EXHIBIT A
LIMITED PARTNERSHIP AGREEMENT
XXXXX-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
TABLE OF CONTENTS
Page
Preliminary Statement ................................................................................... A-3
Article I - Defined Terms ........................................................................... A-3
Article II - Name; Purpose; Term and Certificate .................................................. A-10
Section 2.1 Name; Formation ...................................................................... A-10
Section 2.2 Place of Registered Office ............................................................ A-10
Section 2.3 Purpose ............................................................................... A-10
Section 2.4 Term ................................................................................... A-10
Section 2.5 Recording of Certificate .............................................................. A-10
Article III - Partners; Capital .................................................................... A-10
Section 3.1 General Partners; Assignor Limited Partner; Subordinated Limited Partners ......... ................ A-10
Section 3.2 Unitholders ................................................................................... A-11
Section 3.3 Partnership Capital .................................................................. A-11
Section.3.4 Liability of Partners and Unitholders .............................................. A-12
Article IV - Allocations, Distributions and Applicable Rules ..................................... A-12
Section 4.1 Allocation of Profit or Loss from a Sale ........................................... A-12
Section 4.2 Distribution of Net Proceeds from a Refinancing or Sale ................... A-13
Section 4.3 Distribution of Net Cash Flow and Allocation of Profit and Loss from
Operations ................................................................................... A-13
Section 4.4 Liquidation or Dissolution .......................................................... A-14
Section 4.5 General and Special Rules ........................................................... A-14
Article V - Rights, Powers and Duties of Partners ............................................... A-17
Section 5.1 Management and Control of the Partnership; Tax Matters Partner .................A-17
Section 5.2 Authority of General Partners .............................................................. A-18
Section 5.3 Authority of Limited Partners ..................................................... A-21
Section 5.4 Restrictions on Authority .......................................................... A-21
Section 5.5 Authority of Partners and Affiliated Persons to Deal with Partnership ................................A-22
Section 5.6 Duties and Obligations of the General Partners ........................................... A-23
Section 5.7 Compensation of General Partners ................................................. A-24
Section 5.8 Other Businesses of Partners ...................................................... A-24
Section 5.9 Liability of General Partners and Affiliates to Limited Partners or
Unitholders ............................................................................... A-24
Section 5.10 Indemnification ................................................................ A-25
Article VI - Transferability of a General Partner's Interest .............................. A-25
Section 6.1 Removal, Voluntary Retirement or Withdrawal of a General Partner;
Transfer of Interests .................................................................... A-25
Section 6.2 Election and Admission of Successor or Additional General Partners ....................................A-26
Section 6.3 Events of Withdrawal of a General Partner ..................................... A-26
Section 6.4 Liability of a Withdrawn General Partner ...................................... A-27
Section 6.5 Valuation of Partnership Interest of a General Part .................... A-27
Article VII - Assignment of Assignee Units to Unitholders; Transferability of Limited
Partner Interests and Units ............................................................... A-27
Section 7.1 Assignments of the Assignee Units to Unitholders .............................. A-27
Section 7.2 Transferability of Units ....................................................... A-29
Section 7.3 Death Bankruptcy or Adjudication of Incompetence of a Unitholder or a
Limited Partner ......................................................................... A-29
Section 7.4 Effective Date .................................................................. A-30
Section 7.5 Substitute Limited Partners ................................................... A-30
Section 7.6 Retirement or Withdrawal of a Limited Partner ............................... A-30
Article VIII - Dissolution, Liquidation and Termination of the Partnership ............... X-00
X-0
Section 8.1 Events Causing Dissolution ............................................................. A-30
Section 8.2 Liquidation ............................................................................ A-31
Section 8.3 Capital Contribution Upon Dissolution ................................................ A-31
Article IX - Certain Payments to the General Partners and Affiliates ............................ A-32
Section 9.1 Reimbursement of Certain Costs and Expenses of the General Partners and
Affiliates ....................................................................................... A-32
Section 9.2 Fees ................................................................................... A-33
Article X - Books and Records; Bank Accounts; Reports .............................................. X-00
Xxxxxxx 00.0 Books and Records ..................................................................... A-33
Section 10.2 Bank Accounts ......................................................................... A-34
Section 10.3 Reports ............................................................................... X-00
Xxxxxxx 00.0 Xxxxxxx Tax Elections ................................................................ A-35
Article XI - Meetings of Unitholders ............................................................... A-36
Section 11.1 Calling Meetings ...................................................................... X-00
Xxxxxxx 00.0 Xxxxxx; Procedure .................................................................... X-00
Xxxxxxx 00.0 Right to Vote ........................................................................ A-36
Section 11.4 Proxies; Rules ....................................................................... A-36
Article XII - General Provisions ................................................................... X-00
Xxxxxxx 00.0 Xxxxxxxxxxx of Administrative General Partner as Attorney-in-Fact ............................ X-00
Xxxxxxx 00.0 Xxxxxx of Partition ................................................................ A-37
Section 12.3 Notification ......................................................................... A-37
Section 12.4 Word Meanings ........................................................................ A-37
Section 12.5 Binding Provisions ................................................................... X-00
Xxxxxxx 00.0 Applicable Law ......................................................................... X-00
Xxxxxxx 00.0 Xxxxxxxxxxxx ...........:................. ........................ X-00
Xxxxxxx 00.0 Separability of Provisions ........................................................... X-00
Xxxxxxx 00.0 Xxxxxxxxx Titles ...................................................................... A-38
Section 12.10 Entire Agreement ..................................................................... A-38
Section 12.11 Amendments ........................................................................... A-38
Signatures .............................................................................................. A-39
Schedule A .............................................................................................. A-41
XXXXX-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
AGREEMENT OF LIMITED PARTNERSHIP
PRELIMINARY STATEMENT
THIS AGREEMENT OF LIMITED PARTNERSHIP, dated as of June 1, 1987, is by and
among Xxxxx-Benchmark AGP, Inc., a Maryland corporation, as the Administrative
General Partner, Benchmark Equities, Inc., an Ohio corporation, as the
Development General Partner, Realty Associates 1987 Limited Partnership, a
Maryland limited partnership, and Benchmark Communities, Inc., an Ohio
corporation, as Subordinated Limited Partners, and Xxxxx-Benchmark Holding Co.,
Inc., a Maryland corporation, as the Assignor Limited Partner. WHEREAS, the
General Partners, the Subordinated Limited Partners, and the Assignor Limited
Partner desire to form Xxxxx-Benchmark Properties Limited Partnership (the
"Partnership"), purse- ant to the Delaware Revised Uniform Limited Partnership
Act.
NOW, THEREFORE, in consideration of the mutual promises made herein, the
parties hereto, 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.
"Accountants" means such nationally recognized firm of independent
certified public accountants as shall be engaged from time to time by the
General Partners on behalf of the Partnership.
"Acquisition Expenses" means expenses, including, but not limited to, legal
fees and expenses, travel and communications expenses, costs of appraisals,
non-refundable option payments on property not acquired, accounting fees and
expenses, title insurance, and miscellaneous expenses related to selection and
acquisition of investments, whether or not acquired.
"Acquisition Fees" means the total of all fees and commissions paid by any
party in connection with the selection, purchase or development of, or
investment in, any Property by the Partnership, including, without limitation,
any real estate commission, selection fee, non-recurring management fee,
development fee, or any fee of a similar nature, however designated.
"Act" means the Delaware Revised Uniform Limited Partnership Act (6
DEL.C.ss.17-101 et. seq.) as amended or modified from time to time. "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.
"Adjusted Capital Balance" of a Partner or a Unitholder means the Capital
Contribution of the Partner or the Assignor Limited Partner made on behalf of a
Unitholder, less any Net Proceeds of Sale or Refinancing actually distributed to
the Partner or Unitholder (other than that portion, if any, which is payment of
an unpaid Cumulative Return), as provided in Article IV herein, at the time of
reference thereto.
"Administrative General Partner" means Xxxxx-Benchmark AGP, 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
A-3
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.
"Assigned Limited Partnership Interest" means a Partnership Interest which
is credited to the Assignor Limited Partner on the books and records of the
Partnership in respect of a purchase of one Unit by a Unitholder. Each Assigned
Limited Partnership Interest represents a contribution to the capital of the
Partnership equal to $25.
"Assignee Units" means the ownership interests of a Unitholder in the
Partnership at any particular time, including the right of such Unitholder to
any and all benefits to which a Unitholder may be entitled as provided in this
Agreement. The ownership interests of the Unitholders in the Partnership are
sometimes referred to herein as "Units".
"Assignor Limited Partner" means Xxxxx-Benchmark Holding Co., Inc. which
will (i) own any Assigned Limited Partnership Interests issued pursuant to
Sections 3.2 and 7.1 hereof, and (ii) transfer and assign to those Persons who
acquire Units all of its rights and interest in Assigned Limited Partnership
Interests in accordance with Sections 3.2 and 7.1 hereof.
"Benchmark Homes, Inc." means an Affiliate of the Development General
Partner that will perform certain services for the Partnership pursuant to the
Development Agreements, as more fully described in the Prospectus. "Capital
Account" means (i) the separate account maintained and adjusted on the books and
records of the Partnership for each Partner and (ii) the separate subaccount of
the Capital Account of the Assignor Limited Partner maintained and adjusted for
each Unitholder. Each Partner's and Unitholder'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)). Each Partner's or
Unitholder'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
or Unitholder 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 losses disallowed under Section 267(a)(1) or
707(b) of the Code, and Section 709(a) syndication expenditures applied to
reduce the Capital Accounts of the Partners or Unitholders to whom such
expenditures are allocable at the time such expenditures are paid or incurred).
Each Partner's and Unitholder's Capital Account shall also be adjusted pursuant
to Sections 4.4 and 4.5 hereof and as required by the Income Tax Regulations for
Section 704 of the Code. Any questions concerning a Partner's or Unitholder'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. For purposes of this paragraph, a Partner
or Unitholder who has more than one Partnership Interest or Unit, as the case
may be, shall have a single Capital Account that reflects all of his Partnership
Interests and Units, regardless of the class of Interests owned (e.g., general
or limited) and regardless of the time or manner in which the Partnership
Interests and Units were acquired.
"Capital Contribution" means the total amount of cash and the fair market
value of any other assets contributed to the Partnership by a Partner (net of
liabilities assumed by the Partnership and liabilities to which any such
contributed assets are subject) and, with respect to a Unitholder, the Capital
Contribution of the Assignor Limited Partner made on behalf of such Unitholder
(assuming no volume purchase reduction of selling commissions). Any reference in
this Agreement to the Capital Contribution of a then-Partner or Unitholder shall
include a Capital Contribution previously made by any prior Partner or
Unitholder for the Interest or Unit of such then-Partner or then-
A-4
Unitholder, except to the extent that all or a portion of the Interest or
Unit of any prior Partner or Unitholder shall have been terminated and the
portion so terminated not transferred to a successor Partner or Unitholder.
"Cash Flow Deficit Guaranty Agreement" means that certain agreement to be
entered into by the Partnership pursuant to which Benchmark Communities, Inc.and
Xxxxxx X. Xxxxxx will agree to fund any Partnership Operating Deficits under the
following terms and conditions: (a) the Cash Flow Deficit Guaranty Agreement
will cover Operating Deficits until a period ending two years after the date of
final completion of development of the last phase of the last Property to be
developed; (b) the funding obligation will be limited to $750,000, in the
aggregate at any one time; and (c) any payments made under the Cash Flow Deficit
Guaranty Agreement will be deemed a non-interest bearing loan to the
Partnership, which will be repaid as provided in Article IV.
