EXHIBIT 4
AGREEMENT OF LIMITED PARTNERSHIP
OF
WINDSOR PARK PROPERTIES 6,
A California Limited Partnership
LIMITED PARTNERSHIP AGREEMENT
Table of Contents
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I. FORMATION OF LIMITED PARTNERSHIP..................................................................... 1
1.01 FORMATION AND AGREEMENT OF LIMITED PARTNERSHIP..................................... 1
1.02 NAME AND PRINCIPAL PLACE OF BUSINESS............................................... 1
1.03 TERM OF PARTNERSHIP................................................................ 1
1.04 DEFINITIONS........................................................................ 1
1.05 PURPOSE OF PARTNERSHIP AND INVESTMENT OBJECTIVES................................... 3
1.06 GENERAL AND LIMITED PARTNERS....................................................... 3
(A) GENERAL PARTNERS................................................................... 3
(B) GENERAL PARTNERS CAPITAL CONTRIBUTION.............................................. 3
(C) GENERAL PARTNERS PURCHASE OF UNITS................................................. 3
(D) AUTHORIZED UNITS AND ORIGINAL AND ADDITIONAL LIMITED PARTNERS...................... 4
(E) ADMISSION OF ORIGINAL ADDITIONAL LIMITED PARTNERS.................................. 4
II. MANAGEMENT OF THE PARTNERSHIP....................................................................... 4
2.01 POWERS AND DUTIES OF THE GENERAL PARTNERS.......................................... 4
2.02 INDEMNIFICATION.................................................................... 5
2.03-1 POWERS AND DUTIES OF THE LIMITED PARTNERS.......................................... 6
2.03-2 ACTS NOT DEEMED "PARTICIPATION IN CONTROL"......................................... 6
2.03-3 THE RIGHTS AND DUTIES OF THE PARTNERS IN RELATIONSHIP TO THE PARTNERSHIP SHALL
BE DETERMINED BY THE FOLLOWING RULES............................................... 7
2.04 COMPENSATION OF GENERAL PARTNERS AND AFFILIATES.................................... 7
(1) PROPERTY MANAGEMENT FEE............................................................ 7
(2) AFFILIATE ACQUISITION FEES......................................................... 8
(3) MORTGAGE FINANCING FEE............................................................. 8
(4) LIMITATION......................................................................... 8
2.05 INVESTMENT IN PROPERTIES........................................................... 8
2.06 CERTAIN MORTGAGING................................................................. 9
2.07 REINVESTMENT....................................................................... 9
III. FINANCING OF THE PARTNERSHIP....................................................................... 9
3.01 CAPITAL CONTRIBUTIONS OF THE GENERAL PARTNERS...................................... 9
3.02 CAPITAL CONTRIBUTIONS OF THE LIMITED PARTNERS...................................... 9
(A) PARTNERSHIP UNITS.................................................................. 9
(B) INITIAL SUBSCRIPTIONS.............................................................. 9
3.03 ADDITIONAL CONTRIBUTIONS........................................................... 9
3.04 INTEREST........................................................................... 9
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LIMITED PARTNERSHIP AGREEMENT
TABLE OF CONTENTS
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3.05 TIME FOR RETURN OF CONTRIBUTIONS................................................... 9
3.06 LOANS BY THE PARTNERS.............................................................. 10
3.07 ALLOCATION OF NET PROFITS AND NET LOSSES AND DISTRIBUTIONS FROM CASH AVAILABLE
FOR DISTRIBUTION................................................................... 10
3.08. CONDITIONS AND CONSENT TO ALLOCATIONS AND DISTRIBUTIONS............................ 11
3.09 PARTNERSHIP EXPENSES............................................................... 12
IV. BOOKS OF ACCOUNT, FINANCIAL STATEMENTS AND FISCAL MATTERS........................................... 13
4.01 BOOKS OF ACCOUNT................................................................... 13
4.02 REPORTS AND FINANCIAL STATEMENTS................................................... 13
(A) ANNUAL REPORT...................................................................... 13
(B) REPORT OF FEES..................................................................... 14
(C) QUARTERLY REPORTS.................................................................. 14
(D) TAX INFORMATION.................................................................... 14
(E) SPECIAL REPORTS.................................................................... 14
(F) REPORTS DURING OFFERING............................................................ 14
(G) FILING OF REPORTS.................................................................. 14
4.03 TAX RETURNS AND RECORDS............................................................ 14
4.04 FISCAL YEAR........................................................................ 15
4.05 BANK ACCOUNTS, FUNDS AND ASSETS.................................................... 15
4.06 ADJUSTMENT OF TAX BASIS............................................................ 15
4.07 INSURANCE.......................................................................... 15
4.08 APPRAISALS......................................................................... 15
4.09 TAX MATTERS PARTNER................................................................ 16
V. ASSIGNABILITY OF LIMITED PARTNERS' INTERESTS......................................................... 16
5.01 LIMITED PARTNERS' INTEREST......................................................... 16
5.02 FURTHER RESTRICTION ON TRANSFERS................................................... 16
5.03 SUBSTITUTED PARTNERS............................................................... 16
5.04 ADDITIONAL RESTRICTIONS............................................................ 16
5.05 WITHDRAWAL OF LIMITED PARTNER...................................................... 16
5.06 DEATH OF LIMITED PARTNER........................................................... 17
5.07 RECOGNITION OF SUBSTITUTED AND ASSIGNEE LIMITED PARTNERS........................... 17
VI. REPURCHASE OF UNITS................................................................................. 17
VII. RIGHT OF LIMITED PARTNERS TO RECEIVE PROPERTY OTHER THAN CASH...................................... 17
VIII. TERMINATION OF A GENERAL PARTNER.................................................................. 17
8.01 CEASING TO BE A GENERAL PARTNER.................................................... 17
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LIMITED PARTNERSHIP AGREEMENT
TABLE OF CONTENTS
(continued)
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8.02 CONTINUATION OF BUSINESS OF REMAINING GENERAL PARTNER.............................. 18
8.03 REMOVAL OF A GENERAL PARTNER....................................................... 18
8.04 DISSOLUTION OF PARTNERSHIP AND CONTINUANCE OF PARTNERSHIP BUSINESS................. 18
8.05 PAYMENT TO TERMINATED GENERAL PARTNER.............................................. 18
8.06 TERMINATION OF EXECUTORY CONTRACTS................................................. 19
IX. DISTRIBUTION ON TERMINATION......................................................................... 19
9.01 EVENTS OF DISSOLUTION.............................................................. 19
9.02 GAIN AND LOSS ON DISSOLUTION AND ORDER OF DISTRIBUTION............................. 19
9.03 EMINENT DOMAIN..................................................................... 19
9.04 PERIOD OF LIQUIDATION.............................................................. 19
X. CERTIFICATES AND OTHER DOCUMENTS..................................................................... 20
10.01 GENERAL PARTNERS ATTORNEYS FOR LIMITED PARTNERS.................................... 20
10.02 MAKING, FILING, ETC. OF CERTIFICATES, ETC.......................................... 21
XI. NOTICES............................................................................................. 21
XII. CONVEYANCES, CONTRACTS AND DOCUMENTS............................................................... 21
XIII. DISPUTES AND ARBITRATION.......................................................................... 21
XIV. MEETINGS OF, OR ACTIONS BY, THE LIMITED PARTNERS................................................... 21
XV. CAPTIONS -- PRONOUNS................................................................................ 23
XVI. BINDING EFFECT AND EXHIBITS........................................................................ 24
XVII. AMENDMENT OF THE AGREEMENT........................................................................ 24
XVIII ENTIRE AGREEMENT.................................................................................. 24
XIX. TAX CONTROVERSIES.................................................................................. 24
XX. COUNTERPARTS AND EXECUTION.......................................................................... 25
XXI. INVESTMENT IN OTHER PROGRAMS OF SPONSOR............................................................ 25
XXII. PROCEEDS FROM FINANCING PROPERTIES................................................................ 25
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AGREEMENT OF LIMITED PARTNERSHIP
OF
WINDSOR PARK PROPERTIES 6,
A California Limited Partnership
This Agreement of Limited Partnership is made June 28, 1988, as amended, if
any amendments, to the date stated on the signature page, by and among The
Windsor Corporation, a California corporation (Corporate General Partner) and
Xxxx X. Xxxxx, Xx. (Individual General Partner), as General Partners and
Xxxxxxxx Xxx Xxxxx as the original Limited Partner.
The original Limited Partner and each other person, partnership,
corporation, trust or other entity who or which shall hereafter be admitted to
the Partnership as a limited partner as hereinafter provided, are referred to
collectively as the "Limited Partners" and individually as a "Limited Partner."
I.
FORMATION OF LIMITED PARTNERSHIP
1.01 Formation and Agreement of Limited Partnership. The parties hereby
form a limited partnership (the "Partnership") pursuant to the provisions of the
California Revised Limited Partnership Act as set forth in Title 2, Chapter 3,
of the California Corporations Code, upon the terms and conditions set forth
herein. On the execution of this Agreement (the "Agreement"), the parties will
execute, acknowledge and file a Certificate of Limited Partnership pursuant to
the provisions of Section 15,621 of the California Corporations Code.
1.02 Name and Principal Place of Business. The name of the Partnership is
Windsor Park Properties 6, a California Limited Partnership, and the office and
principal place of business shall be 000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxxxx 00000, and hereafter such other place or places as the General
Partners may from time to time determine.
1.03 Term of Partnership. The Partnership shall commence as of the date
of this Agreement (the "effective date") and shall continue for a period ending
the earlier of:
(a) Six months after the commencement of its public offering
registered with the Securities and Exchange Commission, provided that on
said date the Partnership has not received a minimum of $1,250,000 of
capital contributions from Limited Partners
(b) December 31, 1999;
(c) The date on which all of the assets acquired by the Partnership
are sold or otherwise disposed of;
(d) The date on which the Partnership is voluntarily dissolved by
the agreement of the Partners;
(e) The date on which the Partnership is dissolved by operation of
law or judicial decree; or
(f) The date on which the last remaining original General Partner
retires, dies, becomes legally incapacitated, dissolves, withdraws, is
adjudicated bankrupt or is removed, unless a majority in interest of the
Limited Partners by written consent or vote elect one or more new General
Partners to continue the Partnership business.
1.04 Definitions. The following terms used in this Agreement shall
(unless otherwise expressly provided herein or unless the context otherwise
requires) have the following respective meanings:
(a-1) "Acquisition Fees" shall mean the total of all fees and
commissions paid by any party, including any sponsor, in connection with
the purchase of any property by the Partnership, whether designated as a
real estate commission, acquisition fee, nonrecurring management fee or any
fee of a similar nature, and including the fee described in (a-2) next.
(a-2) "Affiliate Acquisition Fees" mean the acquisition fee paid to
the General Partners for their services in connection with the evaluation
of potential acquisitions by the partnership and in connection with the
acquisition of properties. This fee shall not exceed 7% of the public
offering proceeds.
(b) "Affiliate" shall include (i) any person directly or indirectly
controlling, controlled by or under common control with another person,
(ii) a person owning or controlling 10% or more of the outstanding voting
securities of such other persons, (iii) any officer, director, partner,
general trustee or anyone acting in a substantially similar capacity as to
such person, and (iv) any person who is an officer, director, general
partner, trustee, or holder of 10% or more of the voting securities or
beneficial interests of any of the foregoing.
(c) "Appraised Value" means value according to an appraisal made by
an independent appraiser who is a member in good standing of a professional
appraisal association.
