CAPITAL SOURCE L.P., A LIMITED PARTNERSHIP
LIMITED PARTNERSHIP AGREEMENT
AND AMENDED CERTIFICATE OF LIMITED PARTNERSHIP
THIS AGREEMENT is made as of March 24, 1986 by and among the undersigned
parties.
RECITALS
WHEREAS, as of August 21, 1985, Xxxxxx Insured Mortgage Equities, Inc., a
Delaware corporation (the "Xxxxxx General Partner"), a wholly owned subsidiary
of The X.X. Xxxxxx Group, Inc., a Delaware corporation, and TIG Insured Mortgage
Equities Inc. (the "TIG General Partner"), a wholly owned subsidiary of
The Investment Group Capital Corp., a Delaware corporation, as General Partners,
and H/T Corp., a Delaware corporation, as Initial Limited Partner, executed a
Certificate of Limited Partnership, as amended as of October 31, 1985 (the
"Certificate") forming a limited partnership under the Delaware Revised Uniform
Limited Partnership Act known as Capital Source L.P., which Certificate was
filed in the office of the Secretary of State of the State of Delaware on
August 22, 1985 and amended on November 1, 1985; and
WHEREAS, the parties hereto desire to amend the Certificate to set forth in
full terms and conditions of their agreements and understandings in this Limited
Partnership Agreement and Amended Certificate of Limited Partnership.
NOW, THEREFORE, in consideration of the mutual promises made herein, the
parties, intending to be legally bound, agree to continue Capital Source L.P. as
follows:
ARTICLE I
CONTINUATION, NAME, PLACE OF BUSINESS, PURPOSE AND TERM
Section 1.01. CONTINUATION OF PARTNERSHIP. The undersigned hereby
continue the Partnership under the Delaware Revised Uniform Limited Partnership
Act on the terms and conditions set forth in this Agreement.
Section 1.02. NAME, PRINCIPAL OFFICE AND NAME AND ADDRESS OF REGISTERED
AGENT. The name of the Partnership is Capital Source L.P. The address of the
registered office of the Partnership in the State of Delaware shall be
Corporation Trust Center, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000. The
name of the Partnership's registered agent for service of process at that
address is The Corporation Trust Company. The address of the principal place of
business of the Partnership, unless hereafter changed by the General Partners,
shall be 0000 Xxxxxxxxxxx Xxxxxx, X.X., Xxxxx 000, Xxxxxxxxxx, X.X. 00000.
Notification of any
change in the Partnership's principal office and place of business shall be
given to the Limited Partners and Unitholders.
Section 1.03. PURPOSE. The purpose and character of the business of the
Partnership is to originate, acquire, hold, sell, dispose of and otherwise deal
with Insured Mortgages on multifamily rental housing complexes and to acquire,
hold, sell, dispose of and otherwise deal with limited partnership interests in
Operating Partnerships which construct and operate multifamily rental housing
complexes in order to (a) achieve long-term capital appreciation through
increases in the value of the Partnership's equity investments in the Operating
Partnerships; (b) provide quarterly cash distributions to Investors; (c) provide
Investors with federal income tax deductions that may offset, in part, taxable
cash distributions subsequent to two years after the Initial Closing;
(d) provide the potential for increases in cash distributions from income from
Operating Partnerships and sale of the Complexes; and (e) preserve and protect
the Partnership's capital.
Section 1.04. TERM. The Partnership began on August 22, 1985 and shall
continue in full force and effect until December 31, 2030 or until sooner
dissolved pursuant to the provisions of this Agreement, and upon the filing of a
Certificate of Cancellation with the Secretary of State of the State of Delaware
in accordance with Article VIII.
ARTICLE II
DEFINED TERMS
The defined terms used in this Agreement shall, unless the context
otherwise requires, have the meanings specified in this Article II. The
singular shall include the plural and the masculine gender shall include the
feminine and neuter, and vice versa, as the context requires.
"ACCOUNTANTS" means Xxxxxx Xxxxxxxx & Co. or such other nationally
recognized firm of independent public accountants as shall be engaged from time
to time by the General Partners on behalf of the Partnership.
"ADJUSTED CAPITAL CONTRIBUTION" means, at any time, the Limited Partners'
Capital Contribution (but not including the Initial Limited Partner's Capital
Contribution attributable to Assigned Limited Partnership Interests which are
held by the Initial Limited Partner on behalf of Unitholders) reduced by all
distributions to Limited Partners of Sale Proceeds. Reductions of the Adjusted
Capital Contributions in accordance with the foregoing shall be determined
subsequent to calculation of any distributions to be made to Limited Partners,
but shall be effective as of the date of receipt by the Partnership of the Sale
Proceeds giving rise to such distributions.
"ADJUSTED CONTRIBUTION" means, with respect to Limited Partners, the
"Adjusted Capital Contribution" and, with respect to Unitholders, the "Adjusted
Contribution of Unitholders."
2
"ADJUSTED CONTRIBUTION OF UNITHOLDERS" means, at any time, the Contribution
of Unitholders reduced by all amounts distributed to Unitholders of Sale
Proceeds. Reduction of the Adjusted Contributions of Unitholders in accordance
with the foregoing will be determined subsequent to calculation of any
distributions to be made to Unitholders, but shall be effective as of the date
of receipt by the Partnership of the Sale Proceeds giving rise to such
distributions.
"AFFILIATE" means, when used with reference to a specified Person, (a) any
Person who directly or indirectly controls or is controlled by or is under
common control with the specified Person, (b) any Person who is an officer of,
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, (c) any Person who, directly or indirectly, is the beneficial owner of
or controls 10% or more of any class of equity securities of the specified
Person or of which the specified Person is directly or indirectly the owner of
or controls 10% or more of any class of equity securities, and (d) any Person
who is an officer, director, general partner, trustee or holder of 10% or more
of the voting securities or beneficial interests of any of the foregoing. An
Affiliate of the Partnership or either of the General Partners does not include
a Person who is a partner in a partnership or joint venture with the Partnership
or any other Affiliate of the Partnership if such Person is not otherwise an
Affiliate of the Partnership or either of the General Partners.
"AGREEMENT" means this Limited Partnership Agreement and Amended
Certificate of Limited Partnership, as originally executed and as amended from
time to time.
"ANNUAL ASSET MANAGEMENT AND PARTNERSHIP ADMINISTRATION FEE" means the
annual fee payable to the General Partners in accordance with
Section 5.30(b)(iii) for services rendered by the General Partners to the
Partnership in managing the Partnership's portfolio of Insured Mortgages and
Operating Partnership Interests.
"ASSIGNED LIMITED PARTNERSHIP INTEREST" means a Limited Partnership
Interest which is held of record by the Initial Limited Partner as a nominee on
behalf of a Unitholder.
"BANKRUPTCY" or "BANKRUPT" as to any Person means the filing of a
petition for relief as to any such Person as debtor or bankrupt under the
Bankruptcy Code of 1978 or like provision of law (except if such petitions is
contested by such Person and has been dismissed within 120 days); insolvency
of such Person as finally determined by a court preceeding; filing by such
Person of a petition or application to accomplish the same or for the
appointment of a receiver or a trustee for such Person or a substantial part
of his assets; or commencement of any proceedings relating to such Person
under any other reorganization, arrangement, insolvency, adjustment or debt
or liquidation law of any jurisdiction, whether now in existence or
hereinafter in effect, either by such Person or by another, provided that if
such proceeding is commenced by another, such Person indicates his approval
of such proceeding, consents thereby or acquiesces therein, or such
proceeding is contested by such Person and has not been finally dismissed
within 120 days.
3
"BENEFICIAL OWNERSHIP CERTIFICATE" means a certificate evidencing the
ownership of Units.
"BENEFICIAL OWNERSHIP INTEREST" means the entire ownership interest of a
Unitholder in the Partnership at any particular time, including the right of
such Unitholder to any and all benefits to which a Unitholder may be entitled as
provided in this Agreement. Reference to a majority or specified percentage in
the interest of the Unitholders means Unitholders whose combined holdings of
Units represent more than 50%, or such specified percentage, respectively, of
all of the outstanding Units of the Partnership. The ownership interests of the
Unitholders in the Partnership are sometimes referred to herein as "Units."
"CAPITAL ACCOUNT" means the capital account of a Partner or Unitholder as
described in Section 4.05.
"CAPITAL CONTRIBUTION" means, with respect to Partners, "Capital
Contribution of Partners" and with respect to Unitholders, "Capital Contribution
of Unitholders."
"CAPITAL CONTRIBUTION OF PARTNERS" means the total amount of money
contributed to the Partnership (prior to the deduction of any Selling
Commissions or expenses) by all the Partners or any class of Partners, or by any
one Partner, as the context may require (or the predecessor holders of the
interests of such Partners or Partner), reduced, in the case of the Limited
Partners, by the amount of any funds returned to them pursuant to
Section 3.03(d).
"CAPITAL CONTRIBUTION OF UNITHOLDERS" means the total amount of money paid
to the Partnership (prior to the deduction of any Selling Commissions or
expenses) by all Persons who purchase Units (pursuant to the Partnership's
public offering of up to 5,000,000 Units effected pursuant to the Partnership's
Registration Statement filed with the Securities and Exchange Commission) and
which shall be deemed to be contributed to the Partnership by the Initial
Limited Partner on behalf of the Unitholders, reduced by the amount of any funds
returned to the Unitholders pursuant to Section 3.03(d).
"CASH AVAILABLE FOR DISTRIBUTION" means, with respect to any period, Cash
Flow less any amount set aside from Cash Flow for the creation or restoration of
Reserves.
"CASH FLOW" means, with respect to any period, (a) all cash receipts of the
Partnership from payments of principal and interest on its Insured Mortgages
(exclusive of any Sale Proceeds attributable to such Insured Mortgages), plus
(b) any cash distributions from Operating Partnerships (exclusive of any Sale
Proceeds attributable to the sale or exchange by the Partnership of its interest
in such Operating Partnerships and exclusive of any Sale Proceeds attributable
to the assets of the Operating Partnerships) plus (c) cash receipts from
Partnership operations (including any interest or other income from temporary
investments of the Partnership pursuant to Section 5.02(a)(xiv) and any amounts
withdrawn from Reserves deemed no longer necessary for Partnership operations by
the General Partners), but after deducting from any such receipts amounts used
to pay Operating Expenses and debt service.
4
"CODE" means the Internal Revenue Code of 1954, as amended, or any
corresponding provision or provisions of succeeding law.
"COINSURED MORTGAGE" means a first mortgage loan on a Complex insured by
the FHA and a coinsured lender utilizing the GNMA Mortgage-Backed Securities
Program pursuant to the coinsurance program under the Section 221(d)(4) of the
National Housing Act.
"COMMITMENT FEE" means fees paid by an Operating Partnership to the General
Partners in an amount up to 3.97% of each Insured Mortgage.
"COMPLEX" means a multifamily, rental housing complex in a suburban or
metropolitan area which is owned or is to be constructed by an Operating
Partnership.
"CONSENT" means either the consent given by a vote at a meeting called and
held in accordance with the provisions of Section 10.01 or the prior 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.
"DEALER MANAGER" means X.X. Xxxxxx & Company Inc., a Delaware corporation
which is an Affiliate of the Xxxxxx General Partner.
"EQUITY CONTRIBUTION" means the Partnership's contribution to an Operating
Partnership in exchange for an Operating Partnership Interest.
"ESCROW AGENT" means Omaha National Bank or any successor thereto.
"FHA" means the Federal Housing Administration of HUD.
"FHA INSURED MORTGAGE" means a first mortgage loan on a Complex, insured
pursuant to Section 221(d)(4) or similar section of the National Housing Act.
"FOREIGN PERSON" means a nonresident alien, foreign corporation trust,
foreign trust or foreign estate, within the meaning of Sections 897 and 1445 of
the Code.
"FRONT END FEES" means all acquisition fees, selling commissions,
organizational, offering and selling expenses and any other fees or expenses
paid by any party for any services rendered during the Partnership's
organizational and acquisition phases. Such expenses include but are not
limited to legal fees and expenses, travel and communication expenses, costs of
appraisals, nonrefundable option payments on property not acquired, accounting
fees and expenses, title insurance and miscellaneous expenses related to
selection and acquisition of property, whether or not acquired, including
similar fees paid by the Operating Partnerships during their acquisition or
operational phases if paid directly or indirectly by the Partnership. Front End
Fees (a) shall include the Initial Advisory Fee and the Commitment Fee and
(b) shall not exceed in the aggregate the lesser of such compensation
customarily charged by others rendering similar
5
services as an ongoing public activity in the same geographic location and
for comparable property or an amount equal to 18% of the Gross Proceeds.
"GENERAL PARTNERS" means the Xxxxxx General Partner, the TIG General
Partner and any Person or Persons who, at the time of reference thereto, has
been admitted as a successor General Partner or as an additional General Partner
and, in the case of any of the foregoing, has not withdrawn from the
Partnership, in each such Person's capacity as a General Partner.
"GENERAL PARTNER REIMBURSABLE EXPENSES" means expenses incurred by the
General Partner(s) in connection with the promotion, management and/or operation
of the Partnership.
"GNMA" means the Government National Mortgage Association.
"GNMA MORTGAGE-BACKED SECURITIES PROGRAM" means a program pursuant to which
GNMA guarantees the monthly principal and interest payments of the mortgages
underlying mortgage-backed securities issued by private entities.
"GROSS PROCEEDS" means the total proceeds from the sale of Units before
deduction for expenses incurred in organizing the Partnership and offering the
Units for sale.
"HUD" means the United States Department of Housing and Urban Development
acting through any authorized representative.
"XXXXXX GENERAL PARTNER" means Xxxxxx Insured Mortgage Equities, Inc., a
Delaware corporation.
"INCENTIVE FEE" means the fee payable to the General Partners in accordance
with Section 5.03(b)(v).
"INITIAL ADVISORY FEE" means the nonrecurring fee paid to the General
Partners in accordance with Section 5.03(b)(i) for organizing the Partnership,
analyzing and evaluating potential investments in Insured Mortgages and
Operating Partnership Interests, negotiating the terms of the Partnership's
investments in Insured Mortgages and Operating Partnership Interests and related
matters.
"INITIAL CLOSING" means the initial closing on the sale of at least 500,000
Units to Investors.
"INITIAL LIMITED PARTNER" means H/T Corp., a Delaware corporation, which
(a) owns 100 Limited Partnership Interests, (b) will own a maximum of 5,000,100
Limited Partnership Interests, including 5,000,000 Assigned Limited Partnership
Interests, in the Partnership, and (c) will transfer and assign to those Persons
who purchase Units certain of its rights and interest in Assigned Limited
Partnership Interests in accordance with Section 11.01(a).
6
"INITIAL PROSPECTUS" means the prospectus contained in the Registration
Statement (File No. 2-99909) filed pursuant to Rule 424(b) in its final form
with the Securities and Exchange Commission for the registration of the Units
under the Securities Act of 1933.
"INSURED MORTGAGE" means an FHA Insured Mortgage or a Coinsured Mortgage.
"INTEREST" means the entire ownership interest of a Partner or a Unitholder
in the Partnership at any particular time, including the right of such Partner
or Unitholder to any and all benefits to which a Partner or Unitholder may be
entitled under this Agreement, together with the obligations of such Partner or
Unitholder to comply with all the terms and provisions of this Agreement.
"INVESTED ASSETS" means that portion of the Net Proceeds invested from time
to time in Insured Mortgages, Operating Partnership Interests and other
investments in Operating Partnerships owned by the Partnership.
"INVESTMENT DATE" means the date or dates, from time to time, of the final
closing of the sale of Units pursuant to Section 11.04.
"INVESTMENT IN PROPERTIES" means the amount of Capital Contributions used
to make or invest in mortgage loans or the amount actually paid or allocated to
the purchase, development, construction or improvement of properties acquired by
the Partnership (including the purchase of properties, working capital reserves
allocable thereto (except that working capital reserves in excess of 5% shall
not be included)), and other cash payments such as interest and taxes but
excluding Front End Fees.
