EXHIBIT 10.1
TRIUMPH-LANCASTER HOUSING PARTNERS
A CALIFORNIA LIMITED PARTNERSHIP
LIMITED PARTNERSHIP AGREEMENT
THIS LIMITED PARTNERSHIP AGREEMENT is made and entered into as of this 5th day
of August 1996 by and between INCO HOMES CORPORATION, a Delaware corporation and
the ▇▇▇▇▇ FAMILY TRUST DATED FEBRUARY 19, 1993, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Trustee
("▇▇▇▇▇" or "Limited Partner" herein) with reference to the following facts:
A. Inco has contracted to purchase Seventy-Eight (78) mapped single family
lots in the City of Lancaster, County of Los Angeles, State of California from
▇▇▇▇▇▇▇ and Broad of Southern California, Inc., under that certain Agreement of
Purchase and Sale dated May 1996. Twenty (20) lots must be purchased at the
close of escrow which is scheduled to close the first week of August 1996 and
Inco has Three (3) options to purchase the balance of the lots over a period of
time. The legal description of these lots (the "Real Property" herein) is as
follows:
▇▇▇▇ ▇ - ▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇ - ▇▇ inclusive, ▇▇▇▇ ▇▇ -▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇ - ▇▇▇ inclusive, of Tract #49864-03 as per Map recorded in Book 1194, pages
11 - 16 inclusive of Maps in the Office of the County Recorder of Los Angeles
County, California.
B. The Real Property is zoned, mapped, and has all of the required government
entitlements, except building permits and other incidental reasonably obtainable
approvals/permits, necessary to immediately develop same with single family
houses.
C. Inco has determined that it will need One Hundred and Ninety Thousand
Dollars ($190,000) of equity capital necessary to complete the purchase of the
first Twenty (20) lots of the Real Property. Inco has represented to ▇▇▇▇▇ that
it will obtain from third party sources, or advance to the project, all of the
additional funds that will be required to timely exercise the options to
purchase the remaining lots of the Real Property and to construct and sell
Seventy-Eight (78) single family houses thereon. Inco desires to enter into a
partnership with a limited partner who will contribute to the partnership all of
the equity capital necessary to accomplish the foregoing in exchange for a share
of the profits realized from the sale of houses developed by Inco on the Real
Property.
D. Inco has represented to ▇▇▇▇▇ that it has all of the personnel, knowledge
and expertise, and that it believes that it can obtain all remaining
governmental approvals and third party financing, that it will need to timely
purchase all of the Real Property and develop the Real Property with Seventy-
Eight (78) single family houses, sell same to buyers in the "entry-level" price
market in Lancaster, California, and thereby earn a substantial profit for the
partners.
E. Inco and ▇▇▇▇▇ hereby agree to form a California limited partnership (the
"Partnership" herein) pursuant to the terms and conditions of this Limited
Partnership Agreement. Inco will contribute to the Partnership certain funds
and services and shall take all action necessary to finance and develop the Real
Property with single family houses and sell same at a price that will earn the
maximum possible profit reasonably obtainable for the partners. ▇▇▇▇▇ will
contribute One Hundred and Ninety Thousand Dollars ($190,000) of equity capital
to the Partnership on the date hereof.
F. Inco and ▇▇▇▇▇ desire to enter into this Limited Partnership Agreement to
document their formation of the Partnership.
NOW, THEREFORE, in reliance upon the foregoing recitals and in consideration
of the mutual covenants and agreements contained herein, the parties hereto
agree as follows:
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ARTICLE I
DEFINITIONS
Unless otherwise expressly provided herein or unless the context otherwise
requires, the following terms are hereby defined as follows: 1.01 "Adjusted
Invested Capital" of a Partner shall mean the "Original Invested Capital" of a
Partner, which is the total amount of Capital contributed to the Partnership as
set forth in Sections 4.01 and 4.02 hereof, increased by the value of all
additional contributions to Partnership Capital thereafter made by the Partner
(Section 4.03 hereof) and reduced by the value of all Distributions thereafter
made to the Partner pursuant to Section 5.03(b)(iii) hereof; provided, however,
that a Partner's Adjusted Invested Capital shall not be reduced below Zero
Dollars ($0).
1.02 "Affiliate" shall mean:
(i) Any Person directly or indirectly controlling, controlled by or under
common control with another Person;
(ii) Any Person owning or controlling Ten Percent (10%) or more of the
outstanding voting securities of such other Person; and
(iii) Any Person who is an officer, director or partner of a company,
corporation, association and/or partnership.
1.03 "Assignee" shall mean a Person who has acquired a beneficial interest of
any type in the Partnership from a third party, including a Partner or his
Assignee, but who has not yet become a Substitute Limited Partner as provided in
Section 8.03 hereof.
1.04 "Bankruptcy" shall mean the institution of any proceedings on behalf of a
Person under federal or state law for the relief of debtors, including the
filing of a voluntary or involuntary petition in bankruptcy, or the adjudication
as insolvent or bankrupt, or the assignment of the Person's property for the
benefit of creditors, or the appointment of a receiver, trustee or a conservator
of any substantial portion of the Person's assets, or the seizure by a sheriff,
receiver, trustee or conservator of any substantial portion of the Person's
assets, and the failure in the case of any of the foregoing events to obtain the
dismissal of the proceedings or removal of the receiver, trustee or conservator
or the recovery of the seized assets within ninety (90) days from the occurrence
of any of the above-listed events.
1.05 "Capital" shall mean the money and/or the value of the property or
services contributed to the Partnership by a Partner in exchange for his
Percentage Interest in the Partnership.
1.06 "Capital Account" shall mean the account maintained by the Partnership
for each Partner as part of the Partnership's internal records. Each Partner's
Capital Account shall be credited with the amount of that Partner's Original
Invested Capital, with the amount of each subsequent contribution of Capital and
with the amount of that Partner's share of Net Income allocated to that Partner.
Each Partner's Capital Account shall likewise be debited in the amount of each
Distribution made to a Partner (provided, however, that any Distribution of an
asset (other than cash) to a Partner shall result in a reduction in such
Partner's Capital Account in an amount equal to the Gross Asset Value of the
distributed asset net of liabilities secured by such asset that the Partner is
considered to assume or take subject to under Section 752 of the Code) and with
the amount of that Partner's share of Net Loss allocated to that Partner. It is
the intent of the Partnership to maintain Capital Accounts in accordance with
Regulations Section 1.704-1(b)(2)(iv) and, accordingly, all Capital Accounts
shall be adjusted in any manner necessary to conform to Regulations Section
1.704-1(b)(2)(iv).
1.07 "Cash Available For Distribution" shall mean the excess of Partnership
cash, including but not limited to, cash realized from Partnership operations,
from the sale or refinancing of Partnership assets, and/or from any and all
loans made to the Partnership, over: (i) cash required to satisfy incurred
Operating Expenses and (ii) the Working Capital Reserve.
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1.08 "Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent, superseding revenue laws.
1.09 "Development" shall mean the Seventy-Eight (78) single-family, detached
homes to be constructed by Inco Homes on the Real Property located in Lancaster,
California and all other on-site and off-site improvements related thereto.
1.10 "Distribution" shall mean the cash or other property distributed to a
Partner from or on behalf of the Partnership as a result of his interest in the
Partnership. "Cash Distribution" shall mean a Distribution consisting only of
the lawful money of the United States.
1.11 "General Partner" shall mean Inco Homes Corporation or any other Person
who shares with, or succeeds to, its capacity as the general partner of the
Partnership.
