EXHIBIT 1
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XXXXX INSURED PLUS-II LIMITED PARTNERSHIP
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
AGREEMENT dated as of the 29th day of May, 1987, by and among Xxxxx Insured
Plus Corp., a Massachusetts corporation, and Mortgage Services Partners Limited
Partnership, a Massachusetts limited partnership, as General Partners; Xxxxx
Depositary Corporation, as the Corporate Limited Partner; and those Persons who
may hereafter be admitted to the Partnership as Investor Limited Partners. The
Corporate Limited Partner and the Investor Limited Partners are collectively
referred to herein as the "Limited Partners" and, together with the General
Partners, as the "Partners." Certain other terms used throughout this Agreement
are defined in Section 17 hereof.
WHEREAS, The Xxxxx Corporation, The Xxxxx Company Limited Partnership-IV
and the Corporate Limited Partner formed a limited partnership (the
"Partnership") by filing a Certificate of Limited Partnership with the Secretary
of State of The Commonwealth of Massachusetts on October 29, 1986; and
WHEREAS, The Xxxxx Corporation and The Xxxxx Company Limited Partnership-IV
withdrew as General Partners and Xxxxx Insured Plus Corp. and Mortgage Services
Partners Limited Partnership were admitted as General Partners by the filing of
a First Amended and Restated Certificate of Limited Partnership with the
Secretary of State of The Commonwealth of Massachusetts on April 28, 1987; and
WHEREAS, Xxxxx Insured Plus Corp., Mortgage Services Partners Limited
Partnership and the Corporate Limited Partner entered into an Agreement of
Limited Partnership dated April 28, 1987 (the "Original Agreement") and wish to
amend and restate the Original Agreement and to continue the Partnership under
this Amended and Restated Agreement of Limited Partnership and the provisions of
the Massachusetts Uniform Limited Partnership Act; and
WHEREAS, the General Partners and the Corporate Limited Partner wish to
provide, among other matters, for (i) economic and other rights of investors
(the "Unitholders") in the Partnership who will hold Units of Depositary
Receipts evidencing such rights and who may, under certain circumstances, be
admitted to the Partnership as Investor Limited Partners; (ii) the assignment to
the extent permitted by Massachusetts law by the Corporate Limited Partner to
the Unitholders of all of its interest in distributions, including liquidating
distributions, and profits and losses of the Partnership and all of its other
rights, duties and obligations in connection with the Limited Partner Interests
which correspond to the Units; (iii) the obligation of the Corporate Limited
Partner to exercise any and all rights, duties and obligations with respect to
such Limited Partner Interests solely in favor of, in the interest of, and at
the direction of the Unitholders; (iv) the continued status of the Corporate
Limited Partner as a Limited
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Partner of the Partnership; and (v) the possible admission of Investor Limited
Partners subject to the terms and conditions herein specified;
NOW THEREFORE, the parties hereto agree as follows:
Section 1. CONTINUATION. The parties agree to continue the Partnership
pursuant to this Agreement and the provisions of the Uniform Limited Partnership
Act of The Commonwealth of Massachusetts (the "Act").
Section 2. NAME AND OFFICE. The Partnership shall be conducted under the
name and style of "Xxxxx Insured Plus-II Limited Partnership." The principal
office and place of business of the Partnership shall be located at 000 Xxxxxxxx
Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, or at such other place as the General
Partners may from time to time determine and specify by written notice to all of
the Partners. The Partnership shall at all times maintain in Massachusetts (i)
an office at which shall be kept the basic Partnership documents described in
Section 12.2 hereof, and (ii) an agent for service of process selected by the
General Partners in accordance with any relevant provisions of the Act as then
in effect.
Section 3. PURPOSES AND POWERS.
3.1 PURPOSES. The purposes of the Partnership are to acquire, invest in,
maintain, hold, encumber, sell, exchange, manage and otherwise deal with the
Mortgages of the Partnership.
3.2 POWERS. In furtherance of the above purposes, the Partnership shall
have the powers:
(a) to acquire, hold, sell, encumber, exchange and otherwise dispose of
federally insured mortgages on multi-family residential properties ("Insured
Mortgages") through the purchase of mortgage-backed securities guaranteed as to
principal and basic interest issued in connection with the federal housing
programs of GNMA, FNMA, or FHLMC ("MBS"), some of which Insured Mortgages may
provide for Partnership participation in the operating revenues and residual
value of the underlying properties ("Participating Insured Mortgages") on both a
current settlement and a forward delivery (i.e. beyond a 5-day corporate
settlement period) basis;
(b) to acquire, invest in, maintain, hold, encumber, sell, exchange,
manage and otherwise dispose of MBS backed by mortgages on single-family
residential properties not providing a participation feature ("Single-Family
MBS") on both a current settlement and a forward delivery (i.e. beyond a 5-day
corporate settlement period) basis;
(c) to acquire, invest in, maintain, hold, encumber, sell, exchange,
manage and otherwise dispose of MBS backed by mortgages on multi-family
residential properties not providing a participation feature ("Multi-Family
MBS") on both a current settlement and a forward delivery (i.e. beyond a 5-day
corporate settlement period) basis; and
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(d) to acquire, invest in, maintain, hold, encumber, sell, exchange,
manage and otherwise dispose of conventional participating and non-participating
mortgage loans which are insured ("Other Mortgages");
(e) subject to any applicable statutes and regulations, to borrow money
to further the purposes of the Partnership, to issue evidences of indebtedness
in respect thereof and to secure the same by mortgage or pledge or grant of lien
on or other security interest in a Mortgage or any other assets of the
Partnership; and
(f) to do all things, carry on any activities and enter into, perform,
modify, supplement or terminate any contracts necessary to, in connection with
or incidental to the furtherance of the purposes of the Partnership, all so long
as such things, activities and contracts may be lawfully done, carried on or
entered into by the Partnership under the laws of The Commonwealth of
Massachusetts and the United States of America and under the terms of this
Agreement.
The Partnership shall not engage in any business not provided for in this
Section 3.2 without the Consent of the holders of a majority of the Limited
Partner Interests.
Section 4. TERM. The term of the Partnership shall end at midnight on
December 31, 2026, unless the Partnership is sooner dissolved or terminated as
provided in Section 11 hereof.
Section 5. CAPITAL CONTRIBUTIONS.
5.1 CONTRIBUTIONS OF GENERAL PARTNERS. The General Partners have
contributed in cash in respect of their Interests an aggregate of $3,000, in the
respective amounts set forth opposite their name in Schedule A hereto. Upon the
dissolution and termination of the Partnership, the General Partners will
contribute to the Partnership an amount equal to the lesser of (i) the deficit
balances in their Capital Accounts or (ii) the excess of one and one-hundredths
percent (1.01%) of the total Capital Contributions of the Limited Partners over
the amount of capital previously contributed by the General Partners.
5.2 CONTRIBUTIONS OF LIMITED PARTNERS. The Corporate Limited Partner has
contributed $2,000 in cash in respect of 100 Limited Partner Interests. Upon the
purchase of Units by Unitholders, the Corporate Limited Partner shall contribute
in cash to the Partnership the Subscription Prices paid by the Unitholders,
shall receive Limited Partner Interests in return therefor, shall assign all its
rights with respect to such Interests to the Unitholders to the extent permitted
by Massachusetts law, shall agree to exercise any and all rights with respect to
such Interests as directed by the Unitholders, shall remain a Limited Partner
with respect to such Interests as permitted by the Act, and shall within 45 days
after the termination of the offering deliver Depositary Receipts to the
Unitholders evidencing their rights with respect to such Interests. Not fewer
than 250,000 Units (not including Units purchased by the General Partners and
their Affiliates) and not more than 15,000,000 Units evidenced by Depositary
Receipts will be sold. An investor who
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tenders payment for a Unit and accepts confirmation of purchase without
objection for a ten-day period following the mailing of such confirmation shall
thereby have assented to all of the terms and conditions of this Agreement.
5.3 SALE OF ADDITIONAL LIMITED PARTNER INTERESTS OR UNITS. Subsequent to
the final closing of the sale of not fewer than 250,000 Units (not including
Units purchased by the General Partners and their Affiliates) and not more than
15,000,000 Units, the Partnership may not sell additional Limited Partner
Interests or Units; provided, however, that this Section shall not prevent a
Unitholder from exchanging Units for Limited Partner Interests pursuant to
Section 7.6(h) hereof.
5.4 CAPITAL ACCOUNTS. A Capital Account shall be established and
maintained for each General Partner, Limited Partner, and Unitholder. The
Capital Account of each Partner shall be (a) credited with all payments made to
the Partnership by such Partner on account of Capital Contributions and with
allocations to such Partner of Partnership Profits for Tax Purposes and
tax-exempt income, and (b) charged with allocations to such Partner of
Partnership Losses for Tax Purposes, with other Partnership expenditures which
are not deductible for federal income tax purposes (not including payments of
indebtedness or expenditures included in the basis of any Partnership asset),
and with cash distributions made to such Partner as distributions of Cash Flow
or of Net Cash Proceeds of Capital Transactions and the Terminating Capital
Transaction, and shall otherwise appropriately reflect trans actions of the
Partnership and the Partners, all as provided in Treasury Department Regulations
Section 1.704-1(b). The Capital Account of each Unitholder shall be kept in the
same manner as the Capital Account of a Partner. A Substitute General or Limited
Partner shall be deemed to have made the Capital Contribution to the Partnership
which was made with respect to the Interest transferred or exchanged and to have
received from the Partnership the credits, allocations and charges with respect
to such Interest and shall otherwise succeed to the Capital Account kept with
respect to such Interest.
5.5 ADDITIONAL CAPITAL CONTRIBUTIONS; INTERPRETATION. No Partner or
Unitholder shall be required to make any Capital Contribution, or be entitled to
bring an action for partition against the Partnership, or to demand or receive
any distribution of or with respect to his Capital Contribution except as is
specifically provided under this Agreement. No loan made by a General Partner,
Limited Partner or Unitholder to the Partnership shall constitute a Capital
Contribution for any purpose.
Section 6. GENERAL PARTNERS.
6.1 EXTENT OF POWERS AND DUTIES.
(a) GENERAL. Except as expressly limited by the provisions of this
Agreement, the General Partners shall have complete and exclusive discretion in
the management and control of the affairs and business of the Partnership and
all powers necessary, convenient or appropriate to carry out the purposes,
conduct the business and exercise the powers of the Partnership. Except as so
expressly limited, the General Partners shall possess and
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enjoy with respect to the Partnership all of the rights and powers of partners
of a partnership without limited partners to the extent permitted by
Massachusetts law.
(b) POWERS AND DUTIES. The General Partners shall diligently and
faithfully exercise their discretion to the best of their ability and use their
best efforts during so much of their time as may be necessary to carry out the
purposes and conduct the business of the Partnership in accordance with this
Agreement and in the best interests of the Partnership and so as, consistent
therewith, to protect the interests of the Investor Limited Partners and
Unitholders as a group. The General Partners shall have fiduciary responsibility
for the safekeeping and use of all funds and assets of the Partnership, whether
or not in its immediate possession or control, and they shall not employ or
permit another Person to employ such funds or assets in any manner except for
the exclusive benefit of the Partnership. In particular, the General Partners,
solely, shall be responsible for and shall use their best efforts and exercise
discretion to the best of their ability: (i) to cause Mortgages to be acquired,
held, and sold, exchanged or otherwise disposed of; (ii) assure the proper
application of revenues of the Partnership; (iii) to maintain proper books of
account for the Partnership and to prepare all reports of operations and tax
returns which are to be furnished to the Partners and Unitholders pursuant to
this Agreement or which are required by taxing bodies or other governmental
agencies; (iv) to maintain adequate insurance with respect to any insurable
property of the Partnership pursuant to policies of insurance in form and
coverage customary for such property; and (v) to assure the doing of all other
things which may be necessary or advisable in connection with the supervision of
the affairs, business and property of the Partnership.
(c) AMPLIFICATION OF POWERS AND DUTIES. As amplification, and not by way
of limitation on the powers expressed herein, the General Partners shall have,
subject to the provisions of this Agreement, full power and authority on behalf
of the Partnership, in order to carry out and accomplish its purposes and
functions: (i) to expend Partnership capital and income; (ii) to purchase, sell,
convey, exchange, divide, combine and otherwise transact business with respect
to interests in Mortgages, and in that connection to employ engineers,
contractors, attorneys, accountants, brokers, appraisers, and such other
consultants, advisors, artisans, and workmen as may be necessary or advisable
for the purpose; (iii) to designate depositories of the Partnership's funds, and
the terms and conditions of such deposits and drawings thereon; (iv) to borrow
money or otherwise to procure extensions of credit for the Partnership, as
security therefor to pledge, hypothecate, mortgage, assign, transfer, and
security interests in the Mortgages, to enter into reverse repurchase (resale)
agreement transactions involving such Mortgages, and in connection therewith to
execute, seal, acknowledge and deliver promissory notes, guarantees, security
and other agreements, assignments and any other written documents; (v) to
execute and deliver documents and instruments relating to real and personal
property of whatever kind and description, including, but not limited to, deeds,
mortgages, leases and other documents of title or conveyance, regulatory
agreements with governmental bodies and agencies, powers of attorney, and other
contracts, instruments and agreements of all kinds; (vi) to hold all or any
portion of the Mortgages in the name of one or more trustees, nominees or other
agents of or for the Partnership for the purpose of facilitating transactions
involving said Mortgages; (vii) to establish reserves, in their discretion, for
any proper Partnership purpose; (viii) to invest the
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proceeds of the offering of Units on an interim basis as provided in Section
6.2(a) hereof for a period of up to 24 months after the date on which the
offering of Units commences; (ix) to reinvest the proceeds of the sale or other
realization of a Mortgage if such Mortgage is repaid or sold by the Partnership
within five years after the final closing of the sale of Units; (x) to offer and
sell the Units to the public directly or through any licensed Affiliate of the
General Partners and to employ personnel, agents and dealers for such purpose;
(xi) to receive interest from the escrow agent with respect to the Subscription
Prices and to cause the first distribution to a Unitholder to include the
amount, if any, attributable to such interest on account of subscription
payments accepted prior to the initial closing of the sale of Units; (xii) to
appoint a transfer agent with respect to the Units; (xiii) to list the Units on
NASDAQ or another securities exchange or to withdraw the Units from such listing
and take such actions as they deem appropriate therefor, (xiv) to take such
steps as the General Partners determine are advisable or necessary and will not
result in any material adverse effect on the economic position of a majority in
interest of the Investor Limited Partners and the Unitholders with respect to
the Partnership m order to preserve the tax status of the Partnership as a
pass-through entity for federal income tax purposes, including, without
limitation, removing the Depositary Receipts from public trading markets,
causing the Corporate Limited Partner to cancel all Depositary Receipts and
imposing restrictions on transfers of Units or Limited Partner Interests
(provided restrictions on transfers do not cause the Partnership's Assets to be
deemed to be "plan assets" with respect to investors which are Qualified Plans);
(xv) to take such steps as the General Partners determine are advisable or
necessary and will not result in any material adverse effect on the economic
position of a majority in interest of the Investor Limited Partners and the
Unitholders with respect to the Partnership to restructure the Partnership and
its activities to obtain a prohibited transaction exemption from the Department
of Labor or to comply with any exemption in final plan asset regulations adopted
by the Department of Labor, including, but not limited to, establishing a fixed
percentage of Units permitted to be held by Qualified Plans or other tax-exempt
investors or discontinuing sales to such entities after a given date, in the
event that either the assets of the Partnership constitute "plan assets" for
purposes of ERISA or the transactions contemplated hereunder constitute
prohibited transactions under ERISA or the Code and an exemption for such
transactions is not obtainable from the Department of Labor; (xvi) to take such
steps as the General Partners determine are advisable or necessary with the
Consent of the holders of a majority of the Limited Partner Interests, to
restructure the Partnership and its activities, including amending this
Agreement, in order to enable the Partnership to qualify as a real estate
investment trust or, if possible, as a real estate mortgage investment conduit
for federal income tax purposes; and (xvii) in general to do all things and
execute all documents the General Partners shall deem necessary or convenient to
accomplish the purposes of the Partnership, or to protect and preserve the
Mortgages, to the same extent as if they owned such Mortgages individually. All
the powers of the General Partners enumerated above, except those in subsection
(xvi), maybe carried out by the General Partners and the Corporate Limited
Partner acting on behalf of the Unitholders without any canvassing of or voting
by the Unitholders.
(d) ACCEPTANCE OF UNITHOLDERS. The General Partners' right to accept as
Unitholders prospective transferees of Depositary Receipts is more fully set
forth in
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Section 7.2 hereof. The General Partners shall have the right to accept as
initial Unitholders such Persons (including the General Partners and their
Affiliates) as may acquire at least 250 Units or, in the case of IRAs and Xxxxx
Plans, 100 Units, up to an aggregate of not fewer than 250,000 Units (not
including Units purchased by the General Partners and their Affiliates) and not
more than 15,000,000 Units. Persons desiring to become initial Unitholders shall
comply with the subscription procedures established by the General Partners.
Every subscription shall be subject to acceptance by the General Partners. If
subscriptions are received and accepted respecting not fewer than 250,000 Units
(excluding Units subscribed for by the General Partners and their Affiliates),
the initial closing of the sale of Units shall occur. The General Partners will
accept or reject each subscription for Units within 30 days after they receive
it; if rejected, all subscription payments which accompanied such rejected
subscription shall be returned forthwith to the subscriber. If the Subscriber
Signature Page submitted by or on behalf of a prospective investor is incomplete
or otherwise defective, and the deficiency is not corrected, the General
Partners will reject the subscription approximately 15 days after it was
received by the Partnership. If a subscription is rejected by the General
Partners due to such a deficiency or for any other reason, the subscription
payment (or appropriate portion thereof in the case of a partial acceptance)
will be promptly returned to the prospective investor without interest or
deduction. No General Partner or Affiliate of a General Partner or any
underwriter, dealer or salesman of Units shall directly or indirectly pay or
award any finder's fee, commission or other compensation to any Person engaged
by a potential Unitholder for investment advice as an inducement to such advisor
to advise the purchase of Units; provided, however, that this provision shall
not prohibit the normal sales commission and sales incentive payable to a
registered broker-dealer or other properly licensed Person for selling Units.
