-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N3RJmQgAmMgpUJrsfI1QZJk5zz/i6MF2+8fAtHrTvdujviEifp9q24sgrpxy4SuQ j3N7xX7dA6wVYJLG6O2A0A== 0000765923-96-000001.txt : 19960402 0000765923-96-000001.hdr.sgml : 19960402 ACCESSION NUMBER: 0000765923-96-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960401 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEAN WITTER REALTY GROWTH PROPERTIES L P CENTRAL INDEX KEY: 0000765923 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 133286866 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-18151 FILM NUMBER: 96543154 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CTR STREET 2: 46TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123921054 MAIL ADDRESS: STREET 1: TWO WORLD TRADE CENTER STREET 2: 46TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10048 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file Number 0-18151 DEAN WITTER REALTY GROWTH PROPERTIES, L.P. (Exact name of registrant as specified in governing instrument) Delaware 13-3286866 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2 World Trade Center, New York, NY 10048 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 392-1054 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interests (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . Indicate by check mark if disclosure files pursuant to Item 405 of Regulation S-K (sec. 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] State the aggregate market value of the voting stock held by nonaffiliates of the registrant. Not Applicable DOCUMENTS INCORPORATED BY REFERENCE None PART I. ITEM 1. BUSINESS The Registrant, Dean Witter Realty Growth Properties, L.P. (the "Partnership") is a limited partnership formed in March 1985 under the Uniform Limited Partnership Act of the State of Delaware for the purpose of investing primarily in income-producing commercial and residential properties. The Managing General Partner of the Partnership is Dean Witter Realty Growth Properties Inc., a Delaware corporation, which is wholly-owned by Dean Witter Realty Inc. ("Realty"). The Associate General Partner is Dean Witter Realty Growth Associates, L.P., a Delaware limited partnership (the "Associate General Partner"), the general partner of which is the Managing General Partner. The Managing General Partner manages and controls all aspects of the Partnership's operations. The terms of transactions between the Partnership and its affiliates are set forth in Item 13 below. The Partnership issued 78,594 units of limited partnership interests (the "Units") with gross proceeds of $78,594,000. The offering has been terminated and no additional Units will be sold. The proceeds from the offering were used to make leveraged investments in three office properties (one of which was lost through foreclosure in 1992), an industrial park (a portion of which was disposed of in 1995) and a hotel. The properties are described in Item 2 below. The Partnership considers its business to include one industry segment, investment in real property. Financial information regarding the Partnership is set forth in the Partnership's financial statements in Item 8 below. The Partnership's real property investments are subject to competition from similar types of properties in the vicinities in which they are located. Further information regarding competition and market conditions where the Partnership's properties are located is set forth in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Partnership has no employees. All of the Partnership's business is conducted in the United States. ITEM 2. PROPERTIES. The Partnership's principal offices are located at Two World Trade Center, New York, New York 10048. The Partnership has no other offices. The Partnership owns, through partnership interests, the following property interests. Generally, the leases pertaining to the properties provide for pass-throughs to the tenants of their pro-rata share of certain operating expenses. In the opinion of the Managing General Partner, all of the properties are adequately covered by insurance.
Net Rentable Year(s) Acquisition Type of ownership Area Completed/ Cost of land and Property, location and type (000 sq. ft) Acquired ($000) improvements Bayport Plaza Tampa, FL 45.8% indirect Office building1 259 1984/1985 $26,206 General Partnership interest in a part- nership which owns the building. Hotel1 448 rooms 1985/1985 $11,178 91.6% indirect general partnership interest in a partnership which owns the hotel. Braker Center, Phase III North Austin, TX Warehouse building2 150 1985/1985 $3,848 99% General Part- nership interest. Land2 28 acres NA/1985 $10,108 99% general part- nership interest. Four Office/R&D buildings2 100 1986/1985 - 49.5% indirect general partnership interest in a partnership which owns the property. Peninsula Office Park1 379 1972-82/1985 $6,026 49.9% indirect San Mateo, CA general part- Six office buildings nership interest and restaurant in two limited partnerships which own the buildings. 1. The property is subject to a mortgage loan. See note 6 to the consolidated financial statements in Item 8. 2. Disposed of in part or in full in 1995. See Item 7, Management's Discussion and Analysis of Financial Condition, and Note 4 to the consolidated financial statements in Item 8. Each improved property has been built with on-site parking facilities.
ITEM 3. LEGAL PROCEEDINGS. On December 27, 1995, a class action lawsuit (the "Grigsby Action") naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner and Associate General Partner), Realty, Dean Witter Reynolds Inc. and others as defendants was filed in Superior Court in California. The complaint alleges fraud, negligent misrepresentation, intentional and negligent breach of fiduciary duty, unjust enrichment and related claims and seeks compensatory and punitive damages in unspecified amounts and injunctive and other equitable relief. The defendants have removed the case to the United States District Court for the Southern District of California. The parties have signed a stipulation requesting that the action be transferred to the United States District Court for the Southern District of New York. The defendants have not yet responded to the complaint and intend to vigorously defend the action. On February 14, 1996, a class action lawsuit (the "Schectman Action") naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner), Realty, Dean Witter, Discover & Co., and Dean Witter Reynolds Inc. as defendants was filed in the Chancery Court of Delaware for New Castle County. The complaint alleges reckless and/or negligent misrepresentation and nondisclosure, breach of fiduciary duty and related claims and seeks an accounting of profits and rescissory and/or compensatory damages in unspecified amounts. The defendants have not yet responded to the complaint and intend to vigorously defend the action. On February 23, 1996, a class action lawsuit (the "Dosky Action") naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner), Realty, Dean Witter, Discover & Co., Dean Witter Reynolds Inc. and others as defendants was filed in the Chancery Court of Delaware for New Castle County. The complaint alleges breach of fiduciary duty and seeks an accounting of profits, compensatory damages in unspecified amounts, possible liquidation of the Partnership under a receiver's supervision and other equitable relief. The defendants have not yet responded to the complaint and intend to vigorously defend the action. On February 29, 1996, a class action lawsuit (the "Segel Action") naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner), Realty, Dean Witter Reynolds Inc., Dean Witter, Discover & Co. and others as defendants was filed in the Chancery Court of Delaware for New Castle County. The complaint alleges breach of fiduciary duty and seeks an accounting of profits, compensatory damages in unspecified amounts, possible liquidation of the Partnership under a receiver's supervision and other equitable relief. The defendants have not yet responded to the complaint and intend to vigorously defend the action. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matter was submitted during the fourth quarter of the fiscal year to a vote of Unit holders. PART II. ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER An established public trading market for the Units does not exist, and it is not anticipated that such a market will develop in the future. Accordingly, information as to the market value of a Unit at any given date is not available. However, the Partnership does allow limited partners, (the "Limited Partners") to transfer their units, if a suitable buyer can be located. As of March 18, 1996 there were 6,123 holders of limited partnership interests. The Partnership is a limited partnership and, accordingly, does not pay dividends. However, the Partnership Agreement permits distributions of "Distributable Cash" to its partners. Pursuant to the Partnership Agreement, Distributable Cash is to be paid 96% to the Limited Partners, after the Managing General Partner has received a management fee of 6.25% of Distributable Cash. The Managing General Partner did not receive a management fee in 1995, 1994 or 1993 because the Partnership did not pay a cash distribution in any of those years. Sale or refinancing proceeds will generally be distributed (i) to the Limited Partners until they have received a return of their capital contributions; (ii) to the General Partners until they have received 1.01% of the amount distributed to the Limited Partners; (iii) 99% of any remaining amounts to the Limited Partners and 1% to the General Partners until the Limited Partners have received cumulative distributions in an amount sufficient to provide a 6% cumulative annual return on their adjusted capital contributions; and (iv) 85% to the Limited Partners and 15% to the General Partners after the Managing General Partner receives a brokerage fee, if earned, not in excess of 3% of the aggregate gross sales prices of all properties. During the years ended December 31, 1995 and 1994, the Partnership did not distribute any sale or refinancing proceeds. Taxable income and tax loss generally are allocated to the partners in proportion to the distribution of Distributable Cash (after payment of the Managing General Partner's management fee) or sale or financing proceeds (or 96% to the Limited Partners and 4% to the General Partners if there is no Distributable Cash).
ITEM 6. SELECTED FINANCIAL DATA. The following sets forth a summary of selected financial data for the Partnership: Dean Witter Realty Growth Properties, L.P. Years ended December 31: 1995 1994 1993 1992 1991 Total revenues $ 28,731,324 $ 28,095,985 $ 27,391,611 $ 28,243,603 $ 29,502,208 Loss before extra- ordinary item $ (2,387,229)1 $ (1,105,050) $ (5,550,240)2 $ (6,421,433) $ (7,331,621) Extraordinary item $ 1,938,6453 $ - $ - $ 422,1233 $ - Net loss $ (448,584)1 $ (1,105,050) $ (5,550,240)2 $ (5,999,310) $ (7,331,621) Per unit of Limited Partnership interest: Loss before extra- ordinary item $ (5.22)1 $ (13.50) $ (67.79)2 $ (78.44) $ (89.55) Extraordinary gain $ - $ - $ - $ 5.16 $ - Net loss $ (5.22) $ (13.50) $ (67.79) $ (73.28) $ (89.55) Cash distributions paid $ - $ - $ - $ - $ - Total assets $ 41,836,913 $ 55,097,988 $ 58,385,005 $ 87,483,150 $100,445,904 Long-term debt due after one year $ - $ 54,936,984 $ 57,844,135 $ 84,193,991 $ 92,305,541 1Includes a $1,249,457 loss on the sale of real estate. See Note 4 to the consolidated financial statements in Item 8. 2Includes a $334,988 loss on the sale of real estate. 3Represents gain on extinguishment of debt due to foreclosure of a property. Note: The above financial data should be read in conjunction with the consolidated financial statements and the related notes appearing in Item 8.
ITEM 7. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Liquidity and Capital Resources The Partnership raised $78,594,000 in a public offering which was terminated in 1986. The Partnership has no plans to raise additional capital. The Partnership used the proceeds from the offering to make leveraged investments in four properties (one of which was lost through foreclosure in July 1992). No additional investments are planned. The condition of the real estate markets varies among different regions of the country and by property type. The relative absence of office construction as well as growth in business services has resulted in absorption of office space in certain cities of the Northeast and Southeast. In selected cities in the West, technology and entertainment companies are providing steady demand for office properties. In most markets, office construction is limited to build-to-suit projects. For the hotel industry, demand for rooms has revived with little new construction. As a result, average daily rates, occupancy levels and profits have increased at many hotel properties. The Managing General Partner plans to offer for sale in 1996 the Bayport Plaza hotel and Peninsula Office Park properties. However, there can be no assurance that the properties will be sold. The Partnership's liquidity depends upon cash flow from operations of its properties and capital expenditures. In 1995, all of the Partnership's property investments generated positive cash flow from operations, and it is anticipated that they will continue to do so. In addition, the Partnership's liquidity will be affected by the sale of the Partnership's properties. Because the Partnership has fewer income-producing investments, the Partnership's cash from operations will decline in 1996 and thereafter. In 1995, Partnership cash flow from operations exceeded capital expenditures and investments in joint ventures, and the Partnership expects that this will continue in 1996. The Partnership's current restricted cash balances are being reserved primarily for debt service, working capital, and the replacement of certain furniture, fixtures and equipment at the Bayport Plaza hotel pursuant to the hotel loan and management agreements. In 1996, Bayport Plaza hotel expects to incur capital expenditures of approximately $175,000. The Partnership has lent $210,005 to the Peninsula Office Park investment as of December 31, 1995. The loan bears interest at the prime rate plus 1%. Peninsual Office Park expects to incur capital expenditures of approximately $1 million to be funded from cash reserves at the Joint Venture. In August 1995, the Partnership entered into an Agreement of Sale with Hill Partners, Inc., an unaffiliated party, to sell some of the Braker Center properties for a minimum sales price which was approximately $8.2 million. The closings of the sale of the warehouse and four parcels of land, for a net purchase price of approximately $6,594,000 took place in September and November 1995. At the September closing, the Partnership repaid the $3.7 million mortgage encumbering the property. The remaining proceeds will be used to repay borrowings from an affiliate of Realty and for reserves to fund future leasing costs at the Partnership's other properties. The sales closings for one of the remaining parcels of land is scheduled to occur in April 1996, and the closing of the sale of the final parcel of land is scheduled to occur no later than May 1997. Pursuant to the Agreement of Sale, the Partnership may continue to market the final parcel prior to the closing date of the sale of that parcel. If the final parcel is sold to a third party, the excess of the proceeds from such sale over the purchase price otherwise to be paid by Hill Partners, Inc. will be divided between the Partnership and Hill Partners. In December 1994, the partnership which owned the four office/R&D buildings at Braker Center was in default on its mortgage loan. In January 1995, the Partnership's joint venture partner placed 46 of its properties, including the entity owning the four office/R&D buildings at Braker Center, under bankruptcy protection. The Partnership did not consent to this bankruptcy filing. The joint venture partner subsequently submitted a plan of reorganization which was approved by the bankruptcy court in November. The reorganization plan required the Partnership to contribute additional equity to the joint venture in order to retain its interest in the joint venture. The Managing General Partner believed that the plan of reorganization was not favorable to the Partnership and that additional investment was not justified and, accordingly, did not contribute additional equity. As a result, the Partnership lost its interest in the buildings. Since the mortgage loan on the four office/R&D buildings exceeded their carrying value, the loss of the buildings resulted in a non-cash gain of $1,938,645 which was reported as an extraordinary item. Net loss and cash flow from operations of these properties in 1995 were approximately $222,000 and $55,000, respectively. In May 1995, the Partnership and Hyatt Hotel Corporation modified the management agreement for the hotel at Bayport Plaza. Under the terms of the new agreement, Hyatt is entitled to an annual fee equal to a percentage of the hotel's net revenues in excess of annual debt service, not to exceed an overall percentage cap. In addition, Hyatt has agreed to certain expense reductions that should increase the hotel's cash flow. During the second quarter of 1995, the Partnership prepaid $3 million of the senior debt at the hotel from restricted cash reserves. The Partnership expects to refinance the $42 million mortgage secured by the hotel prior to maturity in 1996. The Partnership has not paid a distribution to the Partners since the fourth quarter of 1990 and does not expect to pay a distribution in 1996. Through December 31, 1990, the General Partners have deferred receipt of cash distributions of $262,316. Except as discussed above and in the consolidated financial statements, the Managing General Partner is not aware of any trends or events, commitments or uncertainties that will have a material impact on liquidity. Operations Fluctuations in the Partnership's operating results for the year ended December 31, 1995, compared to 1994 and 1994 compared to 1993 are primarily attributable to the following: The hotel's average occupancy rate was 67% in 1995, 69% in 1994, and 62% in 1993. The hotel's room revenue increased in 1995 compared to 1994 because increases in room rates offset the slight decrease in occupancy. Food beverage and other revenue increased because of increases in banquet and in-room dining sales. The increases in food and beverage sales led to a corresponding increase in related expenses. Room expenses decreased in 1995 compared to 1994 because of reduced managment fees due to the renegotiated management contract with Hyatt. The hotel's operating revenue increased during 1994 as compared to 1993 as a result of an increased average daily room rate, higher occupancy and an increase in food and beverage income. The increase in occupancy was primarily related to an increase in group room sales. Food and beverage revenue increased primarily due to greater banquet sales, in-room dining sales and outlet beverage sales. The higher operating revenue led to higher hotel operating expenses. The decreases in rental income, property operating expenses, depreciation and amortization in 1995 compared to 1994 are attributable to the disposition of the Partnership's interests in the properties at Braker Center in 1995. The decreases in rental income, property operating expenses, interest expense, depreciation and amortization in 1994 compared to 1993 are attributable to the change from consolidation to the equity method of accounting for the Partnership's investment in the Bayport Plaza office building in July 1993 and the sale of a building at Braker Center in October 1993. Interest expense increased in 1995 compared to 1994 primarily because of the increase in the interest rate on the Bayport Plaza hotel mortgage to 9% in 1995. Equity in net losses of partnerships reflect the operations at the Peninsula Office Park for all years presented. See Note 5 to the consolidated financial statements. General and administrative expenses were higher in 1995 compared to 1994 as a result of legal fees incurred in connection with the modification of the Hyatt management agreement and the bankruptcy reorganization at the Braker Center properties. General and administrative expenses were higher in 1993 compared to 1994 because of legal fees incurred in connection with the restructuring of the Bayport Plaza Office building investment in 1993. The losses on sales of real estate resulted from sales of properties at Braker Center in 1995 and 1993. See Note 4 to the consolidated financial statements. A summary of the hotel, office and warehouse/research and development building markets where the Partnership properties are located and the performance of each property is as follows: The hotel market in the Westshore area of Tampa Bay, FL continued to improve during 1995 as a result of improvements in the economy and a lack of new supply. The Bayport Plaza Office Building, located in the same project as the Hotel, is in a strong market. The market vacancy rate for Class A buildings in the Westshore market is approximately 13%. However, the downtown Tampa market is significantly weaker, and this may adversely impact the Westshore market. As of December 31, 1995, occupancy at the property increased to 96% from 93% in the prior year. The property is leased to 32 tenants. Tenants occupying more than 10% of the building space are: Prudential Insurance, the Federal Insurance Company and Butler and Burnette whose leases expire in 2001, 2000 and 2005, respectively. Approximately 6% of the leases expire in 1996. The Partnership's remaining investment in Braker Center, located in the Austin, TX industrial market, consists of vacant land. The industrial building market in Austin, which has a current vacancy rate of approximately 3% remains strong. A portion of the vacant land at Braker Center has been sold during 1995. The remaining two parcels of land are scheduled to be sold in April 1996 and no later than May 1997. See Note 4 to the consolidated financial statements in Item 8. The office market in San Mateo, CA, the location of Peninsula Office Park, is characterized by declining vacancy rates (approximately 3% at December 31, 1995) and steady leasing activity. As of December 31, 1995, occupancy at the six office buildings is approximately 99%. The 17,000 square foot restaurant remains vacant. The property is leased to 34 tenants. Tenants occupying more than 10% of the building space are USL Capital and CMP, whose leases expire in 1998 and 2005, respectively. Leases totalling approximately 8% of the building space are due to expire in 1996. Inflation Inflation has been consistently low during the periods presented in the financial statements and, as a result, has not had a significant effect on the operations of the Partnership or its properties. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. DEAN WITTER REALTY GROWTH PROPERTIES L.P. INDEX (a) Financial Statements Page Independent Auditors' Report - 1995-1994 12 Independent Auditors' Report - 1993 13 Consolidated Balance Sheets at December 31, 1995 and 1994 14 Consolidated Statements of Operations for the years ended 15 December 31, 1995, 1994 and 1993 Consolidated Statements of Changes in Partners' Capital (Deficiency) 16 for the years ended December 31, 1995, 1994 and 1993 Consolidated Statements of Cash Flows for the years ended 17-18 December 31, 1995, 1994 and 1993 Notes to Consolidated Financial Statements 19-31 (b) Financial Statement Schedule Real Estate and Accumulated Depreciation III 38-40 All other schedules have been omitted because either the required information is not applicable or the information is shown in the consolidated financial statements or notes thereto.
Independent Auditors' Report The Partners Dean Witter Realty Growth Properties, L.P.: We have audited the accompanying consolidated balance sheets of Dean Witter Realty Growth Properties, L.P. and consolidated partnerships (the "Partnership") as of December 31, 1995 and 1994, and the related consolidated statements of operations, changes in partners' capital (deficiency) and cash flows for the years then ended. Our audits also included financial statement schedule III. These financial statements and the financial statement schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Dean Witter Realty Growth Properties, L.P. and consolidated partnerships as of December 31, 1995 and 1994, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. Also, in our opinion, financial statement schedule III, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Deloitte & Touche LLP /s/Deloitte & Touche LLP New York, New York March 29, 1996 Independent Auditors' Report The Partners Dean Witter Realty Growth Properties, L.P. We have audited the accompanying consolidated statements of operations, changes in partners' capital (deficiency) and cash flows of Dean Witter Realty Growth Properties, L.P. and consolidated partnerships for the year ended December 31, 1993. These consolidated financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Dean Witter Realty Growth Properties, L.P. and consolidated partnerships for the year ended December 31, 1993, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP New York, New York March 25, 1994
DEAN WITTER REALTY GROWTH PROPERTIES, L.P. CONSOLIDATED BALANCE SHEETS December 31, 1995 and 1994 ASSETS 1995 1994 Real estate, at cost: Buildings and improvements $ 47,253,598 $ 55,690,646 Land and land improvements 4,658,353 13,161,632 51,911,951 68,852,278 Accumulated depreciation 20,984,839 22,452,497 30,927,112 46,399,781 Real estate held for sale 2,021,342 - Cash and cash equivalents 2,072,917 663,387 Deferred expenses, net 1,277,687 1,655,347 Accounts receivable 1,671,728 1,870,771 Restricted cash 3,570,238 4,042,780 Other assets 295,889 465,922 $ 41,836,913 $ 55,097,988 LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY) Mortgage notes payable $ 42,000,000 $ 54,936,984 Due to affiliates 6,385,499 6,712,665 Accounts payable and accrued expenses 3,083,884 3,270,432 Other liabilities 2,098 509,280 Excess of distributions and losses over cost of investments in partnerships 7,510,575 6,704,781 Minority interests 1,583,135 1,243,540 60,565,191 73,377,682 Partners' capital (deficiency): General partners (3,298,849) (3,260,230) Limited partners ($1,000 per Unit, 78,594 Units issued) (15,429,429) (15,019,464) Total partners' capital (deficiency) (18,728,278) (18,279,694) $ 41,836,913 $ 55,097,988 See accompanying notes to consolidated financial statements. /TABLE
DEAN WITTER REALTY GROWTH PROPERTIES, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS Years ended December 31, 1995, 1994 and 1993 1995 1994 1993 Revenues: Hotel: Room $13,455,469 $13,329,447 $11,413,533 Food, beverage and other 13,895,927 12,864,869 11,841,890 Total 27,351,396 26,194,316 23,255,423 Rental 1,236,740 1,698,704 3,857,816 Interest and other 143,188 202,965 278,372 28,731,324 28,095,985 27,391,611 Expenses: Hotel: Room 3,696,484 4,090,932 3,531,078 Food and beverage 9,201,086 8,335,717 8,410,508 Administrative and other 7,586,269 7,598,825 7,172,063 Total 20,483,839 20,025,474 19,113,649 Interest 5,327,001 4,994,853 6,800,694 Property operating 381,262 537,138 1,975,311 Amortization 246,841 281,710 518,063 Depreciation 2,119,206 2,129,520 3,031,354 Equity in net losses of partnerships 845,578 985,769 832,468 General and administrative 464,415 274,198 453,699 Loss on real estate sold 1,249,457 - 334,988 31,117,599 29,228,662 33,060,226 Loss before minority interest (2,386,275) (1,132,677) (5,668,615) Minority interest in (income) loss of consolidated partnerships (954) 27,627 118,375 Loss before extraordinary item (2,387,229) (1,105,050) (5,550,240) Extraordinary item: Gain on extinguishment of debt due to foreclosure (Note 4) 1,938,645 - - Net loss $ (448,584) $(1,105,050) $(5,550,240) Net loss allocated to: Limited partners $ (409,965) $(1,060,848) $(5,328,230) General partners (38,619) (44,202) (222,010) $ (448,584) $(1,105,050) $(5,550,240) Net loss per Unit of limited partnership interest $ (5.22) $ (13.50) $ (67.79) See accompanying notes to consolidated financial statements. /TABLE
DEAN WITTER REALTY GROWTH PROPERTIES, L.P. CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIENCY) Years ended December 31, 1995, 1994 and 1993 General Limited Partners Partners Total Partners' capital (deficiency) at January 1, 1993 $(2,994,018) $ (8,630,386) $(11,624,404) Net loss (222,010) (5,328,230) (5,550,240) Partners' capital (deficiency) at December 31, 1993 (3,216,028) (13,958,616) (17,174,644) Net loss (44,202) (1,060,848) (1,105,050) Partners' capital (deficiency) at December 31, 1994 (3,260,230) (15,019,464) (18,279,694) Net loss (38,619) (409,965) (448,584) Partners' capital (deficiency) at December 31, 1995 $ (3,298,849) $(15,429,429) $(18,728,278) See accompanying notes to consolidated financial statements.
DEAN WITTER REALTY GROWTH PROPERTIES, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 1995, 1994 and 1993 1995 1994 1993 Cash flows from operating activities: Net loss $ (448,584) $(1,105,050) $(5,550,240) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 2,366,047 2,411,230 3,549,417 Minority interest in joint ventures' operations 954 (27,627) (118,375) Equity in net losses of partnerships 845,578 985,769 832,468 Loss on real estate sold 1,249,457 - 334,988 Gain on extinguishment of debt (1,938,645) - - Decrease (increase) in: Accounts receivable (576,390) (695,414) 802,814 Restricted cash 472,542 (1,621,411) (414,725) Deferred expenses (559,339) (253,181) (301,397) Other assets 603,915 (91,132) 8,153 Increase (decrease) in: Accounts payable and accrued expenses 640,583 511,019 851,475 Due to affiliates (327,166) 344,732 (203,503) Other liabilities (435,122) (133,628) 248,666 Minority interests - (350,795) - Net cash provided by (used in) operating activities 1,893,830 (25,488) 39,741 Cash flows from investing activities: Proceeds from sale of real estate 6,594,399 - 2,500,000 Investment in real estate, net (671,880) (589,225) (1,276,231) (Investment in) distributions from unconsolidated partnerships (39,784) 94,810 - Effect of change in cash from exchange of partnership interests (Note 4) - (25,932) - Effect of change in cash from consolidation to equity accounting (Note 5) - - (144,423) Net cash provided by (used in) investing activities 5,882,735 (520,347) 1,079,346 Cash flows from financing activities: (Repayment of) proceeds from mortgage notes payable (6,367,035) (57,151) 157,415 Minority interest in joint ventures' distributions - (46,000) (125,000) Additional investment by minority interest - 90,800 - Repayment of construction note payable - - (1,900,000) Borrowings from affiliates - - 1,137,234 Net cash used in financing activities (6,367,035) (12,351) (730,351) Increase (decrease) in cash and cash equivalents 1,409,530 (558,186) 388,736 Cash and cash equivalents at beginning of year 663,387 1,221,573 832,837 Cash and cash equivalents at end of year $ 2,072,917 $ 663,387 $ 1,221,573 Supplemental disclosure of cash flow information: Cash paid for interest $ 4,086,567 $ 4,854,870 $ 6,149,991 See accompanying notes to consolidated financial statements. (Continued) /TABLE
DEAN WITTER REALTY GROWTH PROPERTIES, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) Years ended December 31, 1995, 1994 and 1993 1995 1994 1993 Supplemental disclosure of non-cash investing activities: Transfer of partnership interests: Real estate, net $ - $ 2,963,174 $ - Deferred expenses, net - 139,683 - Accounts receivable - 9,002 - Mortgage note payable - (2,850,000) - Accounts payable - (151,588) - Minority interests - (136,203) - Effect of change in cash from transfer of partnership interests $ - $ (25,932) $ - Change from consolidation to equity accounting: Real estate, net $ - $ - $21,813,229 Deferred expenses, net - - 607,217 Accounts receivable - - 1,806,742 Other assets - - 56,675 Mortgage note payable - - (24,607,271) Accounts payable and accrued expenses - - (2,417,382) Other liabilities - - (81,504) Excess of distributions and losses over cost of investment in partnership - - 1,186,284 Minority interests - - 1,491,587 Effect of change in cash from consolidation to equity accounting $ - $ - $ (144,423) Foreclosure of Partnership interest (Note 4): Balance due on mortgage loan $(6,569,949) $ - $ - Writeoff of: Real estate 4,160,145 - - Account receivable and deferred expenses 926,441 - - Minority interest 338,641 - - Other assets 105,268 - - Accounts payable and other liabilities (899,191) - - Gain on extinguishment of debt due to foreclosure $(1,938,645) $ - $ - See accompanying notes to consolidated financial statements. /TABLE DEAN WITTER REALTY GROWTH PROPERTIES, L.P. Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 1. The Partnership Dean Witter Realty Growth Properties, L.P. (the "Partnership") is a limited partnership formed in 1985 under the laws of the State of Delaware. The Managing General Partner of the Partnership is Dean Witter Realty Growth Properties Inc., which is wholly-owned by Dean Witter Realty Inc. ("Realty"). In 1986, the Partnership issued 78,594 units of limited partnership interest (the "Units") for $78,594,000. No additional Units will be sold. The proceeds were used to make investments in income-producing office, industrial and hotel properties. Assets of the Partnership are subject to substantial leverage. All mortgage notes payable are secured by the real estate and are not general obligations of the Partnership. Certain 1994 amounts have been reclassified to conform to the 1995 presentation. 2. Summary of Significant Accounting Policies The financial statements include the accounts of the Partnership, Bayport Ltd.'s investment in the Bayport hotel, and Braker Associates on a consolidated basis. The Partnership's interest in Peninsula/DW Associates and, effective July 19, 1993, Bayport Ltd's investment in the Bayport office building are accounted for on the equity method. The Partnership's records are maintained on the accrual basis of accounting for financial reporting and tax purposes. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The carrying value of real estate includes the purchase price paid by the Partnership and acquisition fees and expenses. Costs of improvements to the properties are capitalized, and repairs are expensed. Depreciation is recorded on the straight-line method. Effective January 1, 1995, the Partnership adopted the provisions of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"); adoption was not required prior to 1995. Pursuant to SFAS 121, at least annually, and more often if circumstances dictate, the Partnership evaluates the recoverability of the net carrying value of its real estate. As part of this evaluation, the fair values of each of the properties are estimated (in some cases with the assistance of independent real estate consultants) based on discounted cash flows. The fair values are compared to the properties' carrying amounts in the financial statements. A deficiency in fair value relative to carrying amount is an indication of the need for a writedown due to impairment. In such case, the expected future net cash flows from the property are estimated for a period of approximately five years (or a shorter period if the Partnership expects that the property may be disposed of sooner), along with estimated sales proceeds at the end of the period. If the total of these future undiscounted cash flows were less than the carrying amount of the property, the property would be written down to its fair value, and a loss on impairment recognized by a charge to earnings. Because the determination of fair value is based upon projections of future economic events such as property occupancy rates, rental rates, operating cost inflation and market capitalization rates which are inherently subjective, the amounts ultimately realized at disposition may differ materially from the net carrying value as of December 31, 1995. The cash flows used to determine fair value are based on good faith estimates and assumptions developed by the Managing General Partner. Unanticipated events and circumstances may occur and some assumptions may not materialize; therefore actual results may vary from the estimates and the variances may be material. The Partnership may provide additional write-downs, which could be material in subsequent years if real estate markets or local economic conditions change. If the provisions of SFAS 121 had been effective for the year ended December 31, 1994, the Partnership would have recognized a loss on impairment of land and a warehouse building at Braker Center of approximately $1 million in 1994. As more fully described in Note 4, the Partnership recognized a loss on such land and warehouse building in the second quarter of 1995, when it determined to sell them and reduced their carrying values to fair value net of selling costs. Cash and cash equivalents consist of cash and highly liquid investments with maturities, when purchased, of three months or less. Deferred expenses consist of deferred asset supervisory fees, which are amortized over the terms of the related agreements, deferred commitment fees, which are amortized over the related commitment periods, and deferred leasing commissions, which are amortized over the applicable lease terms. Rental income is accrued on a straight-line basis over the terms of the leases. Accruals in excess of amounts payable by tenants pursuant to their leases (resulting from rent concessions or rents which periodically increase over the term of a lease) are recorded as receivables and included in other assets. Pursuant to the Bayport hotel loan and management agreements, restricted cash balances are reserved primarily for debt service, working capital, and the replacement of certain furniture, fixtures and equipment at the hotel. Net loss per Unit amounts are calculated by dividing net loss allocated to Limited Partners, in accordance with the Partnership Agreement, by the weighted average number of Units outstanding. No provision for income taxes has been made in the financial statements, since the liability for such taxes is that of the partners rather than the Partnership. The accounting policies used for tax reporting purposes differ from those used for financial reporting as follows: (a) depreciation is calculated using accelerated methods, (b) rental income is recognized based on the payment terms in the applicable leases, and (c) losses on impairment of real estate are not deductible until realized. In addition, offering costs are treated differently for tax and financial reporting purposes. The tax basis of the Partnership's assets and liabilities is approximately $2.2 million higher than the amounts reported for financial statement purposes. 3. Partnership Agreement The Partnership agreement provides that the Limited Partners will receive 96% of distributable cash remaining after the Managing General Partner has received a management fee of 6.25% of distributable cash. Sale or refinancing proceeds will generally be distributed (i) to the Limited Partners until they have received a return of their capital contributions; (ii) to the General Partners until the General Partners have received 1.01% of the amount distributed to the Limited Partners, and (iii) 99% of any remaining amounts to the Limited Partners and 1% to the General Partners, until the Limited Partners have received cumulative distributions sufficient to provide a 6% cumulative annual return on their adjusted capital contributions; and (iv) 85% to the Limited Partners after the Managing General Partner receives a brokerage fee, if earned, not in excess of 3% of the aggregate gross sales prices of all properties. Taxable income (loss) generally will be allocated to the partners in proportion to the distribution of distributable cash or sale or financing proceeds (or 96% to the Limited Partners and 4% to the General Partners if there is no distributable cash). The Partnership did not pay a cash distribution to the Partners in 1995, 1994 or 1993. Through December 31, 1990, the General Partners have deferred receipt of cash distributions of $262,316. 4. Investments in Real Estate Braker Center, Austin, Texas The Partnership owns a 99% general partnership interest in L.S. Braker Associates ("Braker Associates"); a partnership consisting of current and former officers of Realty holds the remaining 1% interest. Braker Associates owned 50% interests in partnerships which owned three warehouses, four office/R&D buildings, and undeveloped land. In 1993, one of the warehouses, (which was subject to a $1.9 million mortgage loan), was sold at a loss of approximately $335,000. In October 1994, Braker Associates exchanged its partnership interest in one of the remaining warehouses for the interests of its joint venture partner in the other warehouse and the undeveloped land. The exchange was accounted for at the book value of the interest given up, and no gain or loss was recognized. Thus, at December 31, 1994, Braker Associates owned one warehouse, the undeveloped land, and a 50% interest in the partnership (the "Office/R&D Building Partnership") which owns the four office/R&D buildings at the property. The carrying value of the Office/R&D Partnership at December 31, 1994 was approximately $4.3 million. During the second quarter of 1995, the Partnership determined to sell the warehouse and land and, accordingly, reclassified the property to real estate held for sale and reduced its carrying value to $8.2 million (its estimated fair value net of selling costs), which resulted in a loss of approximately $1,249,000. In August 1995, the Partnership entered into an Agreement of Sale with Hill Partners, Inc., an unaffiliated party, to sell these properties for a minimum sales price approximately equal to their reduced carrying value. The closings of the sale of the warehouse and four parcels of the land, for a net purchase price of approximately $6,594,000 took place in September and November 1995. At the September closing, the Partnership repaid the $3.7 million mortgage debt encumbering the property. (The Partnership had previously paid a fee of approximately $165,000 (included in interest expense) for an extension of the maturity of the loan.) The remaining proceeds will be used to repay borrowings from an affiliate of Realty and for reserves to fund future leasing costs at the Partnership's other properties. The closings of the sale of one of the remaining parcels of the land is scheduled to occur in April 1996, and the closing of the sale of the final parcel is scheduled to occur no later than May 1997. Pursuant to the Agreement of Sale, the Partnership may continue to market the final parcel prior to the closing date of the sale of that parcel. If the final parcel is sold to a third party, the excess of the proceeds from such sale over the purchase price otherwise to be paid by Hill Partners, Inc. will be divided between the Partnership and Hill Partners, Inc. The buildings owned by the Office/R&D Building Partnership were encumbered by a mortgage loan which was cross-collateralized and cross- defaulted with loans on approximately 94 projects owned by the Partnership's joint venture partner. Because certain of the projects failed to make scheduled principal payments, in December 1994, the lender declared a default. In January 1995, the Partnership's joint venture partner placed 46 of its properties, including the Office/R&D Partnership, under bankruptcy protection. The Partnership did not consent to the bankruptcy filing. The joint venture partner subsequently submitted a plan of reorganization which was approved by the bankruptcy court in November. The reorganization plan required the Partnership to contribute additional equity to the joint venture in order to retain its interest in the Office/R&D Building Partnership. The Managing General Partner believed that several terms of the plan of reorganization were not favorable to the Partnership and that additional investment was not justified and, accordingly did not contribute additional equity. As a result, the Partnership lost its interest in the buildings and the Office/R&D Building Partnership. Since the mortgage loan on the four office/R&D buildings exceeded their carrying value, the loss of the buildings resulted in a non-cash gain of $1,938,645 which was reported as an extraordinary item. Net loss and cash flow from operations of the Braker Associates properties in 1995 were approximately $222,000 and $55,000, respectively. Bayport Plaza Hotel, Tampa, Florida Bayport Plaza is a mixed-use development consisting of an office building and a Hyatt hotel. The Partnership owns a 99% general partnership interest in Bayport, Ltd.; a partnership consisting of current and former officers of Realty holds the remaining 1% interest. Bayport, Ltd. owns (after a preferential return as described below) a 92.5% partnership interest in the partnership which owns the hotel (the "Hotel Partnership"); affiliates of the developer of Bayport Plaza (the "Developer") own the remaining 7.5%. Bayport Ltd. also owns a 46.25% interest in a partnership which owns the office building (the "Office Partnership") (see Note 5). Net cash flow from the Hotel Partnership will generally be distributed 99% to Bayport, Ltd. and 1% to the Developer until Bayport, Ltd. has received a 10% cumulative annual preferred return on the amount of its equity invested in the Hotel Partnership. The balance of any net cash flow will be distributed 92.5% to Bayport, Ltd. and 7.5% to the Developer. Capital proceeds will generally be distributed: first, 100% to Bayport, Ltd., until it has received from all distributions a 10% annual return on the amount of its equity invested in the Hotel Partnership; second, 100% to Bayport, Ltd., until it has received an amount equal to its equity invested in the Hotel Partnership; third, 100% to Bayport, Ltd., in the event that the hotel has been previously disposed of by the other of such partnerships, an amount equal to its equity invested in the Office or Hotel Partnership that has not been theretofore returned to Bayport, Ltd.; thereafter, 92.5% to Bayport, Ltd. and 7.5% to the Developer. Taxable income and losses will generally be allocated in accordance with distributions of net cash flow and capital proceeds. An affiliate of Realty provided a partial loan principal and operating deficit guarantee to the first mortgage lender on the hotel. See Note 7. In May 1995, the Partnership and Hyatt Hotel Corporation modified the management agreement for the hotel at Bayport Plaza. Under the terms of the new agreement, Hyatt is entitled to an annual fee equal to a percentage of the hotel's net revenues in excess of annual debt service, not to exceed an overall percentage cap. In addition, Hyatt has agreed to certain expense reductions that should increase the hotel's cash flow. During the second quarter of 1995, the Partnership prepaid $3 million of the hotel mortgage loan from restricted cash reserves. 5. Investments in and Advances to Partnerships Bayport Plaza Office Building, Tampa, Florida In July 1993, the Partnership completed the restructuring of the Office Partnership and the mortgage loan on the property. The Office Partnership received an equity contribution of approximately $6,700,000 from a third-party investor ("Investor"), which was used to pay down principal on the mortgage to $20,000,000 from $24,607,271, to establish reserves for future real estate taxes, and to pay overdue real estate taxes and certain other expenses aggregating approximately $1,900,000. The Investor also committed up to $2.3 million for future leasing costs and operating deficits. During 1995 and 1994, the Investor contributed approximately $509,000 and $621,000 respectively pursuant to its commitment. The Investor is entitled to receive a preferred return on its investment and a 50% participation in cash flow in excess of the preferred return. In addition, the interest rate on the mortgage loan was reduced from 11.75% to 8.5%, and its maturity was extended to September 1, 1999. Prior to the restructuring, Bayport Ltd. owned a 92.5% interest in the Office Partnership. As a result of the restructuring, the Investor obtained a 50% interest in the Office Partnership, and the Bayport Ltd's interest was reduced to 46.25%. Affiliates of the Developer own the remaining 3.75%. The Partnership remains the managing general partner of the partnership, but the Investor has the right to approve certain major decisions and financial policies of the partnership and, under certain circumstances, has the right to cause the partnership to sell the property after July 1998. Effective upon the restructuring, the Partnership ceased consolidating its investment in the Office Partnership and began accounting for it on the equity method. The Investor was entitled to a monthly minimum distribution from net cash flow equal to a 6% annual return on its invested capital in 1993 and 1994, and an 8.5% annual return on its invested capital thereafter. Net cash flow in excess of the minimum distribution will be distributed, first: 20% to Bayport Ltd. and the Developer, based on their respective interests, and 80% to the Investor, until the Investor has received an annual return (including the minimum distribution) of 12% on average capital; and thereafter, 50% to Bayport Ltd. and the Developer, based on their respective interests, and 50% to the Investor. Capital proceeds will generally be distributed: first, 100% to the Investor until it has received its capital and a 14% annual return thereon; second, to Bayport Ltd. and the Developer until they have received distributions equal to those to the Investor; and thereafter, to Bayport Ltd., the Developer and the Investor in proportion to their interests. Taxable income and losses will generally be allocated in accordance with distributions of net cash flow and capital proceeds. As of December 31, 1995 and 1994, the Partnership has contributed $9,145,691 to the Bayport Plaza Office Partnership. The assets, liabilities and partner's capital of the Office Partnership are summarized as follows:
December 31, 1995 1994 Assets Land and building, net $19,786,585 $20,055,060 Other (including cash and cash equivalents of $200 and $209,260) 2,436,585 2,596,587 Total assets $22,223,170 $22,651,647 Liabilities and Partners' Capital Mortgage notes payable $20,000,000 $20,000,000 Other liabilities 741,793 479,884 Partners' capital 1,481,377 2,171,763 Total liabilities and partners' capital $22,223,170 $22,651,647
The results of operations are summarized as follows: Years ended December 31, 1995 1994 1993 Rental Revenues $ 4,343,102 $ 4,174,012 $3,489,860 Expenses Operating 1,802,630 1,496,912 1,661,761 Interest 1,677,016 1,694,223 2,718,415 Depreciation and amortization 1,509,063 1,389,200 1,191,803 4,988,709 4,580,335 5,571,979 Net loss $ (645,607) $ (406,323) $(2,082,119)
The accounting policies of the Office Partnership are consistent with those of the Partnership. The Office Partnership has determined that all leases relating to its properties are operating leases. The lease terms range from three to five years, and generally require tenants to pay their pro rata share of increases in operating expenses. Peninsula Office Park Peninsula/DW Associates, a general partnership owned 98% by the Partnership and 2% by former and current Realty officers and executives, owns a 49.9% general partnership interest in two limited partnerships (the "Joint Venture") which owns Peninsula Office Park, a corporate office park located in San Mateo, California. The remaining 50.1% interest in the Joint Venture is owned by the developer of Peninsula Office Park. Net cash flow from operations of the Joint Venture and net proceeds from a sale or refinancing of the property are to be allocated to the Joint Venture partners in proportion to their ownership interests. For tax purposes, Peninsula/DW Associates is allocated all losses from the Joint Venture until its cumulative loss is equal to approximately $8,000,000, less any cash distributions previously received. Thereafter, profits and losses will be allocated to the partners in proportion to their ownership interests. Profits and losses for tax purposes and net cash flow from operations and net proceeds from a sale or refinancing will be allocated to the partners in Peninsula/DW Associates in accordance with their partnership interests. As of December 31, 1995 and 1994, the Partnership had lent the Joint Venture $210,005 and $170,222, respectively, bearing interest at the prime rate plus 1%. The prime rate as of December 31, 1995 was 8.50%.
The assets, liabilities and partners' capital (deficit) of the Joint Venture are summarized as follows: December 31, 1995 1994 Assets Land and building, net $31,561,713 $31,777,116 Other (including cash and cash equivalents of $3,829,280 and $3,444,428) 7,794,464 7,505,991 Total assets $39,356,177 $39,283,107 Liabilities and Partners' Capital (Deficit) Mortgage notes payable $42,162,985 $41,639,499 Other liabilities 2,043,192 1,378,615 Partners' capital (deficit) (4,850,000) (3,735,007) Total liabilities and partners' capital (deficit) $39,356,177 $39,283,107
The results of operations of the Joint Venture are summarized as follows: Years ended December 31, 1995 1994 1993 Revenues Rental $ 7,683,063 $ 7,139,299 $8,036,461 Other 90,522 173,956 216,319 7,773,585 7,313,255 8,252,780 Expenses Operating 2,591,492 2,606,631 2,698,413 Interest 4,045,746 3,965,753 3,942,166 Depreciation and amortization* 2,291,124 2,158,136 2,720,618 8,928,362 8,730,520 9,361,197 Net loss $(1,154,777) $(1,417,265) $(1,108,417) *Includes $558,000 per year depreciation of the excess of the cost of the Partnership's investment in the Joint Venture over the underlying equity in net assets at the date of acquisition.
The accounting policies of the Joint Venture are consistent with those of the Partnership. The Joint Venture has determined that all leases relating to its properties are operating leases. The lease terms range from three to eleven years, and generally require tenants to pay their pro rata share of increases in operating expenses, including real estate taxes and maintenance costs over base year expenses. In May 1994, the Joint Venture completed a modification of the mortgage loans (which matured in December 1993) on the Peninsula Office Park properties. The interest accrual and pay rates under the loans were reduced from 9.875% to 9.5%, and from 9% to 8.25%, respectively, and the maturity date was extended to December 1, 1996. The Joint Venture may further extend the maturity dates of the modified loans by making partial paydowns of the loans. If the Joint Venture fails to repay the loans at maturity, it has agreed not to file for bankruptcy or contest any foreclosure proceedings brought by the lender. During the loan term, the Joint Venture is prohibited from making cash distributions to its partners. The Partnership paid a $400,000 fee to the lender as part of the restructuring.
Activity in the Excess of Distributions and Losses over Cost of Investments in Partnerships is as follows: Year ended December 31, 1995 1994 1993 Investment at beginning of year $ 6,704,781 $5,624,202 $3,605,450 Equity in losses 845,578 985,769 832,468 Distributions - 94,810 - Contributions (39,784) - - Change from consolidation to equity accounting - - 1,186,284 Investment at end of year $ 7,510,575 $6,704,781 $ 5,624,202
The Partnership was not entitled to any equity in losses of the Office Partnership in 1995, 1994 or 1993. Accordingly, equity in losses includes only the Partnership's 49.9% share of the losses of the Joint Venture, adjusted to include 100% of the depreciation of the excess of the cost of the Partnership's investment in the Joint Venture over the underlying equity in net assets at the date of acquisition.
6. Mortgage Notes Payable Mortgage notes payable are as follows: December 31, 1995 1994 Mortgage note payable secured by the Bayport Plaza hotel: interest at 7 3/4% through December 1994 and 9% thereafter, matures December 31, 1996; interest-only payable monthly through maturity. $42,000,000 $45,000,000 Mortgage note payable secured by 4 office/research & development buildings at Braker Center: interest at 10.9% with a minimum pay rate of 9.65%, matures December 31, 1996; interest-only payable through maturity. In default as of December 31, 1994. See Note 4. - 6,174,949 Mortgage note payable secured by the warehouse at Braker Center: interest at 9.109%, matures July 1, 1995. Principal and interest of $43,000 is payable monthly through maturity. See Note 4. The fair value of the mortgage note payable is approximately equal it its carrying value. The fair value of the mortgage note payable is estimated by discounting future principal and interest payments using current lending rates and market conditions for instruments with similar maturities and credit quality. - 3,762,035 $42,000,000 $54,936,984
The fair value of the mortgage note payable is approximately equal to its carrying value. The fair value of the mortgage note payable is estimated by discounting future principal and interest payments using current lending rates and market conditions for instruments with similar maturity and credit quality. 7. Related Party Transactions Prior to 1991, the Partnership borrowed funds from an affiliate of Realty to fund working capital needs and capital expenditures at certain properties. Interest expense, calculated at the prime rate (8.5% at December 31, 1995) was $263,976 $196,923 and $127,331 in 1995, 1994 and 1993, respectively. At December 31, 1995 and 1994 the balances due to the affiliate, including accrued interest, were $3,094,625 and $2,830,649, respectively. During the third quarter of 1995, the affiliate and the Partnership agreed to amend and restate the Partnership's borrowing relationship. The Partnership agreed to repay all outstanding amounts borrowed from the affiliate, including accrued and unpaid interest, no later than April 1, 1996. In addition, new advances to the Partnership under the Partnership's line of credit were capped at $500,000. The amended and restated credit facility expires July 31, 1996. Proceeds from the sale of Braker Center will be used to repay this borrowing. Additionally, in conjunction with a 1991 refinancing of the hotel at Bayport Plaza, an affiliate of Realty guaranteed a maximum of $5,350,000 of the first mortgage debt. Advances (all of which were made prior to 1994) by the guarantor to the first mortgage lender under this guaranty (which constitute loans from the guarantor to the Partnership which must be repaid by the Partnership) equalled $2,166,098 at December 31, 1995 and 1994. Consequently, the remaining potential liability of the guarantor to the lender under the guaranty as of December 31, 1995 was $3,183,902. Interest expense, calculated at the prime rate, was $244,619, $182,771 and $152,451 in 1995, 1994 and 1993, respectively. At December 31, 1995 and 1994, the balances the Partnership owed the guarantor, including accrued interest, were $2,867,716 and $2,623,097, respectively. No portion of this indebtedness to the affiliate has been repaid to date. The Managing General Partner is entitled to receive a management fee based on a percentage of distributable cash. Because there was no distributable cash, the Managing General Partner did not receive a fee for the years ended December 31, 1995, 1994 or 1993. As of December 31, 1995 and 1994 $422,987 of management fees earned prior to 1992 remained unpaid. Realty performs administrative functions, processes investor transactions and prepares tax information for the Partnership. For 1995, 1994 and 1993, the Partnership incurred fees of $203,967, $178,160 and $217,714, respectively for these services. As of December 31, 1995 and 1994, the balances due to Realty were $171 and $835,932, respectively. An affiliate of the Partnership's joint venture partner at Braker Center had funded shortfall loans to the property. In 1994, the balance due to the affiliate of $19,200 was repaid. Entities controlled by officers of Realty earned approximately $36,000 and $85,000, respectively, for 1994 and 1993, for providing asset management services. In May 1994, such entities agreed to terminate these fees. 8. Litigation Various public partnerships sponsored by Realty (including the Partnership and its Managing General Partner) have been named as defendants in four class actions lawsuits pending in state and federal courts. The complaints allege a variety of claims, including breach of fiduciary duty, fraud, misrepresentation and related claims, and seek compensatory and other damages and equitable relief. The defendants have not yet responded to the complaints and intend to vigorously defend the actions. It is impossible to predict the effect, if any, the outcome of these actions might have on the Partnership's financial statements. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The Partnership is a limited partnership which has no directors or executive officers. The directors and executive officers of the Managing General Partner are as follows:
Position with the Name Managing General Partner William B. Smith Chairman of the Board of Directors E. Davisson Hardman, Jr. President and Director Lawrence Volpe Controller, Assistant Secretary and Director Ronald T. Carman Secretary and Director
All of the directors have been elected to serve until the next annual meeting of the shareholder of the Managing General Partner or until their successors are elected and qualify. Each of the executive officers has been elected to serve until his successor is elected and qualifies. William B. Smith, age 52, is a Managing Director of Dean Witter Realty, Inc. and has been with Dean Witter Realty Inc. since 1982. He is an Executive Vice President of Dean Witter Reynolds Inc. E. Davisson Hardman, Jr., age 46, is a Managing Director of Dean Witter Realty Inc, and has been with Dean Witter Realty Inc. since 1982. Lawrence Volpe, age 48, is a Director and the Controller of Dean Witter Realty Inc. He is a Senior Vice President and Controller of Dean Witter Reynolds Inc., which he joined in 1983. Ronald T. Carman, age 44, is a Director and the Secretary of Dean Witter Realty Inc. He is a Senior Vice President and Associate General Counsel of Dean Witter, Discover & Co. and of Dean Witter Reynolds Inc., which he joined in 1984. There is no family relationship among any of the foregoing persons. ITEM 11. EXECUTIVE COMPENSATION. The General Partners are entitled to receive a share of cash distributions, when and as cash distributions are made to the Limited Partners, and a share of taxable income or tax loss. Descriptions of such distributions and allocations are contained in Item 5 above. The General Partners have not received cash distributions for the period 1988 through 1995. As of December 31, 1995, the general partners have deferred receipt of cash distributions of $262,316. The General Partners and their affiliates were paid certain fees and reimbursed for certain expenses. Information concerning such fees and reimbursements are contained in Note 7 to the Consolidated Financial Statements in Item 8 above. The directors and executive officers of the Partnership's Managing General Partner received no renumeration from the Partnership. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. (a) No person is known to the Partnership to be the beneficial owner of more than five percent of the Units. (b) The executive officers and directors of the Managing General Partner own the following Units as of December 31, 1995:
Amount and Nature of Title of Class Name of Beneficial Owner Beneficial Ownership Limited William B. Smith * Partnership Interests E. Davisson Hardman, Jr. * All directors and executive * officers of the Managing General Partner, as a group
*Owns, by virtue of ownership of limited partnership interests in the Associate General Partner, less than 1% of the Units of the Partnership. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. As a result of their being partners of a limited partnership which is the limited partner of the Associate General Partner, certain current and former officers and directors of the Managing General Partner also own indirect general partnership interests in the Partnership. The Partnership Agreement of the Partnership provides that cash distributions and allocations of income and loss to the general partners be distributed or allocated 50% to the Managing General Partner and 50% to the Associate General Partner. The general partners' share of cash distributions and income or loss is described in Item 5 above. All of the outstanding shares of common stock of the Managing General Partner are owned by Realty, a Delaware corporation which is a wholly owned subsidiary of Dean Witter, Discover & Co. The general partner of the Associate General Partner is Dean Witter Realty Growth Properties Inc., which is a wholly-owned subsidiary of Realty. The limited partner of the Associate General Partner is LSP, L.P., a Delaware limited partnership. Realty and certain current and former officers and directors of the Managing General Partner are partners of LSP, L.P. Additional information with respect to the directors and executive officers and compensation of the Managing General Partner and affiliates is contained in Items 10 and 11 above. The General Partners and their affiliates were paid certain fees and reimbursed for certain expenses. In addition, affiliates of the General Partners have ownership interest in certain properties. Information concerning these transactions is contained in the Notes to Consolidated Financial Statements in Item 8 above. The Partnership believes that the payment of fees and the reimbursement of expenses to the General Partners and their affiliates are on terms as favorable as would be obtained from unrelated third parties. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) The following documents are filed as part of this Annual Report: 1. Financial Statements (see Index to Financial Statements filed as part of Item 8 of this Annual Report). 2. Financial Statement Schedule (see Index to Financial Statements filed as part of Item 8 of this Annual Report). 3. Exhibits (3)(a) Amended and Restated Agreement of Limited Partnership dated as of July 12, 1985 set forth in Exhibit A to the Prospectus included in Registration Statement Number 2- 96767 is incorporated herein by reference. (3)(b) Certificate of Limited Partnership dated as of July 12, 1985 incorporated by reference in Registration Statement Number 2-96767 is incorporated herein by reference. (4)(a) Amended and Restated Agreement of Limited Partnership dated as of July 12, 1985 set forth in Exhibit A to the Prospectus included in Registration Statement Number 2- 96767 is incorporated herein by reference. (4)(b) Certificate of Limited Partnership dated as of July 12, 1985 incorporated by reference in Registration Statement Number 2-96767 is incorporated herein by reference. (9) Not applicable. (10)(a) Partnership Agreement of TWC Ten, Ltd. was filed as Exhibit 10(b) to Registration Statement No. 2-96767 and is incorporated herein by reference. (b) Partnership Agreement of TWC Eleven, Ltd. was filed as Exhibit 10(c) to Registration Statement No. 2-96767 and is incorporated herein by reference. (c) Amended and Restated Partnership Agreement of Bayport, Ltd. filed as Exhibit b to Registrant's report on Form 8- K, dated July 15, 1985 (Commission File No. 0-18151), is incorporated herein by reference. (d) General Partnership Agreement of TWC Eleven, Ltd. dated as of August 29, 1985. (e) First Amendment to the General Partnership Agreement of TWC Eleven, Ltd. dated as of June 19, 1987. (f) Second Amended and Restated Agreement of Limited Partnership of TWC Ten, Ltd. dated as of July 19, 1993. (g) Partnership Agreement of Braker Lane III Associates was filed as Exhibit 10(a) to Registration Statement No. 2- 96767 and is incorporated herein by reference. (h) Amended and Restated Partnership Agreement of L.S. Braker Associates filed as Exhibit b to Registrants report on Form 8-K dated July 15, 1985 (Commission File No 0-18151) is incorporated herein by reference. (i) Partnership Agreement of Peninsula/DW Associates dated December 27, 1985 filed as Exhibit c to Registrants' report on Form 8-K dated December 27, 1985 (Commission File No 0-18151) is incorporated herein by reference. (j) Amended and Restated Agreement of Limited Partnership of Campus Drive Investment Company, dated as of December 27, 1985. (k) Amended and Restated Agreement of Limited Partnership of Peninsula Office Park, dated as of December 27, 1985. (l) Agreement of Sale, dated August 3, 1995, with respect to the sale of the warehouse and the undeveloped land at Braker Center filed as Exhibit 2 to the Registrant's report on Form 8-K dated September 1, 1995 (Commission File No. 0-18151) and is incorporated herein by reference. (11) Not applicable. (12) Not applicable. (13) Not applicable. (16) Not applicable (18) Not applicable. (19) Not applicable. (21) Subsidiaries: TWC Eleven Limited Partnership, a Florida Limited Partnership. L.S. Braker Associates, a Texas Limited Partnership. (22) Not applicable. (23) Not applicable. (24) Not applicable. (27) Financial Data Schedule. (28) Not applicable. (99) Not applicable. (b) No Forms 8-K were filed by the Partnership during the last quarter of the period covered by this report. (c) See 3a. above. (d) 1. Financial Statements of TWC Ten Limited Partnership an office building located in Tampa, Florida. To be filed when received from TWC Ten Limited Partnership. 2. Financial Statements of Peninsula Office Park, an office complex located in San Mateo, California. To be filed when received from Peninsula Office Park.
