Exhibit 4
AGREEMENT OF LIMITED PARTNERSHIP
OF
WINDSOR PARK PROPERTIES 7/8
A California Limited Partnership
TABLE OF CONTENTS
Page
I. FORMATION OF LIMITED PARTNERSHIP........................................................................1
1.01 Formation and Agreement of Limited Partnership.................................................1
1.02 Name and Principal Place of Business...........................................................1
1.03 Term of Partnership............................................................................1
1.04 Definitions....................................................................................2
1.05 Purpose of Partnership and Investment Objectives...............................................4
1.06 General and Limited Partners...................................................................4
(a) General Partners......................................................................4
(b) General Partners Capital Contribution.................................................5
(c) General Partners Purchase of Units....................................................5
(d) Authorized Units and Original and Additional Limited Partners.........................5
(e) Admission of Original Additional Limited Partners.....................................5
II. MANAGEMENT OF THE PARTNERSHIP...........................................................................5
2.01 Powers and Duties of the General Partners......................................................5
2.02 Indemnification................................................................................7
2.03-1 Powers and Duties of the Limited Partners......................................................8
2.03-2 Acts Not Deemed "Participation in Control\.....................................................8
2.03-3 The Rights and Duties of the Partners in Relationship to the Partnership
Shall Be Determined by the Following Rules.....................................................9
2.04 Compensation of General Partners and Affiliates................................................9
(1) Property Management Fee.....................................................10
(2) Affiliate Acquisition Fees..................................................10
(3) Limitation..................................................................10
2.05 Investment in Properties......................................................................10
2.06 Certain Mortgaging............................................................................11
2.07 Reinvestment..................................................................................11
III. FINANCING OF THE PARTNERSHIP...........................................................................11
3.01 Capital Contributions of the General Partners.................................................11
3.02 Capital Contributions of the Limited Partners.................................................11
(a) Partnership Unit.....................................................................11
(b) Initial Subscriptions................................................................11
(c) Offering Period......................................................................11
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TABLE OF CONTENTS
(continued)
Page
3.03 Additional Contributions......................................................................11
3.04 Interest......................................................................................12
3.05 Time for Return of Contributions..............................................................12
3.06 Loans by the Partners.........................................................................12
3.07 Allocation of Net Profits and Net Losses and Distributions From Cash
Available For Distribution....................................................................12
3.08 Conditions and Consent to Allocations and Distributions.......................................14
3.09 Partnership Expenses..........................................................................14
IV. BOOKS OF ACCOUNT, FINANCIAL STATEMENTS AND FISCAL MATTERS..............................................15
4.01 Books of Account..............................................................................15
4.02 Reports and Financial Statements..............................................................16
(a) Annual Report........................................................................16
(b) Quarterly Reports....................................................................16
(c) Tax Information......................................................................17
(d) Filing of Reports....................................................................17
(e) Special Reports......................................................................17
4.03 Tax Returns and Records.......................................................................17
4.04 Fiscal Year...................................................................................17
4.05 Bank Accounts, Funds and Assets...............................................................17
4.06 Adjustment of Tax Basis.......................................................................17
4.07 Insurance.....................................................................................18
4.08 Appraisals....................................................................................18
4.09 Tax Matters Partner...........................................................................18
V. ASSIGNABILITY OF LIMITED PARTNERS INTERESTS............................................................18
5.01 Limited Partners' Interest....................................................................18
5.02 Further Restriction on Transfers..............................................................19
5.03 Substituted Partners..........................................................................19
5.04 Additional Restrictions.......................................................................19
5.05 Withdrawal of Limited Partner.................................................................19
5.06 Death of Limited Partner......................................................................19
5.07 Recognition of Substituted and Assignee Limited Partners......................................20
VI. PURCHASE OF UNITS BY THE PARTNERSHIP...................................................................20
VII. RIGHT OF LIMITED PARTNERS TO RECEIVE PROPERTY OTHER THAN CASH..........................................20
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TABLE OF CONTENTS
(continued)
Page
VIII. TERMINATION OF A GENERAL PARTNER.......................................................................20
8.01 Ceasing to be a General Partner...............................................................20
8.02 Continuation of Business of Remaining General Partner.........................................21
8.03 Removal of a General Partner..................................................................21
8.04 Dissolution of Partnership and Continuance of Partnership Business............................21
8.05 Payment to Terminated General Partner.........................................................21
8.06 Termination of Executory Contracts............................................................22
IX. DISTRIBUTION ON TERMINATION............................................................................22
9.01 Events of Dissolution.........................................................................22
9.02 Gain and Loss on Dissolution and Order of Distribution........................................22
9.03 Eminent Domain................................................................................23
9.04 Period of Liquidation.........................................................................23
X. CERTIFICATES AND OTHER DOCUMENTS.......................................................................23
10.01 General Partners Attorneys for Limited Partners...............................................23
10.02 Making, Filing, Etc. of Certificates, Etc.....................................................24
XI. NOTICES................................................................................................24
XII. CONVEYANCES, CONTRACTS AND DOCUMENTS...................................................................25
XIII. ARBITRATION............................................................................................25
XIV. MEETINGS OF, OR ACTIONS BY, THE LIMITED PARTNERS.......................................................25
XV. CAPTIONS--PRONOUNS.....................................................................................28
XVI. BINDING EFFECT AND EXHIBITS............................................................................28
XVII. AMENDMENT OF THE AGREEMENT.............................................................................28
XVIII. ENTIRE AGREEMENT.......................................................................................29
XIX. TAX CONTROVERSIES......................................................................................29
XX. COUNTERPARTS AND EXECUTION.............................................................................29
XXI. INVESTMENT IN OTHER PROGRAMS OF SPONSOR................................................................29
XXII. PROCEEDS FROM FINANCING PROPERTIES.....................................................................30
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AGREEMENT OF LIMITED PARTNERSHIP
OF
WINDSOR PARK PROPERTIES 7/8
A California Limited Partnership
This Agreement of Limited Partnership is made (including amendments) as of
the date stated on the signature page, by and among The Windsor Corporation, a
California corporation (Corporate General Partner) and Xxxx X. Xxxxx, Xx.
(Individual General Partner), as General Partners and Xxxxxxxx Xxx Xxxxx as the
original Limited Partner.
The original Limited Partner and each other person, partnership,
corporation, trust or other entity who or which shall hereafter be admitted to
the Partnership as a limited partner as hereinafter provided, are referred to
collectively as the "Limited Partners" and individually as a "Limited Partner."
I.
FORMATION OF LIMITED PARTNERSHIP
1.01 Formation and Agreement of Limited Partnership. The parties hereby
form a limited partnership (the "Partnership") pursuant to the provisions of the
California Revised Limited Partnership Act as set forth in Title 2, Chapter 3,
of the California Corporations Code, upon the terms and conditions set forth
herein. On the execution of this Agreement (the "Agreement"), the parties will
execute, acknowledge and file a Certificate of Limited Partnership pursuant to
the provisions of Section 15,621 of the California Corporations Code.
1.02 Name and Principal Place of Business. The name of the Partnership
is Windsor Park Properties, a California Limited Partnership, and the office and
principal place of business shall be 000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxxxx 00000, and hereafter such other place or places as the General
Partners may from time to time determine.
1.03 Term of Partnership. The Partnership shall commence as of the date
of this Agreement (the "effective date") and shall continue for a period ending
the earlier of:
(a) Six months after the commencement of its public offering
registered with the Securities and Exchange Commission, provided that on
said date the Partnership has not received a minimum of $1,250,000 of
capital contributions from Limited Partners;
(b) December 31, 2005;
(c) The date on which all of the assets acquired by the Partnership
are sold or
otherwise disposed of;
(d) The date on which the Partnership is voluntarily dissolved by the
agreement of the Partners;
(e) The date on which the Partnership is dissolved by operation of law
or judicial decree; or
(f) The date on which the last remaining original General Partner
retires, dies, becomes legally incapacitated, dissolves, withdraws, is
adjudicated bankrupt or is removed, unless a majority in interest of the
Limited Partners by written consent or vote elect one or more new General
Partners to continue the Partnership business.
1.04 Definitions. The following terms used in this Agreement shall (unless
otherwise expressly provided herein or unless the context otherwise requires)
have the following respective meanings:
(a) (a-1) "Acquisition Fees" shall mean the total of all fees and
commissions paid by any party, including any sponsor, in connection with the
purchase or development of any property by the Partnership, whether designated
as a real estate commission, selection fee, development fee, non-recurring
management fee or any fee of a similar nature (except a development fee paid to
a person nonaffiliated with the sponsors in connection with the actual
development of a project after acquisition of the land by the Partnership).
"Development fee" means a fee for the packaging of a Partnership property,
including negotiating and approving plans and undertaking to assist in obtaining
zoning and necessary variances and necessary financing for the specific
property, either initially or at a later date. "Acquisition Fees" include the
fee described in (a-2) next.
(a-2) "Affiliate Acquisition Fees" mean the acquisition fee paid to the
General Partners for their services in connection with the evaluation of
potential acquisitions by the partnership and in connection with the acquisition
of properties. This fee shall not exceed 5% of the public offering proceeds.
(b) "Affiliate" shall include (i) any person directly or indirectly
controlling, controlled by or under common control with another person, (ii) a
person owning or controlling 10% or more of the outstanding voting securities of
such other persons, (iii) any officer, director, partner, general trustee or
anyone acting in a substantially similar capacity as to such person, and (iv)
any person who is an officer, director, general partner, trustee, or holder of
10% or more of the voting securities or beneficial interests of any of the
foregoing.
(c) "Appraised Value" means value according to an appraisal made by an
independent appraiser who is a member in good standing of a professional
appraisal association.
(d) "Cash Available For Distribution" means the cash funds provided from
Partnership operations, including lease payments on net leases from builders and
sellers, without deduction for depreciation, but after deducting cash funds used
to pay all other expenses, debt payments, capital improvements, amounts set
aside for restoration or creation of reserves, and replacements.
(e) "Capital Contributions" means the total investment and contribution to
the capital of the Partnership in cash by Limited or General Partners without
deduction of selling, organization or other expenses.
(f) "Distributions" shall mean any cash or other property distributed to
the Limited and General Partners arising from their interests in the
Partnership, but shall not include any payments to the General Partners under
the provisions of Section 2.04.
(g) "Expenses of Acquisition" includes, but is not limited to, legal fees
and expenses, travel and communication expenses, costs of appraisals, non-
refundable option payments on property not acquired, accounting fees and
expenses, title insurance, and miscellaneous expenses related to selection and
acquisition of properties, whether or not acquired, including reimbursements
(but not in excess of 1% of the gross offering proceeds from the sale of the
Partnership's Units) to the General Partners and their Affiliates for the
salaries and direct expenses of their officers and employees while directly
engaged in the selection and acquisition of properties, whether or not acquired.
(h) "Invested Capital" means General or Limited Partner's original capital
contribution.
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(i) "Net Profits and Net Losses" means the profits or losses of the
Partnership in accordance with accounting method followed for federal income tax
purposes.
(j) "Person" means any natural person, partnership, corporation,
associations or other legal entity.
