LIMITED PARTNERSHIP AGREEMENT AND
AMENDED CERTIFICATE OF LIMITED PARTNERSHIP
CAPITAL SOURCE II L.P.-____, A LIMITED PARTNERSHIP
THIS AGREEMENT is made as of ______________, 198__ by and among the
undersigned parties.
RECITALS
WHEREAS, as of ______________, 198__, Xxxxxx Insured Mortgage Equities II
L.P., a Delaware limited partnership (the "Xxxxxx General Partner"), the general
partner of which is Xxxxxx XX II Housing Inc., a Delaware corporation and a
wholly owned subsidiary of The X.X. Xxxxxx Group Inc., a Delaware corporation,
and TIG Insured Mortgage Equities II 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. II-____, a Delaware corporation, as Initial
Limited Partner, executed a Certificate of Limited Partnership (the
"Certificate") forming a limited partnership under the Delaware Revised Uniform
Limited Partnership Act known as Capital Source II L.P.-__________, which
Certificate was filed in the office of the Secretary of State of the State of
Delaware on ______________, 198__; and
WHEREAS, the parties hereto desire to amend the Certificate to set forth in
full the 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 II
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 RESIDENT
AGENT. The name of the Partnership is Capital Source II L.P.-__________. The
address of the resident 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 000 Xxxxx Xxxxx Xxxxxx, Xxxxx X, Xxx Xxxxx, Xxxxxxxx 00000.
Notification
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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 Federally 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) preserve and protect the Partnership's
capital by investing in Federally Insured Mortgages and Operating Partnership
Interests; (b) provide quarterly cash distributions to Investors from income
from Federally Insured Mortgages; (c) achieve increasing current income and
long-term capital appreciation through increases in the income from the
Partnership's equity investments in the Operating Partnerships; and (d) make the
Units freely transferable 24 to 36 months after the Partnership commences
operations.
Section 1.04. TERM. The Partnership was formed on ______________, 198__,
and shall continue in full force and effect until December 31, 2035, 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."
"ADJUSTED CONTRIBUTION OF UNITHOLDERS" means, at any time, the Contribution
of Unitholders reduced by all distributions to Unitholders of Sale Proceeds.
Reduction of the
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Adjusted Contributions of Unitholders in accordance with the foregoing shall 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 5.03(b)(iii).
"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 petition is contested by such
Person and has been dismissed within 120 days); insolvency of such Person as
finally determined by a court proceeding; 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 of 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.
"BENEFICIAL ASSIGNMENT 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. The ownership interests of the Unitholders in the
Partnership are sometimes referred to herein as "Units."
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"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 Organizational, Offering and Selling 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
Organizational, Offering and Selling Expenses) by all Persons who purchase Units
(pursuant to the Partnership's public offering of 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 Federally Insured
Mortgages (exclusive of any Sale Proceeds attributable to such Federally 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), but after deducting from
any such receipts amounts used to pay Operating Expenses and debt service.
"CODE" means the Internal Revenue Code of 1986, 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 Section 221(d)(4),
Section 223(f) or similar section of the National Housing Act.
"COMMITMENT FEE" means fees paid by an Operating Partnership to the General
Partners in an amount up to 3.54% of each Federally Insured Mortgage.
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"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 the FirsTier Bank, N.A., or any successor thereto.
"FEDERALLY INSURED MORTGAGE" means an FHA Insured Mortgage or a Coinsured
Mortgage.
"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), Section 223(f) or similar section of the National
Housing Act.
"FOREIGN PERSON" means a nonresident alien, foreign corporation, 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 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 services as an ongoing public
activity in the same geographic location and for comparable property or an
amount equal to 15.5% 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.
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"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 II L.P., a
Delaware limited partnership.
"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).
"INITIAL CLOSING" means the initial closing on the sale of the minimum
number of Units to Investors in the Partnership.
"INITIAL LIMITED PARTNER" means H/T Corp. II-____, a Delaware corporation,
which (a) owns 100 Limited Partnership Interests and ____________________
Assigned Limited Partnership Interests in the Partnership, and (b) 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).
"INITIAL PROSPECTUS" means the prospectus contained in the Registration
Statement (File No. 33-8252) 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.
