EXHIBIT B: LIMITED PARTNERSHIP AGREEMENT
XXXXX-XXXXXXXX EQUITY INCOME FUND LIMITED PARTNERSHIP
FORM OF
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
TABLE OF CONTENTS
Page
Preliminary Statement...........................................................................................B-3
Article I---Defined Terms.......................................................................................B-3
Article II---Name; Purpose and Term.............................................................................B-9
Section 2.1 Name; Formation..........................................................................B-9
Section 2.2 Place of Registered Office................................................................B-9
Section 2.3 Purpose..................................................................................B-10
Section 2.4 Term.....................................................................................B-10
Section 2.5 Recording of Certificate.................................................................B-10
Article III---Partners; Capital................................................................................B-10
Section 3.1 General Partners.........................................................................B-10
Section 3.2 Limited Partners.........................................................................B-10
Section 3.3 Partnership Capital......................................................................B-10
Section 3.4 Liability of Partners....................................................................B-11
Article IV---Allocations, Distributions and Applicable Rules...................................................B-11
Section 4.1 Allocation of Profit or Loss and Distribution of Net Proceeds from a Sale................B-11
Section 4.2 Distribution of Net Proceeds of Operational Stage Financing..............................B-12
Section 4.3 Distribution of Net Cash Flow and Allocation of Profit and Loss from Operation.... B-12
Section 4.4 Liquidation or Dissolution...............................................................B-12
Section 4.5 General and Special Rules................................................................B-13
Article V---Rights, Powers and Duties of Partners..............................................................B-15
Section 5.1 Management and Control of the Partnership; Tax Matters Partner......................... B-15
Section 5.2 Authority of General Partners............................................................B-16
Section 5.3 Authority of Limited Partners............................................................B-17
Section 5.4 Restrictions on Authority................................................................B-18
Section 5.5 Authority of Partners and Affiliated Persons to Deal with Partnership................... B-19
Section 5.6 Duties and Obligations of the General Partners...........................................B-20
Section 5.7 Compensation of General Partners.........................................................B-20
Section 5.8 Other Businesses of Partners.............................................................B-20
Section 5.9 Liability of General Partners to Limited Partners........................................B-20
Section 5.10 Indemnification B-21
Article VI---Transferability of a General Partner's Interest...................................................B-21
Section 6.1 Removal, Voluntary Retirement or Withdrawal of a General Partner; Transfer of
Interests................................................................................B-21
Section 6.2 Election and Admission of Successor or Additional General Partners...................... B-22
Section 6.3 Event of Withdrawal of a General Partner.................................................B-22
Section 6.4 Liability of a Withdrawn General Partner.................................................B-23
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Page
Article VII---Admission of Additional and Substitute Limited Partners and Transferability of a
Limited Partner's Interest.....................................................................B-23.
Section 7.1 Admission of Additional Limited Partners Prior to the Termination Date of the
Offering...............................................................................B-23.
Section 7.2 Admission of Additional Limited Partners After the Termination Date of the
Offering...............................................................................B-23.
Section 7.3 Admission of Substitute Limited Partners...............................................B-23.
Section 7.4 Retirement or Withdrawal of a Limited Partner..........................................B-24.
Section 7.5 Transfer or Assignment of a Limited Partner Interest...................................B-24.
Section 7.6 Bankruptcy, Death, Dissolution or Incompetence of a Limited Partner................... B-25
Article VIII---Dissolution, Liquidation and Termination of the Partnership...................................B-25.
Section 8.1 Events Causing Dissolution.............................................................B-25.
Section 8.2 Liquidation............................................................................B-25.
Article IX---Payments to the General Partners and Affiliates.................................................B-26.
Section 9.1 Reimbursement of Certain Expenses of the General Partners..............................B-26
Section 9.2 Fees and Deferred Fees.................................................................B-26.
Article X---Books and Records; Bank Accounts; Reports........................................................B-27.
Section 10.1 Books and Records......................................................................B-27.
Section 10.2 Bank Accounts..........................................................................B-27.
Section 10.3 Reports................................................................................B-28.
Article XI---General Provisions..............................................................................B-29.
Section 11.1 Appointment of Administrative General Partner as Attorney-in-Fact......................B-29
Section 11.2 Waiver of Partition....................................................................B-29.
Section 11.3 Notification...........................................................................B-29.
Section 11.4 Word Meanings..........................................................................B-29.
Section 11.5 Binding Provisions....................................................................B-30.
Section 11.6 Applicable Law.........................................................................B-30.
Section 11.7 Counterparts...........................................................................B-30.
Section 11.8 Separability of Provisions.............................................................B-30.
Section 11.9 Paragraph Titles.......................................................................B-30.
Section 11.10 Entire Agreement.......................................................................B-30.
Section 11.11 Amendments.............................................................................B-30.
Signatures...................................................................................................B-31.
Schedule A...................................................................................................B-32.
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XXXXX-XXXXXXXX EQUITY INCOME FUND LIMITED PARTNERSHIP
FORM OF
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
PRELIMINARY STATEMENT
The following is the Amended and Restated Agreement of Limited Partnership
of Xxxxx-Xxxxxxxx Equity Income Fund Limited Partnership, by and among the
General Partners and Limited Partners (the "Agreement"). The parties hereto
elect to be governed by the provisions of the Delaware Revised Uniform Limited
Partnership Act (6 DEL.C. 17-101 et. seq.). The effective date of this Agreement
is as of August , 1986.
In consideration of the mutual promises made herein, the parties, intending
to be legally bound, hereby agree as follows:
ARTICLE I
DEFINED TERMS
The defined terms used in this Agreement shall, unless the context otherwise
requires, have the meanings specified in this Article I.
"Acquisition Agreement" means that certain agreement to be entered into by
the Partnership and-Xxxxxxxx Development Company pursuant to which Xxxxxxxx
Development Company will (i) provide services to the Partnership in connection
with the planned development of the Properties, including selection of the
Sites, negotiation of purchase prices and terms, and execution of option
agreements; (ii) in some instances, acquire the Sites for the purpose of
conveyance to the Partnership and; (iii) perform work concerning zoning,
permits, water and sewer connections and related matters. In payment for such
services, Xxxxxxxx Development Company will receive an Acquisition Fee.
With respect to Property I only, if the General Contractor commences
construction prior to the time Class A Limited Partners are first admitted to
the Partnership, the property conveyed to the Partnership under the Acquisition
Agreement applicable to Property I will include (a) all construction theretofore
performed in connection with Property I and (b) all contract rights owned by
Xxxxxxxx Development Company relating to Property I, including, but not limited
to, an assignment of Xxxxxxxx Development Company's rights under the
Construction Contract with the General Contractor. In such case, (a) the
purchase price payable by the Partnership under the Acquisition Agreement
relating to Property I will be increased by an amount equal to all sums
theretofore paid by Xxxxxxxx Development Company to Xxxxxxxx Construction
Company under the Construction Contract for Property I (provided that such sums
must be approved by the Administrative General Partner as set forth in Article V
herein), and (b) the Partnership will thereafter assume the balance. of the
Construction Contract costs for Property I pursuant to its agreement to assume
all of the remaining, obligations of Xxxxxxxx Development Company, as owner,
under the Construction Contract. As a result, the purchase price of the Property
I site under the Acquisition Agreement will increase by the amount reimbursed,
to Xxxxxxxx Development Company by the Partnership, and the Construction
Contract price for Property I remaining to be paid by the Partnership will
decrease by an equal amount.
"Acquisition Fee" means the fee paid to Xxxxxxxx Development Company,
pursuant to the Acquisition Agreement, equal to 4 1/2% of the Gross Proceeds of
the Offering, payable 3% at the time Class A Limited Partners are admitted to
the Partnership, and 1 1/2% deferred for later payment as set forth in
Section.9.2.
"Act" means the Delaware Revised Uniform Limited Partnership Act (6 DEL.C.
17-101 et. seq.).
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"Additional General Partner" means any Person who is admitted as an
Additional General Partner of the Partnership, under the provisions of Article
VI, after the date of this Agreement.
"Additional Limited Partner" means a Person who is admitted to the
Partnership pursuant to Section7.1 or 7.2 and who, after his admission to the
Partnership, causes the aggregate of Capital Contributions of the Limited
Partners to increase, and is reflected as such on the books and records of the
Partnership.
"Adjusted Capital Balance " of a Class A Limited Partner means his total
Capital Contribution paid to the Partnership, less amounts actually distributed
to him from the proceeds of Operational Stage Financing or Sale (other than that
portion, if any, which is payment of an unpaid Preferred Return), as provided in
Article IV herein, at the time of reference thereto.
"Administrative General Partner" means Xxxxx Equity Income Properties, Inc.,
a Maryland corporation, or any Person who is designated as an Administrative
General Partner in the Schedule at the time in question.
"Affiliate " or "Affiliated Person" means, when used with reference to a
specified Person (i) any Person who, directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the specified Person, (ii) any Person who is an officer, partner, or trustee of,
or serves in a similar capacity with respect to, the specified Person, or any
Person of which the specified Person is an officer, partner or trustee, or with
respect to which the specified Person serves in a similar capacity, (iii) any
Person who, directly or indirectly, is the beneficial owner of 5% or more of any
class of equity securities of, or otherwise has a substantial beneficial
interest in, the specified Person, or any Person of which the specified Person
is directly or indirectly the owner of 5% or more of any class of equity
securities or in which the specified Person has a substantial beneficial
interest, and (iv) any Family Member of the specified Person.
"Agreement" means this Limited Partnership Agreement as originally executed
and as amended from time to time, as the context requires. Words such as
"herein," "hereinafter," "hereof," "hereto," "hereby" and "hereunder," when used
with reference to this Agreement, refer to this Agreement as a whole unless the
context otherwise requires.
"Capital Account" means the capital account to be maintained by the
Partnership for each Partner, A Partner's Capital Account is credited with his
Capital Contributions and his distributive share of Partnership Profit
(including tax-exempt income and gain (or item thereof) and adjustments under
Section 48(q)(2) of the Code). A Partner's Capital Account is debited with the
cash and the fair market value of any property distributed to him (net of
liabilities assumed by such Partner and liabilities to which such distributed
property is subject), his distributive share of Partnership Loss (and deduction
(or item thereof)), and his distributive share of Partnership expenditures
described in Section 705(a)(2)(B) of the Code (including adjustments resulting
from basis adjustments under Section 48 (q) of the Code, losses disallowed under
Sections 267(a)(1) or 767(b) of the Code, and Section 709(a) syndication
expenditures applied to reduce the Capital Accounts of the Partners to whom such
expenditures are allocable at the time such expenditures are paid or incurred).
A Partner's Capital Account shall also be adjusted pursuant to Sections 4.4 and
4.5 hereof and as required by Section 704 of the Code. Any question concerning a
Partner's Capital Account shall be resolved by the General Partners in their
reasonably exercised discretion, applying principles consistent with this
Agreement and the regulations promulgated under Section 704 of the Code in order
to assure that all allocations herein will have substantial economic effect or
will otherwise be respected for income tax purposes.
"Capital Contribution" means the total amount of cash and the fair market
value of any other assets contributed to the Partnership by the Partners (net of
liabilities assumed by the Partnership and liabilities to which any such
contributed assets are subject). Any reference in this Agreement to the Capital
Contribution of a then-Partner shall include a Capital Contribution previously
made by any prior Partner for the Interest of such then-Partner, except to the
extent that all or a portion of the Interest of any prior-Partner shall have
been terminated and the portion so terminated not transferred to a successor
Partner.
"Cash Flow Deficit Guaranty Agreement" means that certain agreement to be
entered into by the Partnership and Xxxx X. Xxxxxxxx, pursuant to which Xxxx X.
Xxxxxxxx will agree to find any Partnership operating deficits under the
following terms and conditions: (a) the Cash Flow Deficit Guaranty Agreement
will cover
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operating deficits until a period ending two years after the date of completion
of the last Property to be constructed; (b) the funding obligation will be
limited to $500,000, in the aggregate; and (c) any payments made by the
Development General Partner under the Cash Flow Deficit Guaranty Agreement will
be deemed a non-interest bearing loan to the Partnership, which will be
reimbursed from the first available net proceeds of operations, or from the
proceeds of any Operational Stage Financing or Sale.
"Class A Limited Partner" means any Person who is designated as a Class A
Limited Partner on the books and records of the Partnership.