1.12 "Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a Partner to
the Partnership shall be the gross fair market value of such asset, as
determined by the contributing Partner and the Partnership;
(b) The Gross Asset Value of all Partnership assets shall be adjusted to
equal their respective gross fair market values, as determined by the General
Partner, as of the following times: (i) the acquisition of an additional
interest in the Partnership by any new or existing Partner after the formation
of the Partnership in exchange for more than a de minimis Capital contribution;
(ii) the distribution by the Partnership to a Partner of more than a de minimis
amount of Partnership assets as consideration for an interest in the
Partnership; and (iii) the liquidation of the Partnership within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g); provided, however, that adjustments
pursuant to clauses (i) and (ii) above shall be made only if the General Partner
reasonably determines that such adjustments are necessary or appropriate to
reflect the relative economic interests of the Partners in the Partnership;
(c) The Gross Asset Value of any Partnership asset distributed to any Partner
shall be the gross fair market value of such asset on the date of distribution;
and
(d) The Gross Asset Value of the Partnership assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Section 734(b) and 743(b) of the Code, but only to the extent that
such adjustments are taken into account in determining Capital Accounts pursuant
to Regulations Section 1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset
Values shall not be adjusted pursuant to this paragraph (d) to the extent that
the General Partner determines that an adjustment pursuant to paragraph (b) of
this definition is necessary or appropriate in connection with a transaction
that would otherwise result in an adjustment pursuant to this paragraph (d).
If the Gross Asset Value of any asset has been determined or adjusted pursuant
to paragraphs (a), (b) or (d) hereof, such Gross Asset Value shall thereafter be
adjusted by the Depreciation (defined in Section 1.17(d) hereof) taken into
account with respect to such asset for purposes of computing Net Income and Net
Loss under Section 1.17 hereof.
1.13 "Inco" shall mean Inco Homes Corporation, a Delaware corporation.
1.14 The "Limited Partner" shall mean the ▇▇▇▇▇ Family Trust Dated February
19, 1993.
1.15 "Net Income" and "Net Loss" shall mean, for each fiscal year or other
period, an amount equal to the Partnership's taxable income or loss for such
year or period, determined in accordance with Section 703(a) of the Code (for
this purpose, all items of income, gain, loss, or deduction required to be
stated separately pursuant to Section 703(a)(1) of the Code shall be included in
taxable income or loss), with the following adjustments:
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(a) Any income of the Partnership that is exempt from federal income tax and
not otherwise taken into account in computing Net Income or Net Loss pursuant to
this Section 1.17 shall be included in computing such Net Income or Net Loss;
(b) Any expenditures of the Partnership described in Section 705(a)(2)(B) of
the Code or treated as Section 705(a)(2)(B) expenditures pursuant to Regulations
Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing
Net Income or Net Loss pursuant to this Section 1.17, shall be subtracted in
computing such Net Income or Net Loss;
(c) Gain or loss resulting from any disposition of an asset of the
Partnership shall be computed by reference to the Gross Asset Value of the asset
disposed of notwithstanding that the adjusted tax basis of such asset differs
from its Gross Asset Value;
(d) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation (as defined in the following sentence)
for such fiscal year or other period, computed in the following manner.
"Depreciation" for each fiscal year or other period, shall be an amount equal to
the depreciation, amortization, or other cost recovery deduction allowable for
federal income tax purposes with respect to an asset for such year or other
period, except that, if the Gross Asset Value of an asset differs from its
adjusted tax basis for federal income tax purposes at the beginning of such year
or other period, Depreciation shall be an amount that bears the same ratio to
such beginning book value as the federal income tax depreciation, amortization,
or other cost recovery deduction for such year or other period bears to such
beginning adjusted tax basis and if such adjusted tax basis is zero, the
Depreciation shall be based on the method of depreciation utilized in preparing
the financial statements of the Partnership; and
(e) In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to Section 1.17(b) or (c) above, the amount of such adjustment shall be
taken into account as gain or loss from the disposition of such asset for
purposes of computing Net Income or Net Loss.
1.16 "Operating Expenses" shall mean all direct and indirect costs and fees
payable to all Persons for the day-to-day operation, management and
administration of the Partnership. Operating Expenses shall, to the greatest
extent allowable, be expensed in the year incurred on the Partnership's income
tax returns.
1.17 "Original Invested Capital" shall mean the amount of Capital originally
contributed to the Partnership by the Partners as set forth in Sections 4.01
and 4.02 hereof.
1.18 "Overhead Draw" shall mean the reimbursement to Inco for overhead
expenses incurred by Inco as set forth in Section 6.08 hereof.
1.19 "Partners" shall collectively refer to both the General Partner and the
Limited Partner, and reference to a "Partner" shall be to any one of the
Partners.
1.20 "Partnership", shall mean the California limited partnership created
pursuant to this Agreement.
1.21 "Percentage Interest" shall mean the interest of a Partner in the
Capital, Net Income, Net Losses and Distributions of the Partnership as set
forth herein.
1.22 "Person" shall mean an individual or a legal entity, including, but not
limited to, a partnership, corporation, trust or association.
1.23 "Real Property" shall mean the Seventy-Eight (78) lots more particularly
described in Recital A.
1.24 "Revised Act" shall mean California Corporations Code Sections 15611-
15723, inclusive, more generally known as the California Revised Limited
Partnership Act.
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1.25 "Regulation" shall mean Treasury Regulations.
1.26 "Working Capital Reserve" shall mean Partnership cash from all sources in
an amount as determined by the General Partner that is reasonably necessary to
fund the current Operating Expenses plus an amount reasonably estimated by the
General Partner as necessary to satisfy the obligations and contingencies
expected to mature or accrue in the immediate future based upon the operations
of the Partnership conducted in the ordinary course of business.
ARTICLE II
FORMATION OF THE PARTNERSHIP
Section 2.01 Formation of the Partnership.
(a) The Partners hereby form the Partnership pursuant to the Revised Act.
Unless otherwise specifically provided herein, the terms and provisions of the
Revised Act shall control the formation, operation and administration of the
Partnership.
(b) Following the execution hereof, the General Partner shall take all action
required under the Revised Act to properly form the Partnership as a limited
partnership under the laws of California, including particularly, but not
limited to, the completion, execution and filing of a Certificate of Limited
Partnership, Form LP-1, with the California Secretary of State.
(c) Upon the formation of the Partnership, each Partner shall have all of the
rights, liabilities, obligations and responsibilities of either a general
partner or a limited partner, as the case may be, as provided under the Revised
Act and other pertinent laws of California.
Section 2.02 Name of the Partnership.
The name of the Partnership shall be "TRIUMPH-LANCASTER HOUSING PARTNERS, A
CALIFORNIA LIMITED PARTNERSHIP", or such other name as allowed under California
law as may be selected by the General Partner from time to time.
Section 2.03 Principal Office and Place of Business.
The principal office and place of business of the Partnership shall be ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ or such other place as may be
selected by the General Partner from time to time. The General Partner shall
immediately notify the Limited Partners of any change in the location of the
principal office or place of business of the Partnership.
Section 2.04 Term of the Partnership.
(a) The term of the Partnership shall commence on the date hereof and shall
continue until the dissolution of the Partnership which shall occur upon the
earliest of the following events:
(i) The election to dissolve by both the General Partner and Limited
Partners who own a majority Percentage Interest of all Limited Partners in the
Partnership;
(ii) The sale of all or substantially all of the assets of the Partnership
and the distribution of the net proceeds therefrom to the Partners, in general,
and the receipt of all proceeds due the Partnership under the Secured
Participation Note and the distribution of all net proceeds to the Partners, in
particular;
(iii) The removal, bankruptcy, incompetency or dissolution of the then last
remaining general partner of the Partnership; or
(iv) December 31, 2016.
(b) The occurrence of any of the events set forth in Section 2.04(a) above
shall automatically cause a dissolution of the Partnership and of the
relationship between the Partners created hereunder pursuant to the Revised Act.
The Partners nevertheless may, upon the occurrence of any of these
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events, reconstitute the business of the Partnership in a new limited
partnership on the same terms as this Agreement and with a new general partner
selected by the affirmative vote of the Partners who then own a majority
Percentage Interest of all Partners in the Partnership. Expenses incurred in
the reformation, or attempted reformation, of the Partnership shall be deemed
Operating Expenses of the Partnership.