"Certificate" means the Certificate of Limited Partnership establishing the
Partnership, as filed with the office of the Secretary of State of the State of
Delaware on or about the date of this Agreement, as it may be amended from time
to time in accordance with the terms of this Agreement and the Act.
"Code" means the Internal Revenue Code of 1986, as amended (or any
corresponding provision of succeeding law).
"Consent of the Unitholders" shall mean the affirmative vote of Unitholders
owning more than 50% (or such greater percentage if required by law) of the
outstanding Units.
"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.
"Cumulative Return" means the cumulative, non-compounded annual return
equal to 10% of the Adjusted Capital Balance of each Unitholder commencing on
the closing date of the sale of the Units to such Unitholder. The Cumulative
Return shall be determined on an annual basis, according to the fiscal year of
the Partnership. At the time of a Sale or Refinancing, if any portion of the
Cumulative Return of a Unitholder has not been paid from Net Cash Flow, such
unpaid portion will be added to the Unitholder's priority distribution from the
Net Proceeds of Sale or Refinancing, all as more fully set forth in Article IV.
"Deferred Land Payment" means the $200,000 payment with respect to the
acquisition of the land for each of Property I and Property II as more fully set
forth in the Prospectus (and compound interest accruing thereon at a per annum
rate of 9.5%) that has been deferred under the Land Acquisition Agreements
pertaining to Property I and Property II and which will be paid to Bench- xxxx
Homes, Inc. from the Net Proceeds of Sale or Refinancing, all as more fully set
forth in Article IV.
"Development Agreements" means those certain agreements entered into by the
Partnership and Benchmark Homes, Inc. pursuant to which Benchmark Homes, Inc.
will construct the Properties for and on behalf of the Partnership. "Development
General Partner" means Benchmark Equities, Inc., 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.
"Escrow Agent" means Mercantile-Safe Deposit & Trust Company, or such other
escrow agent chosen by the General Partners to hold funds from Persons who have
subscribed to become Unitholders pending the assignment of Assignee Interests to
them.
A-5
"Family Member" means, with respect to any individual, his spouse,
brothers, sisters, ancestors, and descendants.
"Front-End Fees" means fees and expenses paid by any Person for any
services rendered during the organization or acquisition phase of the
Partnership, including the Organization and Start-Up Fee, the Offering and
Promotional Expenses Reimbursement Allowance, the Selling Commissions, the
Acquisition Expenses, the Acquisition Fees, fees paid to the General Partners
and Affiliates in connection with refinancing, and any other similar fees.
"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 of the Unitholders.
"Guaranties of Timely and Lien-Free Completion" means those certain
agreements to be entered into by the Partnership pursuant to which Benchmark
Communities, Inc. and Xxxxxx X. Xxxxxx will guaranty the timely and lien-free
completion of the development of each Property under the applicable Development
Agreement.
"Interest" or "Partnership 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 the 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.
"Interest Income" means interest income under the Purchase Money Financing
with respect to an installment or other deferred Sale.
"Interest Income Cash" means Net Proceeds from a Sale attributable to an
installment or other deferred Sale.
"Interim Investments" means the short-term investments made with the Net
Proceeds of the Offering until such Net Proceeds of the Offering are disbursed
for acquisition and development of the Properties.
"Land Acquisition Agreements" means those certain agreements to be entered
into by the Partnership and Benchmark Homes, Inc., pursuant to which the
Partnership will acquire from Benchmark Homes, Inc. the parcels of land upon
which will be constructed the Properties.
"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.
"Limited Partnership Interest" means the ownership of the Assignor Limited
Partner and all other Limited Partners in the Partnership.
"Limited Partnership Interest Percentage" in respect of any Unitholder
means the percentage obtained by converting to a percentage the fraction having
the number of Assignee Units owned by such Unitholder as its numerator and
having the number of Assignee Units owned by all Unitholders at the time of
reference thereto as its denominator.
"Majority Vote of the Unitholders" shall mean the affirmative vote of
Unitholders owning more than 50% (or such greater percentage if required by law)
of the outstanding Units.
"Marketing Expenses" means the amount reimbursed to the Property Manager
for costs and expenses incurred in marketing the Properties to prospective
tenants, which amount shall not exceed $100,000 for any Property.
"Maximum Offering Amount" means the total amount of $12,500,000 in Gross
Proceeds of the Offering.
A-6
"Minimum Gain" means with respect to each nonrecourse liability of the
Partnership and subject to certain adjustments pursuant to Income Tax Reg.
ss.1.704-1(b)(4)(iv)(c), the amount of gain (of whatever character), if any,
that would be realized by the Partnership, if the Partnership disposed of (in a
taxable transaction) any of the Properties subject to such liability in full
satisfaction of the liability. For this purpose, only the portion of the
Property's adjusted basis allocated to nonrecourse liabilities of the
Partnership shall be taken into account.
"Minimum Offering Amount" means the amount of $8,000,000 in Gross Proceeds
of the Offering.
"Net Cash Flow" means, with respect to any fiscal period, the excess, if
any, of (i) all cash funds derived from the operations of the Partnership during
such period, including the yield from the Interim Investments and excess cash
reserves deemed distributable by the General Partners pursuant to Section 3.3E
hereof, over (ii) all cash disbursed in the operations of the Partnership during
such period, including cash used to pay, or establish reasonable reserves for,
operating expenses, fees, commissions, debt service and loan repayments (except
for repayment of advances under the Cash Flow Deficit Guaranty Agreement),
improvements, repairs, replacements, contingencies and anticipated obligations,
but without regard to amortization and depreciation. Net Cash Flow shall not
include amounts distributed under Sections 4.1 or 4.2 hereof.
"Net Proceeds of the Offering" means the Gross Proceeds of the Offering
less the Selling Commis- sions, the Organization and Start-Up Fee, and the
Offering and Promotional Expenses Reimbursement Allowance. "Net Proceeds from a
Refinancing" means the gross proceeds to the Partnership of any Refinancing,
less 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 (except for repayment of advances under the Cash Flow
Deficit Guaranty Agreement and payment of the Deferred Land Payments), and the
payment of any reasonable expenses or costs associated with the Refinancing,
including but not limited to, fees, points, or commissions paid to any
unaffiliated Persons.
"Net Proceeds from a Sale" means the gross proceeds to the Partnership of
any Sale, less 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 (except for repayment of advances
under the Cash Flow Deficit Guaranty Agreement and payment of the Deferred Land
Payments), and the payment of any reasonable expenses or costs associated with
the Sale, including but not limited to, fees or real estate brokerage
commissions paid to any unaffiliated Persons.
"Net Proceeds of Sale or Refinancing" means the Net Proceeds from a Sale or
Net Proceeds from a Refinancing, as the case may be.
"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 12.3 of this Agreement.
"Offering" means the offering and sale of Units for a minimum of $8,000,000
and a maximum of $12,500,000, as more fully described in the Prospectus.
"Offering and Promotional Expenses Reimbursement Allowance" means the
allowance paid to the Administrative General Partner equal to 2.5% of the Gross
Proceeds of the Offering, payable at the time the Unitholders are recognized as
such on the books of the Partnership.
"Operating Deficit" means, with respect to any fiscal period, the excess,
if any, of (i) all cash disbursed in the operations of the Partnership during
such period, including cash used to pay, or establish reasonable reserves for,
operating expenses, fees, commissions, debt service and loan repayments,
improvements, repairs, replacements, contingencies and anticipated obligations,
but without regard to amortization and depreciation over (ii) all cash funds
derived from the operations of the Partnership during such period, including the
yield from the Interim Investments and excess cash
A-7
reserves deemed distributable by the General Partners pursuant to Section
3.3E hereof, but excluding Net Proceeds of Sale or Refinancing.
"Organization and Start-Up Fee" means the fee equal to 5.0% of Gross
Proceeds of the Offering paid 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; payable at the time the Unitholders are
recognized as such on the books of the Partnership.
"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 Properties and all incidental
personal property.
"Person" means any individual or Entity. "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 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.
"Properties" mean the apartment projects in Ohio, as described in the
Prospectus, which are to be acquired, developed, owned and operated by the
Partnership, including all replacements thereto and all personal property which
is used in connection therewith. One of the Properties may herein be referred to
as a "Property".
"Property Manager" means Benchmark Properties, Inc. or any Person who is
designated by the General Partners as Property Manager.
"Property Management Agreements" means those certain 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 4.5% of the
monthly gross operating revenues of the Properties, such fee to commence on the
date following achievement of break even operations for a Property on an accrual
basis (after giving effect to the management fee, debt service and other
expenses of the Partnership) for a period of three consecutive months.
"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 it 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.
"Refinancing" means any refinancing of an indebtedness of the Partnership
secured by a Property.
"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
A-8
than business or rental interruption insurance proceeds), but excepting any
borrowing or mortgage financings or refinancings.
"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 the Selling Agent Agreement. "Selling Agent Agreement" means
that certain agreement to be entered into by the Partnership, Alex. Xxxxx Realty
Securities, Inc., the Administrative General Partner, and the DevelopmentGeneral
Partner, 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 (or any portion thereof) of 7.0% of the Gross Proceeds of the Offering
paid to the Selling Agent or reallowed other soliciting dealers for their
efforts in offering the Units. The 7.0% maximum Selling Commissions will be
reduced for volume purchases as specified in the Prospectus.
"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 third 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.
"Subordinated Limited Partner" means any Person who is designated as a
Subordinated Limited Partner on the books and records of the Partnership.
"Substitute Limited Partner" means any Unitholder who has elected to
convert from a Unitholder to a Limited Partner pursuant to Section 7.5 of this
Agreement.
"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 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.
"Unit" means (i) an Assignee Unit representing the assignment by the
Assignor Limited Partner of one Assigned Limited Partnership Interest, and (ii)
the Partnership Interest attributable to one Unit of any Unitholder who has
become a Substitute Limited Partner pursuant to Section 7.5 hereof.
"Unitholder" means (i) any Person who holds an Assignee Unit and is
reflected as a Unitholder on the books and records of the Partnership, and (ii)
any Unitholder who has been admitted to the Partnership as a Substitute Limited
Partner pursuant to Section 7.5 hereof.
"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
A-9
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, as increased or decreased from time to time at the discretion of
the General Partners.
ARTICLE II
NAME; PURPOSE; TERM AND CERTIFICATE
Section 2.1 Name; Formation
The Partners hereby form the limited partnership to be known as
"Xxxxx-Benchmark Properties Limited 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 the
Partnership in the State of Delaware at that address is The Corporation Trust
Company. The Partnership's principal place of business is c/o Benchmark
Equities, Inc., 000 Xxx Xxxxxx, Xxxxxxxxxx, Xxxx 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 Partners and
Unitholders on or before the date of any such change.
Section 2.3 Purpose
The purpose of the Partnership is to acquire, own, develop, maintain,
finance, encumber, 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, 2037, 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 the Certificate 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 to each Partner and Unitholder.
ARTICLE III PARTNERS; CAPITAL
Section 3.1 General Partners; Assignor Limited Partner; Subordinated
Limited Partners The name, address and Capital Contribution of each General
Partner, the Assignor Limited
Partner and the Subordinated Limited Partners are set forth on the
Schedule. Upon the dissolution and termination of the Partnership, each General
Partner, within 90 days after the fiscal year in which the dissolution of the
Partnership occurs, shall make a Capital Contribution to the Partnership in an
amount equal to the lesser of (i) the deficit balance, if any, in its Capital
Account or (ii) its proportionate share of the excess of 2.02% of the Capital
Contributions of the Unitholders and
A-10
Limited Partners (excluding the Assignor Limited Partner) over the Capital
Contributions previously contributed by the General Partners.