"Class A Limited Partner Percentage" in respect of any Class A Limited
Partner means the percentage obtained by converting to a percentage the fraction
having the Capital Contribution of such Class A Limited Partner as its numerator
and having the Capital Contributions of all Class A Limited Partners at the time
of reference thereto as its denominator.
"Class B Limited Partner" means any Person who is designated as a Class B
Limited Partner on the books and records of the Partnership.
"Code " means the Internal Revenue Code of 1954, as amended (or any
corresponding provision of succeeding law).
"Consent of the Class A Limited Partners" means the prior written approval
of the Class A Limited Partners holding more than fifty percent (50%) of the
aggregate Class A Limited Partner Percentage in the Partnership at the time of
reference thereto, unless a different percentage of aggregate limited
partnership interests is required by law.
"Contract of Sale" means that certain agreement to be entered into by Xxxx
X. Xxxxxxxx and the Partnership, pursuant to which the Partnership will purchase
from Xxxx X. Xxxxxxxx that certain parcel of 3.369 acres of land located in
Union City, Xxxxxx County, Georgia, for the price of $7,000 per acre, or
$23,583, which 3.369 acres of land shall be a part of the Property II Site.
"Controlling Person" of any General Partner or Affiliate thereof means any
person who (a) performs functions for a General Partner or Affiliate similar to
those of (i) a Chairman or member of the Board of Directors, (ii) executive
management, such as a President, or a Vice-President, Secretary or Treasurer,
or,(iii) senior management; or (b) holds a 5 % or more equity interest in the
General Partner or Affiliate, or has the power to direct or cause the direction
of the General Partner, or Affiliate, whether through the ownership of voting
securities, by contract or otherwise.
"Construction Contracts" means those fixed price contracts for the
construction of the Properties to be entered into by the Partnership and
Xxxxxxxx Construction Company, pursuant to which Xxxxxxxx Construction Company
shall construct the Properties.
"Construction Financing" means indebtedness that may be incurred by the
Partnership, under the terms and conditions set forth in Article V, to complete
a Property.
"Deferred Fees" means that portion of any Selling Commissions, Acquisition
Fee, or Organizational and Start-Up Fee that will be deferred for payment by the
Partnership as set forth in Section 9.2.
"Development General Partner" means Xxxx X. Xxxxxxxx, or any Person who is
designated as a Development General Partner in the Schedule at the time of
reference thereto.
"Entity" means any general partnership, limited partnership, corporation,
joint venture, trust, estate, business trust, cooperative, association or other
legal form of organization.
"Family Member" means, with respect to any individual, his spouse, brothers,
sisters, ancestors, and descendants.
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"Xxxxxxxx Development Company" means an Affiliate of the Development General
Partner that will perform certain services for the Partnership pursuant to the
Acquisition Agreement, as more fully described in the Prospectus.
"General Contractor" means Xxxxxxxx Construction Company, an Affiliate of
the Development General Partner, the company that will construct the Properties
pursuant to the Construction Contracts with the Partnership, or any Person
designated by the General Partners as the General Contractor.
"General Partner" means any Person designated as a General Partner in the
Schedule and any Person who becomes a Successor or Additional General Partner as
provided herein, in each such Person's capacity as a General Partner of the
Partnership.
"Gross Proceeds of the Offering" means the aggregate of the proceeds from
the sale of Units in the Offering, which amount is equal to the total of all
Capital Contributions received from the Class A Limited Partners.
"Guaranty of Timely and Lien-Free Completion" means the agreement to be
entered into by the Partnership, the Development General Partner and the General
Contractor, pursuant to which the Development General Partner and the General
Contractor will agree to jointly and severally guaranty the timely and lien-free
completion of each Property. Each such guaranty will extend to the full net
worth of both guarantors and will be secured by an irrevocable Letter of Credit
in the amount of 15% of the Construction Contract price of each Property.
"Interest" means the entire ownership interest (which may be segmented into
and/or expressed as a percentage of various rights and/or liabilities) of a
Partner in the Partnership at any particular time, including the right of such
Partner to any and all benefits to which a Partner may be entitled as provided
in this Agreement and in the Act, together with the obligations of such Partner
to comply. with all the terms and provisions of this Agreement and of the Act.
"Interim Investments" means the short-term investments made with the Net
Proceeds of the Offering.-until such Net Proceeds are disbursed for acquisition
and development of the Properties.
"Letter of Credit" means the instrument or instruments of a commercial bank,
made at the request -of the Development General Partner for the benefit of the
Partnership, to secure performance under the Guaranty of Timely and Lien-Free
Completion, pursuant to which such bank will honor drafts under the conditions
specified therein, among which are that the Administrative General Partner may,
acting alone, draw on such Letter of Credit for the benefit of the Partnership
upon the occurrence of an event of default by the Development General Partner
and/or the General Contractor under the terms of the Guaranty of Timely and
Lien-Free Completion.
"Limited Partner" means any Person who is designated as a Limited Partner on
the books and records of the Partnership at the time of reference thereto, in
each such Person's capacity as a Limited Partner of the Partnership.
"Maximum Offering Amount"-means the total amount of $27,000,000 in Gross
Proceeds of the Offering.
"Minimum Gain" means the excess of the outstanding principal balance of
Partnership nonrecourse debt which is secured by Partnership Property (excluding
any portion of such principal balance which would-not be treated as an amount
realized under Section 1001 of the Code and Treas. Reg. 1.1001-2(a) promulgated
thereunder if such debt were foreclosed upon), over the adjusted basis of such
Partnership Property. In all events, the term Minimum Gain shall have the
meaning required by any applicable proposed or final regulations promulgated
under Section 704(b) of the Code, as from time to time adopted or amended,
including, until amended, withdrawn or adopted, Prop. Treas. Reg.
1.704-1(b)(4)(iv).
"Minimum Offering Amount" means the amount of $6,455,000 in Gross Proceeds
of the Offering.
"Net Cash Flow" means all cash funds derived from operations of the
Partnership, including the yield from the Interim Investments and excess cash
reserves deemed distributable by the General Partners pursuant to Section 3.3.E
hereof, without reduction for any non-cash charges, but less cash funds used to
pay, or establish reasonable reserves for, fees, commissions, debt payments,
improvements and replacements. Net Cash Flow shall not include amounts
distributed under Sections 4.1 or 4.2 hereof.
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"Net Proceeds of the Offering" means the Gross Proceeds of the Offering less
the portion of the Selling Commissions, Acquisition Fee, Organization and Start-
Up Fee and Offering and Promotional Expenses Reimbursement Allowance paid at the
time that Class A Limited Partners are admitted to the Partnership.
"Net Proceeds of Operational Stage Financing or Sale" means the gross
proceeds to the Partnership of any Operational Stage Financing or Sale, less
payment of any unpaid Deferred Fees and any amounts deemed necessary by the
General Partners to be allocated to the establishment of reserves, the payment
of any debts and liabilities of the Partnership to creditors, the repayment to
the Development General Partner of any advances made to the Partnership pursuant
to the Cash Flow Deficit Guaranty Agreement, and the payment-of any reasonable
expenses or costs associated with the Operational Stage Financing or Sale,
including but not limited to, fees, points, or real estate brokerage commissions
paid to the General Partners or their Affiliates or any unaffiliated Persons.
"Notification" -means a writing, containing the information required by this
Agreement to be communicated to any Person, sent or delivered to such Person in
accordance with the provisions of Section 11.3 of this Agreement.
"Offering " means the offering for sale of a minimum of 6,455 and a maximum
of 27,000 Units of Class A Limited Partnership Interests in the Partnership, as
more fully described in the Prospectus.
"Offering and Promotional Expenses Reimbursement Allowance " means the
allowance paid to the Administrative General Partner of a total of 2% of the
Gross Proceeds of the Offering, payable at the time of admission of Class A
Limited Partners to the Partnership.
"Operational Stage Financing " means any loan obtained by the Partnership,
secured by one or more of the completed and operating Properties or any portion
there-of, including any refinancing of a Property previously subject to
Operational Stage Financing. The Partnership will not place Operational Stage
Financing on a Property in order to make distributions to Partners if, as a
result, the outstanding indebtedness of the Partnership would exceed 80% of the
appraised value of all Properties combined. Depending on numerous factors,
including the terms of then-available financing and prevailing economic
conditions, the General Partners may determine that less than the maximum
permitted financing is desirable.
"Organization and Start- Up Fee" means the fee payable to the Administrative
General Partner for services to the Partnership in preparing the structure of
the Partnership, consulting with various professionals regarding the
organization of the Partnership, and supervising and reviewing the preparation
of all documents, filings and other instruments related to the Partnership. The
Organization and Start-Up Fee will total 4 1/2 % of Gross Proceeds of the
Offering, payable 3% upon the admission of Class A Limited Partners to the
Partnership and 1 1/2% deferred for later payment as set forth in Section 9.2
herein.
"Partner" means any General Partner or Limited Partner.
"Partnership" means the limited partnership formed in accordance with this
Agreement by the parties hereto, as said limited partnership may from time to
time be constituted.
"Partnership Property" means all or any portion of the assets owned or to be
owned by the Partnership, including the Sites, the Properties and all-incidental
personal property.
"Person " means any individual or Entity.
"Preferred Return " means a cumulative, non-compounded annual return equal
to 7.5 % of each Class A Limited Partner's Adjusted Capital Balance. The
Preferred Return shall be determined on an annual, basis, according to the
fiscal year of the Partnership. If any portion of a Class A Limited Partner's
Preferred Return is not paid from Net Cash Flow, such unpaid portion will be
added to the Class A Limited Partner's priority distribution from the Net
Proceeds of Operational Stage Financing or Sale.
"Profit" and "Loss" means taxable income and taxable loss of the Partnership
for federal income tax purposes, determined as of the close of the Partnership's
tax year, including, where the context requires, related federal income tax
items such as capital gain or loss, tax preferences, investment interest,
depreciation cost
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recovery, depreciation recapture, and cost recovery recapture. Except as
otherwise provided herein, each item of income, gain, loss, deduction,
preference or recapture entering into the computation of Profit or Loss
hereunder shall be allocated to each Partner in the same proportion as Profit
and Loss are allocated.
"the Properties" means a minimum of one and a maximum of four apartment
projects to be develop, owned and operated by the Partnership, which Properties
consist of, in order of their planned development (which order, after the
construction of Property I, may be modified by the General Partners in their
sole discretion): (a) the Southland Station apartments, containing 160 units, in
Warner Robins, Georgia ("Property I"); (b) the Hidden Lake Phase Two apartments,
containing 160 units, in Union City, Georgia ("Property II"); (c) the Park Place
apartments, containing 184 units, in Spartanburg, South Carolina ("Property
III"); and (d) the High Ridge apartments, containing 160 units, in Athens,
Georgia ("Property IV").
"Property Manager" means Xxxxxxxx Properties, Inc. or any Person who is
designated by the General Partners as Property Manager.
"Property Management Agreement" means the agreement or agreements to be
entered into by the Partnership and the Property Manager pursuant to which the
Property Manager shall manage each of the Properties for a fee of 5% of the
monthly gross operating revenues of the Properties.
"Prospectus" means the Partnership's Prospectus contained in the
Registration Statement filed on Form S-11 with the Securities and Exchange
Commission for the registration of the Units under the Securities Act of 1933,
in the final form in which ft is filed with the Securities and Exchange
Commission and as thereafter supplemented pursuant to Rule 424 under the
Securities Act of 1933. Any reference herein to "date of the Prospectus" shall
be deemed to refer to the date of the Prospectus in the form filed pursuant to
Rule 424(b) of the Securities Act of 1933.
"Purchase Money Financing" means a purchase money note or other form of
installment sale obligation received by the Partnership pursuant to a Sale.
"Sale" means any transaction entered into by the Partnership resulting in
the receipt of cash or other consideration (other than the receipt of Capital
Contributions) not in the ordinary course of its business, including, without
limitation, sales or exchanges or other dispositions of real or personal
Partnership property, condemnations, recoveries of damage awards and insurance
proceeds (other than business or rental interruption insurance proceeds), but
excepting any borrowing or mortgage financings.
"Schedule" means Schedule A annexed hereto as amended from time to time and
as so amended at the time of reference thereto.
"Selling Agent" means Alex. Xxxxx Realty Securities, Inc., an Affiliate of
the Administrative General Partner, which will offer the Units on a best efforts
basis pursuant to a Selling Agent Agreement with the Partnership.
"Selling Agent Agreement" means that certain agreement to be entered into
by the Partnership and Alex. Xxxxx Realty Securities, Inc. pursuant to which
Alex. Xxxxx Realty Securities, Inc. will offer and sell the Units on a best
efforts basis.
