Exhibit 99.1
AGREEMENT OF LIMITED PARTNERSHIP OF
BHDGI, LTD.
THIS AGREEMENT OF LIMITED PARTNERSHIP (the "AGREEMENT") is made and
entered into effective as of the ___ day of ________, 2005, by and among
GRAYBIRD DEVELOPERS, LLC, a Texas limited liability company (the "GENERAL
PARTNER"), BEHRINGER HARVARD SHORT-TERM OPPORTUNITY FUND I LP, a Texas limited
partnership ("BH INVESTOR"), and ▇▇▇▇▇ ▇. ▇▇▇▇ ("▇▇▇▇").
ARTICLE I.
FORMATION, NAME, PRINCIPAL PLACE OF BUSINESS - AGENT
PURPOSES, TERM AND DEFINITIONS
1.1 FORMATION. For and in consideration of the mutual covenants
herein contained, the Partners hereby form a limited partnership (hereinafter
the "PARTNERSHIP") under and pursuant to the Texas Revised Limited Partnership
Act, Tex. Rev. Civ. Stat. ▇▇▇., art 6132a-1 (such Act hereinafter referred to as
"TRLPA"). The Partnership shall be governed by TRLPA. The Certificate (as
hereinafter defined) has been or shall promptly be filed and recorded in such
office and places as is required by TRLPA.
1.2 NAME. The business of the Partnership shall be conducted under
the name of "BHDGI, LTD."
1.3 PARTNERSHIP OFFICE, REGISTERED OFFICE AND REGISTERED AGENT. The
Partnership shall maintain its principal office in the State of Texas at ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, or at such other place as the
General Partner, subject to Approval by Partnership Vote, may from time to time
designate. The Registered Office in the State of Texas is ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, and the agent for service of process at such
address shall be ▇▇▇▇▇ ▇. ▇▇▇▇. The Partnership may maintain such different or
additional offices as the General Partner may determine, subject to Approval by
Partnership Vote.
1.4 PURPOSES. The nature and business of the Partnership and the
purposes to be conducted and promoted by the Partnership are to engage solely in
the following activities:
(a) To acquire, own, develop, maintain, operate, manage,
finance (including pursuant to the Mortgage Loan, as hereinafter defined),
lease, refinance, and sell or exchange the Property (as hereinafter defined);
and
(b) To exercise all powers enumerated in TRLPA or this
Agreement necessary or convenient to the conduct, promotion or attainment of the
business or purposes set forth in Section 1.4(a).
1.5 TERM. The Partnership shall continue until December 31, 2055,
unless the Partnership is terminated sooner pursuant to Article XII.
1.6 DEFINITIONS. As used in this Agreement, unless the context
clearly requires otherwise, the following words and phrases shall have the
following meanings:
"ADDITIONAL CAPITAL CONTRIBUTIONS" means all amounts contributed
(or deemed to be contributed) to the Partnership as additional Capital
Contributions by the Partners under Section 3.2.
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"ADJUSTMENT DATE" means the close of business on the last day of
any fiscal year of the Partnership.
"AFFILIATE" means, with respect to any Person (a) any other
Person, directly or indirectly controlling, controlled by or under common
control with such Person; (b) any Person owning or controlling ten percent (10%)
or more of the outstanding voting securities of such specified Person; (c) any
officer, director, partner, member or trustee of such specified Person; and (d)
if any Person who is an Affiliate is an officer, director, partner, member or
trustee of another Person, such other Person. The term "control" shall mean the
ability, directly or indirectly, to control the management of an entity.
"AGREEMENT" means this Agreement of Limited Partnership.
"APPROVAL BY PARTNERSHIP VOTE" means approval by the General
Partner and the Class A Limited Partner pursuant to a Partnership Vote.
"ASSETS" means all of the assets of the Partnership (including,
without limitation, the Property).
"CAPITAL ACCOUNT" means, with respect to each Partner, the
account established and maintained on the books and records of the Partnership
for each Partner pursuant to Section 3.3 below, adjusted as provided for
therein.
"CAPITAL CONTRIBUTION" means the amount of money and the Gross
Asset Value of other property or consideration contributed to the capital of the
Partnership by a Partner.
"CAPITAL CONTRIBUTION BALANCE" means, (i) for the Class A
Limited Partner, the cumulative Capital Contributions of that Partner less the
cumulative distributions to that Partner in return thereof pursuant to Sections
6.1(a) and 6.2(a); and (ii) for each of the Class B Partners, the cumulative
Capital Contributions of that Partner less the cumulative distributions to that
Partner in return thereof pursuant to Section 6.1(b) or 6.2(b) hereof.
"CAPITAL TRANSACTION" means any transaction pursuant to which
(i) the Partnership sells all or substantially all of the Property; or (ii) the
Partnership obtains permanent mortgage financing with a term of five (5) years
or more secured by all or substantially all of the Property. It is expressly
agreed that a Mortgage Loan obtained by the Partnership to provide acquisition
or development financing shall not be considered a Capital Transaction, nor
shall any revolving credit loan, line of credit loan, or similar lending
arrangement made by the Partnership be considered a Capital Transaction.
"CASH NEEDS" has the meaning set forth in Section 3.2.
"CERTIFICATE" means the Certificate of Limited Partnership of
the Partnership.
"CLASS A LIMITED PARTNER" means BH Investor and any successors,
assigns, substitutions or replacements thereof in accordance with this
Agreement.
"CLASS A LIMITED PARTNERSHIP PERCENTAGE" means, with respect to
each Class A Limited Partner, the percentage set forth opposite such Class A
Limited Partner's name on the attached EXHIBIT B.
"CLASS B LIMITED PARTNER" means ▇▇▇▇▇ ▇. ▇▇▇▇ and any
successors, assigns, substitutions or replacements thereof in accordance with
this Agreement.
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"CLASS B PARTNERSHIP PERCENTAGE" means, with respect to each
Class B Partner, the percentage set forth opposite such Class B Partner's name
on the attached EXHIBIT B.
"CLASS B PARTNERS" means the General Partner, the Class B
Limited Partner, and any successors, assigns, substitutions or replacements
thereof in accordance with this Agreement.
"CODE" means the Internal Revenue Code of 1986 as it may be
amended or revised from time to time, or any provision of succeeding law.
"DEPRECIATION" means, with regard to any Partnership asset for
any fiscal year or other period, the depreciation, depletion or amortization, as
the case may be, allowed or allowable for federal income tax purposes; provided,
however, that if there is a difference between the Gross Asset Value and the
adjusted tax basis of such asset, Depreciation shall mean "book depreciation,
depletion or amortization" as determined under Section 1.704-1(b)(2)(iv)(g)(3)
of the Regulations.
"DEVELOPER" means MSDL, Inc., a Texas corporation.
"DEVELOPMENT AGREEMENT" means a Development Agreement by and
between the Partnership and Developer providing for the performance by Developer
of development services with respect to the Property and payment by the
Partnership of a development fee to Developer, to be entered into by the General
Partner, on behalf of the Partnership, in accordance with the provisions of
Section 4.7(a) hereof.
"DISTRIBUTABLE CASH" means all cash, revenues, and funds
received by the Partnership, and any amounts released from Reserves to the
extent the General Partner deems that the amount released is no longer required
to be retained in Reserves, less the sum of the following to the extent paid or
set aside by the Partnership: (a) all principal and interest payments on
indebtedness of the Partnership (including any Mortgage Loan) and all other sums
paid to lenders; (b) all cash expenditures incurred incident to the normal
operation of the Partnership business; (c) such amounts as may be added to
Reserves as the General Partner, deems reasonably necessary to the proper
operation of the Partnership's business.
"EQUITY INVESTORS" means the limited partners in BH Investor.
"GENERAL PARTNER" means Graybird Developers, LLC, a Texas
limited liability company, and any other Person who has been admitted as a
General Partner in the Partnership pursuant to the provisions of this Agreement.
"GROSS ASSET VALUE" means, except as set forth below, the
adjusted basis of an asset for federal income tax purposes:
(a) The initial Gross Asset Value of any asset contributed
by a Partner to the Partnership shall be the gross fair market value of such
asset at the time of contribution, as determined by Approval by Partnership
Vote;
(b) The Gross Asset Value of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as determined by
Approval by Partnership Vote, as of the following times: (i) the acquisition of
an additional interest in the Partnership by any new or existing Partners in
exchange for more than a DE MINIMIS Capital Contribution and any such other time
as the General Partner, subject to Approval by Partnership Vote, reasonably
determines that such adjustment is necessary or appropriate to reflect the
relative economic interest of the Partners in the Partnership; (ii) the
distribution
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by the Partnership to a Partner of more than a DE MINIMIS amount of Partnership
property as consideration for an interest in the Partnership and any such other
time as the General Partner, subject to Approval by Partnership Vote, reasonably
determines that such adjustment is necessary or appropriate to reflect the
relative economic interests of the Partners in the Partnership; and (iii) the
liquidation of the Partnership within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g);
(c) The Gross Asset Value of any Partnership asset
distributed to any Partner shall be the gross fair market value of such asset on
the date of distribution, as determined by the General Partner subject to
Approval by Partnership Vote; and
(d) The Gross Asset Values of Partnership assets shall be
increased or decreased to reflect any adjustments to the adjusted basis of such
assets pursuant to Code Section 734(b) or Code Section 743(b) as determined by
the General Partner subject to Approval by Partnership Vote, but only to the
extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations; provided,
however, that Gross Asset Values shall not be adjusted pursuant to this
subsection (d) to the extent the General Partner, subject to Approval by
Partnership Vote, determines that an adjustment pursuant to subsection (b)
hereof is necessary or appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant this subsection (d).
(e) After the Gross Asset Value of an asset has been
determined or adjusted pursuant to subsections (a), (b), or (d) hereof, Gross
Asset Value will be adjusted by the Depreciation taken into account with respect
to the asset for purposes of computing Profits or Losses. If the Gross Asset
Value of an asset has been determined or adjusted pursuant to subsections (a),
(b), (c) or (d) of this provision, such Gross Asset Value shall thereafter be
computed in accordance with Section 1.704-1(b)(2)(iv) of the Regulations.
"HPT" means HPT Management Services LP, a Texas limited
partnership.
"IMPROVEMENTS" means any improvements and related amenities now
located or to be constructed on the Property.
"INITIAL CAPITAL CONTRIBUTIONS" means all amounts contributed
(or deemed to be contributed) to the Partnership as a Capital Contribution by
the Partners under Section 3.1.
"IRR" means, as to the Equity Investors, the actual internal
rate of return on the investment made by the Equity Investors in respect of the
Partnership, as calculated by the Class A Limited Partner and reasonably
approved by the Class B Partner, on an annual basis taking into consideration
the timing and amount of the investments made by the Equity Investors in respect
of the Partnership as well as the timing and amount of all distributions
received as a result of such investment. For purposes of calculating the IRR,
the investment made by the Equity Investors in respect of the Partnership
consists of the capital contributions made by the Equity Investors to BH
Investor and invested in the Partnership and, subject to the limitations set
forth in Section 14.4 hereof, all commissions, fees (including, without
limitation, an annual asset management fee equal to three-fourths of one percent
(0.75%) of the aggregate book value of the assets of the Partnership) and
expenses paid by the Equity Investors in respect of investing in BH Investor or
the Partnership. Furthermore, for purposes of calculating the IRR, all Property
owned by the Partnership shall be treated as a single investment and the income
from the Property owned by the Partnership shall be treated as from a single
source, and no debt of the Partnership shall be allocated to the Class B
Partners as an investment in the Partnership.
