FORM 10-K OF WELLS REAL ESTATE FUND XIII, L.P. URE PARTNERSHIP AGREEMENT OF FUND XIII AND FUND XIV ASSOCIATES

EXHIBIT 10.16

TO FORM 10-K

OF

WELLS REAL ESTATE FUND XIII, L.P.

 

JOINT VENTURE PARTNERSHIP AGREEMENT

OF

FUND XIII AND FUND XIV ASSOCIATES

 

THIS JOINT VENTURE PARTNERSHIP AGREEMENT (the “Agreement”) is made and entered into as of the              day of August, 2003, by and between WELLS REAL ESTATE FUND XIII, L.P., a Georgia limited partnership having Leo F. Wells, III and Wells Capital, Inc., a Georgia corporation, as general partners (“Fund XIII”), and WELLS REAL ESTATE FUND XIV, L.P., a Georgia limited partnership having Leo F. Wells, III and Wells Capital, Inc., a Georgia corporation, as general partners (“Fund XIV”). Each of the parties may also be referred to herein as a “Venturer” and together as the “Venturers.”

 

WITNESSETH :

 

WHEREAS, the Venturers desire to form a partnership under the Georgia Uniform Partnership Act for the acquisition, development, operation and sale of real properties according to the terms and conditions set forth herein;

 

NOW, THEREFORE, for and in consideration of the mutual covenants hereinafter set forth, the parties hereto covenant and agree as follows:

 

1. DEFINITIONS.

 

For the purposes of this Agreement, the following defined terms shall have the meanings ascribed thereto.

 

1.1 “Administrative Venturer” means the Entity responsible for the conduct of the ordinary and usual business of the Venture and the implementation of the decisions of the Venturers, all as is more fully set forth in Subsection 4.2 hereof. The initial Administrative Venturer shall be Fund XIII.

 

1.2 “Agreed Value” means with respect to Contributed Property the fair market value of such property as of the date of contribution to the Venture as determined by the general partners of the Venturers.

 

1.3 “Approve,” “Approved” or “Approval” means, as to the subject matter thereof and as the context may require, an express consent evidenced by and contained in a written statement signed by the approving Entity. A copy of each such written statement shall be kept at the office of the respective Venturer and shall be available for inspection by the other Venturer upon request.

 

1.4 “Bankrupt” or “Bankruptcy” means the occurrence of one or more of the following

events:

(i) The appointment of a permanent or temporary receiver of the assets and properties of the Venture or a Venturer, and the failure to secure the removal thereof within 60 days after such appointment;

 

(ii) The adjudication of the Venture or a Venturer as bankrupt or the commission by the Venture or a Venturer of an act of bankruptcy;

 

(iii) The making by the Venture or a Venturer of an assignment for the benefit of creditors;

 

(iv) The levying upon or attachment by process of the assets and properties of the Venture or a Venturer; or

 

(v) The use by the Venture or a Venturer, whether voluntary or involuntary, of any debt or relief proceedings under the present or future law of any state or of the United States.

 

1.5 “Capital Account” means a separate account maintained for each Venturer in a manner which complies with Treasury Regulation Section 1.704-1(b), as may be amended or revised from time to time.

 

1.6 “Capital Contributions” means the aggregate contributions to the capital of the Venture made by the Venturers as Capital Contributions pursuant to Subsection 3.1 hereof.

 

1.7 “Contributed Property” means any property contributed to the Venture as a Capital Contribution and/or the interest of each Venturer contributing property (excluding cash or cash equivalents) to the Venture in such property.

 

1.8 “Defaulting Venturer” means any Venturer failing to perform any of the obligations of such Venturer under this Agreement or violating the provisions of this Agreement.

 

1.9 “Distribution Percentage Interests” means collectively the interests in the income, gains, losses, deductions, credits, Net Cash Flow, Extraordinary Receipts, as determined by Subsection 3.2 hereof, as such may be adjusted from time to time as provided in this Agreement.

 

1.10 “Entity” means any person, corporation, partnership (general or limited), joint venture, association, joint stock company, trust or other business entity or organization.

