EXHIBIT A
LIMITED PARTNERSHIP AGREEMENT
REALTY PARKING PROPERTIES L.P.
TABLE OF CONTENTS
Page
Preliminary Statement .......................................................................................... A-3
Article I - Defined Terms .................................................................................... A-3
Article II - Name; Purpose; Term and Certificate ................................................... A-9
Section 2.1 Name; Formation .............................................................................. A-9
Section 2.2 Place of Registered Office .................................................................. A-9
Section 2.3 Purpose .......................................................................................... A-9
Section 2.4 Term .............................................................................................. A-9
Section 2.5 Recording of Certificate ..................................................................... A-9
Article III - Partners; Capital .............................................................................. A-10
Section 3.1 General Partners; Assignor Limited Partner; Subordinated
Limited Partners ........................................................................................... A-10
Section 3.2 Investors ........................................................................................ A-10
Section 3.3 Partnership Capital .......................................................................... A-10
Section 3.4 Liability of Partners and Investors ..................................................... A-11
Article IV - Allocations, Distributions and Applicable Rules ................................... A-12
Section 4.1 Allocation of Profit or Loss from a Sale ............................................. A-12
Section 4.2 Distribution of Net Proceeds of Sale or Financing ............................... A-12
Section 4.3 Distribution of Net Cash Flow and Allocation of Profit and
Loss from Operations .................................................................................... A-13
Section 4.4 Liquidation or Dissolution ............................................................... A-13
Section 4.5 General and Special Rules ............................................................... X- 00
Article V - Rights, Powers and Duties of Partners ................................................. A-16
Section 5.1 Management and Control of the Partnership; Tax Matters Partner ............. A-16
Section 5.2 Authority of General Partners .......................................................... A-16
Section 5.3 Authority of Investors ..................................................................... A-19
Section 5.4 Restrictions on Authority ................................................................. A-19
Section 5.5 Authority of Partners and Affiliated Persons to Deal with Partnership ............. A-21
Section 5.6 Duties and Obligations of the General Partner ................................... A-22
Section 5.7 Compensation of General Partner ..................................................... A-23
Section 5.8 Other Businesses of Partner .............................................................. A-23
Section 5.9 Liability of General Partner and Affiliates to Limited Partner or Investors . ..... A-23
Section 5.10 Indemnification ............................................................................. A-23
Article VI - Transferability of a General Partner's Interest ..................................... A-24
Section 6.1 Removal, Voluntary Retirement or Withdrawal of a General Partner;
Transfer of Interests ...................................................................................... A-24
Section 6.2 Election and Admission of Successor or Additional General Partners ....... A-24
Section 6.3 Events of Withdrawal of a General Partner ........................................ A-24
Section 6.4 Liability of a Withdrawn General Partner .......................................... A-25
Section 6.5 Valuation of Partnership Interest of General Partner ........................... A-25
Article VII - Assignment of Assignee Units to Investors; Transferability of Limited
Partner Interests and Units ..............................................................................A-26
Section 7.1 Assignments of the Assignee Units to Investors .................................. A-26
Section 7.2 Transferability of Units .................................................................... A-27
Section 7.3 Death, Bankruptcy or Adjudication of Incompetence of an Investor or a
Limited Partner ........................................................................................... X-00
X-0
Xxxxxxx 7.4 Effective Date ............................................................................ A-28
Section 7.5 Substitute Limited Partners .......................................................... A-28
Section 7.6 Retirement or Withdrawal of a Limited Partner ............................. A-28
Article VIII - Dissolution, Liquidation and Termination of the Fund ................... A-29
Section 8.1 Events Causing Dissolution ......................................................... A-29
Section 8.2 Liquidation ................................................................................ A-29
Section 8.3 Capital Contribution Upon Dissolution ......................................... A-30
Article IX - Certain Payments to the General Partners and Affiliates ................... A-30
Section 9.1 Reimbursement of Certain Costs and Expenses of the General Partner and
Its Affiliates ............................................................................................ A-30
Section 9.2 Fees and Other Payments ............................................................ A-31
Article X - Books and Records; Bank Accounts; Reports ................................... X-00
Xxxxxxx 00.0 Books and Records .................................................................... A-31
Section 10.2 Bank Accounts ......................................................................... A-32
Section 10.3 Reports .................................................................................... X-00
Xxxxxxx 00.0 Xxxxxxx Tax Elections ................................................................ A-33
Article XI - Meetings of Investors ................................................................... A-34
Section 11.1 Calling Meetings ......................................................................... X-00
Xxxxxxx 00.0 Xxxxxx; Procedure ..................................................................... X-00
Xxxxxxx 00.0 Right to Vote ........................................................................... A-34
Section 11.4 Proxies; Rules .......................................................................... A-34
Article XII - General Provisions ..................................................................... X-00
Xxxxxxx 00.0 Xxxxxxxxxxx of General Partner as Attorney-in-Fact ......................... X-00
Xxxxxxx 00.0 Xxxxxx of Partition ................................................................... A-35
Section 12.3 Notification .............................................................................. A-35
Section 12.4 Word Meanings ........................................................................ A-35
Section 12.5 Binding Provisions ................................................................... X-00
Xxxxxxx 00.0 Applicable Law ........................................................................ X-00
Xxxxxxx 00.0 Xxxxxxxxxxxx ............................................................................ A-35
Section 12.8 Separability of Provisions .......................................................... X-00
Xxxxxxx 00.0 Xxxxxxxxx Titles ........................................................................ A-36
Section 12.10 Entire Agreement ...................................................................... A-36
Section 12.11 Amendments .......................................................................... A-36
Signatures ..................................................................................................... A-37
Schedule A .................................................................................................... A-38
REALTY PARKING PROPERTIES L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP, dated as of October 4,1988, is by
and among Realty Parking Company, Inc., a Maryland corporation, as the General
Partner, Parking Properties Holding Co., Inc., a Maryland corporation, as the
Assignor Limited Partner, and Realty Associates 1988 Limited Partnership, a
Maryland limited partnership, as the Subordinated Limited Partner.
Preliminary Statement
The General Partner, the Subordinated Limited Partner and the Assignor
Limited Partner desire to form Realty Parking Properties L.P. (the
"Partnership"), pursuant to the Delaware Revised Uniform Limited Partnership
Act, for the purpose of acquiring parking lot properties located in the United
States.
NOW, THEREFORE, in consideration of the mutual promises made herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINED TERMS
The defined terms used in this Agreement shall, unless the context
otherwise expressly requires, have the meanings specified in this Article I.
"Accountants" means such firm of independent certified public accountants
as shall be engaged from time to time by the General Partner on behalf of the
Partnership.
"Acquisition Expenses" means expenses, including, but not limited to, legal
fees and expenses, travel and communications 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.
"Acquisition Fees" means the total of all fees and commissions paid by any
party on behalf of the Partnership in connection with the selection, purchase or
development of, or investment in, any Property by the Partnership, including,
without limitation, the Property Acquisition Fee payable to the General Partner,
any real estate commission, selection fee, non-recurring management fee,
development fee, or any fee of a similar nature, however designated.
"Act"means the Delaware Revised Uniform Limited Partnership Act (6 DEL.C.
ss.17-101 et. seq.) as amended or modified from time to time.
"Additional General Partner" means any Person who is admitted as an
Additional General Partner of the Partnership, under the provisions of Article
VI, after the date of this Agreement.
"Adjusted Capital Balance" of a Partner or an Investor means the Capital
Contribution of the Partner or the Assignor Limited Partner made on behalf of an
Investor, less any Net Proceeds of Sale or Financing actually distributed to the
Partner or Investor (other than that portion, if any, which is payment of an
unpaid Preferred Return), as provided in Article IV herein, at the time of
reference thereto.
"Affiliate" means (i) any Person directly or indirectly controlling,
controlled by or under common control with another Person, (ii) any Person
owning or controlling 10% or more of the outstanding voting securities of such
other Person, (iii) any officer, director or partner of such Person, and (iv) if
such other Person is an officer, director or partner, any company for which such
Person acts in any such capacity.
"Agreement" means this Agreement of Limited Partnership as originally
executed and as amended from time to time, as the context requires. Words such
as "herein", "hereinafter, " "hereof," "hereto," "hereby" and "hereunder," when
used with reference to this Agreement, refer to this Agreement as a whole unless
the context otherwise requires.
A-3
"Assigned Limited Partnership Interest" means a Partnership Interest which
is credited to the Assignor Limited Partner on the books and records of the
Partnership in respect of a purchase of one Unit by an Investor. Each Assigned
Limited Partnership Interest represents a contribution to the capital of the
Partnership equal to $25, regardless of any reduction in Selling Commissions.
"Assignee Units" means the ownership interests of an Investor in the
Partnership at any particular time, including the right of such Investor to any
and all benefits to which an Investor may be entitled as provided in this
Agreement. The ownership interests of the Investors in the Partnership are
sometimes referred to herein as "Units".
"Assignor Limited Partner" means Parking Properties Holding Co., Inc. which
will (i) own any Assigned Limited Partnership Interests issued pursuant to
Sections 3.2 and 7.1 hereof, and (ii) transfer and assign to those Persons who
acquire Units all of its rights and interest in Assigned Limited Partnership
Interests in accordance with Sections 3.2 and 7.1 hereof.
"Capital Account" means (i) the separate account maintained and adjusted on
the books and records of the Partnership for each Partner and (ii) the separate
subaccount of the Capital Account of the Assignor Limited Partner maintained and
adjusted for each Investor. Each Partner's and Inves- tor's Capital Account is
credited with his Capital Contributions and his distributive share of Profit (or
item thereof). Each Partner's or Investor's Capital Account is debited with the
cash and the fair market value of any property distributed to him (net of
liabilities assumed by such Partner or Investor and liabilities to which such
distributed property is subject), and his distributive share of Loss (and
deduction (or item thereof)). Each Partner's and Investor's Capital Account
shall also be adjusted pursuant to Section 4.5 hereof and as required by the
Income Tax Regulations promulgated under Section 704 of the Code. Any questions
concerning a Partner's or Investor's Capital Account shall be resolved by the
General Partner in its reasonably exercised discretion, applying principles
consistent with this Agreement and the regulations promulgated under Section 704
of the Code in order to assure that all allocations herein will have substantial
economic effect or will otherwise be respected for income tax purposes. For
purposes of this Agreement, a Partner or Investor who has more than one
Partnership Interest or Unit, as the case may be, shall have a single Capital
Account that reflects all of his Partnership Interests and Units, regardless of
the class of Interests owned (e.g., general or limited) and regardless of the
time or manner in which the Partnership Interests and Units were acquired.
"Capital Contribution" means the total amount of cash and the fair market
value of any other assets contributed to the Partnership by a Partner (net of
liabilities assumed by the Partnership and liabilities to which any such
contributed assets are subject) and, with respect to an Investor, the Capital
Contribution of the Assignor Limited Partner made on behalf of such Investor
(without regard to any reduction of Selling Commissions). Any reference in this
Agreement to the Capital Contribution of a then-Partner or Investor shall
include a Capital Contribution previously made by any prior Partner or Investor
with respect to the Interest or Unit of such then-Partner or then- Investor,
except to the extent that all or a portion of the Interest or Unit of any prior
Partner or Investor shall have been terminated and the portion so terminated not
transferred to a successor Partner or Investor.
"Certificate" means the Certificate of Limited Partnership establishing the
Partnership, as filed with the office of the Secretary of State of the State of
Delaware on or about the date of this Agreement, as it may be amended from time
to time in accordance with the terms of this Agreement and the Act.
"Code" means the Internal Revenue Code of 1986, as amended (or any
corresponding provision of succeeding law).
"Controlling Person"of the General Partner or Affiliate thereof means any
person who (a) performs functions for the General Partner or Affiliate similar
to those of (i) a Chairman or member of the Board of Directors, (ii) executive
management, such as a President, or a Vice-President, Secretary or Treasurer, or
(iii) senior management; or (b) holds a 5% or more equity interest in the
A-4
General Partner or Affiliate, or has the power to direct or cause the direction
of the General Partner, or Affiliate, whether through the ownership of voting
securities, by contract or otherwise.
"Deferred Net Cash Flow Amount" means the cumulative excess of the amounts
of Net Cash Flow that the General Partner would have received if Net Cash Flow
had been distributed 95% to the Investors and 5% to the General Partner over the
amounts of Net Cash Flow actually received by the General Partner pursuant to
Section 4.3A hereof.
"Due Diligence Expense Reimbursement Fee" means the fee equal to 2% of the
Gross Proceeds of the Offering allowed to the Selling Agent, which may be
re-allowed to Soliciting Dealers, for advisory services, due diligence
activities and the reimbursement of expenses.
"Entity" means any general partnership, limited partnership, corporation,
joint venture, trust, estate, business trust, cooperative, association or other
legal form of organization.
"Escrow Agent" means Mercantile-Safe Deposit & Trust Company, or such other
escrow agent chosen by the General Partner to hold funds from Persons who have
subscribed to become Investors pending the assignment of Assignee Units to them.
"Financing" means all indebtedness encumbering the Properties or incurred
by the Partnership, the principal amount of which is scheduled to be paid over a
period of not less than 48 months, and not more than 50% of the principal amount
of which is scheduled to be paid during the first 24 months.
"Front-End Fees" means fees and expenses paid by any Person for any
services rendered during the organization or acquisition phase of the
Partnership, including the Offering and Organizational Expense Fee, the Due
Diligence Expense Reimbursement Fee, the Selling Commissions, the Acquisition
Expenses, the Acquisition Fees and any other similar fees.
"General Partner" means Realty Parking Company, Inc. and any other Person
designated as a General Partner in the Schedule and any Person who becomes a
Successor or Additional General Partner as provided herein, in each such
Person's capacity as a General Partner of the Partnership. "Gross Proceeds of
the Offering" means the aggregate of the proceeds from the sale of Units in the
Offering, which amount is equal to the total of all Capital Contributions of the
Investors.
"Increased Maximum Offering Amount" means the total amount of $60,000,000
in Gross Proceeds of the Offering.
"Interest" or "Partnership Interest" means the entire ownership interest
(which may be segmented into and/or expressed as a percentage of various rights
and/or liabilities) of a Partner in the Partnership at any particular time,
including the right of such Partner to any and all benefits to which a Partner
may be entitled as provided in the Agreement and in the Act, together with the
obligations of such Partner to comply with all the terms and provisions of this
Agreement and of the Act.
"Interim Investments" means the short-term investments made with the Net
Proceeds of the Offering until such Net Proceeds of the Offering are disbursed
for acquisition of Properties.
"Investor" means (i) any Person who holds an Assignee Unit and is reflected
as an Investor on the books and records of the Partnership, and (ii) any
Investor who has been admitted to the Partnership as a Substitute Limited
Partner pursuant to Section 7.5 hereof.
