EXHIBIT 3.2
REAL ESTATE ASSOCIATES LIMITED II
RESTATED CERTIFICATE AND AGREEMENT
OF LIMITED PARTNERSHIP
This Restated Certificate and Agreement of Limited Partnership by and
among National Partnership Investments Corp., a California corporation with
principal offices at 1901 Avenue of the Stars, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(the "Corporate General Partner"), and National Partnership Investments
Associates, a limited partnership ("NPIA" or the "Non-Corporate General
Partner"), the general partner of which is ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, an individual
residing at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as
general partners (hereinafter collectively referred to as the "General
Partners"), and ▇▇▇▇▇▇▇▇ ▇. Toy, an individual residing at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Initial Limited Partner"), is entered
into as of December 4, 1979. Such Initial Limited Partner, and any additional
or substituted limited partners hereafter admitted to the Limited Partnership
as herein provided, are referred to collectively as the "Limited Partners" and
individually as a "Limited Partner." The term "Partners" shall mean all
General and Limited Partners, and the term "Partner" means any General or
Limited Partner.
W I T N E S S E T H:
WHEREAS, on December 4, 1979, the Partnership was formed pursuant to
the laws of the State of California;
WHEREAS, the General Partners and the Initial Limited Partner desire
to change certain provisions in, and restate in full, their agreement; and
WHEREAS, it is the intention of the parties thereto to admit
additional Limited Partners to the Partnership for the purpose of acquiring
additional capital therefor;
NOW, THEREFORE, the parties hereto hereby agree as follows:
Section 1: Formation.
1.1 The General Partners and the Initial Limited Partner do hereby
form a limited partnership (the "Partnership") under the Limited Partnership
Act of the State of California.
Section 2: Name.
2.1 The business of the Partnership shall be conducted under the name
Real Estate Associates Limited II, which name may be changed by the General
Partners by written notice to the Limited Partners.
Section 3: Addresses of Parties.
3.1 The principal place of business of the Partnership shall be at
1901 Avenue of the Stars, Suite 1200, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at
such other place as the General Partners may from time to time designate in
writing to the Limited Partners. The Partnership may also maintain such other
offices at such other places as the General Partners may deem advisable.
3.2 The addresses of the General Partners shall be those stated in
the first paragraph of this Agreement, or at such other places as the General
Partners may from time to time designate in writing to the Limited Partners.
The addresses of the Limited Partners shall be those stated after their names
on Schedule A hereto or in any amended certificate hereto. A Limited Partner
may change such address by written notice to the General Partners, which
notice shall become effective upon receipt.
Section 4: Business of the Partnership.
4.1 The business of the Partnership shall be:
(a) to acquire interests as a limited partner in any partnership
or joint venture (a "local limited partnership") which will (i) acquire,
lease, hold, finance, construct, improve, rehabilitate, manage, and/or
operate government-assisted or other housing projects (the "Projects" and
the interests of the Partnership in the local limited partnerships shall
be referred to as "Project Interests"), (ii) monitor and supervise
management of construction and operations of the Projects, (iii) arrange
for and supervise the conversion of any Project to other uses, or (iv)
perform any act for a purpose authorized by this Agreement;
(b) to acquire, hold (in the Partnership's name or under any
other title arrangement selected by the General Partners), lease, sell,
mortgage, convey, or refinance any real or personal property, including,
but not limited to, the Project Interests described in paragraph (a)
above;
(c) to hold, own, maintain, manage, improve, develop, operate,
sell, transfer, convey, lease, mortgage, exchange, or otherwise dispose
of or deal in or with Projects and Project Interests described in
paragraph (a) above; and
(d) to perform any acts to accomplish the foregoing purposes.
Section 5: Contributions to Capital; Additional Limited Partners.
5.1 The capital of the Limited Partnership shall be divided into no
less than 1 and up to 20 General Partners Interests and no less than 480 and
up to 13,204 non-assessable limited partnership interests, each of which
limited partnership interests is hereinafter referred to as a "Limited
Partnership Interest"
5.2 The General Partners shall contribute an aggregate of $12,500 to
the capital of the Partnership, for which the General Partners shall be
credited with the ownership of one General Partners Interest, and shall have
such interest in and to the profits and losses thereof as is described in
Section 7 hereof. Upon liquidation of the Partnership, the General Partners
will discharge any debt balance in their capital accounts by contributing to
the Partnership an amount up to the difference between 1% of total capital
contributions to the Partnership and $12,500.
5.3 (a) The Initial Limited Partner has contributed $4,550 to the
capital of the Partnership pursuant to a promissory note, and has the right,
but not the obligation, to purchase additional Units as provided herein.
Furthermore, upon the admission of additional Limited Partners to the
Partnership, the Initial Limited Partner may withdraw such investment and
cease to be a Limited Partner.
(b) The General Partners are authorized to admit additional
Limited Partners to the Partnership by selling not more than 3,301 Units
for cash to selected persons as may apply to become Limited Partners
pursuant to the terms of an offering described in a Prospectus (the
"Prospectus") to which this Agreement will be annexed, by completing a
subscription agreement (the "Subscription Agreement") in the form to be
set forth in the Prospectus, provided that no person admitted as a
Limited Partner shall have been permitted to purchase more than 50 Units,
subject, however, to the right of the General Partners to establish
special requirements for larger subscriptions.
(c) The Limited Partnership Interests shall be sold to Limited
Partners in "Units." The minimum investment shall be one Unit at a
purchase price of $5,000 per Unit. Each Unit shall consist of two Limited
Partnership Interests and one Warrant which will entitle the purchaser of
a Unit to acquire two additional Limited Partnership Interests
("Additional Limited Partnership Interests") during the period January 1,
1981 to and including January 23, 1981 at $2,500 each. The Partnership
shall have the right to offer for sale, at the best prices obtainable,
any Limited Partnership Interest not purchased pursuant to the exercise
of Warrants. The foregoing sums relating to the purchase of Units and
Limited Partnership interests shall be paid to the Partnership
concurrently with the recordation in the Official Records of Los Angeles
County, California, of an amendment of this Agreement reflecting the
admission of each Limited Partner to the Partnership or increase in the
number of Limited Partnership Interests held by such Limited Partner, as
the case may be. Investors whose subscriptions have been accepted by the
General Partners will be admitted as Limited Partners within 15 days
after the minimum of $1,400,000 from the sale of Units has been received
by the General Partners. Thereafter, investors will be admitted as
Limited Partners no later than the last day of the calendar month
following the date the General Partners accept their subscriptions. The
General Partner will accept or reject subscriptions within three days
after receipt thereof.
