Fill and Sign the Real Estate Partnership Agreement PDF Form

- 1 - [NAME OF PARTNERSHIP] AGREEMENT OF PARTNERSHIP Dated as of , THIS AGREEMENT OF PARTNERSHIP of is entered into and shall be effect ive as of the _________________________________________ day of ________, _____, by and among _________________________________________, a _________________________________, as managing partner (the "Managing Partner"), and ______________________________________, ______________________________________ and ___________________________________, as partners (the Managing Partner and the other partners being hereinafter collectively referred to as the "Partners"), pursuant to the provisions of the Act (this and other capitalize d terms used and not otherwise defined herein shall have the respective meanings set forth in Sec tion 1.10), on the following terms and conditions: ARTICLE 1 THE PARTNERSHIP 1.1 Organization. The Partnership is hereby organized as a ______________________________________ general partnership effective as of the date hereof pursuant to, in accordance with and for purposes of the provisions of the Act.1.2 Partnership Name. The name of the Partnership shall be ______________________________________ and all business of the Partnership shall be conducted in such name. The Partnership shall hold all of its property in the name of the Partnership and not in the name of any Partner. 1.3 Purpose. The purpose of the Partnership is to acquire, develop, construct, improve, finance, mortgage, hold, lease, own, operate, refinance and sell or otherwise dispose of the Property and to engage in actions necessary, convenient or incidental to all of the foregoing. The Partnership shall not engage in any other activity or business and no Partner shall have any a uthority to hold himself out as a general agent of another Partner in any other business or activity. - 2 - 1.4 Principal Place of Business. The principal place of business of the Partners hip shall be located at or at such other place within or without the State of ____________ as may be determined by the Managing Partner. 1.5 Term. The term of the Partnership shall commence on the date hereof and shal l continue until the winding up and liquidation of the Partnership and its business is completed following a Liquidating Event. 1.6 No Payments of Individual Obligations. The Partners shall use the Partnership' s credit and assets solely for the benefit of the Partnership. No asset of the Partnership shall be transferred or encumbered for or in payment of any individual obligation of a Partner. 1.7 Statutory Compliance. The Partnership shall exist under and be governed by, and this Agreement shall be construed in accordance with, the applicable laws of the State of ____________. The Partners shall make all filings and disclosures required by, and shall ot herwise comply with, all such laws. The Partners shall execute and file in the appropriate records any assumed or fictitious name certificates and other documents and instruments as may be necessary or appropriate with respect to the formation of, and conduct of business by, the Partnership. 1.8 Title to Property. All real and personal property owned by the Partnership shall be owned by the Partnership as an entity and, insofar as permitted by applicable law, no Partner shall have any ownership interest in such property in such Partner's individual name or right, and each Partner's interest in the Partnership shall be personal property for all purposes. 1.9 Independent Activities. The Partners hereby acknowledge and agree that each Partner may engage in any activity whatsoever (as an owner, employee, consultant or otherwise), whether or not such activity competes with or is enhanced by the Partnership's business and affairs, and no Partner shall be liable or accountable to the Partnership or any other Part ner for any income, compensation or profit that such Partner may derive from any such activity. Further, no Pa rtner shall be liable or accountable to the Partnership or any other Partner for failure to disclose or make available to the Partnership any business opportunity that such Partner becomes a ware of in such Partner's capacity as a Partner or otherwise. 1.10 Definitions. Capitalized terms used in this Agreement and not otherwise de fined herein shall have the meanings set forth below or in the Section to this Agreement referred to below: (a) "Act" means the _______________________________ Uniform Partnership Law, as amended from time to time and including any successor statute of similar import. (b) "Adverse Act" means, with respect to any Partner, any of the following: (i) a failure of such Partner to make any Capital Contribution required pursuant to any provision of this Agreement; (ii) a Transfer of all or any portion of such Partner's interest in the Partnership except as expressly permitted or required by this Agreement; - 3 - (iii) any termination or dissolution of a corporation or partnership which is a Partner, unless substantially all assets of the terminated or dissolved c orporation or partnership are transferred to an Affiliate; (iv) a determination that such Partner has taken an action, or has failed to take an action within the scope of such Partner's duties hereunder, that result s, or can reasonably be expected to result in, such Partner becoming liable to indemnify the Partnership for a material sum pursuant to any provision of this Agreement or that w ould justify a decree of dissolution of the Partnership under the Act. The determinati on whether a Partner has so acted or failed to act shall be made conclusively by vote of the Partners holding a majority of the Partnership Interests (determined without regard to the P artnership Interest of such Partner); or (v) the occurrence of an Event of Bankruptcy with respect to such Partner. An "Adverse Partner" is any Partner with respect to whom an Adverse Act has occurred. (c) "Affiliate" means, with respect to any Person, (i) any Person directly or indirectly controlling, controlled by or under common control with such Person, (ii) any Person owning or controlling ten percent (10%) or more of the outstanding voting interests of such Person, (iii) any officer, director or general partner of such Person, or (iv) any Person who is an office r, director, general partner, trustee or holder of ten percent (10%) or more of the voting interests of any Person described in clauses (i) through (iii) of this sentence. (d) "Agreement" means this Agreement of Partnership, including Exhibits through attached hereto, as it and they may be amended, restated or supplemented from time to time. Words such as "herein," "hereinafter," "hereof," "hereto" and "hereunder" refer to this Agreement as a whole, including Exhibits through attached hereto, unless the conte xt otherwise requires. (e) "Annual Business Plan" means any plan approved by the Partners pursuant to Section 6.2 hereof.