EXHIBIT 4
AGREEMENT OF LIMITED PARTNERSHIP
OF
WINDSOR PARK PROPERTIES 3,
A California Limited Partnership
TABLE OF CONTENTS
Page
I. FORMATION OF LIMITED PARTNERSHIP................................................................... 1
1.01 FORMATION AND AGREEMENT OF LIMITED PARTNERSHIP..................................................... 1
1.02 NAME AND PRINCIPAL PLACE OF BUSINESS............................................................... 1
1.03 TERM OF PARTNERSHIP................................................................................ 1
1.04 DEFINITIONS........................................................................................ 1
1.05 PURPOSE OF PARTNERSHIP AND INVESTMENT OBJECTIVES................................................... 3
1.06 GENERAL AND LIMITED PARTNERS....................................................................... 3
(A) GENERAL PARTNERS................................................................................... 3
(B) GENERAL PARTNERS CAPITAL CONTRIBUTION.............................................................. 3
(C) GENERAL PARTNERS PURCHASE OF UNITS................................................................. 4
(D) AUTHORIZED UNITS AND ORIGINAL AND ADDITIONAL LIMITED PARTNERS...................................... 4
(E) ADMISSION OF LIMITED PARTNERS...................................................................... 4
II. MANAGEMENT OF THE PARTNERSHIP...................................................................... 4
2.01 POWERS AND DUTIES OF THE GENERAL PARTNERS.......................................................... 4
2.02 INDEMNIFICATION.................................................................................... 5
2.03-1 POWERS AND DUTIES OF THE LIMITED PARTNERS.......................................................... 5
2.03-2 ACTS NOT DEEMED "PARTICIPATION IN CONTROL"......................................................... 6
2.03-3 THE RIGHTS AND DUTIES OF THE PARTNERS IN RELATIONSHIP TO THE PARTNERSHIP SHALL BE DETERMINED BY
THE FOLLOWING RULES................................................................................ 7
2.0 COMPENSATION OF GENERAL PARTNERS AND AFFILIATES.................................................... 7
(1) PROPERTY MANAGEMENT FEE............................................................................ 7
(2) AFFILIATE ACQUISITION FEES......................................................................... 7
(3) LIMITATION......................................................................................... 8
2.05 INVESTMENT IN PROPERTIES........................................................................... 8
2.06 CERTAIN MORTGAGING................................................................................. 8
2.07 REINVESTMENT....................................................................................... 8
III. FINANCING OF THE PARTNERSHIP....................................................................... 9
3.01 CAPITAL CONTRIBUTIONS OF THE GENERAL PARTNERS...................................................... 9
3.02 CAPITAL CONTRIBUTIONS OF THE LIMITED PARTNERS...................................................... 9
(A) PARTNERSHIP UNITS.................................................................................. 9
(B) INITIAL SUBSCRIPTIONS.............................................................................. 9
3.03 ADDITIONAL CONTRIBUTIONS........................................................................... 9
3.04 INTEREST........................................................................................... 9
3.05 TIME FOR RETURN OF CONTRIBUTIONS................................................................... 9
TABLE OF CONTENTS
(continued)
Page
3.06 LOANS BY THE PARTNERS.............................................................................. 9
3.07 ALLOCATION OF NET PROFITS AND NET LOSSES AND DISTRIBUTIONS FROM CASH AVAILABLE FOR DISTRIBUTION.... 9
3.08 CONDITIONS AND CONSENT TO ALLOCATIONS AND DISTRIBUTIONS............................................ 11
3.09 PARTNERSHIP EXPENSES............................................................................... 11
IV.. BOOKS OF ACCOUNT, FINANCIAL STATEMENTS AND FISCAL MATTERS.......................................... 12
4.01 BOOKS OF ACCOUNT................................................................................... 12
4.02 REPORTS AND FINANCIAL STATEMENTS................................................................... 13
(A) ANNUAL REPORT...................................................................................... 13
(B) REPORT OF FEES..................................................................................... 13
(C) QUARTERLY REPORTS.................................................................................. 13
(D) TAX INFORMATION.................................................................................... 13
(E) SPECIAL REPORTS.................................................................................... 13
(F) REPORTS DURING OFFERING............................................................................ 14
(G) FILING OF REPORTS.................................................................................. 14
4.03 TAX RETURNS AND RECORDS............................................................................ 14
4.04 FISCAL YEAR........................................................................................ 14
4.05 BANK ACCOUNTS, FUNDS AND ASSETS.................................................................... 14
4.06 ADJUSTMENT OF TAX BASIS............................................................................ 14
4.07 INSURANCE.......................................................................................... 15
4.08 APPRAISALS......................................................................................... 15
4.08 TAX MATTERS PARTNER................................................................................ 15
V ASSIGNABILITY OF LIMITED PARTNERS' INTERESTS....................................................... 15
5.01 LIMITED PARTNERS' INTEREST......................................................................... 15
5.02 FURTHER RESTRICTION ON TRANSFERS................................................................... 15
5.03 SUBSTITUTED PARTNERS............................................................................... 16
5.04 ADDITIONAL RESTRICTIONS............................................................................ 16
5.05 WITHDRAWAL OF LIMITED PARTNER...................................................................... 16
5.06 DEATH OF LIMITED PARTNER........................................................................... 16
5.07 RECOGNITION OF SUBSTITUTED AND ASSIGNEE LIMITED PARTNERS........................................... 16
VI REPURCHASE OF UNITS................................................................................ 16
VII RIGHT OF LIMITED PARTNERS TO RECEIVE PROPERTY OTHER THAN CASH...................................... 17
VIII TERMINATION OF A GENERAL PARTNER................................................................... 17
8.01 CEASING TO BE A GENERAL PARTNER.................................................................... 17
TABLE OF CONTENTS
(continued)
Page
8.02 CONTINUATION OF BUSINESS OF REMAINING GENERAL PARTNER.............................................. 18
8.03 REMOVAL OF A GENERAL PARTNER....................................................................... 18
8.04 DISSOLUTION OF PARTNERSHIP AND CONTINUANCE OF PARTNERSHIP BUSINESS................................. 18
8.05 PAYMENT TO TERMINATED GENERAL PARTNER.............................................................. 18
8.06 TERMINATION OF EXECUTORY CONTRACTS................................................................. 18
IX DISTRIBUTION ON TERMINATION........................................................................ 19
9.01 EVENTS OF DISSOLUTION.............................................................................. 19
9.02 GAIN AND LOSS ON DISSOLUTION AND ORDER OF DISTRIBUTION............................................. 19
9.03 EMINENT DOMAIN..................................................................................... 19
9.04 PERIOD OF LIQUIDATION.............................................................................. 19
X CERTIFICATES AND OTHER DOCUMENTS................................................................... 19
10.01 GENERAL PARTNERS ATTORNEYS FOR LIMITED PARTNERS.................................................... 19
10.02 MAKING, FILING, ETC. OF CERTIFICATES, ETC.......................................................... 20
XI NOTICES............................................................................................ 21
XII CONVEYANCES, CONTRACTS AND DOCUMENTS............................................................... 21
XIII DISPUTES AND ARBITRATION........................................................................... 21
XIV MEETINGS OF, OR ACTIONS BY, THE LIMITED PARTNERS................................................... 21
XV CAPTIONS-PRONOUNS.................................................................................. 23
XVI BINDING EFFECT AND EXHIBITS........................................................................ 23
XVII AMENDMENT OF THE AGREEMENT......................................................................... 24
XVIII ENTIRE AGREEMENT................................................................................... 24
XIX TAX CONTROVERSIES.................................................................................. 24
XX COUNTERPARTS AND EXECUTION......................................................................... 24
XXI LIABILITY AND INDEMNIFICATION...................................................................... 25
XXII INVESTMENT IN OTHER PROGRAMS OF SPONSOR............................................................ 25
XXIII PROCEEDS FROM FINANCING PROPERTIES................................................................. 26
LIMITED PARTNERSHIP AGREEMENT
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AGREEMENT OF LIMITED PARTNERSHIP
OF
WINDSOR PARK PROPERTIES 3,
A California Limited Partnership
This Agreement of Limited Partnership is made August 7, 1985, as amended to
the date stated on the signature page, by and among The Windsor Corporation, a
California corporation (Corporate General Partner) and ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
(Individual General Partner), as General Partners and ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ as the
original Limited Partner.
The original Limited Partner and each other person, partnership, corporation,
trust or other entity who or which shall thereafter be admitted to the
Partnership as a limited partner as hereinafter provided, are referred to
collectively as "Limited Partners" and individually as "Limited Partner."
I.
FORMATION OF LIMITED PARTNERSHIP
1.01 Formation and Agreement of Limited Partnership. The parties hereby form
a limited partnership (the "Partnership") pursuant to the provisions of the
California Revised Limited Partnership Act as set forth in Title 2, Chapter 3,
of the California Corporation Code, upon the terms and conditions set forth
herein. On the execution of this Agreement (the "Agreement"), the parties will
execute, acknowledge and file a Certificate of Limited Partnership pursuant to
the provisions of Section 15,621 of the California Corporations Code.
1.02 Name and Principal Place of Business. The name of the Partnership is
Windsor Park Properties 3, A California Limited Partnership, and the office and
principal place of business shall be ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and hereafter such other place or places as the
General Partners may from time to time determine.
1.03 Term of Partnership. The Partnership shall commence as of the date of
this Agreement (the "effective date") and shall continue for a period ending the
earlier of:
(a) Six months after the commencement of its public offering registered
with the Securities and Exchange Commission, provided that on said date the
Partnership has not received a minimum of $1,250,000 of capital contributions
from Limited Partners;
(b) December 31, 1999;
(c) The date on which all of the assets acquired by the Partnership are
sold or otherwise disposed of;
(d) The date on which the Partnership is voluntarily dissolved by the
agreement of the Partners;
(e) The date on which the Partnership is dissolved by operation of law or
judicial decree; or
(f) The date on which the last remaining original General Partner retires,
dies, becomes legally incapacitated, dissolves, withdraws, is adjudicated
bankrupt or is removed, unless a majority in interest of the Limited Partners
by written consent or vote elect one or more new General Partners to continue
the Partnership business.
1.04 Definitions. The following terms used in this Agreement shall (unless
otherwise expressly provided herein or unless the context otherwise requires)
have the following respective meanings:
(a-1) "Acquisition Fees" shall mean the total of all fees and commissions
paid by any party, including any sponsor, in connection with the purchase or
development of any property by the Partnership, whether designated as a real
estate commission, acquisition fee, development fee, nonrecurring management
fee or any fee of a similar nature (except a development fee paid to a person
non-affiliated with the sponsors in connection with the actual development of
a project after acquisition of the land by the partnership), and including the
fee
described in (a-2) next. "Development Fee" means a fee for the packaging of a
Partnership property, including negotiating and approving plans and
undertaking to assist in obtaining zoning and necessary variances and
necessary financing for the specific property, either initially or at a later
date.
(a-2) "Affiliate Acquisition Fees" mean the acquisition fee paid to the
General Partners for their services in the acquisition of partnership
properties. This fee shall not exceed 7% of the public offering proceeds.