(d) "Cash Available For Distribution" means the cash funds provided
from Partnership operations, including lease payments on net leases from
builders and sellers, without deduction for depreciation, but after
deducting cash funds used to pay all other expenses, debt payments, capital
improvements, amounts set aside for restoration or creation of reserves,
and replacements.
(e) "Capital Contributions" means the total investment and
contribution to the capital of the Partnership in cash by Limited or
General Partners without deduction of selling, organization or other
expenses.
(f) "Distributions" shall mean any cash or other property
distributed to the Limited and General Partners arising from their
interests in the Partnership, but shall not include any payments to the
General Partners under the provisions of Section 2.04.
(g) "Expenses of Acquisition" includes, but is not limited to, legal
fees and expenses, travel and communication expense, 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.
(h) "Invested Capital" means General or Limited Partner's original
capital contribution.
(i) "Net Profits and Net Losses" means the profits or losses of the
Partnership in accordance with accounting method followed for federal
income tax purposes.
(j) "Person" means any natural person, partnership, corporation,
association or other legal entity.
(k) "Purchase Price" means the price paid upon the purchase or sale
of a particular property, including the amount of acquisition fees and all
liens and mortgages on the property, but excluding points and prepaid
interest.
(l) "Sponsor" shall mean any person directly or indirectly
instrumental in organizing, wholly or in part, the Partnership, or any
person who will manage or participate in the management of the Partnership,
including the General Partners and any affiliate of such person, excluding
any person whose only relation with the Partnership is that of independent
property manager and whose only compensation is as such. Sponsor shall not
include wholly independent third parties such as attorneys, accountants,
and underwriters whose only compensation is for professional services
rendered in connection with the offering of Partnership interest.
(m) "Units" shall mean the partnership interests of the Limited and
General Partners, and each unit shall represent a capital contribution of
$100 to the Partnership and entitle the holder thereof to the rights and
interests of Limited or General Partners as herein provided.
(n) "Adjusted Invested Capital" means the original capital
contribution paid for each Unit reduced by the total cash distributed from
net proceeds from refinancing and net proceeds from the sale of Properties
with respect to each Unit.
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(o) "Organization and Offering Expenses" means those expenses
incurred in connection with and in preparing the Partnership for
registration and subsequently offering and distributing the offering to the
public, including sales commissions paid to broker-dealers in connection
with the distribution of the Partnership's units and all advertising
expenses.
(p) "Competitive Real Estate Commission" means that real estate or
brokerage commission paid for the purchase or sale of property which is
reasonable, customary and competitive in light of the size, type and
location of the property.
1.05 Purpose of Partnership and Investment Objectives. (a) The principal
purpose of the Partnership is to acquire, own, operate, improve, lease and
otherwise manage for investment purposes, either alone or in association with
others, a portfolio of improved, income-producing mobile home properties as
shall from time to time be acquired by the Partnership and which offers the
potential for (i) preserving and protecting the Limited Partners' original
invested capital; (ii) generating an annual cash flow for distribution to the
partners; and (iii) to engage in any and all general business activities related
to and incidental to those purposes; provided however that the Partnership shall
not own or lease property jointly in partnership with others unless (a) such
partner or joint owner is an independent third person who is not a sponsor, (b)
the management of such partnership or joint ownership is under control of the
Partnership which has a majority interest therein, (c) the Partnership, as a
result of such joint ownership or partnership ownership of an investment
property, is not charged, directly or indirectly, more than once for the same
services, (d) the joint ownership or partnership does not authorize or require
the Partnership to do anything as a partner or joint venturer with respect to
the property which the Partnership or the General Partners could not do directly
because of this Agreement: and (e) the General Partners and their affiliates are
prohibited from receiving any compensation, fee or expenses which are not
permitted to be paid by this Agreement. See, however, Article XXI for joint
investment with affiliates.
(b) Until invested in properties (except for reserves), the Partnership
may temporarily invest all or a part of its capital contributions in short-term,
highly liquid investments with appropriate safety of principal, such as U.S.
Treasury Bonds or Bills, insured savings accounts, or similar investments.
(c) All properties, except those acquired after January 1, 1995, are to be
acquired free and clear of any encumbrances. Properties may later be financed.
See Article XXII. Unimproved or non income producing property will not be
acquired. Investment in junior trust deeds or similar obligations shall be
prohibited.
(d) In the event the General Partners or an Affiliate of the General
Partners are presented with a potential investment which might be made by more
than one investment entity which it advises or manages, the decision as to the
suitability of the property for investment by a particular entity will be based
upon a review of the investment portfolio of each entity and upon factors such
as cash flow, the effect of the acquisition on diversification of each entity's
portfolio, the estimated income tax effects of the purchase on each entity, the
policies of each entity relating to leverage, the funds of each entity available
for investment and the length of time such funds have been available for
investment. To the extent that a particular property might be determined to be
suitable for more than one public entity, priority will generally be given to
the public entity having uninvested funds for the longest period of time. If a
property is found to be inappropriate for any public entity then. and only then,
may it be considered for private placement. Nothing herein shall be deemed to
diminish the General Partners' overriding fiduciary obligation to the
Partnership or as a waiver of any right or remedy the Partnership or Limited
Partners may have in the event of a breach by a General Partner of such
obligation.
1.06 General and Limited Partners.
(a) General Partners. The address of the General Partners is as follows:
000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxx 00000. The General Partners'
interest in net profits, net losses and distributions shall be allocated between
them (so long as they act as General Partners) as they determine.
(b) General Partners Capital Contribution. The General Partners may, but
(except as provided in Section 3.07.7) are not required to, contribute to the
capital of the Partnership.
(c) General Partners Purchase of Units. The General Partners may purchase
limited partnership units for investment and not with a view to distribution.
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(d) Authorized Units and Original and Additional Limited Partners.
Xxxxxxxx Xxx Xxxxx, the original Limited Partner, has contributed the sum of
$1,000 cash to the capital of the Partnership and has received 10 units for such
contribution. The Partnership intends to make a public offering of 300,000 units
of limited partnership interests ("Units") and to admit as additional Limited
Partners the persons whose subscriptions for such Units are accepted by the
General Partners. The names and places of residence of such Limited Partners
will be set forth in the Subscription Agreements and Signature Pages attached
hereto. The General Partners may admit an unlimited number of additional Limited
Partners who subscribe from time to time for Units upon such terms and
conditions and in such amount as the General Partners in their sole discretion
shall deem reasonable. No action or consent by Limited Partners shall be
required in connection with such admission of additional Limited Partners
pursuant to this Section 1.06. This Agreement shall be executed by the General
Partners, and an amendment of any Certificate of Limited Partnership, reflecting
such admissions, shall be executed by the General Partners and filed, if and
when and in such jurisdictions as may be required or appropriate. The offering
period of program interests shall cease not later than one year from the date of
the partnership's registration statement as filed with the Securities and
Exchange Commission.
(e) Admission of Original Additional Limited Partners. Upon the original
sale of Partnership units by the Partnership, the purchasers will be admitted as
Limited Partners not later than fifteen (15) days after the release from impound
of the purchaser's funds to the Partnership. and thereafter purchasers will be
admitted into the Partnership not later than the last day of the calendar month
following the date their subscriptions are accepted by the Partnership.
Subscriptions shall be accepted or rejected by the Partnership within thirty
(30) days of their receipt: if rejected all funds will be returned to the
subscriber within ten (10) business days.
II.
MANAGEMENT OF THE PARTNERSHIP
2.01 Powers and Duties of the General Partners. (a) The General Partners
shall have full and complete charge of all affairs of the Partnership. and the
management and control of the Partnership's business shall rest exclusively with
the General Partners, subject to the terms and conditions of this Agreement. The
General Partners shall have a fiduciary responsibility for the safekeeping and
use of all funds and assets of the Partnership, whether or not in the General
Partners' immediate possession or control. The General Partners shall not
employ or permit another to employ such funds or assets in any manner except for
the exclusive benefit of the Partnership. The General Partners shall have the
rights, powers and authority granted to the General Partners hereunder or by
Law, or both, to obligate and bind the Partnership and, on behalf and in the
name of the Partnership, to take such action as the General Partners deem
necessary or advisable including, without limitation, making, executing and
delivering purchase and sale, management and other agreements; leases,
assignments, deeds and other transfers and conveyances; agreements to purchase,
sell, lease or otherwise deal with personal property; escrow instructions;
checks, drafts and other negotiable instruments; and all other documents and
agreements which the General Partners deem reasonable or necessary in connection
with the purchase of the Partnership's properties and the operation and
management thereof. The execution and delivery of any such instrument by the
General Partners shall be sufficient to bind the Partnership. The Limited
Partners cannot contract away the fiduciary duty owed by the General Partners
and the Partnership to Limited Partners under common law.
(b) The General Partners or their affiliates may acquire Units from time
to time on their own behalf and for their own benefit. Such units will be held
by them for investment and not with a view to distribution.
(c) The General Partners or their affiliates may from time to time employ
on behalf of the Partnership such persons, firms or corporations as they in
their sole judgment shall deem advisable in the operation of the business of the
Partnership, including accountants and attorneys, on such terms and for such
compensation as they, in their sole judgment shall determine, provided, however,
that the Partnership shall not: (1) make any loans to any sponsor or affiliate;
(2) grant an exclusive right to sell or exclusive employment to sell property
for the Partnership to a sponsor; (3) offer Limited Partnership interests in
exchange for property; (4) employ a sponsor to constrict or develop Partnership
property; (5) after two years after the public offering terminates, invest any
surplus funds; (6) purchase limited partnership interests in other partnerships;
and (7) incur any indebtedness or place any loans or encumbrances against
Partnership properties (except as provided in Article XXII).
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(d) The Partnership shall not purchase or lease property in which a
sponsor or affiliate has an interest. The Partnership shall not acquire property
from any person in whom a sponsor or affiliate has an interest. Notwithstanding
the foregoing, a sponsor or affiliate may purchase property in its own name and
temporarily hold title thereto for the purpose of facilitating the acquisition
of such property, or any other purpose related to the business of the
Partnership, provided that such property is purchased by the Partnership for a
price no greater than the cost of such property to the sponsor or affiliate and
provided there is no difference in interest rates of the loans secured by the
property at the time acquired by the sponsor or affiliate and the time acquired
by the program, and no other benefit is provided to the sponsor or affiliate
arising out of such transaction apart from compensation otherwise permitted by
this Agreement. The Partnership shall not sell or lease property to a sponsor or
affiliate, or receive any loans from any sponsor or affiliate. See, however,
Article XXI for joint investment with affiliates.
(e) Sponsors shall not receive a rebate, give-up or similar payment or
enter into any reciprocal business arrangement which would circumvent any
provisions contained in this Agreement.
(f) No sponsor shall: (1) commingle the Partnership funds with those of
any other person or entity; (2) operate the Partnership in such a manner as to
have the Partnership classified as an "investment company" for purposes of the
Investment Company Act of 1940; (3) cause the Partnership to enter into any
agreements with the General Partner or their affiliates which shall not be
subject to termination without penalty by either party upon not more than sixty
(60) days' written notice.
(g) Neither the Partnership nor any sponsor shall, directly or indirectly,
pay or award any finder's fees, commissions or other compensation to any person
engaged by a potential investor for investment advice as an inducement to such
advisor to advise the potential investor to purchase Limited Partnership
interests of the Partnership, provided, however, that the Partnership shall not
be prohibited from paying the normal sales commissions payable to registered
broker dealers or other properly licensed persons for selling Units.