"INVESTOR SERVICES REIMBURSEMENT" means the amount to be reimbursed to the
TIG General Partner and its Affiliates for performance of investor services, not
to exceed, together with all other reimbursements to the General Partners and
Affiliates of expenses incurred in the Partnership's operations, 0.5% of
Invested Assets per annum.
"IRAS AND XXXXX PLANS" means Individual Retirement Accounts formed pursuant
to Section 408 of the Code, Retirement (Xxxxx) plans for self-employed
individuals as described in Section 404(a)(8) of the Code and other tax-deferred
pension and profit-sharing plans.
"LIMITED PARTNER" means any Person who is a Limited Partner, including the
Initial Limited Partner, at the time reference thereto, in such Person's
capacity as a Limited Partner of the Partnership.
"LIMITED PARTNERSHIP INTEREST" means the entire ownership interest of a
Limited Partner at any particular time, including the right of such Limited
Partner to any and all benefits to which the Limited Partner may be entitled as
provided in this Agreement, together with the obligations of such Limited
Partner to comply with all terms and provisions of this Agreement.
7
"NASDAQ" means the National Association of Securities Dealers Automated
Quotations, an electronic automated quotation system for a selected number of
over-the-counter securities.
"NET PROCEEDS" means the Gross Proceeds reduced by the expenses, including
Selling Commissions, incurred by the Partnership in connection with its
organization and the offering and sale of the Units.
"NOTICE" means a writing, containing the information required by this
Agreement to be communicated to any Person, personally delivered to such
Person or sent by registered, certified or regular mail, postage prepaid, to
such Person at the last known address of such Person. The date of personal
delivery or the date of mailing thereof, as the case may be, shall be deemed
the date of receipt of Notice.
"OFFERING" means the offering of Units by the Partnership pursuant to the
terms and conditions described in the Prospectus.
"OPERATING EXPENSES" means, with respect to any fiscal period, except to
the extent paid with cash withdrawn from Reserves therefore, the amount of
expenses which were incurred by the Partnership in such period in the ordinary
course of the Partnership's business, including but not limited to the Annual
Asset Management and Partnership Administration Fee, which is subordinated to
payment of the Priority Return on Adjusted Contribution Account on a
noncumulative basis, the Investor Services Reimbursement and all other fees and
expense reimbursements to the General Partners (except for the Incentive Fee and
the Termination Fee), fees paid for placing, servicing and disposition of
Insured Mortgages and Operating Partnership Interests, computer costs,
insurance, brokerage fees, taxes, accounting, bookkeeping, legal, travel and
telephone expenses.
"OPERATING PARTNERSHIP" or "OPERATING PARTNERSHIPS" means any or all of the
limited partnerships which own or lease Complexes and in which the Partnership
acquires an Operating Partnership Interest.
"OPERATING PARTNERSHIP INTEREST" means the limited partnership interest of
the Partnership in an Operating Partnership.
"ORGANIZATIONAL, OFFERING AND SELLING EXPENSES" means those expenses
(exclusive of Selling Commissions) incurred in connection with or related to the
formation and qualification of the Partnership, the registration and
qualification of the Units under applicable federal and state laws and the
marketing, distribution, sale and processing of the Units, including the
following: (a) the costs of preparing, printing, filing and delivering a
registration statement with respect to the Units, the Prospectus (including any
supplements thereto), a "Blue Sky Survey" and all underwriting and sales
agreements, including the cost of all copies thereof supplied to X.X. Xxxxxx &
Company, Inc. and other soliciting dealers, (b) the cost of preparing and
printing this Agreement, other solicitation material and related documents and
the cost of filing and recording such certificates or other documents as are
necessary to comply with the laws of the
8
State of Delaware or for the formation of a limited partnership and
thereafter for the continued good standing of a limited partnership, (c) the
cost of any escrow arrangements, including any compensation to the Escrow
Agent, (d) filing fees payable to the Securities and Exchange Commission, to
state securities commissions and to the National Association of Securities
Dealers, Inc., and (e) fees of the Partnership's counsel and accountants.
"ORGANIZATIONAL, OFFERING AND SELLING EXPENSE REIMBURSEMENT ALLOWANCE"
means the nonaccountable allowance in an amount of 2% of Gross Proceeds payable
to the General Partners in accordance with Section 5.03(b)(ii).
"PARTNER" means any General Partner or any Limited Partner.
"PARTNERSHIP" means the limited partnership formed as of August 22, 1985,
under the Delaware Revised Uniform Limited Partnership Act and known as Capital
Source L.P., as said limited partnership may from time to time be constituted.
"PERMITTED INTERIM INVESTMENTS" means securities issued or fully
guaranteed by the United States Government or its agencies, Certificates of
Deposit and Time or Demand Deposits fully insured by an agency of the United
States Government or in commercial banks or savings and loan associations
having a net worth of at least $100,000,000, or commercial paper rated "P-1"
(the highest possible rating) by Xxxxx'x Investors Service, Inc.
"PERSON" means any individual, partnership, corporation, trust or other
entity.
"PRIORITY RETURN ON ADJUSTED CONTRIBUTION ACCOUNT" means a ledger account
maintained on behalf of each Limited Partner or Unitholder which shall be
credited each quarter with 2% of the Adjusted Contribution attributable to such
Limited Partner or Unitholder, as adjusted through the last day of such quarter,
and shall be charged each quarter with all Cash Available for Distribution which
is distributed to such Limited Partner or Unitholder, in respect of such
quarter.
"PROFITS FOR TAX PURPOSES" and "LOSSES FOR TAX PURPOSES" means the income
or loss of the Partnership for federal income tax purposes determined as of the
close of each calendar quarter. For these purposes, Profits for Tax Purposes
will include income and gain exempt from tax and Losses for Tax Purposes shall
include expenditures which constitute, or are deemed under Treasury Regulations
to constitute, expenditures described in Section 705(a)(2)(B) of the Code.
"PROSPECTUS" means the prospectus contained in the Registration Statement
(File No. 2-99909) filed pursuant to Rule 424(b) with the Securities and
Exchange Commission for the registration of Units under the Securities Act of
1933, in the final form in which such prospectus is filed pursuant to
Rule 424(b) with such Commission and as thereafter supplemented pursuant to
Rule 424(c) under such Act.
9
"RESERVES" means amounts allocated to reserves maintained for working
capital of the Partnership and contingencies, which initially will not be less
than 1% of Gross Proceeds.
"SALE PROCEEDS" means receipts of the Partnership attributable to a Sale
Transaction exclusive of all expenses attributable to the event generating such
receipts and exclusive of any amount of such receipts used to pay Operating
Expenses or set aside by the General Partners for Reserves.
"SALE TRANSACTION" means a transaction involving (a) the prepayment, sale,
exchange, foreclosure or other disposition of an Insured Mortgage held by the
Partnership, (b) the sale, exchange or other disposition of an Operating
Partnership Interest held by the Partnership, (c) the sale, exchange or other
disposition by an Operating Partnership of any of its assets, or (d) the sale,
exchange or other disposition by the Partnership of any of its assets.
"SCHEDULE A" means the schedule, as amended from time to time, of Partners'
names, addresses, Capital Contributions and Interest, which schedule, in its
initial form, is attached to, and made a part of this Agreement.
"SELLING COMMISSIONS" means the commissions up to a maximum of 7% per Unit,
payable by the Partnership to the Dealer Manager.
"SPECIFIED INVESTMENT" means an Operating Partnership in which the
Partnership has determined to invest and which is identified and described in
the Prospectus.
"TARGET RETURN ON ADJUSTED CONTRIBUTION ACCOUNT" means a ledger account on
behalf of each Limited Partner or Unitholder which shall be credited each day
with an amount equal to 13% per annum, as calculated on daily basis, of the
Adjusted Contributions attributable to such Limited Partner or Unitholder as
adjusted through the preceding day, and shall be charged each quarter with all
Cash Available for Distribution which is distributed to such Limited Partner in
respect of such quarter and shall be further charged, as of the day of receipt
by the Partnership of Sale Proceeds, with all such Sale Proceeds distributed to
such Limited Partner or Unitholder in excess of the amount of such Limited
Partner's and Unitholder's Adjusted Contribution, determined as of the day
preceding such receipt by the Partnership of Sale Proceeds.
"TAX MATTERS PARTNER" means the Partner designated as the Tax Matters
Partner of the Partnership by the General Partners pursuant to Section 9.06.
"TERMINATION FEE" means the fee payable to the General Partners in
accordance with Section 5.03(b)(vi).
"TIG GENERAL PARTNER" means TIG Insured Mortgage Equities Inc., a Delaware
corporation.
10
"UNIT" means a Beneficial Ownership Interest representing the assignment
by the Initial Limited Partner of one Assigned Limited Partnership Interest.
"UNITHOLDER" means any Person who holds a Beneficial Ownership Interest
represented by a Unit and who is reflected as a Unitholder on the books and
records of the Partnership.
"VOLUNTARY LOAN" means a loan to the Partnership by a General Partner or
its Affiliate in accordance with Section 5.03(b)(ix).
ARTICLE III
PARTNERS AND CAPITAL
Section 3.01. GENERAL PARTNERS. The names, addresses, Capital
Contributions and Interests of the General Partners are as set forth in
Schedule A. The General Partners, as such, shall not be required to make any
additional Capital Contribution to the Partnership, except as provided in
Section 4.05(b).
Section 3.02. INITIAL LIMITED PARTNER. The name, address, Capital
Contribution and Interest of the Initial Limited Partner are as set forth in
Schedule A. All proceeds which the Partnership receives from persons who
purchase Units pursuant to the Partnership's Registration Statement filed
with the Securities and Exchange Commission shall be treated as contributions
to the Partnership made by the Initial Limited Partner on behalf of, and as
nominee for, the Unitholders. Except as set forth above and with respect to
its own Capital Contributions, the Initial Limited Partner shall not be
required to make any additional Capital Contribution to the Partnership.
Other than to serve as Initial Limited Partner, the Initial Limited Partner
has no other business purpose and will engage in any other activity or incur
any debts.
Section 3.03. PARTNERSHIP CAPITAL.
(a) No Partner or Unitholder shall be paid interest on any Capital
Contribution.
(b) The Partnership shall not redeem or repurchase any Unit and no
Partner or Unitholder shall have the right to withdraw, or receive any
return of, his Capital Contribution, except as specifically provided in
this Agreement, and no Capital Contribution may be returned in the form of
property other than cash.
(c) No Limited Partner or Unitholder shall have priority over any
other Limited Partner or Unitholder as to the return of his Capital
Contribution as or to profits, losses or distributions.
(d) Any portion of the Limited Partners' or Unitholders' Capital
Contributions (except for any amounts utilized to pay the Partnership's
Operating Expenses or any
11
amounts set aside for Reserves) which is not invested or committed for
investment within 24 months from the date of the Prospectus, including the
amount of the Initial Advisory Fee paid to the General Partners with
respect to such portion of the Limited Partner's and Unitholder's Capital
Contributions, shall be distributed, without interest, by the Partnership
to the Limited Partners and Unitholders, as a return of capital. Any
funds with respect to the investment of which the Partnership has executed
a written agreement in principle, commitment letter, letter of intent or
understanding, option agreement or other similar understanding or
contract, within 24 months after the date of the Prospectus shall be deemed
committed to investment on that date and shall not subsequently be returned
to the Limited Partners and Unitholders even if the investment of such
funds is not consummated or the contingent payments are not made.
(e) The General Partners shall have no personal liability for the
repayment of the Capital Contribution of any Limited Partner or Unitholder.
(f) A creditor who makes a nonrecourse loan to the Partnership shall
not have or acquire at any time, solely 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 creditor or secured creditor, as the case may
be.
Section 3.04. LIABILITY OF LIMITED PARTNERS.
(a) The liability of each Limited Partner for the losses, debts,
liabilities and obligations of the Partnership shall, so long as the
Limited Partner complies with Section 5.01(c), be limited to his Capital
Contribution and his share of any undistributed profits of the Partnership.
Similarly, no Unitholder shall have any liability for the losses, debts,
liabilities or obligations of the Partnership so long as the Unitholder
complies with the provisions of Section 5.01(c). No Limited Partner or
Unitholder shall be required to lend any funds to the Partnership or, after
his Capital Contribution has been paid, to make any further capital or
other contribution to the Partnership. It is the intent of the Partners
that no distribution (or any part of any distribution) made to any Limited
Partner pursuant to Section 4.01 shall be deemed a return or withdrawal of
capital even if such distribution represents, in full or in part, an
allocation of depreciation or any other noncash item accounted for as a
loss or deduction from or offset to the Partnership's income, and that no
Limited Partner shall be obligated to pay any such amount to or for the
account of the Partnership or any creditor of the Partnership. If any
court of competent jurisdiction holds, however, that notwithstanding the
provisions of this Agreement, any Limited Partner is obligated to make any
such payment, such obligation shall be the obligation of such Limited
Partner and not of the General Partners.
(b) Notwithstanding the provisions of Section 3.04(a) in the event
the Partnership is required, pursuant to applicable provisions of any
Operating Partnership Agreement or of the limited partnership act of the
jurisdiction of organization of an Operating Partnership to return to any
Operating Partnership any funds previously
12
distributed by such Operating Partnership to the Partnership, which funds
have been distributed by the Partnership, in turn, to the Limited Partners
and Unitholders hereunder, the Limited Partners and Unitholders shall be
required to return promptly to the Partnership that portion of such
Partnership distribution (on a pro rata basis) as shall be required by the
Partnership to meet its obligation to return funds to such Operating
Partnership.
ARTICLE IV
DISTRIBUTIONS OF CASH; ALLOCATIONS OF PROFITS AND LOSSES
Section 4.01. DISTRIBUTIONS OF CASH AVAILABLE FOR DISTRIBUTION. All
Cash Available for Distribution at the end of each quarter of each calendar
year shall be distributed, within 45 days after the end of such quarter, 99%
to the Limited Partners and Unitholders considered as a class and 1% to the
General Partners; provided, however, that after the Adjusted Contributions
have been reduced to zero and the Target Return on Adjusted Contribution
Accounts has been paid on a cumulative basis, such distributions shall be
subordinated to the payment of any accrued but unpaid Incentive Fee or
Termination Fee then owed to the General Partners in accordance with Sections
5.03(b)(v) and 5.03(b)(vi).
Section 4.02. DISTRIBUTIONS OF SALE PROCEEDS.
(a) Except as otherwise provided in Section 8.02 in connection with
the liquidation of the Partnership, Sale Proceeds will be distributed, as
soon as practicable after the Partnership receives such proceeds, 99% to
the Limited Partners and Unitholders considered as a class and 1% to the
General Partners; provided, however, that after the Adjusted Contributions
have been reduced to zero and the Target Return on Adjusted Contribution
Accounts has been paid on a cumulative basis, such distribution shall be
subordinated to the payment of any accrued but unpaid Incentive Fee or
Termination Fee then owed to the General Partners in accordance with
Sections 5.03(b)(v) and 5.03(b)(vi).
(b) Noncash Sale Proceeds shall not be distributed until converted
into cash by the Partnership.
Section 4.03. PROFITS AND LOSSES FOR TAX PURPOSES.
(a) Profits and Losses for Tax Purposes shall be determined in
accordance with the accounting method followed by the Partnership for
federal income tax purposes.
(b) All Profits and Losses for Tax Purposes prior to the first date
on which Units are purchased pursuant to Section 11.04 shall be allocated
99% to the Initial Limited Partner and 1% to the General Partner. Such
Profits and Losses for Tax
13
Purposes shall be determined on the basis of an interim closing of the
Partnership's books as of the first date on which Units are purchased.
(c) Except as set forth in Section 4.03(b), all Profits and Losses
for Tax Purposes not arising from Sale Transactions, and every item of
income, gain, loss, deduction, credit or allowance entering into the
computation thereof, shall be allocated 99% to the Limited Partners and
Unitholders considered as a class and 1% to the General Partners.
