Exhibit 10.5

 

TAX PROTECTION AGREEMENT

 

THIS TAX PROTECTION AGREEMENT (this “Agreement”) is made and entered into
effective as of December 27, 2019 (the “Effective Date”) by and among Broad
Street Realty, Inc., a Delaware corporation (the “Company”), Broad Street
Operating Partnership, LP, a Delaware limited partnership (the “Operating
Partnership”), the persons listed on Schedule 1 hereto (each an “Initial
Protected Partner” and, together, the “Initial Protected Partners”), and any
substitute or additional Protected Partners becoming a party hereto after the
date hereof and in accordance with the terms hereof. Each of the parties to this
Agreement is individually referred to herein as a “Party” and collectively as
the “Parties”.

 

WHEREAS, the Initial Protected Partners together own 100% of the membership
interests in BSV Lamonticello Investors LLC, a Delaware limited liability
company (the “Property LLC”),

 

WHEREAS, the Property LLC directly or indirectly holds a fee simple interest in
the property known as “Midtown Lamonticello” located at 220 Monticello Avenue,
Williamsburg, Virginia (the “Underlying Property”);

 

WHEREAS, pursuant to that certain Agreement and Plan of Merger, dated as of May
28, 2019, by and among the Company, the Operating Partnership, BSV Lamonticello
Merger Sub LLC and the Property LLC (the “Merger Agreement”), the Property LLC
will be merged with and into BSV Lamonticello Merger Sub LLC, with the Property
LLC being the surviving entity (the “Merger”), and all of the outstanding
membership interests in the Property LLC will be converted into the right to
receive units of limited partnership interest in the Operating Partnership (the
“OP Units”); and

 

WHEREAS, the Parties desire to enter into this Agreement to account for certain
U.S. federal and state income tax (“Tax”) consequences in connection with any
future direct or indirect disposition of the Underlying Property by the
Operating Partnership, and certain indebtedness of the Operating Partnership and
its Subsidiaries.

 

NOW, THEREFORE, in consideration of the premises and the mutual representations,
warranties, covenants and agreements contained herein and in the Merger
Agreement, the parties hereto hereby agree as follows:

 

ARTICLE I
DEFINITIONS

 

To the extent not otherwise defined herein, capitalized terms used in this
Agreement shall have the meanings ascribed to them in the Merger Agreement.

 

“Accounting Firm” has the meaning set forth in Section 4.2.

 

“Affiliate” of a person means any other person Controlling, Controlled by, or
under common Control with such person.

 

 

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“Agreement” has the meaning set forth in the recitals.

 

“Business Day” means any day except a Saturday, a Sunday, or other day on which
commercial banks in the City of New York are authorized or obligated by law to
close.

 

“Cash Consideration” has the meaning set forth in Section 2.3(ii).

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Control,” including the terms “Controlling,” “Controlled by,” and “under common
Control with,” means possession, directly or indirectly (through one or more
intermediaries), of the power to direct or cause the direction of the management
or policies (whether through ownership of voting securities, by contract or
otherwise) of a person.

 

“Deficit Restoration Obligation” or “DRO” means a written obligation by a
Protected Partner, entered into in accordance with the provisions of Article
III, pursuant to which such Protected Partner undertakes to restore a limited
amount (equal to the DRO Amount of such DRO) of any deficit in its Capital
Account balance in the Operating Partnership in accordance with any applicable
requirements of Treasury Regulations Section 1.704-1(b)(2)(ii)(c). For the
avoidance of doubt, such an obligation shall be treated as a DRO only to the
extent that the corresponding DRO Amount is recognized as a limited deficit
restoration obligation of the Protected Partner with respect to the Operating
Partnership for purposes of Treasury Regulations Section 1.704-1(b)(2)(iv)(d)(2)
(disregarding for this purpose any limitation imposed by Treasury Regulations
Section 1.752-2(k)).

 

“DRO Amount” means, with respect to any DRO, the dollar amount of Capital
Account deficit specified therein that the relevant Protected Partner undertakes
an obligation to restore in accordance with the terms of such DRO.

 

“Effective Date” has the meaning set forth in the recitals.

 

“Guaranteed Amount” means, with respect to any Guaranteed Debt and any Partner
Guarantor, the aggregate amount of such Guaranteed Debt that is guaranteed by
such Partner Guarantor and for which such Partner Guarantor is treated as having
“economic risk of loss” for purposes of Treasury Regulations Section 1.752-2 as
a result of such guarantee.

