SUPERIOR AND SEDGWICK ASSOCIATES

an ILLINOIS LIMITED PARTNERSHIP

This is an Agreement of Limited Partnership (the “Agreement”) made effective as
of the 1st day of November, 1984, by and among: Robert J. Washlow and Sheldon
Chertow, as General Partners: and Lawson Products, Inc., a Delaware Corporation,
as a Limited Partner.

AGREEMENT

 

1.

Formation, Name, and Office

A.           Formation. The signatories to this Agreement, hereby organize a
Limited Partnership (the “Partnership”) under the Uniform Limited Partnership
Act of the State of Illinois (the “Act”). The rights and obligations of the
General Partners and the Limited Partner shall be determined by the Act, except
as otherwise provided in this Agreement.

B.           Name. The name of the Partnership is “Superior and Sedgwick
Associates; an Illinois Limited Partnership.” The General Partners may, from
time to time, in the General Partners’ discretion, change the name of the
Partnership by giving notice of the change to all the Partners.

C.           Office. The office of the Partnership initially shall be located at
30 North LaSalle Street, Suite 3630, Chicago, Illinois 60602. The General
Partners may, from time to time, in the General Partners’ discretion, change the
location of the office of the Partnership at any time by giving notice of the
change to all Partners.

2.            Principal Business. The principal business of the Partnership
shall be to acquire, rehabilitate, lease and operate the property commonly known
as 366 West Superior and 400-432 West Superior, Chicago, Illinois, legally
described on Exhibit “A” hereto, and to acquire all leases to which such
property is subject, including but not limited to the Lease, and perform all
obligations thereunder, for the purpose of investment. The Partnership shall
have all powers necessary or incidental to conduct such business, including the
right to sell, lease, manage, operate, rehabilitate, remodel, repair and improve
the Partnership Property, to enter into agreements with others to perform such
functions, to borrow money and to do such other things as the General Partners
deem necessary or advisable to carry out the purposes of the Partnership.

 

3.

Evidencing of Partnership Interest.

The Partnership Interest of each Partner is set forth on Exhibit “B”, which is
made a part hereof, as it may be adjusted from time to time pursuant to this
Agreement.

4.            Pertinent Definitions. For purposes of this Agreement, the
following definitions will be applicable:

A.           Affiliate means (i) every entity in which any Partner directly or
indirectly has a controlling financial interests (ii) a partner’s spouse, child,
grandchild, parent, brother or

 

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sister, and (iii) every entity in which a person described in clause (ii)
directly or indirectly has a controlling financial interest.

B.           Auditors shall mean the certified public accountants, from time to
time employed by the Partnership as selected by the General Partners.

C.           Cash Flow means for each Fiscal Year the Net Income or Net Loss for
such year plus the following amounts received, charged, or deducted during such
Fiscal Year:

(1)          Capital Contributions in cash made by the Partners and the proceeds
of all loans to the Partnership (including the proceeds of loans made by the
Partners), but not including Proceeds of Refinancing;

(2)          All other cash receipts of the Partnership from any source not
included in determining Net Income or Net Loss except Proceeds of Refinancing
and Proceeds of Sale;

(3)          Depreciation of building, furniture, fixtures and equipment,
amortization, and other non-cash charges deducted in determining Net Income or
Net Loss; and

(4)          The amount of withdrawals of excess funds from reserves deducted
for the prior Fiscal Year pursuant to (6) and (9) of this Section 4C;

Minus the following items for such Fiscal Year:

(5)          Principal payments on all mortgages, security agreements and loans
of the Partnership, except loans made by the Partners and loans, the repayment
of which have been taken into account in computing Proceeds of Refinancing:

(6)          All deposits to property replacement reserves and capital
expenditures to the extent made other than from such reserves;

(7)          Prepaid expenses, except those paid from reserves previously
accumulated;

(8)          All accrued but uncollected income included in determining Net
Income or Net Loss;

(9)          Such amounts as the General Partners may reasonably deem necessary
to maintain reserves for working capital, real estate taxes, insurance,
replacement contingency and other anticipated expenditures for anticipated
Operating Deficits of the Partnership;

(10)        Security deposits, if any, received from tenants of the Property;
and

 

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(11)        Any and all other cash expenditures of the Partnership to the extent
not deducted in determining Net Income or Net Loss (except refunds of security
deposits).

D.           Closing and Escrow Disbursement means the Closing of the
acquisition of the Property and Escrow Disbursement pursuant to the Contract and
this Agreement.

E.           Contract means the Contract for Sale of Beneficial Interest and
Lessor’s Interest in Lease, Reimbursement of Rehabilitation Costs and Completion
of Construction, attached hereto as Exhibit “C”.

F.            Complete Sale means the sale, condemnation, foreclosure,
destruction or other disposition of the Property or any substantial portion
thereof.

G.           Fiscal Year means the fiscal year of the Partnership which shall be
the calendar year.

H.           General Partners means Robert J. Washlow and Sheldon Chertow and
any person or entity who becomes an additional or successor General Partner in
accordance with this Agreement.

I.             Income means all gross revenues received from the operation of
the Property, including rental receipts from tenants, receipts from parking
lots, and interest income, but excluding security deposits, if any.

J.            Lending Institution means Cardinal Federal Savings Bank or other
entity providing funds of not less than Thirteen Million One Hundred Fifty
Thousand ($13,150,000) Dollars (less loan fees and expenses) to finance the
acquisition of the Property, and other cash requirements of the Partnership.

K.           Limited Partner shall mean Lawson Products, Inc., a Delaware
Corporation, and any other person or entity who becomes an additional or
substituted Limited Partner in accordance with this Agreement.

L.           Lease means that certain Office Building Lease dated March 19,
1984, between the American Trust, as Landlord, and Schering Corporation, a New
Jersey Corporation, as Tenant, (the “Tenant”), guaranteed by Schering-Plough
Corporation, a Delaware Corporation (the “Guarantor”) a copy of which Lease is
attached hereto as Exhibit “D”.

M.          Loan means the loan to be obtained by the Partnership and approved
by the General Partners from the Lending Institution in accordance with the
terms of the Loan Documents for the purpose of acquiring the Property, and
conducting the business of the Partnership.

N.           Loan Documents shall mean all documents, reports, agreements,
notes, mortgages, assignments, loan agreements, letters of credit, and all other
papers or instruments required by the Lending Institution to evidence, document,
or secure the Loan. The Lending Institution’s Commitment to make the Loan is
attached hereto as Exhibit “E”.

 

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O.           Net Income or Net Loss means the Net Income or Net Loss of the
Partnership as determined (or as redetermined, whether by amended return filed
by the Partnership, by court order, or otherwise) for Federal income tax
purposes by the Auditors, but excluding all Gain or Loss on Complete Sale and
determined without regard to any adjustment to basis pursuant to Sections 734
and 743 of the Internal Revenue Code; provided, however, that any portion of any
redetermined amount affecting the Net Income or Net Loss of the Partnership of
another Fiscal Year shall be allocated to the same class of Partners to whom
originally allocated.

P.            Operating Deficit shall mean the amount, for any period, by which
the Income, Loan proceeds, and Capital Contributions, if any, is less than the
Operating Expenses.

Q.           Operating Expenses shall mean, for any Fiscal Year, any and all
expenses and costs paid or incurred in connection with the purchase and
rehabilitation of the Property, the operation of the Property, and the
management of Partnership affairs, including but not limited to payments of
principal and interest on the Loan and loans to the Partnership made by
Partners; amounts set aside for reserves for the foregoing purposes whether
required under the terms of the Loan or by the General Partners; cash
expenditures otherwise capitalized; and expenses of prosecuting, defending,
settling, or disposing of litigation with partners or other parties.

R.           Partners shall mean all of the General Partners, and the Limited
Partner from time to time.

S.            Partnership Class shall mean the group of Partners of the same
type to which each of the General Partners or the Limited Partner respectively
belong.

T.           Partnership Interest shall mean for each Partner at any time, the
share of the Net Income or Net Loss, Gain or Loss on Sale, Cash Flow, Proceeds
of Refinancing, Proceeds of Sale and Capital Accounts allocated to such Partner
(or Partners) at such time under this Agreement. As of the execution of this
Agreement, Lawson Products, Inc., is the sole Limited Partner. If at any time
there are more than one Limited Partner, then the Partnership Interest of each
of the Limited Partners within the Partnership Class of the Limited Partners to
be set forth on a revised Exhibit “B” hereto and shall be determined by taking
the ratio that the Capital Contribution Points allocable to a Limited Partner
bears to the total Capital Contribution Points of all of the Limited Partners.
The Partnership Interest of a Limited Partner within the Partnership Class of
the Limited Partners shall be adjusted from time to time as provided by this
Agreement.

