Limited Partnership Agreement of IBG Dahlia Associates
dated September 1, 1995 between Registrant and
20 Dahlia Partnership, a California limited partnership.
IBG DAHLIA ASSOCIATES,
A CALIFORNIA LIMITED PARTNERSHIP
LIMITED PARTNERSHIP AGREEMENT
LIMITED PARTNERSHIP AGREEMENT
OF
IBG DAHLIA ASSOCIATES,
A CALIFORNIA LIMITED PARTNERSHIP
TABLE OF CONTENTS
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Page
ARTICLE 1 - THE PARTNERSHIP
Section 1.1 Reconstitution.......................... 2
Section 1.2 Name.................................... 2
Section 1.3 Principal Executive Office.............. 2
Section 1.4 Purposes................................ 3
Section 1.5 Purposes Limited........................ 4
Section 1.6 No Payments of Individual
Obligations............................. 4
Section 1.7 Statutory Compliance.................... 4
Section 1.8 Title to Property....................... 4
Section 1.9 Duration................................ 4
ARTICLE 2 - THE PARTNERS
Section 2.1 Identification.......................... 5
Section 2.2 Liability Several....................... 5
Section 2.3 Noncompetition.......................... 5
Section 2.4 Limits on Developer's Activities........ 5
Section 2.5 Other Conflicts......................... 5
Section 2.6 Reimbursement and Fees.................. 6
Section 2.7 Indemnification of Partners by the
Partnership............................. 6
Section 2.8 Indemnification by Partners............. 6
Section 2.9 Limitation on Liability of Partners..... 7
Section 2.10 Payments to Developer and Affiliates.... 8
ARTICLE 3 - CAPITAL
Section 3.1 Capital Accounts and Adjusted Capital
Accounts................................ 8
Section 3.2 Capital Contributions................... 9
Section 3.3 No Further Capital Contributions........ 10
Section 3.4 Capital Contributions - General......... 10
Section 3.5 Interests............................... 11
ARTICLE 4 - LOANS
Section 4.1 Loans................................... 11
Section 4.2 Payment of Third Party Loans............ 11
ARTICLE 5 - CASH DISTRIBUTIONS
Section 5.1 Definitions............................. 11
Section 5.1.1 Guaranteed Payments..................... 14
Section 5.2 Operating Cash Flow..................... 15
Section 5.3 Extraordinary Cash Flow ................ 16
Section 5.4 Distributions in Liquidation............ 17
Section 5.5 In-Kind Distribution.................... 17
ARTICLE 6 - OPERATING DEFICITS
Section 6.1 Operating Deficits ..................... 17
ARTICLE 7 - TAX ALLOCATIONS
Section 7.1 Definition of Net Profit and Net Loss... 17
Section 7.2 Allocation of Net Profit, Gross Income
and Net Loss............................ 19
Section 7.3 Tax Allocations; Code Section 704(c).... 22
Section 7.4 Allocations Upon Transfer or
Change of Interests..................... 23
ARTICLE 8 - ACCOUNTING AND RECORDS
Section 8.1 Books and Records....................... 23
Section 8.2 Reports................................. 24
Section 8.3 Tax Returns............................. 24
Section 8.4 Depreciation............................ 24
Section 8.5 Special Basis Adjustment................ 24
Section 8.6 Tax Matters Partner..................... 25
Section 8.7 Fiscal Year............................. 25
Section 8.8 Bank Accounts........................... 25
ARTICLE 9 - MANAGEMENT AND OPERATIONS
Section 9.1 Management.............................. 25
Section 9.2 Standard of Care........................ 28
Section 9.3 Insurance............................... 28
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ARTICLE 10 - REPRESENTATIONS AND WARRANTIES
Section 10.1 Developer............................... 28
Section 10.2 NEPP V.................................. 29
Section 10.3 Brokers................................. 31
ARTICLE 11 - TRANSFER OF INTERESTS
Section 11.1 Restrictions on Transfer of
Developer's Interest.................... 31
Section 11.2 No Restriction of Transfer
of NEPP V Interest...................... 31
Section 11.3 Permitted Transfers..................... 32
Section 11.4 General Transfer Provisions............. 33
Section 11.5 Tax Allocations and Cash
Distributions........................... 33
Section 11.6 Compliance.............................. 34
Section 11.7 Waiver of Partition..................... 34
ARTICLE 12 - OPTION TO PURCHASE DEVELOPER'S INTERST
Section 12.1 NEPP V'S Right to Acquire
Developer's Interest.................... 33
Section 12.2 Purchase Price.......................... 33
Section 12.3 Closing of Purchase and Sale............ 35
Section 12.4 Payment................................. 35
Section 12.5 Liabilities............................. 35
ARTICLE 13 - TERMINATION OF THE PARTNERSHIP
Section 13.1 Events of Dissolution................... 35
Section 13.2 Effects of Dissolution.................. 36
Section 13.3 Sale of Assets by Liquidating
Trustees................................ 36
ARTICLE 14 - MISCELLANEOUS
Section 14.1 Notices................................. 37
Section 14.2 Successors and Assigns.................. 37
Section 14.3 No Oral Modifications; Amendments....... 37
Section 14.4 Captions................................ 37
Section 14.5 Terms................................... 38
Section 14.6 Invalidity.............................. 38
Section 14.7 Counterparts............................ 38
Section 14.8 Further Assurances...................... 38
Section 14.9 Complete Agreement...................... 38
Section 14.10 Attorneys' Fees......................... 38
Section 14.11 Governing Law........................... 38
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Section 14.12 No Third Party Beneficiary.............. 38
Section 14.13 Exhibits and Glossary................... 39
Section 14.14 Estoppels............................... 39
Section 14.15 References to this Agreement............ 39
Section 14.16 Reliance on Authority of Person
Signing Agreement....................... 39
Section 14.17 Consents and Approvals.................. 39
EXHIBITS
A Legal Description of Land
A Glossary of Defined Terms used in this Agreement is attached.
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IBG DAHLIA ASSOCIATES,
A CALIFORNIA LIMITED PARTNERSHIP
LIMITED PARTNERSHIP AGREEMENT
THIS LIMITED PARTNERSHIP AGREEMENT ("Partnership Agreement"
or "Agreement") of IBG Dahlia Associates, a California Limited
Partnership (the "Partnership"), is dated as of September 1, 1995,
between 20 Dahlia Partnership, a California Limited Partnership
("Developer" or the "Limited Partner"), and New England Pension
Properties V; a Real Estate Limited Partnership, a Massachusetts
limited partnership ("NEPP V" or the "General Partner").
Developer and NEPP V are sometimes hereinafter referred to
collectively as the "Partners" and individually as a "Partner."
Capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the glossary attached
hereto.
WHEREAS, IBG Dahlia Associates (the "Original Partnership"),
was formed pursuant to that certain IBG Dahlia Associates General
Partnership Agreement entered into by and between NEPP V and
Developer dated as of August 28, 1987 (the "Original Agreement");
and
WHEREAS, the Partners have agreed to convert the Partnership
into a California limited partnership as of the date of filing,
with the California Secretary of State, of a Certificate of
Limited Partnership (Form LP-1) for the Partnership;
WHEREAS, the parties hereto now desire to amend and
completely restate the Original Agreement in its entirety on the
terms and conditions hereinafter set forth to provide for (i) the
conversion of the Original Partnership from a California general
partnership into a California limited partnership; and (ii) such
other changes to the Original Agreement as the Partners deem
appropriate.
NOW, THEREFORE, in consideration of the foregoing, and for
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and in consideration of the mutual
agreements set forth in this Agreement and intending to be legally
bound, the parties hereby agree to continue the Partnership as a
California limited partnership in accordance with the California
Revised Limited Partnership Act (the "Act") and do hereby agree as
follows:
ARTICLE I
THE PARTNERSHIP
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Section 1.1 Reconstitution. The Partners hereby
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reconstitute the Original Partnership as a California limited
partnership in accordance with the provisions of the Act. The
Partners hereby make and execute this Agreement so as to set forth
the rights, duties, obligations and limitations on the liabilities
of the Partners, including, without limitation, the rights of the
Partners with respect to the assets and profits of the
Partnership, which the Partners shall be entitled to receive by
reason of being a general or limited partner of the Partnership.
In furtherance of the foregoing provisions of this Section 1.1,
the Partners hereby acknowledge that (i) the interest of Developer
as a general partner in the Original Partnership is hereby
converted into an interest as a limited partner in the
Partnership, and (ii) Developer is hereby entitled to exercise all
of the rights, powers, and privileges, and is hereby obligated to
perform all of the duties and obligations, which may hereafter
exist with respect to a limited partner of the Partnership. Each
of the Partners hereby consents to the conversion described above
in this Section 1.1 and acknowledges that the Partnership shall
not dissolve or terminate as a result of such conversion; on the
contrary, the business of the Partnership shall continue without
any interruption and without any break in continuity.
Concurrently with the execution of this agreement, the
General Partner shall execute one (1) or more copies of a
Certificate of Limited Partnership for the Partnership pursuant to
the provisions of Section 15621 of the California Corporations
Code, which shall be duly filed in the Office of the California
Secretary of State and certified copies of which may, in the sole
discretion of the General Partner, be recorded in any county.
Section 1.2 Name. The name of the Partnership is hereby
----
changed to "IBG Dahlia Associates, a California Limited
Partnership," or if that name is not available, any other name the
General Partner may select that is in compliance with the Act. In
furtherance of the foregoing name change, the Partners hereby
authorize the General Partner to execute and deliver (with
acknowledgment, verification, and/or affidavit, if required) any
and all documents required to effectuate such name change
including, without limitation, a Cancellation of Statement of
Partnership and Statement of Abandonment of Use of Fictitious
Business Name for the Original Partnership.
Section 1.3 Principal Executive Office. The principal
--------------------------
executive office of the Partnership shall be located in care of
Investment Building Group, 500 North State College Boulevard,
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Suite 525, Orange, California 92668, or at such other place
within or without the State of California as may be selected by
NEPP V. The Partnership shall at all times maintain an office in
California for purposes of Section 15614 of the Act.
Section 1.4 Purposes. The sole purposes of the Partnership
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shall be to acquire, own and hold for production of income,
improve, develop, operate, manage, lease, sell, dispose and
otherwise deal with the Project. In furtherance of these
purposes, but subject to all other provisions of this Agreement,
the Partnership is hereby authorized:
- to acquire by purchase, lease or otherwise, any real or
personal property, including the Land (and to enter into
options and agreements so to acquire such real or
personal property), which may be necessary, convenient
or incidental to the accomplishment of the purposes of
the Partnership;
- to construct, operate, maintain, finance, improve, own,
sell, convey, assign, mortgage or lease any real estate
and any personal property necessary, convenient or
incidental to the accomplishment of the purposes of the
Partnership;
- to borrow money and issue evidences of indebtedness in
furtherance of any or all of the purposes of the
Partnership, and to secure the same by mortgage, pledge
or other lien on the Project and/or any other assets of
the Partnership;
- to borrow money on the general credit of the Partnership
for use in the Partnership business and to execute
documents in connection therewith;
- to enter into, perform and carry out contracts of any
kind, including contracts with an Affiliate of a
Partner, necessary to, in connection with or incidental
to, the accomplishment of the purposes of the
Partnership;
- to enter into any kind of activity and to perform and
carry out contracts of any kind necessary to, or in
connection with, or incidental to the accomplishment of
the purposes of the Partnership, so long as said
activities and contracts may be lawfully carried on or
performed by a partnership under applicable laws;
- to enter into, on behalf of the Partnership, easements,
rights of way, utility or other agreements necessary for
the development of the Project or any portion thereof or
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to permit access over, through, and across the Project
or any portion thereof (to serve adjoining properties,
for vehicular and pedestrian access, utility
installations maintenance and other purposes);
- to prepay in whole or in part, refinance, recast,
increase, modify, or extend any mortgage affecting the
Project or other indebtedness of the Partnership and, in
connection therewith, to execute any extensions,
renewals or modifications of such other mortgages and
indebtedness; and
- to take or cause to be taken all actions and to perform
or cause to be performed all functions necessary or
appropriate to promote the business of the Partnership
and to realize and carry out its purposes.
Section 1.5 Purposes Limited. The Partnership shall be a
----------------
partnership only for the purposes specified in Section 1.4.
