Amended and Restated Joint Venture Agreement of Rancho Road Associates
between New England Life Pension Properties IV, a Real Estate Limited
Partnership and Commerce Centre Partners dated January 1, 1995.
AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
OF
RANCHO ROAD ASSOCIATES
TABLE OF CONTENTS
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Page
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ARTICLE 1 - THE PARTNERSHIP
Section 1.1 Organization........................................ 1
Section 1.2 Name................................................ 1
Section 1.3 Place of Business; Registered Agent................. 2
Section 1.4 Purposes............................................ 2
Section 1.5 Purposes Limited.................................... 3
Section 1.6 No Payments of Individual Obligations............... 3
Section 1.7 Statutory Compliance................................ 3
Section 1.8 Title to Property................................... 4
Section 1.9 Duration............................................ 4
ARTICLE 2 - THE PARTNERS
Section 2.1 Identification...................................... 4
Section 2.2 Liability Several................................... 4
Section 2.3 Noncompetition...................................... 4
Section 2.4 Limits on Developer's Activities.................... 4
Section 2.5 Other Conflicts..................................... 4
Section 2.6 Reimbursement and Fees.............................. 5
Section 2.7 Indemnification of NELPP by the Partnership......... 5
Section 2.8 Indemnification by Partners......................... 5
Section 2.9 Limitation on Liability of Partners................. 6
Section 2.10 Restrictions on Developer........................... 7
Section 2.11 ERISA Protection.................................... 7
ARTICLE 3 - CAPITAL
Section 3.1 Capital Accounts and Adjusted Capital Accounts...... 7
Section 3.2 Capital Contributions............................... 9
Section 3.3 No Further Capital Contributions.................... 9
Section 3.4 Capital Contributions - General..................... 9
ARTICLE 4 - LOANS
Section 4.1 Loans............................................... 9
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ARTICLE 5 - CASH DISTRIBUTIONS
Section 5.1 Definitions......................................... 10
Section 5.1.1 Guaranteed Payments................................. 13
Section 5.2 Operating Cash Flow................................. 14
Section 5.3 Extraordinary Cash Flow ............................ 15
Section 5.4 Distributions in Liquidation........................ 15
Section 5.5 In-Kind Distribution................................ 15
ARTICLE 6 - OPERATING DEFICITS
Section 6.1 Deficit Contributions............................... 16
ARTICLE 7 - TAX ALLOCATIONS
Section 7.1 Definition of Net Profit and Net Loss............... 16
Section 7.2 Allocation of Net Profit, Gross Income and
Net Loss............................................ 17
Section 7.3 Tax Allocations; Code Section 704(c)................ 21
Section 7.4 Allocations Upon Transfer or Change of Interests.... 21
ARTICLE 8 - ACCOUNTING AND RECORDS
Section 8.1 Books and Records................................... 22
Section 8.2 Reports............................................. 22
Section 8.3 Annual Audit........................................ 23
Section 8.4 Tax Returns......................................... 23
Section 8.5 Depreciation........................................ 24
Section 8.6 Special Basis Adjustment............................ 24
Section 8.7 Tax Matters Partner................................. 24
Section 8.8 Fiscal Year......................................... 24
Section 8.9 Bank Accounts....................................... 24
ARTICLE 9 - MANAGEMENT AND OPERATIONS
Section 9.1 Management.......................................... 24
Section 9.2 Standard of Care.................................... 27
Section 9.3 Insurance........................................... 27
ARTICLE 10 - REPRESENTATIONS AND WARRANTIES
Section 10.1 Financial Advisory Fee.............................. 27
ARTICLE 11 - TRANSFER OF INTERESTS
Section 11.1 Restrictions on Transfer............................ 28
Section 11.2 Right of First Refusal.............................. 28
Section 11.3 Permitted Transfers................................. 29
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Section 11.4 General Transfer Provisions......................... 29
Section 11.5 Tax Allocations and Cash Distributions.............. 30
Section 11.6 Compliance.......................................... 30
Section 11.7 Waiver of Partition................................. 30
Section 11.8 Option to Acquire Interest of Developer............. 31
ARTICLE 12 - BUY/SELL
Section 12.1 Buy/Sell Events..................................... 31
Section 12.2 Rights Arising from a Buy/Sell Event................ 32
Section 12.3 Determination of Fair Market Value.................. 32
Section 12.4 Determination of Purchase Price..................... 32
Section 12.5 Electing Partner's Option........................... 32
Section 12.6 Closing of Purchase and Sale........................ 32
Section 12.7 Payment............................................. 33
Section 12.8 Liabilities......................................... 33
ARTICLE 13 - TERMINATION OF THE PARTNERSHIP
Section 13.1 Events of Dissolution............................... 33
Section 13.2 Effect of Dissolution............................... 34
Section 13.3 Sale of Assets by Liquidating Trustees.............. 34
ARTICLE 14 - MISCELLANEOUS
Section 14.1 Notices............................................. 35
Section 14.2 Successors and Assigns.............................. 36
Section 14.3 No Oral Modifications; Amendments................... 36
Section 14.4 Captions............................................ 36
Section 14.5 Terms............................................... 36
Section 14.6 Invalidity.......................................... 37
Section 14.7 Counterparts........................................ 37
Section 14.8 Further Assurances.................................. 37
Section 14.9 Complete Agreement.................................. 37
Section 14.10 Attorneys' Fees..................................... 37
Section 14.11 Governing Law....................................... 37
Section 14.12 No Third Party Beneficiary.......................... 37
Section 14.13 Exhibits and Glossary............................... 37
Section 14.14 Estoppels........................................... 38
Section 14.15 References to this Agreement........................ 38
Section 14.16 Reliance on Authority of Person Signing Agreement... 38
Section 14.17 Consents and Approvals.............................. 39
EXHIBIT A Legal Description of Land
A Glossary of Defined Terms used in this Agreement is attached.