(d) The Partnership presently contemplates the public offering
of a maximum of 3,000 Units at an offering price of $5,000 per Unit or an
aggregate offering price of $15,000,000. These Units represent 6,000
Limited Partnership Interests and 3,000 Warrants to purchase an aggregate
of 6,000 Additional Limited Partnership Interests at a price of $2,500
per Additional Limited Partnership Interest, or an aggregate exercise
purchase price of $15,000,000, provided, that if the Additional Limited
Partnership Interests can not be sold for $2,500 each, the General
Partner shall have the authority to offer and sell such Interests at the
best prices that can be obtained. A sales commission of 9% shall be paid
to ▇.▇. ▇▇▇▇▇▇ & Company Inc. ("▇▇▇▇▇▇") with respect to the sale of
Units; a sales commission of 8.75% shall be paid to ▇▇▇▇▇▇ with respect
to the sale of Limited Partnership Interests pursuant to the exercise of
Warrants, provided, however, that the sales commission to be charged on
Limited Partnership Interests available for sale by the Partnership upon
failure to exercise Warrants shall be 9%. In addition, in anticipation of
receipt of subscriptions in excess of 3,000 Units, the Partnership will
register with the Securities and Exchange Commission a total of 3,300
Units (covering an aggregate of 6,600 Limited Partnership Interests and
Warrants to purchase an aggregate of 6,600 Additional Limited Partnership
Interests) and will grant to ▇▇▇▇▇▇ the right, exercisable in its sole
discretion, to sell these additional Units so registered (on the same
terms and conditions as the other Units) on behalf of the Partnership.
Such right to sell an additional 300 Units will expire on the date of
termination of the offering and will provide additional compensation for
▇▇▇▇▇▇.
(e) No Partner shall have the right to withdraw or reduce his
capital contribution. No Limited Partner shall have the right to bring an
action for partition against the Partnership or to demand or receive
property other than cash in return for his capital contribution. No
Limited Partner shall have priority over any other Limited Partner,
either as to the return of his capital contribution or as to profits,
losses, or distributions.
(f) The net proceeds to the Partnership will be $4,550 for each
Unit. A person acquiring Units will participate with other Limited
Partners in the income, gains, losses, deductions, credits, and cash
distributions on a pro rata basis in accordance with the number of
Limited Partnership Interests owned. A Capital Account shall be
maintained for each Partner. To each Account shall be credited the amount
of money paid by a Partner to the Partnership to acquire his Limited
Partnership Interests (but not Warrants), (ii) the Partner's distributive
share of Profits, and (iii) the Partner's distributive share of any
tax-exempt Partnership income, and from each Capital Account there shall
be debited (iv) the net fair market value of property distributed to the
Partner, (v) the amount of money distributed to the Partner, (vi) the
Partner's distributive share of losses, and (vii) the Partner's
distributive share of Partnership expenditures not deductible in
computing taxable income and not properly capitalized.
(g) To accomplish the purpose of this Section 5.3, the General
Partners are hereby authorized to do all things necessary to admit such
additional Limited Partners, including, but not limited to, registering
the Units under the Securities Act of 1933, as amended, pursuant to the
rules and regulations of the Securities and Exchange Commission,
qualifying the Units for sale with state securities regulatory
authorities or perfecting exemptions from qualification, and entering
into such underwriting or agency arrangements for the solicitation of the
Units upon such terms and conditions as the General Partners may deem
advisable.
5.4 Proceeds from contributions for Units and other Partnership funds
shall be held by the General Partners as fiduciaries for the exclusive use of
the Partnership and after the start of Partnership operations shall be
temporarily invested in U.S. Treasury Bills and Bonds, bank certificates of
deposit, commercial paper (investment grade), and tax-exempt notes and bonds,
or registered investment companies holding such securities. Interest thereon
shall inure to the benefit of the Partnership, and the Limited Partners, as
such, shall not receive interest on funds contributed by them. Any funds
(other than designated reserves) not invested in Projects or Project Interests
within 18 months from the effective date of the Prospectus shall be
distributed pro rata to the Limited Partners as a return of capital.
Section 6: Organizational Expenses.
6.1 The Partnership shall pay all costs of qualifying and offering
the Units (including sales commissions) and all formation and organization
expenses, including expenses associated with the selection and acquisition of
Projects (which expenses are, however, subject to the limitation set forth in
Section 9.6.1 hereof). The General Partners will be liable for the amount, if
any, by which the aggregate organizational expenses and sales commissions
exceed 15% of the gross proceeds from the sale of Units.
Section 7: Profits and Losses.
7.1 Prior to the amendment to this Agreement for the purpose of
admitting additional Limited Partners to the Partnership in accordance with
Section 5.3 (b) hereof, the General Partners shall be allocated, as they may
agree between themselves, 99% of each item of income, gain, loss, deduction,
and credit (collectively, "Partnership Tax Items" and individually,
"Partnership Tax Item"). During such period, the Initial Limited Partner shall
be allocated 1% of each Partnership Tax Item. At all times thereafter, except
as provided in Section 7.2 and the following sentence, the General Partners
shall be allocated 1% and the Limited Partners as a class shall be allocated
99% of each Partnership Tax Item. The General Partners shall not be allocated
any income recognized by the Partnership upon the expiration of Warrants; all
income recognized by the Partnership upon expiration of Warrants shall be
allocated to the non-exercising Limited Partners in proportion to their
respective Limited Partnership Interests.
7.2 Upon the total or partial liquidation of the Partnership or the
disposition or partial disposition of a Project or Project Interest, income
and losses of the Partnership shall be allocated as follows. Income not
exceeding an amount equal to the sum of the negative adjusted capital account
balances of all Partners with such balances (computed after any distributions
made under Section 9.6.2) shall be allocated among such Partners in proportion
to their respective negative capital account balances and without regard to
Section 7.3; and income in excess thereof shall be allocated 1% to the General
Partner and 99% to the Limited Partners as a class. Losses not exceeding an
amount equal to the sum of the positive adjusted capital account balances of
all Partners with such balances (computed after any distributions under
Section 9.6.2) shall be allocated among such Partners in proportion to their
respective positive adjusted capital account balances and without regard to
Section 7.3; and losses in excess thereof shall be allocated 1% to the General
Partner and 99% to the Limited Partners as a class.
7.3 Each Limited Partner shall be allocated the same fractional share
of each Partnership Tax Item allocable to Limited Partners as a class as the
total number of Limited Partnership Interests owned by him divided by the
total number of Limited Partnership Interests outstanding, subject to the
following exception. Commencing with the 1981 taxable year, each Partnership
Tax Item allocable to Limited Partners as a class shall be allocated 62 1/2%
to holders of Additional Limited Partnership Interests, and 37 1/2% to holders
of 1980 Partnership Interests until the total amount of each Partnership Tax
Item allocated to each Additional Limited Partnership Interest equals the
total amount of each Partnership Tax Item (including a weighted average of
each 1980 Partnership Tax Item) allocated to each 1980 Partnership Interest.
The weighted average of each 1980 Partnership Tax Item shall be a fraction,
the numerator of which is a sum, consisting of the product, for each month
until January 1, 1981, of the total amount of that Partnership Tax Item
allocated to the group comprised of 1980 Limited Partnership Interests
purchased through that month times the number of months remaining, including
the month in question, until January 1, 1981, and the denominator of which is
a sum, consisting of the product, for each month until January 1, 1981, of
1980 Limited Partnership Interests purchased through that month times the
number of months remaining, including the month in question, until January 1,
1981. As each Partnership Tax Item is so equalized between 1980 Limited
Partnership Interests and Additional Limited Partnership Interests, this
allocation shall cease as to that Partnership Tax Item.