SCHEDULE III DEAN WITTER REALTY GROWTH PROPERTIES, L.P. Real Estate and Accumulated Depreciation December 31, 1995 Initial cost to Partnership (A) Costs Capitalized Buildings & Subsequent to Description Encumbrances Land Improvements Total Acquisition Warehouse Austin, TX $ - $ 666,455 $3,181,552 3,848,007 $ 1,090,568 Office/R&D Austin, TX - - - - 5,272,231 Land & Improvements Austin, TX - 9,974,576 133,809 10,108,385 (3,919,396) Hotel Tampa, FL 42,000,000 4,836,077 6,341,650 11,177,727 41,946,636 $42,000,000 $15,477,108 $ 9,657,011 25,134,119 $ 44,390,039
Gross Amount at which Carried at End of Period (B) Amount Sold Writeoff of Foreclosed or Fully reclassified to Depreciated Real Estate Buildings & Description Assets Held for Sale Land Improvements Total Warehouse Austin, TX $ - $(4,938,575) $ - $ - $ - Office/R&D Austin, TX - (5,272,231) - - - Land and Improvements Austin, TX - (6,188,989) - - - Hotel Tampa, FL (1,212,412) - 4,658,353 47,253,598 51,911,951 $ (1,212,412) $(16,399,795) $4,658,353 $47,253,598 $51,911,951 /TABLE
Life on which Depreciation Accumulated in Latest Income Depreciation Date of Date Statement is Description (C) Construction Acquired Computed Warehouse Austin, TX $ - 1985 July 1985 40 years Office/R&D Austin, TX - 1986 July 1985 40 years Land and Improvements Austin, TX - 1985 July 1985 N/A Hotel Tampa, FL 20,984,839 1985 July 1985 40 and 15 years $20,984,839
Notes: (A) The initial cost includes the purchase price paid by the Partnership and acquisition fees and expenses. There is no difference between cost for financial reporting purposes and cost for federal income tax purpose. (B) Reconciliation of real estate owned at December 31: 1995 1994 1993 Balance at beginning of period $68,852,278 $72,046,998 $102,378,331 Additions during period: Improvements 671,880 589,225 1,277,638 Write-offs (1,212,412) - (1,406) Other - - - Real estate lost through foreclosure - - - Real estate lost through transfer of Partnership interest - (3,783,945) - Sale of real estate - - (2,975,644) Transfer to real estate held for sale (11,127,564) - - Change from consolidation to equity accounting (5,272,231) - (28,631,921) Balance at end of period $ 51,911,951 $ 68,852,278 $ 72,046,998 /TABLE
(C) Reconciliation of accumulated depreciation: 1995 1994 1993 Balance at beginning of period $22,452,497 $20,687,639 $24,615,633 Depreciation expense 2,119,206 2,129,520 3,031,354 Retirements (1,212,412) - - Write-off due to foreclosure - - - Write-off due to transfer of Partnership interest - (364,662) - Write-off due to sale of real estate (1,262,366) - (140,656) Change from consolidation to equity accounting (1,112,086) - (6,818,692) Balance end of period $20,984,839 $ 22,452,497 $ 20,687,639 /TABLE SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DEAN WITTER REALTY GROWTH PROPERTIES, L.P. By: Dean Witter Realty Growth Properties Inc. Managing General Partner By: /s/E. Davisson Hardman, Jr. Date: April 1, 1996 E. Davisson Hardman, Jr. President By: /s/Lawrence Volpe Date: April 1, 1996 Lawrence Volpe Controller (Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. DEAN WITTER REALTY GROWTH PROPERTIES INC. Managing General Partner /s/William B. Smith Date: April 1, 1996 William B. Smith Chairman of the Board of Directors /s/E. Davisson Hardman, Jr. Date: April 1, 1996 E. Davisson Hardman, Jr. Director /s/Lawrence Volpe Date: April 1, 1996 Lawrence Volpe Director /s/Ronald T. Carman Date: April 1, 1996 Ronald T. Carman Director
Exhibit Index for Dean Witter Realty Growth Properties, L.P. Exhibit No. Description Sequential ____________ __________ Page No. (3)(a)* Amended and Restated Agreement of Limited Partnership dated as of July 12, 1985 set forth in Exhibit A to the Prospectus included in Registration Statement Number 2-96767 is incorporated herein by reference. (3)(b)* Certificate of Limited Partnership dated as of July 12, 1985 incorporated by reference in Registration Statement Number 2- 96767 is incorporated herein by reference. (4)(a)* Amended and Restated Agreement of Limited Partnership dated as of July 12, 1985 set forth in Exhibit A to the Prospectus included in Registration Statement Number 2-96767 is incorporated herein by reference. (4)(b)* Certificate of Limited Partnership dated as of July 12, 1985 incorporated by reference in Registration Statement Number 2- 96767 is incorporated herein by reference. (10)(a)* Partnership Agreement of TWC Ten, Ltd. was filed as Exhibit 10(b) to Registration Statement No. 2-96767 and is incorporated herein by reference. (10)(b)* Partnership Agreement of TWC Eleven, Ltd. was filed as Exhibit 10(c) to Registration Statement No. 2-96767 and is incorporated herein by reference. (10)(c)* Amended and Restated Partnership Agreement of Bayport, Ltd. filed as Exhibit b to Registrant's report on Form 8-K, dated July 15, 1985 (Commission File No. 0-18151), is incorporated herein by reference. (10)(d) Partnership Agreement of TWC Eleven, Ltd. dated as of August 29, 1985. (10)(e) First Amendment to the General Partnership Agreement of TWC Eleven, Ltd. dated as of June 19, 1987. (10)(f) Second Amended and Restated Agreement of Limited Partnership of TWC Ten, Ltd. dated as of July 19, 1993. (10)(g)* Partnership Agreement of Braker Lane III Associates was filed as Exhibit 10(a) to Registration Statement No. 2-96767 and is incorporated herein by reference. (10)(h)* Amended and Restated Partnership Agreement of L.S. Braker Associates filed as Exhibit b to Registrants report on Form 8-K dated July 15, 1985 (Commission File No 0-18151) is incorporated herein by reference. (10)(i)* Partnership Agreement of Peninsula/DW Associates dated December 27, 1985 filed as Exhibit c to Registrants' report on Form 8-K dated December 27, 1985 (Commission File No 0-18151) is incorporated herein by reference. (10)(j) Amended and Restated Agreement of Limited Partnership of Campus Drive Investment Company, dated as of December 27, 1985. (10)(k) Amended and Restated Agreement of Limited Partnership of Peninsula Office Park, dated as of December 27, 1985. (10)(l)* Agreement of Sale, dated August 3, 1995, with respect to the sale of the warehouse and the undeveloped land at Braker Center filed as Exhibit 2 to the Registrant's report on Form 8-K dated September 1, 1995 (Commission File No. 0-18151) and is incorporated herein by reference. *incorporated by reference
EX-10 2 Exhibit 10(d) _____________ GENERAL PARTNERSHIP AGREEMENT OF TWC ELEVEN, LTD., A FLORIDA GENERAL PARTNERSHIP This Partnership Agreement is entered into this ___ day of August, 1985 by and between TWC FOURTEEN, LTD., a Florida limited partnership, and BAYPORT, LTD., a Florida general partnership, comprised of Liberty Street/Bayport, Ltd., a Florida limited partnership and DEAN WITTER REALTY GROWTH PROPERTIES, L.P., a Delaware limited partnership. W I T N E S S E T H: WHEREAS, on May 28, 1985 TWC FOURTEEN, LTD. as general partner and BAYPORT, LTD. as limited partner entered into an amended and restated agreement of limited partnership of TWC ELEVEN, LTD. WHEREAS, pursuant to the terms of the aforesaid Limited Partnership Agreement BAYPORT, LTD. exercised its option to convert its interest from a limited partnership interest into a general partnership interest of TWC ELEVEN, LTD. thereby converting TWC ELEVEN, LTD. from a Florida limited partnership to a Florida general partnership. WHEREAS, it is the intention of the parties hereto for this instrument to constitute the General Partnership Agreement by and between the respective partners. NOW, THEREFORE the parties hereto agree as follows: 1. All of the terms of the amended and restated Agreement of Limited Partnership of TWC ELEVEN, LTD. dated as of May 28, 1985, a copy of which is attached hereto, shall operate as the General Partnership Agreement by and between TWC FOURTEEN, LTD. and BAYPORT, LTD. as general partners. Except as may be expressly limited in the Partnership Agreement annexed hereto all actions of TWC ELEVEN, LTD., as a Florida general partnership shall be carried on and conducted jointly by both of the partners. IN WITNESS WHEREOF, the parties hereto have executed this General Partnership Agreement this __ day of August, 1985. Signed, sealed and delivered in the presence of: TWC FOURTEEN, LTD., a Florida Limited Partnership /s/Jack Wilson By: ___________________________ Jack Wilson, individually, a General Partner of TWC Fourteen, Ltd. -AND- By: TWC ELEVEN, INC., a Florida corporation, a General Partner of TWC Fourteen, Ltd. /s/Jack Wilson By: ______________________ Jack Wilson, President (CORPORATE SEAL) -AND- BAYPORT, LTD., a Florida General Partnership, its General Partner By: LIBERTY STREET/ BAYPORT, LTD., a Florida Limited Partnership, a General Partner of Bayport, Ltd. /s/Warren B. Lane By: _____________________ Warren B. Lane, its General Partner -AND- By: DEAN WITTER REALTY GROWTH PROPERTIES, L.P., a Delaware Limited Partnership, a General Partner of Bayport, Ltd. By: DEAN WITTER REALTY GROWTH PROPERTIES, INC., a Delaware Corporation, a General Partner of Dean Witter Realty Growth Properties, L.P. /s/Warren B. Lane By: _________________________ Warren B. Lane, Senior Vice President (CORPORATE SEAL) EX-10 3 Exhibit 10(e) _____________ FIRST AMENDMENT TO THE GENERAL PARTNERSHIP AGREEMENT OF TWC ELEVEN, LTD. This First Amendment to the General Partnership Agreement of TWC ELEVEN, LTD., a Florida general partnership, is entered into effective as of the 19th day of June, 1987, by and between TWC FOURTEEN, LTD., a Florida limited partnership, as General Partner ("TWC FOURTEEN"), and BAYPORT, LTD., a Florida general partnership, as General Partner ("BAYPORT"), W I T N E S S E T H: WHEREAS, TWC FOURTEEN and BAYPORT are parties to that certain Limited Partnership Agreement dated October 30, 1983, as amended by Amended and Restated Limited Partnership for TWC ELEVEN, LTD., dated October 30, 1984, as amended by Amended and Restated Agreement of Limited Partnership for TWC ELEVEN, LTD., dated effective as of May 28, 1985, and as converted to a general partnership pursuant to Section 7.07 of the aforesaid Amended and Restated Agreement by that certain General Partnership Agreement of TWC ELEVEN, LTD., dated August 29, 1985 ("Hotel Partnership Agreement"), all of which pertain to that certain Hyatt hotel situate in Hillsborough County, Florida, more particularly described therein ("Hotel Partnership"); WHEREAS, a Certificate of Limited Partnership for TWC ELEVEN, LTD., was executed as of December 1, 1983, a First Amendment to Certificate of Limited Partnership was executed as of October 30, 1984, a Second Amendment to Certificate of Limited Partnership was executed as of April 15, 1985, a Third Amendment to Certificate of Limited Partnership was executed on May, 1985, and a Certificate of Voluntary Cancellation of the Limited Partnership was executed as of July 15, 1985; WHEREAS, subsequent to the voluntary cancellation of the Limited Partnership Certificate as described above, TWC ELEVEN, LTD., was continued and is operating as a Florida General Partnership; WHEREAS, contemporaneous with the signing of this First Amendment to the Hotel Partnership Agreement the relevant parties thereto are signing a certain First Amendment to that certain Amended and Restated Limited Partnership Agreement of TWC TEN, LTD., dated as of May 25, 1985, as signed by its general partners TWC TEN, INC., JACK WILSON and BAYPORT ("Office Partnership Agreement") which is an amendment to and restatement of the Limited Partnership Agreement of TWC TEN, LTD., dated December 30, 1985, as amended by First Amendment to Limited Partnership dated June 29, 1983, Second Amendment to Limited Partnership dated October 30, 1984, and Third Amendment to Limited Partnership dated April 15, 1985, all of which pertain to that certain office building contiguous to the Hyatt hotel situate in Hillsborough County, Florida, more particularly described therein ("Office Partnership"); and WHEREAS, the parties hereby desire to amend the Hotel Partnership Agreement for the purpose of providing for the disbursement of Additional Shortfall Loans or Shortfall Loans as described in the Hotel Partnership Agreement, as amended hereby, distribution of Net Cash Flow and Capital Proceeds, and the reallocation of Partnership Interests between the parties hereto. NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged by the parties hereto, the parties hereby agree to amend the Hotel Partnership Agreement as follows: 1. Except as expressly modified herein, all of the terms, conditions, representations, and warranties set forth in the Hotel Partnership Agreement are hereby ratified and confirmed effective as of the date hereof. All capitalized terms as used herein shall have the same meaning as described in the Hotel Partnership Agreement unless expressly defined herein. All reference in the Hotel Partnership Agreement to General Partner shall hereinafter mean TWC FOURTEEN and to Limited Partner shall hereinafter mean BAYPORT. Reference herein to Wilson General Partners and Wilson Partners shall have the same meaning as described in the Office Partnership Agreement. 2. The parties hereby acknowledge that BAYPORT has previously exercised its rights under the provisions of Section 7.07 of the Hotel Partnership Agreement to effect the conversion of TWC ELEVEN, LTD., from a Limited Partnership to a General Partnership. All of the terms and provisions of Section 7.07 as it applies to such conversion have been in effect as of the date of the conversion as described above. 3. The term "Partnership Interest" as defined in Section 1.01 of the Hotel Partnership Agreement is hereby modified to reflect that BAYPORT shall have a ninety-two and one-half percent (92.5%) interest and TWC FOURTEEN shall have a seven and one-half percent (7.5%) interest in the Hotel Partnership. The interest in the Hotel Partnership of TWC FOURTEEN shall only be adjusted in the event of a material default as described in Section 4.03(c)(x) herein. 4. Section 3.01 of the Hotel Partnership Agreement is modified by providing that the Hotel Partnership shall be managed by TWC FOURTEEN and BAYPORT in accordance with the terms as set forth in the Hotel Partnership Agreement. 5. Section 3.03 of the Hotel Partnership Agreement, titled "Limitations on General Partner," is hereby now described as Section 3.03-A, "Limitations on General Partner," and subparagraph (a) of Section 3.03 is deleted in its entirety. 6. A new section Section 3.03-B, titled "Rights of Bayport," is hereby added to the Hotel Partnership Agreement. Section 3.03-B shall read as follows: "Notwithstanding anything herein to the contrary, BAYPORT shall have the sole power and authority acting on behalf of the Partnership to sell, lease, assign, exchange, pledge, mortgage, finance, refinance or otherwise encumber, transfer or dispose of all or any portion of the Property, or any of the other properties or assets of the Partnership or any interest in any of the foregoing or enter into any amendment, modification, termination or waiver pertaining thereto, or to amend or modify the Financing Documents." 7. Section 3.10 of the Hotel Partnership Agreement is hereby modified by deleting the Section in its entirety and inserting in lieu thereof the following: "The Partners recognize that BAYPORT will be treated as "Tax Matters Partner" of the Partnership pursuant to Section 6231(a)(7) of the Code. BAYPORT shall take such action as may be necessary to constitute TWC FOURTEEN a "notice partner" within the meaning of Section 6231(a)(8) of the Code. BAYPORT shall keep TWC FOURTEEN informed of all material matters that may come to the attention of BAYPORT in its capacity as Tax Matters Partner by giving TWC FOURTEEN notice thereof." 8. Section 3.11 of the Hotel Partnership Agreement is hereby modified by adding the following to the end thereof: "Notwithstanding anything herein to the contrary, TWC FOURTEEN may be converted to a limited partner of the Partnership at any time and for any reason at the sole and absolute discretion of BAYPORT. The conversion to a limited partner shall take place within five (5) days after written notice of such conversion is received by TWC FOURTEEN from BAYPORT. Contemporaneous with such conversion the Partnership shall be converted from a General Partnership to a Limited Partnership. TWC FOURTEEN hereby grants to BAYPORT a power of attorney for the sole purpose of BAYPORT signing on behalf of TWC FOURTEEN any and all documents necessary to be signed by TWC FOURTEEN with respect to the conversion of TWC FOURTEEN to a limited partner. Subsequent to the conversion of TWC FOURTEEN to a limited partner pursuant to this section TWC FOURTEEN shall remain liable as required by law for all obligations incurred by the Hotel Partnership during the period of time that TWC FOURTEEN was a general partner thereof." 9. Section 4.03 of the Hotel Partnership Agreement is hereby modified by adding the following as Section 4.03(c) thereof: "Section 4.03(c). (i) Shortfall Loans are required to be funded on a seventy-five percent (75%) and twenty-five percent (25%) ratio, respectively, by BAYPORT and TWC FOURTEEN pursuant to Section 4.03 of the Hotel Partnership Agreement and by BAYPORT and WILSON PARTNERS pursuant to Section 4.03 of the Office Partnership Agreement. As of June 18, 1987, BAYPORT has funded Shortfall Loans in the amount of One Million Nine Hundred Two Thousand Six Hundred Eighty-Five and No/100 Dollars ($1,902,685.00) while TWC FOURTEEN and WILSON PARTNERS have funded Three Hundred Eight Thousand One Hundred Twenty-Seven and No/100 Dollars ($308,127.00) in Shortfall Loans. The amount funded as Shortfall Loans by BAYPORT include all DW Advances made pursuant to the terms of the Hotel Partnership Agreement and Office Partnership Agreement which were converted from DW Advances to Shortfall Loans but not interest on such DW Advances. (ii) In order to achieve the ratio of seventy-five percent to twenty-five percent (75%/25%) funding of Shortfall Loans as required prior to the effective date hereof TWC FOURTEEN and/or WILSON PARTNERS shall fund from its deferred fee as described in Section 4.03(c)(vi) hereof a Shortfall Loan to satisfy the next sum of Three Hundred Twenty-Six Thousand One Hundred One and No/100 Dollars ($326,101.00) required to be funded as a Shortfall Loan. (iii) Subsequent to the funding of the Shortfall Loan described in Section 4.03 (c)(ii) the next One Million Three Hundred Sixty-Three Thousand Five Hundred Forty and No/100 Dollars ($1,363,540.00) of Shortfall Loans required to be funded shall be paid by (a) TWC FOURTEEN and/or WILSON PARTNERS funding from its deferred fee as described in Section 4.03(c)(vi) hereof the sum of Three Hundred Forty Thousand Eight Hundred Eighty- Five and No/100 Dollars ($340,885.00) and (b) BAYPORT funding the sum of One Million Twenty-Two Thousand Six Hundred Fifty-Five and No/100 Dollars ($1,022,655.00). (iv) All Shortfall Loan requirements under the Hotel Partnership Agreement and Office Partnership Agreement in excess of the amounts to be funded pursuant to Sections 4.03(c)(ii) and (iii), hereinafter defined as "Additional Shortfall Loans," shall be the sole responsibility of BAYPORT except in the event of a material default by TWC FOURTEEN or WILSON PARTNERS under the terms of the respective Partnership Agreements as hereinafter described. (v) BAYPORT, in its sole discretion, may fund or not fund any or all Shortfall Loans and Additional Shortfall Loans. Except as specifically differentiated herein the term Shortfall Loans as described in the Hotel Partnership Agreement and Office Partnership Agreement shall include Additional Shortfall Loans. (vi) The total of Six Hundred Sixty-Six Thousand Nine Hundred Eighty-Six and No/100 ($666,986.00) in Shortfall Loans to be paid by TWC FOURTEEN and WILSON PARTNERS pursuant to Sections 4.03(c)(ii) and (iii) shall be credited against the balance to be paid to TWC FOURTEEN, or an affiliate thereof, of the deferred fee described in Section 3.05(e) of the Hotel Partnership Agreement which sum was to be distributed pursuant to Section 4.02(a)(ii) thereof. (vii) The Adjusted Net Cash Flow, as herein defined, from either the Hotel Partnership or Office Partnership shall be distributed in accordance with the following priority after first applying such sum generated from either Partnership to pay any Operating Deficits or interest due on underlying mortgage obligations of the other Partnership. (a) Payment of current interest on the Additional Shortfall Loans made to the Partnership that generated the Adjusted Net Cash Flow being distributed; (b) Payment of current interest on the Additional Shortfall Loans made to the other Partnership if not paid by Adjusted Net Cash Flow generated by the other Partnership; (c) Payment of current interest on the Shortfall Loans made to the Partnership that generated the Adjusted Net Cash Flow being distributed; (d) Payment of current interest on the Shortfall Loans made to the other Partnership if not paid by Adjusted Net Cash Flow of the other Partnership; (e) The balance of Adjusted Net Cash Flow shall be applied as follows: (x) Fifty percent (50%) of the remaining Adjusted Net Cash Flow to be disbursed as follows: (i) first to pay accrued interest and then principal on the Additional Shortfall Loans made to the Partnership that generated the Adjusted Net Cash Flow being distributed; (ii) first to pay accrued interest and then principal on the Additional Shortfall Loans made to the other Partnership if not paid by Adjusted Net Cash Flow generated by the other Partnership; (iii) first to pay accrued interest and then principal on the Shortfall Loans made to the Partnership generating the Adjusted Net Cash Flow being distributed; (iv) first to pay accrued interest and then principal on the Shortfall Loans made to the other Partnership if not paid by Adjusted Net Cash Flow generated by the other Partnership; (y) The remaining fifty percent (50%) of the Adjusted Net Cash Flow which is attributed to either the Hotel Partnership or Office Partnership shall be distributed in accordance with the terms of Section 5.02(a) of the respective Partnership Agreements or The term "Adjusted Net Cash Flow" shall mean for the purposes herein the Net Cash Flow without reduction for any principal or interest payments on Shortfall Loans or Additional Shortfall Loans of either Partnership. (viii) In the event of a capital event which results in Adjusted Capital Proceeds as herein defined, the Adjusted Capital Proceeds shall be distributed as follows after first applying such sum generated from either Partnership to pay any Operating Deficits or interest due on underlying mortgage obligations of the other Partnership. (a) Payment of current interest, accrued interest and then principal on the Additional Shortfall Loans made to the Partnership that generated the Adjusted Capital Proceeds being distributed; (b) Payment of current interest, accrued interest and then principal on the Additional Shortfall Loans made to the other Partnership if not paid by Adjusted Capital Proceeds generated by the other Partnership; (c) Payment of current interest, accrued interest and then principal on the Shortfall Loans made to the Partnership that generated the Adjusted Capital Proceeds being distributed; (d) Payment of current interest, accrued interest and then principal on the Shortfall Loans made to the other Partnership if not paid by Adjusted Capital Proceeds of the other Partnership; (e) The remaining Adjusted Capital Proceeds from both the Hotel Partnership and Office Partnership shall be distributed in accordance with the terms of Section 5.02(b) of the Hotel Partnership Agreement and the Office Partnership Agreement. The term "Adjusted Capital Proceeds" shall mean for the purposes herein the Capital Proceeds without reduction for any principal or interest payments on Shortfall Loans or Additional Shortfall Loans. (ix) BAYPORT's agreement to fund, at its sole discretion, one hundred percent (100%) of the additional capital requirements of the Hotel Partnership and Office Partnership by virtue of Additional Shortfall Loans or otherwise, as may be required or determined to be paid by BAYPORT under the terms of the Hotel Partnership Agreement or the Office Partnership Agreement, is expressly contingent upon there being no material default under the terms of the Hotel Partnership Agreement or Office Partnership Agreement by TWC FOURTEEN or WILSON PARTNERS respectively. In the event of a material default under either the Hotel Partnership Agreement or Office Partnership Agreement, BAYPORT shall have the ability to require TWC FOURTEEN and WILSON PARTNERS to fund its twenty-five percent (25%) share of all Additional Shortfall Loans that were advanced by BAYPORT as Additional Shortfall Loans pursuant to Section 4.03(c)(iv). In the event of such material default, notice shall have been provided to TWC FOURTEEN or WILSON PARTNERS, as applicable, pursuant to the terms of the Hotel Partnership Agreement and Office Partnership Agreement, and in the event that such entity has failed to cure such default within any cure period provided for thereunder, either TWC FOURTEEN or WILSON PARTNERS shall be required to immediately fund to BAYPORT twenty-five percent (25%) of the Additional Shortfall Loans funded by BAYPORT pursuant to Section 4.03(c)(iv). This funding will occur within five (5) days of receipt by TWC FOURTEEN or WILSON PARTNERS of written notice of said material default and its failure to cure such default within the applicable cure period, if applicable. (x) To the extent that TWC FOURTEEN or WILSON PARTNERS does not fund its portion of the Additional Shortfall Loans described in Section 4.03(c)(ix) after a material default within the time frame as described therein, then the Partnership Interest in the Hotel Partnership and Office Partnership held by TWC FOURTEEN and WILSON PARTNERS, respectively, shall be reduced by one (1) percentage point for each Forty Thousand Dollars ($40,000.00) of Additional Shortfall Loans not reimbursed to BAYPORT pursuant to the terms of Section 4.03(c)(ix). BAYPORT's percentage of Partnership Interest in both the Hotel Partnership and Office Partnership shall be increased by the amount that TWC FOURTEEN's and WILSON PARTNER's Partnership Interest are diluted as described herein." 10. Section 7.08 of the Hotel Partnership Agreement pertaining to the Buy/Sell provision is hereby modified by expressly limiting the application of such clause to BAYPORT wherein if BAYPORT desires to sell its interest or buy TWC FOURTEEN's interest in the Hotel Partnership BAYPORT may appropriately notify TWC FOURTEEN of its intention. However, TWC FOURTEEN shall not have the right to notify BAYPORT of its desire to sell its interest in the Hotel Partnership unless the Buy/Sell provision is first initiated by BAYPORT. The remaining provisions of the terms of the Buy/Sell provision once notice is so provided by BAYPORT shall apply. 11. With respect to the Construction Cost Overrun guarantee set forth in Section 8.06 of the Hotel Partnership Agreement and Section 8.04 of the Office Partnership Agreement such obligations shall continue to the extent that any overruns are incurred over the amount of Four Hundred Fifty-Three Thousand and No/100 Dollars ($453,000.00) which amount is to be funded by BAYPORT and/or TWC FOURTEEN as either a Shortfall Loan or Additional Shortfall Loan depending on the time period that such disbursement is made, i.e. whether such sums shall be funded pursuant to Sections 4.03(c)(ii), (iii) or (iv). The Construction Cost Overrun guarantee shall be satisfied and TWC FOURTEEN, TWC TEN, INC. and JACK WILSON released from any further liability thereunder upon the completion of installation, construction and repair of the items described in Exhibit "A" to this Amendment. 12. This First Amendment to the General Partnership Agreement of TWC ELEVEN, LTD., supersedes and replaces in all respects the terms, covenants and conditions set forth in that certain letter agreement of addendum dated July 6, 1987, signed by the relevant parties hereto. The parties hereto further acknowledge that except as modified herein all obligations and liabilities of the parties hereto described in the Hotel Partnership Agreement and other parties described in the Hotel Partnership Agreement remain in full force and effect. 13. Section 9.12 of the Hotel Partnership Agreement is hereby modified by providing that the Hotel Partnership Agreement may be modified or amended solely by BAYPORT, without the consent, approval or joinder of TWC FOURTEEN other than a reduction of the Partnership Interest of TWC FOURTEEN which may only be changed as provided for herein. Such amendment shall be evidenced by a writing signed solely by BAYPORT. 14. This First Amendment to the General Partnership Agreement of TWC ELEVEN, LTD., shall be binding on and inure to the benefit of the successors and assigns of the parties hereby. IN WITNESS WHEREOF, the parties hereto have executed this document as of the date described above. Signed, Sealed and Delivered TWC ELEVEN, LTD., a Florida in the Presence of: Limited Partnership, By: TWC FOURTEEN, LTD., a Florida Limited Partnership, /s/Jack Wilson By: _________________________ Jack Wilson, General Partner By: TWC ELEVEN, INC., a Florida Corporation, a General Partner /s/Jack Wilson By: ___________________________ Jack Wilson, President Signed, Sealed and Delivered BAYPORT, LTD., a Florida in the Presence of: General Partnership, By: LIBERTY STREET/BAYPORT, LTD., General Partner By: ____________________________ General Partner EX-10 4 Exhibit (10)(f) SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF TWC TEN, LTD. THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (this "Agreement") of TWC Ten, Ltd., a Florida limited partnership, dated as of July 19, 1993, is entered into by and among BAYROCK REALTY ASSOCIATES L.P., a Delaware limited partnership, as general partner ("TSG"), BAYPORT, LTD., a Florida limited partnership, as general partner ("Bayport"), and the persons and entities identified as limited partners in Exhibit A annexed hereto and hereby made a part hereof (the "Limited Partners"). W I T N E S S E T H : WHEREAS, TWC Ten, Ltd. (the "Partnership") was formed pursuant to that certain Limited Partnership Agreement dated December 30, 1983, as amended by a First Amendment to Limited Partnership Agreement dated June 29, 1984, a Second Amendment to Limited Partnership Agreement dated October 30, 1984, and a Third Amendment to Limited Partnership Agreement dated April 15, 1985, as amended and restated by that certain Amended and Restated Agreement of Limited Partnership dated as of May 28, 1985 (the "Restated Agreement"), and as amended by a First Amendment to the Restated Agreement dated as of May 28, 1985, an additional First Amendment to the Restated Agreement dated as of June 19, 1987, a Second Amendment to the Restated Agreement dated as of December 17, 1991 and a Third Amendment to the Restated Agreement dated as of February 3, 1993 (as so amended, restated and further amended, the "Partnership Agreement"); WHEREAS, the Existing Partners (as hereinafter defined) desire to amend the Partnership Agreement to provide for (i) the admission of TSG as a general partner of the Partnership on the terms and conditions hereinafter set forth, (ii) the admission of Westrock Realty Associates L.P., Ltd. as a limited partner of the Partnership on the terms and conditions hereinafter set forth and (iii) the other matters provided for below; and WHEREAS, the parties hereto desire to amend and restate the Partnership Agreement in its entirety and replace the Partnership Agreement with this Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the undersigned hereby agree as follows: 1. Definitions. As used in this Agreement, the following terms shall have the meanings set forth below: 1.1 "Acquisition Agreement" shall mean the agreement of even date between the TSG Group and Bayport relating to the acquisition by the TSG Group of interests in the Partnership. 1.2 "Act" shall have the meaning set forth in Section 2.1. 1.3 "Act of Insolvency" shall have the meaning set forth in Section 19.3. 1.4 "Additional Capital Contributions" shall mean all contributions hereafter made by the Partners, or any of them, to the capital of the Partnership other than the Mandatory Capital Contribution and Unmatched Capital Contributions. 1.5 "Affiliate," when used in respect of any Person, shall mean a corporation, partnership or other Person which, directly or indirectly, controls, is controlled by or is under the common control with such Person. For the purpose of this definition, control shall mean the ownership of more than 50% of the voting stock of a corporation or more than 50% of all the legal and equitable interests in any other Person, or the possession of the power, directly or indirectly, to direct the management and policies of such Person, whether through the ownership of voting securities, common directors or officers, the contractual right to manage the business affairs of such Person, or otherwise. In addition, with respect to any Partner, "Affiliate" shall also mean a general partner of such Partner, any Person which, directly or indirectly controls such general partner and any Person in which such general partner, directly or indirectly, through one or more intermediaries, is a principal, partner, shareholder, beneficiary or equity owner. 1.6 "Approval Request" shall have the meaning set forth in Section 15.11. 1.7 "Available Net Income" shall have the meaning set forth in Section 11.1 1.8 "Budget Meeting" shall have the meaning set forth in Section 15.3. 1.9 "Building Reserve Account" shall mean an account in the Partnership's name maintained in NationsBank or any other bank selected in the manner provided for in Article 14, which account shall be funded and drawn upon as hereinafter provided, the funds in which shall be invested as provided in Article 14 and, except as otherwise provided in Section 8.1, the balance in which shall not exceed one million dollars ($1,000,000). Said sum of one million dollars ($1,000,000) shall not be reduced by any tax escrows maintained pursuant to the First Mortgage or any substitute First Mortgage placed on the Property in accordance with Section 15.8. 1.10 "Buy-Sell Effective Date" shall have the meaning set forth in Section 21.2. 1.11 "Capital Account" shall have the meaning set forth in subsection 9.1.2. 1.12 "Capital Costs" shall mean, with respect to any period, costs of improvements, repairs, replacements and alterations of or to the Property and other costs incurred in accordance with the applicable provisions of Article 15, which costs, for federal income tax purposes, may not be deducted as an expense but must be capitalized and depreciated or amortized over more than one year, excluding, however, Leasing Costs. "Capital Costs" shall in no event include any Operating Costs. 1.13 "Capital Deficit" for any period shall mean the excess of (a) Capital Costs and Leasing Costs paid or incurred during such period over (b) the sum of the following amounts, if any, to the extent they are then available in accordance with the terms of this Agreement (including, without limitation, Section 7.2.2 in the case of the Supplemental Capital Contribution) to pay such Capital Costs and Leasing Costs: (i) the Gross Revenues for such period, (ii) amounts available in the Building Reserve Account and (iii) the unadvanced portion of the Supplemental Capital Contribution. 1.14 "Capital Deficit Notice" shall have the meaning set forth in subsection 8.2.3. 1.15 "Capital Proceeds" shall have the meaning set forth in Section 12.1. 1.16 "Code" shall mean the Internal Revenue Code of 1986, as amended, or any successor federal income tax statute, including any transition or effective date rules (whether or not codified). 1.17 "Commitment Termination Year" shall have the meaning set forth in subsection 7.2.4. 1.18 "CPI" shall mean the Consumer Price Index, all urban consumers, 1982-84=100, for the Miami-Fort Lauderdale area published by the Bureau of Labor Statistics, U.S. Department of Labor, or if such index ceases to be published, a substitute therefor agreed to by TSG and Bayport. 1.19 "Declaration" shall have the meaning set forth in subsection 15.8.6. 1.20 "Default" shall have the meaning set forth in Section 17.2. 1.21 "Default Loan" shall have the meaning set forth in subsection 7.4.4. 1.22 "dissolved", when used with respect to a Partner, shall have the meaning set forth in Section 19.3. 1.23 "Due Date" shall have the meanings set forth in subsections 7.2.3, 8.2.5 and 8.2.6. 1.24 "Electing Partner" shall have the meaning set forth in Section 21.1. 1.25 "Environmental Laws" shall mean any present or future federal, state and local statutory and common law and any regulation, code, plan, order, decree, judgment, agreement or injunction issued, entered, promulgated or approved thereunder, which is applicable to the Property, imposes a duty in respect thereof on the Partnership and relates to the protection of the environment, including without limitation those relating to emissions, discharges, releases or threatened releases of Hazardous Substances into the environment (including without limitation air, surface water, groundwater or land) or relating to the manufacture, refining, processing, distribution, use, sale, treatment, receipt, storage, disposal, transport or handling of Hazardous Substances, and including without limitation the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"), the Solid Waste Disposal Act, the Toxic Substances Control Act, the Safe Drinking Water Act, the Refuse Act, the Clean Water Act, the Clean Air Act and the Hazardous Materials Transportation Act. 1.26 "event of default" shall have the meaning set forth in Section 17.1. 1.27 "Excess Negative Balance" shall have the meaning set forth in subsection 9.4.6. 1.28 "Existing Partners" shall mean Bayport and those of the Limited Partners which are identified as such on Exhibit A annexed hereto and hereby made a part hereof. 1.29 "Existing Partner Excess" shall have the meaning set forth in subsection 23.3(H). 1.30 "First Mortgage" shall mean that certain first mortgage on the Property dated January 19, 1984, as modified by a certain mortgage modification agreement dated August 28, 1985 and assigned to The Prudential Life Insurance Company of America ("Prudential") by assignment dated August 28, 1985 and as further amended in accordance with the terms of Section 4.03 of that certain Forbearance Agreement dated February 3, 1993 among Prudential, the Partnership and Bayport, as amended through the date of this Agreement (the "Forbearance Agreement"), or any substitute first mortgage placed on the Property in accordance with Section 15.8. The term "First Mortgage" shall also mean and include the note secured by such mortgage and any collateral security documents, including, without limitation, financing statements, security agreements and any assignment of leases and rents, executed and delivered in connection with such mortgage. "First Mortgagee" shall mean Prudential, its successors and assigns or the holder of any substitute First Mortgage placed on the Property in accordance with Section 15.8. 1.31 "General Partners" shall mean (i) TSG and Bayport and their respective successors and permitted assigns, and (ii) if Bayport is converted to a Limited Partner, from and after the date of such conversion TSG and its successors and permitted assigns unless and until Bayport once again becomes a General Partner in accordance with the terms of this Agreement. 1.32 "Governmental Authorities" shall mean all federal, state, county, municipal and local governments, and all departments, commissions, boards, bureaus, agencies and offices thereof, having or claiming jurisdiction over all or any portion of the Property. 1.33 "Gross Revenues" shall mean, with respect to any period, the gross receipts of the Partnership during such period, excluding unforfeited security, damage or similar deposits made by Space Tenants, insurance proceeds (other than rental or business interruption insurance), Capital Proceeds, proceeds of the sale, exchange, transfer, assignment or other disposition of all or substantially all of the Partnership's assets which is an event of dissolution or incident to the liquidation of the Partnership, capital contributions and proceeds of loans (including, without limitation, loans by the Partners) made to the Partnership. 1.34 "Guaranteed Payment" shall mean (i) for each month within each of the first two twelve-month periods commencing on and following the date hereof, an amount equal to 1/12th of 6% of the average outstanding balance during such month of the Unrecovered Capital of the TSG Group and (ii) for each month within each 12- month period or fraction thereafter, an amount equal to 1/12th of 8.5% of the average outstanding balance during such month of the Unrecovered Capital of the TSG Group, each such payment to be made by the Partnership to the TSG Group monthly in arrears on the tenth day of each month, commencing on July 10, 1993, and appropriately prorated for any portion of a month. Interest shall accrue on any Guaranteed Payment not made when due in accordance with the foregoing, at the rate of 14% per annum until paid in full. 1.35 "Hazardous Substances" shall mean collectively any contaminants, pollutants, chemicals, industrial substances, regulated substances, toxic, radioactive or hazardous substances, materials, wastes or constituents, petroleum products, polychlorinated biphenyls, medical wastes, infectious wastes, asbestos, paint containing lead and urea formaldehyde. 1.36 "Hypothetical Capital Account" shall have the meaning set forth in subsection 9.1.2. 1.37 "Improvements" shall mean all buildings, structures and improvements now or hereafter erected on, over or under the Land, together with all walkway and road improvements, parking areas and facilities, landscaping improvements of whatever nature, utility and sewage lines and all apparatus, machinery, devices, fixtures, appurtenances and equipment necessary for the proper operation and maintenance of the foregoing, and all alterations and additions thereto and restorations and replacements thereof. Such buildings and improvements shall include, without limitation, the office building containing approximately 259,500 square feet of rentable area and the 765 parking spaces in a structured parking deck located on the Land at the date of this Agreement. 1.38 "Initial Capital Contribution" shall have the meaning set forth in Section 7.1. 1.39 "Initiating Notice" shall have the meaning set forth in Section 21.1. 1.40 "Internal Rate of Return" shall mean, as of the date of determination, the rate per annum at which all distributions to the TSG Group through such determination date (excluding distributions in respect of Unmatched Capital Contributions and Additional Capital Contributions) must be discounted to the date of this Agreement to cause the present value of such distributions as of the date of this Agreement to equal the sum of the Initial Capital Contribution of the TSG Group and the present value of the Supplemental Capital Contribution of the TSG Group calculated as of the date of this Agreement using the same discount rate. 1.41 "Investor Agreement" shall have the meaning set forth in Section 16.7. 1.42 "Investor Manager" shall have the meaning set forth in Section 16.7. 1.43 "Land" shall mean that certain parcel of land containing approximately 13 acres located at the southwest corner of the intersection of Memorial Highway and Courtney Campbell Causeway in Tampa, Florida. A description of the Land is set forth in Exhibit B annexed hereto and hereby made a part hereof. 1.44 "Laws" shall mean all present or future laws, ordinances, statutes, administrative and judicial orders, rules, regulations and requirements of all Governmental Authorities which may be applicable to the Property. 1.45 "Leasing Costs" shall mean (i) all costs incurred by the Partnership in accordance with the applicable provisions of Article 15 after the date of this Agreement in connection with the leasing of space in the Property (including the renewal or extension of existing Space Leases and the expansion of space demised under a Space Lease) and shall include, without limitation, tenant alteration costs or allowances in lieu thereof, leasing commissions, takeover costs of the existing lease of a new Space Tenant and reasonable attorneys' fees and disbursements, and (ii) all such costs incurred by the Partnership prior to the date of this Agreement in connection with the Space Leases with Microsoft Corp. and/or Merck & Company, Inc. and not paid out of Gross Revenues prior to the date hereof, which costs are listed in Exhibit C hereto. "Leasing Costs" shall in no event include advertising and promotion costs in connection with the leasing of the Property or any other Operating Costs. 1.46 "Leasing Guidelines" shall have the meaning set forth in Section 15.6. 1.47 "Limited Partners" is defined in the introductory paragraph of this Agreement and shall include all other Persons admitted to the Partnership as limited partners in accordance with Section 18.5 or any other provision of this Agreement. 1.48 "Managing General Partner" shall mean Bayport, Ltd., a Florida limited partnership, or any replacement thereof as managing general partner of the Partnership made in accordance with the terms of this Agreement. 1.49 "Mandatory Capital Contribution" shall mean, at any time, the sum of the Initial Capital Contribution and the aggregate amount of the Supplemental Capital Contribution theretofore advanced by the TSG Group to the Partnership as at such time. 1.50 "Minimum Gain" shall mean, at any time, the aggregate amount of gain (of whatever character), if any, that would be realized by the Partnership if, with respect to each nonrecourse liability of the Partnership, the Partnership disposed of the property securing such liability by transferring such property (in a taxable transaction) in full satisfaction of such liability. For purposes of the preceding sentence, the term "nonrecourse liability" shall mean a liability of the Partnership with respect to which no Partner or related person (within the meaning of Regulations Section 1.752-4(b)) bears the economic risk of loss, as determined in accordance with Regulations Section 1.752-2. Each Partner's share of Minimum Gain shall be determined in accordance with Regulations Section 1.704-2(g). 1.51 "Net Effective Rent" shall have the meaning set forth in Section 15.6. 1.52 "net excess insurance proceeds" shall have the meaning set forth in Section 12.6. 1.53 "net income" shall have the meaning set forth in subsection 9.1.1. 1.54 "net losses" shall have the meaning set forth in subsection 9.1.1. 1.55 "net proceeds" shall have the meaning set forth in Section 12.6. 1.56 "Non-Electing Partner" shall have the meaning set forth in Section 21.1. 1.57 "Notices" shall have the meaning set forth in Section 26.1. 1.58 "notice partners" shall have the meaning set forth in Section 13.9. 1.59 "Operating Costs" shall mean, with respect to any period, all costs and expenses of operating, maintaining, protecting and repairing the Property (determined on an accrual basis and, except as hereinafter set forth, in accordance with generally accepted accounting principles consistently applied) incurred by the Partnership in accordance with the applicable provisions of Article 15 and including, without limitation, the following: fees and reimbursement of expenses payable to the property manager; advertising and promotion costs in connection with the leasing of space in the Property; utilities; service contract costs for cleaning, maintenance and the like; cost of repairs (to the extent the same do not constitute Capital Costs); real estate taxes and assessments; interest and principal due and payable under the First Mortgage or any other loan approved as provided in Section 15.8; interest on any loan made by the TSG Group pursuant to subsection 15.5(g); reasonable independent accountants' fees; and reasonable fees of outside counsel in the performance of routine legal matters related to the Property pursuant to this Agreement; but excluding (i) depreciation, amortization of prepaid leasing commissions, loan costs and other pre-paid expenses and other non- cash items, (ii) Capital Costs, (iii) Leasing Costs, (iv) Guaranteed Payments, and (v) amounts deducted in calculating net excess insurance proceeds or net proceeds. 1.60 "Operating Deficit" for any period shall mean the excess of (a) the sum of (i) Operating Costs for such period and (ii) the Guaranteed Payments for such period over (b) the sum of (i) the Gross Revenues for such period, (ii) amounts available in the Building Reserve Account and (iii) the unadvanced portion of the Supplemental Capital Contribution to the extent available for the payment of amounts described in clause (a) hereof pursuant to Section 7.2. 1.61 "Operating Deficit Notice" shall have the meaning set forth in subsection 8.2.1. 1.62 "Other Partner" shall have the meaning set forth in Article 20. 1.63 "Other Party" shall have the meaning set forth in Article 25. 1.64 "Outstanding Additional Capital Contributions" shall mean the excess, if any, of (i) the aggregate amount of Additional Capital Contributions made by the TSG Group or the Existing Partners, as the case may be, as at the time in question over (ii) the aggregate amount of all distributions theretofore made to the TSG Group or the Existing Partners, as the case may be, pursuant to subsection 12.1.6. 1.65 "Outstanding Unmatched Capital Contributions" shall mean the excess, if any, of (i) the aggregate amount of Unmatched Capital Contributions made by the TSG Group or the Existing Partners, as the case may be, as at the time in question over (ii) the aggregate amount of all distributions theretofore made to the TSG Group or the Existing Partners, as the case may be, pursuant to subsection 12.1.5. 1.66 "Partner" shall mean each of the parties to this Agreement and any other Person to which an interest in the Partnership is hereafter transferred, and who is admitted to the Partnership, in accordance with the terms of this Agreement. 1.67 "Partner Nonrecourse Debt Minimum Gain" shall mean, at any time, the aggregate amount of gain (of whatever character), if any, that would be realized by the Partnership if, with respect to each liability (i) that is nonrecourse within the meaning of Regulations Section 1.1001-2, and (ii) with respect to which a Partner or a related person (within the meaning of Regulations Section 1.752-4(b)) bears the economic risk of loss under Regulations Section 1.752-2, the Partnership disposed of the property securing such liability by transferring such property (in a taxable transaction) in full satisfaction of such liability. Each Partner's share of Partner Nonrecourse Debt Minimum Gain shall be as determined in accordance with Regulations Section 1.704-2(i)(5). 1.68 "Partnership" shall mean the limited partnership continued by this Agreement. 1.69 "Partnership Accountants" shall mean the firm of KPMG Peat Marwick and their successors, or any other firm of independent certified public accountants hereafter selected in accordance with the applicable provisions of Section 15.8. 1.70 "Percentage Interest" shall have the meaning set forth in Section 7.3. 1.71 "Permitted Encumbrances" shall mean those defects, charges, liens, encumbrances and other matters set forth on Exhibit D annexed hereto and hereby made a part hereof. 1.72 "Person" shall mean an individual, partnership, corporation, trust or estate, unincorporated association, a Governmental Authority or any other legal entity. 1.73 "Personal Property" shall mean all apparatus, machinery, devices, appurtenances, equipment, furniture, furnishings and other items of personal property used in connection with the operation and maintenance of the Improvements and/or the Property now or hereafter owned or leased by the Partnership. 1.74 "Property" shall mean the Land, together with the Improvements and Personal Property situated thereon or, in the case of Personal Property, used in connection therewith, subject to the Permitted Encumbrances. 1.75 "Purchase Option" shall have the meaning set forth in Section 21.3. 1.76 "Requested Capital Funds" shall have the meaning set forth in subsection 8.2.3. 1.77 "Requested Funds" shall have the meaning set forth in subsection 8.2.5. 1.78 "Requested Operating Funds" shall have the meaning set forth in subsection 8.2.1. 1.79 "Regulations" shall mean the Income Tax Regulations issued under the Code, as such Regulations may be amended from time to time. 1.80 "Sale Option" shall have the meaning set forth in Section 21.3. 1.81 "Selling Partner" shall have the meaning set forth in Article 20. 1.82 "Space Lease" shall mean any lease, sublease, license, concession agreement or any other form of agreement, however denominated, affecting the use and occupancy of the Property or any portion thereof, and all renewals, modifications, amendments and other agreements affecting the same, including, without limitation, all space leases for office or retail use. 1.83 "Space Tenant" shall mean any tenant, subtenant, licensee, concessionaire or other user, occupant or lessee of the Property or any portion thereof under any Space Lease, and any other user or occupant of the Property or any portion thereof. 1.84 "Stated Valuation" shall have the meaning set forth in Section 21.2. 1.85 "Supplemental Capital Contribution" shall have the meaning set forth in Section 7.2. 1.86 "tax matters partner" shall have the meaning set forth in Section 13.9. 1.87 "Title Company" shall have the meaning set forth in subsection 17.1.1. 1.88 "Transfer" shall have the meaning set forth in Section 18.1. 1.89 "TSG Excess" shall have the meaning set forth in subsection 23.3(H). 1.90 "TSG Group" shall mean TSG and the TSG Limited Partners, which shall be the Limited Partners identified as members of the TSG Group in Exhibit A annexed hereto. 1.91 "TSG Leasing Representative" shall have the meaning set forth in Section 15.6. 1.92 "Uncontrollable Expense" shall have the meaning set forth in subsection 15.5(b). 1.93 "Unmatched Capital Contribution" shall have the meaning set forth in subsections 8.2.5(B) and 8.2.6. 1.94 "Unrecovered Capital" shall mean at any given time the excess of (i) the amount of the Mandatory Capital Contribution at such time over (i) all amounts theretofore distributed to the TSG Group pursuant to subsection 12.1.2. 1.95 "Vacant Space" shall have the meaning set forth in Section 15.6. 1.96 "Warranting Party" shall have the meaning set forth in Article 25. 2. Continuance of Partnership. 2.1 The Partners do hereby agree to continue the existence of the Partnership as a limited partnership pursuant to the provisions of the Florida Uniform Limited Partnership Act, as the same may heretofore have been or may hereafter be amended (the "Act"). The business and operations of the Partnership shall be conducted under the name of "TWC Ten, Ltd." 2.2 The Partnership was formed pursuant to a certificate of limited partnership of the Partnership filed pursuant to the Act. Promptly after the execution of this Agreement, the Managing General Partner shall file an amended and restated certificate of limited partnership in the office of the Department of State of the State of Florida pursuant to the Act. The Managing General Partner shall also, from time to time, execute or cause to be executed all such certificates (including limited partnership and fictitious name certificates) or other documents and cause to be done all such filing, recording, publishing or other acts as may be necessary to comply with the Act's requirements for formation and operation of the Partnership as a limited partnership under the laws of the State of Florida. 3. Term. The Partnership shall continue until December 31, 2010, or such earlier date on which the Partnership is terminated in accordance with the terms of this Agreement. 4. Scope of Partnership. The Partnership is and shall be a partnership formed for only the purposes specified in Article 5 and nothing contained in this Agreement shall be deemed to create a partnership between the Partners with respect to any activities whatsoever other than activities within the proper business purposes of the Partnership as specified in Article 5. 5. Purpose. The purposes of the Partnership are to own, operate, mortgage, exchange, lease, encumber, manage, alter, improve and dispose of the Property, and in all respects to act as owner thereof, upon and subject to all of the terms and conditions of this Agreement. The Partnership shall have such powers as are necessary to fulfill its purposes. The Partnership shall not engage in any other business without the prior consent of all Partners. 6. Principal Office; Agent for Service of Process. 6.1 The place of business and principal office of the Partnership shall be in care of Dean Witter Realty, Inc., Two World Trade Center, 64th floor, New York, New York 10048, but other or additional places of business within and without the State of Florida and within the continental United States may be selected from time to time by the Managing General Partner, on Notice to the other Partners. 6.2 The Partnership's registered office within the State of Florida shall be care of CT Corporation System, 1200 South Pine Island Road, Plantation, Florida 33324. The name and address of the registered agent of the Partnership for service of process within the State of Florida shall be CT Corporation System, 1200 South Pine Island Road, Plantation, Florida 33324. In the event that the Person at any time acting as such agent ceases to act as such for any reason, the Managing General Partner shall appoint a substitute agent. The Managing General Partner shall give Notice to the other Partners of the appointment of each such substitute agent promptly after such appointment has been made. Such agent is and shall be the agent of the Partnership upon which any process, notice or demand required or permitted by law to be served on the Partnership may be served. 7. Initial Capital Contribution; Supplemental Capital Contribution; Percentage Interests. 7.1 The TSG Group is this day contributing the sum of $5,339,067.52 in cash to the capital of the Partnership, which sum shall constitute the initial capital contribution (the "Initial Capital Contribution") of the TSG Group. The Initial Capital Contribution of the TSG Group shall be applied as follows: $5,078,481.07 to reduce the outstanding principal balance of the First Mortgage to $20,000,000 and to pay accrued and unpaid interest thereon and $260,586.45 to pay the Accrued Expenses listed on Exhibit E annexed hereto and made a part hereof. 7.2 Subject to the terms and conditions set forth in this Article 7, the TSG Group shall from time to time contribute up to an additional $3,660,932.48 in cash to the capital of the Partnership (the "Supplemental Capital Contribution") at the times and to pay the expenses described in this Section 7.2. 7.2.1 On the date hereof TSG shall contribute $1,506,916.52 of its Supplemental Capital Contribution to the Partnership, such amount to be utilized to pay (a) reasonable costs of due diligence, title insurance premiums and closing costs incurred by the Partnership or the TSG Group in connection with the acquisition by the TSG Group of interests in the Partnership and the entering into of this Agreement and the Acquisition Agreement (except for real estate transfer, stamp or similar taxes, if any, which shall be paid by the Existing Partners) and up to $10,000 payable by the Partnership on account of legal fees and disbursements incurred by Prudential in connection with the modification of the First Mortgage pursuant to the terms of the Forbearance Agreement (it being understood that legal fees and disbursements incurred by Prudential and payable by the Partnership as aforesaid in excess of $10,000 shall be paid by the Existing Partners and legal fees and disbursements incurred by the TSG Group, on the one hand, and the Existing Partners and/or the Partnership, on the other hand, in connection with this Agreement, the Acquisition Agreement and the closing thereunder and the Forbearance Agreement and the modification of the First Mortgage pursuant to the terms thereof shall be paid by the TSG Group and the Existing Partners, respectively), (b) Leasing Costs listed in Exhibit C hereto and paid or incurred prior to the date of this Agreement for or in connection with the Space Leases with Microsoft Corp. and/or Merck & Company, Inc., which Leasing Costs shall be paid to Dean Witter Realty Growth Properties, L.P. in repayment of advances made by it to the Partnership to pay such costs, and (c) $100,000 to be paid to Bayport to reimburse it for an advance, excluding interest thereon, made by it to the Partnership to enable the Partnership to pay such amount to Prudential for an extension to May 15, 1993 of the Termination Date under the Forbearance Agreement referred to in Section 1.30, which amount shall be applied by Bayport to the repayment of the principal amount of a loan made to it by The Taylor Simpson Group. 7.2.2 The balance of the Supplemental Capital Contribution shall be contributed by the TSG Group to the Partnership from time to time, on Notice from the Managing General Partner as hereinafter provided, to pay the following expenses: (A) to the extent that the Gross Revenues and the funds in the Building Reserve Account are at any time insufficient to pay all of the following which are then due, the Supplemental Capital Contribution shall be utilized to pay, to the extent of such insufficiency and in the following order of priority: (i) principal and interest payments on the First Mortgage; (ii) all other Operating Costs; (iii) the Guaranteed Payments; and (iv) Capital Costs; provided, however, that in no event shall more than $377,486.16 in the aggregate of the Supplemental Capital Contribution be utilized pursuant to this subsection 7.2.2(A); and (B) the remaining balance of the Supplemental Capital Contribution shall be utilized to pay Leasing Costs, to the extent that the Gross Revenues and the funds in the Building Reserve Account are insufficient to pay the same in full (it being understood that for all purposes of this Agreement including, without limitation, Section 8.2, the Gross Revenues and funds in the Building Reserve Account shall be applied first to pay the items listed in clauses (i) through (iv) of subsection 7.2.2(A), in the order of priority set forth therein before being utilized for any other purpose). 7.2.3 The TSG Group shall contribute the portion of the Supplemental Capital Contribution specified in subsection 7.2.2 in installments from time to time within 21 days after the giving of Notice from the Managing General Partner to TSG and to The Trustees of Princeton University (the "Due Date" shall be deemed to be the expiration of said 21-day period) specifying the amount of the required installment, the costs or expenses specified in subsection 7.2.2 to be paid with such installment and that such costs or expenses are due or will become due within 60 days after the giving of such Notice; provided, however, that all amounts so called for by the Managing General Partner shall be for the payment of costs or expenses of the nature specified in subsection 7.2.2 which were incurred in accordance with the terms of this Agreement; and provided further, however, that if any amount so called for by the Managing General Partner has not been fully expended to pay the costs and expenses set forth in the Managing General Partner's Notice within 60 days after the giving of such Notice, such unspent amount shall be returned to the TSG Group but may thereafter be called for by the Managing General Partner in accordance with the terms of this Article 7 to the same extent as if such unspent amount had never been advanced by the TSG Group; and provided further, however, that the TSG Group shall have the right to contest in good faith its obligation to advance all or any portion of any installment of the Supplemental Capital Contribution called for by the Managing General Partner pursuant to subsection 7.2.2 by giving Notice to the Managing General Partner on or prior to the Due Date specifying the reasons for such contest by the TSG Group. If TSG gives such a Notice of contest, the period of time within such installment, or such portion thereof, must be paid shall be extended until the matter in contest has been resolved. Promptly after the giving of a Notice of contest, TSG shall meet with Bayport to attempt to resolve the matter in contest or, if that is not feasible, to agree upon an expeditious method of resolving the matter in contest (which may include a declaratory judgment action, arbitration or alternative dispute resolution). Upon a final resolution that all or any portion of such contested installment of the Supplemental Capital Contribution is payable by the TSG Group, such payable amount shall be paid to the Partnership with interest thereon from the Due Date of such installment at the rate of 14% per annum within 15 days after such resolution. Notwithstanding the foregoing, the TSG Group shall not be required to contribute any installment of the Supplemental Capital Contribution specified in subsection 7.2.2 so long as a Default (other than a Default which consists solely of the failure by the Existing Partners to advance all or any portion of Requested Capital Funds in the manner and within the time set forth in Article 8) shall be continuing. 7.2.4 The obligation of the TSG Group to fund any then-unadvanced portion of its Supplemental Capital Contribution shall terminate at the end of a calendar year (the "Commitment Termination Year") if (i) any distribution of Available Net Income for the Commitment Termination Year and also for the calendar year immediately preceding the Commitment Termination Year has been made to the Existing Partners pursuant to Section 11.2 unless (ii) prior to the end of the Commitment Termination Year, the Existing Partners have contributed the entire amount of such distri- bution for the Commitment Termination Year to the capital of the Partnership pursuant to Section 8.1; provided, however, that for the purpose of enabling the Existing Partners to avoid the termination of the aforementioned obligation of the TSG Group, the time within which to satisfy the condition in clause (ii) shall be extended as follows: if any distribution of Available Net Income for the Commitment Termination Year is made pursuant to Section 11.2 within 15 days before the end of or is made after the end of such year, then the Existing Partners shall have the right to contribute such distribution to the capital of the Partnership within 15 days after their receipt thereof. 