Within 15 days after a successful completion of the minimum offering, the
Subscription Prices for such Units shall be contributed in cash to the
Partnership, the Corporate Limited Partner shall receive the Limited Partner
Interests corresponding to such Units, the assignment to the Unitholders and
their contractual rights under Section 7.6(b) hereof with respect to such Units
shall commence, the General Partners shall prepare and file an amendment to the
Certificate of Limited Partnership which shall reflect the contribution to the
Partnership of the Subscription Price of such Units, and the Depositary Receipts
with respect to Such Units shall be delivered to the Unitholders within 60 days
after such initial closing of the sale of Units. Thereafter, Subscription Prices
will be contributed to the Partnership and Depositary Receipts will be delivered
to Unitholders as described above until the termination of the offering of the
Units. The General Partners shall prepare and file from time to time during the
Offering of Units, and at least once every 30 days, further amendments to the
Certificate of Limited Partnership to reflect the increase of the Capital
Contribution of the Corporate Limited Partner on behalf of the Unitholders.
Until acceptance of their subscriptions by the General Partners, subscribers
will not be Unitholders, but their subscription payments will be held in trust
on their behalf and will be returned to the subscribers in the event they are
not accepted as Unitholders.
(e) MAINTENANCE OF NET WORTH. The General Partners shall at all times
use their best efforts to maintain their net worth at a sufficient level to meet
all requirements of the Code under currently applicable published rulings and
regulations of the Internal Revenue Service, as hereafter interpreted by Counsel
to the Partnership or the courts, to
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permit the Partnership to be classified for federal income tax purposes as a
partnership and not as an association taxable as a corporation, and shall,
irrespective of such requirements, maintain such net worth on a fair market
basis at an amount at least equal to $1,000,000.
(f) DELEGATION OF POWERS. Each General Partner, while there is more than
one, may act on behalf of the Partnership in connection with any particular
matter affecting the Partnership, including the authority to execute notes,
deeds, mortgages and other instruments. Except as otherwise provided under this
Agreement or by law, the General Partners may delegate all or any of their
duties under this Agreement to any of their own respective partners, officers or
employees, and in furtherance of such delegation may elect, employ, contract or
deal with any Person (including any General Partner or any Affiliate of a
General Partner).
(g) RELIANCE BY THIRD PARTIES. No Person dealing with the Partnership,
or its Mortgages, whether as mortgagee, assignee, purchaser, lessee, grantee or
otherwise, shall be required to investigate the authority of the General
Partners, or any General Partner purporting to act in behalf of the other
General Partners, in selling, assigning, leasing, mortgaging, conveying or
otherwise dealing with any Partnership Mortgages or any part thereof, nor shall
any such assignee, lessee, purchaser, mortgagee, grantee or other Person
entering into a contract with the Partnership be required to inquire as to
whether the approval of the Partners or Unitholders for any such sale,
assignment, lease, mortgage, transfer or other transaction has been first
obtained. Any such Person shall be conclusively protected in relying upon a
certificate of authority or any other material fact signed by any General
Partner, or in accepting any instrument signed by any General Partner in the
name and behalf of the Partnership or the General Partners.
6.2 LIMITATIONS ON THE EXERCISE OF GENERAL PARTNERS. The General
Partners shall have no power to take any action prohibited by this Agreement or
by the Act. Furthermore, in their administration of the Partnership's affairs,
the General Partners shall be subject to the following specific limitations:
(a) INVESTMENT OBJECTIVES AND POLICIES. The Partnership's Investment in
Mortgages shall not be less than eighty-seven percent (87%) of the gross
proceeds of the Partnership's offering of Units, and Front-End Fees and Expenses
payable from such gross proceeds shall not exceed thirteen percent (13%) of such
gross proceeds. The Partnership shall invest primarily in Participating Insured
Mortgages, but may also invest in Single-Family MBS, Multi-Family MBS, and
insured, multi-family mortgage loans. To the extent that the General Partners
determine that suitable Participating Insured Mortgages are not available for
investment of the proceeds of the offering of Units, the General Partners may,
in their sole discretion, invest such portion of said proceeds as they deem
appropriate in Other Mortgages. The General Partners shall attempt to structure
any borrowings to avoid producing unrelated business taxable income which would
obligate a tax-exempt entity holding Units to file a federal income tax return
or to pay federal income tax as a result. On an interim basis, the Partnership
may invest its funds either in (i) United States Government securities, other
United States Government guaranteed money instruments, certificates of deposit
of Qualified Banks, bank
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repurchase agreements with respect to securities of the United States Government
or governmental agencies, commercial paper issued by entities with a credit
rating equal to one of the top two rating categories of a nationally recognized
statistical rating organization, repurchase agreements with respect to MBS
guaranteed by GNMA, FNMA or FHLMC issued by financial institutions or
corporations having total assets in excess of $500 million, bankers'
acceptances, and similar money market investment or (ii) shares of public
investment companies registered with the Securities and Exchange Commission
whose assets exceed $50,000,000 and are invested in the foregoing types of
investments and held by an independent custodian. The General Partners shall
attempt to manage the Partnership's investments in Mortgages and its interim
investments to make sure that the Partnership shall not be deemed an investment
company as such term is defined in the Investment Company Act of 1940. The
Partnership shall not redeem or repurchase Limited Partnership Interests or
Units and shall not underwrite the securities of other issuers.
(b) SALES OF MORTGAGES FROM OR TO THE GENERAL PARTNERS AND THEIR
AFFILIATES. The Partnership shall not purchase or acquire any Mortgage from any
General Partner or any Affiliate of any General Partner or any Person in which
any General Partner or Affiliate has a material interest including, without
limitation, any partnership of which any General Partner or Affiliate of a
General Partner is a partner. Notwithstanding the foregoing, the General
Partners or their Affiliates may (1) originate mortgages for purchase by the
Partnership or (2) purchase a Mortgage in their own name, and assume loans in
connection therewith and temporarily hold title thereto for the purpose of
facilitating the acquisition of such Mortgage or the borrowing of money for the
Partnership, or any other purpose related to the business of the Partnership,
provided that (i) such Mortgage is purchased by the Partnership for a Purchase
Price (and related cash investment) no greater than the Purchase Price (and
related cash investment) in such Mortgage (including, without limitation, equity
payments, transfer taxes, financing and closing costs) made or agreed to be made
by the General Partners or their Affiliates, except for payment of Acquisition
Expenses to the extent permitted by this Agreement, (ii) there is no difference
in interest rates of the loans secured by the Mortgage at the time acquired by
the General Partners or their Affiliates and the time acquired by the
Partnership, and (iii) no other payment directly or indirectly arising out of
such transaction is received by, nor any other benefit conferred upon, any
General Partner or Affiliate thereof apart from compensation payable by a
Borrower to Xxxxx Mortgage Corporation for services rendered in connection with
the origination, servicing or coinsurance of Mortgages which are purchased by
the Partnership, subject to the limits on compensation mandated by HUD, GNMA,
FNMA or FHLMC or compensation otherwise permitted by this Agreement. Except as
otherwise provided herein, the Partnership shall not sell any Mortgage to any
General Partner or any Affiliate of a General Partner.
(c) NO TRANSACTIONS WITH AFFILIATED BORROWERS. The Partnership shall not
invest in any Mortgages for which the Borrower is an Affiliate of the General
Partners.
(d) LOANS TO OR FROM THE GENERAL PARTNERS AND THEIR AFFILIATES. No loans
may be made by the Partnership to any General Partner or any Affiliate of a
General Partner.
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A General Partner or any Affiliate of a General Partner may loan funds to the
Partnership but only with interest rates and other finance charges and fees not
in excess of the amounts that are charged by unrelated banks on comparable loans
for the same purpose in the locality of the property underlying or subject to
the Mortgage in connection with which the loan was made, and in no event shall
the annual interest rate charged on any such loan exceed by more than 2% the
base rate of Bank of New England, N.A., Boston, Massachusetts. In addition, (i)
to the extent that the General Partners or their Affiliates shall themselves
borrow the funds which they loan to the Partnership, the interest rates and
other finance charges charged to the Partnership shall not exceed the
corresponding amounts paid by the General Partners or their Affiliates, and (ii)
neither any General Partner nor any Affiliate of a General Partner shall make
loans to the Partnership with a prepayment charge or penalty which is evidenced
or secured by either a first or junior or all-inclusive note or mortgage except
to the extent that such prepayment charge or penalty is attributable to an
underlying encumbrance. In the event the Partnership utilizes any all-inclusive
(or "wrap-around") note issued by the Partnership to the General Partners or an
Affiliate thereof, said note shall provide that the Partnership shall receive
credit on its obligations under said note for payments made by the Partnership
directly on the underlying encumbrance and that a bank, escrow company or other
paying agent shall collect payments (other than amounts not to be applied to the
underlying encumbrance) on the all-inclusive note and make disbursements
therefrom to the holder of the underlying encumbrance prior to making any
disbursement to the holder of the all-inclusive note or, in the alternative, all
payments on the all-inclusive note and underlying notes shall be made directly
by the Partnership. In addition, no General Partner or Affiliate of a General
Partner shall receive interest on the amount of the underlying encumbrance
included in any all-inclusive note in excess of that payable to the lender on
that underlying encumbrance.
(e) EXCHANGE OF INTERESTS FOR MORTGAGES. The Partnership shall not
acquire any Mortgage in exchange for Interests in the Partnership.
(f) JOINT VENTURE INVESTMENTS. The Partnership shall not make
investments in the limited partner interests of any other program, or enter into
any joint venture or partnership which owns a particular Mortgage except with a
partnership sponsored by the General Partners or their Affiliates, with DRG or
an Affiliate of DRG, or with any other Person deemed suitable by the General
Partners. The Partnership may enter into a joint venture or partnership with an
unaffiliated Joint Venture Partner only if the Partnership acquires a
controlling interest in any such partnership or venture, unless such partnership
or joint venture is with another partnership sponsored by the General Partners
or their Affiliates as described below. For purposes hereof, the Partnership
shall be deemed to have a "controlling interest" in such partnership or venture
if the Partnership holds an interest of not less than 50% in the capital and
profits of the venture and the joint venture agreement or related documents
grants to the Partnership the joint right to make or participate in basic
management decisions concerning the sale, leasing, refinancing or other
realization of the Mortgage. The Partnership may not enter into a joint venture
or partnership with any other partnership sponsored by the General Partners or
their Affiliates unless (i) the Joint Venture Partner shares similar investment
objectives and management compensation provisions to those of the Partnership;
and (ii) the
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investments by the Partnership and such affiliated partnership are on
substantially the same terms and conditions. If the Joint Venture Partner is an
Affiliate of the Partnership, in the event of a proposed sale of the Mortgage
held by the joint venture initiated by either joint venture partner, the
Partnership must have a right of first refusal to purchase the other party's
interest. The General Partners, in their capacity as managers of the
Partnership, shall not do, or cause a joint venture to do, any act which would
not be permitted hereunder if title to the Mortgage held by such joint venture
were held directly by the Partnership, and no joint venture shall be entered
into by the Partnership which involves the payment of duplicative property
management and other fees or which would have the effect of circumventing any of
the restrictions on and prohibitions of transactions involving conflicts of
interest contained herein. The General Partners may permit one or more Joint
Venture Partners to acquire or retain an equity interest in any joint venture
which owns a particular Mortgage for any consideration deemed appropriate and
fair by the General Partners under the circumstances including the contribution
of an equity interest in property, a right to purchase property, cash or other
property. The Partnership may permit any Person deemed suitable by the General
Partners, which may include without limitation DRG, Affiliates of DRG, and a
partnership sponsored by the General Partners or their Affiliates, to acquire
MBS which represent interests in mortgage loans that also underlie Mortgages
held by the Partnership. Should another Person acquire an interest in an MBS
backed by a property with respect to which the Partnership holds a Participating
insured Mortgage, the Partnership may grant such other Person an interest in the
current income stream and/or the residual value of such property.
(g) LIMITATIONS ON INVESTMENTS IN OTHER MORTGAGES. To the extent the
Partnership invests in Other Mortgages, the following restrictions shall apply
with respect to such Other Mortgages only: (i) the Partnership will not invest
in Other Mortgages on any one underlying property which would exceed, in the
aggregate, an amount equal to 20% of the Capital Contributions of the Limited
Partners; (ii) the Partnership will not invest in Other Mortgages to or from any
one Borrower which would exceed, in the aggregate, an amount greater than 20% of
the Capital Contributions of the Limited Partners; (iii) the Partnership shall
not invest in real estate contracts of sale otherwise known as land sale
contracts, unless such contracts of sale are in recordable form and are
appropriately recorded in the chain of title; (iv) the Partnership shall not
invest in Other Mortgages on any unimproved real property in an amount in excess
of 25% of the Capital Contributions of the Limited Partners; (v) the Partnership
shall not invest in Other Mortgages on any one property if the aggregate amount
of all mortgage loans outstanding on the property, including the mortgage loans
of the Partnership, would exceed an amount equal to 85% of the appraised value
of the property as determined by an independent appraisal unless substantial
justification exists because of the presence of other underwriting criteria; and
(vi) the Partnership may borrow money to the extent necessary to prevent
defaults under existing loans, as when the Partnership has taken over the
operation of property and there is a need for additional capital. The
limitations contained in this Section 6.2(g) shall not apply to investments in
Participating Insured Mortgages or other MBS.
6.3 LIABILITY FOR ACTS OR OMISSIONS AND INDEMNIFICATION. No General
Partner or Affiliate of a General Partner shall be liable, responsible or
accountable in damages to
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any of the Partners, Unitholders or the Partnership for any act or omission of
any General Partner in good faith on behalf of the Partnership and in a manner
reasonably believed by such General Partner to be within the scope of the
authority granted to the General Partners by this Agreement and in the best
interests of the Partnership, except for acts or omissions constituting
negligence, misconduct or breach of fiduciary duty. The General Partners and
their respective Affiliates performing services within the scope of the General
Partners' duties shall be entitled to indemnity from the Partnership for any
loss, damage, or claim by reason of any act or omission performed or omitted by
the General Partners or such Affiliates in good faith on behalf of the
Partnership and in a manner reasonably believed by the General Partners to be
within the scope of the authority granted to the General Partners by this
Agreement and in the best interests of the Partnership, except that they shall
not be entitled to be indemnified in respect of any loss, damage or claim
incurred by reason of negligence, misconduct, or breach of fiduciary duty. Any
indemnity under this Section shall be provided out of and to the extent of
Partnership assets only, and no Partner shall have or incur any personal
liability on account thereof. In no event shall the Partnership assume the cost
of any portion of liability insurance which would insure the General Partners or
any of their Affiliates for any liability as to which the General Partners or
their Affiliates are prohibited from being indemnified by the Partnership.
The Partnership shall not advance any funds to any General Partner or
Affiliate of a General Partner for legal expenses and other costs incurred as a
result of any legal action initiated against such General Partner or its
Affiliates by any Investor Limited Partner or Unitholder of the Partnership.
Notwithstanding the foregoing, the Partnership may provide such advances to the
General Partners or their Affiliates for legal expenses and other costs incurred
as a result of legal action if the following three conditions are satisfied: (i)
the legal action relates to the performance of duties or services by the General
Partners or their Affiliates on behalf of the Partnership; (ii) the legal action
is initiated by a third party who is not an Investor Limited Partner or
Unitholder of the Partnership, and (iii) the General Partners or their
Affiliates undertake to repay the advanced funds to the Partnership in cases in
which they would not be entitled to indemnification.
Notwithstanding the foregoing, neither the General Partners nor any of
their respective Affiliates nor any broker-dealer shall be indemnified for
liabilities arising under federal and state securities laws unless (i) there has
been a successful adjudication on the merits of each count involving alleged
securities law violations as to the particular indemnitee, and a court approves
indemnification of litigation costs, or (ii) such claims have been dismissed
with prejudice on the merits by a court of competent jurisdiction as to the
particular indemnitee and a court approves indemnification of litigation costs,
or (iii) a court of competent jurisdiction approves a settlement of the claims
against a particular indemnitee and finds that indemnification of the settlement
and related costs should be made. In any claim for indemnification for federal
or state securities law violations, the party seeking indemnification shall
place before the court the position of the Securities and Exchange Commission,
the Massachusetts Securities Division and the
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State Securities Commissioners with respect to the issue of indemnification for
securities law violations.
6.4 COMPENSATION OF THE GENERAL PARTNERS AND THEIR AFFILIATES. The
General Partners and their Affiliates shall be entitled to receive from the
Partnership the following amounts in addition to distributions made to them
pursuant to Section 8 hereof:
(a) The Partnership is authorized to enter into a Sales Agent Agreement
with Xxxxx Securities Corporation under which Xxxxx Securities Corporation shall
agree to act as managing underwriter for the offering of Units made pursuant to
Section 6.1(d) hereof. Xxxxx Securities Corporation will in turn enter into
Selected Dealer Agreements with participating selected dealers. Pursuant to the
Sales Agent Agreement and the Selected Dealer Agreements, Xxxxx Securities
Corporation or the participating selected dealers, as the case may be, shall be
entitled to receive out of the gross proceeds of such offering the following
compensation: (1) a sales commission of up to a maximum of $35 (3.5%) per $1,000
of Units sold and (2) an accountable reimbursement of due diligence expenses
incurred by prospective selected dealers up to a maximum of $5 (1/2%) per
$1,000 of Units sold.
(b) For services rendered in connection with the acquisition of
Mortgages by the Partnership, the Partnership shall pay to the General Partners
or their Affiliates at the initial closing and each closing thereafter of the
sale of Units an Acquisition Fee of 2.9% of the gross proceeds of the offering
of Units. Such Acquisition Fee will be reduced, however, to the extent of any
amounts paid to non-affiliated Originators by the Borrowers of the loans secured
by such Mortgages as part of the origination fee in recognition of the
participation feature of the Participating Insured Mortgages which non
affiliated Originators may collect and pay over to the General Partners. In
addition, the Partnership shall reimburse the General Partners and their
Affiliates for accountable Acquisition Expenses incurred up to 0.5% of the gross
proceeds of the offering of Units and will pay the General Partners and their
Affiliates a non-accountable Acquisition Expense allowance of 1.5% of the gross
price of the offering. In the event that any other fee or commission is incurred
by the Partnership in connection with the selection or purchase of any Mortgage
by the Partnership, whether designated as a commission, acquisition fee,
finder's fee, selection fee, consulting fee or any fee of similar nature however
designated and however treated for tax or accounting purposes, it shall be paid
by the General Partners and their Affiliates out of the Acquisition Fee.