7.4 In determining whether Partnership Tax Items are realized, paid,
accrued or incurred during any period in which any Limited Partner is a member
of the Partnership, such Items shall be allocated on any basis permitted by
Section 706(c) of the Internal Revenue Code of 1954, as determined by the
General Partners. In the event of the transfer of a Limited Partnership
Interest (other than in the case of a default), the distributive share of
these Partnership Tax Items (in respect of the Limited Partnership Interest so
transferred) shall be allocated between the transferor and the transferee in
accordance with this Section.
Section 8: Cash Distributions.
8.1 The General Partners shall distribute annually substantially all
of the Partnership's Net Cash Flow as defined herein. Except as provided in
Section 8.2, the General Partners shall be entitled to receive 1% of the Net
Cash Flow to be distributed, but any such distributions to the General
Partners shall be reduced by the amount paid as an Annual Management Fee as
set forth in Section 9.5 hereof. The Limited Partners as a class shall receive
the balance of the distributed Net Cash Flow, which shall be distributed among
individual Limited Partners as Partnership Tax Items are allocated to them
under Section 7.3.
8.2 Upon the total or partial liquidation of the Partnership or the
disposition or partial disposition of a Project or Project Interest, net
assets available for distribution remaining after all distributions required
to be made under Section 9.6.2 shall be distributed to the Partners in
proportion to their positive adjusted capital account balances (computed after
the allocation of income or loss under Section 7.2).
8.3 "Net Cash Flow" shall mean the Partnership's share of all cash
receipts derived from the ownership of Projects and Project Interests therein
(exclusive of any proceeds from the sale or financing of Projects or Project
Interests, refinancing or other extraordinary transactions not in the ordinary
course of business) less (a) expenses, (b) such reserves as the General
Partners deem reasonably necessary for the proper operation of the
Partnership's business, and (c) any fees and expenditures authorized by this
Agreement (except for construction expenditures paid out of capital or loan
proceeds). The General Partners may at their discretion reinvest or distribute
all or any portion of the proceeds from the disposition or refinancing of any
Project or Project Interest therein, provided, that in the event of a sale,
the Partners shall have first received any distributions to which they are
entitled under Section 9.6.2. To the extent that such proceeds are not
reinvested or committed within twelve months from the date of the sale or
refinancing, they shall be distributed. Distributions of the net proceeds from
the sale or financing of Projects or Project Interests, refinancing thereof,
or other extraordinary transactions not in the ordinary course of business
shall be distributed to the General and Limited Partners in the same manner as
net cash is distributed under Section 8.2.
8.4 The General Partners shall designate a record date to determine
Partners entitled to cash distributions, which shall not be less than 15 days
nor more than 30 days before each cash distribution. The Partnership shall
cause to be maintained records reflecting the name, address, and number of
Limited Partnership Interests and General Partners Interests held by each
Partner for the purpose of determining recipients of cash distributions and
notices.
Section 9: The General Partners.
9.1 The General Partners shall have complete discretion in the
management and control of the business of the Partnership for the purposes
herein stated, shall make all decisions affecting the business of the
Partnership and shall manage and control the affairs of the Partnership to the
best of their abilities and use their best efforts to carry out the purposes
of the Partnership. The powers of the General Partners include, but are not
limited to, the powers:
(a) to expend the capital and profits of the Partnership in
furtherance of the Partnership's business;
(b) to acquire, hold (in the Partnership's name or, in the best
interest of the Partnership, under any other title arrangement selected
by the General Partners), lease, sell, mortgage, convey, or refinance any
real or personal property, including Projects and Project Interests, at
such price and upon such terms, as they deem to be in the best interests
of the Partnership, including the power to vote to amend a local limited
partnership agreement in such a manner as to reduce the limited
partnership interest of the Partnership in the local limited partnership,
to vote to reduce the Partnership's interests in the profits, losses, and
special allocations of the local limited partnership and assign a part of
the limited partnership interest in such partnership, provided that such
action is necessary to preserve the economic value of the Partnership's
Project Interest;
(c) to monitor the construction and operations of any of the
Projects, Project Interests, or other Partnership property and to make
recommendations with respect thereto;
(d) to retain independent consultants to evaluate the Projects,
Project Interests, and other Partnership property;
(e) to borrow money and execute promissory notes and to secure
the same by mortgage upon the Partnership's property;
(f) to invest in short-term debt obligations (including
obligations of federal and state governments and their agencies,
commercial paper, and certificates of deposit of commercial banks,
savings banks, or savings and loan associations) such funds as are
temporarily not required for investment in Projects, Project Interests,
or other Partnership property;
(g) to lend money or provide advances in furtherance of the
Partnership's purposes; and
(h) to enter into and carry out agreements of any kind, provided
that all contracts with the General Partners or their affiliates must
provide for termination by the Partnership on 60 days written notice,
without penalty, and to do any and all other acts and things necessary,
proper, convenient, or advisable to effectuate and carry out the purposes
of the Partnership.
9.2 The General Partners shall (a) diligently and faithfully devote
such of their time to the business of the Partnership as they deem necessary
to conduct it for the greatest advantage of the Partnership; (b) file and
publish all certificates, notices, statements, or other instruments required
by law for formation and operation of the Partnership in all appropriate
jurisdictions; (c) cause the Partnership to carry adequate public liability,
property damage, and other insurance, any or all of which may name the General
Partners as the sole insured; (d) indemnify and hold the Partnership harmless
from any loss, damage or liability due to, or arising out of, any General
Partner's breach of fiduciary duty; and (e) maintain capital accounts on the
books and records of the Partnership in respect of each interest in the
Partnership. The General Partners may become Limited Partners and thereby
become entitled to all of the rights of Limited Partners to the extent of the
Limited Partnership Interests so acquired, provided that such acquisition of
Limited Partnership Interests shall not reduce any liability of the General
Partners under this Agreement. Notwithstanding the foregoing, the General
Partners shall have fiduciary responsibility for the safekeeping and use of
all funds and assets of the Partnership, whether or not in their immediate
possession or control 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.
9.3 Notwithstanding any provision in this Agreement to the contrary,
it is understood and agreed that (i) in conducting, carrying on, and managing
the business of the Partnership, the General Partners shall be bound by the
following investment policies, which may not be changed, altered, or amended
except as provided in Section 14 hereof and (ii) the General Partners shall
endeavor to conduct the Partnership's business in accordance with the policies
set forth in the Prospectus:
(a) except for interim commitments in short-term government
obligations, commercial paper (investment grade), certificates of
deposit and tax-exempt notes and bonds or registered investment
companies holding such securities, investments will be initially
limited to Project Interests, provided that (i) not less than 90% of
the amount of public offering proceeds available for investment will
be invested in Project Interests in partnerships or joint ventures
which will own or lease federal, state, or local government-assisted
housing projects and (ii) the Partnership may subsequently refinance
or convert such Project Interests to other uses with a view to
realizing higher revenue or capital gains, although reinvestment of
cash flow (excluding proceeds resulting from a disposition or
refinancing of property) shall not be allowed.