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"LIMITED PARTNER" means each Class A Limited Partner and each
Class B Limited Partner, and any other Person that is admitted as a limited
partner in the Partnership pursuant to the provisions of Article VIII, and
"LIMITED PARTNERS" means collectively all of such Limited Partners.
"MAJOR DECISION" has the meaning set forth in Section 4.3 of
this Agreement.
"MORTGAGE LOAN" shall mean any mortgage loan encumbering the
Property borrowed by the Partnership and used either (a) to acquire the
Property, or (b) to develop the Property.
"NONRECOURSE DEDUCTIONS" has the meaning set forth in Sections
1.704-2(b)(1) and 1.704-2(c) of the Regulations. Subject to the preceding
sentence, the amount of Nonrecourse Deductions for a Partnership fiscal year
equals the excess, if any, of the net increase, if any, in the amount of
Partnership Minimum Gain during the fiscal year (determined under Section
1.704-2(d) of the Regulations) over the aggregate amount of any distributions
during the fiscal year of proceeds of a Nonrecourse Liability that are allocable
to an increase in Partnership Minimum Gain (determined under Section 1.704-2(h)
of the Regulations).
"NONRECOURSE LIABILITY" has the meaning set forth in Section
1.704-2(b)(3) of the Regulations.
"OPERATING BUDGET" means the annual budget, prepared by the
General Partner and with respect to which Approval by Partnership Vote has been
obtained, and setting forth the estimated capital and operating expenses of the
Partnership for the then current or immediately succeeding calendar year and for
each month and each calendar quarter of such calendar year, in such detail as
determined by Approval by Partnership Vote.
"OPERATING EXPENSES" means all the cash expenditures made or
required to be made by the Partnership in connection with the operation of the
Partnership in the ordinary course of business, including without limitation,
cash expenditures made or required to be made by the Partnership in connection
with the development, ownership, management, improvement, operation,
maintenance, financing and upkeep of the Property, as well as debt service
(principal and interest) and capital expenditures of the Partnership; provided,
however, except as provided in the Operating Budget, Operating Expenses shall
not include (a) any overhead or general administrative costs or expenses of the
General Partner or salaries or other compensation paid to its employees,
officers, directors or shareholders (unless specifically provided for in this
Agreement); (b) any expenditures paid or payable from cash Reserves of the
Partnership (provided that to the extent any capital expenditures are made in
excess of any such Reserves established for such capital expenditures, such
excess amounts shall be included as an Operating Expense); and (c) non-cash
items such as depreciation and amortization.
"PARTIALLY ADJUSTED CAPITAL ACCOUNTS" means, with respect to any
Partner as of an Adjustment Date, the Capital Account of such Partner as of the
beginning of the fiscal year ending on such Adjustment Date (where such Capital
Account does not reflect such Partner's share of either cumulative Partner
Minimum Gain or cumulative Partnership Minimum Gain), after giving effect to all
allocations of items of income, gain, loss or deduction not included in Profits
and Losses and all Capital Contributions and distributions during such period,
but before giving effect to any allocations of Profits or Losses for such period
pursuant to Section 7.1 hereof, increased by (a) such Partner's share of
Partnership Minimum Gain as of the end of such fiscal year, and (b) such
Partner's share of Partner Minimum Gain as of the end of such fiscal year.
"PARTNER" means each of the General Partner and the Limited
Partners, and "PARTNERS" means collectively all of such Partners.
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"PARTNER MINIMUM GAIN" means an amount, with respect to each
Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would
result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability.
"PARTNER NONRECOURSE DEBT" has the meaning set forth in Section
1.704-2(b)(4) of the Regulations.
"PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Section 1.704-2(i) of the Regulations. Subject to the foregoing, the amount of
Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a
Partnership fiscal year equals the excess, if any, of the net increase, if any,
in the amount of Partner Minimum Gain attributable to such Partner Nonrecourse
Debt during that fiscal year over the aggregate amount of any distribution
during that fiscal year to the Partner that bears the economic risk of loss for
such Partner Nonrecourse Debt to the extent such distributions are from the
proceeds of such Partner Nonrecourse Debt and are allocable to an increase in
Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined
in accordance with Section 1.704-2(i) of the Regulations.
"PARTNERSHIP" means BHDGI, Ltd., a Texas limited partnership.
"PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Section
1.704-2(d) of the Regulations. Subject to the foregoing, Partnership Minimum
Gain shall equal the amount of gain, if any, which would be recognized by the
Partnership with respect to each nonrecourse liability of the Partnership (or
Property owner) if the Partnership were to Transfer the Partnership property (or
the Property owner were to Transfer the Property owner property) which is
subject to such nonrecourse liability in full satisfaction thereof.
"PARTNERSHIP VOTE" shall mean a vote of the Partners. A
Partnership Vote may be conducted at a meeting of the General Partner and the
Limited Partners, which meeting may take place by means of telephone conference,
video conference or similar communications equipment by means of which all
Persons participating therein can hear each other. Alternatively, a Partnership
Vote may be conducted by notice sent by the General Partner to the Limited
Partners, which notice shall set forth the matter with respect to which the
Partnership Vote is to be made. If a written consent or consents setting forth
the matter to be determined is signed by the General Partner and the Class A
Limited Partner, then Approval by Partnership Vote shall be deemed to have been
obtained with respect to such matter. The Class B Limited Partner shall have no
right to vote with respect to matters of the Partnership.
"PERSON" means any individual or entity, and the heirs,
executors, administrators, legal representatives, successors and assigns of such
Person where the context so admits, and, unless the context otherwise requires,
the singular shall include the plural, and the masculine gender shall include
the feminine and the neuter and vice versa.
"PROFITS" AND "LOSSES" means, for each fiscal year or other
period, an amount equal to the Partnership's taxable income or loss for such
year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from
federal income tax and not otherwise taken into account in computing Profits and
Losses pursuant to this subsection (a) shall be added to such taxable income or
loss;
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(b) Any expenditure of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations Section 1.704(b)(2)(iv)(i), and not otherwise taken into
account in computing Profits or Losses pursuant to this subsection (b) shall be
subtracted from such taxable income or loss;
(c) In the event the Gross Asset Value of any of the
Partnership assets is adjusted pursuant to subsections (b) or (c) of the
definition of Gross Asset Value, the amount of such adjustment shall be taken
into account as gain or loss from the disposition of such asset for purposes of
computing Profits or Losses;
(d) Gain or loss resulting from any disposition of
Partnership assets with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Gross Asset Value of
the property disposed of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value;
(e) In lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account depreciation computed in accordance with
Section 1.704-1(b)(2)(iv)(g) of the Regulations for such fiscal year or other
period; and
(f) Notwithstanding anything contained herein to the
contrary, any items which are specially allocated pursuant to Sections 7.3(a),
7.3(b), 7.3(c), 7.3(d), 7.3(e) and 7.3(f) shall not be taken into account in
computing Profits or Losses.
"PROPERTY" means the tract of land (and all rights and
appurtenances incident thereto) described in EXHIBIT A attached hereto and all
Improvements located, or to be constructed, or developed thereon.
"REGULATIONS" means the federal income tax regulations,
including temporary regulations, promulgated under the Code, as such regulations
may be amended from time to time (including corresponding provisions of
succeeding regulations).
"RESERVES" means funds set aside or amounts allocated to
reserves for working capital, taxes, insurance, debt service or other costs and
expenses incident to the ownership, development and operation of the Property.
The amount of funds to be set aside in Reserves shall be determined by the
General Partner, subject to Approval by Partnership Vote.
"TARGET ACCOUNT" means, with respect to any Partner as of any
Adjustment Date, a balance (which may be positive or negative) equal to the
hypothetical amount that such Partner would receive upon the liquidation of the
Partnership, assuming that (a) all assets of the Partnership were sold for an
amount equal to their respective Gross Asset Values, (b) all liabilities of the
Partnership allocable to those properties became due and were satisfied in
accordance with their terms (limited with respect to each non-recourse
liability, to the Gross Asset Value of the asset securing such liability), and
(c) all net assets of the Partnership were distributed pursuant to Section 6.1
hereof, computed after the Capital Contributions have been made for the period
ending on such Adjustment Date. The General Partner shall determine Gross Asset
Value from year to year or at any point in time as needed.
"TRANSFER" means, with respect to a particular property, right
or interest, the assignment, sale, transfer, pledge, disposition, hypothecation,
mortgage, pledge or the grant of a lien or security interest in such right or
interest (or any part thereof), whether voluntarily, involuntarily or by
operation of law, and whether for consideration or no consideration.
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ARTICLE II.
PARTNERS
2.1 GENERAL PARTNER. The name and address of the General Partner is
as follows:
NAME ADDRESS
Graybird Developers, LLC ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
2.2 LIMITED PARTNERS. The names and addresses of the Limited
Partners are as follows:
NAME ADDRESS
Behringer Harvard Short-Term ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
Opportunity Fund I LP ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: Asset Manager
▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
ARTICLE III.
CAPITAL
3.1 INITIAL CAPITAL CONTRIBUTIONS. Concurrently with the
Partnership's acquisition of fee simple title to the Property subject only to
such matters as are reasonably approved by the Class A Limited Partner, the
Class A Limited Partner shall make an Initial Capital Contribution to the
Partnership of cash in the amount set forth on EXHIBIT B attached hereto and
made a part hereof (it being agreed that time is of the essence with respect to
the making of such Initial Capital Contribution).
3.2 ADDITIONAL CAPITAL CONTRIBUTIONS FOR CONSTRUCTION COSTS. If at
any time the General Partner determines, in its reasonable discretion, that the
Partnership requires (or will require) additional funds for any purpose ("CASH
NEEDS"), then the General Partner shall use reasonable efforts to secure third
party or Partner loans to fulfill such Cash Needs. If such efforts to secure
third party or Partner loans are unsuccessful, the General Partner may send the
Class A Limited Partner a notice (an "ADDITIONAL CAPITAL NOTICE") requesting
that the Class A Limited Partner contribute in cash such amounts as are
necessary to satisfy such Cash Needs and describing the purpose for which the
funds are needed. If the General Partner makes a request to the Class A Limited
Partner in respect of Cash Needs, the Class A Limited Partner shall be obligated
to make an Additional Capital Contribution equal to the amount of the Cash
Needs, as the case may be. The time for the payment of any Additional Capital
Contribution to the
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Partnership shall be determined by the General Partner, but shall in no event be
less than fifteen (15) days after the delivery of the Additional Capital Notice.