Section 2.05 Relationship of the Partners.
The relationship between the parties hereto is solely as partners in the
Partnership which is being formed pursuant hereto only for the purpose described
in Section 3.01 hereof. The parties hereto do not intend to be, nor shall they
be construed to be, by estoppel or any other fact or legal doctrine, a legal
entity of any other kind or formed for any purpose other than as a partnership
formed for the purpose set forth in the preceding sentence, nor shall any
Partner have any right or power to commit or bind or make liable any other
Partner for any other purpose or to any greater extent than as set forth herein.
Accordingly, the Partners may engage in or possess interests in other businesses
of every kind and description, including loans to and/or equity interests in
real estate developments which interests may or may not compete with the
Partnership and/or any other Partner, and no Partner shall have any rights based
on this Agreement to participate in or in any way limit, restrict or control or
share in any such other interest or business of any other Partner whatsoever.
Section 2.06 Title to Assets.
Title to all assets of the Partnership shall be held in the Partnership's name.
ARTICLE III
PURPOSE OF THE PARTNERSHIP
Section 3.01 Purpose of the Partnership.
The sole purpose of the Partnership is to purchase the Real Property, obtain
the remaining entitlements, and to construct the Development and to sell the
constructed single family homes to buyers in the "entry-level" price range in
Lancaster, California and thereby earn the maximum possible profit reasonably
obtainable for the partners.
ARTICLE IV
CAPITAL CONTRIBUTIONS
Section 4.01 Capital Contribution of the General Partner.
The General Partner shall contribute to the Partnership the sum of One
Thousand Dollars ($1,000) in the lawful money of the United States which shall
be its Original Invested Capital. The General Partner shall also contribute to
the Partnership (but shall receive no credit to its Capital Account) all of its
rights to purchase and develop the Real Property.
Section 4.02 Capital Contribution of the Limited Partner.
(a) The Limited Partner shall contribute to the Partnership on the date of
this Agreement the sum of One Hundred and Ninety Thousand Dollars ($190,000) in
the lawful money of the United States (which amount is deemed to be its Original
Invested Capital).
Section 4.03 Additional Capital Contributions.
No Partner shall be required to contribute any additional Capital to the
Partnership. A Partner may, subject to the approval of both the General Partner
and Limited Partner contribute additional Capital to the Partnership in which
event each of the Partner's respective Percentage Interest shall be adjusted
accordingly.
Section 4.04 Interest on Capital Contributions.
No Partner shall receive any interest on his Capital contributions to the
Partnership.
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Section 4.05 Loans and Other Business Transactions.
Inco may from time to time have to advance funds to the Partnership to fund
Partnership operations. A loan to the Partnership shall bear such interest and
shall be on such other terms and conditions as the General Partner and the
Limited Partner agree. Partners who make loans to or who transact other
business with the Partnership shall have the same rights and shall be subject to
the same obligations arising out of such transaction as would be enjoyed or
imposed upon any non-Partner third party who engaged in a similar business
transaction with the Partnership.
Section 4.06 Return of Capital Contributions.
No Partner may withdraw any Capital from the Partnership and no Partner shall
be entitled to the return of his contributions to Capital to the Partnership
except as provided in Section 5.03 during the term of the Partnership or in
Section 9.03 upon the dissolution of the Partnership. Furthermore, the General
Partner shall not be liable for the return of the Capital of the Limited
Partner. Any return of Capital to any Partner shall be made solely from
Partnership assets and once such Capital is returned to a Partner, such Partner
shall have no further obligation to again contribute same to the Partnership.
ARTICLE V
INCOME/LOSSES AND CASH DISTRIBUTIONS
Section 5.01 Accountings.
As soon after the close of each fiscal year as is reasonably practical (not to
exceed 90 days), an annual accounting shall be made with respect to the affairs
of the Partnership for, and as of, the end of such fiscal year. Upon such
accounting being made, the Net Income earned or Net Loss incurred by the
Partnership during such fiscal year shall be ascertained and shall then be
credited or debited, as the case may be, on the books of the Partnership to each
Partner's respective Capital Account in the proportion that each Partner shares
in Partnership Net Income and Net Losses.
Section 5.02 Allocation of Income and Losses.
Net Income, Net Losses, tax credits and other items shall be allocated among
the Partners as follows:
(a) Net Losses of the Partnership shall initially be allocated as follows:
One Percent (1%) to the General Partner, and Ninety-Nine Percent (99%) to the
Limited Partner. The Net Losses allocated pursuant to this Section 5.02(a)
shall not exceed the maximum amount of Net Losses that can be so allocated
without causing any Limited Partner who is not a General Partner to have a
Capital Account deficit at the end of any fiscal year after giving affect to the
following adjustments: (i) credit to such Capital Account the amount which such
Limited Partner is obligated to restore (pursuant to the terms of this Agreement
or under applicable law) or deemed obligated to restore under the Regulations
published under Section 704(b) of the Code and (ii) debit to such Capital
Account the items described in Regulations Section 1.704-1(b)(2)(ii)(4), (5) and
(6). All Net Losses in excess of such limitation shall be allocated to the
General Partner. To the extent that Net Losses are incurred after an allocation
of Net Income has been made pursuant to Section 5.02(c) hereof, such Net Loss
shall first be allocated so as to reverse the effect of the allocation of Net
Income on the Capital Accounts of the Partners who have received such
allocations on a "last in, first out" basis, and thereafter such additional Net
Losses shall be allocated pursuant to this Section 5.02(a).
(b) Net Income of the Partnership shall initially be allocated in reverse
order of the allocation of Net Losses in proportion to, and until such time as,
the prior Net Losses of the Partnership, if any, shall be restored pursuant to
this Section 5.02(b).
(c) After the allocations provided in Section 5.02(b) hereof have been made,
Net Income shall thereafter be allocated among the Partners as follows:
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(i) First, One Hundred Percent (100%) to the Limited Partner in the
amount of and as required under the Code and Regulations to reflect the Cash
Distributions to the Limited Partner pursuant to Section 5.03(b)(ii) hereof;
(ii) Thereafter:
General Partner 50.0%
Limited Partner 50.0%
------
Total 100.0%
======
Section 5.03 Cash Distributions.
(a) Not less often than within fifteen (15) days after the end of each
calendar month, the General Partner shall distribute to the Partners in the
amounts and proportions as hereinafter provided (and as appropriate debit such
Distributions from their respective Capital Accounts) all Cash Available For
Distribution. Except as provided under California Corporations Code Section
15666, once distributed, such cash shall be the property of the Partners and
need not be returned, loaned or recontributed to the Partnership.
(b) Cash Available For Distribution shall be distributed to the Partners in
the following amounts and order:
(i) First, to repay in full any and all loans made to the Partnership by a
Partner;
(ii) Next, One Hundred Percent (100%) to the Limited Partner as a preferred
return until the Limited Partner has received Cash Distributions pursuant to
this Section 5.03(b)(ii) in the amount equal to Ten Percent (10%) of its
Adjusted Invested Capital;
(iii) Next, One Hundred Percent (100%) to the Partners on a pro-rata basis
until each Partner has received an amount equal to all of its respective
Adjusted Invested Capital; and
(iv) Then, all future Cash Available For Distribution shall be distributed to
the Partners as follows:
Partner Percentage of Distribution
General Partner 50.0%
Limited Partner 50.0%
------
Total 100.0%
======
(c) The Partnership is authorized to withhold from Distributions (including
Distributions pursuant to Section 9.03 hereof) any amount required to be
withheld under applicable federal and state statutes, rules and regulations.
Any amounts withheld from Distributions shall be treated as distributed to the
Partner on whose behalf the withholding was made.
ARTICLE VI
GENERAL PARTNER
Section 6.01 General Partner.