Except as otherwise provided in this Agreement, the Partnership
shall not engage in any other activity or business and no Partner
shall have any authority to hold itself out as a general agent of
another Partner in any other business or activity.
Section 1.6 No Payments of Individual Obligations. The
-------------------------------------
Partners shall use the Partnership's credit and assets solely for
the benefit of the Partnership. No asset of the Partnership shall
be transferred or encumbered for or in payment of any individual
obligation of a Partner.
Section 1.7 Statutory Compliance. The Partnership shall
--------------------
exist under and be governed by, and this Agreement shall be
construed in accordance with, the applicable laws of the State of
California. The Partners shall make all filings and disclosures
required by, and shall otherwise comply with, all such laws.
The Partners shall execute and file in the appropriate
records a certificate of limited partnership, and such documents
and instruments as may be necessary or appropriate with respect to
the continuation of, and conduct of business by, the Partnership
as a California limited partnership.
Section 1.8 Title to Property. All real and personal
-----------------
property owned by the Partnership shall be owned by the
Partnership as an entity and, insofar as permitted by applicable
law, no Partner shall have any ownership interest in such property
in its individual name or right and each Partner's interest in the
Partnership shall be personal property for all purposes.
Section 1.9 Duration. The term of the Partnership commenced
--------
on August 28, 1987 and the Partnership shall dissolve on
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December 31, 2035 unless sooner dissolved or terminated pursuant
to statute or any provision of this Agreement.
ARTICLE 2
THE PARTNERS
------------
Section 2.1 Identification. Developer and NEPP V shall be
--------------
the Partners of the Partnership. No other person may become a Partner
except pursuant to a transfer specifically permitted under and effected
in compliance with this Agreement.
Section 2.2 Liability Several. The obligations of the
-----------------
Partners under this Agreement to one another shall be in every
case several and shall not be, or be construed to be, either joint
or joint and several.
Section 2.3 Noncompetition. Intentionally Omitted.
--------------
Section 2.4 Limits on Developer's Activities. Developer
--------------------------------
shall not engage, invest or otherwise participate in any activity,
investment or undertaking other than this Partnership.
Section 2.5 Other Conflicts. NEPP V, Affiliates of NEPP V
---------------
and Affiliates of Developer (but not Developer itself) may conduct
any business or activity whatsoever (including the acquisition,
development, leasing and operation and/or sale of real property)
without any accountability to the Partnership or to any Partner
even if such business or activity competes with the business of
the Partnership. Each Partner understands that NEPP V, Affiliates
of NEPP V and Affiliates of Developer may be interested, directly
or indirectly, in various other businesses and undertakings not
including the Partnership.
Further, each Partner understands and acknowledges that the
conduct of the business of the Partnership may involve business
dealings with such other businesses or undertakings of NEPP V,
Affiliates of Developer and Affiliates of NEPP V. The creation of
the Partnership and the assumption by each of the Partners of its
duties hereunder shall be without prejudice to the respective
rights of NEPP V, Affiliates of Developer and Affiliates of NEPP V
to maintain such other interests and activities and to receive and
enjoy profits or compensation therefrom, and each Partner waives
any rights it might otherwise have to share or participate in such
other interests or activities of NEPP V, Affiliates of Developer
and Affiliates of NEPP V. Notwithstanding anything to the
contrary, Developer shall not engage in or have any business
dealings with any other Person or Entity, except as required for
its administrative operation.
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Section 2.6 Reimbursement and Fees. NEPP V shall and any
----------------------
Affiliate thereof shall be entitled to reimbursement for their
reasonable out-of-pocket expenses paid to third parties incurred
in connection with the performance of its obligations hereunder.
If NEPP V or an Affiliate of NEPP V shall at any time provide
property management services to the Partnership, NEPP V or such
Affiliate shall be entitled to property management fees and
leasing commissions at rates competitive with those which would be
paid to an unaffiliated property manager providing comparable
services to a project of the type and size of the Project, in the
geographic area in which the Project is located.
Section 2.7 Indemnification of Partners by the Partnership.
----------------------------------------------
The Partners shall perform their duties under this Agreement with
ordinary prudence and in a manner characteristic of businessmen in
similar circumstances. However, neither shall have any liability
whatsoever to the Partnership or to any other Partner for loss
caused by any act or by the failure to do any act if the loss
suffered arises out of a mistake in judgment of the Partner, or if
the Partner, in good faith, had determined that the action or lack
of action giving rise to the loss was in the best interests of the
Partnership or if the action or lack of action giving rise to the
loss was based on the advice of counsel; provided, however, that
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such exculpation from liability shall not apply to any liability
for loss caused by any act or by the failure to do any act which
arises out of the gross negligence, willful neglect or willful
misconduct of any Partner.
The Partnership, its receiver or liquidating trustee, shall
indemnify, hold harmless and pay all judgments and claims against
any of the Partners arising from any actions or decisions
performed or made by them in connection with the business of the
Partnership, provided such actions or decisions are within the
--------
scope of the purposes of the Partnership and the Partner seeking
indemnification complied with the immediately preceding paragraph.
This indemnification shall include, without limitation, payment of
attorneys' and accountants' fees incurred in connection with the
defense of any claim or proceeding based on any such action or
decision, which attorneys' and accountants' fees shall be paid as
incurred; and liabilities under Federal and state securities laws,
to the extent permitted by law.
Section 2.8 Indemnification by Partners. Subject to Section
---------------------------
2.7, each Partner (an "Indemnitor") shall indemnify and hold
harmless the other Partner from and against all claims, demands,
actions and rights of action which shall or may arise by virtue of
anything done or omitted to be done by the Indemnitor (directly or
through or by agents, employees or other representatives) outside
the scope of, or in breach of the terms of this Agreement.
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A Partner who desires to make a claim against an Indemnitor
under this Section shall notify the Indemnitor of the claim,
demand, action or right of action which is the basis of such
claim, and shall give the Indemnitor a reasonable opportunity to
participate in the defense thereof. Failure to give such notice
shall not affect the Indemnitor's obligations hereunder, except to
the extent of any actual prejudice resulting therefrom. Any cash
distributions of the Indemnitor under Article 5 shall be charged
for any amounts the Indemnitor is required to pay pursuant to this
Section 2.8.
Section 2.9 Limitation on Liability of Partners. Except as
-----------------------------------
hereinafter provided, no Partner shall have personal liability for
the payment of any sums owing by such Partner to the Partnership or
any other Partner under the terms of this Agreement, or for the
performance of any other covenant or agreement of such Partner
contained herein; rather, the Partnership and each other Partner
shall look solely to the Interest of such Partner or to such other
specific remedies as may be provided for herein, for satisfaction of
each and every of such payments and obligations, and shall never
seek, obtain or enforce any deficiency judgment or other judgment or
mandatory order of any nature the effect of which would be to compel
such Partner to pay any sum of money to any party in respect of any
obligation arising under the terms of this Agreement and owed to the
Partnership or any other Partner (including, without limitation, any
subrogation right or remedy obtained by payment by a Partner of all
or any portion of a Third Party Loan or other indebtedness of the
Partnership).
Except as otherwise provided in this Section 2.9, each Partner
hereby waives and relinquishes any right to have any recourse or
pursue any remedy whatsoever, other than the foregoing specified
remedy, against the following:
- the Partnership, the Partners (or any partner, general or
limited, present or future subscriber to the capital
stock, stockholder, officer or director of any of the
Partners); or
- any corporation, partnership (or any partner thereof),
individual or entity to which any interest in the Project
shall have been transferred.
The foregoing provisions shall not limit the right of any
Partner to name the Partnership or the other Partners a party
defendant in any action or suit in the exercise of the sole remedy
permitted hereunder, so long as no judgment obtained by such Partner
shall be enforced other than as provided above.
Section 2.10 Payments to Developer and Affiliates. The
------------------------------------
Partnership has entered into a Property Management Agreement dated
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as of September 1, 1995, with respect to the Project pursuant to
which the Developer or an Affiliate of the Developer (the "Property
Manager") shall provide management services for the Project.
ARTICLE 3
CAPITAL
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Section 3.1 Capital Accounts and Adjusted Capital Accounts.
----------------------------------------------
(a) A separate capital account ("Capital Account") shall be
maintained for each Partner and adjusted in accordance with Treasury
Regulations under Section 704(b) of the Code. To the extent
consistent with such Regulations, the adjustments to such accounts
shall include the following:
(i) There shall be credited to each Partner's Capital
Account the amount of any cash (which shall not include imputed
or actual interest on any deferred contributions) actually
contributed by such Partner to the capital of the Partnership
(or deemed contributed pursuant to Treasury Regulation
Section 1.704-1(b)(2)(iv)(c)), the fair market value of any
property contributed by such Partner to the capital of the
Partnership (net of any liabilities secured by such property
that the Partnership is considered to assume or to take subject
to under Code Section 752) and such Partner's share of the
Gross Income and Net Profits (and all items thereof) of the
Partnership. There shall be charged against each Partner's
Capital Account the amount of all cash distributions to such
Partner by the Partnership (or deemed distributed pursuant to
Treasury Regulation Section 1.704-1(b)(2)(iv)(c)), the fair
market value of any property distributed to such Partner by the
Partnership (net of any liability secured by such property that
the Partner is considered to assume or take subject to under
Code Section 752) and such Partner's share of the Net Losses
(and all items thereof) of the Partnership.
(ii) If the Partnership at any time distributes any of its
assets in-kind to any Partner, the Capital Account of each
Partner shall be adjusted to account for that Partner's
allocable share (as determined under Article 7 below) of the
Net Profit or Net Loss that would have been realized by the
Partnership had it sold the assets that were distributed at
their respective fair market values immediately prior to their
distribution.
(iii) Any adjustments to the tax basis (or Book Value) of
Partnership property under Code Sections 732, 734 or 743, will
be reflected as adjustments to the Capital Accounts of the
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Partners, only in the manner and to the extent provided in
Treasury Regulation Section 1.704-1(b)(2)(iv)(m).
(b) An adjusted capital account ("Adjusted Capital Account")
shall also be maintained for each Partner, which shall be equal to
such Partner's Capital Account balance increased by (i) the
Partner's Share of Partnership Minimum Gain and (ii) the Partner's
Share of Partner Nonrecourse Debt Minimum Gain.
(c) For purposes of Section 7.2(i) and (j) only, below, a
Partner's Adjusted Capital Account shall be reduced by the net
adjustments, allocations and distributions described in Treasury
Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6) which, as of
the end of the Partnership's taxable year are reasonably expected to
be made to such Partner, and shall be increased by the sum of (i)
any amount which the Partner is required to restore to the
Partnership upon liquidation of his or its interest in the
Partnership (or which is so treated pursuant to Treasury Regulation
Section 1.704-1(b)(2)(ii)(c)) pursuant to the terms of this
Agreement or under state law and (ii) that portion of any
indebtedness of the Partnership (other than Partner Nonrecourse
Debt) with respect to which the Partner bears the Economic Risk of
Loss that such indebtedness would not be repaid out of the
Partnership's assets if all of the Partnership's assets were sold at
their respective Book Values as of the end of the Fiscal Year or
other period and the proceeds from the sales together with any
amounts described in clause (i) above were used to pay the
Partnership's liabilities.
(d) As of December 31, 1994, the respective tax Capital
Account balances of the Partners were as follows:
NEPP V $4,432,382.57
Developer -0-
Section 3.2 Capital Contributions.
---------------------
(a) Upon formation of the Partnership, NEPP V agreed to
contribute to the Partnership capital in the amount of $7,250,000,
of which $1,321,000 was contributed by NEPP V upon such formation,
and of which an additional $5,760,592.62 has been contributed to
the Partnership through the date hereof (so that NEPP V's total
capital contributions to the Partnership through the date hereof
equal $7,081,592.62). Such capital is hereinafter referred to as
NEPP V's "Senior Capital". NEPP V may, but shall have no
obligation to, make any further contribution to the capital of the
Partnership, but, if it reasonably determines that the Partnership
requires, for any reason, additional capital, and it elects to
contribute such capital, the aggregate amount of any such
contribution or contributions shall hereinafter be referred to as
NEPP V's "Junior Capital".
