EXHIBIT 3.2
REAL ESTATE ASSOCIATES LIMITED VII
RESTATED CERTIFICATE AND
AGREEMENT OF LIMITED PARTNERSHIP
This Restated Certificate and Agreement of Limited Partnership by and
among National Partnership Investments Corp., a California corporation with
principal offices at Suite 919, 0000 Xxxxxxx Xxxx Xxxx, Xxx Xxxxxxx,
Xxxxxxxxxx 00000 (the "Corporate General Partner"), and National Partnership
Investments Associates II, a limited partnership ("NPIA II" or the
"Non-Corporate General Partner"), the general partner of which is Xxxxxxx X.
Xxxxxxxxx, an individual residing at 000 Xxxxxxx Xxxx, Xxxxx Xxxxxx,
Xxxxxxxxxx 00000 (hereinafter collectively referred to as the "General
Partner"), and Xxxxx X. Xxxxxxx, an individual residing at 0000 Xxxxxxx
Xxxxxx, Xxxxxx, Xxxxxxxxxx 00000 ("Initial Limited Partner"), is entered into
as of February 1, 1984. Such Initial Limited Partner, and any additional or
substituted limited partners hereinafter admitted to the Limited Partnership
as herein provided, is referred to collectively as the "Limited Partners" and
individually as a "Limited Partner." The term "Partners" shall mean all
General and Limited Partners, and the term "Partner" means any General or
Limited Partner.
W I T N E S S E T H :
WHEREAS, on May 24, 1983, the Partnership was formed pursuant to the
laws of the State of California;
WHEREAS, the General Partners and the initial Limited Partner desire
to change certain provisions in, and restate in full, the agreement; and
WHEREAS, it is the intention of the parties thereto to admit
additional Limited Partners to the Partnership for the purpose of acquiring
additional capital therefor;
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. Formation.
1.1 The General Partners and the Initial Limited Partner do hereby
form a limited partnership (the "Partnership") under the Limited Partnership
Act of the State of California.
SECTION 2. Name.
2.1 The business of the Partnership shall be conducted under the name
Real Estate Associates Limited VII, which name may be changed by the General
Partners by written notice to the Limited Partners.
SECTION 3. Addresses of Parties.
3.1 The principal place of business of the Partnership shall be at
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx 00000, or at such
other place as the General Partners may from time to time designate in writing
to the Limited Partners. The Partnership may also maintain such other offices
at such other places as the General Partners may deem advisable.
3.2 The addresses of the General Partners shall be those stated in
the first paragraph of this Agreement, or at such other places as the General
Partners may from time to time designate in writing to the Limited Partners.
The addresses of the Limited Partners shall be those stated after their names
on Schedule A hereto or in any amended certificate hereto. A Limited Partner
may change such address by written notice to the General Partners, which
notice shall become elective upon receipt.
SECTION 4. Business of the Partnership.
4.1 The business of the Partnership shall be:
(a) primarily to acquire, directly or indirectly, interests as a
limited partner or joint venturer in any partnership or joint venture
which will (i) acquire, least, hold, finance, construct, improve,
rehabilitate, manage, and/or operate government-assisted projects,
including existing government-assisted projects, or other housing
projects (the "Projects," and the interests of the Partnership in the
local limited partnerships or joint ventures shall be referred to as
"Project Interests"), (ii) monitor and supervise management of
construction and operations of the Projects, (iii) arrange for and
supervise the conversion of any Project to other uses, (iv) to
acquire interests as a limited partner in any partnership or as a
general partner or joint venturer in any joint venture which will
acquire, lease, hold, finance, construct, improve, rehabilitate,
manage and/or operate conventional housing projects which shall be
included within the definition "Project," or (v) perform any act for
a purpose authorized by this Agreement; or to directly acquire
existing conventional housing projects (which shall be included
within the definition "Projects");
(b) to acquire, hold (in the Partnership's name or under any other
title arrangement selected by the General Partners), lease, sell,
mortgage, convey, or refinance any real or personal property,
including, but not limited to, the Project Interests described in
paragraph (a) above;
(c) to hold, own, maintain, manage, improve, develop, operate, sell,
transfer, convey, lease, mortgage, exchange, or otherwise dispose of
or deal in or with Projects and Project Interests described in
paragraph (a) above; and
(d) to perform any acts to accomplish the foregoing purposes.
SECTION 5. Contributions to Capital; Additional Limited Partners.
5.1 The capital of the Limited Partnership shall be divided into no
less than 1 and up to 20 General Partners Interests and no less than 480 and
up to 18,000 non-assessable limited partnership interests, each of which
limited partnership interest is hereinafter referred to as a "Limited
Partnership Interest."
5.2 The General Partners shall contribute an aggregate of $15,000 to
the capital of the Partnership, for which the General Partners shall be
credited with the ownership of one General Partner's Interest, and shall have
such interest in and to the profits and losses thereof as is described in
Section 7 hereof. Upon liquidation of the Partnership, the General Partners
will discharge any debit balance in their capital accounts by contributing to
the Partnership an amount up to the difference between 1% of total capital
contributions to the Partnership and $15,000. The General Partners may, but
are not required to, purchase Limited Partnership Interests and will
accordingly have as Limited Partners such additional pro rata interest in and
to the profits and losses of the Partnership pursuant to Section 7 hereof.
5.3(a) The Initial Limited Partner has contributed $4,550 to the
capital of the Partnership pursuant to a promissory note, for which she has
received a Unit and has the right, but not the obligation, to purchase
additional Units. Furthermore, upon the admission of additional Limited
Partners to the Partnership, the Initial Limited Partner may relinquish her
Unit, withdraw such investment, and cease to be a Limited Partner.
(b) The General Partners are authorized to admit additional Limited
Partners to the Partnership by selling not more than 18,000 Limited
Partnership Interests for cash to selected persons as may apply to become
Limited Partners pursuant to the terms of an offering described in a
Prospectus (the "Prospectus") to which this Agreement will be annexed, by
completing a subscription agreement (the "Subscription Agreement") in the form
to be set forth in the Prospectus, provided that no person admitted as a
Limited Partner shall have been permitted to purchase more than 50 Units,
subject, however, to the right of the General Partners to establish special
requirements for larger subscriptions.
(c) The Limited Partnership Interests shall be sold to Limited
Partners in "Units." The minimum investment shall be one Unit at a purchase
price of $5,000 per Unit. Each Unit shall consist of two Limited Partnership
Interests and two warrants, each of which will entitle the purchaser of a Unit
to acquire two Additional Limited Partnership Interests ("Additional Limited
Partnership Interests") during the period January 1, 1985 to and including
January 25, 1985 at $2,500 each. The Partnership shall have the right to offer
for sale, at the best prices reasonably obtainable (which may be less than
$2,500 per Limited Partnership Interest), any Additional Limited Partnership
Interest not purchased pursuant to the exercise of Warrants. The foregoing
sums relating to the purchase of Units and Additional Limited Partnership
Interests shall be paid to the Partnership concurrently with the recordation
in the Official Records of Los Angeles County, California, of an amendment of
this Agreement reflecting the admission of each Limited Partner to the
Partnership or increase in the number of Limited Partnership Interests held by
such Limited Partner, as the case may be. Investors whose subscriptions have
been accepted by the General Partners will be admitted as Limited Partners
within 15 days after the minimum of $1,200,000 from the sale of Units has been
received by the General Partners. Thereafter, investors will be admitted as
Limited Partners no later than the last day of the calendar month following
the date the General Partners accept their subscriptions. The General Partners
will accept or reject subscriptions within two business days after receipt
thereof. All proceeds of the offering will be held by the Partnership and will
be used only for the purposes permitted in this Agreement.