7.3 On the date hereof the residual interest (the "Percentage Interest") of the TSG Group is 50% and the Percentage Interest of the Existing Partners is 50%. Such Percentage Interests shall be allocated to each of the members of the TSG Group and to each of the Existing Partners as set forth on Exhibit A annexed hereto. The Percentage Interests of the TSG Group and the Existing Partners may be adjusted only pursuant to subsections 8.2.5 and 8.2.6 of this Agreement. 7.4 If the TSG Group shall fail on or before the Due Date to advance in full any installment of the Supplemental Capital Contribution when required to do so under Section 7.2, then so long as such failure has not been cured in the manner provided in Section 7.5, the Existing Partners may at any time exercise one or more of the rights and remedies set forth below (provided that the rights set forth in subsections 7.4.1 and 7.4.3 shall be mutually exclusive): 7.4.1 The Existing Partners may, but shall not be obligated to, initiate the buy-sell provisions set forth in Article 21 in accordance with the terms and provisions thereof. 7.4.2 If the amount which the TSG Group so fails to advance, alone or when added to the amount of any prior uncured default or defaults of the TSG Group in advancing any installment(s) of the Supplemental Capital Contribution, in the aggregate exceeds $100,000 and if, at the time of the latest default, no Default (other than a Default which consists solely of the failure by the Existing Partners to advance all or any portion of Requested Capital Funds in the manner and within the time set forth in Article 8) shall then be continuing, Bayport may, but shall not be obligated to, give Notice to TSG that it elects to exercise its rights under this subsection 7.4.2. Upon the date fixed in such Notice, which date shall not be earlier than the 15th day after the giving of such Notice to TSG (it being understood that the TSG Group may cure such default during such 15-day period and, if it is then the Managing General Partner of the Partnership, remain as such, by paying to the Partnership the amount of such installment(s) of the Supplemental Capital Contribution which the TSG Group has previously failed to advance, together with interest thereon at the rate of 14% per annum from the Due Date of each such installment to the date of such payment), without the necessity of any further act, TSG, if it is then the Managing General Partner of the Partnership, shall cease to be such, Bayport shall thereupon become the Managing General Partner of the Partnership (and if its interest in the Partnership shall theretofore have been converted to that of a Limited Partner, such interest shall once again become that of a General Partner) and TSG shall thereafter have no greater rights with respect to the management of the affairs of the Partnership than it had on the date of this Agreement when Bayport was the original Managing General Partner. The conversion of the interest in the Partnership of TSG from that of Managing General Partner to that of a General Partner and the conversion of the interest of Bayport in the Partnership from that of a Limited Partner to that of Managing General Partner (i) shall not cause the Partnership to be dissolved and the business of the Partnership shall continue and be continued after such conversions and (ii) shall not affect or alter the shares of Available Net Income, Capital Proceeds, net income, net losses, gain, loss, deductions and credits of either TSG or Bayport. In addition, on and after the date fixed in such Notice, unless the TSG Group cures its default in the manner and within the time provided for above in this subsection 7.4.2, and whether or not TSG shall then be the Managing General Partner, TSG shall have no further right to convert the interest of Bayport from Managing General Partner to that of a limited partner, notwithstanding the fact that circumstances may thereafter arise which, but for this sentence, would entitle TSG so to do; provided, however, that the restriction on TSG set forth in this sentence shall not apply if (i) after the date fixed in such Notice, such default of the TSG Group is cured in the manner provided for in Section 7.5 and (ii) at the time such default is cured, or at any time thereafter, the TSG Group does not, by reason of a default by the Existing Partners in funding any Operating Deficit pursuant to subsection 8.2.1 or 8.2.2 and within the time period provided for in subsection 8.2.5, which default is not cured within the time period provided for in subsection 8.2.5(C), receive its Guaranteed Payment when due in any month. 7.4.3 The Existing Partners may, but shall not be obligated to, cause a sale of the Property in accordance with the terms and provisions of Article 20. 7.4.4 The Existing Partners may, but shall not be obligated to, advance to the Partnership an amount equal to the installment of the Supplemental Capital Contribution, or portion thereof, which the TSG Group has failed to advance, which advance shall constitute an installment of the Supplemental Capital Contribution by the TSG Group and a loan (a "Default Loan") by the Existing Partners to the TSG Group. Any such Default Loan shall bear interest at the annual rate of 14%, compounded monthly, shall be recourse to the TSG Group, on a joint and several basis, and until such Default Loan is paid in full, all (i) Guaranteed Payments and all distributions of whatever nature which would otherwise be paid or made by the Partnership to the TSG Group pursuant to this Agreement and (ii) all payments which would otherwise be made by the Existing Partners to the TSG Group pursuant to Section 8.3, shall instead be paid to the Existing Partners, notwithstanding anything to the contrary set forth in this Agreement, and shall be applied first to interest on and then to principal of the Default Loan, but for all other purposes of this Agreement, such payments and distributions shall be deemed to have been received by the TSG Group. 7.4.5 The Existing Partners may exercise any other rights or remedies which such Partners may have at law or in equity, including, without limitation, seeking personal recourse against the TSG Group on a joint and several basis on behalf of the Partnership and themselves for the unpaid installment of the Supplemental Capital Contribution, interest thereon from the Due Date of such installment at the rate of 14% per annum, attorneys' fees and other costs of the Existing Partners. 7.5 If the TSG Group shall fail to advance in full any installment of the Supplemental Capital Contribution when required so to do under Section 7.2 and within the time period provided for in Section 7.4, and if the TSG Group fails to cure such default in the manner and within the applicable time period, if any, provided for in Section 7.4 but such default is subsequently cured as hereinafter provided, the Existing Partners shall have no further right to exercise or to continue to exercise remedies consequent on such default; provided, however, that the provisions of this sentence shall not be applicable to any remedy the exercise of which was completed (or, in the case of the remedies provided for in subsections 7.4.1 and 7.4.3, initiated) by the Existing Partners pursuant to Section 7.4 prior to such payment and shall not serve to reinstate TSG as Managing General Partner if the remedy provided for in subsection 7.4.2 has theretofore been exercised. Any such default by the TSG Group shall be deemed cured upon the occurrence of any of the following: (i) payment in full by the TSG Group of the amount awarded to the Existing Partners in any action instituted by them pursuant to subsection 7.4.5 by reason of such default; (ii) payment in full of any Default Loan made by the Existing Partners by reason of such default, together with all interest due thereon; and (iii) if cure is effected at any time prior to the entry of a judgment in any action instituted by the Existing Partners pursuant to subsection 7.4.5 and no Default Loan has been made by the Existing Partners by reason of such default, payment to the Partnership of the amount of the unpaid installment of the Supplemental Capital Contribution, together with interest thereon from the Due Date thereof at the rate of 14% per annum. 7.6 On or prior to the date of this Agreement the Existing Partners (i) are contributing, and hereby do contribute, to the capital of the Partnership the liabilities set forth on the balance sheet included in the 1992 Financial Statements (as such term is defined in the Acquisition Agreement) in respect of shortfall loans due to them, in the amount of $1,232,516, additional shortfall loans due to them, in the amount of $3,295,259, and accrued interest thereon payable in the amount of $2,331,831.00, and (ii) are causing to be discharged or otherwise satisfied the liability set forth in such balance sheet in respect of shortfall loans due to TWC Eleven, Ltd. in the amount of $829,771. 7.7 The TSG Group hereby jointly and severally represents and warrants to Bayport and the Partnership that the partners of each of Bayrock Realty Associates L.P. and Westrock Realty Associates L.P., Ltd. (a) have committed, and are obligated to fund under the partnership agreements of such partnerships, amounts which in the aggregate equal the unfunded portion at the date hereof of the Supplemental Capital Contribution of the TSG Group, for recontribution by such partnerships to the Partnership and (b) have sufficient assets to fulfill the obligations set forth in clause (a) above. The TSG Group further agrees that the obligations of such partners in the partnership agreements of such partnerships to contribute such funds shall not be amended, modified or waived so long as the TSG Group remains obligated to contribute any portion of the Supplemental Capital Contribution to the Partnership. 8. Additional Capital Contributions; Unmatched Capital Contributions. 8.1 If during any calendar year the Existing Partners shall receive a distribution of Available Net Income pursuant to Section 11.2, the Existing Partners shall have the right, but not the obligation, to contribute the entire amount of such distribution to the capital of the Partnership. If the Existing Partners make such a capital contribution for any calendar year, solely for the purpose of subsection 7.2.4, to the extent of such contribution, the Existing Partners shall not be deemed to have received a distribution of Available Net Income for the calendar year in question. If any such contribution is made by the Existing Partners, the full amount thereof shall be deposited by the Partnership in the Building Reserve Account, notwithstanding the fact that the balance in such account may then equal or exceed $1,000,000. Any capital contribution made by the Existing Partners pursuant to this Section 8.1 shall constitute an Additional Capital Contribution and shall not affect any Partner's Percentage Interest. 8.2 It is understood that the Partnership may from time to time require funds for the ongoing operation, leasing, maintenance and improvement of the Property for which sufficient amounts are not available to it from (a) the Gross Revenues, (b) mortgage and other loans made to the Partnership, (c) the Building Reserve Account and (d) contributions made and to be made by the TSG Group to the capital of the Partnership pursuant to Article 7. In order to help ensure that the Partnership will have required funds at all times, the Partners agree as follows: 8.2.1 If, as and when the Managing General Partner shall determine that funds are, or within the immediately succeeding 60 days will be, required to meet an Operating Deficit of the Partnership, the Managing General Partner shall, by Notice to the Existing Partners (the "Operating Deficit Notice"), with a copy to TSG, specify the amount of what it believes to be the Operating Deficit of the Partnership at such time (such amount being hereinafter called the "Requested Operating Funds") and call upon the Existing Partners to advance the Requested Operating Funds to the Partnership. The Operating Deficit Notice shall itemize how the Requested Operating Funds will be applied. Within 21 days after the date of the giving of the Operating Deficit Notice, the Existing Partners shall advance to the Partnership the Requested Operating Funds. Any funds advanced by the Existing Partners to the Partnership pursuant to this subsection 8.2.1 shall be deemed to be Additional Capital Contributions, and shall not affect any Partner's Percentage Interest. The Existing Partners shall not be personally liable to the Partnership, the TSG Group or any other Person for their failure to advance funds to the Partnership pursuant to this subsection 8.2.1, but if the Existing Partners fail to advance any Requested Operating Funds to the Partnership when due, they shall thereby become subject to the provisions of subsection 8.2.5. 8.2.2 Notwithstanding anything to the contrary hereinbefore contained, TSG, if it is not then the Managing General Partner, shall have the right from time to time, upon its determination in the exercise of reasonable business judgment that funds are, or within the immediately succeeding 60 days will be, needed to meet an Operating Deficit of the Partnership, to give Notice to the Managing General Partner requesting it to issue an Operating Deficit Notice to the Existing Partners, specifying the amount of the Requested Operating Funds which are then required and itemizing how such funds will be applied. If within 10 days after the date of giving of such Notice by TSG, the Managing General Partner has not issued an Operating Deficit Notice to the Existing Partners for the Requested Operating Funds, TSG may issue such Operating Deficit Notice without the consent or approval of the Managing General Partner. Upon the giving of such Operating Deficit Notice by TSG, the Existing Partners shall advance funds to the Partnership in accordance with subsection 8.2.1. Notwithstanding the foregoing, TSG shall not have the right to give either of the Notices provided for in this subsection 8.2.2, or to exercise any of the remedies provided for in subsection 8.2.5 upon the failure of the Existing Partners to advance funds to the Partnership pursuant to this subsection 8.2.2, if and so long as the TSG Group shall be in default of its obligations to advance to the Partnership any installment(s) of the Supplemental Capital Contribution pursuant to Section 7.2 within the time period provided for in Section 7.4. The restriction on TSG set forth in the preceding sentence shall cease to apply (i) after the TSG Group has cured such default pursuant to the applicable provisions of Article 7 or (ii) if the TSG Group shall contest in good faith its obligation to advance the installment of the Supplemental Capital Contribution in question pursuant to subsection 7.2.3, after a final determination is issued in such contest which upholds the TSG Group's position or, if such determination requires payment by the TSG Group of all or part of such installment, then after issuance of such determination and payment by the TSG Group of the amount due pursuant to such determination. 8.2.3 If, as and when the Managing General Partner shall determine that funds are, or within the immediately succeeding 60 days will be, required to meet a Capital Deficit of the Partnership, the Managing General Partner shall, by Notice to all Partners (the "Capital Deficit Notice"), a copy of which shall be sent to The Trustees of Princeton University, specify the amount of what it believes to be the Capital Deficit of the Partnership at such time (such amount being hereinafter called the "Requested Capital Funds") and call upon the TSG Group and the Existing Partners to advance to the Partnership their respective proportionate shares (calculated in accordance with their respective Percentage Interests at the time the Capital Deficit Notice is given) of the Requested Capital Funds. The Capital Deficit Notice shall itemize how the Requested Capital Funds will be applied. Within 21 days after the date of the giving of the Capital Deficit Notice, the TSG Group and the Existing Partners shall advance to the Partnership their respective proportionate shares of the Requested Capital Funds; provided, however, that neither the TSG Group nor the Existing Partners shall be required to contribute Requested Capital Funds if the other of them shall fail to advance its proportionate share of the Requested Capital Funds within the time period set forth above; and provided further, however, that if either the TSG Group or the Existing Partners shall advance its proportionate share of the Requested Capital Funds within such time period and the other of them shall not, the TSG Group or the Existing Partners, whichever has made such advance, shall be entitled to receive a refund of such advance from the Partnership. Unless they become Unmatched Capital Contributions in accordance with subsection 8.2.5 or 8.2.6, any funds advanced by the Partners to the Partnership pursuant to this subsection 8.2.3 and not refunded to them pursuant to the immediately preceding sentence shall be deemed to be Additional Capital Contributions, and shall not affect any Partner's Percentage Interest. Neither the TSG Group nor the Existing Partners shall be personally liable to the Partnership, the other Partners or any other Person for their failure to advance funds to the Partnership pursuant to this subsection 8.2.3, but if either the TSG Group or the Existing Partners shall fail to advance in full when due their proportionate share of the Requested Capital Funds to the Partnership when obligated to do so in accordance with this subsection 8.2.3, the TSG Group or the Existing Partners, as the case may be, shall thereby become subject to the provisions of subsection 8.2.5 or 8.2.6, as applicable. 8.2.4 Notwithstanding anything to the contrary hereinbefore contained, TSG, if it is not then the Managing General Partner, shall have the right from time to time, upon its determination in the exercise of reasonable business judgment that funds are, or within the immediately succeeding 60 days will be, needed to meet a Capital Deficit of the Partnership, to give Notice to the Managing General Partner requesting it to issue a Capital Deficit Notice to the Partners, specifying the amount of the Requested Capital Funds which are then required and itemizing how such funds will be applied. If within 10 days after the date of giving of such Notice by TSG, the Managing General Partner has not issued a Capital Deficit Notice to the Partners for the Requested Capital Funds, TSG may issue such Capital Deficit Notice without the consent or approval of the Managing General Partner. Upon the giving of such Capital Deficit Notice by TSG, the Existing Partners and the TSG Group shall advance funds to the Partnership in accordance with, but subject to the terms of, subsection 8.2.3. 8.2.5 If (a) the Existing Partners shall fail to advance all or any part of the Requested Operating Funds or the Requested Capital Funds (collectively, the "Requested Funds") which they are called upon and requested to advance pursuant to either an Operating Deficit Notice or a Capital Deficit Notice within 21 days after the date of giving of such Notice (the "Due Date" shall be deemed to be the expiration of said 21-day period), but only provided that the Existing Partners have not been excused from the making of such advances pursuant to subsection 8.2.2 or 8.2.3, as applicable, or (b) a Default shall occur under Article 17 (other than a Default arising out of a failure to advance funds referred to in clause (a) above), then and in either event, the TSG Group may at any time thereafter, but prior to such time, if ever, as such failure shall have been cured in the manner provided for in subsection 8.2.5(B) or such Default shall have been cured, exercise (which, in the case of the remedies provided for in subdivisions (A) and (D) of this subsection 8.2.5 shall mean the initiation thereof) one or more of the rights and remedies set forth below (provided that the rights set forth in subdivisions (A) and (D) of this subsection 8.2.5 shall be mutually exclusive): (A) The TSG Group may, but shall not be obligated to, initiate the buy-sell provisions set forth in Article 21 in accordance with the terms and provisions thereof. (B) In the case of a failure by the Existing Partners of the nature described in clause (a) above, and provided that in the case of Requested Capital Funds the TSG Group shall have advanced and not elected to receive a refund of their proportionate share of such funds, the TSG Group may, but shall not be obligated to, contribute to the capital of the Partnership an amount equal to the portion of the Requested Funds which the Existing Partners failed to contribute. In the event the TSG Group shall contribute such funds to the capital of the Partnership, TSG shall promptly thereafter give Notice to Bayport of the making of such contribution, the amount thereof and the date on which it was made. If within 15 days after the giving of such Notice the Existing Partners do not cure such default by paying to TSG the amount of such contribution, together with interest thereon at the rate of 14% per annum from the date such contribution was made to the date of such payment, and provided that the Existing Partners have not theretofore cured such default pursuant to subsection 8.2.5(C) (to the extent applicable), the Percentage Interest of the Existing Partners immediately prior to the making of such contribution by the TSG Group shall be reduced (i) in the case of a failure by the Existing Partners to contribute all or any portion of any Requested Operating Funds, to a percentage equal to the product of such Percentage Interest and the following fraction: $4,000,000 x .75 $4,000,000 + (Amount of current (but not prior) unfunded Requested Operating Funds), or (ii) in the case of a failure by the Existing Partners to contribute all or any portion of their proportionate share of Requested Capital Funds, to a percentage equal to the product of such Percentage Interest and the following fraction: $4,000,000 + (aggregate Additional Capital Contributions and Unmatched Capital Contributions theretofore made by the Existing Partners) (Above numerator) + (Amount of unfunded Existing Partners' proportionate share of current (but not prior) Requested Capital Funds). The Percentage Interest of the TSG Group shall be increased by the same amount by which the Percentage Interest of the Existing Partners is reduced pursuant to this subsection 8.2.5(B). If the Existing Partners cure their default within the 15-day period provided for above, the amount paid by them to the TSG Group (exclusive of interest) shall as of the date the original amount was advanced by the TSG Group constitute an Additional Capital Contribution. If the Existing Partners do not so cure their default, any amount advanced by the TSG Group pursuant to this subsection 8.2.5(B) and, in the case of a default by the Existing Partners in contributing their proportionate share of any Requested Capital Funds, the amount contributed by the TSG Group as its proportionate share of such Requested Capital Funds, shall constitute an Unmatched Capital Contribution. (C) If (i) the Existing Partners shall fail prior to the Due Date to contribute their proportionate share of any Requested Capital Funds when obligated so to do pursuant to subsection 8.2.3 or, if applicable, subsection 8.2.4, such failure shall not have been cured pursuant to subsection 8.2.5(B) (to the extent applicable) and the amount of such default, alone or when added to the amount of any prior defaults of the Existing Partners in contributing any amount of Requested Capital Funds to the Partnership, in the aggregate exceeds $100,000, or (ii) a Default (other than a Default arising out of a failure to contribute funds referred to in clause (i) above) shall have occurred and be continuing, TSG may, but shall not be obligated to, by giving Notice to the Managing General Partner, change and convert the general partnership interest of Bayport to a limited partnership interest in the Partnership. If TSG exercises such right, upon the date fixed in such Notice, which date shall be not earlier than the 15th day after the giving of such Notice to the Existing Partners (it being understood that the Existing Partners may cure a default of the nature described in clause (i) above during such 15-day period and remain Managing General Partner by paying to the Partnership its proportionate share of the Requested Capital Funds in question, together with interest thereon at the rate of 14% per annum from the Due Date thereof to the date of such payment) without the necessity of any further act, the partnership interest of Bayport shall be converted to that of a Limited Partner and TSG shall thereupon become the Managing General Partner of the Partnership. From and after the date of such conversion, (a) TSG shall have all of the Managing General Partner's rights and responsibilities to manage and control the Partnership and all of the other rights and obligations set forth herein with respect to the Managing General Partner and (b) Bayport, as a Limited Partner of the Partnership, shall be restricted as to its right to participate in the management of the Partnership as are all of the other Limited Partners of the Partnership pursuant to the terms and provisions of this Agreement; provided, however, that wherever in this Agreement the consent of Bayport (as opposed to the Managing General Partner) is required to any act, or any other right is afforded to Bayport (as opposed to the Managing General Partner), such consent requirement or other right shall continue in effect notwithstanding the conversion of Bayport's interest in the Partnership to that of a Limited Partner; and provided further, however, that notwithstanding the conversion of Bayport's interest in the Partnership from that of a General Partner to that of a Limited Partner, Bayport shall continue to share Available Net Income, Capital Proceeds, net income, net losses, gain, loss, deductions and credits of the Partnership to the same extent as it did while a General Partner of the Partnership. The conversion of the interest in the Partnership of Bayport from that of a General Partner to that of a Limited Partner shall not cause the Partnership to be dissolved and the business of the Partnership shall continue and be continued after such conversion. Promptly after such conversion, TSG shall prepare and file or cause to be prepared and filed an amendment to the Certificate of Limited Partnership of the Partnership which reflects such conversion. (D) The TSG Group may, but shall not be obligated to, cause a sale of the Property in accordance with the terms and provisions of Article 20. (E) TSG may exercise any other rights or remedies which the TSG Group may have at law or in equity; provided, however, that except as otherwise provided in the Acquisition Agreement, in no event shall the TSG Group be entitled to seek to enforce any personal liability against the Existing Partners, or any of them, by reason of such failure to advance or Default. 8.2.6 If the TSG Group fails to advance any or all of the Requested Capital Funds when required to do so under Section 8.2.3 in response to a Capital Deficit Notice within 21 days after the date of giving of such Notice (the "Due Date" shall be deemed to be the expiration of such 21-day period) and the Existing Partners have advanced and not elected to receive a refund of their proportionate share of such Requested Capital Funds, the exclusive remedy of the Existing Partners shall be that provided for in this subsection 8.2.6. The Existing Partners may, but shall not be obligated to, contribute to the capital of the Partnership an amount equal to the portion of the Requested Capital Funds which the TSG Group failed to contribute. In the event the Existing Partners shall contribute such funds to the capital of the Partnership, Bayport shall give Notice to TSG of the making of such contribution, the amount thereof and the date on which it was made. If within 15 days after the giving of such Notice the TSG Group does not cure such default by paying to Bayport the amount of such contribution, together with interest thereon at the rate of 14% per annum from the date such contribution was made to the date of such payment, the Percentage Interest of the TSG Group immediately prior to the making of such contribution by the Existing Partners shall be reduced to a percentage equal to the product of such Percentage Interest and the following fraction: (Mandatory Capital + (Aggregate Additional Capital Contribution) Contributions and Unmatched Capital Contributions thereto- fore made by the TSG Group) (Above numerator) + (Amount of unfunded TSG Group's proportionate share of current (but not prior) Requested Capital Funds). The Percentage Interest of the Existing Partners shall be increased by the same amount by which the Percentage Interest of the TSG Group is reduced pursuant to this subsection 8.2.6. If the TSG Group shall cure its default within the 15-day period provided for above, the amount paid by the TSG Group to Bayport (exclusive of interest) shall as of the date the original amount was advanced by the Existing Partners constitute an Additional Capital Contribution. If the TSG Group does not so cure its default, any amount advanced by the Existing Partners pursuant to this subsection 8.2.6 and the amount contributed by the Existing Partners as their proportionate share of the Requested Capital Funds as to which the TSG Group is in default shall constitute an Unmatched Capital Contribution. 8.3 The TSG Group shall have the right, but shall not be obligated, at any time after December 31, 1998, either to (A) exercise the buy-sell provisions set forth in Article 21 in accordance with the terms and provisions thereof or (B) cause a sale of the Property in accordance with the terms and provisions of Article 20 if, during calendar years 1997 and 1998, the aggregate amount of Guaranteed Payments due and made to the TSG Group during such two-year period, distributions made to the TSG Group in respect of such two-year period pursuant to Article 11 and distributions made to the TSG Group during such period pursuant to subsections 12.1.1, 12.1.3 and 12.1.7 was not sufficient to have afforded the TSG Group during such two-year period an average annual non- compounded return of 12% on the average amount of its Unrecovered Capital outstanding in each year included therein. The TSG Group shall not have the right to exercise any remedy provided for in this Section 8.3 until and unless TSG shall have given the Existing Partners at least 30 days' prior Notice setting forth the TSG Group's calculation of the return received by the TSG Group in such two-year period, together with the amount which the TSG Group must receive in order to afford it with its 12% return. The Existing Partners shall have the right, within the 30-day period specified above, to pay to the TSG Group the amount required to afford it its 12% return, and if such payment is made, the TSG Group's Notice of exercise of such remedy shall be deemed to have been withdrawn and the basis on which such Notice was given shall be deemed no longer to exist; provided, however, that the amount which the Existing Partners may pay to the TSG Group pursuant to this sentence shall not exceed the aggregate amount of distributions made in respect of such two-year period to the Existing Partners pursuant to Article 11 plus distributions made to the Existing Partners during such two- year period pursuant to subsections 12.1.4 and 12.1.7. Any such payment, if made, shall not constitute a capital contribution of the Existing Partners and shall not affect any Partner's Percentage Interest. 8.4 If any amount of Requested Funds called for by the Managing General Partner pursuant to this Article 8 or by TSG pursuant to subsections 8.2.2 or 8.2.4 has not been fully expended to pay the costs and expenses set forth in the Notice issued by the Managing General Partner or TSG, as applicable, within 60 days after the giving of such Notice, such unspent amount of Requested Funds shall be returned to the Partners contributing such amounts in proportion to the contributions made. 8.5 The provisions of Section 8.2 are intended only to govern the obligations of the Partners inter se, and shall not be enforceable against the Partners by any creditor of the Partnership or of any Partner, or by any party claiming by or through any such creditor. 8.6 Except as expressly provided in Article 7, this Article 8 or in any other Article of this Agreement, no Partner shall be required to make any capital contributions or loans to the Partnership. In no event shall any Additional Capital Contributions or Unmatched Capital Contributions made by the TSG Group reduce the amount of the Supplemental Capital Contribution which the TSG Group is then obligated to make. 8.7 For the purposes of Article 7 and this Article 8, the TSG Group and the Existing Partners shall each be deemed to be one partner with one Percentage Interest. 9. Income and Losses. 9.1 For the purposes of this Agreement: 9.1.1 The terms "net income" and "net losses" for any calendar year, or any fraction thereof, shall mean the net income or net losses of the Partnership, as the case may be, for such calendar year or fraction thereof, in each case including the amount, if any, of tax exempt income received or accrued and taking into account depreciation and amortization of the cost or other basis of Partnership property and expenditures of the Partnership described in Section 705(a)(2)(B) of the Code (including expenditures treated as described in Section 705(a)(2)(B) of the Code under Regulations Sec. 1.704-1(b)(2)(iv)(i)), excluding, however, gain or loss recognized by the Partnership on the sale, exchange or other disposition of any assets of the Partnership or upon a transaction of the nature described in Section 12.1 hereof. The Partnership shall determine all items of net income and net losses in accordance with principles applicable in determining taxable income or loss for federal income tax purposes for partnerships and consistent with accounting methods used by the Partnership in determining taxable income or loss for federal income tax purposes. In calculating net income or net losses for any period, Guaranteed Payments for such period shall be treated as an expense of the Partnership. 9.1.2 The term "Capital Account" shall mean, on the date of this Agreement, zero in the case of each of the Existing Partners (which amount, the parties hereto agree, is the fair market value of the property of the Partnership, net of the amount of the First Mortgage, as of the date hereof and which amount has also been determined after giving effect to (A) the contribution by the Existing Partners to the Partnership of the liabilities set forth in the balance sheet included in the 1992 Financial Statements (as such term is defined in the Acquisition Agreement) in respect of shortfall loans, in the amount of $1,232,516, additional shortfall loans, in the amount of $3,295,259, and accrued interest payable in the amount of $2,331,831, and (B) the discharge or other satisfaction of the liability set forth in such balance sheet in respect of shortfall loans due to TWC Eleven, Ltd. in the amount of $829,771), and, in the case of each member of the TSG Group, the amount contributed to the Partnership by such member on the date hereof. Subsequent to the date of this Agreement, the amount of the Capital Account of each Partner shall be increased by (i) the amount (including the fair market value of any contributed property, net of liabilities to which such property is subject) of all capital contributions, if any, made by such Partner pursuant to Section 7.2, Section 8.1, Section 8.2 or otherwise, (ii) the amount of all net income credited to the Capital Account of such Partner pursuant to Section 9.2, (iii) the amount of all income or gain credited to the Capital Account of such Partner pursuant to Section 9.4 and (iv) the amount of any gain credited to the Capital Account of such Partner pursuant to Sections 12.2 and 23.3, and shall be decreased by (a) the amount of all net losses charged to the Capital Account of such Partner pursuant to Section 9.3, (b) the amount of all Available Net Income distributed to such Partner pursuant to Article 11, (c) all amounts distributed to such Partner pursuant to Articles 12 and 23, and (d) the amount of any loss or deduction charged to the account of such Partner pursuant to Sections 9.4, 12.3 and 23.4. The term "Hypothetical Capital Account" shall mean the Capital Account of a Partner, increased by such Partner's share of Minimum Gain and Partner Nonrecourse Debt Minimum Gain. 9.1.3 If the Percentage Interests in the Partnership of the TSG Group and the Existing Partners are changed pursuant to the terms of this Agreement during any calendar year, then except as may otherwise be required under Section 706 of the Code, the amount of all items to be credited or charged to the Capital Accounts of, and the amount of all items to be distributed to, the TSG Group and the Existing Partners for such entire calendar year in accordance with their respective Percentage Interests in the Partnership shall be allocated to the portion of such year which precedes the date of such change (and if there shall have been a prior change in such calendar year, which commences on the date of such prior change) and to the portion of such calendar year which occurs on and after the date of such change (and if there shall be a subsequent change in such calendar year, which precedes the date of such subsequent change), in proportion to the number of days in each such portion, and the amounts of the items so allocated to each such portion shall be credited or charged to the Capital Accounts of, or distributed to, the TSG Group and the Existing Partners in proportion to their respective Percentage Interests in the Partnership during each such portion of the calendar year in question. 9.1.4 For the purposes of this Article 9 and Articles 12 and 23 it shall be deemed that there are only two partners of the Partnership, the TSG Group and the Existing Partners. Any amounts allocated or distributed to the Existing Partners shall be allocated or distributed among the Existing Partners in such manner as they may agree to among themselves in compliance with the requirements of Code Section 704 and the Regulations thereunder. The Partners included in the Existing Partners have agreed on allocations and distributions among themselves pursuant to an agreement of even date herewith. Any amounts allocated or distributed to the TSG Group shall be allocated or distributed between or among the members of the TSG Group in proportion to their respective Percentage Interests set forth in Exhibit A hereto. 9.2 From and after the date of this Agreement, all net income of the Partnership for each calendar year or fraction thereof shall be credited to the Capital Accounts of the Partners as follows and in the following order of priority: (A) first, to the TSG Group and the Existing Partners in proportion to and up to the amount of Available Net Income distributed to each under subsection 11.2.1 for such calendar year or fraction; (B) next, to the TSG Group and the Existing Partners in proportion to and up to the amount of Available Net Income distributed to each under subsection 11.2.2 for such calendar year or fraction; and (C) any remaining net income shall be credited to the Capital Accounts of the Partners in accordance with Section 23.3 (without reference to the parenthetical clause in the first sentence of said Section); provided, however, that in applying such Section each of the Capital Accounts of the TSG Group and the Existing Partners shall be deemed to have a balance equal to the balance of its or their Hypothetical Capital Account. 9.3 From and after the date of this Agreement, all net losses of the Partnership for each calendar year or fraction thereof shall be charged to the Capital Accounts of the TSG Group and the Existing Partners in accordance with Section 23.4 hereof (without reference to the parenthetical clause in the first sentence of said Section); provided, however, that in applying such Section each of the Capital Accounts of the TSG Group and the Existing Partners shall be deemed to have a balance equal to the balance of its or their Hypothetical Capital Account. 9.4 Notwithstanding any other provision of this Agreement, from and after the date of this Agreement, the following allocations shall be made in the following order of priority: 9.4.1 If the Minimum Gain at the end of any fiscal year or other period of the Partnership is less than the Minimum Gain at the end of the immediately preceding fiscal year or other period, then (before any other allocation of Partnership items for such fiscal year or other period under this Agreement) there shall be credited to the capital account of each Partner items of income and gain for such fiscal year or other period equal to the Partner's share of the net decrease in Minimum Gain, determined in accordance with Regulations Section 1.704-2(g). The items of income and gain referred to in the preceding sentence are to be determined in accordance with Regulations Section 1.704-2(f)(6). This subsection 9.4.1 is intended to comply with the minimum gain chargeback requirement in Regulations Section 1.704-2(f) and shall be interpreted in a manner that is consistent with such intent. 9.4.2 In the event that any Partner unexpectedly receives any adjustments, allocations or distributions described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) that causes a negative balance or increases the negative balance in the Capital Account of such Partner, then items of Partnership gross income and gain shall be allocated to such Partner in an amount sufficient to eliminate such negative balance as quickly as possible; provided, however, that any allocation of income or gain shall be required under this sentence only if and to the extent that adjustments, allocations and distributions under this Agreement (other than this subsection 9.4.2) cause the Capital Account of such Partner to have an Excess Negative Balance at the end of the fiscal year or other period of the Partnership to which such adjustments, allocations and distributions relate. This subsection 9.4.2 is intended to comply with the requirements of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted in a manner that is consistent with such intent. 9.4.3 In the event any Partner has a negative Capital Account at the end of any fiscal year or other period of the Partnership that is in excess of the sum of (i) the amount such Partner is obligated to restore and (ii) the amount such Partner is deemed to be obligated to restore pursuant to the penultimate sentence of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), then items of Partnership income and gain shall be allocated to such Partner in the amount of such excess as quickly as possible. 9.4.4 In the event that any Partner bears the economic risk of loss (within the meaning of Regulations Section 1.752-2) with respect to any nonrecourse loan of the Partnership, then (a) the losses, deductions or Section 705(a)(2)(B) expenditures that are attributable to such nonrecourse loan for any fiscal year or other period shall be allocated to the Partners who bear the burden of such economic risk of loss in accordance with Regulations Section 1.704-2(i), and (b) if in any fiscal year or other period of the Partnership there is a net decrease in Partner Nonrecourse Debt Minimum Gain (such net decrease to be determined in accordance with Regulations Section 1.704-2(i)(4)) attributable to such nonrecourse loan, each Partner with a share of Partner Nonrecourse Debt Minimum Gain attributable to such nonrecourse loan (as determined in accordance with Regulations Section 1.704-2(i)(5)) as of the beginning of such year or other period shall be allocated items of income and gain for such year or other period (and, if necessary, for succeeding periods) equal to that Partner's share of the net decrease in Partner Nonrecourse Debt Minimum Gain. This subsection 9.4.4 is intended to comply with the requirements of Regulations Section 1.704-2(i) and shall be interpreted in a manner that is consistent with such intent. 9.4.5 To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Code Section 734(b) or 743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall, to the extent required by and in a manner consistent with such Regulations, be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such gain or loss shall be allocated to the Partners in a manner consistent with the adjustments to their Capital Accounts required by such Section of the Regulations. 9.4.6 For purposes of this Section 9.4, the term "Excess Negative Balance" shall mean, with respect to any Partner, an amount, equal to the negative balance, if any, of the Capital Account of such Partner, determined after crediting to such Capital Account for this purpose an amount equal to any amount that such Partner is obligated to restore or is deemed obligated to restore under the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) and after charging to such Capital Account for this purpose the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6). This subsec- tion 9.4.6 is intended to comply with Regulations Section 1.704- 1(b)(2)(ii)(d) and shall be interpreted in a manner consistent with such intent. 9.5 Notwithstanding any other provision of this Agreement, gain or loss recognized by the Partnership for federal income tax purposes with respect to any property contributed to the Partnership shall be allocated so as to take account of the difference between the fair market value of such property and its adjusted basis as of the date of such contribution in accordance with Section 704(c) of the Code. 9.6 Notwithstanding anything contained in this Agreement to the contrary, if any income or gain is realized by the Partnership for tax purposes by reason of (a) the contribution by the Existing Partners to the Partnership of the liabilities set forth in the balance sheet included in the 1992 Financial Statements (as such term is defined in the Acquisition Agreement) in respect of shortfall loans, in the amount of $1,232,516, additional shortfall loans, in the amount of $3,295,259, and accrued interest payable in the amount of $2,331,831, or (b) the discharge or other satisfaction of the liability set forth in such balance sheet in respect of shortfall loans due to TWC Eleven, Ltd. in the amount of $829,771, such income or gain shall be allocated to the Existing Partners. 10. Depreciation. The property and assets of the Partnership shall be depreciated for federal income tax purposes in accordance with the Code and, to the extent any elections in respect of depreciation are permitted by the Code, as may be agreed to by the General Partners. 11. Distribution of Available Net Income; Guaranteed Payments. 11.1 As used in this Agreement, the term "Available Net Income" for any calendar year or fraction of a calendar year shall mean the excess, if any, of the Gross Revenues for such year, or fraction thereof, over the following paid or payable in respect of such year or fraction thereof: (a) principal of and interest on the First Mortgage or any other loan approved as provided in Section 15.8, (b) other Operating Costs, (c) Guaranteed Payments, (d) Capital Costs, (e) Leasing Costs and (f) the excess of $1,000,000 over the balance in the Building Reserve Account. 11.2 From and after the date of this Agreement, the Available Net Income of the Partnership for each calendar year or fraction thereof shall be distributed as follows in the following order of priority: 11.2.1 first, an amount of such Available Net Income shall be distributed (i) 20% to the Existing Partners and (ii) 80% to the TSG Group until the TSG Group shall have received on account of the calendar year in question an amount which, when added to the Guaranteed Payments made to the TSG Group on account of such calendar year and any amounts previously distributed to the TSG Group on account of such calendar year pursuant to this Section 11.2 and subsections 12.1.1, 12.1.3 and 12.1.7, a return of 12% on the average amount of the Unrecovered Capital of the TSG Group outstanding during such calendar year, such return to be appropriately apportioned in the case of a partial calendar year; and 11.2.2 the balance, if any, of such Available Net Income shall be distributed to the TSG Group and the Existing Partners in proportion to their respective Percentage Interests in the Partnership. 11.3 All of the Available Net Income of the Partnership for each calendar year or fraction thereof shall be distributed, unless the Managing General Partner and, so long as Bayport is the Managing General Partner, TSG, determine otherwise, as promptly as possible after the close of the calendar year to which such Available Net Income relates; provided, however, that if the annual statements provided for in Section 13.3 for any calendar year indicate that Available Net Income for such year was larger than had been anticipated, an additional distribution on account of such calendar year shall be made promptly after such annual statements are issued. 11.4 If at any time the balance in the Building Reserve Account is less than $1,000,000, the Partnership shall make deposits of Available Net Income (calculated without reference to clause (f) of Section 11.l) in the Building Reserve Account from time to time until the balance of the Building Reserve Account is at least equal to $1,000,000, such deposits to be made periodically during the course of each calendar year. 11.5 The Partnership shall accrue and pay to the TSG Group Guaranteed Payments on a monthly basis in the applicable amount, and at the times, provided for in Section 1.34. 12. Proceeds of Mortgage Refinancing, Partial Condemnation, Etc. 12.1 Any net excess insurance proceeds (other than proceeds of rental or business interruption insurance), net proceeds of mortgage refinancing, partial condemnation, sales of easements, rights of way or similar interests in the property of the Partnership, and any other similar items which in accordance with generally accepted accounting principles are attributable to capital (collectively, "Capital Proceeds", it being understood that for purposes of this Article 12, rents payable to the Partnership under Space Leases shall not be deemed to be Capital Proceeds), shall be distributed as follows and in the following order of priority: 12.1.1 first, there shall be distributed to the TSG Group up to an amount of Capital Proceeds which, when added to all Guaranteed Payments previously paid and all distributions previously made to the TSG Group pursuant to Article 11, this subsection 12.1.1 and subsections 12.1.3 and 12.1.7, results in the TSG Group having received a return of 12% per annum, compounded annually, on the average amount of its Unrecovered Capital outstanding during each year or any partial year between the date of this Agreement and the date of such distribution; 12.1.2 next, there shall be distributed to the TSG Group an amount of Capital Proceeds up to the amount of the Unrecovered Capital of the TSG Group; 12.1.3 next, there shall be distributed to the TSG Group up to an amount of Capital Proceeds which, when added to all Guaranteed Payments previously paid and all distributions previously made to the TSG Group pursuant to Article 11 and subsections 12.1.1, 12.1.2, 12.1.3 and 12.1.7 (including, without limitation, any distributions made to the TSG Group pursuant to subsections 12.1.1 and 12.1.2 contemporaneously with the making of a distribution to the TSG Group pursuant to this subsection 12.1.3), results in the Internal Rate of Return realized by the TSG Group equalling 14% as of the date of such distribution; 12.1.4 next, there shall be distributed to the Existing Partners an amount of Capital Proceeds up to the amount of such proceeds contemporaneously being distributed to the TSG Group pursuant to subsection 12.1.3; 12.1.5 next, an amount of Capital Proceeds, up to an amount equal to the then aggregate amount of the Outstanding Unmatched Capital Contributions of the TSG Group and the Existing Partners, shall be distributed to the TSG Group and the Existing Partners in proportion to the then Outstanding Unmatched Capital Contributions of each; 12.1.6 next, an amount of Capital Proceeds, up to an amount equal to the aggregate amount of the Outstanding Additional Capital Contributions of the TSG Group and the Existing Partners, shall be distributed to the TSG Group and the Existing Partners in proportion to the then Outstanding Additional Capital Contributions of each; and 12.1.7 the balance, if any, of Capital Proceeds shall be distributed to the TSG Group and the Existing Partners in proportion to their respective Percentage Interests in the Partnership. 12.2 From and after the date of this Agreement, any gain realized by the Partnership in connection with any transaction or proceeds of the nature described in Section 12.1 shall be credited to the Capital Accounts of the Partners in accordance with Section 23.3 (without reference to the parenthetical clause in the first sentence of said Section); provided, however, that in applying such Section each of the Capital Accounts of the TSG Group and the Existing Partners shall be deemed to have a balance equal to the balance of its or their Hypothetical Capital Account. 12.3 From and after the date of this Agreement, any loss incurred by the Partnership in connection with any transaction or proceeds of the nature described in Section 12.1 shall be charged to the Capital Accounts of the Partners in accordance with Section 23.4 (without reference to the parenthetical clause in the first sentence of said Section); provided, however, that in applying such Section each of the Capital Accounts of the TSG Group and the Existing Partners shall be deemed to have a balance equal to the balance of its or their Hypothetical Capital Account. the proceeds of the type mentioned herein shall be distributed to the Partners promptly after receipt thereof by the Partnership unless the Managing General Partner and, so long as Bayport is the Managing General Partner, TSG determine otherwise. 12.5 The provisions of this Article 12 shall not apply upon the sale of the Property and the liquidation of the Partnership, it being understood that in such circumstances the provisions of Article 23 shall apply. 12.6 For the purposes of this Article 12, "net excess insurance proceeds" shall mean the gross proceeds of any casualty insurance recovery less (i) the costs of all repairs or restoration of the damage resulting from such casualty, as approved by TSG, (ii) the costs of adjusting the loss and (iii) principal and interest required to be paid as a result of such casualty under the First Mortgage or any other mortgage approved in accordance with Section 15.8. In no event shall "net excess insurance proceeds" include proceeds of rent or business interruption insurance. For the purposes of this Article 12, "net proceeds" shall mean with respect to all other transactions covered by Section 12.1, the amount by which the gross proceeds from such transaction exceed the sum of (a) the amounts, if any, used to pay unpaid principal and interest under the First Mortgage or any other mortgage approved in accordance with subsection 15.8, and (b) reasonable transaction costs paid to third parties, including, without limitation, brokerage commissions, transfer taxes, documentary stamp taxes, insurance premiums, closing costs, origination fees and fees of counsel to any lender and the Partnership. 13. Books and Records. Partnership, the Managing General Partner shall keep or cause to be kept full and complete books of account in which shall be entered fully and accurately each transaction of the Partnership. All such books of account, together with an executed copy of this Agreement and the Certificate of Limited Partnership of the Partnership, any amendments hereto or thereto and any other records required by the Act to be maintained by the Partnership, shall at all times be maintained at the principal office of the Partnership, or at such other office of the Partnership as may be designated for such purpose by the Managing General Partner, and shall be open to the inspection and examination of the Partners and their representatives during reasonable business hours. Such books shall be kept on the basis of an accounting period consisting of a calendar year. 13.2 The Managing General Partner shall cause to be prepared from the books of the Partnership as at the end of each calendar year (a) a balance sheet, (b) statements of net profits or losses, changes in the Partners' respective Capital Accounts, individually and in the aggregate, and changes in the financial position of the Partnership for the calendar year then ended and (c) statements of Available Net Income and Capital Proceeds for such calendar year and the respective shares thereof of the TSG Group and the Existing Partners. Such financial statements shall be examined annually in accordance with generally accepted auditing standards by the independent certified public accountants then regularly retained by the Partnership and adjusted, to the extent necessary, to make them conform to generally accepted accounting principles and shall include an examination of the internal controls of the Partnership. 13.3 The Managing General Partner shall send to the Partners each year (a) within 90 days after the close of each calendar year an annual report of the Partnership, including the balance sheet and financial statements provided for in Section 13.2 and including the opinion of the independent certified public accountants then regularly retained by the Partnership, and (b) promptly after the Partnership's tax returns have been approved in accordance with Section 13.7, an annual statement indicating the share of each Partner of the net income, net losses, gain, loss, depreciation and other relevant items of the Partnership for such calendar year for federal income tax purposes, prepared or reviewed by the independent certified public accountants then regularly retained by the Partnership. 13.4 The Managing General Partner shall require, in each management agreement entered into by the Partnership, that the managing agent thereunder submit to TSG, simultaneously with their submission to the Partnership, all statements and reports submitted by such managing agent to the Partnership in respect of the Property, including, without limitation, rent rolls, monthly statements of receipts, disbursements and delinquencies, monthly or quarterly operating statements and the like. The Managing General Partner shall deliver or cause to be delivered to TSG (i) promptly after the execution thereof, a true, correct and complete copy of each Space Lease and each amendment to a Space Lease hereafter entered into and (ii) such other data and information available to the Managing General Partner and relating to the Property as TSG may from time to time reasonably request. 13.5 The Managing General Partner shall establish procedures to ensure that all deeds, leases, contracts, title records, surveys and other documentation, records and financial information relating to the ownership, maintenance, development and sale of the Property are maintained in safekeeping and organized and accessible to the Partners. Each Partner and its representatives shall have the right, at the expense of the Partner taking such action or on whose behalf such action is being taken and upon reasonable Notice, to inspect, examine and copy all books, records, files and other documents of the Partnership (including, without limitation, those maintained for the Partnership by its managing agent) at all reasonable times during normal business hours at the offices of the Partnership or at such other place as any of the same may then be regularly maintained pursuant to the management agreement then in effect with respect to the Property. 13.6 The Partnership will retain the Partnership Accountants as the independent certified public accountants for the Partnership. 13.7 Federal, state and local income tax returns of the Partnership shall be prepared or caused to be prepared by the Managing General Partner and reviewed by the independent certified public accountants then regularly retained by the Partnership. Copies of all tax returns of the Partnership shall be furnished for review and approval to TSG within 75 days after the close of each calendar year. If TSG shall fail to approve or disapprove any such return within 20 days after the same is furnished to TSG, then TSG shall be deemed to have approved such return. If TSG shall disapprove any such return in whole or in part within such 20-day period, or if (a) such 20-day period shall not have expired, (b) TSG shall have failed to approve or disapprove any such return and (c) less than 5 days shall remain prior to the date on which an application for an extension to file such return must be filed with the appropriate taxing authority, then and in either such event the Managing General Partner shall file or cause to be filed such an application with such taxing authority on or prior to such date. The income and deductions of the Partnership shall be reported for tax purposes under the accrual method of accounting. The annual accounting period of the Partnership for tax purposes shall be the calendar year. Except as may otherwise be provided in this Agreement, any allocation to a Partner of a portion of the net income, net losses, gain or loss of the Partnership provided for in this Agreement shall be deemed an allocation to that Partner of the same proportionate part or the same amount of each item of income, gain, loss, deduction or credit as is earned, realized or available by or to the Partnership for federal income tax purposes. 13.8 Any tax credits available to the Partnership under any provisions of the Code shall, subject to the applicable provisions of the Code, be shared equally by the TSG Group and the Existing Partners. Each item of Partnership income and deduction shall be separately reported on each Partner's income tax return pursuant to Income Tax Regulation 1.702-1(a). Tax decisions and elections for the Partnership not expressly provided for in this Agreement shall be agreed upon by the General Partners. Prompt Notice shall be given to TSG or Bayport upon receipt of advice by either of them that the Internal Revenue Service intends to examine Partnership income tax returns for any prior year. 13.9 The Managing General Partner at the close of each tax year of the Partnership shall be the "tax matters partner" of the Partnership within the meaning of Section 6231(a)(7) of the Code for such tax year. The tax matters partner shall promptly take such action as may be necessary to cause Bayport and TSG to become "notice partners" within the meaning of Section 6231(a)(8) of the Code. The tax matters partner shall keep Bayport and TSG apprised of all material matters which come to the attention of the tax matters partner in its capacity as tax matters partner by giving Notice thereof to Bayport and TSG within 10 days after the tax matters partner becomes informed of any such matter or within such shorter period as required to comply with any applicable statutory or regulatory provision. The tax matters partner, in its capacity as tax matters partner, shall not, without the prior approval of TSG and Bayport in each instance, take any action under any of Sections 6222 through 6232 of the Code or any other action which, under the terms of this Agreement, requires the approval of TSG. TSG, if it is not then the Managing General Partner, shall have the right, upon Notice to Bayport, to assume the duties of the tax matters partner. 13.10 Each of Bayport and TSG shall have the right to participate in all audits, appeals and other proceedings or procedures conducted or proposed to be conducted with respect to the federal, state or local tax returns of the Partnership, and neither Bayport nor TSG shall take any action in connection with any such audit, appeal, proceeding or procedure without the prior consent of the other of them. 14. Bank Accounts. All funds of the Partnership shall be deposited in one or more accounts (including a separate account for the Building Reserve Account) in the name of the Partnership in NationsBank or such other bank or banks as may be designated by the Managing General Partner and approved by TSG. Withdrawals from any such bank account or accounts shall be made only in the regular course of the Partner- ship's business. All such withdrawals shall be made upon such signature or signatures as the Managing General Partner may designate. Notwithstanding the foregoing, one or more Persons designated by the TSG Group shall at all times be authorized to make withdrawals from such accounts for Partnership purposes; provided, however, that the TSG Group agrees that no such Person shall exercise his right to make any such withdrawals until and unless either (i) TSG has become the Managing General Partner in accordance with the terms of this Agreement or (ii) an event of default by the Existing Partners shall have occurred, in which case any such Person may exercise its right to make withdrawals solely for the purpose of curing such event of default, which right may be exercised (a) immediately in the case of a failure to make Guaranteed Payments or to pay amounts due under the First Mortgage or (b) in the case of any other event of default only provided that the Existing Partners are not proceeding to remedy such event of default in accordance with the provisions of Article 17 or, in the good faith judgment of TSG, immediate action must be taken to prevent the forfeiture of or material damage to the Property. No funds of the Partnership shall be commingled with the funds of any other Person. The Managing General Partner shall use reasonable efforts to keep funds of the Partnership on hand from time-to-time invested in savings accounts, certificates of deposit, governmental obligations, repurchase obligations of commercial banks in respect of governmental obligations or other high grade interest-bearing obligations. The Managing General Partner shall, promptly after receipt, send to the TSG Group copies of the monthly statements for the Partnership's bank accounts and investments made with the funds from time-to-time on deposit in such accounts. 