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EX 10.31
MHC FINANCING LIMITED PARTNERSHIP TWO
AGREEMENT OF LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP (this "Agreement") has been executed
and delivered as of the seventeenth day of December, 1997, by and between
MHC-QRS TWO, INC. (the "General Partner"), a Delaware corporation, and MHC
OPERATING LIMITED PARTNERSHIP (the "Limited Partner"), an Illinois limited
partnership (the General Partner and the Limited Partner being each a "Partner"
and collectively the "Partners").
RECITALS
The General Partner and the Limited Partner are desirous of forming a
limited partnership in accordance with the Delaware Revised Uniform Limited
Partnership Act and this Agreement, for purposes of owning manufactured housing
community properties (each a "Property" and collectively the "Properties"), as
identified on Exhibit A hereto.
THEREFORE, in consideration of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Partners agree as follows:
1. FORMATION OF PARTNERSHIP. The General Partner and the Limited Partner
do hereby form a Delaware limited partnership according to all of the terms and
provisions of this Agreement and otherwise in accordance with the Act. The
General Partner is the sole general partner and the Limited Partner is the sole
limited partner of the Partnership. The Partnership name shall be "MHC
Financing Limited Partnership Two", but the General Partner may from time to
time change the name of the Partnership or may adopt such trade or fictitious
names as it may determine. No Partner has any interest in any Partnership
property but the interests of all Partners in the Partnership are, for all
purposes, personal property.
2. DEFINITIONS.
2.1 As used in this Agreement, the following terms shall have the meanings
set forth respectively after each:
"Act" shall mean the Delaware Revised Uniform Limited Partnership Act, as
amended from time to time, and any successor statute.
"Adjusted Capital Account Deficit" shall mean, at any time, the then
balance in the Capital Account of a Partner, after giving effect to the
following adjustments:
(i) credit to such Capital Account any amounts that such
Partner is deemed obligated to restore as described in the
penultimate sentences of Regulations Section 1.704-2(g)(1) and
Regulations Section 1.704-2(i)(5), or any successor provisions;
and
(ii) debit to such Capital Account the items described in
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
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"Agreement" shall mean this Agreement of Limited Partnership, as it may be
amended from time to time.
"Bankruptcy" of a Partner shall mean (a) the filing by a Partner of a
voluntary petition seeking liquidation, reorganization, arrangement or
readjustment, in any form, of its debts under Title 11 of the United States
Code (or corresponding provisions of future laws) or any other Federal or state
insolvency law, or a Partner's filing an answer consenting to or acquiescing in
any such petition, (b) the making by a Partner of any assignment for the
benefit of its creditors or the admission by a Partner in writing of its
inability to pay its debts as they mature, or (c) the expiration of sixty (60)
days after the filing of an involuntary petition under Title 11 of the United
States Code (or corresponding provisions of future laws), seeking an
application for the appointment of a receiver for the assets of a Partner, or
an involuntary petition seeking liquidation, reorganization, arrangement or
readjustment of its debts under any other Federal or state insolvency law,
provided that the same shall not have been vacated, set aside or stayed within
such 60-day period.
"Capital Account" shall mean the capital account maintained by the
Partnership for each Partner as described in Section 3.4 hereof.
"Capital Cash Flow" shall have the meaning provided in Section 8.2 hereof.
"Capital Contribution" shall mean, when used in respect of a Partner, the
initial capital contribution of such Partner as set forth in Section 3.1
hereof and any other amounts of money or the fair market value of other
property contributed by such Partner to the capital of the Partnership pursuant
to the terms of this Agreement, including the Capital Contribution made by any
predecessor holder of the Partnership Interest of such Partner.
"Code" shall mean the Internal Revenue Code of 1986, as the same may be
amended from time to time, and any successor statute.
"Depreciation" shall mean for any fiscal year or portion thereof, an
amount equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such period for Federal income tax
purposes, except that if the Gross Asset Value of an asset differs from its
adjusted basis for Federal income tax purposes at the beginning of such period,
Depreciation shall be an amount that bears the same relationship to such
beginning Gross Asset Value as the depreciation, amortization or cost recovery
deduction in such period for Federal income tax purposes bears to the beginning
adjusted tax basis; provided, however, that if the adjusted basis for Federal
income tax purposes of an asset at the beginning of such period is zero,
Depreciation shall be determined with reference to such beginning Gross Asset
Value using any reasonable method selected by the General Partner.
"General Partner" means MHC-QRS Two, Inc., a Delaware corporation.
"Gross Asset Value" means, with respect to any Partnership asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by
a Partner to the Partnership shall be the gross fair market value
of such asset as determined by the General Partner;
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(ii) The Gross Asset Value of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as
determined by the General Partner, as of the following times: (a)
the acquisition of an additional interest in the Partnership by
any new or existing Partner in exchange for more than a de minimis
Capital Contribution; (b) the distribution by the Partnership to a
Partner of more than a de minimis amount of Partnership property
as consideration for an interest in the Partnership; and (c) the
liquidation of the Partnership within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g); provided, however, that adjustments
pursuant to clauses (a) and (b) above shall be made only if the
General Partner reasonably determines that such adjustments are
necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership;
(iii) The Gross Asset Value of any Partnership asset
distributed to any Partner shall be adjusted to equal the gross
fair market value of such asset on the date of distribution as
determined by the General Partner; and
(iv) The Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the
adjusted basis of such assets pursuant to Code Section 734(b) or
Code Section 743(b), but only to the extent that such adjustments
are taken into account in determining Capital Accounts pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m) and paragraph (vi) of the
definition of Profits and Losses and Section 7.3(G) hereof;
provided, however, that Gross Asset Values shall not be adjusted
pursuant to this paragraph (iv) to the extent the General Partner
determines that an adjustment pursuant to paragraph (ii) above is
necessary or appropriate in connection with a transaction that
would otherwise result in an adjustment pursuant to this paragraph
(iv).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to paragraphs (i), (ii) or (iv) above, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset for purposes of computing Profits and Losses.