(h) The General Partners may place record title to, or the right to use,
Partnership assets in, the name or names of a nominee or nominees, trustee or
trustees for any purpose convenient or beneficial to the Partnership.
(i) The Partnership shall provide from the offering proceeds adequate
reserves, of at least 1.5% of offering proceeds, for normal repair, replacements
and contingencies.
2.02 Indemnification.
(a) The General Partners and their affiliates shall have no liability to
the Partnership or to any Partner for any loss suffered by the Partnership which
arises out of any action or inaction of the General Partners or their affiliates
if the General Partners, in good faith, determined that such course of conduct
was in the best interests of the Partnership and such course of conduct did not
constitute negligence or misconduct of the General Partners and their
affiliates.
(b) The General Partners and their affiliates shall be indemnified by the
Partnership against any losses, judgments, liabilities, expenses, and amounts
paid in settlement of any claims sustained by them in connection with the
Partnership, provided that the same were not the result of negligence or
misconduct on the part of the General Partners or their affiliates, and provided
the General Partners, in good faith, determined that such course of action was
in the best interests of the Partnership.
(c) Notwithstanding the above, the General Partners and their affiliates
shall not be indemnified for liabilities arising under federal and state
securities laws unless (1) there has been a successful adjudication on the
merits of each count involving securities law violations, or (2) such claims
have been dismissed with prejudice on the merits by a court of competent
jurisdiction, and provided that a court either (A) approves any settlement and
finds that indemnification of the settlement and related costs should be made,
or (B) approves indemnification of litigation costs if a successful defense is
made and, in this regard, a dismissal with prejudice on the merits is considered
a successful defense.
(d) The Partnership shall not pay for any insurance covering liability of
a General Partner or its affiliates, agents or employees for actions or
omissions to act for which indemnification is not permitted hereunder. The
Partnership may purchase and pay for such types of insurance, including extended
coverage liability and casualty and workmen's compensation, as would be
customary for any person owning comparable property and engaged in a
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similar business and may name the General Partners and their affiliates as
additional insured parties thereunder, provided that such addition does not add
to the cost of premiums payable by the Partnership.
(e) The Partnership shall not indemnify any underwriters, including any
person acting as a broker-dealer, for liabilities under federal and state
securities laws.
(f) Any recovery by the General Partners hereunder is recoverable only out
of assets of the Partnership and not from the Limited Partners.
(g) The Partnership and the General Partners undertake that any and all
parties seeking indemnification will apprise the court of the position of the
Securities and Exchange Commission and state securities commissions/authorities
(including Massachusetts) with respect to indemnification for securities laws
violations before seeking court approval for indemnification.
(h) For the purposes of this section 2.02, the term "affiliates" shall
mean any person performing services on behalf of the Partnership who: (1)
directly or indirectly controls, is controlled by or is under common control
with the General Partners; or (2) owns or controls 10% or more of the
outstanding voting securities of the General Partner; or (3) is an officer,
director, partner or trustee of the General Partner; or (4) if the General
Partner is an officer, director, partner or trustee, is any company for which
the General Partner acts in any such capacity.
(i) For the purposes of this section 2.02. "affiliates" must be performing
services on behalf of the Partnership and acting within the scope of the General
Partners' authority.
(j) For the purposes of this section 2.02, the General Partners must be
acting on behalf of or performing services for the Partnership.
2.03-1 Powers and Duties of the Limited Partners. The Limited Partners
shall not participate in the control of the business affairs of the Partnership,
transact any business on behalf of the Partnership. or have any power or
authority to bind or obligate the Partnership.
2.03-2 Acts Not Deemed "Participation in Control". A Limited Partner does
not participate in the control of the business within the meaning of Section
2.03-1 solely by doing one or more of the following:
(1) Being a contractor for or an agent or employee of the Partnership or of
a General Partner, or an officer, director, or shareholder of the Corporate
General Partner.
(2) Consulting with and advising a General Partner with respect to the
business of the Partnership.
(3) Acting as surety for the Partnership or guaranteeing one or more
specific debts of the Partnership.
(4) Approving or disapproving an amendment to the Partnership Agreement.
(5) Voting on or calling a meeting of the partners for one or more of the
following matters:
(A) The dissolution and winding up of the Partnership.
(B) The sale, exchange, lease, mortgage, pledge, or other transfer of
all or a substantial part of the assets of the Partnership other than in
the ordinary course of its business.
(C) The incurrence of indebtedness by the Partnership other than in the
ordinary course of its business.
(D) A change in the nature of the business.
(E) Transactions in which the General Partners have an actual or
potential conflict of interest with the Limited Partners or the
Partnership.
(F) The removal of a General Partner, and the election of a General
Partner.
(G) An election to continue the business of the Partnership other than
under the circumstances described in subparagraph (I) or (J) of this
paragraph (5).
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(H) The admission of a General Partner other than under the
circumstances described in subparagraph (I) or (J) of this paragraph (5).
(I) The admission of a General Partner or an election to continue the
business of the Partnership after a General Partner ceases to be a General
Partner other then by removal where there is no remaining or surviving
General Partner.
(J) The admission of a General Partner or an election to continue the
business of the limited partnership after the removal of a General Partner
where there is no remaining or surviving General Partner.
(6) Winding up the partnership pursuant to Section 15683 of the California
Corporations Code.
(7) Executing and filing a certificate pursuant to Section 15633 of the
California Corporations Code or a certificate of amendment pursuant to Section
15625 of the California Corporations Code or a certificate of dissolution
pursuant to paragraph (1) of subdivision (a) of Section 15623 of the California
Corporations Code or a certificate of cancellation of certificate of limited
partnership pursuant to paragraph (1) of subdivision (b) of Section 15623 of the
California Corporations Code.
(8) Serving on an audit committee or committee performing the functions of
an audit committee.
The enumeration in this Section 2.03-2 does not mean that any other conduct
or the possession or exercise of any other power by a Limited Partner
constitutes participation by the Limited Partner in the control of the business
of the Partnership.
2.03-3 The Rights and Duties of the Partners in Relationship to the
Partnership Shall Be Determined by the Following Rules: (a) No Limited Partner
shall be required to make any additional contribution to the Partnership.
(b) No Limited Partner shall have a priority over any other Limited
Partner, as to return of contributions or as to compensation as a Limited
Partner by way of income.
(c) The obligation of a partner to make a contribution or return money or
property distributed in violation of this chapter may be compromised only by the
written consent of all the partners.
(d) No Limited Partner shall have the right to receive property other than
money upon any distribution.
(e) A partner may not be compelled to accept a distribution of any asset in
kind from the Partnership in lieu of a proportionate distribution of money being
made to other partners.
(f) The Limited Partners shall have the right to vote on all matters
specified in paragraph (4) and in subparagraphs (A) to (H) and (J), inclusive,
of paragraph (5) of Section 2.03-2 and the actions specified therein may be
taken by the General Partners only with the affirmative vote of a majority in
interest of the Limited Partners, and without the necessity of the consent of
the General Partners.
(g) The Limited Partners shall also have the right to vote on matters
specified in subparagraphs (H) and (I) of paragraph (5) of Section 2.03-2.
Notwithstanding any other provision of the Partnership Agreement to the
contrary, the actions specified in such subparagraphs may only be taken by the
affirmative vote of a majority in interest of the limited partners.
2.04 Compensation of General Partners and Affiliates.
(a) The General Partners and/or their affiliates, or any sponsor shall be
entitled to receive, as an expense of the Partnership, each and all of the
following amounts:
(1) Property Management Fee. For providing property management
services (including all rent-up, leasing and re-leasing fees and bonuses,
and leasing services paid to any person, and including bookkeeping services
for property management and fees paid to unrelated persons for property
management services) actually rendered, the General Partners or affiliate
will be paid a fee of 5% of actual gross receipts collected and received
from all sources; but said property management fees shall not exceed
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in any event an amount which is competitive in price and terms with other
non-affiliated persons rendering comparable services which would reasonably
be made available to the Partnership. "Property Management" means the day-
to-day professional management services in connection with the
Partnership's properties. Property management fees paid by anyone to anyone
may not exceed the lesser of (i) the competitive rate, or (ii) 5% of actual
gross receipts collected and received from all sources. On site personnel
for maintenance, etc., will be paid by the Partnership. Property management
services must be rendered pursuant to a written agreement which precisely
describes the services to be rendered. Such agreement may only be modified
by a majority in interest of limited partners, and may be terminated by
majority vote or consent of the limited partners following sixty days prior
notice thereof by the limited partners.
(2) Affiliate Acquisition Fees. The General Partners may be paid an
Affiliate Acquisition Fee as defined and in the amount stated in Section
l.04(a-2), and as such services are substantially rendered by the General
Partners. Acquisition Fees paid (including, but not limited to, Affiliate
Acquisition Fees paid to the General Partners and any commissions to non-
affiliated brokers) shall not exceed the lesser of the compensation
customarily charged in arms-length transactions by others rendering similar
services as an ongoing public activity in the same geographical location
and for comparable property, or an amount equal to 7% of the initial
capital contributions (less any uninvested funds returned to Limited
Partners pursuant to Section 3.05 relating to funds not invested within two
years) of Limited Partners applicable to the property which is the subject
of the transaction (adjusted to include a pro-rata amount of any selling
expenses). Notwithstanding any other provisions in this agreement, the
General Partners may not be reimbursed for their travel, communication, and
miscellaneous expenses in connection with the rendering of acquisition
services.
(3) Mortgage Financing Fee. At such time as the Partnership's
properties are financed (mortgaged), see Article XXII, the General Partners
shall be paid a mortgage financing fee equal to 1% of the gross financing
proceeds for their services performed in obtaining such financing. The
mortgage financing services to be rendered by the General Partners must
meet the conditions specified in Section 3.09(b). The General Partners
must be previously engaged in the business of rendering such services to
unaffiliated persons independently of the Partnership and as an ordinary
and ongoing business.
(4) Limitation. No sponsor shall render any service to the
Partnership nor receive any fee or other compensation from the Partnership
other than those explicitly provided in this Section 2.04, except for
amounts otherwise permitted pursuant to Sections 3.07, and 3.09 hereof.
(b) Sales commission may be paid to the General Partners upon the sale of
partnership properties; provided, however, that General Partners may receive a
portion of the commission only if the General Partners provide a substantial
amount of the services in the sales effort. Any such compensation payable to the
General Partners shall not exceed, on sale of each property, 3% of the gross
sales price or 50% of the standard real estate brokerage commission, whichever
is lesser. The total real estate brokerage commission paid on resale of each of
the Partnership's properties shall be limited to a competitive real estate
commission, not to exceed 6% of the contract price for the sale of the property.
No such commission shall be paid, however, to the General Partners until each
Limited Partner has received an amount equal to his original invested capital
from the proceeds from the sale or refinancing of properties and cumulative
distributions (including distributed cash from operations and financing) equal
to a 9% cumulative, non-compounded, annual return, commencing at the time each
Limited Partner is admitted to the Partnership, with respect to his adjusted
invested capital.
2.05 Investment in Properties. This section is subject to section
2.04(a)(2).
(a) The General Partners will commit at least 80% of the Partnership's
capital contributions toward Investment in Properties. The remaining capital
contributions may be used to pay Front-End Fees. When "Acquisition Fees" are
paid by the seller of properties, such fees shall not be included in satisfying
the required minimum Investment in Properties. Additionally, in determining the
amount committed to Investment in Properties, such calculation shall not take
into account any Front-End Fees.