15. Management and Powers. 15.1 The management and control of the Partnership's business shall be exercised, and subject to the restrictions set forth in the further provisions of this Article 15, all decisions to be made by the Partnership shall in each case be made, by the Managing General Partner. Whenever in this Agreement it is provided that consent is required of, or a demand shall be made by, or an act or thing shall be done by or at the direction of the Partnership, or any words of like import are used, it is intended that all such consents, demands, acts and things shall, subject to the restrictions hereinafter set forth, be made, given or done by the Managing General Partner. 15.2 Subject to the restrictions set forth in the further provisions of this Article 15, the Managing General Partner is hereby authorized and vested with the power on behalf of the Partnership to execute and/or modify Space Leases, to exercise on behalf of the Partnership the rights and remedies of the landlord and to enforce the obligations of the Space Tenants under Space Leases; to sell or exchange the Property, or any portion thereof, for property, cash or on terms, or any combination thereof; to alter or improve the Improvements; to obtain loans for the Partnership, secured or unsecured, from any source, including one of the Partners, and to secure the same by mortgaging, assigning for security purposes, pledging or hypothecating all or any part of the Partnership property or assets; to prepay in whole or in part, refinance, recast, increase, modify or extend any mortgage, assignment, pledge or other security instruments; to operate and maintain the Property and to pay out of Partnership funds such expenses as are necessary to carry out the provisions of this Agreement; to hire managing and leasing agents to perform its obligations with respect to the management of the Property; and to take all other actions and to execute any and all other contracts, documents and instruments as it may deem appropriate to carry out the intents and purposes of this Agreement. Any Person dealing with the Partnership may rely on any instrument or document signed by the Managing General Partner on behalf of the Partnership and shall be fully protected in so doing; and no Person shall be required to inquire into the authority of the Managing General Partner to execute any instrument or document, or to take any other action, on behalf of the Partnership. 15.3 The General Partners shall meet on a regular basis, not less frequently than quarterly (except as the General Partners shall otherwise agree) to review the operations of the Partnership, to review and, if appropriate, revise the operating and capital improvement budgets and the Leasing Guidelines theretofore approved by the General Partners as hereinafter provided and to consider and pass upon other matters which, pursuant to the further provisions of this Article 15, are to be submitted to the General Partners for their approval. One of such meetings each year (the "Budget Meeting") shall be held not later than 30 days before the close of the then current calendar year for the purpose of reviewing and approving the budgets and Leasing Guidelines for the ensuing calendar year. Unless otherwise agreed upon, all such meetings shall be held at the principal office of the Managing General Partner. 15.4 Either General Partner shall have the right from time to time to call a special meeting of the General Partners on not less than 15 days' prior Notice to the other General Partner. Such Notice shall set forth the purpose of such meeting and an agenda in respect of the same. Unless otherwise agreed upon, each special meeting shall be held at the principal office of the Managing General Partner. 15.5 (a) The Managing General Partner agrees to prepare or cause to be prepared and to submit to TSG annually for approval at the Budget Meeting an operating budget and a capital improvement budget with respect to the Property for the next- succeeding calendar year. Such budgets shall be submitted to TSG at least 30 days prior to the Budget Meeting. The operating budget shall set forth the projected income and receipts from the Property for such next-succeeding calendar year and the Operating Costs to be incurred during such year, such Operating Costs to be set forth in reasonable detail with each category of income and expense listed on a separate line. The capital improvement budget shall set forth in reasonable detail a description of all capital improvements, repairs, replacements and alterations in respect of which the Managing General Partner proposes to incur Capital Costs during the next-succeeding calendar year and the estimated cost of each thereof, with each such improvement, repair, replacement or alteration to be listed on a separate line. (b) Upon approval by TSG of an operating budget for the Property, the Managing General Partner shall have the right, without the further consent or approval of TSG, to incur and pay the Operating Costs set forth in such approved budget, provided that in the case of any Operating Cost which is not an Uncontrollable Expense (as hereinafter defined) the Managing General Partner shall not have the right to incur or pay the same if it exceeds by more than 10% the amount set forth on the appropriate line for the category of expense involved in the approved operating budget or if such expenditure will cause the aggregate amount of Operating Costs which are not Uncontrollable Expenses to exceed by more than 5% the aggregate amount of such Operating Costs provided for in such approved budget. As used in this subsection 15.5(b), the term "Uncontrollable Expense" shall mean an item of expense, the amount of which is not within the power of the Managing General Partner to control and shall include real estate taxes, debt service payable in respect of any mortgage or other loans obtained in accordance with the terms of this Agreement, premiums for insurance approved by the General Partners, fixed charges under contracts entered into in accordance with the terms of this Agreement and utility charges. Upon approval by TSG of a capital improvement budget for the Property, the Managing General Partner shall similarly have the right, without further consent or approval of TSG, to make the capital improvements, repairs, replacements and alterations set forth in such budget and to pay the Capital Costs thereof, provided that the Capital Cost of any such capital improvement, repair, replacement or alteration does not exceed by more than 10% the amount thereof set forth for such item in the approved capital improvement budget and provided that the Capital Cost of all such capital improvements, repairs, replacements and alterations does not exceed by more than 5% the aggregate amount set forth in such capital improvement budget. (c) If at any time the Managing General Partner desires to make a capital improvement, repair, replacement or alteration, the cost of which will constitute a Capital Cost, or to incur an Operating Cost, which is not provided for in an approved capital improvement or operating budget, the Managing General Partner shall not proceed with such improvement, repair, replacement or alteration, or shall not incur such cost, without TSG's prior consent. If at any time it becomes evident to the Managing General Partner that the Capital Cost of any capital improvement, repair, replacement or alteration provided for in an approved capital improvement budget will exceed by more than 10% the amount budgeted therefor in such budget, or the aggregate amount of the Capital Costs of all capital improvements, repairs, replacements and alterations provided for in such budget will exceed by more than 5% the amount budgeted therefor in such budget, the Managing General Partner shall not proceed further with the making of such capital improvement, repair, replacement or alteration or, where the aggregate amount set forth in an approved capital improvement budget will be exceeded by more than 5%, with any of such capital improvements, repairs, replacements or alterations, without the consent of TSG. Similarly, if at any time it becomes evident to the Managing General Partner that any Operating Cost which is not an Uncontrollable Expense will exceed by more than 10% the amount set forth in respect thereof in the relevant approved operating budget, or that all Operating Costs which are not Uncontrollable Expenses will exceed by more than 5% the aggregate amount budgeted therefor in such operating budget, the Managing General Partner shall not incur the Operating Cost in question, or, where the aggregate amount of such Operating Costs will exceed by more than 5% the aggregate amount budgeted for in such approved operating budget, the Managing General Partner shall not incur any of such Operating Costs, without the consent of TSG. Notwithstanding anything to the contrary set forth in this subsection, if in the reasonable good-faith judgment of the Managing General Partner any capital improvement, repair, replacement or alteration must at any time be undertaken, or any Operating Cost incurred, immediately in order to protect the Property or any portion thereof or to avoid accident or injury to Persons, the Managing General Partner shall make such capital improvement, repair, replacement or alteration or incur such Operating Cost without regard to the approved budgets and without first securing the approval of TSG, provided that the Managing General Partner shall use its reasonable efforts to limit the work performed to the minimum required to remedy the emergency condition pending approval by TSG of more extensive work and the Managing General Partner shall notify TSG promptly of any such expenditure made or incurred which exceeds $10,000. (d) If at the beginning of any calendar year any capital improvement budget or operating budget or any item contained in any such budget shall not have been approved by TSG, then any items in such capital improvement budget or operating budget which have been approved shall become operative immediately, no other amounts provided for in such capital improvement budget shall be expended by the Managing General Partner until and unless approved by TSG, and the Managing General Partner shall have the right to expend in respect of items not approved by TSG in such operating budget up to (i) the amount provided for in respect thereof in the operating budget for the calendar year then ended, multiplied by (ii) the percentage, if any, by which the CPI increased between the month of November in the calendar year then ended and the month of November in the preceding calendar year. (e) The TSG Group and the Existing Partners agree that the operating budget should provide for such expenditures, and in such amounts, as are necessary for the maintenance and operation of the Improvements as a first-class office building in the Tampa, Florida, metropolitan area. In the event of a dispute between the Managing General Partner and TSG over whether an expenditure should be included in the operating budget for any year, the Managing General Partner and TSG, in attempting to resolve such dispute, shall be guided by the practices then being followed in respect of such expenditure at the office buildings set forth on Exhibit F. In the event of a dispute between the Managing General Partner and TSG over the amount included in respect of any expenditure in the operating budget for any year, TSG shall have the right to require that the Managing General Partner obtain two or more competitive bids from qualified Persons with respect to such expenditure, and the lowest such bid, or such other bid as shall be acceptable to both the Managing General Partner and TSG, shall be the amount included in the operating budget in respect of such expenditure. (f) The TSG Group and the Existing Partners understand that certain expenditures provided for in a capital improvement budget may be for repairs and replacements that must be made for the Improvements and their systems to continue to function (e.g., major roof repairs, replacement of air conditioning compressors and the like). The TSG Group and the Existing Partners recognize that if a dispute arises between them as to whether or not to make any expenditure of such nature, the issue will likely be whether and the extent to which such expenditure must be made during the year to which the capital budget then being considered relates. In order to resolve any such dispute, the Managing General Partner shall furnish to TSG a list of at least three reputable engineers or other appropriate experts in the Tampa, Florida, area, none of whom shall be an Affiliate or in the regular employ of the Managing General Partner or any Affiliate thereof, from which TSG shall choose one. The engineer or other expert so chosen by TSG shall then determine whether and to what extent the expenditure in dispute should be made, which determination shall be binding on the TSG Group and the Existing Partners with respect to the capital improvement budget then being considered. In the event of a dispute between the Managing General Partner and TSG over the amount included in respect of any expenditure in a capital improvement budget, TSG shall have the right to require that the Managing General Partner obtain two or more competitive bids from qualified Persons with respect to such expenditure, and the lowest such bid, or such other bid as shall be acceptable to both the Managing General Partner and TSG, shall be the amount included in such budget in respect of such expenditure. (g) The TSG Group, provided it has not theretofore defaulted in contributing any installment of the Supplemental Capital Contribution to the Partnership pursuant to Section 7.2 or, if it has, such default has theretofore been cured as provided in Article 7, shall have the right, in its discretion, and without the consent of the Existing Partners, to add to the approved capital improvement budgets for calendar years 1995, 1996 and thereafter up to the following amounts for the purpose of paying the costs of capital improvements, other than repairs and replacements of structural elements of the Improvements or the mechanical, electrical, plumbing, HVAC, fire safety or fire protection systems of the Improvements, which the TSG Group, in its discretion, determines should be made: (i) up to $200,000 to the calendar year 1995 approved capital improvement budget; (ii) up to the excess of $300,000 over the amount added by the TSG Group to the approved capital improvement budget for calendar year 1995 pursuant to this subsection 15.5(g) to the calendar year 1996 approved capital improvement budget; and (iii) to the approved capital improvement budget for each calendar year after 1996, up to the excess of $400,000 over the aggregate amount added by the TSG Group to the approved capital improvement budgets for all prior calendar years pursuant to this subsection 15.5(g). Any such additions shall be made by Notice by TSG to the Existing Partners not later than 15 days after the capital improvement budget for the calendar year in question has been approved by setting forth in such Notice a general identification of the items sought to be added to any capital improvement budget. Any amount added by the TSG Group to a capital improvement budget pursuant to this subsection 15.5(g) shall be funded in one of the following two ways as selected by the Existing Partners, which selection shall be made by Notice to TSG given within 15 days after Notice of the addition of such amount has been given by TSG to the Existing Partners: (a) such added amount may be funded in the same manner as any other expenditures provided for in the approved capital improvement budget for such year - i.e., funded out of Gross Revenues, the Building Reserve Account and capital contributions made pursuant to subsection 8.2.3 or 8.2.4, as applicable; provided, however, that if the funding option provided for in this clause (a) is selected by the Existing Partners and the Existing Partners then fail to advance their proportionate share of any capital call made pursuant to subsection 8.2.3 or 8.2.4 to fund in whole or in part the additional amount so added to the approved capital improvement budget in question, the sole remedy of the TSG Group for such failure shall be that provided for in subsection 8.2.5(B) and such remedy shall be exercisable by the TSG Group only if the TSG Group has advanced to the Partnership as an Unmatched Capital Contribution the full amount of such capital call; or (b) such additional amount may be funded in its entirety by the TSG Group, which funding shall constitute a non-recourse loan by the TSG Group to the Partnership, such loan to bear interest at the rate of 12% per annum, to be payable as to interest annually in arrears (such interest payment to be deemed to be an Operating Expense for all purposes of this Agreement) and to be payable as to principal (and any unpaid interest) upon the dissolution and liquidation of the Partnership before any distributions are made to the Partners. If the Existing Partners fail to make the selection provided for in the preceding sentence within the time period set forth therein, they shall be deemed to have selected the option set forth in clause (b) above. (h) TSG shall have the right to require that the Managing General Partner obtain two or more competitive bids from qualified Persons, none of whom shall be an Affiliate or in the regular employ of the Managing General Partner or any Affiliate thereof, with respect to any expenditure provided for in the approved operating budget or the approved capital improvement budget for any calendar year, but only if TSG gives the Managing General Partner Notice of such requirement in respect of any such expenditure before the Managing General Partner has committed to retain or engage any Person to perform the service or furnish the materials covered by such expenditure. Where bids are obtained in accordance with the immediately preceding sentence, the Managing General Partner shall retain or engage the lowest bidder, or such other bidder as shall be acceptable to both the Managing General Partner and TSG. (i) The operating budget and capital improvement budget for the portion of 1993 remaining after the date hereof have heretofore been submitted to and approved by TSG. 15.6 (a) At least 30 days before each Budget Meeting, the Managing General Partner shall submit to TSG for its approval a schedule setting forth an acceptable range of net effective rent per square foot (the "Net Effective Rent") for each space held for rental in the Improvements which is then vacant or the Space Lease of which will expire during the ensuing calendar year (the "Vacant Space"). Net Effective Rent shall be the total annual base rent per square foot to be charged for any Vacant Space over the proposed lease term less the sum of (i) the cost or amount per square foot of any concessions (other than free or reduced rent) to be granted in connection with the leasing of such Vacant Space, (ii) the amount of any leasing commissions per square foot to be incurred in connection with the leasing of such Vacant Space, (iii) the costs per square foot to be incurred by the Partnership for tenant alterations and/or allowances in lieu thereof in respect of such Vacant Space and (iv) estimated annual base operating costs and real estate taxes per square foot for such Vacant Space which will be payable by the Partnership over the proposed lease term, which difference shall be divided by the number of years (including any fraction of a year expressed as a fraction) in the proposed lease term for such Vacant Space. The Managing General Partner shall also submit to TSG with such schedule for TSG's approval: (A) a range of concessions and/or free rent per square foot to be offered to prospective tenants of each Vacant Space; (B) a range of costs for tenant alterations and/or allowances in lieu thereof per square foot for each Vacant Space based on varying assumptions as to the size of the Vacant Space being rented, the length of the term of the Space Lease and the amount of the annual rent which is to be received for such space; and (C) a range of lease terms for each Vacant Space. For the purposes of this Agreement, the schedule of Net Effective Rent and the information described in clauses (A), (B) and (C) above, as approved by TSG from time to time, shall be referred to herein as the "Leasing Guidelines." If the Managing General Partner and TSG shall be unable to agree upon any of the items in proposed Leasing Guidelines submitted by the Managing General Partner by the commencement of the calendar year to which such Leasing Guidelines relate, the Managing General Partner shall promptly submit to TSG a list of four or more reputable leasing brokers which are active in the Tampa, Florida, area, none of whom shall be an Affiliate or in the regular employ of the Managing General Partner or any Affiliate thereof, from which TSG shall select three. The item or items in dispute shall then be submitted separately to each of such three brokers for its opinion as to what such item or items should be, based on then-current market conditions. The average of the responses received from such three brokers in respect of any such items shall be incorporated into the Leasing Guidelines for such calendar year. (b) Upon approval of the Leasing Guidelines, the Managing General Partner shall lease space in the Property in accordance with the provisions of this Article 15. The Managing General Partner shall cooperate and consult with Alan C. Vaughan, Paul E. Taylor III or any other person hereafter designated by TSG in a Notice to the Managing General Partner as a leasing representative of the TSG Group (collectively, the "TSG Leasing Representative") on efforts to rent the Vacant Space in the ensuing calendar year. The Managing General Partner shall have the right to submit leasing proposals to prospective tenants for any of the Vacant Space, provided that each such proposal does not deviate from any of the standards set forth in the approved Leasing Guidelines, except as follows: (i) Net Effective Rent shall not be less than 90% of the Net Effective Rent for such space in such Leasing Guidelines, (ii) the lease term shall not be less than 90% of the shortest lease term for such space in such Leasing Guidelines and shall not be longer than the longest lease term proposed for such space in such Leasing Guidelines, (iii) the concessions and/or free rent shall not be greater than 110% of the amounts thereof for such space in such Leasing Guidelines and (iv) the costs of tenant alterations and/or allowances in lieu thereof shall not be greater than 110% of the amounts thereof for such space in such Leasing Guildines; and provided that each such proposal is first submitted to TSG's Leasing Representative, it being understood that the prior consent of TSG's Leasing Representative shall not be required for the submission by the Managing General Partner to a prospective tenant of any lease proposal which meets the requirements set forth above in this sentence and in a notice sent in accordance with the last sentence of this subsection 15.6(b). The TSG Leasing Representative shall have the right to require the Managing General Partner or its agent to submit and pursue a leasing proposal to a prospective tenant provided such proposal meets the requirements of the preceding sentence. The Managing General Partner will keep the TSG Leasing Representative informed of leasing inquiries or proposals by prospective tenants or their brokers or agents and of lease renewal or extension or space expansion inquiries or proposals made by current Space Tenants or their brokers or agents; and the Managing General Partner shall not refuse to pursue and shall not reject any such inquiry or proposal received by it without first consulting with the TSG Leasing Representative. If a lease proposal submitted to a prospective tenant in accordance with this subsection 15.6(b) is accepted by the prospective tenant, and provided that any modification of such proposal agreed to by the Managing General Partner (in consultation with the TSG Leasing Representative) does not cause such proposal to cease to meet the requirements of the second sentence of this subsection, the Managing General Partner shall cause a lease to be prepared embodying the terms of such proposal and shall submit the same to the prospective tenant and the TSG Leasing Representative. The Managing General Partner shall then use its reasonable efforts to cause the prospective tenant to agree to the terms of such lease. After a lease is negotiated with a prospective tenant (it being understood that the TSG Leasing Representative shall have the right to participate in such negotiations), the Managing General Partner shall submit to the TSG Leasing Representative for review and approval such negotiated lease and a summary of any material variations of such negotiated lease from the Partnership's standard form of lease and shall not enter into such lease until and unless such variations have been approved by the TSG Leasing Representative. In no event shall a lease be entered into with a prospective tenant until and unless the creditworthiness of such prospective tenant has been approved by the TSG Leasing Representative and the Managing General Partner. The Partnership shall not provide services called for by Space Leases nor shall the Managing General Partner enter into any lease or transaction or conduct any activity upon notification by the TSG Leasing Representative that such services, lease, transaction or activity would cause or would be likely to cause any constituent entity of the TSG Group exempt from income taxation pursuant to Code Section 501 to have any "unrelated business taxable income" (as that term is defined in Code Section 512). (c) TSG shall have the right from time to time to meet with the Property manager, the leasing agent for the Property and the Partnership Accountants and the right to visit and inspect the Property, in each case after giving prior Notice thereof to Bayport (which in this instance only may be by telephone or facsimile transmission). The Existing Partners shall not have the right to have any Person acting on their behalf present at any such meeting or visit. (d) The TSG Group and the Existing Partners hereby agree that the management and leasing agent for the Property shall be Wilson Management Company until and unless such agent is changed pursuant to Section 15.8. 15.7 At or prior to each regularly scheduled meeting of the General Partners, but in no event less frequently than once in each calendar quarter, the Managing General Partner shall submit to TSG reports which set forth for the elapsed portion of the then current calendar year, to the extent of information then obtainable for the Property, (i) the rental and other income received by the Partnership, (ii) the status of the Partnership's efforts in renting Vacant Space or extending expiring Space Leases, setting forth the rents per square foot being obtained, the amount of any concessions or free rent being granted, the amount of any leasing commissions being paid or incurred and the tenant alterations or allowance expense per square foot being incurred, (iii) a schedule of any vacancies which occurred during the calendar year in question and which were not set forth on the Leasing Guidelines, setting forth for such vacant space the information in respect thereof which would have been included in the Leasing Guidelines submitted to TSG in connection with the Budget Meeting if the Managing General Partner had known at that time that the space in question would become vacant, (iv) updated capital improvement and operating budgets, setting forth in comparative form the amounts provided for in the approved budgets, the amounts actually incurred to date and the estimated amounts to be incurred during the remainder of the calendar year in question, (v) a description of any advertising and promotion programs undertaken or to be undertaken during such calendar year, and (vi) a description of all pending litigations instituted by or against the Partnership and the status of each. In addition, at the end of the second quarter in each calendar year, the Managing General Partner shall submit to TSG updated Leasing Guidelines which shall incorporate changes in the Leasing Guidelines previously approved for such year by TSG which may be necessary to reflect then-current market conditions and which shall be subject to the approval of TSG. 15.8 Notwithstanding anything to the contrary set forth in this Article 15 or elsewhere in this Agreement, it is agreed that the Managing General Partner shall not have the right or power on behalf of the Partnership, without the prior consent of TSG, to take any of the following actions: 15.8.1 except as may otherwise be provided in Articles 8, 20 and 21, sell, exchange, transfer, convey, assign or otherwise dispose of or encumber the Property or any portion thereof or any interest therein (other than the sale of items of Personal Property which are being replaced by items of like value and utility); 15.8.2 acquire or lease any property, except as contemplated by an approved budget and the applicable provisions of this Agreement; 15.8.3 make any expenditure or incur any obligation except in accordance with an approved budget and the applicable provisions of this Agreement; 15.8.4 prepay in whole or in part, refinance, recast, increase, modify or extend any mortgage, assignment, pledge or other security instrument; 15.8.5 extend credit or make any loans in an aggregate amount in excess of $10,000 at the time outstanding or make any investments except as provided in Article 14; 15.8.6 enter into, modify, amend, terminate or renew any property management and/or leasing agreement for the Property or any maintenance agreement with respect to common areas on the Property and adjoining property or any occupancy agreement with respect to the Parking Area (as defined in the Declaration of Restrictions and Easements for Bayport Plaza dated August 27, 1985 between the Partnership and TWC Eleven, Ltd., as amended (the "Declaration")); provided, however, that TSG hereby approves the existing property management and leasing agreement dated May 28, 1985 with Wilson Management Company, as amended by a first amendment dated December 17, 1991 and by a second amendment dated as of the date hereof; 15.8.7 dismiss Wilson Management Company as property manager and leasing agent for the Property or engage any other property manager and/or leasing agent or agents for the Property; 15.8.8 initiate or undertake any course of defense in connection with any litigation, arbitrations or dispute resolution proceedings brought against the Partnership, or settle any claim involving the Partnership or the Property, except for the settlement or defense of claims against the Partnership where the claims and the cost of defense thereof are covered by insurance; 15.8.9 settle any casualty insurance claim involving an amount in excess of $50,000; 15.8.10 dismiss KPMG Peat Marwick or their successors as the certified public accountants for the Partnership or engage any other certified public accountants for the Partnership; 15.8.11 agree to the settlement of any proceeding brought for the taking of all or any portion of the Property in condemnation or by eminent domain, or to the sale of all or any portion of the Property in lieu of such a taking; 15.8.12 implement any insurance program with respect to the Property or modify any such insurance program; 15.8.13 make any tax election not provided for elsewhere in this Agreement; 15.8.14 assume any obligations of a Space Tenant under a lease of space in a building not owned by the Partnership; 15.8.1Lease for use in the Improvements or make any material modifications in any standard form of Space Lease previously approved by TSG; 15.8.16 dissolve, liquidate or reorganize the Partnership, except as provided in this Agreement; 15.8.17 compromise or otherwise settle accounts receivable in excess of $10,000 in the aggregate in any fiscal year of the Partnership; 15.8.18 become a surety, guarantor, endorser or accommodation endorser for any Person as to an aggregate amount in excess of $10,000 at any time outstanding; 15.8.19 borrow any money on behalf of the Partnership; 15.8.20 dismiss Annis, Mitchell, Cockey, Edwards & Roehn as legal counsel for the Partnership or engage any other legal counsel for the Partnership; 15.8.21 consent to any assessment or statement of audit changes proposed by the Internal Revenue Service or any state or local authorities which would result in the altering of any amount entered on a tax return of the Partnership by more than $5,000 or would result in altering the character of any item entered on a tax return of the Partnership; 15.8.22 amend, terminate or give any approval, consent or waiver under (i) the Covenants, Restrictions and Land Management Agreement dated July 23, 1984 among the Partnership, TWC Eleven, Ltd. and Tampa Port Authority, (ii) the Declaration or (iii) the Consent Agreement regarding Bayport Plaza Encroachments dated the date of this Agreement between the Partnership and TWC Eleven, Ltd.; or 15.8.23 commit an Act of Insolvency of the nature described in Section 19.3(i), (ii), (iv), (v) or (vi). 15.9 Subject to the availability of requisite funds to the Partnership, the Managing General Partner shall cause the Partnership to comply with the First Mortgage, the Space Leases and all other material agreements and shall not suffer or permit a default on the part of the Partnership to occur thereunder. 15.10 The Managing General Partner agrees, at the request of any Partner, to cause the Partnership, if it has not already done so, to make an election under Section 754 of the Code, or under the comparable provisions of any subsequent law, to adjust the basis of the Partnership's property under Sections 734 and 743 of the Code as of the date of this Agreement. It is understood that the books and records of the Partnership shall be kept, and all allocations of net income, net losses, gain and loss hereunder shall be made, without taking into account the effects of such election, which effects shall be reflected only in the tax returns of the Partnership. 15.11 In the event that the Managing General Partner shall request the consent or approval (an "Approval Request") of TSG or the TSG Leasing Representative pursuant to any of the terms and provisions of this Agreement, unless a different time period for a response is specified elsewhere in this Agreement, TSG or the TSG Leasing Representative shall have 10 days from the time Notice of the Approval Request is received by TSG or the TSG Leasing Representative to approve or deny the Approval Request. If TSG or the TSG Leasing Representative fails to give Notice of its approval or denial of any Approval Request within such 10-day period, TSG or the TSG Leasing Representative shall be conclusively deemed to have approved the matter or matters to which such Approval Request relates. Any Approval Request to which this Section 15.11 applies shall contain a heading in capital letters to the effect that if a response is not given by TSG or the TSG Leasing Representative within 10 days after its receipt of such Approval Request, the matter or matters to which such Approval Request relates shall be deemed approved. The provisions of this Section 15.11 shall not apply to approvals of TSG of the operating budget, the capital improvement budget or the Leasing Guidelines but shall apply in respect of such budgets and Leasing Guidelines to requests by the Managing General Partner for approval (i) to make expenditures not provided for in an approved budget, (ii) to make expenditures provided for in an approved budget which exceed the budgeted amount by more than the latitude granted to the Managing General Partner in Article 15 or (iii) to enter into a Space Lease which deviates from any of the Leasing Guidelines by more than the latitude granted to the Managing General Partner in Article 15 or in which material changes have been made in the approved standard form of Space Lease. The provisions of this Section 15.11 shall also not apply to the approval by TSG of Partnership tax returns. 15.12 If Dean Witter Realty Growth Properties, L.P. shall cease to be the general partner of Bayport and Bayport is at the time the Managing General Partner, TSG may, but shall not be obligated to, by giving Notice to the Managing General Partner, change and convert the general partnership interest of Bayport to a limited partnership interest in the Partnership. If TSG exercises such right, upon the date fixed in such Notice, without the necessity of any further act, the partnership interest of Bayport shall be converted to that of a limited partner and TSG shall thereupon become the Managing General Partner of the Partnership. From and after the date of such conversion, (a) TSG shall have all of the Managing General Partner's rights and responsibilities to manage and control the Partnership and all of the other rights and obligations set forth herein with respect to the Managing General Partner and (b) Bayport, as a Limited Partner of the Partnership, shall be restricted as to its right to participate in the management of the Partnership as are all of the other Limited Partners of the Partnership pursuant to the terms and provisions of this Agreement; provided, however, that wherever in this Agreement the consent of Bayport (as opposed to the Managing General Partner) is required to any act, or any other right is afforded to Bayport (as opposed to the Managing General Partner), such consent requirement or other right shall continue in effect notwithstanding the conversion of Bayport's interest in the Partnership to that of a Limited Partner; and provided further, however, that notwithstanding the conversion of Bayport's interest in the Partnership from that of a General Partner to that of a Limited Partner, Bayport shall continue to share Available Net Income, Capital Proceeds, net income, net losses, gain, loss, deductions and tax credits of the Partnership to the same extent as it did while a General Partner of the Partnership. The conversion of the interest in the Partnership of Bayport from that of a General Partner to that of a Limited Partner shall not cause the Partnership to be dissolved and the business of the Partnership shall continue and be continued after such conver- sion. Promptly after such conversion, TSG shall prepare and file or cause to be prepared and filed an amendment to the Certificate of Limited Partnership of the Partnership. 15.13 Contemporaneously with the giving or receipt by the Managing General Partner of any notice or communication under (i) the Covenants, Restrictions and Land Management Agreement dated July 23, 1984 among the Partnership, TWC Eleven, Ltd. and Tampa Port Authority (ii) the Declaration, or (iii) the Consent Agreement regarding Bayport Plaza Encroachments dated the date of this Agreement between the Partnership and TWC Eleven, Ltd., the Managing General Partner shall give a copy thereof to TSG. 16. Rights and Duties of Partners. 16.1 The Managing General Partner shall be res- ponsible for the affairs of the Partnership and the supervision of its business activities. The Managing General Partner agrees to devote to the Partnership such of its time and to render such services as may be required for the efficient conduct of the business of the Partnership and to carry out the purposes of this Agreement. Without limiting the generality of the foregoing, the Managing General Partner shall have the authority and obligation to obtain casualty, comprehensive general liability, rent or business interruption insurance and any other form of insurance to protect the Partnership's interest in the Property, subject to the provisions of subsection 15.8.12. No compensation shall be paid to the Managing General Partner for such services (other than distributions to which the Managing General Partner may otherwise be entitled to under the terms of this Agreement by virtue of its partnership interest in the Partnership), but the Managing General Partner shall be entitled to charge the Partnership, or to be reimbursed by the Partnership, for all out-of-pocket expenses reasonably incurred by it in connection with the Partnership's business and which are provided for in the applicable approved operating budget, but shall not include overhead expenses of the Managing General Partner. 16.2 Subject to the applicable provisions of Article 15 and Section 16.4, the Managing General Partner may engage, on behalf of the Partnership, such Persons as it, in its judgment, shall deem advisable in the operation and management of the business of the Partnership, including, without limitation, architects, engineers, attorneys, accountants, leasing agents, managing agents, appraisers and experts, on such terms and for such compensation as the Managing General Partner, in its discretion, shall determine, but subject to compliance with the approved operating budget or capital improvement budget, as applicable, and the provisions of Article 15 relating thereto. Unless TSG agrees, the Partnership shall have no employees. 16.3 It is expressly understood that any Partner and the partners of any Partner which is a partnership may engage in any other business, investment or profession, including the construction, development or ownership of or the investment in real estate and the operation and management of real estate, whether located in the State of Florida or elsewhere and whether or not in direct competition with the Property, and neither the Partnership nor any of the other Partners shall have any rights in and to said businesses, investments or professions, or the income or profits derived therefrom. 16.4 Provided that TSG first consents thereto, the fact that an Affiliate of the Managing General Partner is directly or indirectly interested in or connected with any Person employed by the Partnership to render or perform a service or from which or to whom the Partnership may buy or sell merchandise or other property shall not prohibit the Managing General Partner from employing such Person or from dealing with it on competitive terms and at competitive rates of compensation, and neither the Partnership nor any Partner thereof shall have any right in or to any income or profits derived therefrom. 16.5 No General Partner shall be liable, responsible or accountable in damages or otherwise to the Partnership or any Partners for any acts performed within the scope of the authority conferred on it by this Agreement or for its failure or refusal to perform any acts except those expressly required by or pursuant to the terms of this Agreement or for any loss in connection with the affairs of the Partnership unless such General Partner acts in bad faith or is guilty of willful misconduct, gross negligence or fraud. 16.6 The Partnership shall indemnify each General Partner and its agents, employees, partners, officers, directors and shareholders, from and against all claims, losses, damages, assessments, charges and liabilities (including reasonable attorneys fees and expenses) which may be asserted against, imposed on or incurred by such General Partner, its agents, employees, partners, officers, directors or shareholders, by reason of its being a General Partner of the Partnership or as a result of the performance of its duties or rights hereunder; provided, however, that the foregoing indemnity shall not apply to any claim, loss, damage, assessment, charge or liability resulting from bad faith, willful misconduct, gross negligence or fraud of such General Partner. Recourse by such General Partner under the indemnification provided for in this Section 16.6 shall be limited to the assets of the Partnership. 16.7 In the event the Partnership is obligated to indemnify Liberty Street/Bayport, Ltd., a Florida limited partnership (the "Investor Manager"), pursuant to Section 8(b) of that certain Investor Office Management Agreement dated May 28, 1985 by and between the Partnership and the Investor Manager (the "Investor Agreement"), Bayport shall indemnify the Partnership from and against all costs of such indemnification by the Partnership of the Investor Manager. 16.8 Except as otherwise expressly provided in this Agreement, no Partner shall have the right to withdraw from the Partnership or demand the return of all or any part of its contribution to the capital of the Partnership until the Partnership shall have been dissolved and terminated, and then only to the extent provided in this Agreement, nor shall any Partner have the right to demand or receive property other than cash in return of its contribution. 16.9 The Managing General Partner shall use reasonable efforts to include in any contract, document or instrument executed by the Managing General Partner on behalf of the Partnership a clause limiting the liability of the General Partners under such contract, document or instrument to the assets of the Partnership. 16.10 The Limited Partners shall not take part in the management of the Partnership's business or transact any business for the Partnership, and shall have no power to sign for or bind the Partnership. 16.11 Except as otherwise provided in this Agreement, so long as there shall be more than one General Partner, the General Partner which is not the Managing General Partner shall have no right or power to sign for or bind the Partnership, or otherwise to act on behalf of the Partnership. 17. Default by Existing Partners. 17.1 The occurrence of any of the following events shall constitute an "event of default" on the part of the Existing Partners: 17.1.1 (a) Any defect in the Partnership's title to the Property exists on the date of this Agreement and is not disclosed on the owner's title insurance policy issued to the Partnership by Chicago Title Insurance Company (the "Title Company") in connection with the entering into of this Agreement by the TSG Group, and (b) the Title Company disclaims liability for such defect by reason of knowledge of such defect by any of the Existing Partners. 17.1.2 A default shall occur under the First Mortgage which is not solely attributable to (i) a failure by the TSG Group to fund in a timely fashion any installment of its Supplemental Capital Contribution when due in accordance with this Agreement, (ii) the failure of the TSG Group or any member thereof to comply with any covenant specifically applicable to it in any of the documents which evidence and secure the First Mortgage loan or in this Agreement, (iii) the failure or refusal by TSG to approve any expenditure or other action, the making or taking of which requires the approval of TSG under this Agreement and the failure to make or take which constitutes an event of default under the First Mortgage or (iv) a sale of the Property brought about by the TSG Group, or if the provisions of any First Mortgage which refinances the First Mortgage existing at the date hereof make such acquisition a default thereunder, the acquisition by the TSG Group of the interests of the Existing Partners in the Partnership pursuant to Article 21 where the TSG Group is the Electing Partner. 17.1.3 The discovery prior to the second anniversary of the date of this Agreement of an event, circumstance or condition (including, without limitation, any condition on, in or under the Property or the area surrounding the Property), which occurred or existed prior to the date of this Agreement and is not disclosed in the Environmental Reports (as such term is defined in the Acquisition Agreement) and now or hereafter constitutes or creates a violation or liability with respect to the Property and/or the Partnership under Environmental Laws (any such event, circumstance or condition, if any, is hereafter referred to as the "Pre-Existing Environmental Problem") and Bayport shall (a) fail, at its expense, promptly to cure or remediate any Pre-Existing Environmental Problem and/or to prosecute such cure or remediation with due diligence through to completion and/or shall fail to engage an environmental consultant reasonably satisfactory to the TSG Group to advise Bayport and assist in the formulation and implementation of an appropriate remediation plan or (b) in the event a lien is filed against the Property as a result of any Pre-Existing Environmental Problem, Bayport shall fail, at its expense, to have such lien bonded, satisfied or discharged with due diligence or (c) in the event a third party claim is brought against the Partnership as a result of any Pre-Existing Environmental Problem, Bayport shall fail at its expense diligently to defend or settle such claim and/or to pay any amount due in respect of such claim in accordance with any settlement thereof agreed to by Bayport or any final judgment determined in respect thereof. 17.1.4 The Existing Partners, or any of them, shall default in complying with or performing any of their agreements, obligations and undertakings contained in this Agreement. 17.1.5 Bayport defaults in complying with or performing any of its obligations under Section 5.3 of the Acquisition Agreement. 17.2 An event of default under Section 17.1 shall not constitute a default under this Agreement (a "Default") until and unless: 17.2.1 in the case of an event of default of the nature described in subsection 17.1.1, 17.1.4 or 17.1.5, TSG shall have given Notice to Bayport specifying such event of default and such event of default shall not be cured within 30 days after receipt of such Notice by Bayport (with rejection of delivery to constitute receipt), or if such event of default cannot be cured solely by the payment of money and is capable of being cured but not within a period of 30 days, Bayport shall not commence to cure such event of default within such 30-day period or shall not pursue the curing of such event of default with diligence and continuity; provided, however, that, in the case of an event of default of the nature described in subsection 17.1.1, the Existing Partners shall have the right in good faith to dispute with the Title Company whether its disclaimer of liability was proper; 17.2.2 in the case of an event of default of the nature described in subsection 17.1.2, such default is not cured within the applicable grace period, if any, provided for in the First Mortgage; or 17.2.3 in the case of an event of default of the nature described in subsection 17.1.3, the Existing Partners shall not undertake with diligence and continuity the curing and discharge of the violation or liability in question, it being understood that the Existing Partners shall be afforded reasonable amounts of time for investigation, preparation of reports by consultants, formulation and negotiation of plans for remediation or other curative action, investigation as to whether liability rests with an adjoining landowner, a prior owner of the Property or any other Person and, if the Existing Partners in good faith determine that the violation or liability should be contested, for contesting the same. 17.3 Notwithstanding anything to the contrary set forth in this Article 17, Bayport shall have the right, by giving Notice to TSG within the 30-day period provided for in subsection 17.2.1, to dispute with the TSG Group in good faith the existence of any event of default other than an event of default of the nature described in subsection 17.1.2, 17.1.3 or 17.1.5. Promptly after the giving of a Notice of dispute, Bayport shall meet with TSG to attempt to resolve the dispute or, if that is not feasible, to agree upon an expeditious method of resolving the dispute (which may include a declaratory judgment action, arbitration or alternative dispute resolution). If Bayport and TSG are not able to resolve the dispute, or to agree on a method for resolving the dispute, within a period (the "Dispute Period") ending on the earlier of the 21st day after the giving of the above mentioned Notice by Bayport to TSG and the last day of the 30-day period provided for in subsection 17.2.1, then the period of time within which such event of default (if in fact it exists) must be cured, as set forth in subsection 17.2.1, shall commence to run at the end of such Dispute Period. 17.4 Following the occurrence of a Default, and prior to the curing thereof, TSG shall be entitled to exercise the rights and remedies specified in Article 8. 17.5 It is understood that in order to induce the First Mortgagee to reinstate the First Mortgage and modify the terms thereof, Dean Witter Realty Growth Properties, L.P., the general partner of Bayport, is entering into an Environmental Indemnity Agreement for the benefit of the First Mortgagee. Under the terms of such Environmental Indemnity Agreement, Dean Witter Realty Growth Properties, L.P. has agreed to indemnify the First Mortgagee from and in respect of liabilities arising under Environmental Laws at the Property. The Partners hereby agree with respect to such Environmental Indemnity Agreement as follows: 17.5.1 such indemnity obligation of Dean Witter Realty Growth Properties, L.P. under the Environmental Indemnity Agreement is and shall be for the sole benefit of the First Mortgagee and shall not in any way be deemed to be for the benefit of the Partnership or any Partner; 17.5.2 the failure of Dean Witter Realty Growth Properties, L.P. to perform any of its obligations under such Environmental Indemnity Agreement, notwithstanding the fact that such failure may constitute a default under Paragraph 2.01 of the First Mortgage, shall not constitute an event of default or a Default by Bayport under this Agreement (including, without limitation, subsection 17.1.2) or the Acquisition Agreement and shall not give rise to any liability on the part of Bayport or Dean Witter Realty Growth Properties, L.P. to the Partnership or any Partner; 17.5.3 the Partnership's obligations, if any, to comply with Environmental Laws, to cure or remediate violations of Environmental Laws and to pay third party claims based on Environmental Laws or any violations thereof shall be unaffected by the existence of such Environmental Indemnity Agreement and for the purposes of determining how and in what manner the Partnership shall fulfill any such obligations it shall be deemed that such Environmental Indemnity Agreement does not exist; and 17.5.4 if Dean Witter Realty Growth Properties, L.P. makes any payment or incurs any costs or expenses under such Environmental Indemnity Agreement, Dean Witter Realty Growth Properties, L.P. shall be entitled to be reimbursed therefor by the Partnership to the extent that (i) the amounts so paid or incurred by Dean Witter Realty Growth Properties, L.P. constitute obligations or expenses of the Partnership that would have been paid or incurred by the Partnership in the absence of such Environmental Indemnity Agreement and (ii) payment of such costs or expenses is not the obligation of Bayport under subsection 17.1.3 or Section 5.3(a)(iv) of the Acquisition Agreement. Dean Witter Realty Growth Properties, L.P. shall not seek recourse against the personal assets of any Partner for reimbursement of payments made or costs or expenses incurred under such Environmental Indemnity Agreement. Nothing contained in this Section 17.5 shall impair, abrogate or otherwise affect the obligations of Bayport under subsection 17.1.3 or under Section 5.3(a)(iv) of the Acquisition Agreement. 18. Transfer of Partnership Interests. 18.1 No Partner shall sell, transfer, assign, pledge or otherwise dispose of, or mortgage, hypothecate or otherwise encumber, or permit or suffer any encumbrance of, all or part of its interest in the Partnership, (all of the foregoing transactions being referred to as a "Transfer") except in accordance with this Article 18, subsection 8.2.5, subsection 8.2.6 and Article 21, and any Transfer not so excepted shall be void. 18.2 The admission to a General Partner of any additional or substitute general partner or the transfer of any general partnership interest in a General Partner, or the transfer of voting control of any corporate General Partner or any corporate general partner of a General Partner, shall be deemed a Transfer, provided that (i) so long as The Trustees of Princeton University or an Affiliate thereof shall remain a limited partner of TSG or Westrock Realty Associates L.P. Ltd., ("Westrock") TSG shall have the right from time to time to admit as an additional general partner or as a substitute general partner in TSG any Person approved from time to time by The Trustees of Princeton University or such Affiliate, and such admission (and any related withdrawal of a general partner) shall not constitute a Transfer for purposes of this Article 18 and shall not require the consent of any Partner, (ii) so long as The Trustees of Princeton University or an Affiliate thereof shall remain a limited partner of TSG or Westrock, the transfer of voting control of any corporate general partner of TSG to one or more persons approved by The Trustees of Princeton University or such Affiliate shall not constitute a Transfer for purposes of this Article 18 and shall not require the consent of any Partner, and (iii) the transfer of voting control of the corporate general partner of the TSG Group to one or more of the persons who at the time of transfer are partners of the TSG Group shall not constitute a Transfer for purposes of this Article 18 and shall not require the consent of any Partner; provided further, however, that no general partner may be admitted or substituted in the TSG Group and no transfer may be made of voting control of any corporate general partners of the TSG Group as described in clauses (i), (ii) and (iii) above if any such action violates the provisions of the First Mortgage, unless prior consent of the holder of the First Mortgage is obtained. 18.3 Each Limited Partner shall have the right to make one or more Transfers with respect to its Partnership interest without restriction; provided, however, that no Person to whom all or any portion of the interest of a Limited Partner is hereafter assigned or otherwise transferred shall be admitted to the Partnership as a Limited Partner except as provided in Section 18.5, it being understood that until and unless any such transferee is so admitted to the Partnership it shall have no right to exercise any of the rights of a Limited Partner hereunder or at Law, but shall be entitled to all allocations and distributions of net income, net losses, Available Net Income, gain and loss, credits and amounts to be distributed under Sections 12.1 and 23.5 to which the interest or portion thereof assigned or transferred to it is entitled. 18.4 Except as otherwise provided in this Agreement in the case of the conversion of Bayport from a Limited Partner to the Managing General Partner, no Person shall be admitted to the Partnership as a General Partner without the consent of all of the Partners. 18.5 No transferee of all or any portion of a Limited Partner's interest in the Partnership shall be admitted to the Partnership as a Limited Partner without the prior consent of Bayport and TSG. 18.6 In addition to all other limitations on assignment contained in this Agreement, no assignment of all or any part of the interest of a Partner otherwise permitted to be made under this Article 18 shall be permitted or be binding on any Partners or on the Partnership unless (i) the assignee shall execute and acknowledge an instrument, in form reasonably satisfactory to the Managing General Partner, whereby it agrees to assume and be bound by all of the covenants, terms and conditions of this Agreement as the same may have been amended, (ii) a duplicate original of such assignment (or other instrument of transfer) and assumption, duly executed and acknowledged by the assignor and assignee, is delivered to the Managing General Partner, (iii) the assignee shall (if required) execute and acknowledge a certificate amending the Certificate of Limited Partnership of the Partnership in order to reflect such change or take any other action that may be required in connection therewith, (iv) the assignor or assignee shall pay all reasonable expenses in connection with its admission as a Partner, including, but not limited to, the cost (including reasonable attorneys' fees and disbursements) of preparing and filing the certificate referred to in subdivision (iii) above, (v) all required consents of mortgagees or other Persons to such assignment shall have been obtained in writing and delivered to the Managing General Partner and the assignee shall be able to make the representations specified in clause (vi) below, and (vi) the assignee shall, at least 15 days prior to consummation of such proposed assignment, execute and acknowledge an instrument, in form and substance satisfactory to the Managing General Partner, representing that the covenants contained in Subparagraph 1.14(d) of the First Mortgage, or any like covenants in a substitute First Mortgage, will not be rendered untrue after giving effect to the proposed assignment. 19. Retirement, Withdrawal, Bankruptcy or Dissolution of Partners. 19.1 No Partner shall retire or withdraw from the Partnership except as provided in Articles 18, 19, 21 and 22. 19.2 Each General Partner shall maintain its existence as a legal entity throughout the term of this Agreement and shall not terminate or dissolve without being reconstituted or reincorporated. 19.3 An "Act of Insolvency" means with respect to any Person one of the following circumstances: (i) such Person makes an assignment for the benefit of creditors; (ii) such Person files a voluntary petition in bankruptcy; (iii) such Person is adjudicated a bankrupt or insolvent, or has entered against it an order for relief in any bankruptcy or insolvency proceeding; (iv) such Person files a petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law or regulation; (v) such Person files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against such Person in any proceeding of the nature described in subdivision (iv) above; (vi) such Person seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator of such Person or of all or any substantial part of such Person's properties; (vii) within 60-days after the commencement of any proceeding against such Person seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law or regulation, the proceeding has not been dismissed; (viii) within 60-days after the appointment without such Person's consent or acquiescence of a trustee, receiver or liquidator of such Person or of all or any substantial part of such Person's properties, the appointment is not vacated or stayed; or (ix) within 60 days after the expiration of any such stay, the appointment is not vacated. A Partner shall be deemed to be dissolved for the purposes of this Section 19.3 in the following circumstances: (i) in the case of a Partner who is a natural Person, upon his death or upon the entry by a court of competent jurisdiction of an order adjudicating him incompetent to manage his person or property; (ii) in the case of a Partner who is acting as Partner by virtue of being a trustee of a trust, upon the termination of the trust (but not merely by substitution of a new trustee); (iii) in the case of a Partner that is a separate partnership, upon the dissolution and commencement of winding up of the separate partnership; (iv) in the case of a Partner that is a corporation, upon its filing of a certificate of dissolution or the revocation of its charter or certificate of incorporation; or (v) in the case of a Partner that is an estate, upon the distribution by the fiduciary of the estate's entire interest in the Partnership. In the event of the withdrawal, retirement or dissolution of a General Partner or the commission of an Act of Insolvency by a General Partner, the Partnership shall thereupon be dissolved and shall be forthwith terminated as provided in Section 22.3. 19.4 Notwithstanding anything contained in Section 19.3 to the contrary, the business of the Partnership shall be continued after the withdrawal, retirement or dissolution of a General Partner or the commission of an Act of Insolvency by a General Partner if there is a surviving General Partner or, if there is no surviving General Partner, within 90 days after the date of such withdrawal, retirement, dissolution or Act of Insolvency (or if there has been more than one such Act, then after the date of the first such Act), the remaining Partners elect to continue the business of the Partnership and appoint a new General Partner which shall be granted at least a 1% interest in the Partnership. If (a) the business of the Partnership is continued after the withdrawal, retirement, dissolution of or commission of an Act of Insolvency by a General Partner, or (b) Dean Witter Realty Growth Properties, L.P. commits an Act of Insolvency, the interest of such General Partner in the case of clause (a) above or the interest of Bayport in the case of clause (b) above, shall be converted to that of a Limited Partner with the same interest in Available Net Income, Capital Proceeds, net income, net losses, gain, loss and other items as such Partner had prior to said conversion and the surviving or newly-appointed General Partner shall become (if it is not already) the Managing General Partner. If such withdrawal, retirement, dissolution or commission of an Act of Insolvency shall occur with respect to Bayport, then except as provided in the immediately preceding sentence, Bayport shall have no further rights to consent or any other right afforded to Bayport (as opposed to the Managing General Partner). 