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RANCHO ROAD ASSOCIATES
AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
THIS AMENDED AND RESTATED JOINT VENTURE AGREEMENT of Rancho Road
Associates, a Nevada general partnership (the "Partnership"), is dated as of
January 1, 1995 among Commerce Centre Partners, a California general partnership
("Developer"), and New England Pension Properties IV; a Real Estate Limited
Partnership, a Massachusetts limited partnership ("NELPP"). Developer and NELPP
are sometimes hereinafter referred to individually as a "Partner" and
collectively as the "Partners". Capitalized terms used herein shall have the
meanings ascribed to them in the Glossary attached hereto.
WHEREAS, the Partners formed the Partnership pursuant to a Joint Venture
Agreement dated as of December 29, 1986, which Joint Venture Agreement has been
amended from time to time since such date (as so amended, the "Original
Agreement"); and
WHEREAS, Developer desires to transfer to NELPP a portion of its interest
in the Partnership; and
WHEREAS, in connection with such transfer to NELPP, the Partners desire to
modify certain provisions of the Original Agreement.
NOW, THEREFORE, 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 Rancho Road Associates as a Nevada general
partnership in accordance with the Nevada Revised Uniform Partnership Act (the
"Act") and do hereby agree to amend and restate the Original Agreement to read
in its entirety as follows:
ARTICLE I
THE PARTNERSHIP
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Section 1.1 Organization. The Partnership was formed as a Nevada general
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partnership and is hereby continued as a Nevada general partnership pursuant to,
in accordance with, and for purposes of, the provisions of the Act.
Section 1.2 Name. The name of the Partnership shall be Rancho Road
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Associates and all business of the Partnership shall be conducted in such name.
Section 1.3 Place of Business; Registered Agent. The registered office of
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the Partnership in the State of Nevada shall be located in care of Nevada
Brokers, Inc., 3137 West Tompkins Avenue, Las Vegas, Nevada 89103. The principal
place of business of the Partnership shall be located c/o Copley Real Estate
Advisors, Inc., 399 Boylston Street, Boston, Massachusetts 02116, or at such
other place within or without the State of Nevada as may be selected by NELPP.
Section 1.4 Purposes. The sole purpose of the Partnership shall be to
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acquire, own and hold for production of income, improve, develop, operate,
manage, lease, sell, dispose and otherwise deal with real estate. In furtherance
of this purpose, but subject to all other provisions of this Agreement, the
Partnership is hereby authorized:
- to acquire by purchase, lease, contribution or otherwise, any real or
personal property which may be necessary, convenient or incidental to
the accomplishment of the purpose 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
purpose 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 any of the Land and/or the
Improvements, owned or operated by the Partnership 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 purpose of the
Partnership;
- to engage in any kind of activity and to perform and carry out
contracts of any kind necessary to, or in connection with, or
incidental to the accomplishment of the purpose of the Partnership, so
long as said activities and contracts may be lawfully carried on or
performed by a partnership under applicable laws;
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- to enter into, on behalf of the Partnership, easements, rights of way,
utility or other agreements necessary for the development of any of
the Land and/or the Improvements owned or operated by the Partnership
or any portion thereof or to permit access over, through, and across
such land and/or improvements 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 any of the land or the improvements
owned or operated by the Partnership 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 purpose.
Section 1.5 Purposes Limited. The Partnership shall be a partnership only
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for the purpose 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
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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
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be governed by, and this Agreement shall be construed in accordance with, the
applicable laws of the State of Nevada, including without limitation, the Act.
The Partners shall make all filings and disclosures required by, and shall
otherwise comply with, all such laws.
NELPP and the Developer shall also execute and file in the appropriate
records any fictitious name certificate required by law to be filed in
connection with the formation of the Partnership and shall execute and file such
other documents and instruments as may be necessary or appropriate with respect
to the continuation of, and conduct of business by, the Partnership.
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Section 1.8 Title to Property. All real and personal property owned by
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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 December
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29, 1986, and the Partnership shall dissolve on December 31, 1998 unless sooner
dissolved or terminated pursuant to statute or any provision of this Agreement.
ARTICLE 2
THE PARTNERS
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Section 2.1 Identification. Developer and NELPP shall be the Partners in
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the Partnership. No other person may become a Partner except for a transfer
specifically permitted under and effected in compliance with this Agreement.
Section 2.2 Liability Several. The obligations of the Partners under this
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Agreement to one another shall be in every case be several and shall not be, or
be construed to be, either joint or joint and several.
Section 2.3 Noncompetition. Intentionally Omitted.
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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. NELPP, Affiliates of NELPP and Affiliates of
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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 NELPP, Affiliates of NELPP 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 NELPP, Affiliates of Developer and Affiliates of
NELPP. 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 NELPP, Affiliates of Developer and Affiliates of NELPP
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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 NELPP,
Affiliates of Developer and Affiliates of NELPP. However, each Partner shall
give notice to the other Partners of its interest, or of the interest of any of
its Affiliates, in any other business which it proposes to enter into with the
Partnership, and such business or undertaking with the Partnership must be
approved by the non-interested Partner.
Section 2.6 Reimbursement and Fees. NELPP shall be entitled to be
----------------------
reimbursed for all out-of-pocket expenses incurred by it in connection with the
performance of its duties hereunder.