(b) Projects or Project Interests will be acquired with a view
toward maximizing tax deductions, with cash income and long-term
appreciation as additional considerations, and not with a view to
early resale;
(c) the Partnership will seek to avoid depreciation recapture
and defer taxes by not selling any Projects or Project Interests
within ten years, except (i) to qualified tenant cooperatives as
defined in the Internal Revenue Code, and (ii) under circumstances
described in the Prospectus;
(d) upon any sale or refinancing, the Partnership shall not
reinvest any proceeds thereof;
(e) the Partnership may (i) borrow money only against individual
Projects or Project Interests to acquire Projects or interests
therein, to defray expenses or preserve its interest in each
individual Project or interest therein, but may not pledge or
encumber other Projects or Project Interests for this purpose, and
(ii) borrow only such amount for which the Partnership can reasonably
expect to meet debt service requirements from anticipated Net Cash
Flow. The Partnership may make or cause its affiliates to make loans
or advances for the acquisition of Projects or Project Interests, but
may not receive interest or other financing charges or fees in excess
of the amounts which would be charged by unrelated banks for
comparable loans for the same purpose in the locality of the Project
or in amounts which otherwise are unreasonable or require any
prepayment charge or penalty, provided that in connection with any of
the foregoing transactions, (A) the Partnership shall not enter into
transactions involving the use of "all- inclusive" or "wrap-around"
notes except as permitted by the Rules of the Department of
Corporations of the State of California, and (B) the Partnership
shall not incur any indebtedness whereby the lender will have or
acquire, at any time as a result of making such loan, any direct or
indirect interest in the profits, capital, or property of the
Partnership other than as a secured creditor;
(f) the Partnership shall not (i) issue senior securities,
except as set forth in the preceding paragraph and even then only at
par or at a premium, (ii) invest in other issuers for the purpose of
exercising control (other than local limited partnerships owning or
leasing projects), (iii) underwrite the securities of other issuers,
or (iv) offer Units or Limited Partnership Interests in exchange for
property;
(g) except in a case in which a single Project Investment
exceeds this limitation, the Partnership shall not sell and reinvest
more than 25% of its portfolio of Projects or Project Interests
within any single year, unless by exempted sales to qualified tenant
cooperatives;
(h) the Partnership shall not make loans to the General Partners
or their affiliates and will not make loans to others except (i) to
developers in connection with the acquisition of Projects or Project
Interests (and then only if such loans do not exceed, in the
aggregate 5% of the difference between the aggregate amount of
contributions made pursuant to Section 5 hereof less expenses of the
Partnership determined in accordance with Section 6 hereof), (ii) to
local limited partnerships in which the Partnership has an equity
interest, and (iii) as permitted by Sections 5.4 or 9.3 (a) hereof;
(i) commitments of Partnership funds will be contingent upon
receipt of satisfactory appraisals as to non-government-assisted
Projects and Project Interests or FHA feasibility or equivalent
letters as to government-assisted projects and no significant
contributions to government-assisted projects will be made prior to
Initial Endorsement by FHA/HUD or its equivalent for non-FHA/HUD
Projects;
(j) the Partnership will not purchase or lease a Project or
Project Interest, if the General Partners or their affiliates have
(or if any limited partnership in which the General Partners or their
affiliates have an interest in has) any equity interest in such
Project or have made loans with respect thereto (except where their
interest is minimal and held primarily for the benefit of the
Partnership), or have any interest of a type other than equity or
debt which has not been disclosed to the Limited Partners;
(k) the Partnership will not sell or lease any Project or
Project Interest to the General Partners or their affiliates;
(l) the Partnership will not purchase Projects or Project
Interests in exchange for Units or Limited Partnership Interests;
(m) the Partnership shall not give the General Partners or their
affiliates the exclusive right or employment to sell Projects or
Project interests;
(n) the Partnership may not pay the General Partners or their
affiliates any commission in connection with the reinvestment of the
proceeds of any resale, exchange, or refinancing of any Project
Interest;
(o) the General Partners, their affiliates, and any salesman or
dealer offering Units shall not take any action in violation of
Section 260.140.114.6 of Title 10 of the California Administrative
Code;
(p) the Partnership's funds may not be commingled with the funds
of others;
(q) all expenses of the Partnership shall be billed directly to
it, except organizational expense (including, subject to the
limitation set forth in Section 9.6.1, expenses associated with the
selection and acquisition of Projects or Project Interests) paid by
the General Partners or their affiliates, which expenses may be
reimbursed;
(r) the Partnership will not enter into any transaction or
agreement with any Limited Partner or any affiliate of a Limited
Partner, if the Partnership would be prohibited pursuant to this
Section 9.3 from entering into a similar agreement or transaction
with the General Partners or their affiliates, provided that nothing
herein set forth shall prohibit a "sponsor" (i.e., a general partner,
developer, contractor, or affiliate thereof) of any local limited
partnership from acquiring or holding Units or Limited Partnership
Interests in the Partnership or being admitted as a Limited Partner;
(s) the Partnership will not acquire an interest in a
partnership, local limited partnership, or joint venture which does
not constitute at least a 50% interest of all limited partnership or
similar interests; and
(t) the Partnership shall not sell all or substantially all of
the Partnership's assets in a single transaction or a series of
related transactions without obtaining the consent of Limited
Partners owning a majority of the outstanding Limited Partnership
Interests; provided, however, that the foregoing will not apply to a
sale of a single Project (or a sale of Project Interests related to a
single Project) that is not part of a series of related transactions
involving the sale of multiple Projects (or Project Interests related
to multiple Projects) that constitute all or substantially all of the
Projects.
9.4 The General Partners may delegate all or any of their powers,
rights, and obligations hereunder, and in furtherance of any such delegation
may appoint, employ, or contract with any person for the account of the
Partnership for the transaction of the business of the Partnership, which
persons may, under the supervision of the General Partners, perform any acts
or services for the Partnership as the General Partners may approve.
9.5 As compensation for services to the Partnership by the General
Partners pursuant to this Agreement, the General Partners shall be entitled to
receive an Annual Management Fee, the amount of which shall be equal to .4% of
the Partnership's "Invested Assets." "Invested Assets" is defined as the cost
of acquiring Project interests, including the proportionate amount of the
mortgage loans on and other debts related to the Projects equivalent to the
Partnership's interest in the capital accounts of the respective partnerships
and joint ventures, but excluding depreciation, amortization, and capitalized
expenditures (such as the Acquisition and Selection Fees [defined in Section
9.6.1 hereof] due the General Partners, organizational expenditures, and
acquisition closing costs). The Annual Management Fee shall be due and payable
in monthly installments in every year; the other fees due the General Partners
shall be deferred until Annual Management Fees due are paid, and Annual
Management Fees may, to serve the best interests of the Partnership, be paid
out of any Partnership funds. The amount, if any, of the Annual Management Fee
earned, but unpaid in any year, shall accrue for payment in later years.