(d) Profits and Losses for Tax Purposes arising from Sale
Transactions in respect of a calendar quarter shall be allocated 99% to the
Limited Partners and Unitholders considered as a class and 1% to the
General Partners.
(e) Notwithstanding anything to the contrary that may be expressed or
implied in this Agreement, the aggregate interest of the General Partners
in each item of Partnership income, gain, loss, deduction or credit will be
equal to at least 1% of each of those items at all times during the
existence of the Partnership. In determining the interests of the General
Partners in these items, any Limited Partnership Interest owned by the
General Partners shall not be taken into account.
(f) Subject to the provisions of Section 4.03(e), in the event that
the Capital Account of a Partner or the separate subsidiary capital account
of a Unitholder is reduced below zero (or, in the case of a General
Partner, reduced below the deficit balance which such General Partner will
be obligated to restore under Section 4.05(b)), (i) due to an unexpected
allocation of loss or deduction made pursuant to Section 704(e)(2) of the
Code, Section 706(d) of the Code or Paragraph (b)(2)(ii) of Treasury
Regulation Section 1.751-1 or (ii) due to an unexpected distribution to
such Partner or Unitholder which is not offset by a corresponding increase
to such Partner's Capital Account or to such Unitholder's separate
subsidiary capital account, then such Partner or such Unitholder, as the
case may be, will be allocated items of income and gain in an amount and
manner sufficient to eliminate the deficit balance in such Partner's
Capital Account or such Unitholder's separate subsidiary capital account as
quickly as possible.
Section 4.04. DETERMINATION OF ALLOCATIONS AND DISTRIBUTIONS AMONG
LIMITED PARTNERS AND UNITHOLDERS. Within 45 days after the end of each
calendar quarter during the term of the Partnership, a determination shall be
made of (a) the amounts of the Profits and Losses for Tax Purposes (including
every item of income, gain, loss, deduction, credit or allowance entering
into the computation of such Profits and Losses for Tax Purposes) which arose
during such calendar quarter and which was allocable to the Limited Partners
and Unitholders in accordance with the provisions of Section 4.03) and (b)
the amount of the Cash Available for Distribution and the Sale Proceeds which
were actually received by the Partnership during such calendar quarter and
which were allocable to the Limited Partners and Unitholders in accordance
with the provisions of Section 4.03. The above-referenced amounts of tax
items which were attributable to a particular month in a calendar quarter and
which were not attributable to Sale Transactions
14
shall be allocated among each Limited Partner and Unitholder who held an
Interest on the last day of any month (the "Monthly Record Date") during such
calendar quarter and the above-referenced amounts of Cash Available for
Distribution shall be distributed among each Limited Partner and Unitholder
who held an Interest on any Monthly Record Date during such calendar quarter,
both in the ratio which (i) the number of Limited Partnership Interests or
Units held by such Limited Partner or Unitholder on such Monthly Record Date
bears to (ii) the aggregate number of Limited Partnership Interests and Units
outstanding on such Monthly Record Date; provided, however, that such
allocations and distributions with respect to any month during which
subscriptions for Units are released by the Escrow Agent to the Partnership
in accordance with Section 11.04 shall be made pro rata to such Limited
Partners and Unitholders on the basis of the number of days of such month
that they were Limited Partners or Unitholders of record.
The above-referenced amounts of tax items attributable to Sale
Transactions and the above-referenced amounts of Sale Proceeds shall be
allocated or distributed, as the case may be, to each Limited Partner and
Unitholder of record on the date of receipt as determined by the General
Partner if, due to the circumstances of such receipt, advance notice of the
particular date of receipt by the Partnership of such Sale Proceeds (or such
other date within 10 days of such receipt cannot be provided as required by
the federal securities laws or the regulations of any exchange on which the
Units are traded) in the ratio which the number of Limited Partnership
Interests or Units held by such Limited Partner or Unitholder bears to the
aggregate number of Limited Partnership Interests or Units outstanding on
such date.
Section 4.05. CAPITAL ACCOUNTS.
(a) A separate Capital Account shall be maintained and adjusted for
each Partner in accordance with the Code and the Treasury Regulations
thereunder. There shall be credited to each Partner's Capital Account the
amount of his Capital Contribution and such Partner's distributive share of
the Profits for Tax Purposes of the Partnership; and there shall be charged
against each Partner's Capital Account the amount of all Cash Available for
Distribution and Sale Proceeds distributed to such Partner and such
Partner's distributive share of all the Losses for Tax Purposes of the
Partnership. A separate subsidiary capital account with respect to the
Initial Limited Partner's Capital Account shall be maintained and adjusted
for each Unitholder in accordance with the principles contained in this
Section.
(b) Upon the dissolution and termination of the Partnership, the
General Partners will contribute to the Partnership an amount equal to the
lesser of (i) any deficit balance in their Capital Accounts or (ii) the
excess of 1.01% of the total capital contributions attributable to the
Limited Partners and Unitholders over the amount of capital previously
contributed by the General Partners.
15
ARTICLE V
RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNERS
Section 5.01. MANAGEMENT OF THE PARTNERSHIP.
(a) The General Partners, within the authority granted to them under
this Agreement, shall have full, complete and exclusive discretion to
manage and control the business of the Partnership to the best of their
ability to use their best efforts to carry out the purposes of the
Partnership. In so doing, the General Partners shall take all actions
necessary or appropriate to protect the interests of the Limited Partners
and the Unitholders. The General Partners shall devote such time as is
necessary to the affairs of the Partnership and shall receive no
compensation from the Partnership other than as expressly provided in this
Agreement. The General Partners shall, except as otherwise provided in
this Agreement, have all the rights and powers and shall be subject to all
the restrictions and liabilities of a partner in a partnership without
limited partners or Unitholders. All decisions of the General Partners
shall be made pursuant to the unanimous approval of the General Partners
except in respect to decisions involving areas where unilateral authority
has been delegated by the General Partners to one of the General Partners.
(b) All decisions made for and on behalf of the Partnership by the
General Partners shall be binding upon the Partnership. Except as
expressly set forth elsewhere in this Agreement, the General Partners
(acting for and on behalf of the Partnership), in extension and not in
limitation of the rights and powers given by this Section or by the
provisions of this Agreement shall, in their sole discretion, have the full
and entire right, power and authority in the management of the Partnership
business to do any and all things necessary to effectuate the purposes of
the Partnership. Without limiting the foregoing grant of authority, but
subject to the other provisions of this Agreement, the General Partners, in
their capacity as General Partners, shall have the right, power and
authority, acting for and on behalf of the Partnership, to do all acts and
things set forth in Section 5.02. No Person dealing with the General
Partners shall be required to determine their authority to make any
undertaking on behalf of the Partnership or to determine any facts bearing
upon the existence of such authority.
(c) No Limited Partner or Unitholder (except one who may also be a
General Partner, and then only in his capacity as General Partner within
the scope of his authority hereunder) shall participate in or have any
control over the Partnership business or shall have any authority or right
to act or bind the Partnership.
(d) The General Partners shall, after the release from escrow of
subscriptions for Units pursuant to Section 11.04, establish initial
Reserves out of Capital Contributions in an amount not less than 1% of the
Gross Proceeds.
16
(e) All of the Partnership's expenses shall be billed to and paid by
the Partnership; provided, however, that all Organizational, Offering and
Selling Expenses shall be paid by the General Partners. The expenses to be
paid by the Partnership in connection with the Partnership's business shall
include: (i) all costs of personnel employed by the Partnership and
involved in the business of the Partnership, other than individuals who are
employees of the General Partners, (ii) all costs of borrowed money, taxes
and assessments applicable to the Partnership (including interest and other
charges on loans or letters of credit by, or obtained by, the General
Partners or their Affiliates, as permitted hereby), (iii) legal, audit,
accounting, appraisal and engineering 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 Interests in the Partnership or in connection with the
business of the Partnership, (v) fees paid to the Escrow Agent for services
provided in connection with the sale of Units, (vi) fees and expenses paid
to independent contractors, mortgage bankers, finders, brokers and
servicers, consultants, real estate brokers, insurance brokers and other
agents, (vii) expenses in connection with the origination, acquisition,
sale, exchange, foreclosure, prepayment or other disposition of Insured
Mortgages, (viii) expenses of organizing, revising, amending, converting,
modifying or terminating the Partnership, (ix) the cost of insurance in
connection with the business of the Partnership, (x) the costs and expenses
incurred in qualifying the Partnership to do business in any jurisdiction,
including fees and expenses of any resident agent appointed by the
Partnership, (xi) the cost of preparing and disseminating to Limited
Partners and Unitholders the reports described in Section 9.04 and the cost
of preparing and filing reports and tax returns with governmental agencies,
(xii) the costs incurred in connection with any litigation or regulatory
proceedings in which the Partnership is involved unless the General
Partners are adjudged guilty of fraud, bad faith, negligence or misconduct,
(xiii) the cost of any computer services used by the Partnership, and
(xiv) amounts paid to the General Partners as reimbursements in accordance
with Section 5.01(f).
(f) Reimbursements to the General Partners or any of their Affiliates
shall not be allowed, except for reimbursement, without interest, of
(i) the actual costs incurred by the General Partners or such Affiliates in
obtaining goods and materials supplied by unaffiliated parties used for or
by the Partnership; (ii) direct travel and telephone expenses relating to
Partnership business and direct out-of-pocket expenses incurred in
providing legal, accounting, bookkeeping, computer, printing and public
relations services, at rates for which services could be performed by
independent parties; and (iii) costs incurred by the TIG General Partner
and its Affiliates in performance of investor services, including, without
limitation, salaries of employees hired to perform such services (the
"Investor Services Reimbursement"). Reimbursement of expenses (including
the Investor Services Reimbursement) shall not exceed the lesser of the
cost of such expenses or 90% of the competitive price which an independent
party would charge for such services, and shall in no event exceed, on an
annual basis, an amount equal to 0.5% of the Invested Assets as of the last
day of each calendar year. General overhead expenses incurred by the
General Partners or their Affiliates in connection with
17
the administration of the Partnership shall not be charged to the
Partnership. General overhead expenses include, but are not limited to,
salaries of employees not specifically performing the services described
in this Section, rent, capital equipment and such other items generally
constituting overhead, salaries, fringe benefits, travel and utilities
expenses of the General Partners, Affiliates of the General Partners or
any individual general partner or managing officers, directors and
controlling persons of the General Partners. For purposes of this Section
5.01(f), "controlling persons" shall include any person who performs
functions for the General Partners or their Affiliates similar to those
performed by the Chairman or members of the Board of Directors, executive
management, senior management or any person who holds a 5% or more equity
interest in a General Partner or who has the power to direct or cause the
direction of the General Partners.
(g) In no event shall the total of all Front End Fees result in the
commitment of less than eighty-two percent (82%) of all Capital
Contributions of Unitholders to Investment in Properties.
Section 5.02. AUTHORITY OF THE GENERAL PARTNERS.
(a) Subject to Sections 5.02(c), 5.03 and 5.04, the General Partners
for, and in the name and on behalf of, the Partnership, are hereby
authorized, without limitation:
(i) to enter into the Operating Partnership Agreements and all
other agreements, instruments and documents as may be necessary or
appropriate in connection with the acquisition of Operating
Partnership Interests and the admission of the Partnership as a
limited partner of the Operating Partnership;
(ii) to give the consent of the Partnership in its capacity
as a limited partner of each Operating Partnership to any action
proposed to be taken by such Operating Partnership or any of the
Operating General Partners which, under the provisions of its
Operating Partnership Agreement, requires the consent of the
Partnership as the limited partner;
(iii) to invest in, acquire, hold, foreclose, redeem, sell,
dispose of and otherwise deal with Insured Mortgages, at such prices
and upon such terms as they deem to be in the best interests of the
Partnership; provided, however, that notwithstanding any other
provision of this Agreement, the General Partners shall not sell,
dispose of or otherwise transfer (including upon liquidation or
reorganization of the Partnership) any FHA Insured Mortgage other than
to an FHA-approved mortgagee;
(iv) to acquire, hold, sell, dispose of and otherwise deal with
Operating Partnership Interests at such prices and upon such terms as
they deem to be in the best interests of the Partnership;
18
(v) to acquire by purchase, lease, exchange or otherwise, any
real or personal property to be used in connection with the business
of the Partnership;
(vi) to borrow money and issue evidences of indebtedness, and
to secure the same by mortgage, deed of trust, pledge or other lien on
any assets of the Partnership;
(vii) to employ agents, employees, managers, accountants,
attorneys, consultants and other Persons necessary or appropriate to
carry out the business and operations of the Partnership, and to pay
fees, expenses, salaries, wages and other compensation to such
persons; provided, however, that no compensation or fees shall be paid
to a General Partner or its Affiliates except as specifically
permitted by this Agreement;
(viii) to pay, extend, renew, modify, adjust, submit to
arbitration, prosecute, defend or compromise, upon such terms as it
may determine and upon such evidence as they may deem sufficient, any
obligation, suit, liability, cause of action or claim, including
taxes, either in favor of or against the Partnership;
(ix) to determine the appropriate accounting method or methods
to be used by the Partnership (the Partnership intends initially to
utilize the accrual method of accounting in maintaining its books and
records);
(x) to cause the Partnership to make or revoke any of the
elections referred to in Sections 108, 709, 732, 754 or 1017 of the
Code or any similar provisions enacted in lieu thereof;
(xi) to offer and sell Interests in the Partnership to the
public directly or through any licensed Person, including without
limitation the Dealer Manager, and to employ personnel, agents and
dealers for such purposes;
(xii) to establish and maintain Reserves in an initial amount
not less than 1% of Gross Proceeds, for such purposes and in such
amounts as they deem appropriate from time to time;
(xiii) to amend this Agreement to reflect the addition or
substitution of Limited Partners or the reduction of Capital Accounts
upon the return of capital to Partners;
(xiv) to invest all funds not immediately needed in the
operation of the business, including but not limited to (A) the Net
Proceeds prior to investment in Insured Mortgages and Operating
Partnership Interests and (B) Reserves, in Permitted Interim
Investments;
19
(xv) to deal with, or otherwise engage in business with, or
provide services to and receive compensation therefor from any Person
who has provided or may in the future provide any services to, lend
money to, sell property to or purchase property from the General
Partners or any of their Affiliates;
(xvi) to form an Investment Committee to be composed of two
persons selected by the Xxxxxx General Partner and two persons
selected by the TIG General Partner to make all decisions pertaining
to the Partnership's investment in Operating Partnership Interests and
Insured Mortgages;
(xvii) to engage in any kind of activity and to perform and
carry out contracts of any kind necessary or incidental to, or in
connection with, the accomplishment of the purposes of the
Partnership;
(xviii) to transfer any or all Insured Mortgages and Operating
Partnership Interests held by the Partnership at its termination date
to a liquidation trust (but only if at that time the General Partners
determine such transfer to be in the best interest of the Partners and
Unitholders) and to receive fees for serving as trustee of such trust
which are reasonable and consistent with their fiduciary obligations
under the circumstances, and which would not exceed the fees which the
General Partners are otherwise entitled to receive hereunder.
(b) With respect to all of their obligations, powers and
responsibilities under this Agreement, the General Partners are authorized
to execute and deliver, for and on behalf of the Partnership, such notes
and other evidences of indebtedness, contracts, agreements, assignments,
deeds, leases, loan agreements, mortgages and other security instruments
and agreements as they deem proper, all on such terms and conditions as
they deem proper.
(c) Notwithstanding any provision in this Agreement to the contrary,
it is understood and agreed that in making the selection and determination
of the Complexes in respect of which they will invest in Insured Mortgages
and obtain Operating Partnership Interests, the General Partners shall be
bound by the following investment policies which may not be changed,
altered or amended, except as provided in Section 10.02(a):
(i) except for temporary investments as described in
Section 5.02(a)(xiv), investments shall be limited to Insured
Mortgages and Operating Partnership Interests; and
(ii) in selecting Complexes in respect of which they will
originate an Insured Mortgage, the General Partners shall evaluate,
among other factors: (A) the data supplied by the owner to HUD and
(B) the general rental market conditions in the area of the Complexes
(including vacancy rates).