Section 2.7 Indemnification of NELPP by the Partnership. NELPP shall
-------------------------------------------
perform its duties under this Agreement with ordinary prudence and in a manner
characteristic of businessmen in similar circumstances. However, it shall not
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 (i) if the loss suffered
arises out of a mistake in judgment of NELPP, or (ii) if NELPP, 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 (iii) if the action or lack of action
giving rise to the loss was based on the reasonable advice of counsel that such
action or lack of action was not in violation of the express provisions of this
Agreement; provided, however, that 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 NELPP.
The Partnership, its receiver or liquidating trustee, shall indemnify, hold
harmless and pay all judgments and claims against NELPP arising from any actions
or decisions performed or made by NELPP in connection with the business of the
Partnership, provided such actions or decisions are within the scope of the
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purposes of the Partnership and NELPP complied with the immediately preceding
paragraph. This indemnification shall include, without limitation, payment of
reasonable 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
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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
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through or by agents, employees or other representatives) outside the scope of,
or in breach of the terms of this Agreement including, without limitation,
Section 1.5 and, in the case of NELPP, Article 9. 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. Notwithstanding the
-----------------------------------
provisions of Section 2.8 above, except for obligations to recontribute funds to
the Partnership under Section 5.2, 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 any loan or other indebtedness of the Partnership).
Except as otherwise provided above 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
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permitted hereunder, so long as no judgment obtained by such Partner shall be
enforced other than as provided above.
Section 2.10 Restrictions on Developer. Developer shall have no right,
-------------------------
power or authority to act for or bind the Partnership, and shall take no part in
the conduct or control of the Partnership business.
Section 2.11 ERISA Protection. The Partners acknowledge that NELPP's
----------------
Interest is subject to compliance with the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). As a result, the Partnership may be
prohibited from transacting business with "parties in interest" (as defined in
ERISA) of employee benefit plans participating in NELPP. Accordingly,
notwithstanding any other provisions of this Agreement, no Partner shall
knowingly permit the Partnership to transact any business with such "parties in
interest," or knowingly undertake any action or fail to take any action which
would cause a violation of the provisions of ERISA as such are applicable to
NELPP or the Partnership.
ARTICLE 3
CAPITAL
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Section 3.1 Capital Accounts and Adjusted Capital Accounts.
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(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
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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 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(g) and (h) 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) It is the intention of the Partners that the Capital Accounts of the
Partnership be maintained strictly in accordance with the Capital Account
maintenance requirements of Treasury Regulation Section 1.704-1(b). The
foregoing provisions and the other provisions of this Agreement relating to the
maintenance of
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Capital Accounts are intended to comply with Treasury Regulation Section 1.704-
1(b), and shall be interpreted and applied in a manner consistent with such
Regulations and any amendment or successor provision thereto. The Partners also
shall make any appropriate modifications if unanticipated events might otherwise
cause this Agreement not to comply with Treasury Regulation Section 1.704-1(b).
Section 3.2 Capital Contributions.
---------------------
(a) Through the date of this Agreement, NELPP has contributed $18,776,920
to the capital of the Partnership (which amount includes $2,936,919 of
Guaranteed Payments which have accrued through the date hereof).
(b) Through the date of this Agreement, Developer has contributed $360,000
in cash to the capital of the Partnership.
Section 3.3 No Further Capital Contributions. The Partners shall not be
--------------------------------
permitted or required to contribute additional capital or loan any funds to the
Partnership, except as expressly provided in this Article 3, Article 5 and
Article 6 (Operating Deficits). Specifically, but not by way of limitation and
except as required by applicable state law, 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. 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.
ARTICLE 4
LOANS
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Section 4.1 Loans. The Partnership has not obtained and does not intends
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in the future to obtain, loans from any third party.
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ARTICLE 5
CASH DISTRIBUTIONS
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5.1 Definitions.
-----------
Terms Definition
----- ----------
NELPP Invested Capital an amount equal to the aggregate amount of
capital NELPP has contributed to the capital
of the Partnership pursuant to Section 3.2
and Article 6 hereof decreased by the amount
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of proceeds distributed to NELPP pursuant to
clauses SECOND and THIRD of Section 5.2 and
clauses SECOND and THIRD of Section 5.3.
Developer Invested Capital an amount equal to the aggregate amount of
capital Developer has contributed to the
capital of the Partnership pursuant to
Section 3.2 hereof decreased by the amount of
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proceeds distributed to Developer pursuant to
clause SECOND of Section 5.2 and clause
SECOND of Section 5.3.
Project Expenses all expenditures, expenses and charges
relating to the ownership, operation,
construction, development, maintenance and
upkeep of the Project or any portion thereof
and the operations of the Partnership (other
than Monthly Guaranteed Payments and Accrued
Monthly Guaranteed Payments) including,
without limitation, the following:
- 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;
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- marketing, advertising and other
promotional expenses;
- utility costs;
- legal, accounting and other professional
fees and expenses, including without
limitation expenses incurred in preparing
the Partnership's tax returns;
- 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 Land;
- development and management fees;
- payments of principal, interest and other
amounts due or accrued under any loans
obtained by the Partnership; and
- any and all other costs and expenses
included in an Annual Business Plan.
Operating Revenues as to any particular Fiscal Year or portion
thereof, the total cash receipts of the
Partnership (including amounts released from
or expended from the Working Capital Fund and
the Reserve for Replacements) other than (i)
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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), and (iii) any unforfeited security
deposits of Project tenants.
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Operating Cash Flow as to any particular Fiscal Year or portion
thereof, Operating Revenues of the
Partnership less the sum of the following:
----
- Project Expenses paid from Operating
Revenues; and
- a provision for a reasonable working
capital reserve and a reserve for future
Project Expenses in an amount established
by NELPP in its sole but reasonable
discretion (the "Working Capital Fund"),
and a reasonable reserve for replacement
of Partnership assets subject to
depreciation ("Reserve for Replacements")
in an amount established by NELPP in its
sole but reasonable discretion.