9.6.1 In addition, the Partnership will pay to the General Partners,
as compensation for services rendered by the General Partners or their
affiliates, fees for their services and expenses in the organization and
initial management of the Partnership, the syndication of the Units, and a
commitment fee in exchange for its agreement to advance assets to facilitate
financial arrangements regarding a Project Interest. Organization, Initial
Management, Syndication, and Commitment Fees in an aggregate amount of
approximately .9% of the Partnership's Invested Assets (defined in Section 9.5
hereof) will be paid to the General Partners. Acquisition and Selection Fees
in an aggregate amount of approximately 1.3% of the Partnership's Invested
Assets (defined in Section 9.5 hereof) will be paid to the General Partners
for their services in connection with the review, selection, evaluation,
negotiation, and acquisition of the Projects. No payment of any portion of the
Organization, Initial Management, Syndication, and Commitment Fees or
Acquisition and Selection Fees will be made prior to the termination of the
offer and sale of the minimum amount of 240 Units or prior to the payment, at
any time, of Management Fees accrued. Such fees (including the Organization,
Initial Management, Syndication, and Commitment Fee and Acquisition and
Selection Fees), any real estate fees or commissions from sale of Projects to
the Partnership and any fee and expense incurred by the Partnership (whether
directly or in the form of reimbursements to the General Partners for funds
advanced during the organization period) in connection with the selection of
Projects and Project Interests and the negotiations with respect thereto and
investments therein may not exceed (a) 18% of gross offering proceeds, (b) for
any Project or Project Interest, 18% of the proportion of gross offering
proceeds allocable to that Project or Project Interest and (c) the lesser of
6% of the total investment in the Project or Project Interest (including
mortgages) or standard real estate commissions for the region in which the
Project is located. The amount, if any, of the Organization, Initial
Management, Syndication, and Commitment Fees and Acquisition and Selection
Fees unpaid in any year shall accrue for payment in later years.
9.6.2 Upon total or partial liquidation of the Partnership or the
disposition or partial disposition of a Project or Project Interest and
distribution of the proceeds, the then General Partners will be entitled to a
Liquidation Fee equal to the lesser of (a) 10% of the net proceeds to the
Partnership from the sale of a Project or Project Interest or (b) 1% of the
sales price (including the mortgage) plus 3% of the net proceeds after
deducting an amount sufficient to pay federal and state taxes, if any,
calculated at the maximum rates then applicable. No part of such Liquidation
Fee shall be paid, unless the Limited Partners shall have first received an
amount equal to (i) the greater of (A) their aggregate capital contributions,
or (B) an amount sufficient to satisfy the cumulative state and federal income
tax liability, if any, arising from the disposition of all Projects or Project
Interests disposed of to date, calculated at the maximum tax rate then
applicable; less, (ii) all amounts previously distributed to Limited Partners
under this Agreement. Prior to the receipt by the Limited Partners of an
amount equal to the greater of (1) their aggregate capital contributions, or
(2) an amount sufficient to satisfy the cumulative tax liability arising from
the disposition of all Projects or Project Interests disposed of to date, the
unpaid Liquidation Fee shall accrue for later payment to the General Partners.
9.6.3 The General Partners and their affiliates will not receive any
real estate brokerage commission with respect to sales of Projects or Project
Interests. No Limited Partner or affiliate thereof may receive more than a
standard real estate commission. The General Partners or their affiliates may
perform other services for the Partnership, but neither the General Partners
nor affiliates may receive compensation therefor other than from compensation
stated herein as otherwise due to a General Partner, unless the terms of such
services and compensation are approved by the Department of Corporations for
the State of California as complying with the Rules of such Department.
9.7 The General Partners may pay compensation to an entity selected
by them to perform any of the management functions set forth above, provided
that duplicate property management or other fees shall be prohibited and that
any property management fee paid to the General Partners or any of their
affiliates shall not exceed the customary rates paid for such property
management services in the regions where the Projects are located.
9.8 All expenses of the Partnership shall be billed directly to and
paid by the Partnership. Reimbursements (other than for organization and
offering expenses) to the General Partners or their affiliates shall not be
allowed, except for reimbursement of the actual cost to the General Partners
or their affiliates of goods and materials used for or by the Partnership.
Expenses incurred by the General Partners or their affiliates in connection
with the administration of the Partnership, including, but not limited to,
salaries, rent, travel expenses, and such other items generally falling under
the category of General Partners' overhead, shall not be charged to the
Partnership. Neither the General Partners nor their affiliates may receive
insurance brokerage fees or write insurance policies covering the Partnership
or any Projects, or Project Interests, or other investments of the
Partnership.
9.9 The General Partners may not withdraw their interest in the
Partnership, transfer their interest to any person, or admit any person as a
substitute General Partner, except as follows:
(a) Upon notice to all Partners, the Corporate General Partner
may substitute its parent, any of its wholly-owned subsidiaries, or any
wholly-owned subsidiaries of its parent in its stead as General Partners,
provided that such substitution is consented to by the remaining
Partners.
(b) Any General Partner may add or substitute any other person
as a General Partner, provided that such substitution is consented to by
the remaining Partners.
(c) Any General Partner may resign as a General Partner, upon 90
days notice, with the consent of the remaining General Partners, provided
that upon any such resignation the Partnership has (i) a corporate
General Partner who is qualified to act as such and who has sufficient
net worth to meet the then applicable net worth requirement for a sole
corporate general partner of a partnership established by the Internal
Revenue Service for the purpose of determining that a limited partnership
is entitled to be treated as a partnership for tax purposes and not as an
association taxable as a corporation, or (ii) one or more other General
Partners and that the aggregate net worth of the General Partners is
substantial.
(d) Upon the written consent or affirmative vote of Limited
Partners owning a majority of the Limited Partnership Interests then
outstanding, any General Partner may be removed.
(e) The holders of a majority of the Limited Partnership
Interests then outstanding may elect another person or other persons as
additional or substitute corporate or individual General Partners without
the consent of the existing General Partner or any General Partner who
was removed in accordance with paragraph (e) of this Section 9.9.
Upon the removal or withdrawal of any General Partner pursuant to this Section
9.9, the interest of such General Partner in the Partnership shall be valued
at its fair value on the date of such removal or withdrawal, determined, if
necessary, in accordance with the arbitration procedure of the American
Arbitration Association. If, however, immediate payment of such fair value
would cause the Partnership to be insolvent or to be unable to meet its
reasonably foreseeable cash requirements, the Partnership may deliver its
promissory note for such fair value providing for interest at the then prime
rate at United California Bank for a term of not more than five years.
Section 10: Rights of Limited Partners.
10.1 No Limited Partner shall be subject to assessment nor shall any
Limited Partner be personally liable for any of the debts of the Partnership
or any of the losses thereof beyond the amount contributed by him to the
capital of the Partnership and his share of undistributed profits of the
Partnership.
10.2 Subject to the right of the General Partners to purchase Units
or Limited Partnership Interests as set forth in Section 9.2, no Limited
Partner, as such, shall take part in the management of the business, transact
any business for the Partnership, or have the power to sign for or to bind the
Partnership to any agreement or document.