The Partnership shall initially have only one (1) general partner, Inco Homes
Corporation. The Percentage Interest owned by the General Partner is set forth
on Exhibit A hereto.
Section 6.02 Management of the Partnership.
The General Partner shall, subject to the limitations hereinafter set forth,
have full, complete and exclusive discretion and authority to manage and control
the business and affairs of the Partnership for the purpose herein stated. In
so doing the General Partner shall take all actions reasonably necessary and
appropriate to conduct the business and affairs of the Partnership as a
reasonable, prudent businessman would conduct his own
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affairs. The General Partner shall devote as much of its time and the time of
its personnel as is necessary to manage the business and affairs of the
Partnership on a first-class basis and shall take all actions reasonably
necessary and appropriate to ▇▇▇▇▇▇, protect and promote the interest of the
Limited Partners as a group.
Section 6.03 Authority of the General Partner.
(a) The General Partner shall have the authority to take and perform any and
all acts that the Partnership and the general partner of a California limited
partnership, formed and operated under the Revised Act, are authorized to take
and perform (but only to the extent to prudently pursue the sole business
purpose of the Partnership as set forth in Section 3.01 hereof), including, but
not limited to:
(i) Acquire by purchase, lease, or otherwise, any real or personal property,
tangible or intangible;
(ii) Construct, operate, maintain, finance, and improve, and own, sell,
convey, assign, mortgage, or lease any real property and/or any personal
property;
(iii) Sell, dispose, trade, or exchange Partnership assets in the ordinary
course of the Partnership's business;
(iv) Enter into, execute and perform, agreements and contracts;
(v) Purchase liability and other insurance to protect the Partnership's
properties and business;
(vi) Borrow money and lend money for and on behalf of the Partnership, and,
in connection therewith, execute and deliver all appropriate instruments
relating thereto, including instruments encumbering Partnership property;
(vii) Prepay and/or refinance any loans made by or made to the Partnership
and, in connection therewith enter into, amend, modify, or extend any mortgages
or deeds of trust which may affect any asset of the Partnership and execute for
and on behalf of the Partnership any extensions, renewals, or modifications the
loans secured by such mortgages or deeds of trust;
(viii) Make any and all expenditures which the General Partner, in its sole
discretion, deems necessary or appropriate in connection with the management of
the affairs of the Partnership and the carrying out of its obligations and
responsibilities under this Agreement, including, without limitation,
expenditures for legal, accounting, and other related expenses incurred in
connection with the organization, financing, and operation of the Partnership;
(ix) Operate, manage and protect all Partnership property and hire or retain
qualified personnel or professionals as are necessary in connection therewith;
(x) Institute and/or defend actions at law or equity;
(xi) Invest and reinvest Partnership reserves in short-term instruments or
money market funds.; and
(xii) Execute any and all other instruments and documents which may be
necessary or in the opinion of the General Partner desirable to carry out the
intent and purpose of this Agreement, including, but not limited to, documents
whose operation and effect extend beyond the term of the Partnership.
(b) Notwithstanding anything herein to the contrary, the General Partner shall
have no authority to do any of the following without the prior written consent
of the Limited Partners who own a majority of the Percentage Interest owned by
all Limited Partners:
(i) Take any action that is in contravention of the specific terms,
provisions and authorities provided and granted hereunder or by law;
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(ii) Take any action or fail to take any action, as and when required, the
effect of which would materially adversely affect or make it impossible to carry
on the business of the Partnership;
(iii) Admit a Person as a general partner of the Partnership; or
(iv) Amend this Agreement in any material respect other than as allowed under
Section 7.09(a)(i) hereof.
Section 6.04 Representations and Warranties and Affirmative Covenants of the
General Partner.
As a material condition for the Limited Partner to enter into this
Agreement, the General Partner hereby represents and warrants to, and agrees
with, the Limited Partner as follows:
(a) Promptly following the execution hereof, Inco shall contribute to the
Partnership by deed or assignment at no cost to the Partnership any portion of
the Real Property heretofore purchased in the name of the General Partner, the
right to purchase the remainder of the Real Property and all rights with respect
thereto to develop same and the Partnership shall reimburse Inco for all of the
costs and expenses incurred by Inco to-date to acquire same.
(b) Title to the Real Property shall be subject only to such liens,
encumbrances and exceptions which have been reviewed and approved by the Limited
Partner and which the General Partner represents and warrants will not have any
adverse affect on the Partnership constructing and selling the Development in
the time and manner projected by the General Partner. The General Partner shall
furnish the Limited Partner with a copy of the CLTA owner's policy of title
insurance which shows that the Partnership is the fee owner of the Real Property
subject to only such exceptions and exclusions as previously approved by the
Limited Partner.
(c) The General Partner has, to the extent that it is legally able to, or it
is practical to do so, concurrently herewith assigned to the Partnership, and by
this Section 6.04(c) hereby assigns to the Partnership, all of its right, title
and interest in and to all maps, drawings, plans, rights, fees, documents and
any and all other tangible and intangible property pertaining to the Real
Property and the right to construct and market the Development and the
Partnership shall concurrently reimburse Inco for all of the costs and expenses
incurred by Inco to-date in connection therewith. The General Partner further
agrees to assign to the Partnership any such property that it might hereafter
ever own or receive. Following such assignment(s), the Partnership shall own
directly, or with the General Partner, all of the tangible and intangible
property and rights pertaining to the Real Property necessary and/or required
for the construction and sale of the Development.
(d) The General Partner reasonably believes that it has, and shall provide to
the Partnership, all of the personnel, resources and expertise necessary to
construct and market the Development on a highly professional basis. The
General Partner shall contribute to the Partnership on a non-exclusive basis the
time, personnel and resources necessary to construct the Development in a
diligent, efficient, cost effective, and highly professional basis and to
finance and market same in a manner that the General Partner believes will earn
the maximum profit reasonably obtainable for the Partners.
(e) The General Partner shall use its best efforts to timely construct, or
cause to be constructed, the Development and all on-site and off-site
improvements related thereto:
(i) In a workmanlike manner using subcontractors who have the reputation of
constructing a high quality work product consistent with Inco's standards and
prior developments of Inco similar to the Development; and
(ii) Shall use such materials that in all ways substantially comply with
plans and specifications and that equal or, if necessary, exceed code
requirements, to cause the improvements constituting the Development to not have
any material defects as a result of the materials used to construct same.
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(f) The General Partner shall use its best efforts where it deems it necessary
to obtain warranties and guarantees, and, where appropriate, to also obtain
performance and/or guarantee bonds from all suppliers, materialmen and
subcontractors who supply materials and/or labor to the Development.
Section 6.05 Delegation of Authority.
The General Partner may delegate any or all of its powers, rights and
obligations hereunder (but not its responsibilities) and may appoint, employ,
contract or otherwise deal with any person or entity for the transaction of the
Partnership business, which person or entity may perform any acts or services
for the Partnership.
Section 6.06 Partnership Expenses.
The Partnership shall reimburse the General Partner for all direct (out-of-
pocket) costs and expenses reasonably incurred by him to third parties in
furtherance of the business and affairs of the Partnership.
Section 6.07 Compensation of General Partner.
(a) The General Partner shall be paid no organization, syndication or other
front end fees or other compensation or consideration of any sort as a result of
the formation of the Partnership.
(b) The General Partner shall receive the interest in Income and Losses as set
forth in Section 5.02 hereof and the interest in Cash Distributions as set forth
in Section 5.03(b)(iii) hereof.
Section 6.08 Reimbursement of Overhead Expenses of the General Partner.
The General Partner shall be entitled to receive an Overhead Draw from the
Partnership in the amount of Three Percent (3%) of the actual sales price of the
homes in the Development to reimburse the General Partner for its overhead
expenses it incurs to construct and market the Development. Said Overhead Draw
may initially be payable in advance of such sales from cash available from the
construction loan or other Development financing with the amount of such
Overhead Draw paid from such sources on the basis of the total projected sales
price of the Development and with the balance of such Draw payable from Cash
Available for Distribution as the homes in the Development are sold. The
Overhead Draw will be adjusted from time to time as necessary to reflect the
actual sales prices realized from the sale of the homes in the Development.