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(b) Upon formation of the Partnership, Developer contributed
or caused to be contributed to the Partnership its interest in the
Project, and assigned or caused to be assigned to the Partnership
the following, if any:
- all rights of Developer and its Affiliates in any plans,
specifications, working drawings, designs, models and
other similar architectural or engineering materials
prepared for the Project (or any portion thereof);
- all rights or benefits of Developer and its Affiliates
in and to all prior discussions with governmental
bodies, entities and agencies with respect to the
Project (or any portion thereof);
- all agreements providing utility services to the Project
(or any portion thereof);
- all leases for space in the Project;
- all right, title and interest of Developer and its
Affiliates to continue the negotiations, discussions and
business arrangements in connection with the foregoing;
and
- all other rights, licenses and permits related to the
Project (or any portion thereof).
The agreed-upon net fair market value of the interests contributed
by Developer is $10.00.
Section 3.3 No Further Capital Contributions. The Partners
--------------------------------
shall not be required to contribute additional capital or loan any
funds to the Partnership, except as expressly provided in this
Article 3 and Article 5. Specifically, but not by way of
limitation, the Partners shall not be required upon the
liquidation and winding up of the Partnership, to contribute to
the capital of the Partnership the amount of the negative balance,
if any, in their respective Capital Accounts.
Section 3.4 Capital Contributions - General. Except as
-------------------------------
specifically provided herein, no interest shall be paid on any
capital contribution to the Partnership by any Partner. Except as
specifically provided herein, no Partner may contribute capital
to, or withdraw capital from, the Partnership. To the extent any
cash which any Partner is entitled to receive pursuant to
Article 5 or any other provision of this Agreement would
constitute a return of capital, each of the Partners consents to
the withdrawal of such capital. Under circumstances requiring a
return of any capital, no Partner shall have the right to receive
property other than cash.
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Section 3.5 Interests. The respective Interests of the
---------
Partners in the Partnership shall be as follows:
NEPP V 60%
Developer 40%
The provisions of this Section shall not give a Partner an
interest in any amount credited to the Capital Account of any
other Partner.
ARTICLE 4
OTHER LOANS
-----------
Section 4.1 Loans. The Partnership is not currently
-----
obligated for loans to third parties ("Third Party Loans"),
Section 4.2 Payment of Third Party Loans. As set forth in
----------------------------
the definition of Project Expenses, payments of principal and
interest on all Third Party Loans, if any, shall be expenses of
the Partnership.
ARTICLE 5
CASH DISTRIBUTIONS
------------------
5.1 Definitions. As used in this Agreement, the following
-----------
terms shall have the meanings set forth below:
"Junior Invested Capital" means an amount equal to the
-----------------------
aggregate amount of Junior Capital which NEPP V has contributed to
the capital of the Partnership pursuant to Section 3.2 hereof
decreased by the aggregate amount of proceeds distributed to NEPP
V pursuant to clause SECOND of each of Sections 5.2 and 5.3.
"Senior Invested Capital" means an amount equal to the
-----------------------
aggregate amount of Senior Capital which NEPP V has contributed to
the capital of the Partnership pursuant to Section 3.2 hereof
decreased by the aggregate amount of proceeds distributed to NEPP
V pursuant to clause FOURTH of each of Sections 5.2 and 5.3. As
of the date hereof, the amount of NEPP V's Senior Invested Capital
is $7,081,592.62.
"Project Expenses" means all expenditures, expenses and
----------------
charges relating to the ownership, operation, construction,
development, maintenance, management and upkeep of the Project
(other than Monthly Guaranteed Payments and Accrued Monthly
Guaranteed Payments), or any portion thereof, and the operations
of the Partnership including, without limitation, the following:
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- all taxes, assessments, ground rents and other similar
governmental and quasi-governmental charges levied or
imposed on the Project or any portion thereof;
- insurance premiums;
- maintenance and security expenses;
- marketing, advertising and other promotional expenses;
- utility costs;
- legal, accounting and other professional fees and
expenses;
- architects, engineers and surveyors' fees;
- cost of roads and utilities built and installed on the
Land, or any portion thereof;
- other costs associated with the zoning, subdivision and
improvement of the Land, or any portion thereof, into
building lots, whether incurred on or off the site;
- development and management fees;
- payments of principal, interest and other amounts due or
accrued under any Third Party Loans (if any); and
- any and all other costs and expenses specified in this
Agreement as Project Expenses.
Depreciation (cost recovery) and amortization or any other
non-cash items taken into account in determining Net Profits
or Losses shall not be Project Expenses.
"Operating Revenues" means as to any particular Fiscal Year
------------------
or portion thereof, the total cash receipts of the Partnership
other than (i) Extraordinary Cash Flow, (ii) any properly
----------
unapplied advance rentals of the Partnership in connection with
the leasing of the Project (which shall be Operating Revenues when
applied), (iii) the proceeds of any Third Party Loans and (iv) any
unforfeited security deposits of Project tenants.
"Operating Cash Flow" means as to any particular Fiscal Year
-------------------
or portion thereof, Operating Revenues less the sum of the
following: ----
- Project Expenses paid from Operating Revenues during
such period; and
-12-
- a provision for a reasonable working capital reserve and a
reserve for future Project Expenses in an amount
determined by NEPP V in its reasonable discretion (the
"Working Capital Fund"), and a reasonable reserve for
replacement of Partnership assets subject to depreciation
("Reserve for Replacements") in an amount determined by
NEPP V in its reasonable discretion.
"Capital Transaction" means the sale, exchange, condemnation
-------------------
(or similar eminent domain taking or disposition in lieu thereof),
destruction by casualty, refinancing or disposition of the Project
or any portion thereof.
"Extraordinary Cash Flow" means the cash proceeds (including
-----------------------
any applicable insurance proceeds) realized by the Partnership as
a result of a Capital Transaction plus cash interest payments
----
received on such proceeds, decreased by the sum of the following:
---------
- payments to creditors of debts then due and payable,
including the amount of any obligations to pay Project
Expenses that have not been paid from Operating
Revenues;
- the amount of such proceeds used, set aside or committed
by the Partnership for restoration and repair of the
Project;
- provision for the Working Capital Fund and the Reserve
for Replacements, to the extent not funded from
Operating Revenues, in an amount determined by NEPP V in
its reasonable discretion; and
- any expenses, costs or liabilities incurred by the
Partnership in effecting or obtaining any such Capital
Transaction or the proceeds thereof (including, without
limitation, attorneys' and accountants' fees, court
costs, brokerage fees, commissions, recording fees,
transfer taxes, and the like), all of which expenses,
costs and liabilities shall be paid from the gross
amount of such cash proceeds to the extent thereof.
Section 5.1.1 Guaranteed Payments. The Partnership shall
-------------------
make a monthly guaranteed payment to NEPP V ("Senior Monthly
Guaranteed Payment") at the rate of 10% per annum on the Senior
Invested Capital standing from time to time in NEPP V's Capital
Account for each month during the year. All such payments shall
be made monthly in arrears commencing on the first day of the
first full calendar month following the date on which NEPP V
contributed Senior Capital, and ending on the date on which the
Senior Invested Capital of NEPP V shall have been reduced to zero.
Senior Monthly Guaranteed Payments shall be made from Operating
-13-
Cash Flow, Extraordinary Cash Flow and distributions in
liquidation as provided in Sections 5.2, 5.3 and 5.4. To the
extent that any such payments cannot be made when due from
Operating Cash Flow, Extraordinary Cash Flow and distributions
upon liquidation, such payments may accrue, and such accruals
shall bear interest at the rate of 10% per annum, compounded
monthly. The amount of such unpaid Senior Monthly Guaranteed
Payments and the interest accruing thereon until paid in full are
hereinafter referred to collectively as "Accrued Senior Monthly
Guaranteed Payments." Accrued Senior Monthly Guaranteed Payments
shall be payable out of Operating Cash Flow and Extraordinary Cash
Flow as provided in Section 5.2 and 5.3 and distributions in
liquidation as provided in Section 5.4.
As of March 31, 1995, NEPP V's Accrued Senior Monthly
Guaranteed Payments equalled $2,289,254.68.
The Partnership shall make a monthly guaranteed payment to
NEPP V ("Junior Monthly Guaranteed Payment") at the rate of 10%
per annum on the Junior Invested Capital standing from time to
time in NEPP V's Capital Account for each month during the year.
All such payments shall be made monthly in arrears commencing on
the first day of the first full calendar month following the date
on which NEPP V has contributed Junior Capital, and ending on the
date on which the Junior Invested Capital of NEPP V shall have
been reduced to zero. Junior Monthly Guaranteed Payments shall be
made from Operating Cash Flow, Extraordinary Cash Flow and
distributions in liquidation as provided in Sections 5.2, 5.3 and
5.4. To the extent that any such payments cannot be made when due
from Operating Cash Flow, Extraordinary Cash Flow and
distributions upon liquidation, such payments may accrue, and such
accruals shall bear interest at the rate of 10% per annum,
compounded monthly. The amount of such unpaid Junior Monthly
Guaranteed Payments and the interest accruing thereon until paid
in full are hereinafter referred to collectively as "Accrued
Junior Monthly Guaranteed Payments." Accrued Junior Monthly
Guaranteed Payments shall be payable out of Operating Cash Flow
and Extraordinary Cash Flow as provided in Section 5.2 and 5.3 and
distributions in liquidation as provided in Section 5.4.
Junior Monthly Guaranteed Payments and Senior Monthly
Guaranteed Payments are sometimes referred to collectively as
"Monthly Guaranteed Payments." Accrued Junior Monthly Guaranteed
Payments and Accrued Senior Monthly Guaranteed Payments are
sometimes referred to collectively as "Accrued Monthly Guaranteed
Payments."
It is intended that the Monthly Guaranteed Payments and
Accrued Monthly Guaranteed Payments described in this Section
5.1.1 shall constitute guaranteed payments within the meaning of
Section 707(c) of the Code, that they shall be deducted as an
-14-
expense of the Partnership (unless NEPP V determines that such
expense should be amortized) and that their payment shall not
directly reduce the Capital Account of NEPP V.
Section 5.2 Operating Cash Flow. Operating Cash Flow shall
-------------------
be determined for each Fiscal Year, or fraction thereof, and shall
be distributed in the following order of priority:
FIRST: to NEPP V in payment of its Junior Monthly
----- Guaranteed Payments, and any Accrued Junior Monthly
Guaranteed Payments;
SECOND: to NEPP V until its Junior Invested Capital has
------ been reduced to zero;
THIRD: to NEPP V in payment of its Senior Monthly
----- Guaranteed Payments, and any Accrued Senior Monthly
Guaranteed Payments;
FOURTH: to NEPP V until its Senior Invested Capital has
------ been reduced to zero; and
FIFTH: to the Partners in accordance with their respective
----- Interests.
Distributions of Operating Cash Flow shall be made provi-
sionally at such reasonable intervals during the Fiscal Year as
shall be determined by NEPP V, and in any event shall be made on a
monthly basis within 30 days after the last day of each month.
Following the end of each Fiscal Year, and at any time or from
time to time during any Fiscal Year if requested by either Partner
(and after determination of the actual amount of Operating Cash
Flow for such Fiscal Year, or the portion thereof which then shall
have elapsed, as applicable), the above provisional distributions
of Operating Cash Flow to the Partners with respect to such Fiscal
Year or portion thereof shall be recomputed on the basis of the
actual amount of Operating Cash Flow. If the above provisional
distributions with respect to such Fiscal Year or portion thereof
are greater than the distributions thus recomputed for such Fiscal
Year or portion thereof, then the Partners shall recontribute to
the Partnership in reverse order of the priorities set forth above
the amounts received by the Partners for such Fiscal Year or
portion thereof until all distributions of Operating Cash Flow for
such Fiscal Year or portion thereof shall be in conformance with
this Section 5.2.
Furthermore, if it is projected that the Partnership will not
have sufficient cash (from any source) to pay its obligations as
they become due, for all or a portion of the then Fiscal Year, and
distributions of Operating Cash Flow theretofore have been made
with respect to such Fiscal Year, then the Partners shall
-15-
recontribute to the Partnership such distributions in reverse
order of the priorities set forth in this Section 5.2, until there
has been recontributed to the Partnership that aggregate amount
which is equal to the lesser of the total of such distributions
previously made with respect to such Fiscal Year, or the amount of
such projected cash shortfall for such Fiscal Year. Any amounts
so recontributed shall be characterized in the same manner as they
were originally distributed so that, following such
recontribution, subsequent distributions to the Partners pursuant
to any clause of this Section shall be made in the same manner as
if the original distributions were never made (except that, any
Accrued Monthly Guaranteed Payment distributed to NEPP V which is
entitled to earn interest, shall not earn such interest during the
period from the date of distribution of such amount to NEPP V
through the date of its recontribution by NEPP V pursuant to this
sentence). For example, to the extent NEPP V is required to
recontribute distributions made pursuant to clause SECOND of this
Section, the amount of such distributions shall be deemed not to
have been made for purpose of calculating NEPP V's Junior Invested
Capital.