(b) The following definitions apply to this section:
8
(1) Front-End Fees -- fees and expenses paid by any party for any
services rendered during the Partnership's organizational or acquisition
phase including Organization and Offering Expenses, Acquisition Fees,
Expenses of Acquisition (as those terms are defined in Section 1.04), and
any other similar fees (including the mortgage financing fee, Section
2.04(a)(3)), however designated by the General Partners.
(2) Investment in Properties -- the amount of capital contributions
actually paid or allocated to the purchase, development, construction or
improvement of properties acquired by the Partnership (including the
purchase of properties, working capital reserves allocable thereto (except
that working capital reserves in excess of 5% shall not be included), and
reserves for unit repurchase and other cash payments such as interest and
taxes but excluding Front-End Fees).
2.06 Certain Mortgaging. The partnership will not obtain financing,
including wrap-around deeds of trust, containing a balloon payment which does
not contain the following provisions, unless prior approval of the California
Department of Corporations has been attained: All mortgage financing obtained by
the program or retained upon acquired properties must be fully amortized in
equal payment over not more than 30 years. All financing (including financing to
which properties were subject when purchased by the partnership) including all-
inclusive and wrap-around loans and interest-only loans must provide that no
balloon payment will become due sooner than the earlier of: (1) ten years from
the date the program acquired the property, (2) or two years beyond the
anticipated holding period of the property, but in no event sooner than seven
years from the date the program acquires the property. The foregoing balloon
payment limitation does not apply to financing representing, in the aggregate,
25% or less of the total purchase price of the properties acquired, or to
interim financing, including construction financing, with a full take out
commitment.
2.07 Reinvestment. There shall be no reinvestment of cash flow, cash
available for distribution or proceeds from sale or refinancing of property.
III.
FINANCING OF THE PARTNERSHIP
3.01 Capital Contributions of the General Partners. The General Partners
shall contribute capital to the Partnership in their capacity as General
Partners as provided in Section 1.06(b), and may purchase units as Limited
Partners as provided in Section 1.06(c).
3.02 Capital Contributions of the Limited Partners.
(a) Partnership Units. The Limited Partners shall contribute to the
capital of the Partnership, for each Unit subscribed, cash in the amount
determined by the General Partners; provided, however, that all Units subscribed
for as part of the initial public offering of such Units, as contemplated by
Section 1.06(d), shall be paid for in cash in an amount equal to One Hundred
Dollars ($100) for each Unit subscribed.
(b) Initial Subscriptions. All funds of initial subscribers will be placed
in a separate interest-bearing account in a bank or savings and loan association
or invested in short term highly liquid investments as provided in Section 1.05,
and if not more than $1,250,000 is subscribed and contributed on or before six
months after the public offering commences, the Partnership will not accept any
subscription and each subscriber will promptly receive his or her original
investment together with interest actually earned thereon.
3.03 Additional Contributions. In no event shall any Limited Partner be
required to make any additional contributions to the capital of the Partnership
in excess of those set forth in Section 3.02 hereof.
3.04 Interest. No interest shall be paid on the initial or any subsequent
capital contribution to the Partnership.
3.05 Time for Return of Contributions. None of the Partners, either
General or Limited, shall be entitled to a return of the capital contribution
made by any of them until the full and complete winding up and liquidation of
the business and affairs of the Partnership, except as may be permitted pursuant
to Article VI hereof; provided, however, that those portions of the proceeds of
a public offering of Units which have not been invested or
9
committed for investment (evidenced by executed written agreement in principle
or letters of understanding) in properties within two (2) years of the effective
date of the registration of the Units in such offering shall be distributed to
the Limited Partners of record together with any undistributed interest earned
by the Partnership on such funds, and the General Partners will return to
Limited Partners a proportionate share of Partnership Organization and Offering
Expenses (other than selling commissions paid to independent broker dealers)
along with the uninvested proceeds of the offering.
3.06 Loans by the Partners. Neither the General Partners nor the Limited
Partners shall make any loans to the Partnership. No loans or any other
financing may be made by or obtained from any General Partner or other sponsor
of the Partnership.
3.07 Allocation of Net Profits and Net Losses and Distributions From
Cash Available For Distribution.
3.07.1 Net Profits and Net Losses of the Partnership for each fiscal year
of the Partnership shall be allocated 99% to the Limited Partners and 1% to the
General Partner. Net Profits and Net Losses to be allocated to the Limited
Partners will be allocated to Limited Partners based on the number of Units held
by each Limited Partner and the period during the fiscal year that the Limited
Partner owned the Units. Upon the transfer of a Partnership Unit, the transferor
and the transferee shall be allocated a pro rata share of Net Profits and Net
Losses based on the portion of the fiscal year that the transferred Unit was
effectively held by the transferor and transferee, respectively.
3.07.2 Cash Available for Distribution, if any, shall be determined for
each month (or quarter) and, within 30 days after the close of each month (or
quarter), shall be distributed 99% to the Limited Partners pro rata in
accordance with their respective ownership of Units and 1% to the General
Partner. Cash Available for Distribution shall be distributed to the persons who
are Unit holders of record as of the last day of the month (or quarter) for
which such distribution is made. Limited Partners may individually opt for
quarterly distributions.
3.07.3 Net proceeds from refinancing and net proceeds from the sale of
properties. to the extent available for distribution after the establishment of
any reserves that the General Partners may deem reasonably necessary for any
contingent or future liabilities of the Partnership or after the payment in the
discretion of the General Partners of any debts and liabilities of the
Partnership, and subject to the provisions of Section 2.04(b), shall be
distributed among the Partners in the following amounts and order of priority:
(a) To the Limited Partners, an amount equal to the sum of:
(i) The Adjusted Invested Capital attributable to each
Limited Partner; and
(ii) The excess, if any, of an amount equal to 9% per annum
cumulative (but not compounded) return on Adjusted Invested
Capital, calculated from each Limited Partner's respective date of
admission to the Partnership, over total prior distributions of
Cash Available For Distribution with respect to the Units.
(b) To the extent of any balance remaining, 85% to the Limited
Partners to be shared on a pro rata basis in accordance with their
respective ownership of Units and 15% to the General Partners.
Provided, however, that notwithstanding the provisions of this Section 3.07 to
the contrary, the General Partners shall receive at least 1% of the
distributions of net proceeds from refinancing or net proceeds from the sale of
properties.
3.07.4 Except as otherwise provided by this Agreement, profit or loss on
the sale of properties shall be allocated to and among the Partners as follows:
(a) Profit on the sale of properties shall first be allocated to
each Partner with a negative Capital Account proratably in an amount equal
to (or in proportion to if less than) the amount of the negative Capital
Account of each Partner;
(b) Profit on the sale of properties shall next be allocated to the
Limited Partners until each Limited Partner's Capital Account shall be a
positive amount equal to the sum of:
10
(i) The Adjusted Invested Capital attributable to each
Limited Partner; and
(ii) The excess, if any, of an amount equal to 9% per annum
cumulative (but not compounded) return on Adjusted Invested Capital,
calculated from each Limited Partner's respective date of admission to
the Partnership, over total prior distributions of Cash Available For
Distribution with respect to the Units.
(c) To the extent of any remaining profit on the sale of properties,
85% to the Limited Partners to be shared on a pro rata basis in accordance
with their respective ownership of Units and 15% to the General Partners;
(d) To the extent that there is a loss on the sale of properties
arising from a transaction, such loss on the sale of properties shall be
allocated among the Partners with positive balances in their Capita
Accounts pro rata in accordance with their respective positive balances
until the aggregate positive balance of their Capital Accounts is reduced
to zero, and any balance shall be allocated in accordance with the
allocation of Net Profits and Net Loss pursuant to Section 3.07(1) hereof;
(e) The provisions of this Section 3.07.4 notwithstanding, the General
Partner shall be allocated at least 1% of the profit or loss on the sale of
properties, and, to the extent possible, in characterizing the allocated
profit on the sale of properties, that portion which constitutes ordinary
income by reason of recapture of depreciation, if any, shall be allocated
among the Partners such that a Partner (or successor) who realized the
benefit of the deduction or credit will bear the tax burden of the
corresponding recapture.
3.07.5 A Capital Account shall be maintained by the Partnership on behalf
of each Partner. The Capital Account of each Partner shall be credited with the
amount of such Partner's capital contribution as such is contributed. The
Capital Account of each Partner shall be credited with the amount of Net Profit
and profit on the sale of properties of the Partnership allocated to such
Partner and shall be debited with the amount of Net Losses and loss on the sale
of properties allocated to such Partner and with the amount of any distributions
or return of capital made by the Partnership to such Partner.
3.07.6 The Capital Account of a Partner shall also be credited or debited,
as the case may be, with items of income, expense, or other adjustments which do
not enter into the calculation of Net Profits or Net Losses. The Capital Account
of a transferor Partner shall become the Capital Account of the transferee
Partner as it existed at the effective date of the transfer. Any special basis
adjustment resulting from a Internal Revenue Code Section 754 election shall not
be taken into account for purposes of establishing and maintaining Capital
Accounts pursuant to the terms of this Section 3.07.6.
3.07.7 If upon the liquidation of the Partnership, there is a deficit
balance in the Capital Account of the General Partner, after making the
allocations provided in this Agreement, then the General Partner will contribute
an amount equal to such deficit balance in its Capital Account, provided that in
no event shall the General Partner be required to contribute to the Partnership,
as its pro rata share, more than 1% of the total capital contributed by the
Partners plus four-fifths of the Cash Available For Distribution received by the
General Partner pursuant this Agreement.
3.07.8 The provisions of this Agreement notwithstanding, the General
Partners will receive at least 1% of the distributions of net proceeds from the
sale of properties and, at such time as the Partnership is to be liquidated
hereunder, such adjustments, if any, as are appropriate to properly reflect such
minimum distribution shall be made with respect to the allocation of profit or
loss on the sale of properties pursuant to Section 3.07.4 and with respect to
the Capital Accounts of the Partners. Provided, further, that any deduction
which might accrue to the Partnership and which is attributable to said 1%
minimum distribution requirement shall be specially allocated to the General
Partners.
3.07.9 The General Partners shall also distribute, after the completion of
each calendar year, such amount of cash from sales or financing sufficient to
allow a Limited Partner in a 36% federal tax bracket to pay the income taxes due
with respect to net income derived by him from the disposition or financing of
Partnership properties.
3.08. Conditions and Consent to Allocations and Distributions. The
methods, hereinabove set forth, by which Net Profits and Net Losses are
allocated and by which Distributions of Cash Available For Distribution
11
and surplus funds are allocated and distributed, are hereby expressly consented
to by each General and Limited Partner as an express condition to becoming a
General or Limited Partner. All Distributions of Cash Available For Distribution
and surplus funds are subject to the payment of Partnership expenses and to the
maintenance of reasonable working capital reserves deemed sufficient for
Partnership business by the General Partners.
3.09 Partnership Expenses. (a) Reimbursement to the General Partners or
their affiliates may be made for the actual cost to the General Partners or
their affiliates of goods and materials provided by unaffiliated parties and
used for or by the Partnership. The General Partners will pay (and shall not be
reimbursed by the Partnership for): (i) salaries and other compensation of their
affiliates and their officers, directors and employees incidental to the
organization of the Partnership, the sale of Units and the acquisition of
Partnership properties; (ii) expenses incurred by the General Partners or their
affiliates in connection with the administration of the Partnership, including
the overhead expenses (including rent, utilities, capital equipment, other
administrative items, etc.) of the General Partners or their affiliates; (iii)
expenses related to the performance of those services for which the General
Partners or their affiliates are entitled to compensation (and the General
Partners shall not be reimbursed therefore except as provided in subsection (b)
next following).