Section 6.09 Resignation, Bankruptcy, Dissolution, or Removal of the General
Partner.
(a) The General Partner may not resign such position without the prior written
approval of the Limited Partner which approval the Limited Partner may withhold.
(b) Upon the bankruptcy, dissolution or removal of the General Partner, the
Partnership shall nevertheless continue in full force and effect provided that
either (i) the Partnership still has at least one (1) general partner or (ii)
the Limited Partners who own a majority Percentage Interest of all Limited
Partners consent to the continuation of the Partnership and elect a new general
partner so that the Partnership has at least one (1) general partner.
(c) The General Partner may be removed by the affirmative vote of the Limited
Partners who own a majority Percentage Interest of all Limited Partners only for
"cause" (fraud, mismanagement, breach of fiduciary duty and any other matter
which materially adversely affects the ability of the General Partner to perform
its duties hereunder but "cause" shall not include any action or decision which
the General Partner does or makes in good faith as part of the day-to-day
operations of the Partnership). Notice of such removal shall be served on the
General Partner either by certified or by registered mail, return receipt
requested, or by personal service. The notice shall, among other things, set
forth the specific reasons or causes for such removal and the effective date of
the removal. Notwithstanding the foregoing, the
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General Partner shall, after receipt of the notice, be given a reasonable period
of time to correct any and all such deficiencies which caused the vote for its
removal and to thereby return to compliance hereunder.
(d) If the General Partner is allowed to resign or becomes bankrupt, is
dissolved, or is removed, it shall automatically have its Percentage Interest in
the Partnership converted to that of a Limited Partner.
Section 6.10 Other Investment Opportunities.
Except as otherwise expressly set forth herein, provided that the General
Partner at all times uses its reasonable efforts to maximize Partnership
profits, the General Partner shall be free to engage in other businesses of any
type, including investing in, and developing real estate of any type
whatsoever, and may engage in other enterprises and businesses, including those
in direct competition with the Partnership, and need not offer such business
opportunities to the Partnership or to the Limited Partner and may take
advantage of those opportunities for its own account or for the account of other
partnerships or enterprises with which it is associated. Accordingly, neither
the Partnership nor any other Partner shall have the right to any income or
profit earned by the General Partner from any such other enterprise or
opportunity in which it participates.
Section 6.11 Release of the General Partner.
THE PARTNERSHIP AND THE LIMITED PARTNER EACH HEREBY RELEASE AND FORGIVE THE
GENERAL PARTNER FOR ANY LOSS, DAMAGE, OR LIABILITY INCURRED OR SUFFERED BY THE
PARTNERSHIP OR BY THE LIMITED PARTNER CAUSED OR DUE TO THE GENERAL PARTNER
ACTING IN SUCH CAPACITY FOR THE PARTNERSHIP, OR IN ANY WAY CONNECTED WITH THIS
AGREEMENT, THE FORMATION OF THE PARTNERSHIP (INCLUDING ANY ALLEGED VIOLATION OF
FEDERAL OR STATE SECURITIES LAWS) OR THE LIKE; PROVIDED THAT SUCH RELEASE SHALL
NOT APPLY WITH RESPECT TO ANY ACTION OR INACTION OF THE GENERAL PARTNER WHERE
THE COURT DETERMINES THAT THE GENERAL PARTNER WAS ACTING FRAUDULENTLY, IN BAD
FAITH, OR WAS GROSSLY NEGLIGENT.
Section 6.12 Indemnification of the General Partner.
THE GENERAL PARTNER SHALL BE HELD HARMLESS AND INDEMNIFIED BY THE PARTNERSHIP
FOR ANY LIABILITY OR LOSS TO THIRD PARTIES SUFFERED BY THE PARTNERSHIP, OR BY
THE GENERAL PARTNER INDIVIDUALLY, INCURRED BY VIRTUE OF IT ACTING AS THE GENERAL
PARTNER FOR THE PARTNERSHIP; PROVIDED, HOWEVER, SUCH INDEMNIFICATION SHALL NOT
APPLY WITH RESPECT TO ANY ACTION OR INACTION OF THE GENERAL PARTNER WHERE THE
COURT DETERMINES THAT THE GENERAL PARTNER WAS ACTING FRAUDULENTLY, IN BAD FAITH,
OR WAS GROSSLY NEGLIGENT.
ARTICLE VII
LIMITED PARTNER
Section 7.01 The Limited Partner.
(a) The Partnership shall initially have only one (1) Limited Partner, the
▇▇▇▇▇ Family Trust Dated February 19, 1993. The Percentage Interest owned by
the Limited Partner is set forth on Exhibit A hereto.
Section 7.02 Management and Control.
The Limited Partner shall, except as allowed under the Revised Act (such as
California Corporations Code Section 15632(b)) or as provided hereunder, take no
part in or interfere in any manner with the management, conduct or control of
the Partnership business and shall have no right, power or authority to act for
or bind or obligate the Partnership in any manner whatsoever. Notwithstanding
the foregoing, if the General Partner has been removed and the Partnership has
been dissolved, the Limited Partner may, as allowed under the Revised Act, act
for and bind the Partnership during the winding up period.
Section 7.03 Voting Rights.
The Limited Partner shall, as allowed by the Revised Act, have the right to
approve (or disapprove) all matters allowed to be approved (or disapproved)
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by limited partner under the Revised Act (such as California Corporations Code
Section 15636(f)) including, but not limited to, the following Partnership
matters before the General Partner initiates such specified act (unless a
different approval and/or authorization is specifically provided hereunder in
which event the terms of this Agreement shall control):
(a) The dissolution and winding up of the Partnership;
(b) The sale, exchange, lease, or other transfer of all or substantially all
of the assets of the Partnership;
(c) A change in the nature and/or purpose of the Partnership's business;
(d) Transactions in which the General Partner has an actual or potential
conflict of interest with either the Limited Partner;
(e) The removal of the General Partner which the Limited Partner may do but
only if it does so in compliance with Section 6.09(c) hereof;
(f) The election of a successor general partner if the General Partner is
removed by the Limited Partner pursuant to Section 6.09(c) hereof, or the
election of an additional general partner; and
(g) Such other matters that are specifically set forth herein.
Section 7.04 Partnership Meetings.
Unless otherwise provided herein, Partnership meetings shall be called and
held in accordance with the procedures set forth in Section 15637 of the Revised
Act. Partnership meetings may only be called by either the General Partner or
by the Limited Partner. Partnership meetings shall be held at the principal
office of the Partnership or any other place within Los Angeles County,
California as set forth in the notice of meeting.
Section 7.05 Limitations on Rights of the Limited Partner.
(a) The Limited Partner shall have no right or power to:
(i) Withdraw or reduce any portion of its Adjusted Invested Capital except as
a result of the dissolution of the Partnership or as otherwise provided herein
or by law;
(ii) Bring an action for any partition of any property or assets owned by the
Partnership;
(iii) Cause the termination and dissolution of the Partnership, except as set
forth in this Agreement; or
(iv) Demand to receive property other than cash in return for its Adjusted
Invested Capital.
(b) No Limited Partner shall have priority over any other Partner either as to
the return of its respective Adjusted Invested Capital or as to allocations of
Net Income, Net Loss, or Distributions.
Section 7.06 Additional Limited Partner.
The General Partner may, only with the prior written consent of the Limited
Partner, admit additional limited partner to the Partnership.
Section 7.07 Death, Incompetency, Dissolution or Bankruptcy of a Limited
Partner.