10.3 Limited Partners and their designated representatives shall be
entitled to (a) review the records of the Partnership at reasonable times and
at the location where such records are kept by the Partnership and (b) obtain
a list of the names and addresses and interests owned by the Limited Partners
upon payment to the Partnership of such reasonable charges and expenses for
the preparation and reproduction of such list.
Section 11: Nature of Limited Partner's Liabilities for Claims Against
the Partnership.
In furtherance of the intent of the parties that each Limited Partner
shall be liable to creditors only for his contributed capital, notes, and
undistributed partnership profits:
11.1 The General Partners shall arrange to prosecute, defend, settle,
or compromise actions at law or in equity at the expense of the Partnership as
such may be necessary to enforce or protect the Partnership's Interests.
11.2 The General Partners shall satisfy any judgment, decree,
decision, or settlement involving the Partnership first, out of any insurance
proceeds available therefor, second, out of the Partnership assets and income,
and third, out of the assets and income of the General Partners.
Section 12: Assignment and Transfer of Units.
12.1 Except as provided in this Section 12, the only restriction on
the assignment or hypothecation of a Unit shall be the obtaining by the
assignor of a Consent to Transfer for such Unit, if required, from the
Department of Corporations of the State of California and the consent, if
required, of any other state securities commission having jurisdiction with
respect to such assignment or hypothecation. A reasonable transfer fee (not to
exceed $200 per transaction) shall be required to be paid to the Partnership
by the assignor and/or the assignee with respect to any transfer pursuant to
this Section. Limited Partnership Interests and Warrants shall not be
transferable, provided, however, that after January 23, 1981, Limited
Partnership Interests may be transferred as if they were Units.
12.2 Any Partner may, without restriction or consent of the
Department of Corporations of the State of California or any other Partners,
give, sell, transfer, or assign any portion or all of his Units to his spouse,
any member or members of his family, to a trust set up for the benefit of his
spouse or any member or members of his family, or to a corporation or any
other entity in which such Partner has a majority interest. The Units of any
Partner may pass, without consent, to his heirs or legatees upon his death or
by operation of law. A reasonable transfer fee (not to exceed $200 per
transaction) shall be required to be paid to the Partnership by the assignor
and/or the assignee with respect to any transfer pursuant to this Section.
12.3 Subject to compliance with applicable federal and state
securities laws, a Limited Partner may transfer his entire legal and equitable
interest in his Units other than as provided in Section 12.2 hereof, by an
executed and acknowledged written instrument, only with the consent of the
General Partners (which consent may be granted or withheld at the sole
discretion of the General Partners).
12.4 No assignments or transfers will be permitted if such
assignments or transfers would result in 50% or more of the Units being
assigned or transferred within any twelve-month period. Subject to compliance
with applicable federal and state securities laws, assignments will be
recognized by the Partnership only effective the last day of the calendar
month following receipt by the Partnership of written notice of the
assignment. Each item of income, gain, loss, deduction, and credit of the
Partnership attributable to any assigned or transferred Unit shall be divided
between and charged against the assignor and assignee, or transferor and
transferee, of such Unit, in a manner so as to permit the assignor and
assignee, or transferor or transferee, to be allocated such items in the
amounts recognized by the Partnership in those months in which the assignor
and the assignee, or transferor and transferee, were owners of the Units. The
Partnership may charge the assigning or transferring Limited Partner and any
Limited Partner requesting a change of name, type of ownership, etc., a fee
not to exceed $200 per transaction and, in the discretion of the General
Partners, actual legal expenses incurred to defray the actual costs of
effecting the assignment or transfer of his interest in the Partnership or
other change in the records of the Partnership.
12.5 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 the place of his assignor unless all of the following
conditions are satisfied:
(a) The fully executed and acknowledged written instrument of
assignment which has been filed with the Partnership sets forth the
intention of the assignor that the assignee become a substituted
Limited Partner in his place;
(b) The Partnership interest being acquired by the assignee
consists of one or more whole Units (and where applicable, complies
with any additional limitations on, or restrictions with respect to,
transfers of Units which may be imposed by state securities laws);
(c) The assignor and assignee execute and acknowledge such other
instruments as the General Partners may deem necessary or desirable
to effect such admission, including the written acceptance and
adoption by the assignee of the provisions of this Agreement and his
execution, acknowledgement, and delivery to the General Partners of a
Power of Attorney, the form and content of which shall be provided by
the General Partners.
(d) Any transfer fee and legal expenses, if any, referred to in
Section 12.4 required to be paid shall have been paid;
(e) The transfer shall not be in violation of any applicable
federal or state securities laws, including the Securities Act of
1933, as amended, it being understood and agreed that the General
Partners (i) will require that until January 1, 1986, each assignee
must satisfy the same suitability standards imposed upon his assignor
and (ii) may require as a condition to such transfer that the
Partnership be furnished with an opinion of counsel, which counsel
and opinion shall be satisfactory to the General Partner, to the
foregoing effect; and
(f) The General Partners have consented to the assignment (which
consent may be granted or withheld at the sole discretion of the
General Partners).
12.6 The General Partners may elect to treat an assignee who has not
become a substituted Limited Partner as a substituted Limited Partner in the
place of his assignor should they deem, in their sole discretion, that such
treatment is in the best interest of the Partnership for any of its purposes
or for any of the purposes of this Agreement.
12.7 No consent of any of the Limited Partners is required to effect
the substitution of a Limited Partner, except that a Limited Partner who
assigns his interest must evidence his intention that his assignee be admitted
as a substituted Limited Partner in his place and execute any instruments
required in connection therewith.
12.8 The General Partners will be required to amend the Certificate
of Limited Partnership only once each calendar quarter to reflect the
substitution of Limited Partners, provided that prior to the termination of
the offering of the Units, such Certificate will be amended monthly. Until the
Certificate of Limited Partnership is so amended, an assignee shall not become
a substituted Limited Partner.
12.9 Upon the death or legal incompetency of an individual Limited
Partner, his personal representative shall have all of the rights of a Limited
Partner for the purpose of settling or managing his estate and such power as
the decedent or incompetent possessed to constitute a successor as an assignee
of his interest in the Partnership and to join with such assignee in making
application to substitute such assignee as a Limited Partner. The General
Partner may elect to adopt the provisions of Section 754 of the Internal
Revenue Code of 1954, as amended (or any other similar election designed to
protect the estate of a deceased Limited Partner which may in the future be
enacted) upon the first death of a Limited Partner or transfer for value of a
Unit; such election is; however, subject to the revocation rights contained in
Section 754.
12.10 Upon the bankruptcy, insolvency, dissolution, or other
cessation to exist as a legal entity of a Limited Partner not an individual,
the authorized representative of such entity shall have all the rights of a
Limited Partner for the purpose of effecting the orderly winding up and
disposition of the business of such entity and such power as such entity
possessed to constitute a successor as an assignee of its interest in the
Partnership and to join with such assignee in making application to substitute
such assignee as a Limited Partner.
Section 13: Duration of Business; Dissolution.
13.1 The Partnership shall continue until dissolution, as set forth
in Section 13.3. Upon dissolution the business of the Partnership shall be
continued pending an election to continue the Partnership pursuant to Section
13.4, if appropriate, and failing such election shall be terminated in
accordance with Section 13.5.