(c) For services to be rendered in connection with the servicing of the
participation features of the Participating Insured Mortgages throughout their
term and upon their sale or other realization, the Partnership shall prepay the
General Partners or their Affiliates at the initial closing and each closing
thereafter a Participation Servicing Fee equal to 1.6% of the gross proceeds of
the offering of Units.
(d) For services rendered in managing the business of the Partnership,
the Partnership shall pay to the General Partners or their Affiliates, subject
to the provisions of Section 6.4(f) hereof, an Asset Management Fee equal to
0.75% per annum of the value of the Total Invested Assets of the Partnership,
payable quarterly.
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(e) For services rendered in managing the business of the Partnership,
the Partnership shall pay to the General Partners or their Affiliates, subject
to the provisions of Section 6.4(f)hereof, an Incentive Management Fee in an
amount equal to 0.3% per annum of the Partnership's Total Invested Assets, but
payment of such Fee will be subordinated to the extent necessary for the
Unitholders and Investor Limited Partners to receive under Section 8.2 an amount
for such year equal to a 10% non-cumulative annual return on their Invested
Capital.
(f) The total fees payable to the General Partners or their Affiliates
under Sections 6.4(d) and 6.4(e) hereof shall not exceed 10% of Distributable
Cash Flow over the life of the Partnership.
(g) Subject to the provisions of Section 12.4 hereof, the Partnership
shall reimburse the General Partners and their Affiliates for certain expenses
incurred in connection with the organization and operation of the Partnership,
the offering of Units and the acquisition and disposition of Mortgages.
Front-End Fees and Expenses, including the Origination Fees, if any, will not
exceed 16% of the gross proceeds of the Partnership's offering.
(h) Neither the General Partners nor their Affiliates shall be
reimbursed by the Partnership for services for which they are being compensated
by way of fees described in Subsections 6.4(d) and (e) above. However, the fees
described in such Subsections are not compensation for the costs of those
certain administrative functions for which the General Partners or their
Affiliates are entitled to reimbursement pursuant to Section 12.4 hereof, nor
are any of the fees described in this Section 6.4 compensation for the fees
payable by Borrowers to Xxxxx Mortgage Corporation for services rendered in
connection with the origination, servicing or coinsurance of Mortgages purchased
by the Partnership subject to the limits on compensation mandated by HUD, GNMA,
FNMA, or FHLMC.
6.5 OTHER INTERESTS OF THE GENERAL PARTNERS AND THEIR AFFILIATES. Any
General Partner and any Affiliate of a General Partner may engage in or possess
an interest in other business ventures (unconnected with the Partnership) of
every kind and description, independently or with others including, but not
limited to, serving as general partners of other partnerships, participating in
all aspects of the Mortgage markets, which shall include, without limitation,
acquisition, origination, ownership, syndication and disposition of Mortgages,
and participating in the real estate business in all of its phases, which shall
include, without limitation, ownership, operation, financing, construction,
management, syndication and development of real property and which may include
properties competitive with a property underlying any Mortgage. The General
Partners will devote such time to the affairs of the Partnership and each other
such partnership as they, within their sole discretion, deem necessary for the
proper performance of their duties. Neither the Partnership, the Limited
Partners nor the Unitholders (except for the General Partners and their
Affiliates) shall have any rights in and to such independent ventures or the
income or profits therefrom by reason of the General Partners' position with the
Partnership. Neither the General Partners nor any Affiliate of the General
Partners shall be obligated to present any particular investment opportunity to
the
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Partnership even if such opportunity is of a character which, if presented to
the Partnership, could be taken by the Partnership, and each of the Genera
Partners and their Affiliates shall have the right to take for their own account
(individually or otherwise) or to recommend to others any such particular
investment opportunity. Notwithstanding the foregoing, while the Partnership has
available uncommitted funds to invest in additional Mortgages, the General
Partners shall not commit any Mortgage for investment to their own account or to
any non-specified Mortgage partnership subsequently sponsored by the General
Partners or their Affiliates unless the General Partners determine that such
Mortgage would not be a suitable investment for the Partnership or that the
Partnership then has insufficient funds to make such investment. The General
Partners shall make such determination on the basis of the investment policies
and objectives set forth in Section 6.2(a) hereof. Subject to the other
provisions of this Agreement, the Partnership may employ or transact business
with any Person, notwithstanding the fact that any Partner or Unitholder or any
of his Affiliates may have (or have had) an interest in or connection with such
Person, and neither the Partnership, the other Partners nor the Unitholders
shall have any rights by virtue of this Agreement in or to any income or profits
derived therefrom. Nothing herein shall be deemed to diminish the General
Partners' overriding fiduciary obligation to the Partnership or to act as a
waiver of any right or remedy the Partnership or other Partners or Unitholders
may have in the event of a breach by a General Partner of such obligation.
6.6 OTHER TRANSACTIONS INVOLVING THE GENERAL PARTNERS AND THEIR
AFFILIATES. Except as specifically permitted in Sections 6.4 and 12.4 hereof and
other Sections of this Agreement, the General Partners are prohibited from
entering into any agreements, contracts or arrangements on behalf of the
Partnership with any General Partner or any Affiliate of any General Partner.
Such prohibition shall include, without limitation, the following: (a) neither a
General Partner nor any such Affiliate shall be given an exclusive right to sell
or exclusive employment to sell Mortgages for the Partnership; and (b) neither
the General Partner nor any such Affiliate shall receive directly or indirectly
a commission or fee (but may receive reimbursements of expenses incurred) in
connection with the reinvestment of the proceeds of the sale. In addition, in
connection with any property management or other agreement entered into by the
Partnership with any General Partner or any Affiliate of the General Partner, no
rebates or "give-ups" may be received by a General Partner or any such
Affiliate, nor may the General Partner or any such Affiliate participate in any
reciprocal business arrangements which would have the effect of circumventing
any of the provisions of this Agreement.
Section 7. LIMITED PARTNERS AND UNITHOLDERS; CORPORATE LIMITED PARTNER;
DEPOSITARY RECEIPTS.
7.1 CLASSES OF LIMITED PARTNERS AND UNITHOLDERS. There shall be one
class of Limited Partner Interests held by the Corporate Limited Partner and,
under certain circumstances, by Unitholders who become Investor Limited
Partners. Subject to the provisions of Section 9 of this Agreement, a Withdrawn
General Partner, or his estate or legal representatives may also be treated as a
Limited Partner (but not as an Investor or
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Corporate Limited Partner) in respect of any Interest formerly held as a General
Partner in the manner specified in Section 9.3(b) hereof.
7.2 TRANSFERABILITY OF UNITS. The General Partners' right to accept
initial subscribers as Unitholders is set forth in Section 6.1 hereof. Each
prospective transferee of a Depositary Receipt may be accepted by the General
Partners as a Unitholder if such transferee provides the General Partners with
(i) information, including name, address, status as a tax-exempt entity or
non-resident alien, such information as may be necessary or appropriate to
determine suitability under applicable securities laws, and such other
information as the General Partners may request, and (2) a fee of not more than
$10.00 (not including related brokerage commissions) to reimburse the
Partnership for its costs respecting the transfer. The General Partners, in
their sole discretion, may waive the transfer fee of not more than $10.00 in
order to comply with the quotation requirements of NASDAQ or the listing
requirements of a securities exchange. The General Partners will use their best
efforts to accept or reject a prospective transferee as a Unitholder within the
same month as it receives such information. If a prospective transferee is not
accepted by the General Partners, such prospective transferee shall have no
right to any distributions or allocations of the Partnership and shall have no
other rights, obligations or duties under this Agreement with respect to the
Partnership.
The General Partners shall accept a prospective transferee unless a
transfer restriction applies. The General Partners shall reject a prospective
transferee if any of the following transfer restrictions applies.
Notwithstanding the foregoing, the General Partners may, in their sole
discretion, waive the restrictions on transfer in clauses (a) and/or (d) if
necessary in order to comply with the quotation requirements of NASDAQ or the
listing requirements of a securities exchange.
(a) The prospective transferee is not suitable under applicable federal
or state securities laws;
(b) The prospective transferee is not a "United States person" within
the meaning of Section 7701(a)(30) of the Code, unless the General Partners
determine that such transfers would not impose unduly burdensome reporting or
withholding requirements on the Partnership;
(c) The transfer would cause the assets of the Partnership to be "plan
assets" or the transactions contemplated hereunder to be prohibited transactions
under ERISA or the Code;
(d) The transfer is a transfer of fewer than 100 Units, except for
transfer by will or intestacy upon the death of the transferor or by operation
of law, or unless the transferor owns fewer than 100 Units, in which case the
transferor may transfer all of such Units; or
(e) The transfer would cause the Partnership to terminate under
Section 708 of the Code.
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The General Partners may impose additional transfer restrictions in
accordance with Section 6.1(c) hereof. The Depositary Receipts evidencing the
Units shall be transferable after the first distribution from the Partnership of
Distributable Cash Flow under Section 8.2 hereof following the termination of
the offering. Transfers of Depositary Receipts shall be effective on the date of
acceptance by the General Partners.
7.3 ABSENCE OF CONTROL OVER PARTNERSHIP BUSINESS. The Limited Partners
and Unitholders hereby consent to the exercise by the General Partners of the
powers conferred on them by this Agreement. No Limited Partner or Unitholder
(except one who may also be a General Partner, and then only in his capacity as
General Partner) shall participate in or have any control over the Partnership
business or have any right or authority to act for or to bind the Partnership.
No Limited Partner or Unitholder shall have the right to have the Partnership
dissolved and liquidated or to have his Capital Contribution returned except as
provided in this Agreement.
7.4 LIMITED LIABILITY. The liability of each Limited Partner in his
capacity as a Limited Partner shall be limited to the amount of his Capital
Contribution, and the liability of each Unitholder in his capacity as a
Unitholder shall be limited to the amount of his Subscription Price described in
Section 5.2 hereof. No Limited Partner, in his capacity as Limited Partner, and
no Unitholder, in his capacity as Unitholder, shall have any further obligations
to the Partnership or be required to contribute any capital or loan any funds to
the Partnership; provided, however, that nothing herein shall relieve the
Limited Partners or Unitholders of any liability imposed under law, including
but not limited to their liability under the Massachusetts Uniform Limited
Partnership Act for the amount of returned Capital Contributions to the extent
necessary to discharge the Partnership's liabilities to creditors who extend
credit to the Partnership during the period the Capital Contribution was held by
the Partnership. Each Unitholder assumes and agrees to pay or to reimburse the
Corporate Limited Partner with respect to any such liability of the corporate
Limited Partner with respect to the Limited Partner Interests corresponding to
his or its Units.
Notwithstanding the above or Section 7.6(d) hereof, no Unitholder in his
capacity as Unitholder shall be liable for acts of the Corporate Limited Partner
which constitute participation in the control of the Partnership under the
Massachusetts Uniform Limited Partnership Act unless such acts were authorized
by the Unitholders.
7.5 ADMISSION OF INVESTOR AND SUBSTITUTE LIMITED PARTNERS. The General
Partners shall prepare and file from time to time after the initial offering of
Units, and in any event not less frequently than quarterly, amendments to the
Certificate of Limited Partnership to admit Investor Limited Partners and
Substitute Limited Partners pursuant to Sections 7.6(h) and 10 hereof.
7.6 RELATIONSHIP BETWEEN CORPORATE LIMITED PARTNER AND UNITHOLDERS;
DEPOSITARY RECEIPTS.
(a) ISSUANCE OF DEPOSITARY RECEIPTS. Upon the contribution of the
Subscription Price for a Unit to the capital of the Partnership under Sections
5.2 and
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6.1(d) hereof, the Corporate Limited Partner shall receive the Limited Partner
Interest corresponding to such Unit, the assignment to the Unitholder and his
contractual rights under Section 7.6(b) hereof shall commence, the Units will be
deemed deposited by the Unitholders with the Depositary, the Depositary Receipts
will be issued by the Depositary, and a Depositary Receipt registered in the
name of the Unitholder will be delivered to him. Depositary Receipts will be
issued in registered form only, except in the case of the Reinvestment Agent and
except as may otherwise be permitted by the General Partners in their sole
discretion. The Corporate Limited Partner shall act as Depositary with respect
to all Units. By subscribing for a Unit and by the General Partner's acceptance
of such subscription, a Unitholder shall be deemed to have assented to all the
terms and conditions of this Agreement.
(b) ASSIGNMENT AND COVENANT BY CORPORATE LIMITED PARTNER. The Corporate
Limited Partner, by the execution of this Agreement, irrevocably transfers and
assigns, to the extent permitted by the Massachusetts Uniform Limited
Partnership Act, to the Unitholders all of the Corporate Limited Partner's
rights and interest in and to the Limited Partner Interests corresponding to the
Units, including the right to distributions, including liquidating distributions
of the Partnership, as of the time of release to the Partnership of the
Subscription Price for each such Unit. At the same time, the Corporate Limited
Partner, by the execution of this Agreement, agrees and covenants that it will
exercise any other rights with respect to each Limited Partner interest solely
in favor of, in the interest of, and at the direction of the Unitholder whose
Unit corresponds to such Limited Partner Interest. The Corporate Limited Partner
shall remain a Limited Partner of the Partnership with respect to the Limited
Partner Interests corresponding to the Units, notwithstanding the assignment of
its rights and interests under this Section 7.6(b).
(c) CONSENT TO ASSIGNMENT AND COVENANT. The General Partners, by the
execution of this Agreement, irrevocably consent to and acknowledge that (1) the
foregoing assignment and covenant by the Corporate Limited Partner to the
Unitholders with respect to the corporate Limited Partner's rights and interest
in the Limited Partner Interests corresponding to the Units as described above
is effective and (2) the Unitholders are intended to be assignees of record and
third party beneficiaries of all rights and privileges of the Corporate Limited
Partner in respect of the Limited Partner Interests corresponding to their
Units. The General Partners covenant and agree that, in accordance with the
foregoing assignment and covenant of the Corporate Limited Partner, all the
Corporate Limited Partner's rights and privileges in respect of the underlying
Limited Partner Interests may be exercised by the Unitholders on an
Interest-by-Interest basis or, if not permitted to be exercised by the
Unitholders under Massachusetts law, then by the Corporate Limited Partner on an
Interest-by-Interest basis as provided by Section 7.6(e) hereof.
(d) NO LIABILITY OF CORPORATE LIMITED PARTNER. The Corporate Limited
Partner shall not be liable to any Unitholder for any action or nonaction by it
taken or omitted: (1) in good faith and without negligence or misconduct and (2)
in reliance upon advice, written notice, request or direction from a Unitholder
believed by it to be genuine and to have been signed or presented by the proper
person or persons. The Unitholders and Investor Limited Partners and not the
Corporate Limited Partner shall be liable to the
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Partnership or any third party for any obligations for which limited partners
are liable under this Agreement or applicable law in accordance with Section
7.4, and each Unitholder assumes, and agrees to pay or to reimburse the
Corporate Limited Partner with respect to, any such liability applicable to his
Unit.
(e) VOTING. In the event that the Unitholders are not permitted to
exercise any voting or similar rights in the Partnership directly, the Corporate
Limited Partner shall canvass the preferences of all Unitholders on all matters
submitted to a vote of the Limited Partners, and the Corporate Limited Partner
shall vote each underlying Limited Partner Interest only in accordance with the
directions of the Unitholder whose Unit corresponds to such interest, with each
Unit (and, therefore, each Limited Partner Interest) entitled to one vote. The
Corporate Limited Partner shall only vote the Limited Partner Interests held by
it in accordance with, and to the extent of, written instructions received from
the Unitholders. All voting shall be conducted in accordance with Section 13
hereof.
(f) CALLING MEETINGS. Unitholders, individually or collectively with
Investor Limited Partners, owning directly or indirectly 10% or more of the
outstanding Limited Partner Interests, may exercise the rights of Limited
Partners to call a meeting by written notice to the Corporate Limited Partner
and the General Partners. Within ten business days after receipt of such notice,
the Corporate Limited Partner shall request a meeting in accordance with the
procedures set forth in Section 13.1 hereof.
(g) ALLOCATIONS AND DISTRIBUTIONS. The portion of Profits or Losses for
Tax Purposes and distributions which shall be credited to the account of the
Corporate Limited Partner for the benefit of Unitholders shall be allocated and
apportioned among the Unitholders in the same manner as Profits or Losses for
Tax Purposes and distributions are allocated and apportioned among Limited
Partners with respect to the underlying Limited Partner Interests in Section 8
of this Agreement.
(h) EXCHANGE OF UNITS FOR LIMITED PARTNER INTERESTS. Any Unitholder who
desires to exchange all of his Units for Limited Partner Interests may do so by
delivering to the Depositary his Depositary Receipts and transfer applications
(which are available upon request from the Depositary), and the payment of a fee
of $50.00 per transaction, for legal and administrative costs and filing fees
the effective date of any such exchange shall be the first day of the month
following the date as of which the General Partners file an amendment to the
Certificate of Limited Partnership listing the name of such Unitholder as an
Investor Limited Partner. Such an amendment shall be filed no later than 15 days
after the completion of any fiscal quarter of the Partnership in which a Unit is
exchanged for a Limited Partner Interest. Persons who effect such conversion
will receive one Limited Partner Interest for each Unit they exchange and will
not be able to re-exchange Limited Partner Interests for Units. In accordance
with Section 5.4 hereof, the Capital Account of the Corporate Limited Partner
shall be reduced by an amount equal to the capital account of such former
Unitholder, and such amount will be credited to the Unitholder's Capital Account
as an Investor Limited Partner. Units which have been converted into Limited
Partner Interests will be cancelled and will not be reissued. If Units shall be
exchanged for Limited Partner Interests as a result of a requirement
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imposed by the General Partners under Section 6.1(c) hereof or by applicable
law, there shall be no fee charged by the Partnership with respect to the
transaction.
Section 8. ALLOCATIONS AND DISTRIBUTIONS.