U.           Proceeds of Refinancing shall mean cash proceeds received by the
Partnership from the refinancing of the Loan or any other indebtedness
representing a replacement, modification or extension thereof, after deducting
the portion of the Loan or other indebtedness paid by such refinancing.

V.           Proceeds of Sale shall mean the cash proceeds resulting from a
Complete Sale, after deducting all of the expenses and costs incurred in
connection with such sale.

 

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W.          Terminated Partner shall mean a General Partner who has been removed
or who has withdrawn or resigned from the Partnership.

5.            Representations and Warranties of Limited Partners. The Limited
Partner represents, warrants and covenants to both the Partnership and the
General Partners that:

A.           Except as otherwise provided for in this Agreement, the Limited
Partner will not assign, sell, mortgage, pledge, or otherwise transfer or
encumber any of its rights under this Agreement;

B.           The Limited Partner was granted full and unrestricted access to the
Partnership’s business premises, offices, and properties and its business,
partnership, and financial books and records as it requested, and was permitted
to examine the foregoing, to question the General Partners, and to make all
other investigations that it considered appropriate to determine or verify the
business or condition (financial or otherwise) of the Partnership and to
consummate the transaction contemplated by this Agreement;

C.           The Partnership furnished the Limited Partner all additional
information concerning the Partnership’s business and affairs that it requested;

D.           The Limited Partner understands the Partnership and its property,
management, and financial condition; it understands that an investment in the
Partnership is highly speculative;

E.           The Limited Partner is able to evaluate the merits, risks, and
other factors bearing on the suitability of the Partnership as an investment;

F.            The Limited Partner is acquiring its Partnership Interest solely
for its own account, as a principal, for investment purposes and not with a view
to, or for resale in connection with, any distribution or underwriting of its
Partnership Interest;

 

G.

The Limited Partner understands that:

(1)          the Partnership Interest that it will purchase has not been and
will not be registered under the Securities Act of 1933, the Illinois Uniform
Securities Act or any other state securities law;

(2)          the Limited Partner must hold the Partnership Interest indefinitely
unless the Partnership Interest is subsequently registered under those laws or
transferred in reliance on an opinion of counsel satisfactory to the Partnership
and its counsel that registration under those laws is not required and will not
cause a termination of the Partnership under Section 708 of the Internal Revenue
Code, and

(3)          stop-transfer instructions will be noted in the appropriate records
of the Partnership;

 

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H.           The Limited Partner will not sell, transfer, pledge, or otherwise
dispose of its Partnership Interest, unless the Partnership Interest is
registered under the Securities Act of 1933 and under Illinois and any other
applicable state securities law, or unless it furnishes the Partnership an
opinion of counsel satisfactory to it and its counsel that registration under
those laws is not required and that the disposition will not terminate the
Partnership under Sec. 708 of the Internal Revenue Code.

I.             The Limited Partner understands that the Partnership will not
file periodic reports with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934.

6.            Term. The Partnership shall exist from the date the Certificate of
Limited Partnership is recorded pursuant to the Act, to and including December
31, 2025; provided, however, that the Partnership may be dissolved and
terminated prior to such date under the circumstances described in Section 27
below.

 

7.

Capital Contributions.

A.           General Partners. The General Partners shall each contribute One
Hundred ($100) Dollars and their interest under the Contract to the capital of
the Partnership. No additional capital contributions shall be required of the
General Partners and they shall not be obligated to make loans to the
Partnership. If, however, the General Partners advance additional funds to the
Partnership such amounts shall be deemed to be loans made by the General
Partners to the Partnership, and shall bear interest at the prime rate plus one
percentage point as announced from time to time by the Exchange National Bank of
Chicago.

B.           Contributions of Limited Partners. The Limited Partner shall
contribute to the Partnership Capital the aggregate amount of Four Million
($4,000,000) Dollars, as follows:

(1)          As of the execution of this Agreement, the amount of Fifty Thousand
($50,000) Dollars.

(2)          At the time of signing of the Contract, an additional amount of One
Million Five Hundred Thousand ($1,500,000) Dollars, in the form of a receipt for
the Treasury Bill which is to serve as Earnest Money and partial downpayment on
the Contract Price pursuant to Section 2.2A of the Contract. Subject to the
terms of the Contract, interest on the Treasury Bill shall be paid to the
Limited Partner, and the Limited Partner shall substitute cash for such Treasury
Bill, at the time of “Escrow Disbursement”, as defined in the Contract, or the
Treasury Bill shall be sold.

(3)          At the time of “Closing”, as defined in the Contract, an additional
amount of Contract, an additional amount of Five Hundred Thousand ($500,000)
Dollars, which together with the Treasury Bill referred to in Section 7B(2),
shall serve as a downpayment on the Contract Price pursuant to Section 2.2B of
the Contract.

 

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(4)          At Escrow Disbursement, an additional amount of Two Million
($2,000,000) Dollars.

C.           The Loan requires the Limited Partner to guaranty unpaid accrued
interest thereunder up to a maximum aggregate amount of One Million ($1,000,000)
Dollars. The Limited Partner shall execute such Loan Documents that are required
to evidence its guaranty of accrued unpaid interest. If the Limited Partner is
required to make payment on its guaranty of accrued interest, then the amounts
so paid shall be deemed to be Additional Capital contributed by the Limited
Partner, and the Capital Contribution Points and Partnership Interest of the
Limited Partner shall be adjusted pursuant to Sections 8F and G by awarding the
Limited Partner one (1) Capital Contribution Point for each One Thousand
($1,000) Dollars paid in satisfaction of the guaranty of accrued interest.

 

8.

Capital Requirements in Excess of $4,000,000.

A.           If the General Partners reasonably determine that the Capital
Contributions to be made by the Limited Partner pursuant to Sections 7B(l), (2),
(3), and (4) are at any time insufficient to finance the business of the
Partnership or fund the Operating Deficit, they may from time to time arrange
for the Limited Partner (or Limited Partners if there are more than one) to
contribute Additional Capital to the Partnership (“Additional Capital”), as
provided herein, causing the Partnership to raise funds from such Additional
Capital, and in connection therewith, reallocating the then Partnership
Interests of any Partner unwilling to contribute Additional Capital (“Failing
Partner”) to other Partners or persons willing to become Partners, who are then
willing to contribute such Additional Capital (“Contributing Partners”).

B.           The General Partners shall give a written notice (an “Additional
Capital Contributions Notice”) stating: (1) their intention to require
Additional Capital Contributions; (2) the amount thereof; (3) the amount of
Additional Capital to be contributed by the Limited Partner; and (4) the number
of Capital Contribution Points (the “Dilution Factor”) by which a Failing
Partner’s aggregate Capital Contribution Points shall be reduced for each One
Thousand ($1,000) Dollars of Additional Capital not contributed by a Failing
Partner. The Dilution Factor shall be determined by the General Partners in
their reasonable discretion at the time of giving of the Additional Capital
Contribution Notice, but in no event shall the Dilution Factor be greater than
three (3) Capital Contribution Points for each One Thousand ($1,000) Dollars of
Additional Capital not contributed. If there is more than one Limited Partner,
then the Additional Capital Contribution Notice shall also state the aggregate
amount of the Additional Capital Contributions by the Limited Partner as a
class, and the resulting amount of the Additional Capital to be contributed by
each Partner.

C.           None of the General Partners shall be required to contribute
Additional Capital.

D.           If there is more than one Limited Partner at any time, then the
amount of Additional Capital to be contributed by each Limited Partner shall be
in the same proportion that the number of Capital Contribution Points of each
Limited Partner, as may set forth on Exhibit “C” and as may be adjusted from
time to time as provided herein, bears to the total number of

 

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Capital Contribution Points for all of the Limited Partners, at the time of the
notice to contribute Additional Capital.