Any amounts previously set aside in the Working Capital Fund
or the Reserve for Replacements, to the extent funded from
Operating Revenues, shall be additions to Operating Cash Flow when
and to the extent NEPP V no longer regards such reserves as
reasonably necessary to the efficient conduct of the affairs of
the Partnership.
Section 5.3 Extraordinary Cash Flow. Except as provided in
-----------------------
Section 5.4 below, Extraordinary Cash Flow shall be distributed by
the Partnership in the following order of priority:
FIRST: to NEPP V in payment of its Junior Monthly
----- Guaranteed Payments, and any Accrued Junior Monthly
Guaranteed Payments;
SECOND: to NEPP V until its Junior Invested Capital has
------ been reduced to zero;
THIRD: to NEPP V in payment of its Senior Monthly
----- Guaranteed Payments, and any Accrued Senior Monthly
Guaranteed Payments;
FOURTH: to NEPP V until its Senior Invested Capital has
------ been reduced to zero; and
FIFTH: to the Partners in accordance with their respective
----- Interests.
Section 5.4 Distributions in Liquidation. Distributions in
----------------------------
connection with the liquidation and winding up of the Partnership
-16-
(including distributions of Operating Cash Flow and Extraordinary
Cash Flow) shall be made (after payment of the reasonable expenses
incurred in dissolution and termination and payment to creditors
of the Partnership, but excluding secured creditors whose
obligations will be assumed or otherwise transferred on the
liquidation of the Partnership property or assets) to the Partners
in proportion to the positive balances of their Capital Accounts
after Capital Accounts have been adjusted for the allocation of
Net Profit and Net Loss (and items thereof) for the Fiscal Year
during which such liquidation occurs.
Section 5.5 In-Kind Distribution. Assets of the Partnership
--------------------
(other than cash) may be distributed in kind to the Partners. If
any assets of the Partnership are distributed to the Partners in
kind, such assets shall be valued on the basis of the fair market
value thereof on the date of distribution, and any Partner
entitled to any interest in such assets shall receive such
interest as a tenant-in-common with all other Partners so
entitled.
ARTICLE 6
OPERATING DEFICITS
------------------
Section 6.1 Operating Deficits. If, at any time, Project
------------------
Expenses exceed Operating Revenues, Extraordinary Cash Flow and
other funds available to the Partnership (an "Operating Deficit"),
then funds shall be withdrawn from the Working Capital Fund as
required and if available. If Operating Deficits cannot be so
funded, or if it reasonably appears that the Partnership will be
unable to meet in a timely manner any of its obligations as they
mature, NEPP V may, but shall not be required to, contribute
Junior Capital to the Partnership in order to enable the
Partnership to meet its obligations.
ARTICLE 7
TAX ALLOCATIONS
---------------
Section 7.1 Definition of Net Profit and Net Loss. (a) "Net
-------------------------------------
Profit" and "Net Loss" shall mean, for each Fiscal Year or other
period, an amount equal to the Partnership's taxable income or
loss for such Fiscal 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:
-17-
(i) any income of the Partnership that is exempt from
federal income tax or not otherwise taken into account in
computing Net Profit or Net Loss pursuant to this Section 7.1
shall be added to such taxable income or loss;
(ii) any expenditures of the Partnership described in
Code Section 705(a)(2)(B) or treated as Code Section
705(a)(2)(B) expenditures under Code Section 704(b) and not
otherwise taken into account in computing Net Profit or Net
Loss pursuant to this Section 7.1, shall be subtracted from
such taxable income or loss;
(iii) gain or loss resulting from any disposition of
Partnership property with respect to which gain or loss is
recognized for federal income tax purposes shall be computed
by reference to the Book Value of such property rather than
its adjusted tax basis;
(iv) in lieu of the depreciation, amortization, and
other cost recovery deductions taken into account in comput-
ing taxable income or loss, there shall be taken into account
depreciation on the assets' respective Book Values for such
Fiscal Year or other period determined in accordance with
Treasury Regulations under Code Section 704(b); and
(v) the amount of any Gross Income allocated to the
Partners pursuant to Section 7.2(a) and Sections 7.2(e), (f)
and (i), below, shall not be included as income or revenue.
(b) Definition of Net Profits or Net Losses From Capital
----------------------------------------------------
Transactions. "Net Profits or Net Losses from Capital Transac-
------------
tions" shall mean for each Fiscal Year or other period, the Net
Profit or Net Loss for such Fiscal Year or other period calculated
solely by reference to gains and losses from Capital Transactions.
(c) Definition of Net Profits or Net Losses From Operations.
-------------------------------------------------------
"Net Profits or Net Losses from Operations" shall mean for each
Fiscal Year or other period, the Net Profit or Net Loss for such
Fiscal Year or other period calculated without regard to Net
Profits and Net Losses from Capital Transactions.
(d) Definition of Gross Income. "Gross Income" shall mean,
--------------------------
for each Fiscal Year or other period, an amount equal to the
Partnership's gross income as determined for federal income tax
purposes for such Fiscal Year or period but computed with the
adjustments specified in Section 7.1(a)(i) and (iii), above.
(e) Definition of Gross Income from Operations. "Gross
------------------------------------------
Income from Operations" shall mean for each Fiscal Year or other
period, the Gross Income for such year calculated without regard
to Gross Income attributable to Capital Transactions.
-18-
Section 7.2 Allocation of Net Profit, Gross Income and Net
----------------------------------------------
Loss. The Partners hereby agree that the Net Profit, Gross Income
----
and Net Loss of the Partnership shall be allocated among them in
accordance with this Section 7.2.
(a) Gross Income from Operations. Except as otherwise
----------------------------
provided in this Article 7, Gross Income from Operations, if any,
of the Partnership (and each item thereof) for each Fiscal Year or
other period, in an amount equal to the total amount distributed
to Developer pursuant to Section 5.2 with respect to such Fiscal
Year or other period, shall be allocated to Developer.
(b) Net Profits From Operations and Capital Transactions.
----------------------------------------------------
Except as otherwise provided in this Article 7, Net Profit, if
any, of the Partnership (and each item thereof) for each Fiscal
Year or other period shall be allocated among the Partners as fol-
lows:
(i) All Net Profit from Operations of the Partnership
shall be allocated to NEPP V.
(ii) Net Profit from Capital Transactions shall:
(x) first be allocated to the Partners in propor-
tion to the negative balances, if any, in their Adjusted
Capital Accounts (after adjusting such Adjusted Capital
Accounts for allocations of any Gross Income, Net Loss
or Net Profit from Operations of the Partnership for the
Fiscal Year or other period) until such negative
balances are increased to zero, and
(y) thereafter, be allocated to the Partners in
such proportions and in such amounts as would result in
the Adjusted Capital Account balance of each Partner
equaling, as nearly as possible, such Partner's share of
the then Partnership Capital determined by calculating
the amount the Partner would receive if an amount equal
to the Partnership Capital were distributed to the
Partners in accordance with the provisions of Section
5.3 hereof, other than clauses FIRST and THIRD thereof.
(c) Net Losses From Operations and Capital
--------------------------------------
Transactions. Except as otherwise provided in this Article 7, Net
------------
Loss, if any, of the Partnership (and each item thereof) for each
Fiscal Year or other period shall be allocated as follows:
(i) All Net Loss from Operations of the Partnership
shall be allocated to NEPP V.
(ii) Net Loss from Capital Transactions shall:
-19-
(x) first be allocated to those Partners with
positive balances in their Adjusted Capital
Accounts in amounts equal to their respective
Adjusted Capital Account balances; provided,
however, that if the amount of Net Loss to be
allocated is less than the sum of the Adjusted
Capital Account balances of all Partners having
positive Adjusted Capital Account balances, then
the Net Loss shall be allocated to the Partners in
such proportions and in such amounts as would
result in the Adjusted Capital Account balance of
each Partner equaling, as nearly as possible, such
Partner's share of the then Partnership Capital
determined by calculating the amount the Partner
would receive if an amount equal to the Partnership
Capital were distributed to the Partners in accord-
ance with the provisions of Section 5.3 hereof,
other than clauses FIRST and THIRD thereof; and
(y) thereafter, one hundred percent (100%) to
NEPP V.
(d) Liquidation. Subject to the provisions of Sections
-----------
7.2(e) through (j), Net Profit and Net Loss incurred in the Fiscal
Year in which the Partnership is liquidated shall be allocated in
accordance with the provisions of Sections 7.2(b)(ii) and
7.2(c)(ii) without regard to whether such Net Profit and Net Loss
arises from a Capital Transaction, and Sections 7.2(a), 7.2(b)(i)
and 7.2(c)(i) shall not apply.
(e) Minimum Gain Chargeback. Notwithstanding any other
-----------------------
provision of this Agreement to the contrary, if in any Fiscal Year
or other period there is a net decrease in the amount of
Partnership Minimum Gain, then each Partner shall first be
allocated items of Gross Income for such year (and, if necessary,
subsequent years) in an amount equal to such Partner's share of
the net decrease in Partnership Minimum Gain determined as set
forth in the definition of Partnership Minimum Gain; provided,
however, that no such allocation of Gross Income to a Partner
shall occur in the following circumstances:
(i) If the net decrease in Partnership Minimum
Gain is caused by a modification of a Nonrecourse Liability
and the Partner bears the Economic Risk of Loss with respect
to such modified liability;
(ii) If the net decrease in Partnership Minimum
Gain is attributable to a repayment of a Nonrecourse
Liability with amounts contributed to the capital of the
Partnership by the Partner; and
-20-
(iii) If the allocation of Gross Income would cause
a "distortion in the economic arrangement among the Partners"
and the Partnership receives a waiver of the requirement that
Gross Income be so allocated from the Commissioner of the
Internal Revenue Service pursuant to Treasury Regulation
Section 1.704-2(f)(4).
(f) Minimum Gain Chargeback for Partner Nonrecourse
-----------------------------------------------
Debt. Notwithstanding any other provision of this Agreement to
----
the contrary other than Section 7.2(e), above, if in any year
there is a net decrease in the amount of Partner Nonrecourse Debt
Minimum Gain, then each Partner shall first be allocated items of
Gross Income for such year (and, if necessary, subsequent years)
in an amount equal to such Partner's net decrease in Partner
Nonrecourse Debt Minimum Gain with respect to liabilities for
which the Partner bears the Economic Risk of Loss; provided,
however, that no such allocation of Gross Income to a Partner
shall occur in the following circumstances:
(i) If the net decrease in Partner Nonrecourse
Debt Minimum Gain is caused by a modification of a Partner
Nonrecourse Debt and the Partner bears the Economic Risk of
Loss with respect to such modified liability;
(ii) If the net decrease in Partner Nonrecourse
Debt Minimum Gain is attributable to a repayment of a Partner
Nonrecourse Debt with amounts contributed to the capital of
the Partnership by the Partner;
(iii) In any circumstance described in clause (iii)
of Section 7.2(e) hereof; and
(iv) If the net decrease in Partner Nonrecourse
Debt Minimum Gain is caused by a modification of a Partner
Nonrecourse Debt that causes it to become a Nonrecourse
Liability.
(g) Nonrecourse Deductions. All Nonrecourse Deductions of
----------------------
the Partnership for any Fiscal Year or other period shall be
allocated among the Partners in the same manner and proportions as
are Net Losses from Operations of the Partnership.
(h) Partner Nonrecourse Deductions. Any Partner Nonrecourse
------------------------------
Deductions shall be allocated to the Partner who bears the
Economic Risk of Loss with respect to the Partner Nonrecourse
Debt.
(i) Qualified Income Offset. Notwithstanding any of the
-----------------------
provisions above (except Sections 7.2(e) and (f) which shall be
applied first), if in any Fiscal Year or other period a Partner
receives an adjustment, allocation or distribution described in
-21-
Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6),
Gross Income (and items thereof) shall first be allocated to
Partners with negative Adjusted Capital Account balances (adjusted
in accordance with Section 3.1(c) hereof), in proportion to such
negative balances, until such balances are increased to zero.
