions with respect to any interests (the
"Preferred Interests") of the Partnership issued to the REIT in exchange for
the proceeds from the issuance by the REIT of equity securities ranking senior
to the Common Stock with respect to the payment of dividends by the REIT
allocated thereto for such period, (iii) the general and administrative
expenses of the Partnership (other than non-cash expenses and charges and
expenses described in Sections 9.3 (a) and (b)) for such period allocated to
such properties (based on the ratio of Average Partnership Equity in such
properties to the aggregate Average Partnership Equity in all Partnership
Properties), and (iv) the principal amount of debt and dollar amount of
Preferred Interests allocated to any such properties repaid during such period
and, if applicable, the cash costs and expenses of any kind or nature incurred
in respect of the sale or other disposition thereof, by (2) the Average
Partnership Equity in such properties during such period. "AVERAGE
PARTNERSHIP EQUITY" shall mean and refer to (A) the average of the sums of the
aggregate purchase prices therefor, the aggregate fees paid pursuant to
Section 9.3(b)(i)(A) in respect thereof and all other cash costs and expenses
of any kind or nature incurred in connection with the acquisitions thereof
("Property Costs") as of the last day of each calendar month occurring during
the period of determination, less (B) the average outstanding principal amount
of debt of the Partnership and the aggregate dollar value of the Preferred
Interests outstanding as of the last day of each calendar month during such
period and allocated to such properties. The Rate of Return for any
outstanding mortgage loans will be evaluated separately with the mortgage
loans constituting a separate pool of "properties" for such calculation. The
general and administrative expenses allocable to such mortgage loans shall be
equal to the total amount of such expenses for any Fiscal Year multiplied by a
fraction, the numerator of which shall be the aggregate principal amount of
all mortgage loans outstanding at the beginning of such Fiscal Year and the
denominator of which shall be the total of all Property Costs and such
aggregate principal amount.
For the purposes of the foregoing, debt of the Partnership and the
Preferred Interests shall be allocated among the Partnership Properties as
follows: (1) non-recourse debt shall be allocated to the property secured
thereby and, if such debt is secured by more than one property, such debt shall
be allocated among the properties secured thereby based on the relative Property
Costs thereof; and (2) recourse debt and the Preferred Interests shall be
allocated to all of the Partnership Properties based on the relative Property
Costs thereof (reduced for this purpose by the amounts of non-recourse debt
allocated thereto in accordance with clause (1) above).
9.4. REIMBURSEMENT OF THE GENERAL PARTNERS.
In the event that the provisions of Section 9.3 are terminated in
accordance with the terms of Section 9.1, the following compensation provisions
shall apply, to be effective upon the date of such termination.
-66-
(a) The General Partners shall not be compensated for their services as
general partner of the Partnership except as provided in elsewhere in this
Agreement (including the provisions of Article VI regarding distributions,
payments and allocations to which it may be entitled in its capacity as the
General Partner).
(b) Subject to Sections 9.4(c) and 16.9, the Partnership shall be
liable for, and shall reimburse the General Partners on a monthly basis, or
such other basis as the General Partners may determine in their sole and
absolute discretion, for all sums expended in connection with the
Partnership's business or for the benefit of the Partnership, including,
without limitation, (i) expenses relating to the ownership of interests in,
and management and operation of, or for the benefit of, the Partnership, (ii)
compensation of officers and employees, including, without limitation,
payments under future employee benefit plans of any General Partner, (iii)
director fees and expenses, and (iv) all costs and expenses of any General
Partner being a public company, including costs of filings with the
Commission, reports and other distributions to its stockholders.
(c) To the extent practicable, Partnership expenses shall be billed
directly to and paid by the Partnership, subject to Section 16.9, reimbursements
to the General Partner of any of their Affiliates by the Partnership pursuant to
this Section 9.4 shall be treated as "guaranteed payments" within the meaning of
Section 707(c) of the Code.
ARTICLE X
BANK ACCOUNTS; BOOKS AND RECORDS;
FISCAL YEAR; STATEMENTS; TAX MATTERS
10.1. BANK ACCOUNTS.
All funds of the Partnership shall be deposited in its name in such
checking and savings accounts, time deposits, certificates of deposit or other
accounts at such banks or other financial institutions as shall be designated by
the Managing General Partner from time to time, and the Managing General Partner
shall arrange for the appropriate conduct of any such account or accounts. The
Managing General Partner shall have fiduciary responsibility for the safekeeping
and use of the funds of the Partnership, whether or not in possession and
control of the Managing General Partner, and the Managing General Partner shall
not employ or permit any other Person to employ such funds except in accordance
with the terms of this Agreement. The Managing General Partner shall not permit
funds of the Partnership to be commingled with funds of the Managing General
Partner, any Affiliate or any other Person; provided, however, that nothing
herein shall preclude any investment of funds of the Partnership in a mutual
fund or similar entity for which a separate account is maintained on behalf of
each participant.
-67-
10.2. BOOKS AND RECORDS.
(a) The Managing General Partner shall keep, or cause to be kept,
accurate, full, and complete books and accounts with respect to the Partnership,
showing assets, liabilities, income, operations, transactions and the financial
condition of the Partnership. Such books and accounts shall be prepared and
maintained on the accrual basis of accounting in accordance with generally
accepted accounting principles. The Managing General Partner shall maintain and
preserve all Partnership books and records for such period as the Managing
General Partner, in its reasonable discretion, shall determine necessary or
appropriate, subject to any requirements of state or federal law; provided,
however, that all appraisal reports obtained by the Partnership, whether in
connection with the acquisition of the Partnership Properties or otherwise,
shall be retained by the Partnership for at least five (5) years from the date
thereof.
(b) The Limited Partners shall have the right, at reasonable times
and at the Limited Partners' own expense, but only upon twenty (20) days prior
written notice to the Managing General Partner in accordance with Section
16.2, and only for a valid business purpose related to the conduct of the
Partnership's business, (i) to have true and full information regarding the
status of the business and financial condition of the Partnership; (ii) to
inspect and copy the books of the Partnership and other reasonably available
records and information concerning the operation of the Partnership, including
copies of any appraisal reports described in Section 10.2(a) and copies of the
federal, state and local income tax returns of the Partnership; (iii) to have
a current list of the name and last known business, residence or mailing
address of each Partner; (iv) to have true and full information regarding the
amount of cash and a description and statement of the Carrying Value of any
property or services contributed by any Partner to the Partnership and the
date upon which each Partner became a Partner; and (v) to have a copy of this
Agreement, the Certificate of Limited Partnership and all amendments or
certificates of amendment, as the case may be, thereto, together with copies
of any powers of attorney pursuant to which any such amendment or certificate
of amendment has been executed.
(c) Anything in this Section 10.2 to the contrary notwithstanding, the
Managing General Partner, in its sole and absolute discretion, may refuse the
Limited Partners access to any information, records, documents or data it
determines to be confidential, including, without limitation, any records
relating to the sales or revenues or projected sales or revenues of one or more
specific BK Restaurants, information related to the financial condition or
circumstances of any BKC Franchisee or BKC's relationship with any BKC
Franchisee and any other information provided to the Partnership by BKC and
specifically designated by BKC, in its reasonable discretion, to be confidential
and/or proprietary.
10.3. FISCAL YEAR.
The Fiscal Year of the Partnership for financial and federal, state and
local income tax purposes initially shall be the calendar year. The Managing
General Partner shall have authority to change the beginning and ending dates of
the Fiscal Year if the Managing General Partner, in its sole and absolute
discretion, subject to approval by the Internal Revenue Service, shall
-68-
determine such change to be necessary or appropriate to the business of the
Partnership, and shall give written notice of any such change to the Limited
Partners within thirty (30) days after the occurrence thereof.
10.4. FINANCIAL STATEMENT AND INFORMATION.
(a) All financial statements shall be accurate and complete in all
material respects, shall present fairly the financial position and operating
results of the Partnership and shall be prepared on the accrual basis as
provided in Section 10.2 for each Fiscal Year of the Partnership during the term
of this Agreement.