20
(d) Any Person dealing with the Partnership or a General Partner may
rely upon a certificate signed by a General Partner as to:
(i) the identity of the General Partners or Limited Partners or
Unitholders;
(ii) the existence or nonexistence of any fact or facts which
constitute a condition precedent to acts by the General Partners or
are in any other manner germane to the affairs of the Partnership;
(iii) the Persons who are authorized to execute and deliver
any instrument or document by or on behalf of the Partnership; or
(iv) any act or failure to act by the Partnership or as to any
other matter whatsoever involving the Partnership or any Partner.
(e) Notwithstanding any other provision of this Agreement, if, as a
result of the enactment of new federal tax legislation, the Partnership is
or would become or is or would be held to be taxable as a corporation, the
General Partners, with the Consent of a majority in interest of the Limited
Partners and Unitholders, may take any and all such actions they may deem
necessary or appropriate to qualify the Partnership (or a successor entity)
for taxation as a real estate investment trust under Section 856 to 860 of
the Code (or similar provisions). Such actions may include, but shall not
be limited to, amending this Agreement or reorganizing the Partnership into
some other form of association such as a corporation or a business trust.
The General Partners shall effectuate any such qualification, amendment or
reorganization so that, to the extent possible and legally permissible
under the circumstances, the respective interests of the Limited Partners,
Unitholders and the General Partners in the assets and income of the
Partnership (or successor entity) immediately following such qualification,
amendment or reorganization are substantially equivalent to such interests
immediately prior thereto, and the governing documents of the real estate
investment trust comply with the requirements of the applicable guidelines
of the North American Securities Administrators Association, Inc.
(f) Notwithstanding any other provisions of this Agreement, at all
times the General Partners shall have designated one and only one General
Partner to represent the Partnership on an exclusive basis in all dealings
with the FHA (the "Designated FHA Partner"). The Designated FHA Partner's
concurrence shall be required in all Partnership matters involving the FHA,
including, without limitation, any sale of FHA Insured Mortgages or
dissolution of the Partnership (it being understood that the Designated FHA
Partner shall concur in any decision on such matters by vote of the
Unitholders pursuant to Article X). With respect to all such dealings with
the FHA (and only in such respect), the Designated FHA Partner shall be
deemed to be the managing partner of the Partnership and, for purposes of
this provision only, any employee of the
21
Partnership who represents the Partnership in dealing with the FHA will
be deemed an employee of and under the control of the Designated FHA
Partner. The Designated FHA Partner shall be the TIG General Partner.
If the TIG General Partner shall cease to be a General Partner, then,
notwithstanding any other provision of this Agreement, the remaining
General Partners or the Partnership shall designate another Designated
FHA Partner which shall be a "chartered institution" as required by the
regulations of the FHA, and the FHA shall be informed immediately of the
new Designated FHA Partner. Further, if the Partnership shall be in any
way reorganized as or into another entity, the FHA shall be informed
immediately, and, if required, an application for approval of such
entity as an FHA-approved investing mortgagee shall be submitted.
Section 5.03. AUTHORITY OF GENERAL PARTNERS AND THEIR AFFILIATES TO DEAL
WITH THE PARTNERSHIP AND OPERATING PARTNERSHIPS.
(a) Affiliates of the General Partners may, and shall have the right
to, become Operating General Partners, including the sole Operating General
Partner, of any Operating Partnership. Affiliates of the General Partners
may, and shall have the right to deal with Operating Partnerships on an
administrative level including establishing the books of the Operating
Partnership and providing other administrative services, act as management
agent of any Complex on the terms and conditions permitted by applicable
governmental regulations, and shall be compensated for such services in an
amount not to exceed the lesser of cost of such services to the General
Partner or its respective Affiliate or 90% of the competitive price which
would be charged in an arm's-length transaction by others rendering
comparable services in the locality where the Complex is located.
(b) Without limitation upon the other powers set forth herein, the
General Partners are expressly authorized to, in the name of, and on behalf
of, the Partnership:
(i) pay to the General Partners a nonrecurring Initial Advisory
Fee in an amount equal to 1% of the Gross Proceeds, for organizing the
Partnership, analyzing and evaluating potential investments in Insured
Mortgages and Operating Partnership Interests and related matters;
(ii) pay to the General Partners a nonaccountable Organizational,
Offering and Selling Expense Reimbursement Allowance for those
expenses incurred and payable by the General Partners in connection
with or related to the formation and qualification of the Partnership,
the registration and qualification of the Units under applicable
federal and state laws and the marketing, distribution, sale and
processing of the Units, in an amount equal to 2% of Gross Proceeds
and, except for such amount, the General Partners shall not have
recourse to the Partnership for any further reimbursement for
Organizational, Offering and Selling Expenses;
22
(iii) pay to the General Partners the Annual Asset Management
and Partnership Administration Fee for services rendered to the
Partnership during each fiscal year in managing and supervising the
Partnership's investments in Insured Mortgages and Operating
Partnership Interests in an amount equal to 0.5% of Invested Assets as
of the last day of such fiscal year (to be adjusted pro rata with
respect to any fiscal years which are less than 12 months, including
the Partnership's first year of operations which, for purposes of this
provision only, shall be deemed to begin on the date of the Initial
Closing), which shall be payable only during such years that the
Priority Return on Adjusted Contribution Accounts has been paid on a
noncumulative basis with respect to such fiscal year, any unpaid
amounts to accrue and be payable only after the Adjusted Contributions
have been reduced to zero and the Target Return on Adjusted
Contribution Accounts has been paid on a cumulative basis;
(iv) agree to the payment to the General Partners by each
Operating Partnership of a Commitment Fee in an amount up to 3.97% of
the amount of each Insured Mortgage, out of which the General Partners
will pay all expenses incurred in connection with the Partnership's
investments in Operating Partnerships;
(v) pay to the General Partners an Incentive Fee equal to 9.1%
of all Cash Available for Distribution and Sale Proceeds attributable
to receipts of Cash Flow and Sale Transactions subsequent to such time
as the Adjusted Contributions have been reduced to zero and the Target
Return on Adjusted Contribution Accounts has been paid on a cumulative
basis (after deduction from such Cash Available for Distribution
and/or Sale Proceeds of any Termination Fee paid therefrom);
(vi) pay to the General Partners a Termination Fee equal to 3%
of all Sale Proceeds reduced by the amount of actual costs incurred in
connection with all Sales Transactions including closing costs,
brokerage and legal fees; provided, however, that such fees be paid
only after the Adjusted Contributions have been reduced to zero and
the Target Return on Adjusted Contributions has been paid on a
cumulative basis;
(vii) pay to the Dealer Manager a Selling Commission for each
Unit sold in a per Unit amount which will vary depending on the number
of Units purchased by each Investor, but not to exceed 7% of the
purchase price of the Unit;
(viii) utilize Reserves, borrowed funds or loan guarantees to
make additional investments in Operating Partnerships in which the
Partnership owns an interest in an amount not to exceed 15% of the
Partnership's original
23
investment (Insured Mortgage and Equity Contribution) in an Operating
Partnership;
(ix) borrow funds from a General Partner or any of its
Affiliates (a "Voluntary Loan"); provided, however, that such
borrowings may only be on a short-term basis (not to exceed 24
months) and the Partnership may not pay in connection therewith (A)
interest or other financing charges or fees in excess of the
amounts which would be charged by unrelated lending institutions on
comparable loans for the same locality; or (B) any prepayment
charge or penalty;
(x) reimburse the General Partners as provided in
Section 5.01(f); and
(xi) in their sole discretion, defer any amount of the Annual
Asset Management and Partnership Administration Fee otherwise payable
in accordance with Section 5.03(b)(iii) until the Adjusted
Contributions have been reduced to zero and the Target Return on
Adjusted Contribution Accounts has been paid on a cumulative basis,
and/or defer any amount otherwise reimbursable to the General Partners
in accordance with Section 5.01(f) until such time or times that the
Priority Return on Adjusted Contribution Accounts has been paid on a
noncumulative basis with respect to a calendar year.
(c) Any agreements, contracts and arrangements with any General
Partner or Affiliate of any General Partner permitted by this Agreement
shall be subject to the following conditions (except that subsections
(iii), (iv) and (v) shall not apply to the fees and reimbursements set
forth in Section 5.03(b) herein):
(i) any such agreements, contracts or arrangements shall be
embodied in a written contract which describes the services to be
rendered and all compensation to be paid or the goods or materials to
be provided and the price to be paid therefor or the method of
determining such price;
(ii) any such agreements, contracts or arrangements shall be
fully and promptly disclosed to all Partners in the reports provided
for in Section 9.04(c);
(iii) any such agreements, contracts or arrangements shall be
terminable by either party, without penalty, upon 60 days' prior
written notice, and shall not be amended without the Consent of a
majority in interest of the Limited Partners and Unitholders as a
class;
(iv) all goods and services provided to the Partnership must be
necessary to the prudent operation of the Partnership and will be
provided at the lesser of actual cost or 90% of the competitive price
which would be charged for such goods or services by an independent
party; and
24
(v) the person providing such services or goods must be
previously engaged in the business of rendering such services or
selling or leasing such goods, independently of the Partnership as an
ordinary and ongoing business, and shall represent that it has
adequate staff which it utilizes in the conduct of the business and is
able to render such services or provide such goods or materials to the
Partnership in accordance with its needs therefor.
Section 5.04. GENERAL RESTRICTIONS ON AUTHORITY OF THE GENERAL PARTNERS.
Subject to the provisions of Subsection 5.01(b), in exercising management and
control of the Partnership, the General Partners, on behalf of the Partnership
and in furtherance of the business of the Partnership, shall have the authority
to perform all acts which the Partnership is authorized to perform. However,
the General Partners shall not have any authority to:
(a) perform any act in violation of this Agreement or any applicable
law or regulation thereunder;
(b) do any act required to be approved or ratified in writing by all
or part of the Limited Partners under the Delaware Revised Uniform Limited
Partnership Act, unless the right to do so is expressly granted in this
Agreement;
(c) without the consent of a majority in interest of the Limited
Partners (it being understood that the Initial Limited Partner is voting at
the direction of the Unitholders) sell, pursuant to a single transaction or
a series of related transactions, 75% or more of the book value of the
assets of the Partnership, except for (i) a liquidating sale of a final
Insured Mortgage and corresponding Operating Partnership Interest remaining
after the sale of all other Insured Mortgages and Operating Partnership
Interests, or (ii) sales in connection with the liquidation and winding up
of Partnership's business upon its dissolution;
(d) borrow from the Partnership;
(e) without the Consent of a majority in Interest of the Limited
Partners (it being understood that the Initial Limited Partner is voting at
the direction of the Unitholders) (or such greater number of Limited
Partners as may then be required under the Delaware Revised Uniform Limited
Partnership Act) elect to dissolve the Partnership;
(f) do any act which would make it impossible to carry on the
ordinary course of business of the Partnership;
(g) confess a judgment against the Partnership;
(h) possess Partnership property, or assign the Partnership's rights
in specific Partnership property, for other than a Partnership purpose;
25
(i) admit a Person as a General Partner, except as provided in this
Agreement;
(j) admit a Person as a Limited Partner, except as provided in this
Agreement;
(k) knowingly perform any act that would subject any Limited Partner
or Unitholder to liability as a general partner in any jurisdiction;
(l) allocate any income, gain, loss, deduction or credit (or any item
thereof) to any Partner if, and only to the extent that, such allocation
will cause the determinations and allocations of income, gain, loss,
deduction or credit (or any item thereof) provided for in Article IV hereof
not to be permitted by Code Section 704(b) and the Treasury Regulations
promulgated thereunder;
(m) lend any funds to any Person other than in connection with the
extension of funds to the Operating Partnerships or in connection with
temporary investments as described in Section 5.02(a)(xiv);
(n) cause the Partnership to acquire interests in an Operating
Partnership owning unimproved or nonincome-producing property unless it is
anticipated that such property will be developed into a Complex as
evidenced by a construction loan;
(o) invest in the securities of other issuers, except as provided in
Sections 5.02(a) or 9.03;
(p) underwrite the securities of other issuers;
(q) reinvest Sale Proceeds, other than in Permitted Interim
Investments pending distribution of such proceeds;
(r) directly or indirectly pay or award any finder's fees,
commissions or other compensation to any Person engaged by a potential
investor for investment advice as an inducement to such advisor to advise
the purchaser regarding the purchase of Units; provided, however, that the
General Partners shall not be prohibited from paying the normal sales
commissions payable to a registered broker-dealer or other properly
licensed Person for selling Units;
(s) acquire any Insured Mortgage or Operating Partnership Interests
in exchange for Units;
(t) except for the investments specified in the Initial Prospectus,
purchase any Insured Mortgage or Operating Partnership Interest on behalf
of the Partnership from the General Partners or any of their Affiliates
unless one of such Persons purchased the
26
Insured Mortgage or Operating Partnership Interest in his or its name
and temporarily hold title thereto in order to facilitate the
acquisition of such Insured Mortgage or Operating Partnership Interest
by the Partnership; provided, however, that in the event of such an
acquisition from a General Partner or one of its Affiliates, (i) the
purchase price paid by the Partnership shall not exceed the cost of such
Insured Mortgage or Operating Partnership Interest to the seller, and
(ii) no compensation or other benefit from the transaction may accrue to
such General Partner or any of its Affiliates except (A) the General
Partner or any of its Affiliates may be reimbursed for the costs
incurred to carry an Insured Mortgage or Operating Partnership Interest
acquired for the Partnership; and (B) as otherwise permitted by this
Agreement.
(u) change the Partnership's purposes from those set forth in
Section 1.03;
(v) engage in any transaction which results in the receipt by a
General Partner or any of its Affiliates of any undisclosed "rebate" or
"give-up" or in any reciprocal business arrangement which results in the
circumvention of the restrictions contained in this Agreement or in
applicable state securities laws and regulations upon transactions between
the Partnership, a General Partner and its Affiliates;
(w) without the consent of a majority in interest of the Limited
Partners (it being understood that the Initial Limited Partner is voting at
the direction of the Unitholders) amend this Agreement except as provided
in Sections 12.02(b) or (e) hereof;
(x) cause the Partnership to invest in joint venture arrangements
with another program formed by the General Partners or their Affiliates
unless (i) such other program has investment objectives substantially
identical to the Partnership's, (ii) there are no duplicate property
management or other fees, (iii) the sponsor compensation arrangements of
such other program are substantially identical to the Partnership's,
(iv) the Partnership has a right of first refusal to buy if the other
program wishes to sell property held in the joint venture, (v) the
investment of each program is on substantially the same terms and
conditions, and (vi) the Partnership is in control of the joint venture;
(y) pay any person a real estate brokerage commission for the sale of
Partnership property unless such commission is reasonable, customary and
competitive in light of the size, type and location of the property, and
does not exceed 6% of the contract price for the sale of the property, up
to one-half of which (not to exceed 3% of the contract price) may be paid
to a General Partner or an Affiliate only if such person provided
substantial services in the sales effort and payment of such amount is
subordinated to the Investors having received a return of their Adjusted
Contributions and payment of the Target Return on Adjusted Contribution
Accounts on a cumulative basis; provided, however, that no General Partner
or Affiliate shall be granted an exclusive right to act as real estate
agent of the Partnership;
27
(z) pay any fees to a General Partner or Affiliate for property
management services unless such fees are for residential property
management and do not exceed the lesser of (i) 5% of gross revenues from
the property or (ii) fees which are competitive for similar services in the
same geographic area; and
(aa) pay any fees to a General Partner or Affiliate for insurance
brokerage services in connection with obtaining insurance on the
Partnership's property unless (i) such person is independently engaged in
the business of providing such services and 75% or more of such person's
gross revenue is derived from services to non-Affiliates and (ii) the cost
of providing such services is not greater than the lowest quote obtained
from two unaffiliated insurance agencies for comparable coverage and terms.