Section 3.2 Unitholders
A. The General Partners are authorized to accept orders for Units pursuant
to the Offering if, after the acceptance of such orders, the Capital
Contributions of the Unitholders are not less than the Minimum Offering Amount
and not more than the Maximum Offering Amount; provided, however, that no order
for Units sold as part of the Offering shall be accepted after the Termination
Date of the Offering.
B. All orders for Units shall be received by the Partnership in trust and
deposited in an escrow account with the Escrow Agent until the Minimum Offering
Amount is received, at which time the Escrow Agent shall release the funds to
the Assignor Limited Partner which shall immediately transmit such funds to the
Partnership. Orders for Units prior to the receipt of the Minimum Offering
Amount shall be accepted or rejected by the General Partners within 30 days
after their receipt by the Escrow Agent. Upon accepting an order for a Unit by a
Unitholder and release of a Unitholder's funds to the Partnership, an Assigned
Limited Partnership Interest shall be credited to the Assignor Limited Partner
on the books and records of the Partnership in respect of such Unit and the
Assignor Limited Partner shall assign all of its rights with respect to such
Assigned Limited Partnership Interest to the Unitholder to the extent permitted
by, and in accordance with, the Agreement and applicable law. The Assignor
Limited Partner hereby agrees to exercise any and all rights with respect to
such Assigned Limited Partnership Interest as directed by the Unitholder. At
such times as the General Partners deem practicable and as required by the Act,
the Certificate and this Agreement shall be amended to reflect the ownership by
the Assignor Limited Partner of Assigned Limited Partnership Interests in the
amount of such purchased Units. Any interest earned on moneys paid by
Unitholders during the period such moneys are held in escrow shall be paid to
the Partnership following the release of orders and shall be distributed in
accordance with Section 4.5A hereof. Persons whose orders for Units are rejected
by the General Partners shall be returned their moneys (and interest earned
thereon) forthwith after such rejection. If the Escrow Agent does not receive
orders that are accepted by the General Partners equal to the Minimum Offering
Amount on or before the Termination Date of the Offering, the Escrow Agent shall
promptly return all moneys deposited by subscribers together with any interest
earned on such moneys.
Section 3.3 Partnership Capital
A. Each Partner's and Unitholder's Capital Contribution shall be paid in
cash on or prior to the date of such Partner's admission to the Partnership or
the date of the recognition of the Unitholder on the books and records of the
Partnership.
B. Except to the extent of any interest income earned on a Unitholder's
Capital Contribution while it is held in escrow, and later distributed to such
Unitholder pursuant to Section 4.5A, no Partner or Unitholder shall be paid
interest on any Capital Contribution.
C. Except as otherwise provided in this Agreement, no Partner or Unitholder
shall have the right to withdraw, or receive any return of, his Capital
Contribution prior to December 31, 2037.
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 4.0% of
the Gross Proceeds of the Offering. If in any fiscal quarter, 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 and Unitholders as a portion
of the Partnership's Net Cash Flow. If in any fiscal quarter, the General
Partners determine that the Working Capital Reserves are insufficient in
connection with the Partnership's operations and that such Working Capital
Reserves
A-11
shall be increased, the amount of such increase shall reduce Net Cash Flow.
Upon the Sale or disposition of a Property, any Working Capital Reserves
maintained for such Property may be distributed to Partners and Unitholders or
applied as Working Capital Reserves for other Properties.
Section 3.4 Liability of Partners and Unitholders A. Except as provided in
the Act, no Limited Partner or Unitholder will be personally liable for the
debts, liabilities, contracts, or other obligations of the Partnership. Except
as provided in the Act, no Limited Partner or Unitholder will have any liability
in excess of the capital contributions made to the Partnership, and his share of
the Partnership's assets and undistributed profits. In accordance with Section
17-608 of the Act, (i) if a Limited Partner or a Unitholder has received the
return of any part of his Capital Contribution in violation of the Agreement or
the Act, he shall be liable to the Partnership for a period of six years
thereafter for the amount of the Capital Contribution wrongfully returned, (ii)
if without violating this Agreement, a Limited Partner or a Unitholder receives
a return of any part of his Capital Contribution, then he shall be liable to the
Partnership for a period of one year thereafter for the amount of the returned
contribution, but only to the extent necessary to discharge liabilities to
creditors who extended credit to the Partnership during the period the Capital
Contribution was held by the Partnership and (iii) a Limited Partner or
Unitholder receives a return of his Capital Contribution to the extent that a
distribution to him reduces his share of the fair market value of the assets of
the Partnership below the agreed value of his Capital Contribution that has not
been distributed to him.
B. Except as set forth in 3.4A, no Limited Partner or Unitholder 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 or Unitholder be liable for or have
any obligation to restore any negative balance in his Capital Account.
C. Subject to the provisions of Section 5.9 of this Agreement, no General
Partner shall have any personal liability for the repayment of the Capital
Contribution or the Cumulative Return of any Limited Partner or Unitholder or be
required to repay to the Partnership all or any portion of any negative balance
of the Capital Accounts of the Limited Partners or the Unitholders.
D. Neither the payments made by Benchmark Communities, Inc. or Xxxxxx X.
Xxxxxx under the Cash Flow Deficit Guaranty Agreement nor the Deferred Land
Payments ultimately to be received by Benchmark Homes, Inc. shall constitute a
Capital Contribution of the Development General Partner or be credited to the
Capital Account of the Development General Partner.
ARTICLE IV
ALLOCATIONS, DISTRIBUTIONS AND APPLICABLE RULES
Section 4.1 Allocation of Profit or Loss 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:
(i) First, if one or more Partners or Unitholders has a negative balance in
his Capital Account, to such Partners and Unitholders, in proportion to their
negative Capital Accounts, until all such Capital Accounts have zero balances.
(ii) Second, any Profit not allocated pursuant to Section 4.1A(l) shall be
allocated to the Unitholders until the Capital Account of each Unitholder is
equal to the sum of his Adjusted Capital Balance plus his unpaid Cumulative
Return, if any.
(iii) Third, any remaining Profit shall be allocated 80% to the
Unitholders, 14% to Bench- xxxx Communities, Inc., 4% to Realty Associates 1987
Limited Partnership, 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:
A-12
(i) First, if one or more Partners or Unitholders has a positive Capital
Account, to such Partners or Unitholders, in proportion to their positive
Capital Accounts, until all such positive Capital Accounts have zero balances.
(ii) Any remaining Loss shall be allocated as follows: 80% to the
Unitholders, 14% to Benchmark Communities, Inc., 4% to Realty Associates 1987
Limited Partnership, 1% to the Development General Partner and 1% to the
Administrative General Partner.
Section 4.2 Distribution of Net Proceeds of Sale or Refinancing A. Upon the
Refinancing of any Property or portion thereof, and upon a Sale that does not
constitute a Sale of all or substantially all of the Properties, Net Proceeds
from a Refinancing or Net Proceeds from a Sale, as the case may be, shall be
distributed, credited and applied in the following order of priority:
(i) First, to Benchmark Homes, Inc. to pay the Deferred Land Payment with
respect to the Property or Properties sold or refinanced.
(ii) Second, to Benchmark Communities, Inc. or Xxxxxx X. Xxxxxx to repay
any advances under the Cash Flow Deficit Guaranty Agreement.
(iii) Third, to the Unitholders until each Unitholder has received an
amount equal to the sum of his Adjusted Capital Balance plus his unpaid
Cumulative Return, if any.
(iv) Fourth, any remaining Net Proceeds of Sale or Refinancing shall be
distributed 80% to the Unitholders, 14% to Benchmark Communities, Inc., 4% to
Realty Associates 1987 Limited Partnership, 1% to the Development General
Partner and 1% to the Administrative General Partner. B. Upon the Sale of all or
substantially all of the Properties, Net Proceeds from such Sale, if any, shall
be distributed, credited and applied in the following order of priority:
(i) First, to Benchmark Homes, Inc. to pay the Deferred Land Payments. (ii)
Second, to Benchmark Communities, Inc. or Xxxxxx X. Xxxxxx to repay any advances
under the Cash Flow Deficit Guaranty Agreement. (iii) Third, to the Partners and
Unitholders in proportion to their positive Capital Accounts, after the
allocation of Profit and Loss pursuant to Sections 4.1A and 4.1B, until all such
Capital Accounts have been reduced to zero.
Section 4.3 Distribution of Net Cash Flow and Allocation of Profit and Loss
from Operations A. Net Cash Flow, if any, for each year shall be distributed and
applied by the Partnership in the following order of priority:
(i) First, 98% to the Unitholders, 1% to the Development General Partner,
and 1% to the Administrative General Partner, until each Unitholder has received
an amount equal to 10% of his Adjusted Capital Balance.
(ii) Second, to Benchmark Communities, Inc. or Xxxxxx X. Xxxxxx to repay
any advances under the Cash Flow Deficit Guaranty Agreement. (iii) Third, 98% to
the Unitholders, 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 Unitholders, 1% to the
Administrative General Partner and 1% to the Development General Partner.
A-13
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 Unitholders, and any remaining net proceeds shall be distributed in
proportion to the Capital Accounts of the Partners and Unitholders, determined
after the allocations in Sections 0.xX and 0.xX, unless applicable law shall
otherwise require, in which event the allocations set forth in Sections 0.xX and
4.1B shall be modified to the extent necessary, but only to the extent
necessary, to comply with such applicable law.
B. If the election is made, pursuant to Section 8.2C, to distribute any of
the Partnership Property to the Partners in kind such Partnership Property shall
be applied, based upon 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
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 4.1A
and shall be properly credited or charged to the Capital Accounts of the
Partners.
C. All distributions under this Section 4.4 shall be made by the end of the
taxable year of liquidation of the Partnership or, within 90 days of the date of
liquidation, whichever is later.
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 Unitholders: First, if the Partnership has
realized a savings on Selling Commissions payable by the Partnership with
respect to the purchase of Units by a Unitholder of 4,000 or more Units (as more
fully set forth in the Prospectus), the General Partners shall make a
distribution to such Unitholder equal to the amount of such savings realized by
the Partnership. Second, if any interest is earned on a Unitholder's Capital
Contribution while it is held in escrow pending recognition as a Unitholder
under Article VII, such interest shall be paid by the Partnership to such
Unitholder and Profit attributable to such interest shall be allocated in the
same manner.
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.
ss.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 Sections 4.1 and 4.3 hereof, if an allocation of Loss
(or item thereof) to a Unitholder or Partner would cause or increase a deficit
balance in his or its Capital Account in excess of: (i) in the case of a
Unitholder or Partner other than a General Partner, his proportionate share of
Minimum Gain, or (ii) in the case of a General Partner, the sum of the amount
which it is obligated to restore to the Partnership pursuant to Section 3.1
hereof and its proportionate share of Minimum Gain (in each case, such excess
being referred to hereafter as the "Excess Deficit Balance"), then the
allocation shall not be made to such Unitholder or Partner. Instead, such Loss
(or deduction or item thereof) shall be allocated first to the Partners and
Unitholders 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
A-14
Partners and Unitholders 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 thereto) attributable to nonrecourse debt that is secured by
Partnership Property 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. For purposes of making the determination set forth
above, each Unitholder's and each Partner's Capital Account balance shall be
reduced by reasonably expected allocations or adjustments of loss (or item
thereof) including Loss from a Sale under Income Tax Regulation
ss.ss.1.704-1(b)(2)(ii)(d)(4) and (5), and by reasonably expected distributions
to the extent not offset by reasonably expected Capital Account increases
("Account Reduction Items"). For purposes of calculating reasonably expected
Capital Account increases, the value of the Partnership's assets shall be
presumed to be equal to their adjusted basis for federal income tax purposes.
