APPENDIX B
AGREEMENT OF LIMITED PARTNERSHIP
OF
WINDSOR PARK PROPERTIES 4,
A California Limited Partnership
TABLE OF CONTENTS
(continued)
Page
iii
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.................................................2
1.05 Purpose of Partnership and Investment Objectives............3
1.06 General and Limited Partners................................4
(a) General Partners...................................4
(b) General Partners Capital Contribution..............4
(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.................................5
2.01 Powers and Duties of the General Partners...................5
2.02 Indemnification.............................................6
2.03-1 POWERS AND DUTIES OF THE LIMITED PARTNERS.....................7
2.03-2 ACTS NOT DEEMED "PARTICIPATION IN CONTROL\....................7
2.03-3 THE RIGHTS AND DUTIES OF THE PARTNERS IN RELATIONSHIP
TO THE PARTNERSHIP SHALL BE DETERMINED BY THE
FOLLOWING RULES...............................................8
2.04 Compensation of General Partners and Affiliates.............9
2.05 Investment in Properties...................................10
2.06 Certain Mortgaging.........................................10
2.07 Reinvestment...............................................10
III. FINANCING OF THE PARTNERSHIP.................................10
3.01 Capital Contributions of the General Partners..............11
3.02 Capital Contributions of the Limited Partners..............11
3.03 Additional Contributions...................................11
3.04 Interest...................................................11
3.05 Time for Return of Contributions...........................11
3.06 Loans by the Partners......................................11
3.07 Allocation of Net Profits and Net Losses and
Distributions From Cash Available For Distribution.........11
i
3.08 Conditions and Consent to Allocations and
Distributions..............................................13
3.09 Partnership Expenses.......................................14
IV. BOOKS OF ACCOUNT, FINANCIAL STATEMENTS AND FISCAL
MATTERS......................................................15
4.01 Books of Account...........................................15
4.02 Reports and Financial Statements...........................15
4.03 Tax Returns and Records....................................17
4.04 Fiscal Year................................................17
4.05 Bank Accounts, Funds and Assets............................17
4.06 Adjustment of Tax Basis....................................17
4.07 Insurance..................................................17
4.08 Appraisals.................................................18
4.09 Tax Matters Partner........................................18
V. ASSIGNABILITY OF LIMITED PARTNERS' INTERESTS.................18
5.01 Limited Partners' Interest.................................18
5.02 Further Restriction on Transfers...........................19
5.03 Substituted Partners.......................................19
5.04 Additional Restrictions....................................19
5.05 Withdrawal of Limited Partner..............................19
5.06 Death of Limited Partner...................................19
5.07 Recognition of Substituted and Assignee Limited
Partners...................................................19
VI. REPURCHASE OF UNITS..........................................20
VII. RIGHT OF LIMITED PARTNERS TO RECEIVE PROPERTY
OTHER THAN CASH..............................................20
VIII. TERMINATION OF A GENERAL PARTNER.............................20
8.01 Ceasing to be a General Partner............................20
8.02 Continuation of Business of Remaining General
Partner....................................................21
8.03 Removal of a General Partner...............................21
8.04 Dissolution of Partnership and Continuance of
Partnership Business.......................................21
8.05 Payment to Terminated General Partner......................21
8.06 Termination of Executory Contracts.........................22
IX. DISTRIBUTION ON TERMINATION..................................22
9.01 Events of Dissolution......................................22
ii
9.02 Gain and Loss on Dissolution and Order of Distribution.....22
9.03 Eminent Domain.............................................23
9.04 Period of Liquidation......................................23
X. CERTIFICATES AND OTHER DOCUMENTS.............................23
10.01 General Partners Attorneys for Limited Partners............23
10.02 Making, Filing, Etc. of Certificates, Etc..................24
XI. NOTICES......................................................24
XII. CONVEYANCES, CONTRACTS AND DOCUMENTS.........................24
XIII. DISPUTES AND ARBITRATION.....................................25
XIV. MEETINGS OF, OR ACTIONS BY, THE LIMITED PARTNERS.............25
XV. CAPTIONS-PRONOUNS............................................27
XVI. BINDING EFFECT AND EXHIBITS..................................28
XVII. AMENDMENT OF THE AGREEMENT...................................28
XVIII. ENTIRE AGREEMENT.............................................28
XIX. TAX CONTROVERSIES............................................29
XX. COUNTERPARTS AND EXECUTION...........................................29
XXI. INVESTMENT IN OTHER PROGRAMS OF SPONSOR..............................29
XXII. PROCEEDS FROM FINANCING PROPERTIES..................................30
iii
AGREEMENT OF LIMITED PARTNERSHIP
OF
WINDSOR PARK PROPERTIES 4,
A California Limited Partnership
This Agreement of Limited Partnership is made June 6, 1986, 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 the "Limited Partners" and individually as a "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 4, 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, 1997;
(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.