 

“Guaranteed Debt” means any loan existing, incurred or assumed by the Operating
Partnership or any Subsidiaries treated for U.S. federal income tax purposes as
a partnership or entity disregarded as separate from its owner that is
guaranteed in whole or in part by Partner Guarantors at any time on or after the
Closing Date pursuant to Article III hereof.

 

“Initial Units” means the Units initially received in the Merger by the Initial
Protected Partners (i) reduced by the number of Units disposed of by the
Protected Partners to Excluded Transferees that do not become Protected Partners
with respect to such Units and (ii) adjusted appropriately to take into account
Unit splits, Unit recapitalizations, a merger or similar restructuring of the
Operating Partnership and similar such events.

 

“Initial Protected Partners” has the meaning set forth in the recitals.

 

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“OP Agreement” means the Agreement of Limited Partnership of the Operating
Partnership, dated as of May 21, 2019.

 

“OP Units” has the meaning set forth in the recitals.

 

“Operating Partnership” has the meaning set forth in the recitals.

 

“Merger” has the meaning set forth in the recitals.

 

“Minimum Liability Amount” means, for each Protected Partner, the amount set
forth on Schedule 4 hereto next to such Protected Partner’s name, as amended
from time to time.

 

“Nonrecourse Liability” means a liability described in Section 465(b)(6)(A) and
Treasury Regulations Section 1.752-1(a)(2).

 

“Partner Guarantor” means a Protected Partner who has guaranteed any portion of
a Guaranteed Debt.

 

“Partnership Interest Consideration” has the meaning set forth in Section
2.3(ii).

 

“Pre-Merger Gain” means, with respect to each Protected Property and as
reflected on Schedule 3 hereof, the excess of: (i) the fair market value of such
Protected Property as of the Effective Date; over (ii) the adjusted tax basis of
the Protected Property immediately after the Merger (taking into account any
income or gain recognized as a result of the Merger).

 

“Proceeding” has the meaning set forth in Section 6.1.

 

“Property LLC” has the meaning set forth in the recitals.

 

“Protected Gain” shall mean the amount of Pre-Merger Gain, without duplication,
that would be allocated to and recognized by a Protected Partner under
Section 704(c) of the Code in the event of the sale of the Protected Properties
in a fully taxable transaction; provided, however, Protected Gain shall exclude
any gain recognized by a Protected Partner under the Code pursuant to the
Merger. For purposes of calculating the amount of Pre-Merger Gain allocable to a
Protected Partner under Section 704(c) of the Code: (A) such amount of gain
shall be reduced by adjustments to the amount of gain subject to Section 704(c)
as of the Effective Date pursuant to the Treasury Regulations thereunder; and
(B) any “reverse Section 704(c) gain” allocable to such Partner pursuant to
Treasury Regulations Section 1.704-3(a)(6) shall not be taken into account
unless, as a result of adjustments to the “book value” of any Protected Property
pursuant to the OP Agreement, all or a portion of the gain recognized by the
Operating Partnership that would have been Section 704(c) gain without regard to
such adjustments becomes or is treated as “reverse Section 704(c) gain” or
Section 704(b) gain under Section 704 of the Code, in which case such gain shall
continue to be treated as Section 704(c) gain.

 

“Protected Partner” means (i) each of the Initial Protected Partners and (ii)
any person who acquires Units from a Protected Partner in a transaction in which
gain or loss is not recognized in whole or in part and in which such
transferee’s adjusted basis, as determined for U.S. federal income tax purposes,
is determined in whole or in part by reference to the adjusted basis of a
Protected Partner in such Units.

 

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“Protected Property” means (i) the Property LLC and the Underlying Property;
(ii) a direct or indirect interest owned by the Operating Partnership in any
Subsidiary that owns an interest in a Protected Property, if the disposition of
such interest would result in the recognition of Protected Gain with respect to
a Protected Partner; and (iii) any other property that the Operating Partnership
directly or indirectly receives that is in whole or in part a “substituted basis
property” as defined in Section 7701(a)(42) of the Code with respect to a
Protected Property or interest therein and listed on Schedule 2 hereof. For the
avoidance of doubt, if any Protected Property is transferred to another entity
in a transaction in which gain or loss is not recognized, and if the acquiring
entity’s disposition of such Protected Property would cause a Protected Partner
to recognize gain or loss as a result thereof, such Protected Property shall
remain subject to this Agreement.

 

“Start Date” means the Effective Date.

 

“Subsidiary” means any entity in which the Operating Partnership owns a direct
or indirect interest.

 

“Successor Partnership” has the meaning set forth in Section 2.2(i).

 

“Tax” has the meaning set forth in the recitals.