(f) "Capital Account" means, with respect to any Partner, the Capital Account maintained for such Partner in accordance with the following provisions: (i) To each Partner's Capital Account there shall be credited such Partner' s Capital Contributions, such Partner's distributive share of Profits, and any items i n the nature of income or gain which are specially allocated pursuant to Section 3.4 hereof, and t he amount of any Partnership liabilities assumed by such Partner or which are sec ured by the Property or any other Partnership assets distributed to such Partner. (ii) To each Partner's Capital Account there shall be debited the amount of cash and the Gross Asset Value of the Property and any other Partnership asset s distributed to such Partner pursuant to any provision of this Agreement, such Partner's distributive share of Losses, and any items in the nature of expenses or losses which are speci ally allocated pursuant to Section 3.4 hereof, and the amount of any liabilities of such Partner assum ed by - 4 - the Partnership or which are secured by any property contributed by such Partner to the Partnership. (iii) In the event any interest in the Partnership is transferred in accordance with the terms of this Agreement, the transferee shall succeed to the C apital Account of the transferor to the extent it relates to the transferred interest. (iv) In determining the amount of any liability for purposes of paragraphs (i) and (ii) of this definition, there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and Regulations. The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Sect ion 1.704-1(b) and shall be interpreted and applied in a manner consistent with such Regulations. In the event the Managing Partner shall determine that it is prudent to modify the manner in w hich the Capital Accounts, or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities which are secured by contributed or distributed property or which are a ssumed by the Partnership or the Partners), are computed in order to comply with such Regulations, the Managing Partner may make such modification, provided that it is not likely to have a m aterial effect on the amounts distributable to any Partner pursuant to Section 11 hereof upon the dissolution of t he Partnership. The Managing Partner also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Partners and the amount of Partnership capital reflected on the Partnership's balance sheet, as comput ed for book purposes in accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b). (g) "Capital Contributions" means, with respect to any Partner, the amount of money and the initial Gross Asset Value of any property (other than money) contributed to the Partnership with respect to the Partnership Interest held by such Partner pursuant to the terms of this Agreement. The principal amount of a promissory note which is not readily traded on an established securities market and which is contributed to the Partnership by the maker of the note shall not be included in the Capital Contribution of any Partner until the Partnershi p makes a taxable disposition of the note or until (and to the extent) principal payments are made on the note, all in accordance with Regulations Section 1.704-1(b)(2)(iv)(d)(2). (h) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any Federal laws of similar import, and to the extent applicable , any Regulations promulgated thereunder. (i) "Depreciation" means, for each fiscal year or other period, an amount equal to the depreciation, amortization or other cost recovery deduction allowable wit h respect to an asset for such year or other period, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other pe riod, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis; provided, however, that if the federal - 5 - income tax depreciation, amortization or other cost recovery deduction for such year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Managing Partner. (j) "Event of Bankruptcy" means, with respect to any Partner or the Partnership, any of the following: (i) filing a voluntary petition in bankruptcy or for reorganization or for the adoption of an arrangement under the Bankruptcy Code (as now or in the future amended) or an admission seeking the relief therein provided; (ii) making a general assignment for the benefit of creditors; (iii) consenting to the appointment of a receiver for all or a substantial part of such Person's property; (iv) in the case of the filing of an involuntary petition in bankruptcy, an entry of an order for relief; (v) the entry of a court order appointing a receiver or trustee for all or a substantial part of such Person's property without its consent; or (vi) the assumption of custody or sequestration by a court of competent jurisdiction of all or substantially all of such Person's property. (k) "Gross Asset Value" means, with respect to any asset, the asset 's adjusted basis for federal income tax purposes, except as follows: (i) The initial Gross Asset Value of any asset contributed by a Partner t o the Partnership shall be the gross fair market value of such asset, as determine d by the contributing Partner and the Partnership; (ii) The Gross Asset Values of all Partnership assets shall be adjus ted to equal their respective gross fair market values, as determined by the Managing Partner, as of the following times: (a) the acquisition of an additional interest in the Pa rtnership by any new or existing Partner in exchange for more than a de minimis Capital Contribution; (b) the distribution by the Partnership to a Partner of more than a de minimis amount of Partnership's assets as consideration for an interest in the Partnership; and (c) the liquidation of the Partnership within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses (a) and (b) above shall be made only if the Managing Partner reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership; (iii) The Gross Asset Value of any Partnership asset distributed to any Partner shall be the gross fair market value of such asset on the date of distribution; and (iv) The Gross Asset Values of Partnership assets shall be increased (or - 6 - decreased) to reflect any adjustments to the adjusted basis of such asset s pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and Section 3.4(a) hereof; provided, however, that Gross Asset Values shall not be adjusted pursuant to this paragraph (iv) to the extent the Ma naging Partner determines that an adjustment pursuant to paragraph (ii) of this definition i s necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to paragraph (iv) of this definition. If the Gross Asset Value of an asset has been determined or adjusted pursuant to paragraph (i), (ii) or (iv) of this definition, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses. (l) "Liquidating Event" shall have the meaning given such term in Section 11.1. (m) "Managing Partner" means the Person designated as the Managing Partner in the first paragraph of this Agreement, together with any replacement Managing Part ner elected pursuant to Section 6.6 hereof, in such Person's capacity as Managing Partner of the Partnership. (n) "Net Cash From Operations" means the gross cash proceeds from Partnership operations less the portion