(b) (1) The General Partners may be reimbursed for administrative services
necessary to the prudent operation of the Partnership. Such services include
transfer agent, legal, accounting, partner relations and similar services.
(2) The services will be provided at a price which does not exceed the
lesser of actual cost of such services to the General Partners or 90% of the
competitive price which would be charged by non-affiliated persons rendering
similar services in the same or comparable geographic location. Cost of services
as used herein means the pro rata cost of personnel, based on the amount of time
such personnel spent on such services, or other method of allocation acceptable
to the Partnership's independent certified public accountant.
(3) This section 3.09(b) and any contract entered into pursuant hereto may
be modified only with a vote of a majority of the limited partnership interests.
This provision and any such contract may be terminated without penalty on 60
days' notice.
(4) The General Partners represent that they have adequate staff which they
utilize in the conduct of their business and are able to render such services to
the Partnership. The General Partners have been previously and are now rendering
such services to other programs as an ordinary and ongoing business.
(5) Any general or administrative overhead incurred by the General Partners
in connection with the administration of the Partnership which is not directly
attributable to the rendering of services authorized by this section 3.09(b)
shall not be charged to the Partnership. Such general or administrative overhead
includes but is not limited to salaries, rent, travel expenses and other items
generally falling under the category of overhead. Excluded from allowable
reimbursement shall be (i) rent or depreciation, utilities, capital equipment,
other administrative items; and (ii) salaries, fringe benefits, travel expenses,
and other administrative items incurred or allocated to any controlling persons
of the General Partners or their affiliates. Controlling person, for purpose of
the subsection, includes but is not limited to, any person, whatever his or her
title who performs functions for the General Partners similar to those of: (1)
chairman or member of the board of directors; (2) executive management, such as
(i) president, (ii) vice president or senior vice president, (iii) corporate
secretary, (iv) treasurer; (3) senior management, such as the vice president of
an operating division who reports directly to executive management; or (4) those
holding 5% or more equity interest in the General Partners or a person having
the power to direct or cause the direction of the General Partners whether
through the ownership of voting securities, by contract, or otherwise.
(6) No payment will be made for services for which the General Partners or
their affiliates are entitled to compensation by way of a separate fee, other
than as specifically permitted by this Agreement.
(7) Except as provided in Section 2.04 and this Section 3.09(b) no other
services may be performed by the General Partners or their affiliates for the
Partnership except in extraordinary circumstances. Extraordinary circumstances
exist only where there is an emergency situation requiring immediate action by
the General Partners or their affiliates and the service is not immediately
available from unaffiliated parties. Payment for any such services must meet
the requirements of this section 3.09(b).
12
(c) All other expenses of the Partnership shall be billed directly to and
paid by the Partnership as follows: (1) costs of taxes and assessments on
Partnership properties and other taxes applicable to the Partnership; (2) legal,
audit, accounting, and brokerage fees incurred after the offering of Units is
completed; (3) fees and expenses paid to on-site managers, real estate brokers,
and insurance brokers; (4) expenses in connection with the disposition,
replacement, alteration, repair, remodeling, refurbishment, refinancing and
operation of Partnership properties (including the costs and expenses of
foreclosures, insurance premiums, and maintenance of such properties); (5) the
cost of insurance as required in connection with the business of the
Partnership; (6) expenses of revising, amending, converting, modifying or
terminating the Partnership; (7) the costs of printing and mailing to Limited
Partners, evidences of ownership of Units and reports of meetings of the
Partnership, and of preparation of proxy statements and solicitations of proxies
in connection therewith; (8) expenses in connection with preparing and mailing
distribution checks and reports required to be furnished to Limited Partners for
tax reporting purposes; and (9) the cost of preparation and dissemination of the
informational material and documentation relating to potential sale or other
disposition of Partnership property.
IV.
BOOKS OF ACCOUNT, FINANCIAL STATEMENTS AND FISCAL MATTERS
4.01 Books of Account. The General Partners shall, for income tax
purposes, keep on an accrual basis, adequate books of account of the Partnership
wherein shall be recorded and reflected all of the capital contributions of the
Partnership and all of the expenses and transactions of the Partnership. Such
books of account shall be kept at the principal place of business of the
Partnership, and each Limited Partner and his or her authorized representatives
shall have at all times, during reasonable business hours, free access to and
the right to inspect and copy such books of account and all records of the
Partnership, including the right to obtain by mail or to inspect a list of the
names and addresses and interests owned of the Limited Partners. All books and
records of the Partnership shall be kept on the basis of an annual accounting
period ending December 31, except for the final accounting period which shall
end on the dissolution or termination of the Partnership without reconstitution,
provided, however, that the General Partners in their sole discretion may,
subject to approval by the Internal Revenue Service and applicable state taxing
authorities, at any time, without approval of the Limited Partners, change the
Partnership's accounting period and tax year to a period to be determined by the
General Partners. All references herein to a "year of the Partnership" are to
such an annual accounting period.
4.02 Reports and Financial Statements. The General Partners shall provide
the following reports and financial statements to the Limited Partners:
(a) Annual Report. Within 120 days after the end of each fiscal
year, (1) a balance sheet as of the end of such fiscal year together with
statements of income, Partners' equity, and of cash flows for such year.
The balance sheet and such statements shall be prepared in accordance with
generally accepted accounting principles and shall be accompanied by an
auditor's report containing an unqualified opinion of the independent
certified public accountants preparing such report; (2) an unaudited
statement of cash flow disclosing cash available for distributions; (3) a
report of the activities of the Partnership for such year; (4) a report on
distributions to the Limited Partners for such period, separately
identifying distributions from (a) funds from operations during such
period, (b) reserved funds from operations from prior periods, (c) proceeds
from disposition of property and investments, (d) reserves from the
proceeds of public offerings of Units; (5) a detailed statement of any
transactions with the General Partners or their affiliates and fees,
commissions, compensation. and other benefits paid or accrued to the
General Partners or their affiliates for the fiscal year completed, showing
the amount paid or accrued to each recipient and the services performed;
and (6) the annual report must contain a breakdown of the costs reimbursed
to the General Partners. Within the scope of the annual audit of the
General Partner's financial statement, the independent certified public
accountants must verify the allocation of such costs to the Partnership.
The method of verification shall at minimum provide:
(1) A review of the time records of individual employees, the
costs of whose services were reimbursed;
(2) A review of the specific nature of' the work performed by
each such employee.
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The methods of verification shall be in accordance with general
accepted auditing standards and shall accordingly include such tests
of the accounting records and such other auditing procedures which the
General Partners' independent certified public accountants consider
appropriate in the circumstance. The additional costs of such
verification will be itemized by said accountants on a Partnership by
Partnership basis and may be reimbursed to the General Partners by the
Partnership in accordance with subsection 3.09 only to the extent that
such reimbursement when added to the cost for administrative services
rendered does not exceed the allowable rate as determined in
subsection 3.09.
(b) Report of Fees. Within 45 days of the end of each quarter of a
fiscal year during which a sponsor received fees for services from the
Partnership, a report setting forth (i) a statement of the services
rendered and (ii) the amount of fees received. This report may generally be
set forth in a footnote in the quarterly report under section 402(c).
(c) Quarterly Reports. Within 45 days after the end of each fiscal
quarter a report for such period containing an unaudited balance sheet,
statement of income, statement of changes in financial position and a cash
flow statement and a report covering the activities of the Partnership for
such quarter which contains the information specified on Form 10-Q (if such
report is required to be filed with the Securities and Exchange
Commission).
(d) Tax Information. Within 75 days after the end of each fiscal
year, all information necessary for the preparation of the Limited
Partners' federal income tax returns.
(e) Special Reports. Within 60 days after the end of each quarter
during which there have been real property acquisitions, a "Special Report"
(which may be part of the quarterly report) shall be sent to all Limited
Partners until the proceeds of the offering are committed or returned to
the Limited Partners. The report shall contain the following information:
(1) the location and a description of the general character of all
materially important real properties acquired or presently intended to be
acquired by or leased to the Partnership, during the quarter; (2) the
present or proposed use of such properties and their suitability and
adequacy for such use; (3) the terms of any material lease affecting the
property; (4) the proposed method of financing, including estimated down
payment, leverage ratio, prepaid interest, balloon payment(s), prepayment
penalties, due-on-sale or encumbrance clauses and possible adverse effects
thereof and similar details of the proposed financing plan; and (5) a
statement that title insurance and any required construction, permanent or
other financing and performance bonds or other assurances with respect to
builders have been or will be obtained on all properties acquired. This
report may be in substance the information included in Forms 8-K, if such
reports are required to be filed with the Securities and Exchange
Commission.
(f) Reports During Offering. During the offering period and until the
Partnership is fully invested, the Partnership will file any prospectus
required by Section 10(a)(3) of the Securities Act of 1933 as post-
effective amendments to the registration statement. The Partnership will
additionally file after the end of the distribution period, a current
report on Form 8-K containing the financial statements and any additional
information required by Rule 3-14 of Regulation S-X, to reflect each
commitment (i.e., the signing of a binding purchase agreement) made after
the end of the distribution period involving the use of 10% or more (on a
cumulative basis) of the net proceeds of the offering and to provide the
information contained in such report to the limited partners at least once
each quarter after the distribution period of the offering has ended. The
Partnership will also file a sticker supplement pursuant to Rule 424 under
the Securities Act of 1933 during the offering period describing each
property not identified in the prospectus at such time as there arises a
reasonable probability that such property will be acquired (also disclosing
all compensation and fees received by the General Partners and their
affiliates in connection with such acquisition) and to consolidate all such
stickers into a post-effective amendment filed at least once every three
months, with the information contained in such amendment provided
simultaneously to the existing Limited Partners. Lastly, the Partnership
will provide the Limited Partners the Financial Statements required by Form
10-K for the first full fiscal year of operations of the Partnership.
(g) Filing of Reports. The Partnership will file with the
Commissioner of Corporations of the State of California and any other
appropriate federal or state regulatory agency requiring the same a copy of
14
each report made pursuant to subdivisions (a), (b), (c) and (d) of this
Section 4.02, concurrently with their transmittal to the Limited Partners,
if the filing is required by any such state.
4.03 Tax Returns and Records. The General Partners, at Partnership
expense, shall cause income tax returns for the Partnership to be prepared and
timely filed with the appropriate authorities. The General Partners, at
Partnership expense, shall cause to be prepared and timely filed, with
appropriate federal and state regulatory and administrative bodies, all reports
required to be filed with such entities under then current applicable laws,
rules and regulations. Such reports shall be prepared on the accounting or
reporting basis required by such regulatory bodies. Any Limited Partner shall be
provided with a copy of any such report upon request without expense to him or
her. The General Partners, at Partnership expense, shall maintain for at least 4
years a record of the information obtained to determine that a Limited Partner
meets the Partnership's suitability standards and a representation of the
Limited Partner that the Limited Partner is investing for the Limited Partner's
own account.
4.04 Fiscal Year. The fiscal year of the Partnership shall begin with the
first day of January and end on the thirty-first day of December in each year,
provided, however, that the General Partners in their sole discretion may,
subject to approval by the Internal Revenue Service and the applicable state
taxing authorities, at any time without approval of the Limited Partners change
the Partnership's fiscal year to a period to be determined by the General
Partners.