 

“Tax Claim” has the meaning set forth in Section 6.1.

 

“Tax Protection Period” means the period commencing on the Start Date and ending
at 12:01 AM on the day after the seven (7) year anniversary of the Start Date;
provided, however, that with respect to a Protected Partner, the Tax Protection
Period shall terminate at such time as such Protected Partner (or one or more
successor Protected Partners) has disposed of fifty percent (50%) or more of the
OP Units received, directly or indirectly, in the Merger by such Protected
Partner in one or more taxable transactions.

 

“Underlying Property” has the meaning set forth in the recitals.

 

“Units” means the OP Units, and any other interest in an entity taxable as a
partnership for U.S. federal income tax purposes into which such OP Units are
directly or indirectly converted pursuant to a state law conversion of the
Operating Partnership, a merger of the Operating Partnership or a contribution
of substantially all the assets and liabilities of the Operating Partnership.

 

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ARTICLE II  
RESTRICTIONS ON DISPOSITIONS OF
PROTECTED PROPERTIES

 

2.1     General Prohibition on Disposition of Protected Properties. The
Operating Partnership agrees, for the benefit of each Protected Partner and for
the term of the Tax Protection Period, not to directly or indirectly sell,
exchange, transfer or otherwise dispose of a Protected Property or any interest
therein (without regard to whether such disposition is voluntary or involuntary)
in a transaction that would cause a Protected Partner to recognize any Protected
Gain under Section 704(c) of the Code. Without limiting the foregoing, (i) any
transaction or event that would cause a Protected Partner to recognize gain for
U.S. federal income tax purposes with respect to any Protected Property or any
direct or indirect interest therein will be treated as a disposition of a
Protected Property, and (ii) a disposition shall include any transfer, voluntary
or involuntary, in a foreclosure proceeding, pursuant to a deed in lieu of
foreclosure, or in a bankruptcy proceeding.   

 

2.2     Exceptions Where No Gain Recognized. Notwithstanding the restrictions
set forth in Section 2.1:

 

(i)     The Operating Partnership may dispose of any Protected Property (or an
interest therein) if and to the extent that such disposition qualifies as a
like-kind exchange under Section 1031 of the Code, an involuntary conversion
under Section 1033 of the Code, or other transaction (including, but not limited
to, a contribution of property to any entity that qualifies for the
non-recognition of gain under Section 721 or Section 351 of the Code, or a
merger or consolidation of the Operating Partnership with or into another entity
that qualifies for taxation as a “partnership” for U.S. federal income tax
purposes (a “Successor Partnership”)) that does not result (in the year of such
disposition or in a later year within the Tax Protection Period) in the
recognition of any Protected Gain to a Protected Partner. In further
clarification thereof, in the case of a Section 1031 like-kind exchange, if such
exchange is with a “related person” within the meaning of Section 1031(f)(3) of
the Code, any direct or indirect disposition by such related person of the
Protected Property or any other transaction prior to the expiration of the two
(2) year period following such exchange and within the Tax Protection Period
that would cause Section 1031(f)(1) of the Code to apply with respect to such
Protected Property (including by reason of the application of Section 1031(f)(4)
of the Code) and a result of which a Protected Partner recognizes Protected Gain
shall be considered a violation of Section 2.1 by the Operating Partnership.

 

(ii)     The Operating Partnership shall not be obligated to indemnify any
Protected Partner pursuant to the terms of this Agreement with respect to, in
connection with or arising in any way as a result of (A) the treatment or Tax
positions taken by the Initial Protected Partners prior to the date of the
Merger, or (B) changes in Tax law, including retroactive Tax law changes, made
or enacted after the Effective Date.

 

2.3     Mergers.

 

(i)     For the avoidance of doubt, any merger or consolidation involving the
Operating Partnership or any Subsidiary, whether or not the Operating
Partnership or Subsidiary is the surviving entity in such merger or
consolidation, that results in a Protected Partner recognizing part or all of
the Protected Gain under Section 704(c) of the Code shall be deemed a
disposition of the Protected Property subject to Section 2.1.

