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Pennsylvania Limited Partnership Agreement

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Sectors: Real Estate
Governing Law: Pennsylvania, View Pennsylvania State Laws
Effective Date: September 10, 2002
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Exhibit 10.2


AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
FIRST STATES PARTNERS II, L.P.
(A Pennsylvania Limited Partnership)


This Amended and Restated Limited Partnership Agreement ("Agreement") is made and entered into as of September 10, 2002, by and among First States Management, LLC, a Delaware limited liability company, as the general partner ("General Partner"), and all other persons who shall execute this Agreement as limited partners (all of whom are hereinafter collectively referred to as "Limited Partners" and each of whom is hereinafter sometimes referred to individually as a "Limited Partner"), for purposes of continuing First States Partners II, L.P., a partnership under the laws of the Commonwealth of Pennsylvania (the "Partnership").


BACKGROUND


The Partnership was formed on September 12, 2000 and prior to the date hereof, operated pursuant to the terms of a Limited Partnership Agreement, dated as of September 12, 2000 (the "Pre-existing Limited Partnership Agreement").


Pursuant to the organization of American Financial Realty Trust, a Maryland real estate investment trust (the "REIT"), Limited Partners who were parties to the Pre-existing Limited Partnership Agreement (the "Pre-existing Limited Partners") have contributed in the aggregate 87.49% of their Partnership Interests to First States Group, L.P. (the "OP"), a Delaware limited partnership in exchange for units of limited partnership interest in the OP ("Partnership Units") or cash or a combination thereof, all pursuant to the Contribution Agreement, dated September __, 2002, among the OP and the individuals and entities set forth on Schedule I, attached thereto (the "Contribution Agreement"). The General Partner desires to admit the OP as a substitute Limited Partner.


The parties hereto desire to continue the Partnership pursuant to the Revised Uniform Limited Partnership Act of the Commonwealth of Pennsylvania, as amended from time to time (the "Act") for the purposes, among other purposes, of owning and operating directly or indirectly (through subsidiary entities) the Bank Property (defined below). This Agreement amends and restates the Pre-existing Limited Partnership Agreement in its entirety.


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1. DEFINITIONS. For convenience and brevity, certain terms used in this Agreement are defined in Schedule I hereto instead of when first used in this Agreement. Each defined term used in the Agreement has been identified by capitalizing the first letter in such term.


2. GENERAL PROVISIONS


2.1 Continuation of the Partnership; Admission of Partners.


(a) The Partners hereby agree to continue the Partnership under the Act. The Act shall govern the rights and obligations of the Partners except as otherwise expressly set forth herein. The parties hereto hereby amend and restate the Pre-existing Limited Partnership Agreement in its entirety and enter into this Agreement.


(b) Upon execution of this Agreement, First States Group, L.P. shall be admitted as a limited partner of the Partnership.


2.2 Name. The name of the Partnership continued hereby is "First States Partners II, L.P." The name of the Partnership may be changed at any time in the discretion of the General Partner to any name permissible under the Act. The General Partner shall give prompt notice of any name change to the Limited Partners.


2.3 Principal Place of Business. The principal place of business of the Partnership shall be 1725 The Fairway, Jenkintown, Pennsylvania 19046 or such other location as may hereafter be determined by the General Partner. The General Partner shall notify the Limited Partners of any change in the principal place of business of the Partnership.


2.4 Title to Partnership Property. All property owned by the Partnership, whether real or personal, tangible or intangible, shall be deemed to be owned by the Partnership. The Partnership may hold any of its assets in its own name or in the name of its nominee, which nominee may be a Partner or an Affiliate of a Partner and may be one or more individuals, partnerships, trusts or other entities.


2.5 Partition. No Partner, nor any successor-in-interest to any Partner, shall have the right, while this Agreement remains in effect, to have the property of the Partnership partitioned, or to file a complaint or institute any proceeding at law or in equity to have the property of the Partnership partitioned, and each of the Partners, on behalf of itself and its successors, representatives and assigns, hereby waives any such right. It is the intention of the Partners that, during the term of this Agreement, the rights of the Partners and their successors-in-interest shall be governed by the terms of this Agreement, and that the right of any Partner or successor-in-interest to assign, transfer, sell or otherwise dispose of any Interest shall be subject to the limitations and restrictions of this Agreement.