Capital Transaction the sale, exchange, condemnation (or similar
eminent domain taking or disposition in lieu
thereof), destruction by casualty,
refinancing or disposition of all or any
portion of the Project.
Extraordinary Cash Flow 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;
- the amount of such proceeds used, set
aside or committed by the Partnership for
restoration and repair of the Project;
- a reserve in an amount established by
NELPP in its sole but reasonable
discretion, for (i) future Project
Expenses, (ii) future payments of Priority
Return Amounts, and (iii) future
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repayments of capital contributions, and
(iv) contingent, unmatured or unforeseen
liabilities or obligations of the
Partnership; 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 NELPP, within 10 days following the end of each
calendar month during the term of the Partnership ("Monthly Guaranteed
Payment"), in the amount of $121,125. Monthly Guaranteed Payments shall be paid
monthly in arrears commencing on the first day of the first full calendar month
following the date hereof and ending on the date on which NELPP's Invested
Capital shall have been reduced to zero. 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 from such sources when due, such payments may
accrue, and such accruals shall bear interest at the rate of 9 % per annum,
compounded monthly, until paid. The amount of such unpaid Monthly Guaranteed
Payments and the interest accruing thereon is hereinafter referred to
collectively as "Accrued Monthly Guaranteed Payments." Accrued Monthly
Guaranteed Payments shall be payable out of Operating Cash Flow, Extraordinary
Cash Flow and distributions in liquidation as provided in Sections 5.2, 5.3 and
5.4. As of the date hereof, Accrued Monthly Guaranteed Payments payable to NELPP
equals zero.
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 expense of the Partnership (unless the Partners agree that such
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expense should be amortized) and that their payment shall not directly reduce
the Capital Account of NELPP.
Section 5.2 Operating Cash Flow. Except as provided in Section 5.5 below,
-------------------
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 NELPP in payment of any Monthly Guaranteed Payments then due
-----
and then any Accrued Monthly Guaranteed Payments;
SECOND: 60% to NELPP and 40% to Developer, until the Developer Invested
------
Capital is reduced to zero; and
THIRD: the balance, 100% to NELPP.
-----
Distributions of Operating Cash Flow shall be made provisionally at such
reasonable intervals during the Fiscal Year as shall be determined by NELPP, 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.
Further, 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 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
-14-
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. For example, to the extent the Partners are
required to recontribute distributions made pursuant to clause SECOND of this
Section, the amount of the Developer Invested Capital represented by Developer's
share of such distributions shall be deemed not to have been made for purpose of
calculating the Developer Invested Capital.
Any amounts previously set aside out of Operating Revenues as reserves
shall be additions to Operating Cash Flow when and to the extent NELPP 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 5.5
-----------------------
below, Extraordinary Cash Flow shall be distributed by the Partnership in the
following order of priority:
FIRST: to NELPP in payment of any Monthly Guaranteed Payments then due
-----
and then any Accrued Monthly Guaranteed Payments;
SECOND: 60% to NELPP and 40% to Developer, until the Developer Invested
------
Capital is reduced to zero; and
THIRD: the balance, 100% to NELPP.
-----
Section 5.4 Distributions in Liquidation. Distributions in connection
----------------------------
with the liquidation and winding up of the Partnership (including distributions
of Operating Cash Flow, Extraordinary Cash Flow) shall be made (after payment of
(i) 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 and (ii) Monthly Guaranteed Payments and Accrued
Monthly Guaranteed Payments) 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. 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.
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ARTICLE 6
OPERATING DEFICITS
------------------
Section 6.1 Deficit Contributions. 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, then NELPP may
elect, but shall not be required, to contribute all or any portion of the amount
so required to the capital of the Partnership.
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:
(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;
-16-
(iv) in lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing 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 Transactions" 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.
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 follows:
-17-
(i) All Net Profit from Operations of the Partnership shall be
allocated to NELPP.
(ii) Net Profit from Capital Transactions shall:
(x) first be allocated to the Partners in proportion 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 clause FIRST
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 NELPP.
(ii) Net Loss from Capital Transactions shall:
(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 accordance with the provisions of Section 5.3
hereof, other than clause FIRST thereof; and
-18-
(y) thereafter, one hundred percent (100%) to NELPP.
(d) Liquidation. Subject to the provisions of Sections 7.2(e) through
-----------
(j), Gross Income, 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
(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:
-19-
(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 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 provisions 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
-20-
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 Sections 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 manner 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.
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.
-21-
ARTICLE 8
ACCOUNTING AND RECORDS
----------------------
Section 8.1 Books and Records. NELPP shall cause Nevada Brokers, Inc. (an
-----------------
Affiliate of Developer), whom the Partnership has engaged to provide property
management services pursuant to a Property Management Agreement dated as of
January 1, 1994 (the "Property Management Agreement"), or any other party whom
the Partnership has engaged to provide property management services to the
Project (the "Property Manager"), to keep 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
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 NELPP's methods and procedures of reporting investment
transactions.
Section 8.2 Reports. NELPP, at the expense of the Partnership, shall
-------
cause the Property Manager to prepare and distribute to NELPP the following
reports (within 25 days following the last day of each month or calendar
quarter, as the case may be):
- Monthly: an income statement
-------
- Quarterly: an income statement, balance sheet and statements of the
---------
Partnership's equity.