 

1.11 “Extraordinary Receipts” means those funds of the Venture which are derived from (i) the net proceeds of any casualty insurance insuring any of the Properties or any portion thereof, to the extent not applied to the repair, restoration or replacement of the Properties or any portion thereof as may be Approved by the Venturers; (ii) the net proceeds of any condemnation, or any taking by eminent domain, or any transfer in lieu thereof, of any of the Properties, or any portion thereof, to the extent not applied to the repair, restoration or reconstruction of any remaining portion of the Properties as may be Approved by the Venturers; (iii) the net proceeds of any sale of any of the Properties, or any portion thereof; and (iv) the net proceeds of any indebtedness (or any refinancing of such indebtedness) secured in whole or in part by any of the Properties or any portion thereof.

 

1.12 “Fiscal Year” means the fiscal year of the Venture established under Subsection 3.4(c) hereof.

 

1.13 “I.R.C.” means the Internal Revenue Code of 1986, as amended.

 

1.14 “Lease” means a lease or rental agreement now or hereafter existing between the Venture, as lessor or landlord (whether initially or by assignment) and an Entity.

1.15 “Major Decisions” means any decision or action to (i) convey by the Venture substantially all the assets of the Venture; (ii) acquire any Property; (iii) finance or borrow or execute any promissory note or other obligation (other than a Lease) or mortgage or other encumbrance in the name of or on behalf of the Venture; (iv) retain the services of a manager other than Wells Management; (v) approve each construction and architectural contract and all architectural plans, specifications and drawings and all revisions or changes thereof in connection with the development and construction of any improvements for any Property; (vi) reduce any portion of the insurance program for the Properties or the Venture; (vii) determine any fee or other amount to be paid to either Venturer or any affiliate of a Venturer; (viii) make any expenditure or incur any obligation by or on behalf of the Venture involving a sum in excess of $15,000 for any transaction or group of similar transactions except for expenditures made and obligations incurred pursuant to and specifically set forth in a budget Approved by the Venturers; (ix) adjust, settle or compromise any claim, obligation, debt, demand, suit or judgment against the Venture or any Venturer in its capacity as a Venturer, or waive any breach of or default in any monetary or non-monetary obligation owed to the Venture, involving singly or in the aggregate an amount in excess of $15,000, or in the initiation of any such claim or suit for the benefit of the Venture; (x) convey or sell any Property or authorize the conveyance or sale of all Properties; (xi) admit any new Venturer to the Venture; (xii) cause the Venture to be admitted as a joint venturer to any other joint venture; and (xiii) make any other decision or action which by the provisions of this Agreement is required to be Approved by the Venturers or which in a material respect affects the Venture or any of the assets or operations thereof. All Major Decisions shall be made by the Venturers in a timely manner with due regard for the necessity of obtaining and evaluating the information necessary for making such Major Decisions.

 

1.16 “Management Agreements” means, collectively, those certain Property Management and Leasing Agreements between the Venturers as “Owner” and Wells Management Company, Inc. as “Manager” therein, concerning the management of the Properties.

 

1.17 “Manager” means Wells Management Company, Inc.

 

1.18 “Net Cash Flow” means for a given fiscal period, those funds of the Venture constituting the gross cash receipts of the Venture from the operation of the Properties (including interest and proceeds from business interruption or rent insurance) for such period exclusive of Capital Contributions by the Venturers and Extraordinary Receipts, which are available for distribution to the Venturers following (i) the payment of all operating, fixed cost and capital expenditures of the Venture, for which no reserves have been established, applicable to such period; (ii) the payment of all principal and interest with respect to any debt secured by any mortgage permitted by this Agreement; and (iii) the establishment by the Venturers of appropriate reserves for taxes, debt service, maintenance, repairs and other expenses and working capital requirements of the Venture including, without limitation, accruals for real estate taxes, insurance and other annual expense items (unless and to the extent the same are escrowed with a mortgagee).