(d) The Partnership presently contemplates the public offering of a
maximum of 2,000 Units at an offering price of $5,000 per Unit or an aggregate
offering price of $10,000,000. These Units represent 4,000 Limited Partnership
Interests and 4,000 Warrants to purchase an aggregate of 8,000 Additional
Limited Partnership Interests at a price of $2,500 per Additional Limited
Partnership Interest, or an aggregate exercise purchase price of $20,000,000,
provided, that if the Additional Limited Partnership Interests can not be sold
for $2,500 each, the General Partner shall have the authority to offer and
sell such Interests at the best prices that can be reasonably obtained. A
sales commission of 8 1/2% shall be paid to X.X. Xxxxxx & Company Inc.
("Xxxxxx") with respect to the sale of Units; a sales commission of 8 1/4%
shall be paid to Xxxxxx with respect to the sale of Limited Partnership
Interests pursuant to the exercise of Warrants, provided, however, that the
sales commission to be charged on Limited Partnership Interests available for
sale by the Partnership upon failure to exercise Warrants shall be 8 1/2%. The
Partnership will also reimburse Xxxxxx for certain expenses. In anticipation
of receipt of subscriptions for in excess of 2,000 Units, the Partnership will
register with the Securities and Exchange Commission a total of 2,600 Units
(covering an aggregate of 5,200 Limited Partnership Interests and Warrants to
purchase an aggregate of 10,400 Additional Limited Partnership Interests) and
will grant to Xxxxxx the right, exercisable in its sole discretion, to sell
these additional Units so registered (on the same terms and conditions as the
other Units) on behalf of the Partnership. Such right to sell an additional
600 Units will expire on the date of termination of the offering and will
provide additional compensation for Xxxxxx.
(e) No Partner shall have the right, except as provided in Section
5.3(a), to withdraw or reduce his capital contribution. No Limited Partner
shall have the right to bring an action for partition against the Partnership
or to demand or receive property other than cash in return for his capital
contribution. No Limited Partner shall have priority over any other Limited
Partner, either as to the return of his capital contribution or as to profits,
losses, or distributions.
(f) The net proceeds to the Partnership will be $4,575 for each Unit.
Except as otherwise provided in Section 7.3, a person acquiring Units will
participate with other Limited Partners in the income, gains, losses,
deductions, credits, and cash distributions on a pro rata basis in accordance
with the number of Limited Partnership Interests owned. A capital account
shall be maintained for each Partner. To each Account shall be credited (i)
the amount of money paid by a Partner to the Partnership to acquire his
Limited Partnership Interests (but not Warrants), (ii) the Partner's
distributive share of Profits, and (iii) the Partner's distributive share of
any Partnership income, and from each Capital Account there shall be debited
(iv) the net fair market value of property distributed to the Partner, (v) the
amount of money distributed to the Partner, (vi) the Partner's distributive
share of Losses and (vii) the Partner's distributive share of Partnership
expenditures not deductible in computing taxable income and not properly
capitalized.
(g) To accomplish the purpose of this Section 5.3, the General
Partners are hereby authorized to do all things necessary to admit such
additional Limited Partners, including, but not limited to, registering the
Units and Additional Limited Partnership Interests under the Securities Act of
1933, as amended, pursuant to the rules and regulations of the Securities and
Exchange Commission, qualifying the Units and Additional Limited Partnership
Interests for sale with state securities regulatory authorities or perfecting
exemptions from qualification, and entering into such underwriting or agency
arrangements for the solicitation of the Units and Additional Limited
Partnership Interests upon such terms and conditions as the General Partners
may deem advisable.
5.4 Proceeds from contributions for Units and Additional Limited
Partnership Interests and other Partnership funds shall be held by the General
Partners as fiduciaries for the exclusive use of the Partnership and after the
start of Partnership operations shall be temporarily invested in U.S. Treasury
Bills and Bonds, bank certificates of deposit, bank repurchase obligations,
commercial paper (investment grade), and tax-exempt notes and bonds, or
registered investment companies holding such securities. Interest thereon
shall inure to the benefit of the Partnership, and the Limited Partners, as
such, shall not receive interest on funds contributed by them. Any funds
(other than designated reserves) not invested or committed for investment in
Projects or Project Interests within 18 months from the effective date of the
Prospectus shall be distributed pro rata to the Limited Partners as a return
of capital.
SECTION 6. Organizational Expenses.
6.1 The Partnership shall pay all costs of qualifying and offering
the Units and Additional Limited Partnership Interests (including sales
commissions) and all formation and organization expenses, including expenses
associated with the selection and acquisition of Projects (which expenses are,
however, subject to the limitation set forth in Section 9.6.1 hereof). The
General Partners will be liable for the amount, if any, by which the aggregate
organizational expenses and sales commissions exceed 15% of the gross proceeds
from the sale of Units and Additional Limited Partnership Interests.
SECTION 7. Profits and Losses.
7.1 Prior to the amendment to this Agreement for the purpose of
admitting additional Limited Partners to the Partnership in accordance with
Section 5.3(b) hereof, the General Partners shall be allocated, as they may
agree between themselves, 99% of each item of income, gain, loss, deduction,
and credit (collectively, "Partnership Tax Items" and individually
"Partnership Tax Item"). During such period, the Initial Limited Partner shall
be allocated 1% of each Partnership Tax Item. At all times thereafter, except
as provided in Section 7.2 and the remainder of this Section, the General
Partners shall be allocated 1% and the Limited Partners as a class shall be
allocated 99% of each Partnership Tax Item. Income recognized by the
Partnership upon expiration of Warrants shall be allocated 1% to the General
Partners and 99% to the non-exercising Limited Partners in proportion to their
respective Limited Partnership Interests.
7.2 Upon the total or partial liquidation of the Partnership or the
disposition or partial disposition of a Project or Project Interest, income
and losses of the Partnership shall be allocated as follows. Income not
exceeding an amount equal to the sum of the negative adjusted capital account
balances of all Partners with such balances (computed after any distributions
made under Section 9.6.2) shall be allocated among such Partners in proportion
to their respective negative capital account balances and without regard to
Section 7.3; and income in excess thereof shall be allocated 1% to the General
Partners and 99% to the Limited Partners as a class. Losses not exceeding an
amount equal to the sum of the positive adjusted capital account balances of
all Partners with such balances (computed after any distributions under
Section 9.6.2) shall be allocated among such Partners in proportion to their
respective positive adjusted capital account balances and without regard to
Section 7.3; and losses in excess thereof shall be allocated 1% to the General
Partners and 99% to the Limited Partners as a class. Notwithstanding any other
provision of this Agreement, the General Partners shall be allocated at least
1% of each Partnership Tax Item.
7.3 Each Limited Partner shall be allocated the same fractional share
of each Partnership Tax Item allocable to Limited Partners as a class as the
total number of Limited Partnership Interests owned by him divided by the
total number of Limited Partnership Interests outstanding, subject to the
following exception. Commencing on January 1, 1985, and thereafter, each
Partnership Tax Item allocable to Limited Partners as a class shall be
allocated 80% to holders of Additional Limited Partnership Interests, and 20%
to holders of Limited Partnership Interests acquired prior to January 1, 1985
until the total amount of each Partnership Tax Item allocated to each
Additional Limited Partnership Interest equals the total amount of each
Partnership Tax Item (based upon a weighted average of each Partnership Tax
Item attributable to Limited Partnership Interests acquired prior to January
1, 1985) allocated to each Partnership Interest acquired prior to January 1,
1985. The weighted average of each Partnership Tax Item attributable to
Limited Partnership Interests acquired prior to January 1, 1985 shall be a
fraction, the numerator of which is an amount, consisting of the product, for
each month until January 1, 1985, of the total amount of that Partnership Tax
Item allocated to the group comprised of Limited Partnership Interests
purchased through that month times the number of months remaining, including
the month in question, until January 1, 1985, and the denominator of which is
an amount, consisting of the product, for each month until January 1, 1985, of
Limited Partnership Interests purchased through that month times the number of
months remaining, including the month in question, with January 1, 1985. As
each Partnership Tax Item is so equalized between Limited Partnership
Interests acquired prior to January 1, 1985 and Additional Limited Partnership
Interests acquired on or subsequent to January 1, 1985, this allocation shall
cease as to that Partnership Tax Item.