(b) No later than forty-five (45) days after the end of each fiscal
quarter of each Fiscal Year (except the last fiscal quarter of each Fiscal
Year), commencing with the fiscal quarter ending June 30, 1986, the Managing
General Partner shall prepare and deliver to the Limited Partners an unaudited
statement of income for the Partnership for such fiscal quarter, an unaudited
statement of changes in cash flows for the period between the end of the most
recent Fiscal Year and the end of such fiscal quarter and an unaudited balance
sheet of the Partnership dated as of the end of such fiscal quarter, in each
case prepared in accordance with generally accepted accounting principles,
together with a statement setting forth any transactions between the Partnership
and any of the General Partners or any Affiliate thereof, the amount of any
fees, commissions, compensation and other remuneration paid or accrued to any of
the General Partners or any Affiliate thereof and a description of any services
rendered to the Partnership therefor, any other information required by Form
10-Q under the Exchange Act and such other information (financial or otherwise)
as the Managing General Partner, in its discretion, shall deem necessary or
appropriate.
(c) No later than ninety (90) days after the end of each Fiscal Year
during the term of this Agreement, the Managing General Partner shall prepare
and deliver to the Limited Partners: (i) a balance sheet, together with
statements of income, Partners' equity and changes in cash flows for the
Partnership during such Fiscal Year, which financial statements shall be audited
by the Auditing Firm (such financial statements to contain a report of the
Auditing Firm which shall include: (A) a statement that an audit of such
financial statements has been made in accordance with generally accepted
auditing standards and that such financial statements are in conformity with
generally accepted accounting principles; (B) a statement of the opinion of the
Auditing Firm with respect to the financial statements and the accounting
principles and practices reflected therein and in regard to the consistency of
the application of such accounting principles; and (C) an identification of any
matters reflected in such financial statements to which the Auditing Firm takes
exception); (ii) a report summarizing any transactions between the Partnership
and any of the General Partners or any Affiliate thereof, the amount of any
fees, commissions, compensation and other remuneration (including, without
limitation, reimbursements of expenses pursuant to Section 9.3) paid or accrued
by the Partnership for such Fiscal Year to the General Partners and any
Affiliates thereof, and the services rendered to the Partnership in connection
therewith; (iii) a report of the activities of the Partnership during the Fiscal
Year; and (iv) a statement (which statement need not be audited) showing any
Cash Flow
-69-
and any Net Proceeds of a Capital Transaction distributed or to be distributed
to the Partners in respect of such Fiscal Year.
(d) The Managing General Partner shall provide to the Limited Partners
such other reports and information concerning the business and affairs of the
Partnership (i) as the Managing General Partner, in its sole and absolute
discretion, may deem necessary or appropriate, or (ii) to the extent not
provided for in Section 10.4(b) or (c) as may deem necessary or appropriate by
the Delaware RULPA or by any other law or any regulation of any regulatory body
applicable to the Partnership.
(e) The Managing General Partner shall provide any of the reports or
other information referred to in this Section 10.4 to such federal, state or
local governments, governmental agencies or other regulatory entities as the
Managing General Partner, in its sole and absolute discretion, may deem
necessary or appropriate.
10.5. ACCOUNTING DECISIONS.
All decisions as to accounting matters, except as specifically provided
to the contrary herein, shall be made by the Managing General Partner.
10.6. WHERE MAINTAINED.
The books, accounts and records of the Partnership at all times shall be
maintained at the Partnership's principal office or, at the option of the
Managing General Partner, at the principal place of business of the Managing
General Partner.
10.7. PREPARATION OF TAX RETURNS.
The Managing General Partner, at the expense of the Partnership, shall
arrange for the preparation and timely filing of all returns of the Partnership
showing all income, gains, deductions and losses necessary for federal and state
income tax and shall furnish to the Limited Partners within seventy-five (75)
days of the close of the Fiscal Year the tax information reasonably required for
federal and state income tax reporting purposes. The classification,
realization and recognition of income, gains, losses and deductions, and other
items of the Partnership shall be on the accrual method of accounting for
federal income tax purposes.
10.8. TAX ELECTIONS.
Except as otherwise specifically provided herein, the Managing General
Partner shall, in its sole and absolute discretion, determine whether to make
any available election (including, without limitation, the elections provided
for in Sections 48(q)(4), 168 and 754 of the Code) on behalf of the Partnership.
The Managing General Partner shall have the right to seek to revoke any such
election upon the Managing General Partner's determination that such revocation
is in the interests of limited partners and stockholders of the Limited
Partners; provided that the
-70-
Managing General Partner shall not seek to revoke any such election unless the
Managing General Partner has received an Opinion of Independent Counsel to the
effect that such revocation would not cause (a) the loss of limited liability
of the Limited Partners under this Agreement or of the limited partners of the
MLP under the Investors Partnership Agreement, or (b) the Partnership or the
MLP to be treated as an association taxable as a corporation for federal
income tax purposes.
10.9. TAX CONTROVERSIES.
Subject to the provisions hereof, the Managing General Partner is
designated as the "tax matters partner" (as defined in the Code) of the
Partnership and is authorized to 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. Each Partner agrees to cooperate with the Managing General Partner
and to do or refrain from doing any or all things reasonably required by the
Managing General Partner in connection with the conduct of all such proceeding.
10.10. ORGANIZATIONAL EXPENSES.
The Partnership shall elect to deduct expenses considered incurred in
organizing the Partnership ratably over a sixty-month period as provided in
Section 709 of the Code.
10.11. TAXATION AS A PARTNERSHIP.
No election shall be made by the Partnership, the General Partners or
the Limited Partners to be excluded from the application of any of the
provisions of Subchapter K, Chapter I of Subtitle A of the Code or from an
similar provisions of any state tax law.
10.12. QUALIFICATION AS A REIT.
In the event that the Managing General Partner at any time shall
determine that either the Partnership or the MLP does not qualify, or no
longer will qualify, as a partnership for federal income tax purpose, then the
Managing General Partner shall have the right, but not the obligation, to take
any such action as it, in its sole and absolute discretion, determines to be
in the interests of the MLP in connection therewith or as a result thereof,
including, without limitation to cause the Partnership and the MLP to be
reorganized so as to qualify as a "real estate investment trust" within the
meaning of Section 856 of the Code.
-71-
ARTICLE XI
TRANSFER OF INTERESTS
11.1. TRANSFER.
(a) The term "transfer," when used in this Article XI with respect
to a Partnership Interest, shall include any sale, assignment, gift, pledge,
hypothecation, mortgage, exchange or other disposition.
(b) No Partnership Interest shall be transferred in whole or in
part except in accordance with the terms and conditions set forth in this
Article XI. Any transfer or purported transfer of any Partnership Interest
not made in accordance with this Article XI shall be null and void.
11.2. TRANSFERS OF INTERESTS OF GENERAL PARTNERS.
(a) If a General Partner desires to sell or transfer all or any
portion of such General Partner's Partnership Interest as a General Partner
to a Person who is not a General Partner, such transfer shall be permitted if
(and only if):
(i) such transfer and the admission of the transferee as a
general partner of the Partnership is approved by the Limited Partners,
unless the transferee is (A) an Affiliate of the transferring General
Partner or (B) a Limited Partner or an Affiliate of a Limited Partner,
in which case no such approval of the Limited Partners shall be
required; and
(ii) the Partnership receives an Opinion of Independent Counsel
that such transfer and admission (A) would not cause the loss of limited
liability of the Limited Partners under this Agreement or the limited
partners of the MLP under the Investors Partnership Agreement, and (B)
would not cause the Partnership to be treated as an association taxable
as a corporation for federal income tax purposes.