E.            Without personal liability to do so, each Limited Partner shall
contribute his share of the Additional Capital as set forth in the notice of the
General Partners on the date specified in the notice, which shall be at least
thirty (30) days after the date of the notice to contribute Additional Capital
is received by the Limited Partners. The General Partners shall inform the other
Partners of the failure to contribute of a Failing Partner and such Partners
shall then have an opportunity to contribute the balance of the unpaid
Additional Capital in the order or priority described herein. If any Limited
Partner has failed to contribute the Additional Capital requested of him, the
remaining Limited Partners, if any, shall have the first opportunity to
contribute such Additional Capital in the proportions which their interests in
the Partnership bear to the interests in the Partnership of all of the Limited
Partners willing to contribute. If there are no other Limited Partners, or if
the Limited Partners who are willing to contribute fail to contribute the entire
remaining balance of a Failing Partner, then the General Partners shall have the
opportunity without any obligation to contribute such Additional Capital in the
proportions in which their interests in the Partnership bear to the interests in
the Partnership of all the General Partners willing to contribute. If the
General Partners fail to contribute the entire remaining balance of the Failing
Partner’s share of Additional Capital, then the General Partners, without being
obligated to do so, may seek such Additional Capital from persons who are not
Partners and to admit as new Limited Partners to the Partnership those persons
selected by the General Partners who are willing to contribute such Additional
Capital. If the General Partners do not choose to admit new Limited Partners to
the Partnership, then the General Partners shall return the Additional Capital
already contributed to the contributing Partners, and shall have no further
obligation to obtain Additional Capital for Partnership purposes.

F.            The Capital Contribution Points of each Contributing Partner shall
be increased by one additional Capital Contribution Point for each One Thousand
($1,000) Dollars of Additional Capital required of and contributed by him and by
the Dilution factor plus one in number of Contribution Points for each One
Thousand ($1,000) Dollars of Additional Capital contributed as a result of the
failure of a Failing Partner to contribute the Additional Capital requested of
him. Each Failing Partner’s Capital Contribution Points shall be reduced (but
not below zero) by the Dilution Factor in number of Capital Contribution Points
for each One Thousand ($1,000) Dollars of Additional Capital contributed by
another person as a result of the Failing Partner’s failure to contribute the
Additional Capital required of him. If a General Partner, or non-Partner
contributes Additional Capital requested of a Failing Partner, then the
contributor, for purposes of the allocations set forth in Sections 11 to 13,
inclusive, and otherwise shall be deemed to have been admitted to the
Partnership as a Limited Partner to the extent of the Additional Capital
Contribution Points awarded to the contributor as a result of the default of the
Failing Partner.

G.           The interest of each Limited Partner in the Net Income, Net Loss,
Gain or Loss on a Complete Sale, Cash Distributions and Capital Accounts of the
Partnership, as set forth in Sections 11, 12 and 13, are based on the initial
Capital Contribution Points of the Partners set forth on Exhibit “C”. If
additional Capital Contribution Points are allocated to any person under any
provision of this Agreement, or if the Capital Contribution Points of a Partner
are to be reduced under any provision of this Agreement, then the allocation of
Net Profits, Net

 

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Loss, Gain or Loss on a Complete Sale, Cash Distributions and Capital Accounts
shall be adjusted in like proportion. The Partnership Interests of each of the
Limited Partners shall be adjusted (effective as of the first day of the next
quarter following the date on which such adjustment can be calculated) so that
the Partnership Interests are allocated in the same proportion that the Capital
Contribution Points of each of the Limited Partners, as adjusted in accordance
with this Section, bears to the total of the Capital Contribution Points, as so
adjusted, for all of the Limited Partners.

9.            Partnership Borrowings. Except for the Limited Partner’s guaranty
of accrued interest to a maximum of One Million ($1,000,000) Dollars referred to
in Section 7C hereof, the Loan and other Partnership loans in excess of Fifty
Thousand ($50,000) Dollars as obtained by the Partnership shall be non-recourse
without personal liability or guaranty of any Partner. The General Partners may
from time to time at their election borrow from any of the General Partners or
the Limited Partner. All loans made to the Partnership by the General Partners
and loans made to the Partnership by any Limited Partner shall bear interest at
the prime rate plus one percentage point as announced from time to time by the
Exchange National Bank of Chicago.

 

10.

Deposit and Use of Contributions and Other Partnership Funds.

A.           All Partnership funds (to the extent not needed for current working
capital), required in the conduct of the Partnership’s business shall, as
determined by the General Partners, be either (1) deposited in one or more
interest-bearing accounts of the Partnership, in a bank or banks selected by the
General Partners, or (2) invested in short-term United States governmental
securities, certificates of deposit, or commercial paper as the General Partners
deem advisable.

B.           The Partners’ Capital Contributions and any other Partnership funds
(including any interest or other income generated by Partnership deposits or
investments) shall be used exclusively for Partnership purposes authorized by
this Agreement and shall not be used for the benefit of or commingled with the
funds of the General Partners or any other person.

11.          Capital Accounts. The Partnership shall establish capital accounts
for each of the Partners to which it shall credit the amount of their respective
Capital Contributions, and Net Income, and debit the respective Net Loss and
Cash Distributions. No Partner shall be entitled to:

A.           withdraw any part of his Capital Contribution, except as provided
in this Agreement;

 

B.

receive distributions from the Partnership other than cash; or

 

C.

be paid interest on his Capital Contributions.

 

 

12.

Net Income and Net Loss.

 

A.           The Partnership Net Income or Net Loss, other than Gain or Loss on
a Complete Sale, as herein defined, shall be determined as of the end of each
Fiscal Year.

 

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B.           The Partnership Net Income or Net Loss, other than Gain or Loss on
a Complete Sale, shall be allocated ninety-seven percent (97%) to the Limited
Partner (if there is more than one Limited Partner, then pro rata in accordance
with their Capital Contribution Points as adjusted pursuant to Sections 8F and
8G), and one and one-half percent (1.5%) to each of the General Partners.

C.           If there is more than one Limited Partner, the Net Income and Net
Loss allocable to the Limited Partners shall be allocated to each Limited
Partner in accordance with his respective Partnership Interests as initially set
forth on Exhibit “C”, and as may be adjusted from time to time in accordance
with Sections 8F and 8G of this Agreement.

13.          Gain or Loss on Complete Sale. Gain or Loss on a Complete Sale
shall be allocated among the Partners as follows:

 

A.

Loss on a Complete Sale shall be allocated as follows:

(1)          Loss on a Complete Sale shall first be allocated to those Partners
with positive capital accounts, pro rata, in accordance with such positive
capital accounts, until such accounts are brought to zero.

(2)          Any Loss on a Complete Sale not allocated pursuant to Section
13A(l) shall be allocated ninety-seven percent (97%) to the Limited Partner, and
one and one-half percent (1.5%) to each of the General Partners.

 

B.

Gain on a Complete Sale shall be allocated as follows:

(1)          Gain on a Complete Sale shall first be allocated to those Partners
with negative capital accounts, pro rata, in accordance with such negative
capital accounts until such accounts are brought to zero;

(2)          Gain on a Complete Sale not allocated pursuant to Section 13B(1)
shall next be allocated to the Limited Partner, in a manner which results in the
Partner having a capital account equal to an amount calculated to be equal to
the product of the Partner’s number of Capital Contribution Points, as adjusted
pursuant to Sections 8F and 8G multiplied by One Thousand ($1,000) Dollars minus
all previous distributions of cash to the Limited Partner (the “Net Cash
Investment”);

(3)          Gain on a Complete Sale not allocated pursuant to Sections 13B(l)
and (2) shall be allocated to the General Partners equally to a maximum of
Thirty-Five Thousand ($35,000) Dollars each (the “General Partner’s Adjusted
Gain”).

(4)          Any Gain on a Complete Sale not allocated pursuant to
Sections 13B(1), (2) and (3) shall be allocated ninety-seven percent (97%) to
the Limited Partner, and one and one-half percent (1.5%) to each of the General
Partners. Provided that if after the allocation pursuant to Section 13B(2), any
Limited Partner has a capital account in excess of the Net Cash Investment, or
any General Partner has a capital account in excess of the General Partner’s
Adjusted

 

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Gain, then such excess amounts shall be credited against the amounts of gain to
be allocated among the Partners pursuant to this Section 13B(4), so that if
after the allocation of gain pursuant to this Section 13B(4) the Net Cash
Investment were then hypothetically to be subtracted from the capital account of
the Limited Partner, and each General Partner’s Adjusted Gain were then
hypothetically to be subtracted from his capital account, the resulting capital
accounts would be in the ratio of one and one- half percent (1.5%) for each of
the General Partners and ninety-seven percent (97%) for the Limited Partner.