"Limited Partner" shall mean MHC Operating Limited Partnership, an
Delaware limited partnership.
"Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(c).
"Operating Cash Flow" shall have the meaning provided in Section 8.1
hereof.
"Partner Nonrecourse Debt" has the meaning set forth in Regulations
Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Regulations Section 1.704-2(i)(2).
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"Partner Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i).
"Partners" shall mean, collectively, the General Partner and the Limited
Partner, or any additional or successor partners of the Partnership. Reference
to a Partner shall be to any one of the Partners.
"Partnership Interest" shall mean the ownership interest of a Partner in
the Partnership at any particular time, including the right of such Partner to
any and all benefits to which such Partner may be entitled as provided in this
Agreement, and to the extent not inconsistent with this Agreement, under the
Act, together with the obligations of such Partner to comply with all of the
terms and provisions of this Agreement and of the Act.
"Partnership Minimum Gain" has the meaning set forth in Regulations
Sections 1.704-2(b) (2) and 1.704-2(d).
"Percentage Interest" of a Partner in the Partnership shall mean the
percentage interest of such Partner as stated in Schedule A hereto, as such
percentage interest may be adjusted from time to time in accordance with the
provisions of this Agreement.
"Profits" and "Losses" shall mean for each fiscal year or portion
thereof, an amount equal to the Partnership's items of taxable income or loss
for such year or period, determined in accordance with section 703(a) of the
Code with the following adjustments:
(i) any income which is exempt from Federal income tax and
not otherwise taken into account in computing Net Profits or Net
Losses shall be added to taxable income or loss;
(ii) any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Section 705(a)(2)(B)
expenditures under Regulations Section 1.704-1(b)(2)(iv)(i) and
not otherwise taken into account in computing Profits or Losses,
will be subtracted from taxable income or loss;
(iii) in the event that the Gross Asset Value of any
Partnership asset is adjusted pursuant to the definition of Gross
Asset Value contained in this Section 2, the amount of such
adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profits and
Losses;
(iv) gain or loss resulting from any disposition of
Partnership assets with respect to which gain or loss is
recognized for Federal income tax purposes shall be computed by
reference to the Gross Asset Value of the property disposed of,
notwithstanding that the adjusted tax basis of such property
differs from its Gross Asset Value;
(v) in lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Depreciation for
such fiscal year or other period;
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(vi) to the extent an adjustment to the adjusted tax basis of
any Partnership asset pursuant to Code Section 734(b) or Code
Section 743(b) is required pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining
Capital Accounts as a result of a distribution other than in
complete liquidation of a Partner's Partnership Interest, the
amount of such adjustment shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the
adjustment decreases the basis of the asset) from the disposition
of the asset and shall be taken into account for purposes of
computing Profits or Losses; and
(vii) any items specially allocated pursuant to Section 7.3
or Section 7.4 hereof shall not be considered in determining
Profits or Losses.
"Regulations" shall mean the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
3. CAPITAL.
3.1 INITIAL CAPITAL. As its initial Capital Contribution to the
Partnership:
(a) the General Partner shall contribute as its Capital
Contribution to the Partnership an amount equal to its Percentage
interest multiplied by the amount from time to time of the Partners'
total Capital Contributions; and
(b) the Limited Partner is contributing all of its right, title and
interest in and to the Properties.
3.2 ADDITIONAL CAPITAL. No Partner shall be assessed or required to
contribute additional funds or other property to the Partnership. Any
additional funds or other property required by the Partnership, as determined
by the General Partner in its sole discretion, may, at the option of the
General Partner and without an obligation to do so, be contributed by the
General Partner as additional Capital Contributions. The General Partner shall
also have the right (but not the obligation) to raise any additional funds
required for the Partnership by loaning the money to the Partnership or by
causing the Partnership to borrow the money needed from third parties, in
either case on such terms and conditions as the General Partner shall deem
appropriate in its sole discretion. If the Partnership borrows the additional
funds, the General Partner may cause one or more of the Partnership's assets to
be encumbered to secure the loan. No Partner shall have the right to
contribute additional Capital Contributions to the Partnership without the
prior written consent of the General Partner.
3.3 CAPITAL ACCOUNTS. A separate capital account ("Capital Account")
shall be maintained for each Partner.
A. To each Partner's Capital Account there shall be credited such
Partner's Capital Contributions, such Partner's distributive share of Profits
and any items in the nature of income or gain which are specially allocated
pursuant to Section 7.3 or Section 7.4 hereof, and the amount of any
Partnership liabilities assumed by such Partner or which are secured by any
Partnership property distributed to such Partner.
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B. To each Partner's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any Partnership property
distributed to such Partner pursuant to any provision of this Agreement, such
Partner's distributive share of Losses and any items in the nature of expenses
or losses which are specially allocated pursuant to Section 7.3 or Section 7.4
hereof, and the amount of any liabilities of such Partner assumed by the
Partnership or which are secured by any property contributed by such Partner to
the Partnership.
C. In the event all or a portion of a Partnership Interest is
transferred in accordance with the terms of this Agreement, the transferee
shall succeed to the Capital Account of the transferor to the extent it relates
to the transferred Partnership interest.
D. In determining the amount of any liability for purposes of Sections
3.4(A) and 3.4(B) hereof, there shall be taken into account Code Section 752(c)
and any other applicable provisions of the Code and Regulations.