4.05 Bank Accounts, Funds and Assets. The funds of the Partnership shall
be deposited in such bank or banks as the General Partners shall deem
appropriate. Subject to the provisions of Article XII, such funds shall be
withdrawn only by the General Partners or their duly authorized agents. Sponsors
shall have a fiduciary responsibility for the safekeeping and use of all funds
of the Partnership, whether or not in their immediate possession or control, and
they shall not employ or permit another to employ such funds or assets in any
manner except for the exclusive benefit of the Partnership. Sponsors shall not
commingle or permit the commingling of the funds of the Partnership with the
funds of any other person or entity.
4.06 Adjustment of Tax Basis. Upon the transfer of an interest in the
Partnership, the Partnership may, at the sole discretion of the General
Partners, elect, pursuant to Section 754 of the Internal Revenue Code of 1954,
as amended, to adjust the basis of the Partnership property as allowed by
Section 734(b) and 743(b) thereof. The election, if made, will be filed with the
Partnership information income tax return for the first taxable year to which
the election applies.
4.07 Insurance. The Partnership shall at all times maintain public
liability insurance in amounts determined by the General Partners for the
protection of the Partnership and each of its members. In addition, the
Partnership shall carry appropriate Workmen's Compensation Insurance and such
other insurance with respect to the real property owned by it as shall be
customary for similar property, similarly located, from time to time (for
purposes hereof losses catastrophic in nature, e.g., war, earthquakes and
floods, shall not be deemed customary insurance coverages and shall not be
required). No sponsor or affiliate of a sponsor shall receive an insurance
brokerage fee or commission or write any insurance policy covering the
Partnership or any of the property of the Partnership. The Partnership shall not
pay for any insurance covering liability of a General Partner or its affiliates,
agents or employees for actions or omissions to act for which indemnification is
not permitted hereunder. The Partnership may purchase and pay for such types of
insurance, including extended coverage liability and casualty and workmen's
compensation, as would be customary for any person owning comparable property
and engaged in a similar business and may name the General Partners and their
affiliates as additional insured parties thereunder, provided that such addition
does not add to the cost of premiums payable by the Partnership.
4.08 Appraisals.
(a) An appraisal by an independent qualified appraiser shall be obtained
for each investment property. Such qualification may be demonstrated by
membership in a nationally recognized appraisal society such as Member Appraisal
Institute ("M.A.I."), Society of Real Estate Appraisers ("S.R.E.A.") or their
equivalent, but is not limited thereto. The appraisal shall be maintained in the
records of the Partnership for at least five years and shall be available for
inspection and duplication by any Limited Partner.
(b) All persons retained by the Partnership to provide the Partnership
reports of their opinions of appraised values of investment properties being
considered by the Partnership for acquisition or otherwise shall be members in
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good standing of a recognized professional appraisal organization and shall
certify to the Partnership as follows: (1) that he or she has no present or
contemplated future interest in the property being appraised; (2) that he or she
has no personal interest or bias with respect to the subject matter of or the
parties involved in the appraisal; and (3) that his or her employment and
compensation for rendering an opinion and report are not contingent upon the
value so determined, or on any other condition other than the delivery of the
report or opinion for a predetermined fee.
(c) The sum of the purchase price of the Partnership's properties plus the
acquisition fees paid shall not exceed the appraised value of the properties.
4.09 Tax Matters Partner.
XXXX X. XXXXX, XX. is selected and has the right, power and authorization
to represent the Partnership and each Limited Partner as the tax matters partner
in connection with all examinations of the Partnership affairs by tax
authorities, including resulting administrative and judicial proceedings, and to
expend Partnership funds for professional services and costs connected
therewith. Each Limited Partner agrees to cooperate with XXXX X. XXXXX, XX. and
to do or refrain from doing any and all things reasonably required by XXXX X.
XXXXX, XX. to conduct such proceedings.
V.
ASSIGNABILITY OF LIMITED PARTNERS' INTERESTS
5.01 Limited Partners' Interest. Each of the Limited Partners, except as
provided in this Article V, shall not sell, transfer, encumber or otherwise
dispose by operation of law or otherwise of the whole or any part of his or her
interest in the Partnership except by written instrument satisfactory in form to
the General Partners, accompanied by such assurance of the genuineness and
effectiveness of each such signature and the obtaining of any federal and/or
state government approval, if any, as may be reasonably required by the General
Partners.
No less than a minimum of 25 Units (10 for certain fiduciaries) may be
transferred.
No assignment shall be valid or effective unless in compliance with the
conditions herein contained.
5.02 Further Restriction on Transfers. No Partner shall make any
assignment of all or any part of his or her interest in the Partnership if said
transfer or assignment would, in the opinion of counsel, when considered with
all other transfers during the same applicable twelve (12) month period, cause a
termination of the Partnership for federal or any applicable state income tax
purposes, or would, in the opinion of counsel, cause the partnership to be
deemed a "publicly traded partnership" under section 7704 of the Internal
Revenue Code.
5.03 Substituted Partners. No assignee of the whole or any portion of a
Limited Partner's interest in the Partnership shall have the right to become a
substituted Limited Partner in place of his or her assignor, unless (i) such
assignor shall designate such intention in the instrument of assignment; (ii)
the assignment instrument shall be in form and substance satisfactory to the
General Partners; (iii) the assignor and assignee named therein shall execute
and acknowledge such other instrument or instruments as the General Partners may
deem necessary or desirable to effectuate such admission, including but not
limited to a power of attorney with provisions more fully described in this
Agreement; (iv) the assignee shall accept adopt and approve in writing of all of
the terms and provisions of this Agreement, as the same may have been amended;
and (v) the written consent of the General Partners to the substitution (which
consent shall be given unless in the written opinion of the Partnership's tax
counsel such consent should be withheld to preserve the tax status of the
Partnership) if the substituted Limited Partner is not the transferring Limited
Partner's spouse, ancestor, lineal descendent or trust for the benefit of such
person(s).
5.04 Additional Restrictions. Any unauthorized assignment or transfer
shall be void ab initio. All documents and records evidencing a Limited
Partnership interest, whether issued originally or subsequently, owned by
California residents shall bear and be subject to legend conditions as follows:
(a) "IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION
THEREFOR, WITHOUT
16
THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS FOR THE STATE
OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
(b) "Any unauthorized assignment of transfer shall be void ab
initio."
(c) "Assignees of this security may become substituted Limited
Partners only with the consent of the General Partners."
5.05 Withdrawal of Limited Partner. Except as provided in Article VI, no
Limited Partner shall be entitled to withdraw or retire from the Partnership.
5.06 Death of Limited Partner. The death of a Limited Partner shall not
terminate the Partnership. Upon the death of a Limited Partner, the personal
representative of the deceased Limited Partner shall have all the rights of the
Limited Partner in the Partnership to the extent of the deceased Limited
Partner's interest therein, subject to the terms and conditions of this
Agreement, and the estate of the deceased Limited Partner shall be liable for
all of his or her liabilities as a Limited Partner, as well as the execution of
all documents required to effect, subject to the terms of Section 5.03, the
appropriate substitution of the decedent's estate or beneficiary as a Limited
Partner hereunder.
5.07 Recognition of Substituted and Assignee Limited Partners. The
Certificate of Limited Partnership of the Partnership shall be amended and
recorded pursuant to Section 1.01 in any jurisdiction where it may be required
at least once each calendar quarter to recognize the admission of substituted
Limited Partners. Assignees of Limited Partners shall be recognized as such not
later than the first of the calendar month following the General Partners'
receipt of notice of such assignment.
VI.
REPURCHASE OF UNITS
The Partnership, in its sole discretion, may repurchase Units, after the
offering of its Units has closed, at a negotiated price, if such repurchase does
not impair the capital or operations of the Partnership. The Partnership may not
reserve or apply more than an aggregate of .5% of the gross proceeds of its
offering of Units toward any such repurchases.
VII.
RIGHT OF LIMITED PARTNERS TO RECEIVE PROPERTY OTHER THAN CASH
No right is given to a Limited Partner to demand and receive property other
than cash in return for his or her contribution.
VIII.
TERMINATION OF A GENERAL PARTNER
8.01 Ceasing to be a General Partner. A person ceases to be a General
Partner of this Partnership upon the happening of any of the following events
("Terminating Events"):
(a) The General Partner withdraws from this Partnership.
(b) The General Partner is removed as a General Partner.
(c) Unless otherwise provided in the partnership agreement, an order
for relief against the General Partner is entered under Chapter 7 of the
federal bankruptcy law, or the General Partner (1) makes a general
assignment for the benefit of creditors, (2) files a voluntary petition
under the federal bankruptcy law, (3) files a petition or answer seeking
for that partner any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute,
law, or regulation, (4) files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against
that partner in any proceeding of this nature, or (5) seeks, consents to,
or acquiesces in the appointment of a
17
trustee, receiver, or liquidator of the General Partner or of all or any
substantial part of that partner's properties.
(d) Sixty days after the commencement of any proceeding against the
General Partner seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute,
law, or regulation, if the proceeding has not been dismissed, or if within
60 days after the appointment without that partner's consent or
acquiescence of a trustee, receiver, or liquidator of the General Partner
or of all or any substantial part of that partner's properties, the
appointment is not vacated or stayed, or within 60 days after the
expiration of any such stay, the appointment is not vacated.
(e) In the case of a General Partner who is an individual, either of
the following:
(1) The death of that partner.
(2) The entry by a court of competent jurisdiction of an order
adjudicating the partner incompetent to manage the General Partner's
person or estate.
(f) In the case of a General Partner who is acting as a General
Partner by virtue of being a trustee of a trust, the termination of the
trust (but not merely the substitution of a new trustee, in which case the
new trustee automatically becomes the new General Partner).
(g) In the case of a General Partner that is a separate partnership,
the dissolution of the separate partnership.
(h) In the case of a General Partner that is a corporation, the filing
of a certificate of dissolution, or its equivalent, for the corporation.
(i) In the case of a General Partner that is an estate, the
distribution by the fiduciary of the estate's entire interest in the
limited partnership.
Notwithstanding the provisions of subsections (a) and (h) above, without
the concurrence of a majority of the outstanding limited partnership interests,
a General Partner may not withdraw or retire as a General Partner or dissolve
itself or the Partnership.
8.02 Continuation of Business of Remaining General Partner. If one
General Partner ceases to be a General Partner pursuant to the provisions of
Section 8.01, the remaining General Partner shall continue the business of the
Partnership.
8.03 Removal of a General Partner. The Limited Partners holding a
majority in interest of the Units may remove any or all of the General Partners.
Written notice of such determination setting forth the effective date of such
removal shall be served upon the General Partner or General Partners so removed
and, as of the effective date, shall terminate all of such persons' rights and
powers as a General Partner.
8.04 Dissolution of Partnership and Continuance of Partnership Business.
After the occurrence of a terminating event with respect to the last remaining
General Partner, as described in Section 8.01, the Limited Partners shall meet
within ninety (90) days of the terminating event and either:
(a) Elect one or more new General Partners to continue the
Partnership business, in which event, upon the filing of a new Certificate
of Limited Partnership to reflect the new General Partner, this Partnership
shall continue in business; or
(b) Elect to terminate and liquidate the Partnership under the
provisions of Article IX hereof.