(b) Neither Section 11.2(a) nor any other provision of this Agreement
shall be construed to prevent:
(i) the transfer by any corporate General Partner of such
corporate General Partner's Partnership Interest as a General Partner
upon its merger or consolidation with another Person or the transfer by
such General Partner of all or substantially all of its assets to
another Person, and the assumption of the rights and duties of such a
corporate General Partner by such Person, provided such Person furnishes
to the Partnership an Opinion of Independent Counsel to the effect that
such merger, consolidation, transfer or assumption (A) would not cause
the loss of limited liability of the Limited Partners under this
Agreement or the limited partners of the MLP under the Investors
Partnership
-72-
Agreement, and (B) would not cause the Partnership to be treated as
an association taxable as a corporation for federal income tax purposes;
(ii) the transfer by a General Partner of all or any part of its
interest in items of Partnership income, gains, losses, deduction,
credits, distributions or surplus; or
(iii) a General Partner's mortgaging, pledging, hypothecating or
granting a security interest in all or any part of its Partnership
Interest as a General Partner as collateral for a loan or loans.
11.3. TRANSFER OF INTEREST OF LIMITED PARTNERS.
(a) Except to the extent expressly permitted in Sections 11.3(b),
11.3(c), and 11.3(d) or in connection with the exercise of an Exchange Right
pursuant to Section 5.4, a Limited Partner may not transfer all or any
portion of its Partnership Interest, or any of such Limited Partner's
economic rights as a Limited Partner, without the prior written consent of
the Managing General Partner. Any transfer otherwise permitted under Section
11.3(b) or 11.3(c) shall be subject to the conditions set forth in Sections
11.3(d), 11.3(e), and 11.3(f), and all permitted transfers shall be subject
to Section 11.4.
(b) If a Limited Partner is subject to Incapacity, the executor,
administrator, trustee, committee, guardian, conservator or receiver of such
Limited Partner's estate shall have all the rights of a Limited Partner, but not
more rights than those enjoyed by other Limited Partners, for the purpose of
settling or managing the estate and such power as the Incapacitated Limited
Partner possessed to transfer all or any part of his or its interest in the
Partnership. The Incapacity of a Limited Partner, in and of itself, shall not
dissolve or terminate the Partnership.
(c) A Limited Partner (other than the REIT) may transfer, with or
without the consent of the Managing General Partner, all or a portion of his
Partnership Units (i) in the case of a Limited Partner who is an individual,
to a member of his Immediate Family, any trust formed for the benefit of
himself and/or members of his Immediate Family, or any partnership, limited
liability company, joint venture, corporation or other business entity
comprised only of himself and/or members of his Immediate Family and entities
the ownership interests in which are owned by or for the benefit of himself
and/or members of his Immediate Family, (ii) in the case of a Limited Partner
which is a trust, to the beneficiaries of such trust, (iii) in the case of a
Limited Partner which is a partnership, limited liability company, joint
venture, corporation or other business entity to which Partnership Units were
transferred pursuant to (i) above, to its partners, owners or stockholders,
as the case may be, who are members of the Immediate Family of or are
actually the Person(s) who transferred Partnership Units to it pursuant to
(i) above, (iv) in the case of a Limited Partner which is a partnership,
limited liability company, joint venture, corporation or other business
entity, to its partners, owners or stockholders, as the case may be, or the
Persons owning the beneficial interests in any of its partners, owners or
stockholders which are entities, (v) pursuant to a gift or other transfer
without consideration, (vi) pursuant to the applicable laws of descent or
distribution, (vii) to another Limited Partner, and (viii) pursuant to
-73-
a grant of security interest or other encumbrance affected in a BONA FIDE
transaction or as a result of the exercise of remedies related thereto,
subject to the provisions of Section 11.3(f). A trust or other entity will
be considered formed "for the benefit" of a Partner's Immediate Family even
though some other Person has a remainder interest under or with respect to
such trust or other entity.
(d) The Managing General Partner may prohibit any transfer of
Partnership Units by a Limited Partner if, in the opinion of legal counsel to
the Partnership, such transfer would require filing of a registration
statement under the Securities Act or would otherwise violate any federal,
state or foreign securities laws or regulations applicable to the Partnership
or the Partnership Units.
(e) No transfer of Partnership Units by a Limited Partner may be
made to any Person if (i) in the opinion of legal counsel for the
Partnership, it would result in the Partnership being treated as an
association taxable as a corporation for federal income tax purposes or would
result in a termination of the Partnership for federal income tax purposes,
(ii) in the opinion of legal counsel for Partnership it would adversely
affect the ability of the REIT to continue to qualify as a REIT or subject to
the General Partner to any additional taxes under Section 857 or Section 4981
of the Code, or (iii) such transfer is effectuated through an "established
securities market" or a "secondary market (or the substantial equivalent
thereof)" within the meaning of Section 7704 of the Code.
(f) No pledge or transfer of any Partnership Units may be made to
a lender to the Partnership or any Person who is related (within the meaning
of Section 1.752-4(b) of the Treasury Regulations) to any lender to the
Partnership whose loan constitutes a nonrecourse liability, without the
consent of the General Partner, in its discretion, provided that as a
condition to such consent the lender will be required to enter into an
arrangement with the Partnership and the General Partner to exchange or
redeem for the REIT Stock Amount any Partnership Units in which a security
interest is held simultaneously with the time at which such lender would be
deemed to be a partner in the Partnership for purposes of allocating
liabilities to such lender under Section 752 of the Code.
11.4. SUBSTITUTED LIMITED PARTNERS.
(a) No Limited Partner shall have the right to substitute a
transferee as a Limited Partner in its place (whether or not the transfer of
the Limited Partner's Interest is permitted under Section 11.3). The
Managing General Partner shall, however, have the right to consent to the
admission of a transferee of the interest of a Limited Partner pursuant to
this Section 11.4 as a Substituted Limited Partner, which consent may be
given or withheld by the General Partner in its sole and absolute discretion
and for any reason or no reason. The Managing General Partner's failure or
refusal to permit a transferee of any such interests to become a Substituted
Limited Partner shall not give rise to any cause of action against the
Partnership or any Partner.
-74-
(b) A transferee who has been admitted as a Substituted Limited
Partner in accordance with this Article 11 shall have all the rights and
powers and be subject to all the restrictions and liabilities of a Limited
Partner under this Agreement. The admission of any transferee as a
Substituted Limited Partner shall be subject to the transferee executing and
delivering to the Partnership an acceptance of all of the terms and
conditions of this Agreement (including without limitation, the provisions of
Section 2.5 and such other documents or instruments as may be required to
effect the admission).
(c) Upon the admission of a Substituted Limited Partner, the
General Partner shall amend EXHIBIT A to reflect the name, address, number of
Partnership Units, and Percentage Interest of such Substituted Limited
Partner and to eliminate or adjust, if necessary, the name, address and
interest of the predecessor of such Substituted Limited Partner.
11.5. ASSIGNEES.
If the General Partners in their sole and absolute discretion, do not
consent to the admission of any permitted transferee under Section 11.3 as a
Substituted Limited partner, as described in Section 11.4, such transferee shall
be considered an Assignee for purposes of this Agreement. An Assignee shall be
deemed to have had assigned to it, and shall be entitled to receive
distributions from the Partnership and the share of net income, net losses and
any other items of gain, loss, deduction and credit of the Partnership
attributable to the Partnership Units assigned to such transferee, and shall
have the rights granted to the Limited Partners under Section 5.4, but shall not
be deemed to be a holder of Partnership Units for any other purpose under this
Agreement, and shall not be entitled to vote such Partnership Units in any
matter presented to the Limited Partners for a vote (such Partnership Units
being deemed to have been voted on such matter in the same proportion as all
other Partnership Units held by Limited Partners are voted). In the event any
such transferee desires to make a further assignment of any such Partnership
Units, such transferee shall be subject to all the provisions of this Article XI
to the same extent and in the same manner as any Limited Partner desiring to
make an assignment of Partnership Units.
11.6. GENERAL PROVISIONS.
(a) No Limited Partner may withdraw from the Partnership other
than as a result of a permitted transfer of all of such Limited Partner's
Partnership Units in accordance with this Article XI or pursuant to the
exchange of all of its Partnership Units under Section 5.4.