E. This Section 3.4 and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a
manner consistent with such Regulations. In the event the General Partner
shall determine that it is prudent to modify the manner in which the Capital
Accounts, or any debits or credits thereto (including, without limitation,
debits or credits relating to liabilities which are secured by contributed or
distributed property or which are assumed by the Partnership, or the Partners)
are computed in order to comply with such Regulations, the General Partner may
make such modification, provided that it is not likely to have a material
effect on the amounts distributed to any Partner pursuant to Section 14 hereof
upon the dissolution of the Partnership. The General Partner also shall (i)
make any adjustments that are necessary or appropriate to maintain equality
between the Capital Accounts of the Partners and the amount of Partnership
capital reflected on the Partnership's balance sheet, as computed for book
purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(g), and (ii)
make any appropriate modifications in the event unanticipated events (for
example, the acquisition by the Partnership of oil or gas properties) might
otherwise cause this Agreement not to comply with Regulations Section
1.704-1(b).
3.4 INTEREST ON AND RETURN OF CAPITAL.
A. No Partner shall be entitled to any interest on its Capital
Account or on its contributions to the capital of the Partnership.
B. Except as expressly provided for in this Agreement, no Partner shall
have the right to demand or to receive the return of all or any part of his
Capital Contributions to the Partnership and there shall be no priority of one
Partner over the other as to the return of Capital Contributions or withdrawals
or distributions of profits. No Partner shall have the right to demand or
receive property other than cash in return for the Capital Contributions of
such Partner to the Partnership.
3.5 NEGATIVE CAPITAL ACCOUNTS. No Partner shall be required to pay to the
Partnership any deficit balance which may exist in its Capital Account;
provided, however, that upon dissolution of the Partnership the General Partner
shall be obligated to pay to the Partnership any such deficit balance to the
extent of the lesser of (i) such deficit balance and (ii)
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the excess of 1.01% of the total Capital Contributions of the Limited
Partner over all Capital Contributions previously made by the General Partner.
3.6 LIMIT ON CONTRIBUTIONS AND OBLIGATIONS OF PARTNERS. Neither the
Limited Partner nor the General Partner shall be required to make any
additional advances or Capital Contributions to or on behalf of the Partnership
or to endorse any obligations of the Partnership.
4. PRINCIPAL OFFICE. The principal office of the Partnership shall be
located at Xxx Xxxxx Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000, or at
such other place as the General Partner may designate after giving written
notice of such designation to the other Partners.
5. PURPOSE AND POWERS OF PARTNERSHIP.
A. The purposes of the Partnership shall be to acquire, own, operate,
manage, develop, redevelop, finance, refinance, sell, lease and otherwise deal
with the Properties and assets related thereto, and interests therein, whether
directly or indirectly, alone or in association with others. The purposes of
the Partnership include, but are not limited to:
(i) acquiring, developing, operating, leasing and managing the
Properties and conducting any other lawful business relating thereto;
(ii) mortgaging, exchanging, selling, encumbering or otherwise
disposing of any one or more of the Properties or any interest therein;
(iii) constructing, reconstructing, altering, modifying and
subtracting from or adding to any one or more of the Properties or any
part thereof; and
(iv) in general, the making of any investments or expenditures, the
borrowing and lending of money and the taking of any and all other
actions which are incidental or related to any of the purposes recited
above.
It is agreed that each of the foregoing is an ordinary part of the
Partnership's business and affairs. Property may be acquired subject to, or by
assuming, the liens, encumbrances, and other title exceptions which affect such
property.
B. The Partnership purposes may be accomplished by taking any action
which is not prohibited under the Act and which is related to the acquisition,
ownership, development, improvement, operation, management, financing, leasing,
exchanging, selling or otherwise encumbering or disposing of all or any portion
of the assets of the Partnership, or any interest therein.
6. TERM. The term of the Partnership shall continue until the Partnership
is terminated upon the occurrence of an event described in Section 14.1 below.
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7. ALLOCATIONS.
7.1 PROFITS. After giving effect to the special allocations set forth in
Section 7.3 and 7.4 hereof, Profits for any fiscal year shall be allocated
among the Partners in proportion to their respective Percentage Interests.
7.2 LOSSES
A. After giving effect to the special allocations set forth in
Section 7.3 and 7.4 hereof, Losses for any fiscal year shall be allocated
among the Partners in proportion to their respective Percentage Interests.
B. The Losses allocated pursuant to Section 7.2(A) hereof shall not
exceed the maximum amount of Losses that can be so allocated without causing the
Limited Partner to have an Adjusted Capital Account Deficit at the end of any
fiscal year. All Losses in excess of the limitations set forth in this Section
7.2(B) shall be allocated to the General Partner.
7.3 SPECIAL ALLOCATIONS. The following special allocations shall be made
in the following order:
A. MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Regulations Section 1.704-2(f), notwithstanding any other provision of this
Section 7, if there is a net decrease in Partnership Minimum Gain during any
fiscal year, each Partner shall be specially allocated items of Partnership
income and gain for such fiscal year (and, if necessary, subsequent fiscal
years) in an amount equal to such Partner's share of the net decrease in
Partnership Minimum Gain, determined in accordance with Regulations Section
1.704-2(g). The items to be so allocated shall be determined in accordance
with Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 7.3(A)
is intended to comply with the minimum gain chargeback requirement in Section
1.704-2(f) of the Regulations and shall be interpreted consistently therewith.
B. PARTNER MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Regulations Section 1.704-2(i)(4), notwithstanding any other provision of this
Section 7, if there is a net decrease in Partner Nonrecourse Debt Minimum Gain
attributable to a Partner Nonrecourse Debt during any Partnership fiscal year,
each Partner who has a share of the Partner Nonrecourse Debt Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(5), shall be specially allocated items of
Partnership income and gain for such fiscal year (and, if necessary, subsequent
fiscal years) in an amount equal to such Partner's share of the net decrease in
Partner Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with Regulations Section 1.704-2(i)(4). The
items to be so allocated shall be determined in accordance with Regulations
Sections 1.704-2(i)(4) and 1.704-2(i)(2). This Section 7.3(B) is intended to
comply with the minimum gain chargeback requirement in Regulations Section
1.704-2(i)(4) and shall be interpreted consistently therewith.