13.2 The Partnership shall not be terminated by the death, insanity,
bankruptcy, withdrawal, or expulsion of any Limited Partner, by the assignment
by any Limited Partner of his interest, or by the admission of a new Limited
Partner.
13.3 The Partnership shall be dissolved only upon the occurrence of
any of the following events:
(a) The expiration of 52 complete calendar years (December 31,
2031) from the date of formation of the Partnership;
(b) The written consent or affirmative vote to dissolve and
terminate the Partnership of Limited Partners owning a majority of the
Limited Partnership Interests then outstanding;
(c) The disposition of all Projects and Project Interests and
other Partnership assets;
(d) The removal of any General Partner or substitute General
Partner in accordance with Section 9.9 or the retirement, bankruptcy, or
insolvency of any General Partner or substitute General Partner.
13.4 In the event of a dissolution caused by an occurrence specified
in Section 13.3(d), the remaining General Partner or General Partners, if any,
may elect to continue the Partnership, provided that counsel to the
Partnership is of the opinion that such election would not jeopardize the
Partnership's status as a partnership rather than as an association for
federal tax purposes. If such remaining General Partner fails to so elect
within 30 days of the event causing dissolution, or if there is no remaining
General Partner, the Limited Partners owning a majority of the then
outstanding Limited Partnership Interests may elect to continue the
Partnership and, if necessary, elect a new General Partner.
13.5 In the event of dissolution and the subsequent failure of
election pursuant to Section 13.4 within 60 days of dissolution, the General
Partners or other party appointed for such purpose shall wind up the affairs
of the Partnership, shall sell all of the Partnership's assets as promptly as
is consistent with obtaining the fair value thereof, and pay all liabilities
and all costs of dissolution. The winding up of the affairs of the Partnership
and the distribution of its assets shall be conducted exclusively by the
General Partners, who are hereby authorized to do any and all acts and things
authorized by law for these purposes.
13.6 Upon the dissolution of the Partnership and failure of an
election to continue the Partnership pursuant to Section 13.4, a final
statement shall be prepared by the Partnership's certified public accountants
as soon as practicable setting forth the assets and liabilities of the
Partnership. A copy of such statement shall be furnished to each Partner
within 90 days after such dissolution. Thereupon all assets of the Partnership
shall be liquidated as promptly as possible and the proceeds therefrom shall
be distributed in the following order of priority: (a) to the payment of the
debts and liabilities of the Partnership and the expenses of liquidation; (b)
to the setting up of such reserves as the General Partners may deem reasonably
necessary for any contingent or unforeseen liabilities or obligations of the
Partnership arising out of or in connection with the Partnership, provided
that any such reserves shall be paid over by the General Partners to an escrow
agent, to be held by such escrow agent for the purpose of disbursing such
reserves in payment of any of the aforementioned contingencies and, at the
expiration of such period as the General Partners shall deem advisable, to
distribute the balance thereafter remaining in the manner hereinafter
provided; (c) to the Limited and General Partners in accordance with Section
9.6.2 hereof; and (d) to the Limited Partners and the General Partners as
provided in Section 8.2.
13.7 Upon dissolution and termination each Limited Partner shall look
solely to the assets of the Partnership for the return of his cash
contribution, and if the Partnership property remaining after the payment or
discharge of the debts and liabilities of the Partnership is insufficient to
return the cash contribution of each Limited Partner, such Limited Partner
shall have no recourse against the General Partners or any other Limited
Partner.
Section 14: Amendments.
14.1 Amendments to this Agreement may be proposed by the General
Partners or by Limited Partners owning not less than 10% of the then
outstanding Limited Partnership Interests. Following such proposal, the
General Partners shall submit to the Limited Partners a verbatim statement of
any proposed amendment and an opinion of counsel as to the legality of such
amendment. The General Partners shall include in any such submission its
recommendations as to the proposed amendment. In any such event the
affirmative vote of Limited Partners owning a majority of the then outstanding
Limited Partnership Interests will be required to change this Agreement. The
General Partners may require a written approval to be given by the Limited
Partner within a specified period of not less than 15 days and not more than
60 days from the date of notice thereof, and may treat a failure to respond as
the equivalent of concurrence with the General Partners' recommendations.
14.2 Notwithstanding the foregoing Section 14.1, no amendment shall
change the Partnership to a general partnership, change the method of removing
a General Partner or electing a successor General Partner, change the term of
the Partnership, change the liability of the General Partners or the limited
liability of the Limited Partners, change the interest of the General and
Limited Partners as set forth in Section 7.1, or make any changes which, in
the opinion of counsel to the Partnership, may result in the Partnership being
treated as an association rather than as a partnership for federal tax
purposes.
Section 15: Voting Rights of Limited Partners.
15.1 The voting rights granted to the Limited Partners in Section
9.3, 9.9(d), 13.3, 13.4, and 14.1 hereof are granted pursuant to Section 15507
of the Limited Partnership Act as in effect in the State of California. A
Limited Partner shall not be deemed to take part in the control of the
Partnership by virtue of his possessing or exercising such voting rights.
15.2 For purposes of taking any action permitted under the Agreement,
a Partnership meeting may be called by the General Partners or by the holders
of 10% or more of the Limited Partnership Interests outstanding. Upon receipt
by the General Partners of a written request, delivered either in person or by
registered mail, executed by the holders of 10% or more of the Units
outstanding and stating the purpose of the meeting, or if a meeting is to be
held at the call of the General Partners, in each case the General Partners
shall provide all of the Limited Partners, within 10 days after receipt of
such request, written notice (either in person or by certified mail) of the
meeting and the purpose of such meeting which shall be held on a date not less
than 15 nor more than 60 days after receipt of such request, at a time and
place (within the state and county of the principal office of the Partnership)
as shall be selected by the General Partners, convenient to the Partners.
Section 16: Books, Records, and Reports.
16.1 The Partnership's books and records, this Agreement and all
amendments thereto, and appraisals, feasibility of commitment letters, or
equivalents shall be maintained at the principal office of the Partnership
until five years after termination and liquidation of the Partnership and
shall be open to the reasonable inspection and examination of the Partners or
their duly authorized representatives. Such books and records shall be kept on
the cash basis in accordance with sound accounting principles.
16.2 The General Partners will send the following reports to each
person who held an interest in the Partnership during the period covered by
such report:
(a) A semi-annual report within 60 days following the end of the
first six-month period of each year, which report shall not be audited
but shall contain a balance sheet, a statement of income for the period
then ended, a cash flow statement for the period then ended, and any
other pertinent information regarding the Partnership and its activities
during the period covered thereby, including the information designated
in Rule 260.140.115.5 of Title 10 of the California Administrative Code
as in effect on the date of this Agreement.
(b) A report within 60 days of the end of each quarter during
which the General Partners or their affiliates receive fees for services,
containing a detailed statement setting forth the services rendered, or
to be rendered, and the amount of the fees received.