D. Notwithstanding Sections 4.1 and 4.3 hereof, (i) if, in any fiscal year
of the Partnership, an Account Reduction Item unexpectedly causes or increases a
Unitholder's or Partner's Excess Deficit Balance, or (ii) if there is a net
decrease in Minimum Gain during a taxable year, then all Unitholders or Partners
with an Excess Deficit Balance at the end of such year shall be specially
allocated Profit and, to the extent necessary, gross income (as defined in
Section 61 of the Code) to the extent of such Excess Deficit Balances, in
proportion to the Excess Deficit Balance of each Unitholder or Partner. Any
remaining Profit or Loss, after adjustment has been made for allocation of
income or gain pursuant to this Section 4.5D, shall be allocated in accordance
with Sections 4.1, 4.2 and 4.3 hereof. This Section 4.5D is intended to be a
"qualified income offset" provision within the meaning of Income Tax Regulation
ss.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
regulations and any successor provision.
E. Any special allocations of Profit, Loss or gross income under Section
4.5D shall be taken into account in computing subsequent allocations of Profit
or Loss, so that to the extent possible, the aggregate amounts of Profit or Loss
allocated to each Partner or Unitholder will be equal to the aggregate amounts
that would have been allocated to them in the absence of the unexpected Account
Reduction Items.
F. For each fiscal year, all Profit and Loss allocated pursuant to Section
4.3 hereof to the Unitholders shall be allocated among the Persons that are
recognized as Unitholders during such year by determining the Profit and Loss
attributable to each month during such year and by allocating the amount of such
Profit and Loss among Persons who are recognized as Unitholders on the books of
the Partnership on the first business day of such month. The Profit or Loss
attributable to each month of the fiscal year shall be determined by dividing
the Profit or Loss for such year by 365, and then multiplying such per diem
amount by the number of days in each month.
G. All Net Cash Flow distributable to the Unitholders attributable to each
month of a fiscal quarter, if any, pursuant to Section 4.3 hereof, shall be
distributed among the Persons recognized as Unitholders on the books of the
Partnership on the first business day of such month during the fiscal quarter.
The Net Cash Flow attributable to each month of the fiscal quarter shall be
determined by dividing the amount of Net Cash Flow for such quarter by the
number of days in the quarter, and then multiplying such per diem amount by the
number of days in each month.
H. 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 recognized as Unitholders on the books of the Partnership on the
first business day of the month, subject to the special rules set forth in this
Section 4.5H. 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 recognition of persons who become
Unitholders pursuant to a closing of the sale of the Units under the Offering on
or before the Termination Date of the Offering. Accordingly, if there is more
than one closing of the sale of the Units under the Offering and pursuant to
such closing(s), Unitholders are recognized on the books of the Partnership (i)
prior to the sixteenth day of a calendar
A-15
month, the Partnership will close its books as of the end of the last day
of the month prior to the month of recognition, and such Unitholders shall be
treated as a Unitholder on the books of the Partnership on the first business
day of the month of recognition; 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 recognition, and such Unitholders shall be treated
as a Unitholder on the books of the Partnership on the sixteenth day of such
month and thus be allocated Profit, Loss and Net Cash Flow with respect to the
second half of such month.
I. Except as provided in Section 4.5M, for each taxable year, all Profit
or Loss allocated pursuant to Section 4.1 hereof and all Net Proceeds of Sale or
Refinancing, allocable or distributable with respect to any Unit which is
transferred during a taxable year of the Partnership, shall be allocated or
distributed, as the case may be, to the Persons recognized (in accordance with
Section 7.4 hereof) as Unitholders as of the first business day of the month
that includes the date on which the Sale or Refinancing occurs; provided,
however, that all such Profit or Loss which is attributable to, and all Sale
proceeds which represent, Net Proceeds from a Sale received by the Partnership
as a result of an installment or other deferred Sale, shall be allocated or
distributed, as the case may be, to the Persons recognized (in accordance with
Section 7.4 hereof) as Unitholders as of the first business day of the month
that includes the date on which the deferred Net Proceeds from a Sale are
received by the Partnership, and the allocable cash basis items shall be
allocated as required under Section 706(d) of the Code and the Income Tax
Regulations thereunder.
J. In the event that any Unitholder fails to furnish to the General
Partners evidence, in form and substance satisfactory to the General Partners,
establishing that the General Partners have no obliga- t under Section 1445 of
the Code with respect to such Unitholder 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 Unitholder the amount they would be
required to withhold pursuant to Section 1445 of the Code if such Unitholder
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 Unitholder
thereunder. Alternatively, the General Partners may at their option loan the
Unitholder an amount equal to the tax to be withheld (at an interest rate of
12%), such loan to be repaid by retaining such Unitholder's distributions.
K. Notwithstanding anything to the contrary that may be expressed or
implied in this Agreement, if at any time the allocation provisions of this
Article IV do not result in the allocation to the General Partners of an
aggregate of at least 1% of the Profits or Loss being allocated, the General
Partners in the aggregate, shall be allocated 1% thereof.
L. It is the intent of the General Partners that each Unitholder's and
Partner's distributive share of Profit and Loss shall be determined and
allocated in accordance with this Article IV to the fullest extent permitted by
Sections 704(b) and 706 of the Code. Therefore, if the Partnership is advised
that the allocations provided in Article IV of this Agreement are unlikely to be
respected for federal income tax purposes, the General Partners have been
granted the power in Section 12.2.B hereof to amend the allocation provisions of
this Agreement, on advice of the Accountants and the Partner- ship's legal
counsel, to the minimum extent necessary to conform to Sections 704(b) and 706
of the Code the plan of allocations and distributions of Profit and Loss, Net
Cash Flow and Net Proceeds of Sale or Refinancing provided in this Agreement.
M. Notwithstanding any other provisions of this Agreement other than
Section 4.5K to the contrary, "Interest Income" shall be allocated for federal
income tax purposes, and "Interest Income Cash" shall be distributed, among the
Unitholders and Partners as follows:
(1) Profit or Loss from the Sale to which the Interest Income relates shall
be calculated as if the Partnership had made an election out of installment sale
treatment under Section 453 of the Code, and such Profit or Loss shall be
hypothetically allocated among the Unitholders and the Partners and
hypothetically credited or charged to their Capital Accounts as provided in
Section 4.1. The Capital Accounts of the Unitholders and the Partners, as
hypothetically adjusted, shall be referred to as the "Hypothetical Capital
Accounts." The Hypothetical Capital Accounts shall be decreased from time to
time by distributions to the Unitholders and the Partners and shall be
A-16
adjusted from time to time as a result of any adjustment in the principal
amount of the Purchase Money Financing (e.g., as a result of purchase price
adjustments) to which the Interest Income relates. The Hypothetical Capital
Accounts as so adjusted shall be referred to as the "Adjusted Hypothetical
Capital Accounts."
(2) Interest Income shall be allocated among the Unitholders and the
Partners for federal income tax purposes in proportion to their Adjusted
Hypothetical Capital Accounts and the Capital Accounts of the Unitholders and
the Partners shall be increased accordingly.
(3) Interest Income Cash shall be distributed among the Unitholders and the
Partners in the same proportion that Interest Income was allocated above for
federal income tax purposes. Such distributions shall decrease the Capital
Accounts of the Unitholders and the Partners accordingly.
(4) The foregoing allocations and distributions shall be made as of the
last day of each taxable year of the Partnership during which the Partnership
has Purchase Money Financing, based upon the per diem weighted average Adjusted
Hypothetical Capital Accounts of the Unitholders and the Partners during each
such taxable year. N. Notwithstanding any other provision of this Agreement, the
General Partners may, after giving 90 days' prior Notification to the
Unitholders,
(i) adopt any other method for determining, in the event of transfers of
Units, the Unitholders entitled to distributions of Net Cash Flow or Net
Proceeds of Sale or Refinancing that the General Partners, in their sole
discretion, determine is reasonable, and
(ii) allocate Profit or Loss among the Unitholders during the taxable year
in any other manner that the General Partners, in their sole discretion,
determine satisfies the requirements of Section 706 of the Code. The taking of
any action by the General Partners pursuant to this Section 4.5N shall be deemed
to effect an amendment to this Agreement and shall not require the consent of
any Unitholder.
O. Allocations and distributions to Unitholders as a class shall be made to
each Unitholder entitled to such allocation or distribution based upon the ratio
of the number of Units owned by each such Unitholder to the number of Units
owned by all Unitholders entitled to such allocation or distribution.
ARTICLE V
RIGHTS, POWERS AND DUTIES OF PARTNERS
Section 5.1 Management and Control of the Partnership; Tax Matters Partner
A. Subject to the Consent of the Unitholders when required by this
Agreement, 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 or Unitholder (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 and Unitholder shall be responsible for all
costs incurred by such Partner or Unitholder with respect to any tax audit or
tax related administrative or judicial proceeding in connection with such
Partner's or Unitholder's tax
A-17
returns and all costs incurred by any such Partner or Unitholder who
participates in any tax audit or tax-related administrative or judicial
proceeding of or against the Partnership or any Partner. Each Partner and
Unitholder 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 and Unitholders; (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 Unitholder 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.
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 within any applicable cure
period, 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) a material event of default shall have occurred under any of the
documents or instruments evidencing or securing the financing relating to the
acquisition and development of the Properties and such default shall not have
been cured within any applicable cure period;
(ii) Benchmark Homes, Inc. shall be in material default under any of the
Land Acquisition Agreements or Development Agreements, and such default shall
not have been cured within any applicable cure period; (iii) Benchmark
Communities, Inc. or Xxxxxx X. Xxxxxx shall be in default under any of (a) the
Cash Flow Deficit Guaranty Agreement or (b) an0 Guaranty of Timely and Lien-Free
Completion and such default shall not have been cured within any applicable cure
period; or (iv) 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.
If an event of default described above shall not have been cured within the
cure period applicable thereto, then (i) for a period of 45 days the
Administrative General Partner shall have the option to purchase the Partnership
Interests of the Development General Partner and Benchmark Communities, Inc. at
a price equal to their initial Capital Contributions as set forth on the
Schedule, payable in cash and (ii) Benchmark Communities, Inc. will cause the
Partnership's obligations to make the Deferred Land Payments to be forgiven by
Benchmark Homes, Inc.
Section 5.2 Authority of General Partners A. Except to the extent otherwise
provided herein, including, without limitation, Sections 5.2C, 5.3A, 5.4 and
5.5, 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
A-18
compensation for such services or goods must be comparable and competitive
with that of any other Person who provides comparable services or goods and
shall be on competitive terms, and, as to services under the Development
Agreements and with regard to obtaining Refinancing, 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 Unitholders 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, (d) all such
transactions shall be embodied in a written contract that describes the services
or goods to be provided and the compensation to be paid, which contract may only
be modified by the Majority Vote of the Unitholders, and which contract shall
permit termination without penalty on sixty (60) days notice, and (e) except for
those services to be provided under agreements referred to in this Agreement or
the Prospectus, any services provided by a Sponsor will be provided only under
extraordinary circumstances where services are not available elsewhere;
(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;
(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
Property or any other assets of the Partnership and to borrow money on the
general credit of the Partnership for use in the business of the Partnership and
to take any action and enter into any agreement necessary or advisable in
connection with such borrowing;
(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 one and one-half percent (1.5%), the payment of which real estate
commission to the Sponsor shall be subordinated to the payment to Unitholders of
their Adjusted Capital Balance plus the unpaid portion, if any, of their
Cumulative Return.