7.4 In determining whether Partnership Tax Items are realized, paid,
accrued, or incurred during any period in which any Limited Partner is a
member of the Partnership, such Items shall be allocated on any basis
permitted by Section 706(c) of the Internal Revenue Code of 1954, as
determined by the General Partners. In the event of the transfer of a Limited
Partnership Interest, the distributive share of these Partnership Tax Items
(in respect of the Limited Partnership Interest so transferred) shall be
allocated between the transferor and the transferee in accordance with this
Section.
SECTION 8. Cash Distributions.
8.1 The General Partners shall distribute annually substantially all
of the Partnership's Net Cash Flow as defined herein. Except as provided in
Section 8.2 hereof, the General Partners shall be entitled to receive 1% of
the Net Cash Flow to be distributed, but any such distributions to the General
Partners shall be reduced by the amount paid as an Annual Management Fee as
set forth in Section 9.5 hereof. The Limited Partners as a class shall receive
the balance of the distributed Net Cash Flow, which shall be distributed among
Limited Partners as Partnership Tax Items are allocated to them under Section
7.3.
8.2 Upon the total or partial liquidation of the Partnership or the
disposition or partial disposition of a Project or Project Interest, net
assets available for distribution remaining after all distributions required
to be made under Section 9.6.2 shall be distributed to the Partners in
proportion to their positive adjusted capital account balances (computed after
the allocation of income or loss under Section 7.2).
8.3 "Net Cash Flow" shall mean the Partnership's share of all
receipts derived from the ownership of Projects and Project Interests therein
(exclusive of any proceeds from the sale or financing of Projects or Project
Interests, refinancing or other extraordinary transactions not in the ordinary
course of business) less (a) expenses, (b) such reserves as the General
Partners deem reasonably necessary for the proper operation of the
Partnership's business, and (c) any fees and expenditures authorized by this
Agreement (except for construction expenditures paid out of capital or loan
proceeds). The General Partners may at their discretion reinvest or distribute
all or any portion of the proceeds from the disposition or refinancing of any
Project or Project Interest therein, provided that in the event of a sale, the
Partners shall have first received any distributions to which they are
entitled under Section 9.6.2. To the extent that such proceeds are not
reinvested or committed within twelve months from the date of the receipt of
such proceeds, they shall be distributed. Distributions of the net proceeds
from the sale or financing of Projects or Project Interests, refinancing
thereof, or other extraordinary transactions not in the ordinary course of
business shall be distributed to the General and Limited Partners in the same
manner as net cash is distributed under Section 8.2.
8.4 The General Partners shall designate a record date to determine
Partners entitled to cash distributions, which shall not be less than 15 days
nor more than 30 days before each cash distribution. The Partnership shall
cause to be maintained records reflecting the name, address, and number of
Limited Partnership Interests and General Partners Interests held by each
Partner for the purpose of determining recipients of cash distributions and
notices.
SECTION 9. The General Partners.
9.1 The General Partners shall have complete discretion in the
management and control of the business of the Partnership for the purposes
herein stated, shall make all decisions affecting the business of the
Partnership and shall manage and control the affairs of the Partnership to the
best of their abilities and use their best efforts to carry out the purposes
of the Partnership. The powers of the General Partners include, but are not
limited to, the powers:
(a) to expend the capital and profits of the Partnership in
furtherance of the Partnership's business;
(b) to acquire, hold (in the Partnership's name or, in the best
interest of the Partnership, under any other title arrangement
selected by the General Partners), lease, sell, mortgage, convey, or
refinance any real or personal property, including Projects and
Project Interests, at such price and upon such terms, as they deem to
be in the best interests of the Partnership, including the power to
vote to amend a local limited partnership agreement or joint venture
agreement in such a manner as to reduce the limited partnership
interest or joint venture interest of the Partnership in the local
limited partnership or joint venture, to vote to reduce the
Partnership's interests in the profits, losses, and special
allocations of the local limited partnership or joint ventures and
assign a part of the limited partnership interest or joint venture
interest in such partnership, provided that such action is necessary
to preserve the economic value of the Partnership's Project Interest;
(c) to monitor the construction and operations of any of the
Projects, Project Interests, or other Partnership property and to
make recommendations with respect thereto;
(d) to retain independent consultants to evaluate the Projects,
Project Interests, and other Partnership property;
(e) to borrow money and execute promissory notes and to secure the
same by mortgage upon the Partnership's property;
(f) to invest in short-term debt obligations (including obligations
of federal and state governments and their agencies, bank repurchase
obligations, commercial paper, and certificates of deposit of
commercial banks, savings banks, or savings and loan associations)
such funds as are temporarily not required for investment in
Projects, Project Interests, or other Partnership property;
(g) to lend money or provide advances in furtherance of the
Partnership's purposes; and
(h) to enter into and carry out agreements of any kind, provided that
all contracts with the General Partners or their affiliates must
provide for termination by the Partnership on 60 days written notice,
without penalty, and to do any and all other acts and things
necessary, proper, convenient, or advisable to effectuate and carry
out the purposes of the Partnership. The limitation contained in the
proviso in the preceding sentence shall not apply to any agreement
entered into in connection with the proposed Sale.
9.2 The General Partners shall (a) diligently and faithfully devote
such of their time to the business of the Partnership as they deem necessary
to conduct it for the greatest advantage of the Partnership; (b) file and
publish all certificates, notices, statements, or other instruments required
by law for formation and operation of the Partnership in all appropriate
jurisdictions; (c) cause the Partnership to carry adequate public liability,
property damage, and other insurance, any or all of which may name the General
Partners as the sole insured; (d) indemnify and hold the Partnership harmless
from any loss, damage or liability due to, or arising out of, any General
Partner's breach of fiduciary duty; and (e) maintain capital accounts on the
books and records of the Partnership in respect of each interest in the
Partnership. The General Partners may become Limited Partners and thereby
become entitled to all of the rights of Limited Partners to the extent of the
Limited Partnership Interests so acquired, provided that such acquisition of
Limited Partnership Interests shall not reduce any liability of the General
Partners under this Agreement. Notwithstanding the foregoing, the General
Partners shall have fiduciary responsibility for the safekeeping and use of
all funds and assets of the Partnership, whether or not in their immediate
possession or control and they shall not employ, or permit another to employ,
such funds, or assets in any manner except for the exclusive benefit of the
Partnership.
9.3 Notwithstanding any provision in this Agreement to the contrary,
it is understood and agreed that (i) in conducting, carrying on, and managing
the business of the Partnership, the General Partners shall be bound by the
following investment policies, which may not be changed, altered, or amended
except as provided in Section 14 hereof and (ii) the General Partners shall
endeavor to conduct the Partnership's business in accordance with the policies
set forth in the Prospectus:
(a) except for interim commitments in short-term government
obligations, commercial paper (investment grade), certificates of
deposit, bank repurchase obligations, and tax-exempt notes and bonds
or registered investment companies holding such securities,
investments will be initially limited to Project Interests, provided
that (i) not less than 75% of the amount of public offering proceeds
available for investment will be invested in Project Interests in
partnerships or joint ventures which will own or lease federal,
state, or local government-assisted housing projects including
existing government-assisted housing (the Partnership will have the
right to invest up to 25% of the aggregate amount available in
housing projects which are not government-assisted or in local
limited partnerships or joint ventures which will own or lease
housing projects which are not government-assisted) and (ii) the
Partnership may subsequently refinance or convert such Project
Interests to other uses (consistent with partnership objectives) with
a view to realizing higher revenue or capital gains, although
reinvestment of cash flow (excluding proceeds resulting from a
disposition or refinancing of property) shall not be allowed.