 

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(ii)     Notwithstanding Section 2.3(i), Section 2.1 shall not apply to a
voluntary, actual disposition by a Protected Partner of Units in connection with
a merger or consolidation of the Operating Partnership pursuant to which (1) the
Protected Partner is offered either cash or property treated as cash pursuant to
Section 731 of the Code (“Cash Consideration”) or partnership interests
(“Partnership Interest Consideration”) and the receipt of such partnership
interests would not result in the recognition of gain for U.S. federal income
tax purposes by the Protected Partner; (2) the Protected Partner has the right
to elect to receive solely Partnership Interest Consideration in exchange for
his Units, an election to receive solely Partnership Interest Consideration
would not adversely affect the Protected Partner (viewed objectively and
relative to an election to receive Cash Consideration) and the continuing
partnership has agreed in writing to assume the obligations of the Operating
Partnership under this Agreement; (3) no Protected Gain is recognized by the
Operating Partnership as a result of any member of the Operating Partnership
receiving Cash Consideration; and (4) the Protected Partner elects or is deemed
to elect to receive Cash Consideration.

 

ARTICLE III  
ALLOCATION OF LIABILITIES; GUARANTEE OPPORTUNITY
AND DEFICIT RESTORATION OBLIGATIONS

 

3.1     Maintenance of Indebtedness. During the Tax Protection Period, the
Operating Partnership shall use its best efforts to maintain, or cause to be
maintained, an amount of indebtedness treated as Nonrecourse Liabilities of the
Operating Partnership for purposes of Section 752 (including for this purpose
Nonrecourse Liabilities attributed to the Operating Partnership under Treasury
Regulations Section 1.752-4(a)) such that each Protected Partner is allocated
(and the Operating Partnership shall so allocate to each Protected Partner),
pursuant to Treasury Regulations Section 1.752-3, Nonrecourse Liabilities of the
Operating Partnership in an amount no less than such Protected Partner’s Minimum
Liability Amount (as identified on Schedule 4 attached hereto).

 

3.2     Non-Recourse Liability Allocations. During the Tax Protection Period, to
the extent that any Nonrecourse Liabilities of the Operating Partnership are
allocable under Treasury Regulations Section 1.752-3(a)(3), and subject to
Section 3.1, the Operating Partnership shall allocate the maximum amount (in the
aggregate) of its Nonrecourse Liabilities to the Protected Partners under such
Treasury Regulation.

 

3.3     Guarantees; DROs. During the Tax Protection Period and subject to the
provisions of this Section 3.3, a Protected Partner may request: (i) to
guarantee indebtedness of the Operating Partnership or any Subsidiary that is
classified for U.S. federal income tax purposes as a partnership or an entity
disregarded as separate from its owner; or (ii) to enter into a DRO, in each
case in such amount or amounts as are requested by the Protected Partner. The
Operating Partnership shall negotiate in good faith with any Protected Partner
that requests to enter into a guarantee or DRO to consummate such guarantee or
DRO in a manner that allows the requesting Protected Partner to be allocated
Operating Partnership liabilities under Treasury Regulations Sections 1.752-1
and 1.752-2 as a result of such liabilities being treated as recourse to the
relevant Protected Partner; provided that such actions would not adversely
affect the Operating Partnership or other Members of the Operating Partnership
or result in a breach by the Operating Partnership of any of its other
obligations under this Article III; provided, further, that the Operating
Partnership will not be required to incur any indebtedness that it would not
otherwise have incurred. Notwithstanding the foregoing, in the event a Protected
Partner has entered into a DRO, the Operating Partnership will maintain or cause
to be maintained an amount of indebtedness of the Operating Partnership that
would be considered “recourse” indebtedness of the Operating Partnership at
least equal to the sum of the DRO Amounts of all Protected Partners plus the
amount of deficit restoration obligations of other Members of the Operating
Partnership, if any, that would be treated as DRO Amounts if undertaken by a
Protected Partner.

 

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3.4     Change in Law. Notwithstanding the foregoing, if, due to a change in
law, a Protected Partner reasonably believes that such Protected Partner may no
longer continue to be allocated such Protected Partner’s Guaranteed Amount of a
Guaranteed Debt, such Protected Partner may request a modification of such
Guarantee Agreement and the Operating Partnership will use its commercially
reasonable efforts to work with the lender with respect to such Guaranteed Debt
to have the Guarantee Agreement amended in a manner that will permit such
Protected Partner to be allocated such Protected Partner’s Guaranteed Amount
with respect to the Guaranteed Debt, or, in the event the Operating Partnership
has sufficient recourse debt outstanding, such Protected Partner, at its option,
shall be offered the opportunity to enter into a DRO in an amount equal to such
Guaranteed Amount so that, assuming such DRO is effective under applicable law,
the amount of Operating Partnership liabilities allocated to such Protected
Partner shall not decrease as a result of the change in law. Furthermore, if,
due to a change in law, a Protected Partner reasonably believes such Protected
Partner may no longer continue to be allocated Operating Partnership liabilities
equal to such Protected Partner’s DRO Amount, such Protected Partner may request
a modification of the terms of such DRO and the Operating Partnership will use
commercially reasonable efforts to modify such DRO in a manner that will permit
such Protected Partner to be allocated Operating Partnership liabilities in an
amount equal to such Protected Partner’s DRO Amount.