(ix) to recognize transferees of Units as Unitholders and to admit
substitute Limited Partners in accordance with the terms described in the
Prospectus and Article VII of this Agreement;
(x) to invest Working Capital Reserves and, pending the investment of the
Partnership's assets in Properties, to invest the Partnership's assets
(excluding Working Capital Reserves), in interest-bearing accounts and
short-term investments, including obligations of federal, state and
A-19
local governments and their agencies, mutual funds, regulated investment
companies, commercial paper and certificates of deposit of federally-insured
commercial banks, savings banks or savings and loan associations; provided,
however, that such investments are short-term, highly-liquid and provide
appropriate safety of principal;
(xi) to purchase, cancel or otherwise retire or dispose of the Partnership
Interests or Units of any Partner or Unitholder according to the provisions of
this Agreement;
(xii) to execute and deliver all documents necessary or appropriate for the
sale of Units, including the Prospectus and filings under the Securities Act of
1933 and any other federal and state laws relating to the sale of securities;
(xiii) to require Unitholders to become Limited Partners (in which case the
General Partners shall have the power to amend this Agreement without the
Consent of the Unitholders) and to take such other action with respect to the
manner in which Units are being or may be transferred or traded as may be
necessary or appropriate to preserve the tax status of the Partnership as a
partnership for federal income tax purposes and the tax treatment of the
Unitholders as Partners;
(xiv) to take such steps (including amendment of this Agreement) as the
General Partners determine are advisable or necessary and will not result in any
material adverse effect on the economic position of a majority in interest of
the Unitholders with respect to the Partnership in order to preserve the tax
status of the Partnership as a partnership for federal income tax purposes,
including, without limitation, removing the Units from public trading markets
and imposing restrictions on transfers of Units or Interests (provided such
restrictions on transfers do not cause the Partnership's assets to be deemed
"plan assets" within the meaning of ERISA);
(xv) to establish and maintain the Working Capital Reserves described in
Section 3.3E; (xvi) to pay or reimburse any reasonable out-of-pocket expenses
incurred by any Affiliate of the General Partners in connection with any report
pursuant to Section 10.3. No fee shall be paid to any Affiliate in connection
with any such report; and (xvii) after obtaining the Consent of the Unitholders
to the matters set forth in Sections 5.4A(xvii), 5.4A(xviii) or 5.4A(xix), to
take any actions which they deem appropriate to facilitate the purposes
described in such sections, including, without limitation, amendments to this
Agreement to change the dates upon which transfers of Units will be recognized,
and the General Partners shall give prior written notice to the Unitholders of
any such amendment. 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 to acts by the General 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 Partnership; or
(iv) any act or failure to act by the Partnership or as to any other matter
whatsoever involving the Partnership or any Partner. 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 Guarantees of Timely
and Lien-Free Completion, the Land Acquisition Agreements, the Development
Agreements or any other agreements now or hereafter made between the Partnership
and the Development General Partner or any Affiliate thereof.
A-20
Section 5.3 Authority of Limited Partners A. By the Majority Vote of the
Unitholders, the Unitholders, without the consent of the GeneralPartners, may:
(i) amend the Partnership Agreement; provided that such amendment (a) shall
not in any manner allow the Unitholders to take part in the control of the
Partnership's business in a manner which would subject them to liability as
general partners under the Act or any other applicable law, and (b) shall not,
without the consent of any General Partner affected, alter the rights, powers,
or duties of the affected General Partner or its interest in Profit and Loss,
Net Cash Flow, Net Proceeds of Sale or Refinancing, or alter any of the
provisions of Section 8.2 hereof,
(ii) dissolve or terminate the Partnership prior to the expiration of its
term;
(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 Properties; or
(v) terminate, upon 60 days notice, any contract between the Partnership
and any General Partner or any Affiliate thereof. B. Any action taken pursuant
to Section 5.3A hereof shall be void if any Unitholder, within 45 days after
such action is taken, obtains a temporary restraining order, preliminary
injunction or declaratory judgment from a court of competent jurisdiction or an
opinion of counsel selected by the Majority Vote of the Unitholders on grounds
that such action, if given effect, would have the prohibited effect referred to
in Section 5.3A(i)(a) hereof.
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 Unitholders, have any authority:
(i) to voluntarily dissolve or terminate the Partnership prior to the
expiration of its term, except for the acts listed in Section 8.1 hereof,
(ii) to purchase or acquire property other than personal property used in
connection with the Properties or undertake construction of any properties other
than the Properties (except as provided in the Prospectus);
(iii) except as permitted in this Agreement, to do any act required to be
approved by the Unitholders under the Act;
(iv) to reinvest any Net Proceeds of Sale or Refinancing, 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 Interests or Units 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;
A-21
(xi) to operate in such a manner as to be classified as an "investment
company" under the meaning of the Investment Company Act of 1940;
(xii) to purchase or lease any property from or sell or lease property to
the General Partners or their Affiliates;
(xiii) to admit a Person as a General Partner, except as provided in this
Agreement;
(xiv) to admit a Person as a Unitholder or Limited Partner, except as
provided in this Agreement;
(xv) to sell all or substantially all of the Properties;
(xvi) to create or suffer to exist any lien, security interest or other
charge or encumbrance upon or with respect to any portion of the Properties if
the sum of the principal amount of such debt and the principal amount of all
other debts of the Partnership which are secured by all or part of the
Partnership Property, would exceed 60% of the fair market value of all of the
Partnership Property, as determined by an independent appraisal; provided,
however, that the General Partners shall have the authority to create or suffer
to exist any lien, security interest or other charge or encumbrance upon or with
respect to the Partnership Property with a debt in excess of such limitation,
but not in excess of 75% of the fair market value of the Partnership Property,
as determined by an independent appraiser, if the total Gross Proceeds upon the
Termination Date exceeds the Minimum Offering Amount but are less than the
Maximum Offering Amount;
(xvii) to cause or facilitate the merger or consolidation of the
Partnership with other partnerships, including, but not limited to, mergers or
consolidations in which the Unitholders receive in exchange for their Units
interests in the surviving entity, with the objective of listing the interests
of the surviving entity on a national or regional securities exchange or NASDAQ;
(xviii) to list the Units on a securities exchange or enable the Units to
be traded in the over-the-counter market, or otherwise facilitate the
establishment of a market for the trading of Units, or (except as set forth in
Section 5.2A(xiv) to withdraw the Units from such listing;
(xix) to take such steps as the General Partners determine are advisable or
necessary to restructure the Partnership and its activities in order to enable
the Partnership to qualify as a real estate investment trust for federal income
tax purposes. B. The General Partners shall not take any action which, for
federal tax purposes, shall cause the Partnership to terminate or to be treated
as an association taxable as a corporation.
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, acquire property from, borrow money from, enter into agreements,
contracts or the like (in addition to those set forth herein) with, or reimburse
for reasonable out-of-pocket expenses incurred in connection with the
preparation of reports by, 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 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-
A-22
built" appraised value equals or exceeds the purchase price of the Property
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
(vii) to receive any rebate or give-up, or to participate in any reciprocal
business 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 (i) for the
continuation of the Partnership's existence as a limited partnership under the
Act (and under the laws of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Unitholders and the Limited
Partners or to enable the Partnership to conduct the business in which it is
engaged), and (ii) for the acquisition, development, maintenance, preservation
and operation of the Properties in accordance with the provisions of this
Agreement and applicable laws and regulations (it being understood and agreed,
however, that the provision of day-to-day property management services for
specific Properties is not an obligation of the General Partners as general
partners of the Partnership). 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, 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.
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 or Unitholder (except a Limited Partner or
Unitholder 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, and in the proper office or offices in each other jurisdiction in
which the Partnership is formed or qualified, any certificates and other
documents required by the applicable statutes, rules or regulations of any such
jurisdiction.
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 obtain and keep in force, or cause to be
obtained and kept in force during the term hereof, fire and extended coverage,
workmen's compensation, and public liability insurance in favor of the
Partnership with such insurers and in such amounts as the General Partners deem
advisable, but in amounts not less (and with deductible amounts not greater)
than those customarily maintained with respect to apartment complexes comparable
to the Properties.
A-23
F. 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 Unitholders as a group and shall not favor the
interests of any particular Unitholder.
G. The General Partners shall cause the Partnership to commit a percentage
of the Gross Proceeds of the Offering to investment in Properties which is equal
to the greater of: (i) 89.625% of the Gross Proceeds of the Offering reduced
by.1625% for each 1% of financing of Properties owned by the Partnership; or
(ii) 76.625% of the Gross Proceeds of the Offering. For the purpose of this
Section 5.6G, the percent of financing of Properties owned by the Partnership
shall be determined by dividing the amount of financing of the Properties by the
purchase price of the Properties, excluding Front-End Fees. The proceeds of the
Offering will be invested in Properties within two years of the Termination Date
of the Offering.
H. Except for payment of the Selling Commissions, the General Partners
shall not directly or indirectly pay or award any commission or other
compensation to any Person engaged by a potential Unitholder for investment
advice as an inducement to such advisor to advise the purchase of Units.
I. On loans made available to the Partnership by a General Partner, the
General Partner may not receive interest or similar charges or fees in excess of
the amount which would be charged by unrelated lending institutions on
comparable loans for the same purpose, in the same locality of the property if
the loan is made in connection with a particular property. No prepayment charge
or penalty shall be required by the General Partner on a loan to the Partnership
secured by either a first or a junior or all-inclusive trust deed, mortgage or
encumbrance on the property, except to the extent that such prepayment charge or
penalty is attributable to the underlying encumbrance.
J. The General Partners shall not reinvest Net Cash Flow or Net Proceeds of
Sale or Refinancing.
Section 5.7 Compensation of General Partners Except as expressly provided
in Articles IV and IX herein, the General Partners shall receive no fees,
salaries, profits, distributions, reimbursement or other compensation for
serving as General Partners.
Section 5.8 Other Businesses of Partners Neither the Partnership nor any
Partner or Unitholder 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 or Unitholder 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 and Affiliates to Limited
Partners or Unitholders
The General Partners and the Affiliates of the General Partners performing
certain services on behalf the Partnership shall not be liable, responsible, or
accountable, in liabilities, damages or otherwise, to any Unitholder, 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, provided that the General Partners
determine, in good faith, that such act or omission was in the best interests of
the Partnership, except for acts of negligence or misconduct or for damages
arising from any misrepresentation or breach of an agreement with the
Partnership. The Partnership shall not incur the cost of that portion of any
liability insurance which insures a General Partner or the Affiliates of the
General Partners performing certain services on behalf of the Partnership
against
A-24
any liability as to which a General Partner or Affiliate may not be
indemnified under Section 5.10 herein.
Section 5.10 Indemnification
A. The General Partners and the Affiliates of the General Partners
performing certain services on behalf the Partnership 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 them 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 Unitholder or Limited Partner shall have any
personal liability on account thereof.