C. QUALIFIED INCOME OFFSET. In the event any Partner unexpectedly
receives any adjustments, allocations, or distributions described in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5),
or Section 1.704-1(b)(2)(ii)(d)(6), items of
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Partnership income and gain shall be specially allocated to each such
Partner in an amount and manner sufficient to eliminate, to the extent required
by the Regulations, the Adjusted Capital Account Deficit of such Partner as
quickly as possible, provided that an allocation pursuant to this Section
7.3(C) shall be made only if and to the extent that such Partner would have an
Adjusted Capital Account Deficit after all other allocations provided for this
Section 7 have been tentatively made, as if this Section 7.3(C) were not in the
Agreement.
X. XXXXX INCOME ALLOCATION. In the event any Partner has a deficit
Capital Account at the end of any Partnership fiscal year which is in excess of
the sum of (i) the amount such Partner is obligated to restore pursuant to any
provision of this Agreement, and (ii) the amount such Partner is deemed to be
obligated to restore pursuant to the penultimate sentences of Regulations
Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Partner shall be
specifically allocated items of Partnership income and gain in the amount of
such excess as quickly as possible, provided that an allocation pursuant to
this Section 7.3(D) shall be made only if and to the extent that such Partner
would have a deficit Capital Account in excess of such sum after other
allocations provided for in this Section 7 have been made as if in Section
7.3(C) hereof and this Section 7.3(D) were not in the Agreement.
E. NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any fiscal year
shall be allocated among the Partners in accordance with their respective
Percentage Interests.
F. PARTNER NONRECOURSE DEDUCTIONS. Any Partner Nonrecourse Deductions
for any fiscal year shall be specially allocated to the Partner who bears the
economic risk of loss with respect to the Partner Nonrecourse Debt to which
such Partner Nonrecourse Deductions are attributable, in accordance with
Regulations Section 1.704-2(i)(1)
G. SECTION 754 ADJUSTMENTS. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Code Section 734(b) or
Code Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining Capital Accounts as the result of a
distribution to a Partner in complete liquidation of his interest in the
Partnership, the amount of such adjustment to Capital Accounts shall be treated
as an item of gain (if the adjustment increases the basis of the asset) or loss
(if the adjustment decreases such basis) and such gain or loss shall be
specifically allocated to the Partners in accordance with their respective
Percentage Interests in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(2) applies, or the Partner to whom such distribution was
made in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
7.4 CURATIVE ALLOCATIONS. The allocations set forth in Sections 7.2(B),
7.3(A), 7.3(B), 7.3(C), 7.3(D), 7.3(E), 7.3(F) and 7.3(G) hereof (the
"Regulatory Allocations") are intended to comply with certain requirements of
the Regulations under Sections 704(b) and 514(c)(9)(E) of the Code. It is the
intent of the Partners that, to the extent possible, all Regulatory
Allocations shall be offset either with other Regulatory Allocations or with
special allocations of other items of Partnership income, gain, loss, or
deduction pursuant to this Section 7.4. Therefore, notwithstanding any other
provision of this Section 7 (other than the Regulatory Allocations), the
General Partner shall make such offsetting special allocations of Partnership
income, gain, loss, or deduction in whatever manner, it determines appropriate
so that, after such offsetting allocations are made, each Partner's Capital
Account balance is, to
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the extent possible, equal to the Capital Account balance such Partner
would have had if the Regulatory Allocations were not part of the Agreement and
all Partnership items were allocated pursuant to Sections 7.1 and 7.2(A), and
so that, to the greatest extent possible, such allocations comply with the
Regulations under Code Section 514(c)(9)(E). in exercising its discretion under
this Section 7.4, the General Partner shall take into account future Regulatory
Allocations under Sections 7.3(A) and 7.3(B) that, although not yet made, are
likely to offset other Regulatory Allocations previously made under Sections
7.3(E) and 7.3(F).
7.5 OTHER ALLOCATION RULES.
A. For purposes of determining the Profits, Losses, or any other items
allocable to any period, Profits, Losses, and any such other items shall be
determined in a daily, monthly, or other basis, as determined by the General
Partner using any permissible method under Code Section 706 and the Regulations
thereunder.
B. The Partners are aware of the income tax consequences of the
allocations made by this Section 7 and hereby agree to be bound by the
provisions of this Section 7 in reporting their shares of Partnership income
and loss for tax purposes.
C. Solely for purposes of determining a Partner's proportionate share
of the "excess nonrecourse liabilities" of the Partnership within the meaning of
Regulations Section 1.752-3(a)(3), the Partners' interests in Partnership
profits are equal to their respective Percentage Interests.
7.6 TAX ALLOCATIONS: CODE SECTION 704(C).
A. Income, gain, loss, and deduction with respect to any property
contributed to the capital of the Partnership shall, solely for tax purposes,
be allocated among the Partners so as to take account of any variation between
the adjusted basis of such property to the Partnership for federal income tax
purposes and its initial Gross Asset Value in accordance with any permissible
manner or manners under Code Section 704(c) and the Regulations thereunder.
B. In the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to the definition of "Gross Asset Value" contained in Section
2 hereof, subsequent allocations of income gain, loss, and deduction with
respect to such asset shall take account of any variation between the adjusted
basis of such asset for federal income tax purposes and its Gross Asset Value
in the same manner or manners permitted under Code Section 704(c) and the
Regulation thereunder.