 

ARTICLE IV 
REMEDIES FOR BREACH

 

4.1     Monetary Damages. In the event the Operating Partnership or a Subsidiary
breaches its obligations set forth in Article II or Article III with respect to
a Protected Partner, the Protected Partner’s sole right shall be to receive from
the Operating Partnership, and the Operating Partnership shall pay to the
Protected Partner as damages an amount equal to:

 

(i)     in the case of a violation of Article II, the aggregate federal, state,
and local income taxes (including any applicable federal unearned income
Medicare contribution under Section 1411 of the Code) incurred with respect to
the Protected Gain incurred with respect to the Protected Property that is
allocable to such Protected Partner under the OP Agreement; and

 

(ii)     in the case of a violation of Article III, the aggregate federal, state
and local income taxes (including any applicable federal unearned income
Medicare contribution under Section 1411 of the Code) incurred by the Protected
Partner as a result of the gross income or gain allocated to, or otherwise
recognized by, such Protected Partner by reason of such breach;

 

plus, in either case, an additional amount so that, after the payment by such
Protected Partner of all federal, state and local income taxes on amounts
received pursuant to this Section 4.1(including any Tax liability incurred as a
result of such Protected Partner’s receipt of such indemnity payment), such
Protected Partner has received an amount equal to its total federal, state and
local income tax liability incurred as a result of such breach.

 

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For purposes of computing the amount of federal, state, and local income taxes
required to be paid by a Protected Partner, (i) any deduction for state and
local income taxes payable as a result thereof shall be taken into account, and
(ii) a Protected Partner’s Tax liability shall be computed using the highest
federal, state and local marginal income tax rates that would be applicable to
such Protected Partner’s taxable income (taking into account the character of
such income or gain) for the year with respect to which the Taxes must be paid,
and, except as described in clause (i), without regard to any deductions, losses
or credits that may be available to such Protected Partner that would reduce or
offset its actual taxable income or actual Tax liability if such deductions,
losses or credits could be utilized by the Protected Partner to offset other
income, gain or Taxes of the Protected Partner, either in the current year, in
earlier years, or in later years.

 

4.2     Process for Determining Damages. If the Operating Partnership or a
Subsidiary has breached or violated any of the covenants set forth in Article II
or Article III (or a Protected Partner asserts that the Operating Partnership or
a Subsidiary has breached or violated any of the covenants set forth in Article
II or Article III), the Operating Partnership and the Protected Partner agree to
negotiate in good faith to resolve any disagreements regarding any such breach
or violation and the amount of damages, if any, payable to such Protected
Partner under Section 4.1. If any such disagreement cannot be resolved by the
Operating Partnership and such Protected Partner within (i) 60 days after the
receipt of notice from the Operating Partnership of such breach pursuant to
Section 4.3, (ii) 60 days after the receipt of a notice from the Protected
Partner that the Operating Partnership or a Subsidiary has breached its
obligations under this Agreement, which notice shall set forth the amount of
income asserted to be recognized by the Protected Partner and the payment
required to be made to such Protected Partner under Section 4.1 as a result of
the breach, (iii) 10 days following the date that the Operating Partnership
notifies the Protected Partner of its intention to settle, compromise and/or
concede any Tax Claim or Proceeding pursuant to Section 6.2, or (iv) 10 days
following any final determination of any Tax Claim or Proceeding, the Operating
Partnership and the Protected Partner shall jointly retain a nationally
recognized big four independent public accounting firm (an “Accounting Firm”) to
act as an arbitrator to resolve as expeditiously as possible all points of any
such disagreement (including, without limitation, whether a breach of any of the
covenants set forth in Article II and Article III has occurred and, if so, the
amount of damages to which the Protected Partner is entitled as a result
thereof, determined as set forth in Section 4.1). All determinations made by the
Accounting Firm with respect to the resolution of any breach or violation of any
of the covenants set forth in Article II and Article III and the amount of
damages payable to the Protected Partner under Section 4.1 shall, subject to any
subsequent Tax Claim or Proceeding, and subject to the last sentence of this
Section 4.2, be final, conclusive and binding on the Operating Partnership and
the Protected Partner. The fees and expenses of any Accounting Firm incurred in
connection with any such determination shall be shared equally by the Operating
Partnership and the Protected Partner, provided that if the amount determined by
the Accounting Firm to be owed by the Operating Partnership to the Protected
Partner is more than 5% higher than the amount proposed by the Operating
Partnership to be owed to such Protected Partner prior to the submission of the
matter to the Accounting Firm, then all of the fees and expenses of any
Accounting Firm incurred in connection with any such determination shall be paid
by the Operating Partnership, and if the amount determined by the Accounting
Firm to be owed by the Operating Partnership to the Protected Partner is less
than 95% of the amount proposed by the Protected Partner to be owed to the
Protected Partner prior to the submission of the matter to the Accounting Firm
then all fees and expenses of any Accounting Firm incurred in connection with
any such determination shall be paid by the Protected Partner. In the case of
any Tax Claim or Proceeding that is resolved pursuant to a final determination
or that is settled, compromised and/or conceded pursuant to Section 6.2, the
amount of Taxes due to the Internal Revenue Service or other taxing authority
shall, to the extent that such Taxes relate to matters covered in this
Agreement, be presumed to be damages resulting from a breach of this Agreement,
and the amount of any such damages shall be increased by any interest and
penalties required to be paid by the Protected Partner with respect to such
Taxes (other than interest and penalties resulting from a failure of the
Protected Partner to timely and properly file any Tax return or to timely pay
any Tax, unless such failure resulted solely from the Protected Partner
reporting and paying its Taxes in a manner consistent with the Operating
Partnership) so that the amount of the damages under Section 4.1 shall not be
less than the amount required to be paid to the Internal Revenue Service or
other taxing authority that pertains to matters covered in this Agreement.