(b) "Affiliate" shall include (i) any person directly or indirectly
controlling, controlled by or under common control with another person, (ii) a
person owning or controlling 10% or more of the outstanding voting securities
of such other persons, (iii) any officer, director, partner, general trustee
or anyone acting in a substantially similar capacity as to such person, and
(iv) any person who is an officer, director, general partner, trustee, or
holder of 10% or more of the voting securities or beneficial interests of any
of the foregoing.
(c) "Appraised Value" means value according to an appraisal made by an
independent appraiser who is a member in good standing of a professional
appraisal association.
(d) "Cash Available For Distribution" means the cash funds provided from
Partnership operations, including lease payments on net leases from builders
and sellers, without deduction for depreciation, but after deducting cash
funds used to pay all other expenses, debt payments, capital improvements,
amounts set aside for restoration or creation of reserves, and replacements.
(e) "Capital Contributions" means the total investment and contribution to
the capital of the Partnership in cash by Limited or General Partners without
deduction of selling, organization or other expenses.
(f) "Distributions" shall mean any cash or other property distributed to
the Limited and General Partners arising from their interests in the
Partnership, but shall not include any payments to the General Partners under
the provisions of Section 2.04.
(g) "Expenses of Acquisition" includes, but is not limited to, legal fees
and expenses, travel and communication expense, 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 properties, whether or not acquired.
(h) "Invested Capital" means General or Limited Partner's capital
contribution less the sum of surplus funds distributed to such Limited
Partners as of the date of calculation.
(i) "Net Profits and Net Losses" means the profits or losses of the
Partnership in accordance with accounting method followed for federal income
tax purposes.
(j) "Person" means any natural person, partnership, corporation,
association or other legal entity.
(k) "Purchase Price" means the price paid upon the purchase or sale of a
particular property, including the amount of acquisition fees and all liens
and mortgages on the property, but excluding points and prepaid interest.
(l) "Sponsor" shall mean any person directly or indirectly instrumental in
organizing, wholly or in part, the Partnership, or any person who will manage
or participate in the management of the Partnership, including the General
Partners and any affiliate of such person, excluding any person whose only
relation with the Partnership is that of independent property manager and
whose only relation with the Partnership is that of independent property
manager and whose only compensation is as such. Sponsor shall not include
wholly independent third parties such as attorneys, accountants, and
underwriters whose only compensation is for professional services rendered in
connection with the offering of Partnership interest.
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(m) "Units" shall mean the partnership interests of the Limited and General
Partners, and each unit shall represent a capital contribution of $100 to the
Partnership and entitle the holder thereof to the rights and interests of
Limited or General Partners as herein provided.
(n) "Adjusted Invested Capital" means the original capital contribution
paid for each Unit reduced by any return of capital and further reduced by the
total cash distributed from net proceeds from refinancing and net proceeds
from the sale of Properties with respect to each Unit.
(o) "Organization and Offering Expenses" means those expenses incurred in
connection with and in preparing the Partnership for registration and
subsequently offering and distributing the offering to the public, including
sales commissions paid to broker-dealers in connection with the distribution
of the Partnership's units and all advertising expenses.
1.05 Purpose of Partnership and Investment Objectives. The principal purpose
of the Partnership is to acquire, own, operate, improve, lease and otherwise
manage for investment purposes, either alone or in association with others, a
portfolio of improved, income-producing mobile home properties as shall from
time to time be acquired by the Partnership and which offers the potential for
(i) preserving and protecting the Limited Partners' original invested capital;
(ii) generating an annual cash flow for distribution to the partners; and (iii)
to engage in any and all general business activities related to and incidental
to those purposes; provided however that the Partnership shall not own or lease
property jointly in partnership with others unless (a) such partner or joint
owner is an independent third person who is not a sponsor, (b) the management of
such partnership or joint ownership is under control of the Partnership which
has a majority interest therein, (c) the Partnership, as a result of such joint
ownership or partnership ownership of an investment property, is not charged,
directly or indirectly, more than once for the same services, (d) the joint
ownership or partnership does not authorize or require the Partnership to do
anything as a partner or joint venture with respect to the property which the
Partnership or the General Partners could not do directly because of this
Agreement; and (e) the General Partners and their affiliates are prohibited from
receiving any compensation, fee or expenses which are not permitted to be paid
by this Agreement.
Until invested in properties (except for reserves), the Partnership may
temporarily invest all or a part of its capital contributions in short-term,
highly liquid investments with appropriate safety of principal, such as U.S.
Treasury Bonds or Bills, insured savings accounts, or similar investments.
All properties, except those acquired after January 1, 1995, are to be
acquired free and clear of any encumbrances. Unimproved or non income producing
property will not be acquired. Investment in junior trust deeds or similar
obligations shall be prohibited.
In view of the exclusive purposes of the Partnership, none of the parties
shall have any obligation with respect to the Partnership or to any of the other
parties insofar as making other real estate opportunities available to the
Partnership or to any of the other parties. The General Partners and each
Limited Partner may, notwithstanding the existence of this Agreement, engage in
whatever activities they choose, whether the same is competitive with the
Partnership or otherwise, without having or incurring any obligation to offer
any interest in such activities to the Partnership or any party hereto. The
obligations of the parties shall, therefore, be limited solely to those arising
from the acquisition and holding of the Partnership property.
1.06 General and Limited Partners.
(a) General Partners. The address of the General Partners is as follows: ▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The General Partners'
interest in net profits, net losses and distributions shall be allocated between
them (so long as they act as General Partners) as they determine.
(b) General Partners Capital Contribution. The General Partners will, as
General Partners, contribute to the capital of the Partnership that amount of
capital over the next five years so that the partnership will not be required to
register with the Internal Revenue Service as a tax shelter.
3
(c) General Partners Purchase of Units. On or before the closing of the
public offering the General Partners will purchase a minimum of that number of
limited partnership units equal to 1% (but not more than $100,000) of units sold
in the Partnership's public offering, less, however, the amount of capital they
may be required to contribute pursuant to subsection 1.06(b).
(d) Authorized Units and Original and Additional Limited Partners. ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, the original Limited Partner, has contributed the sum of $1,000 cash
to the capital of the Partnership and has received 10 units for such
contribution. The Partnership intends to make a public offering of 200,000 units
of limited partnership interests ("Units") and to admit as additional Limited
Partners the persons whose subscriptions for such Units are accepted by the
General Partners. The names and places of residence of such Limited Partners
will be set forth in the Subscription Agreements and Signature Pages attached
hereto. The General Partners may admit an unlimited number of additional Limited
Partners who subscribe from time to time for Units upon such terms and
conditions and in such amount as the General Partners in their sole discretion
shall deem reasonable. No action or consent by Limited Partners shall be
required in connection with such admission of additional Limited Partners
pursuant to this Section 1.06. This Agreement shall be executed by the General
Partners, and an amendment of any Certificate of Limited Partnership, reflecting
such admissions, shall be executed by the General Partners and filed, if and
when and in such jurisdictions as may be required or appropriate. The offering
period of program interests shall cease not later than one year from the date of
the partnership's registration statement as filed with the Securities and
Exchange Commission.
(e) Admission of Limited Partners. The Subscribers for Units of the
Partnership shall be admitted to the Partnership as Limited Partners within
thirty (30) days after such subscribers' capital contributions are released by
the depository thereof to the Partnership. Thereafter, subscriptions for Units
shall be accepted or rejected by the General Partners within thirty (30) days
after their receipt by the General Partners, and subscribers whose subscriptions
are acceptable shall be admitted to the Partnership as additional Limited
Partners on or before the last day of the calendar month during which such
subscriptions were accepted. All moneys deposited by subscribers whose
subscriptions are rejected by the General Partners will be returned to such
subscriber without any interest thereon forthwith after such rejection.
II.
MANAGEMENT OF THE PARTNERSHIP
2.01 Powers and Duties of the General Partners. The General Partners shall
have full and complete charge of all affairs of the Partnership, and the
management and control of the Partnership's business shall rest exclusively with
the General Partners, subject to the terms and conditions of this Agreement.
The General Partners shall have a fiduciary responsibility for the safekeeping
and use of all funds of the Partnership, whether or not in the General Partners'
immediate possession or control. The General Partners shall not employ or
permit another to employ such funds or assets in any manner except for the
exclusive benefit of the Partnership. The General Partners shall have the
rights, powers and authority granted to the General Partners hereunder or by
law, or both, to obligate and bind the Partnership and, on behalf and in the
name of the Partnership, to take such action as the General Partners deem
necessary or advisable including, without limitation, making, executing and
delivering purchase and sale, management and other agreements; leases,
assignments, deeds and other transfers and conveyances; agreements to purchase,
sell, lease or otherwise deal with personal property; escrow instructions;
checks, drafts and other negotiable instruments; and all other documents and
agreements which the General Partners deem reasonable or necessary in connection
with the purchase of the Partnership's properties and the operation and
management thereof. The execution and delivery of any such instrument by the
General Partners shall be sufficient to bind the Partnership.
The General Partners or their affiliates may acquire Units from time to time
on their own behalf and for their own benefit.
The General Partners or their affiliates may from time to time employ on
behalf of the Partnership such persons, firms or corporations as they in their
sole judgment shall deem advisable in the operation of the business of the
Partnership, including accountants and attorneys, on such terms and for such
compensation as they, in their sole judgment, shall determine, provided,
however, that the Partnership shall not: (1) make any loans to any sponsor; (2)
grant an exclusive right to sell or exclusive employment to sell property for
the Partnership to a sponsor; (3) offer
4
Limited Partnership interests in exchange for property; (4) employ a sponsor to
construct or develop Partnership property; (5) after two years after the public
offering terminates, invest any surplus funds; (6) purchase limited partnership
interests in other partnerships; and (7) incur any indebtedness or place any
loans or encumbrances against Partnership properties (except as provided in
Article XXIII).
The Partnership shall not purchase or lease property in which a sponsor has an
interest. The Partnership shall not acquire property from any person in whom a
sponsor has an interest. Notwithstanding the foregoing, a sponsor may purchase
property in its own name and temporarily hold title thereto for the purpose of
facilitating the acquisition of such property, or any other purpose related to
the business of the Partnership, provided that such property is purchased by the
Partnership for a price no greater than the cost of such property to the sponsor
and provided there is no difference in interest rates of the loans secured by
the property at the time acquired by the sponsor and the time acquired by the
program, and no other benefit is provided to the sponsor arising out of such
transaction apart from compensation otherwise permitted by this Agreement. The
Partnership shall not sell or lease property to a sponsor.
Sponsors shall not receive a rebate, give-up or similar payment or enter into
any reciprocal business arrangement which would circumvent any provisions
contained in this Agreement.
No sponsor shall: (1) commingle the Partnership funds with those of any other
person or entity; (2) operate the Partnership in such a manner as to have the
Partnership classified as an "investment company" for purposes of the Investment
Company Act of 1940; (3) cause the Partnership to enter into any agreements with
the General Partner or their affiliates which shall not be subject to
termination without penalty by either party upon not more than sixty (60) days'
written notice.