The death, legal incompetency, dissolution or bankruptcy of the Limited
Partner shall not terminate or in any way affect the Partnership in any manner
whatsoever. Upon the death, legal incompetency, dissolution or bankruptcy of
the Limited Partner, the personal representative, guardian, trustee or other
successor in interest of said Limited Partner shall have all of the rights of
the Limited Partner for the sole purpose of settling the estate or affairs of
the Limited Partner; provided however, that with the written consent of the
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General Partner, such personal representative, guardian, trustee or other
successor in interest, or the estate of the Limited Partner, or the distributee
of such estate, may be designated as a Substitute Limited Partner in the
Partnership in the place of said Limited Partner.
Section 7.08 Representations of the Limited Partner.
The Limited Partner, by executing and delivering this Agreement, represents,
warrants, and covenants with the Partnership, and to and with the General
Partner, that:
(a) The Limited Partner is sophisticated and experienced in business affairs,
in general, and with respect to investing in the development of tract single
family housing, in particular.
(b) The Limited Partner is acquiring its Percentage Interest for purpose of
long-term investment for its own account and for the account of its respective
Limited Partner. The Limited Partner recognizes and understands that the
Percentage Interest being purchased and sold hereunder has not been registered
under the Securities Act of 1933, as amended, by reason of the fact that the
contemplated transaction is exempt from registration pursuant to Regulation "D"
of the Securities Act of 1933, as amended, nor has the Percentage Interest been
qualified under the California Securities Law of 1968 pursuant to the exemption
therefrom provided under Section 25102(f) of the California Corporations Code.
To qualify for such exemptions, the Limited Partner hereby represents and
warrants that it is purchasing the Percentage Interest for its own account and
not for the purpose of distribution; that no Person other than the Limited
Partner (and its respective Limited Partner) owns any beneficial interest in the
Limited Partner's Percentage Interest; and that there are no contracts,
undertakings or arrangements with any Person to sell or transfer to any Person
or to have any Person sell for it all or any portion of its Percentage Interest
or to afford or allow any participation therein by any other Person. The
foregoing representations, warranties and covenants do not preclude the
existence of such rights, if any, as a Partner's spouse may have as to his
Percentage Interest under community property laws.
(c) The Limited Partner understands that the residential development business
in Southern California has been in a depression in the last several years and
that there is no guarantee or assurance that the development will be profitable.
(d) The Limited Partner understands that the remedies of the Limited Partner
in the event of default by the General Partner are severely limited under
California law and that Inco does not have a substantial net worth and even if
the Limited Partner were to obtain a deficiency judgment against the General.
Section 7.09 Power of Attorney.
(a) The Limited Partner hereby makes, constitutes and appoints Inco Homes
Corporations as its true and lawful Attorney-in-Fact, with full power and
authority to act in his name and on his behalf with respect to the execution,
acknowledgment, delivery, filing and recording of documents pertaining to the
Partnership as follows:
(i) Any documents or instruments required to receive an interest in the
Partnership, including any assignment and substitution agreement, this Limited
Partnership Agreement and any amendments to this Limited Partnership Agreement,
required or allowed under the laws of the State of California or any other
state, provided that such agreements are expressly allowed hereunder or
otherwise do not materially adversely change the Percentage Interest owned by,
or the rights, preferences, and privileges of, the Limited Partner hereunder.
(ii) Any documents which may be required to establish the Partnership or
amend this Limited Partnership Agreement or to effect the continuation of the
partnership, the admission of an additional or substituted limited partner or
general partner or the dissolution and termination of the Partnership, provided
that such establishment, continuation, admission, transfer or dissolution and
termination is materially in accordance with the terms of this Limited
Partnership Agreement; and
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(iii) Any other instrument, document, deed or lien of any type or form
whatsoever that may be required to be signed by the Partnership to further the
business of the Partnership which said Attorney-in-Fact deems advisable to sign,
provided that such instruments are not inconsistent with this Limited
Partnership Agreement.
(b) The Power of Attorney is a special power of attorney, coupled with an
interest and is irrevocable and shall survive the death, bankruptcy, disability,
incapacity and cessation of the existence of the Limited Partner as a legal
entity. The Limited Partner hereby gives and grants to said Attorney-in-Fact
full power and authority to do and perform all and every act and thing
whatsoever requisite, necessary or appropriate to be done in or in connection
with this power of attorney as fully to all intents and purposes as the Limited
Partner might or could do if personally present, hereby ratifying all that said
Attorney-in-Fact shall lawfully do or cause to be done by virtue of this power
of attorney.
ARTICLE VIII
TRANSFER OF PARTNERSHIP INTERESTS
Section 8.01 Permitted Transfer of Partnership Interests.
A Partner shall have the right without restriction to sell, assign, or
transfer his Percentage Interest or any portion thereof to any of the following:
(a) To another Partner;
(b) To any immediate relative of the Transferring Partner;
(c) To an inter vivos trust primarily for the benefit of the Transferring
Partner and/or any immediate relative of the Transferring Partner;
(d) By will or by testamentary trust to any Person whatsoever.
Notwithstanding the foregoing, any Person who acquires a Percentage Interest in
the Partnership in the manner set forth in subparagraphs (a) through (d) above
shall nevertheless acquire and hold such Percentage Interest subject to the
terms of Section 8.02 hereof.
Section 8.02 Right of First Refusal.
(a) Before there can be a valid sale, assignment or transfer ("Transfer"
herein) of any or all of a Partner's Percentage Interest in the Partnership to
any Person not set forth in Section 8.01 hereof, the Partner who desires to
Transfer his Percentage Interest in the Partnership (the "Transferring Partner"
herein) shall first give written notice to the General Partner of his intention
to Transfer such Percentage Interest (the "Notice" herein). The Notice shall
specify the Percentage Interest to be Transferred, the price, the terms on which
such Transferring Partner intends to make such Transfer, and the name and
address of each Person who is to acquire such Percentage Interest.
(b) The General Partner shall, within Ten (10) days after the receipt of the
Notice, send a copy of same to all of the other Partners.
(c) Such other Partners, including the General Partner, shall have Thirty (30)
days from the date they receive the Notice within which to offer to acquire all
or part of the Percentage Interest the Transferring Partner desires to Transfer
for the same price and upon the same terms and conditions as set forth in the
Notice. Such offer must be in writing and must be received by the General
Partner before the end of said Thirty (30) day period.
(d) If the other Partners offer to purchase a Percentage Interest which
exceeds the Percentage Interest the Transferring Partner desires to Transfer,
each Partner who desires to purchase such Percentage Interest (the "Offering
Partner" herein) shall be entitled to purchase such proportion of the Percentage
Interest referred to in the Notice as his respective Percentage Interest in the
Partnership bears to the total Percentage Interest in the Partnership owned by
all of the Offering Partners.
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(e) Provided that the Offering Partners collectively offer to purchase all,
but not less than all, of the Percentage Interest the Transferring Partner
desires to Transfer, the General Partner shall give the Transferring Partner
written notice thereof within Ten (10) days after the end of the Thirty (30) day
period referred to in Section 8.02(c) above and the Transferring Partner shall,
within Ten (10) days after the receipt of said notice from the General Partner
sell his Percentage Interest to the Offering Partners for the same price and
upon the identical terms and conditions as set forth in the Notice.
(f) If the Offering Partners collectively do not within the Thirty (30) day
period referred to in Section 8.02(c) above so offer to purchase all, and not
less than all, of such Percentage Interest which the Transferring Partner
desires to Transfer, the General Partner shall promptly notify the Transferring
Partner thereof and the Transferring Partner shall have no obligation to sell
any of his Percentage Interest to the other Partners as hereinabove provided and
may, within the next Sixty (60) days after the receipt of such notice from the
General Partner, Transfer all of the Percentage Interest referred to in the
Notice but only to the Person or Persons set forth in the Notice and only for
the same price and upon the identical terms and conditions as set forth therein.