 

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4.3     Required Notices; Time for Payment. In the event that there has been a
breach of Article II or Article III, the Operating Partnership shall provide to
each affected Protected Partner notice of the transaction or event giving rise
to such breach, along with a calculation of the amount of income to be
recognized by any Protected Partner and the amount required to be paid to such
Protected Partner under Section 4.1 by reason thereof, not later than 30 days
following the date that the Operating Partnership becomes aware that such
transaction or event constitutes a breach of this Agreement. All payments
required to be made under Section 4.1 to any Protected Partner shall be made to
such Protected Partner at least two Business Days before April 15 of the year
following the year in which the transaction or event giving rise to such payment
took place; provided that if the Protected Partner is required to make estimated
Tax payments that are required to be calculated by reference to any income
resulting from such transaction or event, the Operating Partnership shall make a
payment to the Protected Partner at least two Business Days before the due date
for such estimated Tax payment, and such payment from the Operating Partnership
shall be in an amount that corresponds to the amount of the estimated Tax
required to be paid by such Protected Partner with respect to such income at
such time; provided further that any payment required to be made under
Section 4.1 to any Protected Partner resulting from a Tax Claim or Proceeding
shall be made at least two Business Days before the date that the relevant Taxes
are required to be paid as a result of any final determination of such Tax Claim
or Proceeding or any settlement, compromise and/or concession of such Tax Claim
or Proceeding pursuant to Section 6.2. In the event of a payment made after the
date required pursuant to this Section 4.3, interest shall accrue on the
aggregate amount required to be paid from such date to the date of actual
payment at a rate equal to the “prime rate” of interest, as published in The
Wall Street Journal (or if no longer published there, as announced by Citibank)
effective as of the date the payment is required to be made plus 10%, but not to
exceed the maximum amount permitted by law.

 

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4.4     Offsetting Tax Benefits; Refunds.

 

(i)     If the Protected Partner is entitled to, or has received, a payment
under Section 4.1, the Operating Partnership shall be entitled to reduce such
payment by or, if previously paid, the Protected Partner shall pay to the
Operating Partnership an amount equal to, the excess of any Taxes actually saved
by the Protected Partner as a result of such payment (for example, due to the
allocation by the Operating Partnership of a corresponding deduction for the
payment to the Protected Partner).

 

(ii)     The Protected Partner shall pay to the Operating Partnership any Tax
refunds with respect to which the Operating Partnership has paid an amount
hereunder.

 

(iii)     Notwithstanding clauses (i) and (ii), the amount payable by the
Protected Partner under this Section 4.4 shall not exceed the sum of the amounts
previously paid by the Operating Partnership to the Protected Partner hereunder.
In addition, any subsequent disallowance of Tax savings or refunds paid over by
the Protected Partner hereunder shall be treated as a Tax for which the
Operating Partnership is obligated to indemnify the Protected Partner pursuant
hereto.