19.5 No Limited Partner may withdraw from the Partnership. Upon dissolution of a Limited Partner or the commission of an Act of Insolvency by a Limited Partner, the Partnership shall not be dissolved and the personal representative, guardian or other successor in interest of such Limited Partner shall be entitled to all distributions, allocations and credits to which such Limited Partner would be entitled but shall not be admitted to the Partnership as a limited partner without the written consent of the General Partners. 19.6 Mention in Sections 19.3 and 19.4 of the withdrawal or retirement of a General Partner shall not be construed as authorizing any General Partner to withdraw from the Partnership or retire in violation of the provisions of Section 19.1, whether by dissolution, Act of Insolvency or otherwise, or as relieving a General Partner which does so from liability to the Partnership and the other Partners. 20. Forced Sale of the Property. 20.1 In the event that either the TSG Group or the Existing Partners shall become entitled under Article 7 or 8 to sell the Property in accordance with the provisions of this Article, then the TSG Group or the Existing Partners, whichever has become so entitled to sell the Property (the "Selling Partner"), shall have the right, exercisable by Notice to the other of them (the "Other Partner"), to require the Partnership to sell the Property for cash or for cash subject to the First Mortgage (if the First Mortgage is assumable or the First Mortgagee consents to such a sale). Such sale shall be made on an arms-length basis to the Person(s) who will pay the Partnership the highest amount of cash net of all closing costs and mortgage loans required to be prepaid or assumed in connection with such sale; provided, however, that unless the Other Partner consents thereto, in no event shall the Selling Partner, any Affiliate thereof or any other Person in which the Selling Partner, or any Person having a direct or indirect interest in the Selling Partner, has a direct or indirect interest, have the right to bid on or to purchase the Property. The Other Partner, any Affiliate thereof or any other Person in which the Other Partner, or any Person having a direct or indirect interest in the Other Partner, has a direct or indirect interest shall have the right to bid on and purchase the Property; provided, however, that the Selling Partner shall have no obligation to accept any such bid but shall not have the right to sell the Property for an amount which is lower than the amount of such bid unless, after accepting such bid, the party making the same fails to purchase the Property in accordance with the terms of such bid within 90 days after such bid is accepted. 20.2 The Other Partner shall cooperate with the Selling Partner in effectuating any sale of the Property made pursuant to this Article 20, shall provide all information con- cerning the Property reasonably requested by the Selling Partner and available to the Other Partner and shall execute, acknowledge, if required, and deliver all documents and take such further action as may be necessary to consummate any sale negotiated by the Selling Partner that meets the requirements set forth in Section 20.1; provided, however, that the Selling Partner shall be authorized to execute the contract of sale, deed and any other documents in connection with such sale of the Property on behalf of the Partnership to consummate any sale that meets the requirements set forth in Section 20.1 provided any such document does not commit any Limited Partner to any liability thereunder; and provided further, however, that no Limited Partner included in the Other Partner (including, without limitation, any General Partner that elects to convert its interest to that of a Limited Partner pursuant to Section 20.3) shall be required to execute the contract of sale or any other documents in connection with such sale of the Property. 20.3 The Selling Partner shall provide the Other Partner with a copy of the contract of sale for any such sale no less than five days prior to its execution and copies of the closing documents to be executed by the Partnership at least five days prior to the closing of title or as soon thereafter as they become available. If any Partner included in the Other Partner is a General Partner at the time the contract of sale is about to be entered into by or at the direction of the Selling Partner, such Partner shall have the right, by giving Notice to the Selling Partner, to convert its interest in the Partnership to that of a Limited Partner, and the Selling Partner agrees that it will not enter into or commit to enter into any contract of sale pursuant to this Article until at least 5 days after an execution copy thereof has been delivered to the Other Partner. If such Notice is given prior to the expiration of such 5 day period (or prior to the commencement thereof), the General Partner included in the Other Partner shall automatically, upon the giving of such Notice, be and become a Limited Partner of the Partnership. The conversion of such Partner to a Limited Partner shall not affect the share of such Partner of Available Net Income, Capital Proceeds, net income, net losses, gain loss, deductions and tax credits and shall not cause the Partnership to be dissolved after such conversion, and prior to the execution of the contract of sale, the Selling Partner shall prepare and file or cause to be prepared and filed an amendment to the Certificate of Limited Partnership of the Partnership reflecting such conversion. 20.4 The consent or approval of the Other Partner shall not be required (a) for any such sale negotiated by the Selling Partner or to the terms or conditions of any contract, agreement or instrument to be entered into in connection therewith, provided the conditions set forth in the preceding Sections of this Article 20 are satisfied, or (b) for the retention by the Selling Partner of counsel to represent it and the Partnership in connection with such sale. All of the costs and expenses of the Partnership in selling the Property (including, without limitation, reasonable attorneys' fees and disbursements and transfer taxes) shall be deducted from the proceeds of such sale prior to the application of such proceeds pursuant to the applicable provisions of this Agreement. In the event of the sale of the Property pursuant to this Article 20, the Partnership shall be terminated in accordance with Article 22 and the net proceeds of such sale shall be distributed in accordance with Section 23.5, after crediting or charging gain or loss pursuant to Section 23.3 or 23.4. 21. Buy-Sell. 21.1 In the event that either the TSG Group or the Existing Partners shall become entitled under Article 7 or 8 to initiate the buy-sell pursuant to this Article 21, then the TSG Group or the Existing Partners, whichever has become so entitled to initiate the buy-sell (the "Electing Partner"), shall have the right to serve upon whichever of the TSG Group and the Existing Partners is not the party entitled so to initiate the buy-sell (the "Non- Electing Partner") a Notice (the "Initiating Notice") stating that the Electing Partner intends to institute the buy-sell procedures hereinafter set forth in this Article. 21.2 The Initiating Notice shall set forth an amount which shall be a valuation of all assets of the Partnership (the "Stated Valuation"). The Initiating Notice shall constitute an offer by the Electing Partner either to sell its interests in the Partnership to the Non-Electing Partner or to purchase the Non- Electing Partner's interests in the Partnership for the purchase price specified below. The Initiating Notice shall be accompanied by a statement of the Electing Partner's calculation of the amount which would be distributed to the Electing Partner and the Non- Electing Partner if (i) the assets of the Partnership were sold for cash equal to the Stated Valuation, (ii) all net income or net losses, gain or loss of the Partnership through the last day of the month immediately preceding the giving of the Initiating Notice (the "Buy-Sell Effective Date") were credited or charged in accordance with Section 9.2 or 9.3 and Section 12.2 or 12.3, (iii) all amounts distributable to the Electing Partner and the Non-Electing Partner through the Buy-Sell Effective Date were distributed pursuant to Sections 11.2 and 12.1, (iv) the net gain or net loss from such sale were credited or charged to the Capital Accounts of the Partners pursuant to Section 23.3 or 23.4, (v) the First Mortgage, or any substitute mortgage approved in accordance with Section 15.8 (together with any prepayment penalty due thereon), and all other debts and obligations of the Partnership on the Buy-Sell Effective Date, were paid on the Buy-Sell Effective Date, (vi) the Partnership incurred no expenses in connection with such sale, and (vii) the net proceeds of such sale were distributed in accordance with Section 23.5, without setting aside any reserves. The statement of the Electing Partner described in the preceding sentence shall be subject to confirmation or adjustment by the Partnership Accountants, and the Electing Partner shall promptly instruct such accountants to review such statement and to give the Partners notice of such confirmation or of any required adjustment within 30 days after the giving of the Initiating Notice. The determination of such accountants to confirm or adjust such statement, absent manifest error, shall be conclusive and binding on the Partners, provided that in case of an adjustment, if the Partnership Accountants' calculation of amounts which would be distributed to the Electing Partner and the Non-Electing Partner shall vary from that of the Electing Partner's statement by more than 1%, the Electing Partner shall have the right to revoke its offer to purchase or sell by giving notice to that effect to the Non-Electing Partner at any time on or before the 10th day after delivery by the Partnership Accountants of their determination. The purchase price of the interests of the Electing Partner or the Non-Electing Partner, which are being sold in accordance with this Section 21, shall be the amount, if any, which (as confirmed or adjusted by the Partnership Accountants as aforesaid) would be distributed as described above to such Partner, but subject to adjustment and updating as hereafter provided in Section 21.5. The parties understand and acknowledge that the Stated Valuation may result in the Non-Electing Partner, if it exercises or is deemed to exercise the Sale Option, receiving a purchase price of zero and that the Stated Valuation may have no relationship to actual market value. 21.3 The Non-Electing Partner shall have the option, exercisable by Notice to the Electing Partner given within 90 days after the date of receipt of the Partnership Accountants' determination pursuant to Section 21.2, either to (i) agree to purchase from the Electing Partner all of its Partnership interests for the purchase price determined as provided in Section 21.2 (the "Purchase Option") or (ii) accept the Electing Partner's offer to purchase all of the Non-Electing Partner's Partnership interests for the purchase price determined as provided in Section 21.2 (the "Sale Option"), provided that if the Existing Partners exercise the Sale Option, or if the Existing Partners are the Electing Partner and the TSG Group exercises the Purchase Option, it shall be a condition of the Existing Partner's obligation to sell that the TSG Group shall pay to them, at the closing of the sale, all principal due on any Default Loans, together with interest accrued thereon to the date of closing. If the Non-Electing Partner shall fail to exercise the Purchase Option or the Sale Option within such 90-day period, it shall be deemed to have exercised the Sale Option on the last day of such period. If, following the Non-Electing Partner's exercise of the Purchase Option, the Non-Electing Partner fails to consummate the purchase of the Electing Partner's interests in the Partnership in accordance with the provisions of this Article 21, then, as its sole remedy, the Electing Partner shall have the option, exercisable by Notice to the Non-Electing Partner given within 90 days after such failure by the Non-Electing Partner, to purchase the Non- Electing Partner's interests in the Partnership pursuant to this Section 21.3 as if the Non-Electing Partner had exercised the Sale Option, but in such case the purchase price payable by the Electing Partner to the Non-Electing Partner shall be equal to 90% of the amount called for by Section 21.2 (but in no event less than zero). Similarly, if following the Non-Electing Partner's exercise of the Sale Option, the Electing Partner fails to consummate the purchase of the Non-Electing Partner's interests in the Partnership in accordance with the provisions of this Article 21, then as its sole remedy, the Non-Electing Partner shall have the option, exercisable by Notice to the Electing Partner given within 90 days after such failure by the Electing Partner, to purchase the Electing Partner's interests in the Partnership pursuant to this Section 21.3 as if the Non-Electing Partner had exercised the Purchase Option, but in such case the purchase price payable by the Non-Electing Partner to the Electing Partner shall be equal to 90% of the amount called for by Section 21.2 (but in no event less than zero). 21.4 If the Existing Partners exercise the Sale Option, or if the TSG Group exercises the Purchase Option, and in either such case TSG has not theretofore become the Managing General Partner, it shall become the Managing General Partner on the effective date of such exercise; provided, however, that if the TSG Group fails to consummate the purchase of the Existing Partner's interests, Bayport shall once again become the Managing General Partner of the Partnership effective as of the date of such failure. 21.5 The closing of the sale pursuant to Section 21.3 shall take place at the office of the Managing General Partner on the 180th day after the Non-Electing Partner becomes obligated to purchase by the exercise of its Purchase Option or the Electing Partner becomes obligated to purchase by the exercise by the Non-Electing Partner of its Sale Option, or on any earlier day designated by the purchasing parties by at least 20 days' prior Notice to the selling parties. At such closing, the selling parties shall assign and transfer their interests in the Partnership, free and clear of all liens, encumbrances and adverse claims, to the purchasing parties or their designee or designees and shall deliver to the purchasing parties or their designee or designees such instruments of transfer with respect to their interests in the Partnership (which, if required by the title company engaged by the purchasing parties, shall include one or more quitclaim deeds to the Property) and such evidence of due authorization, execution and delivery and of the absence of any liens, encumbrances or adverse claims as the purchasing parties shall reasonably request, against receipt of the purchase price; provided, however, that the selling parties shall not be obligated to make any warranties or representations in any such instruments or documents other than that they own their respective interests in the Partnership, free and clear of all liens, encumbrances and adverse claims, and have not previously assigned or transferred the same or any interests therein. The purchase price shall be paid by the purchasing parties to the selling parties by wire transfer of federal funds to a bank account designated by the selling parties. The selling parties shall be responsible for any stamp, recording and similar transaction taxes payable upon such transfer but only to the extent that the amount of such taxes do not exceed the amount of the purchase price payable to the selling parties pursuant to this Article 21. At least 5 days prior to the closing, the purchasing parties shall deliver to the selling parties an update of the statement provided for in Section 21.2 prepared by the Partnership's Accountants, which statement shall update the amounts shown on the original statement as distributable to each of the Electing Partner and the Other Partner as of a date as close to the date of closing as is feasible and shall reflect any changes in the Percentage Interests of the Partners since the Buy-Sell Effective Date, which statement shall be binding upon the selling parties and the purchasing parties in the absence of manifest error. The amount shown in such updated statement as distributable to the selling parties shall be the purchase price payable by the purchasing parties to the selling parties pursuant to this Article 21. If any selling party is not present at such closing or otherwise defaults and the sale of such defaulting party's interest in the Partnership to the purchasing parties or their designee or designees is not closed as a result, from and after the date fixed for such closing, such defaulting party shall have no further rights or interests under this Agreement or in or to the Partnership other than to receive the purchase price, or the portion thereof to which such party is entitled, without interest, upon delivering a duly acknowledged assignment of such party's interest in compliance with this Section 21.5. The selling parties, or any of them, are authorized and directed to make any filings necessary or appropriate under the Act to confirm or effect the withdrawal of the selling parties, including any selling party which is not present at closing. 21.6 Notwithstanding anything to the contrary set forth in this Article 21, it is agreed that if the consent of the First Mortgagee is required by the terms of any First Mortgage which refinances or replaces the First Mortgage encumbering the Property at the date hereof for the Non-Electing Partner to purchase the Electing Partner's interest in the Partnership, then the Non- Electing Partner, if it exercises the Purchase Option, shall not be obligated to consummate the purchase of the Electing Partner's interest in the Partnership pursuant to the buy-sell procedures if the consent of such First Mortgagee is not delivered at the closing of such purchase pursuant to this Article 21, and if such consent is not obtained and so delivered, the buy-sell procedures shall be terminated. Once the buy-sell procedures have been terminated as a result of the Electing Partner's failure to obtain the First Mortgagee's consent, the TSG Group or the Existing Partners, whichever were the Electing Partner in the terminated procedures, may not once again serve an Initiating Notice so long as any First Mortgage remains in effect against the Property under which such consent is required without first procuring the First Mortgagee's consent and delivering a copy thereof to the other of them. Each of the TSG Group and the Existing Partners shall cooperate in attempting to obtain the consent of the First Mortgagee to the purchase of either of their interests by the other in a buy-sell transaction and shall accept any reasonable conditions which may be imposed by the First Mortgagee in connection therewith that do not affect the economic terms of the buy-sell transaction or of the First Mortgage in question. 22. Termination of the Partnership. 22.1 The Partnership may be terminated at any time upon the consent of both TSG and Bayport. 22.2 Unless the General Partners agree otherwise, from and after the seventh anniversary of the date of this Agreement, the General Partners shall attempt in good faith to sell the Property to an unrelated third party in an arm's length transaction as promptly as reasonably possible. The Managing General Partner (or if it shall fail to so do with reasonable promptness, the other General Partner) shall list the Property with real estate brokers jointly selected by the General Partners and shall attempt to develop bids for sale of the Property based on an all-cash payment or an all-cash payment subject to the First Mortgage if it is assumable or the First Mortgagee consents to such a sale; provided, however, that unless TSG and Bayport consent thereto, in no event shall any Partner, any Affiliate thereof or any other Person in which a Partner, or any Person having a direct or indirect interest in a Partner, has a direct or indirect interest, have the right to bid on or to purchase the Property. The Partnership shall accept an offer to purchase the Property if jointly approved by TSG and Bayport. If TSG and Bayport have not agreed to sign a letter of intent or a contract to sell the Property within 9 months from the date the Property is first listed with real estate brokers, or if a closing of the sale of the Property has not occurred within 12 months from such date, at any time thereafter, but prior to the time that a letter of intent or contract to sell the Property has been executed by TSG and Bayport, either the TSG Group or the Existing Partners may, but shall not be obligated to, initiate the buy-sell provisions set forth in Article 21 in accordance with the terms and provisions thereof, provided that the Stated Valuation offered by either the TSG Group or the Existing Partners may not be lower than the highest offer received for purchase of the Property during the period that the Property was being marketed. 22.3 Upon the voluntary termination of the Partnership pursuant to Section 19.3 or 22.1, the sale of the Property pursuant to Article 20, Section 22.2 or otherwise or the taking in condemnation or by eminent domain of the Property or substantially all of the Property or any other termination of the Partnership without reconstitution in accordance with the provisions of this Agreement or pursuant to applicable Laws, the Partnership shall wind up its affairs and, except in the case of a termination resulting by reason of the acquisition by the TSG Group or the Existing Partners of all of the interests in the Partnership of the other of them, shall then be liquidated as provided in Article 23. Notwithstanding the foregoing, if in connection with the sale of the property and assets of the Partnership, the Partnership, with the consent of the General Partners, receives a purchase-money mortgage or other purchase-money obligation in partial payment of the sale price, the Partnership, if the General Partners so agree, shall continue in existence to hold and collect such purchase-money mortgage or obligation until the same has been paid in full. 23. Gain, Loss and Distributions on Liquidation. Upon any termination of the Partnership, each of the following shall be accomplished: 23.1 The property and assets of the Partnership shall be liquidated as promptly as possible, but in an orderly and businesslike manner so as not to involve undue sacrifice. 23.2 The Partnership Accountants shall make a final audit of the records of the Partnership and shall determine the Available Net Income on hand as of the dissolution date and the amount of any additional cash held by the Partnership on such date (including without limitation the Building Reserve Account). 23.3 Any net gain realized by the Partnership upon the sale of its property and assets shall be credited to the Capital Accounts of the Partners (after crediting or charging thereto the appropriate portion of all net income or net losses, gain or loss of the Partnership for the then current year in accordance with Sections 9.2, 9.3 and/or 9.4 and Section 12.2 or 12.3, and after giving effect to all amounts distributed or to be distributed to the Partners for such year pursuant to Sections 11.2 and 12.1) as follows and in the following order of priority: (A) First, to the Capital Accounts of the Partners with negative Capital Account balances (if any), in the amount necessary, and in proportion to the amount necessary, to cause such Capital Account balances to equal zero. (B) Next, to the Capital Accounts of the TSG Group, in the amount necessary for the aggregate balance of the Capital Accounts of the TSG Group to equal an amount which, when added to all Guaranteed Payments previously paid and all distributions previously made to the TSG Group pursuant to Article 11 and subsections 12.1.1, 12.1.3 and 12.1.7, is the amount necessary (assuming such amount were being distributed to the TSG Group) for the TSG Group to have received a return of 12% per annum, compounded annually, on the average amounts of its Unrecovered Capital outstanding during each year or any partial year between the date of this Agreement and the date of such allocation. (C) Next, to the Capital Accounts of the TSG Group, in the amount necessary for the aggregate balance of the Capital Accounts of the TSG Group to equal the sum of (i) the amount specified in clause (B) and (ii) the Unrecovered Capital of the TSG Group. (D) Next, to the Capital Accounts of the TSG Group in the amount necessary for the aggregate balance of the Capital Accounts of the TSG Group to equal the sum of (i) the amount specified in clause (C) and (ii) an amount (assuming such amount were being distributed to the TSG Group) which, when added to all Guaranteed Payments previously paid, all distributions previously made to the TSG Group pursuant to Article 11 and subsections 12.1.1, 12.1.2, 12.1.3 and 12.1.7 and all amounts credited to the Capital Accounts of the TSG Group under clauses (B) and (C) (assuming the amounts so credited were being distributed to the TSG Group) results in the Internal Rate of Return realized by the TSG Group equalling 14%, determined as of the date of distribution pursuant to Section 23.5. (E) Next, to the Capital Accounts of the Existing Partners until the aggregate balance of the Capital Accounts of the Existing Partners shall equal the amount of gain credited to the Capital Accounts of the TSG Group pursuant to clause (D)(ii). (F) Next, to the Capital Accounts of the Partners, in the amount necessary, and in proportion to the amount necessary, (i) for the aggregate balance of the Capital Accounts of the TSG Group to equal the sum of (a) the amount set forth in clause (D) and (b) the Outstanding Unmatched Capital Contributions of the TSG Group, and (ii) for the aggregate balance of the Capital Accounts of the Existing Partners to equal the sum of (a) the amount set forth in clause (E) and (b) the Outstanding Unmatched Capital Contributions of the Existing Partners. (G) Next, to the Capital Accounts of the Partners, in the amount necessary, and in proportion to the amount necessary, (i) for the aggregate balance of the Capital Accounts of the TSG Group to equal the sum of (a) the amount set forth in clause (F)(i) and (b) the Outstanding Additional Capital Contributions of the TSG Group, and (ii) for the aggregate balance of the Capital Accounts of the Existing Partners to equal the sum of (a) the amount set forth in clause (F)(ii) and (b) the Outstanding Additional Capital Contributions of the Existing Partners. (H) Next, if the aggregate balance of the Capital Accounts of the TSG Group exceeds the sum set forth in clause (G)(i) (the "TSG Excess"), or the aggregate balance of the Capital Accounts of the Existing Partners exceeds the sum set forth in clause (G)(ii) (the "Existing Partner Excess"), to the Capital Accounts of the Partners to the extent necessary so that the ratio of the TSG Excess to the Existing Partner Excess shall equal the ratio of the Percentage Interest of the TSG Group to the Percentage Interest of the Existing Partners. (I) Any remaining gain shall be credited to the Capital Accounts of the TSG Group and the Capital Accounts of the Existing Partners in proportion to the respective Percentage Interests of the TSG Group and the Existing Partners. 23.4 Any net loss incurred by the Partnership upon the sale of its property and assets shall be charged to the Capital Accounts of the Partners (after crediting or charging thereto the appropriate portion of all net income or net losses, gain or loss of the Partnership for the then-current year in accordance with Sections 9.2, 9.3 and/or 9.4 and Section 12.2 or 12.3, and after giving effect to all amounts distributed or to be distributed to the Partners for such year pursuant to Sections 11.2 and 12.1) as follows and in the following order of priority: (A) First, to the Capital Accounts of the TSG Group and the Capital Accounts of the Existing Partners to the extent necessary so that the ratio of the TSG Excess to the Existing Partner Excess is as set forth in clause (H) of Section 23.3. (B) Next, to the Capital Accounts of the TSG Group and the Capital Accounts of the Existing Partners in proportion to the respective Percentage Interests of the TSG Group and the Existing Partners until the TSG Excess and the Existing Partner Excess each shall equal zero. (C) Next, to the Capital Accounts of the TSG Group and the Capital Accounts of the Existing Partners in the amount necessary, and in proportion to the amount necessary, (i) for the aggregate balance of the Capital Accounts of the TSG Group to equal the amount set forth in clause (F)(i) of Section 23.3, and (ii) for the aggregate balance of the Capital Accounts of the Existing Partners to equal the amount set forth in clause (F)(ii) of Section 23.3. (D) Next, to the Capital Accounts of the TSG Group and the Capital Accounts of the Existing Partners in the amount necessary, and in proportion to the amount necessary, (i) for the aggregate balance of the Capital Accounts of the TSG Group to equal the amount set forth in clause (D) of Section 23.3 and (ii) for the aggregate balance of the Capital Accounts of the Existing Partners to equal the amount set forth in clause (E) of Section 23.3. (E) Next, to the Capital Accounts of the Existing Partners in the amount necessary for the aggregate balance of the Capital Accounts of the Existing Partners to equal zero. (F) Next, to the Capital Accounts of the TSG Group in the amount necessary for the aggregate balance of the Capital Accounts of the TSG Group to equal zero. (G) Any remaining loss shall be charged to the Capital Accounts of the General Partner(s) in proportion to their respective Percentage Interests. 23.5 The proceeds of sale and all other assets of the Partnership (including, without limitation, any balance in the Building Reserve Account), after all distributions for the then current year have been made pursuant to Sections 11.2 and 12.1, shall be applied and distributed as follows and in the following order of priority: 23.5.1 to the payment of the debts and liabilities of the Partnership and the expenses of liquidation; 23.5.2 next, to the setting up of any reserves which the General Partners determine are reasonably neces- sary for any contingent unforeseen liabilities or obligations of the Partnership or of the General Partners arising out of, or in connection with, the Partnership. Such reserves may, in the discretion of the General Partners, be paid over to an escrow agent selected by them to be held by such escrow agent for the purpose of disbursing such reserves in payment of any of the aforementioned contingencies, and at the expiration of such period as the General Partners may deem advisable, to pay or distribute the balance thereafter remaining, if any, as provided in subsection 23.5.3; and 23.5.3 any remaining proceeds shall be distributed to the TSG Group and the Existing Partners in proportion to the amounts of the aggregate positive balances in their respective Capital Accounts, as such Capital Accounts have been adjusted pursuant to Section 23.3 or 23.4 to reflect the gain or loss realized or incurred upon the sale of the Partnership's property and assets. 23.6 A taking of all or substantially all of the Partnership's property and assets in condemnation or by eminent domain shall be treated in all respects as a sale of the Partnership's property and assets upon the dissolution and liquidation of the Partnership pursuant to this Article 23. In such event any portion of the property and assets of the Partnership not so taken shall be sold and the proceeds, together with the condemnation award, shall be distributed in the manner provided for in this Article 23. 23.7 The Managing General Partner shall establish the amount and types of reserves, if any, reasonably necessary to pay for the anticipated liabilities or obligations of the Partnership which are expected to be charged subsequent to the dissolution and liquidation of the Partnership pursuant to this Article 23 and the length of time for which such reserves are to be held; provided, however, that if Bayport has been converted, or has elected to convert itself, from the Managing General Partner to a Limited Partner pursuant to Article 20 or 21 (other than a conversion pursuant to Section 8.2.5), the amount and types of reserves and the length of time they are to be held shall be subject to Bayport's approval, not to be unreasonably withheld or delayed. 23.8 The provisions of Section 23.7 are intended only to govern the obligations of the Partners inter se, and shall not be enforceable against the Partners by any creditor of the Partnership or of any Partner, or by any party claiming by or through any such creditor or any Partner. The obligations of the Partners under Section 23.7 shall survive a termination and winding up of the Partnership and the distribution of all of its assets. Claims and expenses paid after such date which would have been obligations of the Partnership before such date shall be obligations of the Partnership. Losses attributable to such claims and expenses paid after such date shall be allocated to the Capital Accounts of the Partners according to the terms and conditions of this Agreement. 23.9 Intentionally Omitted 24. Investment Representations. Each of the members of the TSG Group represents that it is acquiring its interest as a Partner for its own account for investment and not with a view to the distribution or resale thereof and with no present intention of distributing or reselling all or any portion thereof. Each assignee or transferee of the whole or any portion of the interest of any Partner in the Partnership shall, by executing the assumption agreement provided for in Section 18.6, be deemed to have made the foregoing representation. 25. Brokerage. Each of the TSG Group and the Existing Partners (the "Warranting Party") hereby represent and warrant to the other of them (the "Other Party") that the Warranting Party has not dealt with any broker, consultant, finder or like agent who might be entitled to a commission or compensation on account of introducing the Warranting Party and the Other Party to each other or the negotiation and execution of this Agreement or any of the instruments and agreements contemplated herein. The Warranting Party hereby further agrees to indemnify and hold the Other Party, and their successors and assigns, harmless against and from all claims, losses, liabilities and expenses, including reasonable attorneys' fees, arising out of any breach of its foregoing warranty and representation. 26. Notices. 26.1 All notices, requests, demands, consents, approvals and other communications which may or are required to be served or given hereunder (collectively, "Notices") shall be in writing and shall be sent by registered or certified mail, return receipt requested, or by reputable overnight delivery service, postage prepaid, or by hand delivery, addressed as follows: If to the Partnership, Bayport or the Existing Partners: Dean Witter Realty, Inc. Two World Trade Center - 64th Floor New York, New York 10048 Attention: Mr. E. Davisson Hardman, Jr. with a copy to: Dean Witter Realty, Inc. 130 Liberty Street New York, New York 10006 Attention: Matthew M. Horgan, Esq. If to the TSG Group or TSG: The Taylor Simpson Group One Rockefeller Plaza New York, New York 10020 Attention: Paul E. Taylor III with a copy to the same address to the attention of Kenneth H. Simpson and with a copy to: Breed Abbott & Morgan Citicorp Center 153 East 53rd Street New York, New York 10043 Attention: John O'Callahan, Esq. If to The Trustees of Princeton University: The Trustees of Princeton University 22 Chambers Street Princeton, New Jersey 08542 Attention: Mr. Randall A. Hack with a copy to the same address to the attention of Mr. Robert Honstein and to John D. Sweeney III Director Office of Investment Administration Princeton University 2 New South Building Princeton, NJ 08544 26.2 Either party may, by Notice given as aforesaid, change its address for all subsequent Notices, except that no party may require Notices to it to be sent to more than two addresses. 26.3 Except where otherwise expressly provided to the contrary herein, Notices shall be deemed given or made three business days after the date of the mailing thereof in the case of Notices mailed by registered or certified mail or upon receipt thereof, if overnight delivery service or hand delivery is used, with failure to accept delivery constituting delivery for this purpose. 27. Captions. All section and article titles or captions contained in this Agreement and the table of contents are for convenience only and shall not be deemed a part of this Agreement. 28. Variation of Pronouns. All pronouns and all variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the Person or Persons may require. 29. Counterparts. This Agreement may be executed in any number of counterpart copies, each of which shall constitute an original and all of which, when taken together, shall constitute the same Agreement. 30. Governing Law. This Agreement is made pursuant to the provisions of the laws of the State of Florida and shall be construed accordingly. 31. Successors and Assigns. This Agreement shall be binding upon the parties hereto and their respective successors and assigns, shall inure to the benefit of the parties hereto and, except as otherwise provided herein, their respective successors and assigns, but shall not inure to the benefit of or be enforceable by any other Person. 32. Exculpation of the General Partners. The Partners agree that the obligations of each of the General Partners under or with respect to this Agreement shall not constitute personal obligations of any general partner or any limited partner of such General Partner, and shall not create or involve any claim against, or personal liability on the part of, any such general partner or any such limited partner, and that the Partners will look solely to the assets of such General Partner for satisfaction of any liability of such General Partner under or in respect of this Agreement and will not seek recourse against any general partner or any limited partner of such General Partner, or its or their personal assets, for such satisfaction. 33. Further Assurances. Each Partner hereby agrees to execute, acknowledge (if necessary) and deliver such other documents, instruments, agreements or certificates as may be required by law, or which may in the reasonable opinion of the Managing General Partner be otherwise necessary or advisable to carry out the intents and purposes of this Agreement. 34. Partial Invalidity. If any provision of this Agreement or the application thereof to any Person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected thereby and shall be enforceable to the fullest extent permitted by law. 35. Representatives. It is understood that throughout the term of this Agreement TSG shall act as the representative of the TSG Group and Bayport shall act as the representative of the Existing Partners. In furtherance of the foregoing sentence, (i) the Existing Partners agree that TSG and the TSG Group shall be fully protected (a) in relying on all consents, Notices, directions, elections, instructions and other communications given by Bayport on behalf of the Existing Partners and may conclusively rely thereon to the same extent as if they had been joined in by all of the Existing Partners, and (b) in making all distributions, and all payments of principal and interest on loans, to which the Existing Partners are entitled under this Agreement to Bayport, on behalf of the Existing Partners, and (ii) the TSG Group agrees that Bayport and the Existing Partners shall be fully protected (a) in relying on all consents, Notices, directions, elections, instructions and other communications given by TSG (or, in the case of matters covered by Section 15.6, TSG or any of the Persons then acting as a TSG Leasing Representative) on behalf of the TSG Group and may conclusively rely thereon to the same extent as if they had been joined in by all of the members of the TSG Group, and (b) in making all distributions, and all payments of principal and interest on loans, to which the TSG Group is entitled under this Agreement to TSG, on behalf of the TSG Group. Each of TSG and Bayport may rely on any Notice, consent, direction, election, instruction or other communication purported to be signed or otherwise given by an authorized officer or partner of the other of them (and in the case of Bayport, as to matters covered by Section 15.6, by any one of the Persons then acting as a TSG Leasing Representative) and shall not be required to inquire as to the authorization of the party so purporting to act on behalf of the other of them. Whenever the Managing General Partner is obligated or desires to give a Notice to the TSG Leasing Representative or to afford the TSG Leasing Representative with the opportunity to participate in negotiations, to review lease proposals or take any other action pursuant to Section 15.6, the Managing General Partner may give such Notice or afford such opportunity to any one of the Persons who is then acting as a TSG Leasing Representative and need not give Notice or afford such opportunity to any other Person who is then so acting. 36. Entire Agreement. This Agreement and the documents, instruments, certificates and agreements referred to herein or attached hereto as Exhibits embody the entire agreement and understanding between the parties relating to the subject matter hereof and may not be amended, waived or discharged except by an instrument in writing executed by the party against which enforcement of such amendment, waiver or discharge is sought. In WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first above written. Managing General Partner BAYPORT, LTD., a Florida limited partnership By: DEAN WITTER REALTY GROWTH PROPERTIES, L.P., a Delaware limited partnership, General Partner By: DEAN WITTER REALTY GROWTH PROPERTIES, INC., a Delaware corporation Managing General Partner /s/E. Davisson Hardman, Jr. By:/s/E. Davisson Hardman,Jr. as to E. Davisson E. Davisson Hardman, Jr., Hardman, Jr., President President By:/s/Charles M. Charrow Charles M. Charrow Assistant Secretary GENERAL PARTNER BAYROCK REALTY ASSOCIATES L.P., LTD. a Delaware limited partnership /s/Paul E. Taylor III as to Paul E. Taylor III, By: BAYROCK REALTY, INC., Vice President a Delaware corporation d/b/a BAYROCK TAMPA REALTY, INC. By: /s/Paul E. Taylor III Name: Paul E. Taylor III Vice President LIMITED PARTNERS TWC TEN, INC., a Florida corporation /s/Jack Wilson as to Jack Wilson, President By:/s/Jack Wilson Jack Wilson, President /s/Jack Wilson Jack Wilson /s/Jack Wilson as to Jack Wilson TWC TEN POP LTD., a Florida limited partnership By: TWC TEN, INC., a Florida corporation, General Partner /s/Jack Wilson as to Jack Wilson President By:/s/Jack Wilson Jack Wilson, President /s/David T. Smith David T. Smith /s/David T. Smith as to David T. Smith /s/James Swartz James Swartz /s/James Swartz as to James Swartz /s/David E. Schaughency David E. Schaughency /s/David E. Schaughency as to David E. Schaughency /s/Larry Finch Larry Finch /s/Larry Finch as to Larry Finch WESTROCK REALTY ASSOCIATES L.P., a Delaware limited partnership By: BAYROCK REALTY, INC. a Delaware corporation /s/Paul E. Taylor III By: /s/Paul. E. Taylor as to Paul E. Taylor III Name Paul E. Taylor III Vice President Vice President EXHIBIT A Partners and Percentage Interests EXISTING PARTNERS Managing General Partner Percentage Interest Bayport, Ltd. 46.25% c/o Dean Witter Realty Inc. 2 World Trade Center New York, New York 10048 Limited Partners TWC Ten, Inc., Jack Wilson, 3.75% James Swartz, David T. Smith, TWC Ten Pop, Ltd., David E. Schaughency, and Larry Finch TSG GROUP PARTNERS General Partner Bayrock Realty Associates L.P., Ltd. 1.0% c/o The Taylor Simpson Group One Rockefeller Plaza New York, New York 10020 49.0% Limited Partners Westrock Realty Associates L.P., Ltd. c/o The Taylor Simpson Group One Rockefeller Plaza New York, New York 10020 EX-10 5 Exhibit 10(j) ____________ AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF CAMPUS DRIVE INVESTMENT COMPANY (A California Limited Partnership) Dated as of December 27, 1985 AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP dated as of December 27, 1985, among PENINSULA/DW ASSOCIATES, a California general partnership ("DW"), PENINSULA OFFICE PARK, a California limited partnership ("POP"), the limited partners listed in Exhibit A (the "Limited Partners"); DW and POP are hereinafter sometimes collectively referred to as the "General Partners"; POP and the Limited Partners are hereinafter sometimes collectively referred to as the "Original Partners"; and the General Partners and the Limited Partners are hereinafter sometimes collectively referred to as the "Partners"). Preliminary Statement Campus Drive Investment Company, a California limited partnership (the "Partnership"), was originally formed as a general partnership pursuant to a General Partnership Agreement dated December 28, 1973, as amended by a First Amended General Partnership Agreement dated December 29, 1973. The Partnership was converted to a limited partnership under the California Uniform Limited Partnership Act pursuant to a Second Amended Partnership Agreement dated December 29, 1976 (the "Second Amended Partnership Agreement"). The Second Amended Partnership Agreement was amended pursuant to an Amendment to Second Amended Partnership Agreement dated September 8, 1981. (The Second Amended Partnership Agreement as so amended is hereinafter referred to as the "Initial Partnership Agreement"). A Certificate of Limited Partnership for the Partnership dated December 30, 1976, was recorded January 28, 1977, in Volume 7370, Page 63 of the Official Records of the County Recorder, County of San Mateo, State of California (the "Original Certificate"). The Original Certificate was amended and restated by the First Amendment to Certificate of Limited Partnership dated December 30, 1976, and recorded February 23, 1977, in Volume 7389, Page 386 of the Official Records of the County Recorder, County of San Mateo, State of California (the "Amended and Restated Certificate"). The Amended and Restated Certificate was amended by the Second Amendment to Certificate of Limited Partnership dated September 2, 1980, and recorded on November 28, 1980, in Book 743, at Page 610 of the Official Records of the County Recorder, County of San Mateo, State of California. (The Amended and Restated Certificate, as so amended, is hereinafter referred to as the "Certificate.") DW has acquired portions of the Partnership interests in the Partnership heretofore held by certain of the Original Partners pursuant to a Sale, Purchase and Contribution Agreement dated as of December 27, 1985, between DW and the Partnership (the "Purchase Agreement"). DW desires to have the entire partnership interest which it has acquired be in the form of a general partnership interest and desires to be admitted as a General Partner of the Partnership, and DW and the Original Partners desire to make certain changes in the Initial Partnership Agreement and the Certificate. The parties hereto are entering into this Agreement to evidence their agreements on such matters and to set forth the respective rights and obligations of the parties hereto to each other and to the Partnership. In consideration of the foregoing, and of the mutual covenants, conditions and agreements hereinafter set forth, the parties hereto hereby agree that the Initial Partnership Agreement is hereby amended and restated in its entirety to read as follows: ARTICLE I Continuation of the Partnership SECTION 1.01. Continuation. The Partnership shall, on the terms and conditions hereof, continue its existence, without interruption, as a limited partnership under and subject to the Uniform Limited Partnership Act of the State of California. DW shall be admitted as a General Partner of the Partnership and an amendment to the Certificate (the "New Certificate") shall be filed in the Office of the County Recorder of San Mateo County to reflect such admission and the other matters contained herein. SECTION 1.02. Effectiveness. The provisions hereof shall be effective upon the closing of the purchase (the "Closing"; the date on which the Closing occurs is referred to as the "Closing Date") by DW pursuant to the Purchase Agreement of portions of Partnership Interests (as defined in Section 1.07) heretofore held by the Original Partners and shall continue to be effective until termination and liquidation of the Partnership in accordance with the provisions hereof. SECTION 1.03. Name. The name of the Partnership shall be CAMPUS DRIVE INVESTMENT COMPANY. SECTION 1.04. Place of Business. The principal office and place of business of the Partnership shall be located at 2929 Campus Drive, San Mateo, California 94403, or such other place or places as may from time to time be Approved by the General Partners (as defined in Section 2.01). SECTION 1.05. Purpose. The business of the Partnership shall be to acquire, own, improve, manage, operate, lease, mortgage (or otherwise encumber) or otherwise deal with the real property described in Exhibit B (the "Property") and to engage in any other business as shall be Approved by the General Partners (as defined in Section 2.01). SECTION 1.06. Authority of Partners. Except as expressly provided in this Agreement, no Partner shall have any authority to act for, or to assume any obligations or responsibility on behalf of, the other Partners or the Partnership. SECTION 1.07. Partnership Interests. The "Partnership Interest" of a Partner shall mean the proportional interest of each Partner in the Partnership. The initial Partnership Interests and capital contributions of the Partners are set forth in Exhibit C hereto. ARTICLE II Management SECTION 2.01. Management of the Partnership. (a) Subject to the terms hereof, the General Partners, collectively, shall have full, exclusive and complete discretion in the management and control of the business and affairs of the Partnership and in no event shall the Limited Partners take part in the conduct or control of the business and affairs of the Partnership or have any right or authority to act for or bind the Partnership. Except as expressly provided herein to the contrary, only those Major Decisions (as hereinafter defined) with respect to the management and control of the Partnership which are Approved by the General Partners shall be binding on the Partnership and the Partners. When the phrase "Approved by the General Partners" is used in this Agreement, such phrase shall mean approved by all General Partners. A General Partner shall be deemed to have given approval of a particular action or decision under this Agreement unless such General Partner disapproves (in writing) of such action or decision within 30 days (or 7 days in the case of a particular Major Decision under section 2.01(b)(iv), (v), (xii) or (xiii)) after giving of written notice to such General Partner in accordance with Section 9.02 of request for such approval. The Property shall be managed by a manager (the "Manager"), who shall be designated pursuant to Section 2.02. The Manager shall be responsible for the implementation of the decisions of the General Partners with respect to the Property and for conducting the ordinary and usual business and affairs of the Partnership concerning the Property as more fully set forth in Section 2.03 and as limited by this Agreement and any management agreement between the Partnership and the Manager. The general affairs of the Partnership shall be managed by the managing general partner (the "Managing General Partner"), who shall be designated pursuant to Section 2.10. (b) No action shall be taken, sum expended, decision made or obligation incurred by the Partnership, the Manager or any Partner with respect to a matter within the scope of any of the major decisions enumerated below (the "Major Decisions"), unless Approved by the General Partners. The Major Decisions shall include: (i) the acquisition of any land, or other improved or unimproved real property, or any improvements thereon or interest therein; (ii) subject to Article III, the incurrence of any indebtedness for borrowed money by, or the refinancing of any indebtedness of, the Partnership, including, without limitation, the financing or refinancing of the Property or the operations of the Partnership; (iii) the sale or other disposition of, or the granting of any mortgage, lien or other encumbrance (other than tenant leases) on, the Property or any part thereof; (iv) entering into any lease or other arrangement that (A) involves or would result in the leasing of 5,000 or more square feet of net rentable space in the Property pursuant to a single lease or under multiple leases to the same lessee (or its affiliates), (B) provides for annual rental or other terms less favorable to the Partnership than the rental and other terms, if any, set forth in any written guidelines Approved by the General Partners (which guidelines shall include, without limitation, terms for free rent and other concessions, effective rent, tenant improvements and expense stop and shall be confirmed or revised as Approved by the General Partners no less frequently than quarterly), (C) provides for a term which, with renewals, is equal to or greater than six years or (D) otherwise varies in any material respect that is adverse to the Partnership from lease forms and rent schedules previously Approved by the General Partners; (v) the termination or material modification of any lease or other arrangement involving space in the Property if such lease or other arrangement was required (or would have been required if this Agreement had been in effect when such lease or other arrangement was entered into) to be Approved by the General Partners pursuant hereto or if such modification would result in a modified lease or other arrangement that, if it were a new lease, would be required to be Approved by the General Partners pursuant hereto; (vi) the construction of any capital improvements, repairs, alterations or changes (other than tenant improvements pursuant to a lease or other arrangement which has been Approved by the General Partners or which does not require such approval) in excess of $2,500 in the aggregate in any one fiscal year (unless specifically set forth in a Budget (as defined in Section 2.04) theretofore Approved by the General Partners), or the making of any lease termination payments (other than pursuant to the terms of a lease or other arrangement which has been Approved by the General Partners or which does not require such approval) in excess of $1,000 in the aggregate in any one fiscal year; (vii) the selection or variation of depreciation and accounting methods and other decisions with respect to the treatment of various Partnership transactions for accounting, bookkeeping or tax purposes, and the filing of tax returns by or on behalf of the Partnerships in each case subject to and consistent with the other provisions hereof (including Sections 2.08 and 2.09); (viii) the approval of all construction and architectural contracts and all architectural plans, specifications and drawings prior to the construction of any new improvements or alterations contemplated thereby (other than tenant improvements pursuant to a lease or other arrangement which has been Approved by the General Partners or which does not require such approval); (ix) the selection of all counsel, accountants, engineers and architects to be engaged by the Partnership; (x) distributions to the Partners, except as set forth in Article IV or V; (xi) the approval of each Annual Business Plan (as defined in Section 2.04) pursuant to Section 2.04; (xii) the payment or incurrence of any obligation (other than obligations under the express terms of a lease or other arrangement which has been Approved by the General Partners or under a lease that does not require such approval or other obligations incurred in the ordinary course of business to cure violations of law or to cover other nondiscretionary operating expenses) in any fiscal year involving a sum which (A) when added to the other expenditures of the Partnership for such fiscal year, would result in the Partnership having cumulative expenditures in excess of the Budget Approved by the General Partners for such year of more than $5,000, (B) when added to all expenditures in the same category for such fiscal year, would exceed 105% of the amount set forth for such category of expenditures in the Budget Approved by the General Partners for the then lapsed portion of such fiscal year, or (C) is not provided for in or contemplated by the specific categories of expenditures set forth in the Budget Approved by the General Partners; provided, however, that, in each of the foregoing cases the Manager shall have the right, without the consent of the General Partners if the Manager shall have first used its best efforts under the circumstances to obtain such consent (except in the case of expenditures not exceeding $1,000, where no such efforts shall be required), to make such repairs and alterations to the Property and to expend such funds (not to exceed $5,000 per incident) as in its reasonable judgment are immediately necessary or advisable in the event of an emergency in order to avoid a violation of law or to prevent injuries to persons or damage to property; (xiii) the initiation, defense, adjustment, settlement or compromise of any claim, action, suit or judgment by or against the Partnership involving an amount in excess of $10,000 or any claim for equitable relief; (xiv) subject to Section 2.02(b) and except as provided in any management agreement relating to the Property which has been Approved by the General Partners, the entering into of any management or real estate brokerage agreement (whether oral or written) in respect of the Property or any termination or material modification thereof; (xv) any modification with respect to the type or amount of insurance coverage to be maintained by the Partnership as set forth in the insurance guidelines attached as Exhibit D hereto (as so revised from time to time, the "Insurance Guidelines"); (xvi) entering into any service, maintenance, employment or similar contract or agreement which is not terminable without penalty on an annual basis on not more than 90 days' notice or which provides for monthly payments by the Partnership (whether actual or accrued) in excess of $500 per month, provided that this $500 limitation shall not apply in any fiscal year if such item is covered in the Budget Approved by the General Partners pursuant to Section 2.04 hereof; and (xvii) any other decision or action that is required to be Approved by the General Partners pursuant hereto or that may hereafter be Approved by the General Partners as a Major Decision. (c) A General Partner shall not be liable, responsible or accountable in damages or otherwise to any other Partner for any act or omission pursuant to the authority granted by this Agreement if such General Partner acted in good faith and in a manner it reasonably believed to be within the scope of the authority granted by this Agreement and in or not opposed to the best interests of the Partnership, provided that such General Partner shall not be relieved of liability in respect of any claim, issue or matter as to which such General Partner shall have been adjudged to be liable for gross negligence, wilful misconduct or material breach of this Agreement in the performance of its fiduciary duty to the Limited Partners; and, subject to such limitation in the case of any such judgment of liability, the Partnership shall indemnify each General Partner against any loss or damage incurred by it and against expenses (including attorneys' fees) actually and reasonably incurred by it (which may be paid as incurred) in connection with the defense or settlement of any threatened, pending or completed action or suit by any person in connection therewith. SECTION 2.02. Appointment, Replacement and Resignation of Manager. (a) The General Partners hereby approve the continuation of William Wilson & Associates, as the initial manager of the Property (the "Initial Manager") pursuant to the Management Agreement dated as of December 27, 1985, between the Partnership and the Initial Manager (the "Initial Management Agreement"). (b) For so long as DW shall be a General Partner hereof and a general partner of POP, the right of the Partnership to terminate or not renew the Initial Management Agreement (or any subsequent management agreement) pursuant to Section 5.01(a) of the Initial Management Agreement (or the corresponding provisions of any such subsequent management agreement) and, subject to the following, to hire a replacement manager, shall be exercisable by DW on behalf of the Partnership. If DW shall elect to exercise such right of termination or nonrenewal on behalf of the Partnership or if the Initial Manager (or any subsequent Manager) shall resign as Manager or for any other reason cease to be Manager, as soon as reasonably practicable thereafter a list shall be Approved by the General Partners (such approval not to be unreasonably withheld or delayed) which shall set forth the names of three or more responsible parties who will be requested to submit proposals for assuming the role of Manager. In connection with the replacement of the Initial Manager (or any subsequent Manager), Borel Estate Company (the "Ream Company") shall be included on such list, provided that such company is still active in managing office buildings in the San Mateo area. Within 10 days after receipt of such proposals from all persons on such list (and in any event no later than 20 days after such list shall have been Approved by the General Partners), DW shall give each other General Partner a written notice setting forth the name of the party that it has on behalf of the Partnership selected to act as the Manager from among the choices designated on the aforementioned list and the terms of such engagement; provided, however, that if the Manager so selected by DW shall be an affiliate of DW, such appointment shall require the prior written approval of the general partners of POP (other than DW) (which approval shall not be unreasonably withheld or delayed). Upon receipt by the other General Partners of any such notice referred to in the preceding sentence (and granting of such consent required from them, if any), the General Partners shall execute on behalf of the Partnership a management agreement with such party and perform such other acts as may be required to appoint such party as the Manager. SECTION 2.03. Duties of Manager. The Manager shall implement or cause to be implemented all Major Decisions Approved by the General Partners related to the operation and management of the Property and shall conduct or cause to be conducted the ordinary and usual business and affairs of the Partnership related to the Property in accordance with and as limited by this Agreement and the applicable management agreement. In no event shall the Manager have any authority to make any expenditure or incur any obligation on behalf of the Partnership unless such expenditure or obligation has been specifically provided for in this Agreement or Approved by the General Partners or is made pursuant to an Annual Business Plan Approved by the General Partners. SECTION 2.04. Annual Business Plan. Each management agreement shall provide that, not later than 60 days after the effective date of such agreement, and, thereafter, not later than 60 days prior to the end of each fiscal year, the Manager shall prepare and submit to the General Partners an annual report (the "Annual Business Plan") in respect of the Property setting forth (i) an analysis of the business prospects for the Property for the succeeding fiscal year, including an analysis of competitive factors affecting the Property, such as vacancy rates for the local market and rental rates charged for space of similar quality in the area, (ii) a statement of proposed capital and other improvements to be made in the succeeding fiscal year, including cost and timing estimates therefor and (iii) a proposed operating and capital budget (the "Budget") setting forth the estimated receipts, expenditures, escrow deposits and reserves, if any, of the Partnership for the next succeeding fiscal year. If and when the Annual Business Plan (including the Budget set forth therein, and any modification required by the General Partners) is Approved by the General Partners, the Manager shall implement it and shall be authorized, subject to the requirements of Section 2.01, without the need for further approval by the General Partners, to make the expenditures and incur the obligations provided for in the Budget as so approved. SECTION 2.05. Arrangements with Affiliates. (a) Except as may be expressly provided for herein or in the Initial Management Agreement or as may hereafter be Approved by General Partners, no payment shall be made by the Partnership to a Partner, or any affiliate or employee of a Partner, for the services of such Partner or any affiliate or employee of such Partner. No part of a Partner's central office overhead or general or administrative expenses shall be deemed