Neither the Partnership nor any sponsor shall, directly or indirectly, pay or
award any finder's fees, commissions or other compensation to any person engaged
by a potential investor for investment advice as an inducement to such advisor
to advise the potential investor to purchase Limited Partnership interests of
the Partnership, provided, however, that the Partnership shall not be prohibited
from paying the normal sales commissions payable to registered broker dealers or
other properly licensed persons for selling Units.
The General Partners may place record title to, or the right to use,
Partnership assets in, the name or names of a nominee or nominees, trustee or
trustees for any purpose convenient or beneficial to the Partnership.
The Partnership shall provide from the offering proceeds adequate reserves for
normal repair, replacements and contingencies.
2.02 Indemnification. Except in the case of negligence or misconduct, the
General Partners and agents acting on their behalf shall not be liable,
responsible or accountable in damages or otherwise to the Partnership (in a
Partnership derivative suit) or to any of the Limited Partners for the doing of
any act or the failure to do any act, the effect of which may cause or result in
loss or damage to the Partnership, if done in good faith to promote the best
interests of the Partnership. The General Partners and their agents shall be
entitled to be indemnified by the Partnership from the assets of the
Partnership, or as an expense of the Partnership, but not from the Limited
Partners, against any liability or loss, as a result of any claim or legal
proceeding (whether or not the same proceeds to judgment or is settled or
otherwise brought to a conclusion) relating to the performance or non-
performance of any act concerning the activities of the Partnership (including
all liabilities under federal and state securities acts as permitted by law),
except in the case where the General Partners or their agents are guilty of bad
faith, negligence, misconduct or reckless disregard of duty, provided such act
or omission was done in good faith to promote the best interests of the
Partnership. The indemnification authorized by this paragraph shall include the
payment of reasonable attorneys' fees and other expenses (not limited to taxable
costs) incurred in settling or defending any claims, threatened action or
finally adjudicated legal proceedings.
2.03-1 Powers and Duties of the Limited Partners. The Limited Partners shall
not participate in the control of the business affairs of the Partnership,
transact any business on behalf of the Partnership, or have any power or
authority to bind or obligate the Partnership.
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2.03-2 Acts Not Deemed "Participation in Control". A Limited Partner does
not participate in the control of the business within the meaning of Section
2.03-1 solely by doing one or more of the following:
(1) Being a contractor for or an agent or employee of the Partnership or of a
General Partner, or an officer, director, or shareholder of the Corporate
General Partner.
(2) Consulting with and advising a General Partner with respect to the
business of the Partnership.
(3) Acting as surety for the Partnership or guaranteeing one or more specific
debts of the Partnership.
(4) Approving or disapproving an amendment to the Partnership Agreement.
(5) Voting on or calling a meeting of the partners for one or more of the
following matters:
(A) The dissolution and winding up of the Partnership.
(B) The sale, exchange, lease, mortgage, pledge, or other transfer of
all or a substantial part of the assets of the Partnership other than in the
ordinary course of its business.
(C) The incurrence of indebtedness by the Partnership other than in the
ordinary course of its business.
(D) A change in the nature of the business.
(E) Transactions in which the General Partners have an actual or
potential conflict of interest with the Limited Partners or the Partnership.
(F) The removal of a General Partner.
(G) An election to continue the business of the Partnership other than
under the circumstances described in subparagraph (I) or (J) of this paragraph
(5).
(H) The admission of a General Partner other than under the
circumstances described in subparagraph (I) or (J) of this paragraph (5).
(I) The admission of a General Partner or an election to continue the
business of the Partnership after a General Partner ceases to be a General
Partner other than by removal where there is no remaining or surviving General
Partner.
(J) The admission of a General Partner or an election to continue the
business of the limited partnership after the removal of a General Partner
where there is no remaining or surviving General Partner.
(6) Winding up the partnership pursuant to Section 15683 of the California
Corporations Code.
(7) Executing and filing a certificate pursuant to Section 15633 of the
California Corporations Code or a certificate of amendment pursuant to Section
15625 of the California Corporations Code or a certificate of dissolution
pursuant to paragraph (1) of subdivision (a) of Section 15623 of the California
Corporations Code or a certificate of cancellation of certificate of limited
partnership pursuant to paragraph (1) of subdivision (b) of Section 15623 of the
California Corporations Code.
(8) Serving on an audit committee or committee performing the functions of an
audit committee.
The enumeration in this Section 2.03-2 does not mean that any other conduct or
the possession or exercise of any other power by a Limited Partner constitutes
participation by the Limited Partner in the control of the business of the
Partnership.
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2.03-3 The Rights and Duties of the Partners in Relationship to the
Partnership Shall be Determined by the Following Rules: (a) No Limited Partner
shall be required to make any additional contribution to the Partnership.
(b) No Limited Partner shall have a priority over any other Limited Partner,
as to return of contributions or as to compensation as a Limited Partner by way
of income.
(c) The obligation of a partner to make a contribution or return money or
property distributed in violation of this chapter may be compromised only by the
written consent of all the partners.
(d) No Limited Partner shall have the right to receive property other than
money upon any distribution.
(e) A partner may not be compelled to accept a distribution of any asset in
kind from the Partnership in lieu of a proportionate distribution of money being
made to other partners.
(f) The Limited Partners shall have the right to vote on all matters specified
in subparagraphs (A) to (G), inclusive, of paragraph (5) of Section 2.03-2 and
the actions specified therein may be taken by the General Partners only with the
affirmative vote of a majority in interest of the Limited Partners, and without
the necessity of the consent of the General Partners.
(g) The Limited Partners shall also have the right to vote on matters
specified in subparagraphs (H) and (I) of paragraph (5) of Section 2.03-2.
Notwithstanding any other provision of the Partnership Agreement to the
contrary, the actions specified in such subparagraphs may only be taken by the
affirmative vote of a majority in interest of the limited partners.
2.04 Compensation of General Partners and Affiliates.
(a) The General Partners and/or their affiliates, or any sponsor shall be
entitled to receive, as an expense of the Partnership, each and all of the
following amounts:
(1) Property Management Fee. For providing property management services
(including all rentup, leasing and re-leasing fees and bonuses, and leasing
services paid to any person; and including bookkeeping services for property
management and fees paid to unrelated persons for property management
services) actually rendered, the General Partners will be paid a fee of 5% of
actual gross receipts collected and received from all sources; but said
property management fees shall not exceed in any event an amount which is
competitive in price and terms with other non-affiliated persons rendering
comparable services which would reasonably be made available to the
Partnership. "Property Management" means the day-to-day professional
management services in connection with the Partnership's properties. Property
management fees paid by anyone to anyone may not exceed the lesser of (i) the
competitive rate, or (ii) 5% of actual gross receipts collected and received
from all sources. On site personnel for maintenance, etc., will be paid by the
Partnership. Property management services must be rendered pursuant to a
written agreement which precisely describes the services to be rendered. Such
agreement may only be modified by a majority in interest of limited partners,
and may be terminated by majority vote or consent of the limited partners
following sixty days prior notice thereof by the limited partners.
(2) Affiliate Acquisition Fees. The General Partners may be paid an
Affiliate Acquisition Fee as defined and in the amount stated in Section 1.04
(a-2); provided, however, that Acquisition Fees paid in connection with the
purchase and development of Partnership properties (including, but not limited
to, Affiliate Acquisition Fees paid to the General Partners and any
commissions to non-affiliated brokers) shall not exceed the lesser of the
compensation customarily charged in arms-length transactions by others
rendering similar services as an ongoing public activity in the same
geographical location and for comparable property, or an amount equal to 9% of
the initial capital contributions (less any uninvested funds returned to
Limited Partners pursuant to Section 3.05 relating to funds not invested
within two years) of Limited Partners applicable to the property which is the
subject of the transaction (adjusted to include a pro-rata amount of any
selling expenses).
7
(3) Limitation. No sponsor shall render any service to the Partnership
nor receive any fee or other compensation from the Partnership other than
those explicitly provided for herein, except for amounts otherwise permitted
pursuant to Sections 3.07, and 3.09 hereof.
(b) Sales commission may be paid to the General Partners upon the sale of
partnership properties; provided, however, that General Partners may receive a
portion of the commission only if the General Partners provide a substantial
amount of the services in the sales effort. Any such compensation payable to the
General Partners shall not exceed, on sale of each property, 3% of the gross
sales price or 50% of the standard real estate brokerage commission, whichever
is lesser. The total real estate brokerage commission paid on resale of each of
the Partnership's properties shall be limited to a competitive real estate
commission, not to exceed 6% of the contract price for the sale of the property.
No such commission shall be paid, however, to the General Partners until each
Limited Partner has received an amount equal to his original invested capital
from the proceeds from the sale or refinancing of properties and cumulative
distributions (including distributed cash from operations and financing) equal
to a 9% cumulative, noncompounded, annual return, commencing at the time each
Limited Partner is admitted to the Partnership, with respect to his adjusted
invested capital.
2.05 Investment in Properties.
(a) The General Partners will commit at least 80% of the Partnership's
capital contributions toward Investment in Properties. The remaining capital
contributions may be used to pay Front-End Fees. When "Acquisition Fees" are
paid by the seller of properties, such fees shall not be included in satisfying
the required minimum Investment in Properties. Additionally, in determining the
amount committed to Investment in Properties, such calculation shall not take
into account any Front-End Fees.
(b) The following definitions apply to this section:
(1) Front-End Fees -- fees and expenses paid by any party for any
services rendered during the Partnership's organizational or acquisition
phase including organization and offering expenses, acquisition fees,
acquisition expenses, and any other similar fees, however designated by the
General Partners.
(2) Investment in Properties -- the amount of capital contributions
actually paid or allocated to the purchase, development, construction or
improvement of properties acquired by the Partnership (including the
purchase of properties, working capital reserves allocable thereto (except
that working capital reserves in excess of 5% shall not be included), and
other cash payments such as interest and taxes but excluding Front-End
Fees).
2.06 Certain Mortgaging. The partnership will not obtain first mortgage
financing, including wrap-around deeds of trust, containing a balloon payment
which does not contain the following provisions, unless prior approval of the
California Department of Corporations has been attained: (i) Such balloon
payment will not become due and payable prior to the earlier of (a) ten years
from the date the partnership acquires the property, or (b) two years beyond the
anticipated holding period of the property, provided that in no event may the
balloon payment become due sooner than 7 years from the date the partnership
acquires the property, and (ii) such loan will provide for regular payments in
an amount which would be sufficient to self-liquidate the loan over a 20 to 30
year period. Secondary financing incurred in connection with the purchase, if
any, shall be fully amortizing, or if not fully amortizing, shall not be due and
payable during the expected holding period of the property. The foregoing shall
not apply to financing representing, in aggregate, 25% or less of the total
purchase price of the properties acquired, or to interim financing, including
construction financing, with a full take-out commitment.
2.07 Reinvestment. Partnership shall not pay, directly or indirectly, a
commission or fee to a sponsor in connection with the reinvestment of the
proceeds of the resale, exchange, or refinancing of partnership property. There
shall be no reinvestment of cash flow, cash available for distribution or
proceeds from sale or refinancing of property.