(b) Any Limited Partner who shall transfer all of his Partnership
Units in a transfer permitted pursuant to this Article XI shall cease to be a
Limited Partner upon the admission of all Assignees of such Partnership Units
as Substitute Limited Partners. Similarly, any Limited Partner who shall
transfer all of his Partnership Units pursuant to an exchange of all of his
Partnership Units under Section 5.4 shall cease to be a Limited Partner.
-75-
(c) Transfers pursuant to this Article XI may only be made on the
first day of a fiscal quarter of the Partnership, unless the General Partners
otherwise agree.
(d) If any Partnership Interest is transferred or assigned in
compliance with the provisions of this Article XI or exchanged pursuant to
Section 5.4, on any day other than the first day of a Fiscal Year, then net
income, net losses, each item thereof and all other items attributable to
such interest for such Fiscal Year shall be divided and allocated between the
transferor Partner and the transferee Partner by taking into account their
varying interests during the fiscal year in accordance with Section 706(d) of
the Code, using the interim closing of the books method (unless the Managing
General Partner, in its sole and absolute discretion, elects to adopt a
daily, weekly or monthly proration method, in which event net income, net
losses and each item thereof for such Fiscal Year shall be prorated based
upon the applicable period selected by the Managing General Partner). Solely
for purposes of making such allocations, each of such items for the calendar
month in which the transfer or assignment occurs shall be allocated to the
transferee Partner, and none of such items for the calendar month in which a
redemption occurs shall be allocated to the Exchanging Partner. All
distributions of Cash Flow attributable to such Partnership Unit with respect
to which the payment date (in accordance with Section 6.5(b)) is before the
date of such transfer, assignment or redemption shall be made to the
transferor Partner or the Exchanging Partner, as the case may be, and, in the
case of a transfer or assignment other than a redemption, all distributions
of Cash Flow thereafter attributable to such Partnership Unit shall be made
to the transferee Partner.
ARTICLE XII
ADMISSION OF SUCCESSOR GENERAL PARTNERS
12.1. ADMISSION OF SUCCESSOR GENERAL PARTNERS.
A successor General Partner selected or designated pursuant to
Section 13.1 or 13.2 or the transferee of all or any portion of the
Partnership Interest of a General Partner pursuant to Section 11.2 shall be
admitted to the Partnership as a General Partner (in the place, in whole or
in part, of the transferor or former General Partner), effective as of the
date that an amendment of the Certificate of Limited Partnership, adding the
name of such successor General Partner and other required information, is
recorded pursuant to Section 2.1 (which date, in the event the successor
General Partner is in the place in whole of the transferor or former General
Partner, shall be contemporaneous with the withdrawal of such transferor or
former General Partner), and upon receipt by the transferor or former General
Partner of all of the following:
(a) the successor General Partner's acceptance of, and agreement
to be bound by, all of the terms and provisions of this Agreement, in form
and substance satisfactory to the transferor or former General Partner;
(b) evidence of the authority of such successor General Partner to
become a General Partner and to be bound by all of the terms and conditions
of this Agreement;
-76-
(c) the written agreement of the successor General Partner to
continue the business of the Partnership in accordance with the terms and
provisions of this Agreement; and
(d) such other documents or instruments as may be required in
order to effect the admission of the successor General Partner as a General
Partner under this agreement.
12.2. ADMISSION OF ADDITIONAL GENERAL PARTNERS.
At the consummation of any issuance of additional Partnership Units
pursuant to Section 5.4, the Persons acquiring such Partnership Units may, in
the sole and absolute discretion of the Managing General Partner, be admitted to
the Partnership as Additional Limited Partners upon furnishing to the Managing
General Partner an acceptance of, and an agreement to be bound by, all of the
terms and provisions of this Agreement, in form and substance satisfactory to
the Managing General Partner, and such other documents or instruments as may be
required in order to effect such admission, and such admission shall be
effective when the Managing General Partner determines in its sole and absolute
discretion and such admission is shown on the books and records of the
Partnership.
ARTICLE XIII
WITHDRAWAL OR REMOVAL OF GENERAL PARTNERS
13.1. WITHDRAWAL OR REMOVAL OF GENERAL PARTNERS.
A General Partner may withdraw from the Partnership or be removed as a
General Partner without withdrawing as, or being removed as, a general partner
of the MLP. A General Partner shall withdraw from the Partnership or be removed
as a General Partner if the General Partner withdraws as, or is removed as, a
general partner of the MLP. Such withdrawal or removal shall be effective at
the time the Departing General Partner notifies the other General Partners of
such withdrawal or the Departing General Partner is notified by the Partnership
of such removal or at the same time as is the General Partner's withdrawal or
removal as a general partner of the MLP, as applicable. Except as provided
below, the Managing General Partner shall not withdraw from the Partnership
unless (i) the Managing General Partner shall have transferred all of its
Partnership Interest as a General Partner in accordance with Section 11.2; or
(ii) such withdrawal shall have been approved by a Majority Vote of the Limited
Partners. In the event QSV withdraws or is removed as a General Partner or as a
general partner of the MLP, and, in either case, elects to convert its
Partnership Interest for the Acquisition Price as provided in Section 9.1, the
REIT or an Affiliate of the REIT, as designated by the REIT, shall automatically
succeed the Departing Managing General Partner, provided that if the REIT or any
Affiliate thereof shall decline to serve as a successor General Partner, then a
successor General Partner shall be selected upon the affirmative vote of all
Limited Partners. If no such successor General Partner is selected by the
Limited Partners and the Partnership has no remaining General Partner, then the
Partnership shall be dissolved pursuant to Section 14.2.
-77-
13.2. AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP.
This Agreement and the Certificate of the Limited Partnership shall be
amended to reflect the withdrawal, removal or succession of a General Partner.
13.3. INTEREST OF DEPARTING PARTNER AND SUCCESSOR.
(a) Except as provided in Section 9.1 with respect to QSV, upon
the withdrawal (other than by reason of a transfer pursuant to Section 11.2)
or removal of a Departing Partner, such Departing Partner shall contribute
its Partnership Interest in the Partnership to the MLP and shall become a
limited partner in the MLP, receiving in connection therewith, the number of
Units determined by dividing (i) the "fair market value" of such General
Partner's Partnership Interest as a General Partner herein, determined as of
the effective date of its departure, by (ii) the Unit Price determined as of
the effective date of its departure.
(b) For purposes of this Section 13.3, the "fair market value" of
the Departing Partner's Partnership Interest as a General Partner shall be
the amount that would be distributed to the Departing Partner pursuant to
Section 6.7 if the Partnership Assets were sold for cash in orderly
liquidation of the Partnership Assets commencing on the effective date of the
Departing Partner's departure, with such liquidation being effected through
arm's-length sales between informed and willing purchasers under no
compulsion to buy and informed and willing sellers under no compulsion to
sell, with the proceeds from such hypothetical sales to be discounted (at a
rate equal to the interest rate on U.S. Treasury obligations with a term of
one (1) year issued on the date nearest the effective date of the Departing
Partner's departure) to the effective date of the Departing Partner's
departure to reflect the time period reasonably anticipated to be necessary
to consummate such sales, as such "fair market value" is agreed upon by the
Departing Partner and the Partnership within thirty (30) days after the
effective date of the Departing Partner's departure or, in the absence of
such an agreement, as determined by the Appraiser. The Appraiser shall use
such method or methods of valuation as the Appraiser determines most
accurately reflect the value of the Partnership Properties under the
circumstances provided that for a period of five (5) years from
_________________, 199___, the Appraiser shall use the "capitalization of
income" method (applying such capitalization rate and other assumptions and
adjustments as the Appraiser determines appropriate under the circumstances)
unless the Appraiser determines that use of such method would result in an
understatement of the value of the Partnership Properties. Any appraisal
pursuit to this Section 13.3(b) shall be completed as soon a practical after
the Appraiser is notified of the requirement for such appraisal, and in any
event within forty-five (45) days after such notice, and the report of the
Appraiser setting forth the appraised fair market value of Partnership Assets
as of such date shall be final and binding upon the Departing Partner and the
Partnership. The amount that would be distributed to the Departing Partner
pursuant to Section 6.7 if the Partnership Assets and the assets of the MLP
were so sold shall be determined by the Accounting Firm within fifteen (15)
days after the report of the Appraiser is received by the Partnership. The
closing of the conversion of the Departing Partner's Partnership Interest
into Units pursuant to Section 13.3(a) shall occur within ten (10) days after
the date on which the
-78-
Accounting Firm shall have determined the amount distributable to the Departing
Partner pursuant to Section 6.7 for purposes of this Section 13.3(b).