"Investment in Properties" means the amount of Capital Contributions
actually paid or allocated to the purchase and development of the Properties
(including the purchase of properties, working capital reserves allocable
thereto (except that 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).
"Investment Advisory Agreement" means the agreement referred to in the
Prospectus by and between the Partnership and Allright Auto Parks, Inc.
A-5
"Leases" means those certain agreements to be entered into by the
Partnership and the Parking Lot Operator pursuant to which the Parking Lot
Operator shall lease, operate or manage each of the Properties.
"Limited Partner" means any Person who is designated as a Limited Partner
on the books and records of the Partnership at the time of reference thereto, in
each such Person's capacity as a Limited Partner of the Partnership.
"Limited Partnership Interest" means the ownership interest of the Assignor
Limited Partner and all other Limited Partners in the Partnership.
"Limited Partnership Interest Percentage" in respect of any Investor means
the percentage obtained by converting to a percentage the fraction having the
number of Assignee Units owned by such Investor as its numerator and having the
number of Assignee Units owned by all Investors at the time of reference thereto
as its denominator.
"Majority Vote of the Investors" shall mean the affirmative vote of
Investors owning more than 50% of the outstanding Units or the consent of
Investors owning more than 50% of the outstanding Units, as the case may be.
"Maximum Offering Amount" means the total amount of $25,000,000 in Gross
Proceeds of the Offering.
"Minimum Gain" means with respect to each non-recourse liability of the
Partnership and subject to certain adjustments pursuant to Income Tax Reg.
ss.1.704-1 (b)(4)(iv)(c), the amount of gain (of whatever character), if any,
that would be realized by the Partnership, if the Partnership disposed of (in a
taxable transaction) any of the assets subject to such liability in full
satisfaction of the liability. For this purpose, only the portion of the assets'
adjusted basis allocated to non-recourse liabilities of the Partnership shall be
taken into account.
"Minimum Offering Amount" means the amount of $2,000,000 in Gross Proceeds
of the Offering.
"Net Cash Flow" means, with respect to any fiscal period, the excess, if
any, of (i) all cash funds derived from the operations of the Partnership during
such period, including the yield from the Interim Investments and excess cash
reserves deemed distributable by the General Partner pursuant to Section 3.3E
hereof, over (ii) all cash disbursed in the operations of the Partnership during
such period, including cash used to pay, or establish reasonable reserves for,
operating expenses, fees, commissions, debt service and loan repayments,
improvements, repairs, replacements, contingencies and anticipated obligations,
except to the extent any such payment is made out of reserves set aside for such
purpose. Net Cash Flow shall not include amounts distributed or to be
distributed under Section 4.2 hereof.
"Net Proceeds from a Financing" means the gross proceeds to the Partnership
of any Financing, less any amounts deemed necessary by the General Partner to be
allocated to the establishment of reserves, the payment of any debts and
liabilities of the Partnership to creditors, and the payment of any reasonable
expenses or costs associated with the Financing, including but not limited to,
fees, points, or commissions paid to any unaffiliated Persons.
"Net Proceeds from a Sale" means the gross proceeds to the Partnership of
any Sale, less any amounts deemed necessary by the General Partner to be
allocated to the establishment of reserves, the payment of any debts and
liabilities of the Partnership to creditors, and the payment of any reasonable
expenses or costs associated with the Sale, including but not limited to, fees
or real estate brokerage commissions paid to any unaffiliated Persons and,
subject to Sections 5.2.A(viii) and 9.2.A(vi), fees or real estate brokerage
commissions paid to the General Partner or Affiliates.
"Net Proceeds of the Offering" means the Gross Proceeds of the Offering
less the Selling Commissions, the Due Diligence Expense Reimbursement Fee, and
the Offering and Organizational Expense Fee.
A-6
"Net Proceeds from a Sale or Financing" means the Net Proceeds from a Sale
or Net Proceeds from a Financing, as the case may be.
"Notification" means a writing, containing the information required by this
Agreement to be communicated to any Person, sent or delivered to such Person in
accordance with the provisions of Section 12.3 of this Agreement.
"Offering"means the offering and sale of Units for a minimum of $2,000,000
and a maximum of $60,000,000, as more fully described in the Prospectus.
"Offering and Organizational Expense Fee" means the non-accountable fee
paid to the General Partner equal to 4.5% of the Gross Proceeds of the Offering,
payable at such times as the Investors are recognized as such on the books of
the Partnership, for services rendered and costs incurred in connection with the
organization of the Partnership and the offering of Units.
"Parking Lot Operator" means (i) Allright Auto Parks, Inc. or an Affiliate,
or (ii) such other person selected by the Partnership to operate the Properties.
"Partner" means any General Partner or Limited Partner. "Partnership" means the
limited partnership formed in accordance with this Agreement by the parties
hereto, as said limited partnership may from time to time be constituted.
"Partnership Property" means all or any portion of the assets owned or to
be owned by the Partnership, including the Properties and all incidental
personal property.
"Person" means any individual or Entity. "Preferred Return" means the
cumulative, non-compounded annual return equal to 12% of the Adjusted Capital
Balance of each Investor commencing on the earlier of (i) the final closing for
the sale of Units or (ii) December 31, 1988, less any Net Cash Flow distributed
to each Investor pursuant to Section 4.3 and any Net Proceeds from a Sale or
Financing distributed to each Investor in respect of the Preferred Return
pursuant to Section 4.2A(i).
"Profit" or "Loss" means, for each fiscal year or other period, an amount
equal to the Partner- ship's taxable income or loss for such year or period,
with the following adjustments: (i) any income of the Partnership that is exempt
from federal income tax shall be added to such taxable income or loss; (ii) any
expenditures of the Partnership described in Section 705(a)(2)(B) of the Code,
or treated as Section 705(a)(2)(B) of the Code expenditures pursuant to Income
Tax Reg. ss.1.704-1(b)(2)(iv)(i), shall be subtracted from such taxable income
or loss; and (iii) Pursuant to Income Tax Reg. ss.1.704- l(b)(iv)(g)(3), an
amount equal to the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year or other period for federal
income tax purposes shall be taken into account, except that if the fair market
value on the date that the asset is contributed to the Partnership (or if the
basis of such asset for book purposes is adjusted under the Income Tax
Regulations, such adjusted book basis) differs from its adjusted basis for
federal income tax purposes at the beginning of such year or other period, the
depreciation, amortization and other cost recovery deductions taken into account
shall be equal to an amount which bears the same ratio to such beginning fair
market value (or adjusted book basis) as the federal income tax depreciation,
amortization, or other cost recovery deduction for such year or other period
bears to such beginning adjusted tax basis. Except as otherwise provided herein,
each item of income, gain, loss, deduction, preference or recapture entering
into the computation of Profit or Loss hereunder shall be allocated to each
Partner in the same proportion as Profit and Loss are allocated.
"Profit or Loss from Operations" means Profit or Loss of the Partnership
from any source other than a Sale.
"Properties" means the parking lot properties acquired by the Partnership,
including, without limitation, surface commercial parking lots, parking garages,
suburban parking properties, parking properties requiring the prior demolition
of obsolete structures, or offsite airport parking lots.
A-7
"Property Acquisition Fee" means the fee paid to the General Partner or its
Affiliates for identifying, evaluating and selecting the Properties, as
described in the Prospectus.
"Prospectus" means the Partnership's Prospectus contained in the
Registration Statement filed on Form S-11 with the Securities and Exchange
Commission for the registration of the Units under the Securities Act of 1933,
in the final form in which it is filed with the Securities and Exchange
Commission and as thereafter supplemented pursuant to Rule 424 under the
Securities Act of 1933. Any reference herein to "date of the Prospectus" shall
be deemed to refer to the date of the Prospectus in the form filed pursuant to
Rule 424(b) of the Securities Act of 1933.
"Sale" means any transaction entered into by the Partnership resulting in
the receipt of cash or other consideration (other than the receipt of Capital
Contributions) not in the ordinary course of its business, including, without
limitation, sales or exchanges or other dispositions of Properties and real or
personal property of the Partnership, condemnations, recoveries of damage awards
and insurance proceeds (other than business or rental interruption insurance
proceeds), but excepting any Financing.
"Schedule" means Schedule A annexed hereto as amended from time to time and
as so amended at the time of reference thereto.
"Selling Agent" means Alex. Xxxxx Realty Securities, Inc., an Affiliate of
the General Partner, which will offer the Units on a best efforts basis pursuant
to the Selling Agent Agreement.
"Selling Agent Agreement" means that certain agreement to be entered into
by the Partnership, Alex. Xxxxx Realty Securities. Inc., and the General
Partner, pursuant to which Alex. Xxxxx Realty Securities, Inc. will offer and
sell the Units on a best efforts basis. "Selling Commissions" means the maximum
total (or any portion thereof) of 7% of the Gross Proceeds of the Offering paid
to the Selling Agent or Soliciting Dealers for their efforts in offering the
Units. The 7% maximum Selling Commissions will be reduced for volume purchases
and purchases by certain Affiliates as specified in the Prospectus.
"Sponsor" means any Person directly or indirectly instrumental in
organizing, wholly or in part, the Partnership or who will manage or participate
in the management of the Partnership, and any Affiliate of such Person, but does
not include (a) any Person whose only relationship with the Partnership or the
General Partner is that of an independent property manager if such person's only
compensation from the Partnership is in the form of fees for the performance of
property management services, or (b) wholly-independent third parties such as
attorneys, accountants and broker-dealers whose only compensation from the
Partnership is for professional services rendered in connection with the
Offering or the operations of the Partnership.
"Subordinated Limited Partner" means Realty Associates 1988 Limited
Partnership and such other Persons who are designated as Subordinated Limited
Partners on the books and records of the Partnership.
"Substitute Limited Partner" means any Investor who has elected to convert
from an Investor to a Limited Partner pursuant to Section 7.5 of this Agreement.
"Successor General Partner" means any Person who is admitted as a Successor
General Partner to the Partnership under the provisions of Article VI after the
date of this Agreement.
"Tax Matters Partner" means the General Partner designated in Section 5.1C
as the tax matters partner, as defined in Section 6231(a)(7) of the Code.
"Termination Date of the Offering" means the date upon which the Offering
will terminate, which, if not sooner terminated by the General Partner, will be
one (1) year from the date of the Prospectus.
"Unit" means (i) an Assignee Unit representing the assignment by the
Assignor Limited Partner of one Assigned Limited Partnership Interest, and (ii)
the Partnership Interest attributable to one Unit of any Investor who has become
a Substitute Limited Partner pursuant to Section 7.5 hereof.
A-8
"U.S. Person" means a Person who is (i) an individual who is either a
United States citizen or a resident of the United States for federal income tax
purposes, (ii) a corporation, partnership, or other legal entity created or
organized in or under the laws of the United States or any political subdivision
thereof, (iii) a corporation that is not created or organized in or under the
laws of the United States or any political subdivision thereof but which has
made an election under Section 897(i) of the Code to be treated as a domestic
corporation for certain purposes of federal income taxation, or (iv) an estate
or trust whose income from sources without the United States is includable in
its gross income for federal income tax purposes regardless of its connection
with a trade or business carried on in the United States.
"Working Capital Reserves" means, initially, the portion of the Net
Proceeds of the Offering set aside as working capital reserves pursuant to
Section 3.3E, as increased or decreased from time to time at the discretion of
the General Partner.
ARTICLE II
NAME; PURPOSE; TERM AND CERTIFICATE
Section 2.1 Name; Formation
The Partners hereby form the limited partnership to be known as "Realty
Parking Properties L.P.," and such name shall be used at all times in connection
with the Partnership's business and affairs; provided, however, that the
Partnership may use trade names in its business operations. The Partnership
shall be governed by the Act.
Section 2.2 Place of Registered Office
The address of the registered office in the State of Delaware of the
Partnership is Corporation Trust Center, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxx 00000; the name of the registered agent for service of process on the
Partnership in the State of Delaware at that address is The Corporation Trust
Company. The Partnership's principal place of business is 000 Xxxx Xxxxxxx
Xxxxxx, 0xx Xxxxx, Xxxxxxxxx, Xxxxxxxx 00000 or such other place(s) as the
General Partner may hereafter determine. Notification of any change in the
location of the principal office shall be given to the Partners and Investors on
or before the date of any such change.
Section 2.3 Purpose
The purpose of the Partnership is to acquire, own, develop, maintain,
finance, encumber, operate as a business, lease, sell, dispose of and otherwise
deal with the Properties, and to do all things necessary, convenient or
incidental to the achievement of the foregoing.
Section 2.4 Term
The Partnership shall continue until December 31, 2038, unless the
Partnership is sooner dissolved in accordance with the provisions of this
Agreement.
Section 2.5 Recording of Certificate
The General Partner shall take all necessary action to maintain the
Partnership in good standing as a limited partnership under the Act, including,
without limitation, the filing of the Certificate and such amendments and
further certificates as may be necessary under the Act and necessary to qualify
the Partnership to do business in such states as the Partnership owns property.
The General Partner shall not be required to send a copy of the Partnership's
filed Certificate to each Partner and Investor.
A-9
ARTICLE III
PARTNERS; CAPITAL
Section 3.1 General Partner; Assignor Limited Partner; Subordinated Limited
Partner
The name, address and Capital Contribution of the General Partner, the
Assignor Limited Partner and the Subordinated Limited Partner are set forth on
the Schedule. Upon the dissolution and termination of the Partnership (i) the
General Partner, on or before the later of the last day of the fiscal year in
which the dissolution of the Partnership occurs or ninety (90) days after the
date of dissolution of the Partnership, shall make a Capital Contribution to the
Partnership in an amount equal to the lesser of (A) the deficit balance, if any,
in its Capital Account or (B) the excess of 2.02% of the Capital Contributions
of the Investors and Limited Partners (excluding capital contributions of the
Assignor Limited Partner on behalf of Investors) over the Capital Contributions
previously contributed by the General Partner, and (ii) the Subordinated Limited
Partner, on or before the later of the last day of the fiscal year in which the
dissolution of the Partnership occurs or ninety (90) days after the date of
dissolution of the Partnership, shall make a Capital Contribution to the
Partnership in an amount equal to the lesser of (x) the deficit balance in its
Capital Account or (y) the amount which it agrees to contribute to the capital
of the Partnership pursuant to an amendment hereto.
Section 3.2 Investors
A. The General Partner is authorized to accept orders for Units pursuant to
the Offering. All orders for Units shall be held in trust and deposited in an
escrow account with the Escrow Agent. Orders for Units shall be accepted or
rejected by the General Partner within thirty (30) days after their receipt by
the Escrow Agent.
B. Upon the receipt by the Escrow Agent of orders for an amount equal to
the Minimum Offering Amount, the Escrow Agent shall release the funds in the
escrow account to the Assignor Limited Partner which shall immediately transmit
such funds to the Partnership. Subsequent orders for Units that are accepted by
the General Partner shall be released from the escrow account and transmitted to
the Partnership or returned to subscribers in accordance with the Prospectus.