8
III.
FINANCING OF THE PARTNERSHIP
3.01 Capital Contributions of the General Partners. The General Partners
shall contribute capital to the Partnership in their capacity as General
Partners as provided in Section 1.06(b), and shall purchase units as Limited
Partners as provided in Section 1.06(c).
3.02 Capital Contributions of the Limited Partners.
(a) Partnership Units. The Limited Partners shall contribute to the capital of
the Partnership, for each Unit subscribed, cash in the amount determined by the
General Partners; provided, however, that all Units subscribed for as part of
the initial public offering of such Units, as contemplated by Section 1.06(d),
shall be paid for in cash in an amount equal to One Hundred Dollars ($100) for
each Unit subscribed.
(b) Initial Subscriptions. All funds of initial subscribers will be placed in
a separate interest-bearing account in a bank or savings and loan association,
or invested in short term highly liquid investments as provided in Section 1.05,
and if not more than $1,250,000 is subscribed and contributed on or before six
months after the public offering commences, the Partnership will not be formed
and each subscriber will promptly receive his or her original investment
together with interest actually earned thereon.
3.03 Additional Contributions. In no event shall any Limited Partner be
required to make any additional contributions to the capital of the Partnership
in excess of those set forth in Section 3.02 hereof.
3.04 Interest. No interest shall be paid on the initial or any subsequent
capital contribution to the Partnership.
3.05 Time for Return of Contributions. None of the Partners, either General
or Limited, shall be entitled to a return of the capital contribution made by
any of them until the full and complete winding up and liquidation of the
business and affairs of the Partnership, except as may be permitted pursuant to
Article VI hereof; provided, however, that those portions of the proceeds of a
public offering of Units raised during the first year of such offering which
have not been invested, committed for investment (evidenced by executed written
agreements in principle or letters of understanding) in investment properties
within two (2) years of the effective date of the qualification of the sale of
Units in such offering shall, and such offering proceeds (except for necessary
operating capital) which is committed for investment within such two year
period, but not actually invested within 12 months from the date of commitment,
shall be distributed to the Limited Partners who purchased such Units in
pr oportion to the number of such Units so purchased and such limitation shall
apply by analogy to any proceeds raised during second and subsequent years of a
public offering.
3.06 Loans by the Partners. Neither the General Partners nor the Limited
Partners shall be required to make loans to the Partnership. No financing may be
made by or obtained from any sponsor of the Partnership.
3.07 Allocation of Net Profits and Net Losses and Distributions From Cash
Available For Distribution.
3.07.1 Net Profits and Net Losses of the Partnership for each fiscal year of
the Partnership shall be allocated 99% to the Limited Partners and 1% to the
General Partner. Net Profits and Net Losses to be allocated to the Limited
Partners will be allocated to Limited Partners based on the number of Units held
by each Limited Partner and the period during the fiscal year that the Limited
Partner owned the Units. Upon the transfer of a Partnership Unit, the transferor
and the transferee shall be allocated a pro rata share of Net Profits and Net
Losses based on the portion of the fiscal year that the transferred Unit was
effectively held by the transferor and transferee, respectively.
3.07.2 Cash Available for Distribution, if any, shall be determined for each
quarter and, within 30 days after the close of each quarter, shall be
distributed 95% to the Limited Partners pro rata in accordance with their
respective ownership of Units and 5% to the General Partner. Cash Available for
Distribution shall be distributed to the persons who are Unit holders of record
as of the last day of the quarter for which such distribution is made.
9
3.07.3 Net proceeds from refinancing and net proceeds from the sale of
properties, to the extent available for distribution after the establishment of
any reserves that the General Partners may deem reasonably necessary for any
contingent or future liabilities of the Partnership or after the payment in the
discretion of the General Partners of any debts and liabilities of the
Partnership, and subject to the provisions of Section 2.04(b), shall be
distributed among the Partners in the following amounts and order of priority:
(a) To the Limited Partners, an amount equal to the sum of:
(i) The Adjusted Invested Capital attributable to each Limited Partner;
and
(ii) The excess, if any, of an amount equal to 9% per annum cumulative
(but not compounded) return on Adjusted Invested Capital, calculated from each
Limited Partner's respective date of admission to the Partnership, over total
prior distributions of Cash Available For Distribution with respect to the
Units.
(b) To the extent of any balance remaining, 85% to the Limited Partners to
be shared on a pro rata basis in accordance with their respective ownership of
Units and 15% to the General Partner.
Provided, however, that notwithstanding the provisions of this Section 3.07 to
the contrary, the General Partners shall receive at least 1% of the
distributions of net proceeds from refinancing or net proceeds from the sale of
properties.
3.07.4 Except as otherwise provided by this Agreement, profit or loss on the
sale of properties shall be allocated to and among the Partners as follows:
(a) Profit on the sale of properties shall first be allocated to each
Partner with a negative Capital Account proratably in an amount equal to (or
in proportion to if less than) the amount of the negative Capital Account of
each Partner;
(b) Profit on the sale of properties shall next be allocated to the Limited
Partners until each Limited Partner's Capital Account shall be a positive
amount equal to the sum of:
(i) The Adjusted Invested Capital attributable to each Limited Partner;
and
(ii) The excess, if any, of an amount equal to 9% per annum cumulative
(but not compounded) return on Adjusted Invested Capital, calculated from
each Limited Partner's respective date of admission to the Partnership,
over total prior distributions of Cash Available For Distribution with
respect to the Units.
(c) To the extent of any remaining profit on the sale of properties, 85% to
the Limited Partners to be shared on a pro rata basis in accordance with their
respective ownership of Units and 15% to the General Partners;
(d) To the extent that there is a loss on the sale of properties arising
from a transaction, such loss on the sale of properties shall be allocated
among the Partners with positive balances in their Capital Accounts pro rata
in accordance with their respective positive balances until the aggregate
positive balance of their Capital Accounts is reduced to zero, and any balance
shall be allocated in accordance with the allocation of Net Profits and Net
Loss pursuant to Section 3.07.1 hereof;
(e) The provisions of this Section 3.07.4 notwithstanding, the General
Partner shall be allocated at least 1% of the profit or loss on the sale of
properties, and, to the extent possible, in characterizing the allocated
profit on the sale of properties, that portion which constitutes ordinary
income by reason of recapture of depreciation under Sections 1245 or 1250 of
the Internal Revenue Code or investment tax credit recapture, shall be
allocated among the Partners such that a Partner (or successor) who realized
the benefit of the deduction or credit will bear the tax burden of the
corresponding recapture.
10
3.07.5 A Capital Account shall be maintained by the Partnership on behalf of
each Partner. The Capital Account of each Partner shall be credited with the
amount of such Partner's capital contribution as such is contributed. The
Capital Account of each Partner shall be credited with the amount of Net Profits
and profit on the sale of properties of the Partnership allocated to such
Partner and shall be debited with the amount of Net Losses and loss on the sale
of properties and with the amount of any distributions or return of capital made
by the Partnership to such Partner.
3.07.6 The Capital Account of a Partner shall also be credited or debited, as
the case may be, with items of income, expense, or other adjustments which do
not enter into the calculation of Net Profits or Net Losses. The Capital Account
of a transferor Partner shall become the Capital Account of the transferee
Partner as it existed at the effective date of the transfer. Any special basis
adjustment resulting from an Internal Revenue Code Section 754 election shall
not be taken into account for purposes of establishing and maintaining Capital
Accounts pursuant to the terms of this Section 3.07.6.
3.07.7 If upon the liquidation of the Partnership, there is a deficit balance
in the Capital Account of the General Partner, after making the allocations
provided in this Agreement, then the General Partner will contribute an amount
equal to such deficit balance in its Capital Account, provided that in no event
shall the General Partner be required to contribute to the Partnership, as its
pro rata share, more than 1% of the total capital contributed by the Partners
plus four-fifths of the Cash Available For Distribution received by the General
Partner pursuant this Agreement.
3.07.8 The provisions of this Agreement notwithstanding, the General Partners
will receive at least 1% of the distributions of net proceeds from the sale of
properties and, at such time as the Partnership is to be liquidated hereunder,
such adjustments, if any, as are appropriate to properly reflect such minimum
distribution shall be made with respect to the allocation of profit or loss on
the sale of properties pursuant to Section 3.07.4 and with respect to the
Capital Accounts of the Partners. Provided, further, that any deduction which
might accrue to the Partnership and which is attributable to said 1% minimum
distribution requirement shall be specially allocated to the General Partners.
3.07.9 The General Partners shall also distribute, after the completion of
each calendar year, such amount of cash from sales or financing sufficient to
allow a Limited Partner in a 36% federal tax bracket to pay the income taxes due
with respect to net income derived by him from the disposition or financing of
Partnership properties.
3.08 Conditions and Consent to Allocations and Distributions. The methods,
hereinabove set forth, by which Net Profits and Net Losses are allocated and by
which Distributions of Cash Available For Distribution and surplus funds are
allocated and distributed, are hereby expressly consented to by each General and
Limited Partner as an express condition to becoming a General or Limited
Partner. All Distributions of Cash Available For Distribution and surplus funds
are subject to the payment of Partnership expenses and to the maintenance of
reasonable working capital reserves deemed sufficient for Partnership business
by the General Partners.
3.09 Partnership Expenses. (a) Reimbursement to the General Partners or
their affiliates may be made for the actual cost to the General Partners or
their affiliates of goods and materials provided by unaffiliated parties and
used for or by the Partnership. The General Partners will pay: (i) salaries and
other compensation of their affiliates and their officers, directors and
employees incidental to the organization of the Partnership, the sale of Units
and the acquisition of Partnership properties; (ii) expenses incurred by the
General Partners or their affiliates in connection with the administration of
the Partnership, including the overhead expenses (including rent, utilities,
capital equipment, other administrative items, etc.) of the General Partners or
their affiliates; (iii) expenses related to the performance of those services
for which the General Partners or their affiliates are entitled to compensation.
(b) (1) The General Partners may be reimbursed for administrative services
necessary to the prudent operation of the Partnership. Such services include
transfer agent, legal, accounting, partner relations and similar services.
(2) The services will be provided at a price which does not exceed the lesser
of cost of such services to the General Partners or 90% of the competitive price
which would be charged by non-affiliated persons rendering similar services in
the same or comparable geographic location. Cost of services as used herein
means the pro rata
11
cost of personnel, including an allocation of overhead directly attributable to
such personnel spent on such services, or other method of allocation acceptable
to the Partnership's independent certified public accountant.
(3) This provision may be modified only with a vote of a majority of the
limited partnership interests. This provision may be terminated without penalty
on 60 days' notice.
(4) The General Partners represent that they have adequate staff which they
utilize in the conduct of their business and are able to render such services to
the Partnership. The General Partners have been previously and are now rendering
such services to other programs as an ordinary and ongoing business.