(b) Projects or Project Interests will be acquired with a view toward
maximizing tax deductions, with cash income and long-term
appreciation as additional considerations, and not with a view to
early resale;
(c) the Partnership will seek to avoid depreciation recapture and
defer taxes by not selling any Projects or Project Interests within
ten years, except (i) to qualified tenant cooperatives as defined in
the Internal Revenue Code, and (ii) under circumstances described in
the Prospectus;
(d) upon any sale or refinancing the Partnership shall not reinvest
any proceeds thereof;
(e) the Partnership may (i) borrow money only against individual
Projects or Project Interests to acquire Projects or interests
therein, to defray expenses or preserve its interest in each
individual Project or interest therein, but may not pledge or
encumber other Projects or Project Interests for this purpose, and
(ii) borrow only such amount for which the Partnership can reasonably
expect to meet debt service requirements from anticipated Net Cash
Flow. The Partnership may make or cause its affiliates to make loans
or advances for the acquisition of Projects or Project Interests, but
such affiliates may not receive interest or other financing charges
or fees in excess of the amounts which would be charged by unrelated
banks for comparable loans for the same purpose in the locality of
the Project or in amounts which otherwise are unreasonable or require
any prepayment charge or penalty, provided that in connection with
any of the foregoing transactions, (A) the Partnership shall not
enter into transactions involving the use of "all-inclusive" or
"wrap-around" notes except as permitted by the Rules of the
Department of Corporations of the State of California, and (B) the
Partnership shall not incur any indebtedness whereby the lender will
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;
(f) the Partnership shall not (i) issue senior securities, except as
set forth in the preceding paragraph and even then only at par or at
a premium, (ii) invest in other issuers for the purpose of exercising
control (other than local limited partnerships owning or leasing
projects), (iii) underwrite the securities of other issuers, or (iv)
offer Units or Limited Partnership Interests in exchange for
property;
(g) except in the case in which a single Project investment exceeds
this limitation, the Partnership shall not sell and reinvest more
than 25% of its portfolio of Projects or Project Interests within any
single year, unless by exempted sales to qualified tenant
cooperatives;
(h) the Partnership shall not make loans to the General Partners or
their affiliates and will not make loans to others except (i) to
developers in connection with the acquisition of Projects or Project
Interests (and then only if such loans do not exceed, in the
aggregate, 5% of the difference between the aggregate amount of
contributions made pursuant to Section 5 hereof less expenses of the
Partnership determined in accordance with Section 6 hereof), (ii) to
local limited partnerships in which the Partnership has an equity
interest, and (iii) as permitted by Sections 5.4 or 9.3(a) hereof;
(i) commitments of Partnership funds will be contingent upon receipt
of satisfactory appraisals as to non-government-assisted Projects and
Project Interests and existing government-assisted Projects and
Project Interests or FHA feasibility or equivalent letters as to
newly constructed government-assisted projects and no significant
contributions to government-assisted projects will be made prior to
HUD approval of the transfer, if required, Initial Endorsement by
FHA/HUD or its equivalent for non-FHA/HUD Projects;
(j) the Partnership will not purchase or lease a Project or Project
Interest, if the General Partners or their affiliates have (or if any
limited partnership in which the General Partners or their affiliates
have an interest in has) any equity interest in such Project or have
made loans with respect thereto (except where their interest is
minimal and held primarily for the benefit of the Partnership), or
have any interest of a type other than equity or debt which has not
been disclosed to the Limited Partners;
(k) the Partnership will not sell or lease any Project or Project
Interest to the General Partners or their affiliates; provided that
the foregoing shall not apply to any sale of Project Interests made
in connection with the proposed Sale described in the Definitive
Consent Solicitation Statement of the Partnership dated August 6,
1998.
(l) the Partnership will not purchase Projects or Project Interests
in exchange for Units or Limited Partnership Interests;
(m) the Partnership shall not give the General Partners or their
affiliates the exclusive right or employment to sell Projects or
Project Interests;
(n) the Partnership may not pay the General Partners or their
affiliates any commission in connection with the reinvestment of the
proceeds of any resale, exchange, or refinancing of any Project
Interest;
(o) the General Partners, their affiliates, and any salesman or
dealer offering Units or Additional Limited Partnership Interests
shall not take any action in violation of Section 260.140.114.6 of
Title 10 of the California Administrative Code; (p) the Partnership's
funds may not be commingled with the funds of others;
(q) all expenses of the Partnership shall be billed directly to it,
except organizational expenses and offering expenses (including,
subject to the limitation set forth in Section 9.6.1, expenses
associated with the selection and acquisition of Projects or Project
Interests) paid by the General Partners or their affiliates, which
expenses may be reimbursed;
(r) the Partnership will not enter into any transaction or agreement
with any Limited Partner or any affiliate of a Limited Partner, if
the Partnership would be prohibited pursuant to this Section 9.3 from
entering into a similar agreement or transaction with the General
Partners or their affiliates, provided that nothing herein set forth
shall prohibit a "sponsor" (i.e., a general partner, developer,
contractor, or affiliate thereof) of any local limited partnership
from acquiring or holding Units or Limited Partnership Interests in
the Partnership or being admitted as a Limited Partner;
(s) the Partnership will not acquire an interest in a partnership,
local limited partnership, or joint venture which does not constitute
at least a 50% interest of all limited partnership or similar
interests; and
(t) the Partnership shall not sell all or substantially all of the
Partnership's assets in a single transaction or a series of related
transactions without obtaining the consent of Limited Partners owning
a majority of the outstanding Limited Partnership interests;
provided, however, that the foregoing will not apply to a sale of a
single Project or Project Interest.
9.4 The General Partners may delegate all or any of their powers,
rights, and obligations hereunder, and in furtherance of any such delegation
may appoint, employ, or contract with any person for the account of the
Partnership for the transaction of the business of the Partnership, which
persons may, under the supervision of the General Partners, perform any acts
or services for the Partnership as the General Partners may approve.
9.5 As compensation for services to the Partnership by the General
Partners pursuant to this Agreement, the General Partners shall be entitled to
receive, with respect to the Partnership's investments in local limited
partnerships owning government-assisted housing projects, an Annual Management
Fee, the amount of which shall be equal to .5% of the Partnership's "Invested
Assets." "Invested Assets" is defined as the cost of acquiring Project
Interests or Projects, including capital contributions and other equity
payments to be made and the proportionate amount of the mortgage loans on and
other debts related to the Projects or Project Interests equivalent to the
Partnership's interest in the capital accounts of the respective partnerships,
Projects or joint ventures, but excluding depreciation, amortization, and
capitalized expenditures (such as the Acquisition and Selection Fees [defined
in Section 9.6,1 hereof] due the General Partners, organizational
expenditures, and acquisition closing costs). The Annual Management Fee shall
be due and payable in monthly installments in every year; the other fees due
the General Partners shall be deferred until Annual Management Fees due are
paid, and Annual Management Fees may, to serve the best interests of the
Partnership, be paid out of any Partnership funds. The amount, if any, of the
Annual Management Fee earned, but unpaid in any year, shall accrue for payment
in later years.
9.6.1 In addition, the Partnership will pay to the General Partners,
as compensation for services rendered by the General Partners or their
affiliates, fees for their services and expenses in the organization and
initial management of the Partnership, the syndication of Units and Additional
Limited Partnership Interests, and a commitment fee in exchange for its
agreement to advance assets to facilitate financial arrangements regarding a
Project Interest. Organization, Initial Management, Syndication, and
Commitment Fees in an aggregate amount of approximately .75% of the
Partnership's Invested Assets (defined in Section 9.5 hereof) will be paid to
the General Partners. Acquisition and Selection Fees in an aggregate amount of
approximately 1.75% of the Partnership's Invested Assets (defined in Section
9.5 hereof) will be paid to the General Partners for their services in
connection with the review, selection, evaluation, negotiation, and
acquisition of the Projects. No payment of any portion of the Organization,
Initial Management, Syndication, and Commitment Fees or Acquisition and
Selection Fees will be made prior to the termination of the offer and sale of
the minimum amount of 240 Units or prior to the payment, at any time, of
Management Fees accrued. Such fees (including the Organization, Initial
Management, Syndication, and Commitment Fees and Acquisition and Selection
Fees), any real estate fees or commissions from sale of Projects to the
Partnership and any fee and expense incurred by the Partnership (whether
directly or in the form of reimbursements to the General Partners for funds
advanced during the organization period) in connection with the selection of
Projects and Project Interests and the negotiations with respect thereto and
investments therein may not exceed (a) 18% of gross offering proceeds, (b) for
any Project or Project Interest, 18% of the proportion of gross offering
proceeds allocable to that Project or Project Interest and (c) the lesser of
6% of the total investment in the Project or Project Interest (including
mortgages) or standard real estate commissions for the region in which the
Project is located. The amount, if any, of the Organization, Initial
Management, Syndication, and Commitment Fees and Acquisition and Selection
Fees unpaid in any year shall accrue for payment in later years.