C.           The Gain or Loss on a Complete Sale allocable to the General
Partners shall be allocable among them equally, and if there is more than one
Limited Partner, that allocable to the Limited Partners, except as otherwise
provided in Section 13B(2), shall be allocable to the Limited Partners, pro
rata, in accordance with their Capital Contribution Points as adjusted pursuant
to Sections 8F and 8G.

D.           The foregoing allocations of gain or loss on a Complete Sale may in
the discretion of the General Partners, be amended to conform with final
regulations adopted under Section 704(b) of the Internal Revenue Code, with the
object of preserving to the greatest extent permitted under such final
regulations, the economic objectives of the Partners as expressed herein.

 

14.

Cash Distributions.

A.           Distributions of Cash Flow. Subject to the requirements of
applicable law, any cash available to the Partnership shall first be used to pay
interest and principal on the Loan, when due, cash costs and operating expenses
and any loans made to the Partnership by the Partners. Any remaining cash
available to the Partnership from time to time available shall, in the General
Partners’ discretion, considering the reasonable business needs of the
Partnership, be used or distributed in the following order of priority:

(1)          as a reserve to the extent necessary to satisfy all reasonable and
necessary obligations incurred or expected to be incurred by the Partnership
with respect to the Property and in determining Cash Flow;

 

(2)

to the payment of the fees to be paid pursuant to Section 15A;

(3)          to the Limited Partner, (if there is more than one Limited Partner,
then pro rata, in accordance with their Capital Contribution Points, as adjusted
pursuant to Sections 8F and 8G), One Thousand ($1,000) Dollars for each Capital
Contribution Point less all distributions of cash to the Limited Partner prior
to the date of the distribution.

(4)          Any remaining cash that the General Partners determine is available
for distribution shall be distributed as follows: ninety-seven percent (97%) to
the Limited Partner (or if there is more than one Limited Partner, then pro
rata, in accordance with their Capital Contribution Points, as adjusted in
accordance with Sections 8F and 8G); and one and one-half percent (1.5%) to each
of the General Partners.

 

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(5)          Cash flow may be distributed with respect to any Fiscal Year at
such times as the General Partners may determine based upon their reasonable
discretion.

B.           Distribution of Proceeds of Refinancing. Proceeds of Refinancing
shall be applied and distributed in the following order of priority:

(1)          To the payment of all expenses incurred in connection with the
Refinancing and all debts and liabilities of the Partnership, including
repayment of all interest and principal due on any loans made to the Partnership
by any of the Partners.

(2)          To the payment of the fee to be paid pursuant to Section 15A, to
the extent not previously paid.

(3)          To the Limited Partner (or if there is more than one Limited
Partner, then pro rata, in accordance with their Capital Contribution Points, as
adjusted pursuant to Sections 8F and 8G), at the rate of One Thousand ($1,000)
Dollars for each Capital Contribution Point, less all previous distributions of
cash to the Limited Partners prior to the date on which such Proceeds of
Refinancing are distributed.

(4)          The balance, if any, of such Proceeds shall be distributed
ninety-seven percent (97%) to the Limited Partner (or if there is more than one
Limited Partner, pro rata, in accordance with their Capital Contribution Points,
as adjusted in accordance with Sections 8F and 8G), and one and one-half percent
(1.5%) to each of the General Partners.

C.           Distribution of Proceeds of Complete Sale. Proceeds of Complete
Sale shall be applied and distributed in the following order of priority;

(1)          to the payment of all debts and liabilities of the Partnership,
except Partners Loans made by the Partners to the Partnership;

(2)          to the setting up of any reserves which the General Partners deem
reasonably necessary to provide funds for any contingent or any unforeseen
obligations or liabilities of the Partnership. At the expiration of such period
of time as the General Partners deem advisable, the balance of such reserves
shall be distributed in the manner hereinafter set forth in this subparagraph C;

(3)          to the repayment, pro rata, of all interest and principal due on
all loans made by Partners to the Partnership;

(4)          to the payment of fees, expenses and payments to be paid pursuant
to Section 15A, to the extent not previously paid.

(5)          to the Partners in proportion to the positive balances in their
capital accounts after the allocation of any gain on the Complete Sale.

 

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(6)          any remaining proceeds of Complete Sale shall be distributed
ninety-seven percent (97%) to the Limited Partner (or if there is more than one
Limited Partner, then pro rata, in accordance with their Capital Contribution
Points, as adjusted in accordance with Sections 8F and 8G), and one and one-half
percent (1.5%) to each of the General Partners.

D.           Except as set forth above, no Partner shall be entitled to demand
payment of Cash Flow, other cash distributions herein provided or repayment of
his Capital Contribution prior to the dissolution of the Partnership. Each
Partner shall look solely to the Partnership’s assets for the repayment of his
contributions, and if such assets are insufficient, shall have no recourse
against any or all of the other Partners. No Partner shall be liable to another
for deficits in their respective capital accounts at any time, whether prior to
or upon the termination of the Partnership. Notwithstanding the foregoing, if
after allocation of all Net Income and Net Loss of the Partnership, including
Gain or Loss on a Complete Sale, as provided above, there would be a deficit in
the capital accounts of the General Partners upon termination of the
Partnership, and positive balances in the capital accounts of any Limited
Partner, then the General Partners shall contribute the amount of the deficits
in their respective capital accounts to the Partnership to be distributed to
those partners with positive capital accounts, prorata, in accordance with the
capital accounts.

 

15.

Compensation and Reimbursement.

A.           The Partnership shall pay to the General Partners a fee in the
amount of Fifty Thousand ($50,000) Dollars for their services as General
Partners during the organization of the Partnership and Fifty Thousand ($50,000)
Dollars for the management of Partnership affairs by the General Partners during
the period prior to Escrow Disbursement as defined in the Contract. One half of
such fee shall be payable to Robert J. Washlow and one half to Sheldon Chertow.

B.           One half of the fees to be paid to the General Partners pursuant to
Section 15A shall be paid as of the Closing, as defined in the Contract, and one
half shall be paid as of Escrow Disbursement, as defined in the Contract.

C.           The payments provided for in Section 15A shall be obligations of
the Partnership; however, the General Partners shall not be personally obligated
to make such payments. The payments provided for in Section 15A shall be paid
out of Cash Flow, Proceeds of Refinancing and Proceeds of Complete Sale in the
order of priority specified in Section 14. No interest shall be paid on the
amounts to be paid pursuant to Section 15A.

D.           The General Partners shall be paid reasonable fees as compensation
to them for managing the affairs of the Partnership during periods after Escrow
Disbursement. Such fees shall be comparable to those charged by real estate
management firms in the Chicago metropolitan area and shall conclusively be
deemed to be reasonable if they have been approved by the Limited Partner (or if
there is more than one Limited Partner, then by Limited Partners holding
fifty-five percent (55%) of the interest of all of the Limited Partners).

 

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E.            Partners may be paid reasonable compensation as provided for in
the agreements referred to in Section 18A(4). Such compensation shall
conclusively be deemed to be reasonable if approved by the Limited Partner (or
if there is more than one Limited Partner, then by Limited Partners holding
fifty-five percent (55%) in interest of all of the Limited Partners).

F.            The following items shall be considered to be Partnership expenses
(whether incurred prior to or after the date of this Agreement) and shall be
charged separately to and reimbursed by the Partnership: (1) expenses of
preparing and distributing annual Partnership financial statements and tax
returns, (2) insurance premiums, and (3) transportation, lodging and
communication expenses of the General Partners incurred in connection with
Partnership activities and meetings of the Partnership.

 

16.

Books and Records, Accounting and Reports.

A.           The Partnership shall maintain full and complete books at its
principal office or in such other office of the Partnership as shall be
designated by the General Partners. All such books and records shall, during
regular working hours and upon reasonable notice, be open to inspection and
examination by the General Partners and the Limited Partner and its appointed
representatives.

B.           The Partnership’s Fiscal Year shall end December 31st, and it shall
file its income tax returns using the method of accounting selected by the
General Partners.

C.           As soon as practicable after the close of each Fiscal Year, the
General Partners shall cause to be prepared, at the expense of the Partnership,
a financial report that shall include a Balance Sheet as of the last day of the
Fiscal Year, a Statement of Income or Loss for the full Fiscal Year and a full
Statement of Cash Flow and Distributions for the period, all prepared on the
Partnerships income tax basis of accounting. At the expense of the Partnership,
the General Partners shall engage the Auditors to prepare the Partnership’s tax
returns for the Fiscal Year. As soon after the end of each Fiscal Year as is
practicable, the General Partners shall cause to be delivered to each Partner a
copy of all such financial statements and his Individual Partner’s Schedule K-1
to the Partnership’s Federal Income Tax return.