(5) Any general or administrative overhead incurred by the General Partners in
connection with the administration of the Partnership which is not directly
attributable to the rendering of services authorized by this section 3.09(b)
shall not be charged to the Partnership. Such general or administrative overhead
includes but is not limited to salaries, rent, travel expenses and other items
generally falling under the category of overhead. Excluded from allowable
reimbursement shall be (i) rent or depreciation, utilities, capital equipment,
other administrative items; and (ii) salaries, fringe benefits, travel expenses,
and other administrative items incurred or allocated to any controlling persons
of the General Partners or their affiliates. Controlling person, for purpose of
the subsection, includes but is not limited to, any person, whatever his or her
title who performs functions for the General Partners similar to those of: (1)
chairman or member of the board of directors; (2) executive management, such as
(i) president, (ii) vice president or senior vice president, (iii) corporate
secretary, (iv) treasurer; (3) senior management, such as the vice president of
an operating division who reports directly to executive management; or (4) those
holding 5% or more equity interest in the General Partners or a person having
the power to direct or cause the direction of the General Partners whether
through the ownership of voting securities, by contract, or otherwise.
(6) No payment will be made for services for which the General Partners or
their affiliates are entitled to compensation by way of a separate fee, other
than as specifically permitted by this Agreement.
(c) All other expenses of the Partnership shall be billed directly to and paid
by the Partnership as follows: (1) costs of taxes and assessments on Partnership
properties and other taxes applicable to the Partnership; (2) legal, audit,
accounting, and brokerage fees incurred after the offering of Units is
completed; (3) fees and expenses paid to on-site managers, real estate brokers,
and insurance brokers; (4) expenses in connection with the disposition,
replacement, alteration, repair, remodeling, refurbishment, refinancing and
operation of Partnership properties (including the costs and expenses of
foreclosures, insurance premiums, and maintenance of such properties); (5) the
cost of insurance as required in connection with the business of the
Partnership; (6) expenses of revising, amending, converting, modifying or
terminating the Partnership; (7) the costs of printing and mailing to Limited
Partners, evidences of ownership of Units and reports of meetings of the
Partnership, and of preparation of proxy statements and solicitations of proxies
in connection therewith; (8) expenses in connection with preparing and mailing
distribution checks and reports required to be furnished to Limited Partners for
tax reporting purposes; and (9) the cost of preparation and dissemination of the
informational material and documentation relating to potential sale or other
disposition of Partnership property.
IV.
BOOKS OF ACCOUNT, FINANCIAL STATEMENTS AND FISCAL MATTERS
4.01 Books of Account. The General Partners shall, for income tax purposes,
keep on an accrual or a cash basis (to be determined at their discretion upon
filing the initial federal and state tax returns of the Partnership), adequate
books of account of the Partnership wherein shall be recorded and reflected all
of the capital contributions of the Partnership and all of the expenses and
transactions of the Partnership. Such books of account shall be kept at the
principal place of business of the Partnership, and each Limited Partner and his
or her authorized representatives shall have at all times, during reasonable
business hours, free access to and the right to inspect and copy such books of
account and all records of the Partnership, including the right to obtain by
mail or to inspect a list of the names and addresses and interests owned of the
Limited Partners. All books and records of the Partnership shall be kept on the
basis of an annual accounting period ending December 31, except for the final
accounting period which shall end on the dissolution or termination of the
Partnership without reconstitution, provided, however, that the General Partners
in their sole discretion may, subject to approval by the Internal Revenue
Service and applicable state taxing
12
authorities, at any time, without approval of the Limited Partners, change the
Partnership's accounting period and tax year to a period to be determined by the
General Partners. All references herein to a "year of the Partnership" are to
such an annual accounting period.
4.02 Reports and Financial Statements. The General Partners shall provide
the following reports and financial statements to the Limited Partners:
(a) Annual Report. Within 120 days after the end of each fiscal year, (1) a
balance sheet as of the end of such fiscal year, together with statements of
income, Partners' equity, change in financial position and a cash flow
statement for such year. The balance sheet and such statements (other than the
cash flow statement) shall be prepared in accordance with generally accepted
accounting principles and shall be accompanied by an auditor's report
containing an unqualified opinion of the independent certified public
accountants preparing such report; (2) a report of the activities of the
Partnership for such year; (3) a report on distributions to the Limited
Partners for such period, separately identifying distributions from (a) funds
from operations during such period, (b) reserved funds from operations from
prior periods, (c) proceeds from disposition of property and investments, (d)
reserves from the proceeds of public offerings of Units; (4) a detailed
statement of any transactions with the General Partners or their affiliates
and fees, commissions, compensation, and other benefits paid or accrued to the
General Partners or their affiliates for the fiscal year completed, showing
the amount paid or accrued to each recipient and the services performed; and
(5) the annual report must contain a breakdown of the costs reimbursed to the
General Partners. Within the scope of the annual audit if the General
Partner's financial statement, the independent certified public accountants
must verify the allocation of such costs to the Partnership. The method of
verification shall at minimum provide:
(1) A review of the time records of individual employees, the costs of
whose services were reimbursed;
(2) A review of the specific nature of the work performed by each such
employee.
The methods of verification shall be in accordance with general accepted
auditing standards and shall accordingly include such tests of the
accounting records and such other auditing procedures which the General
Partners' independent certified public accountants consider appropriate in
the circumstance. The additional costs of such verification will be
itemized by said accountants on a Partnership by Partnership basis and may
be reimbursed to the General Partners by the Partnership in accordance with
subsection 3.09 only to the extent that such reimbursement when added to
the cost for administrative services rendered does not exceed the allowable
rate as determined in subsection 3.09.
(b) Report of Fees. Within 45 days of the end of each quarter of a fiscal
year during which a sponsor received fees for services from the Partnership, a
report setting forth (i) a statement of the services rendered and (ii) the
amount of fees received. This report may generally be set forth in a footnote
in the quarterly report under section 402(c).
(c) Quarterly Reports. Within 45 days after the end of each fiscal quarter
a report for such period containing an unaudited balance sheet, statement of
income, statement of changes in financial position and a cash flow statement
and a report covering the activities of the Partnership for such quarter which
contains the information specified on Form 10-Q (if such report is required to
be filed with the Securities and Exchange Commission).
(d) Tax Information. Within 75 days after the end of each fiscal year, all
information necessary for the preparation of the Limited Partners' federal
income tax returns.
(e) Special Reports. A Special Report of real property acquisitions shall
be distributed within 45 days after the end of each quarter until the capital
contributions of the Partnership (other than retained reserves) shall be fully
invested. Such Special Report shall include:
13
(i) description of the properties, (ii) descriptions of the geographic
locale and of the market upon which successful operation is dependent,
(iii) the Appraised Value, (iv) date of appraisal, (v) actual purchase
price and terms, (vi) cash expended from capital contributions to acquire
each property, and (vii) the amount which then remains unexpended, stated
in terms of both dollar amount and percentage of the total amount of
capital contributions. This report may be in substance the information
included in Forms 8-K (if such reports are required to be filed with the
Securities and Exchange Commission).
(f) Reports During Offering. During the offering period and until the
Partnership is fully invested, the Partnership will file any prospectus
required by Section 10(a)(3) of the Securities Act of 1933 as post-effective
amendments to the registration statement. The Partnership will additionally
file after the end of the distribution period, a current report on Form 8-K
containing the financial statements and any additional information required by
Rule 3-14 of Regulation S-X, to reflect each commitment (i.e., the signing of
a binding purchase agreement) made after the end of the distribution period
involving the use of 10% or more (on a cumulative basis) of the net proceeds
of the offering and to provide the information contained in such report to the
limited partners at least once each quarter after the distribution period of
the offering has ended. The Partnership will also file a sticker supplement
pursuant to Rule 424(c) under the Securities Act of 1933 during the offering
period describing each property not identified in the prospectus at such time
as there arises a reasonable probability that such property will be acquired
(also disclosing all compensation and fees received by the General Partners
and their affiliates in connection with such acquisition) and to consolidate
all such stickers into a post-effective amendment filed at least once every
three months, with the information contained in such amendment provided
simultaneously to the existing Limited Partners. Lastly, the Partnership will
provide the Limited Partners the Financial Statements required by Form 10-K
for the first full fiscal year of operations of the Partnership.
(g) Filing of Reports. The Partnership will file with the Commissioner of
Corporations of the State of California and any other appropriate federal or
state regulatory agency requiring the same a copy of each report made pursuant
to subdivisions (a), (b), (c) and (d) of this Section 4.02, concurrently with
their transmittal to the Limited Partners, if the filing is required by any
such state.
4.03 Tax Returns and Records. The General Partners, at Partnership expense,
shall cause income tax returns for the Partnership to be prepared and timely
filed with the appropriate authorities. The General Partners, at Partnership
expense, shall cause to be prepared and timely filed, with appropriate federal
and state regulatory and administrative bodies, all reports required to be filed
with such entities under then current applicable laws, rules and regulations.
Such reports shall be prepared on the accounting or reporting basis required by
such regulatory bodies. Any Limited Partner shall be provided with a copy of any
such report upon request without expense to him or her. The General Partners, at
Partnership expense, shall maintain a record of the information obtained to
indicate that a Limited Partner meets the suitability standards set forth in the
Prospectus.
4.04 Fiscal Year. The fiscal year of the Partnership shall begin with the
first day of January and end on the thirty-first day of December in each year,
provided, however, that the General Partners in their sole discretion may,
subject to approval by the Internal Revenue Service and the applicable state
taxing authorities, at any time without approval of the Limited Partners change
the Partnership's fiscal year to a period to be determined by the General
Partners.
4.05 Bank Accounts, Funds and Assets. The funds of the Partnership shall be
deposited in such bank or banks as the General Partners shall deem appropriate.
Subject to the provisions of Article XII, such funds shall be withdrawn only by
the General Partners or their duly authorized agents. Sponsors shall have a
fiduciary responsibility for the safekeeping and use of all funds of the
Partnership, whether or not in their immediate possession or control, and they
shall not employ or permit another to employ such funds or assets in any manner
except for the exclusive benefit of the Partnership. Sponsors shall not
commingle or permit the commingling of the funds of the Partnership with the
funds of any other person or entity.
4.06 Adjustment of Tax Basis. Upon the transfer of an interest in the
Partnership, the Partnership may, at the sole discretion of the General
Partners, elect, pursuant to Section 754 of the Internal Revenue Code of 1954,
as amended, to adjust the basis of the Partnership property as allowed by
Section 734(b) and 743(b) thereof. The
14
election, if made, will be filed with the Partnership information income tax
return for the first taxable year to which the election applies.
4.07 Insurance. The Partnership shall at all times maintain public liability
insurance in amounts determined by the General Partners for the protection of
the Partnership and each of its members. In addition, the Partnership shall
carry appropriate Workmen's Compensation Insurance and such other insurance with
respect to the real property owned by it as shall be customary for similar
property, similarly located, from time to time (for purposes hereof losses
catastrophic in nature, e.g., war, earthquakes and floods, shall not be deemed
customary insurance coverages and shall not be required). No sponsor or
affiliate of a sponsor shall receive an insurance brokerage fee or commission or
write any insurance policy covering the Partnership or any of the property of
the Partnership.