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2.6 Purpose of the Partnership. The purpose of the Partnership shall be to continue to own, hold, maintain, operate, manage, improve, develop and lease, directly or indirectly (through subsidiary entities), the property known as "Unit #1 and Unit #2 of 123 South Broad Condominium" that is located at 123 South Broad Street, Philadelphia, Pennsylvania and 1319 Walnut Street, Philadelphia, Pennsylvania (the "Bank Property"), to engage in such other activities as may be necessary or advisable in connection with the ownership, operation, management and leasing of the Bank Property, and to engage in such other activities as may be necessary therefor or incidental thereto (collectively, the "Business"). In furtherance of its purpose, the Partnership shall have and may exercise all of the powers now or hereafter conferred upon limited partnerships formed under the Act, and, to the extent permitted by applicable law, the Partnership may do any and all things related to the Business.


2.7 Activities of the Partners. The General Partner, Limited Partners or any of their Affiliates may engage in or hold an interest in other business ventures and activities of any nature, including, without limitation, ventures and activities similar to or competitive with those of the Partnership, and neither the Partnership nor the other Partners shall, by virtue of this Agreement, have any interest or rights in or to such other business ventures and activities or any liability or obligation with respect thereto. The Limited Partners expressly acknowledge that the OP owns, will continue to own and as part of its business plan and the business plan of the REIT will acquire properties and businesses, including real estate assets and interests therein, that may be competitive with the Bank Property, and no Limited Partner shall have, by virtue of this Agreement, any interests or rights in or to any of the other assets, properties or businesses owned or to be owned by the OP.


2.8 Further Assurances. Each Partner agrees to perform such further acts and to execute and deliver such further documents as may be necessary to enable the Partnership to carry out its purposes or comply with applicable law. Whenever necessary, each of the Partners shall also use its best efforts to cause its Affiliates to assist in enabling the Partnership to carry out its purposes or to comply with applicable law.


3. CAPITALIZATION


3.1 Capital Accounts and Percentage Interests.


(a) The Partnership shall establish and maintain Capital Accounts determined and adjusted in accordance with the rules of Treasury Regulations Section 1.704-1(b)(2)(iv). The Partners have previously made capital contributions to the Partnership.


(b) A Partner shall not be entitled to withdraw any part of its Capital Account or to receive any distribution from the Partnership, except as specifically provided in this Agreement. Any Partner, including any substituted Partner, that shall receive an Interest or whose Interest shall


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be increased by means of a transfer to it of all or part of the Interest of another Partner, shall have a Capital Account that reflects such transfer.


(c) As of the date hereof, the Partners listed on Schedule II hereto shall have the Percentage Interests set forth on Schedule II hereto, which may be adjusted pursuant to Section 3.7 hereof.


3.2 Additional Capital Contributions. No additional Capital Contributions shall be required to be made by the Partners. In the event any additional Capital Contributions are necessary, such Capital Contributions shall be made solely by the OP and the OP's Capital Account shall be increased to reflect such Capital Contribution. The Percentage Interests of the Partners shall not be adjusted as a result of any such additional Capital Contributions.


3.3 Liability of Limited Partners. Except as and to the extent provided by law, the Limited Partners shall not be liable for any of the debts or obligations of the Partnership.


3.4 Use of Capital Contributions. The Capital Contributions made pursuant to this Section 3 shall be used, together with other funds available to the Partnership, to engage in the Business and for the payment of the liabilities and obligations of the Partnership.


3.5 No Interest on or Return of Capital. No Partner shall be entitled to interest on any Capital Contribution or Capital Account. No Partner shall have the right to demand or receive the return of all or any part of any Capital Contribution or Capital Account, except as otherwise may be expressly provided herein, and no Partner shall be personally liable for the return of the Capital Contribution of any other Partner.


3.6 Additional Interests in the Partnership. The General Partner may, in its sole discretion, but subject to the limitation expressed in the next following sentence, issue additional interests in the Partnership (including different classes of interests) for such consideration as the General Partner may deem appropriate to such Persons (including any Partner, any Affiliate of any Partner or any Person who is not then a Partner) and on such terms and conditions as the General Partner may deem acceptable. Notwithstanding the foregoing, the General Partner shall first offer any such additional interests in the Partnership (including different classes of interests) to the existing Partners pro rata in accordance with their Percentage Interests. Each new Partner shall execute an instrument agreeing to be bound as either a General Partner or a Limited Partner by the terms and conditions of this Agreement. The General Partner shall promptly amend Schedule II to reflect the issuance of additional Partnership Interests to a new or existing Partner.


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3.7 Adjustment to Percentage Interests.