C. Any elections or other decisions relating to such allocations
shall be made by the General Partner in any permissible manner under the
Code or the Regulations that the General Partner may elect in its sole
discretion. Allocations pursuant to this Section 7.6 are solely for purposes of
federal, state, and local taxes and shall not affect, or in any way be taken
into account in computing, any Partner's Capital Account or share of Profits,
Losses, other items, or distributions pursuant to any provision in this
Agreement.
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8. CASH AVAILABLE FOR DISTRIBUTION.
8.1 OPERATING CASH FLOW. As used in this Agreement, "Operating Cash Flow"
shall mean and be defined as all cash receipts of the Partnership from whatever
source (but excluding Capital Cash Flow) during the period in question in
excess of all items of Partnership expense (other than non-cash expenses such
as depreciation) and other cash needs of the Partnership, including, without
limitation, amounts paid by the Partnership as principal on debts and advances,
during such period, capital expenditures and any reserves (as determined by the
General Partner) established or increased during such period. Operating Cash
Flow shall be distributed to or for the benefit of the Partners not less
frequently than annually, and shall be distributed to the Partners in
accordance with the respective Percentage Interests of the Partners.
8.2 CAPITAL CASH FLOW. As used in this Agreement, "Capital Cash Flow"
shall mean and be defined as collectively (a) gross proceeds realized in
connection with the sale of any assets of the Partnership, (b) gross financing
or refinancing proceeds, (c) gross condemnation proceeds (excluding
condemnation proceeds applied to restoration of remaining property) and (d)
gross insurance proceeds (excluding rental insurance proceeds or insurance
proceeds applied to restoration of property), less (w) closing costs, (x) the
cost to discharge any Partnership financing encumbering or otherwise associated
with the asset(s) in question, (y) the establishment of reserves (as determined
by the General Partner), and (z) other expenses of the Partnership then due and
owing. Subject to Section 14.2 below, if applicable, Capital Cash Flow shall
be distributed to or for the benefit of the Partners not less frequently than
annually and shall be distributed to the Partners in accordance with the
respective Percentage Interests of the Partners.
8.3 CONSENT TO DISTRIBUTIONS. Each of the Partners hereby consents to the
distributions provided for in this Agreement.
9. MANAGEMENT OF PARTNERSHIP.
9.1 GENERAL PARTNER. The General Partner shall be the sole manager of the
Partnership business, and shall have the right and power to make all decisions
and take any and every action with respect to the property, the business and
affairs of the Partnership and shall have all the rights, power and authority
generally conferred by law, or necessary, advisable or consistent with
accomplishing the purposes of the Partnership. All such decisions or actions
made or taken by the General Partner hereunder shall be binding upon all of the
Partners and the Partnership. The powers of the General Partner to manage the
Partnership business shall include, without limitation, the power and authority
to:
(i) operate any business normal, or customary for the owner of or
investor in manufactured housing community property;
(ii) perform any and all acts necessary or appropriate to the
operation of the Partnership assets, including, but not limited
to, applications for rezoning, objections to rezoning of other
property and the establishment of bank accounts in the name of the
Partnership;
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(iii) procure and maintain with responsible companies such
insurance as may be available in such amounts and covering such
risks as are deemed appropriate by the General Partner;
(iv) take and hold all real, personal and mixed property of
the Partnership in the name of the Partnership;
(v) execute and deliver leases on behalf of and in the name
of the Partnership;
(vi) borrow money, finance and refinance the assets of the
Partnership or any part thereof or interest therein;
(vii) coordinate all accounting and clerical functions of the
Partnership and employ such accountants, lawyers, property
managers, leasing agents and other management or service personnel
as may from time to time be required to carry on the business of
the Partnership; and
(viii) acquire, encumber, sell, lend, lease or otherwise
dispose of any or all of the assets of the Partnership, or any
part thereof or interest therein.
9.2 LIMITATIONS ON POWERS AND AUTHORITIES OF PARTNERS. Notwithstanding
the powers of the General Partner set forth in Section 8.1 above, no Partner
shall have the right or power to do any of the following:
(a) do any act in contravention of this Agreement, or any
amendment hereto;
(b) do any act which would make it impossible to carry on the
ordinary business of the Partnership, except to the extent that
such act is specifically permitted by the terms hereof (it being
understood and agreed that a sale of any or all of the assets of
the Partnership, for example, would be an ordinary part of the
Partnership's business and affairs); or
(c) confess a judgment against the Partnership.
9.3 LIMITED PARTNER. The Limited Partner shall not have any right or
authority to act for or to bind the Partnership and the Limited Partner shall
not participate in the conduct or control of the Partnership's affairs or
business.
9.4 LIABILITY OF GENERAL PARTNER. The General Partner shall not be liable
or accountable, in damages or otherwise, to the Partnership or to any other
Partner for any error of judgment or for any mistakes of fact or law or for
anything which it may do or refrain from doing hereafter in connection with the
business and affairs of the Partnership except (i) in the case of fraud,
willful misconduct (such as an intentional breach of fiduciary duty or an
intentional breach of this Agreement) or gross negligence, and (ii) for other
breaches of this Agreement, but, subject, to Section 3.5 hereof, the liability
of the General Partner under this clause (ii) shall be limited to its interest
in the Partnership as more particularly provided for in
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Section 9.8 below. The General Partner shall not have any personal liability
for the return of the Limited Partner's capital.