(k) "Purchase Price" means the price paid upon the purchase or sale of a
particular property, including the amount of acquisition fees and all liens and
mortgages on the property, but excluding points and prepaid interest.
(l) "Sponsor" shall mean any person directly or indirectly instrumental in
organizing, wholly or in part, the Partnership, or any person who will manage or
participate in the management of the Partnership, including the General Partners
and any affiliate of such person, excluding any person whose only relation with
the Partnership is that of independent property manager and whose only
compensation is as such. Sponsor shall not include wholly independent third
parties such as attorneys, accountants, and underwriters whose only compensation
is for professional services rendered in connection with the offering of
Partnership interest.
(m) "Units" shall mean the partnership interests of the Limited and General
Partners, and each unit shall represent a capital contribution of $100 to the
Partnership and entitle the holder thereof to the rights and interests of
Limited or General Partners as herein provided.
(n) "Adjusted Invested Capital" means the original capital contribution
paid for each Unit reduced by any return of capital (defined as a return of cash
invested or cash distributions in excess of funds generated from operations,
should this occur) and further reduced by the total cash distributed from net
proceeds from financing and net proceeds from the sale of Properties with
respect to each Unit. Thus, distributions of cash from operations do not reduce
"adjusted invested capital."
(o) "Organization and Offering Expenses" means any and all costs and
expenses, including Unit selling commissions, incurred by the Partnership, any
General Partner or any Affiliate of any General Partner or any other Partner,
party or person in connection with the formation, qualification, organization,
and registration of the Partnership and in the marketing and distribution of
Units, including, without limitation, the following: legal, accounting and
escrow fees; printing, amending, supplementing, mailing, and distributing costs;
filing, registration and qualification fees and taxes; telegraph and telephone
costs; all advertising, marketing and due diligence expenses; and reimbursements
to the General Partners and their Affiliates for the salaries and direct
expenses of their officers and employees while directly engaged in organizing
the Partnership. The Organization and Offering Expenses shall not exceed 14% of
the gross offering proceeds of Units.
(p) "Competitive Real Estate Commission" means that real estate or
brokerage commission paid for the purchase or sale of property which is
reasonable, customary and competitive in light of the size, type and location of
the property.
(q) "Front-End Fees" means fees and expenses paid by any party for any
services rendered during the Partnership's organizational or acquisition phase
including Organization and Offering Expenses, Acquisition Fees, Expenses of
Acquisition (as those terms are defined in this Section 1.04), and any other
similar fees, however designated by the General Partners.
(r) "Investment In Properties" means the amount of capital contributions
actually paid or allocated to the purchase, development, construction or
improvement of properties acquired by the Partnership (including the purchase of
properties, working capital reserves allocable thereto (except that
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working capital reserves in excess of 5% shall not be included) and other cash
payments such as interest and taxes but excluding Front-End Fees).
1.05 Purpose of Partnership and Investment Objectives. (a) The principal
purpose of the Partnership is to acquire, own, operate, improve, lease and
otherwise manage for investment purposes, either alone or in association with
others, a portfolio of improved, income-producing mobile home properties as
shall from time to time be acquired by the Partnership and which offers the
potential for (i) preserving and protecting the Limited Partners' original
invested capital and (ii) generating an annual cash flow for distribution to the
partners; and to engage in any and all general business activities related to
and incidental to those purposes; provided, however, that the Partnership shall
not own or lease property jointly in partnership with others unless (a) such
partner or joint owner is an independent third person who is not a sponsor, (b)
the management of such partnership or joint ownership is under control of the
Partnership which has a majority interest therein, (c) the Partnership, as a
result of such joint ownership or partnership ownership of an investment
property, is not charged, directly or indirectly, more than once for the same
services, (d) the joint ownership or partnership does not authorize or require
the Partnership to do anything as a partner or joint venturer with respect to
the property which the Partnership or the General Partners could not do directly
because of this Agreement; and (e) the General Partners and their affiliates are
prohibited from receiving any compensation, fee or expenses which are not
permitted to be paid by this Agreement. See, however, Article XXI for joint
investment with affiliates.
(b) Until invested in properties (except for reserves), the Partnership may
temporarily invest all or a part of its capital contributions in short- term,
highly liquid investments with appropriate safety of principal, such as U.S.
Treasury Bonds or Bills, insured savings accounts, or similar investments.
(c) All properties are to be acquired free and clear of any encumbrances.
Properties may later be financed, see Article XXII. Unimproved or non- income
producing property will not be acquired. Investment in junior trust deeds or
similar obligations shall be prohibited.
(d) In the event the General Partners or an Affiliate of the General
Partners are presented with a potential investment which might be made by more
than one investment entity which it advises or manages, the decision as to the
suitability of the property for investment by a particular entity will be based
upon a review of the investment portfolio of each entity and upon factors such
as cash flow, the effect of the acquisition on diversification of each entity's
portfolio, the estimated income tax effects of the purchase on each entity, the
policies of each entity relating to leverage, the funds of each entity available
for investment and the length of time such funds have been available for
investment. To the extent that a particular property might be determined to be
suitable for more than one public entity, priority will generally be given to
the public entity having uninvested funds for the longest period of time. If a
property is found to be inappropriate for any public entity then, and only then,
may it be considered for private placement. If, after completing a review and
consideration of the above factors, the General Partners or an Affiliate of the
General Partners designate a particular property(ies) for private placement,
then such private placement may proceed to consummation irrespective of whether
a public entity thereafter raises equity funds that could be available for such
investment. Nothing herein shall be deemed to diminish the General Partners'
overriding fiduciary obligation to the Partnership or as a waiver of any right
or remedy the Partnership or Limited Partners may have in the event of a breach
by a General Partner of such obligation.
1.06 General and Limited Partners.
(a) General Partners. The address of the General Partners is as follows:
000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxx 00000. The General Partners'
interest in net profits, net losses and distributions shall be allocated between
them (so long as they act as General Partners) as they determine.
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(b) General Partners Capital Contribution. The General Partners may, but
(except as provided in Section 3.07.7) are not required to, contribute to the
capital of the Partnership.
(c) General Partners Purchase of Units. The General Partners may purchase
limited partnership units for investment and not with a view to distribution.
(d) Authorized Units and Original and Additional Limited Partners. Xxxxxxxx
Xxx Xxxxx, the original Limited Partner, has contributed the sum of $1,000 cash
to the capital of the Partnership and has received 10 units for such
contribution. The Partnership intends to make a public offering of units of
limited partnership interests ("Units") and to admit as additional Limited
Partners the persons whose subscriptions for such Units are accepted by the
General Partners. The names and places of residence of such Limited Partners
will be set forth in the Subscription Agreements and Signature Pages attached
hereto. The General Partners may admit an unlimited number of additional Limited
Partners who subscribe from time to time for Units upon such terms and
conditions and in such amount as the General Partners in their sole discretion
shall deem reasonable. No action or consent by Limited Partners shall be
required in connection with such admission of additional Limited Partners
pursuant to this Section 1.06, except that after the close of the public
offering, the General Partners may not offer additional Units without the
affirmative vote of a majority in interest of the Limited Partners.
(e) Admission of Original Additional Limited Partners. Upon the original
sale of Partnership units by the Partnership, the purchasers will be admitted as
Limited Partners not later than fifteen (15) days after the release from impound
of the purchaser's funds to the Partnership, and thereafter purchasers will be
admitted into the Partnership not later than the last day of the calendar month
following the date their subscriptions are accepted by the Partnership.
Subscriptions shall be accepted or rejected by the Partnership within thirty
(30) days of their receipt; if rejected all funds will be returned to the
subscriber within ten (10) business days.
II.
MANAGEMENT OF THE PARTNERSHIP
2.01 Powers and Duties of the General Partners. (a) The General Partners
shall have full and complete charge of all affairs of the Partnership, and the
management and control of the Partnership's business shall rest exclusively with
the General Partners, subject to the terms and conditions of this Agreement. The
General Partners shall have a fiduciary responsibility for the safekeeping and
use of all funds and assets of the Partnership, whether or not in the General
Partners' immediate possession or control. The General Partners shall not employ
or permit another to employ such funds or assets in any manner except for the
exclusive benefit of the Partnership. The General Partners shall have the
rights, powers and authority granted to the General Partners hereunder or by
law, or both, to obligate and bind the Partnership and, on behalf and in the
name of the Partnership, to take such action as the General Partners deem
necessary or advisable including, without limitation, making, executing and
delivering purchase and sale, management and other agreements; leases,
assignments, deeds and other transfers and conveyances; agreements to purchase,
sell, lease or otherwise deal with personal property; escrow instructions;
checks, drafts and other negotiable instruments; and all other documents and
agreements which the General Partners deem reasonable or necessary in connection
with the purchase of the Partnership's properties and the operation and
management thereof. The execution and delivery of any such instrument by the
General Partners shall be sufficient to bind the Partnership. The Limited
Partners cannot contract away the fiduciary duty owed by the General Partners
and the Partnership to Limited Partners under common law.
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(b) The General Partners or their affiliates may acquire Units from time to
time on their own behalf and for their own benefit. Such units will be held by
them for investment and not with a view to distribution.
(c) The General Partners or their affiliates may from time to time employ
on behalf of the Partnership such persons, firms or corporations as they in
their sole judgment shall deem advisable in the operation of the business of the
Partnership, including accountants and attorneys, on such terms and for such
compensation as they, in their sole judgment, shall determine; provided,
however, that the Partnership shall not: (1) make any loans to any sponsor or
affiliate; (2) grant an exclusive right to sell or exclusive employment to sell
property for the Partnership to a sponsor, (3) offer Limited Partnership
interests in exchange for property; (4) employ a sponsor to construct or develop
Partnership property; (5) reinvest any cash available for distribution; (6)
purchase limited partnership interests in other partnerships; and (7) incur any
indebtedness or place any loans or encumbrances against Partnership properties
(except as provided in Article XXII); (8) invest in junior trust deeds; or (9)
invest in unimproved or non-income producing property.
(d) The Partnership shall not purchase or lease property in which a sponsor
or affiliate has an interest or from a program in which a sponsor has an
interest. The Partnership shall not acquire property from any person in whom a
sponsor or affiliate has an interest. Notwithstanding the foregoing, a sponsor
or affiliate may purchase property (but not from a program in which the sponsor
or an affiliate has an interest) in its own name and temporarily hold title
thereto for the purpose of facilitating the acquisition of such property, or any
other purpose related to the business of the Partnership, provided that such
property is purchased by the Partnership for a price no greater than the cost of
such property to the sponsor or affiliate and provided there is no difference in
interest rates of the loans secured by the property at the time acquired by the
sponsor or affiliate and the time acquired by the program, and no other benefit
is provided to the sponsor or affiliate arising out of such transaction apart
from compensation otherwise permitted by this Agreement. The Partnership shall
not sell or lease property to a sponsor or affiliate, or receive any loans from
any sponsor or affiliate. See, however, Article XXI for joint investment with
affiliates.
(e) Sponsors shall not receive a rebate, give-up or similar payment or
enter into any reciprocal business arrangement which would circumvent any
provisions contained in this Agreement.