(a) On the date which is first day of the 38th month after the date hereof (the "Trigger Date"), each Partner's Percentage Interest shall adjust to the respective Adjusted Percentage Interest set forth on Schedule II next to each Partner's name and this Agreement shall be automatically amended to change all references to Percentage Interest to Adjusted Percentage Interest, as appropriate, and such amendment shall not require the consent of the Partners.


(b) During the 30-day period preceding the Trigger Date, the OP may, but is not obligated to, offer to acquire all of each of the other Limited Partner's Interest at a purchase price equal to or greater than the Acquisition Price (as defined below). If the OP offers to acquire any Limited Partner's Interest pursuant to this Subsection (b), it must offer to acquire all of the Limited Partners' Interests from the other Limited Partners. No Partner shall have any obligation to accept the OP's offer. The "Acquisition Price" shall mean (i) the Limited Partner's Percentage Interest (ii) multiplied by the Purchase Price for the Partnership as determined pursuant to Section 2.2 of the Contribution Agreement as of the Closing Date (as defined in the Contribution Agreement) but without deduction for the Disposition Fee (as defined in the Contribution Agreement), (iii) multiplied by .1235955 payable in Partnership Units valued at $10 per Partnership Unit.


(c) In the event the OP makes the offers described in Section 3.7(b), the adjustments described in Section 3.7(a) shall not occur and each Partner's Percentage Interest shall remain the same respective Percentage Interest in effect immediately prior to the Trigger Date and this Agreement shall not be amended as described in Section 3.7(a).


4. ALLOCATIONS OF PROFIT AND LOSS


4.1 Allocations Generally. Except as otherwise provided in Section 4.2 or 4.3 hereof, Income and Loss for a taxable year shall be allocated among the Partners as follows:


(a) Income shall be allocated among the Partners in accordance with their respective Percentage Interests.


(b) Loss shall be allocated among the Partners in accordance with their respective Percentage Interests.


(c) Limitation on Loss Allocations. The Loss allocated pursuant to Section 4.1(b) shall not exceed the maximum amount of Loss that can be so allocated without causing any Partner to have an Adjusted Capital Account Deficit at the end of any fiscal year. In the event some but not all of the Partners would have Adjusted Capital Account Deficits as a consequence of an allocation of Loss pursuant to Section 4.1(b) hereof, the limitation set forth in this Section 4.1(c)


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shall be applied on a Partner by Partner basis so as to allocate the maximum permissible Loss to each Partner under Treasury Regulation Section1.704-1(b)(2)(ii)(d).


4.2 Special Allocations


(a) Minimum Gain. If, in any year there is a net decrease in Minimum Gain (other than a decrease for which a minimum gain chargeback is not required under Treasury Regulation Section 1.704-2(f)), then each Partner will be allocated Income equal to that Partner's share of the net decrease in minimum gain for the year, as determined by Treasury Regulation Section 1.704-2(g)(2). The items of Income to be allocated under this section are determined under Treasury Regulation Section 1.704-2(j)(2). In the event there is insufficient Income for the year to fully chargeback each Partner's share of the decrease in Minimum Gain, then the chargeback for the year shall be in proportion to each Partner's share of the decrease and any decrease that has not been charged back shall be carried over and be treated as a decrease in Minimum Gain in the following year. This subsection is intended to comply with the minimum gain chargeback requirement of Treasury Regulation Section 1.704-2(f) and shall be interpreted consistently therewith.


(b) Partner Minimum Gain. If, in any year there is a net decrease in Partner Minimum Gain (other than a decrease for which a Partner Minimum Gain chargeback is not required under Treasury Regulation Section 1.704-2(i)(4)), then, after the allocation set forth above in Section 4.2(a), each Partner will be allocated Income equal to that Partner's share of the net decrease in Partner Minimum Gain for the year, as determined by Treasury Regulation Section 1.704-2(i)(3). The items of Income to be allocated under this section are determined under Treasury Regulation Section 1.704-2(j)(2). In the event there is insufficient Income for the year to fully chargeback each Partner's share of the decrease in Partner Minimum Gain, then the chargeback for the year shall be in proportion to each Partner's share of the decrease and any decrease that has not been charged back shall be carried over and be treated as a decrease in Partner Minimum Gain in the following year. This subsection is intended to comply with the requirement of Treasury Regulation Section 1.704-2(i)(4) that there be a chargeback of partner nonrecourse debt minimum gain and shall be interpreted consistently therewith.