"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 Federally Insured Mortgages, Operating Partnership Interests and
other investments in Operating Partnerships owned by the Partnership.
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"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
General Partners and their 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 and Permitted Interim Investments per annum.
"IRAS AND XXXXX PLANS" mean 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 of 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.
"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 Selling Commissions and
the Organizational, Offering and Selling Expenses.
"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
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not limited to the Annual Asset Management and Partnership Administration Fee,
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 Federally
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), all "Blue Sky" filing fees and related expenses, 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 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 ______________,
198__, under the Delaware Revised Uniform Limited Partnership Act and known as
Capital Source II LP.-__________, 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 $200,000,000, or commercial paper rated P-1 (the highest
possible rating) by Xxxxx'x Investors Service, Inc.
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"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 ____% 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. 33-8252) 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.
"PROSPECTUS SUPPLEMENT" means the supplement to the Prospectus issued in
connection with commencement of the Partnership's Offering of Units.
"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.
"SALES AGENCY AGREEMENT" means the agreement among the Partnership, General
Partners and Initial Limited Partner as described in Section 5.10 hereof.
"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 a Federally 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.
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"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 Supplement.
"TARGET RETURN ON ADJUSTED CONTRIBUTION ACCOUNT" means a ledger account
maintained on behalf of each Limited Partner or Unitholder which shall be
credited each day with an amount equal to ____% per annum, as calculated on a
daily basis, of the Adjusted Contribution 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 9.05.
"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 II Inc., a
Delaware corporation.
"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
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Partnership receives from persons who purchase Units pursuant to the Offering
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 not 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 Net Proceeds (except for any amounts utilized
to pay the Partnership's Operating Expenses or any amounts set aside for
Reserves) which is not invested or committed for investment within 24
months from the date of the Prospectus Supplement, including the amount of
the Initial Advisory Fee paid to the General Partners with respect to such
portion of Net Proceeds, shall be distributed, without interest, by the
Partnership to the Limited Partners and Unitholders, as a return of
capital; provided, however, that if 90% or more of the Net Proceeds are
committed prior to the end of the 24-month period, the Partnership may also
invest, prior to the expiration of the 24-month period, the remaining
uncommitted Net Proceeds in mortgage-backed securities issued pursuant to
the GNMA Mortgage-Backed Securities Program, provided that such investments
shall in no event violate the provisions of Section 5.01(g) of this
Agreement. 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 Supplement, 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.
(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
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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 and Unitholder for the
losses, debts, liabilities and obligations of the Partnership shall, so
long as the Limited Partner or Unitholder complies with Section 5.01(c), be
limited to his Capital Contribution and his share of any undistributed
profits of the Partnership. 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
or Unitholder 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 or Unitholder 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 or
Unitholder is obligated to make any such payment, such obligation shall be
the obligation of such Limited Partner or Unitholder 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 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 month of each calendar year shall
be distributed, within 45 days after the end of such month, 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, Termination Fee or Annual Asset Management and
Partnership Administration Fee then owed to the General Partners in accordance
with Sections 5.03(b)(iii), 5.03(b)(v) and 5.03(b)(vi).
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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, any accrued but unpaid
Incentive Fee, Termination Fee or Annual Asset Management and Partnership
Administration Fee then owed to the General Partners in accordance with
Sections 5.03(b)(iii), 5.03(b)(v) and 5.03(b)(vi) shall be paid.
(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 Partners. Such
Profits and Losses for Tax 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 month 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 or Unit owned by
the General Partners shall not be taken into account.