"Selling Commissions " means the maximum total of 7 % of the Gross Proceeds
of the Offering paid the Selling Agent or reallowed other soliciting dealers for
their efforts in offering the Units. 5% of the maximum selling Commissions will
be paid at the time of admission of Class A Limited Partners into the
Partnership; the remaining 2% will be deferred for payment from as set forth in
Section 9.2 herein. The 7% maximum Selling Commissions will be reduced for
volume purchases, in which case the reduction will apply to the portion of the
Selling Commission due at the time of admission of Class A Limited Partners to
the Partnership.
"the Sites" means a minimum of one and a maximum of four tracts of land,
three of which are located in the State of Georgia and one of which is located
in the State of South Carolina, upon which the Properties are-to be developed.
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"Sponsor" means any Person directly or indirectly instrumental in
organizing, wholly or in part, the Partnership or who will manage or participate
in the management of the Partnership, and any Affiliate of such Person, but does
not include (a) any Person whose only relationship with the Partnership or the
General Partner is that of an independent property manager whose only
compensation from the Partnership is in the form of fees for the performance of
property management services, or (b) wholly-independent parties such as
attorneys, accountants and broker-dealers whose only compensation from the
Partnership is for professional services rendered in connection with the
Offering or the operations of the Partnership.
"Substitute Limited Partner" means a Person who is the assignee or
transferee, in whole or in part, of a Limited Partner's Interest in the
Partnership, who is admitted to the Partnership as a Limited Partner in
accordance with Section 7.3 hereof, and who is listed as such on the books and
records of the Partnership.
"Successor General Partner" means any Person who is admitted as a Successor
General Partner to the Partnership under the provisions of Article VI after the
date of this Agreement.
"Tax-Exempt Partner(s) " means, depending upon the context, either (a) a
Partner that is a "tax-exempt entity" or that is deemed to be a tax-exempt
entity, or (b) in the case of a disqualified lease by the Partnership to a
tax-exempt entity, the General Partners. As used herein, the terms "tax-exempt
entity" and "disqualified lease" shall have the meanings given them in Section
168(j) of the Code.
"Tax Matters Partner" means the Administrative General Partner designated in
Section 5.1 as the tax matters partner, as defined in Section 6231(a)(7) of the
Code.
"Termination Date of the Offering" means the date upon which the Offering
will terminate, which, if not sooner terminated by the General Partners, will be
one year from the date of the Prospectus, unless extended for up to 60 days
thereafter by the General Partners
"Unit" means a Class A Limited Partner's Interest, which is offered pursuant
to the Offering, and which upon admission of a Class A Limited Partner to the
Partnership, represents a Capital Contribution of $1,000.
"U.S. Person" means a Person who is (i) an individual who is either a United
States citizen or a resident of the United States for federal income tax
purposes, (ii) a corporation, partnership, or other legal entity created or
organized in or under the laws of the United States or any political subdivision
thereof, (iii) a corporation that is not created or organized in or under the
laws of the United States or any political subdivision thereof but which has
made an election under either Section 897(i) or Section 897(k) of the Code to be
treated as a domestic corporation for certain purposes of federal income
taxation, or (iv) an estate or trust whose income from sources without the
United States is includable in its gross income for federal income tax purposes
regardless of its connection with a trade or business carried on in the United
States.
"Working Capital Reserves" means, initially, the portion of the Net Proceeds
of the Offering set aside as working capital reserves pursuant to Section 3.3E
and the funds thereafter set aside by the General Partners for working capital
reserves.
ARTICLE II
NAME; PURPOSE AND TERM
Section 2.1 Name; Formation
The Partners hereby form the limited partnership to be known as
"Xxxxx-Xxxxxxxx Equity Income Fund Limited Partnership" (the "Partnership"), and
such name shall be used at all times in connection with the Partnership's
business and affairs; provided, however, that the Partnership may use trade
names in its business operations. The Partnership shall be governed by the Act.
Section 2.2 Place of Registered Office
The address of the registered office in the state of Delaware of the
Partnership is Corporation Trust Center, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxx 00000; the name of the registered agent for service of process on
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the Partnership in the State of Delaware at that address is The Corporation
Trust Company. The Partnership's principal place of business is 0000 Xxxxx Xxxxx
Xxxx, Xxxxxxxx, Xxxxxxx 00000, or such other place(s) as the General Partners
may hereafter determine. Notification of any change in the location of the
principal office shall be given to the Limited Partners on or before the date of
any such change.
Section 2.3 Purpose
The purpose of the Partnership is to acquire, own, develop, encumber, hold
for investment, operate as a business, lease, sell, dispose of and otherwise
deal with the Partnership Property, and to do all things necessary, convenient
or incidental to the achievement of the foregoing.
Section 2.4 Term
The Partnership shall continue until December 31, 2036, unless the
Partnership is sooner dissolved in accordance with the provisions of this
Agreement.
Section 2.5 Recording of Certificate
The General Partners shall take all necessary action to maintain the
Partnership in good standing as a limited partnership under the Act, including,
without limitation, the filing of a certificate of limited partnership under the
Act and such amendments and further certificates as may be necessary under the
Act and necessary to qualify the Partnership to do business in such states as
the Partnership owns property. The General Partners shall not be required to
send a copy of the Partnership's filed certificate of limited partnership to
each Limited Partner.
ARTICLE III
PARTNERS; CAPITAL
Section 3.1 General Partners
The name, address and Capital Contribution of each General Partner is set
forth on the Schedule. Upon the dissolution and termination of the Partnership,
each General Partner shall make a Capital Contribution to the Partnership in an
amount equal to the lesser of (i) the deficit balance, if any, in his Capital
Account or ( ii) his proportionate share of the excess of 1.01% of the Capital
Contributions of the Limited Partners over the Capital Contributions previously
contributed by the General Partners.
Section 3.2 Limited Partners
The name, address and Capital Contribution of each Limited Partner in his
capacity as such shall be reflected on the books and records of the Partnership.
Section 3.3 Partnership Capital
A. Each Partner's Capital Contribution shall be paid in cash on or prior to
the date of his admission to the Partnership.
B. Except to the extent of any interest income earned on a Class A Limited
Partner's Capital Contribution while it is held in escrow, pending his admission
to the Partnership, and later distributed to such Class A Limited Partner
pursuant to Section 4.5A, no Partner shall be paid interest on any Capital
Contribution.
C. Except as otherwise provided in this Agreement, no Partner shall have
the right to withdraw, or receive any return of, his Capital Contribution.
D. Under circumstances requiring a return of any Capital Contribution, no
Partner shall have the right to receive property other than cash.
E. The Partnership shall initially set aside Working Capital Reserves for
normal repairs, replacements and contingencies in an amount equal to at least
3.0% of the Gross Proceeds of the Offering. If in any fiscal quarter,
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the General Partners determine that the Working Capital Reserves of the
Partnership are in excess of the amount deemed sufficient in connection with the
Partnership's operations, and that such Working Capital Reserves may be reduced,
the amount of such reduction may be distributed to the Partners as a portion of
the Partnership's Net Cash Flow. Upon the Sale or disposition of a Property, any
Working Capital Reserves maintained for such Property may be distributed to
Partners or applied as Working Capital Reserves for other Properties.
Section 3.4 Liability of Partners
A. Except as provided in the Act, a Limited Partner will not be personally
liable for the debts, liabilities, contracts, or other obligations of the
Partnership. Except as provided in the Act, a Limited Partner will have no
liability in excess of the capital contribution which such Limited Partner is
obligated to make to the Partnership, and his share of the Partnership's assets
and undistributed profits.
B. No Limited Partner shall be required to lend any funds to the Partnership
or, after his Capital Contribution has been fully paid, to make any further
capital contribution to the Partnership, nor shall any Limited Partner be liable
for or, have any obligation to restore, any negative Capital Account.
C. No Limited Partner shall have any- personal liability for the repayment
of the Capital Account of any General Partner or be required to repay to the
Partnership all or any portion of any negative amount of the General Partners'
Capital Accounts.
D. No General Partner shall have any personal liability for the repayment of
the Capital Contribution or the Preferred Return of any Limited Partner or be
required to repay to the Partnership all or any portion of any negative amount
of the Limited Partners' Capital Accounts.
E. No payments made by the Development General Partner under the Cash Flow
Deficit Guaranty Agreement shall constitute a Capital Contribution of the
Development General Partner or be credited to the Capital Account of the
Development General Partner. Such payments, if any, shall be treated as an
interest free loan to the Partnership, as set forth in the definition contained
in Article I herein.
ARTICLE IV
ALLOCATIONS, DISTRIBUTIONS AND APPLICABLE RULES
Section 4.1 Allocation of Profit or Loss and Distribution of Net Proceeds
from a Sale
A. Profit from any Sale (and Profit from any deemed Sale pursuant to
Sections 4.4 or 4.5) shall be allocated in the following order of priority
(1) First, if one or more Partners has a negative Capital Account, to such
Partners, in proportion to their negative Capital Accounts, until all such
Capital Accounts have zero balances.
(2) Second, if any Class A Limited Partner has an unpaid Preferred Return,
any Profit not allocated pursuant to Section 4.1A(l) shall be allocated 100% to
the Class A Limited Partners, in accordance with their respective Class A
Limited Partner Percentages, until the Capital Account of each Class A Limited
Partner is equal to his unpaid Preferred Return.
(3) Third, any Profit not allocated pursuant to Sections 4. 1A(l) or 4.
1A(2) shall be allocated 100% to the Class A Limited Partners, in accordance
with their respective Class A Limited Partner Percentages, until the Capital
Account of each Class A Limited Partner is equal to the sum of his Adjusted
Capital Balance plus his unpaid Preferred Return, if any.
(4) Fourth, any remaining Profit shall be allocated 80% to the Class A
Limited Partners, in accordance- with their Class A Limited Partner Percentages,
14% to Xxxx X. Xxxxxxxx in his capacity as a Class B Limited Partner, 4 % to the
Realty Associates 1986 Limited Partnership, a Class B Limited Partner, 1% to the
Development General Partner and 1 % to the Administrative General Partner.
B. Loss from any Sale (and Loss from any deemed Sale pursuant to Sections
4.4 and 4.5) shall be allocated in the following order of priority:
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(1) First, if one or more Partners has a positive Capital Account, to such
Partners, in proportion to their positive Capital Accounts, until all such
positive Capital Accounts have zero balances.
(2) Any remaining Loss shall be allocated as follows: 80% to the Class A
Limited Partners, in accordance with their Class A Limited Partner Percentages,
14% to Xxxx X. Xxxxxxxx in his capacity as a Class B Limited Partner, 4% to
Realty Associates 1986 Limited Partnership, a Class B Limited Partner, 1 % to
the Development General Partner and 1 % to the Administrative General Partner.
C. After the allocation of Profit and Loss pursuant to Sections 4.1A and
4.1B, Net Proceeds, if any, from a Sale, and any net proceeds upon dissolution
of the Partnership, shall be distributed, credited and applied by the
Partnership to its Partners in proportion to their positive Capital Accounts,
until all such Capital Accounts have been reduced to zero. The first Net
Proceeds of Sale distributed to the Class A Limited Partners shall be deemed, to
the extent applicable, distributions of any unpaid Preferred Return due the
Class A Limited Partners.
Section 4.2 Distribution of Net Proceeds of Operational Stage Financing
Upon the Operational Stage Financing of any Property or portion thereof, Net
Proceeds of Operational Stage Financing shall be distributed, credited and
applied in the following order of priority:
(1) First, if any Class A Limited Partner has an unpaid Preferred Return,
100 % to the Class A Limited Partners, in accordance with their Class A Limited
Partner Percentages, until each Class A Limited Partner has received an amount
equal to his unpaid Preferred Return.
(2) Second, 100% to the Class A Limited Partners, in accordance with their
Class A Limited Partner Percentages, until each Class A Limited Partner has
received an amount equal to his Adjusted Capital Balance.
(3) Third, any remaining Net Proceeds shall be distributed 80% to the Class
A Limited Partners, in accordance with their respective Class A Limited Partner
Percentages, 14% to Xxxx X. Xxxxxxxx in his capacity as a Class B Limited
Partner, 4% to Realty Associates 1986 Limited Partnership, a Class B Limited
Partner, 1 % to the Development General Partner and 1 % to the Administrative
General Partner.