3.3 FAILURE TO MAKE CAPITAL CONTRIBUTION.
(a) If the Class A Limited Partner fails to timely
contribute all or any portion of any Capital Contribution required of such Class
A Limited Partner pursuant to the provisions of Section 3.1 above, then such
Class A Limited Partner shall be considered a "CLASS A DELINQUENT PARTNER." In
such event, the Partnership may, upon notice to the Class A Delinquent Partner,
exercise either one of the following remedies as its sole remedy:
(i) permit the Class B Limited Partner to advance
that portion of the required Capital Contribution that is in default as a loan
(a "CLASS A DEFAULT LOAN") with the following results: (A) the sum thus advanced
shall constitute a loan to the Class A Delinquent Partner; (B) such loan and all
accrued unpaid interest thereon shall be due on demand, or if no demand is made,
twelve (12) months after such advance is made; (C) the loan shall bear interest
at the lesser of twelve percent (12%) per annum or the highest rate permitted by
applicable law, from the date made until the date fully repaid compounding
monthly; and (D) all Partnership distributions and other payments that otherwise
would be made to the Class A Delinquent Partner (whether before or after
dissolution of the Partnership) under this Agreement (including those under
Article 6) shall be paid to the Class B Limited Partner until the loan and all
interest accrued thereon is paid in full (with all such payments being applied
first to accrued and unpaid interest and then to principal and being deemed to
be a distribution or payment (as may apply) to the Class A Delinquent Partner,
and, in turn, a payment by the Class A Delinquent Partner with respect to the
loan from the Class B Limited Partner); or
(ii) permit the Class B Limited Partner to contribute
the Capital Contribution not made by the Class A Delinquent Partner as a Capital
Contribution made by the Class B Limited Partner, in which case the Class B
Limited Partner shall have conferred upon it a Class A Limited Partnership
Percentage, and there shall be a corresponding decrease in the Class A Limited
Partnership Percentage of the Class A Delinquent Partner, as follows: (A) the
Class A Limited Partnership Percentage conferred upon the Class B Limited
Partner immediately following such Capital Contribution shall be increased by an
amount equal to 150% x A/B (expressed as a percentage)(up to a maximum of 100%
of the Class A Limited Partnership Percentage owned by the Class A Delinquent
Partner), where `A' equals the amount the Class B Limited Partner contributed in
respect of the Class A Delinquent Partner's required Capital Contribution, and
`B' equals the sum of all unreturned Capital Contributions previously made to
the Partnership by the Class A Limited Partner after giving effect to the
amounts advanced under this Section 3.3(a)(ii) on behalf of the Class A
Delinquent Partner; and (B) the Class A Limited Partnership Percentage of the
Class A Delinquent Partner shall be decreased by the increase of the Class B
Partner's Class A Limited Partnership Percentage.
(b) With respect to any efforts by the General Partner to
obtain loans to the Partnership from a third party or a Partner (including the
General Partner), the financing terms must be substantially similar to (or more
favorable than) loans which the Partnership could obtain on a competitive
arms-length basis. If the General Partner is unable to determine whether the
financing terms are competitive on an arms-length basis, the General Partner may
seek Approval by Partnership Vote on the issue, or may seek and rely upon the
advice of an independent expert in financing. If any Partner makes any loan or
loans to the Partnership or advances money on its behalf, the amount of any loan
or advance shall not be treated as a Capital Contribution but shall be treated
as a debt due from the Partnership to such Partner.
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3.4 CAPITAL ACCOUNTS. The Partnership shall establish and maintain
on its books and records for each Partner a capital account (collectively the
"CAPITAL ACCOUNTS") in accordance with Section 1.704-1(b)(2)(iv) of the
Regulations. Subject to the foregoing, each Partner's Capital Account generally
shall be:
(a) increased by (i) the amount of money contributed by such
Partner to the Partnership, including Partnership liabilities assumed by such
Partner; (ii) the fair market value of property (net of liabilities securing
such property that the Partnership has assumed, or taken subject to, under
Section 752 of the Code), or other consideration contributed by such Partner to
the Partnership; and (iii) allocations to such Partner of Net Profits (and items
thereof, including certain tax exempt income) and income and gain described in
Section 1.704-1(b)(2)(iv)(g) of the Regulations; and
(b) decreased by (i) the amount of money distributed to such
Partner by the Partnership, including such Partner's individual liabilities
assumed by the Partnership; (ii) the fair market value of all property
distributed to such Partner by the Partnership (net of liabilities that such
Partner is considered to assume or take subject to under Section 752 of the
Code); and (iii) allocations to such Partner of Net Losses and deductions,
including expenses described in Section 705(a)(2)(B) of the Code which are not
deductible for tax purposes.
3.5 INTEREST ON AND WITHDRAWAL OF CAPITAL CONTRIBUTIONS. Neither the
General Partner nor the Limited Partners shall be entitled to receive any
interest on Capital Contributions, nor shall the General Partner or the Limited
Partners be entitled to withdraw or otherwise receive a return of their Capital
Contributions from the Partnership, except pursuant to the terms and conditions
of this Agreement. No Partner shall be required to contribute or lend any cash
or property to the Partnership to enable the Partnership to return any Partner's
Capital Contributions. Without limiting the generality of the foregoing
provisions, it is specifically agreed that any Capital Contribution made by the
Class B Partners (and, accordingly, any Capital Contribution Balance of the
Class B Partners) shall be recovered, if at all, from the distributions made to
the Class B Partners pursuant to Section 6.1(b) and Section 6.2(b) below.
3.6 RESIGNATION; REDEMPTION. Except as otherwise expressly permitted
by this Agreement, no Partner may resign or withdraw from the Partnership
without Approval by Partnership Vote. A Partner's interest in the Partnership
may not be redeemed or purchased by the Partnership without prior Approval by
Partnership Vote.
3.7 TRANSFERS. If any interest in the Partnership is Transferred in
accordance with the terms of this Agreement, the Transferee will succeed to the
Capital Account of the Transferor to the extent it relates to the Transferred
interest.
3.8 GUARANTY OF MORTGAGE LOAN. The Partners contemplate that the
Partnership will obtain one or more Mortgage Loans in an aggregate amount of up
to $2,000,000.00 from Dallas City Bank. BH Investor or an affiliated entity ("BH
GUARANTOR") shall execute a guaranty of such Mortgage Loan, provided that the
terms and conditions of such guaranty are satisfactory to BH Guarantor. The
Partnership hereby agrees to indemnify any BH Guarantor against any losses,
judgments, liabilities, expenses and amounts paid in settlement of any claims
sustained by it in connection with any such guaranty.
ARTICLE IV.
MANAGEMENT
4.1 GENERAL POWERS OF GENERAL PARTNER. Except as provided in Section
4.2 hereof, the day-
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to-day administrative management of the Partnership and the implementation of
the policy and decisions of the Partnership (as approved by the requisite vote
of the Partners) shall be the obligation of and rest with the General Partner,
which shall have all the rights and powers as are necessary, advisable or
convenient to the management of the business and affairs of the Partnership,
subject to the limitations contained herein, including those matters described
in Section 4.2 below. The General Partner shall exercise sound business judgment
in managing the affairs of the Partnership.
4.2 MAJOR DECISIONS. All "Major Decisions" (hereinafter defined)
with respect to the Partnership business shall require Approval by Partnership
Vote. All Major Decisions shall be made by the Partners in a timely manner with
due regard for the necessity of obtaining and evaluating the information
necessary for making such Major Decisions. A "MAJOR DECISION" as used in this
Agreement means any decision with respect to the following matters:
(a) any merger or consolidation of the Partnership with
another entity;
(b) any borrowing by the Partnership secured by a deed of
trust or lien against the Property or any guarantee of debt of any other Person;
(c) except for expenditures made and obligations incurred
pursuant to an Operating Budget, making any expenditure or incurring any
obligation by or for the Partnership, or approving any such expenditure or
obligation to be made or incurred by the Partnership, in excess of 105% of the
amount set forth in an Operating Budget therefor (the "105% LIMITATION");
provided, that the General Partner may (without prior Approval by Partnership
Vote) make expenditures that it reasonably determines are necessary or
appropriate that exceed such 105% Limitation provided that the aggregate amount
of such expenditures do not exceed the lesser of: (i) fifteen percent (15%) of
the Operating Budget, or (ii) Twenty Five Thousand Dollars ($25,000.00) in any
12-month period; provided, further, that if emergency repairs to the Property
are necessary to avoid imminent danger of injury to the Property or to an
individual, the General Partner may make such expenditures as may be necessary
to alleviate such situation (without regard to the foregoing limitations) and
shall promptly notify the Limited Partners in writing of the event giving rise
to such repairs and the actions taken with respect thereto;
(d) causing the Partnership to file a voluntarily bankruptcy
petition, seeking or consenting to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator, custodian or any similar official for the
Partnership or a substantial portion of its assets, causing the Partnership to
file a petition or answer seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation or similar relief under any statute, law
or regulation, causing the Partnership to file an answer or other pleading
admitting or failing to contest the material allegations of a petition filed
against it in any proceeding of this nature or to take any action in furtherance
of the foregoing;
(e) causing the Partnership to file any lawsuit, other than
lawsuits arising from the normal day-to-day operation of the Property, such as
suits to collect unpaid rent and eviction suits;
(f) any payment by the Partnership of any compensation to a
Partner or an Affiliate of a Partner, or any transaction between the Partnership
and any Partner or Affiliate of a Partner, except to the extent that any payment
to, or transaction with, a Partner is set forth in an approved Operating Budget
or expressly authorized or approved pursuant to the terms of this Agreement;
(g) executing or approving any agreement or contract with
any Person to be an agent for the Partnership or to be other than an independent
contractor, or which permits any such Person to sign any agreement or contract,
including, without limitation, brokerage, listing or commission agreements or
service contracts, on behalf of the Partnership;
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(h) the dedication of any portion of the Property to any
federal, state or local government or political subdivision;
(i) approval of a management or leasing agreement related to
the Property;
(j) executing or approving any agreement, contract, or
arrangement, with a term of more than one year that is not terminable with
thirty (30) days notice without penalty;
(k) assigning the Partnership's rights in specific
Partnership property for other than Partnership purposes;
(l) any act which would make it substantially impractical to
carry on the ordinary business of the Partnership, other than a Transfer of all
or substantially all of the assets of the Partnership with respect to which
Approval by Partnership Vote has been obtained;
(m) any confession of a judgment against the Partnership;
(n) making, executing or delivering any assignment for the
benefit of creditors of the Partnership, or signing any bond, confession of
judgment, indemnity bond or surety bond by or on behalf of the Partnership;
(o) Except in the ordinary course of the Partnership's
business and as provided for in the Operating Budget, any Transfer (other than
leases of the Property executed in the ordinary course of business) of all or
any part of (i) the Property, or (ii) any other Partnership asset the value of
which exceeds $25,000;
(p) any admission of any new Limited Partner to the
Partnership;
(q) the dissolution or termination of the Partnership
(r) the approval of any tax election that adversely affects
a Limited Partner; and
(s) any other decision or action which by the provisions of
this Agreement is required to be authorized by Approval by Partnership Vote.
4.3 OPERATING BUDGETS. The Partnership shall operate under annual
Operating Budgets which shall be prepared by the General Partner, subject to
Approval by Partnership Vote. After an annual Operating Budget has been the
subject of Approval by Partnership Vote, the General Partner shall implement it
on behalf of the Partnership and may cause the Partnership to incur the
expenditures and obligations therein provided. The General Partner shall submit
to the Class A Limited Partners any proposed Operating Budget for each calendar
year by November 15 of the preceding calendar year. Provided that each of the
Class A Limited Partners receives the proposed Operating Budget for each
calendar year by November 15 of the preceding calendar year, together with all
supporting information necessary for the Class A Limited Partners to review the
Operating Budget, each Class A Limited Partner will approve, reject, or provide
changes to the Operating Budget by December 15 of the year in which the proposed
Operating Budget was submitted to the Class A Limited Partners. If an Operating
Budget for any calendar year has not been the subject of Approval by Partnership
Vote by January 1 of that year, the Partnership shall continue to operate under
the Operating Budget for the previous year with such adjustments as may be
necessary to reflect deletion of non-recurring expense items set forth on the
previous Operating Budget and increased insurance costs, taxes, utility costs,
and debt service payments.