to be an expense of the Partnership; provided, however, that the reasonable travel and other expenses for twelve trips during the first twelve months following the Closing Date (and such number of trips in succeeding periods as shall reasonably be required) by an officer, partner, employee or representative of DW or any affiliate of DW to attend meetings of the General Partners, to inspect the Property or to examine the books and operations of the Partnership shall be expenses of the Partnership. (b) The Partnership shall not enter into any contract, agreement, lease or other arrangement for the furnishing to or by the Partnership of goods, services or space with any person or entity related to or affiliated with a Partner unless such contract, agreement, lease or other arrangement has been specifically Approved by the General Partners; provided, however, that the foregoing shall not restrict the ability of William Wilson III ("Wilson") or his affiliates to bid on providing services (including tenant improvement work) to the Partnership and, if such bid is the lowest or is Approved by the General Partners, from being awarded such contract. SECTION 2.06. Fiscal Year. The fiscal year of the Partnership shall end on the last day of December of each year. SECTION 2.07. Books and Records; Accountants. (a) The books of account of the Partnership shall be kept and maintained at all times at the place or places Approved by the General Partners and shall be maintained on an accrual basis in accordance with generally accepted accounting principles consistently applied. (b) Each Partner shall have the right at all reasonable times during usual business hours to audit, examine and make copies of or extracts from the books of account of the Partnership. Such right may be exercised through any agent, representative, partner or employee of a Partner designated by it or by an independent public accountant designated by such Partner. Each Partner shall bear all expenses incurred in any examination made by such Partner. (c) At the expense of the Partnership, the books of the Partnership shall be examined, audited and certified annually as of the end of each fiscal year by the independent public accounting firm of Peat, Marwick, Mitchell & Co. Such independent public accountants for the Partnership may be changed to any firm of independent public accountants of nationally recognized standing Approved by the General Partners. Peat, Marwick, Mitchell & Co., or any subsequently selected independent public accountants, shall prepare a balance sheet, an income and expense statement and a statement of changes in financial position, all in comparative form and in reasonable detail, and a report setting forth the amount of Net Cash Flow (as defined in Section 4.01) of the Partnership, and the share of the net profits and losses of the Partnership (as defined in Section 6.07) and Net Cash Flow allocable to each Partner, for each fiscal year. The Managing General Partner shall use its best efforts to cause such accountants to prepare such financial statements within 90 days after the end of each fiscal year, and copies of such financial statements and report shall promptly be transmitted by the Managing General Partner to the Partners, together with the report of such accountants covering the results of their audit. Peat, Marwick, Mitchell & Co., or such other accountants, shall also prepare the tax returns of the Partnership (which tax returns shall be satisfactory in form and substance to each General Partner), and the Managing General Partner shall use its best efforts to cause such accountants to prepare such tax returns within 60 days after the end of each fiscal year. The Managing General Partner shall use its best efforts to cause such tax returns to be filed on a timely basis and shall, promptly after the receipt thereof from such accountants, transmit copies thereof to each Partner. SECTION 2.08. Depreciation. All depreciation attributable to any step-up in basis of the Property caused by the transactions contemplated by the Purchase Agreement (a "Step-Up") shall be allocated to DW. Each Partner agrees to cooperate with DW and agrees not to contest or take a position inconsistent with DW's obtaining the Step-Up under Section 754 or any other applicable Section of the Internal Revenue Code of 1954, as amended (the "Code"). The basis of the Partnership's depreciable assets and its methods of depreciation shall not be changed without the express approval of DW. The Partnership's real property shall be depreciated using the straight line method of cost recovery and the shortest cost recovery period permitted by the Code. The Partnership's personal property shall be depreciated using accelerated cost recovery. SECTION 2.09. Tax Elections. (a) All elections required or permitted to be made by the Partnership under the Code shall be made by the Partnership in such manner as DW may reasonably determine from time to time. In connection with the Step-Up, the Partnership shall make an election pursuant to Section 754 of the Code to adjust the basis of the assets of the Partnership with respect to the transfer to DW of its Partnership Interest pursuant to the Purchase Agreement and the transfer of the "DW Interest" (as defined in the Sale, Purchase and Contribution Agreement dated as of December 27, 1985, between POP and DW) to the extent it represents an indirect interest in the Partnership and shall make an election pursuant to Proposed Treasury Regulation sec. 1.704-1(b)(2)(iv)(c)(1) to make corresponding adjustments to the capital account of DW. Elections which are required or permitted to be made because of a change in the Code (or the enactment of any successor statute) after the date hereof shall be subject to the reasonable approval of the other General Partners; provided that for so long as DW shall own a partnership interest in POP the other General Partners may not withhold any such approval if failure to grant such approval would have a material adverse effect on DW. No such election shall be inconsistent with the other terms and conditions of this Agreement. Unless otherwise Approved by the General Partners, DW shall be the "tax matters partner" of the Partnership pursuant to Section 6231(a)(7) of the Code. The "tax matters partner" shall not compromise any claim by the Internal Revenue Service with respect to the Partnership or appeal any ruling or decision thereof with respect to the Partnership unless Approved by the General Partners. (b) Notwithstanding Section 2.09(a), if a Partner transfers all or part of his interest in the Partnership, any basis adjustment attributable to such transfer, whether made under Section 754 of the Code or otherwise, shall be allocated solely to the transferee (and the Partnership, on request, will make any appropriate elections in connection with such basis adjustment). SECTION 2.10. Managing General Partner. (a) The General Partners hereby approve the appointment of POP as the initial Managing General Partner. If at any time the Managing General Partner ceases to be a General Partner, such person shall immediately cease to be the Managing General Partner and a successor shall be appointed from among the remaining General Partners as Approved by the General Partners. The Partnership shall reimburse the Managing General Partner for the reasonable out-of-pocket expenses incurred by him or it in performing his or its obligations as Managing General Partner (as distinguished from his or its obligations as a General Partner). (b) The Managing General Partner shall be responsible for (i) supervising the performance of the Manager under the applicable management agreement, (ii) implementing or causing to be implemented all Major Decisions Approved by the General Partners to the extent not the responsibility of the Manager under the applicable management agreement and (iii) conducting or causing to be conducted the ordinary and usual business and affairs of the Partnership in accordance with and as limited by this Agreement to the extent not the responsibility of the Manager under the applicable management agreement. In no event shall the Managing General Partner have any authority to make any expenditure or incur any obligation on behalf of the Partnership unless such expenditure or obligation has been specifically provided for in this Agreement, Approved by the General Partners or made pursuant to an Annual Business Plan Approved by the General Partners. The parties expressly acknowledge that the position of Managing General Partner is ministerial in nature and is not intended to confer upon the Managing General Partner powers or rights greater than those of any other General Partner. SECTION 2.11. Investment Management Fee. For so long as an investment management agreement between the Partnership and RMS/Liberty Street Associates, an affiliate of DW ("Liberty Street"), shall be in effect, within 30 days after the end of each fiscal quarter and prior to any distribution to Partners pursuant to Section 5.01 the Partnership shall pay to Liberty Street, as an investment management fee (the "Investment Management Fee"), an amount equal to 1% of the Gross Income of the Partnership (as defined in Section 4.01) for such period. Amounts payable under this Section 2.11 shall be paid prior to distributions to Partners pursuant to Section 4.02 or 5.01. To the extent that for any period Adjusted Cash Flow (as defined in Section 3.02(g)) after making payments required pursuant to Section 3.02(e) is insufficient to pay the Investment Management Fee, the unpaid portion thereof shall be accrued (without interest) and paid in subsequent periods out of Adjusted Cash Flow or Adjusted Capital Proceeds (as defined in Section 3.02(g)), in each case to the extent available after making payments required pursuant to Section 3.02(e) and this Section 2.11. ARTICLE III Capital Contributions and Loans SECTION 3.01. Capital Contributions. (a) Subject and pursuant to the terms and conditions of the Purchase Agreement, on the Closing Date DW shall make a capital contribution to the Partnership in immediately available funds of $30,000 and POP shall make a capital contribution to the Partnership in immediately available funds of $30,000. Such capital contributions shall be used to establish a working capital reserve for the Partnership (the "Working Capital Reserve") which shall be used to fund tenant improvements, leasing commissions, other capital expenditures and operating deficits to the extent Approved by the General Partners. (b) DW and POP agree to make additional capital contributions to the Partnership from time to time after the Closing Date (up to a maximum aggregate additional capital contribution of $118,295 for DW and $138,457 for POP to the extent necessary to cause the Working Capital Reserve as of the end of any calendar month not to be less than $25,000, and in any event to fund the full amount of its additional capital contributions required under this Section 3.01(b) by December 31, 1988 (upon notice as provided herein). DW and POP agree to make such additional capital contributions to the Partnership in immediately available funds within 10 days after written request therefor from the Manager or the Managing General Partner. Any such request shall specify the amount of the Working Capital Reserve as of the end of the calendar month preceding the date of such notice and the amount of the additional capital contribution to be made by DW pursuant to this Section 3.01(b), and in no event may such requests be made more frequently than monthly. Such additional capital contributions shall be added to the Working Capital Reserve and applied as provided in this Agreement. (c) Beginning in January 1989, and annually thereafter, amounts held in the Working Capital Reserve may if so Approved by the General Partners be distributed to the Partners in proportion to their Partnership Interests. (d) A Partner shall not have any obligation to the Partnership or to any other Partner to restore any negative balance in the capital account of such Partner. No Partner may withdraw capital or receive any distributions except as specifically provided herein. No interest shall be paid by the Partnership on any capital contributions to the Partnership. SECTION 3.02. Shortfall Loans. (a) If at any time prior to December 31, 1993, the Partnership shall require funds in excess of the capital contributions required under Section 3.01 for working capital in connection with the operation and maintenance of the Property, DW shall from time to time make loans to the Partnership (the "First Shortfall Loans") in an aggregate principal amount of up to $127,100 (determined on a cumulative basis). If a General Partner (or any general partner of POP) reasonably determines that the Partnership requires a First Shortfall Loan as contemplated by the preceding paragraph, such General Partner (or partner) shall give DW notice (each a "First Shortfall Notice") setting forth the specific purpose for which such First Shortfall Loan is required and the amount required to be loaned by DW (determined as provided above). DW shall within 20 days of receiving a First Shortfall Notice deposit the amount required to be loaned by DW in an account Approved by the General Partners and such funds shall be applied to the purposes Approved by the General Partners consistent with such First Shortfall Notice. All First Shortfall Loans shall mature on December 31, 1995, or upon the earlier termination of the Partnership, and may be repaid out of the proceeds of Additional Shortfall Loans (as defined below) as provided in Section 3.02(b) or Special Shortfall Loans (as defined below) as provided in Section 3.02(c). (b) If the Partnership shall (i) require funds in excess of the capital contributions required under Section 3.01 and the First Shortfall Loans required pursuant to Section 3.02(a) for working capital in connection with the operation and maintenance of the Property or (ii) require funds to repay First Shortfall Loans or Additional Shortfall Loans (as hereinafter defined) at the maturity thereof (except upon termination of the Partnership), the Partners shall from time to time make loans ("Additional Shortfall Loans") to the Partnership in an aggregate principal amount of up to the Maximum Additional Shortfall Loan Amount (determined on a cumulative basis). Each such Additional Shortfall Loan shall be made by the Partners pro rata based upon their Partnership Interests at the time of the funding of each such Loan; provided, however, that the obligation of the Limited Partners to make Additional Shortfall Loans shall be limited to funds available in the Pollock Account (as defined in Section 3.02(d) ); provided, further, that the obligations of the Partners to make Additional Shortfall Loans may terminate as provided in Section 3.02(d). If a General Partner (or any general partner of POP) reasonably determines that the Partnership requires an Additional Shortfall Loan as contemplated by the preceding paragraph, such General Partner (or partner) shall give the other Partners notice (each a "Shortfall Notice") setting forth the specific purpose for which such Additional Shortfall Loan is required and the amount required to be loaned by each Partner (determined as provided above). Each Partner within 20 days of giving or receiving, as the case may be, a Shortfall Notice shall deposit the amount required to be loaned by such Partner in an account Approved by the General Partners and such funds shall be applied to the purposes Approved by the General Partners consistent with such Shortfall Notice. Each Additional Shortfall Loan shall mature on the tenth anniversary of the funding of such Loan, or upon the earlier termination of the Partnership. First Shortfall Loans and Additional Shortfall Loans are sometimes collectively referred to herein as "Mandatory Shortfall Loans." (c) If the Partnership shall (i) require funds in excess of the capital contributions required under Section 3.01 and the Mandatory Shortfall Loans required under this Section 3.02 for working capital in connection with the operation and maintenance of the Property or (ii) require funds to repay Shortfall Loans (as hereinafter defined) at the maturity thereof (except upon termination of the Partnership) and such funds shall not be available to the Partnership on reasonable terms from third party sources, POP may, but shall not be required to, make loans ("Special Shortfall Loans") to the Partnership from time to time. Each Special Shortfall Loan shall mature on the tenth anniversary of the funding of such Loan, or upon the earlier termination of the Partnership. First Shortfall Loans, Additional Shortfall Loans and Special Shortfall Loans are sometimes collectively referred to herein as "Shortfall Loans." (d) Pursuant to Section 4(F) of the Purchase Agreement, 23.3817% of the Available Cash (as defined therein) after making all adjustments as contemplated by such Section 4(F) shall be deposited in an interest bearing reserve account with a financial institution Approved by the General Partners for the benefit of the Limited Partners (the "Pollock Account"). Funds on deposit in the Pollock Account shall be used to fund the Limited Partners' share of Additional Shortfall Loans, except that interest earned on the funds in the Pollock Account shall be distributed to the Limited Partners within 30 days after the end of each fiscal quarter. On or before January 1, 1989, the General Partners shall determine whether the funds, if any, on deposit in the Pollock Account are necessary for future working capital requirements of the Partnership. If the General Partners in their sole discretion determine that the funds remaining in the Pollock Account are no longer required to be held in reserve, all such funds shall be distributed to the Limited Partners pro rata based upon their Partnership Interests as of the date of distribution of such funds. If the General Partners in their sole discretion determine that such funds are necessary for future working capital requirements of the Partnership, all such funds shall be retained in the Pollock Account and applied as provided herein until such time, if ever, as the General Partners in their sole discretion determine that such funds are no longer required to be held in reserve (whereupon they shall be distributed as provided above). The obligations of all Partners to make Additional Shortfall Loans shall terminate upon the distribution of funds (other than interest) from the Pollock Account to the Limited Partners pursuant to this Section 3.02(d). (e) Each Shortfall Loan shall be evidenced by a note for each lending Partner maturing as provided in this Section 3.02, setting forth the principal amount of the Shortfall Loan made by such lending Partner and providing for the accrual of interest at the Prime Rate from the date such Shortfall Loan was made pursuant to this Section 3.02. Except as provided in the succeeding sentence, each note shall provide that the principal thereof and the interest thereon shall be due and payable ratably with all other such notes then outstanding. The notes shall be due and payable as follows: (i) current accrued and unpaid interest earned on the notes during any fiscal year of the Partnership shall be due and payable to the extent of, or out of, 100% of the Adjusted Cash Flow for such year, such current interest to be paid quarterly; (ii) unpaid principal on the First Shortfall Loans made by DW shall be due and payable quarterly to the extent of, or out of, 100% of the Adjusted Cash Flow for any fiscal year of the Partnership remaining after payments pursuant to (i) above; (iii) accrued and unpaid interest earned on the notes during prior fiscal years of the Partnership and the principal of the notes (other than principal on the First Shortfall Loans made by DW) shall be due and payable quarterly to the extent of, and out of, 100% of any Adjusted Cash Flow remaining after payments pursuant to (i) and (ii) above; (iv) accrued and unpaid interest (whenever earned) on and principal of (including principal on the First Shortfall Loans) the notes shall be due and payable to the extent of, and out of, 100% of all Adjusted Capital Proceeds; and (v) accrued and unpaid interest (whenever earned) on and principal of (including principal on the First Shortfall Loans) the notes shall be due and payable at maturity thereof. All payments with respect to the notes shall be subordinate with respect to all indebtedness of the Partnership to unaffiliated third parties incurred in accordance with this Agreement. No Partner shall be personally liable to pay any indebtedness evidenced by such notes, and in the event any judgment is obtained by the payee of any such note, enforcement of such judgment shall be limited and restricted to Adjusted Cash Flow and Adjusted Capital Proceeds and any other assets of the Partnership. (f) DW has agreed to make its Mandatory Shortfall Loans in reliance upon the other Partners' agreements to make their Mandatory Shortfall Loans, and the other Partners have agreed to make their Mandatory Shortfall Loans in reliance upon DW's agreement to make its Mandatory Shortfall Loans. The parties acknowledge that such agreements were an inducement, sine qua non, to make their investments in the Partnership and, accordingly, that the performance of such agreements is the basis, sine qua non, on which each of the Partners is to be entitled to receive its interest in Net Cash Flow, Capital Proceeds and each item of income, gain, loss, deduction or tax credit of the Partnership. Therefore, in the event that DW fails to make any Mandatory Shortfall Loan pursuant to this Section 3.02, in whole or in part, within the time specified in this Section 3.02 for such Mandatory Shortfall Loan, the other General Partners (or any general partner of POP on behalf of POP) may send an additional notice to DW setting forth such fact and the amount unpaid, and DW shall have a further period of 10 days to make the full amount of such Mandatory Shortfall Loan. If at the end of such 10-day period DW shall still have failed to make such Mandatory Shortfall Loan, in whole or in part, the other Partners may make such Mandatory Shortfall Loan. If the other Partners make such Mandatory Shortfall Loan to the Partnership, the Partnership Interests of DW and the other Partners shall each automatically be modified as of the date of such loan so that (y) the Partnership Interest of each Partner (other than DW) shall then be the sum of (i) such Partner's Partnership Interest prior to the making of such loan by such Partner plus (ii) one percent for every $6,000 (pro rated for any portion thereof) then being loaned by such Partner in lieu of the amount required to be loaned by DW; and (z) the Partnership Interest of DW shall then automatically become 100% minus the aggregate of the Partnership Interests (adjusted as aforesaid) of the other Partners. In the event that any Partner (other than DW) fails to make any Mandatory Shortfall Loan pursuant to this Section 3.02, in whole or in part, within the time specified in this Section 3.02 for such Mandatory Shortfall Loan, DW may send an additional notice to such Partner setting forth such fact and the amount unpaid, and such Partner shall have a further period of 10 days to make the full amount of such Mandatory Shortfall Loan. If at the end of such 10- day period such other Partner shall still have failed to make such Mandatory Shortfall Loan (and no other Partner shall have made such Mandatory Shortfall Loan on his or its behalf), in whole or in part, DW may make the Mandatory Shortfall Loan required of such other Partner. If the DW makes such Mandatory Shortfall Loan to the Partnership, the Partnership Interests of DW and such other Partner shall each automatically be modified as of the date of such loan so that (yy) the Partnership Interest of DW shall then be the sum of (A) its Partnership Interest prior to the making of such loan by DW plus (B) one percent for every $6,000 (pro rated for any portion thereof) then being loaned by DW in lieu of the amount required to be loaned by such other Partner; and (zz) the Partnership Interest of such other Partner shall then automatically become 100% minus the aggregate of the Partnership Interests (adjusted as aforesaid) of all Partners (other than the Partner whose Partnership Interest is being adjusted pursuant to this clause (zz)). The foregoing rights under this Section 3.02(f) shall be the sole remedy against DW or any other Partner for failing to make any Mandatory Shortfall Loan. If at any time the adjustments to Partnership Interests pursuant to this Section 3.02(f) would cause a technical termination of the Partnership under Section 708 of the Code, the effectiveness of such adjustments shall, unless otherwise determined by the Partner(s) funding such Shortfall Loan, automatically be delayed until the earliest time at which they could be made without causing such a termination. The provisions of this Section 3.02 shall inure solely to the benefit of the Partners and are not made for and shall not benefit any third party. In no event shall any person other than a Partner have any right to enforce the obligations of the General Partners to make Mandatory Shortfall Loans as provided in this Section 3.02. (g) As used in this Agreement, the following terms shall have the meanings set forth below: "Adjusted Capital Proceeds" shall mean Capital Proceeds (as defined in Section 5.01) without reduction for any interest or principal payments on Shortfall Loans or for payments of the Investment Management Fee pursuant to Section 2.11. "Adjusted Cash Flow" shall mean Net Cash Flow (as defined in Section 4.01) without reduction for any interest or principal payments on Shortfall Loans or for payments of the Investment Management Fee pursuant to Section 2.11. "Maximum Additional Shortfall Loan Amount" shall mean the amount obtained by dividing (i) the amount initially deposited in the Pollock Account pursuant to Section 3.02(d) divided by (ii) 0.233817. "Prime Rate" shall mean a rate equal to the sum of the rate publicly announced by Chemical Bank from time to time at its principal office in New York, New York, as its prime rate (or equivalent rate) plus 1% per year (based on the actual number of days elapsed in a 360-day year and with any change in the Prime Rate being effective as of the date announced), compounded monthly, but in no event greater than the highest rate permitted by applicable law. SECTION 3.03. Conversion of a General Partner. Various provisions of this Agreement provide that, upon the occurrence of specified events ("Conversion Events"), a General Partner(s) of the Partnership (the "Former General Partner(s)") may be converted to a Limited Partner(s) of the Partnership automatically upon the occurrence of a Conversion Event or at the direction of some other Partner (the "Directing Partner"). In the case of such conversions requiring action by the Directing Partner, the Directing Partner may at any time within 60 days of receiving actual written knowledge of a Conversion Event deliver a notice to all Partners directing that such a conversion occur, effective upon the date of said delivery. Upon any conversion of the general partnership interests of Wilson in POP to limited partnership interests in POP pursuant to Section 3.03 of the POP Partnership Agreement, DW shall have the right, in its sole discretion, to terminate the Initial Management Agreement and all other agreements entered into between the Partnership and Wilson or his affiliates. Upon any conversion of the general partnership interests of Miller Ream ("Ream") in POP to limited partnership interests in POP pursuant to Section 3.03 of the POP Partnership Agreement, DW shall have the right, in its sole discretion, to terminate any agreements (including any management agreement) entered into between the Partnership and Ream or his affiliates. A conversion under this Section shall not affect any liabilities of the Former General Partner(s) arising with respect to the period prior to the date of said conversion and, except for the obligation to make Mandatory Shortfall Loans pursuant to Section 3.02 (which shall remain in full force and effect as provided therein), the Former General Partner(s) shall following such conversion (i) only have such liabilities to the Partners and third parties as a Limited Partner would have hereunder and under California law with respect to the period following such conversion, (ii) have no rights thereafter as a General Partner, or as POP or DW, as the case may be, hereunder and (iii) only have such rights as a Limited Partner hereunder. Notwithstanding the foregoing sentence, any Former General Partner(s) shall have the same right to receive Net Cash Flow, Capital Proceeds, and each item of income, gain, loss, deduction or tax credit of the Partnership as it would have had if not so converted. This Agreement shall be deemed amended to reflect a conversion pursuant to this Section or the dilution of a Partner's Partnership Interest pursuant to Section 3.02(f) without any action required of the Partners and the Partners agree to execute all documents, agreements and instruments, and to do all things necessary to give effect to this Section and Section 3.02(f) and POP (and any other person that hereafter becomes a General Partner) hereby grant an irrevocable power of attorney to DW, and DW hereby grants an irrevocable power of attorney to such other General Partners, to execute and deliver all such instruments, documents and agreements on their behalf, and each such power of attorney is coupled with an interest and is irrevocable. ARTICLE IV Distribution of Net Cash Flow SECTION 4.01. Definition of Net Cash Flow. As used herein, the term "Net Cash Flow" for any period shall mean Gross Income for such period minus (i) Operating Expenses, (ii) payments on indebtedness of the Partnership (including Shortfall Loans), (iii) leasing commissions, (iv) capital expenditures, (v) costs of putting any tenant into possession and (vi) payments required pursuant to Section 2.11, in each case for the same period. "Gross Income" in respect of any period shall mean the gross amount of all revenues received by the Partnership, calculated on a cash or accrual basis, whichever is less, for such period, including rent, additional rent and insurance proceeds paid in respect of a business interruption or rental income interruption, but shall not include capital contributions, Shortfall Loans or other loans by the Partners to the Partnership or Capital Proceeds. "Operating Expenses" in respect of any period shall mean the total amount of all costs and expenses accrued by the Partnership in connection with the collection of Gross Income and in the maintenance, management, administration, operation, repair and replacement (other than capital improvements) of the property for such period, including, without limitation, advertising costs; real and personal property taxes, assessments and other charges; all taxes upon the gross rental income derived from the Property; water and sewer charges; insurance premiums; annual charges for licenses, permits and inspections; heat, lights, power, steam, and any other utility charges; janitorial services; maintenance and service agreements on equipment servicing the Property; window cleaning; garbage services; costs of air conditioning; costs of supplies, materials, equipment and tools; the cost of contesting the applicability to the Property or the validity of any statute, ordinance, rule or regulation affecting the Property; attorneys' and accountants' fees incurred in connection with the ordinary course of business; and reasonable reserves for working capital, capital expenditures and contingencies. SECTION 4.02. Distribution of Net Cash Flow. Within 30 days after the end of each fiscal quarter, Net Cash Flow for such fiscal quarter shall be distributed among the Partners pro rata in accordance with their Partnership Interests. ARTICLE V Proceeds of Sale and Refinancing SECTION 5.01. Distribution of Capital Proceeds. (a) As used herein, the term "Capital Proceeds" shall mean any net proceeds (after payment of all Partnership debts (other than accounts payable incurred in the ordinary course of business which are reserved for) then due and payable, (including, without limitation, all Shortfall Loans and other borrowings of the Partnership, discount points, sales expenses, legal costs, marketing costs, loan fees, and any other costs associated with the sale, exchange, condemnation, casualty or other disposition of the Property or a part thereof), the establishment of appropriate reserves as Approved by the General Partners and the making of payments required pursuant to Section 2.11 arising from (i) the sale, exchange, or other disposition of the Property or any part thereof or underlying interest associated therewith or (ii) the financing or refinancing (but not including any loans made by Partners), condemnation (or transfer in lieu thereof) or casualty of the Property or any part thereof or underlying interest associated therewith (to the extent such proceeds of casualty or condemnation are not used for repair or restoration and excluding insurance proceeds paid in respect of a business interruption or rental income interruption) (a "Capital Transaction"). (b) Capital Proceeds shall be distributed among the Partners pro rata in accordance with their Partnership Interests; provided, however, that Capital Proceeds from a disposition of all or substantially all the Property and any Capital Proceeds distributed upon liquidation shall be distributed in accordance with the Partners' capital accounts as adjusted pursuant to Article VI for all Partnership operations up to and including such liquidation. ARTICLE VI Profits and Losses SECTION 6.01. Capital Accounts. There shall be established for each Partner on the books of the Partnership a capital account. The capital account of each Partner on the Closing Date shall be as set forth in Exhibit C. Each Partner's capital account on the Closing Date shall thereafter be credited with the amount of all cash contributions by a Partner to the Partnership made after the Closing Date. It shall be increased by the amount of any income or gain allocated to a Partner pursuant to Sections 6.02 and 6.03 and by the Partner's share of any income of the Partnership exempt from tax, and decreased by (i) the amount of all losses allocated to a Partner pursuant to Sections 6.02 and 6.04 and by the Partner's share of any expenditures of the Partnership not deductible in computing its taxable income and not properly chargeable to the capital account and (ii) all amounts distributed to a Partner (and not returned by such Partner) pursuant to Sections 4.02 and 5.01. The making, repayment and payment of interest on loans by Partners to the Partnership (including Shortfall Loans) shall not affect capital accounts. Unless such income or expenditures is directly traceable to any Partner, each Partner's share of income of the Partnership exempt from tax and of any expenditures of the Partnership not deductible in computing its taxable income and not properly chargeable to capital account for any fiscal year shall equal such Partner's share of the Partnership's net profits or losses (as the case may be) for such fiscal year. SECTION 6.02. Net Profits and Losses. Subject to Sections 6.03 and 6.04, the net profits and losses of the Partnership and each item of income, gain, loss, deduction or credit entering into the computation thereof shall be allocated among the Partners and credited to the capital accounts of the Partners in accordance with their respective Partnership Interests; provided, however, that until DW's capital account equals zero all net losses of the Partnership shall be allocated 53.33% to POP and 46.67% to DW. Notwithstanding anything else contained herein, any depreciation or other tax benefits attributable to the Step-Up shall be allocated solely to DW. SECTION 6.03. Capital Profits. The net profits of the Partnership arising from a Capital Transaction shall be allocated among, and credited to the capital accounts of, the Partners in the following order of priority: (a) first, an amount of net profits equal to the aggregate negative capital accounts (as reflected on the books of the Partnership immediately prior to such Capital Transaction after allocating all net profits and losses and charging for prior distributions) of all Partners who have such negative capital accounts shall be allocated among such Partners in proportion to their respective negative capital accounts; (b) second, an amount of any remaining net profits equal to the excess of (x) the Capital Proceeds to be distributed to the Partners with respect to such Capital Transaction pursuant to Section 5.01 (without regard to the proviso set forth in Section 5.01(b)), over (y) the aggregate capital accounts (as adjusted to reflect the allocation of net profits pursuant to subparagraph (a) above) of all Partners shall be allocated among all Partners to whom such Capital Proceeds are to be distributed in proportion to their respective shares of such excess of (x) over (y) in order to bring the capital account balance of each Partner up to an amount equal to the amount of Capital Proceeds to be distributed to such Partner pursuant to Section 5.01 (without regard to the proviso set forth in Section 5.01(b)); and (c) any remaining net profits shall be allocated in the same proportions that an amount of Capital Proceeds equal to such remaining net profits would be distributed pursuant to Section 5.01 were such Capital Proceeds to be distributed in addition to the Capital Proceeds actually distributed to the Partners pursuant to Section 5.01 (without regard to the proviso set forth in Section 5.01(b)). SECTION 6.04. Capital Losses. The net losses of the Partnership arising from a Capital Transaction shall be allocated among and charged to the capital accounts of the Partners in the following order of priority: (a) first, an amount of loss equal to the excess of (x) the aggregate positive capital accounts (as reflected on the books of the Partnership prior to such Capital Transaction) of all Partners who have positive capital accounts over (y) the aggregate Capital Proceeds to be distributed to such Partners with respect to such Capital Transaction pursuant to Section 5.01 (without regard to the proviso set forth in Section 5.01(b)) shall be allocated among such Partners in proportion to their respective shares pursuant to Section 5.01 (without regard to the proviso set forth in Section 5.01 (b)) of such excess of (x) over (y); and (b) any remaining loss shall be allocated among Partners pro rata in accordance with their Partnership Interests. SECTION 6.05. Distribution in Kind. In case any of the assets of the Partnership are distributed in kind, the capital account of the Partners receiving such assets shall be adjusted as if the Partnership had sold the distributed assets for their fair market value on the date of distribution and the resulting gain or loss had been allocated to the Partners pursuant to Section 6.03 or 6.04, as the case may be. SECTION 6.06. Depreciation Recapture. Any gain recognized upon a Capital Transaction that is characterized as ordinary income pursuant to Sections 1245 or 1250 of the Code and any recapture of investment tax credit shall, to the extent possible, without increasing the total gain allocated to a Partner on such Capital Transaction pursuant to Section 6.03, be allocated to the Partners in the same proportions that the Partners shared the depreciation deductions giving rise to such ordinary income or such investment tax credit. SECTION 6.07. Definition of Net Profits and Losses. The "net profits" and "net losses" of the Partnership shall be the net profits and losses of the Partnership for Federal income tax purposes as determined by the independent public accountants referred to in Section 2.07(c) and Approved by the General Partners. ARTICLE VII Transfers; Termination SECTION 7.01. Transfer of General Partner's Interests. (a) A General Partner may sell, assign, mortgage, pledge, grant a security interest in or otherwise transfer its Partnership Interest, whether voluntarily or by operation of law, only as provided in this Agreement. Any unpermitted sale, assignment, mortgage, pledge or transfer of, or grant of a security interest in, the Partnership Interest of a General Partner shall be null and void. (b) Except as provided in Sections 7.03(d) and 7.07, neither a proposed additional General Partner in the Partnership nor a proposed successor to a withdrawing, retiring or removed General Partner shall be admitted as a General Partner unless such person is accepted as a General Partner by all the other General Partners. Such proposed additional or successor General Partner shall be admitted as a General Partner immediately after such acceptance is given and upon such person's assumption, in writing, of all the rights, powers and obligations of a General Partner under this Agreement. SECTION 7.02. Options on Bankruptcy, Etc. (a) If DW shall be bankrupt, then the other General Partners (or the general partners of POP (other than DW) acting on behalf of POP), at their option, shall have the right, in addition to any other rights or claims for damages or specific performance, to purchase the entire Partnership Interest of DW at the fair market value thereof (as determined pursuant to Section 7.09) and/or to cause DW's entire Partnership Interest to be converted to a limited Partnership Interest pursuant to Section 3.03. Any purchase of the Partnership Interests of DW hereunder shall be consummated within 90 days after the final determination of the purchase price therefor and the purchase price shall be paid by certified check or by wire transfer of immediately available funds to an account to be designated by DW. (b) If any General Partner (other than DW) shall be bankrupt (such General Partner being hereinafter called the "Bankrupt Partner"), then DW (at its option) shall have the right, in addition to any other rights or claims for damages or specific performance, to purchase the entire Partnership Interest of the Bankrupt Partner at the fair market value thereof (as determined pursuant to Section 7.09) and/or to cause such Bankrupt Partner's entire Partnership Interest to be converted to a limited Partnership Interest pursuant to Section 3.03. Any purchase of the Partnership Interests of the Bankrupt Partner hereunder shall be consummated within 90 days after the final determination of the purchase price therefor and the purchase price shall be paid by certified check or by wire transfer of immediately available funds to an account to be designated by the Bankrupt Partner. (c) If any General Partner shall be dead, insane, incompetent, incapacitated, dissolved, liquidated or its existence shall be otherwise terminated, such General Partner's entire Partnership Interest shall automatically, without further act by any Partner, become converted to a limited Partnership Interest pursuant to Section 3.03 as of the date of the occurrence of such event. SECTION 7.03. Right of First Offer. (a) At any time after the eighth anniversary of the Closing Date if there shall be more than one General Partner, the Partners (other than DW) as a group (the "Other Partners") shall have the right to sell all (but not part) of their Partnership Interests to any third party and DW shall have the right to sell all (but not part) of its Partnership Interests to any third party; provided, however, that DW shall first be obligated to offer to sell all its Partnership Interests to the other General Partners (the "Other General Partners"), and the Other Partners shall first be obligated to offer to sell all their Partnership Interests to DW, in each case pursuant to the provisions of this Section 7.03. In order to initiate its right to sell its Partnership Interest to a third party, the Other Partners or DW, as the case may be (hereinafter called "Seller") shall deliver a notification to the General Partner or General Partners, as the case may be, entitled pursuant to the preceding sentence to be given a right of offer (the "First Offer Notification") describing a proposed offer to sell such Partnership Interests for a price specified in such First Offer Notification (the "First Offer Sale Price"). The First Offer Notification shall (i) advise that Seller desires to sell all its Partnership Interests to a third party (which third party need not be named or then known), (ii) state the proposed First Offer Sale Price, (iii) set forth the other material terms of the proposed offer, which must include an earnest money deposit equal to at least 5% of the cash portion of the First Offer Sale Price (the "First Offer Deposit") and a statement of who will pay for transfer taxes and other closing costs (the "Other First Offer Sale Terms"), and (iv) give DW or the other General Partners, as the case may be, the option to purchase such Partnership Interests at the First Offer Sale Price and upon the Other First Offer Sale Terms or to consent to the sale of the entire Property on terms directly proportional to the First Offer Sale Price (e.g., if the Selling General Partner's Partnership Interest is 50%, the entire Property may be sold at a price equal to 200% of the First Offer Sale Price) and consistent with the Other First Offer Sale Terms. (b) Within 30 days after the giving of the First Offer Notification, DW or the Other General Partners, as the case may be, shall give notice to Seller (which in the case of the Other Partners as a group as Seller may be given to any of the Other General Partners as representative of the Other Partners) of either: (i) Election to purchase such Partnership Interest, in which event such notice shall be sent with evidence that the First Offer Deposit has been paid to an escrow holder approved by the Seller, to be distributed as provided herein, together with appropriate acknowledgment under California law of the First Offer Deposit as liquidated damages in the event of a default; or (ii) Election to consent to the sale of the entire Property, in which event the Seller shall use all reasonable efforts to arrange for such sale; or (iii) Election not to purchase such Partnership Interest or to consent to the sale of the entire Property, in which event the Seller shall have the right to offer to sell and to sell such Partnership Interest to any third party upon terms and conditions no less favorable to the Selling General Partner than the First Offer Sale Price and the Other First Offer Sale Terms; provided such a sale is the subject of a binding contract within 12 months of, and closes within 18 months of, the giving of the First Offer Notification. If DW or the Other General Partners, as the case may be, do not give notice to the Seller in answer to the First Offer Notification within the 30-day period as provided herein, it or they shall be deemed to have given the answer set forth in clause (iii) above. (c) The closing of any purchase and sale of Partnership Interests pursuant to Section 7.03(b)(i) shall take place not later than 180 days after the Seller gives the First Offer Notification. (d) At the closing of a sale of Partnership Interests pursuant to Section 7.03(b)(i) or (iii), the Partnership and the Partners shall execute and deliver such instruments as shall be appropriate to transfer such Partnership Interests and, if necessary, to admit such purchaser as a General Partner in respect of the General Partnership Interests so transferred (and as a Limited Partner in respect of the Limited Partnership Interests so transferred), such purchaser shall simultaneously pay to the Seller the cash portion of the First Offer Sale Price (less the amount of the First Offer Deposit already paid, which shall be released from escrow to the Seller) and the Partners and the purchaser shall perform the Other First Offer Sale Terms to be performed by them. (e) In the event that DW or the Other General Partners, as the case may be, default in any obligation to purchase a Partnership Interest pursuant to this Section 7.03, then the Seller shall be paid the First Offer Deposit as liquidated damages and may, at any time for a period of 18 months after such default sell all its Partnership Interests to any person at such price and on such terms as Seller may determine. (f) Notwithstanding anything contained herein to the contrary, if DW exercises its rights under Section 7.03(a) hereof concurrently with the exercise of its rights under 7.03(a) of the POP Partnership Agreement, the other General Partners hereunder shall be required to make and shall be deemed to have made the same election under Section 7.03(b) hereof as the election made by the "Other General Partners" (as defined in Section 7.03(a) of the POP Partnership Agreement) under Section 7.03(b) of the POP Partnership Agreement. SECTION 7.04. Transfer of Limited Partner's Interests. (a) The bankruptcy, dissolution, death, insanity, incompetency or legal incapacity of a Limited Partner shall not dissolve or terminate the Partnership. Upon the occurrence of any such event, the legal representative of such Limited Partner shall be deemed to be the assignee of such Limited Partner's Partnership Interest and may become a substituted Limited Partner upon the terms and conditions set forth in Section 7.05. (b) A Limited Partner may sell, assign, mortgage, pledge, grant a security interest in or otherwise transfer its Partnership Interest, whether voluntarily or by operation of law, only as provided in this Agreement. Any unpermitted sale, assignment, mortgage, pledge or transfer of, or grant of a security interest in, the Partnership Interest of a Limited Partner shall be null and void. Except as otherwise provided in this Agreement, a Limited Partner may assign all or any portion of its Partnership Interest to a Permitted Transferee of such Limited Partner. A Limited Partner may assign all (but not part) of its Partnership Interest to a third party if such assignment is Approved by the General Partners, such approval not to be unreasonably withheld. Any other assignment by a Limited Partner of its Partnership Interest may occur only if Approved by the General Partners, which approval may be arbitrarily withheld. Upon any approved assignment pursuant to this Section 7.04(b), the assignee of such interest shall become a substituted Limited Partner only upon the terms set forth in Section 7.05. SECTION 7.05. Substituted Limited Partners. (a) If Approved by the General Partners (which approval may be granted or denied in their sole discretion), any person who acquires the Partnership Interest, or any part thereof, of a Partner may be admitted as a substituted Limited Partner. (b) The admission of an assignee as a substituted Limited Partner shall be conditioned upon the assignee's written acceptance and adoption of all the terms and provisions of this Agreement. Any such assignee not admitted as a substituted Limited Partner shall not have any rights of a Limited Partner but shall have only the right to receive a ratable portion of the Net Cash Flow, Capital Proceeds and net profits and losses relating to the Partnership Interest or part thereof assigned. (c) Any person who acquires all or any part of a Partner's Partnership Interest shall, whether or not admitted to the Partnership as a Partner, acquire the rights to the ratable portion of the Net Cash Flow, Capital Proceeds, and net profits and losses relating to such Partnership Interest or part thereof assigned. SECTION 7.06. Restrictions on Transfer. (a) In addition to any other limitations contained in this Agreement, no Partner shall assign, sell, mortgage, pledge, grant a security interest in or otherwise transfer, whether voluntarily or by operation of law, its Partnership Interest or its share of the net profits and losses, Net Cash Flow or Capital Proceeds (i) for a period of 18 months following the Closing Date, (ii) unless such Partner complies with the applicable provisions of Federal and state securities laws or (iii) at any time prior to the eighth anniversary of the Closing Date if such action would cause a technical termination of the Partnership under Section 708 of the Code. (b) Notwithstanding anything contained in this Agreement to the contrary, no Partner shall be permitted to assign, sell, mortgage, pledge, grant a security interest in or otherwise transfer its Partnership Interest or its share of the net profits and losses, Net Cash Flow or Capital Proceeds after a General Partner has given a First Offer Notification if the effect of such action would be to prevent such General Partner from selling its Partnership Interest pursuant to Section 7.03 as a result of the restrictions contained in Section 7.06(a). The foregoing restriction shall remain in effect until such General Partner has so sold its Partnership Interest pursuant to Section 7.03 or until the right to so sell its Partnership Interest after giving any such notice shall expire, whichever shall occur first. SECTION 7.07. Syndication. Notwithstanding anything to the contrary contained in this Agreement, POP/DW Associates, a California Limited Partnership ("POP/DW"), a general partner of DW, shall have the right (in its sole discretion) at any time to implement a plan of syndication (the "Plan of Syndication") of the limited partnership interests in POP/DW and/or to assign all or any portion of its partnership interests in DW to Dean Witter Realty Growth Properties, L.P. ("Growth Properties") (and, in the case of an assignment of all its partnership interests in DW to Growth Properties, Growth Properties may become a General Partner hereunder and assume all the rights and obligations of DW hereunder provided that Growth Properties agrees in writing to be bound hereby). Additionally, the partnership interests of DW (and of its partners) shall be subject only to those transfer restrictions, if any, which DW (or its partners), in their sole discretion, shall elect to impose; provided, however, that at all times (except after a sale by DW of its Partnership Interests pursuant to Section 7.03) an affiliate of Dean Witter Reynolds Inc. or a person controlled by John J. Preotle, Jr., William B. Smith, E. Davisson Hardman, Jr., Warren B. Lane and Peter J. Carr, or any of them, or of which any of them shall be general partners, shall be or remain a general partner of DW. All Partners agree to cooperate fully with DW and POP/DW in connection with the implementation of the Plan of Syndication but only to the extent that such cooperation does not make them an "issuer" under the Securities Act of 1933, as amended (the "Securities Act"), or does not otherwise create additional liability for them under the Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange Act"). POP/DW agrees to permit the general partners of POP (other than DW) to review and approve all offering materials used in connection with the Plan of Syndication, such approval not to be unreasonably withheld and to be deemed given if written objection to such materials is not received by POP/DW within 15 days after receipt of such materials by such general partners. POP/DW agrees that the Plan of Syndication will be conducted in accordance with all applicable Federal and state securities laws. POP/DW further agrees to indemnify and hold harmless the Partners from and against any and all losses, claims, damages, liabilities, costs and expenses (including reasonable attorney's fees) to which they may become subject under the Securities Act, Exchange Act, any other Federal or state law, statute, or regulation, at common law, or otherwise, arising out of or based on (i) any untrue statement or alleged untrue statement of a material fact made in connection with any sale of limited partnership interest in POP/DW through the Plan of Syndication, (ii) the omission or alleged omission to state a material fact required to be stated or necessary to make the statements made in connection with any such sale not misleading, (iii) the failure to register or qualify such sales under the Securities Act or under state securities laws or (iv) any violation of any rule or regulation promulgated under the Securities Act, the Exchange Act or any Federal or state statute or regulation applicable to any such sale. Notwithstanding anything to the contrary contained in this Agreement, this indemnity shall not apply to any losses, claims, damages or liabilities arising out of or based upon any untrue statement of a material fact or omission of any material fact made in reliance upon and in conformity with (i) representations and warranties of the Partnership in the Purchase Agreement or of POP in the POP Purchase Agreement or (ii) information (including financial statements) furnished in writing by any General Partner (other than DW) or any general partner of POP (other than DW) expressly for use in connection with any such sale. SECTION 7.08. Termination. (a) The Partnership shall terminate upon the first to occur of any of the following events or dates: (i) by mutual agreement of the General Partners; (ii) December 31, 2025; (iii) the sale or other disposition of all the assets of the Partnership and receipt of consideration therefor; or (iv) in the event of the bankruptcy, death, insanity, incompetence, liquidation, termination or legal incapacity of a General Partner (except in any case in which a General Partner which is a partnership shall be reconstituted by its remaining partners following any liquidation or dissolution caused by the legal incapacity of one or more of its partners), unless any of the remaining General Partners elect within 60 days of the termination required under this clause (iv) to continue the business of the Partnership for the balance of the term specified in Section 1.02. (b) Contemporaneously with any disposition of the Property pursuant to any provision of this Article VII or upon termination of the Partnership under Section 7.08(a), the Partnership shall, to the extent (but only to the extent) of the assets of the Partnership, discharge the obligations (including establishment of necessary reserves) and pay the indebtedness of the Partnership (including Shortfall Loans) and distribute the balance, if any, of the assets of the Partnership to the Partners in the order of priority set forth in Section 5.01. After the foregoing has been accomplished, the Partnership shall be deemed liquidated and this Agreement shall terminate and no Partner shall have any further rights or obligations hereunder. The liquidation of the Partnership and the termination of the business and affairs of the Partnership shall be conducted by the General Partners jointly. During such period, the business and affairs of the Partnership shall be conducted so as to maintain and preserve the assets of the Partnership in a manner consistent with the liquidation of the Partnership. SECTION 7.09. Appraisal. In the event that it becomes necessary, under the terms of this Agreement, to determine the fair market value of a Partnership Interest, such value shall be determined by appraisal, made by a board of three reputable real estate appraisers, each of whom shall be a member of the American Institute of Real Estate Appraisers and shall have no disqualifying interest, as that term is hereinafter defined. One appraiser shall be appointed by the person or persons holding such Partnership Interest and a second appraiser shall be appointed by the Partner desiring to purchase the same. A third appraiser shall be appointed by the first two appraisers. If the first two appraisers are unable to agree on a third appraiser within thirty (30) days after the appointment of the second of them to be appointed, or if either side refuses, is unable to or neglects to appoint an appraiser as herein provided, then such third appraiser or such other appraiser whose appointment was not made as aforesaid shall be appointed by the then President of the American Institute of Real Estate Appraisers or such successor body hereafter constituted exercising similar functions, unless such President shall have any direct or indirect financial or other business interest in any of the parties having a power to appoint an appraiser, jointly or alone, other than financial holdings of not more than one percent (1%) of the value of any class of securities issued by any such party or by any corporation or partnership affiliated therewith (hereinafter referred to as a "disqualifying interest"), in which case the third appraiser or such other appraiser whose appointment was not made as aforesaid shall be appointed by the highest ranking officer of the American Institute of Real Estate Appraisers or such successor body who shall not have a disqualifying interest. Each appraiser shall within 60 days after the appointment of the third appraiser make his valuation on the basis of the value of an interest irrespective of the proportion of ownership or control of the Partnership such interest represents or whether it is a general or limited Partnership Interest. If the determinations of any two or all three of the appraisers shall be identical in amount, such amount shall be deemed to be the fair market value of the interest in question. If the determinations of all three appraisers shall be different in amount the highest value shall be averaged with the middle value (the average being hereinafter referred to as Sum A), the lowest appraised value shall be averaged with the middle value (the average being hereinafter referred to as Sum B), and the fair market value of the interest in question shall be determined as follows: (a) if neither Sum A nor Sum B differs from the middle appraised value by more than five percent (5%) of such middle appraised value, then the fair market value of the interest in question shall be deemed to be the average of the three appraisals; (b) if either Sum A or Sum B (but not both of the sums) differs from the middle appraised value by more than five percent (5%) of such middle appraised value, then the fair market value of the interest in question shall be deemed to be the average of the middle appraised value and the appraised value closest in amount to the middle value; and (c) if both Sum A and Sum B differ from the middle appraised value by more than five percent (5%) of such middle appraised value, the appraisal shall have no force and effect, and the fair market value of the interest in question shall be similarly determined by a panel of three qualified real estate appraisers who shall be members of the American Institute of Real Estate Appraisers and who shall have no disqualifying interest. Such panel shall be appointed by the then President of the American Institute of Real Estate Appraisers or such successor body hereafter constituted exercising similar functions, unless such President shall have a disqualifying interest, in which case the panel shall be appointed by the highest ranking officer of the American Institute of Real Estate Appraisers or such successor body hereafter constituted exercising similar functions who shall not have a disqualifying interest. The costs of this appraisal procedure shall be borne equally by the buying and selling Partner. ARTICLE VIII Liabilities SECTION 8.01. Liabilities. The liabilities of the Partnership or of the Partners and the partners in the Partners as a part of or arising out of any of the activities of the Partnership shall be covered by appropriate policies of public liability insurance to be purchased by the Partnership. (It being the intention of the parties that all potential liabilities be covered by insurance consistent with the Insurance Guidelines from time to time Approved by the General Partners.) In the event that any liability arising out of any activities of the Partnership shall not be adequately covered by such public liability insurance, the amount of liability not so insured shall, subject to Section 8.02, first be satisfied out of the assets of the Partnership, and if such assets are not sufficient fully to satisfy the amount of the liability not so insured each Partner which shall have been a General Partner during such period shall be responsible for the balance of any amount due in proportion to the amount its Partnership Interest bears to the aggregate of the Partnership Interests of all such General Partners; provided, however, that for purposes of this Section 8.01 the aggregate Partnership Interests of the General Partners (other than DW) shall be equal to the aggregate Partnership Interests of all Partners (other than DW). In the event a General Partner shall have paid an amount in excess of its share of any such liability, the other of such General Partners and the Limited Partners to the extent of their Partnership Interests shall promptly reimburse such General Partner to the extent of such excess. Nothing in this Section 8.01 shall be deemed to affect the obligations of the Partners to make capital contributions or otherwise contribute funds to the Partnership pursuant to this Agreement. SECTION 8.02. Indemnification; No Recourse. (a) Each Partner shall Indemnify each other Partner and hold harmless each such other Partner against and from all claims, demands, actions, damages, losses, liabilities, costs and expenses which shall or may arise by virtue of anything done or omitted to be done by the former (or by any of its partners, agents, employees or other representatives) which is outside the scope, or in breach of the terms, of this Agreement or which constitutes gross negligence or wilful misconduct. Any Partner having any claim, demand, action or right of action against any other Partner and seeking indemnification or any other remedies therefor whether under this Section or Section 8.01 shall look only to the interest of the indemnifying Partner in the Partnership, and no Partner shall seek satisfaction of such indemnity from any other assets of any other Partner or any partner of any other Partner; provided, however, that the foregoing limitations shall not be applicable with respect to (i) any claim for indemnity based upon gross negligence or wilful misconduct or (ii) any amount paid to third persons by any General Partner in