Section 4.3 Distribution of Net Cash Flow and Allocation of Profit and Loss
from Operations
A. Net Cash Flow, if any, shall be distributed and applied by the
Partnership as follows: 98% to the Class A Limited Partners, in accordance with
their respective Class A Limited Partner Percentages, 1 % to the Development
General Partner and 1 % to the Administrative General Partner. To the extent
feasible, the General Partners will endeavor to distribute any Net Cash Flow on
a quarterly basis.
B. For each taxable year, Profit and Loss (other than Profit or Loss from a
Sale) of the Partnership shall be allocated 98% to the Class A Limited Partners,
in accordance with their respective Class A Limited Partner Percentages, 1 % to
the Administrative General Partner and 1 % to the Development General Partner.
Section 4.4 Liquidation or Dissolution
A. If the Partnership is liquidated or dissolved, the net proceeds from such
liquidation, as provided in Article VIII, shall be distributed first to
creditors, including Partners who are creditors, to the extent otherwise
permitted by law (whether by payment or by establishment of reserves), other
than liabilities for distributions to Partners, and any remaining net proceeds
shall be distributed in the order of priority set forth in Section 4.1A, unless
applicable law shall otherwise require, in which event the order of priority set
forth in Section 4.1A shall be modified to the extent necessary, but only to the
extent necessary, to comply with such applicable law.
B. If the General Partners elect, pursuant to Section 8.2C, to distribute
any of the Property of the Partnership to the Partners in kind, such Property
shall be applied, based upon its fair market value, in the order of priority set
forth in Section 4.4A, unless applicable law shall otherwise require, in which
event the order of priority set forth in Section 4.4A shall be modified to the
extent necessary, but only to the extent necessary, to comply with such
applicable law. In this regard, all unsold Partnership Property shall first be
valued, as
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provided in Section 4.5B, to determine the Profit or Loss that would have
resulted from a Sale of such Property, and, subject to the special rules of
Section 4.5, such Profit or Loss shall be allocated as provided in Section 4.IA
and shall be properly credited or charged to the Capital Accounts of the
Partners.
Section 4.5 General and Special Rules
A. Except as otherwise provided herein, the timing and amount of all
distributions shall be determined by the General Partners. No Partner shall have
the right to demand and receive any distribution of property other than cash.
Notwithstanding any other provision of this Agreement, the General Partners
shall have authority to make the following distributions to certain of the Class
A Limited Partners following such Class A Limited Partners' admission to the
Partnership: First, if the Partnership has realized a savings on Selling
Commissions payable by the Partnership with respect to the purchase of Units by
a Class A Limited Partner, due to the purchase by such Class A Limited Partner
of 100 or more Units (as more fully set forth in the Prospectus), the General
Partners shall make a distribution to such Class A Limited Partner equal to the
amount of such savings realized by the Partnership. Second, if any interest is
earned on a Class A Limited Partner's Capital Contribution while it is held in
escrow, pending such Class A Limited Partner's admission to the Partnership,
such interest shall be paid by the Partnership to such Class A Limited Partner.
B. Subject to all of the special rules of this Section 4.5, if any
Partnership Property is distributed to the Partners in kind, such Partnership
Property first shall be valued on the basis of the fair market value thereof to
determine the Profit or Loss that would have resulted if such Partnership
Property had been sold, and then such Profit or Loss shall be allocated as
provided in Section 4.1A, and shall be properly credited or charged to the
Capital Accounts of the Partners in accordance with Treas. Reg.
1.704-1(b)(2)(iv)(e) or any successor provision thereto. Any Partner entitled to
any interest in such assets shall receive such interest as a tenant-in-common
with all other Partners so entitled. The fair market value of such assets shall
be determined by an independent appraiser who shall be selected by the General
Partners.
C. Notwithstanding any other provision of this Agreement to the contrary,
the allocation of Loss or deduction (or item thereof) attributable to
nonrecourse debt that is secured by any Property of the Partnership shall in no
event be permitted to the Partners having negative Capital Account balances to
the extent that the sum of negative Capital Account balances of the Partner or
Partners receiving such allocations would exceed the Minimum Gain (determined at
the end of the Partnership taxable year to which the allocations relate).
Instead, such Loss (or deduction or item thereof) shall be allocated first to
the Partners having positive Capital Accounts, in proportion to such positive
Capital Accounts, until all such positive Capital Accounts have been reduced to
zero, and any additional Loss (or deduction or item thereof) shall be allocated
to the Partners in accordance with the sharing arrangements set forth in this
Article IV. The Partner or Partners having negative Capital Account balances
resulting in whole or in part from allocations of Loss (or deduction or item
thereof) attributable to nonrecourse debt that is secured by Property of the
Partnership shall, to the extent possible, be allocated Profit (income, gain or
item thereof) in an amount no less than the excess of the sum of such negative
Capital Account balances over the Minimum Gain at a time no later than the time
at which the Minimum Gain is reduced below the sum of such negative Capital
Account balances.
D. Notwithstanding any other provision of this Agreement to the contrary, in
the event that at the end of any Partnership taxable year (i) any Partner's
Capital Account is adjusted for, or (ii) such Partner is allocated, or (iii)
there is distributed to such Partner, any item described in Treas. Reg.
1.704-1(b)(2)(ii)(d)(4), (5)-or (6) in an amount not reasonably expected on the
date of execution of this Agreement and such treatment creates a deficit balance
in such Partner's Capital Account in excess of the deficit balance that is
permitted in accordance with Section 4.5C hereof (the "Excess Deficit Balance"),
then such Partner shall be allocated all items of income and gain of the
Partnership for such taxable year (as set forth below) and all subsequent
taxable years until such Excess Deficit Balance has been eliminated. In the
event that such unexpected adjustments create an Excess Deficit Balance in the
Capital Account of more than one Partner in any Partnership taxable year, all
items of income and gain (as set forth below) of the Partnership for such
taxable year and all subsequent taxable years shall be allocate among such
Partners in proportion to their Excess Deficit Balances until such Excess
Deficit Balances have been eliminated. Any remaining Profit or Loss, after
adjustment has
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been made for allocation of income or gain pursuant to this Sections 4.5D, shall
be allocated in accordance. with Sections 4.1, 4.2 and 4.3 hereof. In allocating
Partnership income or gain to Partners with Excess Deficit Balances, the General
Partners shall first allocate taxable income of the Partnership. If allocations
of taxable income are insufficient to eliminate the Partners' Excess Deficit
Balances, the General Partners shall allocate items of gross income (as defined
in Section 61 of the Code) to Partners having Excess Deficit Balances in amounts
sufficient to eliminate such deficit balances. This Section 4.5D is intended to
be-a "qualified income offset" provision within the meaning of Treas. Reg.
1.704-1(b)(2)(ii)(d), and the General Partners shall be authorized to interpret
and apply this Section 4.5D so as to satisfy the requirement of the final
regulations and any successor provision.
E. If any Partner's Interest in the Partnership is reduced (provided such
reduction does not result in a complete termination of such Partner's Interest),
such Partner's share of the Partnership's "unrealized receivables" (within the
meaning of Section 751(c) of the Code), shall not be reduced so that,
notwithstanding any other provision of this Agreement to the contrary, that
portion of the Profit otherwise allocable upon a liquidation or dissolution of
the Partnership pursuant to Section 4.1 hereof which is taxable as ordinary
income (recaptured) for federal income tax purposes as a result of the
application of Sections 704, 751, 1245 or 1250 of the Code shall, to the extent
possible without increasing the total gain to the Partnership or to any Partner,
be allocated among the Partners in proportion to the deductions (or basis
reductions treated as deductions) giving rise to such recapture. Any questions
as to the aforesaid allocation of ordinary income (recapture), to the extent
such questions cannot be resolved in the manner specified above, shall be
resolved by the General Partners in their reasonably exercised discretion.
F. All Profit and Loss of the Partnership shall be allocated with respect to
each taxable year of the Partnership as of the end of, and within seventy-five
(75) days after the end of, such taxable year, or as soon thereafter as is
practically possible.
G. Generally, all Profit and Loss (other than Profit and Loss from a Sale)
shall be allocated, and Net Cash Flow shall be distributed, as the case may be,
to the Persons shown on the records of the Partnership to have been Partners as
of the last day of the taxable year for which such allocation or distribution is
to be made, subject to the special rules set forth in this Section 4.5G. The
Partnership shall adopt the "interim closing of the books" method of allocating
Partnership Profit and Loss, in accordance with a "semi-monthly convention" with
respect to the admission of Additional Limited Partners or Substitute Limited
Partners on or before the Termination Date of the Offering. Accordingly, if on
or before the Termination Date of the Offering, Additional Limited Partners
and/or Substitute Limited Partners are admitted to the Partnership (i) prior to
the sixteenth day of a calendar month, the Partnership will close its books as
of the end of the last day of the month prior to the month of admission, and
such Additional Limited Partners and/or Substitute Limited Partners shall be
treated as entering the Partnership on the first day of the month of admission;
or (ii) on or after the sixteenth day of a calendar month, the Partnership will
close its books as of the end of the fifteenth day of the month of admission,
and such Additional Limited Partners and/or Substituted Limited Partners shall
be treated as entering the Partnership on the sixteenth day of such month. After
the Termination Date of the Offering, a Substitute Limited Partner shall not be
admitted to the Partnership until the date on which the assignment to such
Substitute Limited Partner of an Interest in the Partnership becomes effective
as provided in Section 7.3B hereof (the "Effective Date"). Accordingly, a
Substitute Limited Partner shall be deemed to be the owner of an Interest in the
Partnership from and after the Effective Date, with such Substitute Limited
Partner being entitled to Partnership distributions and allocations of Profit
and Loss only with respect to Partnership operations commencing on the Effective
Date. Profit and Loss from a Sale shall be allocated, and Net Proceeds of an
Operational Stage Financing or Sale shall be distributed, among the Persons who
are recognized as Partners on the date of closing of such Operational Stage
Financing or Sale. Any distribution of Sale proceeds attributable to deferred
payments that are paid in a taxable year after the year of Sale shall be
distributed to the Persons who are recognized as Partners as of the date of such
distribution.
H. Notwithstanding any other provision hereof, if any portion of the
Properties is "tax-exempt use property" within the meaning of Section 168(j)(3)
and (j)(9) of the Code (or any similar provision of law which may subsequently
be enacted), such portion shall be deemed allocated specially to the Tax-Exempt
Partner(s),
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and cost recovery deductions shall be allocated proportionately among the
Partners other than the Tax-Exempt Partners in such amounts so that, to the
maximum extent possible, the cost recovery deductions otherwise allocable to the
Partners other than the Tax-Exempt Partners shall not be reduced as a result of
such characterization, the intent of this Section being to provide that the
Partners other than the Tax-Exempt Partners shall be entitled to those cost
recovery deductions which would have been available if no portion of the
Property were "tax-exempt use property." If there is more than one Tax-Exempt
Partner, such allocations shall be made in proportion to their respective
Limited Partner Percentages.
I. In the event that any Class A Limited Partner fails to furnish to the
General Partners evidence, in form and substance satisfactory to the General
Partners, establishing that the General Partners have no obligation under
Section 1445 of the Code with respect to such Class A Limited Partner to
withhold and pay over an amount to the Internal Revenue Service, the General
Partners may, in their sole discretion, withhold with respect to such Class A
Limited Partner the amount they would be required to withhold pursuant to
Section 1445 of the Code if such Class A Limited Partner were not a U.S. Person,
and any amount so withheld shall be treated as a distribution under Sections
4.1, 4.2 or 4.3 of this Agreement, as the case may be, and shall reduce the
amount otherwise distributable to such Class A Limited Partner thereunder.
ARTICLE V
RIGHTS, POWERS AND DUTIES OF PARTNERS
Section 5.1 Management and Control of the Partnership; Tax Matters Partner
A. The General Partners shall have the exclusive right to manage and control
the business of the Partnership. Except as otherwise provided herein, decisions
to be made by the General Partners shall be made by the joint agreement of the
Administrative General Partner and the Development General Partner.
B. Except as otherwise provided herein, the Partnership shall be bound by
the signature of any General Partner.
C. No Limited Partner (except one who may also be a General Partner, and
then only in his capacity as General Partner) shall have the right to
participate in the control of the business of the Partnership, or have any
authority or right to act for or bind the Partnership.