Fees during the initial period, including the Organization, Initial
Management, Syndication, and Commitment Fees, if any, the Acquisition and
Selection Fees, and real estate fees or commissions payable upon the sale of
projects or interests in projects to the Partnership, will not exceed those
determined in accordance with the NASAA Guidelines.
At the minimum offering (assuming exercise of none of the Warrants or
sale of any of the Additional Limited Partnership Interests), organizational
and offering expenses and selling commissions are expected to equal
approximately 12% of the Limited Partners' capital contributions. Under the
NASAA Guidelines, assuming no leverage on the properties, an amount equal to
approximately 8% of the Limited Partners' capital contributions would be
available for the payment of Acquisition Expenses, including Acquisition Fees
payable to the General Partners or their affiliates. For each increase or
decrease in organizational and offering expenses or selling commissions, there
would be a corresponding decrease or increase in the Acquisition Fees or
Acquisition Expenses allowable to the General Partners. Under the NASAA
Guidelines, as the amount of leverage increases by 1%, Acquisition Expenses or
the Acquisition Fees which may be payable to the General Partners increase by
..1625% (assuming that organizational and offering expenses, selling
commissions and other Acquisition Expenses remain constant). It is anticipated
that the Partnership will obtain leverage through its investment in local
limited partnerships or joint ventures or its direct investment in properties
of approximately 80%. Based on this leverage, at the minimum offering,
assuming organizational and offering expenses and selling commissions equal to
12% of the Limited Partners' capital contributions, the maximum amount that
would be available for the payment of Acquisition Expenses, including
Acquisition Fees payable to the General Partners, is an amount equal to
approximately 21% of the Limited Partners' capital contributions. Since the
amount of the fees payable to the General Partners is limited by other
restrictions and definitions, it is not anticipated that the maximum amount of
front-end fees allowable under the NASAA Guidelines will be paid.
9.6.2 Upon total or partial liquidation of the Partnership or the
disposition or partial disposition of a Project or Project Interest and
distribution of the proceeds, the then General Partners will be entitled to a
Liquidation Fee equal to the lesser of (a) 10% of the net proceeds to the
Partnership from the sale of a Project or Project Interest or (b) 1% of the
sales price (including the mortgage) plus 3% of the net proceeds after
deducting an amount sufficient to pay federal and state taxes, if any,
calculated at the maximum rates then applicable. No part of such Liquidation
Fee shall be paid, unless the Limited Partners shall have first received an
amount equal to (i) the greater of (A) their aggregate capital contributions,
or (B) an amount sufficient to satisfy the cumulative state and federal income
tax liability, if any, arising from the deposition of all Projects or Project
Interests disposed of to date, calculated at the maximum tax rate then
applicable; less, (ii) all amounts previously distributed to Limited Partners
under this Agreement. Prior to the receipt by the Limited Partners of an
amount equal to the grater of (1) their aggregate capital contributions, or
(2) an amount sufficient to satisfy the cumulative tax liability arising from
the disposition of all Projects or Project Interests disposed of to date, the
unpaid Liquidation Fee shall accrue for later payment to the General Partners.
9.6.3 The General Partners and their affiliates will not receive any
real estate brokerage commission with respect to sales of government-assisted
Projects or Project Interests. In the event of a sale of a non-
government-assisted Project or Project Interest, however, the General Partners
shall receive a commission not to exceed an amount equal to 3% of the gross
sales price of the Project or Project Interest (but in no event to exceed 50%
of the standard real estate brokerage commission which would have been charged
by unaffiliated third parties providing comparable services in the areas in
which such Projects or Project Interests are located), provided the General
Partners provide substantial services in connection with the sale. The
commission shall be subordinated to the return to the Limited Partners of an
amount equal to that part of their capital contributions allocable to these
Projects or Project Interests plus a 6% annual cumulative return from these
Projects or Project Interests (including all amounts previously distributed to
such Limited Partner). The amount of any unpaid real estate brokerage
commission shall accrue for later payment to the General Partners. No General
Partner or affiliate may receive more than the standard real estate commission
in the relevant locality.
The General Partners or their affiliates may perform other services
for the Partnership, but neither General Partner nor affiliates may receive
compensation therefor other than from a compensation stated herein as
otherwise due to a General Partner, unless the terms of such services and
compensation are approved as being in compliance with the rules of the
Department of Corporations for the State of California. In all cases,
compensation for any such services must be reasonable.
9.7 The General Partners may pay compensation to an entity selected
by them to perform any of the management functions set forth above, provided
that duplicate property management or other fees shall be prohibited and that
any property management fee paid to the General Partners or any of their
affiliates shall not exceed the customary rates paid for such property
management services in the regions where the Projects are located.
9.8 All expenses of the Partnership shall be billed directly to and
paid by the Partnership. Reimbursements (other than for organization and
offering expenses) to the General Partners or their affiliates shall not be
allowed, except for reimbursement of the actual cost to the General Partners
or their affiliates of goods, materials, and borrowings used for or by the
Partnership and obtained from entities unaffiliated with the General Partners.
Expenses incurred by the General Partners or their affiliates in connection
with the administration of the Partnership, including, but not limited to,
salaries, rent, travel expenses, and such other items generally falling under
the category of General Partners' overhead, shall not be charged to the
Partnership. Neither the General Partners nor their affiliates may receive
insurance brokerage fees or write insurance policies covering the Partnership
or any Projects, or Project Interests, or other investments of the
Partnership.
9.9 The General Partners may not withdraw their interest in the
Partnership, transfer their interest to any person, or admit any person as a
substitute General Partner, except as follows:
(a) Upon notice to all Partners, the Corporate General Partner may
substitute its parent, any of its wholly-owned subsidiaries, or any
wholly-owned subsidiaries of its parent in its stead as General
Partners, provided that such substitution is consented to by the
remaining Partners.
(b) Any General Partner may add or substitute any other person as a
General Partner, provided that such substitution is consented to by
the remaining Partners.
(c) Any General Partner may resign as a General Partner, upon 90 days
notice, with the consent of the remaining General Partners, provided
that upon any such resignation the Partnership has (i) a corporate
General Partner who is qualified to act as such and who has
sufficient net worth to meet the then applicable net worth
requirement for a sole corporate general partner of a partnership
established by the Internal Revenue Service for the purpose of
determining that a limited partnership is entitled to be treated as a
partnership for tax purposes and not as an association taxable as a
corporation, or (ii) one or more other General Partners and that the
aggregate net worth of the General Partners is substantial.
(d) Upon the written consent or affirmative vote of Limited Partners
owning a majority of the Limited Partnership Interests then
outstanding, any General Partner may be removed.
(e) The holders of a majority of the Limited Partnership Interests
then outstanding may elect another person or other persons as
additional or substitute corporate or individual General Partners
without the consent of the existing General Partner or any General
Partner who was removed in accordance with paragraph (d) of this
Section 9.9.