Section 5.05. DUTIES AND OBLIGATIONS OF THE GENERAL PARTNERS.
(a) The General Partners shall devote to the affairs of the
Partnership such time as may be necessary for the proper performance of
their duties under this Agreement, but neither the General Partners nor the
officers, directors or shareholders of the General Partners shall be
expected to devote his full time to the performance of such duties.
(b) The General Partners shall take such action as may be necessary
or appropriate for the continuation of the Partnership's valid existence
under the laws of the State of Delaware and in order to qualify the
Partnership under the laws of any jurisdiction in which the Partnership is
doing business or in which such qualification is necessary or appropriate
to protect the limited liability of the Limited Partners and Unitholders or
in order to continue in effect such qualification. The General Partners
shall file or cause to be filed for recordation in the office of the
appropriate authorities of the State of Delaware, and in the proper office
or offices in each other jurisdiction in which the Partnership is
qualified, such certificates, including limited partnership and fictitious
name certificates, and other documents as are required by the applicable
statutes, rules or regulations of any such jurisdiction.
(c) The General Partners shall prepare or cause to be prepared and
shall file on or before the due date (or any extension thereof) any
federal, state or local tax returns required to be filed by the
Partnership. The General Partners shall cause the Partnership to pay any
taxes payable by the Partnership.
(d) The General Partners shall use their best efforts to assure that
the Partnership shall not be deemed an "investment company" as such term is
defined in the Investment Company Act of 1940.
(e) 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. The General Partners shall
not employ or permit another to
28
employ such funds or assets in any manner except for the exclusive
benefit of the Partnership; provided, however, that by the execution of
this Agreement, each Partner and Unitholder hereby consents to the
placing by the General Partners of Partnership funds in a bank account
or accounts at banks with which the General Partners or their Affiliates
have informal banking arrangements (which may include compensating
balance requirements), and to the inclusion by such banks of such
Partnership funds in calculating compliance by the General Partners or
their Affiliates with such banking arrangements; however, Partnership
funds may not be used to meet any formal compensating balance
requirements.
(f) The General Partners are authorized, in their sole discretion, to
cause the Partnership to acquire policies of limited partnership liability
insurance, insuring the General Partners, their officers, directors,
employees, shareholders and certain of their Affiliates against certain
liabilities in connection with the business of the Partnership and insuring
the Partnership against certain liabilities with respect to any
indemnification it is legally required or permitted to provide pursuant to
this Agreement to such General Partners, their officers, directors,
employees, shareholders and such Affiliates.
(g) The General Partners will use their best efforts to observe the
standards described under the caption "Investment Objectives and Policies"
in the Prospectus. The Xxxxxx General Partner and the TIG General Partner
shall each designate two representatives to serve on the Investment
Committee and any investment in any Operating Partnership Interest or the
sale of any Operating Partnership Interest shall be subject to the
unanimous approval of the members of the Investment Committee.
Section 5.06. DELEGATIONS OF AUTHORITY. Subject to the provisions of this
Article V, the General Partners may delegate all or any of their powers, rights
and obligations under this Agreement, and may appoint, employ, contract or
otherwise deal with any Person for the transaction of the business of the
Partnership, which Person may, under supervision of the General Partners,
perform any acts or services for the Partnership as the General Partners may
approve.
Section 5.07. OTHER ACTIVITIES. The General Partners and any Affiliate
may engage independently or with others in other business ventures of every
nature and description, including the rendering of advice or services of any
kind to other investors and the making or management of other investments,
including investments in Insured Mortgages or Operating Partnership Interests.
Neither the Partnership nor any Partner or Unitholder shall have any right by
virtue of this Agreement or the partnership relationship created by this
Agreement in or to such other ventures or activities or to the income or
proceeds derived therefrom, and the pursuit of such ventures, even if
competitive with the business of the Partnership, shall not be deemed wrongful
or improper.
29
Section 5.08. LIMITATION ON LIABILITY OF THE GENERAL PARTNERS;
INDEMNIFICATION.
(a) The General Partners shall not be liable, responsible or
accountable in damages or otherwise to the Partnership or any of the
Limited Partners and Unitholders for any act or omission performed or
omitted by such General Partner in good faith and in a manner reasonably
believed by it to be within the scope of the authority granted to it by
this Agreement and in the best interests of the Partnership; provided that
such General Partner's conduct did not constitute fraud, bad faith,
negligence or misconduct. The Partnership shall indemnify and hold
harmless the General Partners and their respective officers, directors,
partners, employees, agents, Affiliates, subsidiaries and assigns from and
against any loss, liability or damage incurred by any of them or the
Partnership by reason of any act performed or omitted to be performed by
them in connection with the business of the Partnership, including all
judgments, costs and reasonable attorneys' fees (which attorneys' fees may
be paid as incurred) and any reasonable amounts expended in settlement of
any claims of liability, loss or damage; provided that such General
Partner's conduct did not constitute fraud, bad faith, negligence or
misconduct. The satisfaction of any indemnification obligation shall be
from and limited to Partnership assets, and no Limited Partner or
Unitholder shall have any personal liability on account thereof. The
termination of any action, suit or proceeding shall not, of itself, create
a presumption that the General Partner did not act in good faith and in a
manner which is reasonably believed to be in or not opposed to the best
interest of the Partnership. Any indemnification under this subsection,
unless ordered by a court, shall be made by the Partnership only as
authorized in the specific case and only upon a determination by
independent legal counsel in a written opinion that indemnification of the
General Partner is proper in the circumstances because he has met the
applicable standard of conduct set forth in this subsection.
Notwithstanding any provision of this subsection to the contrary, the
General Partners shall be presumed to be personally liable to creditors for
the debts of the Partnership.
(b) Notwithstanding the provisions of Section 5.08(a), neither the
General Partners, nor any officer, director, partner, employee, agent,
Affiliate, subsidiary or assign of the General Partners, or the Partnership
shall be indemnified from any liability, loss or damage incurred by them in
connection with any claim or settlement involving allegations that the
Securities Act of 1933 or any state securities law was violated by the
General Partners or by any such other Person or entity unless: (i) the
General Partners or other Persons or entities seeking indemnification are
successful in defending such claim; and (ii) such indemnification is
specifically approved by a court of law which shall have been advised as to
the current position of the Securities and Exchange Commission regarding
indemnification for violations of securities law.
(c) The Partnership shall not incur the cost of that portion of any
liability insurance which insures the General Partners for any liability as
to which the General Partners are prohibited from being indemnified under
this Section.
30
(d) In the event that Section 5.08(a) or any portion thereof or the
application thereof to any Person or circumstances shall to any extent be
invalid or unenforceable, a right of contribution shall exist on the part
of the party or parties who otherwise would have been an indemnified party
or parties under Section 5.08(a) (hereinafter collectively referred to as
"contribution recipient") to the extent of 90% of any losses, claims,
damages, expenses or liabilities to which a contribution recipient may
become liable. In such event, and upon the incurring by a contribution
recipient of any such loss, claim, damage, expense or liability and the
giving by such contribution recipient of written notice thereof to the
party or parties who otherwise would have been an indemnifying party under
the aforesaid provisions (hereinafter collectively referred to as
"contributor"), the contributor shall promptly pay to such contribution
recipient an amount equal to 90% of any such loss, claim, damage, expense
or liability incurred by such contribution recipient as aforesaid. The
Partnership shall satisfy any obligation under this Section 5.08(d) out of,
and only to the extent of, its assets.
Section 5.09. TAX STATUS OF PARTNERSHIP. The General Partners shall use
their best efforts to meet such requirements of the Code, as interpreted from
time to time by the Internal Revenue Service, any other agency of the federal
government, or the courts, necessary to assure that the Partnership will be
classified as a partnership for federal income tax purposes.
Section 5.10. SALES AGENCY AGREEMENT. The Partnership has entered into a
sales agency agreement with X.X. Xxxxxx & Company Inc., as Dealer Manager,
pursuant to which said firm will assist the Partnership in the sale of Units and
be paid Selling Commissions therefor and be indemnified against certain
liabilities as set forth in Section 8 of such agreement. The Unitholders accept
the terms of such agreement by their adherence to this Agreement and acceptance
of their Units.
Section 5.11. RESTRICTIONS ON AUTHORITY TO DEAL WITH THE GENERAL PARTNERS
AND AFFILIATES. Except as specifically authorized in this Article V, the
General Partners are prohibited from entering into any agreements, contracts or
arrangements on behalf of the Partnership with the General Partners or any
Affiliate of the General Partners. Such prohibition shall include, without
limitation, the following: (a) the Partnership shall not loan money to a General
Partner or any Affiliate of a General Partner except in connection with
investments described in the Initial Prospectus; (b) neither a General Partner
nor any such Affiliate shall loan money to the Partnership if interest rates and
other finance charges and fees in connection with such loan are in excess of the
amounts charged by unrelated banks on comparable loans, or make loans with a
prepayment charge or penalty; (c) no compensation or fees shall be paid a
General Partner or its Affiliates except as described in this Agreement or in
the Prospectus, and (d) the Partnership shall not sell or lease property to a
General Partner or Affiliate of a General Partner.
31
ARTICLE VI
CHANGES IN GENERAL PARTNERS
Section 6.01. WITHDRAWAL OF GENERAL PARTNERS.
(a) A General Partner shall not be entitled to withdraw from the
Partnership, or to sell, transfer or assign its Interest as General
Partner, unless a substitute General Partner has been admitted in
accordance with the conditions of Section 6.02.
(b) In the event that a General Partner withdraws from the
Partnership or sells, transfers or assigns its entire Interest, such
General Partner shall be and shall remain liable for all obligations and
liabilities incurred by the Partnership before such withdrawal, sale,
transfer or assignment becomes effective, but shall be free of any
obligation or liability incurred on account of the activities of the
Partnership from and after such withdrawal, sale, transfer or assignment
becomes effective.
(c) The General Partners (with the consent of all General Partners)
may at any time designate additional Persons to be General Partners, whose
Interest in the Partnership shall be such as agreed upon by the General
Partners and such additional General Partners, provided that the Interests
of the Limited Partners and Unitholders shall not be affected thereby.
Such additional Persons shall become additional General Partners only upon
meeting the conditions contained in Section 6.02.
Section 6.02. ADMISSION OF A SUCCESSOR OR ADDITIONAL GENERAL PARTNER. A
Person shall be admitted as a General Partner of the Partnership only if each of
the following conditions is satisfied:
(a) the admission of such Person shall have been Consented to, or
ratified, subject to Section 10.02, by such number of Limited Partners as
are then required under the Delaware Revised Uniform Limited Partnership
Act to Consent to, or ratify, the admission of a general partner, but in
any event, subject to Section 10.02, such admission shall have been
Consented to by not less than a majority in Interest of the Limited
Partners (it being understood that the Initial Limited Partner is voting at
the direction of the Unitholders);
(b) such Person shall have accepted and agreed to be bound by the
terms and provisions of this Agreement, by executing a counterpart hereof,
and such other documents or instruments as may be required or appropriate
in order to effect the admission of such Person as a General Partner shall
have been filed for recording, and all other actions required by law in
connection with such admission shall have been performed;
32
(c) if such Person is a corporation, it shall have provided the
Partnership with evidence satisfactory to counsel for the Partnership of
its authority to become a General Partner and to be bound by the terms and
provisions of this Agreement;
(d) counsel for the Partnership or the Limited Partners and
Unitholders, as the case may be, shall have rendered an opinion to the
Partnership that the admission of such Person is in conformity with the
Delaware Revised Uniform Limited Partnership Act and that none of the
actions taken in connection with the admission of such Person is in
violation of the Delaware Revised Uniform Limited Partnership Act, will
impair the limited liability of the Limited Partners and Unitholders, will
cause the termination or dissolution of the Partnership, will cause the
Partnership to be classified other than as a partnership for federal income
tax purposes or will violate federal or state securities laws; and
(e) such Person is not an individual.
Section 6.03. CONSENT OF LIMITED PARTNERS AND UNITHOLDERS TO ADMISSION OF
SUCCESSOR OR ADDITIONAL GENERAL PARTNER. Unless otherwise prohibited by the
Delaware Revised Uniform Limited Partnership Act at the time that such Consent
is necessary, each of the Limited Partners and Unitholders, by the execution of
this Agreement by the Initial Limited Partner, Consents to the admission of any
Person as a successor additional General Partner to which at the time there has
been given the express Consent of a majority in Interest of the Limited Partners
(including the Initial Limited Partner). Upon receipt of such Consent of a
majority in Interest of the Limited Partners (including the Initial Limited
Partner), such admission shall, without any further Consent or approval of the
Limited Partners or Unitholders, be the act of all the Limited Partners and
Unitholders.
Section 6.04. REMOVAL OF A GENERAL PARTNER. Subject to Section 10.02, a
majority in Interest of the Limited Partners (including the Initial Limited
Partner) voting together as a class, without the Consent or other action by the
General Partner to be removed, may remove any General Partner and may elect a
replacement therefor, such replacement shall become a General Partner only upon
meeting the conditions contained in Section 6.02.
Section 6.05. EFFECT OF REMOVAL, BANKRUPTCY, DEATH, WITHDRAWAL,
DISSOLUTION OR INCOMPETENCY OF A GENERAL PARTNER.
(a) In the event of the removal, Bankruptcy, death, dissolution or
adjudication of incompetence of a General Partner or any other event of
withdrawal of a General Partner, the business of the Partnership may be
continued with Partnership property by any other General Partners with the
unanimous Consent of such other General Partners; provided, however, that
if the removed, Bankrupt, deceased, dissolved, incompetent or withdrawn
General Partner is then the sole General Partner, the provisions of
Section 8.01 shall be applicable.
33
(b) Upon the removal, Bankruptcy, death, dissolution, adjudication of
incompetence or any other event of withdrawal of a General Partner who is
not then the sole General Partner, the removed, Bankrupt, deceased,
dissolved, incompetent or withdrawn General Partner shall immediately cease
to be a General Partner, and there shall first be assigned and transferred
to each remaining or substitute General Partner such percentage as they
shall mutually determine of the General Partner's Interest of the removed,
Bankrupt, deceased, dissolved, incompetent or withdrawn General Partner as
shall be required to increase the aggregate of all remaining General
Partners' Interests to at least one percent (1%), in consideration for
which, except in the case of a General Partner removed for cause, the
removed, Bankrupt, deceased, dissolved, incompetent or withdrawn General
Partner shall be paid the fair market value thereof. Any dispute as to the
fair market value shall be ascertained by averaging appraisals of the fair
market value of such Interest submitted by three appraisers, one chosen by
the removed General Partner, one chosen by the successor General Partner or
the Limited Partners as a class (it being understood that the Initial
Limited Partner is voting at the direction of the Unitholders), as the case
may be, and the third chosen by the two so chosen. To the extent that the
Interest of the removed, Bankrupt, deceased, dissolved, incompetent or
withdrawn General Partner is not so assigned, his Interest shall be
converted to that of a Limited Partner, but with the same rights under
Article IV (except as reduced by assignment and transfer pursuant to the
first sentence of this paragraph) to share in the Profits and Losses for
Tax Purposes, and Cash Available for Distribution of the Partnership and
the same rights under Article IV (which shall not be reduced by reason of
any assignment and transfer pursuant to the first sentence of this
paragraph) to receive Sale Proceeds or proceeds from liquidation of the
Partnership that he would have had if he had remained as a General Partner;
provided, however, that in the case of a General Partner removed for cause,
any such nonassigned Interest shall be forfeited. Nothing in this
Section 6.05(b) shall affect any rights or liabilities of the removed,
Bankrupt, deceased, dissolved, incompetent or withdrawn General Partner
which matured prior to the removal, Bankruptcy, death, dissolution,
incompetence or withdrawal of such General Partner.