D. The Administrative General Partner is hereby designated to serve as the
Partnership's Tax Matters Partner and shall have all of the powers and
responsibilities of such position as provided in Sections 6221 et seq. of the
Code. All third party costs and expenses incurred by the Administrative General
Partner in performing its duties as Tax Matters Partner shall be borne by the
Partnership, as shall all expenses incurred by the Partnership and/or the Tax
Matters Partner in connection with any tax audit or tax related administrative
or judicial proceeding. Each Partner shall be responsible for all costs incurred
by such Partner with respect to any tax audit or tax related administrative or
judicial proceeding in connection with such Partner's tax returns, and all costs
incurred by any such Partner who participates in any tax audit or tax related
administrative or judicial proceeding of or against the Partnership or any
Partner. Each Partner hereby (i) expressly authorizes the Tax Matters Partner to
enter into any settlement with the Internal Revenue Service with respect to any
tax matter, tax item, tax issue, tax audit, or judicial proceeding, which
settlement shall be binding on all Partners; (ii) waives the right to
participate in any administrative or judicial proceeding in which the tax
treatment. of any Partnership item is to be determined; and (iii) agrees to
execute such consents, waivers or other documents as the Tax Matters Partner may
determine are necessary to accomplish the provisions of this Section 5.1D. The
Tax Matters Partner shall have no liability to any Partner or the Partnership,
and shall be indemnified by the Partnership to the full extent provided by law,
for any act or omission performed or omitted by it within the scope of the
authority conferred on it by this Agreement, except for acts of negligence or
for damages arising from any misrepresentation or breach of any other agreement
with the Partnership. The liability and indemnification of the Tax Matters
Partner shall be determined in the same manner as is provided in Sections
5.9,and 5. 10 hereof
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E. Anything herein to the contrary notwithstanding, if any of the following
events of default shall occur at any time during the term hereof, then, until
such time as any such events shall have been cured, all decisions to be made by
the General Partners shall be made solely by the Administrative General Partner,
provided that such event of default shall not have been caused solely by any act
or omission of the Administrative General Partner:
(i) an event of default shall have occurred under any of the documents or
instruments evidencing or securing the Construction Financing and such default
shall not have been cured within any applicable cure period;
(ii) the Property Manager shall be in material default under any Property
Management Agreement, and such default shall not have been cured within any
applicable cure period;
(iii) the General Contractor shall be in material default under (a) the
Construction Contract for any Property or (b) any Guaranty of Timely and
Lien-Free Completion, and such default shall not have been cured within any
applicable cure period;
(iv) Xxxxxxxx Development Company shall be in material default under the
Acquisition Agreement, and such default shall not have been cured within any
applicable cure period;
(v) the Development General Partner shall be in default under any of (a)
the Cash Flow Deficit Guaranty Agreement, (b) any Guaranty of Timely and Lien-
Free Completion or (c) the Contract of Sale, and such default shall not have
been cured within any applicable cure period; or
(vi) the Development General Partner or any of its Affiliates shall be in
material default under any other agreement between or among the Development
General Partner and/or any such Affiliate and the Partnership, and such default
shall not have been cured within any applicable cure period.
Section 5.2 Authority of General Partners
A. Except to the extent otherwise provided herein, including, without
limitation, in Section 5.2C, 5.3A, 5.4A, 5.4B, 5.5A and 5.5B, the General
Partners for, and in the name of, and on behalf of, the Partnership, are hereby
authorized:
(i) to enter into any kind of activity and to perform and carry out
contracts of any kind necessary to, or in connection with, or incidental to the
accomplishment of the purposes of the Partnership, so long as said activities
and contracts may be lawfully carried on or performed by a limited partnership
under applicable laws and regulations;
(ii) to engage Persons, including the Sponsors, to provide services or
goods to the Partnership, upon such terms as the General Partners deem fair and
reasonable and in the best interest of the Partnership, provided, however, that,
as to services or goods provided by a Sponsor, (a) the compensation for-such
services or goods must be comparable and competitive with that of any other
Person who provides comparable services or goods, and, as to services under the
Construction Contracts and with regard to obtaining Operational Stage Financing,
will not exceed 90% of the competitive price that would be charged by
non-affiliated persons or entities rendering similar services in the same or
comparable geographic locations; (b) the compensation and other terms of such
contracts shall be fully disclosed to the Class A Limited Partners in the
reports of the Partnership, (c) the Sponsor must have been previously engaged in
the business of providing such services or goods, independent of the Partnership
and as an ongoing business, and (d) all such transactions shall be embodied in a
contract that describes the services or goods to be provided and the
compensation to be paid, which contract may be modified by the Consent of the
Class A Limited Partners, and which contract shall permit termination without
penalty on sixty (60) days notice;
(iii) to acquire by lease or purchase, develop, own, sell, convey,
finance, improve, assign, mortgage, lease or exchange incident to a tax-free
swap any real estate and any personal property necessary, convenient or
incidental to the accomplishment of the purposes of the Partnership;
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(iv) to develop, construct, maintain, finance, improve, own, grant
options with respect to, sell, convey, assign, mortgage or lease any Partnership
Property or any other real estate or personal property necessary, convenient or
incidental to the accomplishment of the purposes of the Partnership;
(v) to execute any and all agreements, contracts, documents,
certifications and instruments necessary or convenient in connection with the
development, construction, management, maintenance and operation of any
Partnership Property, including without limitation, necessary easements to
public or quasi-public bodies or public utilities;
(vi) to borrow money and issue evidences of indebtedness in furtherance
of any or all of the purposes of the Partnership, and to secure the same by deed
of trust, mortgage, security interest, pledge or other lien or encumbrance on
any Partnership Property or any other assets of the Partnership;
(vii) to repay in whole or in part, negotiate, refinance, recast,
increase, renew, modify or extend any secured, or other indebtedness affecting
any Partnership Property and in connection therewith to execute any extensions,
renewals or modifications of any evidences of indebtedness secured by deeds of
trust, mortgages, security interests, pledges or other encumbrances covering any
Partnership Property;
(viii) to engage a real estate agent (including a Sponsor) to sell any
Partnership Property or portions thereof upon such terms and conditions as are
deemed fair and reasonable by the General Partners and to be in the best
interest of the Partnership, and to pay reasonable compensation for such
services; provided, however, that any real estate commission paid shall not
exceed six percent (6%) of the contract price for the Sale of any Partnership
Property, and, in addition, if a Sponsor provides substantial services in such
regard, the Sponsor may receive up to one-half of such real estate commission,
not to exceed three percent (3 %), the payment of which real estate commission
to the Sponsor shall be subordinated to the payment to Class A Limited Partners
of their Adjusted Capital Balance plus the unpaid portion, if any, of their
Preferred Return.
(ix) to admit Additional Class A Limited Partners to the Partnership in
accordance with the terms described in the Prospectus and Article VII of this
Agreement.
B. Any person dealing with the Partnership or the General Partners may rely
upon a certificate signed by any General Partner, as to:
(i) the identity of any General Partner or any Limited Partner;
(ii) the existence or non-existence of any fact or facts that constitute
conditions precedent tGeneral Partners or in any other manner are germane to the
affairs of the Partnership;
(iii) the Persons who are authorized to execute and deliver any
instrument or document of the Partnorship; (iv) any act or failure to act
by the Partnership or as to any other matter whatsoever iPartnership or
any Partner.
C. The Administrative General Partner shall have the sole authority and
power, on behalf of the Partnership, subject to Section 5.3, to review, approve,
terminate, modify, enforce, continue or otherwise deal, in good faith, with the
Property Management Agreements, the Cash Flow Deficit Guaranty Agreement, the
Guaranties of Timely and Lien-Free Completion, the Contract of Sale, the
Construction Contracts, the Acquisition Agreement or any other agreements now or
hereafter made between the Partnership and the Development General Partner or
any Affiliate thereof.
Section 5.3 Authority of Limited Partners
A. By the vote of the Class A Limited Partners holding a majority of the
Class A Limited Partner Percentages, the Class A Limited Partners, without the
consent of the General Partners, may:
(i) amend the Partnership Agreement;
(ii) dissolve or terminate the Partnership prior to the expiration of its
term;
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(iii) remove a General Partner and elect a new General Partner;
(iv) approve or disapprove of the Sale of all or substantially all of the
Partnership's Property;
(v) terminate, upon 60 days notice, any contract between the Partnership
and any General Partner or any Affiliate thereof.
B. Meetings of the Partnership may be called by the General Partners, or by,
Class A Limited Partners holding more than ten percent (10%) of the Class A
Limited Partner Percentage, for the purpose of discussing and/or voting upon any
of the matters upon which Class A Limited Partners are entitled to vote under
the terms of this Agreement. Upon the General Partners' receipt of Notification
stating the purpose of such meeting by such requisite percentage of the Class A
Limited Partners, the General Partners shall, within ten (10) days after receipt
thereof, provide Notification to the Class A Limited Partners of the time, place
and purpose of such meeting, which shall be held not less than 15 nor more than
60 days after the receipt of such request by the General Partners.
Section 5.4 Restrictions on Authority
A. With respect to the Partnership and Partnership Property, the General
Partners shall have no authority to perform any act in violation of any
applicable laws or regulations thereunder, nor shall the General Partners as
such, without the Consent of the Class A Limited Partners, have any authority:
(i) to voluntarily dissolve or terminate the Partnership prior to the
expiration of its term, exceplisted in Section 8.1 hereof;
(ii) to purchase or acquire property or undertake construction of any
properties other than the Properties specified, provided, however, that the
General Partners may alter the planned order of construction of Properties
II, III and IV if they determine, in their sole discretion, that such change
is not detrimental to the Partnership;
(iii) except as permitted in this Agreement, to do any act required to be
approved by the Class A Limited Partners under the Act;
(iv) to reinvest any Net Proceeds of Operational Stage Financing or
Sale, except in short-term securities pursuant to Section 10.2B;
(v) except with respect to the Interim Investments, to invest in or
underwrite securities of any type or kind for any purpose, or make
investments other than in the Properties and the operations related and
incidental thereto;
(vi) to do any act in contravention of this Agreement;
(vii) to do any act that would make it impossible to carry on the ordinary
business of the Partnership;
(viii) to confess a judgment against the Partnership;
(ix) to offer Class A Limited Partner Interests in the Partnership in
exchange for property;
(x) to possess the Properties or any Partnership Property related
thereto, or assign the Partnership's rights in same, for other than the
exclusive use of the Partnership;
(xi) to admit Additional Class A Limited Partners to the Partnership
after the Termination Date of the Offering (the General Partners shall not
be required to seek the Consent of the Class A Limited Partners to admit
Substitute Limited Partners into the Partnership);
(xii) to operate in such a manner as to be classified as an "investment
company" under the meaning of the Investment Company Act of 1940;
(xiii) except as provided herein and in the Prospectus, to purchase or
lease any property from or sell or lease property to the General Partners or
their Affiliates; or
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(xiv) to obtain financing other than under the circumstances and
conditions set forth herein and in the Prospectus with respect to (a) any
Construction Financing or financing commitment to complete a Property, or
(b) any Operational Stage Financing.
B. In addition, the General Partners shall have no authority to cause the
Partnership to incur Construction Financing with respect to Property 1, or to
cause the Partnership to incur Construction Financing for any of Properties II,
III or IV except on the following terms and conditions:
(i) If the Offering has raised less than 100 % but more than 50 % of the
Gross Proceeds of the Offering necessary to complete a Property, the
Partnership may obtain a Construction Financing commitment for the balance
of the funds necessary to acquire and complete such Property. As the balance
of the Net Proceeds of the Offering necessary to complete such Property are
subsequently raised from additional investors, any Construction Financing
actually drawn with respect to such Property will be retired by such
additional Net Proceeds of the Offering. If for any Property insufficient
additional funds are raised from investors to completely retire the
Construction Financing prior to the Termination Date of the Offering, such
financing will remain in place and constitute a lien against the Property.
Under no circumstances will the Partnership subject more than one Property
to Construction Financing at any given time, nor may the amount of such
Construction Financing exceed 50% of the Net Proceeds of the Offering
necessary for completion of that Property, nor will the Partnership
undertake construction under such circumstances absent a commitment for a
replacement loan at the completion of construction or unless the original
construction financing has a term, including permitted extensions, of not
less than four years.
(ii) If more gm 50% but less than 100% of the Gross Proceeds of the
Offering necessary to construct any of Properties II, III or IV are raised,
the General Partners may, in lieu of obtaining Construction Financing for
such Property, elect to terminate the Offering.