Upon release of an Investor's funds from the escrow account to the Partnership,
an Assigned Limited Partnership Interest shall be credited to the Assignor
Limited Partner on the books and records of the Partnership in respect of such
Unit and the Assignor Limited Partner shall assign all of its rights with
respect to such Assigned Limited Partnership Interest to the Investor to the
extent permitted by, and in accordance with, the Agreement and applicable law.
The Assignor Limited Partner hereby agrees to exercise any and all rights with
respect to such Assigned Limited Partnership Interest as directed by the
Investor.
C. Any interest earned on moneys paid by Investors during the period such
moneys are held in escrow by the Escrow Agent shall be paid to the Partnership
following the release of orders and shall be distributed in accordance with
Section 4.5A hereof. Persons whose orders for Units are rejected by the General
Partner shall be returned their moneys (and interest earned thereon) within ten
(10) days after such rejection.
D. No order for Units sold as part of the Offering shall be accepted after
the Termination Date of the Offering. If the General Partner does not accept
orders totalling an amount equal to the Minimum Offering Amount on or before the
Termination Date of the Offering, the Escrow Agent shall promptly return all
moneys deposited by subscribers together with any interest earned on such
moneys.
E. For purposes of this Agreement, an Investor who acquires Units in the
Offering shall be recognized as an Investor with respect to such Units on the
date that such Investor's funds are released from the escrow account to the
Partnership.
Section 3.3 Partnership Capital
A. Each Partner's and Investor's Capital Contribution shall be paid in cash
on or prior to the date of such Partner's admission to the Partnership or the
date of the recognition of the Investor on the books and records of the
Partnership.
A-10
B. Except to the extent of any interest income earned on an Investor's
Capital Contribution while it is held in escrow, and later distributed to such
Investor pursuant to Section 4.5A, no Partner or Investor shall be paid interest
on any Capital Contribution.
C. Except as otherwise provided in this Agreement, no Partner or Investor
shall have the right to withdraw, or receive any return of, his Capital
Contribution prior to December 31, 2038.
D. Under circumstances requiring a return of any Capital Contribution, no
Partner shall have the right to demand or receive property other than cash.
E. The Partnership shall initially set aside Working Capital Reserves for
contingencies related to ownership of the Properties in an amount equal to at
least 3% of the Gross Proceeds of the Offering. If in any fiscal quarter, the
General Partner determines that the Working Capital Reserves of the Partnership
are in excess of the amount deemed sufficient in connection with the ownership
of the Properties and that such Working Capital Reserves may be reduced, the
amount of such reduction may be distributed to the Partners and Investors as a
portion of the Partnership's Net Cash Flow. Upon the Sale or disposition of a
Property, any Working Capital Reserves maintained for such Property may be
distributed, in the General Partner's discretion, to Partners and Investors or
applied as Working Capital Reserves for other Properties.
Section 3.4 Liability of Partners and Investors
A. Except as provided in Section 17-607 of the Act, or in Section 3.1 with
respect to the Subordinated Limited Partner, the Limited Partners and Investors
shall be liable only to pay their Capital Contributions and no Limited Partner
or Investor will be personally liable for the debts, liabilities, contracts, or
other obligations of the Partnership.
B. Except as set forth in 3.4A, no Limited Partner or Investor shall be
required to lend any funds to the Partnership or, after his Capital Contribution
has been fully paid, to make any further capital contribution to the
Partnership, nor shall any Limited Partner or Investor be liable for or have any
obligation to restore any negative balance in his Capital Account.
C. Subject to the provisions of Sections 3.1 and 5.9 of this Agreement, the
General Partner shall not have any personal liability for the repayment of the
Capital Contribution or the Preferred Return of any Limited Partner or Investor
or be required to repay to the Partnership all or any portion of any negative
balance of the Capital Accounts of the Limited Partners or the Investors.
A-11
ARTICLE IV
ALLOCATIONS, DISTRIBUTIONS AND APPLICABLE RULES
Section 4.1 Allocation of Profit or Loss from a Sale
A. Profit from any Sale (and Profit from any deemed Sale pursuant to
Section 4.5) shall be allocated in the following order of priority:
(i) First, if one or more Investors or Partner has a negative balance in
his Capital Account, to such Partners and Investors, in proportion to their
negative Capital Accounts, until all such Capital Accounts have zero balances.
(ii) Second, to each of the Investors until the Capital Account of each
Investor is equal to the sum of his Adjusted Capital Balance plus his unpaid
Preferred Return, if any.
(iii) Third, to the General Partner until the Capital Account of the
General Partner is equal to the sum of its Adjusted Capital Balance and the
Deferred Net Cash Flow Amount.
(iv) Fourth, to the Subordinated Limited Partner, an amount of Profit equal
to the amount of Net Proceeds from such Sale to which the Subordinated Limited
Partner is entitled to receive pursuant to Section 4.2A (iii) or would have been
entitled to receive if the Sale Proceeds were distributed pursuant to Section
4.2A rather than Section 4.2B.
(v) Fifth, any remaining Profit shall be allocated 98% to the Investors and
2% to the General Partner.
B. Loss from any Sale (and Loss from any deemed Sale pursuant to Section
4.5) shall be allocated 98% to the Investors and 2% to the General Partner.
C. All Profit or Loss allocated pursuant to Section 4.1 hereof with respect
to any Unit which is transferred during a taxable year of the Partnership shall
be allocated to the Persons recognized (in accordance with Section 7.4 hereof)
as Investors as of the first business day of the month that includes the date on
which the Sale occurs; provided, however, that all such Profit or Loss which is
attributable to an installment or other deferred Sale shall be allocated to the
Persons recognized (in accordance with Section 7.4 hereof) as Investors as of
the first business day of the month that includes the date on which the deferred
Net Proceeds from such Sale are received by the Partnership, and the allocable
cash basis items with respect thereto shall be allocated as required under
Section 706(d) of the Code and the Income Tax Regulations thereunder.
Section 4.2 Distribution of Net Proceeds of Sale or Financing
A. Upon a Financing and upon a Sale that does not constitute a Sale of all
or substantially all of the Properties, Net Proceeds from the Financing or Sale
shall be distributed, credited and applied in the following order of priority:
(i) First, to the Investors until each Investor has received an amount
equal to his unpaid Preferred Return, if any, and then his Adjusted Capital
Balance.
(ii) Second, to the General Partner, an amount equal to the sum of its
Adjusted Capital Balance and the deferred Net Cash Flow Amount.
(iii) Third, except as provided in Section 4.2D below, any remaining Net
Proceeds of Sale or Financing shall be distributed 90% to the Investors, 9% to
Realty Associates 1988 Limited Partnership, and 1% to the General Partner.
B. Upon the Sale of all or substantially all of the Properties, Net
Proceeds from the Sale shall be allocated to the Partners and Investors, in
proportion to their positive Capital Accounts, after the allocation of Profit
and Loss pursuant to Sections 4.1A and 4.1B, until all such Capital Accounts
have been reduced to zero.
C. All Net Proceeds of Sale or Financing distributable with respect to any
Unit which is transferred during a taxable year of the Partnership shall be
distributed to the Persons recognized (in
A-12
accordance with Section 7.4 hereof) as Investors as of the first business
day of the month that includes the date on which the Sale or Financing occurs;
provided, however, that all Net Proceeds from a Sale received by the Partnership
as a result of an installment or other deferred Sale shall be distributed to the
Persons recognized (in accordance with Section 7.4 hereof) as Investors as of
the first business day of the month that includes the date on which the deferred
Net Proceeds from a Sale are received by the Partnership.
D. Notwithstanding any other provision of this Article IV, the Subordinated
Limited Partner shall not be entitled to receive any Net Proceeds from a Sale
except (i) to the extent that it has been or will be allocated Profit from such
Sale in an amount equal to the Net Proceeds from such Sale which will be
allocated to it pursuant to Section 4.1A, and (ii) if the amount of Net Proceeds
from such Sale which it would be otherwise entitled to receive exceeds the
amount of Profit from such Sale to be allocated to it pursuant to Section 4.1A,
then, in addition to the amount to which the Subordinated Limited Partner is
entitled to receive under subparagraph (i), an amount equal to the excess of the
amount that the Subordinated Limited Partner has agreed to contribute pursuant
to Section 3.1 over the amount of Profit from such Sale which is allocated to it
(reduced by prior distributions pursuant to this subparagraph (ii)).
Section 4.3 Distribution of Net Cash Flow and Allocation of Profit and Loss
from Operations
A. Net Cash Flow shall be distributed 98% to the Investors and 2% to the
General Partner. The General Partner will endeavor to distribute Net Cash Flow
on a quarterly basis, within approximately sixty (60) days after the close of
each calendar quarter.
B. Profit and Loss from Operations for each fiscal year shall be allocated
98% to the Investors and 2% to the General Partner.
C. For each fiscal year, all Profit and Loss allocated pursuant to Section
4.3B to the Investors shall be allocated among the Persons that are recognized
as Investors during such year by determining the Profit and Loss attributable to
each month during such year and by allocating the amount of such Profit and Loss
among Persons who are recognized as Investors on the books of the Partnership on
the first business day of such month. The Profit or Loss attributable to each
month of the fiscal year shall be determined by dividing the Profit or Loss for
such year by the number of days in such year, and then multiplying such per diem
amount by the number of days in each month.
D. All Net Cash Flow distributable to the Investors attributable to each
month of a fiscal quarter, if any, pursuant to Section 4.3A, shall be
distributed among the Persons recognized as Investors on the books of the
Partnership on the first business day of such month during the fiscal quarter.
The Net Cash Flow attributable to each month of the fiscal quarter shall be
determined by dividing the amount of Net Cash Flow for such quarter by the
number of days in the quarter, and then multiplying such per diem amount by the
number of days in each month.
E. Notwithstanding Sections 4.3C and 4.3D, the Partnership shall adopt the
"interim closing of the books" method of allocating Profit and Loss, in
accordance with a "semi-monthly convention," among persons who become Investors
pursuant to a closing of the sale of the Units on or before the Termination
Date. Accordingly, if there is more than one closing of the sale of the Units,
Investors who are recognized on the books of the Partnership (i) prior to the
sixteenth day of a calendar month, shall be treated as an Investor on the books
of the Partnership on the first business day of the month of recognition, and
(ii) on or after the sixteenth day of a calendar month shall be treated as an
Investor on the books of the Partnership on the sixteenth day of the month of
recognition.
Section 4.4 Liquidation or Dissolution
A. If the Partnership is liquidated or dissolved, the net proceeds from
such liquidation, as provided in Article VIII, shall be distributed first to
creditors, including Partners who are creditors, to the extent otherwise
permitted by law (whether by payment or by establishment of reserves), other
than liabilities for distributions to Partners and Investors, and any remaining
net proceeds shall be
A-13
distributed in proportion to the Capital Accounts of the Partners and
Investors, determined after the allocations in Sections 4.1A and 4.1B.
B. All distributions under this Section 4.4 shall be made by the end of the
taxable year of liquidation of the Partnership or, within ninety (90) days of
the date of liquidation, whichever is later.
Section 4.5 General and Special Rules
A. Except as otherwise provided herein, the timing and amount of all
distributions shall be determined by the General Partner. Notwithstanding any
other provision of this Agreement, the General Partner shall have authority to
make the following distributions to certain of the Investors: First, if the
Partnership has realized a savings on Selling Commissions payable by the
Partnership with respect to the purchase of Units (as more fully set forth in
the Prospectus), the General Partner shall make a distribution to such Investor
equal to the amount of such savings realized by the Partnership. Second, if any
interest is earned on an Investor's Capital Contribution while it is held in
escrow pending recognition as an Investor under Article VII, such interest shall
be paid by the Partnership to such Investor and Profit attributable to such
interest shall be allocated in the same manner.
B. Subject to all of the special rules of this Section 4.5, if any property
or assets of the Partnership are distributed to the Partners in kind, such
property or assets first shall be valued on the basis of the fair market value
thereof to determine the Profit or Loss that would have resulted if such
property or assets had been sold, and then such Profit or Loss shall be
allocated as provided in Section 4.1A and Section 4.1B, and shall be properly
credited or charged to the Capital Accounts in accordance with Income Tax Reg.
ss.1.704-1(b)(2)(iv)(e) or any successor provision thereto. Any Partner entitled
to any interest in such property or assets shall receive such interest as a
tenant-in-common with all other Partners so entitled. The fair market value of
such property or assets shall be determined by an independent appraiser who
shall be selected by the General Partner. This Section 4.5B governs income tax
consequences only and shall not be read or construed as authorizing the
distribution in kind of property or assets of the Partnership.
C. Notwithstanding Sections 4.1 and 4.3 hereof, if an allocation of Loss
(or item thereof) to an Investor or Partner, other than the General Partner,
would cause or increase a deficit balance in his or its Capital Account in
excess of his proportionate share of Minimum Gain (such excess being referred to
hereafter as the "Excess Deficit Balance"), plus, in the case of the
Subordinated Limited Partner, any amount which it agrees to contribute to the
capital of the Partnership pursuant to Section 3.1, then the allocation shall
not be made to such Investor or Partner. Instead, such Loss (or item thereof)
shall be allocated first to the Partners and Investors having positive Capital
Accounts, in proportion to such positive Capital Accounts, until all such
positive Capital Accounts have been reduced to zero, and any additional Loss (or
item thereof) shall be allocated to the General Partner. For purposes of making
the determination set forth above, each Investor's and each Partner's Capital
Account balance shall be reduced by reasonably expected allocations or
adjustments of loss (or item thereof) including Loss from a Sale under Income
Tax Regulation ss.ss.1.704-1(b)(2)(ii)(d)(4) and (5), and by reasonably expected
distributions to the extent not offset by reasonably expected Capital Account
increases ("Account Reduction Items"). For purposes of calculating reasonably
expected Capital Account increases, the value of the Partnership's assets shall
be presumed to be equal to their adjusted basis for federal income tax purposes.
D. Notwithstanding Sections 4.1 and 4.3 hereof, in accordance with Income
Tax Regulation ss.ss.1.704-1(b)(2)(ii)(d) and 1.704-1(b)(4)(iv)(e), (i) if, in
any fiscal year of the Partnership, an Account Reduction Item unexpectedly
causes or increases an Investor's or Partner's Excess Deficit Balance, or (ii)
if there is a net decrease in Minimum Gain during a taxable year, then all
Investors or Partners with an Excess Deficit Balance at the end of such year
shall be specially allocated Profit and, to the extent necessary, gross income
(as defined in Section 61 of the Code) to the extent of such Excess Deficit
Balances, in proportion to the Excess Deficit Balance of each Investor or
Partner. Any remaining Profit or Loss, after adjustment has been made for
allocation of income or gain pursuant to this Section 4.5D, shall be allocated
in accordance with Sections 4.1 and 4.3 hereof. The General Partner shall be
authorized to interpret and apply this Section 4.5D so as to satisfy the
requirements
A-14
of Income Tax Regulation ss.ss.1.704-1(b)(2)(11)(d)and 1.704-1(b)(4)(iv)(e)
and any successor provisions.