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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 6% 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 original capital
contribution.
(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.
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(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
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.
(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 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 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 venturer 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.
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All properties are to be acquired free and clear of any encumbrances.
Properties may later be financed, see Article XXII. Unimproved or non income
producing property will not be acquired. Investment in junior trust deeds or
similar obligations shall be prohibited.
In the event the General Partners or an Affiliate of the General
Partners are presented with a potential investment which might be made by more
than one investment entity which it advises or manages, the decision as to the
suitability of the property for investment by a particular entity will be based
upon a review of the investment portfolio of each entity and upon factors such
as cash flow, the effect of the acquisition on diversification of each entity's
portfolio, the estimated income tax effects of the purchase on each entity, the
policies of each entity relating to leverage, the funds of each entity available
for investment and the length of time such funds have been available for
investment. To the extent that a particular property might be determined to be
suitable for more than one public entity, priority will generally be given to
the public entity having uninvested funds for the longest period of time. If a
property is found to be inappropriate for any public entity then, and only then,
may it be considered for private placement. Nothing herein shall be deemed to
diminish the General Partners' overriding fiduciary obligation to the
Partnership or as a waiver of any right or remedy the Partnership or Limited
Partners may have in the event of a breach by a General Partner of such
obligation.
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 may, but (except
as provided in Section 3.07.7) are not required to, contribute to the capital of
the Partnership.
(c) General Partners Purchase of Units. The General Partners will purchase
$50,000 of limited partnership units at the time the public offering terminates
and an additional $50,000 of limited partnership units within six months
thereafter.
(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 fifteen (15)
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
B-4
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 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 XXII).
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.
B-5
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.
(a) The General Partners shall have no liability to the Partnership or to any
Partner for any loss suffered by the Partnership which arises out of any action
or inaction of the General Partners if the General Partners, in good faith,
determined that such course of conduct was in the best interests of the
Partnership and such course of conduct did not constitute negligence or
misconduct of the General Partners.
(b) The General Partners shall be indemnified by the Partnership against any
losses, judgments, liabilities, expenses, and amounts paid in settlement of any
claims sustained by them in connection with the Partnership, provided that the
same were not the result of negligence or misconduct on the part of the General
Partners, and provided the General Partners, in good faith, determined that such
course of action was in the best interests of the Partnership.
(c) Notwithstanding the above, the General Partners or their affiliates shall
not be indemnified for liabilities arising under federal and state securities
laws unless (1) there has been a successful adjudication on the merits of each
count involving securities law violations, or (2) such claims have been
dismissed with prejudice on the merits by a court of competent jurisdiction, and
provided that a court either (A) approves any settlement and finds that
indemnification of the settlement and related costs should be made, or (B)
approves indemnification of litigation costs if a successful defense is made.
(d) The Partnership shall not pay for any insurance covering liability of a
General Partner or its affiliates, agents or employees for actions or omissions
to act for which indemnification is not permitted hereunder. The Partnership may
purchase and pay for such types of insurance, including extended coverage
liability and casualty and workmen's compensation, as would be customary for any
person owning comparable property and engaged in a similar business and may name
the General Partners and their affiliates as additional insured parties
thereunder, provided that such addition does not add to the cost of premiums
payable by the Partnership.
B-6
(e) The Partnership shall not indemnify any affiliates of the General Partners,
or any underwriters or any other persons for liabilities arising under federal
and state securities laws.
(f) Any recovery by the General Partners hereunder is recoverable only out of
assets of the Partnership and not from the Limited Partners.
(g) The Partnership and the General Partners undertake that any and all parties
seeking indemnification will appraise the court of the position of the
Securities and Exchange Commission and state securities commissions/authorities
with respect to indemnification for securities laws violations before seeking
court approval for indemnification.
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.
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, and the election 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).
B-7
(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 then 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.
2.03 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.
B-8
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 rent-up, 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 8% 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). Notwithstanding
any other provisions in this agreement, the General Partners may not be
reimbursed for their travel, communication, and miscellaneous expenses in
connection with the rendering of acquisition services.