Upon the withdrawal or removal in accordance with action or consent of the
Limited Partners, of any General Partner pursuant to this Section 9.9, the
interest of such General Partner in the Partnership shall be valued at its
fair value on the date of such removal or withdrawal, determined, if
necessary, in accordance with the arbitration procedure of the American
Arbitration Association. If, however, immediate payment of such fair value
would cause the Partnership to be insolvent or to be unable to meet its
reasonably foreseeable cash requirements, the Partnership may deliver its
promissory note for such fair value providing for interest at the then prime
rate at First Los Angeles Bank for a term of not more than five years.
SECTION 10. Rights of Limited Partners.
10.1 No Limited Partner shall be subject to assessment nor shall any
Limited Partner be personally liable for any of the debts of the Partnership
or any of the losses thereof beyond the amount contributed by him to the
capital of the Partnership and his share of undistributed profits of the
Partnership.
10.2 Subject to the right of the General Partners to purchase Units
or Limited Partnership Interests as set forth in Section 9.2, no Limited
Partner, as such, shall take part in the management of the business, transact
any business for the Partnership, or have the power to sign for or to bind the
Partnership to any agreement or document.
10.3 Limited Partners and their designated representatives shall be
entitled to (a) review the records of the Partnership at reasonable times and
at the location where such records are kept by the Partnership and (b) obtain
a list of the names and addresses and interests owned by the Limited Partners
upon payment to the Partnership of such reasonable charges and expenses for
the preparation and reproduction of such list.
SECTION 11. Nature of Limited Partner's Liabilities for Claims
Against the Partnership.
In furtherance of the intent of the parties that each Limited Partner
shall be liable to creditors only for his contributed capital, notes, and
undistributed partnership profits:
11.1 The General Partners shall arrange to prosecute, defend, settle,
or compromise actions at law or in equity at the expense of the Partnership as
such may be necessary to enforce or protect the Partnership's interests.
11.2 The General Partners shall satisfy any judgment, decree,
decision, or settlement involving the Partnership first, out of any insurance
proceeds available therefor; second, out of the Partnership assets and income;
and third, out of the assets and income of the General Partners.
SECTION 12. Assignment and Transfer of Limited Partnership Interests.
12.1 Except as provided in this Section 12, the only restriction on
the assignment or hypothecation of Limited Partnership Interests shall be the
obtaining by the assignor of a Consent to Transfer for such Limited
Partnership Interests, if required, from the Department of Corporations of the
State of California and the consent, if required, of any other state
securities commission having jurisdiction with respect to such assignment or
hypothecation. A reasonable transfer fee (not to exceed $200 per transaction)
shall be required to be paid to the Partnership by the assignor and/or the
assignee with respect to any transfer pursuant to this Section. Limited
Partnership Interests and Warrants shall not be transferable, provided,
however, that after January 25, 1985, Limited Partnership Interests may be
transferred.
12.2 Any Partner may, without restriction or consent of the
Department of Corporations of the State of California or any other Partners,
give, sell, transfer, or assign any portion or all of his Limited Partnership
Interests to his spouse, any member or members of his family, to a trust set
up for the benefit of his spouse or any member or members of his family, or to
a corporation or any other entity in which such Partner has a majority
interest. Limited Partnership Interests of any Partner may pass, without
consent, to his heirs or legatees upon his death or by operation of law. A
reasonable transfer fee (not to exceed $200 per transaction) shall be required
to be paid to the Partnership by the assignor and/or the assignee with respect
to any transfer pursuant to this Section.
12.3 Subject to compliance with applicable federal and state
securities laws, a Limited Partner may transfer his entire legal and equitable
interest in his Limited Partnership Interests other than as provided in
Section 12.2 hereof, by an executed and acknowledged written instrument, only
with the consent of the General Partners (which consent may be granted or
withheld at the sole discretion of the General Partners).
12.4 No assignments or transfers will be permitted if such
assignments or transfers would result in 50% or more of the Limited
Partnership Interests being assigned or transferred within any twelve-month
period. Subject to compliance with applicable federal and state securities
laws, assignments will be recognized by the Partnership only as effective the
last day of the calendar month following receipt by the Partnership of written
notice of the assignment. Each item of income, gain, loss, deduction, and
credit of the Partnership attributable to any assigned or transferred Limited
Partnership Interests shall be divided between and charged against the
assignor and assignee, or transferor and transferee, of such Limited
Partnership Interests, in a manner so as to permit the assignor and assignee,
or transferor or transferee, to be allocated such items in the amounts
recognized by the Partnership in those months in which the assignor and the
assignee, or transferor and transferee, were owners of the Limited Partnership
Interests. The Partnership may charge the assigning or transferring Limited
Partner and any Limited Partner requesting a change of name, type of
ownership, etc., a fee not to exceed $200 per transaction and, in the
discretion of the General Partners, actual legal expenses incurred to defray
the actual costs of effecting the assignment or transfer of his interest in
the Partnership or other change in the records of the Partnership.
12.5 No assignee of the whole or any portion of a Limited Partner's
interest in the Partnership shall have the right to become a substituted
Limited Partner in the place of his assignor unless all of the following
conditions are satisfied:
(a) The fully executed and acknowledged written instrument of
assignment which has been filed with the Partnership sets forth the
intention of the assignor that the assignee become a substituted
Limited Partner in his place;
(b) The Partnership interest being acquired by the assignee consists
of at least two whole Limited Partnership Interests (and where
applicable, complies with any additional limitations on, or
restrictions with respect to, transfers of Limited Partnership
Interests which may be imposed by state securities laws);
(c) The assignor and assignee execute and acknowledge such other
instruments as the General Partners may deem necessary or desirable
to elect such admission, including the written acceptance and
adoption by the assignee of the provisions of this Agreement and his
execution, acknowledgement, and delivery to the General Partners of a
Power of Attorney, the form and content of which shall be provided by
the General Partners;
(d) Any transfer fee and legal expenses, if any, referred to in
Section 12.4 required to be paid shall have been paid;
(e) The transfer shall not be in violation of any applicable federal
or state securities laws, including the Securities Act of 1933, as
amended, it being understood and agreed that the General Partners (i)
will require that until January 1, 1989, each assignee must satisfy
the same suitability standards imposed upon his assignor and (ii) may
require as a condition to such transfer that the Partnership be
furnished with an opinion of counsel, which counsel and opinion shall
be satisfactory to the General Partners, to the foregoing effect; and
(f) The General Partners have consented to the assignment (which
consent may be granted or withheld at the sole discretion of the
General Partners).
12.6 The General Partners may elect to treat an assignee who has not
become a substituted Limited Partner as a substituted Limited Partner in the
place of his assignor should they deem, in their sole discretion, that such
treatment is in the best interest of the Partnership for any of its purposes
or for any of the purposes of this Agreement.
12.7 No consent of any of the Limited Partners is required to effect
the substitution of a Limited Partner, except that a Limited Partner who
assigns his interest must evidence his intention that his assignee be admitted
as a substituted Limited Partner in his place and execute any instruments
required in connection therewith.
12.8 The General Partners will be required to amend the Certificate
and Agreement of Limited Partnership only once each calendar quarter to
reflect the substitution of Limited Partners, provided that prior to the
termination of the offering of the Units or Additional Limited Partnership
Interests, such Certificate will be amended monthly. Until the Certificate and
Agreement of Limited Partnership is so amended, an assignee shall not become a
substituted Limited Partner.
12.9 Upon the death or legal incompetency of an individual Limited
Partner, his personal representative shall have all of the rights of a Limited
Partner for the purpose of setting or managing his estate and such power as
the decedent or incompetent possessed to constitute a successor as an assignee
of his interest in the Partnership and to join with such assignee in making
application to substitute such assignee as a Limited Partner. The General
Partner may elect to adopt the provisions of Section 754 of the Internal
Revenue Code of 1954, as amended (or any other similar election designed to
protect the estate of a deceased Limited Partner which may in the future be
enacted) upon the death of a Limited Partner or transfer for value of Limited
Partnership Interests; such election is, however, subject to the revocation
rights contained in Section 754.