B. Notwithstanding Section 5.10A, the General Partners and the Affiliates
of the General Partners performing certain services on behalf the Partnership
and any person acting as a Broker-Dealer 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 such securities laws violations as to the
particular indemnities and the court approves indemnification of the litigation
costs, (b) such claims have been dismissed with prejudice on the merits by a
court of competent jurisdiction as to the particular indemnities and the court
approves indemnification of the litigation costs, or (c) a court of competent
jurisdiction approves a settlement of the claims and finds that indemnification
of the settlement and related costs should be made, after being advised as to
the current position of the Securities and Exchange Commission, the
Massachusetts Securities Division, the California Commissioner of Corporations,
the Pennsylvania Securities Commission, the Tennes- see Securities Commission
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.
C. For purposes of Sections 5.9 and 5.10, the term "Affiliates" shall mean
any person performing services on behalf of the Partnership who (i) directly or
indirectly controls, is controlled by, or is under common control with a General
Partner; or (ii) owns or controls 10% or more of the outstanding voting
securities of a General Partner; or (iii) is an officer, director, partner or
trustee of a General Partner; or (iv) if a General Partner is an officer,
director, partner or trustee, is any company for which the General Partner acts
in any such capacity.
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 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 Unitholders 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
A-25
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 6.1(B)(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 to reflect such withdrawal or retirement and its
filing for recordation.
Section 6.2 Election and Admission of Successor or Additional General
Partners
A. By the Majority Vote of the Unitholders, a Successor General Partner may
be elected to replace a General Partner removed in the manner described in
Section 5.3A herein.
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 Unitholders 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 opinion referred to
in Section 6.2B(i); (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
Certificate to reflect the admission of the Successor or Additional General
Partner and its filing for recordation.
Section 6.3 Events 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 (i) if the General Partner assigns all of
his Interest in the Partnership, (ii) if the General Partner is removed pursuant
to Section 5.3A; and (iii) upon the following acts or events: (a) 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; (b) if
a corporation, the filing of a certificate of dissolution, or its equivalent,
for the corporation or the revocation of its charter; and (c) if a partnership,
the dissolution and commencement of winding up of the General Partner. 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 remaining General Partner or General Partners may
elect to continue the Partnership, and if such election is made, shall promptly
give Notification of such event and shall make and file such amendments to the
Certificate 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.
C. In the event of the withdrawal of a General Partner and the remaining
General Partner does not elect to continue the Partnership or 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 and Unitholders. In such event, the
Partnership shall be dissolved unless, within 90 days after the withdrawal of
the General Partner, the Unitholders, by the Majority Vote of the Unitholders
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. If the Unitholders elect to
reconstitute the
A-26
Partnership and agree to admit a substitute General Partner, the
relationship of the Unitholders and of substitute General Partner in the
Partnership shall be governed by this Agreement.
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 0.xX.
B. Upon the withdrawal of a General Partner, such General Partner shall
immediately cease to be a General Partner, and, unless a Successor General
Partner has acquired the Interest of the withdrawing General Partner pursuant to
Section 6.5, 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.
Section 6.5. Valuation of Partnership Interest of General Partner. Upon the
voluntary or involuntary withdrawal of a General Partner, the Partnership or a
Successor General Partner may purchase the Partnership Interest of the withdrawn
General Partner at any time subsequent to withdrawal. The price of the withdrawn
General Partner's Interest shall be determined by two (2) independent
appraisers, one selected by the withdrawn General Partner and one selected by
the remaining General Partner, or if none is remaining, by the Unitholders. If
the two appraisers are unable to agree on the value of the General Partner's
Interest, they shall jointly appoint a third independent appraiser whose
determination shall be final and binding. The Partnership shall then pay the
withdrawn General Partner the price of its Interest as a General Partner as so
determined. If the withdrawal is involuntary, payment shall be made by delivery
of a promissory note bearing interest payable semiannually at a floating rate of
interest equal to the lowest rate permitted under the Code to avoid the
imputation of interest income to the withdrawn General Partner, payable in five
equal annual installments, the first installment to be paid as soon as
practicable after the appraisal, and prepayable at any time. If the withdrawal
is voluntary, payment shall be made by delivery of a promissory note bearing no
interest, with principal payable only from distributions which the withdrawn
General Partner would have received under this Agreement had the General Partner
not withdrawn. Immediately upon receiving the note, the withdrawn General
Partner shall cease to be a Partner of the Partnership for all purposes, except
that the withdrawn General Partner shall continue to be subject to Section 6.4
hereunder. All amounts received pursuant to this Section 6.5 shall constitute
complete and full discharge for all amounts owing to the withdrawn General
Partner on account of its Interest in the Partnership.
ARTICLE VII
ASSIGNMENT OF ASSIGNEE UNITS TO UNITHOLDERS;
TRANSFERABILITY OF LIMITED PARTNER INTERESTS AND UNITS
Section 7.1. Assignment of the Assignee Units to Unitholders.
A. Pursuant to Sections 3.2 and 7.1C hereof, the Assignor Limited Partner
shall assign to each Unitholder Assignee Units equal to the number of Units
purchased by each Unitholder in the Offering.
B. Except as provided in Section 7.1.A above, the Assignor Limited Partner
may not transfer or assign a Limited Partnership Interest without the prior
written consent of the Administrative General Partner. The Assignor Limited
Partner shall have no right to vote or consent with respect to Units owned by
the Assignor Limited Partner for its own account and such Units shall not be
considered
A-27
outstanding Units for purposes of determining whether the Majority Vote of
the Unitholders or the Consent of the Unitholders has occurred. The Assignor
Limited Partner, by the execution of this Agreement, acknowledges and agrees
that the Assignor Limited Partner's management will have fiduciary
responsibility for the safekeeping and use of all funds and assets of the
Unitholders, whether or not in the Assignor Limited Partner management's
possession or control, and that the management of the Assignor Limited Partner
will not employ, or permit another to employ such funds or assets in any manner
except for the exclusive benefit of the Unitholder. The Assignor Limited Partner
agrees not to contract away the fiduciary duty owed to the Unitholders by the
Assignor Limited Partner's management under the common law of agency.
C. Except as set forth in Section 7.1G, the Assignor Limited Partner, by
the execution of this Agreement, irrevocably transfers and assigns to the
Unitholders all of the Assignor Limited Partner's rights and interest in and to
the Assigned Limited Partnership Interests, as of the time that payment for such
Assigned Limited Partnership Interests is received by the Partnership and such
Assigned Limited Partnership Interests are credited to the Assignor Limited
Partner on the books and records of the Partnership. The rights and interest so
transferred and assigned shall include, without limitation, the following: (i)
all rights to receive distributions of uninvested Capital Contributions pursuant
to Sections 3.2 and 3.3; (ii) all rights to receive cash distributions pursuant
to Article IV; (iii) all rights in respect to allocations of Profit and Loss
pursuant to Article IV; (iv) all other rights in respect of determinations of
allocations and distributions pursuant to Article IV; (v) all rights to consent
to the admission of successor or additional General Partners pursu- ant to
Sections 6.1 and 6.2; (vi) all rights to receive any proceeds of liquidation of
the Partnership pursuant to Section 8.2; (vii) all rights to inspect books and
records and to receive reports pursuant to Article X; (viii) all voting rights,
rights to attend or call meetings and other such rights; and (ix) all rights
which the Limited Partners have, or may have in the future, under the Act.
D. The General Partners, by the execution of this Agreement, irrevocably
consent to and acknowledge that (i) the foregoing transfer and assignment
pursuant to Section 7.1 by the Assignor Limited Partner to the Unitholders of
the Assignor Limited Partner's rights and interest in the Assigned Limited
Partnership Interests is effective, and (ii) the Unitholders are intended to be
and shall be third party beneficiaries of all rights and privileges of the
Assignor Limited Partner in respect of the Assigned Limited Partnership
Interests. The General Partner covenants and agrees that, in accordance with the
foregoing transfer and assignment, all the Assignor Limited Partner's rights and
privileges in respect of Assigned Limited Partnership Interests may be exercised
by the Unitholders including, without limitation, those cited in Section 7.1.
E. In accordance with the transfer and assignment described in Section 7.1,
Unitholders shall have the same rights that the Limited Partners have under this
Agreement and under the Act.
F. The General Partners shall amend the Certificate to reflect the
crediting of the Assignor Limited Partner with the Capital Contributions made by
Unitholders on a monthly basis or at such other intervals as may be required by
the Act.
G. Notwithstanding the assignment of the Assigned Limited Partnership
Interests referred to in this Section 7.1, the Assignor Limited Partner shall
retain legal title to and be and remain a Limited Partner of the Partnership.
A-28
Section 7.2. Transferability of Units.
A. Units shall be freely transferable, except that the General Partners may
prohibit any transfer which does not comply with Section 7.2B.
B. Prior to the listing of the Units on a securities exchange or on NASDAQ,
a transfer of a Unit shall be prohibited if any one of the following transfer
restrictions applies:
(i) No sale or exchange of any Units shall be made if the Units sought to
be sold or exchanged, when added to the total of all other Units sold or
exchanged within a period of 12 consecutive months prior thereto, would, in the
opinion of counsel for the Partnership, result in the Partnership being
considered to have terminated within the meaning of Section 708 of the Code. The
General Partners shall give Notification to all Unitholders in the event that
sales or exchanges should be suspended for this reason. All deferred sales or
exchanges shall be made (in chronological order to the extent practicable) as of
the first day of the fiscal year beginning after the end of any such 12-month
period, subject to the provisions of this Article VII.
(ii) No transfer or assignment of any Unit shall be made if a counsel for
the Partnership is of the opinion that the particular transfer or assignment
would be in violation of any federal or state securities laws (including any
investment suitability standards) applicable to the Partnership or would cause
the Partnership to be classified other than as a partnership for federal income
tax purposes.
(iii) No transfer or assignment of Units shall be made after which any
transferor or trans- feree would hold (a) less than 200 Units, unless such
transferor would own zero Units or (b) a number of Units not evenly divisible by
four.
(iv) No transfer or assignment of any Unit shall be made if it would result
in the assets of the Partnership being treated as "plan assets" or the
transactions contemplated hereunder to be prohibited transactions under ERISA or
the Code.
(v) No transfer or assignment of a Unit shall be made to a non-resident
alien or a minor or incompetent (unless such transfer or assignment shall be
made to a legal guardian on such person's behalf).
C. In order to record a trade on its books and records, the Partnership may
require such evidence of transfer or assignment and authority of the transferor
or assignor (including signature guarantees), an opinion of counsel to the
effect that there has been no violation of federal or state securities laws in
the assignment or transfer, and evidence of the transferee's suitability under
state securities laws, as the General Partners may determine. The Administrative
General Partner may charge a transfer fee (not to exceed $100) sufficient to
cover all reasonable expenses connected with such transfer.
D. In no event shall a Unitholder be permitted to transfer a fraction of a
Unit. Notwithstanding any other provision to the contrary, a Unitholder may not
transfer a Unit to any Person treated as a foreign person under the Code.
Section 7.3. Death, Bankruptcy or Adjudication of Incompetence of a
Unitholder or a Limited Partner. Upon the death of a Unitholder or a Limited
Partner, his executor, administrator, or trustee, or, if he is adjudicated
incompetent or insane, his committee, guardian, or conservator, or, if he
becomes bankrupt, the trustee or receiver of his estate, shall have all the
rights of a Unitholder or a Limited Partner for the purpose of settling or
managing his estate and shall have whatever power the deceased or incompetent
Unitholder or Limited Partner possessed to assign all or any part of his Units
or Interest. The death, dissolution, adjudication of incompetence, or bankruptcy
of a Unitholder or a Limited Partner shall not dissolve the Partnership.