8.1 ALLOCATIONS OF PROFITS OR LOSSES FOR TAX PURPOSES.
(a) OPERATING PROFITS OR LOSSES. Prior to the initial closing of the
sale of Units, the Profits or Losses for Tax Purposes of the Partnership, and
any other items not otherwise specifically allocated under this Section 8.1,
shall be allocated to the Corporate Limited Partner and the General Partners in
proportion to their respective Capital Contributions. Commencing with the date
of the initial closing of the sale of Units, the Profits or Losses for Tax
Purposes, and any other items not otherwise specifically allocated under this
Section 8.1, of the Partnership, other than Profits or Losses of the Partnership
arising from a Capital Transaction and the Terminating Capital Transaction, for
each fiscal year (or portion thereof) shall be determined as of the end of such
fiscal year, or portion thereof, and allocated ninety-seven percent (97%) to the
class comprised of the Limited Partners, and three percent (3%) to the class
comprised of the General Partner.
(b) PROFITS FOR TAX PURPOSES FROM A CAPITAL TRANSACTION. The Profits for
Tax Purposes of the Partnership arising from a Capital Transaction shall be
allocated as follows:
FIRST, to the class comprised of the Limited Partners to the extent of cash
distributions pursuant to Section 8.3(a) FIRST attributable to the return of
Invested Capital;
SECOND, to the class comprised of the General Partners to the extent of
cash distributions pursuant to Section 8.3(a) SECOND attributable to the return
of Invested Capital;
THIRD, to the class comprised of the Limited Partners and to the class
comprised of the General Partners to the extent of cash distributions pursuant
to Section 8(a) THIRD;
FOURTH, to the class comprised of the General Partners to the extent of
cash distributions to the class comprised of the General Partners pursuant to
Section 8.3(a) FOURTH; and
FIFTH, any remaining Profits for Tax Purposes shall be allocated ninety-six
percent (96%) to the class comprised of the Limited Partners and four percent
(4%) to the class comprised of the General Partners.
(c) PROFITS FOR TAX PURPOSES FROM THE TERMINATING CAPITAL TRANSACTION.
The Profits for Tax Purposes arising from the Terminating Capital Transaction
and the winding up of the affairs of the Partnership shall be allocated among
the Partners (treating the classes comprised of the Limited Partners and the
General Partners as separate classes for such allocation) as follows:
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FIRST, to each class of Partners (without preference over the other class
of Partners) in the amount as to each class equal to (or if less than, in
proportion to) the aggregate of the then negative balances (if any) in the
Capital Accounts of the Partners of such class;
SECOND, to the class comprised of the Limited Partners until the aggregate
of the positive balances in the Capital Accounts of the Partners of such class
is equal to its Invested Capital;
THIRD, to the class comprised of the General Partners until the aggregate
of the positive balances in the Capital Accounts of the Partners of such class
is equal to its Invested Capital;
FOURTH, ninety-nine percent (99%) to the class comprised of the Limited
Partners and one percent (1%) to the class comprised of the General Partners
until the class comprised of the Limited Partners has been allocated an amount
of Profits equal to the Cumulative Return on Invested Capital less the sum of
(i) all amounts of cash whenever distributed to such class pursuant to Section
8.2 and (ii) all amounts of cash whenever distributed to such class pursuant to
Section 8.3(a) THIRD;
FIFTH, to the class comprised of the General Partners until such class has
been allocated an amount of Profits such that the sum of such amount and all
amounts of Profits whenever allocated pursuant to Section 8.1(b) THIRD and
FOURTH and Section 8.1(c) FOURTH equals four percent (4%) of all amounts
whenever distributed of the Net Cash Proceeds of the Terminating Capital
Transaction and all other Capital Transactions whenever occurring; and
SIXTH, any remaining Profits shall be allocated ninety-six percent(96%) to
the class comprised of the Limited Partners and four percent (4%) to the class
comprised of the General Partners.
(d) LOSSES FOR TAX PURPOSES FROM A CAPITAL TRANSACTION. All Losses for
Tax Purposes attributable to a Capital Transaction shall be allocated
ninety-seven percent (97%) to the class comprised of the Limited Partners and
three percent (3%) to the class comprised of the General Partners.
(e) LOSSES FOR TAX PURPOSES FROM THE TERMINATING CAPITAL TRANSACTION.
Losses for Tax Purposes attributable to the Terminating Capital Transaction and
the winding-up of the affairs of the Partnership shall be allocated to the
Partners to the extent of, and any excess in proportion to, the positive
balances in their Capital Accounts (adjusted as though the Partnership's fiscal
year ended immediately prior to the event giving rise to such Losses).
(f) ONE PERCENT INTEREST OF GENERAL PARTNERS. Notwithstanding anything
to the contrary that may be expressed or implied in this Agreement, the
interests of all of the General Partners, taken together, in each item of
Partnership income, gain, loss, deduction, or credit will be equal to at least
one percent (1%) of each of those items at all
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times during the existence of the Partnership. In determining the interests of
the General Partners in those items, any Limited Partner Interests owned by the
General Partners shall not be taken into account.
(g) QUALIFIED INCOME OFFSET. Notwithstanding anything in Section 8.1(a)
to the contrary, if, at the end of any taxable year, any Partner has a negative
Capital Account (beyond the amount of such negative Capital Account such Partner
is required to restore to the Partnership as a result of (a) allocations of loss
or deduction (other than those attributable to nonrecourse debt of the
Partnership) to such Partner pursuant to Code Section 706(d) or Treasury
Department Regulations Section 1.751-(b)2(ii) or (b) distributions to such
Partner, which allocations or distributions could not reasonably have been
expected to occur as of the end of the prior taxable year (such negative Capital
Account referred to hereafter as a "Qualified Income Offset Account"), then
items of income and gain shall be allocated to such Partner (or among all
Partners in proportion to their respective Qualified Income Offset Accounts) to
the extent of such Qualified Income Offset Account as quickly as possible.
(h) INTEREST ON SUBSCRIPTION PRICES. Notwithstanding anything in Section
8.1(a) to the contrary, interest income of the Partnership with respect to
Subscription Prices for Units on account of the period of time prior to the
Initial closing of the sale of Units shall be allocated to each Unit in the same
amount as the portion of Distributable Cash Flow, if any, to be distributed with
respect to such Unit attributable to the receipt by the Partnership of such
interest with respect to such Subscription Price.
8.2 DISTRIBUTABLE CASH FLOW.
Distributable Cash Flow of the Partnership shall be distributed
ninety-seven percent (97%) to the class comprised of the Limited Partners and
three percent (3%) to the class comprised of the General Partners, except that a
portion of Distributable Cash Flow shall be distributed with respect to each
Unit in the amount, if any, equivalent to the interest received by the
Partnership net of escrow expense with respect to the Subscription Price for
such Unit on account of the period of time prior to the initial closing of the
sale of Units.
8.3 PROCEEDS OF CAPITAL TRANSACTIONS AND THE TERMINATING CAPITAL
TRANSACTION.
(a) CAPITAL TRANSACTION PROCEEDS. Net Cash Proceeds of a Capital
Transaction other than the Terminating Capital Transaction shall be distributed
as follows:
FIRST, to the class comprised of the Limited Partners until such class has
received a return of its total Invested Capital;
SECOND, to the class comprised of the General Partners until such class has
received a return of its total Invested Capital;
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THIRD, ninety-nine percent (99%) to the class comprised of the Limited
Partners and one percent (1%) to the class comprised of the General Partners
until the class comprised of the Limited Partners has received an amount equal
to the Cumulative Return on Invested Capital less the sum of (i) all amounts of
cash whenever distributed to such class pursuant to Section 8.2, and (ii) all
amounts of cash whenever distributed to such class pursuant to this Section
8.3(a) THIRD (which distributions were made due to a prior Capital Transaction);
FOURTH, to the class comprised of the General Partners until such class has
received an amount such that the sum of such amount and all amounts of cash
whenever distributed to such class previously distributed pursuant to Section
8.3(a) THIRD and FOURTH equals four percent (4%) of all amounts whenever
distributed of the Net Cash Proceeds of the current and all prior Capital
Transactions; and
FIFTH, any remaining Net Cash Proceeds shall be distributed ninety-six
percent (96%) to the class comprised of the Limited Partners and four percent
(4%) to the class comprised of the General Partners.
(b) TERMINATING CAPITAL TRANSACTION PROCEEDS. Net Cash Proceeds of the
Terminating Capital Transaction and the winding up of the affairs of the
Partnership shall be distributed as follows:
FIRST, to each class of Partners in the amount as to each class equal to
(or if less than, in proportion to) the aggregate of the then positive balances
(if any) in the Capital Accounts of the Partners of such class;
SECOND, to the class comprised of the Limited Partners until such class has
received a return of its total Invested Capital;
THIRD, to the class comprised of the General Partners until such class has
received a return of its total Invested Capital;
FOURTH, ninety-nine percent (99%) to the class comprised of the Limited
Partners and one percent (1%) to the class comprised of the General Partners
until the class comprised of the Limited Partners has received an amount equal
to the Cumulative Return on Invested Capital less the sum of (i) all amounts of
cash whenever distributed to such class pursuant to Section 8.2, and (ii) all
amounts of cash whenever distributed to such class pursuant to Section 8.3(a)
THIRD;
FIFTH, to the class comprised of the General Partners until such class has
received an amount such that the sum of such amount and all amounts of cash
whenever distributed to such class pursuant to Section 8.3(a) THIRD and FOURTH
and Section 8.3(b) FOURTH equals four percent (4%) of all amounts whenever
distributed of the Net Cash Proceeds of the Terminating Capital Transaction and
all other Capital Transactions whenever occurring; and
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SIXTH, any remaining Net Cash Proceeds shall be distributed ninety-six
percent (96%) to the class comprised of the Limited Partners and four percent
(4%) to the class comprised of the General Partners.
8.4 SPECIAL PROVISIONS FOR ALLOCATIONS AND DISTRIBUTIONS.
(a) Subject to the provisions of Sections 8.4(d) and 8.4(e) hereof, and
to allocation (if any) to Partners in accordance with their respective Capital
Accounts of Profits and Net Cash Proceeds from the Terminating Capital
Transaction pursuant to Sections 8.1(c) FIRST and 8.3(b) FIRST, all Profits or
Losses for Tax Purposes of the Partnership allocated to, and distributions of
cash made to, the classes of Partners consisting of the Limited Partners and the
General Partners shall be allocated among the respective members of such classes
as follows: (1) among the Limited Partners, in proportion to their respective
number of Interests, and (2) to the General Partners, in proportion to their
respective Invested Capital.
(b) All Profits or Losses for Tax Purposes allocated to, and
distributions of cash made to, the Partners shall be credited or charged, as the
case may be, to their Capital Accounts as of the date as of which such Profits
or Losses for Tax Purposes are allocated and the date as of which distributions
of cash are made. All distributions made to the Partners pursuant to the
provisions of Section 8.2 hereof shall be treated as having been made and
charged to their respective Capital Accounts prior to the allocation of Profits
or Losses for Tax Purposes pursuant to Section 8.1; distributions under Section
8.3(a) shall be treated as having been made and charged to their respective
Capital Accounts prior to the allocation of Profits for Tax Purposes pursuant to
Section 8.1(b) and prior to the allocation of Losses for Tax Purposes pursuant
to Section 8.1(d); distributions under Section 8.3(b) shall be treated as having
been made and charged to their respective Capital Accounts after the allocation
of all Profits or Losses for Tax Purposes pursuant to Section 8.1. The Profits
or Losses for Tax Purposes of the Partnership allocated among the Partners
pursuant to Section 8.1(a) shall be credited or charged to their respective
Capital Accounts prior to the allocation of Profits or Losses for Tax Purposes
of the Partnership pursuant to Sections 8.1(b), (c), (d) and (e).
(c) The Partnership shall make distributions of Distributable Cash Flow
for each quarter commencing with the quarter in which the initial closing of the
sale of Units occurs. Within 60 days after the completion of each of the first
three quarters of each of the Partnership's fiscal years, the Partnership will
make a distribution of Distributable Cash Flow, which distribution will be based
upon an estimate by the General Partners of the Partnership's total
Distributable Cash Flow for such year. Within 60 days after the end of each
fiscal year, the Partnership's Distributable Cash Flow for such year will be
determined and, after giving effect to the amount of Distributable Cash Flow
previously distributed, the remainder will then be distributed.
(d) All Profits or Losses for Tax Purposes allocated pursuant to Section
8.1(a) and all distributions made pursuant to Section 8.2, if any, to the class
of Limited Partners based upon transactions of the Partnership during any fiscal
year in which Units are initially sold, shall be allocated among the Limited
Partners as follows: (i) each such
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fiscal year shall be divided into 365 equal portions and the operations of the
Partnership shall be deemed to have occurred on a pro rata basis over each of
such portions irrespective of the actual operations of the Partnership; (ii)
such allocations and distributions shall be made with respect to each Interest
on the basis of the number of such portions during such fiscal year such
Interest was outstanding. An Interest shall be deemed outstanding from the date
of acceptance by the General Partners of the subscription therefor.
(e) In the event that a Unit or Interest is transferred, (i)
Distributable Cash Flow with respect to the fiscal quarter during which the
transfer occurs shall be distributed among the Unitholders or Investor Limited
Partners recognized as such under this Agreement on the basis of the number of
days during such quarter that each was so recognized on a pro rata basis
irrespective of the actual operations of the Partnership on such days; (ii) if
Distributable Cash Flow for any fiscal year with respect to a Unit or Interest
is distributed to more than one Person under this Section, then the Profit or
Loss for Tax Purposes allocated under Section 8.1(a) to such Unit or Interest
with respect to such fiscal year shall be divided into 365 equal portions and
allocated one portion to the Person who received Distributable Cash Flow for
each day irrespective of the actual operations of the Partnership; (iii) Net
Cash Proceeds and Profit or Loss For Tax Purposes arising from the same Capital
Transaction (or the Terminating Capital Transaction) shall be distributed and
allocated, respectively, to the Unitholder or Investor Limited Partner
recognized as such under this Agreement as of the date of such Capital
Transaction (or the Terminating Capital Transaction); and (iv) Net Cash Proceeds
and Profit or Loss for Tax Purposes not received or realized, as the case may
be, upon a Capital Transaction (or the Terminating Capital Transaction), but
later received or realized, as the case may be, by the Partnership as a result
of an installment or other deferred payment sale, shall be distributed and
allocated, respectively, to the Unitholder or Investor Limited Partner
recognized as such under this Agreement as of the dates such Net Cash Proceeds
and Profit or Loss are received or realized, as the case may be, by the
Partnership.
(f) Any allocation or distribution with respect to a Limited Partner
Interest shall be made directly to the Unitholder of the Unit corresponding to
such Interest, if any.
(g) If an amount paid or deemed paid to the General Partners or their
Affiliates as a fee or payment described in Section, 6.4 hereof is a
distribution to a general partner in its capacity as a partner and not a
guaranteed payment as defined in Section 707(c) of the Code or a payment to a
partner not acting in his capacity as a partner under Section 707(a) of the
Code, the General Partners shall be allocated an amount of Partnership gross
income equal to such payment and its Capital Account shall be reduced to reflect
the distribution. For purposes of Sections 8.1, 8.2 and 8.3, Profits and Losses
for Tax Purposes shall be determined after making any allocation required by
this Section 8.4(g).
(h) All amounts paid with respect to any Unit as sales commissions shall
be allocated to the particular Unit with respect to which they are paid and the
Capital Account for such Unit shall be reduced to reflect such allocation.
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8.5 RETURN OF CAPITAL CONTRIBUTIONS. All Partners and Unitholders shall
look solely to the assets of the Partnership for the return of Capital
Contributions or any other distributions with respect to their Interests. If the
assets remaining after payment or discharge, or provisions for payment or
discharge, of its debts and liabilities are insufficient to return the Capital
Contributions or to make any other distributions to the Partners and
Unitholders, no Partner or Unitholder shall have any recourse against the
personal assets of any other Partner or Unitholder for that purpose, except to
the limited extent set forth in Section 6.3 hereof.
8.6 REINVESTMENT OF NET CASH PROCEEDS. The Partnership shall not
reinvest Cash Flow in Mortgages. The Partnership may reinvest Net Cash Proceeds
only as provided in Section 6.1(c) hereof. In the event reinvestment is
permitted under Section 6.1(c) hereof, the General Partners may elect, in their
sole discretion based upon real estate, Mortgage and MBS market conditions then
in effect, either to distribute all or any portion of the cash available for
such reinvestment or to reinvest such cash in Mortgages or MBS or in investments
of the type referred to in Section 6.2(a) if the General Partners are unable to
identify immediately suitable Mortgages or MBS for reinvestment. Notwithstanding
the foregoing, if the transaction giving rise to such cash shall create any
federal and state income tax liability for Investor Limited Partners or
Unitholders which are not Tax-Exempt Entities, no such cash shall be reinvested
unless sufficient Net Cash Proceeds are distributed to enable Investor Limited
Partners and Unitholders to pay such taxes (assuming the Investor Limited
Partners and Unitholders are taxable at an overall combined rate of 42% on
ordinary income for 1987 and 32% thereafter and 32% on long-term capital gains).
8.7 RETURN OF UNINVESTED CAPITAL CONTRIBUTIONS. In the event that any
portion of the Limited Partners' Capital Contributions is not invested or
committed for investment in Mortgages by the Partnership within 24 months from
the date on which the offering of Units commenced (except for any amounts
utilized to pay expenses of the Partnership), such portion of Capital
Contributions shall promptly be distributed by the Partnership as a return of
capital. For the purpose of this Agreement, funds will be deemed to have been
committed to investment and will not be returned to the extent written
agreements in principle, commitment letters, letters of intent or understanding,
option agreements or any similar contracts or understandings were at any time
executed but not terminated during the aforesaid 24-month period, regardless of
whether any such investment is or is not ultimately consummated, and to the
extent any funds have been reserved to make contingent payments in connection
with any property, regardless of whether any such payments are or are not
ultimately made. In the event that any Capital Contributions shall be returned
pursuant to this Section, the respective Capital Contributions (and Invested
Capital) of the Investor Limited Partners and Unitholders shall be reduced by
the amount of such distribution.
Section 9. WITHDRAWAL OF GENERAL PARTNERS.