(f) Notwithstanding the foregoing provisions of Section 4.03(c) and
Section 4.03(d) and subject to the provisions of Section 4.03(e), if the
allocation of any loss for any Partnership accounting period pursuant to
this Section 4.03 would cause the
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Capital Account of a Partner or the separate subsidiary capital account of
a Unitholder to be reduced below zero (or, in the case of the General
Partner, reduced below the deficit balance which such General Partner will
be obligated to restore under Section 4.05(b)) (determined after making
appropriate adjustments to reflect (i) all distributions and Capital
Contributions made during such Partnership accounting period, and (ii)
reasonably expected allocations of loss and deduction described in Section
1.704-1(b)(2)(ii)(d)(5) of the Regulations and reasonably expected
distributions described in Section 1.704-1(b)(2)(ii)(d)(6) of the
Regulations) then the portion of such loss which would have such result
shall instead be specially allocated to Partners and Unitholders having
positive Capital Account or subsidiary capital account balances (determined
before such special allocation but after all other adjustments to their
respective Capital Accounts and subsidiary capital accounts for such
Partnership accounting period and any reasonably expected distributions and
allocations of loss and deduction described in the aforesaid sections of
the Regulations) in proportion to such positive Capital Account and
subsidiary capital account balances. 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)) (A) 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 1.751-1 or (B) 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 month
during the term of the Partnership, a determination shall be made of (a) the
amount 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 each calendar
month 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 each calendar month and which were allocable to the
Limited Partners and Unitholders in accordance with the provisions of
Section 4.01 or 4.02. The above-referenced amounts of tax items which were
attributable to a particular month and which were not attributable to Sale
Transactions shall be allocated among each Limited Partner and Unitholder who
held an Interest on the last day of such month (the "Monthly Record Date") and
the above-referenced amounts of Cash Available for Distribution shall be
distributed among each Limited Partner and Unitholder who held an Interest on
such Monthly Record Date, 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
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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 by the Partnership of such Sale Proceeds (or such
other date within 10 days of such receipt as determined by the General Partner
if, due to the circumstances of such receipt, advance notice of the particular
date of 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, particularly Section 1.704-1(b)(2)(iv) of the Regulations.
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.
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 and 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
15
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.
(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 other
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 this Article V. 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 or
circumstances 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 for or bind the Partnership.
(d) The General Partners shall, after the release from escrow of
subscriptions for Units pursuant to Section 11.01, establish initial
Reserves out of Capital Contributions in an amount not less than 1% of the
Gross Proceeds.
(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,
16
sale, exchange, foreclosure, prepayment or other disposition of Federally
Insured Mortgages; (viii) expenses of organizing, revising, amending,
converting, modifying or terminating the Partnership or this Agreement;
(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 or their Affiliates 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 (excluding rent, depreciation, utilities and capital
equipment); (ii) direct travel, meals, lodging and telephone expenses of
employees (noncontrolling persons) 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 such services could be performed by independent parties; and
(iii) costs incurred by the General Partners and their Affiliates in
performance of investor services, including, without limitation, salaries
of persons performing 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 sum of the Invested Assets and Permitted
Interim Investments as of the last day of each calendar year. General
overhead expenses incurred by the General Partners or their Affiliates in
connection with 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
utility 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 84.5% of all Capital Contributions of Unitholders
to Investment in Properties.
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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 Partnerships;
(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 Federally 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;
(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;
18
(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 Federally Insured Mortgages and
Operating Partnership Interests, and (B) Reserves, in Permitted
Interim Investments;
(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
Federally 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; and
(xviii) to transfer any or all Federally Insured Mortgages and
Operating Partnership Interests held by the Partnership at its
termination date to a liquidating 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.
19
(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 originate Federally 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) and investments in mortgage-backed securities as
described in Section 3.03(d), investments shall be limited to
Federally Insured Mortgages and Operating Partnership Interests; and
(ii) in selecting Complexes in respect of which they will
originate a Federally 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).
(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 Sections 856 to 860 of
the Code
20
(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 provision 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 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; serve as coinsured lender,
HUD-approved mortgagee or reinsurer with respect to any Mortgage on a
Complex; deal with Operating Partnerships on an administrative level
including establishing the books of the Operating Partnership and providing
other administrative services; and act as management agent of any Complex
on the terms and conditions permitted by applicable governmental
regulations; and shall be compensated for any of such services in an amount
not to exceed 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.