Any such transferee shall nevertheless take such Percentage Interest subject to
each and all of the terms of this Agreement including, particularly, the
provisions of this Article VIII. If such Transfer is not made by the
Transferring Partner within said Sixty (60) day period exactly as set forth in
Article VIII hereof, the Transferring Partner shall again have to fully comply
with all of the terms and conditions of this Article VIII before Transferring,
or attempting to Transfer, his Percentage Interest in the Partnership referred
to in the notice.
(g) Any Transfer, or attempted Transfer, by a Partner of any portion of his
Percentage Interest shall be null and void unless the terms, conditions and
provisions of this Section 8.02 are strictly observed and followed.
Section 8.03 Admission of a Substitute Partner.
(a) Subject to the other provisions of this Article VIII, an Assignee of any
portion of a Percentage Interest of a Partner shall be admitted as a Substitute
Partner of the Partnership only upon the completion of the following:
(i) With respect to the admission of a Substitute Limited Partner, consent of
the General Partner which consent the General Partner may unreasonably withhold;
(ii) The Transferring Partner, at his expense, shall provide the General
Partner with an opinion of counsel acceptable to counsel for the Partnership
that such a substitution will not cause the Partnership to be deemed to be
dissolved and will not cause the Partnership to be taxed other than as a
partnership for federal income tax purposes;
(iii) The Assignee shall have accepted and agreed to be bound by all of the
terms and provisions of this Agreement by executing a counterpart hereof, and
such other documents or instruments as the General Partner and Partnership
counsel may require in order to effect the admission of such Person as a
Substitute Partner hereof; and,
(iv) The Transferring Partner or his Assignee shall reimburse the Partnership
for all costs, fees and expenses incurred by it in connection with such
Transfer.
(b) For the purpose of allocating Partnership Income and Losses and making
Partnership Distributions, a Substitute Partner shall be treated as having
become a Partner on the date he signs and delivers a copy of this Agreement to
the General Partner.
Section 8.04 Tax Elections - Transfer of Partnership Interests.
In the event of a Transfer of all or any part of the Percentage Interest of a
Partner, the Partnership hereby elects, pursuant to Code Sections 743 and 754
(or any corresponding provisions of succeeding law), to adjust the basis
16
of the Partnership property with respect to the Percentage Interest of such
Transferring Partner. With respect to any Partner whose Percentage Interest has
been affected by an election pursuant to Code Section 754, appropriate
adjustments shall be made to the determination of Partnership Income, Losses and
Distributions. Each Partner agrees to furnish the Partnership with all
information necessary to give effect to such election. The Partnership may
elect to make any other election permitted under any provision of the Code if,
in the opinion of the General Partner based upon the advice of tax counsel
and/or the accountants for the Partnership, such election would be advantageous
to the Partners as a group, or to any Partner, without being disadvantageous to
any other Partner.
ARTICLE IX
DISSOLUTION AND LIQUIDATION
Section 9.01 Dissolution of the Partnership.
The Partnership shall be dissolved and its assets liquidated and distributed
at the time provided in Section 2.04(a) hereof.
Section 9.02 Winding Up and Distribution.
(a) Upon the dissolution of the Partnership, the Partnership business shall be
wound up and its assets liquidated as provided in this Section 9.02 and the net
proceeds of such liquidation shall be distributed in accordance with Section
9.03 hereof.
(b) The General Partner shall act as liquidator and shall file all
certificates and notices of the dissolution of the Partnership required by law.
The General Partner shall proceed without any unnecessary delay to sell and
otherwise liquidate the Partnership's property and assets; provided, however,
that if it determines that an immediate sale of part or all of the Partnership's
property would cause undue loss to the Partners, in order to avoid such loss,
except to the extent prohibited by the Revised Act, it may defer the liquidation
of the Partnership's property for a reasonable time. Upon the complete
liquidation and distribution of the Partnership's assets, the Partners shall
cease to be Partners of the Partnership and the General Partner shall execute,
acknowledge and cause to be filed all certificates and notices required by law
to terminate the Partnership.
(c) Upon the dissolution of the Partnership, the accountants for the
Partnership shall promptly prepare, and the General Partner shall furnish to
each Partner, a statement setting forth the assets and liabilities of the
Partnership upon its dissolution. Promptly following the complete liquidation
and distribution of the Partnership's property and assets, the Partnership's
accountants shall prepare, and the General Partner shall furnish to each
Partner, a statement showing the manner in which the Partnership's assets were
liquidated and distributed and the receipts and disbursements therefor,
including an accounting of all of the Distributions made pursuant to Section
9.03 hereof.
(d) Subject to the foregoing, the business and affairs of the Partnership
shall be wound up and its assets distributed in the manner provided by the laws
of the State of California.
(e) After all of the debts of the Partnership have been paid, the Partners may
elect by mutual agreement to distribute the assets of the Partnership in kind.
In such event, the Partners shall evaluate such assets on a mutually acceptable
basis and only if such a basis is agreed to and the evaluation made, the assets
shall be distributed to the Partners in the same proportion as if said
Distributions were in cash as set forth in Section 9.03 hereof.
Section 9.03 Distribution of Proceeds.
The proceeds from the liquidation of the assets of the Partnership shall be
distributed in the following amounts and order:
(a) First, payment of the expenses of liquidation;
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(b) Next, payment of the debts of the Partnership, both secured and unsecured,
other than debts owing to Partners;
(c) Next, payment of debts owing to Partners;
(d) Next, payment to the Limited Partner of the amount due under Section
5.03(b)(ii) hereof;
(e) Next, to the Partners in accordance with the positive balances in their
Capital Accounts, as determined after taking into account all capital account
adjustments for the fiscal year during which the liquidation occurs (or, if
later, within 90 days after the date of such liquidation), other than any
capital account adjustments which are made pursuant to this Section 9.03.
No Partner shall be required to contribute to the Partnership any negative
balance in such Partner's Capital Account; and
(f) Last, to the Partners in the percentage they share in the Cash
Distributions of the Partnership as set forth in Section 5.03(b)(iv).
ARTICLE X
BOOKS AND RECORDS
Section 10.01 Partnership Records.
The General Partner shall keep and maintain at the Partnership's office such
Partnership books, records and documents as required under the Revised Act
including, but not limited to, the following:
(a) A current list of the full name and last known business or residence
address of each Partner set forth in alphabetical order together with the
contribution and the Percentage Interest owned by each Partner;
(b) A copy of the Certificate of Limited Partnership and all Certificates of
Amendment, and executed copies of any powers of attorney pursuant to which any
Certificate has been executed;
(c) Copies of the Partnership's federal, state and local income tax or
information returns and reports for the six (6) most recent taxable years;
(d) An executed copy of the Limited Partnership Agreement and all amendments
thereto;
(e) Copies of financial statements of the Partnership, if prepared, for the
six (6) most recent fiscal years; and
(f) The Partnership's books and records for the current and past three (3)
fiscal years.
Section 10.02 Delivery and Inspection of Partnership Records.
(a) Upon the request of the Limited Partner, the General Partner shall
promptly deliver to the Limited Partner, at the expense of the Partnership, a
copy of any or all of the information required to be maintained pursuant to
Section 10.01 hereof and any such other data or information about the operations
of the Partnership or any financial information about the Partnership requested
by said Limited Partner provided that such requested data and or information is
reasonable in amount and scope and can be compiled by the General Partner with a
reasonable effort.
(b) The Limited Partner has the right, upon reasonable prior notice, to
inspect and copy during normal business hours any and all of the Partnership
records required to be maintained pursuant to Section 10.01 hereof.
Section 10.03 Reports.
(a) Upon the written request of the Limited Partner, the General Partner shall
cause to be prepared and delivered to each Limited Partner the following reports
of Partnership operations:
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(i) An income statement of the Partnership for the initial three-month, six-
month and nine-month period of each fiscal year of the Partnership and a balance
sheet of the Partnership as of the end of each period.
(ii) An income statement for each fiscal year of the Partnership, a balance
sheet of the Partnership as of the end of each such year and a statement of cash
flows of the Partnership for such year.