4.08 Appraisals.
(a) An appraisal by an independent qualified appraiser shall be obtained for
each investment property. Such qualification may be demonstrated by membership
in a nationally recognized appraisal society such as Member Appraisal Institute
("M.A.I."), Society of Real Estate Appraisers ("S.R.E.A.") or their equivalent,
but is not limited thereto. The appraisal shall be maintained in the records of
the Partnership for at least five years and shall be available for inspection
and duplication by any Limited Partner.
(b) All persons retained by the Partnership to provide the Partnership reports
of their opinions of appraised values of investment properties being considered
by the Partnership for acquisition or otherwise shall be members in good
standing of a recognized professional appraisal organization and shall certify
to the Partnership as follows: (1) that he or she has no present or contemplated
future interest in the property being appraised; (2) that he or she has no
personal interest or bias with respect to the subject matter of or the parties
involved in the appraisal; and (3) that his or her employment and compensation
for rendering an opinion and report are not contingent upon the value so
determined, or on any other condition other than the delivery of the report or
opinion for a predetermined fee.
4.08 Tax Matters Partner.
▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. is selected and has the right, power and authorization to
represent the Partnership and each Limited Partner as the tax matters partner in
connection with all examinations of the Partnership affairs by tax authorities,
including resulting administrative and judicial proceedings, and to expend
Partnership funds for professional services and costs connected therewith. Each
Limited Partner agrees to cooperate with ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. and to do or refrain
from doing any and all things reasonably required by ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. to
conduct such proceedings.
V.
ASSIGNABILITY OF LIMITED PARTNERS' INTERESTS
5.01 Limited Partners' Interest. Each of the Limited Partners, except as
provided in this Article V, shall not sell, transfer, encumber or otherwise
dispose by operation of law or otherwise of the whole or any part of his or her
interest in the Partnership except by written instrument satisfactory in form to
the General Partners, accompanied by such assurance of the genuineness and
effectiveness of each such signature and the obtaining of any federal and/or
state government approval, if any, as may be reasonably required by the General
Partners.
No less than a minimum of 25 Units (20 for certain fiduciaries) may be
transferred.
No assignment shall be valid or effective unless in compliance with the
conditions herein contained.
5.02 Further Restriction on Transfers. No Partner shall make any assignment
of all or any part of his or her interest in the Partnership if said transfer or
assignment would, when considered with all other transfers during the same
applicable twelve (12) month period, cause a termination of the Partnership for
federal or any applicable state income tax purposes.
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5.03 Substituted Partners. No assignee of the whole or any portion of a
Limited Partner's interest in the Partnership shall have the right to become a
substituted Limited Partner in place of his or her assignor, unless (i) such
assignor shall designate such intention in the instrument of assignment; (ii)
the assignment instrument shall be in form and substance satisfactory to the
General Partners: (iii) the assignor and assignee named therein shall execute
and acknowledge such other instrument or instruments as the General Partners may
deem necessary or desirable to effectuate such admission, including but not
limited to a power of attorney with provisions more fully described in this
Agreement; (iv) the assignee shall accept, adopt and approve in writing of all
of the terms and provisions of this Agreement, as the same may have been
amended; and (v) the written consent of the General Partners to the
substitution, which may be granted or denied within the General Partners' sole
and absolute discretion, is obtained if the substituted Limited Partner is not
the transferring Limited Partner's spouse, ancestor, lineal descendent or trust
for the benefit of such person(s).
5.04 Additional Restrictions. Any unauthorized assignment or transfer shall
be void ab initio. All documents and records evidencing a Limited Partnership
interest, whether issued originally or subsequently, owned by California
residents shall bear and be subject to legend conditions as follows:
(a) "IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS FOR THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
(b) "Any unauthorized assignment of transfer shall be void ab initio."
(c) "Assignees of this security may become substituted Limited Partners
only with the consent of the General Partners."
5.05 Withdrawal of Limited Partner. Except as provided in Article VI, no
Limited Partner shall be entitled to withdraw or retire from the Partnership.
5.06 Death of Limited Partner. The death of a Limited Partner shall not
terminate the Partnership. Upon the death of a Limited Partner, the personal
representative of the deceased Limited Partner shall have all the rights of the
Limited Partner in the Partnership to the extent of the deceased Limited
Partner's interest therein, subject to the terms and conditions of this
Agreement, and the estate of the deceased Limited Partner shall be liable for
all of his or her liabilities as a Limited Partner, as well as the execution of
all documents required to effect, subject to the terms of Section 5.03, the
appropriate substitution of the decedent's estate or beneficiary as a Limited
Partner hereunder.
5.07 Recognition of Substituted and Assignee Limited Partners. The
Certificate of Limited Partnership of the Partnership shall be amended and
recorded pursuant to Section 1.01 in any jurisdiction where it may be required
not less often than quarterly to recognize the admission of substituted Limited
Partners. Assignees of Limited Partners shall be recognized as such not later
than the first of the calendar month following the General Partners' receipt of
notice of such assignment.
VI.
REPURCHASE OF UNITS
The Partnership, in its sole discretion, may repurchase Units, after the
offering of its Units has closed, at a negotiated price, if such repurchase does
not impair the capital or operations of the Partnership. The Partnership may not
reserve or apply more than an aggregate of .5% of the gross proceeds of its
offering of Units toward any such repurchases.
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VII.
RIGHT OF LIMITED PARTNERS TO RECEIVE PROPERTY OTHER THAN CASH
No right is given to a Limited Partner to demand and receive property other
than cash in return for his or her contribution. However, the General Partners
may, in their sole discretion, make such distribution of property other than
cash to any or all of the Partners.
VIII.
TERMINATION OF A GENERAL PARTNER
8.01 Ceasing to be a General Partner. A person ceases to be a General
Partner of this Partnership upon the happening of any of the following events:
(a) The General Partner withdraws from this Partnership.
(b) The General Partner is removed as a General Partner.
(c) Unless otherwise provided in the partnership agreement, an order for
relief against the General Partner is entered under Chapter 7 of the federal
bankruptcy law, or the General Partner (1) makes a general assignment for the
benefit of creditors, (2) files a voluntary petition under the federal
bankruptcy law, (3) files a petition or answer seeking for that partner any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law, or regulation, (4) files
an answer or other pleading admitting or failing to contest the material
allegations of a petition filed against that partner in any proceeding of this
nature, or (5) seeks, consents to, or acquiesces in the appointment of a
trustee, receiver, or liquidator of the General Partner or of all or any
substantial part of that partner's properties.
(d) 60 days after the commencement of any proceeding against the General
Partner seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law, or
regulation, the proceeding has not been dismissed, or if within 60 days after
the appointment without that partner's consent or acquiescence of a trustee,
receiver, or liquidator of the General Partner or of all or any substantial
part of that partner's properties, the appointment is not vacated or stayed,
or within 60 days after the expiration of any such stay, the appointment is
not vacated.
(e) In the case of a General Partner who is an individual, either of the
following:
(1) The death of that partner.
(2) The entry by a court of competent jurisdiction of an order
adjudicating the partner incompetent to manage the General Partner's person
or estate.
(f) In the case of a General Partner who is acting as a General Partner by
virtue of being a trustee of a trust, the termination of the trust (but not
merely the substitution of a new trustee, in which case the new trustee
automatically becomes the new General Partner).
(g) In the case of a General Partner that is a separate partnership, the
dissolution of the separate partnership.
(h) In the case of a General Partner that is a corporation, the filing of a
certificate of dissolution, or its equivalent, for the corporation.
(i) In the case of a General Partner that is an estate, the distribution by
the fiduciary of the estate's entire interest in the limited partnership.
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Notwithstanding the provisions of subsections (a) and (h) above, without the
concurrence of a majority of the outstanding limited partnership interests, a
General Partner may not withdraw or retire as a General Partner or dissolve
itself or the Partnership.
8.02 Continuation of Business of Remaining General Partner. If one General
Partner ceases to be a General Partner pursuant to the provisions of Section
8.01, the remaining General Partner may elect to continue the business of the
Partnership.
8.03 Removal of a General Partner. The Limited Partners holding a majority
in interest of the Units may remove any or all of the General Partners. Written
notice of such determination setting forth the effective date of such removal
shall be served upon the General Partner or General Partners so removed and as
of the effective date, shall terminate all of such persons' rights and powers as
a General Partner.
8.04 Dissolution of Partnership and Continuance of Partnership Business.
After the occurrence of a terminating event with respect to the last remaining
General Partner, as described in Section 8.01, the Limited Partners shall meet
within sixty (60) days of the terminating event and either:
(a) Elect one or more new General Partners to continue the Partnership
business, in which event, upon the filing of a new Certificate of Limited
Partnership to reflect the new General Partner, this Partnership shall
continue in business; or
(b) Elect to terminate and liquidate the Partnership under the provisions
of Article IX hereof.
8.05 Payment to Terminated General Partner. Upon the occurrence of a
terminating event, if such terminating event relates to a General Partner who is
the last remaining original General Partner and if the business of the
Partnership is continued, as aforesaid, the Terminated General Partner shall be
entitled to receive from the Partnership the then present fair market value of
his allocated interest in Net Profits, Net Losses, Distributions of Cash
Available for Distribution, surplus Funds upon liquidation, determined by
agreement of the Terminated General Partner and the Partnership, or, if they
cannot agree, by arbitration in accordance with the then current rules of the
American Arbitration Association. The expense of such arbitration shall be borne
equally by the Partnership and the General Partners. For this purpose, the fair
market value of the interest of the Terminated General Partner shall be deemed
to be the amount the Terminated General Partner would receive upon dissolution
and termination of the Partnership under Section 9.02, assuming (a) such
dissolution or termination occurred on the date of the dissolving event
specified above, and (b) the assets of the Partnership were sold for their then
fair market value without compulsion of the Partnership to sell such assets.
The Partnership forthwith either shall (a) pay to the Terminated General Partner
an amount in cash equal to eighty percent (80%) of the present fair market value
of the interest so determined, and such payment when made shall constitute
complete and full discharge of all amounts to which the Terminated General
Partner is entitled for such interest, or (b) execute and deliver to the
Terminated General Partner a promissory note of the Partnership, payable to the
order of the Terminated General Partner, which promissory note shall include the
following provisions: (i) be in a principal amount equal to the present fair
market value of the interest so determined; (ii) bearing interest at a rate per
annum which is the lesser of two percent over the prime rate of the Bank of
America, NT&SA or ten percent per annum, principal and all unpaid accrued
interest payable from time to time, with the remaining unpaid principal balance
and unpaid accrued interest on the promissory note to be due and payable five
years from the date of such terminating event, and (iii) such other provisions
as would be usual and customary in a commercial promissory note, including the
right of the holder upon default to accelerate otherwise unmatured installments
and to recover costs of collection including reasonable attorney's fees.
Notwithstanding the foregoing, where the termination is voluntary, the method of
payment will be by a non-interest bearing unsecured promissory note with
principal payable, if at all, from distributions which the Terminated General
Partner otherwise would have received under the partnership agreement had the
General Partner not terminated.