Section 5.5 Authority of Partners and Affiliated Persons to Deal with
Partnership
A. The General Partners may, for, in the name of, and on behalf of, the
Partnership, borrow money from, or enter into agreements, contracts or the like
(in addition to those set forth herein) with, any Sponsor, in an independent
capacity, as distinguished from such capacity (if any) as a Sponsor, as if such
Sponsor were an independent contractor; provided, however, that any such
agreement shall be subject to the conditions set forth in Section 5.2A(ii)
herein.
B. Neither the General Partners nor any Affiliate thereof shall have the
authority:
(i) to cause the Partnership to invest in any program, partnership or other
venture not enumerated herein;
(ii) to receive any compensation, fee or expense not otherwise permitted to
be paid to it under the terms of this Agreement or the Prospectus;
(iii) to cause the Partnership to acquire and develop any Property
without first having obtained an appraisal with respect to the value thereof
on an "as-built" basis, rendered by an independent, appraiser who is a
member of a nationally recognized society of appraisers, in which the
"as-built" appraised value equals or exceeds the purchase price of the Site,
plus the Construction Contract price for the Property, plus any Acquisition
Fee paid with respect to such Property by the Partnership;
(iv) to commingle the Partnership funds with those of any other person
or entity, or to invest any of the Net Proceeds of the Offering in junior
mortgages, junior deeds of trust or other similar obligations, except that
funds of the Partnership may be temporarily retained by agents of the
Partnership pursuant to contracts for the rendering of services to the
Partnership by such agents or held in accounts established -and maintained
for the purpose of making the Interim Investments and/or computerized
disbursements;
(v) to cause the Partnership to lend money or other assets to the General
Partners or any Affiliates thereof;
(vi) to grant to the General Partners or any Affiliates thereof an
exclusive listing for the Sale of Partnership assets, including the Properties;
or
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(vii) to receive any rebate or give-up, or, except as specifically set
forth herein, to participate in any reciprocal business an-arrangement with
any General Partner or an Affiliate thereof.
Section 5.6 Duties and Obligations of the General Partners
A . The General Partners shall take all action that may be necessary or
appropriate for the continuation of the Partnership's existence as a limited
partnership under the Act. The General Partners shall devote to the Partnership
such time as may be necessary for the proper performance of their duties
hereunder, but neither the General Partners nor any of their Affiliates shall be
expected to devote their full time to the performance of such duties. The
General Partners or their Affiliates may act as general or managing partners for
other partnerships engaged in businesses similar to that conducted by the
Partnership. Nothing herein shall limit the General Partners or their Affiliates
from engaging in any such business activities, or any other activities which may
be competitive with the Partnership, such activities shall not be wrongful or
improper, and the General Partners or their Affiliates shall not incur any
obligation, fiduciary or otherwise, to disclose or offer any interest in such
activities to any party hereto and shall not be deemed to have a conflict of
interest because of such activities.
B. The General Partners shall at all times conduct their affairs, the
affairs of all their Affiliates and the affairs of the Partnership in such a
manner that no Limited Partner (except a Limited Partner who is also a General
Partner) will have any personal liability for Partnership debts except as
otherwise set forth herein and in the Prospectus.
C. The General Partners from time to time shall prepare and file such
certificates (or amendments thereto) and other similar documents as are.
required by the Act.
D. 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
to the extent same are not payable by any other party.
E. The General Partners shall be under a fiduciary duty to conduct the
affairs of the Partnership in the best interests of the Partnership, including
the safekeeping and use of all Partnership funds and assets, whether or not in
the General Partners' possession or control, and the use thereof for the benefit
of the Partnership. The General Partners shall not enter into any contract or
agreement relieving them of their common law fiduciary duty. The General
Partners shall at all times act in good faith and exercise due diligence in all
activities relating to the conduct of the business of the Partnership. The
General Partners shall treat the Class A Limited Partners as a group and shall
not favor the interests of any particular Class A Limited Partner.
Section 5.7 Compensation of General Partners
Except as expressly provided in Article IX herein, the General Partners
shall receive no fees, salaries, reimbursement or other compensation for serving
as General Partners.
Section 5.8 Other Businesses of Partners
Neither the Partnership nor any Partner shall have any rights or
obligations, by virtue of this Agreement, in or to any independent ventures of
any nature or description, or the income or profits derived therefrom, in which
a Partner may engage, including, without limitation, the ownership, operation,
management, syndication and development of other real estate projects, even if
in competition with the Properties.
Section 5.9 Liability of General-Partners to Limited Partners
The General Partners shall not be liable, responsible, or accountable, in
liabilities, damages or otherwise, to any Limited Partner or the Partnership for
any loss, judgment, liability, expense or amount paid in settlement of any
claims sustained which arise out of any act or omission performed or omitted by
them within the scope of the authority conferred on them by this Agreement,
except for acts of negligence or misconduct or for damages arising from any
misrepresentation or breach of an agreement with the Partnership. The
partnership
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shall not incur the cost of that portion of any liability insurance which
insures a General Partner against any liability as to which a General Partner
may not be indemnified under Section 5. 10 herein.
Section 5.10 Indemnification
A. The General Partners shall be indemnified to the full extent provided by
law for any loss, judgment, liability, expense or amount paid in settlement of
any claims sustained by a General Partner which arise out of any act or omission
performed or omitted by any or all of them within the scope of the authority
conferred on them by this Agreement, if the General Partners determine, in good
faith, that such act or omission was in the best interests of the Partnership
and that such act or omission did not constitute negligence or misconduct or
breach of any other agreement with the Partnership, provided that any indemnity
under this Section shall be provided out of and to the extent of Partnership
assets only, and no Limited Partner shall have any personal liability on account
thereof.
B. Notwithstanding Section 5. 10A, the General Partners shall not be
indemnified by the Partnership for any liability, loss or damage incurred by any
or all of them in connection with (i) any claim or settlement arising under
federal or state securities laws unless (a) there has been a successful
adjudication on the merits of each count involving securities laws violations,
(b) such claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction, or (c) a court of competent jurisdiction approves a
settlement of the claims, after being advised as to the current position of the
Securities and Exchange Commission, the Massachusetts Securities Division, the
California Commissioner of Corporations, and such other state securities
administrators, as shall be required by such court, regarding indemnification
for violations of securities law; or (ii) any liability imposed by law,
including liability for negligence or misconduct.
ARTICLE VI
TRANSFERABILITY OF A GENERAL PARTNER'S INTEREST
Section 6.1 Removal, Voluntary Retirement or Withdrawal of a General
Partner; Transfer of Interests
A. A General Partner may be removed in the manner specified in Section 5.3A
herein.
B. No General Partner may voluntarily withdraw or retire from his or its
position as a General Partner of the Partnership unless another General Partner
(including any Additional or Successor General Partner admitted pursuant to
Section 6.2) remains, and unless (i) counsel for the Partnership is of the
opinion that such voluntary retirement or withdrawal from the Partnership will
not cause the Partnership: (a) to be dissolved under the Act; (b) to be
classified other than as a partnership for federal income tax purposes; or (c)
to terminate for federal income tax purposes; and (ii) the approval of the
remaining General Partner(s) and the Consent of the Class A Limited Partners to
such voluntary retirement or withdrawal is obtained.
C. A General Partner who voluntarily retires or withdraws from the
Partnership in violation of this Section 6.1 shall be and remain liable to the
Partnership and the Partners for damages resulting from the General Partner's
breach of this Agreement, and, without limitation of remedies, the Partnership
may offset such damages against the amounts otherwise distributable to the
retiring or withdrawing General Partner.
D. No General Partner shall have the right to sell, exchange, or otherwise
dispose of all or any portion of its Interest unless the proposed assignee or
transferee of all or a portion of the Interest of such General Partner is
admitted as a Successor or Additional General Partner to the Partnership
pursuant to the provisions of Section 6.2 prior to any such sale, exchange or
other disposition.
E. The voluntary retirement or withdrawal of a General Partner shall become
effective only -upon (i) receipt by the Partnership of the opinions of counsel
referred to in Section 6. 1B(i); (ii) receipt by the Partnership of the approval
and consent referred to in Section 6.1B(ii); and (iii) the amendment of the
Partnership's certificate of limited partnership to reflect such withdrawal or
retirement and its filing for recordation.
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Section 6.2 Election and Admission of Successor -or Additional General Partners
A. By the vote of the Class A Limited Partners holding a majority of the
Class A Limited Partner Percentages, a Successor General Partner may be elected
to replace a General Partner removed in the manner described in Section 5.3A
herein; provided, however, that prior to such action the Partnership shall have
received an opinion of counsel for the Partnership that such admission will not
cause the Partnership, to be classified other than as a partnership for federal
income tax purposes, or cause the Partnership to terminate for federal income
tax purposes.
B. Except as otherwise expressly provided herein, no Person shall be
admitted as a Successor or Additional General Partner unless (i) counsel for the
Partnership is of the opinion that the admission of such Successor or Additional
General Partner will not cause the Partnership to be classified other than as a
partnership for federal income tax purposes or cause the Partnership to
terminate for federal income tax purposes; (ii) the consent of the then existing
General Partner(s) is obtained; and (iii) the Consent of the Class A Limited
Partners to such admission has been obtained.
C. The admission of such Successor or Additional General Partner shall
become effective upon (i) receipt by the Partnership of the opinions referred to
in Sections 6.2A or 6.2B(i), as applicable; (ii) receipt by the Partnership of
the consents referred to in Section 6.2B(ii) and (iii), if applicable; and (iii)
the amendment of the Partnership's certificate of limited partnership to reflect
the admission of the Successor or Additional General Partner and its filing for
recordation.
Section 6.3 Event of Withdrawal of a General Partner
A. In addition to a voluntary withdrawal of a General Partner pursuant to
Section 6.1E, a General Partner shall be deemed to withdraw if the General
Partner assigns all of his Interests in the Partnership, if the General Partner
is removed pursuant to Section 5.3A, and upon the following acts or events: (i)
if a natural person, upon his death or the entry by a court of competent
jurisdiction that such General Partner is incompetent to manage his person or
his property; (ii) if a corporation, the filing of a certificate of dissolution,
or its equivalent, for the corporation or the revocation of its charter; (iii)
if a partnership, the dissolution and commencement of winding up of the General
Partner; (iv) if a trustee of a trust, the termination of the trust (but not
merely the substitution of a new trustee); and (v) if an estate, the
distribution by the fiduciary of the estate's entire interest in the
Partnership. To the maximum extent permitted by the Act, no other act or event
shall be deemed an event of withdrawal of a General Partner or serve to convert
a General Partner to a Limited Partner.
B. In the event of the withdrawal of a General Partner who is not then the
sole General Partner, the Partnership shall be continued by the remaining
General Partner or General Partners, who shall make and file such amendments to
the Partnership's certificate of limited partnership as are required by the Act
to reflect the fact that the withdrawn General Partner has ceased to be a
General Partner of the Partnership. In the event. of the withdrawal of the
Development General Partner pursuant to Section 6.3A(i) above, then, at the
election of Xxxxxxxx Properties, Inc. and with the consent of the Administrative
General Partner and the Consent of the Class A Limited Partners, notwithstanding
any other provision of this Agreement, Xxxxxxxx Properties, Inc., a Georgia
corporation, shall be admitted to the Partnership as a Successor General Partner
subject to the satisfaction of all of the requirements of Section 6.2C.
C. In the event of the withdrawal of a sole General Partner, the withdrawn
General Partner, or its successors, representatives, heirs or assigns shall
promptly give Notification of such withdrawal to all remaining Partners. In such
event, the Partnership shall be dissolved unless, within 90 days after the
withdrawal of the sole General Partner, all remaining Partners agree in writing
to continue the business of the Partnership-and to the appointment, effective as
of the date of withdrawal of the sole General Partner, of one or more Additional
General Partners.
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Section 6.4 Liability- of a Withdrawn General Partner
A. Any General Partner who withdraws from the Partnership shall be, and
remain, liable for all obligations and liabilities incurred by it as General
Partner prior to the time such withdrawal becomes effective. In-addition, a
General Partner who voluntarily withdraws in violation of this Agreement shall
be subject to the liability described in Section 6.l C.
B. Upon the withdrawal of a General Partner, such General Partner shall
immediately cease to he a General Partner, and, unless a Successor General
Partner has acquired the Interest of the withdrawing General Partner, the
withdrawn General Partner's Interest shall be converted to a limited partner
Interest of a new class. Such conversion shall not affect any rights or
liabilities of the withdrawn General Partner, except that such General Partner
shall no longer participate in the management of the Partnership.