thereof used to pay or establish reserves for all Partnership expenses, debt payments, capital improvements, replacements and contingencies, all as determined by the Partners. "Net Cash From Operations" shall not be reduced by depreciation, amortization, cost recovery deductions or similar allowances, but shall be increased by any re ductions of reserves previously established. (o) "Net Cash From Sales or Refinancings" means the net cash proceeds from al l sales, other dispositions and refinancings of the Property or other Partnership assets, less any portion thereof used to establish reserves, all as determined by the Partners. "Net Cash From Sales or Refinancings" shall include all principal and interest payments with respect to any note or other obligation received by the Partnership in connection with the sale or other disposi tion of the Property or other Partnership assets. (p) "Net Equity" shall have the meaning given such term in Section 9.4. (q) "Nonrecourse Deductions" has the meaning set forth in Section 1.704-1(b)(4)(iv)(b) of the Regulations. The amount of Nonrecourse Deductions for a Partnership fiscal year equals the net increase, if any, in the amount of Pa rtnership Minimum Gain during that fiscal year, determined according to the provisions of Section 1.704-1(b)(4)(iv)(b) of the Regulations. (r) "Partner Loan Nonrecourse Deductions" means any Partnership deductions that would be Nonrecourse Deductions if they were not attributable to a loan ma de or guaranteed by a Partner within the meaning of Regulations Section 1.704-1(b)(4)(iv)(g). (s) "Partners" means the Persons designated as Partners in the first paragra ph of this Agreement, together with any Person who becomes a substituted Partner as provided herein, in - 7 - such Person's capacity as a partner of the Partnership. "Partner" means any one of the Partners. (t) "Partnership" means the general partnership formed pursuant to this Agreement, as such general partnership may from time to time be amended, res tated and constituted, and including, without limitation, the partnership continuing the busines s of this Partnership in the event of dissolution as herein provided. (u) "Partnership Interest" means, with respect to the Managing Partner, percent (%), with respect to , percent (%), and with respect to , percent (%), subject to adjustment from time to time by reason of any transfer of an interest in the Partnership pursua nt to the applicable provisions of this Agreement. In the event any Partnership interest is transferred in accordance with the provisions of this Agreement, the transferee of such interest shall succeed to the Partnership Interest of the transferor to the extent it relates to the transferred interest. (v) "Partnership Minimum Gain" has the meaning set forth in Regulations Section 1.704-1(b)(4)(iv)(c).(w) "Person" means any individual, partnership, corporation, trust or other entity. (x) "Profits" and "Losses" means, for each fiscal year or other period, an amount equal to the Partnership's taxable income or loss for such year or period, determine d in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction re quired 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 and not otherwise taken into account in computing Profits or Losses pursuant to paragraph (v) of this definition shall 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 pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits or Losses pursuant to paragraph (v) of this definition shall be subtracted from s uch taxable income or loss; (iii) In the event the Gross Asset Value of any Partnership asset is adj usted pursuant to paragraph (ii) or (iii) of the definition of Gross Asset Value, the amount of s uch adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Profits or Losses; (iv) Gain or loss resulting from any disposition of Property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the Property disposed of, notwithstanding tha t the adjusted tax basis of such Property differs from its Gross Asset Value; (v) In lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing such taxable income or loss, there shal l be taken - 8 - into account Depreciation for such fiscal year or other period, computed in accordance with the definition of Depreciation; and (vi) Notwithstanding any other provision of this definition, any items which are specially allocated pursuant to Sections 3.4 hereof shall not be taken into account in computing Profits or Losses. (y) "Property" means those certain premises ___________________________________[to be acquired by the Partnership and] located on or about ___________________________________________, all as more particularly described on Exhibit A attached hereto, including all buildings and other improvements, fixtures, furnit ure and other personal property used in connection with the operation and use thereof (excluding only suc h items as may be owned by tenants under executed leases). (z) "Regulations" means the Federal income tax regulations promulgated under the Code, as such regulations may be amended from time to time (including correspondi ng provisions of succeeding regulations). (aa) "Transfer" means, as a noun, any voluntary or involuntary transfer, sale, pledge, hypothecation or other disposition and, as a verb, voluntarily or involuntarily to transfe r, sell, pledge, hypothecate or otherwise dispose of. ARTICLE 2 CAPITALIZATION 2.1 Capital Contributions. The Managing Partner shall contribute to the Partnership on the date hereof, as the Managing Partner's Capital Contribution, ___________________________________ [all of the Managing Partner's right, title and interest in and to [the Property], which right, title and interest are agreed by the Partners t o have a fair market value, as of the date hereof, of $] [the sum of $ in cash]. The other Partners each s hall contribute to the Partnership on the date hereof, as each such Partner's Capital Contribution, the sum of $ in cash. ___________________________________ [Except to the extent otherwise agreed in writing by the Partners, no Partner shall be permitted or required to make any addition Capital Contributions.] [2.2 Additional Capital Contributions. Additional Capital Contributions may be called for by the Managing Partner by written demand upon the Partners from time to time for any purpose deemed appropriate by the Managing Partner in the Managing Partner's reasonable discretion as long as such purpose is consistent with an Annual Business Pla n approved by the Partners pursuant to Section 6 hereof or is necessary and appropriate in connection wit h any matter approved by the Partners pursuant to Section 6 hereof. Such additional Capital Contributions s hall be payable in proportion to the Partnership Interests of the Partners. In the event any Partner shall fail to make any such additional Capital Contribution within ten (10) days of written demand from the Managing Partner, then such Partner shall be in breach of such Partner's obliga tions hereunder and (i) the Partnership and the other Partners shall have the rights and remedies set forth in this Agreement, and (ii) such breach shall constitute an Adverse Act with respect to which any of the - 9 - other Partners may invoke the purchase provisions of Section 9.3 hereof.] 