(c) At any time after the departure of a Departing Partner, upon
the request of such Departing Partner, the MLP shall, so long as the Units
are still listed on the New York Stock Exchange, Inc., file with the
Commission as promptly as practicable after receiving such request, and shall
use its best efforts to cause to become effective, a registration statement
under the Securities Act registering the offering and sale of the Units owned
by the Departing Partner or any Affiliate at the time of such Departing
Partner's departure, including any Units that were received by the Departing
Partner pursuant to Section 13.3(a) and are included in such request,
provided that the MLP shall be required to file no more than two (2) such
registration statements at the request of any one Departing Partner. In
connection with any registration pursuant to the preceding sentence, the MLP
promptly shall prepare and file such documents as may be necessary to
register or qualify the Units subject to such registration under the
securities laws of such states as the Departing Partner shall reasonably
request and do any and all other acts and things that may reasonably be
necessary or advisable to enable such Departing Partner to consummate a
public sale of such Units in such states. The first registration effected
under this Section 13.3(c) shall be effected at the expense of the MLP,
except for underwriting discounts, fees and commissions and fees and expenses
of legal counsel for the Departing Partner or its affiliates, and any
subsequent registrations shall be at the expense of the Departing Partner.
Any registration statement filed pursuant hereto shall be continued in effect
for a period of not less ninety (90) days following its effective date. In
the event of any registration of any Units pursuant to this Section 13.3(c),
the MLP shall indemnify the Departing Partner and its Affiliates and any
underwriter engaged in connection with such registration and each other
person, if any, who controls any such underwriter within the meaning of the
Securities Act, in the manner and to the extent set forth in Section 7.14(d)
of the Investors Partnership Agreement.
(d) Any successor General Partner other than by reason of the
transfer of a Partnership Interest shall, at the effective date of its
admission to the Partnership as a General Partner, contribute to the capital
of the Partnership cash in an amount equal to (i) the product of the
aggregate number of shares of Common Stock and Units outstanding immediately
prior to the effective date of such successor General Partner's admission
(but after giving effect to the conversion described in Section 13.3(a)),
multiplied by the Share Price or Unit Price, as applicable, determined as of
the effective date of such successor General Partner's admission, multiplied
by (ii) a fraction, the numerator of which shall be the excess (the
"Percentage Interest Excess") of 1.00% over the Percentage Interest of any
remaining General Partners, and the denominator of which shall be 99.00%.
Thereafter, such successor General Partner shall, notwithstanding any other
provision of this Agreement, be entitled to the Percentage Interest Excess of
all Partnership allocations and distributions.
(e) If, at the time of the Departing Partner's departure, the
Partnership is indebted to the Departing Partner under this Agreement or any
other instrument or agreement for funds advanced, properties sold, services
rendered or costs and expenses incurred by the Departing Partner (including,
without limitation, any amounts advanced pursuant to the revolving line of
-79-
credit described in Section 7.13), the Partnership shall, within sixty (60)
days after the effective date of such Departing Partner's departure, pay to
the Departing Partner the full amount of such indebtedness. The successor to
the Departing Partner shall assume all obligations theretofore incurred by
the Departing Partner, as General Partner of the Partnership, and the
Partnership and such successor shall take all such action as shall be
necessary to terminate any guarantees of the Departing Partner, and any of
its Affiliates, of any obligations of the Partnership. If, for whatever
reason, the creditors of the Partnership shall not consent to such
termination of any such guarantees, the successor to the Departing Partner
and the Partnership shall be required to indemnify the Departing Partner for
any liabilities and expenses incurred by the Departing Partner on account of
such guarantees.
ARTICLE XIV
DISSOLUTION AND LIQUIDATION
14.1. NO DISSOLUTION.
The Partnership shall not be dissolved by the admission of additional
Limited Partners or Substituted Limited Partners or by the admission of
additional General Partners or Substituted General Partners in accordance with
the terms of this Agreement.
14.2. EVENTS CAUSING DISSOLUTION.
The Partnership shall be dissolved and its affairs wound up upon the
occurrence of any of the following events:
(a) the expiration of the term of the Partnership, as provided in
Section 4.1;
(b) the withdrawal of the Managing General Partner or the
occurrence of any other event that results in the Managing General Partner
ceasing to be the Managing General Partner (other than by reason of a
transfer pursuant to Section 11.2 or a withdrawal occurring upon or after, or
a removal effective upon or after, selection of a successor pursuant to
Section 13.1);
(c) the "Bankruptcy" (as hereinafter defined) of the Managing General
Partner;
(d) a written determination by the Managing General Partner that
projected future revenues of the Partnership will be insufficient to enable
payment of projected Partnership costs and expenses or, if sufficient, will
be such that continued operation of the Partnership is not in the best
interests of the Partners;
(e) an election by the Limited Partners to terminate, dissolve or
liquidate the Partnership;
-80-
(f) any attempted transfer, sale, assignment, gift, pledge,
hypothecation, mortgage, exchange or other disposition by the Limited
Partners of their Partnership Interests; or
(g) the occurrence of any other event that, under the Delaware
RULPA, would cause the dissolution of the Partnership or that would make it
unlawful for the business of the Partnership to be continued.
For purposes of this Agreement, the term "Bankruptcy" shall mean, and
the Managing General Partner shall be deemed "Bankrupt" upon, (i) the entry
of a decree or order for relief of the Managing General Partner by a court of
competent jurisdiction in any involuntary case involving the Managing General
Partner under any bankruptcy, insolvency or other similar law now or
hereafter in effect; (ii) the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator or other similar agent for the
Managing General Partner or for any substantial part of the Managing General
Partner's assets or property; (iii) the ordering of the winding up or
liquidation of the Managing General Partner's affairs; (iv) the filing with
respect to the Managing General Partner of a petition in any such involuntary
bankruptcy case, which petition remains undismissed for a period of ninety
(90) days or which is dismissed or suspended pursuant to Section 305 of the
Federal Bankruptcy Code (or any corresponding provision of any future United
States bankruptcy law); (v) the commencement by the Managing General Partner
of a voluntary case under any bankruptcy, insolvency or other similar law now
or hereafter in effect; (vi) the consent by the Managing General Partner to
the entry of an order for relief in a involuntary case under any such law or
to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar agent for the
Managing General Partner or for any substantial part of the Managing General
Partner's assets or property; (vii) the making by the Managing General
Partner of any general assignment for the benefit of creditors; or (viii) the
failure by the Managing General Partner generally to pay its debts as such
debts become due.
14.3. RIGHT TO CONTINUE BUSINESS OF PARTNERSHIP.
Upon an event described in Section 14.2(b), 14.2(c) or 14.2(g) (but
not an event described in Section 14.2(g) that makes it unlawful for the
business of the Partnership to be continued), the Partnership thereafter
shall be dissolved and liquidated unless, within ninety (90) days after the
event described in any of such Sections, an election to reconstitute and
continue the business of the Partnership shall be made in writing by the
Limited Partners. If such an election to continue the Partnership is made,
then:
(a) the Limited Partners shall select a successor Managing General
Partner;
(b) the Partnership shall continue until another event causing
dissolution in accordance with this Article XIV shall occur;
(c) the Partnership Interest of the former General Partner shall
be subject to disposition, at the option of the former General Partner, in
the manner provided in Section 13.3(a)
-81-
(which option shall be exercised contemporaneously with the selection of the
successor General Partner); and
(d) all necessary steps shall be taken to amend this Agreement and
the Certificate of Limited Partnership to reflect the reconstitution and
continuation of the business of the Partnership.