C. The personal representatives, heirs, successors or assigns of any General
Partner who withdraws from the Partnership shall be, and remain, liable for all
obligations and liabilities incurred by the General Partner prior to, or in
connection with, its withdrawal.
ARTICLE VII
ADMISSION OF ADDITIONAL AND SUBSTITUTE LIMITED PARTNERS AND
TRANSFERABILITY OF A -LIMITED PARTNER'S INTEREST
Section 7.1 Admission of Additional Limited Partners Prior to the
Termination Date of the Offering
Prior to the Termination Date of the Offering, the Partnership is authorized
to sell and issue not less than 6,455 nor more than 27,000 Units, and to admit
as Class A Limited Partners to the Partnership the Persons who contribute cash
to the capital of the Partnership for such Units and meet such other
requirements as are set forth in the Prospectus. Such Additional Limited
Partners shall be listed in the books and records of the Partnership, and shall
be recognized by the Partnership for the purposes of Partnership distributions
and allocations as set forth in Article IV herein.
Section 7.2 Admission of Additional Limited Partners After the Termination
Date of the Offering
A. After the Termination Date of the Offering, a Person may be admitted as
an Additional Limit Partner with the General Partners' consent, the Consent of
the Class A Limited Partners, and by providing the Administrative General
Partner with a power of attorney acceptable to the Administrative General
Partner. The General Partners shall not consent to the admission of an
Additional Limited Partner if the General Partners receive an opinion of counsel
to the Partnership that such admission would cause the Partnership to be
classified other than as a partnership for federal income tax purposes, or cause
the Partnership to terminate for federal income tax purposes .
B. The admission of a Person as an Additional Limited Partner shall become
effective as of the first day of the fiscal quarter following satisfaction of
the conditions set forth in Section 7.2A. An additional Limited Partner shall be
recognized by the Partnership for the purposes of Partnership distributions and
allocations as set forth in Article IV herein.
C. The Partnership shall be reimbursed by such Additional Limited Partner
for the expense of his admission to the Partnership.
Section 7.3 Admission of Substitute Limited Partners
A. A Person may be admitted as a Substitute Limited Partner with the General
Partners' consent-, and by providing the Administrative General Partner with a
power of attorney acceptable to the Administrative General Partner. The General
Partners shall not consent to the admission of a Substitute Limited Partner if
the General Partners receive an opinion of counsel to the Partnership that such
admission would cause the Partnership to be
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classified other than as a partnership for federal income tax purposes, or cause
the Partnership to terminate for federal income tax purposes.
B. The admission of a Person as a Substitute Limited Partner shall become
effective as of the first day of the fiscal quarter following satisfaction of
the conditions set forth in Section 7.2A. A Substitute Limited Partner shall be
recognized by the Partnership for the purposes of Partnership distributions and
allocations as set forth in Article IV herein.
C. The Partnership shall be reimbursed by any Substitute Limited Partner
for the expense of his admission to the Partnership.
Section 7.4 Retirement or Withdrawal of a Limited Partner
A. No Limited Partner shall have the right to voluntarily retire or withdraw
from the Partnership unless the General Partners shall have consented to such
voluntary retirement or withdrawal by a Limited Partner. Upon the retirement or
withdrawal of a Limited Partner: (i) the Interest of such retiring or
withdrawing Limited Partner shall thereafter belong to the Partnership; (ii)
such retiring or withdrawing Limited Partner shall not be entitled to receive
distributions with respect to any periods after the time of such retirement of
withdrawal; and (iii) such retiring or withdrawing Limited Partner shall not be
entitled to receive any amount for the fair value of his Interest as of the date
of his retirement or withdrawal, other than as agreed to by the General Partners
and the withdrawing Limited Partner. The General Partners shall not consent to
the voluntary retirement or withdrawal of a Limited Partner if the General
Partners receive an opinion of counsel to the Partnership that such retirement
or withdrawal would cause the Partnership to be classified other than as a
partnership for federal income tax purposes, or cause the Partnership to
terminate for federal income tax purposes.
B. At any time after the Termination Date of the Offering, the Partnership
may, in response to the request of a Limited Partner, repurchase any or all of
the Units of such Limited Partner upon mutually agreeable terms, provided that
such. repurchase does not materially impair the capital or operation of the
Partnership. The determination to repurchase Units will be made in the sole
discretion of the General Partners. The determination of the value of the
repurchased Units will be based upon, among other factors, the current fair
market value of the Properties and the Partnership's assets, less all
Partnership debts and obligations. The Partnership will not repurchase Units
prior to the Termination Date of the Offering and is not obligated to
-repurchase Units at any time. Units acquired by the General Partners and their
Affiliates will not be eligible for repurchase by the Partnership. Units
purchased by the Partnership during any fiscal quarter shall be deemed canceled
effective as of the first day of the fiscal quarter following the effective date
of such purchase.
Section 7.5 Transfer or Assignment of a Limited Partner Interest
A. Subject to the conditions set forth in this Section 7.5, a Limited
Partner shall have the right to transfer, sell, exchange, or otherwise dispose
of his Interest with the consent of the General Partners, delivery of
appropriate documents or instruments, all in substance and form satisfactory to
the General Partners, evidencing such Limited Partner's intention to transfer,
sell, exchange or otherwise dispose of his Interest, and by providing the
Administrative General Partner with a power of attorney acceptable to the
Administrative General Partner. The General Partners shall not consent to any
such transfer, sale, exchange or other disposition if the General Partners
receive an opinion of counsel to the Partnership that such transfer, sale,
exchange or other disposition would cause the Partnership to be classified other
dm as a partnership for federal income tax purposes, or cause the Partnership to
terminate for federal income tax purposes.
B. Any such transfer, sale, exchange or other disposition of an Interest by
a Limited Partner shall also comply with the following conditions (i) no such
actions may be taken with respect to a fraction of a Unit; (ii) a Limited
Partner must take such action with respect to all of his Units if he would
otherwise retain less than five (5) Units (or two (2) Units in the case of an
XXX); and (iii) all such actions must be made in compliance with minimum
purchase requirements, and all other requirements of applicable securities laws,
the evidence for which compliance shall be submitted by the Limited Partner to
the General Partners.
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C. The assignee of a Limited Partner's Interest shall not automatically
become or exercise any rights of a Limited Partner of the Partnership. Such
Person shall become and exercise the rights of a Limited Partner of the
Partnership only if such Person is admitted into the Partnership as a Substitute
Limited Partner in accordance with Section 7.3. The Partnership shall be under
no obligation to recognize any such transfer or assignment unless such transfer
or assignment complies with this Section 7.5.
Section 7.6 Bankruptcy, Death, Dissolution or Incompetence of a Limited Partner
In the event of the bankruptcy, dissolution, death or adjudication of
incompetence (which term shall include but not be limited to, insanity) of a
Limited Partner, his successors, assigns,-personal representatives or heirs
shall have all the rights of such Limited Partner for the purpose of settling or
managing his estate or property. The bankruptcy, dissolution, adjudication of
incompetence (which term shall include, but not be limited to, insanity), or
death of a Limited Partner shall not dissolve the Partnership.
ARTICLE VIII
DISSOLUTION, LIQUIDATION AND TERMINATION OF THE PARTNERSHIP
Section 8.1 Events Causing Dissolution
A. The Partnership shall dissolve and its affairs shall be wound up upon
the first to occur of the following events:
(i) the expiration of its term;
(ii) the withdrawal of a General Partner, unless the Partnership is
continued pursuant to Sections 6.3B or 6.3C;
(iii) the Sale of all or substantially all Partnership Property
(excepting (a) a disposition thereof which, in the opinion of counsel to the
Partnership, qualifies, in whole or in part, under Section 1031 or Section
1033 of the Code or (b) a Sale in which the Partnership receives Purchase
Money Financing, in which case the Partnership shall dissolve upon receipt
of the final payment thereunder);
(iv) the election by the General Partners, with the Consent of the Class A
Limited Partners, to dissolve the Partnership; or
(v) Class A Limited Partners holding a majority of the Class A Limited
Partner Percentage vote to dissolve the Partnership.
B. Dissolution of the Partnership shall be effective on the day on which the
event occurs giving rise to the dissolution. A certificate of cancellation shall
be filed under the Act upon the dissolution and the commencement of winding up
of the Partnership; provided, however, that the Partnership shall not terminate
until the assets of the Partnership have been distributed as provided in Section
8.2.
Section 8.2 Liquidation
A. As soon as practical after the dissolution of the Partnership, the
General Partners, or, in the event of the withdrawal of a sole General Partner,
any Limited Partner, shall give Notification to all the Limited Partners of such
fact and shall prepare a plan as to whether and in what manner the assets of the
Partnership shall be liquidated. With the Consent of the Class A Limited
Partners, the assets of the Partnership, subject to its liabilities (and the
establishment of reserves, if necessary, for such liabilities), shall be
transferred to a successor Entity, upon such terms and conditions as are then
agreed upon.
B. Unless the Partners agree to transfer the assets of the Partnership,
subject to its liabilities, to a successor Entity pursuant to Section 8.2A, upon
dissolution of the Partnership, the General Partners (or Limited Partners, as
the case may be) shall liquidate the assets of the Partnership, and apply and
distribute the proceeds thereof in
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accordance with Section 4.4. A Partner or an Affiliate of a Partner may purchase
such assets with the Consent of the Class A Limited Partners.
C. Notwithstanding the provisions of Section 8.2B, in the event the General
Partners shall determine that an immediate sale of all or a portion of the
Partnership assets would cause undue loss to the Partners, the General
Partner(s), in order to avoid such loss, may, after having given Notification to
all the Limited Partners, either defer liquidation of, and withhold from
distribution for a reasonable time, any assets of the Partnership, or distribute
the assets in kind to a liquidating trust to be held for the benefit of the
Partners.
ARTICLE IX
PAYMENTS TO THE GENERAL PARTNERS AND AFFILIATES
Section 9.1 Reimbursement of Certain Expenses of the General Partners
The Partnership shall reimburse the General Partners on a current basis for
all reasonable expenses incurred on behalf of the Partnership for administrative
services necessary to the prudent operation of the Partnership, provided that
the reimbursement shall be at the lower of the actual cost incurred by the
General Partners or the amount that the Partnership would be required to pay for
comparable administrative services in the same geographic location. No
reimbursement shall be permitted for services for which the General Partners are
entitled to compensation by way of separate fees. Excluded from allowable
reimbursement shall be:
(i) rent or depreciation, utilities, capital equipment and other
administrative items related thereto; and
(ii) salaries, fringe benefits, travel expenses and other administrative
items incurred by or allocated to any Controlling Person of any General
Partner or any Affiliate thereof.
Section 9.2 Fees and Deferred Fees
A. The Partnership shall make the following payments and pay the following
fees to the General Partners and/or their Affiliates:
(i) to the Selling Agent, the Selling Commissions.
(ii) to the Administrative General Partner, the Offering and Promotional
Expenses Reimbursement Allowance.
(iii) to Xxxxxxxx Development Company, the Acquisition Fee, and payments
pursuant to the Acquisition Agreement.
(iv) to the Administrative General Partner, the Organization and Start-Up
Fee.
(v) to the General Contractor, construction fees pursuant to the
Construction Contracts.
(vi) to the Property Manager, the fees under the Property Management
Agreements.
(vii) to the Development General Partner, payments pursuant to the Contract
of Sale.
(viii) to the Administrative General Partner, the Development General
Partner and/or their Affiliates, a fee for securing Operational Stage
Financing, payable at the closing of any such financing, provided that the
Development General Partner, the Administrative General Partner and/or their
Affiliates actually render such services. Any fee paid will be reasonable
and competitive with the services provided, and is not expected to exceed a
total of 1% of the principal amount of the debt incurred. If both General
Partners render services to secure Operational Stage Financing, the fee will
be divided between them commensurate with actual services rendered.
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(ix) to the Development General Partner, the Administrative General Partner
and/or their Affiliates, real estate brokerage commissions, payable upon the
Sale of any Property, provided that the Development General Partner, the
Administrative General Partner and/or their Affiliates actually render real
estate brokerage services in connection with such Sale. Any commissions paid to
the General Partners or their Affiliates will be limited to a maximum of 3 % of
the contract price for the Sale of the Property, and will be subordinated to the
payment to Class A Limited Partners of their Adjusted Capital Balance plus the
unpaid portion, if any, of their Preferred Return. If more than one of the
General Partners or their Affiliates is involved in rendering real estate
brokerage services to the Partnership, the commission will be divided between
them commensurate with actual services rendered.