(f) No sponsor shall: (1) commingle the Partnership funds with those of any
other person or entity; (2) operate the Partnership in such a manner as to have
the Partnership classified as an "investment company" for purposes of the
Investment Company Act of 1940; (3) cause the Partnership to enter into any
agreements with the General Partner or their affiliates which shall not be
subject to termination without penalty by either party upon not more than sixty
(60) days' written notice.
(g) Neither the Partnership nor any sponsor shall, directly or indirectly,
pay or award any finder's fees, commissions or other compensation to any person
engaged by a potential investor for investment advice as an inducement to such
advisor to advise the potential investor to purchase Limited Partnership
interests of the Partnership; provided, however, that the Partnership shall not
be prohibited from paying the normal sales commissions payable to registered
broker dealers or other properly licensed persons for selling Units.
(h) The General Partners may place record title to, or the right to use,
Partnership assets in, the name or names of a nominee or nominees, trustee or
trustees for any purpose convenient or beneficial to the Partnership.
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(i) The Partnership shall provide from the offering proceeds adequate
reserves, of at least 1% of offering proceeds, for normal repair, replacements
and contingencies.
2.02 Indemnification.
(a) The General Partners and their affiliates shall have no liability to
the Partnership or to any Partner for any loss suffered by the Partnership which
arises out of any action or inaction of the General Partners or their affiliates
if the General Partners, in good faith, determined that such course of conduct
was in the best interests of the Partnership and such course of conduct did not
constitute negligence or misconduct of the General Partners and their
affiliates.
(b) The General Partners and their affiliates shall be indemnified by the
Partnership against any losses, judgments, liabilities, expenses, and amounts
paid in settlement of any claims sustained by them in connection with the
Partnership, provided that the same were not the result of negligence or
misconduct on the part of the General Partners or their affiliates, and provided
the General Partners, in good faith, determined that such course of action was
in the best interests of the Partnership.
(c) Notwithstanding the above, the General Partners and their affiliates
shall not be indemnified for liabilities arising under federal and state
securities laws unless (1) there has been a successful adjudication on the
merits of each count involving securities law violations, or (2) such claims
have been dismissed with prejudice on the merits by a court of competent
jurisdiction, and provided that a court either (A) approves any settlement and
finds that indemnification of the settlement and related costs should be made,
or (B) approves indemnification of litigation costs if a successful defense is
made and, in this regard, a dismissal with prejudice on the merits is considered
a successful defense.
(d) The Partnership shall not pay for any insurance covering liability of a
General Partner or its affiliates, agents or employees for actions or omissions
to act for which indemnification is not permitted hereunder. The Partnership may
purchase and pay for such types of insurance, including extended coverage
liability and casualty and workmen's compensation, as would be customary for any
person owning comparable property and engaged in a similar business and may name
the General Partners and their affiliates as additional insured parties
thereunder, provided that such addition does not add to the cost of premiums
payable by the Partnership.
(e) The Partnership shall not indemnify any underwriters, including any
person acting as a broker-dealer, for liabilities under federal and state
securities laws.
(f) Any recovery by the General Partners hereunder is recoverable only out
of assets of the Partnership and not from the Limited Partners.
(g) The Partnership and the General Partners undertake that any and all
parties seeking indemnification will apprise the court of the position of the
Securities and Exchange Commission and state securities commissions/authorities
(including Massachusetts and Pennsylvania) with respect to indemnification for
securities laws violations before seeking court approval for indemnification.
(h) For the purposes of this Section 2.02, the term "affiliates" shall mean
any person performing services on behalf of the Partnership who: (1) directly or
indirectly controls, is controlled by, or is under common control with the
General Partners; or (2) owns or controls 10% or more of the outstanding voting
securities of the General Partner, or (3) is an officer, director, partner or
trustee of the General Partner, or (4) if the General Partner is an officer,
director, partner or trustee, is any company for which the General Partner acts
in any such capacity.
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(i) For the purposes of this section 2.02, "affiliates" must be performing
services on behalf of the Partnership and acting within the scope of the General
Partners' authority.
(j) For the purposes of this section 2.02 the General Partners must be
acting on behalf of or performing services for the Partnership.
2.03-1 Powers and Duties of the Limited Partners. The Limited Partners
shall not participate in the control of the business affairs of the Partnership,
transact any business on behalf of the Partnership, or have any power or
authority to bind or obligate the Partnership.
2.03-2 Acts Not Deemed "Participation in Control". A Limited Partner does
not participate in the control of the business within the meaning of Section
2.03-1 solely by doing one or more of the following:
(1) Being a contractor for or an agent or employee of the Partnership
or of a General Partner, or an officer, director, or shareholder of the
Corporate General Partner.
(2) Consulting with and advising a General Partner with respect to the
business of the Partnership.
(3) Acting as surety for the Partnership or guaranteeing one or more
specific debts of the Partnership.
(4) Approving or disapproving an amendment to the Partnership
Agreement.
(5) Voting on or calling a meeting of the partners for one or more of
the following matters:
(A) The dissolution and winding up of the Partnership.
(B) The sale, exchange, lease, mortgage, pledge, or other
transfer of all or a substantial part of the assets of the Partnership
other than in the ordinary course of its business.
(C) The incurrence of indebtedness by the Partnership other than
in the ordinary course of its business.
(D) A change in the nature of the business.
(E) Transactions in which the General Partners have an actual or
potential conflict of interest with the Limited Partners or the
Partnership.
(F) The removal of a General Partner, and the election of a
General Partner.
(G) An election to continue the business of the Partnership
other than under the circumstances described in subparagraph (I) or
(J) of this paragraph (5).
(H) The admission of a General Partner other than under the
circumstances described in subparagraph (I) or (J) of this paragraph
(5).
(I) The admission of a General Partner or an election to
continue the business of the Partnership after a General Partner
ceases to be a General Partner other than by removal where there is no
remaining or surviving General Partner.
8
(J) The admission of a General Partner or an election to continue the
business of the limited partnership after the removal of a General Partner where
there is no remaining or surviving General Partner.
(6) Winding up the partnership pursuant to Section 15683 of the
California Corporations Code.
(7) Executing and filing a certificate pursuant to Section 15633 of
the California Corporations Code or a certificate of amendment pursuant to
Section 15625 of the California Corporations Code or a certificate of
dissolution pursuant to paragraph (1) of subdivision (a) of Section 15623
of the California Corporations Code or a certificate of cancellation of
certificate of limited partnership pursuant to paragraph (1) of subdivision
(b) of Section 15623 of the California Corporations Code.
(8) Serving on an audit committee or committee performing the
functions of an audit committee.
The enumeration in this Section 2.03-2 does not mean that any other conduct
or the possession or exercise of any other power by a Limited Partner
constitutes participation by the Limited Partner in the control of the business
of the Partnership.
2.03-3 The Rights and Duties of the Partners in Relationship to the
Partnership Shall Be Determined by the Following Rules: (a) No Limited Partner
shall be required to make any additional contribution to the Partnership.
(b) No Limited Partner shall have a priority over any other Limited
Partner, as to return of contributions or as to compensation as a Limited
Partner by way of income.
(c) The obligation of a partner to make a contribution or return money
or property distributed in violation of this chapter may be compromised
only by the written consent of all the partners.
(d) No Limited Partner shall have the right to receive property other
than money upon any distribution.
(e) A partner may not be compelled to accept a distribution of any
asset in kind from the Partnership in lieu of a proportionate distribution
of money being made to other partners.
(f) The Limited Partners shall have the right to vote on all matters
specified in paragraph (4) and in subparagraphs (A) to (H) and (J),
inclusive, of paragraph (5) of Section 2.03-2 and the actions specified
therein may be taken by the General Partners only with the affirmative vote
of a majority in interest of the Limited Partners, and without the
necessity of the consent of the General Partners.
(g) The Limited Partners shall also have the right to vote on matters
specified in subparagraphs (H) and (I) of paragraph (5) of Section 2.03-2.
Notwithstanding any other provision of the Partnership Agreement to the
contrary, the actions specified in such subparagraphs may only be taken by
the affirmative vote of a majority in interest of the limited partners.
2.04 Compensation of General Partners and Affiliates.
(a) The General Partners and/or their affiliates, or any sponsor shall
be entitled to receive, as an expense of the Partnership, each and all of
the following amounts:
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(1) Property Management Fee. For providing property management
services (including all rent-up, leasing and re-leasing fees and bonuses,
and leasing services paid to any person, and including bookkeeping services
for property management and fees paid to unrelated persons for property
management services) actually rendered, the General Partners or affiliate
will be paid a fee of 5% of actual gross receipts collected and received
from all sources; but said property management fees shall not exceed in any
event an amount which is competitive in price and terms with other non-
affiliated persons rendering comparable services which would reasonably be
made available to the Partnership. "Property Management" means the day-to-
day professional management services in connection with the Partnership's
properties. Property management fees paid by anyone to anyone may not
exceed the lesser of (i) the competitive rate, or (ii) 5% of actual gross
receipts collected and received from all sources. On-site personnel for
maintenance, etc., will be paid by the Partnership. Property management
services must be rendered pursuant to a written agreement which precisely
describes the services to be rendered. Such agreement may only be modified
by a majority in interest of limited partners, and may be terminated by
majority vote or consent of the limited partners following sixty days'
prior notice thereof by the limited partners.
(2) Affiliate Acquisition Fees. The General Partners may be paid an
Affiliate Acquisition Fee as defined and in the amount stated in Section
l.04(a-2), and as such services are substantially rendered by the General
Partners. Acquisition Fees paid (including, but not limited to, Affiliate
Acquisition Fees paid to the General Partners and any commissions to
non-affiliated brokers) shall not exceed the lesser of the compensation
customarily charged in arm's-length transactions by others rendering
similar services as an ongoing public activity in the same geographical
location and for comparable property, or an amount equal to 5% of the
initial capital contributions (less any uninvested funds returned to
Limited Partners pursuant to Section 3.05 relating to funds not invested
within two years) of Limited Partners applicable to the property which is
the subject of the transaction (adjusted to include a pro rata amount of
any selling expenses). The General Partners may also be reimbursed for
Expenses of Acquisition as defined in and subject to the limitations in
Section 1.04(g).
(3) Limitation. No sponsor shall render any service to the Partnership
nor receive any fee or other compensation from the Partnership other than
those explicitly provided in this Section 2.04, except for amounts
otherwise permitted pursuant to Sections 3.07, and 3.09 hereof.
(b) Sales commission may be paid to the General Partners upon the sale of
partnership properties; provided, however, that General Partners may receive a
portion of the commission only if the General Partners provide a substantial
amount of the services in the sales effort. Any such compensation payable to the
General Partners shall not exceed, on sale of each property, 3% of the gross
sales price or 50% of the standard real estate brokerage commission, whichever
is lesser. The total real estate brokerage commission paid on resale of each of
the Partnership's properties shall be limited to a competitive real estate
commission, not to exceed 6% of the contract price for the sale of the property.