(j) Limit on Loss Allocations. Notwithstanding the provi-
-------------------------
sions of Section 7.2(c), Net Loss (or items thereof) shall not be
allocated to a Partner if such allocation would cause or increase
a negative balance in such Partner's Adjusted Capital Account
(adjusted in accordance with Section 3.1(c) hereof) and shall be
reallocated to the other Partner or Partners, subject to the
limitations of this Section 7.2(j).
(k) Reversal of Mandatory Allocations. In the event that
---------------------------------
any Net Profit or Net Loss, or items thereof, of the Partnership
are allocated pursuant to Sections 7.2(i) or (j), subsequent Net
Profit or Net Loss (or items thereof) will first be allocated
(subject to Sections 7.2(e) through (j)) to the Partners in a
manner which will result in each Partner having a Capital Account
balance equal to that which would have resulted had the original
allocation of Net Profit or Loss or items thereof pursuant to Sec-
tions 7.2(i) and (j) not occurred.
(l) Priority. For purposes of the allocations pursuant to
--------
this Article 7 and except as otherwise provided, Sections
7.2(a) (Gross Income from Operations) shall apply first, then
Sections 7.2(b)(i) and 7.2(c)(i) (Net Profit or Loss from
Operations), and thereafter Sections 7.2(b)(ii) and 7.2(c)(ii)
(Net Profit or Loss from Capital Transactions). The allocation of
Net Profit and Net Loss from Capital Transactions shall be made
before adjusting Capital Account balances to reflect the
distribution of proceeds from such Capital Transactions.
(m) Compliance with Code. The foregoing provisions of this
--------------------
Agreement relating to the allocation of Net Profit and Net Loss
are intended to comply with Treasury Regulations under Section
704(b) of the Code and shall be interpreted and applied in a man-
ner consistent with such regulations.
Section 7.3 Tax Allocations; Code Section 704(c). In
------------------------------------
accordance with Code Sections 704(b) and 704(c) and the Treasury
Regulations thereunder, depreciation, amortization, gain and loss,
as determined for tax purposes, with respect to any property whose
Book Value differs from its adjusted basis for federal income tax
purposes shall, for tax purposes, be allocated among the Partners
so as to take account of any variation between the adjusted basis
of such property to the Partnership for federal income tax
purposes and its Book Value.
-22-
Any elections or other decisions relating to such allocations
shall be made by the Partners in any manner that reasonably
reflects the purpose and intention of this Agreement. Allocations
pursuant to this Section 7.3 are solely for purposes of federal,
state, and local taxes and shall not affect, or in any way be
taken into account in computing, any Partner's Capital Account or
share of Net Profit, Net Loss, other items, or distributions
pursuant to any provision of this Agreement.
Section 7.4 Allocations Upon Transfer or Change of
--------------------------------------
Interests. Upon a transfer of all or a portion of a Partner's
---------
Interest, Gross Income, Net Profits and Net Losses shall be
allocated among the Partners in accordance with the provisions of
Section 11.5.
ARTICLE 8
ACCOUNTING AND RECORDS
----------------------
Section 8.1 Books and Records. NEPP V shall keep or cause
-----------------
to be kept, at Partnership expense, at the Partnership's principal
office, separate books of account for the Partnership which shall
show a true and accurate record of all costs and expenses
incurred, all charges made, all credits made and received and all
income derived in connection with the operation of the Partnership
business in accordance with generally accepted accounting
principles consistently applied and sufficient to obtain an
unqualified opinion from the Accountants as to the Partnership's
financial position and results of operations. The Partnership
shall use the accrual method of accounting in preparation of its
annual reports and for tax purposes and shall keep its books
accordingly. The expenses chargeable to the Partnership shall
include only those which are reasonable and necessary for the
ordinary and efficient operation of the Partnership business and
the performance of the obligations of the Partnership under any
leases or other agreements relating to the Project or the business
of the Partnership.
Each Partner shall, at its sole expense, have the right, at
any time without notice to the other, to examine, copy and audit
the Partnership's books and records during normal business hours.
All books, records (including bills and invoices), reports
and returns of the Partnership required by this Article 8 shall be
maintained in a manner and form consistent with NEPP V's methods
and procedures of reporting investment transactions.
Section 8.2 Reports. With respect to each Fiscal Year of
-------
the Partnership, NEPP V shall cause a general accounting to be
made by the Accountants at the expense of the Partnership. The
-23-
accounting shall be performed in accordance with generally
accepted auditing standards, and shall cover all of the assets,
properties, liabilities and net worth of the Partnership as well
as its dealings, transactions and operations during such Fiscal
Year, together with all other matters customarily included in such
accountings.
Within 90 days after the end of each Fiscal Year, NEPP V
shall cause to be furnished to Developer financial statements for
the Partnership, prepared on an accrual basis and otherwise in
accordance with generally accepted accounting principles
consistently applied, which shall contain a balance sheet as of
the end of the Fiscal Year, statements of profit and loss, and
Operating Cash Flow, changes in the Capital Accounts and a
statement of changes in financial position for the Fiscal Year
then ended. Such financial statements shall disclose and/or
footnote, in sufficient detail, all items of taxable income, gain,
loss, or accounts which vary from the reporting of such items for
financial accounting purposes. Any exceptions to the financial
statements rendered must be made by a Partner within one year from
its receipt and, if no exception is made within that time, the
statements shall be considered to be correct.
Section 8.3 Tax Returns. At Partnership expense, NEPP V
-----------
shall cause the Accountants to prepare all income and other tax
returns of the Partnership (on an accrual basis) and cause the
same to be filed in a timely manner. NEPP V shall furnish to
Developer a copy of each such return before it has been filed,
together with any schedules or other information which each
Partner may require in connection with such Partners' own tax
affairs. Each of the Partners shall, in its respective income tax
return and other statements filed with the Internal Revenue
Service or other taxing authority, report taxable income in
accordance with the provisions of this Agreement.
Section 8.4 Depreciation. The Partnership shall, to the
------------
extent permitted by the Code, utilize the Accelerated Cost
Recovery System (as defined in the Code) on a straight-line basis.
Section 8.5 Special Basis Adjustment. In connection with
------------------------
any assignment or transfer of an Interest permitted by the terms
of this Agreement, NEPP V shall cause the Partnership, at the
written request of the transferor, the transferee or the successor
to such Interest, on behalf of the Partnership and at the time and
in the manner provided in Treasury Regulation Section 1.754-1(b)
(or any like statute or regulation then in effect), to make an
election to adjust the basis of the Partnership's property in the
manner provided in Sections 734(b) and 743(b) of the Code (or any
like statute or regulation then in effect), and such transferee
shall pay all costs incurred by the Partnership in connection
-24-
therewith, including, without limitation, reasonable attorneys'
and accountants' fees.
Section 8.6 Tax Matters Partner. NEPP V shall be the party
-------------------
designated to receive all notices from the Internal Revenue
Service ("IRS") which pertain to the tax affairs of the
Partnership and NEPP V shall be entitled to require that any IRS
examinations or audits shall take place at the offices of NEPP V.
NEPP V shall be the "Tax Matters Partner" of the Partnership
pursuant to the Code.
Section 8.7 Fiscal Year. The Fiscal Year of the Partnership
-----------
shall be the calendar year, unless otherwise determined by NEPP V.
As used in this Agreement, a fiscal year shall include any partial
fiscal year at the beginning and end of the Partnership term.
Section 8.8 Bank Accounts. NEPP V shall have fiduciary
-------------
responsibility for the safekeeping and use of all funds and assets
of the Partnership, whether or not in its immediate possession or
control. The funds of the Partnership shall not be commingled
with the funds of any other person and NEPP V shall not employ, or
permit any other person to employ, such funds in any manner except
for the benefit of the Partnership.
The bank accounts of the Partnership shall be maintained in
such banking institutions as are determined by NEPP V and
withdrawals shall be made only in the regular course of
Partnership business and as otherwise authorized in this Agreement
on such signature or signatures as NEPP V may determine.
ARTICLE 9
MANAGEMENT AND OPERATIONS
-------------------------
Section 9.1 Management. NEPP V acting alone, and without
----------
the consent or approval of Developer, shall have the sole
authority to manage the business and operations of the
Partnership. Without limiting in any way the foregoing, NEPP V
acting alone, shall have the sole authority to make all decisions
respecting the conduct of the Partnership and its business,
without the consent or approval of Developer, including without
limitation, the following:
- acquiring, by purchase, lease, or otherwise, any real
property in addition to the Land, or constructing any
new capital improvements on the Land or replacing an
existing capital improvement following completion of
construction thereof;
-25-
- giving or granting any options, rights of first refusal,
deeds of trust, mortgages, pledges, ground leases,
security interests or otherwise encumbering the Project
or any portion thereof;
- consummating leases in the Project or any portion
thereof, on such terms as NEPP V may approve;
- obtaining, increasing, modifying, consolidating or
extending any loan, line of credit or other obligation,
whether secured or unsecured, affecting the Project or
the Partnership or making draws under any such loan,
line of credit or other obligation;
- consenting to any rezoning or subdivision of the Land or
any other material change in the legal status thereof;
- selling, conveying or refinancing the Project or any
portion thereof;
- causing or permitting the Partnership to extend credit
to or to make any loans or become a surety, guarantor,
endorser or accommodation endorser for any person, firm
or corporation or entering into any contracts with
respect to the operation or management of the business
of the Partnership or the Project (or any portion
thereof);
- initiating, defending, adjusting, settling or
compromising any claim, action, suit or judgment by or
against the Partnership;
- releasing, compromising, assigning or transferring any
claims, rights or benefits of the Partnership;
- confessing a judgment against the Partnership or
submitting a Partnership claim to arbitration;
- distributing any cash or property of the Partnership, or
establishing any reserve, other than as provided in this
Agreement;
- filing on behalf of the Partnership any Federal or state
income tax or information returns, or changing the elec-
tions or choices of methods of reporting income or loss
for Federal or state income tax purposes provided for in
Article 8;
- spending money or entering into any contract or
agreement (or series thereof) of any nature whatsoever
-26-
with respect to the Partnership or the Project (or any
portion thereof);
- assigning the rights of the Partnership in any of its
property;
- selecting attorneys or Accountants, or property
managers, for the Partnership and/or the Project;
- advertising or marketing the Project;
- granting easements or other property rights by documents
that are frequently recorded, except easements for
utilities serving the Project exclusively;
- giving any approval or exercising any right (including
rights to terminate or amend) under any management,
construction or other contract to which the Partnership
or the Project is a party;
- approving or changing or amending the plans or
specifications or budget for any building or structure
being constructed by the Partnership; or
- entering into any amendment, modification, revision,
supplement or rescission with respect to any of the
foregoing.
NEPP V shall devote itself to the business of the Partnership
to the extent it reasonably determines necessary for the efficient
carrying on thereof, without compensation therefor except as
specifically provided in this Agreement; provided, however, that
all of the Partners agree and acknowledge that (a) NEPP V shall
not be required, nor is it expected, to devote itself to the
business of the Partnership on a full-time basis, (b) the Project
shall be managed and maintained by the Property Manager pursuant
to the Management Agreement (or by another person who may serve as
property manager, in the event the Property Management Agreement
is terminated), and NEPP V may rely on the Property Manager (or
such other property manager) to manage and maintain the Project in
a prudent and reasonable manner and shall have no liability to the
Partnership or the Partners with respect to any matter delegated
to the Property Manager (or such other property manager) and (c)
NEPP V shall be permitted to delegate to a third party such other
of its duties and obligations under this Agreement as it may
determine in its sole discretion.
With respect to all of its obligations, powers, and
responsibilities under this Agreement, NEPP V is authorized, in
the name and on behalf of the Partnership, to execute, deliver,
and perform the terms, covenants and obligations of, such notes
-27-
and other evidences of indebtedness, contracts, agreements,
assignments, deeds, leases, loan agreements, mortgages, and other
security instruments and agreements as it deems proper, all on
such terms and conditions as it deems proper.
Without limiting the foregoing, Developer hereby waives any
and all rights it may have under the Act to vote on, approve or
consent to any matter or to participate in the management,
business or operations of the Partnership, including without
limitation any rights it may have under Section 15636 of the Act.