 

1.19 “Nondefaulting Venturer” in the context wherein one or more Venturers become a Defaulting Venturer, means the remaining Venturers (provided the remaining Venturers are not also Defaulting Venturers).

 

1.20 “Notice” means a written advice or notification required or permitted by this Agreement,

 

as more particularly provided in Subsection 8.1 hereof.

 

1.21 “Prime Rate” means the rate of interest announced from time to time by Bank of America, N.A. as its prime rate. In the event the prime rate of Bank of America, N.A. is hereafter discontinued or becomes unascertainable, the Administrative Venturer shall designate a comparable reference rate to be the Prime Rate.

 

1.22 “Property” means any particular tract of land (and all rights and appurtenances incident thereto) owned or to be owned by the Venture or owned or to be owned by any joint venture, partnership, limited liability company or other entity in which the Venture owns an economic or beneficial interest and all improvements located, constructed or developed thereon or to be constructed or developed thereon.

1.23 “Properties” means, collectively, all Property of the Venture at any given time.

 

1.24 “Purchasing Party” means the Venturer other than the Selling Party in the event of a proposed transfer described in Subsection 6.4 hereof.

 

1.25 “Selling Party” means the Venturer desiring to transfer its interest in a transaction described in Subsection 6.4 hereof.

 

1.26 “Venture” means the joint venture formed pursuant to the laws of the State of Georgia by this Agreement.

 

1.27 “Venturer” or “Venturers” means the party or parties to this Agreement and all permitted successors and assigns thereof.

 

1.28 Other terms defined in this Agreement:

 

 

2. THE VENTURE.

 

2.1 Formation. The Venturers hereby enter into and form the Venture as a Georgia general partnership under the Georgia Uniform Partnership Act for the limited purposes and scope set forth herein. The rights and obligations of the Venturers and the status, administration and termination of the Venture shall be governed by the Georgia Uniform Partnership Act and other applicable laws of the State of Georgia. The Venture is being formed for the sole purpose of acquiring, owning, developing, operating and eventually selling Properties.

 

2.2 Purposes and Scope of Venture. Subject to the provisions of this Agreement, the activities of the Venture shall be limited strictly to the acquisition, ownership, financing, development, leasing, operation, sale and management of the Properties for the production of income and profit, either directly or through the ownership of joint ventures, partnerships, limited liability companies or other entities, including all activities reasonably necessary or desirable to accomplish such purposes, and shall not be extended by implication or otherwise unless Approved by all venturers. Nothing in this Agreement shall be deemed to restrict in any way the freedom of any Venturer to conduct any other business or activity whatsoever (including, without limitation,

 

the acquisition, development, leasing, sale, operation and management of other real property) without any accountability to the Venture or any other Venturer, even if such business or activity competes with the business of the Venture, it being understood by each Venturer that the other Venturer may be interested directly or indirectly in various other businesses and undertakings not included in the Venture.

 

2.3 Name of Venture. The business and affairs of the Venture shall be conducted under the name the “Fund XIII and Fund XIV Associates” (or such other names as shall be approved by both Venturers), and such name shall be used at all times in connection with the business and affairs of the Venture. The Venturers shall execute any assumed or fictitious name certificate or certificates required by law to be filed in connection with the formation of the Venture and shall cause such certificate or certificates to be filed in the appropriate records.

2.4 Scope of Authority. Except as otherwise expressly and specifically provided in this Agreement, no Venturer shall have any authority to act for, or assume any obligations or responsibility on behalf of, any other Venturer or the Venture.

 

2.5 Principal Place of Business. The principal place of business and initial office of the Venture shall be located at 6200 The Corners Parkway, Suite 250, Norcross, Georgia 30092, and may be relocated as may be from time to time Approved by the Venturers.

 

2.6 Representations, Warranties and Indemnity. In order to induce the other Venturer to enter into this Agreement, each Venturer does hereby make to each other Venturer the representations and warranties hereinafter set forth, and does hereby agree to indemnify and hold each other Venturer harmless from any and all loss, expense or liability any other Venturer may suffer as a result of any inaccuracy as of the date hereof in any representation and warranty set forth below:

 

(a) Authorization. The execution and delivery of this Agreement has been duly authorized by the agreements by which each Venturer was either created or currently governed.