The above shall be prepared on the accrual basis and shall cover the
immediately preceding month or quarter, as the case
-22-
may be, plus the current Fiscal Year through the end of such preceding
month or quarter, as the case may be, on both an actual and year-to-date
budgeted basis.
- Other: such other financial statements, budgets, plans and schedules
-----
as are from time to time reasonably requested by NELPP.
Section 8.3 Annual Audit. Each Fiscal Year, a general accounting and
------------
audit shall be made by the Accountants at the expense of the Partnership. The
audit shall be conducted 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 accounts and audits.
Within 60 days after the end of each Fiscal Year, NELPP shall cause the
Property Manager to furnish to each Partner audited financial statements,
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. The timing of the annual audit for each Fiscal
Year shall be such that the Accountants are in a position to render a conclusion
as to the probable fairness of presentation of the financial statements of the
Partnership for such Fiscal Year (which shall have been furnished pursuant to
the above provisions of this Section) by the 45th day following the close of the
Fiscal Year. Any exceptions to the audited 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 8.4 Tax Returns. NELPP 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. NELPP shall cause the Accountants to
furnish to each Partner 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.
-23-
Section 8.5 Depreciation. The Partnership shall depreciate the
------------
Improvements on a straight-line basis over the shortest permissible recovery
period.
Section 8.6 Special Basis Adjustment. NELPP shall cause the Partnership,
------------------------
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.
Section 8.7 Tax Matters Partner. NELPP 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 NELPP shall be entitled to require that
any IRS examinations or audits shall take place at the offices of Developer.
NELPP may engage in judicial or administrative proceedings. Except as otherwise
provided above, and unless and until the parties agree otherwise in writing,
NELPP shall be the "Tax Matters Partner" of the Partnership pursuant to the
Code.
Section 8.8 Fiscal Year. The fiscal year of the Partnership shall be the
-----------
calendar year, unless otherwise approved by NELPP. As used in this Agreement, a
fiscal year shall include any partial fiscal year at the beginning and end of
the Partnership term.
Section 8.9 Bank Accounts. NELPP shall have fiduciary responsibility for
-------------
the safekeeping and use of all funds and assets of the Partnership. The funds of
the Partnership shall not be commingled with the funds of any other person and
NELPP 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 selected by NELPP 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 NELPP may determine.
ARTICLE 9
MANAGEMENT AND OPERATIONS
-------------------------
Section 9.1 Management. (a) Except as provided in Section 9.1(b) below,
----------
NELPP acting alone, and without the consent or approval of Developer, shall have
the sole authority to manage the business and operations of the Partnership.
NELPP 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
-24-
provided in this Agreement; provided, however, that all of the Partners agree
and acknowledge that (a) NELPP 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
Property Management Agreement, and NELPP may rely on the 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 under the Management Agreement and (c) NELPP
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, and
shall have no liability to the Partnership or the Partners with respect to any
matter so delegated.
Without in any manner limiting the foregoing, but subject to the provisions
of Section 9.1(b) below, NELPP shall be authorized, acting in the name and on
behalf of the Partnership, or in its own name and on its own behalf, as
appropriate, to take any of the following actions, and Developer shall have no
right to approve or disapprove such actions:
- 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;
- obtaining, increasing, modifying, consolidating or extending any loan
or other obligation, whether secured or unsecured, affecting the
Project or the Partnership;
- consenting to any rezoning or subdivision of the Land or any other
material change in the legal status thereof;
- selling, conveying or refinancing all or any portion of the Project;
- releasing, compromising, assigning or transferring any material
claims, rights or benefits of the Partnership;
- confessing a judgment against the Partnership or submitting a
Partnership claim to arbitration;
- filing on behalf of the Partnership any Federal or state income tax or
information returns, or changing the elections or choices of methods
of reporting income or loss for Federal or state income tax purposes
provided for in Article 8;
-25-
- spending money or entering into any contract or agreement of any
nature whatsoever with respect to the Partnership or the Project (or
any portion thereof);
- entering into any lease with respect to all or a portion of the space
in the Project;
- selecting attorneys or Accountants for the Partnership;
- granting easements or other property rights by documents that are
frequently recorded, except easements for utilities serving the
Project exclusively;
- entering into, amending, terminating, modifying, or giving any
approval under any management, construction or other contract to which
the Partnership is a party;
- changing or amending the plans or specifications 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.
(b) Notwithstanding the provisions of Section 9.1(a) or any other
provision of this Agreement, NELPP shall not, without the prior approval of
Developer:
(1) Obtain, increase, modify or consolidate any loan or other similar
obligation, whether secured or unsecured, affecting the Project or the
Partnership (a "Loan"), if, as a result of such action the lender shall
have personal recourse against the Developer in respect of the Loan,
provided, however, that the provisions of this Section 9.1(b)(1) shall not
prohibit the Partnership from obtaining (and NELPP may cause the
Partnership to obtain) without Developer's prior approval, a Loan that is
nonrecourse to the Partnership and the Partners, except for customary
exceptions, such as, by way of example but not limitation, for fraud, for
willful misconduct, and for environmental conditions arising at the
Project; or
(2) Enter into any partnership or joint venture agreement, if, as a
result of such action the partner or joint venturer of the Partnership
shall have personal recourse against the Developer in respect of such
agreement, provided, however, that the provisions of this Section 9.1(b)(2)
shall not prohibit the Partnership from entering into such an agreement
(and NELPP may cause the Partnership to enter into such an agreement)
without Developer's prior
-26-
approval, if such agreement is nonrecourse to the Developer, except for
customary exceptions, such as, by way of example but not limitation, for
fraud or for willful misconduct.