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(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 Federally Insured Mortgages and Operating Partnership
Interests and related matters (with any unpaid or deferred portions
thereof to be paid without interest during those succeeding years in
which the Priority Return has been paid on a noncumulative basis);
(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;
(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 Federally Insured Mortgages and Operating
Partnership Interests in an amount equal to 1% 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), $50,000 of which shall be payable annually, half of which
(less the $50,000 payable each year) shall be payable only during
those years in which the Priority Return on Adjusted Contribution
Accounts has been paid on a noncumulative basis with respect to such
fiscal year (with any unpaid or deferred portions thereof to be paid
during those succeeding years in which the Priority Return has been
paid on a noncumulative basis), and the second half of which shall be
payable only after the Target Return on Adjusted Contribution Accounts
has been paid on a noncumulative basis (with any unpaid or deferred
portions thereof to accrue and be payable only after the Investors
have received a return of their Adjusted Contributions 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 3.54% of
the amount of each Federally Insured Mortgage, out of which the
General Planners will pay all expenses incurred in connection with the
Partnership's investments in Operating Partnerships;
22
(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 Termination Fee
shall 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 upon the
number of Units purchased by each Investor, but not to exceed 7% of
the purchase price of the Unit; and to pay to the Dealer Manager all
other amounts required under the Sales Agency Agreement;
(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 investment (Federally 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 (except for interest-free loans) 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 purpose in the
same locality, or (B) any prepayment charge or penalty;
(x) reimburse the General Partners as provided in Section
5.01(f);
(xi) in their sole discretion, defer any portion of the
first half (including the $50,000 payable annually) of the Annual
Asset Management and Partnership Administration Fee otherwise payable
in accordance with Section 5.03(b)(iii), 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; and defer any portion of the second
half of the Annual Asset Management and Partnership Administration Fee
otherwise payable in accordance with Section 5.03(b)(iii) until such
time as the Investors have received
23
a return on their Adjusted Contributions and the Target Return on
Adjusted Contribution Accounts has been paid on a cumulative basis;
and
(xii) in their sole discretion, defer any portions of the
Initial Advisory Fee otherwise payable in accordance with Section
5.03(b)(i) 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), (v) and (vi) shall not apply to the fees and
reimbursements set forth in Section 5.03(b) herein and subsections (v) and
(vi) shall not apply to the fees and reimbursements set forth in
Section 5.03(a) 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; provided, however, that any services provided by Affiliates of
the TIG General Partner as coinsured lender, HUD-approved mortgagee or
reinsurer with respect to any Coinsured Mortgage on a Complex will be
compensated in an amount not to exceed 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;
(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 and 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; and
24
(vi) any such services may be performed only in
extraordinary circumstances.
(d) In fixing the terms of the Operating Partnership Agreements, the
General Partners will not diminish the protections to the Unitholders
limiting the compensation payable to the General Partners and their
Affiliates and limiting the extent to which the General Partners and their
Affiliates may have interests that conflict with those of the Partnership.
(e) In the event that an Affiliate of the TIG General Partner is an
Operating General Partner in a Complex and will also construct the Complex,
the construction contract price is based on a firm contract price which
will not exceed the sum of the cost of the land and the cost of
construction, which includes the contractor or construction fee customarily
paid for services as a general contractor. Any overhead of the general
contractor shall not be charged to the Partnership or included in the cost
of construction. In the case of construction, the only fees paid to the
Affiliate of the TIG General Partner in connection with such project shall
consist of a construction fee for acting as a general contractor, which
fees must be comparable and competitive with the fee of disinterested
persons rendering comparable services (excluding, however, any overhead of
the contractor) and a real estate commission in connection with the
acquisition of the land, if appropriate under the circumstances. Any such
real estate commission shall be subject to the limitation set forth in this
Agreement. Such construction services may only be performed in
extraordinary circumstances. In addition, such Affiliate must be
previously engaged in the business of rendering such services independently
and as an ordinary and ongoing business. All services or goods for which
the Affiliate of the TIG General Partner is to receive compensation shall
be embodied in a written contract which describes the services to be
rendered and all compensation paid, which contract may only be modified by
a vote of the majority of the Unitholders. Said contract shall contain a
clause allowing termination without penalty on 60 days' notice.
Section 5.04. GENERAL RESTRICTIONS ON AUTHORITY OF THE GENERAL PARTNERS.