14.4. DISSOLUTION.
Except as otherwise provided in Section 14.3, upon the dissolution of
the Partnership, the Certificate of Limited Partnership shall be canceled in
accordance with the provisions of the Delaware RULPA, and the Managing
General Partner (or, if the dissolution is caused by the withdrawal,
bankruptcy, dissolution or removal of the Managing General Partner, then the
Person designated as Liquidating Trustee in Section 14.5 hereof) promptly
shall notify the Partners of such dissolution.
14.5. LIQUIDATION.
Upon dissolution of the Partnership, unless an election to continue the
business of the Partnership is made pursuant to Section 14.3, the Managing
General Partner, or, in the event the dissolution is caused by an event
described in Section 14.2(b) or 14.2(c), a Person or Persons selected by the
Limited Partners, shall be the Liquidating Trustee. The Liquidating Trustee
shall proceed without any unnecessary delay to sell or otherwise liquidate the
Partnership Assets and shall apply and distribute the proceeds of such sale or
liquidation in the following order of priority, unless otherwise required by
mandatory provisions of applicable law:
(a) to pay (or to make provision for the payment of) all creditors
of the Partnership, including current and former Partners, in the order of
priority provided by law other than obligations to make distributions to
current and former Partners;
(b) to pay, on a pro rata basis, all current and former Partners
with respect to obligations to make distributions thereto; and
(c) After the payment (or the provision for payment) of all debts,
liabilities and obligations of the Partnership, including, without
limitation, the payment of expenses of liquidation of the Partnership, and
the establishment of a reasonable reserve (including an amount estimated by
the Liquidating Trustee to be sufficient to pay an amount reasonably
anticipated to be required to be paid pursuant to Section 7.10 hereof), to
the Partners in accordance with Section 6.7.
The Liquidating Trustee, if other than the Managing General Partner,
shall be entitled to receive such compensation for its services as
Liquidating Trustee as may be approved by the Limited Partners. The
Liquidating Trustee shall agree not to resign at any time without sixty (60)
days prior written notice and, if other than the Managing General Partner,
may be removed at
-82-
any time, with or without cause, by written notice of removal approved by the
Limited Partners. Upon dissolution, removal or resignation of the Liquidating
Trustee, a successor and substitute Liquidating Trustee (who shall have and
succeed to all rights, powers and duties of the original Liquidating Trustee)
shall be selected within ninety (90) days thereafter by the Limited Partners.
The right to appoint a successor or substitute Liquidating Trustee in the
manner provided herein shall be recurring and continuing for so long as the
functions and services of the Liquidating Trustee are authorized to continue
under the provisions hereof, and every reference herein to the Liquidating
Trustee will be deemed to refer also to any such successor or substitute
Liquidating Trustee appointed in the manner herein provided. Except as
expressly provided in this Article XIV, the Liquidating Trustee appointed in
the manner provided herein shall have and may exercise, without further
authorization or consent of any of the parties hereto, all of the powers
conferred upon the Managing General Partner under the terms of this Agreement
(but subject to all of the applicable limitations, contractual and otherwise,
upon the exercise of such powers) to the extent necessary or desirable in the
good faith judgment of the Liquidating Trustee to carry out the duties and
functions of the Liquidating Trustee hereunder (including the establishment
of reserves for liabilities that are contingent or uncertain in amount) for
and during such period of time as shall be reasonably required in the good
faith judgment of the Liquidating Trustee to complete the winding up and
liquidation of the Partnership as provided for herein. In the event that no
Person is selected to be the Liquidating Trustee as herein provided within
one hundred twenty (120) days following the event of dissolution, or in the
event the Limited Partner fails to select a successor or substitute
Liquidating Trustee within the time periods set forth above, any Partner may
make application to a Court of Chancery of the State of Delaware to wind up
the affairs of the Partnership and, if deemed appropriate, to appoint a
Liquidating Trustee.
14.6. REASONABLE TIME FOR WINDING UP.
A reasonable time shall be allowed for the orderly winding up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 14.5 in order to minimize any losses otherwise attendant
upon such a winding up.
14.7. TERMINATION OF PARTNERSHIP.
Except as otherwise provided in this Agreement, the Partnership shall
terminate when all of the assets of the Partnership shall have been converted
into cash, the net proceeds therefrom, as well as any other liquid assets of the
Partnership, after payment of or due provision for all debts, liabilities and
obligations of the Partnership, shall have been distributed to the Partners as
provided for in Sections 6.7 and 14.5 and the Certificate of Limited Partnership
shall have been canceled in the manner required by the Delaware RULPA.
-83-
ARTICLE XV
AMENDMENTS
15.1. AMENDMENTS TO BE ADOPTED SOLELY BY THE MANAGING GENERAL PARTNER.
The Managing General Partner, without the consent or approval at the
time of the Limited Partners, may amend any provision of this Agreement, and
execute, swear to, acknowledge, deliver, file and record all documents required
or desirable in connection therewith, to reflect:
(a) a change in the name of the Partnership or the location of the
principal place of business of the Partnership;
(b) the admission, substitution, termination or withdrawal of Partners
in accordance with this Agreement;
(c) additions to the obligations of the General Partners or surrender
any right or power granted to the General Partners or any Affiliate of the
General Partners for the benefit of the Limited Partners;
(d) the designations, rights, powers, duties and preferences of the
holders of any additional Partnership Interests issued pursuant to Section
5.2(a);
(e) a change that is necessary to qualify the Partnership as a limited
partnership or a partnership in which the Limited Partners have limited
liability under the laws of any state or that is necessary or advisable in the
opinion of the Managing General Partner to ensure that the Partnership will not
be treated as an association taxable as a corporation for federal income tax
purposes;
(f) a change that is (i) of an inconsequential nature and does not
adversely affect the Limited Partners in any material respect; (ii) necessary or
desirable to cure any ambiguity, to correct or supplement any provision herein
that would be inconsistent with any other provision herein or to make any other
provision with respect to matters or questions arising under this Agreement that
will not be inconsistent with the provision of this Agreement; (iii) necessary
or desirable to satisfy any requirements, conditions or guidelines contained in
any opinion, directive, order, ruling or regulation of any federal or state
agency or contained in any federal or state statute; (iv) necessary or desirable
to facilitate the trading of the Units, as contemplated in the Investor
Partnership Agreement, or the shares of Common Stock, or comply with any rule,
regulation guideline or requirement of any securities exchange on which the
Units or the shares of Common Stock are or will be listed for trading,
compliance with any of which the Managing General Partner deems to be in the
interests of the Partnership and the Limited Partners; (v) necessary to conform
this Agreement to any amendments made in the Investors Partnership Agreement in
accordance with the terms thereof; or (vi) required or contemplated by this
Agreement;
-84-
(g) a change in any provision of this Agreement which requires any
action to be taken by or on behalf of the Managing General Partner or the
pursuant to the requirements of applicable Delaware law if the provisions of
applicable Delaware law are amended, modified or revoked so that the taking of
such action is no longer required;
(h) to reflect such changes as are reasonably necessary for any
Partner to maintain its status as a "qualified REIT subsidiary" within the
meaning of Section 856(i)(2) of the Code; or
(i) any other amendments similar to the foregoing.
The authority set forth in this Section 15.1 shall specifically include
the authority to make such amendments to this Agreement and to the Certificate
of Limited Partnership as the Managing General Partner deems necessary or
desirable in the event the Delaware RULPA is amended to eliminate or change any
provision now in effect. Without limiting the foregoing, the Limited Partners
shall, upon the request of the Managing General Partner, execute, swear to or
acknowledge any document determined by the Managing General Partner to be
required or desirable in connection with the foregoing. The Managing General
Partner shall provide notice to the Limited Partners when any action under this
Section 15.1 is taken.