B. Deferred Fees owed to the General Partners and their Affiliates will be
paid from the proceeds of Operational Stage Financing or Sale, in which case the
Deferred Fees will be paid before any distributions therefrom will be made to
Limited Partners. If such event has not occurred within three years of the date
Class A Limited Partners are first admitted to the Partnership, or if
insufficient proceeds are raised therefrom to pay the Deferred Fees, the General
Partners may cause the Partnership to incur other indebtedness to pay such
Deferred Fees, or cause the Partnership to pay the Deferred Fees from operating
revenues before further distributions are made to Limited Partners.
C. The total of the fees and Deferred Fees owed to the General Partners and
their Affiliates, as set forth in subsection A. (i), (ii), (iii) and (iv) above,
shall in no event exceed twenty percent (20%) of the Gross Proceeds of the
Offering.
ARTICLE X
BOOKS AND RECORDS; BANK ACCOUNTS; REPORTS
Section 10.1 Books and Records
A. Unless otherwise directed by the Administrative General Partner, the
books and records of the Partnership shall be maintained by the General Partners
at the Partnership's principal place of business. In all cases, said books and
records shall be available for examination and copying by any Limited Partner,
or his duly authorized representatives, for any purpose reasonably related to
the Limited Partner's interest as a Limited Partner, at the expense of such
Limited Partner, at any and all reasonable times. The Partnership shall keep at
its principal place of business, without limitation, the following records: true
and full information regarding the status of the business and financial
condition of the Partnership; promptly after becoming available, a copy of the
Partnership's federal, state and local income tax returns for each year; a
current list of the names and last known business, residence or mailing
addresses of each Partner; a copy of this Agreement and the certificate of
limited partnership and all amendments thereto, together with executed copies of
any powers of attorney pursuant to which this Agreement and any certificate and
all amendments thereto have been executed; true and full information-regarding
the amount of cash and a description and statement of the agreed value of any
other property or services contributed by each Partner and which each Partner
has agreed to contribute in the future, and the date on which each became a
Partner, and other information regarding the affairs of the Partnership as is
just and reasonable.
B. The Partnership shall keep its books and records in accordance with the
accounting methods followed for federal income tax purposes, which shall reflect
all Partnership transactions and shall be appropriate and adequate for the
Partnership's business. The Partnership's taxable year shall be a calendar year.
Section 10.2 Bank Accounts
A. The General Partners shall have fiduciary responsibility for the
safekeeping and use of all kinds. and assets of the Partnership, whether or not
in their immediate possession or control. The General Partners shall not employ,
or permit any other Person to employ, such funds in any manner except for the
benefit of the Partnership.
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B. The bank accounts of the Partnership shall be maintained in such banking
institutions as the General Partners shall determine, and withdrawals shall be
made only in the regular course of Partnership business on the signature of a
General Partner or such other signature or signatures as the General Partners
may determine. All deposits and other funds may be deposited in interest bearing
or non-interest bearing accounts guaranteed by federal authorities, invested in
short-term United States Government or municipal obligations, or deposited with
a banking institution selected by the General Partners.
Section 10.3 Reports
A. No later dm 75 days after the end of each calendar year, the General
Partners will furnish each Limited Partner with all tax information relating to
the Partnership's performance for the preceding calendar year that is required
to be set forth in the Limited Partner's federal and state income tax return.
B. Within 60 days after the end of each of the first three fiscal quarters
of each fiscal year of the Partnership, the General Partner will furnish to the
Limited Partners, as of the last business day of such quarter, a report setting
forth information with respect to the progress of the Partnership's business,
which report shall include:
(i) an unaudited balance sheet of the Partnership;
(ii) an unaudited statement of income for the quarter;
(iii) an unaudited cash flow statement for the quarter;
(iv) an unaudited statement setting forth in detail the services rendered
to and fees received from the Partnership by any Sponsor; and
(v) other pertinent information concerning the Partnership and its
activities during the quarter.
C. Within 120 days after the end of each fiscal year, the General Partners
will furnish an annual report to each Person who was a Limited Partner as of the
last business day of the fiscal year then ended. Such annual report will
include:
(i) a balance sheet as of the end of the Partnership's fiscal year,
statements of income, Partners' equity and changes in financial position, which
shall be prepared in accordance with generally accepted accounting principles
and accompanied by an auditor's report containing an opinion of an independent
certified public accountant;
(ii) the breakdown of any Fund costs reimbursed to a Sponsor,
(iii) a cash flow statement;
(iv) a report of the activities of the Partnership during the fiscal year;
and
(v) a table comparing the Financial Forecast for Property I provided in
the Prospectus, or any other forecast which may be provided by amendment
thereto, with the actual results for Property I, or any other Property which
is the subject of such forecast, for the fiscal year.
The annual report shall also set forth distributions to the Class A Limited
Partners for the period covered thereby and shall separately identify
distributions from (a) Net Cash Flow during the period, (b) Net Cash Flow during
a prior period which had been held as reserves, (c) Net Proceeds from
Operational Stage Financing or Sale, and (d) Working Capital Reserves.
D. The General Partners will prepare and timely file with appropriate
federal and state regulatory authorities all reports required to be filed with
such entities under then-applicable laws, rules and regulations. Such reports.
shall be prepared on the accounting or reporting basis required by such
regulatory authorities. Upon request, copies of such reports will be furnished
to any Limited Partner for any purpose reasonably related to the Limited
Partner's interest as a Limited Partner. In the event that any regulatory
authority promulgates rules or amendments thereto that would permit a reduction
in any of the reporting requirements to which the
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Partnership is subject under this Agreement at the time of the execution hereof,
the Partnership may cease to prepare and file any such reports in accordance
with such rules or amendments.
E. The General Partner will maintain, (i) for a period of at least four (4)
years, a record of the information obtained to indicate that a Limited Partner
has met the suitability standards set forth in the Prospectus; and (ii) for a
period of at least five (5) years, records of the appraisals made of the
Properties, which appraisal records shall be available for inspection and
copying by any Limited Partner for any purpose reasonably related to the Limited
Partner's interest as a Limited Partner.
ARTICLE XI
GENERAL PROVISIONS
Section 11.1 Appointment of Administrative General Partner as Attorney-in-Fact
A. Each Limited Partner hereunder (including Substitute Limited Partners and
Additional Limited Partners) hereby irrevocably appoints and empowers the
Administrative General Partner his attorney-in-fact to consent to or ratify any
act listed in Subsections 5.4A(i) through (xiv) of this Agreement after the
Consent of the Class A Limited Partners thereto has been obtained, and to
execute, acknowledge, swear to and deliver all agreements and instruments and
file all documents requisite to carrying out the intentions and purposes
contemplated in this Agreement, including, without limitation, the execution and
delivery of this Agreement and all amendments hereto, the filing of all business
certificates and necessary certificates of limited partnership and amendments
thereto from time to time in accordance with all applicable laws and any
certificates of cancellation. This power of attorney shall be deemed coupled
with an interest, and shall not be affected by the subsequent disability or
incapacity of the principal.
D. The appointment by all Limited Partners of the Administrative General
Partner as attorney-in-fact shall be deemed to be a power coupled with an
interest and shall survive the assignment by any Limited Partner of the whole or
any part of his Interest in the Partnership.
C. The power of attorney granted by this Section 11. 1 shall be governed by
the laws of the State of Delaware.
Section 11.2 Waiver of Partition
The Partners hereby waive any right of partition or any right to take any
other action which otherwise might be available to them for the purpose of
severing their relationship with the Partnership or their interest in the assets
held by the Partnership from the interest of the other Partners.
Section 11.3 Notification
Any Notification, in order to be effective, shall be sent by registered or
certified mail, postage prepaid, if to a Partner, to the address of the Partner
set forth in the books and records of the Partnership, and if to the
Partnership, to the principal place of business of the Partnership set forth in
Section 2.2 (unless Notification of a change of the principal office is given),
the date of registry thereof or the date of the certification thereof being
deemed the date of receipt of Notification; provided, however, that any written
communication sent to a Partner or to the Partnership and actually received by
such Person shall constitute Notification for all purposes of this Agreement.
Section 11.4 Word Meanings
In this Agreement, the singular shall include the plural and the masculine
gender shall include the feminine and neuter and vice versa, unless the context
otherwise requires.
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Section 11.5 Binding Provisions
The covenants and agreements contained herein shall be binding upon, and
inure to the benefit of the heirs, personal representatives, successors and
assigns of the respective parties hereto.
Section 11.6 Applicable Law
This Agreement shall be construed and enforced in accordance with the laws
of the State of Delaware, without regard to principles of conflict of laws.
Section 11.7 Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original as against any party whose signature appears
thereon, and all of which shall together constitute one and the same instrument.
This Agreement shall become binding upon the date hereof. Each Additional or
Successor General Partner shall become a signatory hereof by signing such number
of counterparts of this Agreement and such other instrument or instruments, and
in such manner as the General Partners shall determine, and by so signing, shall
be deemed to have adopted and to have agreed to be bound by all the provisions
of this Agreement; provided, however, that no -such counterpart shall be binding
until-it shall have been signed by the Administrative General Partner.
Section 11.8 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 or
contrary to any existing or future law, such invalidity shall not impair the
operation of or affect those portions of this Agreement which are valid.
Section 11.9 Paragraph Titles
Paragraph titles are for descriptive purposes only and shall not control or
alter the meaning of this Agreement as set forth in the text.
Section 11.10 Entire Agreement
This Agreement and the exhibits and documents referred to herein constitute
the entire understanding and agreement among the parties hereto with respect to
the subject matter hereof, and supersede all prior and contemporaneous
agreements and understandings, inducements or conditions, express or implied,
oral or written, except as herein contained. This Agreement may not be modified
or amended other than by an agreement in writing.
Section 11.11 Amendments
A. In addition to the amendments contemplated elsewhere in this Agreement,
this Agreement may be amended with the written consent of all of the General
Partners then entitled to act thereon and the Consent of the Class A Limited
Partners; provided, however, that any amendment to change this Section 11.11
must be approved in writing by all Partners.
B. In addition to the amendments contemplated in Section 11.11A, the General
Partners may also make such amendments to this Agreement, in their reasonably
exercised discretion, without the Consent of the Class A Limited Partners, as
are necessary:
(i) To admit Additional Limited Partners and Substitute Limited Partners
to the Partnership in accordance with the terms of this Agreement;
(ii) To -make ministerial changes to this Agreement that do not affect
the substantive rights of the Partners, such as, without limitation, a
change in the name of the Partnership, the name or address of the resident
agent or address of the Partnership's principal office.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day of August, 1986.
GENERAL PARTNERS
WITNESS:
_______________________________________ ___________________________(SEAL)
Xxxx X. Xxxxxxxx,
the Development General Partner
ATTEST: XXXXX EQUITY INCOME PROPERTIES, INC.,
the Administrative General Partner
_______________________________________ By: (SEAL)
Xxxx X. Xxxxx, President
CLASS A LIMITED PARTNERS
ATTEST: XXXXX EQUITY INCOME PROPERTIES, INC.,
Attorney-in-Fact for each of the Class A Limited
Partners now and hereafter admitted as Class A Lim-
ited Partners of the Partnership pursuant to powers of
attorney now and hereafter executed in favor-of, and
delivered to, the Administrative General Partner.
_______________________________________ By: (SEAL)
Xxxx X. Xxxxx, President
CLASS B LIMITED PARTNERS
WITNESS:
_______________________________________ (SEAL)
Xxxx X. Xxxxxxxx
WITNESS: REALTY ASSOCIATES 1986 LIMITED
PARTNERSHIP
_______________________________________ By: (SEAL)
Authorized Signatory
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SCHEDULE A
Capital
Contribution
General Partners
Administrative General Partner
Xxxxx Equity Income Properties, Inc. $ 50.00
000 Xxxx Xxxxxxx Xxxxxx, 0xx xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Development General Partner
Xxxx X. Xxxxxxxx $ 50.00
0000 Xxxxx Xxxxx Xxxx $100.00
Xxxxxxxx, Xxxxxxx 00000
Class A Limited Partners
To be admitted. _________
$000.00
Class B Limited Partners
Xxxx X. Xxxxxxxx $ 75.00
0000 Xxxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Realty Associates 1986
Limited Partnership $ 25.00
000 Xxxx Xxxxxxx Xxxxxx, 0xx floor $100.00
Xxxxxxxxx, Xxxxxxxx 00000
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