9.1 VOLUNTARY WITHDRAWAL. Any General Partner may Voluntarily Withdraw
as a General Partner from the Partnership at any time provided that (a) the
General
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Partners shall have given sixty (60) days prior written notice thereof to the
Limited Partners, (b) the Partnership shall have received the opinion of Counsel
to the Partnership to the effect that such Withdrawal will not constitute a
termination of the Partnership or otherwise materially adversely affect the
status of the Partnership for federal income tax purposes and (c) if the General
Partner proposing to Withdraw is then the sole General Partner, or if such
Voluntary Withdrawal shall require the admission of a new General Partner in
order to preserve the status of the Partnership as a partnership for federal
income tax purposes, a new General Partner shall have been selected who, or
which, (i) shall have stated willingness to be admitted, (ii) shall satisfy the
then applicable provisions of the Code and any applicable procedures,
regulations, rules and rulings (including published private rulings) thereunder,
including applicable net worth requirements so that the Partnership shall be
classified as a partnership for tax purposes, and (iii) shall have received the
written consent of any remaining General Partner and of Limited Partners holding
not less than a majority of the Limited Partner Interests with respect to such
admission. Notwithstanding the foregoing, in no event shall either Xxxxx Insured
Plus Corp. or Mortgage Services Partners Limited Partnership Voluntarily
Withdraw as a General Partner from the Partnership prior to December 31, 1990.
9.2 INVOLUNTARY WITHDRAWAL. A General Partner shall be deemed to have
Involuntarily Withdrawn as a General Partner from the Partnership upon the
occurrence of any of the following events: (a) in the case of Mortgage Services
Partners Limited Partnership or an additional or Substitute General Partner
which is a partnership, upon the death, physical or mental incapacity (as
determined by certificate of a licensed physician), dissolution or bankruptcy of
all general partners of such partnership, (b) in the case of Xxxxx Insured Plus
Corp. or an additional or Substitute General Partner which is a corporation, the
filing of a certificate of dissolution, or its equivalent, for such General
Partner or the revocation of its charter, (c) the removal of the General Partner
pursuant to a vote of the Limited Partners made in accordance with Section 13 of
this Agreement, (d) the making of an assignment for the benefit of creditors,
the filing of a voluntary petition in bankruptcy, or an adjudication of
bankruptcy, or (e) any other event which constitutes an event of withdrawal
under the Act as then in effect.
9.3 CONSEQUENCES OF WITHDRAWAL.
(a) Upon the Withdrawal of any General Partner, the Withdrawn General
Partner or his estate or legal representatives shall be entitled to receive from
the Partnership (i) any positive balance in his or its Capital Account (as
adjusted to the date of such Withdrawal), (ii) any amounts due and owing to it
or him by the Partnership less any amounts due and owing by it or him to the
Partnership, and (iii) the remaining balance, if any, of fees payable as and
when due pursuant to this Agreement or any other written agreements between the
Partnership and such General Partner in his capacity as General Partner;
however, the Withdrawn General Partner shall not be entitled to any such fees
which had not yet been earned by him prior to his Withdrawal. The right of a
General Partner, his estate or legal representatives to payment of said amounts
and fees shall be subject to any claim for damages which the Partnership or any
Partner may have against such General Partner, his estate or legal
representative if such Withdrawal is in
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contravention of this Agreement. Valuation of a Withdrawn General Partner's
Interest shall be in accordance with the provisions of Section 13.4 hereof.
(b) Each General Partner hereby covenants and agrees, in the event of
his Withdrawal, to transfer to a Substitute General Partner selected as provided
in Section 9.5 hereof or to the remaining General Partner or General Partners,
such portion, if any, of his General Partner Interest as may be required to
assure that the Partnership will meet the minimum general partnership interest
requirement for the continued treatment of the Partnership as a partnership
under the then applicable provisions of the Code and any applicable procedures,
regulations, rules and rulings (including published private rulings) thereunder.
Any such transfer will be made in consideration of the payment by the Substitute
General Partner or the remaining General Partner or Partners to the Withdrawn
General Partner, his estate or legal representatives, of the fair market value
of such interest. Such payments shall be in addition to any amounts payable
pursuant to Section 9.3(a) hereof by the Partnership. Any portion of such
Withdrawn General Partner's Interest which is not transferred to a Substitute
General Partner as aforesaid may be purchased by the Partnership. In the event
of such a purchase, the Interests of the Withdrawn General Partner to be
purchased shall be valued in accordance in Section 13.4 hereof as though such
Withdrawn General Partner had been removed pursuant to Section 13.2 hereof, and
shall be paid for by delivery of a note of the Partnership which shall be
unsecured and non-interest bearing with principal payable, if at all, from
distributions which the Withdrawn General Partner otherwise would have received
under this Agreement had such Withdrawn General Partner not withdrawn. Any
portion of the Withdrawn General Partner's interest which is not required to be
transferred as aforesaid and which the Partnership does not elect to purchase
may be retained by such Withdrawn General Partner, or its estate or legal
representatives as appropriate. In such event, the Withdrawn General Partner, or
its estate or legal representatives, shall be treated as a Limited Partner in
the Partnership in respect to any such retained Interest.
(c) If the Withdrawal of a General Partner shall occur as part of a
removal and replacement of such General Partner effected in accordance with
Section 13 hereof, the provisions of said Section 13 shall govern to the extent
(if any) that the provisions of said Section 13 are inconsistent with the
provisions of this Section 9.3.
9.4 LIABILITY OF WITHDRAWN GENERAL PARTNER. If the business of the
Partnership is continued after Withdrawal of a General Partner, the Withdrawn
General Partner, his estate and legal representatives shall remain liable for
all obligations and liabilities incurred by him while a General Partner and for
which he was liable as a General Partner, but shall be free of any obligation or
liability incurred on account of or arising from the activities of the
Partnership and after the time such Withdrawal shall have become effective.
9.5 CONTINUATION OF PARTNERSHIP BUSINESS.
(a) PROCEDURE IF THERE IS A REMAINING GENERAL PARTNER. Upon the
Withdrawal of a General Partner, the remaining General Partner or Partners, if
any, shall promptly notify the Limited Partners and Unitholders of such
Withdrawal. The remaining General
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Partner or Partners may elect to continue the Partnership business. If at any
time Xxxxx Insured Plus Corp. or a successor General Partner with substantial
net worth shall Withdraw as a General Partner, the remaining General Partners or
Partner, if any, may (but shall not be obligated to) propose for admission a
Substitute General Partner or General Partners, unless a Substitute General
Partner shall have already been proposed by the Limited Partners pursuant to
Section 13 hereof. Any such proposed Substitute General Partner shall, with the
specific written consent of the other General Partner and of the Limited
Partners with respect to not less than a majority of the Limited Partner
Interests, become a Substitute General Partner upon his or its execution of this
Agreement.
(b) PROCEDURE IF THERE IS NO REMAINING GENERAL PARTNER. If, following
the Withdrawal of a General Partner, there is no remaining General Partner or
Substitute General Partner, any Limited Partner may notify the other Limited
Partners and Unitholders of such circumstances and may propose for admission a
Substitute General Partner, unless a Substitute General Partner shall have
already been proposed by the Limited Partners pursuant to Section 13 hereof. Any
Substitute General Partner proposed by such Limited Partners pursuant to this
Section 9.5(b) or Section 13.2 hereof, shall, with the specific written consent
of the Limited Partners with respect to not less than a majority of the Limited
Partner Interests, become a Substitute General Partner upon his or its execution
of this Agreement and may thereupon elect to continue the Partnership business.
If no Substitute General Partner has received the consent of the Limited
Partners with respect to not less than a majority of the Limited Partner
Interests, executed this Agreement, and elected to continue the Partnership
business within one hundred eighty (180) days from the date of the last
remaining General Partner's Withdrawal, then the Partnership shall thereupon
terminate.
Section 10. ASSIGNMENT OF LIMITED PARTNER INTERESTS.
10.1 WITHDRAWAL OF A LIMITED PARTNER. Subject to compliance with this
Agreement, a Limited Partner may withdraw from the Partnership only by assigning
or otherwise transferring his or its Interest as specified in this Section 10.
Such withdrawal of a Limited Partner shall not dissolve or terminate the
Partnership. In the event of a Limited Partner's withdrawal because of death,
legal incompetence, dissolution or other termination, the estate, legal
representative or successor of such withdrawn Limited Partner shall be deemed to
be the assignee of such withdrawn Limited Partner's Interest and may become a
Substitute Limited Partner upon compliance with the provisions of Section 10.3
hereof.
10.2 ASSIGNMENT. Units of Depositary Receipts may be Assigned in
accordance with Section 7.2 hereof. Limited Partner Interests of the Corporate
Limited Partner which correspond to Units may be Assigned in accordance with
Section 7.6(b) hereof. Other Limited Partner Interests may be Assigned only in
accordance with this Section 10.2 and Section 10.4. Such Limited Partner
Interests may be Assigned provided there shall be filed with the Partnership, in
form satisfactory to the General Partners, a duly executed counterpart of the
instrument making such Assignment and such instrument (a) evidences the written
acceptance by the assignee of all of the terms and
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provisions of this Agreement, (b) represents that such Assignment was made in
accordance with all applicable laws and regulations (including, without
limitation, such minimum investment and investor suitability requirements as may
then be applicable under state securities laws), and (c) is accompanied by a fee
of $50.00 to reimburse the Partnership for its costs respecting the Assignment.
10.3 SUBSTITUTION. An assignee of a Limited Partner Interest assigned in
accordance with the provisions of Section 10.1 or 10.2 hereof shall become a
Substitute Limited Partner if:
(a) such assignee executes an instrument reasonably satisfactory to the
General Partners accepting and adopting the terms and provisions of this
Agreement;
(b) in the case of Assignments other than by operation of law, the
assignor states his intention in writing to have his assignee become a
Substitute Limited Partner; and
(c) the General Partners, in their sole discretion, consent in writing
to such substitution (which consent may be withheld).
If all of the conditions of Section 10.1 or 10.2 and this Section 10.3
shall have been met, the assignee of a Limited Partner Interest shall become a
Substitute Limited Partner as of the date as of which the General Partners
consent in writing to his admission to the Partnership as a Substitute Limited
Partner, which consent may be evidenced by the filing of an amendment to the
Certificate of Limited Partnership listing the name of such Substitute Limited
Partner. Such an amendment shall be filed no later than 15 days after the
completion of any fiscal quarter of the Partnership in which a Substitute
Limited Partner is admitted to the Partnership.
An assignee of a Limited Partner Interest who does not become a Substitute
Limited Partner in accordance with this Section 10.3 and who desires to make a
further Assignment of his Interest shall be subject to all the provisions of
Sections 10.2, 10.3 and 10.4 hereof, to the same extent and in the same manner
as any Limited Partner desiring to make an Assignment of his Interest. Failure
or refusal of the General Partners to admit an assignee of a Limited Partner
Interest as a Substitute Limited Partner shall in no way affect the right of
such assignee to receive the share of the Profits or Losses for Tax Purposes and
distributions of Cash Flow and Net Cash Proceeds to which his predecessor in
interest would have been entitled in accordance with Section 8 hereof.
10.4 PROHIBITED ASSIGNMENT. No Limited Partner Interests may be Assigned
or otherwise transferred:
(a) to a non-resident alien unless the General Partners determine that
such transfer would not impose unduly burdensome reporting or withholding
requirements on the Partnership;
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(b) to a minor or incompetent (unless a guardian, custodian or
conservator has been appointed to handle the affairs of such Person);
(c) to any Person not permitted to be a transferee under law including,
in particular but without limitation, applicable state securities laws which
generally provide that, except in the case of a transfer by gift, inheritance,
intra-family transfer, or family dissolution, each transferee of Limited Partner
Interests must acquire not fewer than 250 Limited Partner Interests (100 in the
case of an XXX or Xxxxx Plan), and that following a transfer of less than all
his Limited Partner Interests, each transferor must retain a sufficient number
of Limited Partner Interests to satisfy the minimum investment standards
applicable to his initial purchase of Limited Partner Interests;
(d) to any Person if such Person would hold after such Assignment fewer
than 250 Limited Partner Interests (100 in the case of an XXX or Xxxxx Plan)
unless the General Partners shall give specific written consent to such
Assignment;
(e) to any Person if, in the opinion of Counsel to the Partnership, such
transfer would result in the assets of the Partnership being "plan assets" or
the transactions hereunder being prohibited transactions under ERISA or the
Code; or
(f) to any Person if, in the opinion of Counsel to the Partnership, such
transfer would result in the termination under the Code of the Partnership's
taxable year or of its status as a partnership.
The General Partners may waive clauses (c) and (d) above if, in their
discretion, application of such restrictions would impose a hardship on the
holder or would not be in compliance with the listing or quotation requirements
of any national securities exchange upon which Units may be listed or NASDAQ if
Units may be quoted thereon.
Any such attempted Assignment without the express written consent of the
General Partners shall be void and ineffectual and shall not bind the
Partnership. In the case of a proposed Assignment which is prohibited solely
under clause (f) above, however, the Partnership shall be obligated to permit
such Assignment to become effective if and when, in the opinion of Counsel to
the Partnership, such Assignment would no longer have either of the adverse
consequences under the Code which are specified in that clause.
10.5 STATUS OF AN ASSIGNING LIMITED PARTNER. Any Limited Partner (other
than the Corporate Limited Partner) who shall Assign all of his Interest shall
cease to be a Limited Partner of the Partnership and shall no longer have any of
the rights or privileges of a Limited Partner, except that unless and until a
Substitute Limited Partner is admitted in his stead, such assigning Limited
Partner shall retain the statutory rights of an assignor of a limited partner
interest under the Act.
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Section 11. DISSOLUTION AND WINDING-UP.
11.1 EVENTS CAUSING DISSOLUTION. The Partnership shall be dissolved and
its affairs wound up on the first to occur of the following:
(a) the Withdrawal of any General Partner, unless the remaining General
Partner or General Partners, if any, or a Substitute General Partner admitted in
accordance with Section 9.5 or Section 13 hereof, agree to continue the
Partnership business pursuant to Section 9.5; or
(b) an election to dissolve the Partnership made in writing by the
General Partners with the Consent of a majority in interest of the Limited
Partner Interests, or, subject to compliance with Section 13 hereof, made by a
majority in interest of the Limited Partner Interests, without action by the
General Partners; or
(c) the sale or other disposition of all or substantially all of the
Mortgages unless the General Partners elect to continue the Partnership business
for the purpose of the receipt and collection of a note and payments thereon or
the collection of any other consideration to be received in exchange for the
Mortgages (which activities shall be deemed to be a part of the Terminating
Capital Transaction and the winding-up of the affairs of the Partnership); or
(d) the expiration of the Partnership term; or
(e) any other event which causes the dissolution and/or winding up of
the Partnership under the Massachusetts Uniform Limited Partnership Act to the
extent not otherwise provided herein.
11.2 DISTRIBUTIONS UPON DISSOLUTION. Upon the dissolution of the
Partnership, the General Partners, or if there are none, such other Person
required by law to wind up the Partnership's affairs, shall proceed with the
liquidation of the Partnership (including, without limitation, the sale or other
disposition of any remaining Mortgages and cancellation of the Certificate of
Limited Partnership), and the net proceeds of such liquidation shall be first
applied to the payment of debts and other obligations of the Partnership, and
all remaining net proceeds, if any, shall be applied and distributed in
accordance with the provisions of Section 8.3(b) hereof. During the period of
dissolution and winding-up of the Partnership, the General Partners or any
Person performing such actions may exercise all of the powers granted to the
General Partners herein, and they may adopt such plan, method or procedures as
they may deem reasonable in order to effectuate an orderly winding-up. If the
General Partner shall perform the foregoing functions, they shall be compensated
therefor as provided in Section 6.4 and 8 hereof, and if such functions shall be
performed by Persons other than the General Partners, such Persons shall be
entitled to reasonable compensation from the Partnership for their services.
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Section 12. FISCAL MATTERS.
12.1 TITLE TO ASSETS AND BANK ACCOUNTS. Except to the extent that
trustees, nominees or other agents are utilized as specified in Section
6.1(c)(vi) hereof, the Mortgages of the Partnership shall be held in the name of
the Partnership. The funds of the Partnership shall be deposited in the name of
the Partnership in such commercial bank account or accounts as shall be
designated by the General Partners, and withdrawals therefrom shall be made upon
the signature of any General Partner or such Person or Persons as shall be
designated in writing by any General Partner. The funds of the Partnership shall
not be commingled with the funds of any other Person.
12.2 MAINTENANCE OF AND ACCESS TO BASIC PARTNERSHIP DOCUMENTS. The
General Partners shall maintain at the Partnership's principal office in
Massachusetts the following documents: (a) current lists of the full name and
last known business address of each Partner and Unitholder set forth in
alphabetical order, (b) a copy of the Certificate of Limited Partnership and all
amendments thereto, together with executed copies of any powers of attorney
pursuant to which the Certificate or any such amendment has been executed, (c)
copies of the Partnership's federal, state and local income tax returns and
reports, if any, for the three most recent years, and (d) copies of this
Agreement as then in effect and of any financial statements of the Partnership
for the three most recent years. Such documents are subject to inspection and
copying at the reasonable request, and at the expense, of any Partner or
Unitholder during ordinary business hours. In addition, the Partnership will
furnish a list of the names and addresses of all Limited Partners and
Unitholders, together with their respective Capital Contributions and
Subscription Prices, to any Limited Partner or Unitholder who makes a written
request therefor to the Partnership, provided such Partner or Unitholder shall
pay the cost of reproducing and delivering such list. Except to the extent
requested by any Limited Partner or Unitholder, the General Partners shall have
no obligation to deliver or mail a copy of the Partnership's Certificate of
Limited Partner or any amendment thereto to the Limited Partners or Unitholders.
Each Limited Partner shall also have the right to obtain from the General
Partners from time to time upon reasonable demand: (i) true and full information
regarding the status of the business and financial condition of the Partnership,
(ii) promptly after becoming available, a copy of the Partnership's federal,
state and local income tax returns for each year, and (iii) other information
regarding the affairs of the Partnership as is just and reasonable.
12.3 FINANCIAL BOOKS AND ACCOUNTING. The General Partners shall keep or
cause to be kept complete and accurate financial books with respect to the
Partnership's business. Such books shall be kept on an accrual basis and the
Profits or Losses for Tax Purposes of the Partnership shall be determined for
each fiscal year in accordance with accounting methods followed for federal
income tax purposes and otherwise in accordance with generally accepted
accounting principles applied in a consistent manner. Except as otherwise
provided herein, whenever a proportionate part of the Profits or Losses for Tax
Purposes of the Partnership is credited or charged to a Partner's Capital
Account, every item of income, gain, loss or deduction entering into the
computation of such Profits or Losses shall be considered either credited or
charged, as the case may be,
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and every item of credit or tax preference related to such Profits or Losses and
applicable to the period during which such Profits or Losses were realized shall
be allocated to such Capital Account in the same proportion.