D.           In the case of a distribution of property of the Partnership made
subject to Code Section 734, or in the case of a transfer of a Partnership
interest subject to Code Section 743, the General Partners shall (upon any
Partner’s request) file on the Partnership’s behalf an election under Code
Section 754 in accordance with applicable Treasury regulations and, if feasible,
comparable state laws which might be applicable.

17.          Tax Controversy. If any governmental authority having the power to
assess or collect an income tax (a “Taxing Authority”) challenges the income tax
return of any Limited Partner for any reason, in whole or in part, having to do
with his being a Limited Partner, the Limited Partner shall tender the defense
thereof to the Partnership. If approved by at least fifty-one percent (51%) in
interest of the Partnership Interests of the Limited Partners, the Partnership,
at its expense, shall have the right and shall control the defense against the
challenge. In connection with any defense against a challenge by a Taxing
Authority not so approved, the Partnership will be obligated neither to defend
nor pay for the defense against the Taxing

 

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Authority’s challenge. The General Partners shall designate one of their number
as the tax matters partner under the Internal Revenue Code.

 

18.

Powers and Duties of the General Partners

A.           Powers. Except as provided in Section 23, the General Partners
shall have the exclusive right and power to execute or cause the execution of
any and all documents related to the acquisition of the Property and
rehabilitation thereof, and to manage the business and affairs of the
Partnership, possessing all powers necessary, advisable or convenient to that
end. They shall keep each other reasonably informed of all matters concerning
the business of the Partnership and hold meetings with each other as may be
reasonably required. Specifically, but without limiting the generality of the
foregoing, the General Partners may, on behalf of the Partnership, without the
consent of any Limited Partner except as otherwise provided herein:

(1)          borrow money required for the Partnership’s business and secure the
repayment of such borrowing by mortgage, deed of trust or other security device
upon all or any part of the property of the Partnership, and may refund,
refinance and extend the maturity of any indebtedness created by such borrowing,
all on such terms and conditions as the General Partners, in their sole
discretion, shall approve;

 

(2)

hold title to the Property in the name of a nominee;

(3)          make, from time to time, reasonable and necessary expenditures,
improvements, and maintenance with respect to the Property;

(4)          enter into agreements with independent contractors (or with related
parties or Affiliates, including themselves, but on terms no less favorable to
the Partnership than if the agreement was with an independent contractor) for
accomplishing the Partnership purposes. The General Partners are specifically
authorized to employ the law firm of Washlow, Chertow & Miller, an affiliate of
the General Partners, to provide legal and tax planning services to the
Partnership and to pay that firm’s customary fees for such services, including
fees for such services during the organization of the Partnership;

(5)          establish bank accounts for the Partnership’s funds, authorizing
designees of the General Partners to disburse such funds on behalf of the
Partnership; and for such purpose the General Partners are authorized to certify
the adoption of standard form banking resolutions;

 

(6)

invest Partnership funds;

(7)          determine whether or not the Partnership will effect the Closing
and Escrow Disbursement under the Contract;

(8)          determine the compensation to be paid to the General Partners as
provided in Section 15D.

 

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B.           The General Partners will not effect the Closing and Escrow
Disbursement if, after having informed the Limited Partner of the circumstances
they determine in good faith that such failure to effect the Closing will be in
the best interest of the Partnership.

C.           If the General Partners fail to effect the Closing, then they shall
not be liable for any damages of the Partners, and the assignment of the
Contract to the person named pursuant to Section 28B hereof for the purpose of
liquidating the Partnership shall constitute a full release of the General
Partners (and General Partner) from any and all liability in such event; however
the Limited Partner shall not by virtue of such assignment be deemed to have
assumed the obligation to pay fees under Section 15A hereof.

D.           Duties. The General Partners shall devote such time and effort to
the Partnership’s business as the General Partners, in their sole discretion,
determine to be necessary for the efficient carrying on thereof, and shall also
have the duties imposed by the other provisions of this Agreement. The General
Partners will perform their duties under this Agreement in a prudent, efficient,
and businesslike manner with due care and shall at all times remain active in
the business affairs of the Partnership; provided that a General Partner may
resign subject to the provisions of Section 24. The General Partners, for their
own benefit or the benefit of others, may also engage in other businesses,
whether or not similar in nature to the business of the Partnership.

E.            Number and Control. The General Partners shall endeavor to manage
Partnership affairs by consensus. The unanimous consent of the General Partners
shall be required to bind the Partnership to any material action including,
without limitation, the acts enumerated in Sections 18A(1) through (8) and 18B
inclusive. Actions may be taken by one of the General Partners if the other
General Partner is unavailable.

 

19.

Liability of General Partners.

A.           The General Partners shall not be liable to any Partner for any
loss incurred in connection with the business of the Partnership so long as the
General Partners act in good faith and in accordance with the provisions of this
Agreement and are not guilty of willful misconduct or gross negligence.

B.           The Partnership shall defend, indemnify and hold harmless the
General Partners and Limited Partner (collectively the “Indemnified Parties”) as
follows: In any threatened, pending, or completed action, suit, or proceeding to
which an Indemnified Party was or is a party or is threatened to be made a party
by reason of the fact that he is or was associated with the Partnership (other
than an action by or in the right of the Partnership) involving an alleged cause
of action for damages in carrying out the purposes of the Partnership, the
Partnership shall indemnify the Indemnified Parties against expenses, including
attorneys fees, judgments and amounts paid in settlement, actually and
reasonably incurred by the Indemnified Parties in connection with such action,
suit, or proceeding if the Indemnified Parties acted in good faith and in a
manner reasonably believed to be in and not opposed to the Partnership’s best
interests and provided that the Indemnified Parties’ conduct does not constitute
gross negligence, willful misconduct, or a breach of its fiduciary obligations
to the Partners. The termination of any action, suit, or proceeding by judgment,
order, or settlement shall not, of itself, create a

 

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presumption that the Indemnified Parties did not act in good faith or in a
manner reasonably believed to be in and not opposed to the Partnership’s best
interests.

20.          Liability of Limited Partners. The Limited Partner shall not be
liable for losses, debts or other liabilities of the Partnership beyond the
unpaid amount of its Capital Contribution to the Partnership pursuant to Section
7B above.

21.          Powers and Duties of the Limited Partners. Except for voting rights
as provided herein, the Limited Partner shall have no authority to control or
participate in the management or conduct of the Partnership business, to
interfere with the Powers and Duties of the General Partners, to transact any
business on the Partnership account, to bind the Partnership in any way, or to
sign any document or instrument on the Partnership’s behalf.

 

22.

Acts Requiring Prior Approval of Limited Partners.

A.           The vote or written consent (which shall not be unreasonably
withheld) of Limited Partners holding Partnership Interests totalling at least
seventy percent (70%) of the Partnership Interests of the Limited Partners shall
be required before the General Partners may:

(1)          terminate the Partnership prior to the end of its term (except as
provided in Sections 18B and C);

 

(2)

sell the Property;

 

 

(3)

extend the term of the Partnership; or

 

 

(4)

amend this Agreement, except as set forth in Section 31.

B.           Upon receipt of the consent of the required percentage in interest
of Limited Partners to any of the foregoing, the General Partners shall be
authorized and directed to conclude any such transactions so approved. All
Partners, including but not limited to those Limited Partners who may have been
opposed to any such transaction, shall be bound to conclude the transaction and
to execute such documents and to do such things in furtherance thereof as the
General Partners deem necessary or convenient. Without such vote or written
consent, none of the foregoing acts set forth in Sections 22A(1)-(4) may be
effected.

 

23.

Removal of General Partners.

A.           The Limited Partners holding Partnership Interests totalling at
least seventy percent (70%) of the Partnership Interests of the Limited Partners
may effect (i) the removal of one or more of the General Partners subject to the
terms and conditions of Section 23B; and (ii) if desired, the selection of a
successor General Partner under the terms of Section 25B.

 

B.