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4.4 LIMITED PARTNER PARTICIPATION IN MANAGEMENT. The Limited
Partners, as limited partners, shall not participate in the operation or
management of the business of the Partnership, or transact any business for or
in the name of the Partnership, and the Limited Partners, as the limited
partners, shall not have any right or power to sign for or bind the Partnership
in any manner, except as expressly provided under the provisions of this
Agreement. Any rights of the Limited Partners to consent to and approve of
certain matters under the provisions of this Agreement shall not be deemed a
participation in the operation and management of the business of the Partnership
or the exercise of control of the Partnership business. Except as may be
otherwise expressly provided herein, the Limited Partners shall not have the
right to vote on any matter concerning the management and affairs of the
Partnership.
4.5 PAYMENT OF COSTS AND EXPENSES. The Partnership will be
responsible for paying all costs and expenses of forming and continuing the
Partnership, acquiring the Property, and conducting the business of the
Partnership, including, without limitation, accounting costs, legal expenses and
office supplies. In the event any such costs and expenses are incurred and paid
by the General Partner on behalf of the Partnership, then, except as expressly
provided to the contrary in this Agreement, such Partner shall be entitled to be
reimbursed for such payment so long as such cost or expense was reasonably
necessary and is reasonable in amount. The Partnership may use the proceeds of
any revenues of the Partnership to reimburse a Partner for any such costs and
expenses so paid.
4.6 TRANSACTIONS WITH AFFILIATES. Any agreement whereby any service
or activity to be performed for the Partnership is to be performed by an
Affiliate of a Partner shall require Approval by a Partnership Vote. The
Partners hereby acknowledge and agree that Approval by Partnership Vote has been
obtained with respect to the Development Agreement.
4.7 DEVELOPMENT AGREEMENT. The Partnership shall enter into the
Development Agreement with Developer to perform development services in respect
of the Property, pursuant to which the Developer will receive a development fee
from the Partnership of up to seven percent (7%) of the controllable costs of
developing the Property, subject to the terms set forth in the Development
Agreement.
4.8 OTHER COMPENSATION. Except as provided in this Agreement, no
Partner or its Affiliate shall be entitled to any compensation unless Approval
by Partnership Vote is obtained with respect thereto.
4.9 CONSTRUCTION REQUIREMENTS. The completion of improvements which
are to be constructed on the Property shall be guaranteed at the price
contracted either by an adequate completion bond or by other assurances
satisfactory to all the Partners, which assurances shall include one or more
(upon Approval by Partnership Vote) of the following: (a) a written personal
guarantee of one or more of the general contractor's principals accompanied by
the financial statements of such guarantor indicating a substantial net worth;
(b) a written fixed price contract with a general contractor that has a
substantial net worth; (c) a retention of a reasonable portion of construction
costs as a potential offset to such construction costs in the event the general
contractor does not perform in accordance with the construction contract; or (d)
a program of disbursements control which provides for direct payments to
subcontractors and suppliers. The Partnership shall make no periodic progress or
other advance payments to the general contractor or any subcontractor unless the
Partnership has first received an architect's certification as to the percentage
of the improvements which has been completed and as to the dollar amount of the
construction then completed.
4.10 PROJECT MANAGER. The Partnership shall have no employees. BH
Investor shall designate an asset manager to serve as its representative during
the initial construction of Improvements on the Property.
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ARTICLE V.
RIGHTS AND POWERS OF PARTNERS
5.1 LIMITATION OF LIABILITY.
(a) LIMITATION ON LIABILITY OF LIMITED PARTNERS. The Limited
Partners shall not be bound by, or personally liable for, obligations or
liabilities of the Partnership to outside third parties beyond the amount of
their Capital Contributions to the Partnership, and the Limited Partners shall
not be required to contribute any capital to the Partnership for any obligations
to third parties in excess of the Capital Contributions actually made under
Sections 3.1 and 3.2 hereof.
(b) LIMITATION ON LIABILITY OF GENERAL PARTNER. The General
Partner (including its members, officers, directors, agents, employees and
representatives) shall not be liable or responsible in damages or otherwise to
the Partnership or any Partner for any liability or loss relating to the
performance or nonperformance of any act concerning the business of the
Partnership, provided the General Partner was not guilty of gross negligence or
willful misconduct.
5.2 INDEMNIFICATION.
(a) The General Partner (including its members, partners,
officers, directors, agents, employees and representatives) shall be indemnified
by the Partnership to the fullest extent permitted by law, against any losses,
judgments, liabilities, expenses and amounts paid in settlement of any claims
sustained by it or any of them in connection with the Partnership, provided that
the General Partner has determined in good faith that such course of conduct was
in, and not opposed to, the best interests of the Partnership and such liability
or loss was not the result of gross negligence or willful misconduct, or a
material breach of this Agreement on the part of the General Partner or such
person, and (2) any such indemnification will only be recoverable from the
assets of the Partnership and the Limited Partners shall not have any liability
on account thereof. All rights to indemnification permitted herein and payment
of associated expenses shall not be affected by the dissolution or other
cessation of the existence of the General Partner, or the withdrawal,
adjudication of bankruptcy or insolvency of the General Partner.
(b) Expenses incurred in defending a threatened or pending
civil, administrative or criminal action, suit or proceeding against any person
who may be entitled to indemnification pursuant to this Section 5.2 may be paid
by the Partnership in advance of the final disposition of such action, suit or
proceeding, if (i) the legal action relates to the performance of duties or
services by such person on behalf of the Partnership, (ii) the legal action is
initiated by a third party who is not a Limited Partner, and (iii) such person
undertakes to repay the advanced funds to the Partnership in cases in which it
is not entitled to indemnification under this Section 5.2.
(c) The term "General Partner" as used in this Section 5.2
shall include any additional or substitute general partner and any Affiliate of
a General Partner performing services on behalf of the Partnership.
5.3 OTHER BUSINESS ACTIVITIES. Subject to the other express
provisions of this Agreement, each Partner and any Affiliate thereof may engage
in and possess interests in other business ventures of any and every type and
description, independently or with others, including ones in direct or indirect
competition with the Partnership, with no obligation to offer to the Partnership
or any other Partner the right to participate therein or to account therefor.
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5.4 INFORMATION. In addition to the other rights specifically set
forth in this Agreement, each Partner is entitled to the following information:
(a) true and full information regarding the status of the business and financial
condition of the Partnership; (b) promptly after becoming available, a copy of
the Partnership's federal, state and local income tax returns for each year; (c)
a current list of the name and last known business, residence or mailing address
of each Partner; (d) a copy of this Agreement, the Certificate, and all
amendments to such documents; and (e) other information regarding the affairs of
the Partnership to which that Partner is entitled pursuant to the TRLPA.
5.5 PRESS RELEASES. No public announcement, press release or other
similar public disclosure of the terms of this Agreement will be made unless
same is authorized in writing by the Class A Limited Partner. However,
notwithstanding the preceding sentence, any Partner shall have the right,
without obtaining the consent of any other Partner, to make such disclosures as
may, in the reasonable judgment of such Partner's counsel, be required by
applicable law. Furthermore, it is agreed that the foregoing provisions of this
Section 5.5 shall not prohibit a Partner from disclosing such information to the
accountants, attorneys, consultants, lenders and vendors of the Partnership as
is necessary to allow such parties to provide services, funds or goods to the
Partnership.
ARTICLE VI.
DISTRIBUTIONS/ALLOCATIONS OF PROFITS AND LOSSES
6.1 DISTRIBUTIONS OF DISTRIBUTABLE CASH FROM OPERATIONS. Within
twenty (20) days following the end of each calendar quarter, the Partnership
shall distribute Distributable Cash (other than Distributable Cash arising from
a Capital Transaction) in the following order of priority:
(a) First, to the Class A Limited Partner until the Class A
Limited Partner shall have received distributions resulting from its investment
in the Partnership sufficient to provide an annual IRR Return of eighteen
percent (18%) to the Class A Limited Partner (including the return of the
Capital Contribution Balance of the Class A Limited Partner), it being agreed
that funds distributed pursuant to this clause shall be applied first to pay an
economic return on the Capital Contribution Balance of the Class A Limited
Partner and then to reduce the Capital Contribution Balance of the Class A
Limited Partner; and
(b) Next, sixty percent (60%) to the Class A Limited Partner
and forty percent (40%) to the Class B Partners, in proportion to their
respective Class B Partnership Interests.
6.2 DISTRIBUTIONS OF DISTRIBUTABLE CASH FROM A CAPITAL TRANSACTION.
As soon as reasonably practicable after the occurrence of a Capital Transaction,
the Partnership shall distribute Distributable Cash resulting from such Capital
Transaction in the following order of priority:
(a) First, to the Class A Limited Partner until the Class A
Limited Partner shall have received distributions resulting from its investment
in the Partnership sufficient to provide an annual IRR Return of eighteen
percent (18%) to the Class A Limited Partner (including the return of the entire
Capital Contribution Balance of the Class A Limited Partner), it being agreed
that funds distributed pursuant to this clause shall be applied first to pay an
economic return on the Capital Contribution Balance of the Class A Limited
Partner and then to reduce the Capital Contribution Balance of the Class A
Limited Partner; and
(b) Next, sixty percent (60%) to the Class A Limited Partner
and forty percent (40%) to the Class B Partners, in proportion to their
respective Class B Partnership Interests.
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6.3 REPAYMENT OF CLASS A DEFAULT LOAN For purposes of determining
the IRR of the Class A Limited Partner under Section 6.1 and Section 6.2 above,
any distributions which, under the terms of Section 3.3(a)(i) hereof, are deemed
made to the Class A Limited Partner but paid to the Class B Limited Partner to
repay a Class A Default Loan shall be deemed received by the Class A Limited
Partner.
ARTICLE VII.
ALLOCATION OF PROFITS AND LOSSES
7.1 ALLOCATION OF PROFITS AND LOSSES. After application of Section
7.3 hereof, Profits and Losses for each fiscal year shall be allocated among the
Partners so as to reduce, proportionately, in the case of any Profits, the
difference between their respective Target Accounts and Partially Adjusted
Capital Accounts for such fiscal year and, in the case of Losses, the difference
between their respective Partially Adjusted Capital Accounts and Target Accounts
for such fiscal year. To the extent that, in the fiscal year in which all or
substantially all of the Partnership's assets are disposed of, or in the fiscal
year in which the Partnership is liquidated, the allocation of Profit or Loss
set forth in the preceding sentence does not cause each Partner's Partially
Adjusted Capital Account balance to equal the balance of its Target Account,
items of income or gain will be reallocated to any Partner with a Partially
Adjusted Capital Account which is less than its Target Account, and items of
loss, deduction or expense will be reallocated to any Partner with a Partially
Adjusted Capital Account that is greater than its Target Account in such manner
as to reduce, to the greatest extent possible, the difference between each
Partner's respective balance in its Target Account and its Partially Adjusted
Capital Account balance.