Section 9.2 Standard of Care. NEPP V shall use reasonable
efforts to perform its duties under this Agreement, including,
without limitation, employing necessary personnel, on and off-
site, in connection with the business of the Partnership, and
shall at all times act in a fiduciary manner towards the
Partnership and Developer.
Section 9.3 Insurance. NEPP V shall procure and maintain,
or cause to be procured and maintained, at the expense of the
Partnership, insurance sufficient to enable the Partnership to
comply with applicable laws, regulations and requirements,
including without limitation, obligations imposed on the Project
by the any documents relating to Third Party Loans, and any and
all other agreements and instruments by which the Project is
bound, such additional insurance as may be customary for projects
of a similar type in the geographic area in which the Project is
located, and such additional insurance as NEPP V reasonably
determines to be appropriate for the Project.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 10.1 Developer. As of the date hereof each of the
---------
statements in this Section 10.1 shall be a true, accurate and full
disclosure of all facts relevant to the matters contained therein,
and such warranties and representations shall survive the execu-
tion of this Agreement. As of the date hereof, Developer hereby
represents and warrants that:
- Developer is a duly organized and validly existing
California limited partnership and has the requisite
power and authority to enter into and carry out the
terms of this Agreement.
- All partnership action required to be taken by Developer
to consummate this Agreement has been taken by Developer
(and its partners) and no further approval of any board,
-28-
court, or other body is necessary in order to permit
Developer to consummate this Agreement.
- To the best of its knowledge, neither the execution and
delivery of this Agreement, nor the performance of or
the compliance with, this Agreement has resulted (or
will result) in any violation of, or will be in conflict
with, or invalidate, cancel, or make inoperative, or
interfere with, or constitute a default under, or result
in the creation of any lien, encumbrance or any other
charge upon the Project pursuant to any charter, bylaw,
partnership agreement, trust agreement, mortgage, deed
of trust, indenture, contract, agreement, permit,
judgment, decree, or order to which Developer is a party
or by which the Project (or any portion thereof) is
bound, and there is no default and no event or omission
has occurred which, but for the passing of time or the
giving of notice, or both, would constitute a default on
the part of Developer under this Agreement.
- To the best of its knowledge, there is no action,
proceeding or investigation, pending or threatened (nor
any basis therefor) which questions, directly or
indirectly, the validity or enforceability of this
Agreement as to Developer or which would materially and
adversely affect the Project.
- To the best of Developer's knowledge, no representation,
warranty or covenant of Developer in this Agreement
(except for the first two representations of this
Section 10.1, which shall not be limited to Developer's
best knowledge, but shall be absolute), or in any
document or certificate furnished or to be furnished to
NEPP V pursuant hereto contains or will contain any
untrue statement of material fact or omits or will omit
to state any material fact necessary to make the
statements or facts contained therein not misleading.
All such representations, warranties or statements of
Developer are based, to the best of Developer's
knowledge, upon current, accurate and complete
information as of the time of their making, and there
have been, to the best of Developer's knowledge, no
changes in such information subsequent thereto.
Section 10.2 NEPP V. As of the date hereof each of the
------
statements in this Section 10.2 shall be a true, accurate and full
disclosure of all facts relevant to the matter contained therein,
and such warranties and representations shall survive the execu-
tion of this Agreement. As of the date hereof, NEPP V hereby
represents and warrants that:
-29-
- NEPP V is a duly organized limited partnership validly
existing under the laws of the Commonwealth of
Massachusetts and has the requisite power and authority
to enter into and carry out the terms of this Agreement;
- All partnership action required to be taken by NEPP V to
consummate this Agreement has been taken and that no
further approval of any board, court, or other body is
necessary in order to permit NEPP V to consummate this
Agreement.
- To the best of its knowledge, neither the execution and
delivery of this Agreement nor the performance of nor
the compliance with this Agreement, has resulted (or
will result in) any violation of, or will be in conflict
with, or invalidate, cancel, or make inoperative, or
interfere with, or constitute a default under, or result
in the creation of any lien, encumbrance or any other
charge upon the Project pursuant to any charter, bylaw,
partnership agreement, trust agreement, mortgage, deed
of trust, indenture, contract, agreement, permit,
judgment, decree, or order, to which NEPP V is a party
and there is no default and no event or omission has
occurred which, but for the passing of time or the
giving of notice, or both, would constitute a default on
the part of NEPP V under this Agreement.
- To the best of NEPP V's knowledge, there is no action,
proceeding or investigation, pending or threatened (nor
any basis therefor), which questions, directly or
indirectly, the validity or enforceability of this
Agreement as to NEPP V.
- To the best of NEPP V's knowledge, no representation,
warranty or covenant of NEPP V in this Agreement (except
for the first two representations of this Section 10.2,
which shall not be limited to NEPP V's knowledge, but
shall be absolute), or in any document or certificate
furnished or to be furnished to Developer pursuant
hereto contains or will contain any untrue statement of
material fact or omits or will omit to state any
material fact necessary to make the statements or facts
contained therein not misleading. All such
representations, warranties or statements of NEPP V are
based, to the best of NEPP V's knowledge, upon current,
accurate and complete information as of the time of
their making, and there have been, to the best of NEPP
V's knowledge, no changes in such information subsequent
thereto.
-30-
Section 10.3 Brokers. Each party represents to the other
-------
that, except for fees paid upon formation of the Partnership to
Charterhouse Investment Company, they have not retained or been
approached by any broker, finder, agent or the like in connection
with this transaction or the negotiations thereof. Each party
shall indemnify and hold the other party hereto harmless from and
against all loss, liabilities, claims, damages and expenses,
including court costs and reasonable attorneys' fees, arising out
of any claim for brokerage or other commissions relative to this
Agreement or the transactions contemplated hereby insofar as any
such claim arises by reason of services alleged to have been
rendered to or at the insistence of such indemnifying party.
ARTICLE 11
TRANSFER OF INTERESTS
---------------------
Section 11.1 Restrictions on Transfer of Developer's
---------------------------------------
Interest. Except as expressly provided for in this Agreement,
--------
Developer may not, without the prior written consent of NEPP V,
sell, convey, transfer, assign, mortgage, pledge, hypothecate or
otherwise encumber in any way ("transfer") all or any portion of
its Partnership Interest or any interest it may have in any
property of the Partnership, or withdraw or retire from the
Partnership. Any such attempted transfer, withdrawal or
retirement not permitted hereunder shall be null and void. A
transfer of an interest in Developer shall be deemed a transfer
for the purpose of this Section 11.1.
Section 11.2 No Restriction on Transfer of NEPP V Interest.
---------------------------------------------
NEPP V may, without the consent or approval of Developer, sell,
convey, transfer, assign, mortgage, pledge, hypothecate or
otherwise encumber in any way ("transfer") all or any portion of
its Partnership Interest or any interest it may have in any
property of the Partnership, or withdraw or retire from the
Partnership. Any such transferee may be admitted to the
Partnership in substitution for NEPP V with respect to the
interest (or portion thereof) so transferred, and Developer hereby
consents to such substitution.
Section 11.3 Permitted Transfers. Developer or its
-------------------
successors, without the consent of NEPP V, may make the following
transfers:
- a transfer of stock in Investment Building Group ("IBG")
to any party so long as Jack M. Langson and/or a trust
of which he is the sole trustee retains voting control
of and at least 51% of the stock of IBG; and
-31-
- transfers by Jack M. Langson of all or any portion of
his limited partnership interest in Developer to any
trust of which he is the sole trustee.
Any such permitted transferee shall receive and hold such
Partnership Interest or portion thereof subject to the terms of
this Agreement and the obligations of the Developer, and there
shall be no further transfer of such Partnership Interest or
portion thereof except to a trust, person or entity to whom such
permitted transferee could have transferred his Partnership
Interest in accordance with this Section 11.3 had such permitted
transferee originally been named as a Partner or as a partner in
Developer, or otherwise in accordance with the other terms of this
Agreement.
Section 11.4 General Transfer Provisions. All transfers
---------------------------
shall be by instrument in form and substance satisfactory to
counsel for the Partnership and shall contain an expression by the
assignee of its intention to accept the assignment and to accept
and adopt all of the terms and provisions of this Agreement, as
the same may have been amended, and shall provide for the payment
by the assignor of all reasonable expenses incurred by the
Partnership in connection with such assignment, including, without
limitation, the necessary amendments to this Agreement to reflect
such transfer. The transferor shall execute and acknowledge all
such instruments, in form and substance reasonably satisfactory to
the Partnership's counsel, as may be necessary or desirable to
effectuate such transfer.
In no event shall the Partnership dissolve or terminate upon
the admission of any Partner to the Partnership or upon any
permitted assignment of an Interest in the Partnership by any
Partner. Each Partner hereby waives its right to dissolve,
liquidate or terminate the Partnership in such event.
Upon completion of a transfer in compliance with this
Agreement, the transferor shall be released from all future
obligations arising under this Agreement after the date of such
transfer provided the assignee of such transferor assumes all such
--------
obligations of the transferor. However, the transferor shall
remain liable for its obligations under this Agreement occurring
on or prior to the date of such transfer.
Section 11.5 Tax Allocations and Cash Distributions. If an
--------------------------------------
Interest is transferred, the Net Profit or Loss allocable, and
cash distributable, to the holder of such Interest for the then
Fiscal Year shall be allocated and distributed based on a method
consistent with Section 706(d) of the Code. However, if such
parties agree that such Net Profit or Loss and cash are to be
allocated and distributed based upon an interim closing of the
Partnership books, and such parties agree to pay all expenses
-32-
incurred by the Partnership in connection therewith and so notify
the non-transferring Partner, then all such Net Profit or Loss and
cash shall be allocated and distributed between the transferor and
transferee based upon an interim closing of the Partnership's
books and records. In no event, however, shall Extraordinary Cash
Flow or Net Profit or Loss arising from a Capital Transaction be
distributed and allocated to any Partner other than the Partners
owning Interests as of the date of the Capital Transaction in
question.
Section 11.6 Compliance. Notwithstanding anything to the
----------
contrary in this Agreement, at law or in equity, no Partner shall
transfer or otherwise deal with any Interest in a way that would
cause a default under any material agreement to which the
Partnership is a party or by which it is bound.
Section 11.7 Waiver of Partition. Neither Partner shall,
-------------------
either directly or indirectly, take any action to require
partition or appraisement of the Partnership or of any of its
assets or properties or cause the sale of any Partnership
property, and notwithstanding any provisions of applicable law to
the contrary, each Partner (and its legal representatives,
successors or assigns) hereby irrevocably waives any and all right
to maintain any action for partition or to compel any sale with
respect to its Interest, or with respect to any assets or
properties of the Partnership, except as expressly provided in
this Agreement.
ARTICLE 12
OPTION TO PURCHASE DEVELOPER'S INTEREST
---------------------------------------
Section 12.1 NEPP V's Right to Acquire Developer's
-------------------------------------
Interest. At any time, NEPP V may, by providing written notice to
--------
Developer, elect to purchase (or cause its designee to purchase)
Developer's entire Interest in the Partnership. The purchase
price for the interest shall be determined in accordance with
Section 12.2 below.
Section 12.2 Purchase Price. The purchase price of
--------------
Developer's Interest shall be an amount mutually acceptable to
Developer and NEPP V; provided that, if they are unable to agree,
the purchase price shall equal 100% of the aggregate amount which
would be distributable to Developer under Section 5.3 if the
assets of the Partnership were sold for their "Fair Value" and the
proceeds of such sale were distributed under Section 5.3. Such
Fair Value shall be determined in the manner specified in the
following paragraph, and the amount distributable to Developer
upon a sale of the Project for its Fair Value shall be determined
as provided below. Within 15 days after the determination of the
-33-
Fair Value of the assets of the Partnership, the Accountants shall
determine the amount of cash which would be distributed to each
Partner pursuant to the provisions of each of clauses FIRST
through FIFTH of Section 5.3 if the assets of the Partnership had
been sold for the Fair Value as of the date of the determination
and shall give each Partner written notice ("Accountant's Notice")
thereof. The determination by the Accountant of such amounts
shall be conclusive.