9.5 INDEMNITY. The Partnership shall indemnify and shall hold the General
Partner (and the officers and directors thereof) harmless from any loss or
damage, including without limitation reasonable legal fees and court costs,
incurred by it by reason of anything it may do or refrain from doing hereafter
for and on behalf of the Partnership or in connection with its business or
affairs; provided, however, that (i) the Partnership shall not be required to
indemnify the General Partner (or any officer or director thereof) for any loss
or damage which it might incur as a result of its fraud, willful misconduct or
gross negligence in the performance of its duties hereunder and (ii) this
indemnification shall not relieve the General Partner of its proportionate part
of the obligations of the Partnership as a Partner. In addition, the General
Partner shall be entitled to reimbursement by the Partnership for any amounts
paid by it in satisfaction of indemnification obligations owed by the General
Partner to present or former directors of the General Partner to present or
former directors of the General Partner or its predecessors, as provided for in
or pursuant to the Articles of Incorporation and By-Laws of the General
Partner. The right of indemnification set forth in this Section 9.5 shall be
in addition to any rights to which the person or entity seeking indemnification
may otherwise be entitled and shall inure to the benefit of the successors and
assigns of any such person or entity. No Partner shall be personally liable
with respect to any claim for indemnification pursuant to this Section 9.5, but
such claim shall be satisfied solely out of assets of the Partnership.
9.6 OTHER ACTIVITIES OF PARTNERS AND AGREEMENTS WITH RELATED PARTIES. The
General Partner shall devote its full-time efforts in furtherance of the
Partnership business, it being expressly understood that the General Partner
shall conduct all of its activities with respect to the manufactured housing
community property business exclusively through the Partnership and shall not
conduct or engage in any way in any other business. Except as may otherwise be
agreed to in writing, the Limited Partner, and its affiliates, shall be free to
engage in, to conduct or to participate in any business or activity whatsoever,
including, without limitation, the acquisition, development, management and
exploitation of real and personal property (other than property of the
Partnership), without any accountability, Iiability or obligation whatsoever to
the Partnership or to the General Partner, even if such business or activity
competes with or is enhanced by the business of the Partnership. The General
Partner, in the exercise of its power and authority under this Agreement, may
contract and otherwise deal with or otherwise obligate the Partnership to
entities in which the General Partner, or any one or more of the officers,
directors or shareholders of the General Partner may have an ownership other
financial interest, whether direct or indirect.
9.7 OTHER MATTERS CONCERNING THE GENERAL PARTNER.
A. The General Partner shall be protected in relying, acting or
refraining from acting on any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture,
or other paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties.
B. The General Partner may exercise any of the powers granted or
perform any of the duties imposed by this Agreement either directly or through
agents. The General Partner may consult with counsel, accountants, appraisers,
management consultants, investment banks and other consultants selected by it,
each of whom may serve as consultants
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for the Partnership. An opinion by any consultant, on a matter which the
General Partner believes to be within its professional or expert competence
shall be full and complete protection as to any action taken or omitted by the
General Partner based on the opinion and taken or omitted in good faith. The
General Partner shall not be responsible for the misconduct, negligence, acts
or omissions of any consultant or contractor of the Partnership or to the
General Partner, and shall assume no obligations other than to use due care in
the selection of all consultants and contractors.
C. No mortgagee, grantee, creditor or any other person dealing with the
Partnership shall be required to investigate the authority of the General
Partner or secure the approval of or confirmation by the Limited Partner of any
act of the General Partner in connection with the conduct of the Partnership
business.
D. The General Partner may retain such persons or entities as it shall
determine (including the General Partner or any entity in which the General
Partner shall have an interest or with which it is affiliated) to provide
services to or on behalf of the Partnership. The General Partner shall be
entitled to reimbursement from the Partnership for its out-of-pocket expenses
(including, without limitation, amounts paid or payable by the General Partner
or any entity in which the General Partner shall have an interest or with which
it is affiliated) incurred in connection with Partnership business. Such
expenses shall be deemed to include those expenses required in connection with
the administration of the Partnership such as the maintenance of Partnership
books and records, management of the Partnership property and assets and
preparation of information respecting the Partnership needed by the Partners in
the preparation of their individual tax returns.
9.8 PARTNER EXCULPATION. Subject to Section 3.5 hereof except for fraud,
willful misconduct and gross negligence, no Partner shall have any personal
liability whatever, whether to the Partnership or to the other Partner, for the
debts or liabilities of the Partnership or its obligations hereunder, and the
full recourse of the other Partner shall be limited to the interest of that
Partner in the Partnership. To the fullest extent permitted by law, no
officer, director or shareholder of the General Partner shall be liable to the
Partnership for money damages except for (i) active and deliberate dishonesty
established by a final judgment or (ii) actual receipt of an improper benefit
or profit in money, property or services. Without limitation of the foregoing,
and except for fraud, willful misconduct and gross negligence, no property or
assets of any Partner, other than its interest in the Partnership, shall be
subject to levy, execution or other enforcement procedures for the satisfaction
of any judgment (or other judicial process) in favor of any other Partner(s)
and arising out of, or in connection with, this Agreement. This Agreement is
executed by the officers of each Partner solely as officers of the same and not
in their own individual capacities. No advisor, trustee, director, officer,
partner, employee, beneficiary, shareholder, participant or agent of any
Partner (or of any partner of a Partner) shall be personally liable in any
matter or to any extent under or in connection with this Agreement, and the
Partnership, each Partner, and their respective successors and assigns shall
look solely to the interest of the other Partner in the Partnership for the
payment of any claim or for any performance hereunder.
9.9 GENERAL PARTNER EXPENSES AND LIABILITIES. All costs and expenses
incurred by the General Partner in connection with its activities as the
General Partner hereunder, all costs and expenses incurred by the General
Partner in connection with its continued corporate existence, qualification as
a "qualified REIT subsidiary" under the Code
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and otherwise, and all other liabilities incurred or suffered by the General
Partner in connection with the pursuit of its business and affairs as
contemplated hereunder and in connection herewith, shall be paid (or reimbursed
to the General Partner, if paid by the General Partner) by the Partnership.
10. BANKING. The funds of the Partnership shall be kept in accounts
designated by the General Partner and all withdrawals therefrom shall be made
on such signature or signatures as shall be designated by the General Partner.