7.2 LIMITATION ON LOSS ALLOCATIONS. Notwithstanding anything in this
Agreement to the contrary, no Losses or item of deduction shall be allocated to
a Partner if such allocation would cause the Capital Account of such Partner to
have a deficit in excess of the sum of (a) the amount of additional capital such
Partner would be required to contribute to the Partnership if the Partnership
were to dissolve on the last day of the accounting period to which such
allocation relates plus (b) such Partner's distributive share of Partnership
Minimum Gain as of the last day of such accounting period, determined pursuant
to Regulations Section 1.704-2(g)(1), plus (c) such Partner's share of Partner
Minimum Gain as of the last day of such year, determined pursuant to Regulation
Section 1.704-2(i)(5). Any amounts not allocated to a Partner pursuant to the
limitations set forth in this paragraph shall be allocated to the other Partners
to the extent possible without violating the limitations set forth in this
paragraph. For purposes of the foregoing provisions, the balance of a Partner's
Capital Account shall be determined after reducing such Capital Account by (i)
all anticipated allocations of loss or deduction pursuant to Sections 704(e)(2)
and 706(d) of the Code, and Section 1.751-1(b)(2)(ii) of the Regulations, and
(ii) anticipated distributions to such Partner to the extent such anticipated
distributions exceed anticipated increases to such Partner's Capital Account
during or prior to the year of distribution (other than increases which may not
be taken into account pursuant to Section 1.704-1(b)(2)(ii)(d)(6) of the
Regulations).
7.3 SPECIAL ALLOCATIONS. The following special allocations shall be
made in the following order:
(a) MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Section 1.704-2(f) of the Regulations, in the event there is a net decrease in
Partnership Minimum Gain during a Partnership taxable year, each Partner shall
be allocated (before any other allocation is made pursuant to this Section 7.3)
items of income and gain for such year (and, if necessary, for subsequent years)
equal to that Partner's share of the net decrease in Partnership Minimum Gain.
The determination of a Partner's share of the net decrease in Partnership
Minimum Gain shall be determined in accordance
16
with Regulations Section 1.704-2(g). The items to be specially allocated to the
Partners in accordance with this Section 7.3(a) shall be determined in
accordance with Regulation Section 1.704-2(f)(6). This Section 7.3(a) is
intended to comply with the Minimum Gain chargeback requirement set forth in
Section 1.704-2(f) of the Regulations and shall be interpreted consistently
therewith.
(b) PARTNER MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Section 1.704-2(i)(4), in the event there is a net decrease in
Partner Minimum Gain during a Partnership taxable year, each Partner who has a
share of that Partner Minimum Gain as of the beginning of the year, to the
extent required by Regulation Section 1.704-2(i)(4), shall be specially
allocated items of Partnership income and gain for such year (and, if necessary,
subsequent years) equal to that Partner's share of the net decrease in Partner
Minimum Gain. Allocations pursuant to this subparagraph (b) shall be made in
accordance with Regulation Section 1.704-2(i)(4). This Section 7.3(b) is
intended to comply with the requirement set forth in Regulation Section
1.704-2(i)(4) and shall be interpreted consistently therewith.
(c) QUALIFIED INCOME OFFSET ALLOCATION. In the event any
Partner unexpectedly receives any adjustments, allocations or distributions
described in Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6) or which would cause the
negative balance in such Partner's Capital Account to exceed the sum of (i) his
obligation to restore a Capital Account deficit upon liquidation of the
Partnership, plus (ii) his share of Partnership Minimum Gain determined pursuant
to Regulation Section 1.704-2(g)(1), plus (iii) such Partner's share of Partner
Minimum Gain determined pursuant to Regulation Section 1.704-2(i)(5), items of
Partnership income and gain shall be specially allocated to such Partner in an
amount and manner sufficient to eliminate such excess negative balance in his
Capital Account as quickly as possible. This Section 7.3(c) is intended to
comply with the alternative test for economic effect set forth in Regulation
Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
(d) GROSS INCOME ALLOCATION. In the event any Partner has a
deficit Capital Account at the end of any Partnership fiscal year which is in
excess of the sum of (i) any amounts such Partner is obligated to restore
pursuant to this Agreement, plus (ii) such Partner's distributive share of
Minimum Gain as of such date, plus such Partner's share of Partner Minimum Gain
determined pursuant to Regulation Section 1.704-2(i)(5), each such Partner shall
be specially allocated items of Partnership income and gain in the amount of
such excess as quickly as possible, provided that an allocation pursuant to this
Section 7.3(d) shall be made only if and to the extent that such Partner would
have a deficit Capital Account in excess of such sum after all other allocations
provided for in this Section 7.3 have been made, except assuming that Section
7.3(c) above and this Section 7.3(d) were not contained in this Agreement.
(e) ALLOCATION OF NONRECOURSE DEDUCTIONS. Nonrecourse
Deductions shall be allocated to the Class A Partners in accordance with their
respective Class A Partnership Percentages.
(f) ALLOCATION OF PARTNER NONRECOURSE DEDUCTIONS. Partner
Nonrecourse Deductions shall be allocated as prescribed by the Regulations.
(g) BASIS ADJUSTMENT UNDER SECTION 754. To the extent an
adjustment to the adjusted tax basis of any Partnership assets pursuant to Code
Section 734(b) or Code Section 743(b) is required, pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be treated
as an item of gain, if the adjustment increases the basis of the asset, or loss,
if the adjustment decreases such basis, and such gain or loss shall be specially
allocated to the Partners in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Section of the
Regulations.
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7.4 BUILT-IN GAIN OR LOSS/SECTION 704(C) TAX ALLOCATIONS. In the
event that the Capital Accounts of the Partners are credited with or adjusted to
reflect the Gross Asset Value of the Partnership's property and assets, the
Partners' distributive shares of depreciation, depletion, amortization, and gain
or loss, as computed for tax purposes, with respect to such property, shall be
determined pursuant to Section 704(c) of the Code and the Regulations
thereunder, so as to take account of the variation between the adjusted tax
basis and Gross Asset Value of such property in a manner determined by Approval
by Partnership Vote. Any deductions, income, gain or loss specially allocated
pursuant to this Section 7.4 shall not be taken into account for purposes of
determining Profits or Losses or for purposes of adjusting a Partner's Capital
Account.
7.5 RECAPTURE. Ordinary income arising from the recapture of
depreciation and unrecaptured Section 1250 gain shall be allocated to the
Partners in the manner that is prescribed by the Regulations, or if the
Regulations do not prescribe a manner in which depreciation is to be recaptured,
then depreciation shall be recaptured in the same manner as such depreciation
was allocated to the Partners.
7.6 RETENTION OF SECTION 751 ASSETS. Upon the occurrence of an event
which would otherwise cause a reduction in a Partner's respective interest in
the Partnership's Section 751 assets ("substantially appreciated inventory" and
"unrealized receivables" as defined in Section 751 of the Code), such as the
admission of new Partners or otherwise, no such reduction shall occur with
respect to Partners who were Partners immediately preceding such event and who
continue to be Partners after the occurrence of such event but, rather, each
such Partner shall retain his respective interest in the Partnership's Section
751 assets existing immediately prior to such event.
7.7 PROHIBITION AGAINST RETROACTIVE ALLOCATIONS. Notwithstanding
anything in this Agreement to the contrary, no Partner shall be allocated any
loss, credit or income attributable to a period prior to his admission to the
Partnership. In the event that a Partner Transfers all or a portion of his
Partnership interest, or if there is a reduction in a Partner's Class A Limited
Partnership Percentage or Class B Partnership Percentage (as the case may be)
due to the admission of new Partners or otherwise, each Partner's distributive
share of Partnership items of income, loss, credit, etc., shall be determined by
taking into account each Partner's varying interests in the Partnership during
the Partnership's taxable year. For this purpose, each Partner's distributive
share shall be estimated by taking the pro rata portion of the distributive
share such Partner would have included in his taxable income had he maintained
his Class A Limited Partnership Percentage or Class B Partnership Percentage (as
the case may be) throughout the Partnership year. Such proration shall be based
upon the portion of the year during which such Partner held the Class A Limited
Partnership Percentage or Class B Partnership Percentage (as the case may be),
except that extraordinary, nonrecurring items shall be allocated to the persons
holding Partnership interests at the time such extraordinary items occur.
7.8 ALLOCATION OF NONRECOURSE LIABILITIES. The "excess nonrecourse
liabilities" of the Partnership (within the meaning of Section 1.752-3(a)(3) of
the Regulations) shall be allocated to the Partners in accordance with their
respective Class A Limited Partnership Percentage or Class B Partnership
Percentage (as the case may be).
ARTICLE VIII.
TRANSFER OF PARTNERSHIP INTEREST
8.1 PROHIBITION ON DISPOSITION OF GENERAL PARTNER'S INTEREST. Unless
Approval by Partnership Vote is obtained, the General Partner may not, directly
or indirectly, by operation of law or otherwise (a) withdraw or resign from the
Partnership, or (b) Transfer any or all of its interest in the
18
Partnership. In addition, the General Partner shall not permit the Transfer of
any interest in the General Partner unless Approval by Partnership Vote is
obtained with respect to such Transfer. Any act in violation of this Section 8.1
shall be null and void as against the Partnership and the Limited Partners,
except as otherwise required by law.
8.2 GENERAL PARTNER CEASING TO BE A GENERAL PARTNER. Unless Approval
by Partnership Vote is otherwise obtained, a General Partner shall cease to be a
General Partner of the Partnership upon the happening of any of the following
events (hereinafter each referred to as an "EVENT OF WITHDRAWAL"):
(a) such General Partner makes an assignment for the benefit
of creditors; files a voluntary petition of bankruptcy; is adjudicated as
bankrupt or insolvent or is the subject of an order for relief under the
bankruptcy laws; files a petition or answer seeking for itself any
reorganization, arrangement or similar relief under any statute, law or
regulation; files an answer or other pleading admitting or failing to contest
the material allegations of a petition filed against it in any proceeding of
this nature; or seeks, consents to or acquiesces in the appointment of a
trustee, receiver or liquidator of all or any substantial part of its
properties;
(b) such General Partner fails to dismiss within one hundred
twenty (120) days after the commencement of any proceeding which attempts to
attach or charge the General Partner's Partnership interest or which seeks
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief against the General Partner under any statute, law or
regulation, or if within ninety (90) days after a court order attaching or
charging its Partnership interest or the appointment without its consent or
acquiescence of a trustee, receiver or liquidator of such General Partner or all
or any substantial part of its properties, the order or appointment is not
vacated or stayed, or within ninety (90) days after the expiration of any such
stay, the order or appointment is not vacated;
(c) In the case of any General Partner which is a
corporation, limited partnership or limited liability company, the filing of a
certificate of dissolution or its equivalent for the corporation, limited
partnership or limited liability company, or the revocation of its charter or
authority to do business in the jurisdiction of its formation;
(d) The withdrawal of a General Partner from the Partnership
as provided in Section 8.1 above; or
(e) The Transfer by a General Partner of all or any part of
its interest in the Partnership except as approved by Partnership Vote pursuant
to Section 8.1.