Subject to the provisions of Section 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,
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66-2/3% or more of the book value of the assets of the Partnership, except
for (i) a liquidating sale of a final Federally Insured Mortgage and
corresponding Operating Partnership Interest remaining after the sale of
all other Federally 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 except in connection with Specified
Investments as described in the Prospectus Supplement;
(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 prior to December 31,
2035, other than following the disposition of all Partnership assets;
(f) do any act which would make it impossible to carry on the
ordinary 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;
(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;
26
(o) invest in the securities of other issuers, except as provided in
Sections 3.03(d), 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 the Dealer Manager or another dealer acting
pursuant to Xxxxxx authority, for selling Units;
(s) acquire any Federally Insured Mortgage or Operating Partnership
Interests in exchange for Units;
(t) except for investments specified in the Prospectus Supplement,
purchase any Federally 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 Federally Insured
Mortgage or Operating Partnership Interest in his or its name and
temporarily holds title thereto in order to facilitate the acquisition of
such Federally 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 Federally 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 a
Federally 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 Section 12.02(b) or (e) hereof;
27
(x) cause the Partnership to invest in joint venture arrangements
with another partnership formed by the General Partners or their Affiliates
unless (i) such other partnership 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 partnership are substantially identical to the Partnership's,
(iv) the Partnership has a right of first refusal to buy if the other
partnership wishes to sell property held in the joint venture, and (v) the
investment of each partnership is on substantially the same terms and
conditions;
(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;
(z) pay any fees to a General Partner or Affiliate or any third party
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;
(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 service is no greater than the lowest quote obtained from
two unaffiliated insurance agencies for comparable coverage and terms; or
(bb) purchase any Federally Insured Mortgage or Operating Partnership
Interest on behalf of the Partnership from the General Partners or any of
their Affiliates unless (i) the investment is specified in the Prospectus
Supplement, (ii) the Federally Insured Mortgage or Operating Partnership
Interest is sold upon terms fair to the Partnership and at a price not in
excess of the appraised value, and (iii) the cost of the property and any
improvements thereon to the General Partners or any of their Affiliates is
clearly established. However, if the cost to the General Partner or
Affiliate was less than the price to be paid by the Partnership, the price
to be paid by the Partnership will not be deemed fair, regardless of the
appraised value, unless some material change has occurred to the property
which would increase the value since the General Partner or Affiliate
acquired the property. Material factors may include the passage of a
significant amount of time (but in no event less than two years), the
assumption by the General Partner or Affiliate of the risk of obtaining a
rezoning of the property and its subsequent rezoning or some other
extraordinary event which in fact increases the value of the property.
28
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 their 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 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 or acceptance of their Units, as
the case may be, 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
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
29
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. DELEGATION 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 Federally 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.
Section 5.08. LIMITATION ON LIABILITY OF THE GENERAL PARTNERS;
INDEMNIFICATION.
(a) Neither the General Partners nor their Affiliates shall be
liable, responsible or accountable in damages or otherwise to the
Partnership or to any of the Limited Partners or Unitholders for any act or
omission performed or omitted by such General Partner or Affiliate 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 or its
Affiliate's conduct did not constitute negligence or misconduct. The
Partnership shall indemnify and hold harmless the General Partners and
their Affiliates against and for 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 attorneys' fees (which attorneys' fees
may be paid as incurred, except as provided in Section 5.08(d)) and any
amounts expended in settlement of any claims of liability, loss or damage,
provided that the indemnified Person's conduct did not constitute
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
30
action, suit or proceeding, by judgment or settlement, shall not, of
itself, create a presumption that the indemnified Person did not act in
good faith and in a manner which is reasonably believed to be in or not
opposed to be in the best interest of the Partnership. Any indemnification
under this subsection, unless ordered by a court, shall be made by the
Partnership only upon a determination by independent legal counsel in a
written opinion that indemnification of the indemnified Person is proper in
the circumstances because he has met the applicable standard of conduct set
forth in this Agreement. 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, or any of their Affiliates or any person acting as a
Broker-Dealer shall be indemnified with regard to any losses, liability or
expenses arising from or out of an alleged violation of federal or state
securities laws unless: (i) (A) there has been a successful adjudication on
the merits of each count involving alleged securities law violations as to
the particular indemnitee and the court approves indemnification of the
litigation costs, or (B) such claims have been dismissed with prejudice on
the merits by a court of competent jurisdiction as to the particular
indemnitee and the court approves indemnification of the litigation costs,
or (C) a court of competent jurisdiction approves a settlement of the
claims against a particular indemnitee and finds that indemnification of
the settlement and related costs should be made; 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, the Massachusetts Securities Division, the Office of the
Commissioner of Securities of the State of Tennessee and of any other state
securities commission regarding indemnification for violations of
securities laws.