2.3 General. (a) Except as otherwise provided in this Agreement, no Partner shall demand or receive a return of such Partner's Capital Contributions or withdraw from the Partners hip without the consent of all Partners. Under circumstances requiring a return of any Capital Contributions, no Partner shall have the right to receive property other than cash except as may be specifically provided herein. (b) No Partner shall receive any interest, salary, or drawing with respect to suc h Partner's Capital Contributions or such Partner's Capital Account or for services re ndered on behalf of the Partnership or otherwise in such Partner's capacity as Partner, except as otherwise provided in this Agreement. (c) Except as otherwise provided in this Section 2 and Section 8 hereof, relating to Transfers of Partnership interests, no Person shall be admitted to the Part nership as a Partner without the unanimous consent of the Partners. ARTICLE 3 ALLOCATIONS 3.1 Profits. After giving effect to the special allocations set forth in Sect ion 3.4 hereof, Profits for any fiscal year shall be allocated among the Partners in proportion to their respective Partnership Interests. 3.2 Losses. After giving effect to the special allocations set forth in Sec tion 3.4 hereof, Losses for any fiscal year shall be allocated among the Partners in proportion t o their respective Partnership Interests. 3.3 General. (a) Except as otherwise provided in this Agreement, all items of Partnership income, gain, loss, deduction and any other allocations not otherwise provided for shall be divided among the Partners in the same proportions as they share Profits or Losses, as the case may be, for the year. (b) The Partners are aware of the income tax consequences of the allocations made by this Article 3 and hereby agree to be bound by the provisions of this Article 3 in reporting their shares of Partnership income and loss for income tax purposes. (c) For purposes of determining the Profits, Losses or any other items allocable to any period, Profits, Losses and any such other items shall be determined on a daily, monthly or other basis, as determined by the Managing Partner using any permissible method under Code Section 706 and the Regulations thereunder. - 10 - 3.4 Special Allocations. (a) Code Section 754 Adjustment. To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Ac counts shall be treated as an item of gain (if the adjustment increases the basis of t he asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocat ed to the Partners in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such Section of the Regulations. (b) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year or other period shall be specially allocated among the Partners in proportion to thei r respective Partnership Interests. (c) Partner Loan Nonrecourse Deductions. Any Partner Loan Nonrecourse Deductions for any fiscal year or other period shall be specially allocated to the Partner who bears the risk of loss with respect to the loan to which such Partner Loan Nonrecourse Deductions are attributable in accordance with Regulations Section 1.704-1(b)(4)(iv)(g). (d) Curative Allocations. The allocations set forth in Sections 3.4(b) and 3.4(c) hereof (the "Regulatory Allocations") are intended to comply with certain requirem ents of Regulations Section 1.704-1(b). Notwithstanding any other provisions of this Article 3, the Regulatory Allocations shall be taken into account in allocating other Profits, Losses and items of income, gain, loss and deduction among the Partners so that, to the extent possibl e, the net amount of such allocations of other Profits, Losses and other items and the Regulatory All ocations to each Partner shall be equal to the net amount that would have been allocated to each such Partner if the Regulatory Allocations had not occurred. Notwithstanding the preceding sentence, Regulat ory Allocations relating to (a) Nonrecourse Deductions shall not be taken into account except to the extent that there has been a reduction in Partnership Minimum Gain, and (b) Part ner Loan Nonrecourse Deductions shall not be taken into account except to the extent tha t there would have been a reduction in Partnership Minimum Gain if the loan to which such deductions are attributable were not made or guaranteed by a Partner within the meaning of Regulations Section 1.704-1(b)(4)(iv)(g). 3.5 Tax Allocations: Code Section 704(c). In accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss and deduction with respect to any property contributed to the capital of the Partnership shall, solely for tax purposes, be al located 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 initial Gross Asset Val ue (computed in accordance with paragraph (i) of the definition of Gross Asset Value.) In the event the Gross Asset Value of any Partnership asset is adjusted pursuant to paragraph (ii) of the definition of Gross Asset Value, subsequent allocations of incom e, gain, loss and deduction with respect to such asset shall take into account any variat ion between the adjusted basis of such asset for federal income tax purposes and its Gross Asset Va lue in the same manner as - 11 - under Code Section 704(c) and the Regulations thereunder. Any elections or other decisions relating to such allocations shall be made by the Managing Partner in any manner that reasonably reflects the purpose and intention of this Agre ement. Allocations pursuant to this Section 3.5 are solely for purposes of federal, state a nd local taxes and shall not affect, or in any way be taken into account in computing, any Person's Capi tal Account or share of Profits, Losses, other items or distributions pursuant to any provisions of this Agreement. ARTICLE 4 DISTRIBUTIONS 4.1 Net Cash From Operations. Except as provided in Section 11.2 hereof, relating to the liquidation of the Partnership, Net Cash From Operations shall be determine d by the Managing Partner quarterly, and the amount so determined shall be distributed to the Partne rs in proportion to their respective Partnership Interests. 4.2 Net Cash From Sales or Refinancing. Except as provided in Section 11.2 hereof, relating to the liquidation of the Partnership, all Net Cash From Sales or Re financings, if any, shall be distributed, from time to time as determined by the Managing Partner, to the Partners in proportion to their respective Partnership Interests. 