Any person ceasing to be a General Partner (other than as a
result of paragraph (d) and (e) of this Section 8.2) shall automatically become
a limited partner of the Partnership having the same percentage interest in the
profits, losses and distributions of the Partnership that it had while it was a
general partner, and provided further that in the event that the Partners elect
to continue the Partnership pursuant to Section 12.1(b) below, and a new General
Partner is admitted to the Partnership to enable the Partnership to continue,
then the General Partner being converted to a limited partner shall Transfer a
..005% Class B Partnership Percentage to the newly admitted general partner. Such
Transfer shall not reduce the interest in the Partnership of any Partner other
than the General Partner which is being converted to a limited partner.
8.3 GENERAL PROHIBITION AGAINST TRANSFERS OF LIMITED PARTNER'S
INTEREST. A Limited Partner may not Transfer any or all of such Partner's
interest in the Partnership except as permitted in Section 8.4. Any act in
violation of this Article shall be null and void as against the Partnership and
the Partners, except as otherwise provided by law.
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8.4 CONDITIONS UPON TRANSFERS BY A LIMITED PARTNER. A Limited
Partner may Transfer all or any part of such Partner's interest in the
Partnership only with the written consent of the General Partner and Approval by
Partnership Vote; provided, however, that the General Partner's written consent
shall not be given unless:
(i) the General Partner is satisfied that the
proposed Transfer will not have any adverse effect upon the Partnership or the
Partners under federal income tax laws then in effect or cause any default in
any loan documents of the Partnership or the Property owner;
(ii) the General Partner has received, if requested,
an opinion from counsel for the Partnership to the effect that such Transfer
will not violate federal or state securities laws or regulations; and
(iii) the person, firm or entity to acquire such
interest agrees to comply with all terms of this Agreement, including without
limitation Section 8.5 below.
8.5 SUBSTITUTION OF ASSIGNEE. No Transferee of the whole or any
portion of a Limited Partner's interest in the Partnership shall have the right
to be admitted to the Partnership and become a Limited Partner unless and until
all of the Partners in their absolute discretion consent and all of the
following conditions are satisfied:
(a) the Transferor and Transferee execute and acknowledge a
written instrument of assignment, together with such other instruments as the
General Partner may deem necessary or desirable to effect the admission of the
Transferee as a substitute Limited Partner; and
(b) an instrument specifically Transferring such interest,
signed by both assignor and assignee, shall be filed with the General Partner,
and until such instrument is so filed, the Partnership shall not recognize any
Transfer of interest for the purposes of making payments of profits, income or
any other distribution with respect to such interest.
8.6 BUY-SELL AGREEMENT.
(a) After the second anniversary date of this Agreement, any
Partner (the "OFFEROR") may make an offer in writing to the other Partners (the
"OFFEREE"), which shall state an amount (the "BUY-SELL VALUE") determined in the
sole and absolute discretion of the Offeror. The Buy-Sell Value shall be the
amount that the Offeror chooses to be the value of the Assets. An offer made
pursuant to this Section 8.7 shall constitute an irrevocable offer by the
Offeror to the Offeree either (i) to sell all, but not less than all, of the
Offeror's interests in the Partnership (including any interests held by, or
Transferred to, its Affiliates), or (ii) to purchase all, but not less than all,
of the Offeree's interests in the Partnership (including any interests held by
or Transferred to its Affiliates). The Offeree shall have sixty (60) days after
receipt of an offer made pursuant to this Section 8.6 to elect either (A) to
sell its interests in the Partnership at a price equal to the amount the Offeree
would have received pursuant to a liquidation of the Partnership if the Assets
had been sold to a third party for the Buy-Sell Value and the proceeds therefrom
had been applied and distributed in accordance with Section 12.2 (assuming that
all allocations resulting from the sale had been made and no reserves are
established); or (B) to buy the Offeror's interest in the Partnership at a price
equal to the amount the Offeror would have received pursuant to a liquidation of
the Partnership if the Assets had been sold to a third party for the Buy-Sell
Value and the proceeds therefrom had been applied and distributed in accordance
with Section 12.2 (assuming that all allocations resulting from the sale had
been made and no reserves are established). If the Offeree fails to make such an
election within sixty (60) days after receipt of an offer under this Section
8.6(a), the Offeree shall be deemed to have elected to sell its interests in the
Partnership. In any case in which there is more than one
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purchasing Partner, the purchasing Partners shall determine the proportions of
the interests in the Partnership to be purchased by each such Partner.
Notwithstanding anything stated hereinabove to the contrary, it is specifically
understood and agreed that the Buy-Sell Value shall in no event be an amount
less than the amount sufficient to provide an annual IRR Return of eighteen
percent (18%) to the Class A Limited Partner (including the return of the
capital contribution balance of the Class A Limited Partner) for a one-year
period.
(b) Closing shall occur at the offices of the Partnership no
later than ninety (90) days following the date after the election to purchase
has been made or deemed made. It is understood and agreed that if a portion of
the Assets are sold between the time that the Offeror initiates the procedure
set forth Section 8.6(a) above and closing, the proceeds of such sale shall be
retained by the Partnership and not distributed to the Partners. At the closing,
the applicable interests in the Partnership shall be duly conveyed, free of all
liens and encumbrances, and the purchase price shall be paid by wire transfer of
immediately available federal funds. At the election of the purchasing Partner,
the applicable interests in the Partnership to be purchased may be acquired in
the name of a nominee (whether or not such nominee is an Affiliate of the
Purchasing Partner), provided, that the Purchasing Partner shall have designated
such nominee by written notice prior to the date of purchase. It shall be a
condition of the selling Partner's obligation to proceed with any such purchase
that the purchasing Partner shall have obtained releases of any guaranties of
indebtedness of the Partnership executed by the selling Partner or any
Affiliates of (or principals in) such selling Partner. The purchasing Partner,
in addition to paying at the closing the purchase price, shall be obligated to
loan to the Partnership an amount sufficient to discharge at the closing all
outstanding and unpaid obligations of the Partnership to the selling Partner as
of such time.
(c) Upon receipt of the purchase price, the selling Partner
shall execute and deliver all documents reasonably required to transfer the
interest in the Partnership being sold. The selling Partner shall also execute
such resignations and other documents as may be reasonably required by counsel
for the Partnership to accomplish the withdrawal of the selling Partner as a
Partner of the Partnership and the purchasing Partner shall assume all of the
selling Partner's obligations to the Partnership and any of its creditors under
any loans to the Partnership permitted by this Agreement, such assumptions to be
in form reasonably satisfactory to counsel for the selling Partner.
(d) It is expressly agreed that the remedy at law for breach
of any of the obligations set forth in this Section 8.6 is inadequate in view of
(i) the complexities and uncertainties in measuring the actual damages that
would be sustained by reason of the failure of a Partner to comply fully with
each of said obligations, and (ii) the uniqueness of the Partnership business
and Partners' relationship. Accordingly, each of the aforesaid obligations shall
be, and is hereby expressly made, enforceable by specific performance.
8.7 AUTHORITY OF GENERAL PARTNER. For purposes of Section 8.6 above,
the General Partner and the Class B Limited Partner shall be treated as one
Partner, and the General Partner shall make all decisions on behalf of the
General Partner and the Class B Limited Partner regarding the initiation of the
buy/sell procedure or any other decision to be made pursuant to Section 8.6. The
Class B Limited Partner hereby irrevocably constitutes and appoints the General
Partner as its attorney-in-fact with full power to bind the Class B Limited
Partner hereunder and execute documents of transfer on its behalf.
8.8 COST AND EXPENSE OF TRANSFER; ALLOCATION OF PROFITS AND LOSSES.
All costs and expenses incurred by the Partnership in connection with any
disposition of a Partner's interest, including any filing, recording and
publishing costs and the fees and disbursements of counsel, shall be paid by the
Partner disposing of such interest. If an interest in the Partnership is
disposed of pursuant to this Article VIII, the selling Partner shall
nevertheless be entitled to a portion of the profits and be charged with a
21
portion of the losses allocated to such interest or part thereof for the fiscal
year of the Partnership in which such disposition occurs, consistent with
Section 7.7 above.
ARTICLE IX.
OWNERSHIP OF PARTNERSHIP PROPERTY
All real or personal property, including all improvements placed or
located thereon, acquired by the Partnership shall be owned by and in the name
of the Partnership, such ownership being subject to the other terms and
provisions of this Agreement.
ARTICLE X.
FISCAL MATTERS
10.1 FISCAL YEAR. The fiscal year of the Partnership shall be the
calendar year.
10.2 RECORDS; FINANCIAL STATEMENTS.
(a) Proper books and records shall be kept with reference to
all Partnership transactions at the principal place of business of the
Partnership, and each Partner shall at all reasonable times during business
hours have access thereto. The books shall be kept in such manner of accounting
as shall properly reflect the actions of the Partnership in accordance with
accounting principles generally accepted within the industry and consistently
applied on such basis as will, in the opinion of the Partnership's accountants,
be most advantageous to the Partnership. The books and records shall include the
designation and identification of any property in which the Partnership owns a
beneficial interest. The books and records of the Partnership shall be reviewed
annually at the expense of the Partnership by an independent certified public
accountant selected by the General Partner, who shall prepare and deliver to the
Partnership, for filing, the appropriate federal Partnership income tax
return(s) before March 31 of each year. The General Partner shall provide each
Limited Partner with a copy of the Partnership income tax return at least ten
(10) business days prior to filing such return. The Partnership shall report its
operations for tax purposes on the accrual basis.
(b) The General Partner shall, at Partnership expense,
furnish (or request the manager of the Property to furnish) to the Partners (i)
on or before the twentieth (20th) day of each calendar quarter, an unaudited
statement setting forth and describing in reasonable detail the receipts and
expenditures of the Partnership during the preceding calendar quarter and
comparing the results of operations of the Partnership for such calendar quarter
and for the year to date to the appropriate Operating Budget, (ii) on or before
one hundred twenty (120) days after the end of each fiscal year, a balance sheet
of the Partnership dated as of the end of such fiscal year, a statement of the
Partners' Capital Accounts and Capital Contribution Balances, a statement of
Distributable Cash, and a statement setting forth the Profits and Losses for
such fiscal year, audited by an independent firm of certified public accountants
as determined by Approval by Partnership Vote, and (iii) from time to time, all
other information relating to the Partnership and the business and its affairs
reasonably requested by any Partner.
(c) The General Partner acknowledges that (a) the Class A
Limited Partner is subject to various reporting and auditing requirements
pursuant to governmental requirements (including, without limitation, securities
laws) and standards in its industry; and (b) it is critical to the Class A
Limited Partner that the Class A Limited Partner comply with such reporting and
auditing requirements in a timely manner. The General Partner agrees to provide
to the Class A Limited Partner, within five (5)
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days after request therefor, with such information as is requested by the Class
A Limited Partner in respect of such reporting and auditing requirements, to the
extent that such information is in the possession or within the control of the
General Partner. Furthermore, the General Partner agrees to cooperate otherwise
with the Class A Limited Partner and the employees, accountants, auditors and
agents of the Class A Limited Partners in causing the Class A Limited Partner to
comply with such reporting and auditing requirements.