 

(b) Claims. There is no claim, litigation, proceeding or governmental investigation pending, or, so far as is known to each Venturer, threatened, against or relating to each Venturer, or the transactions contemplated by this Agreement which does or would reasonably be expected materially and adversely to affect the ability of each Venturer to enter into this Agreement or to carry out its obligations hereunder, and there is not any basis for any such claim, litigation, proceeding or governmental investigation.

 

(c) Conflicts. Neither the consummation of the transactions contemplated by this Agreement to be performed, nor the fulfillment of the terms, conditions and provisions of this Agreement, conflict with or will result in the breach of any of the terms, conditions or provisions of, or constitute a default under, the agreements by which each Venturer was created or is currently governed or any material agreement, indenture, instrument or undertaking to which each Venturer is a party.

 

(d) Investment Objectives. The investment objectives of each Venturer with respect to the Properties and the objectives of the Venture are: (i) to maximize Net Cash Flow; (ii) to preserve, protect and return the Venturers’ investment in the Venture; and (iii) to realize appreciation upon the sale of the Properties.

 

(e) Charges to the Venturer. Neither Venturer will be charged, directly or indirectly, more than once for the same services.

 

2.7 Term of Venture.

 

(a) Commencement. The Venture term shall begin on the date of this Agreement as set forth above and end upon dissolution of the Venture.

 

(b) Dissolution and Termination. Dissolution shall occur upon the occurrence of any of the events described in Section 7 of this Agreement. Upon dissolution, the assets shall be liquidated in due course and distributed as provided in Subsection 3.3(c)(i) hereof. The Venture shall continue until termination in accordance with the relevant dissolution and termination provisions of the Georgia Uniform Partnership Act.

 

3. FINANCIAL STRUCTURE.

 

3.1 Capital Contributions. The Venturers shall from time to time make Capital Contributions to the Venture in such amounts as are agreed to by the Venturers.

 

3.2 Distribution Percentage Interest. The Distribution Percentage Interest of each of the

Venturers shall be equal to the percentage equivalent (rounded to the nearest one-hundredth of a percent) of a fraction, the numerator of which is the aggregate of all Capital Contributions (or the Agreed Value thereof) made by each Venturer pursuant to Subsection 3.1 hereof, and the denominator of which is the aggregate amount of all Capital Contributions (or the Agreed Value thereof) made by all of the Venturers pursuant to Subsection 3.1 hereof. Each Venturer’s interest in the Venture shall always be proportional to its Capital Contributions.

 

Each Venturer (the “First Venturer”) does hereby agree to indemnify and hold the other Venturer (the “Second Venturer”) harmless from and against any claim, action, liability, loss, damage, cost or expense, including, without limitation, attorney’s fees and expenses incurred by the Second Venturer by reason of (i) any act or omission of the First Venturer in connection with the operation of the Venture and the Properties, or (ii) the claims made by third parties to the extent that the Second Venturer’s percentage share of the total liability, loss, damage, cost or expense incurred by the Venture and the Venturers in connection with such claims exceeds its Distribution Percentage Interest at the time such liability, loss, damage, cost or expense is suffered or incurred. Upon dissolution, each Venturer shall look solely to the assets of the Venture for the return of its investment, and if the Venture Property remaining after payment or discharge of the debts and liabilities of the Venture, including debts and liabilities owed to one or more of the Venturers, is insufficient to return the aggregate Capital Contributions of each Venturer, such Venturers shall have no recourse against the Venture or any other Venturer.

 

3.3 Allocations and Distributions. Allocations for accounting purposes and for federal, state and local income tax purposes of each item of income, loss, deduction and gain, and distributions of Net Cash Flow and Extraordinary Receipts shall be allocated among the Venturers as follows:

 

(a) Allocation of Tax Items. For federal, state and local income tax purposes and for purposes of maintaining the Venturers’ Capital Accounts, except as otherwise provided herein, each item of income, gain, loss and deduction of the Venture for each tax year shall be allocated to the Venturers in accordance with their Distribution Percentage Interests.