8.05 Payment to Terminated General Partner. Upon the occurrence of a
terminating event, if such terminating event relates to a General Partner who is
the last remaining original General Partner and if the business of the
Partnership is continued, as aforesaid, the Terminated General Partner shall be
entitled to receive from the Partnership the then present fair market value of
his allocated interest in Net Profits, Net Losses, Distributions of Cash
Available for Distribution, surplus Funds upon liquidation, determined by
agreement of the Terminated General Partner and the Partnership, or, if they
cannot agree, by arbitration in accordance with the then current rules
18
of the American Arbitration Association. The expense of such arbitration shall
be borne equally by the Partnership and the General Partners. For this purpose,
the fair market value of the interest of the Terminated General Partner shall be
deemed to be the amount the Terminated General Partner would receive upon
dissolution and termination of the Partnership under Section 9.02, assuming (a)
such dissolution or termination occurred on the date of the dissolving event
specified above, and (b) the assets of the Partnership were sold for their then
fair market value without compulsion of the Partnership to sell such assets. The
Partnership forthwith shall execute and deliver to the Terminated General
Partner a promissory note of the Partnership, payable to the order of the
Terminated General Partner, which promissory note shall include the following
provisions: (i) be in a principal amount equal to the present fair market value
of the interest so determined; (ii) bearing interest at a rate per annum which
is the lesser of two percent over the prime rate of the Bank of America, NT&SA
or ten percent per annum, principal and all unpaid accrued interest payable in
equal annual installments with the remaining unpaid principal balance and unpaid
accrued interest on the promissory note to be due and payable five years from
the date of such terminating event, and (iii) such other provisions as would be
usual and customary in a commercial promissory note, including the right of the
holder upon default to accelerate otherwise unmatured installments and to
recover costs of collection including reasonable attorney's fees.
Notwithstanding the foregoing, where the termination is voluntary, the method of
payment will be by a non-interest bearing unsecured promissory note with
principal payable, if at all, from distributions which the Terminated General
Partner otherwise would have received under the partnership agreement had the
General Partner not terminated.
8.06 Termination of Executory Contracts. Upon removal of a General Partner,
all executory contracts between the Partnership and the terminating General
Partner or any affiliate thereof (unless such affiliate is also an affiliate of
a continuing General Partner) may be terminated by the Partnership effective
upon written notice to the party so terminated. The terminating General Partner
or any affiliate (unless such affiliate is also an affiliate of a continuing
General Partner) thereof may also terminate and cancel any such executory
contract effective upon sixty (60) days' prior written notice of such
termination and cancellation given to the new General Partner, if any, or to the
Partnership.
IX.
DISTRIBUTION ON TERMINATION
9.01 Events of Dissolution. The Partnership shall be terminated and
dissolved, prior to the end of its term, in accordance with any other provision
of this Agreement, or upon the happening of any of the following events:
(a) The Limited Partners holding a majority of all the Units of the
Partnership determine, by written consent or approving vote, that the
Partnership should be dissolved; or
(b) The Partnership is adjudicated insolvent or bankrupt.
9.02 Gain and Loss on Dissolution and Order of Distribution.
(a) In the event of the dissolution or termination of the Partnership,
unless the remaining Partners elect to continue the business of the Partnership
as provided in this Agreement, the General Partners or the liquidator of the
Partnership shall proceed with the winding up of the affairs and the liquidation
of the Partnership. The General Partners, who shall be the liquidators of the
Partnership, shall cause to be prepared a statement setting forth the assets and
liabilities of the Partnership as of the date of dissolution, and such statement
shall be furnished to all of the Partners (General and Limited). The assets of
the Partnership, which the General Partners determine should be liquidated, then
shall be liquidated as promptly as possible, but in an orderly and businesslike
manner so as not to involve undue sacrifice.
(b) The aggregate net profit and net loss realized by the Partnership upon
the sale or other disposition of its assets shall be credited or charged to the
accounts of the General Partners and Limited Partners in accordance with the
provisions of Section 3.07 hereof after providing for the debts and liabilities
of the Partnership.
(c) The proceeds of such liquidation shall be applied and distributed in
the order of priority and in the same manner as provided in Section 3.07 hereof
after providing for the debts and liabilities of the Partnership.
19
(d) All distributions under Section 9.02(c) shall be made in money arising
from the sale of assets of the Partnership.
9.03 Eminent Domain. A taking of all or substantially all of the
Partnership's property and assets in condemnation or by eminent domain shall be
treated in all respects as a sale of the Partnership's property and assets upon
the dissolution and liquidation of the Partnership, pursuant to this Article IX.
In such event any portion of the property and assets of the Partnership not so
taken shall be sold and/or distributed, together with the condemnation award, in
the manner provided for in this Article IX.
9.04 Period of Liquidation. A reasonable time shall be allowed for the
orderly liquidation of the assets of the Partnership, so as to enable the
General Partners or the liquidator to minimize the normal losses attendant upon
liquidation.
X.
CERTIFICATES AND OTHER DOCUMENTS
10.01 General Partners Attorneys for Limited Partners. Each Limited
Partner, by becoming a Limited Partner, hereby constitutes and appoints each of
the General Partners and his successors the true and lawful attorneys of, and in
the name, place and stead of said Limited Partner, from time to time:
(a) To make all agreements amending this Agreement, as now or
hereafter amended, that may be appropriate to reflect solely:
(i) A change of the name or the location of the principal
place of business of the Partnership;
(ii) The disposal by a Limited Partner of his or her
interest in the Partnership, in any manner permitted by this Agreement
and any return of the capital contribution of a Limited Partner (or
any part thereof), if any, provided for by this Agreement;
(iii) A person becoming a Limited Partner of the Partnership
as permitted by this Agreement;
(iv) A change in any provision of this Agreement or the
exercise by any person of any right or rights thereunder not requiring
the consent of said Limited Partner; and
(v) The exercise by any person of any right or rights
under this Agreement requiring the consent or approval of a majority
or a specified percentage of the Limited Partners and the required
consent or approval has been given.
(b) To make such certificates, instruments and documents, including
Fictitious Business Name Statements, as may be required by, or may be
appropriate under, the laws of any state or other jurisdiction in which the
Partnership is doing or intends to do business in connection with the use
of the name of the Partnership by the Partnership; and
(c) To make such certificates, instruments and documents, including
amendments to this Agreement and the Certificate of Limited Partnership, as
said Limited Partner may be required or as may be appropriate for said
Limited Partner to make, by the laws of any state or other jurisdiction
solely to reflect:
(i) A change of address of said Limited Partner;
(ii) Any changes in or amendments to this Agreement, or
pertaining to the Partnership, of any kind referred to in paragraph
(a) of this subsection; and
(iii) Any other changes in or amendments to this Agreement
but only if and when said Limited Partner has agreed to such other
changes or amendments by signing, either personally or by duly
appointed attorney, an agreement amending this Agreement.
20
Each of said agreements, certificates, instruments and documents shall be
in such form as said attorney and counsel for the Partnership shall deem
appropriate. The powers hereby conferred to make agreements, certificates,
instruments and documents shall be deemed to include the powers to sign,
execute, acknowledge, swear to, verify, deliver, file, record and publish the
same.
Each Limited Partner authorizes said attorney to take any further action
which said attorney shall consider necessary or convenient in connection with
any of the foregoing and hereby gives said attorney full power and authority to
do and perform each and every act and thing whatsoever requisite and necessary
to be done in and about the foregoing as fully as said Limited Partner might or
could do if personally present, and hereby ratifies and confirms all that said
attorney shall lawfully do or cause to be done by virtue hereof.
The powers hereby conferred shall continue from the date said Limited
Partner becomes a Limited Partner in the Partnership until said Limited Partner
shall cease to be such a Limited Partner and, being coupled with an interest,
shall be irrevocable.
10.02 Making, Filing, Etc. of Certificates, Etc. The General Partners
agree, when authorized pursuant to Section 10.01, or otherwise, to make, file or
record with the appropriate public authority and (if required) publish the
Certificate, any amendments thereof, and such other certificates, instruments
and documents as may be required or appropriate in connection with the business
and affairs of the Partnership.
XI.
NOTICES
All notices (except notices required under Section XIV hereof), requests
and other communications provided for herein shall be in writing and, unless
otherwise specified, shall be forwarded by first class mail, directed to the
parties at the addresses set forth in the Subscription Agreement and Signature
Pages attached hereto or to such other addresses as any party may from time to
time designate in writing, and given in accordance with the provisions of this
Article XI. Notices or communications given, as set forth herein, shall be
conclusively deemed to have been received by the party to whom addressed three
business days after the same are deposited in the United States mail.
XII.
CONVEYANCES, CONTRACTS AND DOCUMENTS
Any deed, xxxx of sale, mortgage, deed of trust, lease, contract of sale,
or other commitment purporting to convey or encumber the interest of the
Partnership in all or in any portion of any real or personal property at any
time held in its name, and any other contract, check, draft, document,
communication or notice to which the Partnership is a party, may be signed by
any one of the General Partners acting alone or on behalf of the Partnership.
XIII.
DISPUTES AND ARBITRATION
(This Article omitted at the request of state securities commissions.)
XIV.
MEETINGS OF, OR ACTIONS BY, THE LIMITED PARTNERS
(a) Meetings of partners may be held at any place within or without this
state as may be fixed by the General Partners. If no other place is so fixed,
partners' meetings shall be held at the principal executive office of the
Partnership.
(b) A meeting of the partners may be called by any of the General Partners
or by Limited Partners representing more than 10 percent of the interests of
Limited Partners for any matters on which the Limited Partners may vote.
21
(c) (1) Whenever partners are required or permitted to take any action at a
meeting, a written notice of the meeting shall be given, within ten days after
receipt of a request, not less than 15, nor more than 60, days before the date
of the meeting to each partner entitled to vote at the meeting. The notice shall
state the place, date, and hour of the meeting and the general nature of the
business to be transacted, and no other business may be transacted.
(2) Notice of a Partners' meeting or any report shall be given either
personally or by mail or other means of written communication, addressed to the
partner at the address of the partner appearing on the books of the Partnership
or given by the partner to the Partnership for the purpose of notice, or, if no
address appears or is given, at the place where the principal executive office
of the partnership is located or by publication at least once in a newspaper of
general circulation in the county in which the principal executive office is
located. The notice or report shall be deemed to have been given at the time
when delivered personally or deposited in the mail or sent by other means of
written communication. An affidavit of mailing of any notice or report in
accordance with the provisions of this article, executed by a General Partner,
shall be prima facie evidence of the giving of the notice or report. Included
with the notice shall be a detailed statement of the action proposed, including
a verbatim statement of the wording of any resolution proposed for adoption by
the limited partners and of any proposed amendment to the partnership agreement.
If any notice or report addressed to the partner at the address of the
partner appearing on the books of the Partnership is returned to the Partnership
by the United States Postal Service marked to indicate that the United States
Postal Service is unable to deliver the notice or report to the partner at the
address, all future notices or reports shall be deemed to have been duly given
without further mailing if they are available for the partner at the principal
executive office of the Partnership for a period of one year from the date of
the giving of the notice or report to all other partners.
(3) Upon written request to the General Partners by any person entitled to
call a meeting of partners, the General Partners shall, within ten days after
receipt of a request, cause written notice to be given in person or by certified
mail to the partners entitled to vote that a meeting will be held at a time
requested by the person calling the meeting, not less than 15, nor more than 60,
days after the receipt of the request. If the notice is not given within 20 days
after receipt of the request, the person entitled to call the meeting may give
the notice or, upon the application of such person, the superior court of the
county in which the principal executive office of the Partnership is located, or
if the principal executive office is not in this state, the county in which the
Partnership's address in this state is located, shall summarily order the giving
of the notice, after notice to the Partnership giving it an opportunity to be
heard. The procedure provided in subdivision (c) of Section 305 of the
California Corporations Code shall apply to the application. The court may issue
any order as may be appropriate, including, without limitation, an order
designating the time and place of the meeting, the record date for determination
of partners entitled to vote, and the form of notice.