The "Fair Value" of the assets of the Partnership shall be
determined by one or more real estate appraisers (as provided
herein), who shall be members of the American Institute of Real
Estate Appraisers. NEPP V and Developer shall each select one
appraiser within 15 days after the giving of written notice
pursuant to Section 12.1, and each shall notify the other of the
appraiser selected by it. If a Partner fails to select an
appraiser, the appraiser selected shall act alone. Each Partner
shall, after selection of all appraiser(s), be required to provide
to the appraiser(s) a proposal as to the Fair Value of the
Partnership's assets (the "Proposed Fair Value"). The
appraiser(s) so selected shall be required to select as the
Partnership's Fair Value one of the two Proposed Fair Values. If
they fail to do so, then either Partner may request the American
Arbitration Association or any successor organization thereto to
appoint a third appraiser. If a third appraiser has not been
appointed by the American Arbitration Association within 60 days
of a Partners' request for it to do so, then either Partner may
apply to any court having jurisdiction to appoint the third
appraiser. The third appraiser, whether appointed by the original
appraisers, the American Arbitration Association or a court, shall
select, from among the two Proposed Fair Values, the Fair Value
within 30 days after its selection or appointment. The
appraiser(s) shall select the Proposed Fair Value which they
believe, as between the two Proposed Fair Values, to be the
fairest price estimated in terms of money which the Partnership
could obtain if its assets were exposed for sale in the open
market allowing a reasonable time to find a purchaser who buys
with knowledge of the uses which such assets in their then
condition are adapted and for which such assets are capable of
being used at the time of the appraisal. The appraiser(s) shall
also take into consideration whether or not any debt to which the
assets of the Partnership are subject is prepayable or callable.
This provision for determination of the Fair Value shall be
specifically enforceable to the extent such remedy is available
under applicable law, and the determination of Fair Value
hereunder shall be final and binding upon the parties.
In connection with a determination of the Fair Value pursuant
to this Section 12.2: if one appraiser is used, each of the
Partners shall bear 50% of the fees and expenses of the appraiser;
-34-
if two appraisers are used, each of the Partners shall bear the
fees and expenses of the appraiser selected by such Partner; if
three appraisers are used, each of the Partners shall bear the
fees and expenses of the appraiser selected by such Partner and
50% of the fees and expenses of the third appraiser.
Section 12.3 Closing of Purchase and Sale. The closing of a
----------------------------
purchase pursuant to this Article 12 shall be held at the
principal office of the Partnership within 30 days after purchase
price of the Developer's interest has been determined. Developer
shall transfer to NEPP V its entire Interest in the Partnership
free and clear of all liens, security interests and competing
claims, and shall deliver to NEPP V or its designee such
instruments of transfer and such evidence of due authorization,
execution and delivery and of the absence of any liens, security
interests or competing claims as NEPP V shall reasonably request.
Section 12.4 Payment. At the closing, NEPP V or its
-------
designee shall pay the purchase price by delivery at the closing
of a certified or bank cashier's check payable to the order of
Developer in the amount of the purchase price determined pursuant
to Section 12.2.
Section 12.5 Liabilities. The purchase of the Interest of
-----------
Developer pursuant to this Article 12 shall release the Developer
(and NEPP V shall indemnify and hold harmless Developer) from all
liabilities and claimed liabilities of the Partnership except for
liabilities not taken into account in the determination of the
purchase price and tort liabilities not taken into account in the
determination of Purchase Price to the extent such tort
liabilities are not covered by insurance for events occurring
prior to Developer's withdrawal from the Partnership.
ARTICLE 13
TERMINATION OF THE PARTNERSHIP
------------------------------
Section 13.1 Events of Dissolution. The Partnership shall
---------------------
dissolve upon the first to occur of the following events:
- the expiration of the term of the Partnership as
provided in Section 1.9;
- the sale or other disposition (including, without limi-
tation, taking by eminent domain) of all or substan-
tially all of the assets of the Partnership unless such
sale or other disposition involves any deferred payment
of the consideration for such sale or disposition, in
which case the Partnership shall not dissolve until the
-35-
last day of the calendar year during which the Partner-
ship shall receive the balance of such deferred payment;
- the occurrence of an Event of Bankruptcy of the
Partnership, which is not discharged or stayed within 90
days of occurrence;
- at the election of NEPP V, at any time; or
- the issuance of a decree of dissolution by a court of
competent jurisdiction.
Section 13.2 Effect of Dissolution. Upon dissolution of the
---------------------
Partnership pursuant to Section 13.1, the Partnership shall not
terminate but shall continue solely for the purposes of liqui-
dating all of the assets owned by the Partnership (until all such
assets have been sold or liquidated) and collecting the proceeds
from such sales and all receivables of the Partnership unless the
same have been written off as uncollectible. Upon dissolution,
the Partnership shall engage in no further business thereafter
other than that necessary to cause the Project to be operated on
an interim basis and for the Partnership to collect its
receivables, liquidate its assets and pay or discharge its
liabilities.
Section 13.3 Sale of Assets by Liquidating Trustee. Upon
-------------------------------------
dissolution of the Partnership, NEPP V shall, as "Liquidating
Trustee", proceed diligently to wind up the affairs of the Part-
nership and distribute its assets. NEPP V shall be permitted to
appoint another person to serve as Liquidating Trustee, or another
person to succeed any subsequently selected successor, whenever
the person originally selected or any such subsequently selected
successor, as the case may be, fails for any reason to carry out
such purpose. The Liquidating Trustee may be an individual,
corporation or general or limited partnership.
The decision to accept or reject an offer to purchase assets
of the Partnership shall be made solely by the Liquidating
Trustee.
In winding up the affairs of the Partnership, the Liquidating
Trustee shall pay the liabilities of the Partnership in such order
of priority as provided by law. If at the time of dissolution the
completion of all buildings then under construction on the Land
has not occurred, the Liquidating Trustee, in winding up the
affairs of the Partnership, shall have the authority, but not the
obligation, to complete the construction of the buildings.
All distributions of cash in winding up the affairs of the
Partnership shall be made in accordance with the provisions of
Section 5.4.
-36-
ARTICLE 14
MISCELLANEOUS
-------------
Section 14.1 Notices. All notices required or permitted by
-------
this Agreement shall be in writing and may be delivered in person
to either party or may be sent by registered or certified mail,
with postage prepaid, return receipt requested, or may be
transmitted by telegraph, telecopy, overnight courier, personal
delivery or other commercially reasonable means, and addressed in
the case of NEPP V to:
c/o Copley Real Estate Advisors, Inc.
399 Boylston Street
Boston, Massachusetts 02116
Attention: General Counsel
Re: IBG Dahlia Associates
and in the case of Developer to:
c/o Investment Building Group
500 North State College Boulevard
Suite 525
Orange, California 92668
Attention: Jack M. Langson
RE: IBG Dahlia Associates
or to such other address as shall from time to time be supplied in
writing by any party to the other. Notice sent by registered or
certified mail, postage prepaid, with return receipt requested,
addressed as above provided, shall be deemed given four days after
deposit of same in the United States mail. If any notice is
telegraphed the same shall be deemed served or delivered 48 hours
after the transmission thereof. Any notice or other document sent
or delivered in any other manner shall be effective only if and
when received.
Section 14.2 Successors and Assigns. Subject to the
----------------------
restrictions on transfer set forth herein, this Agreement shall
bind and inure to the benefit of the parties hereto and their
respective legal representative, successors and assigns.
Section 14.3 No Oral Modifications; Amendments. No oral
---------------------------------
amendment of this Agreement shall be binding on the Partners. Any
modification or amendment of this Agreement must be in writing
signed by all of the Partners.
Section 14.4 Captions. Any article, section or paragraph
--------
titles or captions contained in this Agreement and the table of
contents are for convenience of reference only and shall not be
deemed a part of this Agreement.
-37-
Section 14.5 Terms. Common nouns and pronouns shall be
-----
deemed to refer to the masculine, feminine, neuter, singular and
plural, as the identity of the Person or Entity may in the context
require. Any references to the Code, the Act or other statutes or
laws shall include all amendments, modifications or replacements
of the specific sections and provisions concerned.
Section 14.6 Invalidity. If any provision of this Agreement
----------
shall be held invalid, it shall not affect in any respect
whatsoever the validity of the remainder of this Agreement.
Section 14.7 Counterparts. This Agreement may be executed
------------
in counterparts, each of which shall be deemed an original and all
of which, when taken together, shall constitute one and the same
instrument, binding on the Partners, and the signature of any
party to any counterpart shall be deemed a signature to, and may
be appended to, any other counterpart.
Section 14.8 Further Assurances. The parties hereto agree
------------------
that they will cooperate with each other and will execute and
deliver, or cause to be delivered, all such other instruments, and
will take all such other actions, as either party hereto may
reasonably request from time to time in order to effectuate the
provisions and purposes hereof.
Section 14.9 Complete Agreement. This Agreement constitutes
------------------
the complete and exclusive statement of the agreement between the
Partners. It supersedes all prior written and oral statements and
no representation, statement, condition or warranty not contained
in this Agreement shall be binding on the Partners or have any
force or effect whatsoever.
Section 14.10 Attorneys' Fees. If any proceeding is brought
---------------
by one Partner against the other to enforce, or for breach of, any
of the provisions in this Agreement, the prevailing Partner shall
be entitled in such proceeding to recover reasonable attorneys'
fees together with the costs of such proceeding therein incurred.
Section 14.11 Governing Law. This Agreement shall be
-------------
construed and enforced in accordance with the laws of the State of
California.
Section 14.12 No Third Party Beneficiary. Any agreement to
--------------------------
pay any amount and any assumption of liability herein contained,
express or implied, shall be only for the benefit of the Partners
and their respective heirs, successors and assigns, and such
agreements and assumption shall not inure to the benefit of the
obligees of any indebtedness or any other party, whomsoever, it
being the intention of the Partners that no one shall be deemed to
be a third party beneficiary of this Agreement.
-38-
Section 14.13 Exhibits and Glossary. Each of the Exhibits
---------------------
and the Glossary attached hereto are hereby incorporated herein
and made a part hereof for all purposes, and references herein
thereto shall be deemed to include this reference and
incorporation.
Section 14.14 Estoppels. Each Partner shall, upon not less
---------
than 15 days' written notice from the other Partner, execute and
deliver to the other Partner a statement certifying that this
Agreement is unmodified and in full force and effect (or, if
modified, the nature of the modification) and whether or not there
are, to such Partner's knowledge, any uncured defaults on the part
of the other Partner, specifying such defaults if any are claimed.
Any such statement may be relied upon by third parties.
Section 14.15 References to this Agreement. Numbered or
----------------------------
lettered articles, sections and subsections herein contained refer
to articles, sections and subsections of this Agreement unless
otherwise expressly stated. The words "herein," "hereof,"
"hereunder," "hereby," "this Agreement" and other similar
references shall be construed to mean and include this Partnership
Agreement and all amendments thereof and supplements thereto
unless the context shall clearly indicate or require otherwise.
Section 14.16 Reliance on Authority of Person Signing
---------------------------------------
Agreement. If a Partner is a trust (with or without disclosed
---------
beneficiaries), general partnership, limited partnership, joint
venture, corporation, or any entity other than a natural person,
the Partnership and the Partners shall:
- not be required to determine the authority of the person
signing this Agreement to make any commitment or under-
taking on behalf of such entity or to determine any fact
or circumstance bearing upon the existence of the
authority of such entity or to determine any fact or
circumstance bearing upon the existence of the authority
of such person;
- not be required to see to the application or distribu-
tion of proceeds paid or credited to persons signing
this Agreement on behalf of such entity;
- be entitled to rely on the authority of the person
signing this Agreement with respect to the voting of the
Interest of such entity and with respect to the giving
of consent on behalf of such entity in connection with
any matter for which consent is permitted or required
under this Agreement; and
- be entitled to rely upon the authority of any general
partner, joint venturer, co- or successor trustee, or
-39-
president or vice president, as the case may be, of any
such entity the same as if such person were the person
originally signing this Agreement on behalf of such
entity.
Section 14.17 Consents and Approvals. Whenever the consent
----------------------
or approval of a Partner is required by this Agreement, such
Partner shall have the right to give or withhold such consent or
approval in its sole discretion, unless otherwise specified.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
NEW ENGLAND PENSION PROPERTIES V; A
REAL ESTATE LIMITED PARTNERSHIP
By: FIFTH COPLEY CORP., a
Massachusetts corporation, its
Managing General Partner
By:__________________________
Authorized Officer
DEVELOPER:
20 DAHLIA PARTNERSHIP, a California
Limited Partnership
By Investment Building Group, its
General Partner
By__________________________
Authorized Officer
-40-
IBG DAHLIA ASSOCIATES
EXHIBIT A
LEGAL DESCRIPTION OF LAND
-------------------------
Lot 8, Tract No. 8554, County of San Bernardino, State of
California, as per map recorded in Book 123 of Maps, Pages 13 to
17, inclusive, in the office of the County Recorder of said
County.