(c) A special report within 30 days of the end of each quarter
in which the Partnership acquires or disposes of any Projects or Project
Interests, containing a description of the Projects and Project Interests
acquired during such quarter, including the purchase price therefor,
other material information, and a statement as to the aggregate
investments to date, which reports are required to be prepared until an
amount equal to 75% of the proceeds of the offering of the Units has been
invested in the acquisition of Projects and Project Interests.
(d) A report within 75 days after the end of each of the
Partnership's fiscal years containing all information necessary for the
preparation of the Limited Partners' federal and state income tax
returns.
(e) An annual report within 120 days after the end of each of
the Partnership's fiscal years containing (1) a balance sheet as of the
end of the fiscal year, and a statement of income, partner's equity, and
changes in financial position for the year then ended, all of which shall
be prepared in accordance with generally accepted accounting principles
and accompanied by an auditor's report containing an opinion of an
independent certified public accountant or independent accountant, and
(2) a report of the activities of the Partnership during the period
covered by the report. Such report shall also include a cash flow
statement which will set forth distributions to Limited Partners for the
period covered thereby, and shall separately identify distributions from
cash flow from operations during the period, cash flow from operations
during a prior period which had been held as reserves, proceeds from
disposition of property and investment, lease payments on net leases with
builders and reserves retained from the gross proceeds of the offering
originally obtained from the Limited Partners.
16.3 The General Partners will file with the Department of
Corporations of the State of California copies of any of the reports sent to
holders of Units pursuant to Section 16.2 hereof.
Section 17: Power of Attorney.
17.1 Each Limited Partner makes, constitutes, and appoints the
General Partners, with full power of substitution, his true and lawful
attorneys for him and in his name, place, and ▇▇▇▇▇ and for his use and
benefit, to sign, execute, certify, acknowledge, file, and record this
Agreement, and to sign, execute, certify, acknowledge, file, and record all
appropriate instruments amending this Agreement as now or hereafter amended,
including, without limitation, agreements or other instruments or documents:
(a) to reflect the exercise by the General Partners of any of the powers
granted to them under this Agreement; (b) to reflect any amendments duly made
to the Agreement; (c) to reflect the admission to the Partnership of a
substituted Limited Partner or the withdrawal of any Partner, in the manner
prescribed in this Agreement; and (d) which may be required of the Partnership
or of any Partner by the laws of the State of California or any other
jurisdiction or governmental agency, including, but not limited to,
Certificates of Fictitious Name as required by Section 17910 of the California
Business and Professions Code. Each Limited Partner authorizes such
attorneys-in-fact to take any further action which such attorneys-in-fact
shall consider necessary or advisable to be done in and about the foregoing
(including the power to consent to items (a), (b), (c), and (d) above as fully
as such Limited Partner might or could do if personally present) and hereby
ratifies and confirms that all such attorneys-in-fact shall lawfully do or
cause to be done by virtue hereof.
17.2 The foregoing power of attorney is a special power of attorney
coupled with an interest and is irrevocable, may be exercised by such
attorneys-in-fact by listing all of the Limited Partners executing any
agreement, certificate, instruction, or document with the single signature of
any one of such attorneys-in-fact acting as attorney-in-fact for all of them,
and, notwithstanding any provision of this Agreement to the contrary, shall
survive the delivery of an assignment by a Limited Partner of the whole or a
portion of his interest in the Partnership, until the assignee thereof becomes
a substituted Limited Partner.
17.3 Each Limited Partner has executed and delivered to the General
Partners a power of attorney as set forth in the Subscription Agreement. Each
such power of attorney is on file at the principal place of business of the
Partnership and is incorporated herein by reference.
Section 18: Indemnification.
18.1 The Partnership, its receiver or its trustee, shall indemnify,
save harmless and pay all judgments and claims against the General Partners,
their officers, directors, employees, agents, affiliates, subsidiaries and
assigns, from any liability, loss, or damage incurred by them or by the
Partnership by reason of any act performed or omitted to be performed by them
in connection with the business of the Partnership, including costs and
attorneys' fees (which attorneys' fees may be paid as incurred) and any
amounts expended in the settlements of any claims of liability, loss or
damage, provided that, if such liability, loss, or claim arises out of any
action or inaction of the General Partners, the General Partners must have
determined, in good faith, that such course of conduct was in the best
interests of the Partnership and did not constitute fraud, negligence, breach
of fiduciary duty, or willful misconduct by the General Partners and, provided
further, that any such indemnification shall be recoverable only from the
assets of the Partnership and not from the assets of the Limited Partners. All
judgments against the Partnership and a General Partner, wherein a General
Partner is entitled to indemnification, must be satisfied from Partnership
assets before such General Partner is responsible for these obligations.
18.2 Notwithstanding the above Section 18.1, neither the General
Partner, nor any officer, director, employee, agent, subsidiary or assignee,
of the General Partners or of the Partnership shall be indemnified from any
liability, loss, or damage incurred by them (i) in connection with any
liability imposed by law, including liability for fraud, bad faith, or
negligence, or (ii) in connection with any claim or settlement involving
allegations that the securities laws, including the Securities Act of 1933, as
amended, were violated by the General Partners or by any such other person or
entity unless, as to liabilities, loss, or damages arising under clause (ii)
hereof, (a) the General Partners or other persons or entities seeking
indemnification are (except in case of a settlement) successful in defending
such action; and (b) such indemnification is specifically approved by a court
of law which shall have been advised as to the current position of both the
Securities and Exchange Commission and the California Commissioner of
Corporations regarding indemnification for violations of securities laws.
Section 19: Miscellaneous Provisions.
19.1 Notice. Except as otherwise provided herein, any notice which
shall be given in connection with the business of the Partnership shall be
duly given if reduced to writing and delivered personally to the person to
whom it is authorized to be given, or if sent by mail or telegraph to the last
address furnished by him for such purpose.
19.2 Validity. If any provision of this Agreement, or the application
of such provision to any person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to persons
or circumstances other than those as to which it is held invalid, shall not be
affected thereby.
19.3 Applicable Law. This Agreement has been executed, delivered, and
recorded in the State of California by the General Partners and the Limited
Partners, and all questions with respect to the validity, construction, or
enforceability hereof shall be governed exclusively by its terms and by the
law of the State of California.
19.4 Binding Agreement. This Agreement shall be binding upon the
parties hereto, their successors, heirs, devisees, assigns, legal
representatives, executors, and administrators.
19.5 Waiver of Action for Partition. Each of the parties hereto
irrevocably waives during the term of the Partnership any right that he may
have to maintain any action for partition with respect to the property and
other assets of the Partnership.
19.6 Article Headings. All section headings in this Agreement are for
convenience of reference only and are not intended to qualify the meaning of
any article or section.
19.7 Counterparts. This Agreement may be executed in several
counterparts, and all so executed shall constitute one agreement, binding on
all of the parties hereto, notwithstanding that all the parties are not
signatory to the original or the same counterpart.
19.8 Nonrecourse Creditors. A creditor who makes a nonrecourse loan
to the Partnership must not have or acquire, at any time as a result of making
the loan, any direct or indirect interest in the profits, capital, or property
of the Partnership other than as a secured creditor.