 

(b) Net Cash Flow. All distributions of Net Cash Flow shall be made to the Venturers in accordance with each such Venturer’s Distribution Percentage Interest and shall be made at such intervals as may be approved by the Venturers, but in no event less frequently than quarterly.

 

(c) Extraordinary Receipts. Distributions of Extraordinary Receipts shall be made as follows:

 

(i) Distributions Not in Connection With Dissolution. Distribution of Extraordinary Receipts not generated in connection with an event of dissolution shall be made as follows: first, to the establishment of any reserve approved by the Venturers; and second, to the Venturers based on their respective Distribution Percentage Interests.

 

(ii) Distributions in Connection With Dissolution. Distribution of Extraordinary Receipts generated in connection with an event of dissolution (as well as the other assets of the Venture) shall be made as follows: first, to the payment of debts and liabilities of the Venture to creditors (including all mortgages, but excluding any other debts or liabilities to Venturers or affiliates of Venturers), and to the expenses of liquidation; second, to the establishment of such reserves as the Venturers may deem reasonably necessary for contingent or unforeseen liabilities or obligations of the Venture, which may be held in escrow for a reasonable period of time and then distributed pursuant to the remainder of this Subsection; third, to the repayment of any remaining debts and obligations of the Venture to the Venturers or affiliates of the Venturers; and fourth, to the Venturers in accordance with the positive balances in their respective Capital Accounts.

 

(d) Compliance with Section 704(c). To comply with Section 704(c) of the I.R.C., items of income, gain, loss, depreciation and cost recovery deductions attributable to Contributed Property shall be allocated for federal income tax purposes among the Venturers in the manner provided under Section 704(c) of the

I.R.C. taking into account the variation, if any, between the Agreed Value of such Property and its adjusted tax basis at the time of contribution.

 

(e) Qualified Income Offset. Notwithstanding any provision to the contrary contained herein, in the event that any Venturer receives an adjustment, allocation or distribution described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6) which causes a deficit balance in such Venturer’s Capital Account, such Venturer will be allocated items of income or gain (consisting of a pro rata portion of each item of partnership income, including gross income, and gain for such year) in an amount and manner sufficient to eliminate such deficit balance as quickly as possible, all in accordance with Treasury Regulations Section 1.704-1(b)(2)(ii)(d). (It is the intent of the Venturers that the foregoing provision constitute a “Qualified Income Offset,” as defined in Treasury Regulations Section 1.704-1(b)(2)(ii)(d), and the foregoing provision shall in all events be interpreted so as to constitute a valid “Qualified Income Offset.”)

 

3.4 Income Taxes and Accounting.

 

(a) Income Tax Returns. All income tax returns of the Venture shall be prepared on an accrual basis (except to the extent as may otherwise be Approved by all Venturers or be required by law, statute or regulation governing such tax and returns).

 

(b) Elections. Any provision of this Agreement to the contrary notwithstanding, solely for federal income tax purposes, each of the Venturers hereby recognizes that the Venture will be subject to all provisions of Subchapter K of Chapter 1 of Subtitle A of the I.R.C.; provided, however, that the filing of U.S. Partnership Returns of Income shall not be construed to extend the purposes of the Venture or expand the obligations or liabilities of the Venturers. The Venture shall file an election under Section 754 of the I.R.C. only in the event of a transfer or proposed transfer by any one or more Venturers of all or any part of their interest or interests in the Venture to any Entity. Such election shall be filed by the Venture upon the request of any Venturer made with respect to the income tax return for the period which includes the date of transfer of such interest in the Venture; such request shall be in writing and shall be made not less than 60 days prior to the initial date established by law for filing such income tax return.

 

(c) Fiscal Year. The Venture shall operate on a calendar year basis.

 

(d) Books of Account. The books of account