A General Partner may be removed only for any of the following reasons:

(1)          An admission by the Partner, in writing, of an inability to pay his
debts generally as they become due;

 

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(2)          The Partner’s consenting, seeking or acquiescing to the appointment
of a receiver, trustee, liquidator, or fiscal agent for all or a substantial
part of his property;

(3)          Gross negligence in the performance of the Partner’s obligations
under this Agreement;

(4)          Commission of a felony involving moral turpitude in connection with
the management of the Partnership or its business;

 

(5)

Commission of a fraud on the Partners or the Partnership;

(6)          Knowingly and willfully breaching a material obligation under this
Agreement; or

(7)          Permanent Disability resulting when the Partner is permanently
unable to adequately carry out his duties and responsibilities under this
Agreement for a period exceeding one year including, but not limited to,
disability arising from insanity.

C.           The removal of a General Partner shall further be conditioned upon
the payment to such Partner of any compensation and distribution to which the
Partner may be entitled pursuant to the terms of this Agreement to the effective
date of such removal. In the event of the removal of a General Partner, the
removed Partner shall, subject to the provisions of Section 19, remain liable
for the debts, obligations, and liabilities of the Partnership incurred during
the period of time he was such a Partner to the extent that he was so liable in
his capacity as such a Partner.

 

24.

Resignation, Withdrawal or Permanent Disability of General Partner.

A.           Resignation or Withdrawal. A General Partner shall not have the
right to resign or withdraw from the Partnership, without the approval of all
other Partners. In the event of such resignation or withdrawal, such resigning
or withdrawing Partner shall, subject to the provisions of Section 19, remain
liable for the debts, obligations, and liabilities of the Partnership incurred
during the period of time he was such a Partner, and for which he was liable in
his capacity as such a Partner.

B.           Permanent Disability. The permanent disability of a General Partner
shall not be deemed a resignation or withdrawal of such Partner. The Partnership
Interest of such permanently disabled Partner shall be permanently vested as a
limited partnership interest, without the voting or approval rights granted to
Limited Partners hereunder, and with the same interest as Net Income, Net Loss
and Cash Distributions as such Partner had when a General Partner. A General
Partner who has become permanently disabled may be removed as a General Partner
(without the loss of his Partnership Interest) by a vote of the Limited Partners
to remove such Partner and to select, if desired, a successor General Partner in
accordance with the procedures set forth in Sections 23A and 25B of the
Agreement. Subject to the provisions of Section 19, a permanently disabled
General Partner shall remain liable for the debts and

 

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obligations of the Partnership incurred during the time he was a General
Partner, and for which he was liable in his capacity as such a Partner.

25.          Effect of Removal, Resignation, Withdrawal, or Death of General
Partner; Successor Partner.

A.           Continuation of Partnership. Upon the removal, resignation,
withdrawal or death of a General Partner, all of the Partners consent that the
Partnership shall be automatically reconstituted and continued under the same
name, terms, and conditions as those provided in this Agreement, as it may have
been amended before the General Partner’s removal resignation, withdrawal, or
death, and with the same Partners as those existing on the date of the
resignation or withdrawal of the General Partner, and any successor Partner who
may be elected. Except in the case of removal because of Permanent Disability as
provided in Section 24B, or death, as provided in Section 26A, the Partnership
Interest of a Terminated Partner shall be terminated and reduced to zero without
compensation for such Terminated Partner’s Partnership Interest, other than
payment of any compensation or distribution accruing prior to the date of
removal, resignation or withdrawal.

B.           Appointment of Successor General Partner in Case of Removal,
Resignation or Withdrawal. If one or more General Partners remain after the
removal, resignation, withdrawal or death of a General Partner, the remaining
General Partner shall continue the business of the Partnership without the
appointment of a successor to the deceased or Terminated Partner unless the
Limited Partner (or if there is more than one Limited Partner, then seventy
percent (70%) of the Partnership Interests of the Limited Partners) by vote or
written consent designates a successor General Partner subject to the approval
of the remaining General Partner, to replace the Terminated Partner(s). If there
is no General Partner remaining after the removal, resignation, withdrawal or
death of a General Partner, then within ninety (90) days after the General
Partner’s removal, resignation, withdrawal or death, the Limited Partner (or if
there is more than one Limited Partner, then seventy percent (70%) of the
Partnership Interests of the Limited Partners) shall designate one or more
successor General Partners. If there is more than one Limited Partner and the
Limited Partners, in accordance with the above procedures, seventy percent (70%)
in Interest of the Limited Partners have failed to select a successor General
Partner(s) within ninety (90) days after the General Partner’s removal,
resignation, withdrawal or death, then fifty-one percent (51%) of the
Partnership Interests of the Limited Partners may select one or more successor
General Partners within fifteen (15) days after the ninetieth (90th) day above
referred to. If no General Partner is so selected, then the Partnership shall be
dissolved, terminated and liquidated.

C.           Capital Contribution and Partnership Interest. In case of removal
(other than for Permanent Disability), withdrawal or resignation of a General
Partner, the successor General Partner, if any, shall have the same rights and
obligations as the Terminated Partner under this Agreement, except that the
successor General Partner may be required to make a Capital Contribution in an
amount specified by the Limited Partner (or if there is more than one Limited
Partner, then by seventy percent (70%) of the Partnership Interests of the
Limited Partners), and may be entitled to only that portion of the Capital
Contribution Points or Partnership Interests of the Terminated Partner as may be
so specified. If there is a failure to specify the amount of Capital
Contribution, or the Partnership Interest, or the Capital

 

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Contribution Points then no Capital Contribution shall be required and neither a
Partnership Interest nor Capital Contribution Points shall be allocated to the
successor General Partner. In the case of the death or removal by reason of
Permanent Disability of a General Partner, the successor General Partner shall
have the same rights and obligations as the deceased or removed permanently
disabled Partner, and may be paid compensation by the Partnership in an amount
to be determined by vote or written consent of the Limited Partner (or if there
is more than one Limited Partner, then by seventy percent (70%) of the
Partnership Interests of the Limited Partners).

D.           Effect on Creditors. Sections 23, 24 and 25 shall not affect the
statutory rights of creditors of the Partnership which arise upon the
resignation, removal, death, or withdrawal of a General Partner.

E.            Indemnifications. Upon the removal, withdrawal or resignation of a
General Partner pursuant to Sections 23 and 24, the Partnership shall indemnify
and hold a Terminated Partner harmless from and against any loss, liability,
cost or expense, including reasonable attorneys’ fees, arising out of
Partnership business conducted following the removal of a Terminated Partner and
for business conducted prior to the removal of a Terminated Partner and effected
in good faith and without gross negligence.

 

26.

Transfer of Partnership Interest.

A.           Death. In the event of the death of a General Partner, or a Limited
Partner, such Partner’s heirs, beneficiaries, devisees or any revocable trust
created by the Partner and to which he has assigned one hundred percent (100%)
of his interest in Net Income, Net Loss (including gain or loss on a Complete
Sale) and cash distributions, receiving such Partnership Interest shall be
vested in the entire Partnership Interest and Capital Contribution Points of
such Partner and shall become a Partner in the Partnership of the same
Partnership class as the deceased Partner except that the heir, beneficiary,
devisee or assignee revocable trust, of a deceased General Partner shall become
a Limited Partner with a Partnership Interest otherwise identical to the
interest of the deceased Partner.

B.           Transfers by Partners to Affiliates. The Partnership Interests of
any of the Partners shall be nontransferable except as provided in Sections 26A,
26C, and 26D, and except that up to ninety-nine percent (99%) of any Partner’s
Partnership Interest may be assigned from time to time to one or more Affiliates
of such transferring Partners. The interest so assigned shall be an interest
only in Net Income, Net Loss, (including gain or loss on the sale of Partnership
Property) and cash distributions, and the assignee shall not thereby become a
Partner in the Partnership and shall not have any voting rights provided herein.
Such assigning Partner shall not cease to be a Partner of the Partnership or
cease to be liable for any of the obligations for which he would otherwise have
been liable had such assignment not been made. No affiliate to whom an
assignment is made shall be admitted and substituted as a Partner without the
consent of the General Partners and satisfaction of the requirements of Sections
26E and F. Furthermore, any Partner may assign one hundred percent (100%) of his
interest in Net Income, Net Loss and cash distributions to an intervivos
revocable trust created by him for estate planning purposes.

 

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C.           Transfer by Limited Partner to Non-affiliate. Subject to Section
26E, and the consent of the General Partners, which shall not unreasonably
withheld, a Limited Partner may make an assignment of all or any part of such
Limited Partner’s Partnership Interest to a non-affiliate of such Partner. In
all events, no such assignment shall relieve the Limited Partner of his
obligations and liabilities under this Agreement, or constitute the assignee a
Limited Partner or substituted Limited Partner, or confer on the assignee a
Limited Partner’s rights in the Partnership. If an assignment is made with the
General Partner’s consent then the assignee of or all part of a Limited
Partner’s Partnership Interest may be admitted and substituted as a Limited
Partner and acquire the rights of a Limited Partner only upon the satisfactory
completion of the requirements specified in Section 26F.