11. ACCOUNTING.
11.1 FISCAL YEAR. The fiscal year of the Partnership shall end on the
last day of December of each year, unless another fiscal year end is selected
by the General Partner.
11.2 BOOKS OF ACCOUNT. The Partnership books of account shall be
maintained at the principal office designated in Section 4 above or at such
other locations and by such person or persons as may be designated by the
General Partner. The Partnership shall pay the expense of maintaining its
books of account. Each Partner shall have, during reasonable business hours
and upon reasonable prior notice, access to the books of the Partnership and in
addition, at its expense, shall have the right to copy such books. The General
Partner, at the expense of the Partnership, shall cause to be prepared and
distributed to the Partners annual financial data sufficient to reflect the
status and operations of the Partnership and its assets and to enable each
Partner to file its federal income tax return.
11.3 METHOD OF ACCOUNTING. The Partnership books of account shall be
maintained and kept, and its income, gains, losses and deductions shall be
accounted for, in accordance with sound principles of accounting consistently
applied, or such other method of accounting as may be adopted hereafter by the
General Partner. All elections and options available to the Partnership for
Federal or state income tax purposes shall be taken or rejected by the
Partnership in the sole discretion of the General Partner.
11.4 SECTION 754 ELECTION. In case of a distribution of property made in
the manner provided in Section 734 of the Code (or any similar provision
enacted in lieu thereof), or in the case of a transfer of any interest in the
Partnership permitted by this Agreement made in the manner provided in Section
743 of the Code (or any similar, provision enacted in lieu thereof), the
General Partner, on behalf of the Partnership, may, in its sole discretion,
file an election under Section 754 of the Code (or any similar provision
enacted in lieu thereof) in accordance with the procedures set forth in the
applicable Treasury regulations.
11.5 TAX MATTERS PARTNER. The General Partner is hereby designated the
Tax Matters Partner (hereinafter referred to as the "TMP") of the Partnership
and shall have all the rights and obligations of the TMP under the Code.
11.6 ADMINISTRATIVE ADJUSTMENTS. If the TMP receives notice of a Final
Partnership Administrative Adjustment (the "FPAA") or if a request for an
administrative adjustment made by the TMP is not allowed by the United States
Internal Revenue Service (the "IRS") and the IRS does not notify the TMP of the
beginning of an administrative proceeding with respect to the Partnership's
taxable year to which such request relates (or if the IRS so notifies the TMP
but fails to mail a timely notice of an FPAA), the TMP may, but shall not be
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obligated to, petition a Court for readjustment of partnership items. In the
case of notice of an FPAA, if the TMP determines that, the United States
District Court or Claims Court is the most appropriate forum for such a
petition, the TMP shall notify each person who was a Partner at any time during
the Partnership's taxable year to which the IRS notice relates of the
approximate amount by which its tax liability would be increased (based on such
assumptions as the TMP may in good faith make) if the treatment of partnership
items on his return was made consistent with the treatment of partnership items
on the Partnership's return, as adjusted by the FPAA. Unless each such person
deposits with the TMP, for deposit with IRS, the approximate amount of his
increased tax liability, together with a written agreement to make additional
deposits if required to satisfy the jurisdictional requirements of the Court,
within thirty days after the TMP's notice to such person, the TMP shall not
file a petition in such Court. Instead, the TMP may, but shall not be
obligated to, file a petition in the United States Tax Court.
12. TRANSFERS OF PARTNERSHIP INTERESTS. In no event may any Partner
assign, sell, transfer, pledge, hypothecate or otherwise dispose of all or any
portion of its Partnership Interest, except by operation of law. Any purported
assignment, sale, transfer, pledge, hypothecation or other disposition shall be
void ab initio.
13. DEATH, LEGAL INCOMPETENCY, ETC. OF A LIMITED PARTNER. The death,
legal incompetency, insolvency, dissolution or Bankruptcy of a Limited Partner
shall not dissolve or terminate the Partnership.
14. TERMINATION, LIQUIDATION AND DISSOLUTION OF PARTNERSHIP.
14.1 TERMINATION EVENTS. The Partnership shall be dissolved and its
affairs wound up in the manner hereinafter provided upon the earliest to occur
of the following events:
(a) December 31, 2080; or
(b) the agreement of all Partners that the Partnership
should be dissolved.
14.2 METHOD OF LIQUIDATION. Upon the happening of any of the events
specified in Section 14.1 above, the General Partner (or if there be no General
Partner, a liquidating trustee selected by the Limited Partner) shall
immediately commence to wind up the Partnership's affairs and shall liquidate
the assets of the Partnership as promptly as possible, unless the General
Partner, or the liquidating trustee, shall determine that an immediate sale of
Partnership assets would cause undue loss to the Partnership), in which event
the liquidation may be deferred for a reasonable time. The Partners shall
continue to share Operating Cash Flow, Capital Cash Flow, Profits and Losses
during the period of liquidation in the same proportions as before dissolution.
The proceeds from liquidation of the Partnership, shall be applied in the
order of priority as follows:
(a) Debts of the Partnership, including repayment of principal and
interest on loans and advances made by the General Partner pursuant to
Section 3.2 above; then
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(b) To the establishment of any reserves deemed necessary or
appropriate by the General Partner, or by the person(s) winding up
the affairs of the Partnership in the event there is no remaining
General Partner of the Partnership, for any contingent or
unforeseen Iiabilities or obligations of the Partnership. Such
reserves established hereunder shall be held for the purpose of
paying any such contingent or unforeseen liabilities or
obligations and, at the expiration of such period as the General
Partner, or such person(s) deems advisable, the balance of such
reserves shall be distributed in the manner provided hereinafter
in this Section 14.2 as though such reserves had been distributed
contemporaneously with the other funds distributed hereunder;
(c) Then, to the Partners in accordance with their respective
Capital Account balances, after giving effect to all
contributions, distributions and allocations for all periods.