A-29
Section 7.4. Effective Date. The Partnership shall recognize the transferee
of a Unit as a Unitholder on the Partnership's books and records on the first
business day of the next calendar month after the month in which the Partnership
receives all necessary documentation required to effect the transfer of his
Units.
Section 7.5. Substitute Limited Partners. Any Unitholder may elect to
become a Substitute Limited Partner upon (i) signing a counterpart of this
Agreement and any other instrument or instruments deemed necessary by General
Partners, including a Power of Attorney in favor of the General Partners as
described in Section 12. l.A hereof, and (ii) paying all reasonable legal fees
and filing costs in connection with his substitution as a Limited Partner. The
Administrative General Partner may charge a conversion fee of $150. Unitholders
who elect to become Substitute Limited Partners will receive one Limited
Partnership Interest for each Unit they convert and will not be able to
re-exchange their Limited Partnership Interests for Units. The Capital Account
of the former Unitholder attributable to transferred Units shall be credited to
the Capital Account of the Substitute Limited Partner.
Section 7.6 Retirement or Withdrawal of a Unitholder A. No Unitholder 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 Unitholder. Upon the retirement or withdrawal of a Unitholder: (i) the
Interest of such retiring or withdrawing Unitholder shall thereafter belong to
the Partnership; (ii) such retiring or withdrawing Unitholder 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 Unitholder
shall not be entitled to receive any amount for the fair value of his Units as
of the date of his retirement or withdrawal, other than as agreed to by the
General Partners and the withdrawing Unitholder. The General Partners shall not
consent to the voluntary retirement or withdrawal of a Unitholder 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 Unitholder, repurchase any or all of the
Units of such Unitholder 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 Property, less all
Partnership debts and obligations. The Partnership will not repurchase Units
prior to the Termina- t Date of the Offering and is not obligated to repurchase
Units at any time. Units acquired by the General Partners and their Affiliates
or by the Assignor Limited Partner will not be eligible for repurchase by the
Partnership. Units purchased by the Partnership during any month shall be deemed
cancelled effective as of the first day of the month following the effective
date of such purchase.
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;
A-30
(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
Unitholders, to dissolve the Partnership; (v) by the Majority Vote of the
Unitholders pursuant to Section 5.3A to dissolve the Partnership; or
(vi) the happening of any other event causing the dissolution of the
Partnership under applicable law.
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 Partnership Property has been distributed as provided in
Section 8.2. Notwithstanding the dissolution of the Partnership, prior to the
termination of the Partnership, the business of the Partnership and the affairs
of the Partners, as such, shall continue to be governed by this Agreement.
Section 8.2 Liquidation
A. As soon as practical after the dissolution of the Partnership, the
General Partners, or if there are no General Partners, any Limited Partner or
the liquidating trustee under the Act, as the case may be, shall give
Notification to all the Limited Partners and Unitholders of such fact and shall
prepare a plan as to whether and in what manner the Partnership Property shall
be liquidated. By the Majority Vote of the Unitholders, the assets of the
Partnership, subject to its liabilities (and the establishment of reserves, if
necessary, for such liabilities), may be transferred to a successor Entity, upon
such terms and conditions as are then agreed upon.
B. Unless the Unitholders 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, any Limited Partner or the
liquidating trustee under the Act, as the case may be, shall liquidate the
Partnership Property, and apply and distribute the proceeds thereof in
accordance with Section 4.4. A Partner or an Affiliate of a Partner may purchase
such assets with the Consent of the Unitholders.
C. Notwithstanding the provisions of Section 8.2B. in the event the General
Partners, any Limited Partner, or the liquidating trustee under the Act, as the
case may be, shall determine that an immediate sale of all or a portion of the
Partnership Property would cause undue loss to the Partners and Unitholders, the
General Partners, any Limited Partner, or the liquidating trusee under the Act,
as the case may be, in order to avoid such loss, may, after having given
Notification to all the Unitholders and 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 Unitholders and Partners.
Section 8.3. Capital Contribution Upon Dissolution Subject to the
provisions of Section 5.9 of this Agreement, each Unitholder and Partner shall
look solely to the assets of the Partnership for all distributions with respect
to the Partnership and his Capital Contribution and shall have no recourse (upon
dissolution or otherwise) against any Partner or Unitholder; provided, however,
that upon the dissolution and termination of the Partnership, the General
Partners will make the Capital Contributions referred to in Section 3.1. All
amounts so contributed by the General Partners shall be distributed first to the
Partnership's creditors entitled thereto, and the balance to the Unitholders and
Partners in proportion to the positive balances in their Capital Accounts at the
time of dissolution and termination of the Partnership.
A-31
ARTICLE IX
CERTAIN PAYMENTS TO THE GENERAL PARTNERS AND AFFILIATES
Section 9.1 Reimbursement of Certain Costs and Expenses of the General
Partners and Affiliates
A. Subject to the provisions of Article V hereof, the Partnership shall be
permitted to reimburse the General Partners for the actual cost to the General
Partners or any of their Affiliates of the Partnership's operating expenses. In
determining the actual cost to a General Partner or an Affiliate of a General
Partner of goods and materials and administrative services, actual cost means
the actual cost to a General Partner or an Affiliate of a General Partner of
goods and materials used for or by the Partnership and obtained from entities
not affiliated with a General Partner, and actual cost of administrative
services means the pro rata cost of personnel as if such persons were employees
of the Partnership. The cost for administrative services to be reimbursed to a
General Partner or an Affiliate shall be at the lower of the General Partner's
or Affiliate's actual cost or the amount the Partnership would be required to
pay to independent parties for comparable administrative services in the same
geographic location. The General Partners shall use their best efforts to cause
all of the Partnership's expenses to be billed directly to and paid by the
Partnership to the extent practicable.
B. Subject to the foregoing, the Partnership shall pay all expenses (which
expenses shall be billed directly to the Partnership) of the Partnership which
may include but are not limited to: (a) all costs of personnel (excluding rent
or depreciation, utilities, capital equipment, and other administrative items)
employed full-or part-time by the Partnership and involved in the business of
the Partnership and allocated pro rata to their administrative services
performed on behalf of the Partnership, including Persons who may also be
officers or employees of the General Partners or their Affiliates (other than
Controlling Persons); (b) all costs of borrowed money, taxes and assessments on
Properties and other taxes applicable to the Partnership; (c) legal, audit,
accounting, brokerage and other fees; (d) printing, engraving and other expenses
and taxes incurred in connection with the issuance, distribution, transfer,
registration and recording of documents evidencing ownership of an Interest or
Unit or in connection with the business of the Partnership; (e) fees and
expenses paid to independent contractors, mortgage bankers, brokers and
servicers, leasing agents, consultants, on-site property managers and other
property management personnel (other than Controlling Persons and other officers
of the General Partners or their Affiliates), real estate brokers, insurance
brokers and other agents; (f) expenses in connection with the disposition,
replacement, alteration, repair, remodeling, refurbishment, leasing, refinancing
and operating of the Properties (including the costs and expenses of
foreclosures, insurance premiums, real estate brokerage and leasing commissions
and of maintenance of such Properties); (g) expenses of organizing, revising,
amending, converting, modifying or terminating the Partnership; (h) expenses in
connection with distributions made by the Partnership to, and communications and
bookkeeping and clerical work necessary in maintaining relations with Limited
Partners and Unitholders, including the costs of printing and mailing to such
Persons evidences of ownership of Interests or Units and reports of meetings of
the Partnership, and of preparation of proxy statements and solicitations of
proxies in connection therewith; (i) expenses in connection with preparing and
mailing reports required to be furnished to Limited Partners and
Unitholders for investor tax reporting or other purposes, or which reports
the General Partners deem the furnishing thereof to Limited Partners or
Unitholders to be in the best interests of the Partnership; (j) accounting,
computer, statistical or bookkeeping costs necessary for the maintenance of the
books and records of the Partnership; and (k) the cost of preparation and
dissemination of the informational material and documentation relating to
potential sale, or other disposition of Properties or in connection with any
meetings or votes if the Unitholders.
C. The Partnership shall reimburse the Property Manager for all Marketing
Expenses incurred by the Property Manager, subject to a maximum of $100,000 per
Property. D. Notwithstanding any other provision of this Agreement, no
reimbursement shall be permit- xxx for services for which the General Partners
are entitled to compensation by way of a separate fee.
A-32
Section 9.2 Fees and Other Payments
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 the Administrative General Partner, the Organization and Start-Up
Fee.
(iv) to Benchmark Homes, Inc., payments pursuant to the Land Acquisition
Agreements and the Development Agreements.
(v) to the Property Manager, payments under the Property Management
Agreements, provided that such payments do not exceed the lesser of (a) the fees
which are competitive for similar services in the geographic area of the
Property or (b) 5% of the gross revenues from the Property to which the Property
Management Agreement relates, including leasing, re-leasing and leasing related
services, and that included in the Property management Fee are bookkeeping
services and fees paid to non-related persons.
(vi) to the Administrative General Partner, the Development General Partner
and/or their Affiliates, a fee for securing Refinancing, 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
Refinancing, the fee will be divided between them commensurate with actual
services rendered.
(vii) 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 1.5% of
the contract price for the Sale of the Property, and will be subordinated to the
payment to Unitholders of their Adjusted Capital Balance plus the unpaid
portion, if any, of their Cumulative 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. The total of the fees owed to the General Partners and their Affiliates,
as set forth in subsection A. (i), (ii) and (iii) above, shall in no event
exceed 14.5% 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,
Unitholder or his duly authorized representatives, for any purpose related to
the Limited Partner's or Unitholder's interest as a Limited Partner or
Unitholder, at the expense of such Limited Partner or Unitholder, 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
A-33
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 and Unitholder; a copy
of this Agreement and the Certificate and all amendments thereto; 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 funds 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.
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 than 75 days after the end of each calendar year, the General
Partners will furnish each Person who was a Unitholder or Limited Partner at any
time during the fiscal year with all tax information relating to the
Partnership's performance for the preceding calendar year that is required to be
set forth in the Unitholder's and 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 each
Person who was a Unitholder or Limited Partner at any time during the fiscal
quarter then ended, 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.
The various reports required pursuant to this Section 10.3.B may be sent earlier
than or separately from any of the other reports required pursuant to this
Section 10.3.B, and the information required to be contained in any of the
reports required pursuant to this Section 10.3.B may be contained in more than
one report.
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 or a
Unitholder 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
A-34
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 Partnership costs reimbursed to a Sponsor and a statement
setting forth in detail the services rendered to, and fees received from, the
Partnership by any Sponsor; (iii) a cash flow statement; and (iv) a report of
the activities of the Partnership during the fiscal year. The annual report
shall also set forth distributions to the Unitholders 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 of Sale or Refinancing, and (d) Working Capital
Reserves.
D. Within 45 days after the end of each fiscal quarter in which a Sale or
Refinancing occurs, the General Partners shall send to each Person who was a
Unitholder as of the close of business on the first business day of the month
that includes the date of occurrence of the Sale or Refinancing, a report as to
the nature of the Sale or Refinancing and as to the Profit or Loss arising from
the Sale or Refinancing.
E. 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 Unitholder or Limited Partner for any purpose reasonably related to the
Unitholder's or Limited Partner's interest as a Unitholder or 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 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.