No such commission shall be paid, however, to the General Partners until each
Limited Partner has received an amount equal to his original capital
contribution from the net proceeds from the sale or refinancing of properties
plus an amount equal to 6% of each Limited Partner's Adjusted Invested Capital
per annum, cumulative, non-compounded, commencing at the time each Limited
Partner is admitted to the Partnership. The 6% cumulative return may be reduced,
but not below zero, by the aggregate amount of prior distributions from Cash
Available For Distribution.
2.05 Investment in Properties. The General Partners will commit at least 80% of
the Partnership's capital contributions toward Investment in Properties. The
remaining capital contributions may be used to pay Front-End Fees. When
"Acquisition Fees" are paid by the seller of properties, such
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fees shall not be included in satisfying the required minimum Investment in
Properties. Additionally, in determining the amount committed to Investment in
Properties, such calculation shall not take into account any Front-End Fees.
This section is subject to Section 2.04(a)(2).
2.06 Certain Mortgaging. The partnership will not obtain financing,
including wrap-around deeds of trust, containing a balloon payment which does
not contain the following provisions: All mortgage financing obtained by the
program or retained upon acquired properties must be fully amortized in equal
payment over not more than 30 years. All financing (including financing to which
properties were subject when purchased by the partnership) including
all-inclusive and wrap-around loans and interest-only loans must provide that no
balloon payment will become due sooner than the earlier of: (1) ten years from
the date the program acquired the property, (2) or two years beyond the
anticipated holding period of the property, but in no event sooner than seven
years from the date the program acquires the property. The foregoing balloon
payment limitation does not apply to financing representing, in the aggregate,
25% or less of the total purchase price of the properties acquired, or to
interim financing, including construction financing, with a full take-out
commitment.
2.07 Reinvestment. There shall be no reinvestment of cash flow, cash
available for distribution or proceeds from sale or refinancing of property.
III.
III.
FINANCING OF THE PARTNERSHIP
3.01 Capital Contributions of the General Partners. The General Partners
shall contribute capital to the Partnership in their capacity as General
Partners as provided in Section 1.06(b), and may purchase units as Limited
Partners as provided in Section 1.06(c).
3.02 Capital Contributions of the Limited Partners.
(a) Partnership Units. The Limited Partners shall contribute to the capital
of the Partnership, for each Unit subscribed, cash in the amount determined by
the General Partners; provided, however, that all Units subscribed for as part
of the initial public offering of such Units, as contemplated by Section
1.06(d), shall be paid for in cash in an amount equal to One Hundred Dollars
($100) for each Unit subscribed.
(b) Initial Subscriptions. All funds of initial subscribers will be placed
in a separate interest-bearing account in a bank or savings and loan
association, or invested in short-term highly liquid investments as provided in
Section 1.05, and if not more than $1,250,000 is subscribed and contributed on
or before six months after the public offering commences, the Partnership will
not accept any subscription and each subscriber will promptly receive his or her
original investment together with interest actually earned thereon.
(c) Offering Period. The Partnership expects to publicly offer its Units
for a one-year period beginning with the effective date of its registration
statement flied with the Securities and Exchange Commission. However, the
General Partners may extend the offering period an additional year (to a period
ending two years after such effective date), subject to compliance with federal
and state securities laws and rules.
3.03 Additional Contributions. In no event shall any Limited Partner be
required to make any additional contributions to the capital of the Partnership
in excess of those set forth in Section 3.02 hereof.
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3.04 Interest. No interest shall be paid on the initial or any subsequent
capital contribution to the Partnership.
3.05 Time for Return of Contributions. None of the Partners, either General
or Limited, shall be entitled to a return of the capital contribution made by
any of them until the full and complete winding up and liquidation of the
business and affairs of the Partnership, except as may be permitted pursuant to
Article VI hereof; provided, however, that any proceeds of the offering
(together with a pro rata amount of Organization and Offering Expenses,
including in this regard sales commissions paid to affiliated broker-dealers)
not invested within the later of two years after commencement of the offering or
one year after the termination of the offering shall be distributed to the
Limited Partners of record together with any undistributed interest earned by
the Partnership on such funds.
3.06 Loans by the Partners. Neither the General Partners nor the Limited
Partners shall make any loans to the Partnership. No loans or any other
financing may be made by or obtained from any General Partner or other sponsor
of the Partnership.
3.07 Allocation of Net Profits and Net Losses and Distributions From Cash
Available For Distribution.
3.07.1 Net Profits and Net Losses of the Partnership for each fiscal year
of the Partnership shall be allocated 99% to the Limited Partners and 1% to the
General Partner. Net Profits and Net Losses to be allocated to the Limited
Partners will be allocated to Limited Partners based on the number of Units held
by each Limited Partner and the period during the fiscal year that the Limited
Partner owned the Units. Upon the transfer of a Partnership Unit, the transferor
and the transferee shall be allocated a pro rata share of Net Profits and Net
Losses based on the portion of the fiscal year that the transferred Unit was
effectively held by the transferor and transferee, respectively.
3.07.2 Cash Available for Distribution, if any, shall be determined for
each month (or quarter) and, within 45 days after the close of each month (or
quarter) shall be distributed 99% to the Limited Partners pro rata in accordance
with their respective ownership of Units and 1% to the General Partner. Cash
Available for Distribution shall be distributed to the persons who are Unit
holders of record as of the last day of the month (or quarter) for which such
distribution is made. Limited Partners may individually opt for quarterly
distributions.
3.07.3 Net proceeds from refinancing and net proceeds from the sale of
properties, to the extent available for distribution after the establishment of
any reserves that the General Partners may deem reasonably necessary for any
contingent or future liabilities of the Partnership or after the payment in the
discretion of the General Partners of any debts and liabilities of the
Partnership, and subject to the provisions of Section 2.04(b), shall be
distributed among the Partners in the following amounts and order of priority:
(a) To the Limited Partners, an amount equal to the sum of:
(i) The Adjusted Invested Capital attributable to each Limited
Partner; and
(ii) The excess, if any, of an amount equal to 9% per annum cumulative
(but not compounded) return on Adjusted Invested Capital, calculated from
each Limited Partner's respective date of admission to the Partnership,
over total prior distributions of Cash Available For Distribution with
respect to the Units.
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(b) To the extent of any balance remaining, 85% to the Limited Partners to
be shared on a pro rata basis in accordance with their respective ownership of
Units and 15% to the General Partners.
3.07.4 Except as otherwise provided by this Agreement, profit or loss on
the sale of properties shall be allocated to and among the Partners as follows:
(a) Profit on the sale of properties shall first be allocated to each
Partner with a negative Capital Account proratably in an amount equal to (or in
proportion to if less than) the amount of the negative Capital Account of each
Partner;
(b) Profit on the sale of properties shall next be allocated to the Limited
Partners until each Limited Partner's Capital Account shall be a positive amount
equal to the sum of:
(i) The Adjusted Invested Capital attributable to each Limited
Partner; and
(ii) The excess, if any, of an amount equal to 9% per annum cumulative
(but not compounded) return on Adjusted Invested Capital, calculated from
each Limited Partner's respective date of admission to the Partnership,
over total prior distributions of Cash Available For Distribution with
respect to the Units.
(c) To the extent of any remaining profit on the sale of properties, 85% to
the Limited Partners to be shared on a pro rata basis in accordance with their
respective ownership of Units and 15% to the General Partners;
(d) To the extent that there is a loss on the sale of properties arising
from a transaction, such loss on the sale of properties shall be allocated among
the Partners with positive balances in their Capital Accounts pro rata in
accordance with their respective positive balances until the aggregate positive
balance of their Capital Accounts is reduced to zero, and any balance shall be
allocated in accordance with the allocation of Net Profits and Net Loss pursuant
to Section 3.07.1 hereof;
(e) The provisions of this Section 3.07.4 notwithstanding, the General
Partner shall be allocated at least 1% of the profit or loss on the sale of
properties, and, to the extent possible, in characterizing the allocated profit
on the sale of properties, that portion which constitutes ordinary income by
reason of recapture of depreciation, if any, shall be allocated among the
Partners such that a Partner (or successor) who realized the benefit of the
deduction or credit will bear the tax burden of the corresponding recapture.
3.07.5 A Capital Account shall be maintained by the Partnership on behalf
of each Partner. The Capital Account of each Partner shall be credited with the
amount of such Partner's capital contribution as such is contributed. The
Capital Account of each Partner shall be credited with the amount of Net Profits
and profit on the sale of properties of the Partnership allocated to such
Partner and shall be debited with the amount of Net Losses and loss on the sale
of properties allocated to such Partner and with the amount of any distributions
or return of capital made by the Partnership to such Partner.
3.07.6 The Capital Account of a Partner shall also be credited or debited,
as the case may be, with items of income, expense, or other adjustments which do
not enter into the calculation of Net Profits or Net Losses. The Capital Account
of a transferor Partner shall become the Capital Account of the transferee
Partner as it existed at the effective date of the transfer. Any special basis
adjustment resulting from an Internal Revenue Code Section 754 election shall
not be taken into account for purposes of establishing and maintaining Capital
Accounts pursuant to the terms of this Section 3.07.6.
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3.07.7 If upon the liquidation of the Partnership, there is a deficit
balance in the Capital Account of the General Partner, after making the
allocations provided in this Agreement, then the General Partner will contribute
an amount equal to such deficit balance in its Capital Account, provided that in
no event shall the General Partner be required to contribute to the Partnership,
as its pro rata share, more than 1% of the total capital contributed by the
Partners plus four-fifths of the Cash Available For Distribution received by the
General Partner pursuant to this Agreement.
3.07.8 The provisions of this Agreement notwithstanding, the General
Partners will receive at least 1% of the distributions of net proceeds from the
sale of properties and, at such time as the Partnership is to be liquidated
hereunder, such adjustments, if any, as are appropriate to properly reflect such
minimum distribution shall be made with respect to the allocation of profit or
loss on the sale of properties pursuant to Section 3.07.4 and with respect to
the Capital Accounts of the Partners, Provided, further, that any deduction
which might accrue to the Partnership and which is attributable to said 1%
minimum distribution requirement shall be specially allocated to the General
Partners.
3.07.9 The General Partners shall also distribute, after the completion of
each calendar year, such amount of cash from sales or financing sufficient to
allow a Limited Partner in a 28% federal tax bracket to pay the income taxes due
with respect to net income derived by him from the disposition or financing of
Partnership properties.
3.08 Conditions and Consent to Allocations and Distributions. The methods,
hereinabove set forth, by which Net Profits and Net Losses are allocated and by
which Distributions of Cash Available For Distribution and surplus funds are
allocated and distributed, are hereby expressly consented to by each General and
Limited Partner as an express condition to becoming a General or Limited
Partner. All Distributions of Cash Available For Distribution and surplus funds
are subject to the payment of Partnership expenses and to the maintenance of
reasonable working capital reserves deemed sufficient for Partnership business
by the General Partners.
3.09 Partnership Expenses. (a) Reimbursement to the General Partners or
their affiliates may be made for the actual cost to the General Partners or
their Affiliates for goods and materials provided by unaffiliated parties and
used for or by the Partnership.
(b) (1) The General Partners may be reimbursed for administrative services
necessary to the prudent operation of the Partnership. Such services include
transfer agent, legal, accounting, partner relations and similar services.