(b) The General Partner shall also prepare and deliver to the Limited Partner
such other reports as may from time to time be reasonably requested by the
Limited Partner pertaining to the operation of the Partnership or the financial
status of the Partnership, including, but not limited to, the following:
(i) A monthly report on the status of the construction, sales, and escrow
closings of houses in the Development which shall be delivered to the Limited
Partner not later than the Twenty-Fifth (25th) day of the following calendar
month;
(ii) A monthly report on the amount of Cash Available For Distribution and
the computation of Net Income which shall be delivered to the Limited Partner
not later than the Twenty-Fifth (25th) day of the following calendar month; and
(iii) A quarterly report on all items described in Sections 10.03(b)(i) and
(ii) above shall be prepared for each calendar quarter and delivered to the
Limited Partner by not later than the Fiftieth (50th) day after the end of each
calendar quarter and for each calendar year such reports shall be prepared for
the year and delivered to the Limited Partner not later than the One Hundred and
Fifth (105th) day after the end of each calendar year.
Section 10.04 Tax Returns.
(a) Certified public accountants for the Partnership shall be retained and
instructed by the General Partner to timely prepare and file all required income
tax returns for the Partnership.
(b) The General Partner shall send, or cause to be sent, to each Partner
within ninety (90) days after the end of each taxable year the information
necessary for the Partner to complete his federal and state income tax or
information returns, and, if requested by a Limited Partner, the General Partner
shall also send such Partner a copy of the Partnership's complete federal, state
and local income tax or information returns for the year.
(c) The General Partner shall be the "Tax Matters Partner" for the purposes of
Section 6231(a)(7) of the Code.
Section 10.05 Bank Accounts.
All funds of the Partnership not otherwise invested shall be deposited in one
or more accounts maintained in the name of the Partnership in such banking
institutions as the General Partner shall determine, and withdrawals shall be
made only in the regular course of Partnership business on such signature or
signatures as the General Partner may from time to time determine.
Section 10.06 Accountants.
The certified public accountants for the Partnership shall be selected by the
General Partner.
Section 10.07 Fiscal Year.
The fiscal year of the Partnership shall be the calendar year.
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ARTICLE XI
GENERAL PROVISIONS
Section 11.01 Notices.
Any and all notices, demands or other communications required or desired to be
given hereunder by any party shall be in writing and shall be validly given or
made to another party if served either personally, by an overnight delivery
service or by the United States mail, certified or registered, postage prepaid,
return receipt requested. If such notice, demand or communication is served
personally, service shall be conclusively deemed made at the time of such
personal service. If such notice, demand or communication is served by
overnight delivery service, service shall be conclusively deemed made within
twenty-four (24) hours after it was delivered to said overnight delivery
service. If such notice, demand or communication is given by mail, service
shall be conclusively deemed made forty-eight (48) hours after the deposit
thereof in the United States mail addressed to the party to whom such notice,
demand or other communication is to be given as set forth on Exhibit A hereto.
Any party hereto may change his address for the purpose of receiving notices,
demands and other communications as herein provided by a written notice given in
the manner aforesaid to the other parties hereto.
Section 11.02 Applicable Law and Severability.
This Agreement shall, in all respects, be governed by the laws of the State of
California applicable to agreements executed and to be wholly performed therein.
Nothing contained herein shall be construed so as to require the commission of
any act contrary to law, and wherever there is any conflict between any
provision contained herein and any present or future statute, law, ordinance or
regulation contrary to which the parties have no legal right to contract, the
latter shall prevail but the provision of this Agreement which is affected shall
be curtailed and limited only to the extent necessary to bring it within the
requirements of the law.
Section 11.03 Further Assurances.
Each of the parties hereto shall execute and deliver any and all additional
papers, documents, and other assurances, and shall do any and all acts and
things reasonably necessary in connection with the performance of their
respective obligations hereunder and to carry out the intent of the parties
hereto.
Section 11.04 Successors and Assigns.
All of the terms and provisions contained herein shall inure to the benefit of
and shall be binding upon the parties hereto and their respective heirs,
personal representatives, successors and assigns.
Section 11.05 Attorney's Fees.
In the event any action be instituted by a party to enforce any of the terms
and provisions contained herein, the prevailing party in such action shall be
entitled to be awarded from the losing party such reasonable attorney's fees,
costs and expenses (including all court costs) as the Court may award.
Section 11.06 Entire Agreement.
This Agreement constitutes the entire understanding and agreement of the
parties and any and all prior agreements, understandings, or representations of
any kind are hereby terminated and canceled in their entirety and are of no
further force or effect. No amendment, change or modification of this Agreement
shall be valid unless in writing and signed by all of the parties hereto.
Section 11.07 Captions.
The captions appearing at the commencement of the paragraphs hereof are
descriptive only and for convenience in reference. Should there be any conflict
between any such caption and the paragraph at the head of which it appears, the
paragraph and not such caption shall control and govern in the construction of
this Agreement.
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Section 11.08 No Partition.
No Partner, without the prior written consent of the General Partner, shall
have any right, power or authority to make application to any court or commence
or prosecute any action or to in any way force the partition or involuntary sale
of any Partnership property and, in the event any such application is made or
any such action is commenced, the General Partner or any other Partner, in their
own name or in the name of the Partnership, in addition to all other rights and
remedies provided hereunder, at law and in equity, shall have the right to
obtain an injunction, decree and/or restraining order to enjoin or stop such
application, action or proceeding.
Section 11.09 Counsel For the Partnership.
The Partnership shall retain the services of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., the General
Partner, who shall provide certain of the legal services pertaining to the
formation, administration and operation of the Partnership, including drafting
this Limited Partnership Agreement. The Partnership shall pay ▇▇. ▇▇▇▇▇ only
such fees/compensation for such legal services as are approved by Limited
Partner who own a majority of the Percentage Interest owned by all Limited
Partner and shall reimburse him for all of his direct costs incurred on behalf
of the Partnership. The Partners acknowledge that ▇▇. ▇▇▇▇▇ represents the
Partnership and not any of the respective Partners; provided, however, since ▇▇.
▇▇▇▇▇ is the general partner of the General Partner of the Partnership, there
may be a potential conflict between ▇▇. ▇▇▇▇▇' legal representation of the
Partnership and the legal position of one or all of the Limited Partner. By
executing this Agreement, the Limited Partner each hereby waive any such
potential conflict in interest and agree to obtain separate legal counsel to
represent their respective legal interest with respect to entering into this
Agreement.
Section 11.10 Arbitration.
The parties shall submit any dispute concerning the interpretation of or the
enforcement of rights and duties under this Agreement to final and binding
arbitration pursuant to the rules of the American Arbitration Association. At
the request of any party, the arbitrators, attorneys, parties to the
arbitration, witnesses, experts, court reporters, or other persons present at
the arbitration shall agree in writing to maintain the strict confidentiality of
the arbitration proceedings. Arbitration shall be conducted by a single,
neutral arbitrator, or, at the election of any party, three neutral arbitrators,
appointed in accordance with the rules of the American Arbitration Association.
The award of the arbitrator(s) shall be enforceable according to the applicable
provisions of the California Code of Civil Procedure. The arbitrator(s) may
award damages and/or permanent injunctive relief, but in no event shall the
arbitrator(s) have the authority to award punitive or exemplary damages. If
proper notice of any hearing has been given, the arbitrator(s) will have full
power to proceed to take evidence or to perform any other acts necessary to
arbitrate the matter in the absence of any party who fails to appear.
IN WITNESS WHEREOF, the parties have executed and delivered this Limited
Partnership Agreement as of the date first set forth above.
GENERAL PARTNER: LIMITED PARTNER:
Inco Homes Corporation, ▇▇▇▇▇ Family Trust
a Delaware corporation Dated February 19, 1993
By ----------------------- By --------------------
▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Chairman and CEO Trustee
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