4.3 Distribution Among Partners. If a Permitted Transfer, pursuant to Section 8 hereof, of an interest in the Partnership occurs during any accounting period, Profits, Losses, each item thereof and all other items attributable to such interest for such period shall be divided and allocated between the transferor and the transferee by taking into account their varying interes ts during the period in accordance with Code Section 706(d), using any conventions permitted by law and selected by the Managing Partner. All distributions on or before the date of a Pe rmitted Transfer shall be made to the transferor, and all distributions thereafter shall be ma de to the transferee. Solely for purposes of making such allocations and distributions, the Partnership shall recognize a Permitted Transfer not later than the end of the calendar month during which it i s given notice of such Transfer; provided, however, that if the Partnership does not receive a notice s tating the date such interest was transferred and such other information as the Managing Partner m ay reasonably require within thirty (30) days after the end of the accounting period during which the trans fer occurs, or if a Transfer is not a Permitted Transfer then all of such items shall be allocated, and all distributions shall be made, to the Person who, according to the books and records of the Partnership, on the last day of the accounting period during which the Transfer occurs, wa s the owner of the Partnership Interest. The Managing Partner and the Partnership shall i ncur no liability for making allocations and distributions in accordance with the provisions of this S ection 4.3, whether or not the Managing Partner or the Partnership has knowledge of any Transfer of ownership of any interest in the Partnership. 4.4 Amounts Withheld. All amounts withheld pursuant to the Code or any provision of any state or local tax law with respect to any payment or distribution to t he Partnership or the Partners shall be treated as amounts distributed to the Partners pursuant to this Section 4 for all purposes under this Agreement. The Managing Partner may allocate any such amounts among the - 12 - Partners in any manner that is in accordance with applicable law. ARTICLE 5 ACCOUNTING AND RECORDS 5.1 Books and Records. The Managing Partner shall keep, or cause to be kept, complete and accurate books of account and records of the Partnership. The books and records of the Partnership shall be kept on the ___________________________________ [accrual] [cash receipts and disbursements] basis of accounting, and otherwise in accordance with generall y accepted accounting principles consistently applied, and all such books and records shall at all times be maintained or made available at the principal business office of the Partne rship. Each Partner, or such Partner's designated representative, shall have access to and the right to inspect and copy, during normal business hours and at the expense of such Partner, the contents of such books and records. 5.2 Reports. The Managing Partner shall prepare, or cause to be prepared, financial reports of the Partnership and shall coordinate financial matters of the Partners hip with the Partnership's accountants. Within ninety (90) days after the end of each fiscal ye ar and within sixty (60) days of the end of any fiscal quarter, the Managing Partner shall cause ea ch Partner to be furnished with a copy of the balance sheet of the Partnership as of the last da y of the applicable period and a statement of income or loss for the Partnership for such period. Annual st atements shall also include a statement showing any item of income, deduction, credit or loss allocable for federal income tax purposes pursuant to the terms of this Agreement. Annual stat ements shall be prepared by the Partnership's accountants. 5.3 Tax Returns. The Managing Partner shall cause the Partnership's accountants to prepare all income and other tax returns of the Partnership and shall cause the same to be filed in a timely manner. The Managing Partner shall furnish to each Partner a copy of each such return, together with any schedules or other information which each Partner may require in c onnection with such Partner's own tax affairs. 5.4 Special Basis Adjustment. In connection with any Permitted Transfer of a Partnership interest, the Managing Partner shall cause the Partnership, at t he written request of the transferor or the transferee, on behalf of the Partnership and at the time and in t he manner provided in Regulations Section 1.754-1(b), to make an election to adjust the basis of the Pa rtnership's property in the manner provided in Sections 734(b) and 743(b) of the Code, and such transferee shall pay all costs incurred by the Partnership in connection therewith, including, without limitation, reasonable attorneys' and accountants' fees. 5.5 Tax Matters Partner. The Managing Partner shall be the party designated to receive all notices from the Internal Revenue Service which pertain to the tax affairs of the Partnership. The Managing Partner shall be the "Tax Matters Partner" pursuant to the Code. 5.6 Fiscal Year. The fiscal year of the Partnership shall be the calendar year, unless otherwise approved by the Partners. As used in this Agreement, a fiscal year shall include any - 13 - partial fiscal year at the beginning and end of the Partnership term. 5.7 Bank Accounts. The Managing Partner shall have fiduciary responsibility for the safekeeping and use of all funds and assets of the Partnership, whether or not in the Managing Partner's immediate possession or control. The funds of the Partnership shall not be commingled with the funds of any other Person and the Managing Partner 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 approved by the Managing Partner and withdrawals shall be made only in the regular course of Part nership business and as otherwise authorized in this Agreement on such signature or signatures as the Managing Partner may determine. All funds of the Partnership shall be invested in acc ordance with the then applicable Annual Business Plan. ARTICLE 6 MANAGEMENT 6.1 Day-to-Day Management by Managing Partner. Subject to the limitations and restrictions set forth in this Agreement, including, without limitation, those set forth in this Article 6, the Managing Partner may exercise the following specific rights and powers wit hout any further consent of the other Partners being required: (a) to expend the capital and income of the Partnership to the extent permitte d by this Agreement and consistent with the then applicable Annual Business Plan; (b) to ask for, collect and receive any rents, issues and profits or income from the Property or any other assets of the Partnership, or any part or parts thereof, and to di sburse Partnership funds for Partnership purposes to those persons entitled to receive same; (c) to purchase from or through others, contracts of liability, casualty or other insurance for the protection of the properties or affairs of the Partnership or the Partne rs or for any purpose convenient or beneficial to the Partnership; (d) to pay all taxes, licenses or assessments of whatever kind or nature impos ed upon or against the Partnership or the Property, and for such purposes to make such returns and do all other such acts or things as may be deemed necessary and advisable by the Partnership; (e) to establish, maintain and supervise the deposit of any monies or securitie s of the Partnership with federally insured banking institutions or other institutions as may be selected by the Managing