(2) The services will be provided at a price which does not exceed the
lesser of actual cost of such services to the General Partners or 90% of
the competitive price which would be charged by non-affiliated persons
rendering similar services in the same or comparable geographic location.
Cost of services as used herein means the pro rata cost of personnel, based
on the amount of time such personnel spent on such services, or other
method of allocation acceptable to the Partnership's independent certified
public accountant.
(3) This Section 3.09(b) and any contract entered into pursuant hereto
may be modified only with a vote of a majority of the limited partnership
interests. This provision and any such contract may be terminated without
penalty on 60 days' notice.
(4) The General Partners represent that they have adequate staff which
they utilize in the conduct of their business and are able to render such
services to the Partnership. The General Partners have been previously and
are now rendering such services to other programs as an ordinary and
ongoing business.
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(5) Any general or administrative overhead incurred by the General
Partners in connection with the administration of the Partnership shall not
be charged to the Partnership. Such general or administrative overhead
includes but is not limited to salaries, rent, travel expenses and other
items generally falling under the category of overhead. Excluded from
allowable reimbursement shall be (i) rent or depreciation, utilities,
capital equipment, other administrative items; and (ii) salaries, fringe
benefits, travel expenses, and other administrative items incurred or
allocated to any controlling persons of the General Partners or their
affiliates. Controlling person, for purpose of the subsection, includes but
is not limited to, any person, whatever his or her title who performs
functions for the General Partners similar to those of: (1) chairman or
member of the board of directors; (2) executive management, such as (i)
president, (ii) vice president or senior vice president, (iii) corporate
secretary, (iv) treasurer, (3) senior management, such as the vice
president of an operating division who reports directly to executive
management; or (4) those holding 5% or more equity interest in the General
Partners or a person having the power to direct or cause the direction of
the General Partners whether through the ownership of voting securities, by
contract, or otherwise.
(6) No payment will be made for services for which the General
Partners or their affiliates are entitled to compensation by way of a
separate fee or reimbursement of costs or expenses, other than as
specifically permitted by this Agreement.
(7) Except as provided in Section 2.04 and this Section 3.09(b) no
other services may be performed by the General Partners or their affiliates
for the Partnership except in extraordinary circumstances. Extraordinary
circumstances exist only where there is an emergency situation requiring
immediate action by the General Partners or their affiliates and the
service is not immediately available from unaffiliated parties. Payment for
any such services must meet the requirements of this Section 3.09(b).
(c) All other expenses of the Partnership shall be billed directly to and
paid by the Partnership as follows: (1) costs of taxes and assessments on
Partnership properties and other taxes applicable to the Partnership; (2) legal,
audit, accounting, and brokerage fees incurred after the offering of Units is
completed; (3) fees and expenses paid to on-site managers, real estate brokers,
and insurance brokers; (4) expenses in connection with the disposition,
replacement, alteration, repair, remodeling, refurbishment, refinancing and
operation of Partnership properties (including the costs and expenses of
foreclosures, insurance premiums, and maintenance of such properties); (5) the
cost of insurance as required in connection with the business of the
Partnership; (6) expenses of revising, amending, converting, modifying or
terminating the Partnership; (7) the costs of printing and mailing to Limited
Partners, evidences of ownership of Units and reports of meetings of the
Partnership, and of preparation of proxy statements and solicitations of proxies
in connection therewith; (8) expenses in connection with preparing and mailing
distribution checks and reports required to be furnished to Limited Partners for
tax reporting purposes; and (9) the cost of preparation and dissemination of the
informational material and documentation relating to potential sale or other
disposition of Partnership property.
IV.
BOOKS OF ACCOUNT, FINANCIAL STATEMENTS AND FISCAL MATTERS
4.01 Books of Account. The General Partners shall, for income tax purposes,
keep on an accrual basis, adequate books of account of the Partnership wherein
shall be recorded and reflected all of the capital contributions of the
Partnership and all of the expenses and transactions of the Partnership. Such
books of account shall be kept at the principal place of business of the
Partnership, and each Limited Partner and his or her authorized representatives
shall have at all times, during reasonable business hours,
15
free access to and the right to inspect and copy such books of account and all
records of the Partnership, including the right to obtain by mail or to inspect
a list of the names and addresses and interests owned of the Limited Partners.
All books and records of the Partnership shall be kept on the basis of an annual
accounting period ending December 31, except for the final accounting period
which shall end on the dissolution or termination of the Partnership without
reconstitution, provided, however, that the General Partners in their sole
discretion may, subject to approval by the Internal Revenue Service and
applicable state taxing authorities, at any time, without approval of the
Limited Partners, change the Partnership's accounting period and tax year to a
period to be determined by the General Partners. All references herein to a
"year of the Partnership" are to such an annual accounting period.
4.02 Reports and Financial Statements. The General Partners shall provide
the following reports and financial statements to the Limited Partners:
(a) Annual Report. Within 120 days after the end of each fiscal year, (1) a
balance sheet as of the end of such fiscal year, together with statements of
income, Partners' equity, and of cash flows for such year. The balance sheet and
such statements shall be prepared in accordance with generally accepted
accounting principles and shall be accompanied by an auditor's report containing
an unqualified opinion of the independent certified public accountants preparing
such report; (2) an unaudited statement of cash flow disclosing cash available
for distributions; (3) a report of the activities of the Partnership for such
year; (4) a report on distributions to the Limited Partners for such period,
separately identifying distributions from (a) funds from operations during such
period, (b) reserved funds from operations from prior periods, (c) proceeds from
disposition of property and investments, (d) reserves from the proceeds of
public offerings of Units; (5) a detailed statement of any transactions with the
General Partners or their affiliates and fees, commissions, compensation, and
other benefits paid or accrued to the General Partners or their affiliates for
the fiscal year completed, showing the amount paid or accrued to each recipient
and the services performed; and (6) the annual report must contain a breakdown
of the costs reimbursed to the General Partners. Within the scope of the annual
audit of the General Partner's financial statement, the independent certified
public accountants must verify the allocation of such costs to the Partnership.
The method of verification shall at minimum provide:
(1) A review of the time records of individual employees, the costs of
whose services were reimbursed;
(2) A review of the specific nature of the work performed by each such
employee.
The methods of verification shall be in accordance with generally accepted
auditing standards and shall accordingly include such tests of the accounting
records and such other auditing procedures which the General Partners'
independent certified public accountants consider appropriate in the
circumstance. The additional costs of such verification will be itemized by
said accountants on a Partnership by Partnership basis and may be reimbursed to
the General Partners by the Partnership in accordance with subsection 3.09 only
to the extent that such reimbursement when added to the cost for administrative
services rendered does not exceed the allowable rate as determined in subsection
3.09.
(b) Quarterly Reports. The Partnership expects to register its units under
Section 12(g) of the Securities Exchange Act of 1934. After such registration,
within 60 days after the end of each quarter, a report containing (i) a balance
sheet, which may be unaudited, (ii) a statement of income for the quarter then
ended, which may be unaudited, (iii) a statement of cash flows for the quarter
then ended, which may be unaudited, and (iv) other pertinent information
regarding the Partnership and its activities during the quarter covered by the
report.
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(c) Tax Information. Within 75 days after the end of each fiscal year, all
information necessary for the preparation of the Limited Partners' federal
income tax returns.
(d) Filing of Reports. The Partnership will file with the Commissioner of
Corporations of the State of California and any other appropriate federal or
state regulatory agency requiring the same a copy of each report made pursuant
to subdivisions (a), (b) and (c) of this Section 4.02, concurrently with their
transmittal to the Limited Partners.
(e) Special Reports. Within 60 days after the end of each quarter during
which there have been real property acquisitions, a Special Report (which may be
part of the quarterly report) shall be sent to all Limited Partners until the
proceeds of the offering are committed or returned to the Limited Partners. The
report shall contain the following information: (1) the location and a
description of the general character of all materially important real properties
acquired or presently intended to be acquired by or leased to the program,
during the quarter; (2) the present or proposed use of such properties and their
suitability and adequacy for such use; (3) the terms of any material lease
affecting the property; (4) the proposed method of all-cash financing; and (5) a
statement that title insurance and any required construction, permanent or other
financing and performance bonds or other assurances with respect to builders
have been or will be obtained on all properties acquired.
4.03 Tax Returns and Records. The General Partners, at Partnership expense,
shall cause income tax returns for the Partnership to be prepared and timely
filed with the appropriate authorities. The General Partners, at Partnership
expense, shall cause to be prepared and timely filed, with appropriate federal
and state regulatory and administrative bodies, all reports required to be filed
with such entities under then current applicable laws, rules and regulations.
Such reports shall be prepared on the accounting or reporting basis required by
such regulatory bodies. Any Limited Partner shall be provided with a copy of any
such report upon request without expense to him or her. The General Partners, at
Partnership expense, shall maintain during the term of the Partnership a record
of the information obtained to determine that a Limited Partner meets the
Partnership's suitability standards and a representation of the Limited Partner
that the Limited Partner is investing for the Limited Partner's own account.
4.04 Fiscal Year. The fiscal year of the Partnership shall begin with the
first day of January and end on the thirty-first day of December in each year,
provided, however, that the General Partners in their sole discretion may,
subject to approval by the Internal Revenue Service and the applicable state
taxing authorities, at any time without approval of the Limited Partners change
the Partnership's fiscal year to a period to be determined by the General
Partners.
4.05 Bank Accounts, Funds and Assets. The funds of the Partnership shall be
deposited in such bank or banks as the General Partners shall deem appropriate.
Subject to the provisions of Article XII, such funds shall be withdrawn only by
the General Partners or their duly authorized agents. Sponsors shall have a
fiduciary responsibility for the safekeeping and use of all funds of the
Partnership, whether or not in their immediate possession or control, and they
shall not employ or permit another to employ such funds or assets in any manner
except for the exclusive benefit of the Partnership. Sponsors shall not
commingle or permit the commingling of the funds of the Partnership with the
funds of any other person or entity.
4.06 Adjustment of Tax Basis. Upon the transfer of an interest in the
Partnership, the Partnership may, at the sole discretion of the General
Partners, elect, pursuant to Section 754 of the Internal Revenue Code of 1954,
as amended, to adjust the basis of the Partnership property as allowed by
Section 734(b) and 743(b) thereof. The election, if made, will be filed with the
Partnership information income tax return for the first taxable year to which
the election applies.
17
4.07 Insurance. The Partnership shall at all times maintain public
liability insurance in amounts determined by the General Partners for the
protection of the Partnership and each of its members. In addition, the
Partnership shall carry appropriate Workmen's Compensation Insurance and such
other insurance with respect to the real property owned by it as shall be
customary for similar property, similarly located, from time to time (for
purposes hereof losses catastrophic in nature, e.g., war, earthquakes and
floods, shall not be deemed customary insurance coverages and shall not be
required). No sponsor or affiliate of a sponsor shall receive an insurance
brokerage fee or commission or write any insurance policy covering the
Partnership or any of the property of the Partnership. The Partnership shall not
pay for any insurance covering liability of a General Partner or its affiliates,
agents or employees for actions or omissions to act for which indemnification is
not permitted hereunder. The Partnership may purchase and pay for such types of
insurance, including extended coverage liability and casualty and workmen's
compensation, as would be customary for any person owning comparable property
and engaged in a similar business and may name the General Partners and their
affiliates as additional insured parties thereunder, provided that such addition
does not add to the cost of premiums payable by the Partnership.