(c) With respect to all of its obligations, powers, and responsibilities
under this Agreement, NELPP is authorized, in the name and on behalf of the
Partnership, to execute, deliver, and perform the terms, covenants and
obligations of, such notes 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.
Section 9.2 Standard of Care. NELPP 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.
Section 9.3 Insurance. NELPP 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 loan obtained by the Partnership, 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 NELPP reasonably determines to be appropriate for the Project.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 10.1 Financial Advisory Fee. The Partnership paid to Charterhouse
----------------------
Investment Company in the amount of $124,000 for its services in connection with
advising the Partnership with regard to various financial matters involving the
Partnership. Except for Charterhouse Investment Company, the parties each
represent to the other that they have not retained or been approached by any
broker, finder, agent or the like in connection with the organization of the
Partnership or the negotiations relating thereto. 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
the organization of the Partnership 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.
-27-
ARTICLE 11
TRANSFER OF INTERESTS
---------------------
Section 11.1 Restrictions on Transfer. Except as expressly provided for in
------------------------
this Agreement, no Partner may, without the consent of the other Partner, 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 Right of First Refusal. If a Partner consents to a proposed
----------------------
transfer or the prohibitions contained in Section 11.1 are determined by a court
of competent jurisdiction to be unenforceable, then a Partner (the "Selling
Partner") desiring to transfer its Interest shall nevertheless notify ("Offering
Notice") the other of its intention to do so. The Offering Notice shall specify
the nature of the transfer, the consideration to be received therefor, the
identity of the proposed purchaser (or lender, as the case may be), and the
terms upon which it intends to undertake such transfer. The non-Selling Partner
shall have the right to elect to purchase from the Selling Partner all (but not
less than all) of the Interest referred to in the Offering Notice at the same
price and on the same terms as specified in the Offering Notice for a period of
30 days after the giving of the Offering Notice (or make the loan, if the same
involves an encumbrance, hypothecation or mortgage, upon the same terms on which
said loan was to be made therefor) by delivering in writing to the Selling
Partner an offer to purchase (or loan) that portion of the Interest of the
Selling Partner covered by the Offering Notice. Within 45 days thereafter, the
purchase by the non-Selling Partner of said Interest shall be consummated on the
terms and conditions set forth in the Offering Notice of the Selling Partner (or
if the same involves a mortgage, encumbrance or other hypothecation, the loan
shall be consummated upon the terms and conditions of the loan set forth in the
Offering Notice).
If within the 30-day period during which the non-Selling Partner has the
right to elect to purchase the Selling Partner's Interest (or to elect to make
the loan specified therein), it does not make such election, then the Selling
Partner, within 60 days after the expiration of said 30-day period, or within
the time scheduled for closing by the purchasing person, firm or corporation,
whichever is later, may undertake and complete the transfer to any Person the
identity of which was disclosed in the Offering Notice. The transfer shall not
be undertaken at a lower price or upon more favorable terms than specified in
the Offering
-28-
Notice. If the Selling Partner does not then consummate the original proposed
transfer within 60 days after the date of the Offering Notice, or within the
time scheduled for closing by the purchasing person, firm or corporation,
whichever is later, then all restrictions of this Section 11.2 shall apply as
though no Offering Notice had been given.
Section 11.3 Permitted Transfers.
-------------------
(a) NELPP, without the consent of Developer, or being subject to Section
11.2, may:
- transfer all of its Interest to its successors by merger or
consolidation or to an Affiliate of NELPP, or to any entity managed by
Copley Real Estate Advisors, Inc. or any Affiliate of Copley Real
Estate Advisors, Inc.;
- transfer to any Person any portion of its allocable interest in the
items of loss, deduction and credit of the Partnership (on the
condition that NELPP never shall have less than 1% interest in such
items); or
- assign its rights to all cash distributions and other issues, profits,
proceeds and avails payable to it under this Agreement in connection
with any loans or financing arrangements obtained by it from time to
time.
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 transferor Partner, 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 otherwise in accordance with the other terms of this
Agreement.
In the event that NELPP proposes to transfer to any third party (other than
a permitted transferee, as described above), all or substantially all of its
Interest, it shall use commercially reasonable efforts to cause such permitted
transferee to offer to acquire at the same time and on the same terms, a
proportionate share of the Interest of the Developer in the Partnership.
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
-29-
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
(including NELPP's obligation to make capital contributions pursuant to Section
3.2) occurring on or prior to the date of such transfer.
Section 11.5 Tax Allocations and Cash Distributions. If an Interest is
--------------------------------------
transferred, the Gross Income, 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 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 appraisal of the
Partnership or of any of its assets or properties or cause the sale of any
Partnership property, and
-30-
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 his Interest, or with respect to any assets or properties of the
Partnership, except as expressly provided in this Agreement.
Section 11.8 Option to Acquire Interest of Developer. At any time after
---------------------------------------
the date on which the Developer Invested Capital has been reduced to zero, NELPP
(or its designee) shall have the option to purchase, for $1.00, the entire
right, title and interest of Developer in the Partnership. Such option shall be
exercisable at any time by NELPP, effective upon written notice of exercise to
the Developer. Promptly following the exercise of such option, Developer and
NELPP shall execute and deliver an amendment to this Agreement, an assignment
and assumption agreement, statements of partnership, and/or such other
agreements, instruments, documents, certificates and filings shall may be
necessary, appropriate or convenient in order to reflect the transfer of
Developer's interest to NELPP.