(c) Qualified Income Offset. In the event any Partner received any adjustment, allocation or distribution described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) that was not reasonably expected at the end of the preceding year and that causes, or increases, an Adjusted Capital Account Deficit, items of income and gain shall be allocated to that Partner in an amount and manner sufficient to eliminate such Adjusted Capital Account Deficit. If there is insufficient Income in any year to make the allocation called for under this subsection, then the shortfall shall be carried over to subsequent years and will be treated as items to be offset in those years. Allocations under this subsection will only be made to the extent that a Partner has an


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Adjusted Capital Account Deficit after all other allocations provided in Section 4 have been tentatively made as if this subsection were not in the Agreement.


(d) Partnership Nonrecourse Deductions. Loss attributable (under Treasury Regulation Section 1.704-2(c)) to "partnership nonrecourse liabilities" (within the meaning of Treasury Regulation Section 1.704-2(b)(1)) shall be allocated among the Partners in the same proportion as their respective Percentage Interests.


(e) Partner Nonrecourse Deductions. Loss attributable under Treasury Regulation Section 1.704-2(i)(2) to "partner nonrecourse debt" (within the meaning of Treasury Regulation Section 1.704-2(b)(4)) shall be allocated, in accordance with Treasury Regulation Section 1.704-2(i)(1), to the Partner who bears the economic risk of loss with respect to the debt to which the Loss is attributable.


(f) Curative Allocations. The allocations set forth in Sections 4.1(c), 4.2(a), 4.2(b), 4.2(c), 4.2(d) and 4.2(e) (the "Regulatory Allocations") are intended to comply with certain provisions of the Treasury Regulations. It is the intent of the Partners that, to the extent possible, all Regulatory Allocations shall be offset with other Regulatory Allocations or with special allocations of other Partnership Items pursuant to this Section 4.2(f). Therefore, notwithstanding any other provision of this Section 4 (other than the Regulatory Allocations), the General Partner shall make such offsetting allocations of Partnership Items in whatever manner it shall determine appropriate so that, after such offsetting allocations are made, each Partner's Capital Account balance is, to the extent possible, equal to the Capital Account balance such Partner would have had if the Regulatory Allocations were not part of the Agreement and all Partnership items were allocated pursuant to Sections 4.1(a) and 4.1(b).


4.3 Other Allocation Rules.


(a) Allocations of Partnership Items with respect to any property contributed to the capital of the Partnership shall, solely for federal, state and local income tax purposes, be allocated among the Partners so as to take account of any variation between the adjusted basis of such property to the Partnership and its fair market value (as agreed herein). The Partners further agree that any gain or income attributable to the difference between the agreed fair market value of the Purchase Agreement and the Partnership's basis therein for tax purposes shall be deemed to be an item governed by Section 704(c) of the Code and, pursuant to Section 704(c) of the Code and the regulations promulgated thereunder shall be allocated when recognized in whole or in part to the Partner contributing the Purchase Agreement. Upon contribution of the Purchase Agreement to the Partnership, the Partnership shall be provided sufficient information for it to determine the amount of such built-in gain or income. The Partnership shall then allocate such built-in gain or income among the properties to be purchased by the Partnership pursuant to the Purchase Agreement. Such


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allocation shall be based upon the proportion of the relative fair market values of each property to the sum of the fair market values of all properties purchased. Upon the sale, disposition, or other recognition event for tax purposes of any property, gain or income attributable to Section 704(c), at the time of the recognition of such gain/income by the Partnership with respect to such property(ies), shall be allocated at that time to the Partner contributing the Purchase Agreement. The Partners hereby further agree that such allocation of gains/income shall not require, or otherwise entitle the Partner that contributed the Purchase Agreement to any priority cash distribution, notwithstanding any other provision of this Agreement, as amended.


(b) If during any fiscal year of the Partnership there is a change in any Partner's Interest, then for purposes of complying with Code Section 706(d), the determination of items of Income and Loss allocable to any such period shall be made by using any method permissible under Code Section 706(d) and the Treasury Regulations thereunder as may be determined by the General Partner.


(c) The Partners agree to be bound by the provisions of this Section 4 in reporting their shares of Partnership Items for tax purposes.


5. DISTRIBUTIONS


5.1 Distributions of Cash.


(a) Net Cash Flow. Except as provided in Section 8 regarding liquidating distributions, Net Cash Flow shall be determined by the General Partner and shall be distributed to the Partners no less frequently than annually to the Partners in accordance with their respective Percentage Interests.


(b) Net Proceeds of Sales or Refinancings. Except as provided in Section 8 regarding liquidating distributions, Net Proceeds of Sales or Refinancings shall be distributed within a reasonably practicable time after receipt, as determined by the General Partner to the Partners in accordance with their Percentage Interests.