4.08 Appraisals.
An appraisal by an independent qualified appraiser shall be obtained for
each investment property. Such qualification may be demonstrated by membership
in a nationally recognized appraisal society such as Member Appraisal Institute
("M.A.I."), Society of Real Estate Appraisers ("S.R.E.A.") or their equivalent,
but is not limited thereto. The appraisal shall be maintained in the records of
the Partnership for at least five years and shall be available for inspection
and duplication by any Limited Partner.
4.09 Tax Matters Partner.
Xxxx X. Xxxxx, Xx. is selected and has the right, power and authorization
to represent the Partnership and each Limited Partner as the tax matters partner
in connection with all examinations of the Partnership affairs by tax
authorities, including resulting administrative and judicial proceedings, and to
expend Partnership funds for professional services and costs connected
therewith. Each Limited Partner agrees to cooperate with Xxxx X. Xxxxx, Xx. and
to do or refrain from doing any and all things reasonably required by Xxxx X.
Xxxxx, Xx. to conduct such proceedings. Xx. Xxxxx is subject to the same
limitations on indemnification, with respect to this matter, as provided in
section 2.02.
V.
ASSIGNABILITY OF LIMITED PARTNERS INTERESTS
5.01 Limited Partners' Interest. Each of the Limited Partners, except as
provided in this Article V, shall not sell, transfer, encumber or otherwise
dispose by operation of law or otherwise of the whole or any part of his or her
interest in the Partnership except by written instrument satisfactory in form to
the General Partners, accompanied by such assurance of the genuineness and
effectiveness of each such signature and the obtaining of any federal and/or
state government approval, if any, as may be reasonably required by the General
Partners.
No less than a minimum of 25 Units (10 for certain fiduciaries) may be
transferred.
No assignment shall be valid or effective unless in compliance with the
conditions herein contained.
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5.02 Further Restriction on Transfers. No Partner shall make any assignment
of all or any part of his or her interest in the Partnership if said transfer or
assignment would, in the opinion of counsel, (i) when considered with all other
transfers during the same applicable twelve (12) month period, cause a
termination of the Partnership for federal or any applicable state income tax
purposes; or (ii) not comply with the safe harbor provisions of Internal Revenue
Service Notice 88-75 (or other safe harbors adopted by the Internal Revenue
Service that protect against treatment as a publicly traded partnership) or
(iii) otherwise adversely affect the tax status of the Partnership or the
characterization or treatment of income or loss. Any such restrictions on
assignment shall be modified or eliminated at such time as the restriction is no
longer necessary.
5.03 Substituted Partners. No assignee of the whole or any portion of a
Limited Partner's interest in the Partnership shall have the right to become a
substituted Limited Partner in place of his or her assignor, unless (i) such
assignor shall designate such intention in the instrument of assignment; (ii)
the assignment instrument shall be in form and substance satisfactory to the
General Partners; (iii) the assignor and assignee named therein shall execute
and acknowledge such other instrument or instruments as the General Partners may
deem necessary or desirable to effectuate such admission, including but not
limited to a power of attorney with provisions more fully described in this
Agreement; (iv) the assignee shall accept; adopt and approve in writing of all
of the terms and provisions of this Agreement, as the same may have been
amended; and (v) the written consent of the General Partners to the substitution
(which consent shall be given unless in the written opinion of the Partnership's
tax counsel such consent should be withheld to preserve the tax status of the
Partnership) if the substituted Limited Partner is not the transferring Limited
Partner's spouse, ancestor, lineal descendent or trust for the benefit of such
person(s).
5.04 Additional Restrictions. Any unauthorized assignment or transfer shall
be void ab initio. All documents and records evidencing a Limited Partnership
interest, whether issued originally or subsequently, owned by California
residents shall bear and be subject to legend conditions as follows:
(a) "IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THERE-FOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS FOR THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
(b) "Any unauthorized assignment of transfer shall be void ab initio."
(c) "Assignees of this security may become substituted Limited Partners
only
with the consent of the General Partners."
5.05 Withdrawal of Limited Partner. Except as provided in Article VI, no
Limited Partner shall be entitled to withdraw or retire from the Partnership.
5.06 Death of Limited Partner. The death of a Limited Partner shall not
terminate the Partnership. Upon the death of a Limited Partner, the personal
representative of the deceased Limited Partner shall have all the rights of the
Limited Partner in the Partnership to the extent of the deceased Limited
Partner's interest therein, subject to the terms and conditions of this
Agreement, and the estate of the deceased Limited Partner shall be liable for
all of his or her liabilities as a Limited Partner, as well as the execution of
all documents required to effect, subject to the terms of Section 5.03, the
appropriate substitution of the decedent's estate or beneficiary as a Limited
Partner hereunder.
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5.07 Recognition of Substituted and Assignee Limited Partners. The
Certificate of Limited Partnership of the Partnership shall be amended and
recorded pursuant to Section 1.01 in any jurisdiction where it may be required
at least once each calendar quarter to recognize the admission of substituted
Limited Partners. Assignees of Limited Partners shall be recognized as such not
later than the first of the calendar month following the General Partners'
receipt of notice of such assignment.
VI.
PURCHASE OF UNITS BY THE PARTNERSHIP
The Partnership, in its sole discretion, may purchase Units, after the
offering of its Units has closed, at a negotiated price, if such purchase does
not impair the capital or operations of the Partnership. The purchase price may
be no less than 85% of the then fair market value at the time of purchase. The
Partnership will not apply more than an aggregate of 1% of the Partnership's
annual cash flow from operations, noncumulative, to any such purchases. In
addition, such purchases will not exceed 2% of the gross proceeds of the
offering annually, not to exceed in the aggregate a total of $200,000.
VII.
RIGHT OF LIMITED PARTNERS TO RECEIVE PROPERTY OTHER THAN CASH
No right is given to a Limited Partner to demand and receive property other
than cash in return for his or her contribution.
VIII.
TERMINATION OF A GENERAL PARTNER
8.01 Ceasing to be a General Partner. A person ceases to be a General
Partner of this Partnership upon the happening of any of the following events
("Terminating Events"):
(a) The General Partner withdraws from this Partnership.
(b) The General Partner is removed as a General Partner.
(c) Unless otherwise provided in the partnership agreement, an order for
relief against the General Partner is entered under Chapter 7 of the federal
bankruptcy law, or the General Partner (1) makes a general assignment for the
benefit of creditors, (2) files a voluntary petition under the federal
bankruptcy law, (3) files a petition or answer seeking for that partner any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law, or regulation, (4) files an answer or
other pleading admitting or failing to contest the material allegations of a
petition filed against that partner in any proceeding of this nature, or (5)
seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or
liquidator of the General Partner or of all or any substantial part of that
partner's properties.
(d) Sixty days after the commencement of any proceeding against the General
Partner seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law, or
regulation, if the proceeding has not been dismissed, or if within 60 days after
the appointment without that partner's consent or acquiescence of a trustee,
receiver, or liquidator of the General Partner or of all or any substantial part
of that partner's properties, the appointment is not vacated or stayed, or
within 60 days after the expiration of any such stay, the appointment is not
vacated.
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(e) In the case of a General Partner who is an individual, either of
the following:
(1) The death of that partner.
(2) The entry by a court of competent jurisdiction of an order adjudicating
the partner incompetent to manage the General Partner's person or estate.
(f) In the case of a General Partner who is acting as a General Partner by
virtue of being a trustee of a trust, the termination of the trust (but not
merely the substitution of a new trustee, in which case the new trustee
automatically becomes the new General Partner).
(g) In the case of a General Partner that is a separate partnership,
the dissolution of the separate partnership.
(h) In the case of a General Partner that is a corporation, the filing of a
certificate of dissolution, or its equivalent, for the corporation.
(i) In the case of a General Partner that is an estate, the distribution by
the fiduciary of the estate's entire interest in the limited partnership.
Notwithstanding the provisions of subsections (a) and (h) above, without
the concurrence of a majority of the outstanding limited partnership interests,
a General Partner may not withdraw or retire as a General Partner or dissolve
itself or the Partnership.
8.02 Continuation of Business of Remaining General Partner. If one General
Partner ceases to be a General Partner pursuant to the provisions of Section
8.01, the remaining General Partner shall continue the business of the
Partnership.
8.03 Removal of a General Partner. The Limited Partners holding a majority
in interest of the Units may remove any or all of the General Partners. Written
notice of such determination setting forth the effective date of such removal
shall be served upon the General Partner or General Partners so removed and, as
of the effective date, shall terminate all of such persons' rights and powers as
a General Partner.
8.04 Dissolution of Partnership and Continuance of Partnership Business.
After the occurrence of a terminating event with respect to the last remaining
General Partner, as described in Section 8.01, the Limited Partners shall meet
within ninety (90) days of the terminating event and either:
(a) Elect one or more new General Partners to continue the Partnership
business, in which event, upon the filing of a new Certificate of Limited
Partnership to reflect the new General Partner, this Partnership shall continue
in business; or
(b) Elect to terminate and liquidate the Partnership under the provisions
of Article IX hereof.
8.05 Payment to Terminated General Partner. Upon the occurrence of a
terminating event, if such terminating event relates to a General Partner who is
the last remaining original General Partner and if the business of the
Partnership is continued, as aforesaid, the Terminated General Partner shall be
entitled to receive from the Partnership the then present fair market value of
his allocated interest in Net Profits, Net Losses, Distributions of Cash
Available for Distribution, surplus Funds upon Liquidation, determined by
agreement of the Terminated General Partner and the Partnership, or, if they
cannot agree, by arbitration in accordance with the then current rules of the
American Arbitration Association. The expense of such arbitration shall be borne
equally by the Partnership and the General Partners. For this
21
purpose, the fair market value of the interest of the Terminated General Partner
shall be deemed to be the amount the Terminated General Partner would receive
upon dissolution and termination of the Partnership under Section 9.02, assuming
(a) such dissolution or termination occurred on the date of the dissolving event
specified above, and (b) the assets of the Partnership were sold for their then
fair market value without compulsion of the Partnership to sell such assets. The
Partnership forthwith shall execute and deliver to the Terminated General
Partner a promissory note of the Partnership, payable to the order of the
Terminated General Partner, which promissory note shall include the following
provisions: (i) be in a principal amount equal to the present fair market value
of the interest so determined; (ii) bearing interest at a rate per annum which
is the lesser of two percent over the prime rate of the Bank of America, NT&SA
or ten percent per annum, principal and all unpaid accrued interest payable in
equal annual installments with the remaining unpaid principal balance and unpaid
accrued interest on the promissory note to be due and payable five years from
the date of such terminating event, and (iii) such other provisions as would be
usual and customary in a commercial promissory note, including the right of the
holder upon default to accelerate otherwise unmatured installments and to
recover costs of collection including reasonable attorney's fees.