E. Any special allocations of Profit, Loss or gross income under Section
4.5D shall be taken into account in computing subsequent allocations of Profit
or Loss, so that to the extent possible, the aggregate amounts of Profit or Loss
allocated to each Partner or Investor will be equal to the aggregate amounts
that would have been allocated to them in the absence of the unexpected Account
Reduction Items.
F. In the event that any Investor fails to furnish to the General Partner
evidence, in form and substance satisfactory to the General Partner,
establishing that the General Partner has no obligation under Section 1445 of
the Code with respect to such Investor to withhold and pay over an amount to the
Internal Revenue Service, the General Partner may, in its sole discretion,
withhold with respect to such Investor the amount it would be required to
withhold pursuant to Section 1445 of the Code if such Investor were not a U.S.
Person, and any amount so withheld shall be treated as a distribution under
Sections 4.2 or 4.3 of this Agreement, as the case may be, and shall reduce the
amount otherwise distributable to such Investor thereunder. Alternatively, the
General Partner may at its option loan the Investor an amount equal to the tax
to be withheld (at an interest rate equal to the Escrow Agent's announced "prime
rate" plus two percentage points), such loan to be repaid by retaining such
Investor's distributions. In addition, the General Partner is authorized to
withhold from any distribution made to an Investor the amount of tax paid or to
be paid by the Partnership under Section 1446 of the Code with respect to such
Investor.
G. Notwithstanding anything to the contrary that may be expressed or
implied in this Agreement, if at any time the allocation provisions of this
Article IV do not result in the allocation to the General Partner of at least 1%
of the Profit or Loss being allocated, the General Partner shall be allocated 1%
thereof.
H. It is the intent of the General Partner that each Investor's and
Partner's distributive share of Profit and Loss shall be determined and
allocated in accordance with this Article IV to the fullest extent permitted by
Sections 704(b) and 706 of the Code. Therefore, if the Partnership is advised by
the Accountants or the Partnership's legal counsel, that the allocations
provided in Article IV of this Agreement are unlikely to be respected for
federal income tax purposes, the General Partner has been granted the power in
Section 12.1l.B hereof to amend the allocation provisions of this Agreement, on
advice of the Accountants or the Partnership's legal counsel, to the minimum
extent necessary to conform to Sections 704(b) and 706 of the Code the plan of
allocations and distributions of Profit and Loss, Net Cash Flow and Net Proceeds
of Sale or Financing provided in this Agreement.
I. Notwithstanding any other provision of this Agreement, the General
Partner may, after giving ninety (90) days' prior Notification to the Investors,
(i) adopt any other method for determining, in the event of transfers of Units,
the Investors entitled to distributions of Net Cash Flow or Net Proceeds from a
Sale or Financing that the General Partner, subject to the review and approval
of the Accountants, determines is reasonable, and (ii) allocate Profit or Loss
among the Investors during the taxable year in any other manner that the General
Partner, determines satisfies the requirements of Section 706 of the Code, but
only to the extent such allocation of Profit and Loss incorporates the minimum
changes required to comply with such section and is supported by an opinion of
counsel to the Partnership.
J. Allocations and distributions to Investors as a class shall be made to
each Investor entitled to such allocation or distribution based upon the ratio
of the number of Units owned by each such Investor to the number of Units owned
by all Investors entitled to such allocation or distribution.
K. In accordance with Section 704(c) of the Code and the Income Tax
Regulations thereunder, income, gain, loss, and deduction (including
depreciation) with respect to any property contributed to the capital of the
Partnership shall be allocated among the Investors and Partners so as to take
account of any variation between the adjusted basis of such property to the
Partnership for federal income tax purposes and its fair market value on the
date of contribution. In the event the value at
A-15
which Partnership assets are carried on its balance sheet maintained under
the terms of this Agreement are adjusted pursuant to Income Tax Reg.
ss.1.704-1(b)(2)(iv)(f), subsequent allocations of income, gain, loss and
deduction with respect to such assets shall take account of any variation
between the adjusted basis of such asset for federal income tax purposes and the
value carried on such balance sheet in the same manner as under Section 704(c)
of the Code and the Income Tax Regulations thereunder. Any elections or other
decisions relating to such allocations shall be made by the General Partner in
any manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section are solely for purposes of federal, state
and local taxes and shall not affect, or in any way be taken into account in
computing, any Investor's or Partner's Capital Account or share of Profit, Loss,
Net Cash Flow, Net Proceeds from a Sale, Net Proceeds from a Financing, or other
distributions pursuant to any provision of this Agreement.
ARTICLE V
RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNER
Section 5.1 Management and Control of the Partnership; Tax Matters Partner
A. Subject to the Majority Vote of the Investors when required by this
Agreement, the General Partner shall have the exclusive right to manage and
control the business of the Partnership.
B. No Limited Partner or Investor (except one who may also be a General
Partner, and then only in his capacity as General Partner) shall have the right
to participate in the control of the business of the Partnership, or have any
authority or right to act for or bind the Partnership.
C. The General Partner is hereby designated to serve as the Partnership's
Tax Matters Partner and shall have all of the powers and responsibilities of
such position as provided in Sections 6221 et seq. of the Code. All third party
costs and expenses incurred by the General Partner in performing its duties as
Tax Matters Partner shall be borne by the Partnership, as shall all expenses
incurred by the Partnership and/or the Tax Matters Partner in connection with
any tax audit or tax-related administrative or judicial proceeding. Each Partner
and Investor shall be responsible for all costs incurred by such Partner or
Investor with respect to any tax audit or tax related administrative or judicial
proceeding in connection with such Partner's or Investor's tax returns and all
costs incurred by any such Partner or Investor who participates in any tax audit
or tax-related administrative or judicial proceeding of or against the
Partnership or any Partner. Each Partner and Investor hereby (i) expressly
authorizes the Tax Matters Partner to enter into any settlement with the
Internal Revenue Service with respect to any tax matter, tax item, tax issue,
tax audit, or judicial proceeding, which settlement shall be binding on all
Partners and Investors; (ii) waives the right to participate in any
administrative or judicial proceeding in which the tax treatment of any
Partnership item is to be determined; and (iii) agrees to execute such consents,
waivers or other documents as the Tax Matters Partner may determine are
necessary to accomplish the provisions of this Section 5.1C. The Tax Matters
Partner shall have no liability to any Partner or Investor or the Partnership,
and shall be indemnified by the Partnership to the full extent provided by law,
for any act or omission performed or omitted by it within the scope of the
authority conferred on it by this Agreement, except for acts of negligence or
for damages arising from any misrepresentation or breach of any other agreement
with the Partnership. The liability and indemnification of the Tax Matters
Partner shall be determined in the same manner as is provided in Sections 5.9
and 5.10 hereof.
Section 5.2 Authority of General Partner
A. Except to the extent otherwise provided herein, including, without
limitation, Sections 5.3A, 5.4 and 5.5, the General Partner for, and in the name
of, and on behalf of, the Partnership is hereby authorized:
(i) to enter into any kind of activity and to perform and carry out
contracts of any kind necessary to, or in connection with, or incidental to the
accomplishment of the purposes of the Partnership, so long as said activities
and contracts may be lawfully carried on or performed by a limited partnership
under applicable laws and regulations;
A-16
(ii) to engage Persons, including the Sponsors as provided in Article IX,
to provide services or goods to the Partnership, upon such terms as the General
Partner deems fair and reasonable and in the best interest of the Partnership,
provided, however, that, as to services or goods provided by a Sponsor (except
for those services specifically authorized under the NASAA Guidelines to be
performed by a Sponsor), (a) the compensation for such services or goods must be
the lesser of the cost of such services or goods to the Sponsor or ninety
percent (90%) of the competitive price that would be charged by non-affiliated
persons or entities rendering similar types and quality of services in the same
or comparable geographic locations; (b) the compensation and other terms of such
contracts shall be fully disclosed to the Investors in the reports of the
Partnership; (c) the Sponsor must have been previously engaged in the business
of providing such services or goods, independent of the Partnership and as an
ongoing business; (d) all such transactions shall be embodied in a written
contract that describes the services or goods to be provided and the
compensation to be paid, which contract may only be modified by the Majority
Vote of the Investors, and ,which contract shall permit termination without
penalty on sixty (60) days notice; and (e) except for those services to be
provided under agreements referred to in this Agreement or the Prospectus, any
services provided by a Sponsor will be provided only under extraordinary
circumstances where services are not available elsewhere;
(iii) to acquire by lease or purchase, improve, develop, own, construct,
finance, maintain, mortgage, lease or exchange incident to a tax-free swap any
real estate and any personal property necessary, convenient or incidental to the
accomplishment of the purposes of the Partnership, including without limitation,
any Property;
(iv) to grant options with respect to, sell, convey, or assign any Property
or any other real estate or personal property necessary, convenient or
incidental to the accomplishment of the purposes of the Partnership;
(v) to execute any and all agreements, contracts, documents, certifications
and instruments necessary or convenient in connection with the acquisition,
development, construction, management, maintenance and operation of any
Property, including without limitation, the Investment Advisory Agreement and
the Leases;
(vi) to borrow money and issue evidences of indebtedness in furtherance of
any or all of the purposes of the Partnership, and to secure the same by deed of
trust, mortgage, security interest, pledge or other lien or encumbrance on any
Property or any other assets of the Partnership and to borrow money on the
general credit of the Partnership for use in the business of the Partnership and
to take any action and enter into any agreement necessary or advisable in
connection with such borrowing;
(vii) to repay in whole or in part, negotiate, refinance, recast, increase,
renew, modify or extend any secured, or other indebtedness affecting any
Partnership Property and in connection therewith to execute any extensions,
renewals or modifications of any evidences of indebtedness secured by deeds of
trust, mortgages, security interests, pledges or other encumbrances covering any
Partnership Property or assets, provided, however, that it is the Partnership's
objective to acquire the Properties on an all-cash basis and the General Partner
does not anticipate that it will be necessary to borrow money to acquire the
Properties or to maintain the Partnership's investment in the Properties;
(viii) to engage a real estate agent (including a Sponsor) to sell any
Partnership Property or assets or portions thereof upon such terms and
conditions as are deemed fair and reasonable by the General Partner and to be in
the best interest of the Partnership, and to pay reasonable compensation for
such services; provided, however, that any real estate commission paid shall not
exceed the lesser of the competitive real estate commission for like properties
located in the same geographic area or six percent (6%) of the contract price
for the Sale of any Partnership Property or assets, and, in addition, if a
Sponsor provides substantial services in such regard, to pay the Sponsor up to
one-half of such real estate commission, provided, however, that the payment of
such real estate commission to the Sponsor shall be subordinated to the payment
to
A-17
Investors of their Adjusted Capital Balance plus the unpaid portion, if any, of
their Preferred Return;
(ix) to recognize transferees of Units as Investors and to admit substitute
Limited Partners in accordance with the terms described in the Prospectus and
Article VII of this Agreement;
(x) to invest Working Capital Reserves and, pending the investment of the
Partnership's assets in the Properties, to invest the Partnership's assets
(excluding Working Capital Reserves), in interest-bearing accounts and
short-term investments, including obligations of federal, state and local
governments and their agencies, regulated investment companies, commercial paper
and certificates of deposit of federally-insured commercial banks, savings banks
or savings and loan associations; provided, however, that such investments are
short-term, highly-liquid and provide appropriate safety of principal;
(xi) to purchase and cancel or otherwise retire or dispose of the
Partnership Interests or Units of any Partner or Investor according to the
provisions of this Agreement;
(xii) to execute and deliver all documents necessary or appropriate (a) for
the sale of Units, including the Prospectus and filings under the Securities Act
of 1933 and any other federal and state laws relating to the sale of securities
and (b) to file state and local tax returns at the Partnership level on behalf
of the Investors and Partners;
(xiii) to require Investors to become Limited Partners (in which case the
General Partner shall have the power to amend this Agreement without the
Majority Vote of the Investors) and to take such other action with respect to
the manner in which Units are being or may be transferred or traded as may be
necessary or appropriate to preserve the tax status of the Partnership as a
partnership for federal income tax purposes and the tax treatment of the
Investors as Partners (but such action shall be taken only to the minimum extent
required by an opinion of Counsel and only with the Majority Vote of Investors
if the changes would adversely affect the Investors);
(xiv) to take such steps (including amendment of this Agreement) as the
General Partner determines are advisable or necessary and will not result in any
material adverse effect on the economic position of a majority in interest of
the Investors with respect to the Partnership in order to preserve the tax
status of the Partnership as a partnership for federal income tax purposes and
the tax treatment of the Investors as Partners, including, without limitation,
removing the Units from public trading markets and imposing restrictions on
transfers of Units or Interests (provided such restrictions on transfers do not
cause the Partnership's assets to be deemed "plan assets" within the meaning of
ERISA) (but such action shall be taken only to the minimum extent required by an
opinion of Counsel and only with the Majority Vote of Investors if the changes
would adversely affect the Investors);
(xv) to establish and maintain the Working Capital Reserves described in
Section 3.3E; (xvi) to pay or reimburse any reasonable out-of-pocket expenses
incurred by any Affiliate of the General Partner in connection with any report
pursuant to Section 10.3, provided that no fee shall be paid to any Affiliate in
connection with any such report;
(xvii) upon the Majority Vote of the Investors to the matters set forth in
Sections 5.4A(xv), 5.4A(xvi) or 5.4A(xvii), to take any actions which they deem
appropriate to the extent authorized by the Investors to facilitate the purposes
described in such sections, including, without limitation, amendments to this
Agreement to change the dates upon which transfers of Units will be recognized,
and the General Partner shall give prior written notice to the Investors of any
such amendment; and
(xviii) to take such steps as the General Partner determines are advisable
or necessary and will not result in any material adverse effect on the economic
position of a majority in interest of the Investors with respect to the
Partnership to restructure the Partnership and its activities to obtain a
prohibited transaction exemption from the Department of Labor or to comply with
any exemption in final plan asset regulations adopted by the Department of
Labor, including, but not limited to, establishing a fixed percentage of Units
permitted to be held by qualified plans or
A-18
other tax-exempt investors or discontinuing sales to such entities after a
given date, in the event that either the assets of the Partnership constitute
"plan assets" for purposes of ERISA or the transactions contemplated hereunder
constitute prohibited transactions under ERISA or the Code. B. Any person
dealing with the Partnership or the General Partner may rely upon a certificate
signed by the General Partner, as to:
(i) the identity of any General Partner or any Limited Partner;
(ii) the existence or non-existence of any fact or facts that constitute
conditions precedent to acts by the General Partner or in any other manner are
germane to the affairs of the Partnership;
(iii) the Persons who are authorized to execute and deliver any instrument
or document of the Partnership; or
(iv) any act or failure to act by the Partnership or as to any other matter
whatsoever involving the Partnership or any Partner.