(d) When a partners' meeting is adjourned to another time or place, unless
the Partnership Agreement otherwise requires and, except as provided in this
subdivision, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting the Partnership may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than 45
days or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each partner of
record entitled to vote at the meeting.
(e) The transactions of any meeting of partners, however called and
noticed, and wherever held, are as valid as though had at a meeting duly held
after regular call and notice, if a quorum is present either in person or by
proxy, and if, either before or after the meeting, each of the persons entitled
to vote, not present in person or by proxy, signs a written waiver of notice or
a consent to the holding of the meeting or an approval of the minutes thereof.
All waivers, consents, and approvals shall be filed with the Partnership records
or made a part of the minutes of the meeting. Attendance of a person at a
meeting shall constitute a waiver of notice of the meeting, except when the
person objects, at the beginning of the meeting to the transaction of any
business because the meeting is not lawfully called or convened and except that
attendance at a meeting is not a waiver of any right to object to the
consideration of matters required by this chapter to be included in the notice
but not so included, if the objection is expressly made at the meeting. Neither
the business to be transacted at nor the purpose of any meeting of partners need
be specified in any written waiver of notice, unless otherwise provided in the
partnership agreement, except as provided in subdivision (f).
22
(f) Any partner approval at a meeting, other than unanimous approval by
those entitled to vote, pursuant to paragraph (5) of subdivision (b) of Section
15632 of the California Corporations Code shall be valid only if the general
nature of the proposal so approved was stated in the notice of meeting or in any
written waiver of notice.
(g) (1) A majority in interest of the Limited Partners represented in
person or by proxy shall constitute a quorum at a meeting of partners.
(2) The partners present at a duly called or held meeting at which a quorum
is present may continue to transact business until adjournment notwithstanding
the withdrawal of enough partners to leave less than a quorum, if any action
taken (other than adjournment) is approved by the requisite percentage of
interests of Limited Partners specified in California Revised Limited
Partnership Act or in the Partnership Agreement.
(3) In the absence of a quorum, any meeting of partners may be adjourned
from time to time by the vote of a majority of the interests represented either
in person or by proxy, but no other business may be transacted, except as
provided in paragraph (2).
(h) Unless otherwise provided in the Partnership Agreement, any action
which may be taken at any meeting of the partners may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
partners having not less than the minimum number of votes that would be
necessary to authorize or take that action at a meeting at which all entitled to
vote thereon were present and voted. In the event the Limited Partners are
requested to consent on a matter without a meeting, each partner shall be given
notice of the matter to be voted upon in the same manner as described in
subdivision (c). In the event any General Partner, or Limited Partners
representing more than 10 percent of the interests of the Limited Partners,
request a meeting for the purpose of discussing or voting on the matter, the
notice of a meeting shall be given in accordance with subdivision (c) and no
action shall be taken until the meeting is held. Unless delayed in accordance
with the provisions of the preceding sentence, any action taken without a
meeting will be effective 15 days after the required minimum number of voters
have signed the consent, however, the action will be effective immediately if
all General Partners and Limited Partners representing at least 90 percent of
the interests of the Limited Partners have signed the consent.
(i) The use of proxies in connection with this section will be governed in
the same manner as in the case of corporations formed under the General
Corporation Law of California. The Partnership will provide for proxies or
written consents which specify a choice between approval and disapproval of each
matter to be acted upon at the meeting.
(j) In order that the Partnership may determine the partners of record
entitled to notices of any meeting or to vote, or entitled to receive any
distribution or to exercise any rights in respect of any other lawful action,
the General Partners, or Limited Partners representing more than 10 percent of
the interests of Limited Partners, may fix, in advance, a record date, which is
not more than 60 or less than 15 days prior to the date of the meeting and not
more than 60 days prior to any other action. If no record date is fixed:
(1) The record date for determining partners entitled to notice of
or to vote at a meeting of partners shall be at the close of business
on the business day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held.
(2) The record date for determining partners entitled to give
consent to Partnership action in writing without a meeting shall be the
day on which the first written consent is given.
(3) The record date for determining partners for any other purpose
shall be at the close of business on the day on which the general
partners adopt it, or the 60th day prior to the date of the other
action whichever is later.
(4) The determination of partners of record entitled to notice of or
to vote at a meeting of partners shall apply to any adjournment of the
meeting unless the general partners, or the limited partners who called
the meeting, fix a new record date for the adjourned meeting, but the
general partners, or the limited partners who called the meeting, shall
fix a new record date if the meeting is adjourned for more than 45 days
from the date set for the original meeting.
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XV.
CAPTIONS -- PRONOUNS
Any titles or captions of articles or paragraphs contained in this
Agreement are for convenience only and shall not be deemed part of the context
of this Agreement. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine, neuter, singular or plural, as the
identification of the person or person, firm or firms, corporation or
corporations may require.
XVI.
BINDING EFFECT AND EXHIBITS
Except as otherwise herein provided, this Agreement shall be binding upon
and inure to the benefit of the parties hereto, their heirs, executors,
administrators, successors and all persons hereafter having or holding an
interest in this Partnership, whether as assignees, substituted Limited
Partners, or otherwise. All exhibits hereto are by this reference incorporated
herein.
XVII.
AMENDMENT OF THE AGREEMENT
Except as provided by this Article XVII, this Agreement may be modified or
amended only by a vote of a majority in interest of the Limited Partners;
provided, however, this Agreement may be amended from time to time by the
General Partners, without the consent of any of the Limited Partners, but only
if such amendment does not affect the rights of the limited partners, (i) to add
to the representations, duties or obligations of the General Partners or their
Affiliates or to surrender any right or power granted to the General Partners or
their Affiliates herein, for the benefit of the Limited Partners; (ii) to cure
any ambiguity, to correct or supplement any provision which may be inconsistent
with any other provision, or to make any other provisions with respect to
matters or questions arising under this Agreement which will not be inconsistent
with the provisions of this Agreement; (iii) to reflect reductions in the
capital contributions of the Limited Partners resulting from the return of
capital to the Limited Partners in accordance with the requirements of this
Agreement; (iv) to delete or add any provisions of this Agreement required to be
so deleted or added by the Staff of the Securities and Exchange Commission or by
a State "Blue Sky" Administrator or similar official, which addition or deletion
is deemed by the Administrator or official to be for the benefit or protection
of the Limited Partners; (v) to elect for the Partnership to be governed by any
successor California statute governing limited partnerships; (vi) to effect
changes to substantially comply with Internal Revenue Service Regulations
Section 1.704-1; and (vii) as otherwise provided for pursuant to this
Partnership Agreement. The General Partner shall notify the Limited Partners
within a reasonable time of the adoption of any amendment. Notwithstanding
anything to the contrary contained in this Agreement, this Agreement may not be
amended without the consent of all Partners to be adversely affected by the
amendment that:
a. Converts a Limited Partner into a general partner;
b. Modifies the limited liability of a Limited Partner;
c. Alters the interest of the General Partner or Limited Partners in net
income or net loss or distributions from the Partnership; or
d. Adversely affects the status of the Partnership as a partnership for
federal income tax purposes.
XVIII
ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreements between the
parties hereto respecting the within subject matter, and there are no
representations, agreements, arrangements or understandings, oral or written,
between and among the parties hereto relating to the subject matter of this
Agreement which are not fully expressed herein. This Agreement shall be governed
by and construed in accordance with the laws of the State of California
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and, unless expressly or by necessary implication contravened by any provision
hereof, the provisions of the California Revised Limited Partnership Act shall
apply.
XIX.
TAX CONTROVERSIES
Should there be any controversy with the Internal Revenue Service or any
other taxing authority involving the Partnership or an individual Partner or
Partners, the outcome of which may adversely affect the Partnership, either
directly or indirectly, the Partnership may incur expenses it deems necessary
and advisable in the interest of the Partnership to oppose such proposed
deficiency, including, without being limited thereto, legal and accounting fees.
XX.
COUNTERPARTS AND EXECUTION
This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original Agreement, and all of which shall constitute one
Agreement, by each of the parties hereto on the dates respectively indicated in
the signatures of said parties, notwithstanding that all of the parties are not
signatories to the original or to the same counterpart, to be effective as of
the day and year hereinabove set forth.
XXI.
INVESTMENT IN OTHER PROGRAMS OF SPONSOR
21.01 The provisions of this Article are effective notwithstanding anything
to the contrary in Sections 1.05 and 2.01.
21.02 Investments in limited partnership interests of another program shall
be prohibited; however, nothing herein shall preclude the investment in general
partnerships or ventures which own and operate a particular property provided
this partnership acquires a controlling interest in such other ventures or
general partnerships (except as permitted by subsection 21.03). In such event,
duplicate property management or other fees shall not be permitted.
21.03 This partnership shall be permitted to invest in joint venture
arrangements with another program formed by the sponsor if all the following
conditions are met.
(a) The two programs have substantially identical investment
objectives.
(b) There are no duplicate property management or other fees.
(c) The sponsor compensation should be substantially identical in
each program.
(d) The partnership must have a right of first refusal to buy if the
other program wishes to sell property held in the joint venture.
(e) The investment of each program is on substantially the same terms
and conditions.
(f) The prospectus must disclose the potential risk of impasse on
joint venture decisions since neither program controls and the potential
risk that while one program may buy the property from the other joint
venturer, in the event of a sale, it may not have the resources to do so.
XXII.
PROCEEDS FROM FINANCING PROPERTIES
22.1 After the Partnership has owned a property for two years or more, or
after January 1, 1995, the Partnership may borrow money and mortgage such
property subject to the following:
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(a) A mortgage may be a lien on one or more properties owned by the
Partnership.
(b) The holder of the note evidencing the borrowing may have recourse
only to the property(ies) secured by the mortgage for payment of the note;
no recourse may be had against any other property owned by the Partnership,
or against any General or Limited Partner personally.
(c) All net financing proceeds received after January 1, 1995 may
either be distributed to the Limited and General Partners as provided in
this Agreement or be reinvested in manufactured home communities.
(d) The net financing proceeds should return substantially all of the
Limited Partner's invested capital.
(e) The financing may assist in the sale of all of the Partnership's
properties.
(f) In the General Partner's judgment, the financing should increase
the economic return to the Limited Partners, and should not substantially
increase the risk of investment in the property(ies).
(g) Neither the General Partners nor their affiliates shall provide or
make available any such financing.
(h) The mortgage maximum indebtedness shall not exceed 80% of the
aggregate fair market value as determined by the lender as of the date of
refinancing as to all properties which have been refinanced. For purposes
of this section "indebtedness" shall include the principal of any loan
together with any interest that may be deferred pursuant to the terms of
the loan agreement which exceeds 5% per annum of the principal balance of
such indebtedness (excluding contingent participations in income and/or
appreciation in the value of the Partnership's property) and shall exclude
any indebtedness incurred by the Partnership for necessary working capital.
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In witness whereof, the parties have signed this agreement on the dates
indicated below:
Original Limited Partner: XXXXXXXX XXX XXXXX June 28, 1988
-----------------------------
Xxxxxxxx Xxx Xxxxx as amended to
June 8, 1995
Individual General Partner: XXXX X. XXXXX, XX. June 28, 1988
-----------------------------
Xxxx X. Xxxxx, Xx. as amended to
June 8, 1995
Corporate General Partner: The Windsor Corporation
By XXXX X. XXXXX, XX. June 28, 1988
----------------------------
Xxxx X. Xxxxx, Xx. as amended to
President June 8, 1995
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