(c) If, at the time of removal, Bankruptcy, death, dissolution,
adjudication of incompetence or withdrawal of a General Partner, the
removed, Bankrupt, deceased, dissolved, incompetent or withdrawn General
Partner was not the sole General Partner of the Partnership, the remaining
General Partner or Partners shall immediately (i) give Notice to the
Limited Partners and Unitholders of such removal, Bankruptcy, death,
dissolution, adjudication of incompetence or withdrawal, and (ii) prepare
such amendments to this Agreement and execute and file for recording such
amendments or documents or other instruments necessary to reflect the
assignment, transfer, termination or conversion (as the case may be) of the
Interest of the removed, Bankrupt, deceased, dissolved, incompetent or
withdrawn General Partner.
34
(d) All parties hereto hereby agree to take all actions and to
execute all documents necessary or appropriate to effect the foregoing
provisions of this Section 6.05.
ARTICLE VII
TRANSFERABILITY OF LIMITED PARTNERS' INTERESTS
Section 7.01. ASSIGNABILITY OF UNITS. The Units shall be evidenced by
Beneficial Ownership Certificates which shall be issued in registered form only.
Until such time as the Partnership qualifies the Units for quotation by NASDAQ
or a national or regional securities exchange, the transferability of Units
shall be subject to the restrictions imposed in Section 7.02 below. Upon
qualification of the Units for quotation by NASDAQ or a national or regional
securities exchange, such Units shall be freely transferable (except when
transfer is restricted under federal or state securities laws). Notwithstanding
the foregoing, the General Partners may cause the delisting of the Units and the
reimposition of the restriction of Section 7.02 if (a) in their opinion, a
termination pursuant to Code Section 708 is likely to occur as a result of 50%
or more of the Units being sold or exchanged, exclusive of successive sales or
exchanges within a 12-month period or (b) if, as a result of federal income tax
legislation, partnerships with publicly traded partnership interests would be
taxable as corporations.
Section 7.02. RESTRICTIONS ON TRANSFERS OF INTERESTS OF LIMITED PARTNERS
OR UNITHOLDERS. Except as provided in Section 7.01, a Limited Partner or (until
such time as the Partnership qualifies the Units for quotation by NASDAQ or a
national or regional securities exchange) a Unitholder may assign his Limited
Partnership Interests or Units by a duly executed written instrument of
assignment, the terms of which are not in contravention of any of the provisions
of this Agreement. Within 30 days after an assignment of a beneficial interest
in Limited Partnership Interests or Units which occurs without a transfer of
record ownership of such Limited Partnership Interests or Units, the assignor
shall give notice of such assignment to the General Partners. Notwithstanding
the foregoing, a Limited Partner or Unitholder may not sell, assign, pledge,
transfer or exchange any of his Limited Partnership Interests or Units:
(a) until said Limited Partnership or Unitholder obtains an opinion
of counsel for the Partnership stating:
(i) that such sale, assignment, pledge, transfer or exchange
would not result, when considered with all other sales, assignments,
transfers and exchanges of Interests in the Partnership within the
previous 12 months, in the Partnership being considered to have been
terminated within the meaning of Section 708 of the Code; and
(ii) that such sale, assignment, pledge, transfer or exchange
would not be in violation of any applicable federal or state
securities laws (including any investor suitability standards);
35
(b) except for transfers by gift or inheritance, intrafamily
transfers, transfers resulting from family dissolutions and transfers to
Affiliates, if the transferor or the transferee would hold less than 250
(100 in the case of IRAs and Xxxxx Plans) Limited Partnership Interests or
Units; or
(c) if the transferee is a Foreign Person.
Any attempted sale, assignment, pledge, transfer or exchange in contravention of
the provisions of this Article VII shall be void and ineffectual and shall not
be recognized by the Partnership.
Section 7.03. ASSIGNEES OF LIMITED PARTNERS.
(a) If a Limited Partner or Unitholder dies, his executor,
administrator or trustee, or, if he is adjudicated incompetent, his
committee, guardian or conservator, or, if he becomes Bankrupt, the trustee
or receiver of his estate, shall have all the rights of a Limited Partner
or Unitholder for the purpose of settling or managing his estate and such
power as the deceased or incompetent Limited Partner or Unitholder
possessed to assign all or any part of his Limited Partnership Interest or
Units and to join with the assignee thereof in satisfying any conditions
precedent to such assignee becoming a Limited Partner or Unitholder. The
death, dissolution, adjudication of incompetence or Bankruptcy of a Limited
Partner or Unitholder shall not dissolve the Partnership.
(b) The Partnership need not recognize for any purpose any assignment
of all or any fraction of the Limited Partnership Interests or (so long as
the transfer restrictions of Section 7.02 are applicable to Units) Units of
a Limited Partner or Unitholder unless there shall have been filed with the
Partnership and recorded on the Partnership's books a duly executed and
acknowledged counterpart of the instrument effecting such assignment and
unless such instrument evidences the written acceptance by the assignee of
all of the terms and provisions of this Agreement, contains a
representation that such assignment was made in accordance with all
applicable laws and regulations (including any investor suitability
requirements) and in all other respects is satisfactory in form and
substance to the General Partners.
(c) Any Limited Partner or (so long as the transfer restrictions of
Section 7.02 are applicable to Units) Unitholder who shall assign all of
his Limited Partnership Interests or Units shall cease to be a Limited
Partner or Unitholder of the Partnership, except that unless and until a
Limited Partner is admitted, or a Unitholder is recognized, in his stead,
such assigning Limited Partner or Unitholder shall retain the statutory
rights of an assignor of a limited partnership interest or Unit under the
Delaware Revised Uniform Limited Partnership Act.
(d) An assignee of Limited Partnership Interests or (so long as the
transfer restrictions of Section 7.02 are applicable to Units) Units may
become a Limited Partner or Unitholder only if each of the following
conditions is satisfied:
36
(i) the instrument of assignment sets forth the intentions of
the assignor that the assignee succeed to the assignor's interest as a
Limited Partner or Unitholder in his place;
(ii) the assignee shall have fulfilled the requirements of
Sections 7.03(b) and 12.02;
(iii) the assignee shall have paid all reasonable legal fees
and filing costs incurred by the Partnership in connection with his
substitution as a Limited Partner or Unitholder; and
(iv) the General Partners shall have consented to such
substitution, which consent may be granted or withheld by the General
Partners in their sole discretion.
(e) This Agreement shall be amended at least once each calendar
quarter if necessary to recognize the admission of any Limited Partners and
shall be submitted in a timely manner for filing with the office of the
Secretary of State of the State of Delaware. Assignees of Limited
Partnership Interests shall be recognized as such, to the extent set forth
in Sections 7.03(b) or 7.03(d), as of the day which the Partnership has
received the instrument of assignment and all of the other conditions to
the assignment are satisfied.
(f) An assignee of Limited Partnership Interests or Units who does
not become a Limited Partner or Unitholder and who desires to make a
further assignment of his Limited Partnership Interests or Units shall be
subject to all of the provisions of this Article VII to the same extent and
in the same manner as a Limited Partner or Unitholder desiring to make an
assignment of Limited Partnership Interests or Units.
Section 7.04. JOINT OWNERSHIP OF INTERESTS. Subject to the other
provisions of this Agreement, a Limited Partnership Interest or Unit may be
acquired by two or more individuals, who shall, at the time they acquire such
Limited Partnership Interest or Unit, indicate to the Partnership whether the
Limited Partnership Interest or Unit is being held by them as joint tenants with
the right of survivorship, as tenants-in-common or as community property. In
the absence of any such designation, they shall be presumed to hold such Limited
partnership Interest or Unit as tenants-in-common. Any Consent of the Limited
Partners or Units shall require the action or vote of all owners of any such
jointly held Limited Partnership Interest or Unit.
Section 7.05. RESTRICTIONS ON TRANSFERS OF INTERESTS OF THE INITIAL
LIMITED PARTNER. Other than pursuant to Section 11.01(a), the Initial Limited
Partner may not transfer or assign a Limited Partnership Interest without the
prior written consent of the General Partners.
37
ARTICLE VIII
DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP
Section 8.01. EVENTS CAUSING DISSOLUTION.
(a) The Partnership shall dissolve upon the happening of any of the
following events:
(i) the bankruptcy, death, dissolution, withdrawal, removal or
adjudication of incompetence of a General Partner, unless the
remaining General Partners (or in the case of a General Partner who is
at that time the sole General Partner, all of the remaining Partners)
agree in writing to continue the business of the Partnership within 90
days of the occurrence of such an event;
(ii) the sale, repayment or other disposition of all Insured
Mortgages and Operating Partnership Interests held by, and
substantially all other assets, if any, held by the Partnership;
(iii) the election by the General Partners pursuant to
Section 5.04(e);
(iv) the expiration of the term of the Partnership specified in
Section 1.04; or
(v) any other event causing the dissolution of the Partnership
under the laws of the State of Delaware.
(b) Dissolution of the Partnership shall be effective on the day on
which the event occurs giving rise to the dissolution, but the Partnership
shall not terminate until a Certificate of Cancellation is filed with the
office of the Secretary of State of the State of Delaware and the assets of
the Partnership are distributed as provided in Section 8.02.
Notwithstanding the dissolution of the Partnership, prior to the
termination of the Partnership, the business of the Partnership and the
affairs of the Partners shall continue to be governed by this Agreement.
Section 8.02. LIQUIDATION.
(a) Upon dissolution of the Partnership, unless all of the Partners
and Unitholders elect to reform the Partnership, the General Partners shall
liquidate the assets of the Partnership, apply and distribute the proceeds
thereof as contemplated by this Section 8.02 and cause this Agreement to be
cancelled. If there is no General Partner, the Limited Partners, acting
together as a class, may elect a liquidator to liquidate the assets of the
Partnership and perform the functions of the General Partners set forth in
this Section 8.02.
38
(b) After payment of liabilities owing to creditors of the
Partnership, the General Partners shall set aside as a Reserve such amount
as they deem reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Partnership. Said reserve may be paid
over by the General Partners to a bank, to be held in escrow for the
purpose of paying any such contingent or unforeseen liabilities or
obligations and, at the expiration of such period as the General Partners
may deem advisable, the amount in such reserve shall be distributed among
the Partners in the manner set forth in Section 8.02(c).
(c) After paying such liabilities and providing for such reserve, the
General Partners shall cause the remaining net assets of the Partnership to
be distributed among the Partners. The Profits or Losses for Tax Purposes
resulting from the liquidation of the assets of the Partnership (determined
prior to any deduction attributable to the payment to the General Partners
of any Incentive Fee or Termination Fee from the proceeds resulting from
such liquidation of the assets of the Partnership) shall be allocated among
the Partners in accordance with the applicable provisions of Section
4.03(d). All remaining net assets shall then be distributed among the
Partners and Unitholders in proportion to their respective Capital
Accounts, including, in the case of Unitholders, the special subaccounts
established through the Initial Limited Partner's Capital Account on behalf
of such Unitholders, until the Adjusted Contributions and the Target Return
on Adjusted Contribution Accounts have been reduced to zero. After the
Adjusted Contributions and the Target Return on Adjusted Contribution
Accounts have been reduced to zero, remaining net assets shall be applied
to the payment of any accrued but unpaid Incentive Fee or Termination Fee
then owed to the General Partners in accordance with Section 5.03(b)(v) and
(b)(vi). Any Partnership net assets remaining after the payment of such
fees shall be distributed among the Partners and Unitholders in proportion
to their respective adjusted Capital Accounts, including, in the case of
Unitholders, the special subaccounts established through the Initial
Limited Partner's Capital Account on behalf of such Unitholders.
(d) Notwithstanding the foregoing, if the General Partners shall
determine that an immediate sale of part or all of the Partnership's assets
would cause undue loss to the Partners or the Unitholders, the General
Partners may, after giving Notice to all of the Limited Partners and
Unitholders, and to the extent not then prohibited by any applicable law of
any jurisdiction in which the Partnership is then formed or qualified,
defer liquidation and withhold from distribution for a reasonable time any
assets of the Partnership except those necessary to satisfy the
Partnership's debts and obligations, or transfer such assets to a
liquidating trust in accordance with Section 5.02(a)(xviii).
(e) Upon dissolution of the Partnership, if there is no General
Partner, such other Person who may be appointed in accordance with
applicable law shall be responsible to take all action related to the
winding up and distribution of assets of the Partnership and shall perform
the actions of the General Partners described in this Section 8.02.
39
(f) Each holder of Limited Partnership Interests or Units shall look
solely to the assets of the Partnership for all distributions with respect
to the Partnership and his Capital Contribution or Contribution of
Unitholders and his share of Cash Available for Distribution, Sale Proceeds
and Profits and Losses for Tax Purposes, and shall have no recourse
therefor, upon dissolution or otherwise, against the General Partners, any
Limited Partner or Unitholder. No Partner or Unitholder shall have any
right to demand or receive property other than cash upon dissolution and
termination of the Partnership.
ARTICLE IX
BOOKS AND RECORDS, ACCOUNTING, REPORTS AND TAX ELECTIONS
Section 9.01. BOOKS AND RECORDS.
(a) The Partnership shall maintain at the principal office of the
Partnership the following records, which shall be available during ordinary
business hours for examination and copying there at the reasonable request,
and at the expense, of any Partner or Unitholder or his duly authorized
representative, or copies of such records may be requested in writing for
any proper purpose by any Partner or Unitholder or his duly authorized
representative provided that the reasonable costs of fulfilling such
request, including copying expenses, shall be paid by the Partner or
Unitholder making such request:
(i) a current list of the full name and last known home or
business address of each Partner and Unitholder, set forth in
alphabetical order;
(ii) a copy of this Agreement, together with executed copies of
any powers of attorney pursuant to which this Agreement, and any
amendments hereto, have been executed;
(iii) copies of the Partnership's federal, state and local
income tax returns and reports, if any, for the three most recent
years;
(iv) copies of (A) any effective written partnership agreements
and (B) any financial statements of the Partnership for the three most
recent years; and
(v) the Partnership books.
(b) The General Partners, at Partnership expense, shall maintain for
a period of at least four years a record of any information obtained to
indicate that a Limited Partner or Unitholder meets with the suitability
standards set forth in the Prospectus and shall retain for five years any
appraisal obtained with respect to the value of a Complex
40
owned by an Operating Partnership in which the Partnership purchases an
Operating Partnership Interest.
Section 9.02. ACCOUNTING BASIS AND FISCAL YEAR. The books of the
Partnership initially shall be kept on the accrual method. The fiscal year of
the Partnership shall be the year ending September 30.
Section 9.03. BANK ACCOUNTS. The bank accounts of the Partnership shall
be maintained in such banking institutions as the General Partners shall
determine. All deposits and other funds not immediately needed in the operation
of the business may be invested in Permitted Interim Investments; provided,
however, that prior to the sale by the Partnership of the minimum number of
Units, no funds paid by subscribers for Units shall be invested in tax-exempt
notes or bonds. The funds of the Partnership shall not be commingled with the
funds of any other Person.
Section 9.04. REPORTS.
(a) If the Units are not registered pursuant to Section 12 of the
Securities Exchange Act of 1934, within 60 days after the end of the
Partnership's first two complete quarters of operations and, thereafter,
within 60 days after the end of each first six-month period of each
Partnership year, the General Partners shall send to each person who was a
Limited Partner or Unitholder during such period a balance sheet and
statements of operations, changes in partners' capital, changes in
financial position and Cash Available for Distribution and Sales Proceeds
for, or as of the end of, such quarter, none of which need be audited,
together with a report of the activities of the Partnership during each
six-month period.
(b) If the Units are registered pursuant to Section 12 of the
Securities Exchange Act of 1934, within 45 days after the end of each of
the first three quarters of each year, the General Partners shall send to
each person who was a Limited Partner or Unitholder during such quarter a
balance sheet and statements of operations, changes in partners' capital,
changes in financial position (all prepared in accordance with generally
accepted accounting principles) and a statement of Cash Available for
Distribution and Sales Proceeds for, or as of the end of, such quarter,
none of which need be audited, together with a report of the activities of
the Partnership during such quarter.