15.2. AMENDMENT PROCEDURES.
Except as specifically provided in Sections 15.1 and 15.3, all
amendments to this Agreement shall be made solely in accordance with the
following procedures:
(a) Any amendments of this Agreement must be proposed either:
(i) by the Managing General Partner, by submitting the text of
the proposed amendment to all Limited Partners in writing; or
(ii) by Limited Partners owning (as Limited Partners and not as
Assignees) at least twenty-five percent (25%) of the total
Partnership Units owned by Limited Partners (as Limited Partners and
not as Assignees), by submitting their proposed amendment in writing
to the Managing General Partner. The Managing General Partners
shall, within sixty (60) days after the receipt of any such proposed
amendment, or as soon thereafter as is reasonably practicable, submit
the text of the proposed amendment to all Limited Partners. The
Managing General Partner may include in such submission its
recommendation as to the proposed amendment.
(b) If an amendment is proposed pursuant to this Section 15.2, the
Managing General Partner shall seek the written consent of the Limited Partners
to such amendment or shall call a meeting of the Limited Partners to consider
and vote on the proposed amendment, unless, in the opinion of Independent
Counsel, such proposed amendment would be illegal under Delaware law if adopted,
in which case the Managing General Partner shall not be required to take any
further action with respect thereto. For purposes of obtaining a written vote,
the Managing
-85-
General Partner may require a response within a reasonable period of time, but
not less than fifteen (15) days, and failure to respond in such time shall
constitute a vote which is consistent with the Managing General Partner's
recommendation with respect to the proposal. A proposed amendment shall be
effective only if approved by the General Partners in writing and by a Majority
Vote of the Limited Partners, unless a greater percentage vote of the Limited
Partners is required by law or any other provision of this Agreement. The
Managing General Partner shall keep all Partners advised of the status of any
proposed amendment and shall notify all Partners upon final adoption or
rejection of any proposed amendment.
15.3. AMENDMENT RESTRICTIONS.
Notwithstanding Sections 15.1 and 15.2, this Agreement shall not be
amended without the consent of each Partner adversely affected if such
amendment would (a) convert a Limited Partner Interest into a General Partner
Interest; (b) modify the limited liability of a Limited Partner in a manner
adverse to such Limited Partner; (c) alter rights of the Partner to receive
distributions pursuant to Article VI or Article XIV (except as permitted
pursuant to Section 5.2 or 15.1(e)); (d) alter or modify the Exchange Right and
REIT Stock Amount as set forth in 5.4, and the related definitions, in a manner
adverse to such Partner; (e) cause the termination of the Partnership prior to
the time set forth in Article IV or Section 14.2; or (f) amend this Section
15.3. Further, no amendment may alter the restrictions on the General
Partner's authority set forth in Section 7.3(b) without the consent specified
in that section. Notwithstanding any other provision hereof, the General
Partner shall not amend Section 5.2(a), 7.6, 7.7 or 15.4 unless approved by the
Majority Vote of the Limited Partners, excluding Partnership Units held by the
REIT.
15.4. MEETINGS OF THE PARTNERS.
(a) Meetings of the Partners may be called by the General Partners and
shall be called upon the receipt by the General Partners of a written request by
Limited Partners (other than the REIT) holding twenty percent (20%) or more of
the Partnership Units. The request shall state the nature of the business to be
transacted. Notice of any such meeting shall be given to all Partners not less
than ten (10) days nor more than sixty (60) days prior to the date of such
meeting. Partners may vote in person or by proxy at such meeting. Whenever the
vote or consent of the Partners is permitted or required under this Agreement,
such vote or consent may be given at a meeting of the Partners or may be given
in accordance with the procedure prescribed in Section 15.2(b). Except as
otherwise expressly provided int his Agreement, the Majority Vote of the Limited
Partners (including Partnership Units held by the REIT) shall control.
(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 so taken is signed by a majority of the Percentage Interests of the
Partners (or such other percentage as is expressly required by this Agreement).
Such consent may be in one instrument or in several instruments, and shall have
the same force and effect as a vote of a majority of the Percentage Interests of
-86-
the Partners (or such other percentage as is expressly required by this
Agreement). Such consent shall be filed with the General Partner. An action so
taken shall be deemed to have been taken at a meeting held on the effective date
so certified.
(c) Each Limited Partner may authorize any Person or Persons to act
for it by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting or voting or participating
at a meeting. Every proxy must be signed by the Limited Partner or its
attorney-in-fact. No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the Limited Partner executing it,
such revocation to be effective upon the Partnership's receipt of written
notice of such revocation from the Limited Partner executing such proxy.
(d) Each meeting of the Partners shall be conducted by the General
Partner or such other Person as the Managing General Partner may appoint
pursuant to such rules for the conduct of the meeting as the Managing General
Partner or such other Person deems appropriate. Without limitation, meetings
of Partners may be conducted in the same manner as meetings of the stockholders
of the REIT and may be held at the same time, and as part of, meetings of the
stockholders of REIT.
ARTICLE XVI
MISCELLANEOUS PROVISIONS
16.1. ADDITIONAL ACTIONS AND DOCUMENTS.
Each of the Partners hereby agrees to take or cause to be taken such
further actions, to execute, acknowledge, deliver and file or cause to be
executed, acknowledged, delivered and filed such further documents and
instruments, and to use best efforts to obtain such consents as may be necessary
or as may be reasonably requested in order to fully effectuate the purposes,
terms and conditions of this Agreement, whether before, at or after the closing
of the transactions contemplated by this Agreement.
16.2. NOTICES.
All notices, demands, requests or other communications which may be or
are required to be given, served or sent by a Partner or the Partnership
pursuant to this Agreement shall be in writing, and shall be personally
delivered, mailed by first-class mail, postage prepaid, or transmitted by
facsimile, telegram or telex, addressed as follows:
-87-
(a) If to the Managing General Partner:
QSV Properties, Inc.
Attn: Chairman or President
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the MLP:
U.S. Restaurant Properties Master L.P.
Attn: Managing General Partner
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(c) If to the REIT:
U.S. Restaurant Properties, Inc.
Attn: Chief Executive Officer
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(d) If to the Partnership:
U.S. Restaurant Properties Operating L.P.
Attn: Managing General Partner
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Each Partner and the Partnership may designate by notice in writing a
new address to which any notice, demand, request or communication may
thereafter be so given, served or sent. Each notice, demand, request or
communication which shall be delivered, mailed or transmitted in the manner
described above shall be deemed to have been duly given when delivered in
person, sent by first class mail or transmitted by facsimile, telegram or telex.
-88-
16.3. SEVERABILITY.
The invalidity of any one or more provisions hereof or of any other
agreement or instrument given pursuant to or in connection with this Agreement
shall not affect the remaining portions of this Agreement or any such other
agreement or instrument or any part thereof, all of which are inserted
conditionally on their being held valid in law; and in the event that one or
more of the provisions contained herein or therein should be invalid, or should
operate to render this Agreement or any such other agreement or instrument
invalid, this Agreement and such other agreements and instruments shall be
construed as if such invalid provisions had not been inserted.
16.4. SURVIVAL.
It is the express intention and agreement of the Partners that all
covenants, agreements, statements, representations, warranties and indemnities
made in this Agreement shall survive the execution and delivery of this
Agreement.
16.5. WAIVERS.
Neither the waiver by a Partner of a breach of or a default under any of
the provisions of this Agreement, nor the failure of a Partner, on one or more
occasions, to enforce any of the provisions of this Agreement or to exercise any
right, remedy or privilege hereunder shall thereafter be construed as a waiver
of any subsequent breach or default of a similar nature, or as a waiver of any
such provisions, rights, remedies or privileges hereunder.
16.6. EXERCISE OF RIGHTS.
No failure or delay on the part of a Partner or the Partnership in
exercising any right, power or privilege hereunder and no course of dealing
between the Partners or between a Partner and the Partnership shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
expressly provided are cumulative and not exclusive of any other rights or
remedies which a Partner or the Partnership would otherwise have at law or in
equity or otherwise.