10.3 ACCOUNTS. All funds of the Partnership shall be deposited in its
name in an account or accounts maintained at a bank designated by the General
Partner or with an agent designated by the General Partner. Checks shall be
drawn upon the Partnership account or accounts only for purposes of the
Partnership and shall be signed by the General Partner.
10.4 FEDERAL TAX ELECTIONS. All elections for federal tax purposes,
including but not limited to an election to adjust the basis of the assets of
the Partnership pursuant to Section 754 of the Code, and the adoption of
accelerated depreciation or cost recovery methods required or permitted to be
made by the Partnership under the Code shall be determined by Approval by
Partnership Vote.
10.5 TAX AUDITS. The General Partner shall be designated as the "tax
matters partner" of the Partnership as defined in Sections 6221 ET SEQ, of the
Code and, in the event of an audit of the Partnership by the Internal Revenue
Service ("IRS"), the General Partner, at Partnership expense, shall have the
exclusive right to conduct all negotiations with the Internal Revenue Service on
behalf of the Partnership, and the attorneys and accountants selected by the
Partners to conduct such negotiations are hereby specifically authorized by the
Partners to act on behalf of the Partnership in such negotiations, and each
Partner will execute such further authority as the IRS may require to permit the
General Partner and its selected attorneys and accountants to so represent the
Partners; provided the General Partner shall not take any action take any action
contemplated by Sections 6222 through 6232 of the Code without prior Approval by
Partnership Vote. This provision is not intended to authorize the General
Partner to take any action left to the determination of an individual Partner
under Sections 6222 through 6232 of the Code.
ARTICLE XI.
AMENDMENT
This Agreement may not be altered or amended by except by a written
instrument signed by all the Partners.
ARTICLE XII.
DISSOLUTION OF THE PARTNERSHIP
12.1 DISSOLUTION.
(a) It is the intention of the Partners that the Partnership
shall be continued by the Partners, or those remaining, pursuant to the
provisions of this Agreement, notwithstanding the occurrence of any event which
would otherwise result in a dissolution of the Partnership pursuant to the law
of the State of Texas, and no Partner shall be released or relieved of any duty
or obligation hereunder by reason of any such dissolution; provided, however,
that the Partnership shall be terminated, its affairs wound up and its property
and assets distributed on the earlier of:
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(i) expiration of the Partnership term as provided
in Section 1.5 hereof;
(ii) the written consent of the General Partner and
Approval by Partnership Vote;
(iii) an Event of Withdrawal of a General Partner (as
defined in Article VIII hereof) unless at the time of the Event of Withdrawal,
there is at least one (1) other General Partner or the provisions of Section
12.1(b) below are satisfied;
(iv) the disposition (including condemnation or
casualty loss) of all or substantially all of the property and assets of the
Partnership and receipt of the proceeds from such sale of other disposition
(except under circumstances where (x) all or a portion of the purchase price is
payable after the closing of the sale or other disposition, or (y) the
Partnership retains a material economic or ownership interest in the entity to
which all or substantially all of its assets are Transferred); or
(v) dissolution by law or appropriate judicial
decree.
(b) Upon the occurrence of any Event of Withdrawal of a
General Partner at a time when there is no other General Partner, the
Partnership shall be continued if, within a period of ninety (90) days from the
date of such occurrence, all other Partners agree in writing that the
Partnership shall be continued and designate one or more individuals or legal
entities to be admitted to the Partnership as a General Partner, which agreement
shall be effective as of the date of the occurrence of the applicable Event of
Withdrawal. Any such individual or legal entity shall, upon admission to the
Partnership, succeed to all of the rights and powers of a General Partner
hereunder.
(c) Dissolution of the Partnership shall be effective on
December 31, 2053 or the day on which the event occurs giving rise to the
dissolution, but the Partnership shall not terminate until the Certificate shall
have been canceled and the assets of the Partnership shall have been distributed
as provided below. Notwithstanding the dissolution of the Partnership, prior to
the termination of the Partnership as aforesaid, the business of the Partnership
and the affairs of the Partners shall continue to be governed by this Agreement.
(d) The bankruptcy, insolvency, dissolution, or adjudication
of incompetency of a Limited Partner shall not cause the dissolution of the
Partnership. In the event of the bankruptcy, or incompetency of a Limited
Partner, its administrators or representatives ("Successor") shall have the same
rights that such Limited Partner would have had if it had not become bankrupt,
except that, in the event of bankruptcy, such Successor shall have no right to
participate in the management of the Partnership or vote on any Partnership
matter unless such Successor is admitted to the Partnership as a Limited Partner
pursuant to Section 8.5, and the interest of such Limited Partner in the
Partnership shall, until the termination of the Partnership, otherwise be
subject to the terms, provisions and conditions of this Agreement as if such
Limited Partner had not become bankrupt. In the event of any other withdrawal of
a Limited Partner, the Limited Partner shall only be entitled to Partnership
distributions distributable to it but not actually paid to it prior to such
withdrawal and shall not have any right to have its interest in the Partnership
purchased or paid for.
(e) Notwithstanding anything in this Agreement to the
contrary, upon a sale of all or substantially all of the assets of the
Partnership in a single transaction (a "SINGLE SALE TRANSACTION") where all or
any portion of the consideration payable to the Partnership is to be received by
the Partnership more than ninety (90) days after the date on which such Single
Sale Transaction occurs, the Partnership shall continue for purposes of
collecting the deferred payments and making distributions to the Partners. In
such event (i) gain recognized and cash distributed in any year as a result of
such Single Sale Transaction
24
shall be allocated and distributed among the Partners in the same proportion as
such gain and cash would have been allocated and distributed were the entire
gain resulting from such Single Sale Transaction required to be recognized for
Federal income tax purposes in the year in which such Single Sale Transaction
occurred; and (ii) income attributable to interest on deferred payments shall be
allocated among, and such interest shall be distributed to, the Partners as if
the deferred payment obligations received by the Partnership had been
distributed to the Partners pursuant to Section 6.1.
12.2 WIND-UP OF AFFAIRS. As expeditiously as possible following the
occurrence of an event giving rise to a termination of the Partnership pursuant
to Section 12.1 above, the General Partner(s) or, if none, a liquidator
appointed by the Class A Limited Partner (the General Partner or such
liquidator, as the case may be, is referred to here as the "LIQUIDATOR") shall
liquidate the assets of the Partnership, apply and distribute the proceeds
thereof as contemplated by this Agreement and cause the cancellation of the
Certificate. As soon as possible after the dissolution of the Partnership, a
full account of the assets and liabilities of the Partnership shall be taken,
and a statement shall be prepared by the independent accountants then acting for
the Partnership setting forth the assets and liabilities of the Partnership. A
copy of such statement shall be furnished to each of the Partners within ninety
(90) days after such dissolution. Thereafter, the Liquidator shall wind up the
affairs of the Partnership and distribute the Partnership assets in the
following order of priority:
(a) to creditors (including Partners who are creditors) in
satisfaction of the liabilities of the Partnership, other than liabilities to
existing and former Partners for distributions from the Partnership;
(b) to the establishment of any reserves which the
Liquidator deems reasonably necessary for any contingencies or unforeseen
liabilities or obligations of the Partnership. Such reserves shall be paid over
by the Liquidator to an escrow agent or shall be held by the Liquidator for the
purpose of disbursing such reserves in payment of any of such contingencies. At
the expiration of such period as the Liquidator deems advisable, the balance
thereof shall be distributed in the manner and order provided in this Section;
(c) to existing and former Partners in satisfaction of any
liabilities to them, if any, for distributions from the Partnership;
(d) to Partners in accordance with Section 6.2 above.
Notwithstanding anything to the contrary, in the event the Partnership
is "liquidated" within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g)
and an event described in Section 12.1(a) shall have occurred, liquidating
distributions shall be made pursuant to this Section 12.2 by the end of the
taxable year in which the Partnership is liquidated, or, if later, within ninety
(90) days after the date of such liquidation. Distributions pursuant to the
preceding sentence may be made to a trust for the purpose of an orderly
liquidation of the Partnership by the trust in accordance with the Act.
12.3 COMPLIANCE WITH TREASURY REGULATIONS. It is the intent of the
Partners that the allocations provided in Section 7.1 result in distributions
required pursuant to Section 12.2(d) being in accordance with positive Capital
Accounts as provided for in the Treasury Regulations under Code Section 704(b).
However, if after giving hypothetical effect to the allocations required by
Section 7.1, the Capital Accounts of the Partners are in such ratios or balances
that distributions pursuant to Section 12.2(d) would not be in accordance with
the positive Capital Accounts of the Partners as required by the Treasury
Regulations under Code Section 704(b), such failure shall not affect or alter
the distributions required by Section 12.2(d). Rather, the liquidator will have
the authority to make other allocations of Profits and Losses (or items thereof)
among the Partners which, to the extent possible, will result in the
25
Capital Accounts of each Partners having a balance prior to distribution equal
to the amount of distributions to be received by such Partners pursuant to
Section 12.2(d).
12.4 NO DEFICIT CAPITAL ACCOUNT OBLIGATION. Notwithstanding anything
else to the contrary in this Agreement, upon a liquidation within the meaning of
Section 1.704-1(b)(2)(ii)(g) of the Regulations, if any Partner has a deficit
Capital Account (after giving effect to all contributions, distributions,
allocations and other Capital Account adjustments for all taxable years,
including the year during which such liquidation occurs), such Partner shall
have no obligation to make any Capital Contribution, and the negative balance of
such Partner's Capital Account shall not be considered a debt owed by such
Partner to the Partnership or to any other Person for any purpose whatsoever.
12.5 DISTRIBUTION IN KIND. If any assets of the Partnership are to be
distributed in kind, the net fair market value of such assets as of the date of
dissolution shall be determined by independent appraisal or by agreement of the
Partners. Prior to distribution, such assets shall be deemed to have been sold
for their fair market values and the Capital Accounts of the Partners shall be
adjusted pursuant to the terms of this Agreement to reflect the allocation of
gain or loss which would have resulted from such deemed sale.
12.6 CANCELLATION OF CERTIFICATE. Upon the dissolution and the final
liquidation of the Partnership, there shall be filed for record as provided by
Texas law a Certificate of Cancellation executed by the General Partner.
12.7 RETURN OF CONTRIBUTION NONRECOURSE TO OTHER PARTNERS. Except as
provided by law or as expressly provided in this Agreement, upon dissolution
each Partner shall look solely to the assets of the Partnership for the return
of its Capital Contribution. If the Partnership property remaining after the
payment or discharge of the debts and liabilities of the Partnership is
insufficient to return the cash contribution of one or more Partners, such
Partner or Partners shall have no recourse against any other Partner.
ARTICLE XIII.
MISCELLANEOUS PROVISIONS
13.1 NOTICES. Except as may be otherwise specifically provided in
this Agreement, all notices required or permitted hereunder shall be in writing
and shall be deemed to be delivered on the earlier of (i) when delivered in
person, or (ii) when delivered by commercial courier such as Federal Express,
Express Mail or other overnight delivery service where delivery is evidenced by
written receipt, addressed to the appropriate party at the addresses set forth
in Article II, or such other address of the party as may have been changed as
provided herein. Any party may change the address to which notices will be given
by giving notice of such change to the other parties, in accordance with the
provisions of this Section 14.1.