Partner, in accounts in the name of the Partnership with such institutions; (f) to institute, prosecute, defend, settle, compromise and dismiss lawsuits or other judicial or administrative proceedings brought on or in behalf of, or against, the Pa rtnership or the Partners in connection with activities arising out of, connected with or i ncidental to this Agreement, and to engage counsel for others in connection therewith; - 14 - (g) to execute for and on behalf of the Partnership, and with respect to the Property, all such applications for permits and licenses as the Managing Part ner deems necessary and advisable, and to execute and cause to be filed and recorded all such subdivis ion, parcel or similar maps covering or relating to the Property that the Managing Partner deems advisable; (h) to perform all ministerial acts and duties relating to the payment of al l indebtedness, taxes and assessments due or to become due with regard to the P roperty, and to give and receive notices, reports and other communications arising out of or in connection w ith the ownership, indebtedness or maintenance of the Property; (i) to conduct the affairs of the Partnership with the general objective of financial gain; and (j) to negotiate for and enter into leases for space within the Property on terms consistent with the then applicable Annual Business Plan. 6.2 Annual Business Plan. The Managing Partner shall prepare for the approval of the Partners each fiscal year (no later than thirty (30) days prior to the end of the then current fiscal year) an Annual Business Plan for the next fiscal year. No material changes or departures from any item in an approved Annual Business Plan shall be made by the Managing Partner without the prior approval of the Partners. Each Annual Business Plan shall include the following: (a) a narrative description of any activities proposed to be undertaken; (b) a projected annual income statement (accrual basis) on a quarter-by-quarter basis; (c) a projected balance sheet as of the end of the period; (d) a schedule of projected operating cash flow (including itemized operating revenues, Property costs and Property expenses) for such fiscal year on a quarter-by-quarter bas is, including a schedule of projected operating deficits, if any; (e) a marketing plan indicating the portions of the Property that the Managing Partner recommends be made available for lease and the proposed terms and condit ions relating thereto; (f) a description of any proposed construction and capital expenditures, including projected dates for commencement and completion of the foregoing; (g) a development schedule identifying the projected development periods as well as the times for completion of the various stages of the Property and the costs attributable to each such stage; (h) a description of the proposed investment of any funds of the Partnership which are (or are expected to become) available for investment; - 15 - (i) a description, including the identity of the recipient (if known) and the amount and purpose, of all fees and other payments proposed or expected to be paid for professi onal services and, if a fee or payment exceeds $10,000, for other services rendered to the Pa rtnership by third parties; and (j) a detailed description of such other information, plans, maps, contracts, agreements or other matters necessary in order to inform the Partners of all ma tters relevant to the development, operation, management and sale of the Property or any portion thereof or to enabl e the Partners to make an informed decision with respect to their approval of such Annual Business Plan or as may be reasonably desired by the Partners. 6.3 Implementation of Plan by the Managing Partner. The Managing Partner shall, subject to the limitations contained herein and the availability of operat ing revenues and other cash flow (as long as the Managing Partner has used reasonable efforts to maximize the same), implement the then applicable Annual Business Plan. The Managing Partner sha ll promptly advise and inform the Partners of any transaction, notice, event or proposal directly relat ing to the management and operation of the Property which does or could significantly affect, eit her adversely or favorably, the Property or the Partnership or cause a significant deviation from the A nnual Business Plan. 6.4 Insurance. (a) Coverage. The Managing Partner shall procure and maintain, or cause to be procured and maintained, insurance sufficient to enable the Partnership to comply wi th applicable laws, regulations and requirements, including as a minimum and without limitation, the following: (i) comprehensive general liability insurance (with limits of liability not less than such amount as may be reasonably requested by the Partners) combined single l imit for bodily injury, public liability, property damage and personal injury with no deductible; (ii) with respect to completed improvements, fire and extended coverage insurance (including earthquake coverage), and, whenever construction of any improvements is taking place, builders' risk insurance, in each case, on a re placement cost basis of not less than one hundred percent (100%) of the full replacement cost of such improvements; (iii) worker's compensation insurance as required by law including employers' liability in an amount not less than $100,000; (iv) fidelity insurance in an amount not less than $250,000 to protect against losses due to employee dishonesty, theft by a property manager or any other third parties and mysterious disappearances; and (v) such additional insurance against other risks of loss to the Property as, from time to time, may be required by any lender making a loan to the Partnership or which may be required by law. - 16 - The Managing Partner shall furnish the Partners, no less frequently than annually, a schedule of such insurance and copies of certificates evidencing the same. (b) Liability of the Managing Partner. The Managing Partner shall be liable to the Partners for any loss to the Partnership by reason of the inadequacy of the insuranc e proceeds payable under any such policy or insurance if the Partners previously notified and authorize d the Managing Partner to increase the limits of any such insurance to amounts wit hin reasonable industry standards and the Managing Partner failed to increase such insurance within te n (10) days after such notice, and the insured-against event occurred. 