16.7. BINDING EFFECT.
Subject to any provisions hereof restricting assignment, this Agreement
shall be binding upon and shall inure to the benefit of the Partners (and BKC
and its successors and assigns for purposes of Article VIII and Section 15.3)
and their respective heirs, devisees, executors, administrators, legal
representatives, successors and assigns.
-89-
16.8. LIMITATION ON BENEFITS OF THIS AGREEMENT.
It is the explicit intention of the Partners that, with the exception of
the rights of BKC, its successors and assigns, in connection with Article VIII
and Section 15.3, no person or entity other than the Partners and the
Partnership is or shall be entitled to bring any action to enforce any provision
of this Agreement against any Partner or the Partnership, and that, except as
set forth in Section 8.1(b), the covenants, undertakings and agreements set
forth in this Agreement shall be solely for the benefit of, and shall be
enforceable only by, the Partners (or their respective successors and assigns as
permitted hereunder) and the Partnership.
16.9. LIMITATION TO PRESERVE REIT STATUS.
Notwithstanding anything else in this Agreement, to the extent that the
amount paid, credited, distributed or reimbursed by the Partnership to any REIT
Partner or its officers, directors, employees or agents, whether as a
reimbursement, fee, expense or indemnity (a "REIT Payment"), would constitute
gross income to the REIT Partner for purposes of Section 856(c)(2) or 856(c)(3)
of the Code, then, notwithstanding any other provision of this Agreement, the
amount of such REIT Payments, as selected by the General Partners in their
discretion from among items of potential distribution, reimbursement, fees,
expenses and indemnities, shall be reduced for any fiscal year of the
Partnership so that the REIT Payments, as so reduced, for or with respect to
such REIT Partner shall not exceed the lesser of:
(a) an amount equal to the excess, if any, of (i) four and
nine-tenths percent (4.9%) of the REIT Partner's total gross income
(but excluding the amount of any REIT Payments) for the fiscal year of
the Partnership that is described in Section 856(c)(2) of the Code (or
any substitute or successor provision thereto) over (ii) the amount of
gross income (within the meaning of Section 856(c)(2) of the Code (or
any substitute or successor provision thereto)) derived by the REIT
Partner from sources other than those described in Section 856(c)(2)
of the Code (or any substitute or successor provision thereto) (but
not including the amount of any REIT Payments); or
(b) an amount equal to the excess, if any, of (i) twenty-four
percent (24%) of the REIT Partner's total gross income (but excluding
the amount of any REIT Payments) for the fiscal year of the
Partnership that is described in Section 856(c)(3) of the Code (or any
substitute or successor provision thereto) over (ii) the amount of
gross income (within the meaning of Section 856(c)(3) of the Code (or
any substitute or successor provision thereto)) derived by the REIT
Partner from sources other than those described in Section 856(c)(3)
of the Code (or any substitute or successor provision thereto) (but
not including the amount of any REIT Payments);
provided, however, that REIT Payments in excess of the amounts set forth in
clauses (a) and (b) above may be made if the General Partners, as a condition
precedent, obtain an opinion of tax
-90-
counsel that the receipt of such excess amounts shall not adversely affect the
REIT Partner's ability to qualify as a real estate investment trust under the
Code. To the extent that REIT Payments may not be made in a fiscal year of the
Partnership as a consequence of the limitations set forth in this Section 16.9,
such REIT Payments shall carry over and shall be treated as arising in the
following fiscal year of the Partnership. The purpose of the limitations
contained in this Section 16.9 is to prevent any REIT Partner from failing to
qualify as a real estate investment trust under the Code by reason of such REIT
Partner's share of items, including distributions, reimbursements, fees,
expenses or indemnities, receivable directly or indirectly from the
Partnership, and this Section 16.9 shall be interpreted and applied to
effectuate such purpose.
16.10. FORCE MAJEURE.
If the Managing General Partner is rendered unable, wholly or in part,
by "force majeure" (as herein defined) to carry out any of its obligations
under this Agreement, other than the obligation hereunder to make money
payments, the obligations of the Managing General Partner, insofar as they are
affected by such force majeure, shall be suspended during, but no longer than,
the continuance of such force majeure. The term "force majeure" as used herein
shall mean an act of God, strike, lockout or other industrial disturbance, act
of public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, governmental restraint, unavailability of equipment and any other
cause, whether of the kind specifically enumerated above or otherwise, which is
not reasonably within the control of the Managing General Partner.
16.11. ENTIRE AGREEMENT.
This Agreement contains the entire agreement among the Partners with
respect to the transactions contemplated herein, and supersedes all prior oral
or written agreements, commitments or understandings with respect to the matters
provided for herein.
16.12. PRONOUNS.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the person
or entity may require.
16.13. HEADINGS.
Article, Section and subsection headings contained in this Agreement are
inserted for convenience of reference only, shall not be deemed to be a part of
this Agreement for any purpose and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
-91-
16.14. GOVERNING LAW.
This Agreement, the rights and obligations of the parties hereto and any
claims or disputes relating thereto, shall be governed by and construed in
accordance with the laws of Delaware (but not including the choice of law rules
thereof).
16.15. EXECUTION IN COUNTERPARTS.
To facilitate execution, this Agreement may be executed in as many
counterparts as may be required; and it shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind any party, appear on each counterpart; but it shall be
sufficient that the signature of, or on behalf of, each party, or that the
signatures of the persons required to bind any party, appear on one or more of
the counterparts. All counterparts shall collectively constitute a single
agreement. It shall not be necessary in making proof of this Agreement to
produce or account for more than a number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
-92-
ARTICLE XVII
EXECUTION
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement,
or have caused this Agreement to be duly executed on their behalf, as of the
day and year first hereinabove set forth.
MANAGING GENERAL PARTNER:
ATTEST: QSV PROPERTIES INC.
By: By:
-------------------------------- ---------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Secretary Title: President and Chief
Executive Officer
LIMITED PARTNER:
U.S. RESTAURANT PROPERTIES
MASTER L.P.
By: U.S. RESTAURANT PROPERTIES INC.,
MANAGING GENERAL PARTNER
ATTEST:
By: By:
-------------------------------- ---------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Secretary Title: President and Chief
Executive Officer
-93-
ATTEST: REIT:
U.S. RESTAURANT PROPERTIES, INC.
By: By:
-------------------------------- ---------------------------------
Name: Name:
-------------------------- ----------------------------
Title: Title:
------------------------- --------------------------
-94-
EXHIBIT A
PARTNERS CONTRIBUTIONS AND PARTNERSHIP INTERESTS
NAME AND ADDRESS CASH AGREED VALUE OF TOTAL PARTNERSHIP PERCENTAGE
OF PARTNER CONTRIBUTION CONTRIBUTED PROPERTY CONTRIBUTION UNITS INTEREST
---------------- ------------ -------------------- ------------ ----------- ----------
A-1
EXHIBIT B
NOTICE OF REDEMPTION
The undersigned Limited Partner hereby irrevocably (i) exchanges
____________ Partnership Units in U.S. Restaurant Properties Operating L.P. in
accordance with the terms of the Third Amended and Restated Agreement of Limited
Partnership of U.S. Restaurant Properties Operating L.P. and the Exchange Right
referred to therein; (ii) surrenders such Partnership Units and all right, title
and interest therein; and (iii) directs that the REIT Stock Amount deliverable
upon exercise of the Exchange Right be delivered to the address specified below,
and that the shares of Common Stock be registered or placed in the name(s)
specified below. The undersigned hereby represents, warrants and certifies that
the undersigned (a) has marketable and unencumbered title to such Partnership
Units, free and clear of the rights or interests of any other person or entity;
(b) has the full right, power and authority to redeem and surrender such
Partnership Units as provided herein; and (c) has obtained the consent or
approval of all person or entities, if any, having the right to consent or
approve such redemption and surrender.
Dated:
-----------------------------
Name of Limited Partner:
------------------------------
Please Print
----------------------------------
(Signature of Limited Partner)
----------------------------------
(Street Address)
----------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
----------------------------------
Issue shares of Common Stock to:
Name:
----------------------------
Please insert social security of identifying number:
-------------------------
B-1