(c) Within 45 days after the end of each of the first three quarters
in each year and within 120 days after the end of the fourth quarter in
each year, the General Partners shall cause to be prepared and distributed
to each Person who was a Limited Partner or Unitholder at any time during
the quarter then ended (i) a detailed statement describing any new
agreement, contract or arrangement between the Partnership and the General
Partners or any of their Affiliates, (ii) the amount of all fees and other
compensation paid by the Partnership during such quarter to the General
Partners or any Affiliate of the General Partners, and (iii) until the
Capital Contributions of Unitholders shall be fully
41
invested, a special report of all Insured Mortgage and Operating
Partnership Interest acquisitions including (A) a description of the
Insured Mortgage, (B) a description of the Property securing the Insured
Mortgage, (C) the purchase price and remaining term of the Insured
Mortgage, and (D) the amount which then remains unexpended, stated in
terms of both dollar amount and percentage of the sum of the Partners'
Capital Contributions and the Contributions of Unitholders.
(d) The General Partners shall send to each person who was a Limited
Partner or Unitholder at any time during the year then ended such tax
information as shall be necessary for the preparation by such Limited
Partner or Unitholder of his federal income tax return and required state
income and other tax returns. The General Partners shall send this
information within 75 days after the end of each calendar year.
(e) Within 120 days after the end of each year, the General Partners
shall send to each person who was a Limited Partner or Unitholder at any
time during the year then ended an annual report including (i) the balance
sheet of the Partnership as of the end of such year and statements of
operations, changes in partners' capital and changes in financial position
of the Partnership for such year, all of which shall be prepared in
accordance with generally accepted accounting principles and accompanied by
a report of the Accountants containing an opinion of the Accountants; (ii)
a statement of Cash Available for Distribution and Sale Proceeds for such
year, (iii) a report of the activities of the Partnership during such year;
(iv) a statement (which need not be audited) showing distribution per
Limited Partnership Interest and per Unit by admission date during such
year in respect of such year, which statement shall identify distributions
from (A) Cash Available for Distribution and Sale Proceeds generated during
such year, (B) Cash Available for Distribution and Sale Proceeds generated
during prior years, and (C) Reserves and other sources; (v) a detailed
statement of any transactions with the General Partners or their
Affiliates, and of fees, commissions, compensation and other benefits paid,
or accrued to the General Partners or their Affiliates for the fiscal year
completed, showing the amount paid or accrued to each recipient and the
services performed, and (vi) a breakdown of the amounts actually reimbursed
to the General Partners. Accountants to the General Partners will certify
that the amounts actually reimbursed were costs incurred in the management
of the Partnership. The methods of verification used by the accountants
will be in accordance with generally accepted auditing standards and
include such tests of the accounting records and other auditing procedures
which the accountants for the General Partners consider appropriate,
including, but not limited to, review of the time records of employees of
the General Partners and their Affiliates, and review of the nature of the
tasks performed by such employees for which the General Partners are
reimbursed.
(f) The Partnership shall send to the Limited Partners and
Unitholders the information specified by Form 10-Q within 45 days after the
end of each quarterly period for which it is required to file such a report
with the Securities and Exchange Commission.
42
(g) A copy of each report referred to in this Section 9.04 shall be
filed with all securities commissions requiring such filing at the time
required by such commissions.
Section 9.05. SECTION 754 ELECTIONS. The Partnership shall not make an
election, pursuant to Section 754 of the Internal Revenue Code of 1954 (or any
corresponding provision of succeeding law), to adjust the basis of the
Partnership property.
Section 9.06. DESIGNATION OF TAX MATTERS PARTNER. The General Partners
hereby designate the TIG General Partner as Tax Matters Partner of the
Partnership, as provided in regulations pursuant to Section 6231 of the Code.
Each Partner and Unitholder consents to such designation of the Tax Matters
Partner and agrees to execute, certify, acknowledge, deliver, swear to, file and
record at the appropriate public offices such documents as may be necessary or
appropriate to evidence such consent.
Section 9.07. DUTIES OF TAX MATTERS PARTNER.
(a) To the extent and in the manner provided by applicable law and
regulations, the Tax Matters Partner shall furnish the name, address,
profits, interest and taxpayer identification number of each Partner and
Unitholder to the Secretary of the Treasury or his delegate (the
"Secretary").
(b) To the extent and in the manner provided by applicable law and
regulations, the Tax Matters Partner shall keep each Partner and Unitholder
informed of the administrative and judicial proceedings for the adjustment
at the Partnership level of any item required to be taken into account by a
Partner or Unitholder for income tax purposes (such administrative
proceeding being referred to hereinafter as a "tax audit" and such judicial
proceeding being referred to hereinafter as "judicial review").
Section 9.08. AUTHORITY OF TAX MATTERS PARTNER. The Tax Matters Partner
is hereby authorized, but not required:
(a) to enter into any settlement with the Internal Revenue Service or
the Secretary with respect to any tax audit or judicial review, and in the
settlement agreement the Tax Matters Partner may expressly state that such
agreement shall bind the other Partners and Unitholders, except that such
settlement agreement shall not bind any Partner or Unitholder who (within
the time prescribed pursuant to the Code and regulations thereunder) files
a statement with the Secretary providing that the Tax Matters Partner shall
not have the authority to enter into a settlement agreement on behalf of
such Partner or Unitholder;
(b) in the event that a notice of a final administrative adjustment
at the Partnership level of any item required to be taken into account by a
Partner or Unitholder for tax purposes (a "final adjustment") is mailed to
the Tax Matters Partner, to seek judicial review of such final adjustment,
including the filing of a petition for readjustment
43
with the Tax Court, the District Court of the United States for the
district in which the Partnership's principal place of business is located,
or the United States Claims Court;
(c) to intervene in any action brought by any other Partner or
Unitholder for judicial review of a final adjustment;
(d) to file a request for an administrative adjustment with the
Secretary at any time and, if any part of such request is not allowed by
the Secretary, to file a petition for judicial review with respect to such
request;
(e) to enter into an agreement with the Internal Revenue Service to
extend the period for assessing any tax which is attributable to any item
required to be taken into account by a Partner or Unitholder for tax
purposes, or an item affected by such item; and
(f) to take any other action on behalf of the Partners, the
Unitholders or the Partnership in connection with any administrative or
judicial tax proceeding to the extent permitted by applicable law or
regulations.
Section 9.09. EXPENSES OF TAX MATTERS PARTNER. The Partnership shall
indemnify and reimburse the Tax Matters Partner for all expenses, including
legal and accounting fees, claims, liabilities, losses and damages incurred in
connection with any administrative or judicial proceeding with respect to the
tax liability of the Partners and Unitholders. The payment of all such expenses
shall be made before any distributions are made from Cash Flow or any reserves
are set aside by the General Partners. Neither the General Partners, nor any
Affiliate, nor any other Person shall have any obligation to provide funds for
such purpose. The taking of any action and the incurring of any expense by the
Tax Matters Partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole discretion of the Tax Matters Partner
and the provisions on limitations of liability of General Partners and
indemnification set forth in Section 5.08 of this Agreement shall be fully
applicable to the Tax Matters Partner in its capacity as such.
ARTICLE X
MEETINGS AND VOTING RIGHTS OF LIMITED PARTNERS AND UNITHOLDERS
Section 10.01. MEETINGS.
(a) Meetings of the Limited Partners and Unitholders for any purpose
may be called by the General Partners at any time and shall be called by
the General Partners within 15 days after receipt of a written request for
such a meeting signed by 10% or more in Interest of the Limited Partners
considered as a class (it being understood that the Initial Limited Partner
is voting the Interests of the Unitholders in accordance with their
directions). Any such request shall state the purpose of the proposed
meeting and
44
the matters proposed to be acted upon thereat. Meetings shall be held
at the principal office of the Partnership or at such other place as may
be designated by the General Partners. In addition, the General Partners
shall submit any matter upon which the Limited Partners (including the
Initial Limited Partner acting for and at the direction of the Unitholders)
are entitled to act to the Limited Partners for a vote by written Consent
without a meeting.
(b) Notice of any meeting to be held pursuant to Section 10.01(a)
shall be given not less than 10 days nor more than 60 days before the date
of the meeting to each Limited Partner and Unitholder at his record
address, or at such other address which he may have furnished in writing to
the General Partners. Such Notice shall state the place, date and hour of
the meeting and shall indicate that the Notice is being issued at the
direction of, or by, the Partner(s) 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 an 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 Partners (including the Initial Limited Partner
acting for and at the direction of the Unitholders) considered as a class
shall constitute a quorum at all meetings of the Limited Partners;
provided, however, that if no such quorum is present, holders of a majority
in Interest of the Limited Partners considered as a class (it being
understood that the Initial Limited Partner is voting at the direction of
the Unitholders) 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 of
Limited Partners and Unitholders need be given to any Limited Partner or
Unitholder who attends in person or is represented by proxy, except for a
Limited Partner or Unitholder attending a meeting for the express purpose
of objecting at the beginning of the meeting to the transaction of any
business on the ground that the meeting is not lawfully called or convened,
or to any Limited Partner or Unitholder entitled to such Notice who, in
writing, executed and filed with the records of the meeting, either before
or after the time thereof, waives such Notice.
(c) For the purpose of determining the Limited Partners entitled to
vote on, or to vote at, and the Unitholders entitled to direct the voting
of the Initial Limited Partner on or at any meeting of the Limited Partners
and Unitholders, or any adjournment thereof, or to vote by written Consent
without a meeting, the General Partners or the Limited Partners and
Unitholders requesting such meeting or vote may fix, in advance, a date as
the record date of any such determination of Limited Partners and
Unitholders. Such date shall not be more than 60 days nor less than 10
days before any such meeting or submission of a matter to the Limited
Partners and Unitholders for a vote by written Consent.
(d) At each meeting of Limited Partners and Unitholders, the Limited
Partners present or represented by proxy shall elect such officers and
adopt such rules for the conduct of such meeting as they shall deem
appropriate.
45
Section 10.02. VOTING RIGHTS OF LIMITED PARTNERS AND UNITHOLDERS.
(a) Subject to Section 10.03, a majority in interest of the Limited
Partners (it being understood that the Initial Limited Partner is voting at
the direction of Unitholders), without the concurrence of the General
Partners, may: (i) amend this Agreement, subject to the conditions that
such amendment (A) may not in any manner allow the Limited Partners and
Unitholders to take part in the management or control of the Partnership's
business or otherwise modify their limited liability, and (B) may not,
without the consent of the General Partner affected, alter the rights,
powers and duties of such General Partner as set forth in Article V, the
interest of such General Partner in Profits and Losses for Tax Purposes, or
Cash Available for Distribution, or Sale Proceeds as set forth in this
Agreement; (ii) sell all or substantially all of the Partnership's assets
or dissolve the Partnership; or (iii) remove any General Partner and elect
a replacement therefor, which replacement shall become a General Partner
only in accordance with Section 6.02. If the Limited Partners, voting as a
class (it being understood that the Initial Limited Partner is voting at
the direction of the Unitholders) vote to remove a General Partner pursuant
to this Section 10.02, they shall provide the removed General Partner with
Notice thereof, which Notice shall be set forth the date upon which such
removal is to become effective.
(b) Any General Partner removed pursuant to this Section shall remain
liable for all obligations and liabilities incurred by him as General
Partner before such removal becomes effective, but shall be free of any
obligation or liability as General Partner incurred on account of the
activities of the Partnership from and after the time such removal becomes
effective.
(c) A Limited Partner shall be entitled to cast one vote for each
Limited Partnership Interest which he owns, and a Unitholder shall be
entitled to direct the Initial Limited Partner to cast one vote for each
Unit which he owns (it being understood that the Initial Limited Partner is
voting at the direction of the Unitholders) (i) at a meeting, in person, by
written 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 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 prior to the date
upon which the votes of Limited Partners are to be counted. Every proxy
must be signed by the Limited Partner or Unitholder or his
attorney-in-fact. No proxy shall be valid after the expiration of 12
months from the date thereof unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the Limited Partner or the
Unitholder executing it. Only the votes of Limited Partners of record on
the Notice date (or the record date, if one is fixed pursuant to Section
10.01(c)), whether at a meeting or otherwise, shall be counted. The
General Partners shall not be entitled to vote in their capacity as General
Partners. The laws of the State of Delaware pertaining to the validity and
use of corporate proxies shall govern the validity and use of proxies given
by the Limited Partners and the Unitholders. The
46
Unitholders may give proxies only to the Initial Limited Partner. The
Initial Limited Partner will vote in accordance with the directions of
the Unitholders so that each interest of a Unitholder will be voted
separately.
Section 10.03. CONDITIONS TO ACTION BY LIMITED PARTNERS AND UNITHOLDERS.
The voting rights of the Limited Partners set forth in Section 5.04(c) and (e)
and Section 10.02 shall not be exercised unless and until (a) the Partnership
has received an opinion of counsel, which counsel is satisfactory to a majority
in Interest of the Limited Partners (it being understood that the Initial
Limited Partner is voting at the direction of the Unitholders), that such action
is legal, (b) either (i) the Partnership has received an opinion from such
counsel that such action may be effected without subjecting the Limited Partners
and Unitholders to liability as general partners under the Delaware Revised
Uniform Limited Partnership Act, or (ii) a Delaware court having jurisdiction
over the matter enters a judgment, not subject to further appeal, to such
effect, and (c) either (i) the Partnership has received an opinion from such
counsel that such action may be effected without changing the Partnership's
status for tax purposes, or (ii) a court having jurisdiction over the matter
enters a judgment not subject to further appeal, or the Internal Revenue Service
issues a ruling to such effect. For purposes of this Section 10.03, counsel
will be deemed satisfactory to the Limited Partners if proposed by the General
Partners and not disapproved in writing within 45 days by a majority in Interest
of the Limited Partners (it being understood that the Initial Limited Partner is
voting at the direction of the Unitholders), provided that if the holders of 10%
or more of the outstanding Limited Partnership Interests propose counsel for
this purpose, such proposed counsel, and not counsel proposed by the General
Partners, shall be submitted for such approval by the Limited Partners as a
class.
Section 10.04. MANAGEMENT OF THE PARTNERSHIP. No Limited Partner or
Unitholder shall take part in the management or control of the business of the
Partnership or transact any business in the name of the Partnership. No Limited
Partner shall have the power or authority to bind the Partnership or to sign any
agreement or document in the name of the Partnership. No Limited Partner or
Unitholder shall have any power or authority with respect to the Partnership
except insofar as the Consent of the Limited Partners shall be expressly
required by this Agreement. The exercise by the Limited Partners and
Unitholders (acting through the Initial Limited Partner) of any of their voting
and other rights pursuant to and in accordance with this Agreement shall not
constitute participation in or control over Partnership business.
Section 10.05. OTHER ACTIVITIES. The Limited Partners and Unitholders may
engage in or possess interests in other business ventures of every kind and
description of their own accounts, including, without limitation, serving as
general or limited partners of other partnerships which own, either directly or
through interests in other partnerships or otherwise, FHA Insured Mortgages.
Neither the Partnership nor any of the Partners or Unitholders shall have any
rights by virtue of this Agreement in or to such business ventures or to the
income or profits derived therefrom.
47
ARTICLE XI
ASSIGNMENT OF ASSIGNED LIMITED PARTNERSHIP INTERESTS
TO UNITHOLDERS AND RIGHTS OF UNITHOLDERS
Section 11.01. ASSIGNMENT OF ASSIGNED LIMITED PARTNERSHIP INTERESTS TO
UNITHOLDERS.
(a) The Initial Limited Partner, by the execution of this Agreement,
irrevocably transfers and assigns to the Unitholders all of the Initial
Limited Partner's rights and interest in and to the Assigned Limited
Partnership Interests, except as otherwise provided herein, as of the time
of release by the Escrow Agent to the Partnership of any payments for
Units.