(c) For purposes of this Section 5.1, the Partners acknowledge that, in accordance with the definitions of Net Cash Flow and Net Proceeds of Sales or Refinancings provided in Schedule I, the General Partner may, in its sole discretion, adjust the amount which would otherwise constitute Net Cash Flow or Net Proceeds of Sales or Refinancings by establishing, adding amounts to, and releasing (with respect to Net Cash Flow) amounts from, such reserves as it deems, in its sole discretion, to be necessary or advisable for working capital, contingencies, replacements, expansions, acquisitions, or other expenditures of the Partnership.


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5.2 Distributions in Kind. The General Partner may direct that property of the Partnership be distributed (including upon the dissolution and liquidation of the Partnership) in kind, provided that such a distribution in kind shall, to the extent possible, be distributed to the Partners in accordance with Section 5.1(a) as though the fair market value of the distributed property was Net Proceeds of Sales or Refinancings (except that distributions in liquidation shall be made in accordance with Section 8). The amount by which the fair market value of any property to be distributed in kind to the Partners exceeds or is less than the book value of such property shall, to the extent not otherwise recognized by the Partnership, be taken into account in determining Partnership Income and Loss and determining the Capital Accounts of the Partners as if such property had been sold at its fair market value immediately prior to the distribution. If any assets are sold in transactions in which, by reason of the provisions of Section 453 of the Code or any successor thereto, gain is realized but not recognized, such gain shall be taken into account when realized in computing gain or loss of the Partnership for purposes of allocation of Partnership Income and Loss under Section 4, and, if such sales shall involve substantially all the assets of the Partnership, the Partnership shall be deemed to have been dissolved and terminated notwithstanding any election by the Partnership to continue the Partnership for purposes of collecting the proceeds of such sales.


5.3 Cash in Return of Capital. No Partner shall be entitled to demand and receive property other than cash in return for such Partner's Capital Contribution or in payment of any other distributions to which such Partner is entitled.


6. MANAGEMENT AND OPERATIONS


6.1 Authority of the General Partner. The General Partner shall have the sole and exclusive right to manage the business of the Partnership and shall have all of the rights and powers which may be possessed by general partners under the Act including, without limitation, the right and power to perform any act permitted or required to be performed by the Partnership in connection with the accomplishment of Partnership purposes. Except as otherwise provided in this Agreement, the General Partner shall have the following powers and duties and shall be permitted, on behalf of the Partnership, to act in all matters affecting the day-to-day management and supervision of the Partnership's affairs, including:


(a) execute and deliver any loan documents relating to the business of the Partnership and enter into and perform such additional agreements as are deemed necessary by the General Partner in connection with the Partnership's consummation of any loan to the Partnership;


(b) enter into arrangements with brokers to assist in the leasing of space to tenants, if such arrangements, in the judgment of the General Partner, are prudent, and pay any leasing or brokerage commission incident thereto as a Partnership expense;


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(c) purchase and maintain fire and extended coverage, liability, workmen's compensation, rental loss and other insurance with respect to any property owned or leased by the Partnership or any subsidiary thereof;


(d) enter into arrangements from time to time with qualified property managers, including, without limitation, any Affiliate of the General Partner for management of any real property owned or leased by the Partnership or any subsidiary thereof, and improvements thereon, if such arrangements, in the judgment of the General Partner, are prudent, and pay any reasonable and customary management fee incident thereto as a Partnership expense;


(e) exercise any power, authority or duty delegated or appointed to the General Partner under this Agreement; and


(f) take all other actions determined necessary or advisable by the General Partner for the accomplishment of the Partnership's purposes.


Notwithstanding the foregoing, the General Partner may not directly or indirectly sell, assign or otherwise transfer, or refinance the Partnership's interest in the Bank Property without the prior consent of a Majority-In-Interest of the Limited Partners other than the OP, provided that this consent shall cease to be required in the event the OP makes the offers described in Section 3.7(b) hereof.


6.2 Right to Rely on General Partner. Any Person dealing with the Partnership may rely upon a certificate signed by the General Partner as to:


(a) the identity of any Partner;


(b) the existence or nonexistence of any fact or facts which constitute a condition precedent to acts by a General Partner or which are in any other manner germane to the affairs of the Partnership;


(c) the Persons who are authorized to execute and deliver any instrument or document of the Partnership; or


(d) any act or failure to act by the Partnership or any
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