14.3 DATE OF TERMINATION. The Partnership shall be terminated when all
notes received in connection with such disposition have been paid and all of
the cash or property available for application and distribution under Section
14.2 above (including reserves) shall have been applied and distributed in
accordance therewith.
15. MISCELLANEOUS.
15.1 NOTICES. Any notice, election or other communication provided for or
required by this Agreement shall be in writing and shall be deemed to have been
given when delivered by hand or by telecopy or other facsimile transmission,
the first business day after sent by overnight courier (such as Federal
Express), or on the second business day after deposit in the United States
Mail, certified or registered, return receipt requested, postage prepaid,
properly addressed to the Partner to whom such notice is intended to be given
at the address for the Partner set forth on the signature pages of this
Agreement, or at such other address as such person may have previously
furnished in writing to the Partnership and each Partner with copies to:
Manufacturted Home Communities, Inc.
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
15.2 MODIFICATIONS. No change or modification of this Agreement shall be
valid or binding upon the Partners, nor shall any waiver of any term or
condition in the future, unless such change or modification or waiver shall be
in writing and signed by all of the Partners, except as provided to the
contrary in this Agreement.
15.3 SUCCESSORS AND ASSIGNS. Any person acquiring or claiming an interest
in the Partnership, in any manner whatsoever, shall be subject to and bound by
all of the terms, conditions and obligations of this Agreement to which his
predecessor-in-interest was subject or bound, without regard to whether such a
person has executed a counterpart hereof or any other document contemplated
hereby. No person, including the legal representative, heir or legatee
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of a deceased Partner, shall have any rights or obligations greater than
those set forth in this Agreement, and no person shall acquire an interest in
the Partnership or become a Partner thereof except as expressly permitted by
and pursuant to the terms of this Agreement. Subject to the foregoing, and the
provisions of Section 12 above, this Agreement shall be binding upon and inure
to the benefit of the Partners and their respective successors, assigns, heirs,
legal representatives, executors and administrators.
15.4 DUPLICATE ORIGINALS. For the convenience of the Partners, any number
of counterparts hereof may be executed, and each such counterpart shall be
deemed to be an original instrument, and all of which taken together shall
constitute one agreement.
15.5 CONSTRUCTION. The titles of the Sections and subsections herein have
been inserted as a matter of convenience of reference only and shall not
control or affect the meaning or construction of any of the terms or provisions
herein.
15.6 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Delaware. Except to the extent the Act is inconsistent with the
provisions of this Agreement, the provisions of such Act shall apply to the
Partnership.
15.7 OTHER INSTRUMENTS. The parties hereto covenant and agree that they
will execute such other and further instruments and documents as, in the
opinion of the General Partner, are or may become necessary or desirable to
effectuate and carry out the Partnership as provided for by this Agreement.
15.8 LEGAL CONSTRUCTION. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
15.9 GENDER. Whenever the context shall so require, all words herein in
any gender shall be deemed to include the masculine, feminine or neuter gender,
all singular words shall include the plural, and all plural words shall include
the singular.
15.10 PRIOR AGREEMENTS SUPERSEDED. This Agreement supersedes any prior
understandings or written or oral agreements amongst the Partners, or any of
them, respecting the within subject matter and contains the entire
understanding amongst the Partners with respect thereto.
15.11 NO THIRD PARTY BENEFICIARIES. The terms and provisions of this
Agreement are for the exclusive use and benefit of the General Partner and the
Limited Partner and shall not inure to the benefit of any other person or
entity.
15.12 WAIVER. No consent or waiver, express or implied, by any Partner to
or of any breach or default by any other Partner in the performance by such
other Partner of its obligations hereunder shall be deemed or construed to be a
consent to or waiver of any other breach or default in the performance by such
other Partner of the same or any other obligations of such Partner hereunder.
Failure on the part of any Partner to complain of any act or failure to act on
the part of any other Partner or to declare any other Partner in default,
irrespective of
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how long such failure continues, shall not constitute a waiver by such Partner
of its rights hereunder.
15.13 TIME OF ESSENCE. Time is hereby expressly made of the essence with
respect to the performance by the parties of their respective obligations under
this Agreement.
15.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, which when taken together, shall constitute but one original.
IN WITNESS WHEREOF, this Agreement has been executed and sworn to as of
the day and year first above written by the General Partner and the Limited
Partner.
PERCENTAGE INTEREST GENERAL PARTNER
------------------- ---------------
1% MHC-QRS TWO, INC., a Delaware corporation
By: /s/ Xxxxx Kellcher
-----------------------------------------
Title: Exec. VP/Genl. Counsel
LIMITED PARTNER
---------------
99% MHC OPERATING LIMITED PARTNERSHIP, an Illinois
limited partnership, by its sole general partner:
Manufactured Home Communities, Inc., a
Maryland corporation
By: /s/ Xxxxx Kellcher
-----------------------------------------
Title: Exec. VP/Genl. Counsel
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EXHIBIT A
Property State
-------- -----
Em Xx Xx Arizona
Fairview Manor Arizona
Mesa Regal Arizona
Colony Park California
Laguna Lake (undivided 9.4% interest) California
Laguna Lake (undivided 44.15% interest) California
Rancho Mesa California
Bear Creek Village Colorado
Carriage Cove Florida
Country Xxxxxxx Florida
Hillcrest Florida
Holiday Ranch Florida
Indian Oaks Florida
Pickwick Village Florida
Sherwood Forest Florida
Southern Palms Florida
The Landings Florida
Windmill Manor Florida
Five Seasons Iowa
Creekside Michigan
Boulder Cascade Nevada
Brook Gardens New York
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