D.           Transfer by General Partner to Non-affiliate. Subject to Section
26E and the satisfaction of all of the requirements of Section 26F, a General
Partner may make an assignment of both his Partnership Interest and his rights
and obligations as a General Partner if the assignee assumes in writing all the
General Partner’s obligations and liabilities in respect of the Partnership.
Upon compliance with the provisions of the immediately preceding sentence, the
assignee of the General Partner shall be substituted in whole or in part as the
case may be as a General Partner, and have all the rights and powers granted to
the General Partners under this Agreement and shall be subject to all the
obligations and liabilities of such Partners under this Agreement: provided,
however, that such assignment by a General Partner and substitution of the
assignee as a Partner shall not be deemed a withdrawal or resignation of the
assigning Partner for purposes of Section 25A.

E.            Restriction on Transfer. Notwithstanding any other provision of
this Agreement, sale or exchange of all or part of a Partnership Interest shall
not be made, and consent thereto shall be withheld unless:

(1)          the Partnership Interest sought to be sold or exchanged, when added
to the total of all other Partnership Interests sold or exchanged within the
immediately preceding period of twelve (12) consecutive months, would not result
in the termination of the Partnership under the Internal Revenue Code of 1954,
as amended:

(2)          it will not violate any applicable securities law (including
investor suitability standards) and the Act;

(3)          either it has been registered under applicable federal securities
laws and any applicable state securities law, or the General Partners have
received an opinion of counsel satisfactory to them and counsel for the
Partnership that the proposed assignment may be made without registration under
any applicable securities law; and

(4)          the transfer is not sought to be made to a minor or incompetent
except by will or intestate succession.

 

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F.            Admission of Substitute Partner. Subject to the other provisions
of this Agreement, an assignee of a Partnership Interest may be admitted as a
Partner and granted Partnership rights in the Partnership only if:

(1)          the General Partners determine that the assignee is a qualified
offeree under applicable securities laws;

(2)          the General Partners consent to the admission by executing two
counterparts of this Agreement that evidence the rights of the assignee under
the Partnership; and, if the assignee is to be admitted as a General Partner,
the Limited Partner consents to the admission (or if there is more than one
Limited Partner, then the holder of fifty-one percent (51%) in Interests of the
Limited Partners consent to the admission) which consent shall not be
unreasonably withheld;

(3)          the assignee accepts, signs, and agrees to be bound by the terms
and provisions of this Agreement by executing two counterparts of it, and such
other documents or instruments as the General Partners require to effectuate the
admission of the assignee as a Partner;

(4)          the assignee provides the General Partners with evidence
satisfactory to the General Partners of the assignee’s authority to become a
Partner under the terms and provisions of this Agreement;

(5)          the assignee has executed a form of Power of Attorney containing
the terms and provisions set forth in herein;

(6)          an amendment to the Certificate of Limited Partnership is filed of
record as required by the Act, and

(7)          the assignee pays all filing, publication, and other costs
(including reasonable attorneys’ fees) incurred by either the Partnership or the
General Partners in connection with the admission and substitution of the
assignee as a Partner.

G.           Amendment of Certificate. Upon the admission of a substitute,
successor, or new Partner, the General Partners shall amend this Agreement to
reflect the name of such Partner and to eliminate the name of any withdrawing
prior Partner and shall file an amendment to the Partnership’s Certificate of
Limited Partnership reflecting the admission as required by the Act. All
Partners and the substitute Partner shall execute such documents as may be
required by the General Partners to signify the substitute Partner’s agreement
to be bound by this Agreement.

H.           Rights of Partner After Assignment. Upon the assignment of all his
Partnership Interest to an assignee who becomes substituted for such Partner, a
Partner shall cease to be a Partner and to have any rights of a partner in the
Partnership.

 

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I.             Tax Allocations. It shall be the responsibility of any person who
acquires the Partnership Interest during the Fiscal Year to allocate Partnership
gain, loss, deductions and credits between himself and the person from whom he
acquired his Partnership Interest, as provided in the Internal Revenue Code and
regulations thereunder.

 

27.

Dissolution.

A.           Events of Dissolution. The Partnership shall be dissolved and
terminated upon:

 

(1)

the expiration of its term;

(2)          the vote or written consent of all of the General Partners and the
Limited Partner (or if there is more than one Limited Partner, then of Limited
Partners holding at least fifty-one percent (51%) in Interest of Limited
Partners to dissolve the Partnership);

 

(3)

the Partnership being adjudicated insolvent or bankrupt;

(4)          a General Partner being adjudicated insolvent or bankrupt, unless
the Limited Partners, within ninety (90) days after such adjudication, remove
the Partner as provided above;

(5)          the resignation, withdrawal, removal or death of a General Partner
leaving no General Partner then acting and the failure by the Limited Partners
to select a successor within the time period provided above;

 

(6)

the sale or transfer of substantially all of the Partnership’s assets;

(7)          the General Partners not effecting the Closing before December 31,
1985, unless otherwise extended by the General Partners.

B.           Manner of Dissolution. Upon dissolution and termination of the
Partnership, then the remaining General Partner or Partners, if any, or if there
is no General Partner, a person approved by the vote or written consent of the
Limited Partner (or if there is more than one Limited Partner, then of Limited
Partners holding at least fifty-one percent (51%) in Interest of the Limited
Partners) shall take full account of the Partnership’s assets and liabilities.
The assets shall be liquidated as promptly as is consistent with obtaining the
fair value thereof, and the proceeds thereof, to the extent sufficient therefor,
shall be distributed and Gain and Loss allocated in the same manner as with
respect to Proceeds of Sale. In the event the remaining General Partner or the
person designated by the Limited Partners determines that it is necessary to
make a distribution of Partnership Property in kind, such Property shall be
assigned to a trustee for the benefit of the Partners. Such trustee shall hold
and administer such Property for all the Partners in proportion to their
respective Interests in Proceeds of Sale determined as though a Complete Sale
had been made of such Property for its fair market value, and as though the Gain
or Loss on such Sale had been allocated as provided hereinabove. Neither the
Partnership nor any Partner shall be liable to pay any fees under Section 15A in
the event of the dissolution and termination of the Partnership under Section
27A(7).

 

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28.

Certificates and Other Documents.

A.           General Partners as Attorneys for Limited Partners. Each Limited
Partner, by becoming a Limited Partner, constitutes and appoints with full power
of substitution, the General Partners and each of them, their true and lawful
attorneys, in the name, place and stead, of said Limited Partner, from time to
time:

(1)          To make all agreements amending this Agreement, as now or
hereinafter amended, that may be appropriate to reflect:

(a)          A change of the name of or the location of the principal place of
business of the Partnership.

(b)          The disposal by any Partner of his interest in the Partnership, or
any part thereof, in any manner permitted by this Agreement, and any return of
the Capital Contribution of a Limited Partner (or any part thereof) provided for
by this Agreement.

(c)          A person becoming a Limited Partner of the Partnership as permitted
by this Agreement.

(d)          The exercise by any person of any right or rights under this
Agreement or a change in any provision of the Agreement requiring the consent or
approval of a specified percentage in interest of the Limited Partners, and the
required consent or approval has been given.

(2)          To make such certificates, instruments and documents as may be
required by, or may be appropriate under, the laws of any state or other
jurisdiction in which the Partnership is doing or intends to do business, in
connection with the use of the name of the Partnership by the Partnership;

(3)          To make such certificates, instruments and documents as may be
required of the Limited Partners or as may be appropriate for the Limited
Partners to make, by the laws of any state or other jurisdiction, to reflect:

 

(a)

A change in name of or address of said Limited Partners.

(b)          Any changes in or amendments of this Agreement, or pertaining to
the Partnership, of any kind referred to in subdivision (1) of this subparagraph
A.

(c)          Any other changes in or amendments of this Agreement but only if
and when said Limited Partner has agreed to such changes or amendments by
signing, either personally or by duly appointed attorney, a document amending
this Agreement.

B.           Each of such agreements, certificates, instruments and documents
shall be in such form as legal counsel for the Partnership shall deem
appropriate. The powers hereby

 

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conferred to make agreements, certificates, instruments and documents shall be
deemed to include the powers to sign, execute, acknowledge, swear to, verify,
deliver, file, record and publish the same.