Developer hereby constitutes and appoints NELPP, and each general partner
of NELPP, Developer's agent and attorney-in-fact for the purpose of (i)
executing, delivering and filing such amendments, assignments, statements of
partnership, agreements, certificates and other instruments as said
attorney-in-fact shall deem necessary or appropriate in order to transfer the
interest of Developer in the Partnership to NELPP following exercise by NELPP of
the option contained in this Section 11.8. The power of attorney contained in
this Section 11.8 is coupled with an interest and, therefore, is irrevocable and
shall survive the death, dissolution, bankruptcy or incapacity of Developer.
Any transfer effectuated pursuant to this Section 11.8 shall not be subject
to the provisions of Sections 11.1 and 11.2.
ARTICLE 12
BUY/SELL
--------
Section 12.1 Buy/Sell Events. For purposes of this Article 12, each of
---------------
the following shall constitute a "Buy/Sell Event":
- if an Event of Bankruptcy with respect to a Partner occurs which is
not discharged or stayed within a period of 90 days of its occurrence;
- the Incapacity of a Partner;
-31-
Section 12.2 Rights Arising from a Buy/Sell Event. When a Buy/Sell Event
------------------------------------
occurs with respect to a Partner (the "Defaulting Partner"), the other Partner
(the "Electing Partner") shall have the right, but not the obligation, to
implement the Buy/Sell procedures set forth in this Article 12, by giving
written notice within 120 days of the Buy/Sell Event ("Election Notice") thereof
to the Defaulting Partner.
Section 12.3 Determination of Fair Market Value. Upon the giving of an
----------------------------------
Election Notice, NELPP, acting in good faith, shall determine the "Fair Market
Value" of the assets of the Partnership based on the most recent third party
appraisal of the Project obtained by NELPP in connection with its year-end
valuation of its assets.
Section 12.4 Determination of Purchase Price. Within 15 days after the
-------------------------------
determination of the Fair Market 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 THIRD
of Section 5.3 if the assets of the Partnership had been sold for the Fair
Market Value as of the date of the Buy/Sell Event and shall give each Partner
written notice ("Accountant's Notice") thereof. The determination by the
Accountant of such amounts shall be conclusive.
Section 12.5 Electing Partner's Option. If the Electing Partner is NELPP,
-------------------------
for a period of 30 days after the Electing Partner receives the Accountant's
Notice, the Electing Partner shall have the option to purchase, exercisable by
notice to Developer, for cash, the Interest of Developer for 100% of the
aggregate amount which would be distributable to Developer under clause SECOND
of Section 5.3 if the assets of the Partnership had been sold for the Fair
Market Value as of the date of the Buy/Sell Event (the "Purchase Price"). If the
Electing Partner is Developer, the Electing Partner shall have the option to
purchase, exercisable by notice to NELPP, for cash, the Interest of NELPP for
100% of the aggregate amount which would be distributable to NELPP under clauses
FIRST through THIRD of Section 5.3 if the assets of the Partnership had been
sold for the their fair market value on the date of the Buy/Sell Event (the
"Purchase Price").
If the foregoing options are not so exercised, then they shall terminate
and be of no further force or effect.
Section 12.6 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 30 days after the Electing Partner exercises its option under
Section 12.5. The Defaulting Partner (the seller) shall transfer to the Electing
Partner (the buyer or its designee) the entire Interest of the Defaulting
-32-
Partner in the Partnership free and clear of all liens, security interests and
competing claims, and shall deliver to the Electing Partner or its designee such
instruments of transfer, releases and such evidence of due authorization,
execution and delivery and of the absence of any liens, security interests or
competing claims as the Electing Partner shall reasonably request.
Section 12.7 Payment. At the closing, the Electing Partner 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 the Defaulting Partner in the
amount of the Purchase Price determined pursuant to clause 12.5.
Section 12.8 Liabilities. The purchase of the Interest of a Defaulting
-----------
Partner pursuant to this Article 12 shall release the Defaulting Partner (and
the purchasing Partner shall indemnify and hold harmless the Defaulting Partner)
from all liabilities and claimed liabilities of the Partnership except for
liabilities not taken into account in the determination of Purchase Price and
tort liabilities not covered by insurance for events occurring prior to the
Defaulting Partners' 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;
- on a date determined by NELPP;
- the sale or other disposition (including, without limitation, taking
by eminent domain) of all or substantially 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 last day of
the calendar year during which the Partnership shall receive the
balance of such deferred payment;
- the occurrence of an Event of Bankruptcy of the which is not
discharged or stayed within 90 days of occurrence;
- the issuance of a decree of dissolution by a court of competent
jurisdiction; and
-33-
- upon the occurrence of an event which causes the dissolution of a
general partnership as provided in the Act, unless the Partnership is
continued pursuant to a right to do so contained herein or pursuant to
the Act.
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 liquidating 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, NELPP (or its designee) shall, as "Liquidating Trustee",
proceed diligently to wind up the affairs of the Partnership. Another person may
be selected by NELPP to succeed the original Liquidating Trustee, or 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.
All of the assets of the Partnership, if any, other than cash, shall be
offered (either as an entirety or on an asset-by-asset basis) promptly for sale,
upon such terms as the Liquidating Trustee shall determine.
The Partners and their Affiliates shall have the right to negotiate or bid
for any or all of the assets being offered for sale from and after such date as
is 90 days after the Partnership dissolves, but not before such date.
Subject only to the Partners' rights to match offers below, the decision to
accept or reject an offer to purchase assets of the Partnership (a "Purchase
Offer") shall be made solely by the Liquidating Trustee. Within five days of
receipt of any Purchase Offer by the Liquidating Trustee, the Liquidating
Trustee shall notify each Partner of the terms of such Purchase Offer.