12.10 Upon the bankruptcy, insolvency, dissolution, or other
cessation to exist as a legal entity of a Limited Partner not an individual,
the authorized representative of such entity shall have all the rights of a
Limited Partner for the purpose of effecting the orderly winding up and
disposition of the business of such entity and such power as such entity
possessed to constitute a successor as an assignee of its interest in the
Partnership and to join with such assignee in making application to substitute
such assignee as a Limited Partner.
SECTION 13. Duration of Business; Dissolution.
13.1 The Partnership shall continue until dissolution, as set forth
in Section 13.3. Upon dissolution the business of the Partnership shall be
continued pending an election to continue the Partnership pursuant to Section
13.4, if appropriate, and failing such election shall be terminated in
accordance with Section 13.5.
13.2 The Partnership shall not be terminated by the death, insanity,
bankruptcy, withdrawal, or expulsion of any Limited Partner, by the assignment
by any Limited Partner of his interest, or by the admission of a new Limited
Partner.
13.3 The Partnership shall be dissolved only upon the occurrence of
any of the following events:
(a) The expiration of 50 complete calendar years (December 31, 2033)
from the date of formation of the Partnership;
(b) The written consent or affirmative vote to dissolve and terminate
the Partnership of Limited Partners owning a majority of the Limited
Partnership Interests then outstanding;
(c) The disposition of all Projects and Project Interests and other
Partnership assets;
(d) The removal of any General Partner or substitute General Partner
in accordance with Section 9.9 or the retirement, bankruptcy, or
insolvency of any General Partner or substitute General Partner.
13.4 In the event of a dissolution caused by an occurrence specified
in Section 13.3(d), the remaining General Partner or General Partners, if any,
may elect to continue the Partnership, provided that counsel to the
Partnership is of the opinion that such election would not jeopardize the
Partnership's status as a partnership rather than as an association for
federal tax purposes. If such remaining General Partner fails to so elect
within 30 days of the event causing dissolution, or if there is no remaining
General Partner, the Limited Partners owning a majority of the then
outstanding Limited Partnership Interests may elect to continue the
Partnership and, if necessary, elect a new General Partner.
13.5 In the event of dissolution and the subsequent failure of
election pursuant to Section 13.4 within 60 days of dissolution, the General
Partners or other party appointed for such purpose shall wind up the affairs
of the Partnership, shall sell all of the Partnership's assets as promptly as
is consistent with obtaining the fair value thereof, and pay all liabilities
and all costs of dissolution. The winding up of the affairs of the Partnership
and the distribution of its assets shall be conducted exclusively by the
General Partners, who are hereby authorized to do any and all acts and things
authorized by law for these purposes.
13.6 Upon the dissolution of the Partnership and failure of an
election to continue the Partnership pursuant to Section 13.4, a final
statement shall be prepared by the Partnership's certified public accountants
as soon as practicable setting forth the assets and liabilities of the
Partnership. A copy of such statement shall be furnished to each Partner
within 90 days after such dissolution. Thereupon all assets of the Partnership
shall be liquidated as promptly as possible and the proceeds therefrom shall
be distributed in the following order of priority: (a) to the payment of the
debts and liabilities of the Partnership and the expenses of liquidation; (b)
to the setting up of such reserves as the General Partners may deem reasonably
necessary for any contingent or unforeseen liabilities or obligations of the
Partnership arising out of or in connection with the Partnership, provided
that any such reserves shall be paid over by the General Partners to an escrow
agent, to be held by such escrow agent for the purpose of disbursing such
reserves in payment of any of the aforementioned contingencies and, at the
expiration of such period as the General Partners shall deem advisable, to
distribute the balance thereafter remaining in the manner hereinafter
provided; (c) to the Limited and General Partners in accordance with Section
9.6.2 hereof; and (d) to the Limited Partners and the General Partners as
provided in Section 8.2 hereof.
13.7 Upon dissolution and termination each Limited Partner shall look
solely to the assets of the Partnership for the return of his cash
contribution, and if the Partnership property remaining after the payment or
discharge of the debts and liabilities of the Partnership is insufficient to
return the cash contribution of each Limited Partner, such Limited Partner
shall have no recourse against the General Partners or any other Limited
Partner.
SECTION 14. Amendments.
14.1 Amendments to this Agreement may be proposed by the General
Partners or by Limited Partners owning in the aggregate 10% of the then
outstanding Limited Partnership Interests. Following such proposal, the
General Partners shall submit to the Limited Partners a verbatim statement of
any proposed amendment and an opinion of counsel as to the legality of such
amendment. The General Partners shall include in any such submission its
recommendations as to the proposed amendment. In any such event the
affirmative vote of Limited Partners owning a majority of the then outstanding
Limited Partnership Interests will be required to change this Agreement;
provided, however, no vote of the Limited Partners shall be required to amend
the Agreement to clarify ambiguities to reconcile inconsistencies in the
Agreement with the Prospectus and comply with state securities laws, if in the
opinion of counsel, such amendments would not adversely affect the rights,
responsibilities or liabilities of the Limited Partners. The General Partners
may require a written approval to be given by the Limited Partner within a
specified period of not less than 15 days and not more than 60 days from the
date of notice thereof, and may treat a failure to respond as the equivalent
of concurrence with the General Partners' recommendations.
14.2 Notwithstanding the foregoing Section 14.1, no amendment shall
change the Partnership to a general partnership, change the method of removing
a General Partner or electing a successor General Partner, change the term of
the Partnership, change the liability of the General Partners or the limited
liability of the Limited Partners, change the interest of the General and
Limited Partners as set forth in Section 7.1, or make any changes which, in
the opinion of counsel to the Partnership, may result in the Partnership being
treated as an association rather than as a partnership for federal tax
purposes.
SECTION 15. Voting Rights of Limited Partners.
15.1 The voting rights granted to the Limited Partners in Sections
9.3, 9.9, 13.3, 13.4, and 14.1 hereof are granted pursuant to Section 15507 of
the Limited Partnership Act as in effect in the State of California. A Limited
Partner shall not be deemed to take part in the control of the Partnership by
virtue of his possessing or exercising such voting rights.
15.2 For purposes of taking any action permitted under the Agreement,
a Partnership meeting may be called by the General Partners or by the holders
of in the aggregate 10% or more of the Limited Partnership Interests
outstanding. Upon receipt by the General Partners of a written request,
delivered either in person or by registered mail, executed by the holders of
10% or more of the Limited Partnership Interests outstanding and stating the
purpose of the meeting, or if a meeting is to be held at the call of the
General Partners, in each case the General Partners shall provide all of the
Limited Partners, within 10 days after receipt of such request, written notice
(either in person or by certified mail) of the meeting and the purpose of such
meeting which shall be held on a date not less than 15 nor more than 60 days
after receipt of such request, at a time and place (within the state and
county of the principal office of the Partnership) as shall be selected by the
General Partners, convenient to the Partners.
SECTION 16. Books, Records, and Reports.
16.1 The Partnership's books and records, this Agreement and all
amendments thereto, and appraisals, feasibility or commitment letters, or
equivalents shall be maintained at the principal office of the Partnership
until five years after termination and liquidation of the Partnership and
shall be open to the reasonable inspection and examination of the Partners or
their duly authorized representatives. Such books and records shall be kept on
the cash basis in accordance with sound accounting principles.
16.2 The General Partners will send the following reports to each
person who held an interest in the Partnership during the period covered by
such report:
(a) A semi-annual report within 60 days following the end of the
first six-month period of each year, which report shall not be
audited but shall contain a balance sheet, a statement of income for
the period then ended, a cash flow statement for the period then
ended, and any other pertinent information regarding the Partnership
and its activities during the period covered thereby, including the
information designated in Rule 260.140.115.5 of Title 10 of the
California Administrative Code as in effect on the date of this
Agreement.
(b) A report within 60 days of the end of each quarter during which
the General Partners or their affiliates receive fees for services,
containing a detailed statement setting forth the services rendered,
or to be rendered, and the amount of the fees received.