8.06 Termination of Executory Contracts. Upon removal of a General Partner,
all executory contracts between the Partnership and the terminating General
Partner or any affiliate thereof (unless such affiliate is also an affiliate of
a continuing General Partner) may be terminated by the Partnership effective
upon written notice to the party so terminated. The terminating General Partner
or any affiliate (unless such affiliate is also an affiliate of a continuing
General Partner) thereof may also terminate and cancel any such executory
contract effective upon sixty
18
(60) days' prior written notice of such termination and cancellation given to
the new General Partner, if any, or to the Partnership.
IX.
DISTRIBUTION ON TERMINATION
9.01 Events of Dissolution. The Partnership shall be terminated and
dissolved, prior to the end of its term, in accordance with any other provision
of this Agreement, or upon the happening of any of the following events:
(a) The Limited Partners holding a majority of all the Units of the
Partnership determine, by written consent or approving vote, that the
Partnership should be dissolved; or
(b) The Partnership is adjudicated insolvent or bankrupt.
9.02 Gain and Loss on Dissolution and Order of Distribution.
(a) In the event of the dissolution or termination of the Partnership, unless
the remaining Partners elect to continue the business of the Partnership as
provided in this Agreement, the General Partners or the liquidator of the
Partnership shall proceed with the winding up of the affairs and the liquidation
of the Partnership. The General Partners, who shall be the liquidators of the
Partnership, shall cause to be prepared a statement setting forth the assets and
liabilities of the Partnership as of the date of dissolution, and such statement
shall be furnished to all of the Partners (General and Limited). The assets of
the Partnership, which the General Partners determine should be liquidated, then
shall be liquidated as promptly as possible, but in an orderly and businesslike
manner so as not to involve undue sacrifice.
(b) The aggregate net profit and net loss realized by the Partnership upon the
sale or other disposition of its assets shall be credited or charged to the
accounts of the General Partners and Limited Partners in accordance with the
provisions of Section 3.07 hereof after providing for the debts and liabilities
of the Partnership.
(c) The proceeds of such liquidation shall be applied and distributed in the
order of priority and in the same manner as provided in Section 3.07(d) hereof
after providing for the debts and liabilities of the Partnership.
(d) All distributions under Section 9.02(c) shall be made in money arising
from the sale of assets of the Partnership.
9.03 Eminent Domain. A taking of all or substantially all of the
Partnership's property and assets in condemnation or by eminent domain shall be
treated in all respects as a sale of the Partnership's property and assets upon
the dissolution and liquidation of the Partnership, pursuant to this Article IX
In such event any portion of the property and assets of the Partnership not so
taken shall be sold and/or distributed, together with the condemnation award, in
the manner provided for in this Article IX
9.04 Period of Liquidation. A reasonable time shall be allowed for the
orderly liquidation of the assets of the Partnership, so as to enable the
General Partners or the liquidator to minimize the normal losses attendant upon
liquidation.
X.
CERTIFICATES AND OTHER DOCUMENTS
10.01 General Partners Attorneys for Limited Partners. Each Limited Partner,
by becoming a Limited Partner, hereby constitutes and appoints each of the
General Partners and his successors the true and lawful attorneys of, and in the
name, place and stead of said Limited Partner, from time to time:
(a) To make all agreements amending this Agreement, as now or hereafter
amended, that may be appropriate to reflect solely:
19
(i) A change of the name or the location of the principal place of
business of the Partnership;
(ii) The disposal by a Limited Partner of his or her interest in the
Partnership, in any manner permitted by this Agreement and any return of
the capital contribution of a Limited Partner (or any part thereof), if
any, provided for by this Agreement;
(iii) A person becoming a Limited Partner of the Partnership as permitted
by this Agreement;
(iv) A change in any provision of this Agreement or the exercise by any
person of any right or rights thereunder not requiring the consent of said
Limited Partner; and
(v) The exercise by any person of any right or rights under this
Agreement requiring the consent or approval of a majority or a specified
percentage of the Limited Partners and the required consent or approval has
been given.
(b) To make such certificates, instruments and documents, including
Fictitious Business Name Statements, as may be required by, or may be
appropriate under, the laws of any state or other jurisdiction in which the
Partnership is doing or intends to do business in connection with the use of
the name of the Partnership by the Partnership; and
(c) To make such certificates, instruments and documents, including
amendments to this Agreement and the Certificate of Limited Partnership, as
said Limited Partner may be required or as may be appropriate for said Limited
Partner to make, by the laws of any state or other jurisdiction solely to
reflect:
(i) A change of address of said Limited Partner;
(ii) Any changes in or amendments to this Agreement, or pertaining to
the Partnership, of any kind referred to in paragraph (a) of this
subsection; and
(iii) Any other changes in or amendments to this Agreement but only if
and when said Limited Partner has agreed to such other changes or
amendments by signing, either personally or by duly appointed attorney, an
agreement amending this Agreement.
Each of said agreements, certificates, instruments and documents shall be in
such form as said attorney and counsel for the Partnership shall deem
appropriate. The powers hereby conferred to make agreements, certificates,
instruments and documents shall be deemed to include the powers to sign,
execute, acknowledge, swear to, verify, deliver, file, record and publish the
same.
Each Limited Partner authorizes said attorney to take any further action which
said attorney shall consider necessary or convenient in connection with any of
the foregoing and hereby gives said attorney full power and authority to do and
perform each and every act and thing whatsoever requisite and necessary to be
done in and about the foregoing as fully as said Limited Partner might or could
do if personally present, and hereby ratifies and confirms all that said
attorney shall lawfully do or cause to be done by virtue hereof.
The powers hereby conferred shall continue from the date said Limited Partner
becomes a Limited Partner in the Partnership until said Limited Partner shall
cease to be such a Limited Partner and, being coupled with an interest, shall be
irrevocable.
10.02 Making, Filing, Etc. of Certificates, Etc. The General Partners agree,
when authorized pursuant to Section 10.01, or otherwise, to make, file or record
with the appropriate public authority and (if required) publish the Certificate,
any amendments thereof, and such other certificates, instruments and documents
as may be required or appropriate in connection with the business and affairs of
the Partnership.
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XI.
NOTICES
All notices (except notices required under Section XIV hereof), requests and
other communications provided for herein shall be in writing and, unless
otherwise specified, shall be forwarded by first class mail, directed to the
parties at the addresses set forth in the Subscription Agreement and Signature
Pages attached hereto or to such other addresses as any party may from time to
time designate in writing, and given in accordance with the provisions of this
Article XI. Notices or communications given, as set forth herein, shall be
conclusively deemed to have been received by the party to whom addressed three
business days after the same are deposited in the United States mail.
XII.
CONVEYANCES, CONTRACTS AND DOCUMENTS
Any deed, ▇▇▇▇ of sale, mortgage, deed of trust, lease, contract of sale, or
other commitment purporting to convey or encumber the interest of the
Partnership in all or in any portion of any real or personal property at any
time held in its name, and any other contract, check, draft, document,
communication or notice to which the Partnership is a party, may be signed by
any one of the General Partners acting alone or on behalf of the Partnership.
XIII.
DISPUTES AND ARBITRATION
Any dispute or controversy arising under, out of, or in connection with or in
relation to this Agreement and any amendments thereof, or the breach thereof, or
in connection with the dissolution of the Partnership, shall be determined and
settled by arbitration to be held in the city where the office of the
Partnership is located, in accordance with the rules then applicable of the
American Arbitration Association. Any award rendered therein shall be final and
binding on each and all of the Partners, and judgment may be entered thereon in
a court of appropriate jurisdiction. Arbitration of alleged securities
violations is not allowed.
XIV.
MEETINGS OF, OR ACTIONS BY, THE LIMITED PARTNERS
(a) Meetings of partners may be held at any place within or without this state
as may be fixed by the General Partners. If no other place is so fixed,
partners' meetings shall be held at the principal executive office of the
Partnership.
(b) A meeting of the partners may be called by any of the General Partners or
by Limited Partners representing more than 10 percent of the interests of
Limited Partners for any matters on which the Limited Partners may vote.
(c) (1) Whenever partners are required or permitted to take any action at a
meeting, a written notice of the meeting shall be given not less than 15, nor
more than 60, days before the date of the meeting to each partner entitled to
vote at the meeting. The notice shall state the place, date, and hour of the
meeting and the general nature of the business to be transacted, and no other
business may be transacted.
(2) Notice of a Partners' meeting or any report shall be given either
personally or by mail or other means of written communication, addressed to the
partner at the address of the If any notice or report addressed to the partner
at the address of the partner appearing on the books of the Partnership or given
by the partner to the Partnership for the purpose of notice, or, if no address
appears or is given, at the place where the principal executive office of the
partnership is located or by publication at least once in a newspaper of general
circulation in the county in which the principal executive office is located.
The notice or report shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by other means of written
communication. An affidavit of mailing of any notice or report in accordance
with the provisions of this article, executed by a General Partner, shall be
prima facie evidence of the giving of the notice or report. Included with the
notice shall be a detailed statement of the action proposed, including a
verbatim statement of the wording of any resolution proposed for adoption by the
limited partners and of any proposed amendment to the partnership agreement.
21
If any notice or report addressed to the partner appearing on the books of the
Partnership is returned to the Partnership by the United States Postal Service
marked to indicate that the United States Postal Service is unable to deliver
the notice or report to the partner at the address, all future notices or
reports shall be deemed to have been duly given without further mailing if they
are available for the partner at the principal executive office of the
Partnership for a period of one year from the date of the giving of the notice
or report to all other partners.
(3) Upon written request to the General Partners by any person entitled to
call a meeting of partners, the General Partners immediately shall cause notice
to be given to the partners entitled to vote that a meeting will be held at a
time requested by the person calling the meeting, not less than 15, nor more
than 60, days after the receipt of the request. If the notice is not given
within 20 days after receipt of the request, the person entitled to call the
meeting may give the notice or, upon the application of such person, the
superior court of the county in which the principal executive office of the
Partnership is located, or if the principal executive office is not in this
state, the county in which the Partnership's address in this state is located,
shall summarily order the giving of the notice, after notice to the Partnership
giving it an opportunity to be heard. The procedure provided in subdivision (c)
of Section 305 of the California Corporations Code shall apply to the
application. The court may issue any order as may be appropriate, including,
without limitation, an order designating the time and place of the meeting, the
record date for determination of partners entitled to vote, and the form of
notice,
(d) When a partners' meeting is adjourned to another time or place, unless the
Partnership Agreement otherwise requires and, except as provided in this
subdivision, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting the Partnership may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than 45
days or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each partner of
record entitled to vote at the meeting.