Notwithstanding the foregoing, where the termination is voluntary, the method of
payment will be by a non-interest bearing unsecured promissory note with
principal payable, if at all, from distributions which the Terminated General
Partner otherwise would have received under the partnership agreement had the
General Partner not terminated.
8.06 Termination of Executory Contracts. Upon removal of a General Partner,
all executory contracts between the Partnership and the terminating General
Partner or any affiliate thereof (unless such affiliate is also an affiliate of
a continuing General Partner) may be terminated by the Partnership effective
upon written notice to the party so terminated. The terminating General Partner
or any affiliate unless such affiliate is also an affiliate of a continuing
General Partner) thereof may also terminate and cancel any such executory
contract effective upon sixty (60) days' prior written notice of such
termination and cancellation given to the new General Partner, if any, or to the
Partnership.
IX.
DISTRIBUTION ON TERMINATION
9.01 Events of Dissolution. The Partnership shall be terminated and dissolved,
prior to the end of its term, in accordance with any other provision of this
Agreement, or upon the happening of any of the following events:
(a) The Limited Partners holding a majority of all the Units of the
Partnership determine, by written consent or approving vote, that the
Partnership should be dissolved; or
(b) The Partnership is adjudicated insolvent or bankrupt.
9.02 Gain and Loss on Dissolution and Order of Distribution.
(a) In the event of the dissolution or termination of the Partnership,
unless the remaining Partners elect to continue the business of the Partnership
as provided in this Agreement, the General Partners or the liquidator of the
Partnership shall proceed with the winding up of the affairs and the liquidation
of the Partnership. The General Partners, who shall be the liquidators of the
Partnership, shall cause to be prepared a statement setting forth the assets and
liabilities of the Partnership as of the date of dissolution, and such statement
shall be furnished to all of the Partners (General and Limited). The assets of
the Partnership, which the General Partners determine should be liquidated, then
shall be liquidated as promptly as possible, but in an orderly and businesslike
manner so as not to involve undue sacrifice.
22
(b) The aggregate net profit and net loss realized by the Partnership upon
the sale or other disposition of its assets shall be credited or charged to the
accounts of the General Partners and Limited Partners in accordance with the
provisions of Section 3.07 hereof after providing for the debts and liabilities
of the Partnership.
(c) The proceeds of such liquidation shall be applied and distributed in
the order of priority and in the same manner as provided in Section 3.07 hereof
after providing for the debts and liabilities of the Partnership.
(d) All distributions under Section 9.02(c) shall be made in money arising
from the sale of assets of the Partnership.
9.03 Eminent Domain. A taking of all or substantially all of the
Partnership's property and assets in condemnation or by eminent domain shall be
treated in all respects as a sale of the Partnership's property and assets upon
the dissolution and liquidation of the Partnership, pursuant to this Article IX.
In such event any portion of the property and assets of the Partnership not so
taken shall be sold and/or distributed, together with the condemnation award, in
the manner provided for in this Article IX.
9.04 Period of Liquidation. A reasonable time shall be allowed for the
orderly liquidation of the assets of the Partnership, so as to enable the
General Partners or the liquidator to minimize the normal losses attendant upon
liquidation.
X.
CERTIFICATES AND OTHER DOCUMENTS
10.01 General Partners Attorneys for Limited Partners. Each Limited
Partner, by becoming a Limited Partner, hereby constitutes and appoints each of
the General Partners and his successors the true and lawful attorneys of, and in
the name, place and stead of said Limited Partner, from time to time:
(a) To make all agreements amending this Agreement, as now or hereafter
amended, that may be appropriate to reflect solely:
(i) A change of the name or the location of the principal place of
business of the Partnership;
(ii) The disposal by a Limited Partner of his or her interest in the
Partnership, in any manner permitted by this Agreement and any return of
the capital contribution of a Limited Partner (or any part thereof), if
any, provided for by this Agreement
(iii) A person becoming a Limited Partner of the Partnership as
permitted by this Agreement;
(iv) A change in any provision of this Agreement or the exercise by
any person of any right or rights thereunder not requiring the consent of
said Limited Partner; and
(v) The exercise by any person of any right or rights under this
Agreement requiring the consent or approval of a majority or a specified
percentage of the Limited Partners and the required consent or approval has
been given.
23
(b) To make such certificates, instruments and documents, including
Fictitious Business Name Statements, 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; and
(c) To make such certificates, instruments and documents, including
amendments to this Agreement and the Certificate of Limited Partnership, as said
Limited Partner may be required or as may be appropriate for said Limited
Partner to make, by the laws of any state or other jurisdiction solely to
reflect:
(i) A change of address of said Limited Partner;
(ii) Any changes in or amendments to this Agreement, or pertaining to
the Partnership, of any kind referred to in paragraph (a) of this
subsection; and
(iii) Any other changes in or amendments to this Agreement but only if
and when said Limited Partner has agreed to such other changes or
amendments by signing, either personally or by duly appointed attorney, an
agreement amending this Agreement.
Each of said agreements, certificates, instruments and documents shall be
in such form as said attorney and counsel for the Partnership shall deem
appropriate. The powers hereby 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.
Each Limited Partner authorizes said attorney to take any further action
which said attorney shall consider necessary or convenient in connection with
any of the foregoing and hereby gives said attorney full power and authority to
do and perform each and every act and thing whatsoever requisite and necessary
to be done in and about the foregoing as fully as said Limited Partner might or
could do if personally present, and hereby ratifies and confirms all that said
attorney shall lawfully do or cause to be done by virtue hereof.
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.
10.02 Making, Filing, Etc. of Certificates, Etc. The General Partners
agree, when authorized pursuant to Section 10.01, or otherwise, to make, file or
record with the appropriate public authority and (if required) publish the
Certificate, 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.
XI.
NOTICES
All notices (except notices required under Section XIV hereof), requests
and other communications provided for herein shall be in writing and, unless
otherwise specified, shall be forwarded by first class mail, directed to the
parties at the addresses set forth in the Subscription Agreement and Signature
Pages attached hereto or to such other addresses as any party may from time to
time designate in writing, and given in accordance with the provisions of this
Article XI. Notices or communications given, as set forth herein, shall be
conclusively deemed to have been received by the party to whom addressed three
business days after the same are deposited in the United States mail.
24
XII.
CONVEYANCES, CONTRACTS AND DOCUMENTS
Any deed, xxxx of sale, mortgage, deed of trust, lease, contract of sale,
or other commitment purporting to convey or encumber the interest of the
Partnership in all or in any portion of any real or personal property at any
time held in its name, and any other contract, check, draft, document,
communication or notice to which the Partnership is a party, may be signed by
any one of the General Partners acting alone or on behalf of the Partnership.
XIII.
ARBITRATION
(This Article omitted at the request of state securities commissions.)
XIV.
MEETINGS OF, OR ACTIONS BY, THE LIMITED PARTNERS
(a) Meetings of partners may be held at a time and place convenient to the
Limited Partners within or without this state as may be fixed by the General
Partners. If no other place is so fixed, partners' meetings shall be held at the
principal executive office of the Partnership.
(b) A meeting of the partners may be called by any of the General Partners
or by Limited Partners representing more than 10 percent of the interests of
Limited Partners for any matters on which the Limited Partners may vote.
(c) (1) Whenever partners are required or permitted to take any action at a
meeting, a written notice of the meeting shall be given, within ten days after
receipt of a request, not less than 15, nor more than 60, days before the date
of the meeting to each partner entitled to vote at the meeting. The notice shall
state the place, date, and hour of the meeting and the general nature of the
business to be transacted, and no other business may be transacted.
(2) Notice of a Partners' meeting or any report shall be given either
personally or by mail or other means of written communication, addressed to
the partner at the address of the partner appearing on the books of the
Partnership or given by the partner to the Partnership for the purpose of
notice, or, if no address appears or is given, at the place where the
principal executive office of the partnership is located or by publication
at least once in a newspaper of general circulation in the county in which
the principal executive office is located. The notice or report shall be
deemed to have been given at the time when delivered personally or
deposited in the mail or sent by other means of written communication. An
affidavit of mailing of any notice or report in accordance with the
provisions of this article, executed by a General Partner, shall be prima
facie evidence of the giving of the notice or report. Included with the
notice shall be a detailed statement of the action proposed, including a
verbatim statement of the wording of any resolution proposed for adoption
by the limited partners and of any proposed amendment to the partnership
agreement.
If any notice or report addressed to the partner at the address of the
partner appearing on the books of the Partnership is returned to the Partnership
by the United States Postal Service marked to indicate that the United States
Postal Service is unable to deliver the notice or report to the partner at the
address, all future notices or reports shall be deemed to have been duly given
without further mailing if
25
they are available for the partner at the principal executive office of the
Partnership for a period of one year from the date of the giving of the notice
or report to all other partners.
(3) Upon written request to the General Partners by any person
entitled to call a meeting of partners, the General Partners shall, within
ten days after receipt of a request, cause written notice to be given in
person or by certified mail to the partners entitled to vote that a meeting
will be held at a time requested by the person calling the meeting, not
less than 15, nor more than 60, days after the receipt of the request. If
the notice is not given within 20 days after receipt of the request, the
person entitled to call the meeting may give the notice or, upon the
application of such person, the superior court of the county in which the
principal executive office of the Partnership is located, or if the
principal executive office is not in this state, the county in which the
Partnership's address in this state is located, shall summarily order the
giving of the notice, after notice to the Partnership giving it an
opportunity to be heard. The procedure provided in subdivision (c) of
Section 305 of the California Corporations Code shall apply to the
application. The court may issue any order as may be appropriate,
including, without limitation, an order designating the time and place of
the meeting, the record date for determination of partners entitled to
vote, and the form of notice.
(d) When a partners' meeting is adjourned to another time or place, unless
the Partnership Agreement otherwise requires and, except as provided in this
subdivision, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting the Partnership may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than 45
days or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each partner of
record entitled to vote at the meeting.
(e) The transactions of any meeting of partners, however called and
noticed, and wherever held, are as valid as though had at a meeting duly held
after regular call and notice, if a quorum is present either in person or by
proxy, and if, either before or after the meeting, each of the persons entitled
to vote, not present in person or by proxy, signs a written waiver of notice or
a consent to the holding of the meeting or an approval of the minutes thereof.
All waivers, consents, and approvals shall be filed with the Partnership records
or made a part of the minutes of the meeting. Attendance of a person at a
meeting shall constitute a waiver of notice of the meeting, except when the
person objects, at the beginning of the meeting to the transaction of any
business because the meeting is not lawfully called or convened and except that
attendance at a meeting is not a waiver of any right to object to the
consideration of matters required by this chapter to be included in the notice
but not so included, if the objection is expressly made at the meeting. Neither
the business to be transacted at nor the purpose of any meeting of partners need
be specified in any written waiver of notice, unless otherwise provided in the
partnership agreement, except as provided in subdivision (f).
(f) Any partner approval at a meeting, other than unanimous approval by
those entitled to vote, pursuant to paragraph (5) of subdivision (b) of Section
15632 of the California Corporations Code shall be valid only if the general
nature of the proposal so approved was stated in the notice of meeting or in any
written waiver of notice.