(3) Mortgage Financing Fee. At such time as the Partnership's properties are
financed (mortgaged), see Article XXII, the General Partners shall be paid a
mortgage financing fee equal to 1% of the gross financing proceeds for their
services performed in obtaining such financing. The mortgage financing services
to be rendered by the General Partners must meet the conditions specified in
Section 3.09(b).
(4) 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 in this Section 2.04, 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.
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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, Expenses of Acquisition
(as those terms are defined in Section 1.04), and any other similar fees
(including the mortgage financing fee, Section 2.04(a)(3)), 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 reserves for unit repurchase 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: All mortgage financing
obtained by the program or retained upon acquired properties must be fully
amortized in equal payment over not more than 30 years. All financing (including
financing to which properties were subject when purchased by the partnership)
including all-inclusive and wrap-around loans and interest-only loans must
provide that no balloon payment will become due sooner than the earlier of: (1)
ten years from the date the program acquired the property, (2) or two years
beyond the anticipated holding period of the property, but in no event sooner
than seven years from the date the program acquires the property. The foregoing
balloon payment limitation does not apply to financing representing, in the
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. The 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.
III.
FINANCING OF THE PARTNERSHIP
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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 be distributed to the Limited Partners who
purchased such Units in proportion to the number of such Units so purchased.
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.
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3.07.2 Cash Available for Distribution, if any, shall be determined for each
month and, within 30 days after the close of each month, shall be distributed
99% to the Limited Partners pro rata in accordance with their respective
ownership of Units and 1% 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 month for which such distribution is made.
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:
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(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.
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.
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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 (and shall not be
reimbursed by the Partnership for): (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 (and the General
Partners shall not be reimbursed therefore except as provided in subsection (b)
next following).
(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 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.
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(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 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
B-15
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 of 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:
(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
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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 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
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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. The Partnership shall not
pay for any insurance covering liability of a General Partner or its affiliates,
agents or employees for actions or omissions to act for which indemnification is
not permitted hereunder. The Partnership may purchase and pay for such types of
insurance, including extended coverage liability and casualty and workmen's
compensation, as would be customary for any person owning comparable property
and engaged in a similar business and may name the General Partners and their
affiliates as additional insured parties thereunder, provided that such addition
does not add to the cost of premiums payable by 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.
4.09 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.
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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.
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 consent shall be given unless in the written opinion of the Partnership's
tax counsel such consent should be withheld to preserve the tax status of the
Partnership) 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
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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.
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.
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.
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(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.
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 shall execute
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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 in equal annual installments
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 noninterest 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 (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.
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(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 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:
(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
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(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.
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
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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, within ten days after
receipt of a request, 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 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.
If any notice or report addressed to the partner at the address of 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
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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 shall, within ten days after receipt
of a request, 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.
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(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 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
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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.
XVII.
AMENDMENT OF THE AGREEMENT
Except as provided by this Article XVII, this Agreement may be modified
or amended only by a vote of a majority in interest 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; (vi) to effect
changes to substantially comply with Internal Revenue Service Regulations
Section 1.704-1; and (vii) 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
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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.
XXI.
INVESTMENT IN OTHER PROGRAMS OF SPONSOR
21.01 The provisions of this Article are effective notwithstanding anything to
the contrary in Sections 1.05 and 2.01.
21.02 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 21.03). In such event,
duplicate property management or other fees shall not be permitted.
21.03 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 risk 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.
XXII.
PROCEEDS FROM FINANCING PROPERTIES
22.01 After the Partnership has owned a property for two years or more, the
Partnership may borrow money and mortgage such property subject to the
following:
(a) A mortgage may be a lien on one or more properties owned by the Partnership.
(b) The holder of the note evidencing the borrowing may have recourse only to
the property(ies) 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 must be distributed to the Limited and General
Partners as provided in this Agreement.
(d) The net financing proceeds should return substantially all of the Limited
Partner's invested capital.
(e) The financing will assist in the sale of all of the Partnership's
properties.
(f) In the General Partner's judgment, the financing should increase the
economic return to the Limited Partners, and should not substantially increase
the risk of investment in the property(ies).
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In witness whereof, the parties have signed this agreement on the dates
indicated below:
Original Limited Partner: ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ June 6, 1986
------------------- as amended to
▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ September 19, 1986
Individual General ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇ June 6, 1986
------------------- as amended to
Partner: ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. September 19, 1986
Corporate General
Partner: The Windsor Corporation
By ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. June 6, 1986
------------------- as amended to
▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. September 19, 1986