F. 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 Unitholder 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
Unitholder or Limited Partner for any purpose reasonably related to the
Unitholder's or Limited Partner's interest as a Unitholder or a Limited Partner.
Section 10.4. Federal Tax Elections
The Partnership, in the sole discretion of the General Partners, may make
elections for federal tax purposes as follows:
(i) In case of a transfer of a Unit, the Partnership, in the sole
discretion of the General Partners, may timely elect pursuant to Section 754 of
the Code (or corresponding provisions of future law) and pursuant to similar
provisions of applicable state or local income tax laws, to adjust the basis of
the assets of the Partnership. In such event, any basis adjustment attributable
to such election shall be allocated solely to the transferee of the Unit.
(ii) The General Partners may elect accelerated depreciation methods under
the Code, or may elect straight-line depreciation over a period as long as 45
years if, in their sole discretion, the determination of the percentage of
tax-exempt Unitholders becomes too cumbersome.
(iii) All other elections required or permitted to be made by the
Partnership under the Code shall be made by the General Partners in such manner
as will, in their sole opinion, be most advantageous to a majority of the
Unitholders. The Partnership shall, to the extent permitted by applicable law
and regulations, elect to treat as an expense for federal income tax purposes
all amounts incurred by it for real estate taxes, interest and other charges
which may, in accordance with applicable law and regulations, be considered as
expenses.
A-35
ARTICLE XI
MEETINGS OF UNITHOLDERS
Section 11.1. Calling Meetings
Meetings of the Unitholders for any purpose may be called by any General
Partner and shall be called by the General Partners upon receipt of a request in
writing signed by Unitholders having in the aggregate more than 10% of the
outstanding Units. Notice of any meeting shall be sent to the Unitholders within
10 days after receipt of such a request. The request shall state the purpose of
the proposed meeting and the matters proposed to be acted upon. The meeting
shall be held at the principal office of the Partnership, or at such other place
in the continental United States as the General Partners shall designate.
Section 11.2 Notice; Procedure
Notice of any meeting shall be given either personally or by certified
mail, not less than 15 days nor more than 60 days before the date of the
meeting, to each Unitholder at his record mailing address. The notice shall be
in writing, and shall state the place, date, hour, and purpose of the meeting,
and shall indicate that it is being issued at or by the direction of the
Partners or Unitholders calling the meeting. If a meeting is adjourned to
another time or place, and if any announcement of the adjournment of time or
place is made at the meeting, it shall not be necessary to give notice of the
adjourned meeting. The presence in person or by proxy of the holders of more
than 50% of the outstanding Units shall constitute a quorum at all meetings of
the Unitholders; provided, however, that if there is no quorum present, holders
of a majority in interest of the Unitholders present or represented may adjourn
the meeting from time to time without further notice until a quorum is obtained.
No notice of the time, place or purpose of any meeting of Unitholders need be
given to any Unitholder who attends in person or is present by proxy (except
when a Unitholder attends a meeting for the express purpose of objecting at the
beginning of the meeting to the transaction of any business on the ground that
the meeting is not lawfully called or convened), or to any Unitholder entitled
to notice who, in a writing executed and filed with the records of the meeting,
either before or after the time of the meeting, waives the notice requirement.
Section 11.3 Right to Vote
For the purpose of determining the Unitholders entitled to vote at any
meeting of the Partnership, any General Partner or the Unitholders requesting
the meeting may fix a date, in advance, as the record date for the determination
of Unitholders entitled to vote. This date shall be not more than 50 days nor
less than 10 days before any meeting.
Section 11.4 Proxies; Rules
Each Unitholder may authorize any person or persons to act for him by proxy
in all matters in which a Unitholder is entitled to participate, whether by
waiving notice of any meeting, or voting or participating at a meeting. Every
proxy must be signed by the Unitholder or his attorney-in-fact. No proxy shall
be valid after the expiration of 11 months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be recoverable at the
pleasure of the Unitholder executing it. At each meeting of Unitholders, the
General Partners shall appoint officers and adopt rules as they deem appropriate
for the conduct of the meeting.
ARTICLE XII
GENERAL PROVISIONS
Section 12.1 Appointment of Administrative General Partner as
Attorney-in-Fact A. Each Limited Partner and Unitholder hereunder 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 (xix) of this Agreement after the Consent of the Unitholders thereto has
been obtained, and to execute, acknowledge, swear to and deliver all agreements
and instruments and
A-36
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.
B. The appointment by all Limited Partners and Unitholders 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
Partners or Unitholders of the whole or any part of his Interests or Units in
the Partnership.
C. The power of attorney granted by this Section 12.1 shall be governed by
the laws of the State of Delaware.
Section 12.2 Waiver of Partition
Each Partner and Unitholder, on behalf of himself, his successors,
representatives, heirs and assigns hereby waives any right of partition or any
right to take any other action which otherwise might be available to him for the
purpose of severing his relationship with the Partnership or his interest in the
assets held by the Partnership from the interest of the other Partners or
Unitholders.
Section 12.3 Notification
Any Notification, in order to be effective, shall be sent by registered or
certified mail, postage prepaid, if to a Partner or Unitholder, to the address
of the Partner or Unitholder 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
Unitholder or to the Partnership and actually received by such Person shall
constitute Notification for all purposes of this Agreement.
Section 12.4 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.
Section 12.5 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 12.6 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 12.7 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.
A-37
Section 12.8 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 invalidly shall not impair the operation of or affect those portions of
this Agreement which are valid.
Section 12.9 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 12.10 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 12.11 Amendments
A. In addition to the amendments otherwise authorized herein, amendments
may be made to this Agreement from time to time by the General Partners with the
Consent of the Unitholders; provided, however, that without the consent of the
Partners or Unitholders to be adversely affected by the amendment, this
Agreement may not be amended so as to (i) convert a Unitholder's interest into a
General Partner's interest; (ii) modify the limited liability of a Unitholder;
(iii) alter the interest of a Partner or Unitholder in Net Cash Flow, Profit or
Loss, or Net Proceeds of Sale or Refinancing; (iv) increase the amount of the
Capital Contributions required to be paid by the Unitholders; or (v) extend the
termination date specified in Section 2.4, except as provided in Section 12.11B.
B. In addition to the amendments otherwise authorized herein, amendments
may be made to this Agreement from time to time by the General Partners, without
the consent of any of the Unitholders, (i) to add to the duties or obligations
of the General Partners or surrender any right or power granted to the General
Partners herein, for the benefit of the Unitholders; (ii) to cure any ambiguity,
to correct or supplement any provision herein which may be inconsistent with any
other provision herein, or to make any other provisions with respect to matters
or questions arising under this Agreement which will not be inconsistent with
the provisions of this Agreement; (iii) to delete or add any provision of this
Agreement required to be deleted or added by the Staff of the Securities and
Exchange Commission or other federal agency or by a state securities
commissioner or similar official and deemed by the commission, agency,
commissioner, or official to be for the benefit or protection of the
Unitholders; (iv) to take any actions necessary to cause the assets of the
Partnership to come within the exclusion from the definition of plan assets
contained in Section 2550.40lb-1 of Title 29 of the Code of Federal Regulations;
and (v) to give effect to any action permitted pursuant to Section 5.2;
provided, however, that no amendment shall be adopted pursuant to this Section
12.2.B unless its adoption (1) is for the benefit of or not adverse to the
interests of the Unitholders; (2) is consistent with Section 5.2; (3) does not
affect the distribution of Net Cash Flow or Net Proceeds of Sale or Refinancing
or the allocation of Profit or Loss among the Unitholders as a class and the
General Partners as a class, except as provided in clause (y) below; and (4)
does not affect the limited liability of the Unitholders or the status of the
Partnership as a partnership for federal income tax purposes. In addition to the
amendments otherwise authorized herein, amendments may be made to this Agreement
(x) prior to or in connection with the initial closing of the sale of Units
pursuant to the Offering, so long as purchasers are given notice of the
amendment prior to the closing, and (y) to amend provisions of Article IV of
this Agreement relating to the allocations of Profit or Loss and to
distributions of Net Cash Flow or Net Proceeds of Sale or Refinancing among the
Partners and Unitholders if the Partnership is advised at any time by the
Partnership's Accountants and counsel that the allocations provided in Article
IV of this Agreement are unlikely to be respected for federal income tax
purposes. The General Partners are empowered to amend the distribution and
allocation
A-38
provisions of Article IV pursuant to Section 12.2B(y) to the minimum extent
necessary in accordance with the advice of the Partnership's Accountants and
counsel to effect the plan of distribution of Net Cash Flow and Net Proceeds of
Sale or Refinancing, and, consistent therewith, the allocations of Profit and
Loss provided in this Agreement. New allocations made by the General Partners in
reliance upon the advice of the Partnership's Accountants and counsel shall be
deemed to be made pursuant to the fiduciary obligation of the General Partners
to the Partnership and the Unitholders, and no such new allocations shall give
rise to any claim or cause of action by any Unitholder. This Section 12.11 shall
be subject to the provisions of Section 5.9 of this Agreement.
C. If this Agreement is amended as a result of adding or substituting a
Limited Partner or increasing the investment of a Limited Partner, the amendment
shall be signed by the General Partners and by the Person to be substituted or
added, or the Limited Partner increasing his investment in the Partnership, and,
if a Limited Partner is to be substituted, by the assigning Limited Partner. If
this Agreement is amended to reflect the designation of an additional General
Partner, the amendment shall be signed by the other General Partner or General
Partners and by the additional General Partner. If this Agreement is amended to
reflect the withdrawal of a General Partner when the business of the Partnership
is being continued, the amendment shall be signed by the withdrawing General
Partner and by the remaining or successor General Partner or General Partners.
D. In making any amendments, there shall be prepared and filed for
recordation by the General Partners all documents and certificates required to
be prepared and filed under the Act and under the laws of the other
jurisdictions under the laws of which the Partnership is then formed or
qualified.
IN WITNESS WHEREOF, parties hereto have executed this Agreement as of the
1st day of June, 1987.
GENERAL PARTNERS
ATTEST: BENCHMARK EQUITIES, INC.,
the Development General Partner
/s/ XXXXX XXXXX By: /s/ XXXXXX X. XXXXXX (SEAL)
Xxxxxx X. Xxxxxx, President
ATTEST: XXXXX-BENCHMARK AGP, INC.,
the Administrative General Partner
/s/ XXXXX X. XXXXXXXX By: /s/ XXXX X. XXXXX (SEAL)
Assistant Secretary Xxxx X. Xxxxx, President
A-39
SUBORDINATED LIMITED PARTNERS
ATTEST: BENCHMARK COMMUNITIES, INC.
/s/ XXXXX XXXXX By: /s/ XXXXXX X. XXXXXX (SEAL)
Xxxxxx X. Xxxxxx, Chairman
WITNESS: REALTY ASSOCIATES 1987 LIMITED PARTNERSHIP
By: RESIDUAL INVESTMENT ASSOCIATES,
A MARYLAND LIMITED PARTNERSHIP,
\ General Partner
By: A.B. RESIDUAL, INC., General Partner
/s/ XXXXXXXXX X. XXXX By: /s/ XXXXXX X. XXXXXX (SEAL)
Xxxxxx X. Xxxxxx, Treasurer
ASSIGNOR LIMITED PARTNER
ATTEST: XXXXX-BENCHMARK HOLDING CO., INC.
/s/ XXXXX X. XXXXXXXX By: /s/ XXXX X. XXXXX (SEAL)
Assistant Secretary Xxxx X. Xxxxx
President
A-40