Section 5.3 Authority of Investors
A. By the Majority Vote of the Investors, the Investors, without the
consent of the General Partner, may:
(i) amend this Agreement; provided that such amendment (a) shall not in any
manner allow the Investors to take part in the control of the Partnership's
business in a manner which would subject them to liability as general partners
under the Act or any other applicable law, and (b) shall not, without the
consent of the General Partner affected, alter the rights, powers, or duties of
the General Partner or its interest in Profit and Loss, Net Cash Flow, Net
Proceeds of Sale or Financing, or alter any of the provisions of Section 8.2
hereof;
(ii) dissolve or terminate the Partnership prior to the expiration of its
term; (iii) remove the General Partner and, pursuant to Section 6.2, elect a new
General Partner, or
(iv) approve or disapprove of the Sale of all or substantially all of the
Partnership Property.
B. Any action taken pursuant to Section 5.3A hereof shall be void ab
initio, if prior to or within fifteen (15) days after such vote either (i) the
Partnership shall have received an opinion of counsel, which counsel is approved
by the Majority Vote of the Investors, that such action may not be effected
without subjecting the Investors to liability as general partners under the Act
or under the laws of such other jurisdiction in which the Partnership owns
properties or is doing business, or (ii) a court of competent jurisdiction shall
have entered a final judgment to the foregoing effect. For purposes of this
paragraph, counsel will be deemed approved by the Majority Vote of the Investors
if proposed by the General Partner and affirmatively approved in writing within
forty-five (45) days; provided, that if the holders of 10% or more of the
outstanding Units proposed counsel for this purpose, such proposed counsel, and
not counsel proposed by the General Partner shall be submitted for such approval
by the Investors. The existence of such an opinion of counsel or court judgment
with respect to a particular contemplated Partnership action shall not affect
the rights of the Investors to vote on other future actions or the existence of
such rights. If the opinion of counsel or court judgment referred to above has
not been obtained the vote shall proceed as scheduled and it shall not be
delayed or postponed for any reason except as otherwise permitted by the Act.
Section 5.4 Restrictions on Authority
A. The General Partner and its Affiliates shall have no authority to
perform any act in violation of any applicable laws or regulations thereunder,
nor shall the General Partner as such have any authority:
A-19
(i) to purchase or acquire property other than as described in the
Prospectus or to invest more than 25% of the Gross Proceeds of the Offering in
unimproved, non-income producing property;
(ii) except as permitted in this Agreement, to do any act required to be
approved by the Investors under the Act;
(iii) to reinvest any Net Cash Flow or Net Proceeds of Sale or Financing,
except in short-term securities pursuant to Section 10.2B;
(iv) except with respect to the Interim Investments, to invest in or
underwrite securities of any type or kind for any purpose, or make investments
other than in the Properties and the operations related and incidental thereto;
(v) to do any act in contravention of this Agreement;
(vi) to do any act that would make it impossible to carry on the ordinary
business of the Partnership;
(vii) to confess a judgment against the Partnership;
(viii) to offer Interests or Units in exchange for property;
(ix) to possess any property, or assign the Partnership's rights in same,
for other than the exclusive use of the Partnership;
(x) to operate in such a manner as to be classified as an "investment
company" under the meaning of the Investment Company Act of 1940;
(xi) to purchase or lease any property from or sell or lease property to
the General Partner, its Affiliates or any program or partnership in which the
General Partner or its Affiliates have any interest (provided however that the
General Partner or an Affiliate may temporarily hold title to a Property to
facilitate an acquisition by the Partnership so long as no profit is received by
the General Partner or Affiliate);
(xii) to admit a Person as a General Partner, except as provided in this
Agreement;
(xiii) to admit a Person as an Investor or Limited Partner, except as
provided in this Agreement;
(xiv) to create or suffer to exist a total indebtedness incurred by the
Partnership in excess of 60% of the fair market value of all of the assets of
the Partnership, as determined, by an independent appraisal; provided, however,
that the General Partner shall have the authority to incur indebtedness with
respect to any single Property up to but not in excess of 75% of the then fair
market value of such Property, as determined by an independent appraiser;
provided, further, that the foregoing term "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 or
appreciation in the value of the property);
(xv) without the Majority Vote of the Investors, to cause or facilitate the
merger or consolidation of the Partnership with other partnerships, including,
but not limited to, mergers or consolidations in which the Investors receive in
exchange for their Units interests in the surviving entity, with the objective
of listing the interests of the surviving entity on a national or regional
securities exchange or NASDAQ;
(xvi) subject to Section 7.2.A, without the Majority Vote of the Investors,
to list the Units on a securities exchange or enable the Units to be traded in
the over-the-counter market, or otherwise facilitate the establishment of a
market for the trading of Units, or (except as set forth in Section 5.2A(xiv))
to withdraw the Units from such listing; or
(xvii) without the Majority Vote of the Investors, to restructure the
Partnership as a real estate investment trust ("REIT") for federal income tax
purposes; or
A-20
(xviii) to obtain mortgage financing which is not fully amortized over not
more than 30 years or which requires balloon payments due sooner than seven
years from the date the Partnership acquires the Property securing such
financing; provided, however, that the foregoing do not apply to financing
representing 25% or less of the purchase price of the Properties acquired or to
interim financing. B. The General Partner shall not take any action which, for
federal tax purposes, shall cause the Partnership to terminate or to be treated
as an association taxable as a corporation.
Section 5.5 Authority of Partners and Affiliated Persons to Deal with
Partnership
A. The General Partner may, for, in the name of, and on behalf of, the
Partnership, acquire property from, borrow money from, enter into agreements,
contracts or the like (in addition to those set forth herein) with, or reimburse
for reasonable out-of-pocket expenses incurred in connection with the
preparation of reports by, any Sponsor in an independent capacity, as
distinguished from such capacity (if any) as a Sponsor, as if such Sponsor were
an independent contractor; provided, however, that any such agreement shall be
subject to the conditions set forth in Section 5.2A(ii) herein.
B. Neither the General Partner nor any Affiliate thereof shall have the
authority: (i) to cause the Partnership to invest in any program, partnership or
other venture;
(ii) to receive any compensation, fee or expense not otherwise permitted to
be paid to it under the terms of this Agreement or the Prospectus;
(iii) to cause the Partnership to acquire a Property without first having
obtained an appraisal with respect to the value of the Property, rendered by a
competent, independent appraiser, in which the appraised value equals or exceeds
the purchase price to be paid by the Partnership;
(iv) to commingle the Partnership's funds with those of any other Person,
or to invest any of the Net Proceeds of the Offering in junior mortgages, junior
deeds of trust or other similar obligations, except that funds of the
Partnership may be temporarily retained by agents of the Partnership pursuant to
contracts for the rendering of services to the Partnership by such agents or
held in accounts established and maintained for the purpose of making the
Interim Investments and/or computerized disbursements;
(v) to cause the Partnership to lend money or other assets to the General
Partner or any Affiliate thereof,
(vi) to grant to the General Partner or any Affiliate thereof an exclusive
listing for the Sale of any assets of the Partnership;
(vii) to receive any rebate or give-up, or to participate in any reciprocal
business arrangement with the General Partner or an Affiliate thereof,
(viii) to cause the Partnership to acquire a Property that is under
construction without completion bonds, fixed price guarantees or other
satisfactory arrangements;
(ix) to cause the Partnership to pay directly or indirectly, a commission
or fee (except as provided under Section 5.2.A.(viii)) to a Sponsor in
connection with the reinvestment or distribution of the proceeds of the resale,
exchange or refinancing of the Properties; or
(x) to cause the Partnership to engage a Sponsor to construct or develop
the Properties or render any services in connection with the construction or
development of the Properties.
C. If a loan is made to the Partnership by the General Partner, the General
Partner may not receive interest or similar charges or fees in excess of the
amount which would be charged by unrelated lending institutions on comparable
loans for the same purpose, in the same locality of the property if the loan is
made in connection with a particular property. No prepayment charge or penalty
shall be required by the General Partner on a loan to the Partnership secured by
either a first or a junior or all-inclusive trust deed, mortgage or encumbrance
on the property, except to the extent
A-21
that such prepayment charge or penalty is attributable to the underlying
encumbrance. Notwithstanding the foregoing, the General Partner shall not
provide Financing to the Partnership.
Section 5.6 Duties and Obligations of the General Partner
A. The General Partner shall take all action that may be necessary or
appropriate (i) for the continuation of the Partnership's existence as a limited
partnership under the Act (and under the laws of each other jurisdiction in
which such existence is necessary to protect the limited liability of the
Investors and the Limited Partners or to enable the Partnership to conduct the
business in which it is engaged), and (ii) for the acquisition, maintenance,
preservation and operation of the Properties in accordance with the Prospectus,
the provisions of this Agreement and applicable laws and regulations. The
General Partner shall devote to the Partnership such time as may be necessary
for the proper performance of its duties hereunder, but neither the General
Partner nor any of its Affiliates shall be expected to devote its full time to
the performance of such duties. The General Partner or its Affiliates may act as
general or managing partners for other partnerships engaged in businesses
similar to that conducted by the Partnership. Nothing herein shall limit the
General Partner or its Affiliates from engaging in any such business activities,
or any other activities which may be competitive with the Partnership.
B. The General Partner shall at all times conduct its affairs, the affairs
of all its Affiliates and the affairs of the Partnership in such a manner that
no Limited Partner or Investor (except a Limited Partner or Investor who is also
a General Partner) will have any personal liability for Partnership debts except
as otherwise set forth herein and in the Prospectus.
C. The General Partner shall prepare or cause to be prepared, and shall
file, on or before the due date (or any extension thereof), any federal, state
or local tax returns required to be filed by the Partnership. The General
Partner shall cause the Partnership to pay any taxes payable by the Partnership
to the extent same are not payable by any other party.
D. The General Partner shall obtain and keep in force, or cause to be
obtained and kept in force during the term hereof, fire and extended coverage,
workmen's compensation, and public liability insurance in favor of the
Partnership with such insurers and in such amounts as the General Partner deems
advisable, but in amounts not less (and with deductible amounts not greater)
than those customarily maintained with respect to parking lots or garages
comparable to the Properties.
E. The General Partner shall be under a fiduciary duty to conduct the
affairs of the Partnership in the best interests of the Partnership, including
the safekeeping and use of all Partnership funds and assets, whether or not in
the General Partner's possession or control, and the use thereof for the benefit
of the Partnership. The General Partner shall not enter into any contract or
agreement relieving it of its common law fiduciary duty. The General Partner
shall at all times act in good faith and exercise due diligence in all
activities relating to the conduct of the business of the Partnership. The
General Partner shall treat the Investors as a group and shall not favor the
interests of any particular Investor.
F. The General Partner shall cause the Partnership to commit a percentage
of the Gross Proceeds of the Offering to Investment in Properties which is equal
to the greater of. (i) 80% of the Gross Proceeds of the Offering reduced
by.1625% for each 1% of financing of the Partnership; or (ii) 67% of the Gross
Proceeds of the Offering. The proceeds of the Offering will be invested in
Properties within two years of the date of the Prospectus.
I. Except for payment of the Selling Commissions and the re-allowance of
the Due Diligence Expense Reimbursement Fee, the General Partner shall not
directly or indirectly pay or award any commission or other compensation to any
Person engaged by a potential Investor for investment advice as an inducement to
such advisor to advise the purchase of Units.
A-22
Section 5.7 Compensation of General Partner
Except as expressly provided in Articles IV and IX herein, the General
Partner shall receive no fees, salaries, profits, distributions, reimbursement
or other compensation for serving as General Partner.
Section 5.8 Other Businesses of Partners
Neither the Partnership nor any Partner or Investor shall have any rights
or obligations, by virtue of this Agreement, in or to any independent ventures
of any nature or description, or the income or profits derived therefrom, in
which a Partner or Investor may engage, including, without limitation, the
ownership, operation, management, syndication and development of other real
estate projects.
Section 5.9 Liability of General Partner and Affiliates to Limited Partners
or Investors
The General Partner and its Affiliates performing certain services on
behalf of the Partnership shall not be liable, responsible, or accountable, in
liabilities, damages or otherwise, to any Investor, Limited Partner or the
Partnership for any loss, judgment, liability, expense or amount paid in
settlement of any claims sustained which arise out of any act or omission
performed or omitted by them within the scope of the authority conferred on them
by this Agreement, provided that the General Partner determines, in good faith,
that such act or omission was in the best interests of the Partnership, except
for acts of negligence or misconduct or for damages arising from any
misrepresentation or breach of an agreement with the Partnership. The
Partnership shall not incur the cost of that portion of any liability insurance
which insures the General Partner or its Affiliates performing certain services
on behalf of the Partnership against any liability as to which the General
Partner or its Affiliate may not be indemnified under Section 5.10 herein. In
the event the General Partner is held liable to Investors and the General
Partner's assets are insufficient to satisfy such liability, the Subordinated
Limited Partner agrees to permit Investors to recover from it to the extent of
the Subordinated Limited Partner's interest in the Partnership.
Section 5.10 Indemnification
A. The General Partner and its Affiliates performing certain services on
behalf of the Partnership shall be indemnified to the full extent provided by
law for any loss, judgment, liability, expense or amount paid in settlement of
any claims sustained by them which arise out of any act or omission performed or
omitted by any or all of them within the scope of the authority conferred on
them by this Agreement, if the General Partner determines, in good faith, that
such act or omission was in the best interests of the Partnership and that such
act or omission did not constitute negligence or misconduct or breach of any
other agreement with the Partnership, provided that any indemnity under this
Section shall be provided out of and to the extent of Partnership assets only,
and no Investor or Limited Partner shall have any personal liability on account
thereof.
B. Notwithstanding Section 5.10A, the General Partner and its Affiliates
performing certain services on behalf of the Partnership and any Person acting
as a Broker-Dealer shall not be indemnified by the Partnership for any
liability, loss or damage incurred by any or all of them in connection with (i)
any claim or settlement arising under federal or state securities laws unless
(a) there has been a successful adjudication on the merits of each count
involving such securities laws violations as to the particular indemnities and
the court approves indemnification of the litigation costs, (b) such claims have
been dismissed with prejudice on the merits by a court of competent jurisdiction
as to the particular indemnities and the court approves indemnification of the
litigation costs, or(c) a court of competent jurisdiction approves a settlement
of the claims and finds that indemnification of the settlement and related costs
should be made, after being advised as to the current position of the Securities
and Exchange Commission, the Massachusetts Securities Division, the California
Commissioner of Corporations, the Pennsylvania Securities Commission, the
Tennessee Securities Commission, the Missouri Securities Division (and such
other state securities administrators as shall be required by such court),
regarding indemnification for violations of securities law; or (ii) any
liability imposed by law, including liability for negligence or misconduct.