6.5 Restrictions on the Managing Partner. Notwithstanding anything in this Agreement to the contrary, neither the Managing Partner nor any other Partner shall have any authori ty to take any action not expressly delegated to such Managing Partner or other Partner hereunder. W ithout limiting the generality of the preceding sentence, neither the Managing Partne r nor any other Partner shall do any of the following acts on behalf of the Partnership without the approval of the Partners (except to the extent that the matter in question is included in, and budgete d for or permitted by, the then applicable Annual Business Plan): (a) acquiring, by purchase, lease or otherwise, any real property in addition to the Property or constructing any new capital improvements on the Property or replacing a n existing capital improvement following completion of construction thereof; (b) giving or granting any options, rights of first refusal, deeds of trust, mortgages, pledges, ground leases, security interests or otherwise encumbering the P roperty or any portion thereof; (c) obtaining, increasing, modifying, consolidating or extending any loan, whether secured or unsecured, affecting the Property or the Partnership; (d) consenting to any rezoning or subdivision of the Property or any other material change in the legal status thereof; (e) selling, conveying or refinancing the Property or any portion thereof; (f) causing or permitting the Partnership to extend credit to or to make any loans or become a surety, guarantor, endorser or accommodation endorser for any person, firm or corporation or entering into any contracts with respect to the operation or management of the business of the Partnership or the Property (or any portion thereof); (g) releasing, compromising, assigning or transferring any claims, rights or benefits of the Partnership; (h) confessing a judgment against the Partnership or submitting a Partnership claim to arbitration; (i) distributing any cash or property of the Partnership, other than as provided in this Agreement, or establishing any reserve; - 17 - (j) admitting a new Partner to the Partnership; (k) doing any act in contravention of this Agreement or which would make it impossible or unreasonably burdensome to carry on the business of the Partnership; (l) possessing any property of the Partnership or assigning the rights of the Partnership in any of its property; (m) advertising or marketing the Property other than in accordance with the provisions of the then applicable Annual Business Plan; (n) granting easements or other property rights by documents that are customarily recorded; (o) giving any approval under any management, construction or other contract to which the Partnership is a party, if the subject matter of such approval would re quire approval of the Partners if undertaken directly by the Managing Partner; (p) changing or amending the plans or specifications for any building or structure being constructed by the Partnership; or (q) entering into any amendment, modification, revision, supplement or rescission with respect to any of the foregoing. Notwithstanding the above, the Managing Partner shall have the right to take suc h actions as the Managing Partner, in the Managing Partner's reasonable judgment, deems necessary for the protection of life or health or the preservation of Partnership assets if, under the c ircumstances, in the good faith estimation of the Managing Partner, there is insufficient time to allow the Managing Partner to obtain the approval of the Partners to such action and any delay would ma terially increase the risk to life or health or preservation of assets. The Managing Partner shall notify the Partners of each such action contemporaneously therewith or as soon as reasonably practicable thereafter. Such authority shall lapse and terminate upon reduction of such risk to life or health or preservation of assets or upon receipt by the Managing Partner of telephone, telegraphic or writte n notice from any Partner of such Partner's disapproval of any or all of the proposed actions. 6.6 Replacement of Managing Partner. In the event the Partners holding a majority of the Partnership Interests shall at any time, or from time to time, be dis satisfied with the Managing Partner's performance under this Section 6 (regardless of whether such dissatisfact ion shall constitute legal "cause" for termination), such Partners shall have the right to give the Managing Partner written notice of such dissatisfaction, specifying the particulars in respect of which the Managing Partner's performance is deemed by such Partners to be unsatisfactory. If duri ng the 30-day period from the date of such notice the Managing Partner's performance shall cont inue to be unsatisfactory (if such notice relates to matters capable of being cured) or im mediately if such unsatisfactory performance is not capable of being cured, such Partners shall have t he right to remove such Managing Partner. A Person who has been removed as Managing Partner shal l continue to be a Partner for all other purposes of this Agreement. The approval of Part ners holding - 18 - a majority of the Partnership Interests shall be required to elect a new Managing Partner. 6.7 Failure to Obtain Approvals. In the event the Partners do not give their approval relative to any matter requiring such approval, including, without limitation, any propose d Annual Business Plan or any matter proposed by the Managing Partner or any other Partner requiring approval pursuant to Section 6.5 hereof, then the Partners shall have the rights set fort h in Sections 9.1 and 9.2 hereof, relating to sale disagreements and impasses. ARTICLE 7 REPRESENTATIONS AND WARRANTIES 7.1 Representations and Warranties. As of the date hereof, each of the statement s contained herein shall be a true, accurate and full disclosure of all facts relevant to the matters contained therein, and such warranties and representations shall survive the exec ution of this Agreement. Each Partner hereby represents and warrants that: (a) If such Partner is a corporation (partnership), such Partner is a duly organized and validly existing corporation (partnership) under the laws of the State of and has the requisite power and authority to enter into and carry out the terms of this Agreement. (b) If such Partner is a corporation (partnership), all corporate (partnership) action required to be taken by such Partner to consummate this Agreement has be en taken and no further approval of any board, court or other body is necessary in order to permit such Partner to consummate this Agreement. (c) To the best of such Partner's knowledge, neither the execution and delivery of this Agreement, nor the performance of or the compliance with, this Agreement ha s resulted (or will result) in any violation of, or be in conflict with, or invalidate, cancel or make inoperative, or interfere with, or constitute a default under, or result in the creation of any lie n, encumbrance or any other charge upon the Property pursuant to any charter or bylaw provision, partnership agreement, trust agreement, mortgage, deed of trust, indenture, contract, agreement, permit, judgment , decree or order to which such Partner is a party or by which the Property (or any portion thereof) is bound, and there is no default and no event or omission has occurred which, but for the passing of time or the giving of notice, or both, would constitute a default on the part of such Partner under this Agreement. (d) To the best of such Partner's knowledge, there is no action, proceeding or investigation, pending or threatened (nor any basis therefore) which questions, directly or i ndirectly, the validity or enforceability of this Agreement as to such