12.4 PARTNERSHIP EXPENSES.
(a) The Partnership shall reimburse the General Partners and their
Affiliates for organizational and offering expenses incurred by the General
Partners and such Affiliates, provided that in no event shall the amount of
organizational and offering expenses paid directly or indirectly by the
Partnership exceed 2% of the gross proceeds of the offering of Units, and the
General Partners shall pay for any organizational and offering expenses in
excess of such 2% amount. For purposes hereof, "organizational and offering
expenses" shall mean those expenses incurred in connection with, and in
preparing the Partnership for, qualification under the federal and state
securities laws and subsequently offering and distributing the Units to the
public, including certain marketing expenses but not sales commissions, sales
incentives or reimbursement for due diligence expenses paid by the Partnership
to Xxxxx Securities Corporation and selected dealers in connection with the
offering of Units. In addition, the Partnership shall pay or reimburse up to an
additional 0.5% of the gross proceeds for due diligence expenses of the Sales
Agent and prospective selected dealers.
(b) Subject to the foregoing, the Partnership shall pay all expenses
(which expenses shall be billed directly to the Partnership) of the Partnership
which may include but are not limited to: (i) all costs of personnel (excluding
rent or depreciation, utilities, capital equipment, and other administrative
items) employed full- or part-time by the Partnership and involved in the
business of the Partnership and allocated pro rata to their administrative
services performed on behalf of the Partnership, including Persons who may also
be officers or employees of the General Partners or their Affiliates (other than
Controlling Persons); (ii) all costs of borrowed money, taxes on Mortgages and
other taxes applicable to the Partnership; (iii) legal, audit, accounting,
brokerage and other fees; (iv) printing, engraving and other expenses and taxes
incurred in connection with the issuance, distribution, transfer, registration
and recording of documents evidencing ownership of an Interest or Unit or in
connection with the business of the Partnership; (v) fees and expenses paid to
independent contractors, mortgage bankers, brokers and servicers, leasing
agents, consultants, on-site property managers and other property management
personnel (other than Controlling Persons and other officers of the General
Partners or their Affiliates), real estate brokers, insurance brokers and other
agents; (vi) expenses in connection with the ownership, exchange, sale or other
realization of Mortgages; (vii) expenses of organizing, revising, amending,
converting, modifying or terminating the Partnership; (viii) expenses in
connection with distributions made by the Partnership to, and communications and
bookkeeping and clerical work necessary in maintaining relations with Limited
Partners and Unitholders, including the costs of printing and mailing to such
Persons evidences of ownership of Limited Partner Interests or Units and reports
of meetings of the Partnership, and of preparation of proxy statements and
solicitations of proxies in connection therewith; (ix) expenses in connection
with preparing and mailing reports required to be furnished to Limited Partners
and Unitholders for investor, tax reporting or other purposes, or which reports
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the General Partners deem the furnishing thereof to Limited Partners or
Unitholders to be in the best interests of the Partnership; (x) accounting,
computer, statistical or bookkeeping costs necessary for the maintenance of the
books and records of the Partnership; and (xi) the cost of preparation and
dissemination of the informational material and documentation relating to
potential sale, or other disposition of Partnership Mortgages. Other than as
specifically described above in this Section and in Section 6.4 hereof, the
Partnership shall not pay the General Partners for any other items generally
considered to be the General Partners' overhead and expenses.
(c) Except for organizational and offering expenses and the 1.5%
allowance for non-accountable expenses connected with the acquisition of
Mortgages provided in Section 6.4(b), the Partnership shall not reimburse the
General Partners or their Affiliates except for reimbursement of the actual cost
to the General Partners or their Affiliates of goods, materials and services
used for or by the Partnership and obtained from Persons unaffiliated with the
General Partners and their Affiliates; provided, however, subject to the
limitations stated below, the General Partners and their Affiliates may receive
reimbursement for the administrative services necessary to the prudent operation
of the Partnership, such as legal, accounting, computer, transfer agent and
other services which could be performed directly for the Partnership by
independent parties. The amounts charged to the Partnership for such
administrative services will not exceed the lesser of (i) the actual costs to
the General Partners or their Affiliates, or (ii) 90% of those which the
Partnership would be required to pay to independent parties for comparable
services in the same or comparable geographic locations. As part of the
Partnership's annual report to the Limited Partners and Unitholders, an itemized
breakdown will be included of such reimbursements, all of which shall be
verified by the Accountants. Such verification shall at minimum provide (i) a
review of the records of individual employees, the costs of whose services were
reimbursed, and (ii) a review of the specific nature of the work performed by
each such employee. The methods of verification shall be performed in accordance
with generally accepted auditing standards, and shall accordingly include such
tests of the accounting records and such other auditing procedures which the
Accountants consider appropriate in the circumstance. The additional costs of
such verification will be itemized by the Accountants on a
partnership-by-partnership basis and may be reimbursed to the General Partners
and their Affiliates by the Partnership only to the extent that such
reimbursement, when added to the cost for administrative services rendered, does
not exceed 90% of the competitive rate for such services as determined above.
(d) Any agreements, contracts and arrangements in addition to those
authorized by Section 6.4 hereof may be entered into with a General Partner or
an Affiliate of the General Partners subject to the following additional
conditions:
(A) any such agreements contracts or arrangements shall be
embodied in a written contract which precisely describes the subject matter
thereof and all compensation to be paid therefor;
(B) neither a General Partner (in any capacity other than as
General Partner) nor any such Affiliate may act as paying or purchasing agent
for the
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Partnership and no funds of the Partnership may be paid to a General Partner or
any such Affiliate by way of reimbursement for Partnership expenses except as
permitted by this Section 12.4;
(C) any such agreements, contracts or arrangements shall be
fully and promptly disclosed to all Partners in the reports provided for in
Section 12.6(a) hereof (stating the compensation paid and to be paid by the
Partnership); and
(D) any such agreements, contracts or arrangements shall be
terminable by either party, without penalty, upon 60 days' prior written notice.
(e) Subsections 12.4(a), (b) and (c) are not applicable to the fees
payable by Borrowers to Xxxxx Mortgage Corporation for services rendered in
connection with the origination, servicing or coinsurance of Mortgages purchased
by the Partnership subject to the limits on compensation mandated by HUD, GNMA,
FNMA or FHLMC.
12.5 FISCAL YEAR. Except as may otherwise be determined from time to time
by the General Partners, the Partnership's fiscal year for federal income tax
and financial reporting purposes shall end on December 31 of each year.
12.6 REPORTS, ACCOUNTING DECISIONS AND FEDERAL TAX ELECTIONS.
(a) REPORTS TO LIMITED PARTNERS.
(1) QUARTERLY REPORTS. Within 60 days after the end of each of
the first three quarters of each fiscal year, the General Partners shall send to
each Person who was a Limited Partner or Unitholder at any time during the
quarter then ended (i) a balance sheet (which need not be audited), (ii) a
statement of operations (which need not be audited), (iii) a Cash Flow statement
(which need not be audited), (iv) a statement describing (A) any new agreement,
contract or arrangement required to be reported by Section 12.4(d), and (B) the
amount of all fees and other compensation and distributions paid by the
Partnership for such quarter to any General Partner or any Affiliate of any
General Partner, (v) a report in narrative form summarizing the status of the
Partnership's investments, (vi) a report of the activities of the Partnership
during such fiscal quarter, (vii) a schedule of the most recent Appraised Values
of the Mortgages, and (viii) if the Partnership is then required to file
quarterly reports on Form 10-Q with the Securities and Exchange Commission, the
information contained in each such report. Until the Capital Contributions to
the Partnership derived from the offering of Units shall be fully invested,
except for reserves, each quarterly report (or a special report distributed
prior to or concurrently with such quarterly report) will also contain a report
on Mortgage acquisitions made by the Partnership during the period covered by
the report including (A) a description of the Mortgages purchased, (B) in the
case of Participating Insured Mortgages, a description of the geographic markets
upon which the success of operations is dependent, (C) the appraised value of
each property underlying to subject to a Participating Insured Mortgage, (D) the
actual purchase price and terms, (E) the cash expended from Capital
Contributions to acquire each Mortgage, and (F) the amount of Capital
Contributions which then remains unexpended, stated both in terms of dollar
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amount and percentage of the total amount of Capital Contributions derived from
the offering of Units.
(2) ANNUAL REPORTS. Within 120 days after the end of each fiscal
year, the General Partners shall send to each Person who was a Limited Partner
or Unitholder at any time during the fiscal year then ended a report in
narrative form summarizing the status of the Partnership's investments and
containing (i) a balance sheet as of the end of such fiscal year and statements
of operations, Partners' equity and changes in financial position for such
fiscal year, all of which shall be prepared in accordance with accounting
methods followed for federal income tax purposes and generally accepted
accounting principles and accompanied by an auditor's' report containing an
opinion of the Accountants, (ii) a cash flow statement (which need not be
audited), (iii) a report summarizing the fees and other remuneration paid by the
Partnership for such fiscal year to any General Partner or any Affiliate of any
General Partner, (iv) an estimate by the General Partners of the value of the
Units, and (v) a statement (which need not be audited) showing the Distributable
Cash Flow and the Net Cash Proceeds from any Capital Transaction or Terminating
Capital Transaction distributed per Interest during such fiscal year. Such
report shall separately identify (to the extent then applicable) distributions
from (a) cash flow from operations during the period, (b) cash flow from
operations during a prior period which had been held as reserves, (c) net cash
proceeds arising from disposition of Mortgages and other investments, and (d)
reserves from the gross proceeds of the offering of Units. Until the Capital
Contribution of the Partnership derived from the offering of Units shall be
fully invested, the annual report shall also contain a report on Mortgage
acquisitions providing the information specified above for quarterly reports,
unless such information shall have previously been or shall concurrently be
provided in a quarterly or special report to the Limited Partners and
Unitholders.
(b) TAX RETURNS AND TAX INFORMATION. The General Partners shall:
(i) have the Accountants prepare the tax returns (federal, state
and local, if any) of the Partnership for each fiscal year within 75 days after
the end of each calendar year in which such fiscal year was completed; and
(ii) deliver to each Partner and Unitholder within 75 days after
the end of each calendar year the information necessary to prepare his federal
income tax return for the calendar year during which such fiscal year was
completed.
(c) ACCOUNTING DECISIONS. All decisions as to accounting matters, except
as specifically provided to the contrary herein, shall be made by the General
Partners in accordance with generally accepted accounting principles and
procedures applied in a consistent manner. The General Partners may rely upon
the advice of the Accountants as to whether such decisions are in accordance
with generally accepted accounting principles and methods followed for federal
income tax purposes.
(d) FEDERAL TAX ELECTIONS. The Partnership, in the sole discretion of
the General Partners, may make elections for federal tax purposes as follows:
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(i) In case of a transfer of all or part of the Interest of a
Partner, the Partnership, in the absolute discretion of the General Partners,
may timely elect pursuant to Section 754 of the Code (or corresponding
provisions of future law) and pursuant to similar provisions of applicable state
or local income tax laws, to adjust the basis of the assets of the Partnership.
In such event, any basis adjustment attributable to such election shall be
allocated solely to the transferee.
(ii) The General Partners may elect accelerated depreciation
methods under the Code, or may elect straight-line depreciation over a period as
long as 45 years if in their judgment the determination of the percentage of
tax-exempt investors becomes too cumbersome.
(iii) All other elections required or permitted to be made by the
Partnership under the Code shall be made by the General Partners in such manner
as will, in the opinion of the Accountants, be most advantageous to a majority
of the Limited Partner Interests. The Partnership shall, to the extent permitted
by applicable law and regulations, elect to treat as an expense for federal
income tax purposes all amounts incurred by it for real estate taxes, interest
and other charges which may, in accordance with applicable law and regulations,
be considered as expenses.
(e) TAX MATTERS PARTNER. Xxxxx Insured Plus Corp. is hereby designated
as the "Tax Matters Partner" under Section 6231(a)(7) of the Code, to manage
administrative and judicial tax proceedings conducted at the Partnership level
by the Internal Revenue Service with respect to Partnership matters. Any Partner
has the right to participate in such administrative or judicial proceedings
relating to the determination of partnership items at the Partnership level.
Xxxxx Insured Plus Corp. as Tax Matters Partner shall inform each other Partner
and each Unitholder of all administrative and judicial proceedings for an
adjustment at the Partnership level of partnership items, shall forward to each
other Partner and to each Unitholder within 30 days after receipt all notices
received from the Internal Revenue Service regarding the commencement of a
Partnership-level audit or a final Partnership administrative adjustment, and
shall perform all other duties imposed by Sections 6231 and 6232 of the Code on
Xxxxx Insured Plus Corp. as Tax Matters Partner. Expenses of any such
administrative or judicial proceedings undertaken by the Tax Matters Partner
will be paid out of Partnership assets. Each other Partner or Unitholder who
elects to participate in such proceedings will be responsible for any expenses
incurred by such Partner or Unitholder in connection with such participation.
Further, the cost of any adjustments to a Partner or Unitholder and the cost of
any resulting audits or adjustments of a Partner's or Unitholder tax return will
be borne solely by the affected Partner or Unitholder.
(f) REPORTS TO FEDERAL AND STATE AUTHORITIES. The General Partners 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 or Unitholder shall be provided with a
copy of any such report upon request without expense to him.
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Section 13. MEETINGS AND VOTING RIGHTS OF LIMITED PARTNERS AND
UNITHOLDERS.
13.1 MEETINGS.
(a) Meetings of the Limited Partners and Unitholders for any purpose may
be called by the General Partners and shall be called by the General Partners
upon receipt of a request in writing signed by the holders of 10% or more of the
Limited Partner Interests. Notice of any such meeting shall be sent within ten
days after receipt of such request. Such request shall state the purpose of the
proposed meeting and the matters proposed to be acted upon at the meeting. Such
meeting shall be held at the principal office of the Partnership, or at such
other place as may be designated by the General Partners, or, if called upon the
request of Limited Partners or Unitholders, as designated by such Limited
Partners or Unitholders. In addition, upon receipt of a request in writing
signed by the holders of 10% or more of the Limited Partner Interests, the
General Partners shall submit any matter (upon which the Limited Partners and
Unitholders are entitled to act) to the Limited Partners and Unitholders for a
vote by written Consent without a meeting.
(b) A notice of any such meeting shall be given either personally or by
mail, not less than 15 days nor more than 60 days before the date of the
meeting, to each Limited Partner and Unitholder. Such notice shall state the
place, date and hour of the meeting, and shall indicate that it is being issued
at or by the direction of the Partner or Partners calling the meeting. The
notice shall state the purpose or purposes of the meeting. If a meeting is
adjourned to another time or place, and if any announcement of the adjournment
of time or place is made at the meeting, it shall not be necessary to give
notice of the adjourned meeting. The presence in person or by proxy of a
majority in interest of the Limited Partner Interests shall constitute a quorum
at all meetings, provided, however, that if there be no such quorum, holders of
a majority in interest of such Limited Partner Interests so present or so
represented may adjourn the meeting from time to time without further notice,
until a quorum shall have been obtained. No notice of the time, place or purpose
of any meeting need be given with respect to any Limited Partner Interest which
is represented by proxy or by a Limited Partner or Unitholder who attends in
person (except when a Limited Partner or Unitholder attends a meeting for the
express purpose of objecting at the beginning of the meeting to the transaction
of any business on the ground that the meeting is not lawfully called or
convened), or with respect to any Limited Partner Interest entitled to such
notice if a waiver of such notice, in writing, has been executed and filed with
the records of the meeting, either before or after the time thereof.
(c) For the purpose of determining the Limited Partner Interests
entitled to vote on, or to vote at, any meeting or any adjournment thereof, the
General Partners, Limited Partners or Unitholders requesting such meeting may
fix, in advance, a date as the record date for any such determination of
Interests. Such date shall not be more than 50 days nor less than ten days
before any such meeting.
(d) A Limited Partner or Unitholder shall be entitled to cast one vote
for each Limited Partner Interest or Unit which he owns (i) at a meeting, in
person, by written
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proxy or by a signed writing directing the manner in which he desires that his
vote be cast, which writing must be received by the General Partners (or the
Limited Partners or Unitholders calling the meeting) prior to such meeting, or
(ii) without a meeting, by a signed writing directing the manner in which he
desires that his vote be cast, which writing must be received by the General
Partners (or the Limited Partners or Unitholders soliciting such vote) prior to
the date upon which the votes of Limited Partners and Unitholders are to be
counted. Any Limited Partner or Unitholder may waive notice of or attendance at
any meeting and may attend by telephone or any other electronic communication
device or may execute a signed written consent. Only the votes of Limited
Partners and Unitholders of record on a record date, if established pursuant to
clause (c) above, whether at a meeting or otherwise, shall be counted. The laws
of The Commonwealth of Massachusetts pertaining to the validity and use of
corporate proxies shall govern the validity and use of proxies given by Limited
Partners and Unitholders.
(e) At each meeting, the Limited Partners and Unitholders present or
represented by proxy may adopt such rules for the conduct of such meeting as
they shall deem appropriate, provided that such rules shall not be inconsistent
with the provisions hereof.
13.2 VOTING RIGHTS OF LIMITED PARTNERS AND UNITHOLDERS. Subject to
Section 13.3, a majority in interest of the Limited Partner Interests, without
the concurrence of the General Partner, may (a) amend this Agreement, subject to
the provisions of Section 14 hereof and to the conditions that such amendment
may not in any manner allow the Limited Partners and Unitholders to take part in
the control of the Partnership's business, (b) dissolve the Partnership, (c)
remove any General Partner and elect a replacement therefor, or (d) approve or
disapprove the sale of all or substantially all the assets of the Partnership.
For purposes of exercising such rights, each Limited Partner Interest shall have
one vote; provided that the following Limited Partner Interests shall not be
voted and shall be deemed not to be outstanding for purposes of calculating
applicable percentage requirements: Limited Partner Interests held by the
General Partners or any of their Affiliates other than the Corporate Limited
Partner; and Limited Partner Interests held by the Corporate Limited Partner
other than on behalf of Unitholders unaffiliated with the General Partners.