(c) For purposes of this Section 5.08, the term "Affiliates" shall
mean any person performing services on behalf of the Partnership who (i)
directly or indirectly controls, is controlled by or is under common
control with a General Partner; or (ii) owns or controls 10% or more of the
outstanding voting securities of a General Partner; or (iii) is an officer,
director or partner of a General Partner; or (iv) if a General Partner is
an officer, director, partner or trustee, is any company for which a
General Partner acts in any such capacity.
(d) In the event that any action, suit or proceeding is instituted
against the Partnership or a General Partner or any of their Affiliates
with respect to the business, assets, liabilities or activities of the
Partnership, such General Partner, Affiliate and the Partnership may each
obtain separate legal counsel and other expert assistance to defend or
assist in defending any such action, suit or proceeding. Such General
Partner or Affiliate shall have advanced to it by the Partnership, at its
request, funds for payment of all expenses and costs reasonably incurred in
connection with the defense or any action, suit or proceeding only if (i)
such action, suit or proceeding relates to the performance of duties or
services by such General Partner or its Affiliates on behalf of the
Partnership; (ii) such action, suit or proceeding is initiated by a third
party who is
31
not a Limited Partner or Unitholder; and (iii) such General Partner or
Affiliate, as the case may be, undertakes to repay the advanced funds to
the Partnership, without interest, in cases in which such General Partner
would not be entitled to indemnification. The General Partners or
Affiliates shall not be advanced funds from the Partnership for legal
expenses and other related costs incurred as a result of any legal action,
suit or proceeding initiated by a Limited Partner or Unitholder against the
General Partners or Affiliates.
(e) The Partnership shall not incur the reasonably estimated portion
of the cost of liability insurance which insures a General Partner for any
liability as to which a General Partner is prohibited from being
indemnified under this Section 5.08.
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, General Partners
and Initial Limited Partner have 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 Prospectus Supplement; (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.
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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;
(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;
33
(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 and the acceptance by the
Unitholders of their Units, 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 voting
at the direction of the Unitholders), 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 at the direction of the Unitholders) 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.
(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
34
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 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. In
the event of a dispute as to fair market value of such Interest, an
independent appraiser shall be chosen by the removed General Partner and
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 fair market value of such
Interest as determined by such appraiser shall be binding. Expenses of
appraisal shall be borne equally by the removed General Partner and the
Partnership. The payment to the removed, Bankrupt, deceased, dissolved or
incompetent General Partner under this Section 6.05(b) shall be in the form
of an interest-bearing promissory note coming due in no less than five
years with equal installments due each year. The payment to the withdrawn
General Partner will be in the form of a noninterest bearing unsecured
promissory note with principal payable, if at all, from distributions which
such withdrawn General Partner otherwise would have received had such
General Partner not withdrawn. 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
Section 6.05(b)) 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 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 Section 6.05(b)) 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
35
or conversion (as the case may be) of the Interest of the removed,
Bankrupt, deceased, dissolved, incompetent or withdrawn General Partner.
(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 AND UNITS
Section 7.01. ASSIGNABILITY OF UNITS. The Units shall be evidenced by
Beneficial Assignment Certificates which shall be issued in registered form
only. Until such time as the Partnership qualifies the Units for quotation by
NASDAQ or for trading on 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
for trading on 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
decide not to list the Units or 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 or regulation, (i) partnerships with publicly traded partnership
interests would be taxable as corporations, or (ii) income to the Partnership
would not be classified as passive activity income as a result of the listing of
the Units.
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 for
trading on 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 Partner.
Notwithstanding the foregoing, a Limited Partner or Unitholder may not sell,
assign, pledge, transfer or exchange any of his Limited Partnership Interest or
Units:
(a) until said Limited Partner 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
36
(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);
(b) except for transfers by gift or inheritance, intra-family
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.
The General Partners, in their sole discretion, may waive any or all of the
requirements set forth in paragraphs (a), (b) or (c) of this Section 7.02. 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 Interests 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.
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(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:
(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 Partner 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 as soon as practicable 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 Section 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.