Partner or which woul d materially and adversely affect the Property or the Partnership. ARTICLE 8 TRANSFERS OF INTERESTS; WITHDRAWALS - 19 - 8.1 Restrictions on Transfers. Except as expressly permitted or required by this Agreement, no Partner shall Transfer all or any portion of such Partner's interest in the Partnership or any rights therein without the unanimous consent of the Partners. Any Transfer or att empted Transfer by any Partner in violation of the preceding sentence shall be null and void and of no effect whatever. Each Partner hereby acknowledges the reasonableness of the restricti ons on Transfer imposed by this Agreement in view of the Partnership purposes and the relationship of the Partners. Accordingly, the restrictions on Transfer contained herein shall be specifically enforceable. Each Partner hereby further agrees to hold the Partnership and each Partner (and each Partne r's successors and assigns) wholly and completely harmless from any cost, liability or damage (including, without limitation, liabilities for income taxes and costs of enforcing this indemni ty) incurred by any of such indemnified Persons as a result of a Transfer or an attempted Transfer in viola tion of this Agreement. 8.2 Permitted Transfers. (a) General. Subject to the conditions and restrictions set forth in this Section 8.2, a Partner shall have the right to Transfer all or any portion of such Part ner's interest in the Partnership by means of a Permitted Transfer. (b) Definition of Permitted Transfer; Permitted Transferees. (i) A "Permitted Transfer" is any Transfer by a Partner of all or any portion of such Partner's interest in the Partnership to a Permitted Transferee, provide d that such Transfer otherwise complies with the conditions and restrictions of this Section 8.2. (ii) A "Permitted Transferee" of a Partner is any Person who is (1) an Affiliate of such Partner, (2) a member of such Partner's Family, (3) any other Partner, (4) a Personal Representative of such Partner, or (5) any Person approved as a Permitted Transferee by the unanimous consent of the Partners. (iii) A Partner's "Family" includes only any Person who, at the time of the Permitted Transfer, is such Partner's spouse, natural or adoptive lineal ances tors or descendants and trusts for such Partner's or their exclusive benefit. (iv) A Partner's "Personal Representative" includes only any Person who succeeds to such Partner's estate as a result of such Partner's death, legal incompetence or Event of Bankruptcy and any transferee of such Partner's interest from any such Person. (c) Conditions to Permitted Transfers. A Transfer otherwise permitted under this Section 8.2 shall not be a Permitted Transfer and any attempted Transfe r of a Partner's interest to a Permitted Transferee shall be null and void and of no effect whatever unles s and until the following conditions are satisfied: (i) Except in the case of a Permitted Transfer to a Partner's Personal Representative, the transferor and transferee shall execute such documents and ins truments of conveyance and assumption as may be necessary or appropriate in the opinion of counsel - 20 - to the Partnership to effect such Transfer and to confirm the Permitted Transfere e's assumption of all monetary obligations of the transferor Partner with respect to t he interest being transferred and the transferor Partner's agreement to guarantee the prompt payment and performance of such assumed obligations. (ii) In the case of a Permitted Transfer to a Partner's Personal Representative, the Permitted Transferee shall deliver such assurances as may be necessary or appropriate in the opinion of counsel to the Partnership to confirm such Transfer and that such Partner (and/or such Partner's estate) remains liable to perform all monetary obligations with respect to such interest. (iii) Except in the case of a Permitted Transfer to a Partner's Personal Representative, the Partnership shall receive, prior to such Transfer, an opinion of couns el satisfactory to the Partnership confirming that such Transfer will not terminat e the Partnership for federal income tax purposes. (iv) A Partner making a Permitted Transfer of all or a portion of such Partner's Partnership interest and the Permitted Transferee thereof shall pa y all reasonable costs and expenses incurred by the Partnership in connection with such Transfer. (d) Admission of Permitted Transferee as a Partner. A Permitted Transferee of an interest in the Partnership shall be admitted as a Partner in the Partnership only upon the unanimous consent of the Partners. The rights of a Permitted Transferee who is not admitted as a Partner shall be limited to the right to receive allocations and distribut ions from the Partnership with respect to the interest transferred, as provided by this Agreement. The transferor of such interest shall not be a partner with respect to such interest, and, without limiting the foregoing, shall have no right to inspect the Partnership's books, act for or bind the Partnership or otherwise interfere in its operations. (e) Effect of Permitted Transfer on Partnership. The Partners intend that the Permitted Transfer of an interest in the Partnership shall not cause the di ssolution of the Partnership under the Act; provided, however, notwithstanding any such dissolution, the Partners shal l continue to hold the Partnership's assets and operate its business in Partnership form under this Agreement as if no such dissolution had occurred. 8.3 Waiver of Partition. No Partner shall, either directly or indirectly, take any action to require partition or appraisement of the Partnership or of any of its assets or properti es or cause the sale of any Partnership property, and notwithstanding any provisions of applicable law to the contrary, each Partner (and such Partner's legal representatives, successors or a ssigns) hereby irrevocably waives any and all rights to maintain any action for partition or to c ompel any sale with respect to such Partner's Partnership interest, or with respect to any asse ts or properties of the Partnership, except as expressly provided in this Agreement. 8.4 Covenant Not to Withdraw or Dissolve. Notwithstanding any provision of the Act, each Partner hereby covenants and agrees that the Partners have entered into thi s Agreement based on their mutual expectation that all Partners will continue as Partners and carry out the duties and obligations undertaken by them hereunder and that, except as otherwise expressly requi red or - 21 - permitted hereby, no Partner shall withdraw or retire from the Partnership, be entit led to demand or receive a return of such Partner's contributions or profits (or a bond or other security for the return of such contributions or profits) or exercise any power under the Act to dissolve the Pa rtnership without the unanimous consent of the Partners. 8.5 Consequences of Violation of Covenant. Notwithstanding anything to the contrary in the Act, if a Partner (a "Breaching Partner") attempts to (i) cause a partition in breach of Section 8.3 above or (ii) withdraw from the Partners