excess of its share of any liability and for which it seeks reimbursement from any other General Partner pursuant to the second to last sentence of Section 8.01 or (iii) any claim for indemnity arising out of the covenants to make capital contributions pursuant to Section 3.01. In no event shall any Partner seek satisfaction of any claim for indemnity against a limited partner of any other Partner, except to the extent that such limited partner shall have guaranteed any obligations of such other Partner pursuant to a separate agreement and then only in accordance with such separate agreement. Nothing contained in this Section 8.02 shall be construed to limit or restrict the rights of DW under the Purchase Agreement or the POP Purchase Agreement (including, without limitation, under Sections 10 and 11 thereof). (b) Any Partner claiming an indemnity under this Agreement shall give notice of the existence of the claim as soon as practicable to the indemnifying party (provided that failure to give such notice shall not relieve the indemnifying party of its liabilities except to the extent it is prejudiced thereby), and the indemnifying party shall control the defense or settlement of any third party claim, demand or action which it is indemnifying in its entirety. (c) Notwithstanding anything contained in Sections 8.01 and 8.02 to the contrary, in computing Net Cash Flow and Capital Proceeds any liabilities which pursuant to Section 4(D) of the Purchase Agreement shall not be the responsibility of DW (and which have not been previously paid to DW or to the creditors of the Partnership for the account of DW by the other Partners) and any other unpaid claim of DW for indemnification under the Purchase Agreement which shall have been established by arbitration or court order or consented to, shall be charged to the Partners (other than DW) in proportion to their Partnership Interests. ARTICLE IX General SECTION 9.01. Other Businesses. Each Partner shall have the right to engage in other businesses and ventures of every nature, including, without limitation, the ownership, management, improvement and operation of other real estate, including real estate located in the vicinity of and/or competitive with the Property, provided that each of Wilson and Ream will act in good faith in conducting business for and with the Partnership and, in determining good faith, transactions of each of them will be considered as a whole on an ongoing basis (as opposed to an individual basis), and provided further, that Wilson and Ream and their affiliates shall not divulge any nonpublic information with respect to the Partnership or the Property to any third persons for the benefit of, or in connection with, any other project or venture (other than POP). SECTION 9.02. Notices. All notices, demands or other communications hereunder shall be in writing and shall be deemed to have been given on (i) the date of delivery, if delivered by hand, (ii) upon confirmation of receipt if sent by independent courier service guaranteeing one-day delivery, or (iii) the seventh day after mailing, if mailed first-class, postage prepaid, United States registered or certified mail; in each case, to the parties at the addresses set forth below or at such other addresses as such parties may designate by notice to the other parties: (i) if to DW, in care of: Dean Witter Realty Inc. 130 Liberty Street New York, New York 10005 Attention of Ronald DiPietro, with a copy to Cravath, Swaine & Moore One Chase Manhattan Plaza New York, N.Y. 10005 Attention of William P. Dickey, Esq. (ii) if to POP (or any of its partners), at: William Wilson & Associates 2929 Campus Drive Suite 450 San Mateo, California 94403 with a copy to Farella, Braun & Martel 235 Montgomery Street San Francisco, California Attention of Lee Van Boven, Esq. with a copy to Pollock Partnership, a California limited partnership 801 Welch Road Palo Alto, California 94304 (iii) if to the Limited Partners, at their addresses set forth in Exhibit A. SECTION 9.03. Applicable Law. This Agreement and the obligations of the parties hereunder shall be interpreted, construed and enforced in accordance with the laws of the State of California. [???] any of its acts or actions, and each party hereto hereby agrees to indemnify and hold harmless the others from and against all liabilities, costs, damages and expenses from any such claims. SECTION 9.04. [Intentionally Omitted.] SECTION 9.05. Entire Agreement. This Agreement contains the entire agreement among the parties hereto relative to the continuation and operations of the Partnership. SECTION 9.06. Waiver. No consent or waiver, express or implied, by any party hereto of any breach or default by any other party hereto in the performance of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such party of the same or any other obligations of such party hereunder. Failure on the part of any party to complain of any act or failure to act of another party or to declare another party in default, irrespective of how long such failure continues, shall not constitute a waiver by such party of its rights hereunder. SECTION 9.07. Severability. If any provision of this Agreement or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provisions to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law. SECTION 9.08. Relationship of the Partners. The relationship between the Partners shall be limited to the performance of the transactions contemplated by this Agreement and in accordance with the terms of this Agreement. The relationship set forth in this Agreement shall be construed and deemed to be a limited partnership under the laws of the State of California created for the sole purpose of carrying out the transactions contemplated hereby. Nothing herein shall be construed to authorize any Partner to act as general agent for any other. Nothing in this Agreement shall be deemed to create any right in any creditor or other person not a party hereto (other than the successors and assigns of a party hereto and, to the extent expressly provided herein, the general partners of POP and the general partners of DW) and this instrument shall not be construed in any respect to be a contract in whole or in part for the benefit of any other party except as aforesaid. Except as otherwise provided herein, all provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by and against the respective heirs, executors, administrators, legal representatives, successors and permitted assigns of the Partners. Any permitted assignee of DW's entire Partnership Interest shall succeed to all the rights and obligations of DW hereunder provided such assignee agrees to be bound hereby, and upon such assignment and assumption DW shall be released from its obligations hereunder. SECTION 9.09. Further Assurances. The parties hereto shall execute and deliver such further instruments and do such further acts and things as may be required to carry out the intent and purposes of this Agreement. SECTION 9.10. Counterparts. This Agreement may be executed in counterparts and as so executed shall constitute one agreement. SECTION 9.11. Captions. Captions contained in this Agreement are inserted only as a matter of convenience and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provision hereof. SECTION 9.12. Waiver of Partition. Each Partner hereby irrevocably waives any right to partition the Property. SECTION 9.13. Certain Definitions. (a) Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice versa. Terms such as "herein," "hereby," "hereunder" and "hereof," unless the context otherwise requires, refer to this Agreement as a whole and not to the Articles, Sections or other subdivisions where the terms appear. References herein to any agreement or other instrument shall, unless the context otherwise requires, be deemed references to the same as it may from time to time be changed, amended or extended in accordance with its terms. (b) The term "person" shall include an individual, corporation, partnership, association, trust, joint stock company or unincorporated organization. (c) An "affiliate" of a specified person is a person who, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. (d) The "bankruptcy" of a person shall be deemed to have occurred or a person shall be deemed "bankrupt" upon the happening of any of the following: (i) the filing of an application by such person for, or a consent to, the appointment of a trustee of its or his assets; (ii) the filing by such person of a voluntary petition in bankruptcy or the seeking of relief under Title 11 of the United States Code, as now constituted or hereafter amended, or the filing of a pleading in any court of record admitting in writing its or his inability to pay its or his debts as they come due; (iii) the making by such person of a general assignment for the benefit of creditors; (iv) the filing by such person of an answer admitting the material allegations of, or its or his consenting to, or defaulting in answering, a bankruptcy petition filed against it or him in any bankruptcy proceeding or petition seeking relief under Title 11 of the United States Code, as now constituted or as hereafter amended; or (v) the entry of an order, judgment or decree by any court of competent jurisdiction adjudicating such person a bankrupt or appointing a trustee of its or his assets, and such order, judgment or decree continues unstayed and in effect for a period of 60 consecutive days. (e) The term "POP Partnership Agreement" shall mean the Amended and Restated Agreement of Limited Partnership of POP dated as of the date hereof, as amended from time to time. The term "POP Purchase Agreement" shall mean the Sale, Purchase and Contribution Agreement dated as of December 27, 1985, between POP and DW. (f) The term "Permitted Transferee" shall mean, with respect to any person, such person under declaration of trust, or any parent, spouse, brother, sister, lineal descendant or adopted descendant of such person. Any transfer of a Partnership Interest to a Permitted Transferee may be by declaration of trust, inter vivos gift, specific testamentary disposition or for consideration. SECTION 9.14. Power of Attorney. Each Limited Partner hereby irrevocably constitutes and appoints each General Partner and any person hereafter admitted pursuant to this Agreement as a successor or additional General Partner, acting singly or collectively (the "Attorneys"), in each case with full power of substitution, the true and lawful attorney-in-fact of such Limited Partner, with full power and authority in such Limited Partner's name, place and stead, to make, execute, verify, consent to, swear to, make oath as to, acknowledge, publish, record and file all of the following: (i) the New Certificate or any amendment thereto and any other agreements, certificates, consents or other instruments said Attorneys, or any of them, deem necessary or appropriate for the purpose of giving effect to the provisions of this Agreement and to preserve the character of the Partnership as a limited partnership, the execution and delivery by any of said Attorneys of any such agreement, certificate, consent or other instrument being conclusive evidence that said execution and delivery was authorized hereby; (ii) any and all amendments to or modifications of this Agreement and of the instruments described in subparagraph (i) hereof (including, without limitation, amendments of this Agreement necessary to effect the addition, removal or substitution of one or more General or Limited Partners or changes in Partnership Interests pursuant to Section 3.02(f) or otherwise), provided that each such amendment of this Agreement is adopted in accordance with or made pursuant to the terms of this Agreement, the execution and delivery by any of said Attorneys of any such amendment or modification being conclusive evidence that such execution and delivery was authorized hereby; (iii) any and all certificates and other instruments which may be required to effectuate the dissolution and termination of the Partnership pursuant to the provisions of this Agreement, the execution and delivery by any of said Attorneys of any such certificate or other instrument being conclusive evidence that such execution and delivery was authorized hereby; and (iv) all such other instruments as shall be Approved by the General Partners as necessary or desirable to carry out fully the provisions of this Agreement in accordance with its terms, the execution and delivery of such instruments by any of said Attorneys being conclusive evidence that said execution and delivery was authorized hereby. Each Limited Partner acknowledges that the Power of Attorney hereby granted is coupled with an interest and is irrevocable. Said Power of Attorney shall survive the death or incapacity of such Limited Partner, or, if such Limited Partner is a partnership, corporation, trust or other entity, the dissolution, liquidation or termination thereof, or the assignment of such Limited Partner's limited Partnership Interest or any part thereof. If such Limited Partner transfers its limited Partnership Interest, the Power of Attorney granted hereby shall remain in effect for the purpose of and for the length of time necessary to effectuate and complete such transfer. SECTION 9.15. Amendments. Except as provided in this Agreement, this Agreement may not be modified or amended unless (i) such modification or amendment has been Approved by the General Partners and (ii) in the case of any modification or amendment increasing the obligation of the Limited Partners to make capital contributions or Shortfall Loans, decreasing the rights of Limited Partners hereunder to Net Cash Flow or Capital Proceeds or amending this Section 9.15, such modification or amendment has been approved in writing by each Limited Partner. IN WITNESS WHEREOF, this Agreement is executed as of the date first set forth above. GENERAL PARTNERS: PENINSULA/DW ASSOCIATES by POP/DW ASSOCIATES, a California Limited Partnership, General Partner, by POP/LIBERTY STREET ASSOCIATES, a California Limited Partnership, General Partner, /s/Warren B. Lane by ________________ Warren B. Lane General Partner by DEAN WITTER REALTY GROWTH PROPERTIES, L.P., General Partner, by DEAN WITTER REALTY GROWTH PROPERTIES INC., Managing General Partner, /s/Warren B. Lane by _________________ Warren B. Lane Sr. Vice President PENINSULA OFFICE PARK by PENINSULA/DW ASSOCIATES, General Partner, by POP/DW ASSOCIATES, a California Limited Partnership, General Partner, by POP/LIBERTY STREET ASSOCIATES, a California Limited Partnership, General Partner, /s/Warren B. Lane by _________________ Warren B. Lane General Partner by DEAN WITTER REALTY GROWTH PROPERTIES, L.P., General Partner, by DEAN WITTER REALTY GROWTH PROPERTIES INC., Managing General Partner, /s/Warren B. Lane by __________________ Warren B. Lane Sr. Vice President /s/William Wilson by _______________________ William Wilson III General Partner /s/Miller Ream by ______________________ Miller Ream General Partner LIMITED PARTNERS: By: James E. Bateman, as Attorney-in-Fact for James Pollock, Attorney-in-Fact for the limited partners whose names are set forth below: The Pollock Partnership, a California limited partnership Roland E. Brandel Ira Michael Heyman David E. Nelson Virginia C. Taylor Michael G. Fleishman, Trustee for Matthew Couch and Whitney A. Couch J. Richard McMichael James Pollack /s/James. E. Bateman By: __________________________ James E. Bateman Attorney-in-Fact EX-10 6 Exhibit 10(k) ____________ AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF PENINSULA OFFICE PARK (A California Limited Partnership) Dated as of December 27, 1985 AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP dated as of December 27, 1985, among PENINSULA/DW ASSOCIATES, a California general partnership ("DW"), WILLIAM WILSON III ("Wilson"), MILLER REAM ("Ream"), the limited partners listed in Exhibit A (the "Limited Partners") and the persons listed in Exhibit A-1 (the "Withdrawing Partners"); DW, Wilson and Ream are hereinafter sometimes collectively referred to as the "General Partners"; Wilson, Ream, the Limited Partners and the Withdrawing Partners are hereinafter sometimes collectively referred to as the "Original Partners"; and the General Partners and the Limited Partners are hereinafter sometimes collectively referred to as the "Partners"). Preliminary Statement Peninsula Office Park, a California limited partnership (the "Partnership"), was formed pursuant to a Limited Partnership Agreement and Certificate dated October 1, 1971 (the "Original Agreement"). A Certificate of Limited Partnership for the Partnership was executed by the parties to the Original Agreement, dated October 1, 1971, and recorded October 6, 1971, in Volume 6025, Page 457 of the Official Records of the County Recorder, County of San Mateo, State of California (the "Original Certificate"). The Partnership was continued and the Original Agreement, as theretofore amended, was amended and restated by a Restatement of Limited Partnership Agreement and Certificate dated as of June 1, 1977 (the "Restated Agreement'). The Original Certificate was amended and restated by the First Amendment to Certificate of Limited Partnership dated July 1, 1977, and recorded July 21, 1977 in Volume 7551, Page 120 of the Official Records of the County Recorder, County of San Mateo, State of California (the "Amended and Restated Certificate"). The Amended and Restated Certificate was amended by the Second Amendment to Certificate of Limited Partnership dated June 29, 1982, and recorded September 30, 1982, as Document Number 82083974 of the Official Records of the County Recorder, County of San Mateo, State of California. The Amended and Restated Certificate was further amended by the Third Amendment to Certificate of Limited Partnership dated June 30, 1982, and recorded December 15, 1982, as Document Number 82110539 of the Official Records of the County Recorder, County of San Mateo, State of California. (The Amended and Restated Certificate, as amended by the Second and Third Amendments to Certificate of Limited Partnership, is hereinafter referred to as the "Certificate"). The Restated Agreement was amended by the First Amendment to Restatement of Limited Partnership Agreement dated June 30, 1982, and the Second Amendment to Restatement of Limited Partnership Agreement dated February 15, 1984 (the Restated Agreement, as so amended, is hereinafter referred to as the "Initial Partnership Agreement"). DW has acquired portions of the Partnership interests in the Partnership heretofore held by the Original Partners pursuant to a Sale, Purchase and Contribution Agreement dated as of December 27, 1985, between DW and the Partnership (the "Purchase Agreement"). DW desires to have the entire partnership interest which it has acquired be in the form of a general partnership interest and desires to be admitted as a General Partner of the Partnership, and DW and the Original Partners desire to make certain changes in the Initial Partnership Agreement and the Certificate. The parties hereto are entering into this Agreement to evidence their agreements on such matters and to set forth the respective rights and obligations of the parties hereto to each other and to the Partnership. In consideration of the foregoing, and of the mutual covenants, conditions and agreements hereinafter set forth, the parties hereto hereby agree that the Initial Partnership Agreement is hereby amended and restated in its entirety to read as follows: ARTICLE I Continuation of the Partnership SECTION 1.01. Continuation. The Partnership shall, on the terms and conditions hereof, continue its existence, without interruption, as a limited partnership under and subject to the Uniform Limited Partnership Act of the State of California. DW shall be admitted as a General Partner of the Partnership and an amendment to the Certificate (the "New Certificate") shall be filed in the Office of the County Recorder of San Mateo County to reflect such admission and the other matters contained herein. SECTION 1.02. Effectiveness. The provisions hereof shall be effective upon the closing of the purchase (the "Closing"; the date on which the Closing occurs is referred to as the "Closing Date") by DW pursuant to the Purchase Agreement of portions of Partnership Interests (as defined in Section 1.07) heretofore held by the Original Partners and shall continue to be effective until termination and liquidation of the Partnership in accordance with the provisions hereof. SECTION 1.03. Name. The name of the Partnership shall be PENINSULA OFFICE PARK. SECTION 1.04. Place of Business. The principal office and place of business of the Partnership shall be located at 2929 Campus Drive, San Mateo, California 94403, or such other place or places as may from time to time be Approved by the General Partners (as defined in Section 2.01). SECTION 1.05. Purpose. The business of the Partnership shall be to acquire, own, improve, manage, operate, lease, mortgage (or otherwise encumber) or otherwise deal with the real property and interests in real property described in Exhibit B (the "Property") and the general partnership interest of the Partnership in Campus Drive (the "Campus Drive Interest") and to engage in any other business as shall be Approved by the General Partners (as defined in Section 2.01). The Property and the Campus Drive Interest are hereinafter sometimes collectively referred to as the "Partnership Assets". SECTION 1.06. Authority of Partners. Except as expressly provided in this Agreement, no Partner shall have any authority to act for, or to assume any obligations or responsibility on behalf of, the other Partners or the Partnership. SECTION 1.07. Partnership Interests. The "Partnership Interest" of a Partner shall mean the proportional interest of each Partner in the Partnership. The initial Partnership Interests and capital contributions of the Partners are set forth in Exhibit C hereto. ARTICLE II Management SECTION 2.01. Management of the Partnership. (a) Subject to the terms hereof, the General Partners, collectively, shall have full, exclusive and complete discretion in the management and control of the business and affairs of the Partnership and in no event shall the Limited Partners take part in the conduct or control of the business and affairs of the Partnership or have any right or authority to act for or bind the Partnership. Except as expressly provided herein to the contrary, only those Major Decisions (as hereinafter defined) with respect to the management and control of the Partnership which are Approved by the General Partners shall be binding on the Partnership and the Partners. When the phrase "Approved by the General Partners" is used in this Agreement, such phrase shall mean (i) for so long as DW, Wilson and Ream remain General Partners, approved by DW and either Wilson or Ream and (ii) if any of DW, Wilson or Ream ceases to be a General Partner, approved by all General Partners. A General Partner shall be deemed to have given approval of a particular action or decision under this Agreement unless such General Partner disapproves (in writing) of such action or decision within 30 days (or 7 days in the case of a particular Major Decision under Section 2.01(b)(iv), (v), (xii) or (xiii) or (xvii) to the extent that such decision under the Campus Drive Partnership Agreement must be made within 7 days) after giving of written notice to such General Partner in accordance with Section 9.02 of request for such approval. The Property shall be managed by a manager (the "Manager"), who shall be designated pursuant to Section 2.02. The Manager shall be responsible for the implementation of the decisions of the General Partners with respect to the Property and for conducting the ordinary and usual business and affairs of the Partnership concerning the Property as more fully set forth in Section 2.03 and as limited by this Agreement and any management agreement between the Partnership and the Manager. The general affairs of the Partnership shall be managed by the managing general partner (the "Managing General Partner"), who shall be designated pursuant to Section 2.10. (b) No action shall be taken, sum expended, decision made or obligation incurred by the Partnership, the Manager or any Partner with respect to a matter within the scope of any of the major decisions enumerated below (the "Major Decisions"), unless Approved by the General Partners. The Major Decisions shall include: (i) the acquisition of any land, or other improved or unimproved real property, or any improvements thereon or interest therein; (ii) subject to Article III, the incurrence of any indebtedness for borrowed money by, or the refinancing of any indebtedness of, the Partnership, including, without limitation, the financing or refinancing of the Property or the operations of the Partnership; (iii) the sale or other disposition of, or the granting of any mortgage, lien or other encumbrance (other than tenant leases) on, the Partnership Assets or any part thereof; (iv) entering into any lease or other arrangement that (A) involves or would result in the leasing of 5,000 or more square feet of net rentable space in the Property pursuant to a single lease or under multiple leases to the same lessee (or its affiliates), (B) provides for annual rental or other terms less favorable to the Partnership than the rental and other terms, if any, set forth in any written guidelines Approved by the General Partners (which guidelines shall include, without limitation, terms for free rent and other concessions, effective rent, tenant improvements and expense stop and shall be confirmed or revised as Approved by the General Partners no less frequently than quarterly), (C) provides for a term which, with renewals, is equal to or greater than six years or (D) otherwise varies in any material respect that is adverse to the Partnership from lease forms and rent schedules previously Approved by the General Partners; (v) the termination or material modification of any lease or other arrangement involving space in the Property if such lease or other arrangement was required (or would have been required if this Agreement had been in effect when such lease or other arrangement was entered into) to be Approved by the General Partners pursuant hereto or if such modification would result in a modified lease or other arrangement that, if it were a new lease, would be required to be Approved by the General Partners pursuant hereto; (vi) the construction of any capital improvements, repairs, alterations or changes (other than tenant improvements pursuant to a lease or other arrangement which has been Approved by the General Partners or which does not require such approval) in excess of $10,000 in the aggregate in any one fiscal year (unless specifically set forth in a Budget (as defined in Section 2.04) theretofore Approved by the General Partners), or the making of any lease termination payments (other than pursuant to the terms of a lease or other arrangement which has been Approved by the General Partners or which does not require such approval) in excess of $5,000 in the aggregate in any one fiscal year; (vii) the selection or variation of depreciation and accounting methods and other decisions with respect to the treatment of various Partnership transactions for accounting, bookkeeping or tax purposes, and the filing of tax returns by or on behalf of the Partnership, in each case subject to and consistent with the other provisions hereof (including Sections 2.08 and 2.09); (viii) the approval of all construction and architectural contracts and all architectural plans, specifications and drawings prior to the construction of any new improvements or alterations contemplated thereby (other than tenant improvements pursuant to a lease or other arrangement which has been Approved by the General Partners or which does not require such approval); (ix) the selection of all counsel, accountants, engineers and architects to be engaged by the Partnership; (x) distributions to the Partners, except as set forth in Article IV or V; (xi) the approval of each Annual Business Plan (as defined in Section 2.04) pursuant to Section 2.04; (xii) the payment or incurrence of any obligation (other than obligations under the express terms of a lease or other arrangement which has been Approved by the General Partners or under a lease that does not require such approval or other obligations incurred in the ordinary course of business to cure violations of law or to cover other nondiscretionary operating expenses) in any fiscal year involving a sum which (A) when added to the other expenditures of the Partnership for such fiscal year, would result in the Partnership having cumulative expenditures in excess of the Budget Approved by the General Partners for such year of more than $25,000, (B) when added to all expenditures in the same category for such fiscal year, would exceed 105% of the amount set forth for such category of expenditures in the Budget Approved by the General Partners for the then lapsed portion of such fiscal year, or (C) is not provided for in or contemplated by the specific categories of expenditures set forth in the Budget Approved by the General Partners; provided, however, that, in each of the foregoing cases the Manager shall have the right, without the consent of the General Partners if the Manager shall have first used its best efforts under the circumstances to obtain such consent (except in the case of expenditures not exceeding $1,000, where no such efforts shall be required), to make such repairs and alterations to the Property and to expend such funds (not to exceed $5,000 per incident) as in its reasonable judgment are immediately necessary or advisable in the event of an emergency in order to avoid a violation of law or to prevent injuries to persons or damage to property; (xiii) the initiation, defense, adjustment, settlement or compromise of any claim, action, suit or judgment by or against the Partnership involving an amount in excess of $10,000 or any claim for equitable relief; (xiv) subject to Section 2.02(b) and except as provided in any management agreement relating to the Property which has been Approved by the General Partners, the entering into of any management or real estate brokerage agreement (whether oral or written) in respect of the Property or any termination or material modification thereof; (xv) any modification with respect to the type or amount of insurance coverage to be maintained by the Partnership as set forth in the insurance guidelines attached as Exhibit D hereto (as so revised from time to time the "Insurance Guidelines"); (xvi) entering into any service, maintenance, employment or similar contract or agreement which is not terminable without penalty on an annual basis on not more than 90 days' notice or which provides for monthly payments by the Partnership (whether actual or accrued) in excess of $500 per month, provided that this $500 limitation shall not apply in any fiscal year if such item is covered in the Budget Approved by the General Partners pursuant to Section 2.04 hereof; (xvii) except as contemplated by Section 3.02(c), the exercise of any right or power or the granting of any approval or consent as a general partner of Campus Drive pursuant to the Campus Drive Partnership Agreement or otherwise (other than those actions within the scope of authority of the Partnership as the "Managing General Partner" of Campus Drive, which shall be performed by the Managing General Partner hereunder); and (xviii) any other decision or action that is required to be Approved by the General Partners pursuant hereto or that may hereafter be Approved by the General Partners as a Major Decision. (c) A General Partner shall not be liable, responsible or accountable in damages or otherwise to any other Partner for any act or omission pursuant to the authority granted by this Agreement if such General Partner acted in good faith and in a manner it reasonably believed to be within the scope of the authority granted by this Agreement and in or not opposed to the best interests of the Partnership, provided that such General Partner shall not be relieved of liability in respect of any claim, issue or matter as to which such General Partner shall have been adjudged to be liable for gross negligence, wilful misconduct or material breach of this Agreement in the performance of its fiduciary duty to the Limited Partners; and, subject to such limitation in the case of any such judgment of liability, the Partnership shall indemnify each General Partner against any loss or damage incurred by it and against expenses (including attorneys' fees) actually and reasonably incurred by it (which may be paid as incurred) in connection with the defense or settlement of any threatened, pending or completed action or suit by any person in connection therewith. (d) At any time when there shall be only one General Partner, there shall be no sale or other disposition of all or any substantial portion of the Partnership Assets unless such sale or disposition shall have been either approved by the Limited Partners as provided in Section 7.03(f) or approved in writing by a majority in interest of the Limited Partners (based upon Partnership Interests). SECTION 2.02. Appointment, Replacement and Resignation of Manager. (a) The General Partners hereby approve the continuation of William Wilson & Associates, as the initial manager of the Property (the "Initial Manager") pursuant to the Management Agreement dated as of December 27, 1985, between the Partnership and the Initial Manager (the "Initial Management Agreement"). (b) The right of the Partnership to terminate or not renew the Initial Management Agreement (or any subsequent management agreement) pursuant to Section 5.01(a) of the Initial Management Agreement (or the corresponding provisions of any such subsequent management agreement) and, subject to the following, to hire a replacement manager, shall be exercisable by DW on behalf of the Partnership. If DW shall elect to exercise such right of termination or nonrenewal on behalf of the Partnership or if the Initial Manager (or any subsequent Manager) shall resign as Manager or for any other reason cease to be Manager, as soon as reasonably practicable thereafter a list shall be Approved by the General Partners (such approval not to be unreasonably withheld or delayed) which shall set forth the names of three or more responsible parties who will be requested to submit proposals for assuming the role of Manager. In connection with the replacement of the Initial Manager (or any subsequent Manager), Borel Estate Company (the "Ream Company") shall be included on such list, provided that such company is still active in managing office buildings in the San Mateo area. Within 10 days after receipt of such proposals from all persons on such list (and in any event no later than 20 days after such list shall have been Approved by the General Partners), DW shall give each other General Partner a written notice setting forth the name of the party that it has on behalf of the Partnership selected to act as the Manager from among the choices designated on the aforementioned list and the terms of such engagement; provided, however, that if the Manager so selected by DW shall be an affiliate of DW, such appointment shall require the prior written approval of the other General Partners (which approval shall not be unreasonably withheld or delayed). Upon receipt by the other General Partners of any such notice referred to in the preceding sentence (and granting of such consent required from them, if any), the General Partners shall execute on behalf of the Partnership a management agreement with such party and perform such other acts as may be required to appoint such party as the Manager. SECTION 2.03. Duties of Manager. The Manager shall implement or cause to be implemented all Major Decisions Approved by the General Partners related to the operation and management of the Property and shall conduct or cause to be conducted the ordinary and usual business and affairs of the Partnership related to the Property in accordance with and as limited by this Agreement and the applicable management agreement. In no event shall the Manager have any authority to make any expenditure or incur any obligation on behalf of the Partnership unless such expenditure or obligation has been specifically provided for in this Agreement or Approved by the General Partners or is made pursuant to an Annual Business Plan Approved by the General Partners. SECTION 2.04. Annual Business Plan. Each management agreement shall provide that, not later than 60 days after the effective date of such agreement, and, thereafter, not later than 60 days prior to the end of each fiscal year, the Manager shall prepare and submit to the General Partners an annual report (the "Annual Business Plan") in respect of the Property setting forth (i) an analysis of the business prospects for the Property for the succeeding fiscal year, including an analysis of competitive factors affecting the Property, such as vacancy rates for the local market and rental rates charged for space of similar quality in the area, (ii) a statement of proposed capital and other improvements to be made in the succeeding fiscal year, including cost and timing estimates therefor and (iii) a proposed operating and capital budget (the "Budget") setting forth the estimated receipts, expenditures, escrow deposits and reserves, if any, of the Partnership for the next succeeding fiscal year. If and when the Annual Business Plan (including the Budget set forth therein, and any modification required by the General Partners) is Approved by the General Partners, the Manager shall implement it and shall be authorized, subject to the requirements of Section 2.01, without the need for further approval by the General Partners, to make the expenditures and incur the obligations provided for in the Budget as so approved. SECTION 2.05. Arrangements with Affiliates. (a) Except as may be expressly provided for herein or in the Initial Management Agreement or as may hereafter be Approved by the General Partners, no payment shall be made by the Partnership to a Partner, or any affiliate or employee of a Partner, for the services of such Partner or any affiliate or employee of such Partner. No part of a Partner's central office overhead or general or administrative expenses shall be deemed to be an expense of the Partnership; provided, however, that the reasonable travel and other expenses for twelve trips during the first twelve months following the Closing Date (and such number of trips in succeeding periods as shall reasonably be required) by an officer, partner, employee or representative of DW or any affiliate of DW to attend meetings of the General Partners, to inspect the Property or to examine the books and operations of the Partnership shall be expenses of the Partnership. (b) The Partnership shall not enter into any contract, agreement, lease or other arrangement for the furnishing to or by the Partnership of goods, services or space with any person or entity related to or affiliated with a Partner unless such contract, agreement, lease or other arrangement has been specifically Approved by the General Partners; provided, however, that the foregoing shall not restrict the ability of Wilson or his affiliates to bid on providing services (including tenant improvement work) to the Partnership and, if such bid is the lowest or is Approved by the General Partners, from being awarded such contract. SECTION 2.06. Fiscal Year. The fiscal year of the Partnership shall end on the last day of December of each year. SECTION 2.07. Books and Records; Accountants. (a) The books of account of the Partnership shall be kept and maintained at all times at the place or places Approved by the General Partners and shall be maintained on an accrual basis in accordance with generally accepted accounting principles consistently applied. (b) Each Partner shall have the right at all reasonable times during usual business hours to audit, examine and make copies of or extracts from the books of account of the Partnership. Such right may be exercised through any agent, representative, partner, or employee of a Partner designated by it or by an independent public accountant designated by such Partner. Each Partner shall bear all expenses incurred in any examination made by such Partner. (c) At the expense of the Partnership, the books of the Partnership shall be examined, audited and certified annually as of the end of each fiscal year by the independent public accounting firm of Peat, Marwick, Mitchell & Co. Such independent public accountants for the Partnership may be changed to any firm of independent public accountants of nationally recognized standing Approved by the General Partners. Peat, Marwick, Mitchell & Co., or any subsequently selected independent public accountants, shall prepare a balance sheet, an income and expense statement and a statement of changes in financial position, all in comparative form and in reasonable detail, and a report setting forth the amount of Net Cash Flow (as defined in Section 4.01) of the Partnership, and the share of the net profits and losses of the Partnership (as defined in Section 6.07) and Net Cash Flow allocable to each Partner, for each fiscal year. The Managing General Partner shall use its best efforts to cause such accountants to prepare such financial statements within 90 days after the end of each fiscal year, and copies of such financial statements and report shall promptly be transmitted by the Managing General Partner to the Partners, together with the report of such accountants covering the results of their audit. Peat, Marwick, Mitchell & Co., or such other accountants, shall also prepare the tax returns of the Partnership (which tax returns shall be satisfactory in form and substance to each General Partner), and the Managing General Partner shall use its best efforts to cause such accountants to prepare such tax returns within 60 days after the end of each fiscal year. The Managing General Partner shall use its best efforts to cause such tax returns to be filed on a timely basis and shall, promptly after the receipt thereof from such accountants, transmit copies thereof to each Partner. SECTION 2.08. Depreciation. All depreciation attributable to any step-up in basis of the Property caused by the transactions contemplated by the Purchase Agreement (a "Step-Up") shall be allocated to DW. Each Partner agrees to cooperate with DW and agrees not to contest or take a position inconsistent with DW's obtaining the Step-Up under Section 754 or any other applicable Section of the Internal Revenue Code of 1954, as amended (the "Code"). The basis of the Partnership's depreciable assets and its methods of depreciation shall not be changed without the express approval of DW. The Partnership's real property shall be depreciated using the straight line method of cost recovery and the shortest cost recovery period permitted by the Code. The Partnership's personal property shall be depreciated using accelerated cost recovery. SECTION 2.09. Tax Elections. (a) All elections required or permitted to be made by the Partnership under the Code shall be made by the Partnership in such manner as DW may reasonably determine from time to time. In connection with the Step-Up, the Partnership shall make an election pursuant to Section 754 of the Code to adjust the basis of the assets of the Partnership with respect to the transfer to DW of its Partnership Interest pursuant to the Purchase Agreement and shall make an election pursuant to Proposed Treasury Regulation sec. 1.704-1(b) (2)(iv) (c) (1) to make corresponding adjustments to the capital account of DW. Elections which are required or permitted to be made because of a change in the Code (or the enactment of any successor statute) after the date hereof shall be subject to the reasonable approval of the other General Partners; provided that the other General Partners shall not withhold any such approval if failure to grant such approval would have a material adverse effect on DW. No such election shall be inconsistent with the other terms and conditions of this Agreement. Unless otherwise Approved by the General Partners, DW shall be the "tax matters partner" of the Partnership pursuant to Section 6231(a)(7) of the Code. The "tax matters partner" shall not compromise any claim by the Internal Revenue Service with respect to the Partnership or appeal any ruling or decision thereof with respect to the Partnership unless Approved by the General Partners. (b) Notwithstanding Section 2.09(a), if a Partner transfers all or part of its interest in the Partnership, any basis adjustment attributable to such transfer, whether made under Section 754 of the Code or otherwise, shall be allocated solely to the transferee (and the Partnership, on request, will make any appropriate elections in connection with such basis adjustment). SECTION 2.10. Managing General Partner. (a) The General Partners hereby approve the appointment of Wilson as the initial Managing General Partner. If at any time the Managing General Partner ceases to be a General Partner, such person shall immediately cease to be the Managing General Partner and a successor shall be appointed from among the remaining General Partners as Approved by the General Partners. The Partnership shall reimburse the Managing General Partner for the reasonable out-of-pocket expenses incurred by him in performing his obligations as Managing General Partner (as distinguished from his obligations as a General Partner). (b) The Managing General Partner shall be responsible for (i) supervising the performance of the Manager under the applicable management agreement, (ii) implementing or causing to be implemented all Major Decisions Approved by the General Partners to the extent not the responsibility of the Manager under the applicable management agreement and conducting or causing to be conducted the ordinary and usual business and affairs of the Partnership in accordance with and as limited by this Agreement to the extent not the responsibility of the Manager under the applicable management agreement. In no event shall the Managing General Partner have any authority to make any expenditure or incur any obligation on behalf of the Partnership unless such expenditure or obligation has been specifically provided for in this Agreement, Approved by the General Partners or made pursuant to an Annual Business Plan Approved by the General Partners. The parties expressly acknowledge that the position of managing General Partner is ministerial in nature and is not intended to confer upon the Managing General Partner powers or rights greater than those of any other General Partner. SECTION 2.11. Appointment of Denison as a General Partner. If at any time both Wilson and Ream cease to be General Partners and at such time the aggregate Partnership Interests of the Limited Partners exceed 25%, then a majority in interest of the Limited Partners (based upon Partnership Interests) shall have the right (exercisable within 60 days after both Wilson and Ream shall have ceased to be General Partners) to appoint Paul M. Denison ("Denison") as a General Partner provided that he at that time satisfies the requirement set forth in Section 7.01(e)(i). If Denison shall be so appointed, upon his assumption, in writing, of all the rights, powers and obligations of a General Partner under this Agreement he shall become a General Partner and his limited Partnership Interest shall be converted to a General Partnership Interest (but he shall have the same right to receive Net Cash Flow, Capital Proceeds, and each item of income, gain, loss, deduction or tax credit of the Partnership as he would have had if not so converted). SECTION 2.12. Investment Management Fee. For so long as an investment management agreement between the Partnership and RMS/Liberty Street Associates, an affiliate of DW ("Liberty Street"), shall be in effect, within 30 days after the end of each fiscal quarter and prior to any distribution to Partners pursuant to Section 5.01 the Partnership shall pay to Liberty Street, as an investment management fee (the "Investment Management Fee"), an amount equal to 1% of the Gross Income of the Partnership (as defined in Section 4.01, but excluding for purposes of this calculation distributions of cash from Campus Drive to the Partnership) for such period. Amounts payable under this Section 2.12 shall be paid prior to distributions to Partners pursuant to Section 4.02 or 5.01. To the extent that for any period Adjusted Cash Flow (as defined in Section 3.02(f)) after making payments required pursuant to Section 3.02(d) is insufficient to pay the Investment Management Fee, the unpaid portion thereof shall be accrued (without interest) and paid in subsequent periods out of Adjusted Cash Flow or Adjusted Capital Proceeds (as defined in Section 3.02 (f)), in each case to the extent available after making payments required pursuant to Section 3.02(d) and this Section 2.12. SECTION 2.13. Additional Development. The Partners acknowledge that the Property includes a parcel of land adjacent to the Building No. 8 which is suitable for future development as an office building. Under current zoning and land use restrictions, an office building containing approximately 60,000 square feet could be built on such site. It is the intention of the Partners that the Partnership will proceed with the development of that site when it becomes economically advantageous to do so, and Partnership funds may be expended for predevelopment activities, such as soils and engineering studies, schematic design, permit and approval processing and the like as Approved by the General Partners. However, the Partnership will not commit or expend funds for the preparation of construction documents or for actual construction purposes until the development and the method of financing the same shall have been Approved by the General Partners. Nothing contained in this Section 2.13 shall be deemed to create any obligation on the part of any Partner to make any capital contributions or Shortfall Loans to fund the development or construction of improvements on such site. ARTICLE III Capital Contributions and Loans SECTION 3.01. Capital Contributions. (a) Subject and pursuant to the terms and conditions of the Purchase Agreement, on the Closing Date DW shall make a capital contribution to the Partnership in immediately available funds of $510,000 and the other Partners shall make capital contributions to the Partnership aggregating $165,471. Such capital contributions shall be used to establish a working capital reserve for the Partnership (the "Working Capital Reserve") which shall be used to fund tenant improvements, leasing commissions, other capital expenditures and operating deficits to the extent Approved by the General Partners and for funding the Partnership's required capital contribution to Campus Drive pursuant to Section 3.01(a) of the Campus Drive Partnership Agreement. (b) DW agrees to make additional capital contributions to the Partnership from time to time after the Closing Date (up to a maximum aggregate additional capital contribution of $1,676,234) to the extent necessary to cause the Working Capital Reserve as of the end of any calendar month not to be less than $200,000 and to fund the Partnership's required capital contribution to Campus Drive pursuant to Section 3.01(b) of the Campus Drive event to the full amount of its additional capital contributions required under this Section 3.01(b) by December 31, 1988 (upon notice as provided herein). DW agrees to make such additional capital contributions to the Partnership immediately available funds within 10 days after written request therefor from the Manager or the Managing General Partner. Any such request shall specify the amount of the Working Capital Reserve as of the end of the calendar month preceding the date of such notice and the amount of the additional capital contribution to be made by DW pursuant to this Section 3.01 (b), and in no event may such requests be made more frequently than monthly. Such additional capital contributions shall be added to the Working Capital Reserve and applied as provided in this Agreement. (c) After DW has made the maximum additional capital contribution required of it pursuant to Section 3. 01(b) , and in any event by December 31, 1988 (upon notice as provided herein), the Partners (other than DW) agree to make an additional capital contribution to the Partnership of $-0- (to be allocated among them in accordance with their Partnership Interests). Such additional capital contribution shall be made in immediately available funds within 10 days after written request therefor from the Manager or any General Partner specifying that DW has made its maximum additional contribution as aforesaid and the amount of the additional capital contribution to be made by such Partner pursuant to this Section 3.01(c). (d) Beginning in January 1989, and annually thereafter, amounts held in the Working Capital Reserve may if so Approved by the General Partners be distributed to the Partners in proportion to their Partnership Interests. (e) A Partner shall not have any obligation to the Partnership or to any other Partner to restore any negative balance in the capital account of such Partner. No Partner may withdraw capital or receive any distributions except as specifically provided herein. No interest shall be paid by the Partnership on any capital contributions to the Partnership. SECTION 3.02. Shortfall Loans. (a) If at any time prior to December 31, 1993, the Partnership shall require funds in excess of the capital contributions required under Section 3.01 for working capital in connection with the operation and maintenance of the Property, DW shall from time to time make loans to the Partnership (the "First Shortfall Loans") in an aggregate principal amount of up to $872,900 (determined on a cumulative basis). In no event may First Shortfall Loans be used to fund the capital requirements of Campus Drive without the prior written consent of DW. If a General Partner reasonably determines that the Partnership requires a First Shortfall Loan as contemplated by the preceding paragraph, such General Partner shall give DW notice (each a "First Shortfall Notice") setting forth the specific purpose for which such First Shortfall Loan is required and the amount required to be loaned by DW (determined as provided above). DW shall within 20 days of receiving a First Shortfall Notice deposit the amount required to be loaned by DW in an account Approved by the General Partners and such funds shall be applied to the purposes Approved by the General Partners consistent with such First Shortfall Notice. All First Shortfall Loans shall mature on December 31, 1995, or upon the earlier termination of the Partnership, and may be repaid out of the proceeds of Additional Shortfall Loans (as defined below) as provided in Section 3.02(b). (b) If the Partnership shall (i) require funds in excess of the capital contributions required under Section 3.01 and the First Shortfall Loans required pursuant to Section 3.02(a) for working capital in connection with the operation and maintenance of the Property, (ii) require funds to meet its obligation as a general partner of Campus Drive to make "Additional Shortfall Loans" to Campus Drive (as defined in and pursuant to the Campus Drive Partnership Agreement), or (iii) require funds to repay First Shortfall Loans or Additional Shortfall Loans (as hereinafter defined) at the maturity thereof (except upon termination of the Partnership), each Partner shall from time to time make loans ("Additional Shortfall Loans") to the Partnership pro rata based upon their Partnership Interests at the time of the funding of each such Loan. If a General Partner reasonably determines that the Partnership requires an Additional Shortfall Loan as contemplated by the preceding paragraph, such General Partner shall give the other Partners notice (each a "Shortfall Notice") setting forth the specific purpose for which such Shortfall Loan is required and the amount required to be loaned by each Partner (determined as provided above) . Each Partner within 20 days of giving or receiving, as the case may be, a Shortfall Notice shall deposit the amount required to be loaned by such Partner in an account Approved by the General Partners and such funds shall be applied to the purposes Approved by the General Partners consistent with such Shortfall Notice. Each Additional Shortfall Loan shall mature on the tenth anniversary of such Loan, or upon the earlier termination of the Partnership. (c) If Campus Drive shall require funds in excess of the capital contributions and "Mandatory Shortfall Loans" required under the Campus Drive Partnership Agreement for working capital in connection with the operation and maintenance of its property or shall require funds to repay Special Shortfall Loans (as hereinafter defined) at the maturity thereof (except upon termination of the Partnership) and such funds shall not be available to campus Drive on reasonable terms from third party sources, each Partner shall from time to time make loans ("Special Shortfall Loans") to the Partnership in the following proportions: 23.2883% by DW, 11.6908% by Wilson, 11.6908% by Ream and the balance by all Partners (including DW, Wilson and Ream) pro rata based upon their Partnership Interests at the time of the funding of each such Loan. If a General Partner reasonably determines that the Partnership requires a Special Shortfall Loan as contemplated by the preceding paragraph, such General Partner shall give the other Partners notice (each a "Special Shortfall Notice") setting forth the specific purpose for which such Special Shortfall Loan is required and the amount required to be loaned by each Partner (determined as provided above). Each Partner within 20 days of giving or receiving, as the case may be, a Special Shortfall Notice shall deposit the amount required to be loaned by such Partner in an account Approved by the General Partners and such funds shall be applied to the purposes Approved by the General Partners consistent with such Special Shortfall Notice. Each Special Shortfall Loan shall mature on the tenth anniversary of the funding of such Loan, or upon the earlier termination of the Partnership. The obligations of DW, Wilson and Ream under this Section 3.02(c) shall continue in full force and effect notwithstanding the conversion of any of them to Limited Partners pursuant to Section 3.03 and shall be binding upon their respective heirs, executors, administrators, legal representatives, successors and permitted assigns and enforceable against them as provided in Section 3.02(e). First Shortfall Loans, Additional Shortfall Loans and Special Shortfall Loans are sometimes collectively referred to herein as "Shortfall Loans". (d) Each Shortfall Loan shall be evidenced by a note for each lending Partner maturing as provided in this Section 3.02, setting forth the principal amount of the Shortfall Loan made by such lending Partner and providing for the accrual of interest at the Prime Rate from the date such Shortfall Loan was made pursuant to this Section 3.02. Except as provided in the succeeding sentence, each note shall provide that the principal thereof and the interest thereon shall be due and payable ratably with all other such notes then outstanding. The notes shall be due and payable as follows: (i) current accrued and unpaid interest earned on the notes during any fiscal year of the Partnership shall be due and payable to the extent of, or out of, 100% of the Adjusted Cash Flow for such year, such current interest to be paid quarterly; (ii) unpaid principal on the First Shortfall Loans made by DW shall be due and payable quarterly to the extent of, or out of, 100% of the Adjusted Cash Flow for any fiscal year of the Partnership remaining after payments pursuant to (i) above; (iii) accrued and unpaid interest earned on the notes during prior fiscal years of the Partnership and the principal of the notes (other than principal on the First Shortfall Loans made by DW) shall be due and payable quarterly to the extent of, and out of, 100% of any Adjusted Cash Flow remaining after payments pursuant to (i) and (ii) above; (iv) accrued and unpaid interest (whenever earned) on and principal of (including principal on the First Shortfall Loans) the notes shall be due and payable to the extent of, and out of, 100% of all Adjusted Capital Proceeds; and (v) accrued and unpaid interest (whenever earned) on and principal of (including principal on the First Shortfall Loans) the notes shall be due and payable at maturity thereof. All payments with respect to the notes shall be subordinate with respect to all indebtedness of the Partnership to unaffiliated third parties incurred in accordance with this Agreement. No Partner shall be personally liable to pay any indebtedness evidenced by such notes, and in the event any judgment is obtained by the payee of any such note, enforcement of such judgment shall be limited and restricted to Adjusted Cash Flow and Adjusted Capital Proceeds and any other assets of the Partnership. (e) DW has agreed to make its Shortfall Loans in reliance upon the other Partners' agreements to make their Shortfall Loans, and the other Partners have agreed to make their Shortfall Loans in reliance upon DW's agreement to make its Shortfall Loans. The parties acknowledge that such agreements were an inducement, sine qua non, to make their investments in the Partnership and, accordingly, that the performance of such agreements is the basis, sine qua non, on which each of the Partners is to be entitled to receive its interest in Net Cash Flow, Capital Proceeds and each item of income, gain, loss, deduction or tax credit of the Partnership. Therefore, in the event that DW fails to make any Shortfall Loan pursuant to this Section 3.02, in whole or in part, within the time specified in this Section 3.02 for such Shortfall Loan, the other General Partners may send an additional notice to DW setting forth such fact and the amount unpaid, and DW shall have a further period of 10 days to make the full amount of such Shortfall Loan. If at the end of such 10-day period DW shall still have failed to make such Shortfall Loan, in whole or in part, the other Partners may make such Shortfall Loan. If the other Partners make such Shortfall Loan to the Partnership, the Partnership Interests of DW and the other Partners shall each automatically be modified as of the date of such loan so that (y) the Partnership Interest of each Partner (other than DW) shall then be the sum of (i) such Partner's Partnership Interest prior to the making of such loan by such Partner plus (ii) 1/10 of 1% for every $5,000 (pro rated for any portion thereof) then being loaned by such Partner in lieu of the amount required to be loaned by DW; and (z) the Partnership Interest of DW shall then automatically become 100% minus the aggregate of the Partnership Interests (adjusted as aforesaid) of the other Partners. In the event that any Partner (other than DW) fails to make any Shortfall Loan pursuant to this Section 3.02 (and no other Partner shall have made such Mandatory Shortfall Loan on his or its behalf), in whole or in part, within the time specified in this Section 3.02 for such Shortfall Loan, DW may send an additional notice to such Partner (with a copy to the other General Partners) setting forth such fact and the amount unpaid, and such Partner shall have a further period of 10 days to make the full amount of such Shortfall Loan. If at the end of such 10-day period such other Partner shall still have failed to make such Shortfall Loan, in whole or in part, DW may make the Shortfall Loan required of such other Partner. If DW makes such Shortfall Loan to the Partnership, the Partnership Interests of DW and such other Partner shall each automatically be modified as of the date of such loan so that (yy) the Partnership Interest of DW shall then be the sum of (A) its Partnership Interest prior to the making of such loan by DW plus (B) 1/10 of 1% for every $5,000 (prorated for any portion thereof) then being loaned by DW in lieu of the amount required to be loaned by such other Partner; and (zz) the Partnership Interest of such other Partner shall then automatically become 100% minus the aggregate of the Partnership Interests (adjusted as aforesaid) of all Partners (other than the Partner whose Partnership Interest is being adjusted pursuant to this clause (zz)). The foregoing rights under this Section 3.02(e) shall be the sole remedy against DW or any other Partner for failing to make any Shortfall Loan. If at any time the adjustments to Partnership Interests pursuant to this Section 3.02(e) would cause a technical termination of the Partnership under Section 708 of the Code, the effectiveness of such adjustments shall, unless otherwise determined by the Partner(s) funding such Shortfall Loan, automatically be delayed until the earliest time at which they could be made without causing such a termination. In the event that the Partnership Interest of DW shall be reduced below 20% for any reason, including as a result of dilution of Partnership Interests pursuant to this Agreement, the other General Partners shall have the right, in their sole discretion, to cause DW's general Partnership Interests in the Partnership to be converted to limited Partnership Interests in accordance with Section 3.03. The provisions of this Section 3.02 shall inure solely to the benefit of the Partners and are not made for and shall not benefit any third party. In no event shall any person other than a Partner have any right to enforce the obligations of the General Partners to make Shortfall Loans as provided in this Section 3.02. (f) As used in this Agreement, the following terms shall have the meanings set forth below: "Adjusted Capital Proceeds" shall mean Capital Proceeds (as defined in Section 5.01) without reduction for any interest or principal payments on Shortfall Loans or for payments of the Investment Management Fee