GLOSSARY OF DEFINED TERMS
IBG DAHLIA ASSOCIATES,
A CALIFORNIA LIMITED PARTNERSHIP
LIMITED PARTNERSHIP AGREEMENT
Capitalized terms used in this Limited Partnership Agreement
of IBG Dahlia Associates, a California Limited Partnership, shall
have the meanings ascribed to them below:
Accountants means Price Waterhouse, or such other firm of
-----------
nationally-recognized independent certified public accountants as
may be selected by NEPP V.
Accountant's Notice shall have the meaning set forth in
-------------------
Section 12.2.
Accrued Junior Monthly Guaranteed Payment shall have the
-----------------------------------------
meaning set forth in Section 5.1.1.
Accrued Monthly Guaranteed Payment shall have the meaning set
----------------------------------
forth in Section 5.1.1.
Accrued Senior Monthly Guaranteed Payment shall have the
-----------------------------------------
meaning set forth in Section 5.1.1.
Act means the California Revised Limited Partnership Act, as
---
set forth in Title 2, Chapter 3 of the California Corporations
code, as amended.
Adjusted Capital Account shall have the meaning set forth in
------------------------
Section 3.1(b).
Affiliate means a Person that directly or indirectly, through
---------
one or more intermediaries, controls, is controlled by, or is
under common control with the person in question and any officer,
director, trustee, employee, stockholder (10% or more) or partner
of any Person referred to in the preceding clause. For purposes
of this definition, the term "control" means the ownership of 10%
or more of the beneficial interest or the voting power of the
appropriate Entity. Notwithstanding the foregoing, a person shall
not be considered an affiliate of NEPP V or Developer solely by
reason of the fact that such person is engaged in one or more real
estate projects with NEPP V or Developer on a joint venture basis.
Book Value means, with respect to any asset, the asset's
----------
adjusted basis for federal income tax purposes, except as follows:
(i) the initial Book Value of any asset contributed (or
deemed contributed) to the Partnership shall be such asset's
gross fair market value at the time of such contribution;
(ii) the Book Value of all Partnership assets shall be
adjusted to equal their respective gross fair market values
at the times specified in Treasury Regulation Section 1.704-
1(b)(2)(iv)(f) if the Partnership so elects;
(iii) if the adjusted basis of any asset acquired by the
Partnership is determined by reference to the adjusted basis
of any other asset of the Partnership, the Book Value of the
acquired asset shall be determined by reference to the Book
Value of the other asset rather than its adjusted basis; and
(iv) if the Book Value of an asset has been determined
pursuant to clause (i), (ii) or (iii), such Book Value shall
thereafter be adjusted in the same manner as would the
asset's adjusted basis for federal income tax purposes except
that depreciation deductions shall be computed in accordance
with Section 7.1(a)(iv).
Capital Account shall have the meaning set forth in Section
---------------
3.1(a).
Capital Transaction shall have the meaning set forth in
-------------------
Section 5.1.
Code means the Internal Revenue Code of 1986, as amended from
time to time, and all published rules, rulings and regulations
thereunder at the time of reference thereto.
Developer or the Limited Partner shall have the meaning set
--------- ---------------
forth in the Recital.
Economic Risk of Loss means the risk as determined under
---------------------
Treasury Regulation Section 1.752-2 that a partner or person
related to a partner will suffer an economic loss as a result of
the failure of the Partnership to repay a liability.
Entity means any general partnership, limited partnership,
------
corporation, joint venture, trust, business trust, cooperative or
association.
Event of Bankruptcy means, as to the Partnership or a
-------------------
Partner, (1) filing a voluntary petition in bankruptcy or for
reorganization or for the adoption of an arrangement under the
Federal Bankruptcy Code (as now or in the future amended) or an
admission seeking the relief therein provided; (2) making a
general assignment for the benefit of its creditors; (3)
consenting to the appointment of a receiver for all or a substan-
tial part of its property; (4) in the case of the filing of an
involuntary petition in bankruptcy, an entry of an order for
relief; (5) the entry of a court order appointing a receiver or
trustee for all or a substantial part of its property without its
consent; or (6) the assumption of custody or sequestration by a
court of competent jurisdiction of all or substantially all of its
property.
-2-
Extraordinary Cash Flow shall have the meaning set forth in
-----------------------
Section 5.1.
Fair Value shall have the meaning set forth in Section 12.2.
----------
Fiscal Year shall have the meaning set forth in Section 8.7.
-----------
Gross Income shall have the meaning set forth in Section 7.1.
------------
Improvements means the buildings and other improvements
------------
constructed on the Land by the Partnership.
Incapacity means for a Partner or an Entity which is the
----------
general partner of a Partner, the dissolution, liquidation or ter-
mination (but not including a termination under Section
708(b)(1)(B) or Section 708(b)(2)(A) of the Code) of such Partner
or Entity.
Indemnitor shall have the meaning set forth in Section 2.8.
----------
Interest means the entire ownership interest (which may be
--------
segmented into and/or expressed as a percentage of various rights
and/or liabilities) of a Partner in the Partnership at any
particular time, including the right of such Partner to any and
all benefits to which a Partner may be entitled as provided in
this Agreement and in the Act, together with the obligations of
such Partner to comply with all the terms and provisions of this
Agreement and of the Act.
IRS means the Internal Revenue Service.
---
Junior Capital shall have the meaning set forth in
--------------
Section 3.2.
Junior Invested Capital shall have the meaning set forth in
-----------------------
Section 5.1.
Junior Monthly Guaranteed Payment shall have the meaning set
---------------------------------
forth in Section 5.1.1.
Land means the approximately 12.87-acre parcel of land
----
located in Fontana, County of San Bernardino, California, as more
particularly described in Exhibit A to this Agreement.
---------
Liquidating Trustee shall have the meaning set forth in
-------------------
Section 14.3.
Monthly Guaranteed Payment shall have the meaning set forth
--------------------------
in Section 5.1.
NEPP V or the General Partner shall have the meaning set
------ ---------------
forth in the Recital.
-3-
Net Profit and Net Loss shall have the meanings set forth in
---------- --------
Section 7.1.
Nonrecourse Deductions for a Fiscal Year (or other period)
----------------------
means deductions funded by Nonrecourse Liabilities (as determined
under Treasury Regulation Section 1.704-2(c)) for such year and
are generally equal to the excess, if any, of (i) the net increase
in Partnership Minimum Gain during such year over (ii) the sum of
(A) the aggregate distributions of proceeds from Nonrecourse
Liabilities attributable to increases in Partnership Minimum Gain
during such year and (B) increases in Partnership Minimum Gain
during such year attributable to conversions of liabilities into
Nonrecourse Liabilities.
Nonrecourse Liability means any liability of a partnership
---------------------
(or portion thereof) to the extent that no partner bears the
Economic Risk of Loss associated with the liability.
Operating Cash Flow shall have the meaning set forth in
-------------------
Section 5.1.
Operating Deficit shall have the meaning set forth in Section
-----------------
6.1.
Operating Revenues shall have the meaning set forth in
------------------
Section 5.1.
Original Agreement shall have the meaning set forth in
------------------
Recital.
Original Partnership shall have the meaning set forth in the
--------------------
Recital.
Partner means NEPP V and Developer, and such successors,
-------
assigns or additional partners as may be admitted to the
Partnership, from time to time, pursuant to the terms of this
Agreement.
Partner Nonrecourse Debt means any partnership liability to
------------------------
the extent that the liability is nonrecourse for purposes of
Treasury Regulation Section 1.1001-2 and a partner bears the
Economic Risk of Loss associated with the liability.
Partner Nonrecourse Debt Minimum Gain means the amount that
-------------------------------------
would result if Partnership Minimum Gain were computed with
respect to Partner Nonrecourse Debt rather than Nonrecourse
Liabilities.
Partner Nonrecourse Deductions means deductions funded from
------------------------------
Partner Nonrecourse Debt (as determined under Treasury Regulation
Section 1.704-2(i)(2)) computed for a Fiscal Year (or other
period) in a manner similar to that used in computing Nonrecourse
Deductions but with reference to Partner Nonrecourse Debt Minimum
Gain rather than Partnership Minimum Gain.
-4-
Partner's Share of Partner Nonrecourse Debt Minimum Gain
--------------------------------------------------------
means an amount of Partner Nonrecourse Debt Minimum Gain computed
for each Partner in a manner similar to that used in computing a
Partner's Share of Partnership Minimum Gain but with reference to
Partner Nonrecourse Debt with respect to which the Partner bears
the Economic Risk of Loss rather than to Nonrecourse Liabilities.
Partner's Share of Partnership Minimum Gain means an amount
-------------------------------------------
of Partnership Minimum Gain computed for each Partner under
Treasury Regulation Section 1.704-2(g) and generally equal to the
excess of (i) the sum of (A) the aggregate amount of Nonrecourse
Deductions previously allocated to the Partner, (B) the aggregate
amount of proceeds of Nonrecourse Liabilities attributable to
increases in Partnership Minimum Gain previously distributed to
the Partner and (C) increases in Partnership Minimum Gain during
such Fiscal Year attributable to conversions of liabilities into
Nonrecourse Liabilities over (ii) the Partner's aggregate
proportionate share of previous decreases in Partnership Minimum
Gain. A Partner's proportionate share of the decrease in
Partnership Minimum Gain for a Fiscal Year shall be based upon the
ratio that such Partner's Share of Minimum gain for the preceding
year bore to the aggregate amount of Partnership Minimum Gain for
such preceding Fiscal Year.
Partnership means the limited partnership governed by this
-----------
Agreement as said limited partnership may from time to time be
constituted and amended.
Partnership Agreement shall have the meaning set forth in the
---------------------
Recital.
Partnership Capital means an amount equal to the sum of all
-------------------
of the Partners' Capital Account balances determined immediately
prior to the allocation to the Partners pursuant to Sections
7.2(b)(ii)(y) or 7.2(c)(ii)(x) of any Net Profit or Net Loss from
a Capital Transaction increased by the aggregate amount of Net
Profit to be allocated to the Partners pursuant to Section
7.2(b)(ii)(y) as a result of such Capital Transaction or decreased
by the aggregate amount of Net Loss to be allocated to the
Partners pursuant to Section 7.2(c)(ii)(x) as a result of such
Capital Transaction.
Partnership Minimum Gain means the amount determined by
------------------------
computing with respect to each Nonrecourse Liability of the
Partnership, the amount of Gross Income, if any, that would be
realized by the Partnership if it disposed of the property
securing such liability in full satisfaction thereof, and by then
aggregating the amounts so computed. For purposes of determining
the amount of such Gross Income with respect to a liability, the
Book Value of the asset securing the liability shall be allocated
among all the liabilities that the asset secures in the manner set
forth in Treasury Regulation Section 1.704-2(d)(2).
-5-
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.
Project means the Land, together with the streets, sewers,
-------
curbs, gutters, utility service connections, and other land
development infrastructure and improvements constructed or to be
constructed on or related to the Land (including related off-site
improvements) pursuant to an Annual Business Plan.
Project Expenses shall have the meaning set forth in Section
----------------
5.1.
Property Manager shall have the meaning set forth in Section
----------------
2.10.
Proposed Fair Value shall have the meaning set forth in
-------------------
Section 12.2.
Purchase Price shall have the meaning set forth in Section
--------------
13.2.
Reserve for Replacements shall have the meaning set forth in
------------------------
Section 5.1.
Selling Partner shall have the meaning set forth in Section
---------------
11.2.
Senior Capital shall have the meaning set forth in
--------------
Section 3.2.
Senior Invested Capital shall have the meaning set forth in
-----------------------
Section 5.1.
Senior Monthly Guaranteed Payment shall have the meaning set
---------------------------------
forth in Section 5.1.1.
Tax Matters Partner shall have the meaning set forth in
-------------------
Section 8.6.
Third Party Loans shall have the meaning set forth in Section
-----------------
4.1.
Transfer shall have the meaning set forth in Section 11.1.
--------
Working Capital Fund shall have the meaning set forth in
--------------------
Section 5.1.
-6-