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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
Federally Insured Mortgages and Operating Partnership Interests held
by, and substantially all other assets, if any, held by the
Partnership;
(iii) the election by a majority in interest of the Limited
Partners (including the Initial Limited Partner voting on behalf of
the Unitholders) pursuant to Section 10.02 or 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 and Unitholders 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
39
assets of the Partnership and perform the functions of the General Partners
set forth in this Section 8.02.
(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 and Unitholders. 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 and Unitholders 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 or 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 Sections 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
40
Partnership and shall perform the actions of the General Partners described
in this Section 8.02.
(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, 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, has 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
41
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 December 31.
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 period, 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 Partner 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 invested, a special
report of all Federally Insured Mortgage and Operating Partnership Interest
acquisitions including (A) a description of the Federally Insured Mortgage,
(B) a
42
description of the Complex securing the Federally Insured Mortgage, (C) the
purchase price and remaining term of the Federally Insured Mortgage, and
(D) the amount which then remains unexpended, stated in terms of both
dollar amount and percentage of the sum of the Partner's 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 Partner 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.
(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.
43
Section 9.05. 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 9.06. 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 9.07. 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 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;
44
(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 9.08. 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, 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 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 acting for
and at the direction of the Unitholders). Any such request shall state the
purpose of the proposed meeting and the matters proposed to be acted upon
thereat. The General Partners shall provide to all Limited Partners within
10 days of receipt of such request, written notice by certified mail of a
meeting. 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) Any meeting to be held pursuant to Section 10.01(a) shall be held
not less than 15 days nor more than 60 days after receipt of such request.
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
45
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.
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) approve or disapprove the sale of all or substantially all
of the Partnership's assets; (iii) dissolve the Partnership; or (iv) remove
any General Partner and elect a replacement therefor, which replacement
shall become
46
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 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 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 Sections 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
47
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 and Units considered as a class propose counsel for this purpose, such
proposed counsel, and not counsel proposed by the General Partners, shall be
submitted for such approval.
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, Federally 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.
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
48
foregoing transfer and assignment, all the Initial Limited Partner's rights
and privileges in respect of 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.
(c) Unitholders shall have the same rights as Limited Partners under
the Delaware Revised Uniform Limited Partnership Act to bring derivative
actions on behalf of the Partnership.
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 Partners), 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 increased from time to time in the discretion of the General
Partner). This Agreement shall be amended as soon as practicable 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 CLOSINGS.
(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 Contribution of Unitholders
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
49
receipt of Subscription Agreements by the General Partners. Upon receipt
of subscriptions acceptable to the General Partners for at least ____
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 Partners 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
____ Units on or before 60 days from the commencement of the Offering,
which date may be extended by agreement of the General Partners 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.
(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. 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
50
to the manner in which Units 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 Partnership Interests, by the execution of this Agreement
irrevocably constitutes 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.
51
(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 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) 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
52
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. 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. The
Designated FHA Partner shall notify the FHA of any proposed amendment to
this Agreement a reasonable period of time prior to its adoption.
(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 Accountants, 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 a 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 Unitholder 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.
53
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.
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.
54
IN WITNESS WHEREOF, the parties have signed this Agreement as of the ____
day of __________ 199__.
GENERAL PARTNERS:
TIG INSURED MORTGAGE EQUITIES II INC.
By
--------------------------------------
Xxxxxxx X. Xxxxxxxxx, President
XXXXXX INSURED MORTGAGE EQUITIES II L.P.
By: Xxxxxx XX II Housing Inc.
By
---------------------------------
Xxxxxx X. Xxxxx, President
INITIAL LIMITED PARTNER:
H/T CORP., II-
By
---------------------------------
Xxxxxxx X. Xxxxxxxxx, President
55
SCHEDULE A
Capital Partnership
Contribution Interest
------------ ----------
GENERAL PARTNERS:
Xxxxxx Insured Mortgage Equities II L.P. $ 10.10 .5%
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
TIG Insured Mortgage Equities II Inc. $ 10.10 .5%
000 Xxxxx Xxxxx Xxxxxx
Xxxxx X
Xxx Xxxxx, Xxxxxxxx 00000
INITIAL LIMITED PARTNER:
H/T Corp. II- $2,000.00 99%
0000 Xxxxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
56