 

ARTICLE V 
SECTION 704(C) METHOD AND ALLOCATIONS

 

5.1     Application of “Traditional Method with Curative Allocations.”
Notwithstanding any provision of the OP Agreement to the contrary, the Operating
Partnership shall use the “traditional method with curative allocations” under
Treasury Regulations Section 1.704-3(c) for purposes of making all allocations
under Section 704(c) of the Code with respect to the Protected Properties.

 

ARTICLE VI 
TAX PROCEEDINGS

 

6.1     Notice of Tax Audits. If any claim, demand, assessment (including a
notice of proposed assessment) or other assertion is made with respect to Taxes
against any Protected Partner or the Operating Partnership the calculation of
which involves a matter covered in this Agreement or the income tax treatment of
the Merger (a “Tax Claim”), or if the Operating Partnership receives any notice
from any jurisdiction with respect to any current or future audit, examination,
investigation or other proceeding involving the Protected Partners or the
Operating Partnership or that otherwise could involve a matter covered in this
Agreement and could directly or indirectly affect (adversely or otherwise) the
Protected Partners (a “Proceeding”), then (i) in the case of a notification of a
Tax Claim or Proceeding received by the Operating Partnership, the Operating
Partnership shall promptly notify the Protected Partners of such Tax Claim or
Proceeding, but in no event later than 20 Business Days after receipt of such
notice, and (ii) in the case of a notification of a Tax Claim or Proceeding
received by any Protected Partner, or any notice of any current or future audit,
examination, investigation or other proceeding received by a Protected Partner
that involves or could involve a matter covered in this Agreement or the income
tax treatment of the Merger, the Protected Partner shall promptly notify the
Operating Partnership of such Tax Claim, Proceeding, or other notice, but in no
event later than 20 Business Days after receipt of such notice.

 

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6.2     Control of Tax Proceedings. The Operating Partnership shall have the
right to control the defense, settlement or compromise of any Proceeding or Tax
Claim; provided, however, that the Operating Partnership shall keep the
Protected Partners duly informed of the progress thereof to the extent that such
Proceeding or Tax Claim could directly or indirectly affect (adversely or
otherwise) the Protected Partners; the Protected Partners shall have the right
to participate in the portion of any such Proceeding or Tax Claim related to
them at their own expense; and the Operating Partnership shall not settle,
compromise and/or concede such portion of such Proceeding or Tax Claim without
the prior written consent of the Protected Partners, which written consent shall
not be unreasonably withheld, delayed or conditioned.

 

ARTICLE VII 
AMENDMENT OF THIS AGREEMENT; WAIVER OF CERTAIN PROVISIONS

 

7.1     Amendment. This Agreement may not be amended, directly or indirectly
(including by reason of a merger between the Operating Partnership and another
entity), except by a written instrument signed by the Operating Partnership and
the Protected Partners holding a majority of the Units held by all Protected
Partners.

 

7.2     Waiver. Notwithstanding the foregoing, upon written request by the
Operating Partnership, each Protected Partner, in its sole discretion, may waive
the payment of any damages that is otherwise payable to such Protected Partner
pursuant to Article IV hereof. Such a waiver shall be effective only if obtained
in writing from the affected Protected Partner.

 

ARTICLE VIII 
MISCELLANEOUS

 

8.1     Additional Actions and Documents. Each of the parties hereto hereby
agrees to take or cause to be taken such further actions, to execute, deliver,
and file or cause to be executed, delivered and filed such further documents,
and will obtain such consents, as may be necessary or as may be reasonably
requested in order to fully effectuate the purposes, terms and conditions of
this Agreement.

 

8.2     Assignment. No party hereto shall assign its or his rights or
obligations under this Agreement, in whole or in part, except by operation of
law, without the prior written consent of the other parties hereto, and any such
assignment contrary to the terms hereof shall be null and void and of no force
and effect. Notwithstanding the foregoing: (i) the Operating Partnership may
assign its rights and obligations under this Agreement to a direct or indirect
successor (including a Successor Partnership), whether by merger, transfer,
spin-off or otherwise, to all or substantially all of the assets of the
Operating Partnership; and (ii) in the event a Protected Partner transfers its
Units in a transaction described in clause (ii) of the definition of “Protected
Partner,” such transferee of such Units shall become a Protected Partner for
purposes of this Agreement.

 

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8.3     Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the Protected Partners and their respective successors
and permitted assigns, whether so expressed or not. This Agreement shall be
binding upon the Operating Partnership, and any entity that is a direct or
indirect successor (including a Successor Partnership), whether by merger,
transfer, spin-off or otherwise, to all or substantially all of the assets of
the Operating Partnership (or any prior successor thereto as set forth in the
preceding portion of this sentence), provided that none of the foregoing shall
result in the release of liability of the Company and the Operating Partnership
hereunder.