Each Partner shall have the right to match each Purchase Offer and upon so
matching, shall have the right and duty to purchase in accordance with all of
the terms of the Purchase Offer, provided, however;
-34-
- the right to match shall be exercised and shall be effective only if
exercised by written notice of exercise delivered by the exercisor to
the Liquidating Trustee and the other Partner within 30 days of the
date of the notice of the Purchase Offer provided by the Liquidating
Trustee to the Partners (the "Notice Date"); and
- if both Partners make timely exercise of the right to match neither
exercise shall be effective but instead, on the thirtieth day after
the Notice Date, each Partner shall by sealed bid deliver to the other
Partner (the bids to be simultaneously exchanged) an offer to purchase
the asset or assets to which the Purchase Offer relates. Any such
offer shall be on terms substantially similar to those contained in
the Purchase Offer, except for the purchase price specified therein.
On such date, the sealed bids shall be opened and the Partner who
shall have made the higher offer shall have the right to purchase the
assets in accordance with such offer.
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 5.5.
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 federal express (or other reputable overnight courier), or may be
transmitted by
-35-
telegraph or facsimile telecopy, and addressed in the case of NELPP to:
c/o Copley Real Estate Advisors, Inc.
399 Boylston Street
Boston, Massachusetts 02116
Attention: General Counsel
Re: Rancho Road Associates
Telecopy Number: (617) 578-1728
and in the case of Developer to:
B.H. Miller Companies
One Brookhollow Drive
Santa Ana, California 92705
Attention: Mr. Bradford H. Miller
Telecopy Number: (714) 641-3877
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. Notice
sent by federal express or facsimile telecopy shall be deemed given one business
day after sent. 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.
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, Act or
other statutes or laws shall include all amendments, modifications or
replacements of the specific sections and provisions concerned.
-36-
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 Nevada.
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.
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.
-37-
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 distribution 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 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.
-38-
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 LIFE PENSION PROPERTIES IV; A
REAL ESTATE LIMITED PARTNERSHIP, a
Massachusetts limited partnership
By: FOURTH COPLEY CORP., a Massachusetts
corporation, its general partner
By____________________________
Authorized Officer
COMMERCE CENTRE PARTNERS, a California
general partnership
By_________________________________
Bradford H. Miller, General Partner
-39-
RANCHO ROAD ASSOCIATES
EXHIBIT A
LEGAL DESCRIPTION OF LAND
-------------------------
GLOSSARY OF DEFINED TERMS
RANCHO ROAD ASSOCIATES
Capitalized terms used in the General Partnership Agreement of the
Partnership shall have the meanings ascribed to them below:
Accountants means Deloitte & Touche or such other firm of nationally-
-----------
recognized independent certified public accountants as may be selected by NELPP.
Accountant's Notice shall have the meaning set forth in Section 12.5.
-------------------
Accrued Monthly Guaranteed Payment shall have the meaning set forth in
----------------------------------
Section 5.1.1.
Act means the Uniform Partnership Act as from time to time in force in the
---
State of Nevada.
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
NELPP or Developer solely by reason of the fact that such person is engaged in
one or more real estate projects with NELPP 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).
Buy/Sell Event shall have the meaning set forth in Section 12.1.
--------------
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.
Defaulting Partner shall have the meaning set forth in Section 12.2.
------------------
Developer shall have the meaning set forth in the Recital.
---------
Developer Invested Capital shall have the meaning set forth in Section 5.1.
--------------------------
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.
Electing Partner shall have the meaning set forth in Section 12.2.
----------------
Election Notice shall have the meaning set forth in Section 12.2.
---------------
Entity means any general partnership, limited partnership, corporation,
------
joint venture, trust, business trust, cooperative or association.
ERISA shall have the meaning set forth in Section 2.11.
-----
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 substantial part of its property; (4) in the case of
the filing of an involuntary petition in bankruptcy, an entry of an order for
-2-
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.
Extraordinary Cash Flow shall have the meaning set forth in Section 5.1.
-----------------------
Fair Market Value shall have the meaning set forth in Section 12.3.
-----------------
Fiscal Year shall have the meaning set forth in Section 8.8.
-----------
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 termination (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.
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Interest means the entire ownership interest (which may be segmented into
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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.
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Land means the approximately 14.08-acre parcel of land zoned for commercial
----
use which is located in the County of Clark, State of Nevada, as more
particularly described in Exhibit A to this Agreement.
Liquidating Trustee shall have the meaning set forth in Section 13.3.
-------------------
Monthly Guaranteed Payment shall have the meaning set forth in Section
--------------------------
5.1.1.
NELPP shall have the meaning set forth in the Recital.
-----
NELPP Invested Capital shall have the meaning set forth in Section 5.1.
----------------------
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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.
Notice Date shall have the meaning set forth in Section 13.3.
-----------
Offering Notice shall have the meaning set forth in Section 11.2.
---------------
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 the Recital.
------------------
Partner means NELPP and Developer, and such successors, assigns or
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additional joint venturers 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
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Deductions but with reference to Partner Nonrecourse Debt Minimum Gain rather
than Partnership Minimum Gain.
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 general partnership governed by this Agreement as
-----------
said general 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 Interest shall have the meaning set forth in Section 11.3.
--------------------
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
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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).
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 Management Agreement shall have the meaning set forth in Section
-----------------------------
8.1.
Property Manager shall have the meaning set forth in Section 8.1.
----------------
Purchase Offer shall have the meaning set forth in Section 13.3.
--------------
Purchase Price shall have the meaning set forth in Section 12.6.
--------------
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.
---------------
Tax Matters Partner shall have the meaning set forth in Section 8.7.
-------------------
Transfer shall have the meaning set forth in Section 11.1.
--------
Working Capital Fund shall have the meaning set forth in Section 5.1.
--------------------
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