A-23
ARTICLE VI
TRANSFERABILITY OF THE GENERAL PARTNER'S INTEREST
Section 6.1 Removal, Voluntary Retirement or Withdrawal of the General
Partner; Transfer of Interests
A. The General Partner may be removed in the manner specified in Section
5.3A herein.
B. The General Partner may not voluntarily withdraw or retire from its
position as a General Partner of the Partnership unless another General Partner
(including any Additional or Successor General Partner admitted pursuant to
Section 6.2) remains, and unless (i) counsel for the Partnership is of the
opinion that such voluntary retirement or withdrawal from the Partnership will
not cause the Partnership: (a) to be dissolved under the Act; (b) to be
classified other than as a partnership for federal income tax purposes; or (c)
to terminate for federal income tax purposes; and (ii) the approval of the
remaining General Partners, if any, and the Majority Vote of the Investors to
such voluntary retirement or withdrawal is obtained.
C. If the General Partner voluntarily retires or withdraws from the
Partnership in violation of this Section 6.1, it shall be and remain liable to
the Partnership and the Partners for damages resulting from the General
Partner's breach of this Agreement, and, without limitation of remedies, the
Partnership may offset such damages against the amounts otherwise distributable
to the General Partner.
D. The General Partner shall not have the right to sell, exchange, or
otherwise dispose of all or any portion of its Interest unless the proposed
assignee or transferee of all or a portion of the Interest of the General
Partner is admitted as a Successor or Additional General Partner to the
Partnership pursuant to the provisions of Section 6.2 prior to any such sale,
exchange or other disposition.
E. The voluntary retirement or withdrawal of the General Partner shall
become effective only upon (i) receipt by the Partnership of the opinions of
counsel referred to in Section 6.1(B)(i); (ii) receipt by the Partnership of the
approval and consent referred to in Section 6.1B(ii); and (iii) the amendment of
the Partnership's Certificate to reflect such withdrawal or retirement and its
filing for recordation.
Section 6.2 Election and Admission of Successor or Additional General
Partners A. The General Partner may at any time designate additional persons to
be Successor or Addi- tional General Partners, provided that the conditions of
Section 6.2B are satisfied. B. Except as otherwise expressly provided herein, no
Person shall be admitted as a Successor or Additional General Partner unless (i)
counsel for the Partnership is of the opinion that the admission of such
Successor or Additional General Partner will not cause the Partnership to be
classified other than as a partnership for federal income tax purposes or cause
the Partnership to terminate for federal income tax purposes; (ii) the consent
of the then remaining General Partners, if any, is obtained; and (iii) the
Majority Vote of the Investors to such admission has been obtained.
C. The admission of such Successor or Additional General Partner shall
become effective upon (i) receipt by the Partnership of the opinion referred to
in Section 6.2B(i); (ii) receipt by the Partnership of the consents referred to
in Section 6.2B(ii) and (iii), if applicable; and (iii) the amendment of the
Certificate to reflect the admission of the Successor or Additional General
Partner and its filing for recordation.
Section 6.3 Events of Withdrawal of a General Partner
A. In addition to a voluntary withdrawal of the General Partner pursuant to
Section 6.lE, the General Partner shall be deemed to withdraw (i) if the General
Partner assigns all of its Interest in the Partnership, (ii) if the General
Partner is removed pursuant to Section 5.3A; and (iii) the filing of a
certificate of dissolution, or its equivalent, for the General Partner or the
revocation of its charter. To the maximum extent permitted by the Act, no other
act or event shall be deemed an event of withdrawal of the General Partner or
serve to convert a General Partner to a Limited Partner.
A-24
B. In the event of the withdrawal of the General Partner and if a Successor
or Additional General Partner has been admitted to the Partnership in accordance
with Section 6.2, the remaining General Partner or General Partners, including
such Successor or Additional General Partner may elect to continue the
Partnership, and if such election is made, shall promptly give Notification of
such event and shall make and file such amendments to the Certificate as are
required by the Act to reflect the fact that the withdrawn General Partner has
ceased to be a General Partner of the Partnership.
C. In the event of the withdrawal of the General Partner and no Successor
or Additional General Partner has been admitted to the Partnership, or such
Successor or Additional General Partner does not elect to continue the
Partnership, the withdrawn General Partner, or its successors, representatives,
heirs or assigns shall promptly give Notification of such withdrawal to all
remaining Partners and Investors. In such event, the Partnership shall be
dissolved unless, within ninety (90) days after the withdrawal of the General
Partner, the Investors, by the Majority Vote of the Investors (or such higher
percentage vote as may be required by the Act), agree in writing to continue the
business of the Partnership and to the appointment, effective as of the date of
withdrawal of the sole General Partner, of one or more Additional General
Partners. If the Investors elect to reconstitute the Partnership and agree to
admit an Additional General Partner, the relationship of the Investors and of
substitute General Partner in the Partnership shall be governed by this
Agreement.
Section 6.4 Liability of a Withdrawn General Partner
A. Any General Partner who withdraws from the Partnership shall be, and
remain, liable for all obligations and liabilities incurred by it as General
Partner prior to the time such withdrawal becomes effective. In addition, a
General Partner who voluntarily withdraws in violation of this Agreement shall
be subject to the liability described in Section 6.1C.
B. Upon the withdrawal of a General Partner, such General Partner shall
immediately cease to be a General Partner, and, unless a Successor General
Partner has acquired the Interest of the withdrawing General Partner pursuant to
Section 6.5, the withdrawn General Partner's Interest shall be converted to a
limited partner Interest of a new class. Such conversion shall not affect any
rights or liabilities of the withdrawn General Partner, except that such General
Partner shall no longer participate in the management of the Partnership. For
purposes of this Section 6.4.B and Section 6.5, the Interest of the withdrawing
General Partner shall include the interest in the Partnership as a Subordinated
Limited Partner (if any) owned by an Affiliate of such withdrawing General
Partner.
C. The personal representatives, heirs, successors or assigns of any
General Partner who withdraws from the Partnership shall be, and remain, liable
for all obligations and liabilities incurred by the General Partner prior to, or
in connection with, its withdrawal.
Section 6.5 Valuation of Partnership Interest of General Partner
Upon the voluntary or involuntary withdrawal of a General Partner, the
Partnership or a Successor General Partner may purchase the Partnership Interest
of the withdrawn General Partner at any time subsequent to withdrawal. The price
of the withdrawn General Partner's Interest shall be determined by two (2)
independent appraisers, one selected by the withdrawn General Partner and one
selected by the remaining General Partner, or if none is remaining, by the
Investors. If the two appraisers are unable to agree on the value of the General
Partner's Interest, they shall jointly appoint a third independent appraiser
whose determination shall be final and binding. The Partnership shall then pay
the withdrawn General Partner the price of its Interest as a General Partner as
so determined. The expense of the appraisals shall be borne equally by the
terminated General Partner and the Partnership. If the withdrawal is
involuntary, payment shall be made by delivery of a promissory note bearing
interest payable semiannually at a floating rate of interest equal to the lowest
rate permitted under the Code to avoid the imputation of interest income to the
withdrawn General Partner, payable in five equal annual installments, the first
installment to be paid as soon as practicable after the appraisal, and
prepayable at any time. If the withdrawal is voluntary, payment shall be made by
delivery of a promissory note bearing no interest, with principal payable only
from distributions which the withdrawn General Partner would have received under
this Agreement had the
A-25
General Partner not withdrawn. Immediately upon receiving the note, the
withdrawn General Partner shall cease to be a Partner of the Partnership for all
purposes, except that the withdrawn General Partner shall continue to be subject
to Section 6.4 hereunder. All amounts received pursuant to this Section 6.5
shall constitute complete and full discharge for all amounts owing to the
withdrawn General Partner on account of its Interest in the Partnership. Any
disputes regarding valuation or payment pursuant to this Section which are not
resolved in a binding manner by the provisions of this Section shall be resolved
by arbitration in accordance with the then current rules of the American
Arbitration Association. The expense of arbitration shall be borne equally by
the terminated General Partner and the Partnership.
ARTICLE VII
ASSIGNMENT OF ASSIGNEE UNITS TO INVESTORS;
TRANSFERABILITY OF LIMITED PARTNER INTERESTS AND UNITS
Section 7.1 Assignment of the Assignee Units to Investors
A. Pursuant to Sections 3.2 and 0.xX hereof, the Assignor Limited Partner
shall assign to each Investor Assignee Units equal to the number of Units
purchased by each Investor in the Offering.
B. Except as provided in Section 7.1.A above, the Assignor Limited Partner
may not transfer a Limited Partnership Interest without the prior written
consent of the General Partner. The Assignor Limited Partner shall have no right
to vote or consent with respect to Units owned by the Assignor Limited Partner
for its own account and such Units shall not be considered outstanding Units for
purposes of determining whether the Majority Vote of the Investors or the
Consent of the Investors has occurred. The Assignor Limited Partner, by the
execution of this Agreement, acknowledges and agrees that the Assignor Limited
Partner's management will have fiduciary responsibility for the safekeeping and
use of all funds and assets of the Investors, whether or not in the Assignor
Limited Partner's management's possession or control, and that the management of
the Assignor Limited Partner will not employ, or permit another to employ such
funds or assets in any manner except for the exclusive benefit of the Investor.
The Assignor Limited Partner agrees not to contract away the fiduciary duty owed
to the Investors by the Assignor Limited Partner's management under the common
law of agency.
C. Except as set forth in Section 7.1G, the Assignor Limited Partner, by
the execution of this Agreement, irrevocably transfers and assigns to the
Investors all of the Assignor Limited Partner's rights and interest in and to
the Assigned Limited Partnership Interests, as of the time that payment for such
Assigned Limited Partnership Interests is received by the Partnership and such
Assigned Limited Partnership Interests are credited to the Assignor Limited
Partner on the books and records of the Partnership. The rights and interest so
transferred and assigned shall include, without limitation, the following:
(i) all rights to receive distributions of uninvested Capital Contributions
pursuant to Sec- tions 3.2 and 3.3;
(ii) all rights to receive cash distributions pursuant to ArticleIV;
(iii) all rights in respect to allocations of Profit and Loss pursuant to
Article IV;
(iv) all other rights in respect of determinations of allocations and
distributions pursuant to Article IV,
(v) all rights to consent to the admission of Successor or Additional
General Partners pursuant to Sections 6.1 and 6.2;
(vi) all rights to receive any proceeds of liquidation of the Partnership
pursuant to Section 8.2;
(vii) all rights to inspect books and records and to receive reports
pursuant to Article X;
(viii)all voting rights, rights to attend or call meetings and other such
rights; and
A-26
(ix) all rights which the Limited Partners have, or may have in the future,
under the Act.
D. The General Partner, by the execution of this Agreement, irrevocably
consents to and acknowledges that (i) the foregoing transfer and assignment
pursuant to Section 7.1 by the Assignor Limited Partner to the Investors of the
Assignor Limited Partner's rights and interest in the Assigned Limited
Partnership Interests is effective, and (ii) the Investors are intended to be
and shall be third party beneficiaries of all rights and privileges of the
Assignor Limited Partner in respect of the Assigned Limited Partnership
Interests. The General Partner covenants and agrees that, in accordance with the
foregoing transfer and assignment, all the Assignor Limited Partner's rights and
privileges in respect of Assigned Limited Partnership Interests may be exercised
by the Investors including, without limitation, those cited in Section 7.1.
E. In accordance with the transfer and assignment described in Section 7.1,
Investors shall have the same rights that the Limited Partners have under this
Agreement and under the Act.
F. Notwithstanding the assignment of the Assigned Limited Partnership
Interests referred to in this Section 7.1, the Assignor Limited Partner shall
retain legal title to and be and remain a Limited Partner of the Partnership.
Section 7.2 Transferability of Units
A. Units are generally transferable, provided, however, that a transfer of
Units shall be prohibited if one of the following restrictions applies:
(i) No sale or exchange of any Units shall be made if the Units sought to
be sold or exchanged, when added to the total of all other Units sold or
exchanged within a period of twelve (12) consecutive months prior thereto,
would, in the opinion of counsel for the Partnership, result in the Partnership
being considered to have terminated within the meaning of Section 708(b)(1)(A)
of the Code. The General Partner shall give Notification to all Investors in the
event that sales or exchanges should be suspended for this reason. All deferred
sales or exchanges shall be made (in chronological order to the extent
practicable) as of the first day of the fiscal year beginning after the end of
any such 12-month period, subject to the provisions of this Article VII.
(ii) No transfer or assignment of any Unit shall be made if a counsel for
the Partnership is of the opinion that the particular transfer or assignment
would be in violation of any federal or state securities laws (including any
investment suitability standards) applicable to the Partnership or would cause
the Partnership to be classified other than as a partnership for federal income
tax purposes.
(iii) No transfer or assignment of any Unit shall be made if in the opinion
of Counsel to the Partnership such transfer would cause the Partnership to be
treated as a "publicly traded partnership" under Sections 7704 and 469(k) of the
Code. Each Investor agrees not to transfer, and agrees that the Partnership
shall not recognize for any purpose any transfer on or through a listing on a
securities exchange, over-the-counter market or secondary market or any transfer
to or from a dealer in securities or partnership interests or other market
maker, or any transfer arranged thrugh or facilitated by means of an interdealer
quotation system, information system or other facility that may create the
equivalent of a secondary market in partnership interests, unless counsel to the
Partnership is of the opinion that such transfers will not result in the
partnership becoming taxable as a corporation or a publicly traded partnership.
(iv) No transfer or assignment of Units shall be made after which any
transferor or transferee would hold (a) a number of Units not evenly divisible
by four, or (b) less than 200 Units, except for Individual Retirement Accounts,
or (c) less than 80 Units in the case of Individual Retirement Accounts,
provided, however, that any such transferor or transferee may hold zero Units.
(v) No transfer or assignment of any Unit shall be made if it would result
in the assets of the Partnership being treated as "plan assets" or the
transactions contemplated hereunder to be prohibited transactions under ERISA or
the Code.
A-27
(vi) No transfer or assignment of a Unit shall be made to a foreign person
under the Code or a minor or incompetent (unless such transfer or assignment
shall be made to a legal guardian on such person's behalf).
B. In order to record a trade on its books and records, the Partnership may
require such evidence of transfer or assignment and authority of the transferor
or assignor (including signature guarantees), evidence of the transferee's
suitability under state securities laws, and the written acceptance and adoption
by the transferee of the provisions of this Agreement, as the General Partner
may determine. The General Partner may charge a transfer fee sufficient to cover
an reasonable expenses connected with such transfer (with no profit to any party
in the transaction).