(c) A special report within 30 days of the end of each quarter in
which the Partnership acquires or disposes of any Projects or Project
Interests, containing a description of the Projects and Project
Interests acquired during such quarter, including the purchase price
therefor, other material information, and a statement as to the
aggregate investments to date, which reports are required to be
prepared until an amount equal to 75% of the proceeds of the offering
of the Units has been invested in the acquisition of Projects and
Project Interests.
(d) A report within 75 days after the end of each of the
Partnership's fiscal years containing all information necessary for
the preparation of the Limited Partners' federal and state income tax
returns.
(e) An annual report within 120 days after the end of each of the
Partnership's fiscal years containing (1) a balance sheet as of the
end of the fiscal year, and a statement of income, partner's equity,
and changes in financial position for the year then ended, all of
which shall be prepared in accordance with generally accepted
accounting principles and accompanied by an auditor's report
containing an opinion of an independent certified public accountant
or in-dependent accountant, and (2) a report of the activities of the
Partnership during the period covered by the report. Such report
shall also include a cash flow statement which will set forth
distributions to Limited Partners for the period covered thereby, and
shall separately identify distributions from cash flow from
operations during the period, cash flow from operations during a
prior period which had been held as reserves, proceeds from
disposition of property and investment, lease payments on net leases
with builders and reserves retained from the net proceeds of the
offering originally obtained from the Limited Partners.
16.3 The General Partners will file with the Department of
Corporations of the State of California copies of any of the reports sent to
Limited Partners pursuant to Section 16.2 hereof.
SECTION 17. Power of Attorney.
17.1 Each Limited Partner makes, constitutes, and appoints the
General Partners, with full power of substitution, his true and lawful
attorneys for him and in his name, place, and xxxxx and for his use and
benefit, to sign, execute, certify, acknowledge, file, and record this
Agreement, and to sign, execute, certify, acknowledge, file, and record all
appropriate instruments amending this Agreement as now or hereafter amended,
including, without imitation, agreements or other instruments or documents:
(a) to reflect the exercise by the General Partners of any of the powers
granted to them under this Agreement; (b) to reflect any amendments duly made
to the Agreement; (c) to reflect the admission to the Partnership of a
substituted Limited Partner or the withdrawal of any Partner, in the manner
prescribed in this Agreement; and (d) which may be required of the Partnership
or of any Partner by the laws of the State of California or any other
jurisdiction or governmental agency, including, but not limited to,
Certificates of Fictitious Name as required by Section 17910 of the California
Business and Professions Code. Each Limited Partner authorizes such
attorneys-in-fact to take any further action which such attorneys-in-fact
shall consider necessary or advisable to be done in and about the foregoing
(including the power to consent to items (a), (b), (c), and (d) above as fully
as such Limited Partner might or could do if personally present) and hereby
ratifies and confirms that all such attorneys-in-fact shall lawfully do or
cause to be done by virtue hereof.
17.2 The foregoing power of attorney is a special power of attorney
coupled with an interest and is irrevocable, may be exercised by such
attorneys-in-fact by listing all of the Limited Partners executing any
agreement, certificate, instruction, or document with the single signature of
any one of such attorneys-in-fact acting as attorney-in-fact for all of them,
and, notwithstanding any provision of this Agreement to the contrary, shall
survive the delivery of an assignment by a Limited Partner of the whole or a
portion of his interest in the Partnership, until the assignee thereof becomes
a substituted Limited Partner.
17.3 Each Limited Partner has executed and delivered to the General
Partners a power of attorney as set forth in the Subscription Agreement. Each
such power of attorney is on file at the principal place of business of the
Partnership and is incorporated herein by reference.
SECTION 18. Indemnification.
18.1 The Partnership, its receiver or its trustee, shall indemnify,
save harmless and pay all judgments and claims against the General Partners,
their officers, directors, employees, agents, affiliates, subsidiaries and
assigns, from any liability, loss, or damage incurred by them or by the
Partnership by reason of any act performed or omitted to be performed by them
in connection with the business of the Partnership, including costs and
attorneys' fees (which attorneys' fees may be paid as incurred) and any
amounts expended in the settlements of any claims of liability, loss or damage
provided that, if such liability, loss, or claim arises out of any action or
inaction of the General Partners, the General Partners must have determined,
in good faith, that such course of conduct was in the best interests of the
Partnership and did not constitute fraud, negligence, breach of fiduciary duty
or willful misconduct by the General Partners and, provided further, that any
such indemnification shall be recoverable only from the assets of the
Partnership and not from the assets of the Limited Partners. All judgments
against the Partnership and a General Partner, wherein a General Partner is
entitled to indemnification, must be satisfied from Partnership assets before
such General Partner is responsible for these obligations.
18.2 Notwithstanding the above Section 18.1, neither the General
Partner, or any officer, director, employee, agent, subsidiary or assignee, of
the General Partners or of the Partnership shall be indemnified from any
liability, loss, or damage incurred by them (i) in connection with any
liability imposed by law, including liability for fraud, bad faith,
negligence, or willful misconduct or (ii) in connection with any claim or
settlement involving allegations that the securities laws, including the
Securities Act of 1933, as amended, were violated by the General Partners or
by any such other person or entity unless, as to liabilities, loss, or damages
arising under clause (ii) hereof, (a) the General Partners or other persons or
entities seeking indemnification are (except in case of a settlement)
successful in defending such action; and (b) such indemnification is
specifically approved by a court of law which shall have been advised as to
the current position of both the Securities and Exchange Commission and the
California Commissioner of Corporations regarding indemnification for
violations of securities laws. The Partnership may at its own expense obtain a
general partner liability insurance policy which would insure the General
Partners (and the officers and directors of the Corporate General Partner and
partners of NPIA II) for liabilities which they may incur with respect to
claims made against them for certain wrongful or allegedly wrongful acts,
including certain errors, misstatements, misleading statements, omissions,
neglect or breeches of duty; provided that the Partnership will only be
required to pay the premiums for this policy to the extent of coverage for
those acts and omissions as to which the foregoing persons could receive
indemnification from the Partnership under this agreement (the cost of any
coverage for acts or omissions not covered by the foregoing indemnification
being paid by the General Partners).
SECTION 19. Miscellaneous Provisions.
19.1 Notices. Except as otherwise provided herein, any notice which
shall be given in connection with the business of the Partnership shall be
duly given if reduced to writing and delivered personally to the person to
whom it is authorized to be given, or if sent by mail or telegraph to the last
address furnished by him for such purpose.
19.2 Validity. If any provision of this Agreement, or the application
of such provision to any person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to persons
or circumstances other than those as to which it is held invalid, shall not be
affected thereby.
19.3 Applicable Law. This Agreement has been executed, delivered, and
recorded in the State of California by the General Partners and the Limited
Partners, and all questions with respect to the validity, construction, or
enforceability hereof shall be governed exclusively by its terms and by the
law of the State of California.
19.4 Binding Agreement. This Agreement shall be binding upon the
parties hereto, their successors, heirs, devisees, assigns, legal
representatives, executors, and administrators.
19.5 Waiver of Action for Partition. Each of the parties hereto
irrevocably waives during the term of the Partnership any right that he may
have to maintain any action or partition with respect to the property and
other assets of the Partnership.
19.6 Article Headings. All section headings in this Agreement are for
convenience of reference only and are not intended to quality the meaning of
any article or section.
19.7 Counterparts. This Agreement may be executed in several
counterparts, and all so executed shall constitute one agreement, binding on
all of the parties hereto, notwithstanding that all the parties are not
signatory to the original or the same counterpart.
19.8 Nonrecourse Creditors. A creditor who makes a nonrecourse loan
to the Partnership will not have or acquire, at any time as a result of making
the loan, any direct or indirect interest in the profits, capital, or property
of the Partnership other than as a secured creditor.
19.9 Definitions. The capitalized terms contained herein and not
otherwise defined have the meanings set forth in the Glossary to the
Prospectus.