13.3 CONDITIONS TO ACTION BY LIMITED PARTNERS AND UNITHOLDERS. The rights
of the Limited Partners and Unitholders pursuant to Section 13.2 hereof shall
not be effective or be exercised in any manner (i) to subject the Limited
Partners or Unitholders to liability as general partners under the Act or under
the laws of such other jurisdictions in which the Partnership is qualified or in
which a property underlying or subject to a Mortgage is located, or (ii) to
change the Partnership's status for tax purposes. Any vote and any action taken
pursuant to Section 13.2 shall be void if any Partner, within 45 days after such
action is taken, obtains a temporary restraining order, preliminary injunction
or declaratory judgment from a court of competent jurisdiction or an opinion of
counsel selected by a majority in interest of the Limited Partners and
Unitholders on grounds that such action, if given effect, would have one or more
of the prohibited effects referred to in this Section 13.3. For purposes of this
Section 13.3, counsel will be deemed to have
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been selected by a majority in interest of the Limited Partners and Unitholders
if such counsel is affirmatively approved in writing by a majority in interest
of the Limited Partners and Unitholders within 45 days of the date that the
holders of 10% or more of the interests of the Limited Partners and Unitholders
propose counsel for this purpose.
13.4 VALUATION OF INTEREST OF GENERAL PARTNERS. In the event of removal
of any General Partner pursuant to Section 13.2 hereof, its Interest as a
General Partner in the Partnership shall be appraised by two independent
appraisers, one selected by the removed or withdrawing General Partner and one
by the Limited Partners and Unitholders. In the event that such two appraisers
are unable to agree on the value of such General Partner's Interest, they shall
jointly appoint a third independent appraiser whose determination shall be final
and binding. The expense of such appraisers shall be borne equally by the
removed or withdrawing General Partner and the Partnership. The Partnership
shall pay such General Partner for the value of its Interest as so determined by
delivery of a promissory note bearing interest at the then base rate of Bank of
New England, N.A., Boston, Massachusetts, with interest payable annually in cash
and principal payable from any cash thereafter received by the Partnership from
the sale of Partnership Assets and prior to any distribution being made to the
Partners pursuant to Section 8.3 of this Agreement. Any amounts received
pursuant to this Section 13.4 shall constitute complete and full discharge for
all amounts owing to such General Partner on account of its Interest in the
Partnership. For purposes of this Section 13.4, the independent appraiser
selected by the Limited Partners and Unitholders shall be selected in the
following manner: a list of three qualified MAI (Member of Appraisal Institute)
appraisers shall be obtained (by a General Partner not being removed or
withdrawn) from the Boston chapter of the American Institute of Real Estate
Appraisers and one of said three appraisers shall be selected by random number
and proposed by such General Partner for selection by the Limited Partners and
Unitholders. Such appraiser shall be deemed selected by the Limited Partners and
Unitholders unless objected to in writing by a majority in interest of the
Limited Partner Interests within 45 days after notification thereof is sent in
writing by such General Partner.
Section 14. AMENDMENTS.
(a) In addition to the right of the Limited Partners and Unitholders to
amend this Agreement pursuant to Section 13 hereof, the General Partners may
propose an amendment to this Agreement. The General Partners shall submit to all
of the Partners in writing the text of such proposed amendment to this Agreement
and a statement by the General Partners of the purpose of any such amendment.
The General Partners may include in any submission a statement of the view of
the General Partners as to the proposed amendment. Upon the Consent of the
General Partners and of a majority in interest of the Limited Partner Interests,
such amendment shall take effect, except that no amendment adopted in accordance
with either Section 13 or 14 hereof shall increase the liability of any Partner
or Unitholder or adversely affect any Partner's or Unitholder's share of
distributions of cash or allocations of Profits or Losses for Tax Purposes of
the Partnership without in each case the approval of the Partner or Unitholder
involved, and except that any amendment of this Section 14 must be approved by a
unanimous vote
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with respect to all Limited Partner Interests. A written approval may not be
withdrawn or voided once it is filed with the General Partners.
(b) In addition to any amendments otherwise authorized herein, this
Agreement may be amended from time to time by the General Partners without the
consent of any of the Limited Partners: (i) to add to the representations,
duties or obligations of the General Partners or surrender any right or power
granted to the General Partner herein, for the benefit of the Limited Partners;
(ii) to cure any ambiguity, to correct or supplement any provision herein which
may be inconsistent with any other provision herein, or to make any other
provisions with respect to matters or questions arising under this Agreement
which will not be inconsistent with the provisions of this Agreement; (iii) to
preserve the status of the Partnership as a "partnership" for federal income tax
purposes; (iv) to delete or add any provision of this Agreement required to be
so deleted or added by the staff of the Securities and Exchange Commission or
other federal agency or by a state "Blue Sky" commissioner or similar such
official, which addition or deletion is deemed by such staff, agency or official
to be for the benefit or protection of the Limited Partners; (v) to permit the
Units to fall within any exclusion from the definition of "plan assets"
contained in Section 2550.401b-(1) of Title 29 of the Code of Federal
Regulations; or (vi) if the Partnership is advised that any allocations of
income, gain, loss, deduction, or credit provided in this Agreement are unlikely
to be respected for federal income tax purposes, to amend the allocation
provisions of this Agreement, on advice of accountants and legal counsel, to the
minimum extent necessary to effect the plan of allocations and distributions
provided in this Agreement.
Section 15. POWER OF ATTORNEY.
(a) APPOINTMENT. Each of the Limited Partners hereby makes, constitutes
and appoints the General Partners of the Partnership, and each person who shall
hereafter become a General Partner during the term of the Partnership and any
continuation of the Partnership pursuant to Section 9.5 and Section 11, with
full power of substitution, the true and lawful attorney-in-fact of, and in the
name, place and stead of, such Limited Partner, with the power from time to time
to execute, acknowledge, make, swear to, verify, deliver, record and/or publish:
(i) this Agreement of Limited Partnership and the Certificate of
Limited Partnership under the laws of The Commonwealth of Massachusetts or any
other jurisdiction, that may be required by this Agreement or by the laws of
Massachusetts or any other jurisdiction, any subsequent amendment to this
Agreement and the Certificate of Limited Partnership (including, but not limited
to, amendments reflecting the addition of any signatory hereto as a Partner, or
any admission or substitution of other Partners, or reflecting the Capital
Contribution made by any signatory hereto or by any other Partner), or any other
document required from time to time to admit a Partner, to effect the
substitution of a Partner, or to effect the substitution of any Limited
Partner's assignee as a Limited Partner;
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(ii) any other document required to reflect any action of the
Partners duly taken in the manner provided for in this Agreement, whether or not
such Limited Partner voted in favor of or otherwise Consented to such action;
(iii) any other instrument, certificate or document which may be
required by any regulatory agency, laws of the United States, any state, or any
other jurisdiction in which the Partnership is doing or intends to do business
or which the General Partners deem advisable to file or record, provided such
instrument, certificate or document is not inconsistent with the terms of this
Agreement as then in effect;
(iv) any certificate of dissolution or cancellation of the
Certificate of Limited Partnership that may be necessary upon the termination of
the Partnership, and
(v) any instrument or papers required to continue or terminate
the business of the Partnership pursuant to Sections 9.5 and 11 hereof;
provided that no General Partner shall take any action as attorney-in-fact for
any Limited Partner which could in any way increase the liability of such
Limited Partner beyond the liability expressly set forth in this Agreement or
alter the rights of Limited Partners under Section 8 of this Agreement, unless
(in either case) the Limited Partner has given a Power of Attorney to a General
Partner expressly for such purpose or (in the latter case) the alteration is
made pursuant to Section 14(b)(vi).
(b) AMENDMENTS TO AGREEMENT AND CERTIFICATE.
(i) Each of the Limited Partners is aware that the terms of this
Agreement permit certain amendments of this Agreement to be effected and certain
other actions to be taken or omitted by, or with respect to, the Partnership, in
each case with the approval of less than all the Limited Partners if a specified
percentage of the Partners shall have voted in favor of, or otherwise Consented
to, such action. If, as, and when:
(A) an amendment of this Agreement is proposed or an action
is proposed to be taken or omitted by, or with respect to, the Partnership which
requires, under the terms of this Agreement, the Consent of a specified
percentage in interest (but less than all) of the Partners;
(B) Partners holding the percentage of interests specified
in this Agreement as being required for such amendment or action have Consented
to such amendment or action in the manner contemplated by this Agreement; and
(C) a Limited Partner has failed or refused to Consent to
such amendment or action (hereinafter referred to as a "non-consenting Limited
Partner"), then each non-consenting Limited Partner agrees that each
attorney-in-fact specified in Section 15(a) above, with full power of
substitution, is hereby authorized and empowered to execute, acknowledge, make,
swear to, verify, deliver, record, file and/or publish, for and on behalf of
such non-consenting Limited Partner, and in his name, place and xxxxx, any and
all instruments and documents which may be necessary or appropriate to permit
such amendment to be lawfully made or action lawfully taken or omitted. Each
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consenting and non-consenting Limited Partner is fully aware that he and each
other Limited Partner have executed this special power of attorney and that each
Limited Partner will rely on the effectiveness of such powers with a view to the
orderly administration of the Partnership's affairs.
(ii) Any amendment to this Agreement (and to the Certificate of
Limited Partnership substituting a Limited Partner, or adding a Limited or
General Partner, may be signed by any General Partner and by the Person to be
substituted as a Limited Partner, or added as a Limited or General Partner. Any
amendment reflecting the determination of the remaining General Partner or
Partners to continue the business of the Partnership upon the Withdrawal of a
General Partner need be signed only by one General Partner. The execution of any
such amendment on behalf of a Limited Partner or any proposed substitute or
added Limited Partner may be effected by his attorney-in-fact.
(c) POWER COUPLED WITH AN INTEREST. The foregoing grant of authority:
(i) is a special power of attorney coupled with an interest in
favor of the General Partners and as such shall be irrevocable and shall survive
the death or insanity of each Limited Partner;
(ii) may be exercised for each Limited Partner by a signature of
any General Partner of the Partnership or by listing the names of all of the
Limited Partners, including such Limited Partner, and executing any instrument
with a single signature of any General Partner acting as attorney-in-fact for
all of them; and
(iii) shall survive the Assignment by any Limited Partner of the
whole or any portion of his Interest (including the assignment by the Corporate
Limited Partner to the Unitholders under Section 7.6 hereof), except that, where
the assignee of the whole thereof has furnished a power of attorney and has been
approved by the General Partners for admission to the Partnership as a
Substitute Limited Partner, this power of attorney shall survive such Assignment
with respect to the assignor for the sole purpose of enabling a General Partner
to execute, acknowledge and file any instrument necessary to effect such
substitution and shall thereafter terminate with respect to any Partner who
assigns his entire Interest.
(d) POWER OF ATTORNEY BY SUBSTITUTE INVESTOR LIMITED PARTNERS. A similar
power of attorney shall be one of the instruments which the General Partners
shall require an assignee of a Limited Partner to execute as a condition to the
admission of such assignee as a Substitute Limited Partner.
Section 16. GENERAL PROVISIONS.
16.1 NOTICES, APPROVALS AND CONSENTS. All notices, approvals, Consents or
other communications hereunder shall be in writing and signed by the party
giving the same, and shall be deemed to have been given when the same are (a)
deposited in the United States mail and sent by first class mail, postage
prepaid, or (b) delivered. In each case, said mailing or delivering shall be
made to the parties at the addresses set forth
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below or at such other addresses as such parties may designate by notice to the
Partnership:
(i) If to the Partnership or any General Partner, at the
principal office of the Partnership;
(ii) If to the Corporate Limited Partner, at the address set
forth in Schedule A hereto or to such other address as may be designated by
notice from such Partner given in the manner hereby specified;
(iii) If to an Investor Limited Partner, at the address set forth
in Schedule A hereto or to such other address as may be designated by notice
from such Partner given in the manner specified; and
(iv) If to a Unitholder, at such address as he has most recently
furnished in writing to the Partnership.
16.2 FURTHER ASSURANCES. The Partners will execute, acknowledge and
deliver such further instruments and do such further acts and things as may be
required to carry out the intent and purpose of this Agreement.
16.3 CAPTIONS. Captions contained in this Agreement are inserted only as
a matter of convenience and in no way define, limit, extend or describe the
scope of this Agreement or the intent of any of the provisions thereof.
16.4 BINDING EFFECT. Except to the extent required under the Act and for
fees, rights to reimbursement, and other compensation provided as such, none of
the provisions of this Agreement shall be for the benefit of or be enforceable
by any creditor of the Partnership.
16.5 SEPARABILITY. If one or more of the provisions of this Agreement or
any application thereof shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and any other application thereof shall not in any way be
affected or impaired thereby, and such remaining provisions shall be interpreted
consistently with the omission of such invalid, illegal or unenforceable
provisions.
16.6 INTEGRATION. This Agreement constitutes the entire agreement among
the parties pertaining to the subject matter hereof and supersedes all prior
contemporaneous agreements and understandings of the parties in connection
therewith which conflict with the express terms of this Agreement. No covenant,
representation or condition not expressed in this Agreement shall affect or be
effective to interpret, change or restrict the express provisions of this
Agreement.
16.7 APPLICABLE LAW. This Agreement shall be construed and enforced in
accordance with and governed by the laws of The Commonwealth of Massachusetts.
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16.8 COUNTERPARTS. This Agreement may be signed by each party hereto upon
a separate copy (including, in the case of the Limited Partners, a separate
subscription agreement or signature page executed by one or more such Partners),
in which event all such copies shall constitute a single counterpart of this
Agreement. However, no counterpart shall be binding unless accepted by the
General Partners, which acceptance shall be evidenced by the filing of the
Certificate of Limited Partnership or an appropriate amendment thereto.
16.9 CREDITORS. No creditor who makes a non-recourse loan to the
Partnership shall have or acquire at any time, as a result of making such loan,
any direct or indirect interest in the profits, capital or property of the
Partnership other than as a secured creditor.
16.10 INTERPRETATION. Unless the context in which words are used in this
Agreement otherwise indicates that such is the intent, words in the singular
shall include the plural and in the masculine shall include the feminine and
neuter and vice versa.
Section 17. DEFINITIONS. The defined terms used in this Agreement shall
have the meanings specified below:
"ACCOUNTANTS" means Coopers & Xxxxxxx, Boston, Massachusetts, a successor
thereto, or another firm of independent certified public accountants selected by
the General Partners.
"ACQUISITION EXPENSES" means expenses (other than the Acquisition Fee and
the Participation Servicing Fee) incurred by the Partnership relating to
selection and acquisition of Mortgages, whether or not acquired, including the
fees and expenses of lawyers, appraisers, engineers, architects and accountants,
Affiliate costs, travel and communications expenses, costs of appraisals,
non-refundable option payments on Mortgages not acquired, and accounting fees
and expenses, but not fees and com-missions paid by any Person to any Person in
connection with the selection or purchase of any Xxxx xxxx by the Partnership,
whether designated as a real estate commission, acquisition fee, finder's fee,
selection fee, non-recurring management fee, consulting fee or any fee of
similar nature however designated and however treated for tax or accounting
purposes, and not any loan fees ("points").
"ACQUISITION FEE" means the fee described in Section 6.4(b) hereof.
"ACT" means the Massachusetts Uniform Limited Partnership Act, as it may be
amended from time to time.
"ADDITIONAL INTEREST" means Minimum Additional Interest, Shared
Appreciation Interest, and Shared Income Interest.
"AFFILIATE" means, when used with reference to a specified Person, (i) any
Person that directly or indirectly through one or more intermediaries controls
or is controlled by or is under common control with the specified Person, (ii)
any Person that is an officer of,
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partner in or trustee of, or serves in a similar capacity with respect to, the
specified Person or of which the specified Person is an officer, partner or
trustee, or with respect to which the specified Person serves in a similar
capacity, (iii) any Person that, directly or indirectly, is the beneficial owner
of 10% or more of any class of equity securities of, or otherwise has a
substantial beneficial interest in, the specified Person or of which the
specified Person is directly or indirectly the owner of 10% or more of any class
of equity securities or in which the specified Person has a substantial
beneficial interest, and (iv) any Immediate Family Member of the specified
Person. A Person who is a partner in a partnership or joint venture with the
Partnership shall not be deemed an Affiliate of the Partnership or a General
Partner if such Person is not otherwise an Affiliate of the Partnership or such
General Partner as defined in the preceding sentence. Notwithstanding the above,
"Affiliates" for the purpose of the indemnification provisions of this Agreement
shall include only those persons performing services on behalf of the
Partnership.
"AGREEMENT" means this Amended and Restated Agreement of Limited
Partnership, as the same may hereafter be amended from time to time.
"APPRAISED VALUE" shall mean, as to any Mortgage, the market value thereof
based upon the expected use according to an appraisal made by an independent
qualified appraiser who is a member in good standing of the American Institute
of Real Estate Appraisers.
"ASSET MANAGEMENT FEE" means the fee established by Section 6.4(d) hereof.
"ASSIGN" means, with respect to an Interest or part thereof, to sell,
assign, transfer, give, or otherwise dispose of, whether voluntarily or
involuntarily or by operation of law, except that in the case of a bona fide
pledge or other hypothecation, no Assignment shall be deemed to have occurred
unless and until the secured party has exercised any of his rights of
foreclosure with respect thereto.
"ASSIGNMENT" means an act of Assigning an Interest or any part thereof.
"BASIC INTEREST" means interest which is generally payable monthly, is
calculated on the unpaid balance of the underlying mortgage loan at a certain
percentage rate specified in the documents establishing such mortgage loan, and
payment of which is insured, or coinsured by FHA.
"BORROWER" means the borrower of a mortgage loan underlying a MBS.
"CAPITAL ACCOUNTS" means the capital accounts established and maintained in
accordance with Section 5.4 hereof.
"CAPITAL CONTRIBUTION" means the amount of cash contributed to the
Partnership by a Partner, prior to the deduction of any offering expenses or
selling commissions.
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"CAPITAL TRANSACTION" means the repayment of principal or prepayment of a
Mortgage to the extent classified as return of capital for federal income tax
purposes, and the sale, exchange, condemnation, eminent domain taking, casualty
or other disposition of a Mortgage or a property subject to or underlying a
Participating Insured Mortgage, but not including the Terminating Capital
Transaction.