C. In no event shall an Investor be permitted to transfer a fraction of a
Unit.
Section 7.3 Death, Bankruptcy or Adjudication of Incompetence of an
Investor or a Limited Partner
Upon the death of an Investor or a Limited Partner, his executor,
administrator, or trustee, or, if he is adjudicated incompetent or insane, his
committee, guardian, or conservator, or, if he becomes bankrupt, the trustee or
receiver of his estate, shall have all the rights of an Investor or a Limited
Partner for the purpose of settling or managing his estate and shall have
whatever power the deceased or incompetent Investor or Limited Partner possessed
to assign all or any part of his Units or Interest. The death, dissolution,
adjudication of incompetence, or bankruptcy of an Investor or a Limited Partner
shall not dissolve the Partnership.
Section 7.4 Effective Date
The Partnership shall recognize the transferee of Units as an Investor on
the Partnership's books and records on the first business day of the next
calendar month after the month in which the Partnership receives all necessary
documentation and consents required to effect the transfer of Units.
Section 7.5 Substitute Limited Partners
Any Investor may elect to become a Substitute Limited Partner upon (i)
signing a counterpart of this Agreement and any other instrument or instruments
deemed necessary by the General Partner, including a Power of Attorney in favor
of the General Partner as described in Section 12.1.A hereof, and (ii) paying a
fee equal to the actual costs and expenses incurred by the General Partner for
legal and administrative costs and recording fees. Investors who elect to become
Substitute Limited Partners will receive one Limited Partnership Interest for
each Unit they convert and will not be able to re-exchange their Limited
Partnership Interests for Units. The Capital Account of the former Investor
attributable to transferred Units shall be credited to the Capital Account of
the Substitute Limited Partner. The Partnership's Certificate will be amended no
less often than quarterly, if required by applicable law, to reflect the
substitution of Limited Partners.
Section 7.6 Retirement or Withdrawal of an Investor
A. No Investor shall have the right to voluntarily retire or withdraw from
the Partnership unless the General Partner shall have consented to such
voluntary retirement or withdrawal by an Investor. Upon the retirement or
withdrawal of an Investor: (i) the Interest of such retiring or withdrawing
Investor shall thereafter belong to the Partnership; (ii) such retiring or
withdrawing Investor shall not be entitled to receive distributions with respect
to any periods after the time of such retirement of withdrawal; and (iii) such
retiring or withdrawing Investor shall not be entitled to receive any amount for
the fair value of his Units as of the date of his retirement or withdrawal,
other than as agreed to by the General Partner and the withdrawing Investor. The
General Partner shall not consent to the voluntary retirement or withdrawal of
an Investor if the General Partner receives an opinion of counsel to the
Partnership that such retirement or withdrawal would cause the Partnership to be
classified other than as a partnership for federal income tax purposes, or cause
the Partnership to terminate for federal income tax purposes.
A-28
B. At any time after the Termination Date of the Offering, the Partnership
may, in its sole discretion, in response to the request of an Investor,
repurchase any or all of the Units of such Investor upon mutually agreeable
terms, provided that such repurchase does not materially impair the capital or
operation of the Partnership. The determination to repurchase Units will be made
in the sole discretion of the General Partner. The determination of the value of
the repurchased Units will be based upon, among other factors, the current fair
market value of the Properties and the assets of the Partnership, less all
Partnership debts and obligations. The Partnership will not repurchase Units
prior to the Termination Date of the Offering and is not obligated to repurchase
Units at any time. Units acquired by the General Partner and its Affiliates or
by the Assignor Limited Partner will not be eligible for repurchase by the
Partnership. Units purchased by the Partnership during any month shall be deemed
cancelled effective as of the first day of the month following the effective
date of such purchase.
ARTICLE VIII
DISSOLUTION, LIQUIDATION AND TERMINATION OF THE FUND
Section 8.1 Events Causing Dissolution
A. The Partnership shall dissolve and its affairs shall be wound up upon
the first to occur of the following events:
(i) the expiration of its term;
(ii) the withdrawal of the General Partner, unless the Partnership is
continued pursuant to Sections 6.3B or 6.3C;
(iii) the Sale of all of the Properties (excepting (a) a disposition
thereof which, in the opinion of counsel to the Partnership, qualifies, in whole
or in part, under Section 1031 or Section 1033 of the Code or (b) a Sale in
which the purchase price is paid in one or more installments, in which case the
Partnership shall dissolve upon receipt of the final payment thereunder);
(iv) the election by the General Partner, with the Majority Vote of the
Investors, to dissolve the Partnership;
(v) by the Majority Vote of the Investors pursuant to Section 5.3A to
dissolve the Partner- ship; or
(vi) the happening of any other event causing the dissolution of the
Partnership under applicable law.
B. Dissolution of the Partnership shall be effective on the day on which
the event occurs giving rise to the dissolution. A certificate of cancellation
shall be filed under the Act upon the dissolution and the commencement of
winding up of the Partnership; provided, however, that the Partnership shall not
terminate until the assets of the Partnership has been distributed as provided
in Section 8.2. Notwithstanding the dissolution of the Partnership, prior to the
termination of the Partnership, the business of the Partnership and the affairs
of the Partners, as such, shall continue to be governed by this Agreement.
Section 8.2 Liquidation
A. As soon as practical after the dissolution of the Partnership, the
General Partner, or if there is no General Partner, any Limited Partner or the
liquidating trustee under the Act, as the case may be, shall give Notification
to all the Limited Partner and Investors of such fact and shall prepare a plan
as to whether and in what manner the assets of the Partnership shall be
liquidated. By the Majority Vote of the Investors, the assets of the
Partnership, subject to its liabilities (and the establishment of reserves, if
necessary, for such liabilities), may be transferred to a successor Entity, upon
such terms and conditions as are then agreed upon.
B. Unless the Investors agree to transfer the assets of the Partnership,
subject to its liabilities, to a successor Entity pursuant to Section 8.2A, upon
dissolution of the Partnership, the General Partner,
A-29
any Limited Partner or the liquidating trustee under the Act, as the case may
be, shall liquidate the assets of the Partnership, and apply and distribute the
proceeds thereof in accordance with Section 4.4.
C. Notwithstanding the provisions of Section 8.2B, in the event the General
Partner or any liquidating agent under the Act, as the case may be, shall
determine that an immediate sale of all or a portion of the assets of the
Partnership would cause undue loss to the Partners and Investors, the General
Partner or liquidating agent under the Act, as the case may be, in order to
avoid such loss, may, after having given Notification to all the Investors and
Limited Partners, either defer liquidation of, and withhold from distribution
for a reasonable time, any assets of the Partnership, or distribute the assets
in kind to a liquidating trust to be held for the benefit of the Investors and
Partners.
Section 8.3 Capital Contribution Upon Dissolution
Subject to the provisions of Section 5.9 of this Agreement, each Investor
and Partner shall look solely to the assets of the Partnership for all
distributions with respect to the Partnership and his Capital Contribution and
shall have no recourse (upon dissolution or otherwise) against any Partner or
Investor; provided, however, that upon the dissolution and termination of the
Partnership, the General Partner will make the Capital Contributions referred to
in Section 3.1. All amounts so contributed by the General Partner shall be
distributed first to the Partnership's creditors entitled thereto, and the
balance to the Investors and Partners in proportion to the positive balances in
their Capital Accounts at the time of dissolution and termination of the
Partnership.
ARTICLE IX
CERTAIN PAYMENTS TO THE GENERAL PARTNER AND AFFILIATES
Section 9.1 Reimbursement of Certain Costs and Expenses of the General
Partner and its Affiliates
A. Subject to the provisions of Article V hereof, the Partnership shall be
permitted to reimburse the General Partner for the actual cost to the General
Partner or any of its Affiliates of the Partner- ship's operating expenses. In
determining the actual cost to the General Partner or an Affiliate of the
General Partner of goods and materials and administrative services, actual cost
means the actual cost to the General Partner or an Affiliate of the General
Partner of goods and materials used for or by the Partnership and obtained from
entities not affiliated with the General Partner, and actual cost of
administrative services means the pro rata cost of personnel as if such persons
were employees of the Partnership. The cost for administrative services to be
reimbursed to the General Partner or an Affiliate shall be at the lower of the
General Partner's or Affiliate's actual cost or ninety percent (90%) of the
amount the Partnership would be required to pay to independent parties for
comparable administrative services in the same geographic location. The General
Partner shall use its best efforts to cause all of the Partnership's expenses to
be billed directly to and paid by the Partnership to the extent practicable.
B. Subject to the foregoing, the Partnership shall pay all expenses (which
expenses shall be billed directly to the Partnership) of the Partnership which
may include but are not limited to: (a) an costs of personnel (excluding rent or
depreciation, utilities, capital equipment, and other administrative items)
employed full- or part-time by the Partnership and involved in the business of
the Partnership and allocated pro rata to their administrative services
performed on behalf of the Partnership, including Persons who may also be
officers or employees of the General Partner or its Affiliates (other than
Controlling Persons); (b) all costs of borrowed money, taxes and assessments on
Properties and other taxes applicable to the Partnership; (c) legal, audit,
accounting, brokerage and other fees; (d) printing, engraving and other expenses
and taxes incurred in connection with the issuance, distribution, transfer,
registration and recording of documents evidencing ownership of an Interest or
Unit or in connection with the business of the Partnership; (e) fees and
expenses paid to independent contractors, mortgage bankers, brokers and
servicers, leasing agents, consultants, on-site property managers and other
property management personnel (other than Controlling Persons and other officers
of the General Partner or its Affiliates), real estate brokers, insurance
brokers and other
A-30
agents; (f) expenses in connection with the disposition, replacement,
alteration, repair, remodeling, refurbishment, leasing, refinancing and
operating of the Properties (including the costs and expenses of foreclosures,
insurance premiums, real estate brokerage and leasing commissions and of
maintenance of such Properties); (g) expenses of organizing, revising, amending,
converting, modifying or terminating the Partnership; and (h) the cost of
preparation and dissemination of the informational material and documentation
relating to potential sale, or other disposition of Properties or in connection
with any meetings or votes if the Investors.
C. Notwithstanding any other provision of this Agreement, no reimbursement
shall be permitted for services for which the General Partner is entitled to
compensation by way of a separate fee.
Section 9.2 Fees and Other Payments
A. The Partnership shall cause the following payments and fees to be paid
to the General Partner and its Affiliates:
(i) to the Selling Agent, the Selling Commissions and the Due Diligence
Expense Reimburse- ment Fee.
(ii) to the General Partner or its Affiliates, the Offering and
Organizational Expense Fee.
(iii) to the General Partner or its Affiliates, the Acquisition Expenses
previously paid by the General Partner or its Affiliates. (iv) to the General
Partner or its Affiliates, the Property Acquisition Fee.
(v) to the General Partner, an annual property management fee equal to 1%
of the gross revenues of the Properties.
(vi) to the General Partner, real estate brokerage commissions, payable
upon the Sale of any Property, provided that the General Partner actually
renders real estate brokerage services in connection with such Sale. Any
commissions paid to the General Partner will be limited to one-half of the
competitive real estate commission for like properties located in the same
geographic area not to exceed 1% of the contract price for the Sale of the
Property, and will be subordinated to the payment to Investors of their Adjusted
Capital Balance plus the unpaid portion, if any, of their Preferred Return. B.
The total of the fees owed to the General Partner and its Affiliates and
described in. (i), (ii), (iii) and (iv) above shall in no event exceed 16.5% of
the Gross Proceeds of the Offering.
ARTICLE X
BOOKS AND RECORDS; BANK ACCOUNTS; REPORTS
Section 10.1 Books and Records
A. The books and records of the Partnership shall be maintained by the
General Partner at the Partnership's principal place of business. In all cases,
said books and records shall be available for examination and copying by any
Limited Partner, Investor or his duly authorized representatives, for any
purpose related to the Limited Partner's or Investor's interest as a Limited
Partner or Investor, at the expense of such Limited Partner or Investor, at any
and all reasonable times. The Partnership shall keep at its principal place of
business, without limitation, the following records: true and full information
regarding the status of the business and financial condition of the Partnership;
promptly after becoming available, a copy of the Partnership's federal, state
and local income tax returns for each year; a current list of the names and last
known business, residence or mailing addresses of and the numbers of Units held
by each Partner and Investor; a copy of this Agreement and the Certificate and
all amendments thereto; and other information regarding the affairs of the
Partnership as is just and reasonable. The current list of the names and last
known business, residence or mailing addresses of each Partner and Investor
shall be mailed to any Investor upon payment of a reasonable charge for copy
work.
A-31
B. The Partnership shall keep its books and records in accordance with the
accounting methods determined by the General Partner. The Partnership's taxable
year shall be a calendar year.
Section 10.2 Bank Accounts
A. The General Partner shall have fiduciary responsibility for the
safekeeping and use of all funds and assets of the Partnership, whether or not
in their immediate possession or control. The General Partner shall not employ,
or permit any other Person to employ, such funds in any manner except for the
benefit of the Partnership.
B. The bank accounts of the Partnership shall be maintained in such banking
institutions as the General Partner shall determine, and withdrawals shall be
made only in the regular course of Partnership business on the signature of the
General Partner or such other signature or signatures as the General Partner may
determine. All deposits and other funds may be deposited in interest bearing or
non-interest bearing accounts guaranteed by federal authorities, invested in
short-term United States Government or municipal obligations, or deposited with
a banking institution selected by the General Partner.
Section 10.3 Reports
A. No later than seventy-five (75) days after the end of each calendar
year, the General Partner will furnish each Person who was an Investor or
Limited Partner at any time during the fiscal year with all tax information
relating to the Partnership's performance for the preceding calendar year that
is required to be set forth in the Investor's and Limited Partner's federal and
state income tax return.
B. Within sixty (60) days after the end of each of the first three fiscal
quarters of each fiscal year of the Partnership, the General Partner will
furnish to each Person who was an Investor or Limited Partner at any time during
the fiscal quarter then ended, a report setting forth information with respect
to the progress of the Partnership's business, which report shall include: (i)
an unaudited balance sheet of the Partnership; (ii) an unaudited statement of
income for the quarter; (iii) an unaudited cash flow statement for the quarter;
(iv) an unaudited statement setting forth the services rendered to, and fees
received from, the Partnership by any Sponsor; and (v) other pertinent
information concerning the Partnership and its activities during the quarter.
The various reports required pursuant to this Section 10.3.B may be sent earlier
than or separately from any of the other reports required pursuant to this
Section 10.3.B, and the information required to be contained in any of the
reports required pursuant to this Section 10.3.B may be contained in more than
one report.