 

8.4     Captions. The Article and Section headings contained in this Agreement
are inserted for convenience of reference only, shall not be deemed to be a part
of this Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.

 

8.5     Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered, mailed or transmitted, and shall be effective upon
receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the email address or
telecopier number specified below:

 

  (i) if to the Company or the Operating Partnership, to:          

c/o Broad Street Realty, LLC

7250 Woodmont Avenue, Suite 350

Bethesda, MD 20814

Attention: Michael Z. Jacoby

Facsimile: (301) 828-1201

Email: mjacoby@broadstreetllc.net

          with a copy to:          

Morrison & Foerster LLP

2000 Pennsylvania Avenue NW, Suite 6000

Washington, DC 20006-1888

Attention: David P. Slotkin, Lauren C. Bellerjeau and Andrew P. Campbell

Facsimile: (202) 887-0763

Email: dslotkin@mofo.com, lbellerjeau@mofo.com and andycampbell@mofo.com

       

(ii)

if to a Protected Partner, to the address on file with the Operating
Partnership.

 

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Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request, or communication which shall be hand delivered,
sent, mailed, emailed or faxed in the manner described above, shall be deemed
sufficiently given, served, sent, received or delivered for all purposes at such
time as it is delivered to the addressee (with the return receipt, the delivery
receipt, or (with respect to a facsimile) the answerback being deemed
conclusive, but not exclusive, evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.

 

8.6     Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.

 

8.7     Governing Law. The interpretation and construction of this Agreement,
and all matters relating thereto, shall be governed by the laws of the State of
Delaware, without regard to the choice of law provisions thereof.

 

8.8     Consent to Jurisdiction; Enforceability.

 

(i)     This Agreement and the duties and obligations of the parties hereunder
shall be enforceable against any of the parties in the courts of the State of
Delaware. For such purpose, each party hereto hereby irrevocably submits to the
nonexclusive jurisdiction of such courts and agrees that all claims in respect
of this Agreement may be heard and determined in any of such courts.

 

(ii)     Each party hereto hereby irrevocably agrees that a final judgment of
any of the courts specified above in any action or proceeding relating to this
Agreement shall be conclusive and may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by law.

 

8.9     Severability. If any part of any provision of this Agreement shall be
invalid or unenforceable in any respect, such part shall be ineffective to the
extent of such invalidity or unenforceability only, without in any way affecting
the remaining parts of such provision or the remaining provisions of this
Agreement.

 

8.10     Costs of Disputes. Except as otherwise expressly set forth in this
Agreement, the nonprevailing party in any dispute arising hereunder shall bear
and pay the costs and expenses (including, without limitation, reasonable
attorneys’ fees and expenses) incurred by the prevailing party or parties in
connection with resolving such dispute.

 

8.11     Confidential Information. Each Party agrees that the Tax returns and
all related information of the other is highly confidential and shall not be
disclosed to any person (including the other) for any reason except as
contemplated by the Merger Agreement, the OP Agreement, or as otherwise required
by law; provided that the Protected Partner shall disclose to the Operating
Partnership under a confidentiality agreement reasonably acceptable to the
Protected Partner such Tax returns and related information to allow the
Operating Partnership to assess and comply with its obligations hereunder and
participate in the contest of any Tax Claim or Proceeding.

 

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[SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF, the Company, the Operating Partnership and each Protected
Partner have caused this Agreement to be signed by their respective duly
authorized officers or representatives, all as of the date first written above.

 

 

 

 

BROAD STREET REALTY, INC.

 

 

 

 

 

 

 

 

 

 

By:

/s/ Michael Z. Jacoby

 

 

Name:

Michael Z. Jacoby

 

 

Title:

Chief Executive Officer

 

                 

BROAD STREET OPERATING PARTNERSHIP, LP

         

By: BROAD STREET OP GP LLC, its general partner

         

By: BROAD STREET REALTY, INC., its sole member

                     

By:

/s/ Michael Z. Jacoby

   

Name:

Michael Z. Jacoby

   

Title:

Chief Executive Officer

                    ALEXANDER TOPCHY            

By:

/s/ Alexander Topchy    

Name:

Alexander Topchy    

 

      ARAS HOLDEN             By: /s/ Aras Holden     Name: Aras Holden        
    MICHAEL Z. JACOBY             By: /s/ Michael Z. Jacoby     Name: Michael Z.
Jacoby             THOMAS YOCKEY             By: /s/ Thomas Yockey     Name:
Thomas Yockey