(b) The General Partner, by the execution of this Agreement,
irrevocably consents to and acknowledges that (i) the foregoing transfer
and assignment pursuant to Section 11.01(a) by the Initial Limited Partner
to the Unitholders of the Initial Limited Partner's rights and interest in
the Assigned Limited Partnership Interests is effective, and (ii) the
Unitholders are intended to be third-party beneficiaries of all rights and
privileges of the Initial Limited Partner in respect of the Assigned
Limited Partnership Interests. The General Partner covenants and agrees
that, in accordance with the foregoing transfer and assignment, all the
Initial Limited Partner's rights and privileges in respect of the Assigned
Limited Partnership Interests may be exercised by the Unitholders except as
otherwise provided herein.
Section 11.02. RIGHTS OF UNITHOLDERS.
(a) Limited Partners (including the Initial Limited Partner but only
with respect to its own Interests) and Unitholders shall share PARI PASSU
on the basis of one Limited Partnership Interest for one Unit, and shall be
considered as a single class with respect to all rights to receive
distributions of Cash Available for Distribution, Sale Proceeds,
allocations of Profits and Losses for Tax Purposes, and other
determinations of allocations and distributions pursuant to this Agreement.
(b) Limited Partners, including the Initial Limited Partner voting
the Interests of the Unitholders at their direction, shall vote on all
matters in respect of which they are entitled to vote (either in person, by
proxy or by written Consent), as a single class with each Limited
Partnership Interest entitled to one vote.
Section 11.03. EXCHANGE OF UNITS FOR LIMITED PARTNERSHIP INTERESTS. Any
Unitholder who desires to exchange his Units for Limited Partnership Interests
may do so only with the consent of the General Partners, which shall not be
unreasonably withheld, by delivering to the Partnership executed subscription
agreements and transfer applications (which are available upon request from the
General Partner), fulfilling the requirements of Section 12.02, and paying a fee
of $100 per transaction, for legal and administrative costs and recording (which
fee may be
48
increased from time to time in the discretion of the General Partner). This
Agreement shall be amended at least once monthly to recognize the admission
of such persons as Limited Partners of the Partnership. Persons who effect
such an exchange shall receive one Limited Partnership Interest for each Unit
they exchange and shall not have the right thereafter to re-exchange their
Limited Partnership Interests for Units. Units which have been exchanged for
Limited Partnership Interests shall be cancelled and shall not be reissued.
Section 11.04. SUBSCRIPTIONS FOR UNITS AND CLOSING.
(a) The General Partners are authorized, from time to time or at any
time, to accept subscriptions for Units from any Person if, after the
acceptance of such subscriptions, such Person's Capital Contribution is not
less than $5,000 ($2,000 for IRAs and Xxxxx Plans) and not more than such
maximum amount (not to exceed $10,000,000) as the General Partners shall
determine; provided, however, that no subscriptions for Units shall be
accepted after one year from the date of the Prospectus.
(b) All subscriptions for Units shall be received by the Partnership
in trust and deposited in an escrow account with the Escrow Agent within
two business days after receipt of Subscription Agreements by the General
Partners. Subscriptions for Units shall be accepted or rejected by the
General Partners within 15 days after their receipt by the Partnership.
Upon receipt of subscriptions acceptable to the General Partners for at
least 500,000 Units, the Escrow Agent shall release such subscriptions to
the Partnership (such release of subscriptions to be treated as
contributions to the Partnership made by the Initial Limited Partner on
behalf of, and as nominee for the Unitholders). Investors shall become
Unitholders of record as of the close of business on the day of receipt of
such subscriptions by the Partnership. Any interest earned on moneys paid
by Investors during the period such moneys are held in escrow shall be paid
to Investors following release of subscriptions. All moneys deposited by
Investors whose subscriptions are rejected by the General Partner will be
returned to such Investors, with any interest earned thereon, promptly
after such rejection. If the Escrow Agent does not receive subscriptions
for at least 500,000 Units on or before 60 days from the commencement of
the Offering, which date may be extended by agreement of the General
Partner to not later than one year from the date of the Prospectus, it
shall promptly return all moneys deposited by Investors, together with any
interest earned thereon. The General Partners and their Affiliates shall
have the right to subscribe for Interests for their own accounts but any
such subscriptions shall not be included for purposes of determining
whether the minimum number of subscriptions has been received. After
Initial Closing, additional subscribers whose subscriptions for Units are
acceptable to the General Partners shall be admitted as Unitholders not
later than the fifteenth day of the month if such Unitholders'
subscriptions were accepted during the first fifteen days of the month, and
not later than the last day of the month if such subscriptions were
accepted between the sixteenth and last days of such month, or such later
date or dates as determined by the General Partners.
49
(c) The General Partners are hereby authorized to do all things
necessary in order to accomplish the purpose of this Section 11.04,
including, but not limited to, registering the Units under the Securities
Act of 1933, as amended, pursuant to the rules and regulations of the
Securities and Exchange Commission, qualifying the Units 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 upon such terms and conditions as the
General Partners may deem advisable.
(d) Immediately upon the release by the Escrow Agent to the
Partnership of subscriptions of Unitholders (such release of subscriptions
to be treated as contributions to the Partnership made by the Initial
Limited Partner on behalf of, and as nominee for, the Unitholders), the
Initial Limited Partner shall be credited on the books and records of the
Partnership with additional Limited Partnership Interests and additional
Capital Contributions in the amount of such subscriptions and the Limited
Partnership Certificate of the Partnership shall be amended to reflect the
ownership by the Initial Limited Partner of Assigned Limited Partnership
Interests in the amount of such purchased Units. The Initial Limited
Partner's rights and interest in such Assigned Limited Partnership
Interests shall be deemed to have been transferred and assigned to the
Unitholders in accordance with Section 11.01(a).
(e) Subject to the provisions of Article VII, a Person shall be
treated as a Unitholder on the books and records of the Partnership as of
the close of business of the day on which the Partnership receives such
Person's subscription pursuant to Section 11.04(b) or of the day on which
the Partnership receives evidence of transfer of a Unit to such Person, and
all Unitholder rights, and all allocations in respect of Unitholders,
including allocations of Profits will vest in, and be allocable to, each
Unitholder as of the close of business of such day.
Section 11.05. PRESERVATION OF TAX STATUS. The General Partners may at
any time require the Unitholders to become Limited Partners, and may take such
other action with respect to the manner in which Units or Limited Partnership
Interests are being or may be transferred or traded, as it may deem necessary or
appropriate, in order to preserve the status of the Partnership as a partnership
rather than an association taxable as a corporation for federal income tax
purposes or to insure that Unitholders will be treated as limited partners for
federal income tax purposes.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. APPOINTMENT OF THE GENERAL PARTNERS AS ATTORNEY-IN-FACT.
(a) Each Limited Partner, including each Unitholder who exchanges his
Units for Limited Partner Interests, by the execution of this Agreement
irrevocably constitutes
50
and appoints, with full power of substitution, the General Partners, and
each of them acting singly, as his true and lawful attorney-in-fact with
full power and authority in his name, place and xxxxx to execute, certify,
acknowledge, deliver, swear to, file and record at the appropriate public
offices such documents as may be necessary or appropriate to carry out the
provisions of this Agreement, including, but not limited to:
(i) all certificates and other instruments (including
counterparts of this Agreement), and any amendment thereof, which any
such Person deems appropriate to form, qualify or continue the
Partnership as a limited partnership (or a partnership in which the
Limited Partners will have limited liability comparable to that
provided by the Delaware Revised Uniform Limited Partnership Act on
the date thereof) in a jurisdiction in which the Partnership may
conduct business or in which such formation, qualification or
continuation is, in the opinion of any such Person, necessary to
protect the limited liability of the Limited Partners and Unitholders;
(ii) any other instrument or document which may be required to
be filed by the Partnership under federal law or under the laws of any
state in which any such Person deems it advisable to file;
(iii) all amendments to this Agreement adopted in accordance
with the terms hereof and all instruments which any such person deems
appropriate to reflect a change or modification of the Partnership in
accordance with the terms of this Agreement; and
(iv) any instrument or document, including amendments to this
Agreement, which may be required to effect the continuation of the
Partnership, the admission of a Limited Partner or an additional or
successor General Partner, or the dissolution and termination of the
Partnership (provided such continuation, admission or dissolution and
termination are in accordance with the terms of this Agreement) or to
reflect any reductions in amount of Capital Contributions.
(b) The appointment by each Limited Partner of each of such persons
as his attorney-in-fact is irrevocable and shall be deemed to be a power
coupled with an interest, in recognition of the fact that each of the
Partners under this Agreement will be relying upon the power of such
persons to act as contemplated by this Agreement in any filing and other
action by them on behalf of the Partnership, and such power shall survive
the removal, Bankruptcy, death, incompetence or dissolution of any Person
hereby giving such power and the transfer or assignment of all or any part
of the Limited Partnership Interests of such Person; provided, however,
that in the event of a transfer by a Limited Partner of all or any part of
his Limited Partnership Interests, the foregoing power of attorney of a
transferor Limited Partner shall survive such transfer only until such time
as the transferee is admitted to the Partnership as a Limited Partner and
all
51
required documents and instruments are duly executed, filed and recorded
to effect such substitution.
Section 12.02. SIGNATURES; AMENDMENTS.
(a) Each Limited Partner, each General Partner, additional General
Partner and successor General Partner shall become a signatory hereto by
signing such number of counterpart signature pages to this Agreement and
such other instrument or instruments in such manner and at such time as the
General Partners shall determine. By so signing, each Limited Partner,
General Partner, successor General Partner or additional General Partner,
as the case may be, shall be deemed to have adopted, and to have agreed to
be bound by, all the provisions of this Agreement, as amended from time to
time; provided, however, that no such counterpart shall be binding unless
and until it has been accepted by the General Partners.
(b) In addition to any amendments otherwise authorized herein,
amendments may be made to this Agreement from time to time by the General
Partners, without the consent of the Limited Partners or Unitholders, (i)
to add to the representations, duties or obligations of the General
Partners or surrender any right or power granted to the General Partners in
this Agreement; (ii) to cure any ambiguity or correct or supplement any
provision in this Agreement which may be inconsistent with the manifest
intent of this Agreement; (iii) to delete or add any provision of this
Agreement required to be deleted or added based upon comments by the staff
of the Securities and Exchange Commission or other federal agency or by a
state "Blue Sky" commissioner or similar official; (iv) to delete, add or
revise any provision of this Agreement that may be necessary or
appropriate, in the General Partners' judgment, to insure that the
Partnership will be treated as a partnership, and that each Unitholder and
each Limited Partner will be treated as a limited partner, for federal
income tax purposes; and (v) to cause investments of the Partnership to be
exempt from the definition of "plan assets" under the Employee Retirement
Income Security Act of 1974 and any regulations promulgated thereunder;
provided, however, that no amendment shall be adopted pursuant to this
Section 12.02(b) unless the adoption thereof (A) is for the benefit of, or
not adverse to the interests of, the Limited Partners and the Unitholders;
(B) is consistent with Section 5.01(c); (C) does not affect the
distribution of Cash Available for Distribution or Sale Proceeds or the
allocation of Profits and Losses for Tax Purposes among the Limited
Partners and the Unitholders; and (D) does not affect the limited liability
of the Limited Partners or the Unitholders or the status of the Partnership
as a partnership for federal income tax purposes.
(c) If this Agreement shall be amended as a result of substituting a
Limited Partner, the amendment to this Agreement shall be signed by the
General Partners, the Person to be substituted and the assigning Limited
Partner. If this Agreement shall be amended to reflect the designation of
an additional General Partner, such amendment shall be signed by the other
General Partners and by such additional General Partner.
52
If this Agreement shall be amended to reflect the withdrawal of a General
Partner when the business of the Partnership is being continued, such
amendment shall be signed by the withdrawing General Partner and by the
remaining or successor General Partner or Partners.
(d) In making any amendments, there shall be prepared and filed by
the General Partners for recording such documents and certificates as shall
be required to be prepared and filed under the Delaware Revised Uniform
Limited Partnership Act and under the laws of any other jurisdictions in
use under the laws of which the Partnership is then qualified.
(e) Any provision to the contrary herein notwithstanding, the General
Partners may, without the Consent of the majority in interest of Limited
Partners or Unitholders, make any amendments to Section 4.04 of this
Agreement on the advice of tax counsel and the independent public
accountant of the Partnership, to the extent necessary to insure compliance
with the Code including any changes thereof, provided that such amendments
do not materially adversely affect the interests of the Limited Partners or
Unitholders. Any amendment made by the General Partners in accordance with
this Section shall be deemed to be made pursuant to the fiduciary
obligation of the General Partners to the Partnership, the Limited Partners
and the Unitholders, and shall not give rise to any claim or cause of
action by any Limited Partner or Unitholder.
Section 12.03. OWNERSHIP BY LIMITED PARTNERS OF GENERAL PARTNERS OR
THEIR AFFILIATES. No Limited Partner or Unitholder shall at any time, either
directly or indirectly, own any stock or other interest in any General
Partner or in any Affiliate of any General Partner if such ownership by
itself or in conjunction with the stock or other interest owned by other
Limited Partners and Unitholders would, in the opinion of counsel for the
Partnership, jeopardize the classification of the Partnership as a
partnership for federal income tax purposes. Each Limited Partner and
Unitholder shall promptly supply any information requested by the General
Partners in order to establish compliance by the Limited Partner or
Unitholders with the provisions of this Section 12.03.
Section 12.04. BINDING PROVISIONS. The covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the
heirs, executors, administrators, personal representatives, successors and
assigns of the respective parties hereto.
Section 12.05. APPLICABLE LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware.
Section 12.06. COUNTERPARTS. This Agreement may be executed in several
counterparts, all of which together shall constitute one agreement binding on
all parties hereto, notwithstanding that all the parties have not signed the
same counterpart, except that no counterpart shall be binding unless signed
by the General Partners.
53
Section 12.07. SEPARABILITY OF PROVISIONS. Each provision of this
Agreement shall be considered separable and if for any reason any provision
or provisions hereof are determined to be invalid and contrary to any law,
such invalidity shall not impair the operation of or affect those portions of
this Agreement which are valid.
Section 12.08. CAPTIONS. Article and Section titles are for
descriptive purposes only and shall not control or alter the meaning of this
Agreement as set forth in the text.
Section 12.09. DISALLOWANCE OF EXPENSES. Any fee paid to a General
Partner pursuant to this Agreement which is disallowed as a deductible
expense for federal income tax purposes shall constitute, for federal income
tax purposes, a special allocation of gross income to the General Partner
receiving such fee.
Section 12.10. ENTIRE AGREEMENT. This Agreement, together with the
Exhibits attached hereto, sets forth all (and is intended by all parties to
be an integration of all) of the promises, agreements and understandings
among the parties hereto with respect to the Partnership, the Partnership
business and the property of the Partnership, and there are no promises,
agreements or understandings, oral or written, express or implied, among them
other than as set forth or incorporated herein.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
24th day of March, 1986.
GENERAL PARTNERS:
TIG INSURED MORTGAGE EQUITIES INC.
By /s/ Xxxxxxx X. Xxxxxxxxx
------------------------------------------
Xxxxxxx X. Xxxxxxxxx, President
XXXXXX INSURED MORTGAGE EQUITIES INC.
By /s/ Xxxxxx X. Xxxxx
------------------------------------------
Xxxxxx X. Xxxxx, President
54
INITIAL LIMITED PARTNER:
H/T CORP. INC.
By /s/ Xxxxxxx X. Xxxxxxxxx
------------------------------------------
Xxxxxxx X. Xxxxxxxxx, President
55
SCHEDULE A
Capital Partnership
Contributions Interest
------------- --------
GENERAL PARTNERS: $1,000,000 .5%
Xxxxxx Insured Mortgage Equities Inc.
00 Xxxxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
TIG Insured Mortgage Equities Inc. 1,000,000 .5
0000 Xxxxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
INITIAL LIMITED PARTNER: 2,000.00 99
H/T Corp.
0000 Xxxxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
56