C. Within one hundred twenty (120) days after the end of each fiscal year,
the General Partner shall furnish an annual report to each Person who was a
Limited Partner or an Investor as of the last business day of the fiscal year
then ended. Such annual report will include:
(i) a balance sheet as of the end of the Partnership's fiscal year,
statements of income, Partners' equity and cash flow, which shall be prepared in
accordance with generally accepted accounting principles and accompanied by (a)
an auditor's report containing an opinion of an independent certified public
accountant and (b) a reconciliation to information furnished to Investors for
income tax purposes;
(ii) the breakdown of any Partnership costs reimbursed to a Sponsor and a
statement setting forth in detail the services rendered to, and fees received
from, the Partnership by any Sponsor as verified by a review of the time records
of, and the specific nature of the work performed by, individual employees, the
cost of whose services were reimbursed (and within the scope of the
A-32
annual audit by the Accountants shall be the obligation to verify the
allocations of the costs reimbursed to the General Partner or Affiliate
thereof);
(iii) a cash flow statement; and
(iv) a report of the activities of the Partnership during the fiscal year.
The annual report shall also set forth distributions to the Investors for the
period covered thereby and shall separately identify distributions from (a) Net
Cash Flow during the period, (b) Net Cash Flow during a prior period which had
been held as reserves, (c) Net Proceeds of Sale or Financing, and (d) Working
Capital Reserves.
D. Within forty-five (45) days after the end of each fiscal quarter in
which a Sale or Financing occurs, the General Partner shall send to each Person
who was an Investor as of the close of business on the first business day of the
month that includes the date of occurrence of the Sale or Financing, a report as
to the nature of the Sale or Financing and as to the Profit or Loss arising from
the Sale or Financing.
E. The General Partner shall prepare and timely file with appropriate
federal and state regulatory authorities all reports required to be filed with
such entities under then-applicable laws, rules and regulations. Such reports
shall be prepared on the accounting or reporting basis required by such
regulatory authorities. Upon request, copies of such reports will be furnished
to any Investor or Limited Partner for any purpose reasonably related to the
Investor's or Limited Partner's interest as an Investor or a Limited Partner. In
the event that any regulatory authority promulgates rules or amendments thereto
that would permit a reduction in any of the reporting requirements to which the
Partnership is subject under this Agreement at the time of the execution hereof,
the Partnership may cease to prepare and file any such reports in accordance
with such rules or amendments.
F. The General Partner shall maintain, (I) for a period of at least six (6)
years, a record of the information obtained to indicate that an Investor has met
the suitability standards set forth in the Prospectus; and (ii) for a period of
at least five (5) years, records of the appraisals made of the Properties, which
appraisal records shall be available for inspection and copying by any Investor
or Limited Partner for any purpose reasonably related to the Investor's or
Limited Partner's interest as an Investor or a Limited Partner.
Section 10.4 Federal Tax Elections
The Partnership, in the sole discretion of the General Partner, may make
elections for federal tax purposes as follows:
(i) In case of a transfer of a Unit, the Partnership, in the sole
discretion of the General Partner, may timely elect pursuant to Section 754 of
the Code (or corresponding provisions of future law) and pursuant to similar
provisions of applicable state or local income tax laws, to adjust the basis of
the assets of the Partnership.
(ii) The General Partner may elect accelerated depreciation methods under
the Code, or may elect straight-line depreciation over a period as long as forty
(40) years if, in its sole discretion, the determination of the percentage of
tax-exempt Investors becomes too cumbersome.
(iii) All other elections required or permitted to be made by the
Partnership under the Code shall be made by the General Partner in such manner
as will, in its sole opinion, be most advantageous to a Majority of the
Investors. The Partnership shall, to the extent permitted by applicable law and
regulations, elect to treat as an expense for federal income tax purposes all
amounts incurred by it for real estate taxes, interest and other charges which
may, in accordance with applicable law and regulations, be considered as
expenses.
A-33
ARTICLE XI
MEETINGS OF INVESTORS
Section 11.1 Calling Meetings
Meetings of the Investors for any purpose may be called by the General
Partner and shall be called by the General Partner upon receipt of a request in
writing signed by Investors having in the aggregate more than 10% of the
outstanding Units. Upon receipt of a written request stating the purpose(s) of
the meeting, the General Partner shall provide all Investors within 10 days
after receipt of such request with notice as described in Section 11.2. The
meeting shall be held at a time and place convenient to the Investors.
Section 11.2 Notice, Procedure
If a meeting is called at the request of the Investors, the General Partner
shall provide all Investors with notice of such meeting given either personally
or by certified mail, which notice shall state the purpose thereof, such meeting
to be held on a date not less than fifteen (15) nor more than sixty (60) days
after the receipt by the General Partner of the request for the meeting. Notice
of any other meeting shall be given either personally or by certified mail, not
less than fifteen (15) days nor more than sixty (60) days before the date of the
meeting, to each Investor at his record mailing address. The notice shall be in
writing, and shall state the place, date, hour, and purpose of the meeting, and
shall indicate that it is being issued at or by the direction of the Partners or
Investors calling the meeting. If a meeting is adjourned to another time or
place, and if any announcement of the adjournment of time or place is made at
the meeting, it shall not be necessary to give notice of the adjourned meeting.
The presence in person or by proxy of the holders of more than 50% of the
outstanding Units shall constitute a quorum at all meetings of the Investors;
provided, however, that if there is no quorum present, holders of a majority in
interest of the Investors present or represented may adjourn the meeting from
time to time without further notice until a quorum is obtained. No notice of the
time, place or purpose of any meeting of Investors need be given to any Investor
who attends in person or is present by proxy (except when an Investor attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business on the ground that the meeting is not lawfully
called or convened), or to any Investor entitled to notice who, in a writing
executed and filed with the records of the meeting, either before or after the
time of the meeting, waives the notice requirement.
Section 11.3 Right to Vote
For the purpose of determining the Investors entitled to vote at any
meeting of the Partnership, the General Partner or the Investors requesting the
meeting may fix a date, in advance, as the record date for the determination of
Investors entitled to vote. This date shall be not more than fifty (50) days nor
less than ten (10) days before any meeting.
Section 11.4 Proxies; Rules
Each Investor may authorize any person or persons to act for him by proxy
in all matters in which an Investor is entitled to participate, whether by
waiving notice of any meeting, or voting or participating at a meeting. Every
proxy must be signed by the Investor or his attorney-in-fact. No proxy shall be
valid after the expiration of 11 months from the date thereof unless otherwise
provided in the proxy. Every proxy shall be recoverable at the pleasure of the
Investor executing it. At each meeting of Investors, the General Partner shall
appoint officers and adopt rules as they deem appropriate for the conduct of the
meeting.
A-34
ARTICLE XII
GENERAL PROVISIONS
Section 12.1 Appointment of General Partner as Attorney-in-Fact
A. Each Limited Partner and Investor hereunder hereby irrevocably appoints
and empowers the General Partner his attorney-in-fact to consent to or ratify
any act listed in Subsections 5.4A(i) through (xviii) and Section 6.3C of this
Agreement after the Majority Vote of the Investors thereto has been obtained,
and to execute, acknowledge, swear to and deliver all agreements and instruments
and file all documents requisite to carrying out the intentions and purposes
contemplated in this Agreement, including, without limitation, the execution and
delivery of this Agreement and all amendments hereto, the filing of all business
certificates and necessary certificates of limited partnership and amendments
thereto from time to time in accordance with all applicable laws and any
certificates of cancellation.
B. The appointment by all Limited Partners and Investors of the General
Partner as attorney-in-fact shall be deemed to be a power coupled with an
interest, shall not be affected by the subsequent disability or incapacity of
the principal and shall survive the assignment by any Limited Partners or
Investors of the whole or any part of his Interests or Units in the Partnership.
C. The power of attorney granted by this Section 12.1 shall be governed by
the laws of the State of Delaware.
Section 12.2 Waiver of Partition
Each Partner and Investor, on behalf of himself, his successors,
representatives, heirs and assigns hereby waives any right of partition or any
right to take any other action which otherwise might be available to him for the
purpose of severing his relationship with the Partnership or his interest in the
assets held by the Partnership from the interest of the other Partners or
Investors.
Section 12.3 Notification
Any Notification, in order to be effective, shall be sent by registered or
certified mail, postage prepaid, if to a Partner or Investor, to the address of
the Partner or Investor set forth in the books and records of the Partnership,
and if to the Partnership, to the principal place of business of the Partnership
set forth in Section 2.2 (unless Notification of a change of the principal
office is given), the date of registry thereof or the date of the certification
thereof being deemed the date of receipt of Notification; provided, however,
that any written communication sent to a Partner or Investor or to the
Partnership and actually received by such Person shall constitute Notification
for all purposes of this Agreement.
Section 12.4 Word Meanings
In this Agreement, the singular shall include the plural and the masculine
gender shall include the feminine and neuter and vice versa, unless the context
otherwise requires.
Section 12.5 Binding Provisions
The covenants and agreements contained herein shall be binding upon, and
inure to the benefit of, the heirs, personal representatives, successors and
assigns of the respective parties hereto.
Section 12.6 Applicable Law
This Agreement shall be construed and enforced in accordance with the laws
of the State of Delaware, without regard to principles of conflict of laws.
Section 12.7 Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original as against any party whose signature appears
thereon, and all of which shall together
A-35
constitute one and the same instrument. This Agreement shall become binding
upon the date hereof. Each Additional or Successor General Partner shall become
a signatory hereof by signing such number of counterparts of this Agreement and
such other instrument or instruments, and in such manner as the General Partner
shall determine, and by so signing, shall be deemed to have adopted and to have
agreed to be bound by all the provisions of this Agreement.
Section 12.8 Separability of Provisions
Each provision of this Agreement shall be considered separable, and if for
any reason any provision or provisions hereof are determined to be invalid or
contrary to any existing or future law, such invalidly shall not impair the
operation of or affect those portions of this Agreement which are valid.
Section 12.9 Paragraph Titles
Paragraph titles are for descriptive purposes only and shall not control or
alter the meaning of this Agreement as set forth in the text.
Section 12.10 Entire Agreement
This Agreement and the exhibits and documents referred to herein constitute
the entire understanding and agreement among the parties hereto with respect to
the subject matter hereof, and supersede all prior and contemporaneous
agreements and understanding, inducements or conditions, express or implied,
oral or written, except as herein contained. This Agreement may not be modified
or amended other than by an agreement in writing.
Section 12.11 Amendments
A. In addition to the amendments otherwise authorized herein, amendments
may be made to this Agreement from time to time by the General Partner with the
Majority Vote of the Investors; provided, however, that without the consent of
the Partners or Investors to be adversely affected by the amendment, except as
provided in Section 12.11B, this Agreement may not be amended so as to (i)
convert an Investor's interest into a General Partner's interest; (ii) modify
the limited liability of an Investor; (iii) alter the interest of a Partner or
Investor in Net Cash Flow, Profit or Loss, or Net Proceeds of Sale or Financing;
(iv) increase the amount of the Capital Contributions required to be paid by the
Investors; or (v) extend the Termination Date.
B. In addition to the amendments otherwise authorized herein, amendments
may be made to this Agreement from time to time by the General Partner, without
the consent of any of the Investors, (i) to add to the duties or obligations of
the General Partner or surrender any right or power granted to the General
Partner herein, for the benefit of the Investors; (ii) to cure any ambiguity, to
correct or supplement any provision herein which may be inconsistent with any
other provision herein, 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 delete or add any provision of this
Agreement required to be deleted or added by the Staff of the Securities and
Exchange Commission or other federal agency or by a state securities
commissioner or similar official and deemed by the commission, agency,
commissioner, or official to be for the benefit or protection of the Investors;
(iv) to take any actions necessary to cause the assets of the Partnership to
come within the exclusion from the definition of "plan assets" contained in
Section 2550.40lb-1 of Title 29 of the Code of Federal Regulations; and (v) to
give effect to any action permitted pursuant to Section 5.2; provided, however,
that no amendment shall be adopted pursuant to this Section 12.2.B unless its
adoption (1) is not adverse to the interests of the Investors; (2) is consistent
with Section 5.2; (3) does not affect the distribution of Net Cash Flow or Net
Proceeds of Sale or Financing or the allocation of Profit or Loss among the
Investors as a class and the General Partner, except as provided below; and (4)
does not affect the limited liability of the Investors or the status of the
Partnership as a partnership for federal income tax purposes. In addition to the
amendments otherwise authorized herein, amendments may be made to this Agreement
to amend provisions of Article IV of this Agreement relating to the allocations
of Profit or Loss and to distributions of Net Cash Flow or Net Proceeds of Sale
or
A-36
Financing among the Partners and Investors if the Partnership is advised at
any time by the Partner- ship's Accountants and counsel that the allocations
provided in Article IV of this Agreement are unlikely to be respected for
federal income tax purposes. The General Partner is empowered to amend the
distribution and allocation provisions of Article IV pursuant to Section 12.11B
to the minimum extent necessary in accordance with the advice of the
Partnership's Accountants and counsel to effect the plan of distribution of Net
Cash Flow and Net Proceeds of Sale or Financing, and, consistent therewith, the
allocations of Profit and Loss provided in this Agreement. New allocations made
by the General Partner in reliance upon the advice of the Partnership's
Accountants and counsel shall be deemed to be made pursuant to the fiduciary
obligation of the General Partner to the Partnership and the Investors. This
Section 12.11 shall be subject to the provisions of Section 5.9 of this
Agreement.
C. If this Agreement is amended as a result of adding or substituting a
Limited Partner or increasing the investment of a Limited Partner, the amendment
shall be signed by the General Partner and by the Person to be substituted or
added, or the Limited Partner increasing his investment in the Partnership, and,
if a Limited Partner is to be substituted, by the assigning Limited Partner. If
this Agreement is amended to reflect the designation of an Additional General
Partner, the amendment shall be signed by the other General Partner or General
Partners and by the Additional General Partner. If this Agreement is amended to
reflect the withdrawal of a General Partner when the business of the Partnership
is being continued, the amendment shall be signed by the withdrawing General
Partner and by the remaining or successor General Partner or General Partners.
D. In making any amendments, there shall be prepared and filed for
recordation by the General Partner all documents and certificates required to be
prepared and filed under the Act and under the laws of the other jurisdictions
under the laws of which the Partnership is then formed or qualified.
IN WITNESS WHEREOF, parties hereto have executed this Agreement as of the
date first above written.
GENERALPARTNER
ATTEST: REALTY PARKING COMPANY, INC.
By: (SEAL)
Name: Name:
Title: Title:
SUBORDINATED LIMITED PARTNER
WITNESS: REALTY ASSOCIATES 1988 LIMITED
PARTNERSHIP
By: RESIDUAL INVESTMENT ASSOCIATES,
A MARYLAND LIMITED
PARTNERSHIP, General Partner
By: A.B. RESIDUAL, INC., General Partner
By: (SEAL)
Name:
Title:
ASSIGNOR LIMITED PARTNER
ATTEST: PARKING PROPERTIES HOLDING CO., INC.
By:
Name: Name:
Title: Title:
A-37