(g) (1) A majority in interest of the Limited Partners represented in
person or by proxy shall constitute a quorum at a meeting of partners.
(2) The partners present at a duly called or held meeting at which a
quorum is present may continue to transact business until adjournment
notwithstanding the withdrawal of enough partners to Leave less than a quorum,
if any action taken (other than adjournment) is
26
approved by the requisite percentage of interests of Limited Partners specified
in California Revised Limited Partnership Act or in the Partnership Agreement.
(3) In the absence of a quorum, any meeting of partners may be
adjourned from time to time by the vote of a majority of the interests
represented either in person or by proxy, but no other business may be
transacted, except as provided in paragraph (2).
(h) Unless otherwise provided in the Partnership Agreement, any action
which may be taken at any meeting of the partners may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
partners having not less than the minimum number of votes that would be
necessary to authorize or take that action at a meeting at which all entitled to
vote thereon were present and voted. In the event the Limited Partners are
requested to consent on a matter without a meeting, each partner shall be given
notice of the matter to be voted upon in the same manner as described in
subdivision (c). In the event any General Partner, or Limited Partners
representing more than 10 percent of the interests of the Limited Partners,
request a meeting for the purpose of discussing or voting on the matter, the
notice of a meeting shall be given in accordance with subdivision (c) and no
action shall be taken until the meeting is held. Unless delayed in accordance
with the provisions of the preceding sentence, any action taken without a
meeting will be effective 15 days after the required minimum number of voters
have signed the consent, however, the action will be effective immediately if
all General Partners and Limited Partners representing at least 90 percent of
the interests of the Limited Partners have signed the consent.
(i) The use of proxies in connection with this section will be governed in
the same manner as in the case of corporations formed under the General
Corporation Law of California. The Partnership will provide for proxies or
written consents which specify a choice between approval and disapproval of each
matter to be acted upon at the meeting.
(j) In order that the Partnership may determine the partners of record
entitled to notices of any meeting or to vote, or entitled to receive any
distribution or to exercise any rights in respect of any other lawful action,
the General Partners, or Limited Partners representing more than 10 percent of
the interests of Limited Partners, may fix, in advance, a record date, which is
not more than 60 or less than 15 days prior to the date of the meeting and not
more than 60 days prior to any other action. If no record date is fixed:
(1) The record date for determining partners entitled to notice of or
to vote at a meeting of partners shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice
is waived, at the close of business on the business day next preceding the
day on which the meeting is held.
(2) The record date for determining partners entitled to give consent
to Partnership action in writing without a meeting shall be the day on which
the first written consent is given.
(3) The record date for determining partners for any other purpose
shall be at the close of business on the day on which the general partners
adopt it, or the 60th day prior to the date of the other action, whichever
is later.
(4) The determination of partners of record entitled to notice of or
to vote at a meeting of partners shall apply to any adjournment of the
meeting unless the general partners, or the limited partners who called the
meeting, fix a new record date for the adjourned meeting, but the general
partners, or the limited partners who called the meeting, shall fix a new
record date if the meeting is adjourned for more than 45 days from the date
set for the original meeting.
27
XV.
CAPTIONS--PRONOUNS
Any titles or captions of articles or paragraphs contained in this
Agreement are for convenience only and shall not be deemed part of the context
of this Agreement. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine, neuter, singular or plural, as the
identification of the person or persons, firm or firms, corporation or
corporations may require.
XVI.
BINDING EFFECT AND EXHIBITS
Except as otherwise herein provided, this Agreement shall be binding upon
and inure to the benefit of the parties hereto, their heirs, executors,
administrators, successors and all persons hereafter having or holding an
interest in this Partnership, whether as assignees, substituted Limited
Partners, or otherwise. All exhibits hereto are by this reference incorporated
herein.
XVII.
AMENDMENT OF THE AGREEMENT
Except as provided by this Article XVII, this Agreement may be modified or
amended only by a vote of a majority in interest of the Limited Partners;
provided, however, this Agreement may be amended from time to time by the
General Partners, without the consent of any of the Limited Partners, but only
if such amendment does not affect the rights of the limited partners, (i) to add
to the representations, duties or obligations of the General Partners or their
Affiliates or to surrender any right or power granted to the General Partners or
their Affiliates herein, for the benefit of the Limited Partners; (ii) to cure
any ambiguity, to correct or supplement any provision which may be inconsistent
with any other provision, or to make any other provisions with respect to
matters or questions arising under this Agreement which will not be inconsistent
with the provisions of this Agreement; (iii) to reflect reductions in the
capital contributions of the Limited Partners resulting from the return of
capital to the Limited Partners in accordance with the requirements of this
Agreement; (iv) to delete or add any provisions of this Agreement required to be
so deleted or added by the Staff of the Securities and Exchange Commission or by
a State "Blue Sky" Administrator or similar official, which addition or deletion
is deemed by the Administrator or official to be for the benefit or protection
of the Limited Partners; (v) to elect for the Partnership to be governed by any
successor California statute governing limited partnerships; (vi) to effect
changes to substantially comply with Internal Revenue Service Regulations
Section 1.704-1; and (vii) as otherwise provided for pursuant to this
Partnership Agreement. The General Partner shall notify the Limited Partner
within a reasonable time of the adoption of any amendment. Notwithstanding
anything to the contrary contained in this Agreement, this Agreement may not be
amended without the consent of all Partners to be adversely affected by the
amendment that:
(a) Alters the interest of the General Partners or Limited Partners in net
income or net loss or distributions from the Partnership; or
(b) Adversely affects the status of the Partnership as a partnership for
federal income tax purposes.
Further notwithstanding anything to the contrary contained in this
Agreement, this Agreement may not be amended (even if all Partners agree) to (i)
convert a Limited Partner into a General Partner, or (ii) modify the limited
liability of a Limited Partner.
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XVIII.
ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreements between the
parties hereto respecting the within subject matter, and there are no
representations, agreements, arrangements or understandings, oral or written,
between and among the parties hereto relating to the subject matter of this
Agreement which are not fully expressed herein. This Agreement shall be
governed by and construed in accordance with the laws of the State of California
and, unless expressly or by necessary implication contravened by any provision
hereof, the provisions of the California Revised Limited Partnership Act shall
apply.
XIX.
TAX CONTROVERSIES
Should there be any controversy with the Internal Revenue Service or any
other taxing authority involving the Partnership or an individual Partner or
Partners, the outcome of which may adversely affect the Partnership, either
directly or indirectly, the Partnership may incur expenses it deems necessary
and advisable in the interest of the Partnership to oppose such proposed
deficiency, including, without being limited thereto, legal and accounting fees.
The General Partners are subject to the same limitations on indemnification,
with respect to this matter, as provided in section 2.02.
XX.
COUNTERPARTS AND EXECUTION
This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original Agreement, and all of which shall constitute one
Agreement, by each of the parties hereto on the dates respectively indicated in
the signatures of said parties, notwithstanding that all of the parties are not
signatories to the original or to the same counterpart, to be effective as of
the day and year hereinabove set forth.
XXI.
INVESTMENT IN OTHER PROGRAMS OF SPONSOR
21.01 The provisions of this Article are effective notwithstanding anything
to the contrary in Sections 1.05 and 2.01.
21.02 Investments in limited partnership interests of another program shall
be prohibited; however, nothing herein shall preclude the investment in general
partnerships or ventures which own and operate a particular property provided
this partnership acquires a controlling interest in such other ventures or
general partnerships (except as permitted by subsection 21.03). In such event,
duplicate property management or other fees shall not be permitted. For purposes
of this Section, "controlling interest" means an equity interest possessing the
power to direct or cause the direction of the management and policies of the
general partnership or joint venture, including the authority to: (a) review all
contracts entered into by the general partnership or joint venture that will
have a material effect on its business or property; (b) cause a sale or
refinancing of the property or its interest therein subject in certain cases
where required by the partnership or joint venture agreement, to limits as to
time, minimum amounts and/or a right of first refusal by the joint venture
partner or consent of the joint venture partner, (c) approve budgets and major
capital expenditures, subject to a stated minimum amount; (d) veto any
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sale or refinancing of the property, or, alternatively, to receive a specified
preference on sale or refinancing proceeds; and, (e) exercise a right of first
refusal on any desired sale or refinancing by the joint venture partner of its
interest in the property except for transfer to an affiliate of the venture
partner.
21.03 This partnership shall be permitted to invest in general partnerships
or joint venture arrangements with another publicly registered program formed by
the sponsor if all the following conditions are met.
(a) The two programs have substantially identical investment objectives.
(b) There are no duplicate property management or other fees.
(c) The sponsor compensation should be substantially identical in each
program.
(d) The partnership must have a right of first refusal to buy if the other
program wishes to sell property held in the joint venture.
(e) The investment of each program is on substantially the same terms and
conditions.
(f) The prospectus must disclose the potential risk of impasse on joint
venture decisions since neither program controls and the potential risk that
while one program may buy the property from the other joint venturer, in the
event of a sale, it may not have the resources to do so.
XXII.
PROCEEDS FROM FINANCING PROPERTIES
22.01 After the Partnership has owned a property for two years or more, the
Partnership may borrow money and mortgage such property subject to the
following:
(a) A mortgage may be a lien on one or more properties owned by the
Partnership.
(b) The holder of the note evidencing the borrowing may have recourse only
to the property(ies) secured by the mortgage for payment of the note; no
recourse may be had against any other property owned by the Partnership, or
against any General or Limited Partner personally.
(c) All net financing proceeds must be distributed to the Limited and
General Partners as provided in this Agreement.
(d) The net financing proceeds should return substantially all of the
Limited Partner's invested capital.
(e) The financing may assist in the sale of all of the Partnership's
properties.
(f) In the General Partner's judgment, the financing should increase the
economic return to the Limited Partners, and should not substantially increase
the risk of investment in the property(ies).
(g) Neither the General Partners nor their affiliates shall provide or make
available any such financing.
(h) The mortgage maximum indebtedness shall not exceed 80% of the aggregate
fair market value as determined by the lender as of the date of refinancing as
to all properties which have been
30
refinanced. For purposes of this section "indebtedness" shall include the
principal of any loan together with any interest that may be deferred pursuant
to the terms of the loan agreement which exceeds 5% per annum of the principal
balance of such indebtedness (excluding contingent participations in income
and/or appreciation in the value of the Partnership's property) and shall
exclude any indebtedness incurred by the Partnership for necessary working
capital.
In witness whereof, the parties have signed this agreement on the dates
indicated below:
Original Limited /s/ XXXXXXXX XXX XXXXX March 8, 1990
------------------------------------------
Partner: Xxxxxxxx Xxx Xxxxx
Individual General /s/ XXXX X. XXXXX, XX. March 8, 1990
------------------------------------------
Partner: Xxxx X. Xxxxx, Xx.
Corporate General The Windsor Corporation
Partner:
By /s/ XXXX X. XXXXX, XX. March 8, 1990
------------------------------------------
Xxxx X. Xxxxx, Xx.
President
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