C.           Each Limited Partner authorizes the General Partners as their said
attorney to take any further action which said attorney shall consider necessary
or convenient in connection with any of the foregoing, hereby giving said
attorney full power and authority to do and perform each and every act and thing
whatsoever requisite, necessary or convenient to be done in and about the
foregoing as fully as said Limited Partner might or could do if personally
present, and hereby ratifying and confirming all that said attorney shall
lawfully do or cause to be done by virtue hereof.

D.           The powers hereby conferred shall continue from the date said
Limited Partner becomes a Limited Partner in the Partnership until said Limited
Partner shall cease to be such a Limited Partner and, being coupled with an
interest, shall be irrevocable.

E.            Making, Filing, Etc. of Certificates, Etc. The General Partners
agree, when authorized pursuant to subparagraph A above, or otherwise, to make,
file or record with the appropriate public authority and (if required) publish
the Certificate of Limited Partnership, any amendments thereof and such other
certificates, instruments and documents as may be required or appropriate in
connection with the business and affairs of the Partnership.

F.            Required Signatures. Any writing to amend the Certificate of
Limited Partnership to reflect the addition of a Partner need be signed only by
one of the General Partners and by the person to be added as a Partner. Any
writing to amend the Certificate of Limited Partnership to reflect the
substitution of a Partner need be signed by only one of the General Partners, by
the Partner who is disposing of his Partnership interest in the Partnership and
by the person to be substituted as a Partner; but the General Partners may sign
for either or both said Partners as their attorney-in-fact pursuant to
subparagraph A above. If the Certificate of Limited Partnership is to be amended
because of the resignation, withdrawal, removal or death of a General Partner,
and the business of the Partnership is continued pursuant to the terms of this
Agreement or with the consent of the Limited Partner, the writing to amend the
Certificate of Limited Partnership need be signed by only any of the other
General Partners of the Partnership or, if there be no other General Partner, by
a designee of the Limited Partner (or if there is more than one Limited Partner,
of fifty-one percent (51%) in Interest of the Limited Partners).

29.          Notices. Whenever any notice is required or permitted to be given
under any provision of this Agreement, such notice shall, in lieu of personal
delivery, be in writing, signed by or on behalf of the person giving the notice,
and shall be deemed to have been given when mailed by prepaid registered or
certified mail, with or without request for return receipt, to the person or
persons to whom such notice is to be given, addressed in the case of the
Partnership or the General Partners to the principal place of business of the
Partnership, and, if to any General Partner or Limited Partner, to his address
set out in the Certificate of Limited Partnership or to such other address as
the General Partner or Limited Partner may from time to time specify by notice
to the Partnership.

 

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30.

Meetings.

A.           Meetings of the Partners may be called by the General Partners for
any purpose at any time, but shall be called by the General Partners within
thirty (30) days after they eceive a written request for a meeting from the
Limited Partner (or if there is more than one Limited Partner, of Limited
Partners whose Partnership Interests exceed, collectively, fifty-one percent
(51%) of the Interests of Limited Partners) stating the purpose of the requested
meeting and the matters proposed for consideration. Meetings of the Partners may
be held at such time, date, and place as the General Partners designate.

B.           Notice of any meeting of the Partners shall be given, not less than
ten (10) nor more than sixty (60) days before the date of the meeting, to each
General Partner and Limited Partner at his address in the manner provided for in
Section 29 above. The notice shall state the time, date, and place of the
meeting, the purpose of the meeting, and the Partner at whose direction or
request the meeting is called. If a meeting is adjourned to another time or
place, notice of the adjourned meeting shall not be required if the time and
place of the adjournment is announced at the called meeting. Any notice of
meeting required by this Section 30 may be waived in writing at, before, or
after the meeting and shall be deemed to be waived by each General Partner and
Limited Partner who is present in person or by proxy at the meeting. If there is
more than one Limited Partner, then the presence in person or by proxy of
fifty-one percent (51%) in Interest of Limited Partners shall constitute a
quorum at all meetings. Only those persons who are Partners at the close of
business on the day before the meeting shall be entitled to vote at the meeting.

C.           Any Partner entitled to vote at a meeting may authorize any person
to act for him by written proxy if a copy of the proxy is delivered to the
General Partners before the commencement of the meeting. Every proxy must be
signed by the Partner (and, if applicable, each co-owner) or his duly appointed
attorney-in-fact, and no proxy shall be valid for more than eleven (11) months
after its date. Every proxy shall be revocable at the pleasure of the Partner
granting it.

31.          Amendments. Except as otherwise provided in this Agreement, no
alterations, modifications, amendments or changes herein shall be effective or
binding upon the parties unless the same shall have been agreed to by the
General Partners, and the Limited Partner (or if there is more than one Limited
Partner, by seventy percent (70%) of the Interests of the Limited Partners);
provided that no amendment of this Agreement shall reduce the Partnership
Interest of any Partner without that Partner’s consent. If there is more than
one Limited Partner, then upon receipt of a written request executed by the
holders of Partnership Interests totalling at least fifty-one percent (51%) of
the Partnership Interests of Limited Partners for the adoption of an amendment
to this Agreement, for removal of the General Partners pursuant to Section 23 or
for termination of the Partnership pursuant to Section 27, the General Partners
shall adopt and implement a plan whereby the Limited Partners may act upon the
adoption of such amendment, removal or termination.

32.          Heirs and Assigns. Subject to the restrictions upon assignment
contained herein, this Agreement shall be binding upon and inure to the benefit
of the parties, their heirs, devisees, legal representatives, successors and
assigns.

 

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33.          Gender. All references herein to any particular gender shall
include either or both of the additional genders, and references to the singular
shall include the plural, unless the context otherwise requires.

34.          Captions. The captions to the operative paragraphs of this
Agreement are inserted for convenience only, and shall not affect the intent of
this Agreement.

35.          Counterparts and Duplicate Originals. This Agreement and all
amendments hereto and the Certificate and Amendments thereto may be executed in
several counterparts and each counterpart shall constitute a duplicate original.

36.          Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Illinois.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.

GENERAL PARTNERS:

 

/s/ Robert J. Washlow, GP

Robert J. Washlow

 

 

/s/ Sheldon Chertow

Sheldon Chertow

 

 

 

LIMITED PARTNER:

 

LAWSON PRODUCTS, INC., a

Delaware Corporation

 

By: /s/ David Meyer  

Its: Chairman of the Board

ATTEST:

/s/ Joseph Pawlick                                          
                      

Its: Assistant Secretary  

 

 

 

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Subscribed and Sworn to before me by Robert J. Washlow this 17th day of April,
1985.

 

Subscribed and Sworn to before me by Sheldon Chertow this 17th day of April,
1985.

 

 

 

Tamara A. Frederick
Notary Public

 

Tamara A. Frederick
Notary Public

 

 

 

 

 

 

Subscribed and Sworn to before me by Daniel F. Meyer and Joseph L. Pawlick,
personally known to me to be the C.O.B. and Asst. Sec., respectively, of Lawson
Products, Inc., a Delaware Corporation

 

 

 

 

 

 

 

 

Henry Knintus
Notary Public

 

 

 

 

 

 

 

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EXHIBIT A

 

LEGAL DESCRIPTION

PARCEL 1:

Lots 10 through 23, inclusive (except the North 45.65 feet of the East 100.20
feet of Lots 19 through 23, inclusive, taken as a tract), in Block 2 in Higgins,
Law and Company’s Addition to Chicago, in the Northwest 1/4 of Section 9,
Township 39 North, Range 14, East of the Third Principal Meridian, in Cook
County, Illinois.

PARCEL 2:

Lots 5 and 6 in Block 1 in Higgins, Law and Company’s Addition to Chicago, in
the Northwest 1/4 of Section 9, Township 39 North, Range 14, East of the Third
Principal Meridian, in Cook County, Illinois.

 

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EXHIBIT B

 

SUPERIOR AND SEDGWICK ASSOCIATES

 

PARTNERSHIP INTERESTS

General Partners:

Robert J. Washlow

Sheldon Chertow

Limited Partner:

Name

Capital
Contribution
Points

 

 

Lawson Products, Inc.

4,000

 

 

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EXHIBIT C

 

CONTRACT

See Attached

 

 

31

 

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EXHIBIT D

 

LEASE

See Attached

 

 

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EXHIBIT E

 

LOAN COMMITMENT

See Attached

 

 

33