pursuant to Section 2.12. "Adjusted Cash Flow" shall mean Net Cash Flow (as defined in Section 4.01) without reduction for any interest or principal payments on Shortfall Loans or for payments of the Investment Management Fee pursuant to Section 2.12. "Prime Rate" shall mean a rate equal to the sum of the rate publicly announced by Chemical Bank from time to time at its principal office in New York, New York, as its prime rate (or equivalent rate) plus 1% per year (based on the actual number of days elapsed in a 360-day year and with any change in the Prime Rate being effective as of the date announced) , compounded monthly, but in no event greater than the highest rate permitted by applicable law. SECTION 3.03. Conversion of a General Partner. Various provisions of this Agreement provide that, upon the occurrence of specified events ("Conversion Events"), a General Partner(s) of the Partnership (the "Former General Partner(s)") may be converted to a Limited Partner(s) of the Partnership automatically upon the occurrence of a Conversion Event or at the direction of some other Partner (the "Directing Partner"). In the case of such conversions requiring action by the Directing Partner, the Directing Partner may at any time within 60 days of receiving actual written knowledge of a Conversion Event deliver a notice to all Partners directing that such a conversion occur, effective upon the date of said delivery. Upon any conversion of Wilson's general Partnership Interests under this Section, DW shall have the right, in its sole discretion, to terminate the Initial Management Agreement and all other agreements entered into between the Partnership and Wilson or his affiliates. A conversion under this Section shall not affect any liabilities of the Former General Partner(s) arising with respect to the period prior to the date of said conversion and, except as provided in Section 3.02(c), the Former General Partner(s) shall following such conversion (i) only have such liabilities to the Partners and third parties as a Limited Partner would have hereunder and under California law with respect to the period following such conversion, (ii) have no rights thereafter as a General Partner, or as Wilson, Ream or DW, as the case may be, hereunder and (iii) only have such rights as a Limited Partner hereunder. Notwithstanding the foregoing sentence, any Former General Partner(s) shall have the same right to receive Net Cash Flow, Capital Proceeds, and each item of income, gain, loss, deduction or tax credit of the Partnership as it would have had if not so converted. Upon the conversion of the Partnership Interests of Wilson or Ream under this Section (or upon the purchase of the Partnership Interests of either of them by DW), their rights hereunder which are exercisable by them jointly shall automatically be exercisable by whichever of them remains a General Partner hereunder. This Agreement shall be deemed amended to reflect a conversion pursuant to this Section or the dilution of a Partner's Partnership Interest pursuant to Section 3.02(e) without any action required of the Partners and the Partners agree to execute all documents, agreements and instruments and to do all things necessary to give effect to this Section and Section 3.02 (e) and the General Partners (other than DW) hereby grant an irrevocable power of attorney to DW, and DW hereby grants an irrevocable power of attorney to such other General Partners, to execute and deliver all such instruments, documents and agreements on their behalf, and each such power of attorney is coupled with an interest and is irrevocable. ARTICLE IV Distribution of Net Cash Flow SECTION 4.01. Definition of Net Cash Flow. As used herein, the term "Net Cash Flow" for any period shall mean Gross Income for such period minus (i) Operating Expenses, (ii) payments on indebtedness of the Partnership (including Shortfall Loans), (iii) leasing commissions, (iv) capital expenditures, (v) costs of putting any tenant into possession and (vi) payments required pursuant to Section 2.12, in each case for the same period. "Gross Income" in respect of any period shall mean the gross amount of all revenues received by the Partnership, calculated on a cash or accrual basis, whichever is less, for such period, including rent, additional rent, insurance proceeds paid in respect of a business interruption or rental income interruption and distributions to the Partnership from Campus Drive (other than distributions of "Capital Proceeds" as defined in the Campus Drive Partnership Agreement), but shall not include capital contributions, Shortfall Loans or other loans by the Partners to the Partnership or Capital Proceeds. "Operating Expenses" in respect of any period shall mean the total amount of all costs and expenses accrued by the Partnership in connection with the collection of Gross Income and in the maintenance, management, administration, operation, repair and replacement (other than capital improvements) of the Property for such period, including, without limitation, advertising costs; real and personal property taxes, assessments and other charges; all taxes upon the gross rental income derived from the Property; water and sewer charges; insurance premiums; annual charges for licenses, permits and inspections; heat, lights, power, steam, and any other utility charges; janitorial services; maintenance and service agreements on equipment servicing the Property; window cleaning; garbage services; costs of air conditioning; costs of supplies, materials, equipment and tools; the cost of contesting the applicability to the Property or the validity of any statute, ordinance, rule or regulation affecting the Property; attorneys' and accountants' fees incurred in connection with the ordinary course of business; and reasonable reserves for working capital, capital expenditures and contingencies. SECTION 4.02. Distribution of Net Cash Flow. Within 30 days after the end of each fiscal quarter, Net Cash Flow for such fiscal quarter shall be distributed among the Partners pro rata in accordance with their Partnership Interests. ARTICLE V Proceeds of Sale and Refinancing SECTION 5.01. Distribution of Capital Proceeds. (a) As used herein, the term "Capital Proceeds" shall mean any net proceeds (including distributions to the Partnership from Campus Drive of "Capital Proceeds" as defined in the Campus Drive Partnership Agreement) after payment of all Partnership debts (other than accounts payable incurred in the ordinary course of business which are reserved for) then due and payable (including, without limitation, all Shortfall Loans and other borrowings of the Partnership, discount points, sales expenses, legal costs, marketing costs, loan fees, and any other costs associated with the sale, exchange, condemnation, casualty or other disposition of the Property or a part thereof), the establishment of appropriate reserves as Approved by the General Partners and the making of payments required pursuant to Section 2.12 arising from (i) the sale, exchange, or other disposition of the Partnership Assets or any part thereof or underlying interest associated therewith or (ii) the financing or refinancing (but not including any loans made by Partners), condemnation (or transfer in lieu thereof) or casualty of the Partnership Assets or any part thereof or underlying interest associated therewith (to the extent such proceeds of casualty or condemnation are not used for repair or restoration and excluding insurance proceeds paid in respect of a business interruption or rental income interruption) (a "Capital Transaction"). (b) Capital Proceeds shall be distributed among the Partners pro rata in accordance with their Partnership Interests; provided, however, that Capital Proceeds from a disposition of all or substantially all the Partnership Assets and any Capital Proceeds distributed upon liquidation shall be distributed in accordance with the Partners' capital accounts as adjusted pursuant to Article VI for all Partnership operations up to and including such liquidation. ARTICLE VI Profits and Losses SECTION 6.01. Capital Accounts. There shall be established for each Partner on the books of the Partnership a capital account. The capital account of each Partner on the Closing Date shall be as set forth in Exhibit C. Each Partner's capital account on the Closing Date shall thereafter be credited with the amount of all cash contributions by a Partner to the Partnership made after the Closing Date. It shall be increased by the amount of any income or gain allocated to a Partner pursuant to Sections 6.02 and 6.03 and by the Partner's share of any income of the Partnership exempt from tax, and decreased by (i) the amount of all losses allocated to a Partner pursuant to Sections 6.02 and 6.04 and by the Partner's share of any expenditures of the Partnership not deductible in computing its taxable income and not properly chargeable to the capital account and (ii) all amounts distributed to a Partner (and not returned by such Partner) pursuant to Sections 4.02 and 5.01. The making, repayment and payment of interest on loans by Partners to the Partnership (including Shortfall Loans) shall not affect capital accounts. Unless such income or expenditures is directly traceable to any Partner, each Partner's share of income of the Partnership exempt from tax and of any expenditures of the Partnership not deductible in computing its taxable income and not properly chargeable to capital account for any fiscal year shall equal such Partner's share of the Partnership's net profits or losses (as the case may be) for such fiscal year. SECTION 6.02. Net Profits and Losses. Subject to Sections 6.03 and 6.04, the net profits and losses of the Partnership and each item of income, gain, loss, deduction or credit entering into the computation thereof shall be allocated among the Partners and credited to the capital accounts of the Partners and credited to the capital accounts of the Partners in accordance with their respective Partnership Interests; provided, however, that until DW's capital account equals zero all net losses of the Partnership shall be allocated 100% to DW. Notwithstanding anything else contained herein, any depreciation or other tax benefits attributable to the Step-Up shall be allocated solely to DW. SECTION 6.03. Capital Profits. The net profits of the Partnership arising from a Capital Transaction (whether of the Partnership or campus Drive) shall be allocated among, and credited to the capital accounts of, the Partners in the following order of priority: (a) first, an amount of net profits equal to the aggregate negative capital accounts (as reflected on the books of the Partnership immediately prior to such Capital Transaction after allocating all net profits and losses and charging for prior distributions) of all Partners who have such negative capital accounts shall be allocated among such Partners in proportion to their respective negative capital accounts; (b) second, an amount of any remaining net profits equal to the excess of (x) the Capital Proceeds to be distributed to the Partners with respect to such Capital Transaction pursuant to Section 5.01 (without regard to the proviso set forth in Section 5.01(b)), over (y) the aggregate capital accounts (as adjusted to reflect the allocation of net profits pursuant to subparagraph (a) above) of all Partners shall be allocated among all Partners to whom such Capital Proceeds are to be distributed in proportion to their respective shares of such excess of (x) over (y) in order to bring the capital account balance of each Partner up to an amount equal to the amount of Capital Proceeds to be distributed to such Partner pursuant to Section 5.01 (without regard to the proviso set forth in Section 5.01(b)); and (c) any remaining net profits shall be allocated in the same proportions that an amount of Capital Proceeds equal to such remaining net profits would be distributed pursuant to Section 5.01 were such Capital Proceeds to be distributed in addition to the Capital Proceeds actually distributed to the Partners pursuant to Section 5.01 (without regard to the proviso set forth in Section 5.01(b)). SECTION 6.04. Capital Losses. The net losses of the Partnership arising from a Capital Transaction (whether of the Partnership or Campus Drive) shall be allocated among and charged to the capital accounts of the Partners in the following order of priority: (a) first, an amount of loss equal to the excess of (x) the aggregate positive capital accounts (as reflected on the books of the Partnership prior to such Capital Transaction) of all Partners who have positive capital accounts over (y) the aggregate Capital Proceeds to be distributed to such Partners with respect to such Capital Transaction pursuant to Section 5.01 (without regard to the proviso set forth in Section 5.01(b)) shall be allocated among such Partners in proportion to their respective shares pursuant to Section 5.01 (without regard to the proviso set forth in Section 5.01(b)) of such excess of (x) over (y); and (b) any remaining loss shall be allocated among Partners pro rata in accordance with their Partnership Interests. SECTION 6.05. Distribution in Kind. In case any of the assets of the Partnership are distributed in kind, the capital account of the Partners receiving such assets shall be adjusted as if the Partnership had sold the distributed assets for their fair market value on the date of distribution and the resulting gain or loss had been allocated to the Partners pursuant to Section 6.03 or 6.04, as the case may be. SECTION 6.06. Depreciation Recapture. Any gain recognized upon a Capital Transaction that is characterized as ordinary income pursuant to Sections 1245 or 1250 of the Code and any recapture of investment tax credit shall, to the extent possible, without increasing the total gain allocated to a Partner on such Capital Transaction pursuant to Section 6.03, be allocated to the Partners in the same proportions that the Partners shared the depreciation deductions giving rise to such ordinary income or such investment tax credit. SECTION 6.07. Definition of Net Profits and Losses. The "net profits" and "net losses" of the Partnership shall be the net profits and losses of the Partnership for Federal income tax purposes as determined by the independent public accountants referred to in Section 2.07(c) and Approved by the General Partners. ARTICLE VII Transfers; Termination SECTION 7.01. Transfer of General Partner's Interests. (a) A General Partner may sell, assign, mortgage, pledge, grant a security interest in or otherwise transfer its Partnership Interest, whether voluntarily or by operation of law, only as provided in this Agreement. Any unpermitted sale, assignment, mortgage, pledge or transfer of, or grant of a security interest in, the Partnership Interest of a General Partner shall be null and void. (b) Except as provided in Sections 2.11, 7.03(d) and (f) and 7.07, neither a proposed additional General Partner in the Partnership nor a proposed successor to a withdrawing, retiring or removed General Partner shall be admitted as a General Partner unless such person is accepted as a General Partner by all the other General Partners. Such proposed additional or successor General Partner shall be admitted as a General Partner immediately after such acceptance is given and upon such person's assumption, in writing, of all the rights, powers and obligations of a General Partner under this Agreement. (c) Wilson agrees that he (i) shall, at all times while William Wilson & Associates is the Manager, be active in the management and decision-making process of such corporation and own at least 51% of the stock thereof, (ii) shall own (individually or together with his Permitted Transferees, as defined in Section 9.13), at all times, Partnership Interests (general and/or limited) aggregating at least 10% and (iii) shall not sell, assign, mortgage, pledge, grant a security interest in or otherwise transfer any portion of such Partnership Interests in the Partnership without the prior written approval of DW or as otherwise permitted by this Agreement; provided, however, that Wilson may assign portions of his Partnership Interest (in the form of limited Partnership Interests) to (x) his Permitted Transferees (provided that such transfer is subject to a limitation that no further assignment, sale, mortgage, pledge or other transfer of such interest may be made except to Wilson or a Permitted Transferee of Wilson) and (y) to third parties so long as after giving effect to such assignment Wilson (individually or together with his Permitted Transferees) shall retain Partnership Interests aggregating at least 10%. If Wilson fails, at any time, to satisfy any of the requirements set forth in this Section 7.01(c) for any reason, including as a result of any dilution pursuant to the terms of this Agreement or as a result of the decision of any court or other governmental body, DW shall have the right (which shall be its sole remedy for a breach of these requirements), exercisable in its sole discretion within 90 days after DW has knowledge of the event giving rise to such right, to cause all of Wilson's Partnership Interests to be converted to limited Partnership Interests pursuant to Section 3.03 and/or to terminate the Initial Management Agreement and/or to terminate all other agreements entered into between the Partnership and Wilson or his affiliates. (d) Ream agrees that he (i) shall, at all times while the Ream Company is the Manager, if any, be active in the management and decision-making process of such corporation and own at least 51% of the stock thereof, (ii) shall own (individually or together with his Permitted Transferees), at all times, Partnership Interests (general and/or limited) aggregating at least 10% and (iii) shall not sell, assign, mortgage, pledge, grant a security interest in or otherwise transfer any portion of such Partnership Interests in the Partnership without the prior written approval of DW or as otherwise permitted by this Agreement; provided, however, that Ream may assign portions of his Partnership Interest (in the form of limited Partnership Interests) to (x) his Permitted Transferees (provided that such transfer is subject to a limitation that no further assignment, sale, mortgage, pledge or other transfer of such interest may be made except to Ream or a Permitted Transferee of Ream) any (y) to third parties so long as after giving effect to such assignment Ream (individually or together with his Permitted Transferees) shall retain Partnership Interests aggregating at least 10%. If Ream fails, at any time, to satisfy any of the requirements set forth in this Section 7.01(d) for any reason, including as a result of any dilution pursuant to the terms of this Agreement or as a result of the decision of any court or other governmental body, DW shall have the right (which shall be its sole remedy for a breach of these requirements), exercisable in its sole discretion within 90 days after DW has knowledge of the event giving rise to such right, to cause all of Ream's Partnership Interests to be converted to limited Partnership Interests pursuant to Section 3.03 and/or to terminate all agreements (including any management agreement) entered into between the Partnership and Ream or his affiliates. (e) Denison agrees that if he shall become a General Partner of the Partnership pursuant to Section 2.11, he (i) shall own (individually or together with his Permitted Transferees), at all times thereafter, Partnership Interests (general and/or limited) aggregating at least 10% and (ii) shall not thereafter sell, assign, mortgage, pledge, grant a security interest in or otherwise transfer any portion of such Partnership Interests in the Partnership without the prior written approval of DW or as otherwise permitted by this Agreement; provided, however, that Denison may assign portions of his Partnership Interest (in the form of limited Partnership Interests) to his Permitted Transferees (provided that such transfer is subject to a limitation that no further assignment, sale, mortgage, pledge or other transfer of such interest may be made except to Denison or a Permitted Transferee of Denison). If Denison fails, at any time, to satisfy any of the requirements set forth in this Section 7.01(e) for any reason, including as a result of any dilution pursuant to the terms of this Agreement or as a result of the decision of any court or other governmental body, DW shall have the right (which shall be its sole remedy for a breach of these requirements), exercisable in its sole discretion within 90 days after DW has knowledge of the event giving rise to such right, to cause all of Denison's Partnership Interests to be converted to limited Partnership Interests pursuant to Section 3.03. SECTION 7.02. Options on Bankruptcy, Etc. (a) If DW shall be bankrupt, then the other General Partners (at their option) shall have the right, in addition to any other rights or claims for damages or specific performance, to purchase the entire Partnership Interest of DW at the fair market value thereof (as determined pursuant to Section 7.09) and/or to cause DW's entire Partnership Interest to be converted to a limited Partnership Interest pursuant to Section 3.03. Any purchase of the Partnership Interests of DW hereunder shall be consummated within 90 days after the final determination of the purchase price therefor and the purchase price shall be paid by certified check or by wire transfer of immediately available funds to an account to be designated by DW. (b) If any General Partner (other than DW) shall be bankrupt (such General Partner being hereinafter called the "Bankrupt Partner"), then DW (at its option) shall have the right, in addition to any other rights or claims for damages or specific performance, to purchase the entire Partnership Interest of the Bankrupt Partner at the fair market value thereof (as determined pursuant to Section 7.09) and/or to cause such Bankrupt Partner's entire Partnership Interest to be converted to a limited Partnership Interest pursuant to Section 3.03. Any purchase of the Partnership Interests of the Bankrupt Partner hereunder shall be consummated within 90 days after the final determination of the purchase price therefor and the purchase price shall be paid by certified check or by wire transfer of immediately available funds to an account to be designated by the Bankrupt Partner. (c) If any General Partner shall be dead, insane, incompetent, incapacitated, dissolved, liquidated or its existence shall be otherwise terminated, such General Partner's entire Partnership Interest shall automatically, without further act by any Partner, become converted to a limited Partnership Interest pursuant to Section 3.03 as of the date of the occurrence of such event. SECTION 7.03. Right of First Offer. (a) At any time after the eighth anniversary of the Closing Date if there shall be more than one General Partner the Partners (other than DW) as a group (the "Other Partners") shall have the right to sell all (but not part) of their Partnership Interests to any third party and DW shall have the right to sell all (but not part) of its Partnership interests to any third party; provided, however, that DW shall first be obligated to offer to sell all its Partnership Interests to the Other Partners (the "Other General Partners"), and the Other Partners shall first be obligated to offer to sell all their Partnership Interests to DW, in each case pursuant to the provisions of this Section 7.03; provided, further, that upon the sale of any General Partnership Interests by any of the Other General Partners pursuant to this Section 7.03 (other than to DW) such general Partnership Interests shall automatically be deemed converted to limited Partnership Interests pursuant to Section 3.03. In order to initiate its right to sell its Partnership Interests to a third party, the Other Partners or DW, as the case may be (hereinafter called "Seller") shall deliver a notification to the General Partner or General Partners, as the case may be, entitled pursuant to the preceding sentence to be given a right of offer (the "First Offer Notification") describing a proposed offer to sell such Partnership Interests for a price specified in such First Offer Notification (the "First Offer Sale Price"). The First Offer Notification shall (i) advise that Seller desires to sell all its Partnership Interests to a third party (which third party need not be named or then known), (ii) state the proposed First Offer Sale Price, (iii) set forth the other material terms of the proposed offer, which must include an earnest money deposit equal to at least 5% of the cash portion of the First Offer Sale Price (the "First Offer Deposit") and a statement of who will pay for transfer taxes and other closing costs (the "Other First Offer Sale Terms"), and (iv) give DW or the Other General Partners, as the case may be, the option to purchase such Partnership Interests at the First Offer Sale Price and upon the Other First Offer Sale Terms or to consent to the sale of the Partnership Assets (which in the case of the Campus Drive Interest may be through the sale of all such Interest or the underlying property, as Seller may elect) at a price not less than a price directly proportional to the First Offer Sale Price (e.g., if the Selling General Partner's Partnership Interest is 50%, then all Partnership Assets may be sold at a price equal to 200% of the First Offer Sale Price) and consistent with the Other First Offer Sale Terms. (b) Within 30 days after the giving of the First Offer Notification, DW or the Other General Partners, as the case may be, shall give notice to the Seller (which in the case of the Other Partners as a group as Seller may be given to any of the Other General Partners as representative of the Other Partners) of either: (i) Election to purchase such Partnership Interest, in which event such notice shall be sent with evidence that the First Offer Deposit has been paid to an escrow holder approved by the Seller, to be distributed as provided herein, together with appropriate acknowledgment under California law of the First Offer Deposit as liquidated damages in the event of a default; or (ii) Election to consent to the sale of all the Partnership Assets, in which event the Seller shall use all reasonable efforts to arrange for such sale; or (iii) Election not to purchase such Partnership Interest or to consent to the sale of all the Partnership Assets, in which event the Seller shall have the right to offer to sell and to sell such Partnership Interests to any third party upon terms and conditions no less favorable to the Seller than the First Offer Sale Price and the Other First Offer Sale Terms; provided such a sale is the subject of a binding contract within 12 months of, and closes within 18 months of, the giving of the First Offer Notification. If DW or the Other General Partners, as the case may be, do not give notice to the Seller in answer to the First Offer Notification within the 30-day period as provided herein, it or they shall be deemed to have given the answer set forth in clause (iii) above. (c) The closing of any purchase and sale of Partnership Interests pursuant to Section 7.03 (b) (i) shall take place not later than 180 days after the Seller gives the First Offer Notification. (d) At the closing of the sale of Partnership Interests pursuant to Section 7.03(b)(i) or (iii), the Partnership and the Partners shall execute and deliver such instruments as shall be appropriate to transfer such Partnership Interests and, if necessary, in the case a sale by the Other Partners to admit such purchaser as a Limited Partner (and in the case of a sale by DW, to admit such purchaser as a General Partner), such purchaser shall simultaneously pay to the Seller the cash portion of the First Offer Sale Price (less the amount of the First Offer Deposit already paid, which shall be released from escrow to the Seller) and the Partners and the purchaser shall perform the Other First Offer Sale Terms to be performed by them. (e) In the event that DW or the Other General Partners, as the case may be, default in any obligation to purchase a Partnership Interest pursuant to this Section 7.03, then the Seller shall be paid the First Offer Deposit as liquidated damages and may, at any time for a period of 18 months after such default, sell all its Partnership Interests to any person at such price and on such terms as Seller may determine. (f) At any time after the eighth anniversary of the Closing Date if there shall be only one General Partner such General Partner shall have the right to sell all (but not part) of its Partnership Interests (general and limited) to any third party, subject to the limitations of this Section 7.03(f). In order to initiate its right to sell all its Partnership Interests to a third party, such General Partner shall deliver to the Limited Partners a notification (the "Sole GP Notification") which shall (i) advise that such General Partner desires to sell all its Partnership Interests to a third party (which third party and the terms of such sale need not be specified or then known) and (ii) give the Limited Partners the option to consent to the sale of all the Partnership Assets (which in the case of the Campus Drive Interest may be through the sale of such Interest or the underlying property, as such General Partner may elect) on such terms as such General Partner, in good faith, deems to be fair and reasonable. Within 30 days after the giving of the Sole GP Notification, a majority in interest of the Limited Partners (based upon Partnership Interests) shall give notice to such General Partner of either: (i) Election to consent to the sale of all the Partnership Assets, in which event such General Partner shall use all reasonable efforts to arrange for such sale; or (ii) Election not to consent to the sale of all the Partnership Assets, in which event such General Partner shall have the right at any time thereafter to offer to sell and to sell all its Partnership Interests to any third party upon such terms and conditions as it in its sole discretion deems appropriate; provided such a sale closes within 18 months of the giving of the Sole GP Notification. If a majority in interest of the Limited Partners (based upon Partnership Interests) does not give notice to the General Partner in answer to the Sole GP Notification within the 30-day period as provided herein, they shall be deemed to have given the answer set forth in clause (ii) above. At the closing of any purchase and sale of Partnership Interests pursuant to this Section 7.03(f), the Partnership and the Partners shall execute and deliver such instruments as shall be appropriate to transfer such Partnership Interests and admit such purchaser as the General Partner. SECTION 7.04. Transfer of Limited Partner's Interests. (a) The bankruptcy, dissolution, death, insanity, incompetency or legal incapacity of a Limited Partner shall not dissolve or terminate the Partnership. Upon the occurrence of any such event, the legal representative of such Limited Partner shall be deemed to be the assignee of such Limited Partner's Partnership Interest and may become a substituted Limited Partner upon the terms and conditions set forth in Section 7.05. (b) A Limited Partner may sell, assign, mortgage, pledge, grant a security interest in or otherwise transfer its Partnership Interest, whether voluntarily or by operation of law, only as provided in this Agreement. Any unpermitted sale, assignment, mortgage, pledge or transfer of, or grant of a security interest in, the Partnership Interest of a Limited Partner shall be null and void. Except as otherwise provided in this Agreement, a Limited Partner may assign all or any portion of its Partnership Interest to a Permitted Transferee of such Limited Partner. A Limited Partner may assign all (but not part) of its Partnership Interest to a third party if such assignment is Approved by the General Partners, such approval not to be unreasonably withheld. Any other assignment by a Limited Partner of its Partnership Interest may occur only if Approved by the General Partners, which approval may be arbitrarily withheld. Upon any approved assignment pursuant to this Section 7.04(b), the assignee of such interest shall become a substituted Limited Partner only upon the terms set forth in Section 7.05. SECTION 7.05. Substituted Limited Partners. (a) If Approved by the General Partners (which approval may be granted or denied in their sole discretion), any person who acquires the Partnership Interest, or any part thereof, of a Partner may be admitted as a substituted Limited Partner. (b) The admission of an assignee as a substituted Limited Partner shall be conditioned upon the assignee's written acceptance and adoption of all the terms and provisions of this Agreement. Any such assignee not admitted as a substituted Limited Partner shall not have any rights of a Limited Partner but shall have only the right to receive a ratable portion of the Net Cash Flow, Capital Proceeds and net profits and losses relating to the Partnership Interest or part thereof assigned. (c) Any person who acquires all or any part of a Partner's Partnership Interest shall, whether or not admitted to the Partnership as a Partner, acquire the rights to the ratable portion of the Net Cash Flow, Capital Proceeds, and net profits and losses relating to such Partnership Interest or part thereof assigned. SECTION 7.06. Restrictions on Transfer. (a) In addition to any other limitations contained in this Agreement, no Partner shall assign, sell, mortgage, pledge, grant a security interest in or otherwise transfer, whether voluntarily or by operation of law, its Partnership Interest or its share of the net profits and losses, Net Cash Flow or Capital Proceeds (i) for a period of 18 months following the Closing Date, (ii) unless such Partner complies with the applicable provisions of Federal and state securities laws or (iii) at any time prior to the eighth anniversary of the Closing Date if such action would cause a technical termination of the Partnership under Section 708 of the Code. (b) Notwithstanding anything contained in this Agreement to the contrary, no Partner shall be permitted to assign, sell, mortgage, pledge, grant a security interest in or otherwise transfer its Partnership Interest or its share of the net profits and losses, Net Cash Flow or Capital Proceeds after a General Partner has given a First Offer Notification or a Sole GP Notification if the effect of such action would be to prevent such General Partner from selling its Partnership Interest pursuant to Section 7.03 as a result of the restrictions contained in Section 7.06(a). The foregoing restriction shall remain in effect until such General Partner has so sold its Partnership Interest pursuant to Section 7.03 or until the right to so sell its Partnership Interest after giving any such notice shall expire, whichever shall occur first. SECTION 7.07. Syndication. Notwithstanding anything to the contrary contained in this Agreement, POP/DW Associates, a California Limited Partnership ("POP/DW") , a general partner of DW, shall have the right (in its sole discretion) at any time, to implement a plan of syndication (the "Plan of Syndication") of the limited partnership interests in POP/DW and/or to assign all or any portion of its partnership interests in DW to Dean Witter Realty Growth Properties, L.P. ("Growth Properties") (and, in the case of an assignment of all its partnership interests in DW to Growth Properties, Growth Properties may become a General Partner hereunder and assume all the rights and obligations of DW hereunder provided that Growth Properties agrees in writing to be bound hereby). Additionally, the partnership interests of DW (and of its partners) shall be subject only to those transfer restrictions, if any, which DW (or its partners), in their sole discretion, shall elect to impose; provided, however, that at all times (except after a sale by DW of its Partnership Interests pursuant to Section 7.03) an affiliate of Dean Witter Reynolds Inc. or a person controlled by John J. Preotle, Jr., William B. Smith, E. Davisson Hardman, Jr., Warren B. Lane and Peter J. Carr, or any of them, or of which any of them shall be general partners, shall be or remain a general partner of DW. All Partners agree to cooperate fully with DW and POP/DW in connection with the implementation of the Plan of Syndication but only to the extent that such cooperation does not make them an "issuer" under the Securities Act of 1933, as amended (the "Securities Act"), or does not otherwise create additional liability for them under the Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange Act"). POP/DW agrees to permit the other General Partners to review and approve all offering materials used in connection with the Plan of Syndication, such approval not to be unreasonably withheld and to be deemed given if written objection to such materials is not received by POP/DW within 15 days after receipt of such materials by the other General Partners. All out-of-pocket expenses incurred by the General Partners in connection with such review (up to a maximum of $5,000) shall be reimbursed by the Partnership. POP/DW agrees that the Plan of Syndication will be conducted in accordance with all applicable Federal and state securities laws. POP/DW further agrees to indemnify and hold harmless the Partners from and against any and all losses, claims, damages, liabilities, costs and expenses (including reasonable attorney's fees) to which they may become subject under the Securities Act, Exchange Act, any other Federal or state law, statute, or regulation, at common law or otherwise, arising out of or based on (i) any untrue statement or alleged untrue statement of a material fact made in connection with any sale of limited partnership interest in POP/DW through the Plan of Syndication, (ii) the omission or alleged omission to state a material fact required to be stated or necessary to make the statements made in connection with any such sale not misleading, (iii) the failure to register or qualify such sales under the Securities Act or under state securities laws or (iv) any violation of any rule or regulation promulgated under the Securities Act, the Exchange Act or any Federal or state statute or regulation applicable to any such sale. Notwithstanding anything to the contrary contained in this Agreement, this indemnity shall not apply to any losses, claims, damages or liabilities arising out of or based upon any untrue statement of a material fact or omission of any material fact made in reliance upon and in conformity with (i) representations and warranties of the Partnership in the Purchase Agreement or of Campus Drive in the Campus Drive Purchase Agreement or (ii) information (including financial statements) furnished in writing by any General Partner (other than DW) expressly for use in connection with any such sale. SECTION 7.08. Termination. (a) The Partnership shall terminate upon the first to occur of any of the following events or dates: (i) by mutual agreement of the General Partners; (ii) December 31, 2025; (iii) the sale or other disposition of all the assets of the Partnership and receipt of consideration therefor; or (iv) in the event of the bankruptcy, death, insanity, incompetence, liquidation, termination or legal incapacity of a General Partner (except in any case in which a General Partner which is a partnership shall be reconstituted by its remaining partners following any liquidation or dissolution caused by the legal incapacity of one or more of its partners), unless any of the remaining General Partners elect within 60 days of the termination required under this clause (iv) to continue the business of the Partnership for the balance of the term specified in Section 1.02. (b) Contemporaneously with any disposition of the Partnership Assets pursuant to any provision of this Article VII or upon termination of the Partnership under Section 7.08(a), the Partnership shall, to that extent (but only to the extent) of the assets of the Partnership, discharge the obligations (including establishment of necessary reserves) and pay the indebtedness of the Partnership (including Shortfall Loans) and distribute the balance, if any, of the assets of the Partnership to the Partners in the order of priority set forth in Section 5.01. After the foregoing has been accomplished, the Partnership shall be deemed liquidated and this Agreement shall terminate and no Partner shall have any further rights or obligations hereunder. The liquidation of the Partnership and the termination of the business and affairs of the Partnership shall be conducted by the General Partners jointly. During such period, the business and affairs of the Partnership shall be conducted so as to maintain and preserve the assets of the Partnership in a manner consistent with the liquidation of the Partnership. SECTION 7.09. Appraisal. In the event that it becomes necessary, under the terms of this Agreement, to determine the fair market value of a Partnership Interest, such value shall be determined by appraisal, made by a board of three reputable real estate appraisers, each of whom shall be a member of the American Institute of Real Estate Appraisers and shall have no disqualifying interest, as that term is hereinafter defined. One appraiser shall be appointed by the person or persons holding such Partnership Interest and a second appraiser shall be appointed by the Partner desiring to purchase the same. A third appraiser shall be appointed by the first two appraisers. If the first two appraisers are unable to agree on a third appraiser within thirty (30) days after the appointment of the second of them to be appointed, or if either side refuses, is unable to or neglects to appoint an appraiser as herein provided, then such third appraiser or such other appraiser whose appointment was not made as aforesaid shall be appointed by the then President of the American Institute of Real Estate Appraisers or such successor body hereafter constituted exercising similar functions, unless such President shall have any direct or indirect financial or other business interest in any of the parties having a power to appoint an appraiser, jointly or alone, other than financial holdings of not more than one percent (1%) of the value of any class of securities issued by any such party or by any corporation or partnership affiliated therewith (hereinafter referred to as a "disqualifying interest"), in which case the third appraiser or such other appraiser whose appointment was not made as aforesaid shall be appointed by the highest ranking officer of the American Institute of Real Estate Appraisers or such successor body who shall not have a disqualifying interest. Each appraiser shall within 60 days after the appointment of the third appraiser make his valuation on the basis of the value of an interest irrespective of the proportion of ownership or control of the Partnership such interest represents or whether it is a general or limited Partnership Interest. If the determinations of any two or all three of the appraisers shall be identical in amount, such amount shall be deemed to be the fair market value of the interest in question. If the determinations of all three appraisers shall be different in amount the highest value shall be averaged with the middle value (the average being hereinafter referred to as Sum A), the lowest appraised value shall be averaged with the middle value (the average being hereinafter referred to as Sum B), and the fair market value of the interest in question shall be determined as follows: (a) if neither Sum A nor Sum B differs from the middle appraised value by more than five percent (5%) of such middle appraised value, then the fair market value of the interest in question shall be deemed to be the average of the three appraisals; (b) if either Sum A or Sum B (but not both of the sums) differs from the middle appraised value by more than five percent (5%) of such middle appraised value, then the fair market value of the interest in question shall be deemed to be the average of the middle appraised value and the appraised value closest in amount to the middle value; and (c) if both Sum A and Sum B differ from the middle appraised value by more than five percent (5%) of such middle appraised value, the appraisal shall have no force and effect, and the fair market value of the interest in question shall be similarly determined by a panel of three qualified real estate appraisers who shall be members of the American Institute of Real Estate Appraisers and who shall have no disqualifying interest. Such panel shall be appointed by the then President of the American Institute of Real Estate Appraisers or such successor body hereafter constituted exercising similar functions, unless such President shall have a disqualifying interest, in which case the panel shall be appointed by the highest ranking officer of the American Institute of Real Estate Appraisers or such successor body hereafter constituted exercising similar functions who shall not have a disqualifying interest. The costs of this appraisal procedure shall be borne equally by the buying and selling Partner. ARTICLE VIII Liabilities SECTION 8.01. Liabilities. The liabilities of the Partnership or of the Partners and the partners in the Partners as a part of or arising out of any of the activities of the Partnership shall be covered by appropriate policies of public liability insurance to be purchased by the Partnership. (It being the intention of the parties that all potential liabilities be covered by insurance consistent with the Insurance Guidelines from time to time Approved by the General Partners.) In the event that any liability arising out of any activities of the Partnership shall not be adequately covered by such public liability insurance, the amount of liability not so insured shall, subject to Section 8.02, first be satisfied out of the assets of the Partnership, and if such assets are not sufficient fully to satisfy the amount of the liability not so insured each Partner which shall have been a General Partner during such period shall be responsible for the balance of any amount due in proportion to the amount its Partnership Interest bears to the aggregate of the Partnership Interests of all such General Partners; provided, however, that for purposes of this Section 8.01 the aggregate Partnership Interests of the General Partners (other than DW) shall be equal to the aggregate Partnership Interests of all Partners (other than DW). In the event a General Partner shall have paid an amount in excess of its share of any such liability, the other of such General Partners and the Limited Partners to the extent of their interests in the Partnership shall promptly reimburse such General Partner to the extent of such excess. Nothing in this Section 8.01 shall be deemed to affect the obligations of the Partners to make capital contributions or otherwise contribute funds to the Partnership pursuant to this Agreement. SECTION 8.02. Indemnification; No Recourse. (a) Each Partner shall indemnify each other Partner and hold harmless each such other Partner against and from all claims, demands, actions, damages, losses, liabilities, costs and expenses which shall or may arise by virtue of anything done or omitted to be done by the former (or by any of its partners, agents, employees or other representatives) which is outside the scope, or in breach of the terms, of this Agreement or which constitutes gross negligence or wilful misconduct. Any Partner having any claim, demand, action or right of action against any other Partner and seeking indemnification or any other remedies therefor whether under this Section or Section 8.01 shall look only to the interest of the indemnifying Partner in the Partnership, and no Partner shall seek satisfaction of such indemnity from any other assets of any other Partner or any partner of any other Partner; provided, however, that the foregoing limitations shall not be applicable with respect to (i) any claim for indemnity based upon gross negligence or wilful misconduct or (ii) any amount paid to third persons by any General Partner in excess of its share of any liability and for which it seeks reimbursement from any other General Partner pursuant to the second to last sentence of Section 8.01 or (iii) any claim for indemnity arising out of the covenants to make capital contributions pursuant to Section 3.01. In no event shall any Partner seek satisfaction of any claim for indemnity against a limited partner of any other Partner, except to the extent that such limited partner shall have guaranteed any obligations of such other Partner pursuant to a separate agreement and then only in accordance with such separate agreement. Nothing contained in this Section 8.02 shall be construed to limit or restrict the rights of DW under the Purchase Agreement (including, without limitation, under Sections 10 and 11 thereof). (b) Any Partner claiming an indemnity under this Agreement shall give notice of the existence of the claim as soon as practicable to the indemnifying party (provided that failure to give such notice shall not relieve the indemnifying party of its liabilities except to the extent it is prejudiced thereby), and the indemnifying party shall control the defense or settlement of any third party claim, demand or action which it is indemnifying in its entirety. (c) Notwithstanding anything contained in sections 8.01 and 8.02 to the contrary, in computing Net Cash Flow and Capital Proceeds any liabilities which pursuant to Section 4(D) of the Purchase Agreement shall not be the responsibility of DW (and which have not been previously paid to DW or to creditors of the Partnership for the account of DW by the other Partners), and any other unpaid claim of DW for indemnification under the Purchase Agreement which shall have been established by arbitration or court order or consented to, shall be charged to the Partners (other than DW) in proportion to their Partnership Interests. ARTICLE IX General SECTION 9.01. Other Businesses. Each Partner shall have the right to engage in other businesses and ventures of every nature, including, without limitation, the ownership, management, improvement and operation of other real estate, including real estate located in the vicinity of and/or competitive with the Property, provided that each of Wilson and Ream will act in good faith in conducting business for and with the Partnership and, in determining good faith, transactions of each of them will be considered as a whole on an ongoing basis (as opposed to an individual basis), and provided further, that Wilson and Ream and their affiliates shall not divulge any nonpublic information with respect to the Partnership or the Property to any third persons for the benefit of, or in connection with, any other project or venture (other than Campus Drive). SECTION 9.02. Notices. All notices, demands or other communications hereunder shall be in writing and shall be deemed to have been given on (i) the date of delivery, if delivered by hand, (ii) upon confirmation of receipt if sent by independent courier service guaranteeing one-day delivery, or (iii) the seventh day after mailing, if mailed first-class, postage prepaid, United States registered or certified mail; in each case, to the parties at the addresses set forth below or at such other addresses as such parties may designate by notice to the other parties: (i) if to DW, in care of: Dean Witter Realty Inc. 130 Liberty Street New York, New York 10005 Attention of Ronald DiPietro, with a copy to Cravath, Swaine & Moore One Chase Manhattan Plaza New York, N.Y. 10005 Attention of William P. Dickey, Esq. (ii) if to Wilson, at: William Wilson & Associates 2929 Campus Drive Suite 450 San Mateo, California 94403 with a copy to Farella, Braun & Martel 235 Montgomery Street San Francisco, California Attention of Lee Van Boven, Esq. (iii) if to Ream, at: Borel Estate Company 2988 Campus Drive Suite 300 San Mateo, California 94403 (iv) if to the Limited Partners, at their addresses set forth in Exhibit A. SECTION 9.03. Applicable Law. This Agreement and the obligations of the parties hereunder shall be interpreted, construed and enforced in accordance with the laws of the State of California. SECTION 9.04. Brokers. [Intentionally Omitted.] SECTION 9.05. Entire Agreement. This Agreement contains the entire agreement among the parties hereto relative to the continuation and operations of the Partnership. SECTION 9.06. Waiver. No consent or waiver, express or implied, by any party hereto of any breach or default by any other party hereto in the performance of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such party of the same or any other obligations of such party hereunder. Failure on the part of any party to complain of any act or failure to act of another party or to declare another party in default, irrespective of how long such failure continues, shall not constitute a waiver by such party of its rights hereunder. SECTION 9.07. Severability. If any provision of this Agreement or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provisions to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law. SECTION 9.08. Relationship of the Partners. The relationship between the Partners shall be limited to the performance of the transactions contemplated by this Agreement and in accordance with the terms of this Agreement. The relationship set forth in this Agreement shall be construed and deemed to be a limited partnership under the laws of the State of California created for the sole purpose of carrying out the transactions contemplated hereby. Nothing herein shall be construed to authorize any Partner to act as general agent for any other. Nothing in this Agreement shall be deemed to create any right in any creditor or other person not a party hereto (other than the successors and assigns of a party hereto and, to the extent expressly provided herein, the general partners of DW) and this instrument shall not be construed in any respect to be a contract in whole or in part for the benefit of any other party except as aforesaid. Except as otherwise provided herein, all provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by and against the respective heirs, executors, administrators, legal representatives, successors and permitted assigns of the Partners. Any permitted assignee of DW's entire Partnership Interest shall succeed to all the rights and obligations of DW hereunder provided such assignee agrees to be bound hereby, and upon such assignment and assumption DW shall be released from its obligations hereunder. SECTION 9.09. Further Assurances. The parties hereto shall execute and deliver such further instruments and do such further acts and things as may be required to carry out the intent and purposes of this Agreement. SECTION 9.10. Counterparts. This Agreement may be executed in counterparts and as so executed shall constitute one agreement. SECTION 9.11. Captions. Captions contained in this Agreement are inserted only as a matter of convenience and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provision hereof. SECTION 9.12. Waiver of Partition. Each Partner hereby irrevocably waives any right to partition the Partnership Assets. SECTION 9.13. Certain Definitions. (a) Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice versa. Terms such as "herein," "hereby," "hereunder" and "hereof," unless the context otherwise requires, refer to this Agreement as a whole and not to the Articles, Sections or other subdivisions where the terms appear. References herein to any agreement or other instrument shall, unless the context otherwise requires, be deemed references to the same as it may from time to time be changed, amended or extended in accordance with its terms. (b) The term "person" shall include an individual, corporation, partnership, association, trust, joint stock company or unincorporated organization. (c) An "affiliate" of a specified person is a person who, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. (d) The "bankruptcy" of a person shall be deemed to have occurred or a person shall be deemed "bankrupt" upon the happening of any of the following: (i) the filing of an application by such person for, or a consent to, the appointment of a trustee of its or his assets; (ii) the filing by such person of a voluntary petition in bankruptcy or the seeking of relief under Title 11 of the United States Code, as now constituted or hereafter amended, or the filing of a pleading in any court of record admitting in writing its or his inability to pay its or his debts as they come due; (iii) the making by such person of a general assignment for the benefit of creditors; (iv) the filing by such person of an answer admitting the material allegations of, or its or his consenting to, or defaulting in answering, a bankruptcy petition filed against it or him in any bankruptcy proceeding or petition seeking relief under Title 11 of the United States Code, as now constituted or as hereafter amended; or (v) the entry of an order, judgment or decree by any court of competent jurisdiction adjudicating such person a bankrupt or appointing a trustee of its or his assets, and such order, judgment or decree continues unstayed and in effect for a period of 60 consecutive days. (e) The term "Campus Drive" shall mean Campus Drive Investment Company, a California limited partnership. The term "Campus Drive Partnership Agreement" shall mean the Amended and Restated Agreement of Limited Partnership of Campus Drive dated as of the date hereof, as amended from time to time. (f) The term "Permitted Transferee" shall mean, with respect to any person, such person under declaration of trust, or any parent, spouse, brother, sister, lineal descendant or adopted descendant of such person. Any transfer of a Partnership Interest to a Permitted Transferee may be by declaration of trust, inter vivos gift, specific testamentary disposition or for consideration. SECTION 9.14. Power of Attorney. Each Limited Partner hereby irrevocably constitutes and appoints each General Partner and any person hereafter admitted pursuant to this Agreement as a successor or additional General Partner, acting singly or collectively (the "Attorneys"), in each case with full power of substitution, the true and lawful attorney-in-fact of such Limited Partner, with full power and authority in such Limited Partner's name, place and stead, to make, execute, verify, consent to, swear to, make oath as to, acknowledge, publish, record and file all of the following: (i) the New Certificate or any amendment thereto and any other agreements, certificates, consents or other instruments said Attorneys, or any of them, deem necessary or appropriate for the purpose of giving effect to the provisions of this Agreement and to preserve the character of the Partnership as a limited partnership, the execution and delivery by any of said Attorneys of any such agreement, certificate, consent or other instrument being conclusive evidence that said execution and delivery was authorized hereby; (ii) any and all amendments to or modifications of this Agreement and of the instruments described in subparagraph (i) hereof (including, without limitation, amendments of this Agreement necessary to effect the addition, removal or substitution of one or more General or Limited Partners or changes in Partnership Interests pursuant to Section 3.02(e) or otherwise), provided that each such amendment of this Agreement is adopted in accordance with or made pursuant to the terms of this Agreement, the execution and delivery by any of said Attorneys of any such amendment or modification being conclusive evidence that such execution and delivery was authorized hereby; (iii) any and all certificates and other instruments which may be required to effectuate the dissolution and termination of the Partnership pursuant to the provisions of this Agreement, the execution and delivery by any of said Attorneys of any such certificate or other instrument being conclusive evidence that such execution and delivery was authorized hereby; and (iv) all such other instruments as shall be Approved by the General Partners as necessary or desirable to carry out fully the provisions of this Agreement in accordance with its terms, the execution and delivery of such instruments by any of said Attorneys being conclusive evidence that said execution and delivery was authorized hereby. Each Limited Partner acknowledges that the Power of Attorney hereby granted is coupled with an interest and is irrevocable. Said Power of Attorney shall survive the death or incapacity of such Limited Partner, or, if such Limited Partner is a partnership, corporation, trust or other entity, the dissolution, liquidation or termination thereof, or the assignment of such Limited Partner's limited Partnership Interest or any part thereof. If such Limited Partner transfers its limited Partnership Interest, the Power of Attorney granted hereby shall remain in effect for the purpose of and for the length of time necessary to effectuate and complete such transfer. SECTION 9.15. Amendments. Except as provided in this Agreement, this Agreement may not be modified or amended unless (i) such modification or amendment has been Approved by the General Partners and (ii) in the case of any modification or amendment increasing the obligation of the Limited Partners to make capital contributions or increasing their proportionate share of Shortfall Loans (other than as a result of changes in Partnership Interests in accordance with this Agreement), decreasing the rights of Limited Partners hereunder to Net Cash Flow or Capital Proceeds, or amending Section 2.01(d) or this Section 9.15, such modification or amendment has been approved in writing by a majority in interest of the Limited Partners (based upon Partnership Interests). IN WITNESS WHEREOF, this Agreement is executed as of the date first set forth above. GENERAL PARTNERS: PENINSULA/DW ASSOCIATES by POP/DW Associates, a California Limited Partnership, General Partner by: POP/Liberty Street Associates, a California Limited Partnership, General Partner /s/Warren B. Lane by:___________________ Warren B. Lane General Partner by: Dean Witter Realty Growth Properties, L.P., General Partner by: Dean Witter Realty Growth Properties Inc., Managing General Partner /s/Warren B. Lane by:___________________ Warren B. Lane Sr. Vice President /s/William Wilson III __________________________________ William Wilson III /s/Miller Ream __________________________________ Miller Ream LIMITED PARTNERS: By: William Wilson III as Attorney-in-Fact for the limited partners whose names are set forth below: John W. Leyerzaph Paul Moore Denison, Trustee under Trust Agreement dated April 6, 1976 C. David Robinson David H. Knott Dr. Albert C. Hass Richard M. Lavenstein, Trustee of the Richard M. Lavenstein Trust dated April 30, 1975 Ceasar Villano Roger C. and Carmen Stuhlmuller Gilbert E. Bovet Webcor Investment Company, a California limited partnership /s/William Wilson III ________________________________ William Wilson, III H. Whitwell Wales by Miller Ream as his Attorney-in-Fact /s/Miller Ream _____________________________ Miller Ream OUTGOING PARTNERS: BOREL DEVELOPMENT COMPANY a partnership By: Borel Estate Company, general partner By: Ream Wilson, a limited partnership, general partner /s/William Wilson III By:____________________________ William Wilson III, general partner /s/Miller Ream By:____________________________ Miller Ream, general partner /s/Gilbert E. Bovet By: _________________________________ Gilbert E. Bovet, general partner /s/Miller Ream By: ___________________________ Miller Ream, attorney-in-fact By: Wilson & Ream, general partner /s/William Wilson III By:____________________________ William Wilson III, general partner /s/Miller Ream By:____________________________ Miller Ream, general partner By: Borel Estate Company, general partner By: Ream Wilson, a limited partnership, general partner /s/William Wilson III By:________________________ William Wilson III, general partner /s/Miller Ream By:________________________ Miller Ream, general partner /s/Gilbert E. Bovet By:_______________________________ Gilbert E. Bovet, general partner /s/Miller Ream By:_________________________ Miller Ream, Attorney-in-Fact The following outgoing partners by William Wilson III as their attorney-in-fact: Peter V. Hall Gate King Properties, Inc. Carolyn Henley Roberta McWilliams Mathews Kevin S. McWilliams Keith B. McWilliams Richard D. Freemon, Trustee under Inter Vivos Trust of Richard D. Freemon dated August 1, 1980 Harold J. Freemon Webcor Builders Inc. Profit Sharing Fund /s/William Wilson III _______________________________ William Wilson III EX-27 7
5 Registrant is a limited partnership which invests in real estate and real estate joint ventures. In accordance with industry practice, its balance sheet is unclassified. For full information, refer to the accompanying audited financial statements. 0000765923 DEAN WITTER REALTY GROWTH PROPERTIES L.P. 12-MOS DEC-31-1995 DEC-31-1995 2,072,917 0 1,671,728 0 0 0 0 0 41,836,913 0 0 0 0 0 (18,728,278) 41,836,913 0 28,731,324 0 0 25,791,552 0 5,327,001 (2,387,229) 0 (2,387,229) 0 1,938,645 0 (448,584) (5.22) 0 In addition to cash and receivables, total assets include net investments in real estate of $30,927,112, real estate held for sale of $2,021,342, net deferred expenses of $1,277,687, restricted cash of $3,570,238 and other assets of $295,889. Represents partners' capital deficiency. Liabilities include mortgage notes payable of $42,000,000, investments in unconsolidated partnerships of $7,510,575, due to affiliates of $6,385,499, minority interests of $1,583,135 and accounts payable and other liabilities of $3,085,982. Total revenue includes hotel operating revenue of $27,351,396, rental revenue of $1,236,740 and interest and other revenue of $143,188. Net loss includes loss on real estate sold of $1,249,457. Represents net loss per Unit of limited partnership interest.
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