13.2 GOVERNING LAW. This Agreement shall be construed under and in
accordance with the laws of the State of Texas, excluding any conflicts of law
rule or principle which might refer such construction to the laws of another
state or country.
13.3 EXECUTION OF OTHER AGREEMENTS. The parties hereto covenant and
agree that they will execute such other further instruments and documents as are
or may become necessary or convenient to effectuate and carry out the
Partnership created by this Agreement.
26
13.4 NO ACTION FOR PARTITION. No Partner shall be entitled to bring
an action for partition against the Partnership, and each Partner hereby
irrevocably waives, during the term of the Partnership and during the period of
its liquidation following any dissolution, any right to maintain an action for
partition with respect to any of the assets of the Partnership.
13.5 PARAGRAPH HEADINGS. The headings used in this Agreement are used
for administrative purposes only and do not constitute substantive matter to be
considered in construing the terms of this Agreement.
13.6 BINDING EFFECT AND BENEFIT. This Agreement is binding on, and
shall inure to the benefit of, all of the parties hereto and to their respective
heirs, executors, administrators, legal representatives, and successors and
assigns where permitted by this Agreement.
13.7 SEVERABILITY. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
13.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which together shall constitute a single contract, and each
of such counterparts shall for all purposes be deemed to be an original. This
Agreement may be executed and delivered by fax (telecopier); any original
signatures that are initially delivered by fax shall be physically delivered
with reasonable promptness thereafter. This Agreement shall become binding when
one or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the signatories.
13.9 GENDER. Wherever the context so requires, all words herein in
the neuter gender shall be deemed to include the feminine or masculine genders,
and vice versa, all singular words shall include the plural, and all plural
words shall include the singular.
13.10 ENTIRE AGREEMENT. This Agreement, together with all Exhibits
hereto and all other documents referred to herein, constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof,
and supersedes all prior and contemporaneous agreements, understanding,
inducements or conditions, express or implied, oral or written.
13.11 VALIDITY. In the event that all or any portion of any provision
of this Agreement shall be held to be invalid, the same shall not affect in any
respect whatsoever the validity of the remainder of this Agreement.
13.12 INDULGENCES, ETC. Neither the failure nor any delay on the part
of any party hereto to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or any other right, remedy, power or privilege; nor shall
any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and signed by the party asserted to have granted such waiver.
13.13 REMEDIES. In the event of any breach of this Agreement by any
Partner or default by any Partner in connection with performing any obligation
of such Partner under this Agreement, the Partnership's and the non-defaulting
Partner's rights and remedies contained herein or in any other
27
agreement shall be cumulative and shall not be exclusive of any other rights or
remedies which the Partnership or the non-defaulting Partner may have at law or
in equity.
13.14 INTERPRETATION. No provision of this Agreement is to be
interpreted for or against either party because that party or that party's legal
representative drafted such provision.
13.15 TIME OF ESSENCE. TIME IS OF THE ESSENCE in connection with this
Agreement.
13.16 ALTERNATIVE DISPUTE RESOLUTION. If a dispute, controversy or
claim (whether based upon contract, tort, statute, common law or otherwise)
(collectively a "DISPUTE") arises from or relates directly or indirectly to the
subject matter hereof, and if the Dispute cannot be settled through direct
discussions, the parties hereto shall first endeavor to resolve the Dispute by
participating in a mediation administered by the American Arbitration
Association (the "AAA") under its Commercial Mediation Rules before resorting to
arbitration. Thereafter, any unresolved Dispute shall be resolved among the
parties by binding arbitration administered by the AAA in accordance with its
Commercial Arbitration Rules and judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction. The arbitration
proceedings shall be conducted in Dallas, Texas on an expedited basis before a
single neutral arbitrator (or multiple arbitrators if called for by the
Commercial Arbitration Rules, with all references herein to the arbitrator to
include multiple arbitrators). Each arbitrator shall be an attorney with
excellent academic and professional credentials, who (a) is a member of the Bar
of the State of Texas, (b) has been actively engaged in the practice of law for
at least fifteen (15) years, and (c) specializes in commercial transactions,
with substantial experience with limited partnerships that own and operate
significant commercial real estate. Attorneys selected as arbitrators need not
have any special experience or training in arbitration proceedings. Any attorney
who serves as an arbitrator shall be compensated at a rate equal to his or her
current regular hourly billing rate. Upon the request of either party, the
arbitrator's award shall include findings of fact and conclusions of law
provided that such findings may be in summary form and the arbitrator shall
render his or her decision based on applicable law. The prevailing party in the
arbitration proceeding shall be entitled to an award of all reasonable
out-of-pocket costs and expenses (including attorneys' and arbitrators' fees)
related to the entire arbitration proceeding. Upon request of either party, the
arbitrator may require that the subject arbitration proceedings be kept
confidential and no party shall disclose or permit the disclosure of any
information produced or disclosed in the arbitration proceedings until the award
is final. A party shall not be prevented from seeking temporary injunctive
relief before a court of competent jurisdiction in an emergency situation, but
responsibility for resolution of the Dispute shall be appropriately transferred
to the arbitrator upon appointment in accordance with the provisions hereof.
13.17 NOTICE OF INDEMNIFICATION. THE PARTIES TO THIS AGREEMENT HEREBY
ACKNOWLEDGE AND AGREE THAT THIS AGREEMENT CONTAINS CERTAIN INDEMNIFICATION
PROVISIONS PURSUANT TO SECTION 5.2.
ARTICLE XIV.
SECURITIES LAW CONSIDERATIONS
14.1 NO REGISTRATION/RESTRICTION ON SALE. THE PARTNERSHIP INTERESTS
HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, NOR HAVE THEY BEEN REGISTERED WITH
THE SECURITIES COMMISSION OF ANY OTHER APPLICABLE STATE, INCLUDING WITHOUT
LIMITATION THE STATE OF TEXAS. THE PARTNERSHIP INTERESTS MAY BE ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND MAY NOT BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED,
SOLD OR TRANSFERRED EXCEPT IN COMPLIANCE WITH THE
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TERMS AND CONDITIONS OF THIS AGREEMENT AND IN A TRANSACTION WHICH IS EITHER
EXEMPT FROM REGISTRATION UNDER SUCH ACTS OR PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACTS.
14.2 COMPLIANCE WITH SECURITIES LAWS. The Limited Partners
acknowledge and confirm that their Limited Partnership interests have not been
registered under any federal or state securities laws by virtue of exemptions
from the registration provisions thereof and consequently cannot be sold except
pursuant to appropriate registration or exemption from registration as
applicable. No Transfer of all or any part of a Limited Partnership interest
(except a Transfer upon the death, incapacity or bankruptcy of a Limited Partner
to his personal representative and beneficiaries), including, without
limitation, any Transfer of a right to distributions, profits and/or losses to a
person who does not become a Partner, may be made unless the Partnership is
provided with an opinion of counsel acceptable to the General Partner (both as
to the identity of the counsel and the substance of the opinion) to the effect
that such offer or assignment (a) may be effected without registration under the
Securities Act of 1933, as amended, or the Investment Company Act of 1940, as
amended, and (b) does not violate any applicable federal or state securities
laws (including any investment suitability standards) applicable to the
Partnership or the General Partner.
14.3 ACCESS TO INFORMATION. Each of the Limited Partners represents
to the General Partner and the Partnership that before determining to enter into
this Agreement and to invest in the Partnership, each Limited Partner made an
independent investigation into the Partnership and the General Partner and that
it received whatever information it deemed necessary or relevant in order to
decide whether to enter into this Agreement or invest in the Partnership. Each
Limited Partner acknowledges that the financial materials provided to the
Limited Partners are only estimates of expected future operations based on
assumptions about future markets and there is no assurance that such projections
will be realized.
14.4 LIMITATIONS OF FEES. Reference is made to that certain Amended
and Restated Agreement of Limited Partnership of Behringer Harvard Short-Term
Opportunity Fund I LP dated as of September 15, 2003 (together with all
amendments thereto, the "BH INVESTOR AGREEMENT"). Notwithstanding anything
contained in this Agreement to the contrary, if any fee paid by the Partnership
to any general partner in BH Investor or any Affiliate of any such general
partner (each a "BH INVESTOR GENERAL PARTNER PARTY") results in BH Investor
paying, through its interest in the Partnership, fees in excess of those fees
permitted to be paid to such BH Investor General Partner Party under the terms
of the BH Investor Agreement, then such BH Investor General Partner Party shall
reimburse directly to BH Investor its allocable share of such fee to the extent
necessary to comply with the terms of the BH Investor Agreement. In the event
that a BH Investor General Partner Party receives from the Partnership a fee
whose retention by such BH Investor General Partner Party is, under the terms of
the BH Investor Agreement, contingent upon the happening of future events, such
BH Investor General Partner Party shall hold BH Investor's allocable share of
such fee until the applicable contingencies are resolved, and shall thereafter
dispose of BH Investor's allocable share of such fee in accordance with the BH
Investor Agreement. It is understood and agreed that the limitations and
provisions set forth in this Section 14.4 are for the sole benefit of BH
Investor, and, accordingly, no other party shall be entitled to a refund of fees
paid by the Partnership under this Agreement or any other benefit set forth in
this Section 14.4. Furthermore, it is understood and agreed that the limitations
and other provisions set forth in this Section 14.4 shall not be applicable at
such time as BH Investor no longer owns a direct or indirect interest in the
Partnership.
14.5 AMENDMENTS TO AGREEMENT. Notwithstanding anything contained
herein to the contrary, in the event that legal counsel for BH Investor
reasonably determines that an amendment to this Agreement is necessary or
advisable in order for this Agreement to comply with applicable securities laws,
the BH Investor Agreement, or NASAA Guidelines (as such term is defined in the
BH Investor
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Agreement), then each Partner shall, within ten (10) days after request from BH
Investor, execute such an amendment; provided, however, that no such amendment
may reduce a Partner's economic interest in the Partnership or increase a
Partner's liabilities or obligations under this Agreement without such Partner's
prior written consent.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
Limited Partnership as of the date first above written.
GENERAL PARTNER:
GRAYBIRD DEVELOPERS, LLC,
a limited liability company
By:_____________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Its: Manager
[This space intentionally left blank]
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LIMITED PARTNERS:
BEHRINGER HARVARD SHORT-TERM OPPORTUNITY
FUND I LP, a Texas limited partnership
By: Behringer Harvard Advisors II LP, a
Texas limited partnership, its
General Partner
By: Harvard Property Trust, LLC
Its General Partner
By:___________________________
Name:_________________________
Title:________________________
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
[This space intentionally left blank]
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Exhibit A
---------
LEGAL DESCRIPTION OF PROPERTY
33
Exhibit B
---------
PARTNERSHIP PERCENTAGES AND CAPITAL CONTRIBUTIONS
Class A Limited Partner
Class a Limited Partner Class a Limited Partnership Percentage Capital Contribution
----------------------- -------------------------------------- --------------------
Behringer Harvard Short-Term
Opportunity Fund I LP 100% ____________
Class B Partners Class B Partnership Percentage Capital Contribution
---------------- ------------------------------ --------------------
Graybird Developers, LLC .1% $100
▇▇▇▇▇ ▇. ▇▇▇▇ 99.9% $100
34