(e) The transactions of any meeting of partners, however called and noticed,
and wherever held, are as valid as though had at a meeting duly held after
regular call and notice, if a quorum is present either in person or by proxy,
and if, either before or after the meeting, each of the persons entitled to
vote, not present in person or by proxy, signs a written waiver of notice or a
consent to the holding of the meeting or an approval of the minutes thereof. All
waivers, consents, and approvals shall be filed with the Partnership records or
made a part of the minutes of the meeting. Attendance of a person at a meeting
shall constitute a waiver of notice of the meeting, except when the person
objects, at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened and except that
attendance at a meeting is not a waiver of any right to object to the
consideration of matters required by this chapter to be included in the notice
but not so included, if the objection is expressly made at the meeting. Neither
the business to be transacted at nor the purpose of any meeting of partners need
be specified in any written waiver of notice, unless otherwise provided in the
partnership agreement, except as provided in subdivision (f).
(f) Any partner approval at a meeting, other than unanimous approval by those
entitled to vote, pursuant to paragraph (5) of subdivision (b) of Section 15632
of the California Corporations Code shall be valid only if the general nature of
the proposal so approved was stated in the notice of meeting or in any written
waiver of notice.
(g) (1)A majority in interest of the Limited Partners represented in person
or by proxy shall constitute a quorum at a meeting of partners.
(2) The partners present at a duly called or held meeting at which a quorum is
present may continue to transact business until adjournment notwithstanding the
withdrawal of enough partners to leave less than a quorum, if any action taken
(other than adjournment) is approved by the requisite percentage of interests of
Limited Partners specified in California Revised Limited Partnership Act or in
the Partnership Agreement.
(3) In the absence of a quorum, any meeting of partners may be adjourned from
time to time by the vote of a majority of the interests represented either in
person or by proxy, but no other business may be transacted, except as provided
in paragraph (2).
(h) Unless otherwise provided in the Partnership Agreement, any action which
may be taken at any meeting of the partners may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed
22
by partners having not less than the minimum number of votes that would be
necessary to authorize or take that action at a meeting at which all entitled to
vote thereon were present and voted. In the event the Limited Partners are
requested to consent on a matter without a meeting, each partner shall be given
notice of the matter to be voted upon in the same manner as described in
subdivision (c). In the event any General Partner, or Limited Partners
representing more than 10 percent of the interests of the Limited Partners,
request a meeting for the purpose of discussing or voting on the matter, the
notice of a meeting shall be given in accordance with subdivision (c) and no
action shall be taken until the meeting is held. Unless delayed in accordance
with the provisions of the preceding sentence, any action taken without a
meeting will be effective 15 days after the required minimum number of voters
have signed the consent, however, the "action will be effective immediately if
all General Partners and Limited Partners representing at least 90 percent of
the interests of the Limited Partners have signed the consent.
(i) The use of proxies in connection with this section will be governed in the
same manner as in the case of corporations formed under the General Corporation
Law of California. The Partnership will provide for proxies or written consents
which specify a choice between approval and disapproval of each matter to be
acted upon at the meeting.
(j) In order that the Partnership may determine the partners of record
entitled to notices of any meeting or to vote, or entitled to receive any
distribution or to exercise any rights in respect of any other lawful action,
the General Partners, or Limited Partners representing more than 10 percent of
the interests of Limited Partners, may fix, in advance, a record date, which is
not more than 60 or less than 15 days prior to the date of the meeting and not
more than 60 days prior to any other action. If no record date is fixed:
(1) The record date for determining partners entitled to notice of or to vote
at a meeting of partners shall be at the close of business on the business day
next preceding the day on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held.
(2) The record date for determining partners entitled to give consent to
Partnership action in writing without a meeting shall be the day on which the
first written consent is given.
(3) The record date for determining partners for any other purpose shall be at
the close of business on the day on which the general partners adopt it, or the
60th day prior to the date of the other action, whichever is later.
(4) The determination of partners of record entitled to notice of or to vote
at a meeting of partners shall apply to any adjournment of the meeting unless
the general partners, or the limited partners who called the meeting, fix a new
record date for the adjourned meeting, but the general partners, or the limited
partners who called the meeting, shall fix a new record date if the meeting is
adjourned for more than 45 days from the date set for the original meeting.
XV.
CAPTIONS-PRONOUNS
Any titles or captions of articles or paragraphs contained in this Agreement
are for convenience only and shall not be deemed part of the context of this
Agreement. All pronouns and any variations thereof shall be deemed to refer to
the masculine, feminine, neuter, singular or plural, as the identification of
the person or persons, firm or firms, corporation or corporations may require.
XVI.
BINDING EFFECT AND EXHIBITS
Except as otherwise herein provided, this Agreement shall be binding upon and
inure to the benefit of the parties hereto, their heirs, executors,
administrators, successors and all persons hereafter having or holding an
interest in this Partnership, whether as assignees, substituted Limited
Partners, or otherwise. All exhibits hereto are by this reference incorporated
herein.
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XVII.
AMENDMENT OF THE AGREEMENT
Except as provided by this Article XVII, this Agreement may be modified or
amended only by a majority vote of the Limited Partners; provided, however, this
Agreement may be amended from time to time by the General Partners, without the
consent of any of the Limited Partners, but only if such amendment does not
affect the rights of the limited partners, (i) to add to the representations,
duties or obligations of the General Partners or their Affiliates or to
surrender any right or power granted to the General Partners or their Affiliates
herein, for the benefit of the Limited Partners; (ii) to cure any ambiguity, to
correct or supplement any provision which may be inconsistent with any other
provision, 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 reflect reductions in the capital contributions of
the Limited Partners resulting from the return of capital to the Limited
Partners in accordance with the requirements of this Agreement; (iv) to delete
or add any provision of this Agreement required to be so deleted or added by the
Staff of the Securities and Exchange Commission or by a State "Blue Sky"
Administrator or similar official, which addition or deletion is deemed by the
Administrator or official to be for the benefit or protection of the Limited
Partners; (v) to elect for the Partnership to be governed by any successor
California statute governing limited partnerships; and (vi) as otherwise
provided for pursuant to this Partnership Agreement. The General Partner shall
notify the Limited Partners within a reasonable time of the adoption of any
amendment. Notwithstanding anything to the contrary contained in this Agreement,
this Agreement may not be amended without the consent of all Partners to be
adversely affected by the amendment that:
a. Converts a Limited Partner into a general partner;
b. Modifies the limited liability of a Limited Partner;
c. Alters the interest of the General Partner or Limited Partners in net
income or net loss or distributions from the Partnership; or
d. Adversely affects the status of the Partnership as a partnership for
federal income tax purposes.
XVIII.
ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreements between the
parties hereto respecting the within subject matter, and there are no
representations, agreements, arrangements or understandings, oral or written,
between and among the parties hereto relating to the subject matter of this
Agreement which are not fully expressed herein. This Agreement shall be governed
by and construed in accordance with the laws of the State of California and,
unless expressly or by necessary implication contravened by any provision
hereof, the provisions of the California Revised Limited Partnership Act shall
apply.
XIX.
TAX CONTROVERSIES
Should there be any controversy with the Internal Revenue Service or any other
taxing authority involving the Partnership or an individual Partner or Partners,
the outcome of which may adversely affect the Partnership, either directly or
indirectly, the Partnership may incur expenses it deems necessary and advisable
in the interest of the Partnership to oppose such proposed deficiency,
including, without being limited thereto, legal and accounting fees.
XX.
COUNTERPARTS AND EXECUTION
This Agreement may be executed in multiple counterparts; each of which shall
be deemed an original Agreement, and all of which shall constitute one
Agreement, by each of the parties hereto on the dates respectively indicated in
the signatures of said parties, notwithstanding that all of the parties are not
signatories to the original or to the same counterpart, to be effective as of
the day and year hereinabove set forth.
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XXI.
LIABILITY AND INDEMNIFICATION
21.01 Notwithstanding the provisions of Section 2.02, the partnership shall
not provide for indemnification of the general partners for any liability or
loss suffered by the general partners, nor shall it provide that the general
partners be held harmless for any loss or liability suffered by the partnership,
unless all of the following conditions are met:
(i) the general partners have determined, in good faith, that the course
of conduct which caused the loss or liability was in the best interests of the
partnership, and
(ii) such liability or loss was not the result of negligence or misconduct
by the general partners, and
(iii) such indemnification or agreement to hold harmless is recoverable
only out of the assets of the partnership and not from the limited partners.
21.02 Indemnification of the General Partners or their affiliates will not be
allowed for any liability arising from or out of a violation of state or federal
securities laws.
21.03 In the event the Partnership enters into any selling agreement with
securities broker-dealers that provides, in any way, directly or indirectly, for
indemnification by the Partnership to such broker-dealers or other persons for
any violations of securities laws, then and in such event the General Partners
will indemnify and hold the Partnership harmless from any liability, claim,
costs, attorneys fees, etc., which may arise pursuant to such selling broker-
dealer indemnification agreements. The General Partners will pay all such items
from their own personal funds and may not be reimbursed, directly or indirectly,
from Partnership funds for such items.
21.04 The purpose, intent and effect of sections 21.02 and 21.03 are that no
Partnership funds shall ever be used to indemnify any person (including General
Partners) against violations of federal or state securities laws.
XXII.
INVESTMENT IN OTHER PROGRAMS OF SPONSOR
22.01 The provisions of this Article are effective notwithstanding anything
to the contrary in Sections 1.05 and 2.01.
22.02 Investments in limited partnership interests of another program shall
be prohibited; however, nothing herein shall preclude the investment in general
partnerships or ventures which own and operate a particular property provided
this partnership acquires a controlling interest in such other ventures or
general partnerships (except as permitted by subsection 22.03). In such event,
duplicate property management or other fees shall not be permitted.
22.03 This partnership shall be permitted to invest in joint venture
arrangements with another program formed by the sponsor if all the following
conditions are met.
(a) The two programs have substantially identical investment objectives.
(b) There are no duplicate property management or other fees.
(c) The sponsor compensation should be substantially identical in each
program.
(d) The partnership must have a right of first refusal to buy if the other
program wishes to sell property held in the joint venture.
(e) The investment of each program is on substantially the same terms and
conditions.
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(f) The prospectus must disclose the potential right of impasse on joint
venture decisions since neither program controls and the potential risk that
while one program may buy the property from the other joint venturer, in the
event of a sale, it may not have the resources to do so.
XXIII.
PROCEEDS FROM FINANCING PROPERTIES
23.1 After the Partnership has owned a property for two years or more, or
after January 1, 1995, the Partnership may borrow money and mortgage such
property subject to the following:
(a) the mortgage must be a lien only on one specific property owned by the
Partnership.
(b) the holder of the note evidencing the borrowing may have recourse only
to the property secured by the mortgage for payment of the note; no recourse
may be had against any other property owned by the Partnership, or against
any General or Limited Partner personally.
(c) all net financing proceeds received after January 5, 1995 may either be
distributed to the Limited and General Partners as provided in this Agreement
or be reinvested in manufactured home communities.
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In witness whereof, the parties have signed this agreement on the dates
indicated below:
Original Limited ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ August 7, 1985, as amended
-----------------------------
Partner: ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ to June 8, 1995
Individual General ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. August 7, 1985, as amended
-----------------------------
Partner: ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. to June 8, 1995
Corporate General The Windsor Corporation
Partner:
▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. August 7, 1985, as amended
-----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. to June 8, 1995
President
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