"CASH FLOW" means, for a particular fiscal year, all Profits or Losses for
Tax Purposes from the operation of the Partnership for such fiscal year,
including interest (including Minimum Additional Interest and Shared Income
Interest but excluding Shared Appreciation Interest) from Mortgages, interest
from interim investments (including interest on interim investments of the
Distribution Reinvestment Plan), interest from the escrow of the Subscription
Price for Units, and repayment of principal and prepayment of MBS to the extent
classified as income or gain for federal income tax purposes, but excluding
Profits or Losses for Tax Purposes for such fiscal year arising from a Capital
Transaction or the Terminating Capital Transaction, and shall be determined by
adjusting such Profits or Losses (to the extent not otherwise adjusted) as
follows:
(1) Depreciation of any depreciable assets shall not be
considered a deduction;
(2) Amortization of any item for which there is not an associated
cash payment shall not be considered a deduction; (3) Principal and interest
payments on a mortgage or other loan payable by the Partnership shall be
considered deductions;
(4) Principal payments on all conditional sales contracts and
other secured obligations shall be considered a deduction;
(5) If the General Partners shall so determine, reasonable
reserves shall be deducted to provide for any contingency of the Partnership;
(6) Amounts equal to accounts payable and accrued items payable
at the close of the Partnership fiscal year, to the extent not already deducted
in calculating Profits or Losses for Tax Purposes, shall be considered a
deduction;
(7) Amounts required to maintain reasonable working capital
reserves shall be considered a deduction;
(8) The reimbursements and fees incurred and payable to the
General Partners hereunder (other than the Asset Management Fee and the
Incentive Management Fee) shall be considered a deduction, whether or not
currently paid to the General Partners;
(9) Capital Contributions to the Partnership and the Net Cash
Proceeds of any Capital Transaction or the Terminating Capital Transaction shall
not be included
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in Cash Flow of the Partnership and payments made from such sources of funds
shall be excluded in determining Cash Flow of the Partnership; and
(10) Any other cash receipts from the operation of the Partnership
not properly includable in Profits or Losses for Tax Purposes, any amounts
released from operating reserve accounts available for distribution, and the
amount of the Asset Management Fee and the Incentive Management Fee payable with
respect to such fiscal year, shall be included in Cash Flow of the Partnership.
"CERTIFICATE OF LIMITED PARTNERSHIP" means the certificate of limited
partnership filed with the Secretary of State of The Commonwealth of
Massachusetts with respect to the Partnership, as the same may be amended from
time to time.
"CODE" means the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent laws.
"CONSENT" means either the consent given by vote at a meeting called and
held in accordance with the provisions of Section 13.1 hereof or the written
consent, as the case may be, of a Person to do the act or thing for which the
consent is solicited, or the act of granting such consent, as the context may
require.
"CONTROLLING PERSON" means, with respect to any General Partner or its
Affiliates, any of its general partners, chairman, directors, president,
secretary, treasurer, or executive or senior vice presidents, or any Person
holding a 5% or more equity interest in the General Partner or such Affiliate or
having the power to direct or cause the direction of the General Partner or such
Affiliate, whether through the ownership of voting securities, by contract, or
otherwise.
"CORPORATE LIMITED PARTNER" means Xxxxx Depositary Corporation, or its
successor, which has acquired and will hold for its own account 100 Limited
Partner Interests and will acquire and hold up to 15,000,000 Limited Partner
Interests on behalf of those Persons who purchase Units, on the basis of one
Limited Partner Interest for each Unit, and will assign to those Persons its
rights, obligations, and interests with respect to such Limited Partner
Interests under Section 7.6 hereof.
"COUNSEL TO THE PARTNERSHIP" means Xxxxxx Xxxx & Xxx Xxxxxxxx, Boston,
Massachusetts, or another law firm selected by the General Partners.
"CUMULATIVE RETURN ON INVESTED CAPITAL" means a percentage return equal to
11% per annum on the Invested Capital of the class comprised of the Limited
Partners calculated from the respective dates on which the sales of Units to the
Unitholders occur through the most recent fiscal year completed prior to the
transaction giving rise to the computation. In calculating whether the
Cumulative Return on Invested Capital has been satisfied, only distributions by
the Partnership of cash will be considered and no credit will be given for tax
benefits allocated to the Limited Partners.
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"DEPOSITARY" means the Corporate Limited Partner or another Person selected
by the General Partners.
"DEPOSITARY RECEIPT" means a depositary receipt evidencing one or more
Units.
"DISTRIBUTABLE CASH FLOW" means Cash Flow less any Asset Management Fee and
Incentive Management Fee payable for such year.
"DRG" means DRG Financial Corporation and its Affiliates, a fully approved
coinsurance lender under Section 244 of the National Housing Act.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"FHA" means the Federal Housing Administration.
"FHLMC" means the Federal Home Loan Mortgage Corporation.
"FHLMC MBS" means MBS issued in connection with the housing programs of the
FHLMC.
"FNMA" means the Federal National Mortgage Association.
"FNMA MBS" means MBS issued in connection with the housing programs of the
FNMA.
"FRONT-END FEES AND EXPENSES" means fees and expenses paid by any Person
for any services rendered during the Partnership's organizational or acquisition
phase including, without limitation, organizational and offering expenses, the
Acquisition Fee, the Participation Servicing Fee, and Acquisition Expenses.
"GENERAL PARTNER" means any Person designated as a General Partner in
Schedule A of this Agreement or who becomes an additional or Substitute General
Partner as provided in this Agreement, in such Person's capacity as a General
Partner of the Partnership.
"GENERAL PARTNERS" means every Person or Persons who serve(s) as a General
Partner, whether there be one or several.
"GNMA" means the Government National Mortgage Association.
"GNMA MBS" means MBS issued in connection with the federal housing programs
of the GNMA.
"HUD" means the Department of Housing and Urban Development of the United
States.
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"IMMEDIATE FAMILY MEMBER" means with respect to any person, his spouse,
parent, parent-in-law, issue, brother, sister, brother-in-law, sister-in-law, or
child-in-law.
"INCENTIVE MANAGEMENT FEE" means the fee described in Section 6.4(e)
hereof.
"INSURED MORTGAGE" means a mortgage on multi-family residential properties
that is insured or coinsured by the Federal Housing Administration and
securitized by GNMA.
"INTEREST" means, with respect to a General Partner, the entire ownership
interest and, with respect to a Limited Partner, the ownership interest
representing an initial Capital Contribution of Twenty Dollars ($20.00) (or a
lesser amount in the event of a reduction in sales commissions with respect to a
single purchaser subscribing for more than $250,000 in Units or in the event of
the purchase by the General Partner or Affiliates of Units net of sales
commissions), including the right of such Partner to any and all benefits to
which a Partner may be entitled as provided in this Agreement, together with the
obligations of such Partner to comply with all the terms and provisions of this
Agreement, but excluding any claims which such Partner may have against the
Partnership as a creditor.
"INVESTED CAPITAL" means, with respect to the General Partners, their
Capital Contributions and, with respect to the Limited Partners and Unitholders
$20.00 for each Limited Partner Interest or Unit, in either case reduced by any
amounts of cash distributed to such Partner or Unitholder pursuant to Clauses
First and Second of Section 8.3(a) and Section 8.7 hereof.
"INVESTMENT IN MORTGAGES" means the amount of Capital Contributions
actually paid for or allocated to the purchase of Mortgages acquired by the
Partnership, including amounts paid for or allocated to the purchase of
Mortgages, and other cash payments such as interest and taxes, but excluding
Front-End Fees and Expenses.
"INVESTOR LIMITED PARTNER" means any Unitholder who shall be admitted to
the Partnership as a Limited Partner, in the capacity of such Person as a
Limited Partner.
"INVOLUNTARY WITHDRAWAL" means, with respect to any General Partner, the
Withdrawal of such General Partner from the Partnership pursuant to Section 9.2
hereof.
"XXX" means an investment retirement account established pursuant to
Section 408 of the Code.
"JOINT VENTURE PARTNER" means a Person that enters into a joint venture or
partnership with the Partnership.
"LIMITED PARTNER" means any Corporate Limited Partner, Investor Limited
Partner or Substitute Limited Partner in the capacity of such Person as a
Limited Partner.
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"MBS" means guaranteed mortgage-backed securities issued or originated
under or in connection with the housing programs of GNMA, FNMA, or FHLMC.
"MINIMUM ADDITIONAL INTEREST" means Additional Interest provided for in a
Subordinated Promissory Note, which Additional Interest is payable monthly, is
calculated on the unpaid balance of the underlying mortgage loan at a certain
percentage rate specified in the Participating Mortgage Documents of such
mortgage loan, and is subtracted from gross rental collections in excess of a
certain monthly base income on the property underlying such mortgage loan in
order to determine Shared Income Interest.
"MORTGAGE" means collectively Participating Insured Mortgages,
Single-Family MBS, Multi-Family MBS, and Other Mortgages.
"MULTI-FAMILY MBS" means MBS backed by Insured Mortgages that do not
provide for participation in the revenues and the sale or refinancing proceeds
of the property subject to or underlying the Insured Mortgages that back such
MBS.
"NASDAQ" means the National Association of Securities Dealers Automated
Quotation system.
"NET CASH PROCEEDS" of a Capital Transaction or the Terminating Capital
Transaction means the cash received by the Partnership as a result of such
Transaction, less (i) any amounts which are reinvested in accordance with
Section 6.1(c), (ii) all debts and liabilities of the Partnership required to be
paid as a result of the Transaction (including, among other liabilities, any
fees and expenses payable pursuant to Section 6.4 hereof), and (iii) any
reserves for contingent liabilities (including fees then earned but not yet
payable pursuant to Section 6.4 hereof), to the extent deemed reasonable by the
General Partners provided that, at the expiration of such period as the General
Partners shall deem advisable, the balance of such reserves remaining after
payment of such contingencies shall be distributed in the manner provided in
this Agreement for Net Cash Proceeds. In the event the Partnership takes back a
mortgage note in connection with any Capital Transaction or the Terminating
Capital Transaction, all payments subsequently received in cash by the
Partnership with respect to such note shall be included in the Net Cash Proceeds
of that Transaction, irrespective of the extent to which any portion of such
payments shall be treated by the Partnership as principal or interest for tax or
accounting purposes.
"ORIGINATOR" means collectively DRG, any Affiliate of the General Partners
that originates Mortgages and any independent third party engaged in the
business of Mortgage origination.
"OTHER MORTGAGES" means conventional participating and non-participating
mortgage loans which are insured.
"PARTICIPATING INSURED MORTGAGE" means an Insured Mortgage that provides
for participation by its holder in the revenues and sale or refinancing proceeds
of the property subject to or underlying said Insured Mortgage.
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"PARTICIPATING MORTGAGE DOCUMENTS" means the Subordinated Mortgage and
Security Agreement, the Subordinated Promissory Note and any other documents
used to establish, memorialize or amend a mortgage loan or mortgage underlying a
Participating Insured Mortgage as the same may be amended from time to time.
"PARTICIPATION SERVICING FEE" means the fee established by Section 6.4(c)
hereof.
"PARTNER" means any General Partner or Limited Partner.
"PARTNERSHIP" means the limited partnership as formed in accordance with
this Agreement, as said limited partnership may from time to time be
constituted.
"PERSON" means any individual, partnership, corporation, trust,
governmental body or agency, or other entity of any type.
"PLAN" means the Reinvestment Plan adopted by the Partnership pursuant to
which a Unitholder may automatically reinvest its Partnership distributions in
Units available for sale, as more fully described in Exhibit C to the
Prospectus.
"PROFITS OR LOSSES FOR TAX PURPOSES" means profits or losses as determined
by the Partners for federal income tax purposes, and items of income, gain,
loss, deduction, or credit entering into the computation thereof; provided
however, if, in keeping with the provisions of Treasury Regulation Section
1.704-1(b), any assets of the Partnership are accounted for on the books of the
Partnership and in the capital accounts of the Partners at an amount other than
their adjusted bases for tax purposes, then items of income, gain, loss or
deduction shall be calculated based upon the value of the assets on the
Partnership's books.
"PROSPECTUS" means the Prospectus of the Partnership used in connection
with its public offering of Units, as supplemented or amended.
"PURCHASE PRICE" means the price paid upon or in connection with the
purchase of a particular Mortgage, including the amount of Acquisition Fees and
Acquisition Expenses.
"QUALIFIED BANK" means a commercial bank located in the continental United
States with capital funds of at least $100,000,000.
"QUALIFIED PLANS" means qualified pension, profit-sharing and other
employee retirement benefit plans (including Xxxxx Plans) and trusts, and bank
commingled trust funds for such plans.
"REINVESTMENT AGENT" means LCS, Inc. and its successors or assigns, or any
other reinvestment agent selected in accordance with the terms of the
Reinvestment Plan.
"SALES AGENT AGREEMENT" means the Sales Agent Agreement between the
Partnership and Xxxxx Securities Corporation entered into pursuant to Section
6.4(a) hereof.
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"SCHEDULE A" means Schedule A to this Agreement as amended from time to
time.
"SHARED APPRECIATION INTEREST" means Additional Interest provided for in a
Subordinated Promissory Note, which Additional Interest is calculated as a
percentage of certain increases in the value of the property securing the
underlying mortgage loan and is due and payable upon sale or other realization
of the property underlying the Mortgage.
"SHARED INCOME INTEREST" means Additional Interest provided for in a
Subordinated Promissory Note, which Additional Interest is calculated with
reference to gross rental collections, net cash flow before or after debt
service or net income as it may otherwise be defined, of the property underlying
the Mortgage.
"SINGLE-FAMILY MBS" means MBS backed by mortgage loans on single-family
residential properties, including mobile homes.
"SUBORDINATED MORTGAGE AND SECURITY AGREEMENT" means a subordinated
mortgage and security agreement executed in connection with a mortgage loan
underlying a Participating Insured Mortgage or another document performing a
similar function in connection with such a mortgage loan as the same may be
amended from time to time.
"SUBORDINATED PROMISSORY NOTE" means a subordinated promissory note
executed in connection with a mortgage loan underlying a Participating Insured
Mortgage or another document performing a similar function in connection with
such a mortgage loan as the same may be amended from time to time.
"SUBSCRIPTION PRICE" means the amount of cash contributed to the
Partnership on behalf of a Unitholder, prior to the deduction of any offering
expenses or selling commissions.
"SUBSTITUTE GENERAL PARTNER" means the assignee of a General Partner
Interest who is admitted to the Partnership as a General Partner pursuant to
Section 9.5 or Section 13.2 of this Agreement.
"SUBSTITUTE LIMITED PARTNER" means the assignee of a Limited Partner
Interest who is admitted to the Partnership as a Limited Partner pursuant to
Section 10.3 hereof.
"TAX-EXEMPT ENTITIES" means Qualified Plans and other entities exempt from
federal income taxation, such as IRAs, endowment funds, foundations and
charitable, religious, scientific and educational organizations.
"TERMINATING CAPITAL TRANSACTION" means the repayment of principal or
prepayment of a Mortgage to the extent classified as a return of capital for
federal income tax purposes, and the sale, exchange, condemnation, eminent
domain taking, casualty or other disposition of a Mortgage or a property subject
to or underlying a Participating Insured Mortgage, which results in the
dissolution of the Partnership pursuant to Section 11 of this Agreement. The
Terminating Capital Transaction shall also include the
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receipt and collection of notes, if any, and payments thereon or any other
consideration received or to be received by the Partnership upon a sale or other
disposition of all or substantially all of the Mortgages of the Partnership and
all activities reasonably related thereto. Such activities are deemed to be
included in the winding up of Partnership affairs, and all allocations and
distributions therefrom shall be governed by Sections 8.1(c) and (e) and 8.3(b)
hereof.
"TOTAL INVESTED ASSETS" means that portion of the net proceeds of the
offering of Units which shall from time to time be invested in Mortgages.
"UBTI" means unrelated business taxable income determined in accordance
with Sections 511-514 of the Code.
"UNIT" means the interest of a Unitholder in a Limited Partner Interest of
the Partnership. Each Unit will be evidenced by a Depositary Receipt and
represents (i) the assignment by the Corporate Limited Partner of its interest
in the corresponding Limited Partner Interest to the extent permitted by
Massachusetts law and (ii) the right to require the Corporate Limited Partner to
exercise any other rights with respect to such Limited Partner Interest at the
direction of the Unitholder.
"UNITHOLDER" means any Person who holds Units in accordance with Section
6.1(d) or Section 7.2 hereof as reflected in the records of the Partnership and
the Depositary.
"VOLUNTARY WITHDRAWAL" means, with respect to a General Partner, the
voluntary retirement or withdrawal of a General Partner from the Partnership, or
the voluntary sale, assignment, encumbrance or other disposition of all of his
General Partner Interest pursuant to Section 9.1 hereof. In the case of a
General Partner which is a partnership, a Voluntary Withdrawal shall be deemed
to have occurred when all general partners of such partnership shall have
voluntarily withdrawn therefrom as general partners or voluntarily sold or
otherwise disposed of all of their general partner interests therein.
"WITHDRAWAL" means, with respect to a General Partner, the Voluntary or
Involuntary Withdrawal of such General Partner. "Withdraw" means to effect any
such Withdrawal.
"WITHDRAWN GENERAL PARTNER" means a General Partner whose Withdrawal in
accordance with the provisions of this Amended Agreement is effective.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement of Limited Partnership as of the date first specified above.
GENERAL PARTNERS CORPORATE LIMITED PARTNER
XXXXX INSURED PLUS CORP. XXXXX DEPOSITARY CORPORATION
By: Xxxxxxx Xxxxx By: Xxxxxxx Xxxxx
------------- -------------
Xxxxxxx Xxxxx, Co-Chairman of the Xxxxxxx Xxxxx, President
Board of Directors
MORTGAGE SERVICES
PARTNERS LIMITED
PARTNERSHIP
By: Xxxxx Insured Plus Corp.,
its general partner
By: Xxxxxxx Xxxxx
-------------
Xxxxxxx Xxxxx, Co-Chairman of the
Board of Directors
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SCHEDULE A
SCHEDULE A
NAMES, BUSINESS ADDRESSES AND
CAPITAL CONTRIBUTIONS OF PARTNERS
CAPITAL
CONTRIBUTION
NAME AND BUSINESS ADDRESS MADE
------------------------- ------------
GENERAL PARTNERS
X. Xxxxx Insured Plus Corp. $ 75
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Mortgage Services Partners
Limited Partnership
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000 $ 2,925
------------
Total $ 3,000
CORPORATE LIMITED PARTNER
II. Xxxxx Depositary Corporation $ 2,000
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
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